TiVo 2011 Annual Report Download - page 67

Table of Contents TIVO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
TiVo Inc. (together with its subsidiaries the "Company” or “TiVo”) was incorporated in August 1997 as a Delaware corporation and is located in Alviso,
California. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All inter-company accounts and
transactions have been eliminated in consolidation. The Company conducts its operations through one reportable segment.
The Company is subject to a number of risks, including delays in product and service developments; competitive product and service offerings; lack of
market acceptance; uncertainty of future profitability; the dependence on third-parties for manufacturing, marketing, and sales support, as well as third-party
rollout schedules, software development issues for third-party products which contain its technology; intellectual property claims by and against the
Company; access to television programming including digital cable signals in connection with CableCARD and switched digital technologies; dependence on
its relationships with third-party service providers such as Charter, DIRECTV, Grande Communications, ONO, RCN, Suddenlink, and Virgin Media, among
others, for subscription growth; and the Company’s ability to sustain and grow both its TiVo-Owned and MSO subscription base. The Company anticipates
that its retail business will continue to be seasonal and expects to generate a significant portion of its new subscriptions during and immediately after the
holiday shopping season. However, while the Company expects growth in its MSO subscription base in fiscal year ending January 31, 2013, the Company
remains cautious about its ability to grow or even maintain its TiVo-Owned subscription base.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and judgments affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Company evaluates its estimates, including
those related to estimated lives of product lifetime subscriptions, total estimated cost of engineering service and profitability of deployment agreements,
allowance for doubtful accounts, product returns, inventories and related reserves, warranty obligations, contingencies, stock compensation, and assessment of
other-than-temporary impairment of investments, allocation of amounts from litigation settlements. The Company bases estimates on historical experience
and on other assumptions that its management believes are reasonable under the circumstances. As future events and their effects cannot be determined with
precision, actual results could differ significantly from these estimates. Changes in those estimates will be reflected in the financial statements in future
periods.
Cash and Cash Equivalents
The Company considers investments with a maturity of three months or less when purchased to be cash equivalents. The majority of payments due from
banks for third-party credit card, debit card, and electronic benefit transactions (“EBT”) process within 24-72 hours, except for transactions occurring on a
Friday, which are generally processed the following Monday. All credit card, debit card, and EBT transactions that process in less than three days are
classified as cash and cash equivalents. Amounts due from banks for these transactions classified as cash totaled $1.6 million and $1.8 million at January 31,
2012 and 2011, respectively.
Short-term and Long-term Investments
Short-term and long-term investments are classified as available-for-sale and are carried at fair value. The Company’s short-term and long-term
investments are reviewed each reporting period for declines in value that are considered to be other-than temporary and, if appropriate, the investments are
written down to their estimated fair value. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities
are included in the Company’s consolidated statements of operations. Unrealized gains and unrealized losses deemed temporary are included in accumulated
other comprehensive income (loss). The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as
available-for-sale are included in interest income in the consolidated statements of operations.
Receivables
Accounts receivable consist primarily of receivables from retailers, cable and satellite companies, as well as
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