TiVo 2006 Annual Report Download - page 86

Table of Contents
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
As of January 31,
2007 2006
(In thousands)
Compensation and vacation $ 5,124 $ 5,188
Consumer rebates 14,538 17,248
Marketing and promotions 6,471 5,285
Redeemable gift certificates for subscriptions 2,722 1,932
Other 7,687 7,796
Total accrued liabilities $ 36,542 $ 37,449
7. INDEMNIFICATION ARRANGEMENTS AND GUARANTEES
Product Warranties
The Company's standard warranty period to consumers for TiVo-enabled DVRs is 90 days from the date of consumer purchase also known as the
Limited Warranty. Within the limited warranty period, consumers are offered a no-charge exchange for TiVo-enabled DVRs returned due to product defect,
within 90 days from the date of consumer purchase. Thereafter, consumers may exchange a TiVo-enabled DVR with a product defect for a charge. At
January 31, 2007 and 2006, the accrued warranty reserve was $479,000 and $166,000, respectively. The Company's accrued warranty reserve is included in
accrued liabilities in the accompanying consolidated balance sheets.
Indemnification Arrangements
The Company undertakes indemnification obligations in its ordinary course of business. For instance, the Company has undertaken to indemnify its
underwriters and certain investors in connection with the issuance and sale of its securities. The Company has also undertaken to indemnify certain customers
and business partners for, among other things, the licensing of its products, the sale of its DVRs, and the provision of engineering and consulting services.
Pursuant to these agreements, the Company may indemnify the other party for certain losses suffered or incurred by the indemnified party in connection with
various types of claims, which may include, without limitation, intellectual property infringement, advertising and consumer disclosure laws, certain tax
liabilities, negligence and intentional acts in the performance of services and violations of laws, including certain violations of securities laws with respect to
underwriters and investors. The term of these indemnification obligations is generally perpetual. The Company's obligation to provide indemnification would
arise in the event that a third party filed a claim against one of the parties that was covered by the Company's indemnification obligation. As an example, if a
third party sued a customer for intellectual property infringement and the Company agreed to indemnify that customer against such claims, its obligation
would be triggered.
The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to its indemnification obligations. A few of
the variables affecting any such assessment include but are not limited to: the nature of the claim asserted; the relative merits of the claim; the financial ability
of the party suing the indemnified party to engage in protracted litigation; the number of parties seeking indemnification; the nature and amount of damages
claimed by the party suing the indemnified party; and the willingness of such party to engage in settlement negotiations. During the period of calendar year
2002 through 2006, the Company incurred legal fees in the amount of $6.1 million in connection with the indemnification and defense of a claim against one
of its manufacturers of which approximately $50,000 was related to fiscal year 2007. However, that indemnification obligation was not typical of the
Company's indemnity liability and does not necessarily provide a reasonable measure of liability that may be expected to be incurred pursuant to its
indemnification obligations. Due to the nature of the Company's potential indemnity liability, its indemnification obligations could range from immaterial to
having a material adverse impact on its financial position and its ability to continue operation in the ordinary course of business.
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