LeapFrog 2002 Annual Report Download - page 46

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increase inventories in advance of our primary selling season; and timing of introductions of new products. For a
discussion of these and other factors affecting seasonality, see “— Our business is seasonal, and therefore our
annual operating results will depend, in large part, on sales relating to the brief holiday season;” and “— Our
quarterly operating results are susceptible to fluctuations that could cause our stock price to decline.”
The following table sets forth selected unaudited quarterly statement of operations information for 2001 and
2002. The unaudited quarterly information includes all normal recurring adjustments that management considers
necessary for a fair presentation of the information shown. Historically, we have been profitable in our third and
fourth quarters and unprofitable in our first and second quarters. We expect that we will continue to incur losses
during the first and second quarters of each year for the foreseeable future. Because of the seasonality of our
business and other factors, results for any interim period are not necessarily indicative of the results that may be
achieved for the full fiscal year.
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Year Ended
December 31,
(In thousands)
2002
Net sales ................................... $57,980 $43,218 $182,127 $248,447 $531,772
Grossprofit ................................ 27,416 21,245 95,750 127,621 272,032
Income (loss) from operations .................. (8,073) (12,555) 44,378 47,601 71,351
Netincome(loss) ............................ (5,059) (7,541) 26,683 29,361 43,444
Net income (loss) per common share—basic ...... $ (0.15) $ (0.22) $ 0.65 $ 0.59 $ 1.09
Net income (loss) per common share—diluted ..... $ (0.15) $ (0.22) $ 0.50 $ 0.50 $ 0.86
2001
Net sales ................................... $21,984 $26,462 $112,382 $153,415 $314,243
Grossprofit ................................ 9,036 10,726 53,339 71,544 144,645
Income (loss) from operations .................. (14,319) (12,067) 23,529 19,292 16,435
Netincome(loss ............................ (8,535) (7,401) 14,087 11,518 9,669
Net income (loss) per common share—basic ...... $ (0.26) $ (0.22) $ 0.42 $ 0.34 $ 0.29
Net income (loss) per common share—diluted ..... $ (0.26) $ (0.22) $ 0.37 $ 0.27 $ 0.25
Certain reclassifications have been made to be in conformity with the presentation of the annual financial
statements.
Liquidity and Capital Resources
Net cash provided by operating activities was $22.5 million in 2002 compared to net cash used in operating
activities of $35.3 million in 2001. This was our first year with positive cash flow from operations and it was due
primarily to an increase of $33.8 million in net income from 2001 to 2002. Net cash used in operating activities
was $29.7 million in 2000. Year-end net accounts receivable increased to $169.7 million in 2002 from $115.5
million in 2001 and $54.2 million in 2000 due to increased net sales year over year and the concentration of sales
at year end due to the holiday selling season. Based on the same factors, we anticipate that the trend of increasing
year-end net accounts receivable will continue in 2003. Our year-end allowances related to accounts receivable
were $16.4 million in 2002, $9.9 million in 2001 and $11.4 million in 2000.
Net cash used in investing activities was $15.1 million in 2002 compared to $14.6 million in 2001 and $9.4
million in 2000. The primary components of the net cash used in investing activities for 2002, 2001 and 2000
were purchases of property and equipment used in the ordinary course of our business.
We typically commit to inventory production, content development and advertising expenditures prior to the
peak third and fourth quarter retail selling season. In addition, our accounts receivable balance typically peaks in
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