LeapFrog 2012 Annual Report Download - page 71

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
In addition, the Company had commitments to purchase inventory under normal supply arrangements totaling
approximately $53,929 at December 31, 2012. The Company also had outstanding off-balance sheet
commitments for outsourced manufacturing and component purchases of $3,177.
Legal Proceedings
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business,
including claims of alleged infringement of patents and other intellectual property rights, claims related to
breach of contract, employment matters and a variety of other claims. Unsettled matters are in various stages
of litigation and their outcome is currently not determinable. However, in the opinion of management, based
on current knowledge, none of the pending legal proceedings or claims is likely to have a material adverse
effect on the Company’s financial position, results of operations or cash flows. Regardless of the outcome,
litigation can have an adverse impact on the Company because of defense costs, diversion of management
resources and other factors. In addition, although management considers the likelihood of such an outcome to
be remote, if one or more of these legal matters were resolved against the Company in a particular reporting
period for amounts in excess of management’s expectations, the Company’s consolidated financial statements
of the same reporting period could be materially adversely affected.
20. Segment Reporting
The Company’s business is organized, operated and assessed in two geographic segments: U.S. and
International.
The Company attributes sales to non-U.S. countries on the basis of sales billed by each of its foreign
subsidiaries to its customers. Additionally, the Company attributes sales to non-U.S. countries if the product is
shipped from Asia or one of its leased warehouses in the U.S. to a distributor in a foreign country. The
Company charges all of its indirect operating expenses and general corporate overhead to the U.S. segment
and does not allocate any of these expenses to the International segment.
The accounting policies of the segments are the same as those described in Note 2 of these Notes to the
Consolidated Financial Statements.
The primary business of the two operating segments is as follows:
• The U.S. segment is responsible for the development, design, sales and marketing of multimedia
learning platform products and related content, and learning toys, sold primarily through retail and
distributor channels and through the Company’s website in the U.S. In addition, beginning in late
2011, this segment began distributing third-party content through the Company’s App Center.
• The International segment is responsible for the localization, sales and marketing of multimedia
learning platform products and related content, and learning toys, originally developed for the
U.S., sold primarily in retail and distributor channels outside of the U.S. In addition, beginning in
late 2011, this segment began distributing, to certain territories, third-party content through the
Company’s App Center.
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