LeapFrog 2011 Annual Report Download - page 37

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Fiscal Year 2011 Compared to Fiscal Year 2010
Advertising expense for the 2011 declined 20% as compared to 2010, primarily driven by an overall planned
decrease in marketing, advertising and promotion of our products through the utilization of more cost effective
in-store promotional displays, continued leveraging of our consumer email database and expanded use of
social networks for our marketing communications.
Fiscal Year 2010 Compared to Fiscal Year 2009
Advertising expenses for 2010 increased 25% as compared to 2009. The increase was primarily driven by
increased costs to support the launch of Leapster Explorer and to build consumer awareness of the Tag
reading system.
OTHER INCOME (EXPENSE)
The components of other income (expense) were as follows:
2011 2010 2009
% Change
2011 vs.
2010
% Change
2010 vs.
2009
(Dollars in millions)
Other income (expense):
Interest income ..................... $0.1 $0.2 $0.6 (33)% (63)%
Interest expense .................... (0.3) (0.2) (0.1) (7)% (305)%
Other, net......................... (4.8) (1.8) (2.0) (169)% 9%
Total .......................... $(4.9) $(1.8) $(1.5) (170)% (25)%
Fiscal Year 2011 Compared to Fiscal Year 2010
Other expense increased significantly for 2011 as compared to 2010, resulting primarily from our foreign
currency activity. The U.S. dollar strengthened significantly against several of our foreign currencies late
in the third quarter of 2011 resulting in a $0.3 million realized foreign currency translation loss and a
$1.6 million unrealized foreign currency translation loss for the third quarter of 2011. We generally enter into
short-term foreign exchange forward contracts, typically based on 30 day forward spot rates, to minimize
certain foreign exposures. However, during the third quarter of 2011, an operational error caused us to enter
into forward hedging contracts that differed from what we had intended. As a result of this error, we recorded
a $1.5 million realized loss on foreign exchange forward contracts in our U.S. segment for the third quarter of
2011. We subsequently made improvements to our foreign currency hedging program to provide greater
assurance of accurate execution of our hedging determinations which performed as expected during the fourth
quarter of 2011.
Fiscal Year 2010 Compared to Fiscal Year 2009
Interest income decreased during 2010 as compared to 2009 reflecting a reduction in the average balance of
interest-bearing investments as well as lower interest rates in 2010 as compared to 2009.
The improvement in the other, net category was primarily due to the stabilization of the fair values of our
investment in auction rate securities (‘‘ARS’’); we recorded a gain on sale of $0.5 million in 2010 as
compared to a net impairment charge of $0.3 million in 2009. This improvement was offset by an increase
in the amortization of fees related to the amended asset-based revolving credit facility entered into on
August 13, 2009.
27