LeapFrog 2006 Annual Report Download - page 46
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research and development, product and marketing activities. In addition, to the costs associated with this
relocation, research and development expense also reflected compensation costs, which increased by
approximately $1.4 million primarily related to stock-based compensation expense under SFAS 123(R). These
factors were partially offset by capitalization of allowable content development costs.
Advertising Expense
The advertising expense in dollars for each segment and the related percentage of our total net sales was as
follows:
Year Ended December 31,
2006 2005 Change
Segment $(1)
%of
Segment
Net Sales $(1)
%of
Segment
Net Sales $(1) %
U.S. Consumer ......................... $57.1 16.3% $52.5 11.0% $4.6 9%
International ........................... 17.6 15.4% 17.0 13.0% 0.6 4%
SchoolHouse ........................... 0.7 1.9% 0.5 1.1% 0.2 40%
Total Company ........................ $75.4 15.0% $70.0 10.8% $5.4 8%
(1) In millions.
Our advertising expense for the year ended December 31, 2006 was $75.4 million compared to $70.0
million in 2005. We increased our advertising expenditure to support our efforts to reduce retailer and LeapFrog
inventory levels.
Depreciation and Amortization Expenses (excluding depreciation of tooling and amortization of content
development costs, which are included in cost of sales)
Depreciation and amortization expenses decreased year-over-year by $0.3 million, or 3.0%, from $10.1
million in 2005, to $9.8 million in 2006. As a percentage of net sales, depreciation and amortization expense
increased from 1.6% in 2005 to 2.0% in 2006. The decrease in depreciation and amortization expense was
primarily due to lower amortization expense for intangible assets some of which were fully amortized during the
year.
Income (Loss) From Operations
Income (loss) from operations in dollars and the related percentage of segment net sales were as follows:
Year Ended December 31,
2006 2005 Change
Segment $(1)
%of
Segment
Net Sales $(1)
%of
Segment
Net Sales $(1) %
U.S. Consumer .................. $(110.4) (31.5)% $ (4.9) (1.0)% $(105.5) (2153)%
International .................... (9.3) (8.1)% 24.9 19.0% (34.2) (137)%
SchoolHouse .................... (5.0) (13.5)% 0.9 2.3% (5.9) (654)%
Total Company ................. $(124.7) (24.8)% $20.9 3.2% $(145.6) (697)%
(1) In millions.
We record indirect expenses in our U.S. Consumer segment and do not allocate these expenses to our
International and SchoolHouse segments.
39