LeapFrog 2010 Annual Report Download - page 44

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Cash Sources and Uses
The table below shows our sources and uses of cash for the three fiscal years ended December 31, 2010, 2009
and 2008.
2010 2009 2008
% Change
2010 vs.
2009
% Change
2009 vs.
2008
(Dollars in millions)
Cash flows provided by (used in):
Operating activities ......................... $(22.6) $ (5.0) $ 12.0 (352%) (142%)
Investing activities ......................... (21.2) (13.3) (23.4) (59%) 43%
Financing activities ......................... 1.6 (0.2) (0.2) 900% — %
Effect of exchange rate fluctuations on cash ...... 0.1 1.0 (2.8) (90%) 136%
Increase (decrease) in cash and cash
equivalents ......................... $(42.1) $(17.5) $(14.4) (141%) (22%)
Fiscal Year 2010 Compared to Fiscal Year 2009
Net cash used in operating activities for 2010 increased $17.6 million, as compared to 2009, primarily due to a
significantly higher inventory level purchased to support expected sales demand, and a decrease in associated
accounts payable due to timelier payments, offset partially by increased cash collected from our accounts
receivable.
Net cash used in investing activities increased $7.9 million, or 59%, for 2010 as compared to 2009, primarily due
to a $5.3 million purchase of intangible assets related to the technology used in our Tag reading system. The
remaining increase is primarily related to various computer hardware and software upgrades and maintenance, as
well as new software purchases to further automate processes and better support operations.
Net cash provided by financing activities improved $1.8 million for 2010 as compared to 2009, primarily due to
an increase in employee stock option exercises in response to a higher average company stock price during 2010
as compared to 2009.
Fiscal Year 2009 Compared to Fiscal Year 2008
Net cash flow from operations in 2009 declined $17.0 million from 2008 as a result of a higher proportion of net
sales in the fourth quarter of 2009, and the relative timing of sales within the fourth quarter. Net sales in the
fourth quarter of 2009 increased 37% over the same period of 2008, with a significant portion of the sales
occurring later in the quarter compared to the same period of 2008. While net inventory declined $29.0 million as
a result of the stronger 2009 fourth quarter sales and effective production management, net accounts receivable
increased $57.5 million. Given that a majority of the sales occurred later in the quarter, a larger proportion of
2009 sales were not due until 2010 as compared to sales at the end of 2008.
Net cash flow used in investing activities decreased $10 million in 2009 driven by reductions in capital
expenditures, principally property and equipment and capitalized content, as well as proceeds received from the
sale of part of our investment in ARS.
34