Published: August 02, 2011
LeapFrog Reports Second Quarter 2011 Results
EMERYVILLE, Calif., Aug. 2, 2011 /PRNewswire/ -- LeapFrog Enterprises, Inc. (NYSE:LF) today announced financial results for the second quarter ended June 30, 2011.
Highlights:
-- Retail point-of-sale, or POS, dollars(1) were up 7% in the U.S. for the
26 weeks ended July 2, 2011 compared to the 26 weeks ended July 3, 2010.
-- Consolidated net sales were $54 million in the second quarter, down 13%
compared to a year ago, reflecting the effect of higher retail inventory
at the end of 2010 and the timing of new product shipments relative to a
year ago.
-- Net loss per share was $0.21 in the second quarter, compared to a net
loss per share of $0.20 a year ago. For the first six months of the
year, net loss per share improved $0.01 compared to a year ago.
-- Working capital improved $17 million for the first six months of the
year compared to a year ago.
"Our second quarter performance was as we expected," said John Barbour, Chief Executive Officer. "While net sales declined due to the year-end retail carry-over, operating expenses were well managed, and we delivered a flat bottom line."
"Our global POS performance continues to remain solid, driven by the great educational entertainment our products provide. We will further strengthen our product portfolio this month with the launch of LeapPad, a personalized learning tablet for children that will offer more than 100 pieces of content to educate and entertain children by year end. July pre-order sales of LeapPad provided a good read on consumer demand, and we expect it to be a top-seller during the holidays. Long-term, I believe that LeapFrog has tremendous earnings potential given our leading brand, best-in-class educational focused content, and strong product portfolio," continued Mr. Barbour.
Second Quarter 2011 Results Compared to Second Quarter 2010 Results
Net sales were $54 million, down 13%, and included a one percentage point favorable impact from changes in currency exchange rates.
Net sales from the United States segment were $39 million, down 20%, as expected, reflecting the effect of higher retail inventory at the end of 2010 and the timing of new product launches.
Net sales from the International segment were $15 million, up 11%, and included a six percentage point favorable impact from changes in currency exchange rates.
Gross margin was 34.9%, down 1.5 percentage points, primarily due to lower sales volume.
Loss from operations was $13 million, compared to $12 million a year ago.
Guidance
"Our solid POS performance has resulted in retail inventory reaching levels consistent with the prior year. As a result, we expect net sales and earnings growth in the second half of the year," said Mark Etnyre, Chief Financial Officer.
"We believe we are tracking to achieve the previously provided full-year guidance. In 2011, we expect net sales to be flat to slightly down compared to 2010 and net income per share to be in the range of $0.15 to $0.20. In the third quarter of 2011, we expect net sales to be in the range of $139 million to $142 million and net income per share to be in the range of $0.24 to $0.28," continued Mr. Etnyre.
Conference Call and Webcast
LeapFrog will hold a conference call to discuss second quarter 2011 financial results on August 2, 2011, at 2:00 p.m. Pacific Daylight Time (5:00 p.m. Eastern Daylight Time). The conference call will be webcast and can be accessed at LeapFrog's investor web site at www.leapfroginvestor.com. To participate in the call, please dial (706) 634-0183 and request conference ID 83977303. A replay of the call will be available for one month. To access the replay, please dial (404) 537-3406 and use conference ID 83977303.
Description of Retail Point-of-Sale Dollars
Retail point-of-sale, or POS, dollars is a non-audited operating metric that represents a measure of U.S. retailers' sales of LeapFrog products to consumers. Retail point-of-sale dollars differs significantly from LeapFrog's reported net sales, which reflect all products sold by LeapFrog to its retailer customers in all markets and also includes other sources of revenue. The point-of-sale data, based on retail prices, is provided to LeapFrog by retailers and also includes sales through online retailers and our online retail store at LeapFrog.com. LeapFrog believes this represents approximately 95% of our U.S. retailers' dollar sales of LeapFrog products to consumers, based on historical shipments by us to such retailers. LeapFrog management uses point-of-sale data to evaluate the retail channel sales environment and develop net sales forecasts. Results for retail point-of-sale dollars are for the 26 weeks ended July 2, 2011 and the 26 weeks ended July 3, 2010.
About LeapFrog
LeapFrog Enterprises, Inc. is a leading developer of educational entertainment for children. LeapFrog's award-winning product portfolio is designed to help every child achieve their full potential by delivering best-in-class curriculum through engaging content, technology-based platforms, and toys. The Learning Path, LeapFrog's proprietary online destination for parents and extended family, provides personalized feedback on a child's learning progress and offers product recommendations to enhance each child's learning experience. Through the power of play, LeapFrog's products and curriculum help children of all ages prepare for life and academic success. LeapFrog's products are available in more than 45 countries and have been used by teachers in more than 100,000 U.S. classrooms. LeapFrog is based in Emeryville, California and was founded in 1995 by a father who revolutionized technology-based learning solutions to help his child learn how to read. Come see the learning at www.leapfrog.com.
NOTE: LEAPFROG, the LeapFrog logo, and LEAPPAD are trademarks or registered trademarks of LeapFrog Enterprises, Inc.
Forward-Looking Statements
This news release contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements include statements regarding anticipated financial results (including net sales, earnings growth and net income per share). Our actual results may differ materially from those expressed or implied by such forward-looking statements. The risks that could cause our results to differ include highly changeable consumer preferences and toy trends, our ability to achieve anticipated sales levels, particularly with respect to newly-launched products, the overall economic environment and its effect on retail business, the seasonality of our business, introductions of products that compete with our platforms by a variety of other companies, our ability to respond quickly and cost effectively to changes in manufacturing costs and in consumer demand for our products, our ability to manage operating expenses effectively, and our ability to provide high-quality experiences to consumers with all of our products and services. These risks and others are discussed under "Risk Factors" in our filings with the U.S. Securities and Exchange Commission, including our 2010 annual report on Form 10-K filed on February 22, 2011. All information provided in this release is as of the date hereof, and we undertake no obligation to update this information.
(1) Please see Description of Retail Point-of-Sale Dollars below for an explanation of this operating metric.
Contact Information
Investors: Media:
Karen Sansot Monica Ma
Investor Relations Media Relations
(510) 420-4803 (510) 596-3437
LEAPFROG ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
---------------------------
2011 2010
---- ----
Net sales $54,420 $62,413
Cost of sales 35,438 39,666
------ ------
Gross profit 18,982 22,747
Operating expenses:
Selling, general and administrative 17,650 17,737
Research and development 8,141 9,361
Advertising 3,492 4,710
Depreciation and amortization 2,791 3,118
----- -----
Total operating expenses 32,074 34,926
------ ------
Loss from operations (13,092) (12,179)
Other income (expense):
Interest income 36 54
Interest expense (44) (22)
Other, net (283) (654)
---- ----
Total other expense, net (291) (622)
---- ----
Loss before income taxes (13,383) (12,801)
Provision for (benefit from) income
taxes 387 (220)
--- ----
Net loss $(13,770) $(12,581)
======== ========
Net loss per share:
Class A and B - basic and diluted $(0.21) $(0.20)
Weighted average shares used to
calculate net loss per share:
Class A and B - basic and diluted 65,293 64,303
Six Months Ended June 30,
-------------------------
2011 2010
---- ----
Net sales $94,098 $104,819
Cost of sales 63,360 69,640
------ ------
Gross profit 30,738 35,179
Operating expenses:
Selling, general and administrative 38,137 38,858
Research and development 16,372 17,957
Advertising 5,827 8,054
Depreciation and amortization 5,344 5,544
----- -----
Total operating expenses 65,680 70,413
------ ------
Loss from operations (34,942) (35,234)
Other income (expense):
Interest income 69 114
Interest expense (80) (25)
Other, net (843) (1,384)
---- ------
Total other expense, net (854) (1,295)
---- ------
Loss before income taxes (35,796) (36,529)
Provision for (benefit from) income taxes 160 (390)
--- ----
Net loss $(35,956) $(36,139)
======== ========
Net loss per share:
Class A and B - basic and diluted $(0.55) $(0.56)
Weighted average shares used to calculate
net loss per share:
Class A and B - basic and diluted 65,027 64,189
LEAPFROG ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
June 30, December 31,
-------- ------------
2011 2010 2010
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $57,733 $55,662 $19,479
Accounts receivable, net of
allowances for doubtful accounts
of $840, $908 and $776,
respectively 48,964 57,479 157,646
Inventories 63,398 46,330 47,455
Prepaid expenses and other
current assets 9,266 10,185 8,321
Deferred income taxes 1,771 2,028 1,678
Total current assets 181,132 171,684 234,579
Long-term investments 2,681 3,685 2,681
Deferred income taxes 980 1,240 989
Property and equipment, net 18,184 14,293 15,059
Capitalized product costs, net 13,253 14,864 13,184
Goodwill 19,549 19,549 19,549
Other intangible assets, net 4,589 6,901 5,653
Other assets 2,023 2,118 1,786
----- ----- -----
Total assets $242,391 $234,334 $293,480
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $28,127 $38,048 $31,390
Accrued liabilities 23,527 21,152 41,425
Income taxes payable 229 539 167
Total current liabilities 51,883 59,739 72,982
Long-term deferred income taxes 3,394 3,099 3,199
Other long-term liabilities 12,013 11,962 11,734
Stockholders' equity:
Class A Common Stock, par value
$0.0001;
Authorized -139,500 shares;
Issued and outstanding:
49,758, 37,234 and 43,783,
respectively 5 4 5
Class B Common Stock, par value
$0.0001;
Authorized -40,500 shares;
Issued and outstanding:
15,817, 27,141 and 20,961,
respectively 2 3 2
Treasury stock (185) (185) (185)
Additional paid-in capital 391,592 383,804 387,833
Accumulated other comprehensive
income 2,025 (626) 292
Accumulated deficit (218,338) (223,466) (182,382)
-------- -------- --------
Total stockholders' equity 175,101 159,534 205,565
------- ------- -------
Total liabilities and
stockholders' equity $242,391 $234,334 $293,480
======== ======== ========
LEAPFROG ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended June 30,
---------------------------
2011 2010
---- ----
Operating activities:
Net loss $(13,770) $(12,581)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 4,921 5,094
Deferred income taxes 49 141
Stock-based compensation expense 1,196 449
Loss on disposal of long-term assets - -
Allowance for doubtful accounts (132) 99
Other changes in operating assets and
liabilities:
Accounts receivable, net (11,053) (17,743)
Inventories (8,384) (11,213)
Prepaid expenses and other current
assets 1,750 182
Other assets 152 283
Accounts payable 5,995 10,497
Accrued liabilities 2,120 (2,383)
Long-term liabilities 321 (286)
Income taxes payable 184 277
Other - 29
--- ---
Net cash provided by operating
activities (16,651) (27,155)
------- -------
Investing activities:
Purchases of property and equipment (2,662) (1,923)
Capitalization of product costs (2,171) (1,231)
Purchases of intangible assets - -
Disposal of property and equipment - -
Other - -
--- ---
Net cash used in investing activities (4,833) (3,154)
------ ------
Financing activities:
Proceeds from stock option exercises
and employee stock purchase plans 1,682 387
Net cash paid for payroll taxes on
restricted stock unit releases (74) (83)
--- ---
Net cash provided by (used in)
financing activities 1,608 304
----- ---
Effect of exchange rate changes on cash 115 (479)
--- ----
Net change in cash and cash equivalents (19,761) (30,484)
Cash and cash equivalents, beginning of
period 77,494 86,146
Cash and cash equivalents, end of
period $57,733 $55,662
======= =======
Six Months Ended June 30,
-------------------------
2011 2010
---- ----
Operating activities:
Net loss $(35,956) $(36,139)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 9,447 9,434
Deferred income taxes (84) 61
Stock-based compensation expense 2,424 2,907
Loss on disposal of long-term assets 53 -
Allowance for doubtful accounts 279 330
Other changes in operating assets and
liabilities:
Accounts receivable, net 108,835 89,265
Inventories (15,191) (18,574)
Prepaid expenses and other current
assets (821) (2,896)
Other assets (236) 1,041
Accounts payable (3,312) (19,943)
Accrued liabilities (18,100) (18,500)
Long-term liabilities 583 68
Income taxes payable 62 297
Other - 3
--- ---
Net cash provided by operating
activities 47,983 7,354
------ -----
Investing activities:
Purchases of property and equipment (7,284) (4,363)
Capitalization of product costs (4,340) (3,947)
Purchases of intangible assets - (5,335)
Disposal of property and equipment 67 -
Other (65) -
--- ---
Net cash used in investing activities (11,622) (13,645)
------- -------
Financing activities:
Proceeds from stock option exercises
and employee stock purchase plans 1,944 833
Net cash paid for payroll taxes on
restricted stock unit releases (610) (112)
---- ----
Net cash provided by (used in)
financing activities 1,334 721
----- ---
Effect of exchange rate changes on cash 559 (380)
--- ----
Net change in cash and cash equivalents 38,254 (5,950)
Cash and cash equivalents, beginning of
period 19,479 61,612
Cash and cash equivalents, end of
period $57,733 $55,662
======= =======
LEAPFROG ENTERPRISES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands)
(Unaudited)
Three Months Ended June 30,
---------------------------
2011 2010
---- ----
Net sales $54,420 $62,413
Cost of sales (1) 35,438 39,666
------ ------
Gross profit 18,982 22,747
Operating expenses: (2) (3)
Selling, general and administrative 17,650 17,737
Research and development 8,141 9,361
Advertising 3,492 4,710
Depreciation and amortization 2,791 3,118
----- -----
Total operating expenses 32,074 34,926
------ ------
Loss from operations (13,092) (12,179)
Other income (expense):
Interest income 36 54
Interest expense (44) (22)
Other, net (283) (654)
---- ----
Total other expense, net (291) (622)
---- ----
Loss before income taxes (13,383) (12,801)
Provision for (benefit from) income taxes 387 (220)
--- ----
Net loss $(13,770) $(12,581)
======== ========
(1) Includes depreciation and amortization 2,130 1,976
Includes stock-based compensation as
(2) follows:
Selling, general and administrative 1,016 128
Research and development 180 321
(3) Includes severance costs as follows:
Selling, general and administrative 55 213
Research and development 18 101
Segment data:
Net sales:
U.S. segment 39,123 48,680
International segment 15,297 13,733
Income (loss) from operations*:
U.S. segment (14,442) (12,956)
International segment 1,350 777
Six Months Ended June 30,
-------------------------
2011 2010
---- ----
Net sales $94,098 $104,819
Cost of sales (1) 63,360 69,640
------ ------
Gross profit 30,738 35,179
Operating expenses: (2) (3)
Selling, general and administrative 38,137 38,858
Research and development 16,372 17,957
Advertising 5,827 8,054
Depreciation and amortization 5,344 5,544
----- -----
Total operating expenses 65,680 70,413
------ ------
Loss from operations (34,942) (35,234)
Other income (expense):
Interest income 69 114
Interest expense (80) (25)
Other, net (843) (1,384)
---- ------
Total other expense, net (854) (1,295)
---- ------
Loss before income taxes (35,796) (36,529)
Provision for (benefit from) income taxes 160 (390)
--- ----
Net loss $(35,956) $(36,139)
======== ========
(1) Includes depreciation and amortization 4,103 3,890
Includes stock-based compensation as
(2) follows:
Selling, general and administrative 2,120 2,248
Research and development 304 659
(3) Includes severance costs as follows:
Selling, general and administrative 2,421 443
Research and development 22 284
Segment data:
Net sales:
U.S. segment 65,475 81,334
International segment 28,623 23,485
Income (loss) from operations*:
U.S. segment (35,716) (34,848)
International segment 774 (386)
* Certain corporate-level operating expenses associated with sales and
marketing, product support, human resources, legal, finance,
information technology, corporate development, procurement
activities, research and development, legal settlements and other
corporate costs are charged entirely to our U.S. segment, rather
than being allocated between the U.S. and International segments.
All related prior period financial data has been recast to conform
to the current presentation.
SOURCE LeapFrog Enterprises, Inc.
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