LeapFrog 2003 Annual Report Download - page 2

Fellow stockholders,
To gauge LeapFrog’s success, we constantly measure our
performance against our vision: To become the leading brand
for quality, technology-based educational products for school and
home use for all ages around the world.
I am pleased to say that 2003 was a very good year for LeapFrog.
Net sales grew 28% to $680 million, and net income grew 67%
to $72.7 million. We sold nearly 9 million interactive educational
platform products and almost 24 million units of software. Since
introducing our LeapPad® learning system in 1999, we’ve sold
nearly 24 million interactive educational platforms.
LeapFrog’s share of the U.S. preschool toy market grew from 18% to 22%. In spite of intense
new competition, our share of the preschool electronic learning aid market grew from 70%
to 75%. Our infant share more than doubled to 16%. We are now the second largest infant
products manufacturer in the toy industry.1
We are particularly proud of our 2003 fourth quarter market share achievement: LeapFrog grew
to 27% of the total U.S. preschool market, making LeapFrog the number one brand in the
preschool category in the fourth quarter.1
Why is LeapFrog recording these gains in sales and market share? In our view, our success
refl ects the increasing recognition among teachers and parents that the LeapFrog® brand
stands for learning. We incorporate in all of our products a proprietary educational scope and
sequence that is correlated to state and national education standards. We have 1,000 employees
committed to developing and producing the best learning products available. Most importantly,
our products are succeeding in homes in the United States and around the world, as well as
making a difference in over 25,000 U.S. classrooms.
Our success in the international segment continues to grow. Our LeapPad platform is the
number one product in the U.K. preschool electronic learning market. With our fi rst full year
in France, our LeapPad platform has become the seventh best-selling preschool product. We
had a successful launch in Mexico and we are planning to introduce products to German-
speaking European markets beginning in the second half of 2004. Our International division
grew net sales 80%, and in many ways, we are just beginning our efforts around the world.2
Net sales in our SchoolHouse division grew 86% to $37.5 million in a period of lackluster
growth in the category, and we nearly achieved profi tability. Our share in the K–12 instructional
software market grew more than any other top-ten publisher. We continue to invest in our sales
force and in our innovative, interactive classroom content, which allows us to assess and provide
personalized learning for each student.3
Going forward, we aim to increase stockholder value by staying true to our vision. We will
invest in new technologies that will enable us to improve the learning experience for children,
parents and teachers. We will continue to build our international and school-based businesses
and invest in new systems, facilities and people to ensure greater operational effectiveness. As
we increase the value we deliver to customers we should create real value for our stockholders.
We are very proud of our achievements in 2003 and look forward to continuing to make a
difference in children’s lives every day in 2004 and beyond.
Tom K a linske
CEO
1 The NPD Group, Inc. / NPD Funworld® / Consumer Panel, year-end 2003
2 NPD EPOS UK and France Retail Tracking Service, year-end 2003
3 K-12 instructional software market data based on 2003 Simba Information, Inc.
I have been a high-risk
kindergarten and first-grade reading
teacher for 15 years, and I am thrilled
with your products. I also have a
three-year-old daughter, so I bought
the My First LeapPad last year. She
reads with it almost every day… she
is dying to learn, and every girl loves
Disney Princesses. This year we bought
The Letter Factory video and we
have watched it several times every
day. It is surely our new favorite.
As a parent and a teacher, I am
thrilled to have such wonderful
products. My students love the
LeapPad we have in the classroom,
and the many donations of well-used
and well-loved LeapPad phonics
products. My extreme appreciation
for your product comes from your
obvious research and knowledge of
how children learn.
I love The Letter Factory’s use of
visuals to help students remember
the sounds, and A+ on your use
of handwriting examples! Your
products are continually on the list
of recommended holiday gifts that I
send to parents every year, and the
first thing I suggest when they ask
what they can get to improve their
child’s reading skills.
I am also thrilled with Leapster.
Again, you have hit it on the nose.
My niece loves it!
I love that you have created products
that span a wide range of age and
functioning levels, and that let
children transition from one product
to the next leveled product with
ease. I have found no gaps in your
presentation. All I can say is WOW,
WOW, WOW!!! You deserve an
A+++!
— Most appreciatively,
Anna Beth P.,
Parent and Teacher
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