LeapFrog 2009 Annual Report Download - page 87

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Legal Proceedings
From time to time, in the normal course of business, the Company is party to various pending claims and
lawsuits. Currently, the Company is party to a claim regarding our use of various trademarks and logos in
connection with its Tag reading systems. In October 2009, TAG Toys, Inc. filed a complaint against the
Company in the United States District Court for the Central District of California, alleging that the Company’s
use of various logos and marks relating to the our Tag Reading Systems infringes trademark rights held by TAG
Toys, constitutes a false designation of origin for its products, and constitutes unfair competition under federal
and California laws. TAG Toys is seeking unspecified monetary damages, costs and attorneys’ fees, and
injunctive relief. In December 2009, the Company filed our answer to TAG Toys’ complaint, denying the
material allegations and asserting affirmative defenses. The Company has not accrued a liability for potential
damages as it is unable to estimate the possible loss.
19. Segment Reporting
The Company’s business is organized, operated and assessed in two geographic segments; United States and
International.
Historically, LeapFrog organized, operated and assessed its business in three segments, U.S. Consumer,
International and School. The School segment sold products tailored for the educational market directly to
schools, teacher supply stores and through catalogs and websites aimed at educators, all in the United States.
During 2008, we ceased marketing directly to the educational channel, reduced headcount and direct facilities
expenses accordingly, and transferred responsibility for this sales channel to the former U.S. Consumer operating
segment. Accordingly, in 2009, we have consolidated and reclassified the results of the former U.S. Consumer
and School segments into the United States segment for the fiscal years ended December 31, 2009, 2008 and
2007.
We charge all of our indirect operating expenses and general corporate overhead to the United States segment
and do not allocate any of these expenses to the International segment.
The accounting policies of the segments are the same as those described in Note 2 of these Notes to these
Consolidated Financial Statements.
The primary business of the two operating segments is as follows:
• The United States segment is responsible for the development, design and marketing of electronic
educational hardware products and related software, sold primarily through retail channels and through
the Company’s website in the United States.
• The International segment is responsible for the localization and marketing of electronic educational
hardware products and related software originally developed for the United States, sold primarily in
retail channels outside of the United States.
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