LeapFrog 2002 Annual Report Download - page 86

LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except share, per share and percent data)
9. Accrued Liabilities
December 31,
2002 2001
Royalties and commission payable ............................... $ 5,587 $1,324
Legal fees and settlement costs .................................. 5,562 —
Accrued compensation and benefits .............................. 4,701 1,886
Accrued inventory related costs ................................. 3,372 1,060
Sales and VAT tax payable ..................................... 1,339 —
Accrued equity participation plan liability ......................... — 1,265
Accrued patents acquisition cost ................................. — 1,000
Accrued interest .............................................. — 310
Other ...................................................... 4,935 2,497
$25,496 $9,342
10. Borrowings Under Credit Agreements and Long-Term Debt
On July 30, 2002, upon completion of our initial public offering the Company repaid the entire outstanding
balance of $34,100 owing under our long term secured credit facility with Foothill Capital Corporation. On
October 28, 2002, the Company formally terminated this facility.
On December 31, 2002 the Company entered into a $30.0 million three year unsecured senior credit facility
with a financial institution, with an option to increase the facility to $50.0 million. The agreement requires the
Company to comply with certain financial covenants, including the maintenance of a minimum quick ratio on a
quarterly basis and a minimum level of EBITDA on a rolling quarterly basis. The Company was in compliance
with these covenants at December 31, 2002. The level of a certain financial ratio maintained by the Company
determines interest rates on borrowings. The interest rate will be between prime and prime plus 0.25% or LIBOR
plus 1.25% and LIBOR plus 2.00%.
The balance outstanding at December 31, 2002 and 2001 was $0 and $61,163, respectively, and is classified
as long-term on the balance sheet. At December 31, 2002 and 2001, the Company had outstanding letters of
credit of $1,350 and $2,700, respectively. At December 31, 2002 and 2001, $29,849 and $15,827 of unused
borrowings were available to the Company.
During 2000, the Company obtained funding totaling $22,500 from Knowledge Universe Capital Co. LLC,
an affiliate, through the issuance of a series of promissory notes. The notes payable and related accrued interest
were paid in full in April 2001.
11. License Agreements
The Company licenses certain of its content from third parties under exclusive and nonexclusive
agreements, which permit the Company to utilize characters, stories, illustrations and/or trade names throughout
specified geographic territories. The total amount of royalty expense related to these license agreements was
$6,463, $1,223 and $193 for the years ended December 31, 2002, 2001 and 2000, respectively. The Company
had $3,949 and $756 in accrued royalties at December 31, 2002 and 2001, respectively. See Note 20
(Commitments and Contingencies).
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