TiVo 2004 Annual Report Download - page 27

Table of Contents
Index to Financial Statements
for evaluating and recording impairment losses on debt and equity investments, as well as new disclosure requirements for investments that are deemed to be
temporarily impaired. Adoption of the recognition and measurement guidance of EITF 03-1 has been temporarily deferred by the FASB, but the disclosure
requirements of EITF 03-1 are effective for our fiscal 2005 annual consolidated financial statements. Accordingly, additional disclosures as required by EITF
03-1 are included in Note 3 of the Notes to the Consolidated Financial Statements.
In November 2004, the FASB issued FASB Statement No. 151, Inventory Costs-an Amendment of ARB No. 43, Chapter 4 (FAS 151). FAS 151
amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be
recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after
June 15, 2005. The adoption of the provisions of FAS 151 is not expected to have a material impact on the Company's financial position or results of
operations.
On December 16, 2004, the FASB issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No.
123, Accounting for Stock Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends
FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123.
However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income
statement based upon their fair values. Pro forma disclosure is no longer an alternative. Early adoption will be permitted in periods in which financial
statements have not yet been issued. Statement 123(R) must be adopted in the first interim period beginning after June 15, 2005. We expect to adopt the
standard by August 1, 2005, the beginning of our third quarter.
Statement 123(R) permits public companies to adopt its requirements using one of two methods:
1. A "modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of
Statement 123(R) for all share-based payments granted after the effective date; and (b) based on the requirements of Statement 123 for all awards
granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date.
2. A "modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits
entities to restate based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior
periods presented; or (b) prior interim periods of the year of adoption.
We are currently evaluating which of the two methods we will adopt.
As permitted by Statement 123, we currently account for share-based payments to employees using the intrinsic value method and, as such, generally
recognize no compensation cost for employee stock options. Accordingly, the adoption of Statement 123(R)'s fair value method will have a significant impact
on our results of operations, although it will have no impact on our overall financial position based on our current share based awards to employees. The
impact of adoption of Statement 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future, the
valuation model used to value the options and other variables. However, had we adopted Statement 123(R) in prior periods, the impact of that standard would
have approximated the impact of Statement 123 as described in the Stock Compensation disclosure included in Note 2 to our consolidated financial
statements.
Results of Operations
Net Revenues. Our net revenues for the fiscal years ended January 31, 2005, 2004, and 2003 as a percentage of total net revenues were as follows:
Fiscal Year Ended January 31,
Revenues
2005 2004 2003
(In thousands, except percentages)
Service revenues $ 107,166 62% $ 61,560 44% $ 39,261 41%
Technology revenues 8,310 5% 15,797 11% 20,909 22%
Hardware revenues 111,275 65% 72,882 52% 45,620 47%
Rebates, revenue share, and other payments to channel (54,696) (32)% (9,159) (6)% (9,780) (10)%
Net revenues $ 172,055 $ 141,080 $ 96,010
Change from prior fiscal year 22% 47% 445%
25