Memorex 2007 Annual Report Download - page 61

Summary of Contractual Obligations
Total
Less Than
1 Year 1-3 Years 3-5 Years
More Than
5 Years
Payments Due by Period
(In millions)
Notes payable(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31.3 $ 10.0 $21.3 $ — $ —
Operating leases obligations . . . . . . . . . . . . . . . . . . . . . . . . . 35.9 16.7 14.8 3.8 0.6
Purchase obligations(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.0 115.7 0.3 — —
Contingent consideration payment(3) . . . . . . . . . . . . . . . . . . . 2.5 2.5 — — —
Other liabilities(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.9 0.9 1.3 0.8 44.9
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $233.6 $145.8 $37.7 $4.6 $45.5
(1) Does not include interest payments on the debt of approximately $1.4 million, $1.2 million and $0.2 million which will
be paid in 2008, 2009 and 2010, respectively.
(2) The majority of the purchase obligations consist of 90-day rolling estimates. Each month, we provide various suppliers
with rolling forecasts of our demand for products for the next three months. The forecasted amounts are generally
binding on us as follows: 100 percent for the first month, 75 percent for the second month and 50 percent for the third
month.
(3) Additional cash consideration of a minimum of $2.5 million will be paid related to the Memorex acquisition. Additional
cash consideration of up to a maximum of $42.5 million could be paid based on the financial performance of the
acquisition through April 2009.
(4) Except for the sale-leaseback payments recorded in long-term liabilities, timing of payments for the vast majority of the
remaining liabilities, primarily consisting of pension, cannot be reasonably determined and as such have been included
in the “More Than 5 Years” category.
The table above does not include possible payments for uncertain tax positions. Our reserve for uncertain tax
positions, including accrued interest and penalties, was $9.5 million as of December 31, 2007. Due to the nature of the
underlying liabilities and the extended time often needed to resolve income tax uncertainties, we cannot make reliable
estimates of the amount or timing of cash payments that may be required to settle these liabilities.
We may be required to pay additional cash consideration of up to $70 million and $20 million related to the TDK
Recording Media and the Memcorp business acquisitions, respectively, contingent on future financial performance of the
acquired businesses. We have not recorded a liability for these contingent payments at December 31, 2007 as payment is
not probable based on current financial performance.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our Consolidated
Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenue, expenses and related disclosures of contingent assets and liabilities.
On an on-going basis, we evaluate our estimates to ensure they are consistent with historical experience and the various
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions and could materially impact our results of
operations.
We believe the following critical accounting policies are affected by significant judgments and estimates used in the
preparation of our Consolidated Financial Statements:
Income Tax Accruals and Valuation Allowances. When preparing the Consolidated Financial Statements, we are
required to estimate the income taxes in each of the jurisdictions in which we operate. This process involves estimating
the actual current tax obligations based on expected income, statutory tax rates and tax planning opportunities in the
various jurisdictions in which we operate. In the event there is a significant unusual or one-time item recognized in the
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