TiVo 2013 Annual Report Download - page 72

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TiVo Inc. (together with its subsidiaries the Company or TiVo) was incorporated in August 1997 as a Delaware corporation and is located
in San Jose, California. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All
inter-company accounts and transactions have been eliminated in consolidation. The Company conducts its operations through one
reportable segment.
The Company is subject to a number of risks, including delays in product and service developments; competitive product and service
offerings; lack of market acceptance; the dependence on third-parties for manufacturing, marketing, and sales support, as well as third-party
rollout schedules, software development issues for third-party products which contain its technology; intellectual property claims by and
against the Company; access to television programming including digital cable signals in connection with CableCARD and switched digital
Internet Protocol, downloadable conditional access, and other new signal delivery and encryption technologies; dependence on its
relationships with third-party service providers for subscription growth; and the Company’s ability to sustain and grow both its TiVo-Owned
and MSO subscription base. The Company anticipates that its retail business will continue to be seasonal and expects to generate a
significant portion of its new subscriptions during and immediately after the holiday shopping season. The Company remains cautious about
its ability to grow or even slow the decline in its TiVo-Owned subscription base.
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The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and
judgments affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an
ongoing basis, the Company evaluates its estimates, including those related to estimated lives of product lifetime subscriptions, total
estimated cost of engineering service and profitability of deployment agreements, allowance for doubtful accounts, product returns,
inventories and related reserves, warranty obligations, contingencies, stock compensation, goodwill, valuation of deferred taxes, and
intangible assets impairment, and allocation of amounts from litigation settlements. The Company bases estimates on historical experience
and on other assumptions that its management believes are reasonable under the circumstances. As future events and their effects cannot
be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates will be reflected in
the financial statements in future periods.
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The Company considers investments with a maturity of three months or less when purchased to be cash equivalents. The majority of
payments due from banks for third-party credit card, debit card, and electronic benefit transactions (EBT) process within 24-72 hours, except
for transactions occurring on a Friday, which are generally processed the following Monday. All credit card, debit card, and EBT transactions
that process in less than three days are classified as cash and cash equivalents. Amounts due from banks for these transactions classified as
cash totaled $1.9 million and $1.2 million at January 31, 2014 and 2013, respectively.
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Short-term and long-term investments are classified as available-for-sale and are carried at fair value. The Company’s short-term and
long-term investments are reviewed each reporting period for declines in value that are considered to be other-than temporary and, if
appropriate, the investments are written down to their estimated fair value. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in the Company’s consolidated statements of operations. Unrealized gains
and unrealized losses deemed temporary are included in accumulated other comprehensive income (loss). The cost of securities sold is
based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income
in the consolidated statements of operations.
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Accounts receivable consist primarily of receivables from retailers, cable and satellite companies, as well as individual consumers and
relate to its subscription, technology, and hardware revenues. Additionally, amounts due