LeapFrog 2009 Annual Report Download - page 69

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
For the years ended December 31, 2009 and 2008, the Company accounted for gains and losses incurred on its
ARS investment as follows:
Long-term
Investments
Accumulated
Other
Comprehensive
Income
Accumulated
Losses on
Investments
(Balance Sheets) (Balance Sheets) (Statements of
Operations)
Balance at December 31, 2007 ........................... $10,925 $(598) $(2,477)
Loss for the year ended December 31, 2008 ............. (5,963) — (5,963)
Temporary loss transferred to other-than-temporary ....... — 598 (598)
Balance at December 31, 2008 ........................... $ 4,962 $ — $(9,038)
Gain (loss) for the year ended December 31, 2009 ........ 143 574 (431)
Sale of ARS investments ............................ (1,420) (139) 143
Balance at December 31, 2009 ........................... $ 3,685 $ 435 $(9,326)
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.
The impairment losses recorded in 2008 include $598 of losses that had previously been accounted for as
temporary at December 31, 2007 and recorded in “accumulated other comprehensive income (loss)” at that date.
The loss of $598 was charged as an other-than-temporary loss to the statement of operations in the second quarter
of 2008, as credit market conditions throughout the first half of 2008 worsened. The Company accounted for all
losses incurred in 2008 as other-than-temporary in the statement of operations.
3. Inventories
The Company’s inventories, stated on a first-in, first-out basis at the lower of cost or market as of December 31,
2009 and 2008 were as follows:
December 31,
2009 2008
Raw materials ...................................................... $ 1,739 $ 5,521
Work in process ..................................................... — 1,621
Finished goods ..................................................... 26,441 49,795
Total ......................................................... $28,180 $56,937
As of September 30, 2009, the Company’s agreements with contract manufacturers were modified such that title
and risk of loss pass to the Company upon delivery of finished goods. As a result, the Company no longer holds
title to any work-in-progress inventory. Related work in progress inventory held by the contract manufacturers
approximated $4,590 as of December 31, 2009.
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