LeapFrog 2009 Annual Report Download - page 39
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Fiscal Year 2009 Compared to Fiscal Year 2008
R&D expenses declined 28% in 2009, reflecting lower headcount-related expenses, lower web development and
lower product development costs. Workforce reductions implemented in 2009 resulted in a 13% year-over-year
decline in full time headcount contributing to lower salary and bonus expenses. Web development costs
decreased in 2009 as compared to 2008; in 2008, we made significant investments to build out web capabilities
supporting our connected product strategy. Finally, product development costs declined as our largest platform
launch in 2009, Tag Jr., leveraged much of the underlying Tag platform technology developed in prior years.
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.
Advertising Expenses
Advertising expense consists of costs associated with marketing, advertising and promoting our products,
including customer-related discounts and promotional allowances.
2009 2008 2007
% Change
2009 vs.
2008
% Change
2008 vs.
2007
(Dollars in millions)
Advertising expense .................................... $39.3 $67.4 $64.0 -42% 5%
As a percent of net sales ................................. 10% 15% 14% (5) 1*
* Percentage point increase (decrease)
Fiscal Year 2009 Compared to Fiscal Year 2008
Advertising expenses declined 42% in 2009 primarily as a result of our continued focus on efficient spending,
given the expected net sales decline and fewer key product launches. More specifically, our marketing strategy
leveraged less costly alternatives, such as direct-to-consumer marketing programs through the LeapFrog
Learning Path, instead of traditional marketing programs.
Fiscal Year 2008 Compared to Fiscal Year 2007
Advertising expense increased 5% during 2008 to support the Tag, Leapster2 and Didj product launches.
Other Income (Expense)
The components of other income (expense) were as follows:
2009 2008 2007
% Change
2009 vs.
2008
% Change
2008 vs.
2007
(Dollars in millions)
Other income (expense):
Interest income .................................... $0.6 $2.3 $6.9 -74% -67%
Interest expense .................................... (0.1) (0.4) (0.1) 75% 312%
Other, net ......................................... (2.0) (8.2) (3.2) 76% -156%
Total ........................................ $(1.5) $(6.3) $ 3.6 -76% -275%
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