LeapFrog 2004 Annual Report Download - page 105

Download and view the complete annual report

Please find page 105 of the 2004 LeapFrog annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
In 2002, all existing, unexercised rights under the Equity Plan were converted into non-qualified stock
options, and the plan was terminated in July 2002. At December 31, 2004 and 2003, there were no rights
outstanding.
The Company recognized $0, $0, and $1,341 of compensation expense in connection with the Equity Plan
for the years ended December 31, 2004, 2003 and 2002, respectively.
19. Derivative Financial Instruments
The Company realized a net loss of $32 for the year ended December 31, 2004 related to its foreign
currency exposure and hedging contracts. For the year ended December 31, 2004, the Company recorded a net
loss of $5,850 on the foreign current forward contracts. This loss was largely offset by a foreign exchange gain of
$5,818 on the underlying transactions.
At December 31, 2004, the Company had outstanding foreign exchange forward contracts, all with
maturities of approximately one month, to purchase and sell the equivalent of approximately $60,300 in foreign
currencies, including British Pounds, Canadian Dollars, Euros and Mexican Pesos. The fair market value of these
instruments was not significant and accordingly was not recorded in the balance sheet. We believe the
counterparties to these contracts are creditworthy multinational commercial banks and thus the risks of
counterparty nonperformance associated with these contracts are not considered to be material. Notwithstanding
the Company’s efforts to manage foreign exchange risk, there can be no assurances that its hedging activities will
adequately protect against the risks associated with foreign currency fluctuations.
20. Net Income (Loss) Per Share
The Company follows the provisions of SFAS No. 128, Earnings Per Share (“SFAS 128”), which requires
the presentation of basic net income (loss) per common share and diluted net income (loss) per common share.
Basic net income (loss) per common share excludes any dilutive effects of options, warrants and convertible
securities.
The following table sets forth the computation of basic and diluted net income (loss) per share.
Year Ended December 31,
2004 2003 2002
Numerator:
Net income (loss) ................................ $(6,528) $72,675 $43,444
Denominator—weighted average shares:
Class A and B—shares ............................ 59,992 57,246 39,695
Less: shares of unvested stock ...................... (16) — —
Denominator for basic net income (loss) per Class A and
B share ...................................... 59,976 57,246 39,695
Effect of dilutive securities:
Employee stock options ........................... — 3,302 3,359
Warrants ....................................... — — 5,909
Convertible preferred stock ........................ — — 1,781
Denominator for diluted net income (loss) per Class A
and B share ................................... 59,976 60,548 50,744
Net income (loss) per Class A and B share:
Basic ...................................... $ (0.11) $ 1.27 $ 1.09
Diluted .................................... $ (0.11) $ 1.20 $ 0.86
F-26