LeapFrog 2013 Annual Report Download - page 40
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Please find page 40 of the 2013 LeapFrog annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.The following table summarizes our outstanding contractual obligations at December 31, 2013.
Payments Due In
Total
Less Than
1 Year 1 − 3 Years 3 − -5 Years
More Than
5 Years
(Dollars in millions)
Operating leases ............. $10.6* $5.7 $4.7 $0.2 $—
Royalty guarantees ............ 4.1 2.0 2.1 — —
Total ................... $14.7 $7.7 $6.8 $0.2 $—
* Amount was reduced by minimum sublease rent of $1.5 million due in the future under non-cancelable
sublease.
In addition, we had commitments to purchase inventory under normal supply arrangements totaling
approximately $24.1 million at December 31, 2013. We also had outstanding off-balance sheet commitments
for outsourced manufacturing and component purchases of $0.5 million.
As of December 31, 2013, we had no outstanding borrowings or letters of credit under our revolving credit
facility, and had $75.0 million of potential availability on the line.
CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES
Our financial statements and accompanying notes are prepared in accordance with GAAP. Preparing financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. We believe that certain accounting policies, which we refer to as critical
accounting policies, are particularly important to the portrayal of our financial position and results of
operations and require the use of significant estimates and the application of significant judgment by our
management. On an on-going basis, we evaluate our estimates, particularly those related to our critical
accounting policies.
The following discussion highlights those policies and the underlying estimates and assumptions, which we
consider critical to an understanding of the financial information in this report.
Revenue Recognition, Allowance for Doubtful Accounts, and Other Accounts Receivable and Revenue
Reserves
We derived the majority of our revenue from sales of our technology-based learning products and related
content. Revenue is recognized when products are shipped and title passes to the customer, provided that there
is evidence of a commercial arrangement, delivery has occurred, there is a fixed or determinable fee and
collection is reasonably assured. We sell App Center cards to retailers and directly to end customers, which
are redeemable on our App Center for content downloads. We record proceeds from the initial sale of the card
to deferred revenue, which are then recognized into revenue when the right to download content is granted to
the customer upon redemption of the card. For content purchased by the customer with a personal credit card
directly through our App Center, we recognize revenue when the right to download content is granted.
Amounts billed to customers for shipping and handling costs are recognized as revenue. Costs incurred to ship
merchandise from warehouse facilities are recorded in cost of sales.
Net sales represent gross sales less estimated sales returns, allowances for defective products, promotional
markdowns, chargebacks and price changes, and cooperative promotional arrangements. Correspondingly,
these allowances are recorded as reductions of gross accounts receivable.
We reduce our gross accounts receivable balance by an allowance for amounts we believe may become
uncollectible. This allowance is an estimate based primarily on management’s evaluation of the customer’s
financial condition in the context of current economic conditions, past collection history, aging of the accounts
receivable balances and trade credit insurance coverage levels. Determining such allowance requires judgment,
the result of which may have a significant effect on the amounts reported in accounts receivable. If changes in
the economic climate or in the financial condition of any of our customers impair or improve their ability to
make payments, adjustments to the allowances may be required.
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