Vtech 2015 Annual Report Download - page 70

VTech Holdings Limited Annual Report 2015
Notes to the Financial Statements
68
19 Commitments
2015
US$ million
2014
US$ million
(i) Capital commitments for property,
plant and equipment
Authorised but not contracted for 26.3 27.3
Contracted but not provided for 8.6 7.4
34.9 34.7
(ii) Operating lease commitments
The future aggregate minimum
lease payments under non-
cancellable operating leases are
as follows:
Land and buildings
In one year or less 16.1 15.6
Between one and two years 13.3 14.2
Between two and five years 35.0 36.6
In more than five years 15.7 24.4
80.1 90.8
In November 2010, the Group has entered into agreements with
an independent third party in the PRC to lease factory premises
in Houjie, Dongguan comprising several factory buildings. There
are a number of leases which expire in 2016, 2022, 2030 and
2031 respectively. The lease expiring in 2016 is not cancellable.
The lease expiring in 2022 can be cancelled on six months’ notice
without penalty. The lease expiring in 2030 and 2031 have a
non-cancellable period of first ten years. The operating lease
commitments above include total commitments over the non-
cancellable period of the lease terms.
In November 2010, September 2013 and January 2014, the Group
entered into an agreement with an independent third party in
the PRC whereby the PRC party constructed in phases and leases
to the Group a production facility in Liaobu, Dongguan. There are
a number of leases which expire in 2029, 2030, 2031 and 2035
respectively. The lease expiring in 2029, 2030 and 2035 have a non-
cancellable period of first ten years. The lease expiring in 2031
is not cancellable. The operating lease commitments above
include total commitments over the non-cancellable period of the
lease terms.
Under a Brand License Agreement expiring on 31 March 2020, a
wholly-owned subsidiary of the Group is required to make royalty
payments to AT&T Intellectual Property II, L.P., calculated as a
percentage of net sales, as defined, of the relevant categories of
products, subject to certain minimum aggregate royalty payments.
The percentage of net sales payable varies over time and between
products. There is no maximum royalty payment. The annual
minimum royalty payment is determined based on a percentage of
the preceding year’s earned royalty payment (calculated based on
the preceding year’s net sales payable).
Certain wholly-owned subsidiaries of the Group (the “licensees”)
entered into certain licensing agreements with various third party
licensors for the granting of certain rights to use the relevant
cartoon characters in the Group’s electronic learning products.
Under these licensing agreements, the licensees are required to
make royalty payments to the licensors, calculated as a percentage
of net sales of the relevant character licensed products, subject to
certain minimum aggregate royalty payments. The percentage of
royalty payable varies over time and between licensed characters.
There is no maximum royalty payment. The aggregate minimum
royalty payments as at 31 March 2015 amounted to US$1.9 million
(2014: US$2.2 million), of which US$1.6 million and US$0.2 million
are payable in the financial years ended 31 March 2016 and 2017
respectively and the remaining US$0.1 million is payable before
the financial year ended 31 March 2020.
20 Contingent Liabilities
The Directors have been advised that certain accusations of
infringements of patents have been lodged against the Company
and its subsidiaries. In the opinion of the legal counsel, it is too
early to evaluate the outcome of these claims and provisions have
been made only to the extent that the amounts can be reliably
estimated.
Certain subsidiaries of the Group are involved in litigation arising in
the ordinary course of their respective businesses. Having reviewed
outstanding claims and taking into account of legal advice
received, the Directors are of the opinion that even if the claims are
found to be valid, there will be no material adverse effect on the
financial position of the Group.
As at 31 March 2015, there were contingent liabilities in respect
of guarantees given by the Company on behalf of subsidiaries
relating to overdrafts, short term loans and credit facilities of up
to US$353.6 million (2014: US$353.4 million). The Company has
not recognised any deferred income for the guarantees given in
respect of borrowings and other banking facilities for subsidiaries
as their fair value cannot be reliably measured and their transaction
price was US$Nil.
As at 31 March 2015, the Directors do not consider it is probable
that a claim will be made against the Company under any of
the guarantees.