LeapFrog 2008 Annual Report Download - page 41
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Fiscal Year 2008 Compared to Fiscal Year 2007
R&D expenses decreased in 2008, reflecting improvements in our overall R&D process, increased reliance
on third-party development partners and the timing of our platform development cycle. In 2007 we invested
heavily in developing the Tag, Didj and Leapster2 platforms, while 2008 R&D activity was focused on
developing content for these platforms.
Fiscal Year 2007 Compared to Fiscal Year 2006
R&D expenses increased in 2007 due to the platform development cycle as spending ramped up in 2007 to
support extensive new product introductions planned for 2008 and 2009.
We expect research and development expenses to decline again in 2009, given lower headcount and a shift
to more content development as compared to platform development.
Advertising Expenses
Advertising expense consists of costs associated with marketing, advertising and promoting our products,
including customer-related discounts and promotional allowances.
2008 2007 2006
% Change
2008 vs.
2007
% Change
2007 vs.
2006
(Dollars in millions)
Advertising expense ............................ $67.4 $64.0 $75.4 5% -15%
As a percent of net sales ......................... 15% 14% 15% 1 (1)(1)
(1) Percentage point change
Fiscal Year 2008 Compared to Fiscal Year 2007
Advertising expense increased during 2008 to support the Tag, Leapster2 and Didj product launches.
Fiscal Year 2007 Compared to Fiscal Year 2006
Advertising expense decreased in 2007 relative to 2006 primarily due to lower sales and promotional
spending. In 2006, promotional spending was increased to drive reductions in LeapFrog and retailer inventory
levels.
Advertising expenses are expected to decline in 2009 as spending will be weighted more toward retailer and
online advertising and less toward mass media communication channels.
31