LeapFrog 2006 Annual Report Download - page 50
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• Higher employee costs resulting from restructuring related charges from our LeapFrog realignment plan
announced during the first quarter of 2005. During 2005, we incurred approximately $2.5 million of
expense due to the workforce reduction.
• Higher consulting and auditing fees of $2.2 million, which primarily include expenses resulting from
compliance with the Sarbanes-Oxley Act internal control requirements.
These factors were partially offset by our cost containment efforts, especially in the U.S. Consumer and
International segments.
Research and Development Expense
The research and development expense in dollars for each segment and the related percentage of our total
net sales were as follows:
Year Ended December 31,
2005 2004 Change
Segment $(1)
%of
Total
Segment’s
Net Sales $(1)
%of
Total
Segment’s
Net Sales $(1) %
U.S. Consumer ....................... $46.3 9.7% $54.3 12.6% $(8.0) (15)%
International ......................... 2.7 2.0% 3.7 2.4% (1.0) 27%
SchoolHouse ........................ 3.4 8.5% 3.0 5.4% 0.4 13%
Total Company ..................... $52.4 8.1% $61.0 9.5% $(8.6) (14)%
(1) In millions.
We classify research and development expense into two categories, product development and content
development. Product development expense reflects the costs related to the conceptual design, engineering and
testing stages of our platforms and stand-alone products. Content development expense reflects the costs related
to the conceptual, design and testing stages of our software and books. These expenses were as follows:
Year Ended December 31,
2005 2004 Change
$(1)
%of
Net Sales $(1)
%of
Net Sales $(1) %
Content development ................... $26.1 4.0% $32.0 5.0% $(5.9) (18)%
Product development ................... 26.3 4.0% 29.0 4.5% (2.7) (9)%
Research and development ............. $52.4 8.1% $61.0 9.5% $(8.6) (14)%
(1) In millions.
The $8.6 million decrease in year-over-year spending for research and development was primarily due to
decreased spending in our U.S. Consumer segment for our FLY Pentop Computer platform.
43