LeapFrog 2015 Annual Report Download - page 160

The Net Sales performance levels and related achievement level (for purposes of calculating the Bonus
Factor) for 2014 were as follows:
Net Sales Achievement Level
$567 million ............................................... 50%
$580 million ............................................... 100%
$590 million ............................................... 105%
$602 million ............................................... 120%
$614 million ............................................... 140%
$626 million ............................................... 160%
$638 million ............................................... 180%
$650 million ............................................... 200%
When it selected net sales as a measure for the 2014 bonus awards, the compensation committee believed
that the measure was appropriate because the level of our net sales would be one of the most significant
measures of the type of growth necessary to increase long-term stockholder value.
The Company achieved actual net sales of $362.1 million in the 2014 calendar year. Since our actual Net
Sales were below the lowest level of 50%, the achievement level for this component of the annual
performance-based bonus plan was zero.
Company Component — Operating Income. The other portion of the Company component depended
upon achievement of a specified Operating Income level. As with the Net Sales measure, several achievement
levels for operating income were established by the compensation committee in March 2014 based on our
2014 operating plan and data regarding our financial results and business expectations as of that time,
including toy industry and technology company financial benchmarks for product margin, operating expenses
and operating income as a percentage of net sales, and Company resources and capabilities. In addition, these
levels were consistent with the relative risk acceptable to our board of directors in approving the Company’s
operating plan.
The compensation committee then established achievement levels for each result. In each instance,
operating income achievement between the various achievement levels would result in ratable funding
achievement level score for the Operating Income measure.
The Operating Income performance levels and related achievement levels (for purposes of calculating the
Bonus Factor) for 2014 were as follows:
Operating Income Achievement Level
$25.0 million ............................................... 50%
$30.0 million ............................................... 100%
$35.0 million ............................................... 105%
$38.9 million ............................................... 120%
$42.7 million ............................................... 140%
$46.7 million ............................................... 160%
$51.1 million ............................................... 180%
$55.7 million ............................................... 200%
When it selected operating income as a measure for the 2014 bonus awards, the compensation committee
believed that the measure was appropriate because the level of our operating income would be one of our
most significant measures of the sustainability of our business results. While net sales is an important measure
of Company growth, the operating income financial measure indicates the profitable and sustainable growth
necessary to maintain long-term stockholder value. Operating income was weighted more highly than net sales
because our board of directors had established improving the profitability of the business as a key priority.
The Company had an actual operating loss of $84.0 million in the 2014 calendar year. Since our actual
Operating Income was below the threshold performance level, the achievement level for this component of the
annual performance-based bonus plan was zero.
50