LeapFrog 2015 Annual Report Download - page 42

We did not borrow any amount against the revolving credit facility during the year ended March 31, 2015,
or the three months ended March 31, 2014, or the years ended December 31, 2013 and 2012, and had no
borrowings outstanding under the revolving credit facility at March 31, 2015. As of March 31, 2015, we had
an insignificant stand-by letter of credit issued under our revolving credit facility as a security deposit for
utility expenditures. We anticipate borrowing against the revolving credit facility during the year ending
March 31, 2016 to support our working capital needs and planned capital expenditures.
Contractual Obligations and Commitments
We conduct our corporate operations from leased facilities under operating leases that expire at various dates
through 2021. Generally, these have initial lease periods of three to twelve years and contain provisions for
renewal options of five years at market rates. We account for rent expense on a straight-line basis over the
term of the lease. In addition, we are obligated to pay certain minimum royalties in connection with license
agreements to which we are a party.
The following table summarizes our outstanding contractual obligations at March 31, 2015:
Total
Payments Due In
Less Than
1 Year 1 − 3 Years 3 − 5 Years
More Than
5 Years
(Dollars in millions)
Operating leases ............. $19.2* $6.4* $6.9 $5.7 $0.2
Royalty guarantees ............ 1.5 0.9 0.6 — —
Total ................... $20.7 $7.3 $7.5 $5.7 $0.2
* Amount was reduced by minimum sublease rent of $0.7 million due in the future under non-cancelable
sublease.
In addition, as of March 31, 2015, we had commitments to purchase inventory under normal supply
arrangements totaling approximately $40.3 million.
As of March 31, 2015, we had an insignificant stand-by letter of credit issued under our revolving credit
facility as a security deposit for utility expenditures, which was an off-balance sheet arrangement. Borrowing
availability under the revolving credit facility was $27.4 million as of March 31, 2015.
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.
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