EMERYVILLE, Calif., Nov. 1, 2011 /PRNewswire/ -- LeapFrog Enterprises, Inc. (NYSE: LF) today announced financial results for the third quarter ended September 30, 2011.
(Logo: http://photos.prnewswire.com/prnh/20090219/LFLOGO)
Highlights of third quarter 2011 results compared to third quarter 2010 results:
- Consolidated net sales were $151 million, up 9%.
- International segment net sales were $35 million, up 28%.
- Income from operations was $25 million, up 54%.
- Net income per diluted share was $0.35, up 46% compared to $0.24 a year ago.
"We delivered solid growth in the third quarter driven by the successful launch of LeapPad™," said John Barbour, Chief Executive Officer. "LeapPad further strengthens our product portfolio and leadership in the educational entertainment market. Having received several prestigious awards and been selected for many retailers' top holiday toy lists, LeapPad is the leader in children's tablets. We are excited about our momentum and strong position as we head into the holiday season. At the same time, we are also cautious about potential supply constraints and the current challenging economic environment."
Financial Overview
For the quarter, net sales were $151 million, up 9% compared to $138 million last year, including favorable changes in currency exchange rates of one percentage point. A key driver of net sales growth was the launch of LeapPad in the third quarter. On a segment basis, third quarter net sales increased 5% for the U.S. and increased 28% in international markets, including favorable changes in currency exchange rates of five percentage points. Gross margin was 41% in the third quarter, down one percentage point compared to a year ago due to a higher mix of hardware sales. Income from operations for the quarter was $25 million, up 54% compared to $16 million in the prior year.
Guidance
"We continue to execute against our stated goal for the year of driving significant earnings growth through operating efficiencies and tight expense control," said Mark Etnyre, Chief Financial Officer. "For the full year 2011, we now expect net sales to be in the range of $435 million to $445 million, an increase of 1% to 3% compared to the prior year, and we now expect net income per diluted share to be in the range of $0.17 to $0.22 compared to $0.08 in the prior year."
Conference Call and Webcast
LeapFrog will hold a conference call to discuss third quarter 2011 financial results on November 1, 2011, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern 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 17851541. A replay of the call will be available for one month. To access the replay, please dial (404) 537-3406 and use conference ID 17851541.
About LeapFrog
LeapFrog Enterprises, Inc. is a leading developer of educational entertainment for children. LeapFrog's award-winning product portfolio is designed to help children 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) and the market position of the LeapPad. 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, 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: |
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 September 30, |
Nine Months Ended September 30, |
||||||||||
2011 |
2010 |
2011 |
2010 |
||||||||
Net sales |
$ 150,832 |
$ 137,956 |
$ 244,930 |
$ 242,775 |
|||||||
Cost of sales |
89,025 |
79,970 |
152,385 |
149,610 |
|||||||
Gross profit |
61,807 |
57,986 |
92,545 |
93,165 |
|||||||
Operating expenses: |
|||||||||||
Selling, general and administrative |
17,875 |
19,206 |
56,012 |
58,984 |
|||||||
Research and development |
8,276 |
7,851 |
24,648 |
24,888 |
|||||||
Advertising |
7,790 |
11,728 |
13,617 |
19,781 |
|||||||
Depreciation and amortization |
2,917 |
2,959 |
8,261 |
8,504 |
|||||||
Total operating expenses |
36,858 |
41,744 |
102,538 |
112,157 |
|||||||
Income (loss) from operations |
24,949 |
16,242 |
(9,993) |
(18,992) |
|||||||
Other income (expense): |
|||||||||||
Interest income |
35 |
62 |
104 |
176 |
|||||||
Interest expense |
(22) |
(17) |
(102) |
(42) |
|||||||
Other, net |
(3,632) |
182 |
(4,475) |
(1,203) |
|||||||
Total other income (expense), net |
(3,619) |
227 |
(4,473) |
(1,069) |
|||||||
Income (loss) before income taxes |
21,330 |
16,469 |
(14,466) |
(20,061) |
|||||||
Provision for (benefit from) income taxes |
(1,718) |
679 |
(1,558) |
288 |
|||||||
Net income (loss) |
$ 23,048 |
$ 15,790 |
$ (12,908) |
$ (20,349) |
|||||||
Net income (loss) per share: |
|||||||||||
Class A and B - basic |
$ 0.35 |
$ 0.25 |
$ (0.20) |
$ (0.32) |
|||||||
Class A and B - diluted |
$ 0.35 |
$ 0.24 |
$ (0.20) |
$ (0.32) |
|||||||
Weighted average shares used to |
|||||||||||
calculate net income (loss) per share: |
|||||||||||
Class A and B - basic |
65,618 |
64,433 |
65,244 |
64,271 |
|||||||
Class A and B - diluted |
66,177 |
65,319 |
65,244 |
64,271 |
|||||||
LEAPFROG ENTERPRISES, INC. |
||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||
(In thousands, except per share data) |
||||||||
(Unaudited) |
||||||||
September 30, |
December 31, |
|||||||
2011 |
2010 |
2010 |
||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ 25,663 |
$ 21,798 |
$ 19,479 |
|||||
Accounts receivable, net of allowances for doubtful |
136,256 |
136,818 |
157,646 |
|||||
Inventories |
70,338 |
82,957 |
47,455 |
|||||
Prepaid expenses and other current assets |
8,089 |
10,341 |
8,321 |
|||||
Deferred income taxes |
1,585 |
2,292 |
1,678 |
|||||
Total current assets |
241,931 |
254,206 |
234,579 |
|||||
Long-term investments |
2,681 |
2,681 |
2,681 |
|||||
Deferred income taxes |
907 |
959 |
989 |
|||||
Property and equipment, net |
17,891 |
15,143 |
15,059 |
|||||
Capitalized product costs, net |
13,215 |
14,476 |
13,184 |
|||||
Goodwill |
19,549 |
19,549 |
19,549 |
|||||
Other intangible assets, net |
3,960 |
6,277 |
5,653 |
|||||
Other assets |
1,841 |
1,937 |
1,786 |
|||||
Total assets |
$ 301,975 |
$ 315,228 |
$ 293,480 |
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ 57,851 |
$ 88,327 |
$ 31,390 |
|||||
Accrued liabilities |
32,979 |
33,167 |
41,425 |
|||||
Income taxes payable |
373 |
524 |
167 |
|||||
Total current liabilities |
91,203 |
122,018 |
72,982 |
|||||
Long-term deferred income taxes |
3,480 |
3,197 |
3,199 |
|||||
Other long-term liabilities |
9,455 |
12,266 |
11,734 |
|||||
Stockholders' equity: |
||||||||
Class A Common Stock, par value $0.0001; |
||||||||
Authorized - 139,500 shares; Issued and outstanding: |
5 |
4 |
5 |
|||||
49,862, 37,375 and 43,783, respectively |
||||||||
Class B Common Stock, par value $0.0001; |
||||||||
Authorized - 40,500 shares; Issued and outstanding: |
2 |
3 |
2 |
|||||
15,817, 27,141 and 20,961, respectively |
||||||||
Treasury stock |
(185) |
(185) |
(185) |
|||||
Additional paid-in capital |
393,230 |
385,487 |
387,833 |
|||||
Accumulated other comprehensive income |
75 |
115 |
292 |
|||||
Accumulated deficit |
(195,290) |
(207,677) |
(182,382) |
|||||
Total stockholders’ equity |
197,837 |
177,747 |
205,565 |
|||||
Total liabilities and stockholders’ equity |
$ 301,975 |
$ 315,228 |
$ 293,480 |
|||||
LEAPFROG ENTERPRISES, INC. |
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||||||
(In thousands) |
|||||||||||
(Unaudited) |
|||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||
2011 |
2010 |
2011 |
2010 |
||||||||
Operating activities: |
|||||||||||
Net income (loss) |
$ 23,048 |
$ 15,790 |
$ (12,908) |
# |
$ (20,349) |
||||||
Adjustments to reconcile net income (loss) to net cash |
|||||||||||
provided by (used in) operating activities: |
|||||||||||
Depreciation and amortization |
5,063 |
5,051 |
14,510 |
14,485 |
|||||||
Deferred income taxes |
259 |
18 |
175 |
79 |
|||||||
Stock-based compensation expense |
1,640 |
1,539 |
4,064 |
4,446 |
|||||||
Loss on disposal of long-term assets |
(45) |
- |
8 |
- |
|||||||
Allowance for doubtful accounts |
(107) |
(38) |
172 |
292 |
|||||||
Other changes in operating assets and liabilities: |
|||||||||||
Accounts receivable, net |
(87,704) |
(79,037) |
21,131 |
10,228 |
|||||||
Inventories |
(7,815) |
(36,228) |
(23,006) |
(54,802) |
|||||||
Prepaid expenses and other current assets |
1,040 |
(72) |
219 |
(2,968) |
|||||||
Other assets |
181 |
144 |
(55) |
1,185 |
|||||||
Accounts payable |
29,780 |
50,029 |
26,468 |
30,086 |
|||||||
Accrued liabilities |
9,690 |
11,858 |
(8,410) |
(6,642) |
|||||||
Long-term liabilities |
(2,592) |
419 |
(2,009) |
487 |
|||||||
Income taxes payable |
144 |
(15) |
206 |
282 |
|||||||
Other |
- |
196 |
- |
199 |
|||||||
Net cash provided by (used in) operating activities |
(27,418) |
(30,346) |
20,565 |
(22,992) |
|||||||
Investing activities: |
|||||||||||
Purchases of property and equipment |
(2,085) |
(3,141) |
(9,369) |
(7,504) |
|||||||
Capitalization of product costs |
(1,979) |
(1,944) |
(6,319) |
(5,891) |
|||||||
Purchases of intangible assets |
- |
- |
- |
(5,335) |
|||||||
Disposal of property and equipment |
- |
- |
67 |
- |
|||||||
Sale of investments |
- |
1,004 |
- |
1,004 |
|||||||
Other |
- |
- |
(65) |
- |
|||||||
Net cash used in investing activities |
(4,064) |
(4,081) |
(15,686) |
(17,726) |
|||||||
Financing activities: |
|||||||||||
Proceeds from stock option exercises and employee |
|||||||||||
stock purchase plans |
105 |
337 |
2,049 |
1,170 |
|||||||
Net cash paid for payroll taxes on restricted stock |
|||||||||||
unit releases |
(107) |
(146) |
(717) |
(258) |
|||||||
Net cash provided by financing activities |
(2) |
191 |
1,332 |
912 |
|||||||
Effect of exchange rate changes on cash |
(586) |
372 |
(27) |
(8) |
|||||||
Net change in cash and cash equivalents |
(32,070) |
(33,864) |
6,184 |
(39,814) |
|||||||
Cash and cash equivalents, beginning of period |
57,733 |
55,662 |
19,479 |
61,612 |
|||||||
Cash and cash equivalents, end of period |
$ 25,663 |
$ 21,798 |
$ 25,663 |
$ 21,798 |
|||||||
LEAPFROG ENTERPRISES, INC. |
|||||||||||
SUPPLEMENTAL FINANCIAL INFORMATION |
|||||||||||
(In thousands) |
|||||||||||
(Unaudited) |
|||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||
2011 |
2010 |
2011 |
2010 |
||||||||
Net sales |
$ 150,832 |
$ 137,956 |
$ 244,930 |
$ 242,775 |
|||||||
Cost of sales (1) |
89,025 |
79,970 |
152,385 |
149,610 |
|||||||
Gross profit |
61,807 |
57,986 |
92,545 |
93,165 |
|||||||
Operating expenses: (2) (3) |
|||||||||||
Selling, general and administrative |
17,875 |
19,206 |
56,012 |
58,984 |
|||||||
Research and development |
8,276 |
7,851 |
24,648 |
24,888 |
|||||||
Advertising |
7,790 |
11,728 |
13,617 |
19,781 |
|||||||
Depreciation and amortization |
2,917 |
2,959 |
8,261 |
8,504 |
|||||||
Total operating expenses |
36,858 |
41,744 |
102,538 |
112,157 |
|||||||
Income (loss) from operations |
24,949 |
16,242 |
(9,993) |
(18,992) |
|||||||
Other income (expense): |
|||||||||||
Interest income |
35 |
62 |
104 |
176 |
|||||||
Interest expense |
(22) |
(17) |
(102) |
(42) |
|||||||
Other, net (4) |
(3,632) |
182 |
(4,475) |
(1,203) |
|||||||
Total other income (expense), net |
(3,619) |
227 |
(4,473) |
(1,069) |
|||||||
Income (loss) before income taxes |
21,330 |
16,469 |
(14,466) |
(20,061) |
|||||||
Provision for (benefit from) income taxes |
(1,718) |
679 |
(1,558) |
288 |
|||||||
Net income (loss) |
$ 23,048 |
$ 15,790 |
$ (12,908) |
$ (20,349) |
|||||||
(1) |
Includes depreciation and amortization |
2,146 |
2,092 |
6,249 |
5,981 |
||||||
(2) |
Includes stock-based compensation as follows: |
||||||||||
Selling, general and administrative |
1,366 |
1,274 |
3,484 |
3,522 |
|||||||
Research and development |
274 |
265 |
580 |
924 |
|||||||
(3) |
Includes severance costs as follows: |
||||||||||
Selling, general and administrative |
1 |
(7) |
2,422 |
437 |
|||||||
Research and development |
- |
3 |
22 |
287 |
|||||||
(4) |
Includes impairment of auction rate securities |
- |
(194) |
- |
(194) |
||||||
Segment data: |
|||||||||||
Net sales: |
|||||||||||
U.S. segment |
115,974 |
110,766 |
181,449 |
192,099 |
|||||||
International segment |
34,858 |
27,190 |
63,481 |
50,676 |
|||||||
Income (loss) from operations*: |
|||||||||||
U.S. segment |
17,956 |
11,419 |
(17,760) |
(23,429) |
|||||||
International segment |
6,993 |
4,823 |
7,767 |
4,437 |
|||||||
* |
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.
Share this article