LeapFrog 2007 Annual Report Download - page 46
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School
Our School segment’s net sales declined by $11.0 million, or 30%, from $37.0 million in 2006 to $26.0
million in 2007. In December 2006, we announced that we had decided to implement changes in our School
segment designed to return it to positive operating income by focusing our sales efforts on profitable regions.
Four products each accounted for 10% or more of our net sales in the School segment in 2007 or 2006.
Net Sales % of Total
Year Ended
December 31, Change
Year Ended
December 31,
School segment: 2007(1) 2006(1) $(1) % 2007 2006
LeapPad (2) ........................... $ 3.5 $ 3.1 $ 0.4 13% 13% 8%
LeapTrack ............................ 4.6 7.7 (3.1) (40) 18 21
Literacy Center ........................ 2.2 5.5 (3.3) (60) 8 15
Interactive Library ..................... 3.8 7.7 (3.9) (51) 15 21
All other products ...................... 11.9 13.0 (1.1) (8) 46 35
Total School segment .............. $26.0 $37.0 $(11.0) (30)% 100% 100%
(1) In millions
(2) Includes sales of classic LeapPad hardware and software
Gross Profit and Gross Margin
The gross profit for each segment and the related gross profit percentage of segment net sales, or gross
margin, were as follows:
Segment Performance:
Year Ended December 31,
2007 2006 Change
Segment $(1)
%of
Segment’s
Sales $(1)
%of
Segment’s
Sales $(1) %
U.S. Consumer .................... $120.1 38.4% $ 96.7 27.6% $23.4 24%
International ...................... 38.1 36.8% 30.1 26.2% 8.0 27%
School ........................... 15.1 58.1% 20.2 54.9% (5.1) (25)%
Total Company ................... $173.3 39.2% $147.0 29.3% $26.3 18%
(1) In millions
During 2007, gross margin benefited from the recovery of inventory written down in the prior year. In 2007,
we recorded net sales of $12.0 million on $8.0 million of inventory written off in 2006. In 2007, we also
established new write-downs of $12.8 million, of which approximately $7.0 million related to inventory on hand
at December 31, 2006.
U. S. Consumer
The gross margin for 2007 improved by 10.8 percentage points compared to the same period in 2006. The
improvement in our U. S. Consumer segment was primarily due to the following factors:
• Lower allowances for excess and obsolete inventory and charges for purchase order cancellations
(excluding FLY Fusion write-downs, discussed below), which impacted gross margin by approximately
7.5 percentage points.
38