LeapFrog 2002 Annual Report Download - page 62

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our revenues are currently denominated in U.S. dollars, a strengthening of the dollar could make our products
less competitive in foreign markets. We are billed by and pay our third-party manufacturers in U.S. dollars. In
2002, we experienced a foreign currency exchange gain of $1.0 million. Prior to 2002, exchange rate fluctuations
had little impact on our operating results.
Cash equivalents are presented at fair value on our balance sheets. We invest our excess cash in accordance
with our investment policy. At December 31, 2002 our cash was invested primarily in municipal money market
funds and short term fixed income municipal securities.
We are exposed to market risk from changes in interest rates on our outstanding bank debt. The level of a
certain financial ratio maintained by LeapFrog determines interest rates we pay on borrowings. The interest rate
will be between prime and prime plus 0.25% or LIBOR plus 1.25% and LIBOR plus 2.00%. Prime rate is the rate
publicly announced by Bank of America as its prime rate The interest cost of our bank debt is affected by
changes in either prime rates or LIBOR. Any adverse changes could harm our operating results. We had no
outstanding debt at December 31, 2002.
Item 8. Financial Statements and Supplementary Data.
See “Index to Consolidated Financial Statements” at page F-1 below.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None
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