Rosetta Stone 2015 Annual Report Download - page 50

Table of Contents

Net cash used in financing activities was $0.3 million for the year ended December 31, 2014 compared to cash used in financing activities of $10.5
million for the year ended December 31, 2013. Net cash used in financing activities during the year ended December 31, 2014 was primarily due to payments
made under capital lease obligations of $0.6 million and payment of debt issuance costs of $0.4 million, offset by net cash provided of $0.7 million from the
exercise of stock options.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financing arrangements. We do not have any material interest in entities referred to as variable interest
entities, which include special purpose entities and other structured finance entities.
Contractual Obligations
As discussed in Notes 9 and 16 of Item 8, , we lease buildings, parking spaces, equipment, and office
space under operating lease agreements. We also lease certain equipment, software and a building near Versailles, France under capital lease agreements. The
following table summarizes our future minimum rent payments under non-cancellable operating and capital lease agreements as of December 31, 2015 and
the effect such obligations are expected to have on our liquidity and cash flow in future periods.
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
Capitalized leases and other financing arrangements
$ 3,621
$ 644
$ 1,138
$ 984
$ 855
Operating leases
16,592
5,591
8,196
2,215
590
Total
$ 20,213
$ 6,235
$ 9,334
$ 3,199
$ 1,445
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Foreign Currency Exchange Risk
The functional currency of our foreign subsidiaries is their local currency. Accordingly, our results of operations and cash flows are subject to
fluctuations due to changes in foreign currency exchange rates. The volatility of the prices and applicable rates are dependent on many factors that we cannot
forecast with reliable accuracy. In the event our foreign sales and expenses increase, our operating results may be more greatly affected by fluctuations in the
exchange rates of the currencies in which we do business. At this time we do not, but we may in the future, invest in derivatives or other financial instruments
in an attempt to hedge our foreign currency exchange risk.
Interest Rate Sensitivity
Interest income and expense are sensitive to changes in the general level of U.S. interest rates. However, based on the nature and current level of our
marketable securities, which are primarily short-term investment grade and government securities and our notes payable, we believe that there is no material
risk of exposure.
Credit Risk
Accounts receivable and cash and cash equivalents present the highest potential concentrations of credit risk. We reserve for credit losses and do not
require collateral on our trade accounts receivable. In addition, we maintain cash and investment balances in accounts at various banks and brokerage firms.
We have not experienced any losses on cash and cash equivalent accounts to date. We sell products to retailers, resellers, government agencies, and
individual consumers and extend credit based on an evaluation of the customer's financial condition, without requiring collateral. Exposure to losses on
accounts receivable is principally dependent on each customer's financial condition. We monitor exposure for credit losses and maintain allowances for
anticipated losses. We maintain trade credit insurance for certain customers to provide coverage, up to a certain limit, in the event of insolvency of some
customers.

Our consolidated financial statements, together with the related notes and the report of independent registered public accounting firm, are set forth on
the pages indicated in Item 15.
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