LeapFrog 2003 Annual Report Download - page 46

•Increase in tax benefit from exercise of stock options of $34.2 million due to the increase in option
exercises in 2003.
•The higher receivable balances negatively impacted our cash flows from operations by $58.0 million
from 2002 to 2003. Our days sales outstanding, or DSO, increased from 61.5 days at December 31, 2002
to 76.5 days at December 31, 2003. The DSO increase was primarily due to the timing of shipments, as
ahigher percentage of sales in 2003 were shipped later in the fourth quarter, pushing collection into
early 2004. As of February 29, 2004, our account receivables balance, net of allowances, was
approximately $87.0 million. We anticipate the collection of these receivables will positively impact our
cash flow from operations in the first quarter of 2004. Our year-end allowances related to accounts
receivable were $27.0 million at December 31, 2003, $16.4 million at December 31, 2002 and $9.9
million at December 31, 2001, primarily due to lower average selling prices resulting from discounts on
our more matured platforms.
The net cash used in operating activities in 2001 of $35.3 million consisted primarily of the net income in
2001 of $9.7 million, and increases in the provision for allowances for accounts receivable of $16.0 million and
income taxes payable of $9.6 million, offset by the increase in accounts receivable of $77.3 million.
Investing activities
Net cash used in investing activities was $59.0 million in 2003 compared to $17.6 million in 2002 and $14.6
million in 2001. The primary component of net cash used in investing activities for 2003 was net purchases of
short-term investments of $40.4 million and $15.8 million in purchases of property and equipment. The primary
components of the net cash used in investing activities for 2002 and 2001 were purchases of property and
equipment of $14.8 million in 2002 and $13.6 million in 2001, used in the ordinary course of our business.
Financing activities
Net cash provided by financing activities was $30.6 million in 2003 compared to $57.5 million in 2002 and
$52.8 million in 2001. The primary component of cash from financing activities in 2003 was proceeds received
from the exercise of stock options and purchases of our common stock pursuant to our employee stock purchase
plan. In 2001 and for part of 2002, we relied on our long-term secured credit facility with Foothill Capital
Corporation and proceeds received from the issuance of Series A preferred stock to fund our operations. We
repaid the entire amount of our outstanding long-term loan with Foothill from the proceeds from our initial
public offering in 2002. The Series A preferred stock was converted to Class A common stock in November
2002.
We estimate that our capital expenditures for 2004 will be between $19.0 million and $24.0 million, as
compared to $15.8 million in 2003, $14.8 million in 2002 and $13.6 million in 2001. The increase in our 2004
estimate over 2003 is primarily related to increased computers and software expenses, resulting from our
continued growth, and increased manufacturing tool purchases for use in the production of our existing and new
products.
We believe our current cash and short-term investments and anticipated cash flow from operations will be
sufficient to meet our working capital and capital requirements through 2005.
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