LeapFrog 2009 Annual Report Download - page 72

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
The total amount of royalty expense related to third-party license agreements was $15,711, $19,315, and
$21,768, for 2009, 2008 and 2007, respectively.
During the fourth quarter of 2008, the Company implemented a company-wide reduction in force resulting in a
significant reduction in employee-related expenses accrued at December 31, 2009 as compared to December 31,
2008. In addition, the bonus accrual for 2009 was significantly lower than for 2008 as performance targets were
not met.
One-time termination benefits accrued at December 31, 2009 were as a result of consolidation of the Company’s
France and United Kingdom administrative operations and the termination of several senior-level employees.
The liabilities were recorded at fair value, which equaled the stated value of the benefits.
In the fourth quarter of 2008, the Company ceased using its school-related facility in Austin, Texas related to its
former School segment and one of four suites in its Emeryville, California headquarters and vacated both office
sites. The fair values of future lease expenses were calculated based on the net of the remaining contractual lease
rental payments reduced by estimated sublease rentals that management believes could be reasonably obtained
for the facilities, discounted to present value using the Company’s credit-adjusted risk-free rate of 5.37%, and
then offset by deferred rent credits. During the second quarter of 2009, the Company sublet the vacated suite at
its headquarters to a third party. As of December 31, 2009 and 2008, the facilities closure liabilities were $495
and $3,664, respectively, of which, $234 and $1,935 were included in current liabilities and $261 and $1,729
were included in other long-term liabilities.
8. Income Taxes
The Company’s loss before taxes included the following components:
Years Ended December 31,
2009 2008 2007
United States ................................................... $(10,399) $(63,509) $(117,751)
Foreign ........................................................ 523 (2,971) 18,998
Total ...................................................... $ (9,876) $(66,480) $ (98,753)
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