LeapFrog 2011 Annual Report Download - page 68

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Amortization expense related to content development is charged to cost of sales in the statement of operations
and totaled $6,557, $6,916 and $6,896 for the years ended December 31, 2011, 2010 and 2009, respectively.
Amortization expense related to website development is included in depreciation and amortization expense and
totaled $2,238, $2,434 and $2,391 for the years ended December 31, 2011, 2010 and 2009, respectively.
The Company performs a periodic impairment evaluation of capitalized product development costs. The
Company’s evaluation in 2011 and 2010 identified capitalized costs related to platforms that were in the
process of being discontinued or non-performing titles, while the 2009 evaluation resulted in minor
impairments. Accordingly, the Company accelerated the amortization of these costs, resulting in an increase in
cost of sales in the U.S. segment of $347, $720 and $279 in 2011, 2010 and 2009, respectively.
7. Goodwill
The Company’s goodwill is related to its 1997 acquisition of substantially all the assets and business of its
predecessor, LeapFrog RBT, and its 1998 acquisition of substantially all the assets of Explore Technologies.
All of its goodwill is allocated to the Company’s U.S. segment.
The Company performed the qualitative assessment for impairment as of December 31, 2011 and the
quantitative test for impairment as of December 31, 2010, and concluded that its goodwill balance of $19,549
had not been impaired.
8. Other Intangible Assets, net
The Company’s other intangible assets, net, as of December 31, 2011 and 2010 were as follows:
December 31,
2011 2010
Intellectual property, license agreements and other intangibles ............. $16,755 $ 16,690
Less: accumulated amortization.................................. (13,405) (11,037)
Total .................................................. $ 3,350 $ 5,653
In February 2010, the Company acquired, for $5,400, intangible assets related to the rights to use an
application-specific integrated circuit technology included in its Tag and Tag Junior reading systems. The
purchased intangible assets are being amortized to operating expense on a straight-line basis over three years.
In 2004, the Company entered into a ten-year license agreement with a third party to use the third party’s
technology in a Company platform and related products. The $6,000 license fee is included in intangible
assets on the balance sheet and is being amortized to operating expense on a straight-line basis over the life of
the contract.
Amortization expense of other intangible assets is included in depreciation and amortization expense in the
statement of operations and totaled $2,368, $2,348 and $620 for the years ended December 31, 2011, 2010
and 2009, respectively.
The estimated future amortization expense of the Company’s intangible assets other than goodwill as of
December 31, 2011 is as follows:
Fiscal Year Amount
2012 .............................................................. $2,400
2013 .............................................................. 900
2014 .............................................................. 50
Total ............................................................ $3,350
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