LeapFrog 2011 Annual Report Download - page 34

RESULTS OF OPERATIONS
SUMMARY OF CONSOLIDATED RESULTS FOR FISCAL YEARS ENDED DECEMBER 31, 2011,
2010 and 2009
2011 2010 2009
% Change
2011 vs.
2010
% Change
2010 vs.
2009
(Dollars in millions)
Net sales ........................... $455.1 $432.6 $379.8 5% 14%
Gross margin* ....................... 40.9% 41.4% 41.6% (0.5)** (0.2)**
Operating expenses .................... 162.5 171.2 166.4 (5)% 3%
Income (loss) from operations ............ 23.7 7.8 (8.4) 204% 193%
Net income (loss) per share − basic and diluted . $ 0.30 $ 0.08 $ (0.04) 296% 283%
* Gross profit as a percentage of net sales
** Percentage point change in gross margin
Fiscal Year 2011 Compared to Fiscal Year 2010
Net sales for 2011 increased 5% compared to 2010. The increase was largely driven by the launch of the
LeapPad learning tablet in August 2011 and strong growth in our International segment, partially offset by
higher than desired U.S. retail inventory levels at the end of 2010, which generally reduced retailer demand
for our products in the first half of 2011. Net sales for 2011 were not materially affected by foreign currency
exchange rates.
Consolidated gross margin for 2011 declined 50 basis points over 2010, primarily driven by changes in
product mix with proportionally higher sales of lower margin multimedia learning platforms, specifically
LeapPad, partially offset by lower trade allowances and discounts.
Operating expenses for 2011 decreased 5% compared to 2010, primarily driven by an overall planned decrease
in marketing, advertising and promotional spending through continued leverage of our consumer email
database and expanded use of social networks. SG&A expenses increased slightly due to higher employee
bonus expense as we exceeded the overall Company performance targets set as a part of our employee bonus
programs, largely offset by lower rent expense, and other employee-related expenses resulting from a decrease
in headcount during the year.
Income from operations for 2011 improved 204% as compared to 2010, due to the increase in net sales and
lower operating expenses, partially offset by a slight decline in gross margin.
Our basic and diluted net income per share for 2011 improved by $0.22 per share compared to 2010.
Fiscal Year 2010 Compared to Fiscal Year 2009
Net sales for 2010 increased 14% as compared to 2009. The increase was primarily driven by the launch of
Leapster Explorer in June 2010, a full year of sales of our Scout line of learning toys, which we launched late
in the second quarter of 2009, and significantly lower retail inventory levels leading into the first and second
quarters of 2010 as compared to 2009. Net sales for 2010 were not materially affected by foreign currency
exchange rates.
Gross margin for 2010 declined 20 basis points as compared to 2009 as a result of the decrease of
5.5 percentage points in the international segment, which was offset by the increase of 1.1 percentage point in
the U.S. segment.
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