Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - LEAPFROG ENTERPRISES INC | d8k.htm |
Exhibit 99.1
LEAPFROG REPORTS SECOND QUARTER 2011 RESULTS
EMERYVILLE, Calif.—August 2, 2011—LeapFrog Enterprises, Inc. (NYSE:LF) today announced financial results for the second quarter ended June 30, 2011.
Highlights:
| • | Retail point-of-sale, or POS, dollars1 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.
| 1 | Please see Description of Retail Point-of-Sale Dollars below for an explanation of this operating metric. |
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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
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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.
Contact Information
| Investors:
Karen Sansot Investor Relations (510) 420-4803 |
Media:
Monica Ma Media Relations (510) 596-3437 |
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LEAPFROG ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Net sales |
$ | 54,420 | $ | 62,413 | $ | 94,098 | $ | 104,819 | ||||||||
| Cost of sales |
35,438 | 39,666 | 63,360 | 69,640 | ||||||||||||
|
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|
|||||||||
| Gross profit |
18,982 | 22,747 | 30,738 | 35,179 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
17,650 | 17,737 | 38,137 | 38,858 | ||||||||||||
| Research and development |
8,141 | 9,361 | 16,372 | 17,957 | ||||||||||||
| Advertising |
3,492 | 4,710 | 5,827 | 8,054 | ||||||||||||
| Depreciation and amortization |
2,791 | 3,118 | 5,344 | 5,544 | ||||||||||||
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| Total operating expenses |
32,074 | 34,926 | 65,680 | 70,413 | ||||||||||||
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| Loss from operations |
(13,092 | ) | (12,179 | ) | (34,942 | ) | (35,234 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
36 | 54 | 69 | 114 | ||||||||||||
| Interest expense |
(44 | ) | (22 | ) | (80 | ) | (25 | ) | ||||||||
| Other, net |
(283 | ) | (654 | ) | (843 | ) | (1,384 | ) | ||||||||
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| Total other expense, net |
(291 | ) | (622 | ) | (854 | ) | (1,295 | ) | ||||||||
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|||||||||
| Loss before income taxes |
(13,383 | ) | (12,801 | ) | (35,796 | ) | (36,529 | ) | ||||||||
| Provision for (benefit from) income taxes |
387 | (220 | ) | 160 | (390 | ) | ||||||||||
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| Net loss |
$ | (13,770 | ) | $ | (12,581 | ) | $ | (35,956 | ) | $ | (36,139 | ) | ||||
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| Net loss per share: |
||||||||||||||||
| Class A and B—basic and diluted |
$ | (0.21 | ) | $ | (0.20 | ) | $ | (0.55 | ) | $ | (0.56 | ) | ||||
| Weighted average shares used to calculate net loss per share: |
||||||||||||||||
| Class A and B—basic and diluted |
65,293 | 64,303 | 65,027 | 64,189 | ||||||||||||
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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 | |||||||||
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| 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 | |||||||||
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| Total assets |
$ | 242,391 | $ | 234,334 | $ | 293,480 | ||||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
||||||||||||
| Accounts payable |
$ | 28,127 | $ | 38,048 | $ | 31,390 | ||||||
| Accrued liabilities |
23,527 | 21,152 | 41,425 | |||||||||
| Income taxes payable |
229 | 539 | 167 | |||||||||
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| 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 | ) | ||||||
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| Total stockholders’ equity |
175,101 | 159,534 | 205,565 | |||||||||
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| Total liabilities and stockholders’ equity |
$ | 242,391 | $ | 234,334 | $ | 293,480 | ||||||
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LEAPFROG ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Operating activities: |
||||||||||||||||
| Net loss |
$ | (13,770 | ) | $ | (12,581 | ) | $ | (35,956 | ) | $ | (36,139 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||||||||
| Depreciation and amortization |
4,921 | 5,094 | 9,447 | 9,434 | ||||||||||||
| Deferred income taxes |
49 | 141 | (84 | ) | 61 | |||||||||||
| Stock-based compensation expense |
1,196 | 449 | 2,424 | 2,907 | ||||||||||||
| Loss on disposal of long-term assets |
— | — | 53 | — | ||||||||||||
| Allowance for doubtful accounts |
(132 | ) | 99 | 279 | 330 | |||||||||||
| Other changes in operating assets and liabilities: |
||||||||||||||||
| Accounts receivable, net |
(11,053 | ) | (17,743 | ) | 108,835 | 89,265 | ||||||||||
| Inventories |
(8,384 | ) | (11,213 | ) | (15,191 | ) | (18,574 | ) | ||||||||
| Prepaid expenses and other current assets |
1,750 | 182 | (821 | ) | (2,896 | ) | ||||||||||
| Other assets |
152 | 283 | (236 | ) | 1,041 | |||||||||||
| Accounts payable |
5,995 | 10,497 | (3,312 | ) | (19,943 | ) | ||||||||||
| Accrued liabilities |
2,120 | (2,383 | ) | (18,100 | ) | (18,500 | ) | |||||||||
| Long-term liabilities |
321 | (286 | ) | 583 | 68 | |||||||||||
| Income taxes payable |
184 | 277 | 62 | 297 | ||||||||||||
| Other |
— | 29 | — | 3 | ||||||||||||
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| Net cash provided by operating activities |
(16,651 | ) | (27,155 | ) | 47,983 | 7,354 | ||||||||||
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| Investing activities: |
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| Purchases of property and equipment |
(2,662 | ) | (1,923 | ) | (7,284 | ) | (4,363 | ) | ||||||||
| Capitalization of product costs |
(2,171 | ) | (1,231 | ) | (4,340 | ) | (3,947 | ) | ||||||||
| Purchases of intangible assets |
— | — | — | (5,335 | ) | |||||||||||
| Disposal of property and equipment |
— | — | 67 | — | ||||||||||||
| Other |
— | — | (65 | ) | — | |||||||||||
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| Net cash used in investing activities |
(4,833 | ) | (3,154 | ) | (11,622 | ) | (13,645 | ) | ||||||||
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| Financing activities: |
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| Proceeds from stock option exercises and employee stock purchase plans |
1,682 | 387 | 1,944 | 833 | ||||||||||||
| Net cash paid for payroll taxes on restricted stock unit releases |
(74 | ) | (83 | ) | (610 | ) | (112 | ) | ||||||||
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| Net cash provided by (used in) financing activities |
1,608 | 304 | 1,334 | 721 | ||||||||||||
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| Effect of exchange rate changes on cash |
115 | (479 | ) | 559 | (380 | ) | ||||||||||
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| Net change in cash and cash equivalents |
(19,761 | ) | (30,484 | ) | 38,254 | (5,950 | ) | |||||||||
| Cash and cash equivalents, beginning of period |
77,494 | 86,146 | 19,479 | 61,612 | ||||||||||||
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| Cash and cash equivalents, end of period |
$ | 57,733 | $ | 55,662 | $ | 57,733 | $ | 55,662 | ||||||||
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LEAPFROG ENTERPRISES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Net sales |
$ | 54,420 | $ | 62,413 | $ | 94,098 | $ | 104,819 | ||||||||
| Cost of sales (1) |
35,438 | 39,666 | 63,360 | 69,640 | ||||||||||||
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| Gross profit |
18,982 | 22,747 | 30,738 | 35,179 | ||||||||||||
| Operating expenses: (2) (3) |
||||||||||||||||
| Selling, general and administrative |
17,650 | 17,737 | 38,137 | 38,858 | ||||||||||||
| Research and development |
8,141 | 9,361 | 16,372 | 17,957 | ||||||||||||
| Advertising |
3,492 | 4,710 | 5,827 | 8,054 | ||||||||||||
| Depreciation and amortization |
2,791 | 3,118 | 5,344 | 5,544 | ||||||||||||
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| Total operating expenses |
32,074 | 34,926 | 65,680 | 70,413 | ||||||||||||
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| Loss from operations |
(13,092 | ) | (12,179 | ) | (34,942 | ) | (35,234 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
36 | 54 | 69 | 114 | ||||||||||||
| Interest expense |
(44 | ) | (22 | ) | (80 | ) | (25 | ) | ||||||||
| Other, net |
(283 | ) | (654 | ) | (843 | ) | (1,384 | ) | ||||||||
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| Total other expense, net |
(291 | ) | (622 | ) | (854 | ) | (1,295 | ) | ||||||||
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| Loss before income taxes |
(13,383 | ) | (12,801 | ) | (35,796 | ) | (36,529 | ) | ||||||||
| Provision for (benefit from) income taxes |
387 | (220 | ) | 160 | (390 | ) | ||||||||||
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| Net loss |
$ | (13,770 | ) | $ | (12,581 | ) | $ | (35,956 | ) | $ | (36,139 | ) | ||||
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|
(1) Includes depreciation and amortization |
2,130 | 1,976 | 4,103 | 3,890 | ||||||||||||
| (2) Includes stock-based compensation as follows: |
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| Selling, general and administrative |
1,016 | 128 | 2,120 | 2,248 | ||||||||||||
| Research and development |
180 | 321 | 304 | 659 | ||||||||||||
| (3) Includes severance costs as follows: |
||||||||||||||||
| Selling, general and administrative |
55 | 213 | 2,421 | 443 | ||||||||||||
| Research and development |
18 | 101 | 22 | 284 | ||||||||||||
| Segmentdata: |
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| Net sales: |
||||||||||||||||
| U.S. segment |
39,123 | 48,680 | 65,475 | 81,334 | ||||||||||||
| International segment |
15,297 | 13,733 | 28,623 | 23,485 | ||||||||||||
| Income (loss) from operations*: |
||||||||||||||||
| U.S. segment |
(14,442 | ) | (12,956 | ) | (35,716 | ) | (34,848 | ) | ||||||||
| International segment |
1,350 | 777 | 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. |