TiVo 2004 Annual Report Download - page 87

Table of Contents
Index to Financial Statements
In August and September 2004, Phillip Igbinadolor, on behalf of himself, filed complaints against TiVo, Sony Corporation, Sony Electronics, Inc.,
Sony Corporation of America, JVC, Clarrion Corporation of America, and Philips Consumer Electronics Company in the U.S. District Court for the Eastern
District of New York alleging infringement of U.S. Patent Nos. 395,884 and 6,779,196 and U.S. Trademark No. 2,260,689, each relating to an "integrated car
dubbing system." The complaints were consolidated into one action captioned Igbinadolor v. Sony Corporation et al. On November 10, 2004, the Company
filed its answer, affirmative defenses and counterclaims and on January 31, 2005, the Company filed a motion for summary judgment. The Company is
incurring expenses in connection with this litigation that may become material in the future, and in the event there is an adverse outcome, the Company's
business could be harmed.
On November 23, 2004, Digital Development Corporation filed a complaint against TiVo Inc. in the U.S. District Court for the Southern District of
New York alleging infringement, inducement of others to infringe, and contributory infringement of U.S. Patent Nos. 4,975,950 and 5,121,345, each entitled
"System and Method of Protecting Integrity of Computer Data and Software." On January 27, 2005, the Company and Digital Development Corporation
entered into a settlement agreement which the Company agreed to license the patents at issue for an immaterial amount, and on February 23, 2005, the Court
dismissed the case.
The Company is involved in numerous lawsuits in the ordinary course of its business. The Company assesses potential liabilities in connection with
these lawsuits under Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." The Company accrues an estimated loss for these
loss contingencies if both of the following conditions are met: information available prior to issuance of the financial statements indicates that it is probable
that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. As of January 31, 2005, the
Company had not accrued a liability for any of the lawsuits filed against it as the conditions for accrual have not been met.
Facilities Leases
In October 1999, the Company entered into an office lease with WIX/NSJ Real Estate Limited Partnership for its headquarters. The lease began on
March 10, 2000 and has a seven-year term. Monthly rent is approximately $258,000 with built-in base rent escalations periodically throughout the lease term.
The lease is classified as an operating lease. Rent expense is recognized using the straight-line method over the lease term. The lease is classified as an
operating lease. Rent expense is recognized using the straight-line method over the lease term and for the fiscal years ended January 31, 2005, 2004, and 2003
was $3.0 million, $(624,000), and $1.4 million, respectively. Additionally, the Company delivered a letter of credit totaling $476,683, to WIX/NSJ Real
Estate Limited Partnership as collateral for performance by the Company of all of its obligations under the lease. The letter of credit is to remain in effect the
entire term of the lease.
The Company's corporate headquarters consists of two buildings located in Alviso, California, which are used for administrative, sales and marketing,
customer service, and product research and development activities. Operating lease cash payments for the fiscal years ended January 31, 2005, 2004, and 2003
was $3.1 million, $3.0 million, and $2.9 million, respectively.
In January 2002, the Company recorded an accrual of $5.1 million for the abandonment of one of the two-story Alviso buildings as the Company
planned for it to be vacant during the fiscal year ended January 31, 2003. In January 2003, the Company made an adjustment to reduce the accrual by
$449,000 as the Company planned to reoccupy one floor of the vacant building. In January 2004, the Company reversed the balance of the restructuring
accrual of $2.7 million, when the Company made the decision to reoccupy the second floor during the fiscal year ended January 31, 2005.
Additionally, the Company leases office space in Berkshire, United Kingdom under an operating lease that expires in March 2006. The Company
abandoned this facility in May 2002 and recorded a restructuring accrual of $367,000.
The following table summarizes the accrued facilities expenses recorded as a result of the Company's unoccupied facility as of January 31, 2005:
Accrual
balance as of
January 31, 2003
Total cash
payments
for the
year ended
January 31, 2004
Accrual
balance as of
January 31, 2004
Total cash
payments
for the
year ended
January 31, 2005
Accrual
balance as of
January 31, 2005
(In thousands)
TiVo, Alviso, CA facility lease expenses $ 3,640 $ (3,640) $ — $ — $ —
TiVo, Berkshire, United Kingdom facility lease expenses 367 (113) 254 (113) 141
Total $ 4,007 $ (3,753) $ 254 $ (113) $ 141
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