LeapFrog 2012 Annual Report Download - page 58

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
The Company performs a periodic impairment evaluation of capitalized product development costs. The
Company’s evaluation in 2012, 2011 and 2010 identified capitalized costs related to platforms that were in the
process of being discontinued or non-performing titles. Accordingly, the Company accelerated the amortization
of these costs, resulting in an increase in cost of sales in the U.S. segment of $161, $347 and $720 in 2012,
2011 and 2010, respectively. In addition, the Company wrote off website development costs of $2,696
in 2012.
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, 2012 and 2011 and
concluded that its goodwill balance of $19,549 had not been impaired.
8. Other Intangible Assets
The Company’s other intangible assets as of December 31, 2012 and 2011 were as follows:
December 31,
2012 2011
Intellectual property, license agreements and other intangibles ....... $16,755 $ 16,755
Less: accumulated amortization ............................ (15,805) (13,405)
Total ............................................ $ 950 $ 3,350
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 $2,400, $2,368 and $2,348 for the years ended December 31, 2012, 2011
and 2010, respectively.
The estimated future amortization expense of the Company’s intangible assets other than goodwill as of
December 31, 2012 is $900 in 2013 and $50 in 2014.
9. Accrued Liabilities
The Company’s accrued liabilities as of December 31, 2012 and 2011 were as follows:
December 31,
2012 2011
Employee-related expenses ............................... $22,796 $14,380
Advertising and promotion ............................... 10,613 10,993
Royalties payable ..................................... 8,385 7,894
Manufacturing and warehousing ........................... 1,675 2,385
Marketing, consulting and web-related ....................... 2,904 2,346
Other ............................................. 4,980 4,546
Total ............................................ $51,353 $42,544
50