TiVo 2013 Annual Report Download - page 57

Table of Contents
On January 3, 2012, we entered into a Settlement and Patent License Agreement with AT&T, Inc. Under the terms of the agreement,
AT&T agreed to pay us a minimum of $215 million plus incremental monthly fees per DVR subscriber if the growth of AT&T's subscriber
base exceeds certain pre-determined levels. On January 4, 2012, we received $51.0 million in cash with the remaining $164.0 million to be
paid in installments after the end of each calendar quarter in the amount of $5.0 million for the first four calendar quarters and approximately
$6.5 million in subsequent calendar quarters through the calendar quarter ending June 30, 2018.
The total consideration of $215.0 million was allocated on a relative fair value basis as $54.4 million to the past infringement and
litigation settlement element, $254,000 to interest income related to past infringement and $160.3 million to the future base license royalties
element. The amount related to interest income was recorded under “Interest income” in the quarter ended January 31, 2012. (For additional
information, refer to Note 16. "Settlements" of Notes to Consolidated Financial Statements included in Part II. Item 8. of this report.)
On April 29, 2011, we entered into a Settlement and Patent License Agreement with EchoStar and DISH . Under the terms of the
agreement, DISH and EchoStar agreed to pay us $500.0 million, including an initial payment of $300.0 million received by us on May 2,
2011 with the remaining $200.0 million to be distributed in six equal annual installments of $33.3 million between 2012 and 2017.
The total consideration of $500.0 million was allocated on a relative fair value basis as $175.7 million to the past infringement and
litigation settlement element, $2.9 million to interest income related to past infringement and $321.4 million to the future license royalties
element. The amount related to past infringement and settlement was recorded under “Litigation proceeds” in the fiscal year ended January
31, 2013. The amount related to interest income was recorded under “Interest income” in the fiscal year ended January 31, 2013. (For
additional information, refer to Note 16. "Settlements" of Notes to Consolidated Financial Statements included in Part II. Item 8. of this
report.)
Interest income. Interest income for the fiscal years ended January 31, 2014, 2013, and 2012 was $4.7 million, $4.0 million, and $5.7
million, respectively. The increase of $776,000 for the fiscal year ended January 31, 2014 as compared to the same prior year period was
largely attributable to the increased cash and short-term investment balances TiVo had during the fiscal year ended January 31, 2014.
Additionally, we recorded $752,000 of interest income related to past patent infringement as compared to $568,000 in the same prior year
period.
The decrease of $1.7 million for the fiscal year ended January 31, 2013 as compared to the same prior year period was largely related to
the interest received from the litigation settlements. During the fiscal year ended January 31, 2013 we recorded $568,000 in interest income
related to our settlement with Verizon and during the fiscal year ended January 31, 2012 we recorded $3.2 million in interest income related
to the settlements with DISH and AT&T.
Interest expense and other. Interest and other expense for the fiscal years ended January 31, 2014, 2013 and 2012, was $8.1
million, $7.9 million, and $12.0 million, respectively. The interest expense in the fiscal year ended January 31, 2014 remained relatively flat
as compared to the same prior year period.
The decrease in interest expense and other for the fiscal year ended January 31, 2013 as compared to the same prior year period was
largely due to the impairment of fair value of a long-term cost method investment that was below its carrying value and we recorded a $3.4
million other-than-temporary impairment during the fiscal year ended January 31, 2012. The fiscal year ended January 31, 2013 had no
such similar impairment.
Benefit (Provision) for income taxes. Income tax benefit (provision) was $167.9 million, $(1.0) million and $(807,000), in fiscal years
2014, 2013, and 2012, respectively. The income tax benefit recorded in the fiscal year ended January 31, 2014 was primarily related to the
release of the valuation allowance previously recorded against deferred tax assets (see Note 14 "Income Taxes" included in Part II, Item 8).
The effective tax rate for the fiscal years ended January 31, 2014, 2013, and 2012 was a benefit of 161.6%, provisions of 24.5%, and 0.8%,
respectively. For fiscal year 2014 the difference between the effective tax rate and the income tax determined by applying the statutory federal
income tax rate of 35% was primarily due to release of valuation allowance recorded against the deferred tax assets. We anticipate income tax
expense to be slightly higher than the statutory income tax rate in fiscal year 2015 due to certain non-deductible expenses and the fact that our
income tax rate in 2014 benefited from the use of our deferred tax assets which will not be available to us at the same level in 2015.
The income tax expense in fiscal years 2013 and 2012 relates primarily to state income taxes and foreign withholding taxes.
As of January 31, 2014 the Company had net operating loss carryforwards for federal and state income tax purpose of approximately
$284.1 million and $172.9 million, respectively, available to reduce future taxable income. For tax purposes, the deferred revenue related to
the Motorola/Cisco settlement of $338.5 million will be fu
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