LeapFrog 2004 Annual Report Download - page 106

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LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
If the Company had reported net income for the year ended December 31, 2004, the calculation of diluted net
income (loss) per Class A and B share would have included an additional 1,582 common equivalent shares
related to outstanding stock options and unvested stock (determined using the treasury stock method).
21. Commitments and Contingencies
The Company leases office and warehouse space under noncancelable operating leases having initial terms
in excess of one year and expiring in various years between 2005 and 2016. The Company also has several
noncancelable office equipment leases with initial terms in excess of one year and which expire in various years
between 2005 and 2007, and certain of these leases contain rent escalation clauses. Generally, these have initial
lease periods of three to ten years, and contain provisions for renewal options of five years at market rates.
Rent expense for the years ended December 31, 2004, 2003 and 2002 was $5,088, $3,656 and $2,772,
respectively.
Future minimum annual payments under the Company’s commitments for the years ended December 31
are:
Year Commitments
2005 .......................................................... $21,637
2006 .......................................................... 9,622
2007 .......................................................... 5,142
2008 .......................................................... 4,565
2009 .......................................................... 4,581
Thereafter ...................................................... 15,023
Total .......................................................... $60,570
The commitment schedule includes commitments related to the amendment of the Emeryville lease signed
in March 2005. The Company is also obligated to pay certain minimum royalties in connection with license
agreements to which the Company is a party. Commitments to be paid in 2005 include $11,000 in royalties
related to a technology agreement. Amounts related to capital leases are included in the schedule above but are
immaterial.
Deferred rent liability was $1,275 and $528 at December 31, 2004 and 2003.
Legal Proceedings
Various claims and lawsuits are pending against the Company. The Company intends to defend or pursue
these suits vigorously.
LeapFrog Enterprises, Inc. v. Fisher-Price, Inc. and Mattel, Inc.
In October 2003, the Company filed a complaint in the federal district court of Delaware against Fisher-
Price, Inc., No. 03-927 GMS, alleging that the Fisher-Price PowerTouch learning system violates United States
Patent No. 5,813,861. In September 2004, Mattel, Inc. was joined as a defendant. The Company is seeking
damages and injunctive relief. Trial by jury is set for May 16, 2005.
F-27