Rosetta Stone 2013 Annual Report Download - page 50

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Table of Contents







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Interest Income
$117
$ 187
$(70)
(37.4)%
Interest Expense
(61)
—
(61)
n/a
Other Income (Expense)
368
3
365
12,166.7 %
Total other income (expense)
$424
$ 190
$234
123.2 %
Interest income represents interest earned on our cash and cash equivalents. Interest income for the year ended December 31, 2013 was $117,000, a
decrease of $70,000, or 37%, from the year ended December 31, 2012.
Interest expense for the year ended December 31, 2013 was $61,000, an increase of $61,000, or 100% from the year ended December 31, 2012. This
increase was primarily attributable to interest on our capital leases.
Other income for the year ended December 31, 2013 was $368,000, an increase of $365,000, as compared to other income of $3,000 for the year ended
December 31, 2012. The increase was primarily due to a donation of software to a children's foundation in Korea and an increase in legal settlements in
connection with our anti-piracy enforcement efforts, partially offset by foreign exchange losses.









Income tax expense (benefit)
$(1,884)
$28,909
$(30,793)
(106.5)%
Our income tax benefit for the year ended December 31, 2013 was $1.9 million, compared to income tax expense of $28.9 million for the year ended
December 31, 2012. The change primarily resulted from partial valuation allowance releases of $5.4 million related to the Livemocha and Lexia acquisitions in
2013 and a $26.0 million non-cash charge associated with establishing a valuation allowance for our U.S. and certain foreign operations in 2012.

Our revenue increased to $273.2 million for the year ended December 31, 2012 from $268.4 million for the year ended December 31, 2011. The change
in revenue is due to an increase in North American Consumer revenues of $15.3 million, partially offset by a $10.2 million decrease in ROW Consumer
revenue, over the prior year period. Global Enterprise & Education revenues decreased $0.3 million over the same period, driven by a decline in our
government channel which was offset by growth in corporate revenues. Bookings, calculated as revenue plus the change in deferred revenue, increased to
$284.8 million for the year ended December 31, 2012 from $273.2 million for the year ended December 31, 2011. The increase was due to a $21.8 million
increase in North America Consumer bookings, partially offset by a $12.8 decrease in ROW Consumer bookings. Additionally, Global Enterprise &
Education bookings increased $2.6 million compared to the prior year period.
We reported an operating loss of $5.3 million for the year ended December 31, 2012 compared to an operating loss of $27.9 million for the year ended
December 31, 2011. The decrease in operating loss was primarily due to a decrease in operating expenses of $17.6 million and an increase in gross margin of
$5.0 million. The decrease in operating expenses was primarily related to a decrease of $12.3 million in kiosk related expenses as the number of worldwide
kiosks decreased from 174 as of December 31, 2011 to 87 as of December 31, 2012 and $8.2 million decrease in media and marketing activities related to
prior year brand identity campaigns and Version 4  launches in the U.K., Japan and Korea, as well as  in Korea and Japan. These decreases
were offset by a $1.9 million increase in restructuring and other related expenses including severance expense in the U.S., the closing of our Germany office
location, and the closing of several kiosks in Japan, a $0.6 million increase in VAT tax related to a change in our transfer pricing agreements, and
$0.6 million increase in non-kiosk payroll expenses primarily related to sales and marketing.

The following table sets forth revenue for each of our three operating segments for the years ended December 31, 2012 and 2011:
47