LeapFrog 2015 Annual Report Download - page 8

PART I
ITEM 1. BUSINESS
LeapFrog Enterprises, Inc. (‘‘LeapFrog,’’ ‘‘we,’’ ‘‘us’’ or ‘‘our’’), founded in 1995 and incorporated in 1997 in
the State of Delaware, is a leading developer of educational entertainment for children. Our product portfolio
consists of multimedia learning platforms and related content and learning toys. We have developed a number
of learning platforms, including the LeapTV educational video game system, the LeapPad family of learning
tablets, the Leapster family of handheld learning game systems, and the LeapReader reading and writing
systems, which facilitate a wide variety of learning experiences provided by our rich content libraries,
available in cartridge, print and digital format. We have created hundreds of interactive content titles for our
platforms, covering subjects such as phonics, reading, writing, mathematics, science, social studies, creativity
and life skills. In addition, we have a broad line of stand-alone interactive learning toys, including the popular
My Pal Scout line. Many of our products connect to our proprietary online LeapFrog Learning Path (the
‘‘Learning Path’’), which provides personalized feedback on a child’s learning progress and offers product
recommendations to enhance each child’s learning experience. Our products are available in four languages
(English, Queen’s English, French and Spanish) and are sold globally through retailers, distributors and
directly to consumers via the LeapFrog App Center (‘‘App Center’’). LeapFrog is headquartered in
Emeryville, California.
On May 31, 2014, our board of directors approved a change in our fiscal year-end from December 31 to
March 31 in order to better align our business planning and financial reporting functions with the seasonality
of our business. In connection with this change, this Annual Report on Form 10-K reports financial results for
the year ended March 31, 2015 (our first full fiscal year since the change, which we also refer to as ‘‘fiscal
2015’’), the three-month transition period ended March 31, 2014, and the years ended December 31, 2013
and 2012. For purposes of comparison, we have included the unaudited financial results for the year ended
March 31, 2014 (which reflects the combined results for the nine months from April 1, 2013 through
December 31, 2013 and the three-month transition period from January 1, 2014 through March 31, 2014).
Refer to Note 22 — ‘‘Unaudited Comparative Data’’ in our Consolidated Financial Statements included in this
Annual Report on Form 10-K for additional information.
Business Segments and Operations
We organize, operate and assess our business in two primary operating segments: United States (‘‘U.S.’’) and
International. Refer to Note 21 — ‘‘Segment Reporting’’ in our Consolidated Financial Statements included in
this Annual Report on Form 10-K for detailed information on our segments and their financial results for the
year ended March 31, 2015, the three months ended March 31, 2014 and the years ended December 31, 2013
and 2012.
The operations of our business segments are described below.
•United States: The U.S. segment is responsible for the development, design, sale and marketing of
multimedia learning platforms, related content and learning toys, which are sold primarily through
retailers, including their online channels, distributors, and directly to consumers via our App Center
in the U.S. The App Center includes both content developed by us and content from third parties
that we curate and distribute.
The U.S. segment represented approximately 69%, 69%, 70% and 73% of our consolidated net sales
for the year ended March 31, 2015, the three months ended March 31, 2014 and the years ended
December 31, 2013 and 2012, respectively. The majority of this segment’s net sales are to four
large retailers. Sales invoiced to Wal-Mart Stores, Inc. (‘‘Wal-Mart’’), Toys ‘‘R’’ Us, Inc. (‘‘Toys
‘‘R’’ Us’’), Target Corporation (‘‘Target’’) and Amazon.com, Inc. (‘‘Amazon’’), in the aggregate,
accounted for approximately 70%, 60%, 73% and 73% of the segment’s gross sales for the year
ended March 31, 2015, the three months ended March 31, 2014 and the years ended December 31,
2013 and 2012, respectively. Each of these customers accounted for 10% or more of our
consolidated and U.S. segment’s gross sales for the year ended March 31, 2015. Wal-Mart, Toys
‘‘R’’ Us and Target accounted for 10% or more of our consolidated and U.S. segment’s gross sales
1