LeapFrog 2012 Annual Report Download - page 36

LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
Cash and cash equivalents totaled $120.0 million and $71.9 million at December 31, 2012 and 2011,
respectively. The increase in cash balance was primarily due to an increase in net sales. Cash and cash
equivalents held by our foreign subsidiaries totaled $34.2 million and $16.3 million at December 31, 2012 and
2011, respectively. We do not intend to repatriate any foreign cash and cash equivalents as it will be used to
fund foreign operations. However, if we were to do so, any associated tax liability would be fully offset by
our net operating loss or tax credit carryforwards for the foreseeable future. In line with our investment policy,
all cash equivalents were invested in high-grade money market funds, including Treasury money market funds,
at December 31, 2012.
We have an asset-based revolving credit facility (the ‘‘revolving credit facility’’) with a potential borrowing
availability of $75.0 million for the months of September through December and $50.0 million for the
remaining months. There were no borrowings outstanding on this line of credit at December 31, 2012.
We do not expect our accumulated deficit of $76.0 million at December 31, 2012 to be indicative of our
future ability to generate cash flow, given our anticipated cash flows from operations and the availability of
our revolving credit facility.
Future capital expenditures are primarily planned for new product development and purchases related to the
upgrading of our information technology capabilities. We expect that capital expenditures in 2013, including
those for capitalized content and website development costs, will be funded with cash flows generated by
operations. Capital expenditures were $25.1 million for 2012, $19.9 million for 2011, and $22.5 million,
including a $5.4 million purchase of intangible assets, for 2010. We expect capital expenditures to be in the
range of $30 million to $35 million for the year ending December 31, 2013.
We believe that cash on hand, cash flow from operations and amounts available under our revolving credit
facility will provide adequate funds for our foreseeable working capital needs and planned capital expenditures
over the next twelve months. Our ability to fund our working capital needs and planned capital expenditures,
as well as our ability to comply with all of the financial covenants of our revolving credit facility, depend on
our future operating performance and cash flows, which in turn are subject to prevailing economic conditions.
Cash Sources and Uses
The table below shows our sources and uses of cash for the fiscal years ended December 31, 2012, 2011
and 2010.
2012 2011 2010
% Change
2012 vs. 2011
% Change
2011 vs. 2010
(Dollars in millions)
Cash flows provided by (used in):
Operating activities .......... $67.9 $ 70.2 $(22.6) (3)% N/M
Investing activities .......... (22.6) (19.9) (21.2) (14)% 7%
Financing activities .......... 2.5 2.2 1.6 10% 38%
Effect of exchange rate
fluctuations on cash ........ 0.4 (0.1) 0.1 N/M N/M
Increase (decrease) in cash
and cash equivalents ..... $48.1 $ 52.4 $(42.1) (8)% N/M
Fiscal Year 2012 Compared to Fiscal Year 2011
Cash flow provided by operations for 2012 decreased $2.3 million compared to 2011, primarily driven by an
increase in accounts receivable due to higher sales, lower accounts payable, and increased inventory purchases
to support expected sales demand. The increase in net income partially offset the decrease in cash flow
provided by operations for 2012.
Net cash used in investing activities for 2012 increased $2.7 million compared to 2011, primarily due to an
increase in hardware and software purchases, partially offset by the cash generated from sales of investments
in 2012, of which there were none in 2011.
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