LeapFrog 2010 Annual Report Download - page 45

Seasonal Patterns of Cash Provided By (Used in) Operations
The table below shows our seasonal patterns of cash flow provided by (used in) operations by quarter for the
fiscal years ended December 31, 2010, 2009 and 2008.
2010 2009 2008
(Dollars in millions)
1st quarter ....................................................... $34.5 $ 10.1 $ 18.1
2nd quarter ...................................................... (27.2) (20.6) (30.7)
3rd quarter ...................................................... (30.3) (39.8) (35.4)
4th quarter ...................................................... 0.4 45.3 60.0
Total, net for fiscal year ....................................... $(22.6) $ (5.0) $ 12.0
With the exception of 2008 and 2009, our cash flow from operations have generally been highest in the first
quarter of the year when we collected the majority of our accounts receivable booked in the fourth quarter of the
prior year. In 2008 and 2009, quarterly cash flows did not conform to this general pattern as a result of our
tightened cash management practices in response to the economic crisis, leading to higher accounts payable
balances. Thus, cash flow provided by operations was higher in the fourth quarter of 2008 and 2009 than in the
first quarter of 2009 and 2010, respectively.
Cash flow used in operations tends to be highest in our third quarter, as collections from prior accounts
receivables taper off and we invest heavily in inventory in preparation for the fourth quarter holiday season.
Historically, cash flow generally turned positive again in the fourth quarter as we start to collect on the accounts
receivables associated with the holiday season. Based on the shift in ordering patterns by retailers beginning in
2009, which resulted in orders being placed significantly later in the year, cash flows from operations in the
fourth quarter of 2010 were significantly lower than has historically been the case in the fourth quarter of our
fiscal year. As a result, we expect cash flows from operations in the first quarter of 2011 to be higher than
previous years.
These seasonal patterns may vary depending upon general economic conditions and other factors.
Line of Credit and Borrowing Availability
On August 13, 2009, we entered into an amended and restated loan and security agreement for a $75.0 million
asset-based revolving credit facility with Bank of America, N.A. and certain other financial institutions. We have
granted a security interest in substantially all of our assets to the lenders as security for our obligations under the
facility. Provided there is no default under the loan agreement and subject to availability of additional credit, we
may elect, without the consent of any of the lenders, to increase the size of the credit facility under the loan
agreement up to an aggregate of $150.0 million.
This credit facility superseded and replaced our previous $100.0 million credit facility, dated November 8, 2005,
which would have otherwise expired in November 2010 and was terminated as of August 13, 2009 in connection
with signing the amended and restated loan and security agreement.
The borrowing availability varies according to the levels of our accounts receivable and cash and investment
securities deposited in secured accounts with the lenders. Subject to the level of this borrowing base, we may
make and repay borrowings from time to time until the maturity of the facility. The interest rate is, at our
election, Bank of America, N.A.’s prime rate (or base rate) or a LIBOR rate defined in the loan agreement, plus,
in each case, an applicable margin. The applicable margin for a loan depends on the average daily availability for
the most recent fiscal quarter and the type of loan. Availability under this agreement was $75.0 million as of
December 31, 2010.
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