LeapFrog 2013 Annual Report Download - page 67
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
10. Income Taxes − (continued)
The changes in the balance of gross unrecognized tax benefits, during the years ended December 31, 2013,
2012 and 2011 were as follows:
Years Ended December 31,
2013 2012 2011
Balance at beginning of year ...................... $15,192 $19,493 $21,608
Gross increase − tax positions taken during a prior period . . 4 107 65
Gross decrease − tax positions taken during a prior period . . (105) (41) (223)
Increases due to tax positions taken during the current
period ................................... 5,524 — —
Decreases in the unrecognized tax benefits relating to statute
of limitations expiration ....................... (296) (4,367) (1,957)
Balance at end of year ....................... $20,319 $15,192 $19,493
Of the gross unrecognized tax benefits as of December 31, 2013, 2012, and 2011, $20,319, $15,192, and
$19,493, respectively, would impact the Company’s effective tax rate if recognized.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
Income tax expense for the years ended December 31, 2013, 2012, and 2011 included interest and penalties of
$82, $276, and $446, respectively. As of December 31, 2013 and 2012, the Company had approximately $362
and $625, respectively, of accrued interest and penalties related to uncertain tax positions.
The Company is subject to examination for tax years 2000 and forward. The Company believes it is
reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $523,
excluding potential interest and penalties, related to its foreign operations over the course of the next twelve
months due to expiring statutes of limitations, which could be recognized as a tax benefit and affect the
effective tax rate.
Open and Resolved Tax Matters
The Company files income tax returns in the U.S. federal, various state and foreign jurisdictions. The
Company has substantially concluded all U.S. federal and state income tax matters through 1999, and foreign
income tax matters through 2005.
The state of California has notified the Company of a pending examination related to its R&D credits claimed
for the tax years 2002 and 2003; however, the Company has not been notified when the audit will commence.
In 2012, the Company was notified by the tax authority in Mexico of an income tax audit for the 2010 tax
year. The outcome of this foreign audit is not yet determinable.
With respect to the open matters, the outcomes are not yet determinable. However, management does not
anticipate that any adjustments would result in a material change to the Company’s results of operations,
financial conditions or liquidity.
11. Borrowings under Credit Agreements
On August 13, 2009, the Company, certain financial institutions and Bank of America, N.A., entered into an
amended and restated loan and security agreement for an up-to-$75,000 asset-based revolving credit facility
(the ‘‘revolving credit facility’’). The Company has granted a security interest in substantially all of its assets
to the lenders as security for its obligations under the revolving credit facility. Provided there is no default
under the revolving credit facility, the Company may elect, without the consent of any of the lenders, to
increase the size of the revolving credit facility up to an aggregate of $150,000.
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