LeapFrog 2010 Annual Report Download - page 66

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
During the year ended December 31, 2009, there was a $431 decline in the Company’s estimated cash flows
expected to be collected on its ARS investments, of which $409 was determined to be credit-related and therefore
reported as a reduction to earnings. Also during the year, the Company tendered one of its ARS investments,
which had been written down by $580 in prior years from the original par value of $2,000, resulting in a $143
gain.
4. Inventories
The Company’s inventories, stated on a first-in, first-out basis at the lower of cost or market as of December 31,
2010 and 2009 were as follows:
December 31,
2010 2009
Raw materials ............................................................. $ 3,277 $ 1,739
Finished goods ............................................................ 44,178 26,441
Total ................................................................ $47,455 $28,180
During 2010, 2009 and 2008, the Company recorded net sales of inventory written down in the previous year
resulting in a benefit to gross margin of $1,997, $2,899 and $1,016, respectively.
At December 31, 2010 and 2009, there were no accrued liabilities for cancelled purchase orders.
5. Property and Equipment
As of December 31, 2010 and 2009, property and equipment consisted of the following:
December 31,
2010 2009
Tooling, cards, dies and plates ................................................ $16,250 $ 14,053
Computers and software ..................................................... 36,729 30,920
Equipment, furniture and fixtures .............................................. 3,650 3,939
Leasehold improvements .................................................... 4,347 4,226
60,976 53,138
Less: accumulated depreciation ............................................... (45,917) (38,870)
Total ................................................................ $15,059 $ 14,268
Property and equipment, with the exception of leasehold improvements is depreciated on a straight-line basis
over a period of two to three years. Leasehold improvements are depreciated over the shorter of their useful life
or the term of the lease. Depreciation expense for tooling cards, dies and plates is charged to cost of sales in the
statement of operations as the expense relates directly to the product manufacturing process. The expense
charged to cost of sales was $2,238, $3,193 and $2,486 for the three years ended December 31, 2010, 2009 and
2008, respectively.
Depreciation expense related to the remainder of property and equipment included in depreciation and
amortization expense in the statements of operations was $6,401, $7,395 and $7,631 for the three years ended
December 31, 2010, 2009 and 2008, respectively.
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