LeapFrog 2010 Annual Report Download - page 38
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Fiscal Year 2009 Compared to Fiscal Year 2008
SG&A expenses declined 29% during 2009 as compared to 2008, reflecting decreased headcount-related
expenses and lower bad debt expense, partially offset by slightly higher severance expense than in 2008. Attrition
and workforce reductions implemented during 2009 resulted in a 14% year-over-year decline in full time
headcount, contributing to lower salary and bonus expenses. Bad debt expense declined $6.2 million as the
economy began to stabilize and fewer retailers declared bankruptcy in 2009.
Research and Development Expenses
R&D expenses consist primarily of salaries, employee benefits, stock-based compensation and other headcount-
related expenses associated with content development, product development, product engineering, third-party
development and programming and localization costs to translate content for international markets. We capitalize
external third-party costs related to content development, which are subsequently amortized into cost of sales in
the statements of operations.
2010 2009 2008
% Change
2010 vs.
2009
% Change
2009 vs.
2008
(Dollars in millions)
R&D expense ................................. $35.1 $35.0 $48.5 — % (28%)
As a percent of net sales ......................... 8% 9% 11% (1)* (2)*
* Percentage point increase (decrease)
Fiscal Year 2010 Compared to Fiscal Year 2009
R&D expenses for 2010 remained relatively level as compared to 2009 with no significant offsetting items.
Fiscal Year 2009 Compared to Fiscal Year 2008
R&D expenses declined 28% in 2009 as compared to 2008, 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 Junior, leveraged much of the underlying Tag platform technology
developed in prior years.
Advertising Expenses
Advertising expense consists of costs associated with marketing, advertising and promoting our products,
including customer-related discounts and promotional allowances.
2010 2009 2008
% Change
2010 vs.
2009
% Change
2009 vs.
2008
(Dollars in millions)
Advertising expense ............................ $49.3 $39.3 $67.4 25% (42%)
As a percent of net sales ......................... 11% 10% 15% 1* (5)*
* Percentage point increase (decrease)
28