Memorex 2009 Annual Report Download - page 38

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)
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43.3 $ 12.7 $19.6 $9.5 $ 1.5
Purchase obligations(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.8 175.8 — — —
Litigation settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.0 8.2 24.8 — —
Other liabilities(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.6 — — — 20.6
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $272.7 $196.7 $44.4 $9.5 $22.1
(1) 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.
(2) Timing of payments for the vast majority of other liabilities cannot be reasonably determined and, as such, have been
included in the “More Than 5 Years” category.
The table above does not include payments for non-contributory defined benefit pension plans. It is our general
practice, at a minimum, to fund amounts sufficient to meet the requirements set forth in applicable benefits laws and local
tax laws. From time to time, we contribute additional amounts, as we deem appropriate. We expect to contribute
approximately $5 million to $10 million to our pension plans in 2010 and have $36.3 million recorded in other liabilities
related to pension plans as of December 31, 2009.
The table above does not include possible payments for uncertain tax positions. Our reserve for uncertain tax
positions, including accrued interest and penalties, was $16.0 million as of December 31, 2009. 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 $30 million, $20 million and $6 million related to
the TDK Recording Media, Memcorp and XtremeMac 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,
2009 as payment is not probable based on current financial performance. The above table does not include any contingent
purchase price adjustments.
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. We record income taxes under the asset and liability method,
whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis
and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid.
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