LifeLock 2013 Annual Report Download - page 56

The average monthly balance of the LOC bore interest at Silicon Valley Bank’s prime rate plus a percentage ranging from 0.0% to 1.0% for the year
ended December 31, 2011, depending on our liquidity ratio. The actual interest rates ranged from 3.25% to 4.25% for the year ended December 31, 2011. The
rate was 3.25% as of December 31, 2011. A commitment fee payable quarterly at the rate of 0.125% accrued on any unused amount of the LOC.
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As of December 31, 2012, we had $1.3 million in letters of credit issued against the $2.0 million revolving line of credit provided in our prior senior
credit facility. The restrictions on the cash used to fully collateralize the standby letters of credit were released in July 2012.
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We lease various office facilities, including our corporate headquarters in Tempe, Arizona, under operating lease agreements that expire between 2014
and 2024. As of December 31, 2013, we did not have any debt or material capital lease obligations, all of our property, equipment, and software had been
purchased with cash, and we had no material long-term purchase obligations outstanding with any vendors or third parties.
Our future minimum payments under non-cancelable operating leases for office facilities were as follows as of December 31, 2013:
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    
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        
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Operating leases $ 40,563 $ 3,276 $ 10,034 $ 8,510 $ 18,743
The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding. Obligations under
contracts that we can cancel without a significant penalty are not included in the table above.
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We do not engage in any off-balance sheet financing activities, nor do we have any interest in entities referred to as variable interest entities.
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Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The
preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenue, costs and expenses, and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets and
liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions
that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from
these estimates under different assumptions or conditions.
We believe that of our significant accounting policies, which are described in Note 2 of the accompanying notes to our audited consolidated financial
statements included in Part II, Item 8 of this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and
complexity. Accordingly, we believe these are the most critical to fully understanding and evaluating our financial condition and results of operations.
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In our consumer segment, we recognize revenue from our identity theft protection services when it is probable that the economic benefits associated with
the transactions will flow to us and the amount of revenue can be measured reliably. This is normally demonstrated when (i) persuasive evidence of an
arrangement exists, (ii) the fee is fixed or determinable, (iii) performance of service has been deliver ed, and (iv) collection is reasonably assured.
Our consumer services are primarily offered to consumers on an annual or monthly subscription basis, which may include free trial periods. Fees for
these subscriptions are typically billed to the member’s credit or debit card. We recognize revenue for member subscriptions ratably on a daily basis from the
latter of cash receipt, activation of a member’s account, or expiration of free trial periods to the end of the subscription period.
We also provide consumer services for which the primary customer is an enterprise purchasing identity theft protection services on behalf of its
employees or customers. In such cases, we defer revenue for each member until the member’s account has been activated. We then recognize revenue ratably on
a daily basis over the term of the subscription period.
In our enterprise segment, we recognize revenue based on a negotiated fee per transaction. In many cases, we also negotiate a monthly minimum fee.
Transaction fees in excess of any of the monthly minimum fees are billed and recorded as revenue in addition to the monthly minimum fees. In some
instances, we receive up-front non-refundable payments against which the monthly minimum
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