Question-and-Answer Session
Operator
(Operator instructions). We will go first to Jay Vleeschhouwer with Merrill Lynch.
Jay Vleeschhouwer - Merrill Lynch
Thanks, good morning. Frank, could you walk us though the accounting for the IP licensing first, that is question number one. At the end of '07 you had about $350 million in deferred bear, $430 million at the end of '08, second quarter of '08, and now just $15 million according to the Q, so help us understand that reduction in deferred, the VFOE conditions you met for taking the amount of up-front revenues you did in Q3 for IP, and how you still get the $250 to 350 million per year for the next number of years. Then a couple of follow-ups, thanks.
Frank Sklarsky
Keep in mind that the deferred revenue account is all the deferred revenue, particularly associated with IP, but there was a long-term arrangement obviously that we now reached an agreement for in the third quarter of 2008 that required us to reduce the gross amount of the liability and record the amount of profitability in the third quarter, net of all the items that are disclosed in the 10-Q, including various fees and other deferred revenues associated with that amount.
So it was a long-term agreement which has now been translated into resolving that agreement in the third quarter. And so the total amount of the deferred revenue is reduced and results in the net amount, net of fees and other reserves, to the amount that you have seen in the 10-Q of $112 million.
Jay Vleeschhouwer - Merrill Lynch
Secondly, could you be a bit more specific about the incremental cost reductions and operational improvements you will be making? Can you talk about that in terms of any functionaries of the company, product lines, or business units? We have talked, for example, about your need to materially consolidate your portfolio in GCG, like some of your other prepress competitors are doing; could you just elaborate on that, please?
Frank Sklarsky
Well, first of all, I would just point out again that we know how to do this really well in terms of cost reduction. In the third quarter, I want to reiterate what was in the release, the fact that we reduced SG&A costs by $61 million on a year-over-year basis, and brought the SG&A as a percent of revenue down by over 1.5 percentage points.
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