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·	Net sales to be between $35 and $45 million

·	Gross margin to be between 30% and 33%

·	Operating expenses to be between $34 and $36 million, down approximately 27% to 31% year-over-year

·	Net sales to be between $100 and $120 million

·	Gross margin to be between 37% and 41%

·	Operating expenses to be between $40 and $44 million, down approximately 21% to 28% year-over-year

 

 

 

 

 

 

 

LeapFrog Enterprises, Inc. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
	Three Months Ended March 31,
		2009				2008
Net sales	$	29,879			$	58,274
Cost of sales		21,793				37,143
Gross profit		8,086				21,131
Operating expenses:
Selling, general and administrative		19,938				30,761
Research and development		9,973				12,110
Advertising		2,168				4,532
Depreciation and amortization		2,899				2,351
Total operating expenses		34,978				49,754
Loss from operations		(26,892	)			(28,623	)
Interest income		159				967
Interest expense		(25	)			(13	)
Other expense, net		(413	)			(392	)
Total other income (expense)		(279	)			562
Loss before income taxes		(27,171	)			(28,061	)
Benefit from income taxes		(50	)			(625	)
Net loss	$	(27,121	)		$	(27,436	)
Net loss per common share:
Class A and B – basic and diluted	$	(0.43	)		$	(0.43	)
Weighted average shares outstanding:
Class A and B – basic and diluted		63,786				63,491

LeapFrog Enterprises, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Three Months Ended March 31,
		2009				2008
Operating activities:
Net loss	$	(27,121	)		$	(27,436	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		5,232				4,407
Unrealized foreign exchange loss		(1,319	)			(734	)
Deferred income taxes		128				(3	)
Stock-based compensation expense		3,004				2,958
Impairment of investment in auction rate securities		23				255
Decrease in allowance for doubtful accounts		(810	)			(191	)
Decrease in other accounts receivable-related allowances		(22,493	)			(12,658	)
Disposal of property and equipment		(4	)			(21	)
Other changes in operating assets and liabilities:
Accounts receivable		107,623				100,196
Inventories		(1,291	)			(3,143	)
Prepaid expenses and other current assets		(479	)			(2,115	)
Other assets		104				279
Accounts payable		(36,613	)			(10,904	)
Accrued liabilities and deferred revenue		(16,662	)			(33,070	)
Long-term liabilities		124				(125	)
Income taxes payable		(207	)			62
Other		837				829
Net cash provided by operating activities		10,076				18,586
Investing activities:
Purchases of property and equipment		(1,300	)			(1,394	)
Capitalization of product costs		(2,230	)			(5,239	)
Net cash used in investing activities		(3,530	)			(6,633	)
Financing activities:
Proceeds from stock option exercises and employee stock   purchase plans		41				180
Net cash paid for payroll taxes on restricted stock unit releases		(6	)			(77	)
Net cash provided by financing activities		35				103
Effect of exchange rates on cash		(359	)			320
Net change in cash and cash equivalents		6,222				12,376
Cash and cash equivalents, beginning of period		79,101				93,460
Cash and cash equivalents, end of period	$	85,323			$	105,836

LeapFrog Enterprises, Inc. Consolidated Balance Sheets (In thousands) (Unaudited)
	March 31,								December 31,
		2009				2008				2008
										(Audited)
Assets
Current assets:
Cash and equivalents	$	85,323			$	105,836			$	79,101
Accounts receivable, net of allowances for
doubtful accounts of $1,884, $288 and $3,872		5,598				39,207				89,918
Inventories		59,487				55,558				58,196
Prepaid expenses and other current assets		11,301				22,542				10,822
Deferred income taxes		3,076				3,409				3,189
Total current assets		164,785				226,552				241,226
Long-term investments		4,939				10,670				4,962
Deferred income taxes		482				212				497
Property and equipment, net		18,025				19,408				19,611
Capitalized product costs, net		16,250				17,139				16,227
Goodwill		19,549				19,549				19,549
Other assets		5,006				8,532				5,260
Total assets	$	229,036			$	302,062			$	307,332
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	19,744			$	29,909			$	56,357
Accrued liabilities and deferred revenue		27,934				30,550				44,596
Income taxes payable		22				79				229
Total current liabilities		47,700				60,538				101,182
Long-term deferred income taxes		22,662				20,191				22,404
Other long-term liabilities		3,686				2,198				3,820
Stockholders’ equity:
Class A common stock – 139,500 shares authorized;
outstanding 36,674, 35,895 and 36,627		4				4				4
Class B common stock – 40,500 shares authorized;
outstanding 27,141, 27,614 and 27,141		3				3				3
Treasury stock		(185	)			(185	)			(185	)
Additional paid-in capital		367,696				356,917				364,657
Accumulated other comprehensive income (loss)		(2,911	)			4,074				(2,055	)
Accumulated deficit		(209,619	)			(141,678	)			(182,498	)
Total stockholders’ equity		154,988				219,135				179,926
Total liabilities and stockholders’ equity	$	229,036			$	302,062			$	307,332

LeapFrog Enterprises, Inc. Supplemental Financial Information (In thousands) (Unaudited)
	Three Months Ended March 31,
		2009				2008
Net sales	$	29,879			$	58,274
Cost of sales (1)		21,793				37,143
Gross profit		8,086				21,131
Operating expenses: (2) (3)
Selling, general and administrative		19,938				30,761
Research and development		9,973				12,110
Advertising		2,168				4,532
Depreciation and amortization		2,899				2,351
Total operating expenses		34,978				49,754
Loss from operations		(26,892	)			(28,623	)
Interest income		159				967
Interest expense		(25	)			(13	)
Other expense, net (4)		(413	)			(392	)
Total other income (expense)		(279	)			562
Loss before income taxes		(27,171	)			(28,061	)
Benefit from income taxes		(50	)			(625	)
Net loss	$	(27,121	)		$	(27,436	)
(1) Includes depreciation and amortization	$	2,333			$	2,056
(2) Includes stock-based compensation as follows:
Selling, general and administrative	$	2,455			$	2,458
Research and development		549				500
(3) Includes severance costs as follows:
Selling, general and administrative	$	553			$	430
Research and development		266				805
(4) Includes impairment of auction rate securities	$	23			$	255

 

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