LeapFrog 2004 Annual Report Download - page 37
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• Larger mix of lower margin sales to distributors as compared to higher-margin sales direct to retailers;
and
• Higher fixed expenses, including warehousing and freight expenses resulting from higher levels of
inventory.
Education and Training. The three percentage point increase in our Education and Training segment’s gross
profit percentage year-over-year was primarily due to better net sales leverage achieved as the segment’s fixed
expenses represent a lower percentage of those sales, partially offset by lower margin ancillary services sold in
conjunction with the LeapTrack learning system.
Selling, General and Administrative Expenses
The selling, general and administrative expenses in dollars for each segment and the related percentage of
our total net sales were as follows:
Year Ended December 31,
2004 2003 Change
Segment $(1)
%of
Total
Company
Net Sales $(1)
%of
Total
Company
Net Sales $(1) %
U.S. Consumer ....................... $ 82.9 19.2% $64.4 11.8% $18.6 29%
International ......................... 17.1 11.2% 10.9 11.3% 6.2 57%
Education and Training ................ 20.8 37.6% 16.3 43.6% 4.4 27%
Total Company ..................... $120.8 18.9% $91.6 13.5% $29.2 32%
(1) In millions.
U.S. Consumer. The dollar increase in selling, general and administrative expenses for our U.S. Consumer
segment was primarily due to:
• Higher employee and employee-related expenses of $3.3 million due to increased headcount;
• Expense of approximately $3.1 million related to the startup of our new distribution center;
• Higher legal expenses of $6.4 million primarily related to pending litigation; and
• Higher outside professional expenses of approximately $1.7 million related to the implementation of the
internal control requirements of the Sarbanes-Oxley Act.
International. The dollar increase in selling, general and administrative expenses for our International
segment was primarily due to:
• Higher compensation and related employee expenses, including sales commissions, in Europe of $2.3
million resulting primarily from increased headcount; and
• Increased marketing related expenses of $1.5 million.
Education and Training. The dollar increase in selling, general and administrative expenses for our
Education and Training segment was primarily due to:
• Higher compensation and related employee expenses of $3.0 million resulting from expansion of the
sales force; and
• Increased marketing related expenses of $ 1.4 million to support the segment’s expansion.
30