Form 8-K/A LEAPFROG ENTERPRISES For: Jun 11

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

FORM 8-K/A

 

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

 

June 11, 2015
Date of Report (date of earliest event reported)

 

 

LEAPFROG ENTERPRISES, INC. (Exact name of registrant as specified in its charter)

 

Delaware (State or other jurisdiction of incorporation)

1-31396 (Commission File Number)

95-4652013 (IRS Employer Identification No.)

 

6401 Hollis Street, Suite 100
Emeryville, California 94608-1463
(Address of principal executive offices) (Zip Code)

 

(510) 420-5000 Registrant's telephone number, including area code

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On June 11, 2015, we issued a press release announcing financial results for the fiscal quarter and year ended March 31, 2015. A revised copy of this press release, with financial tables included, entitled “LeapFrog Reports Fiscal Fourth Quarter and Full Year 2015 Financial Results” is furnished as Exhibit 99.1 to this Current Report on Form 8-K/A and is incorporated herein by reference.

 

The information furnished in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits

 

The following exhibit is filed herewith:

 

Exhibit Number		Description
99.1		Press release dated June 11, 2015 entitled “LeapFrog Reports Fiscal Fourth Quarter and Full Year 2015 Financial Results”

  

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	LeapFrog Enterprises, Inc.
Date:  June 11, 2015	By:	/s/ Raymond L. Arthur
		Raymond L. Arthur
		Chief Financial Officer

 

 

EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press release dated June 11, 2015 entitled “LeapFrog Reports Fiscal Fourth Quarter and Full Year 2015 Financial Results”

 

 

Exhibit 99.1

 

 

LEAPFROG REPORTS FISCAL FOURTH QUARTER AND FULL YEAR 2015 FINANCIAL RESULTS

 

EMERYVILLE, Calif.—June 11, 2015—LeapFrog Enterprises, Inc. (NYSE: LF) today announced financial results for the fiscal fourth quarter and full year 2015. The company’s fiscal year covers the twelve-month period ending March 31, 2015.

 

Summary of financial results for the fiscal year ended March 31, 2015 compared to the full year ended March 31, 2014:

 

·

Consolidated net sales were $339.1 million, down 36%. U.S. segment net sales were down 37%, and international segment net sales were down 33%.

·

Net loss per basic and diluted share was $3.12 and included a net non-cash charge of $0.22 per share for goodwill impairment, $0.52 per share for impairment of long-lived assets and $1.30 per share for additional deferred tax asset valuation allowance. In the prior year period, net income per diluted share was $1.07 and included $0.89 per share non-cash benefit from the reduction of deferred tax asset valuation allowance.

·

Adjusted net loss per basic and diluted share1, which excludes goodwill impairment, impairment of long-lived assets and the deferred tax asset valuation allowance adjustment, was $1.08, compared to adjusted net income per diluted share1 of $0.18 a year ago.

·

Cash and cash equivalents were $127.2 million as of March 31, 2015, down 45% compared to $232.0 million as of March 31, 2014.

 

“Sales and net income declined year over year and fell below expectations primarily due to high carry-forward retail inventories from the holidays, lower demand for our tablets and associated content and the later than planned shipment and promotion of LeapTV. While we are disappointed with our fiscal 2015 results, we believe that by responding effectively to the changing needs of parents and leveraging our unique assets we can transform our business and deliver enduring growth,” said John Barbour, Chief Executive Officer.

 

“With more parents around the world concerned about their children’s educational, emotional, and creative development, the demand for fun experiences that engage, inspire and enrich a child’s intellectual curiosity is growing. Our recent research provides a deep insight into millennial parents and caregivers – while education remains a core need, many are also searching for solutions that expand their child’s world and help them develop to be more holistic and well rounded. We are uniquely positioned to take advantage of this opportunity through the extension and evolution of the LeapFrog brand, products, and services."

 

¹ Adjusted net income (loss) per basic and diluted share is a non-GAAP financial measure. It is described below and reconciled to its comparable GAAP measure in the accompanying financial tables.

 

 

LeapFrog Enterprises, Inc.

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“In addition to operating our business more cost effectively, the key elements of our strategic plan are the diversification of the LeapFrog brand into new children’s product categories, the stabilization and broadening of our current product lines and the growth of content share of our business, including the distribution of our award winning content beyond our hardware base to other platforms. According to NPD our Explorer content was the #4 best-selling toy in the US last year and was a top seller in the UK. We believe there is currently a substantial amount of consumer interest in having access to our content on the wide variety of platforms that are in homes today.”

 

“For 20 years, we have created award-winning learning solutions that combine developmental expertise, innovative technology and a child’s love for fun. This will continue to be our focus as we broaden our portfolio with innovative new products to entertain and develop children to help them achieve their potential,” continued Mr. Barbour.

 

Financial Overview for the Fourth Fiscal Quarter Ended March 31, 2015 Compared to the Quarter Ended March 31, 2014

 

Fourth fiscal quarter net sales were $33.9 million, down 40% compared to $56.9 million last year, and included a 1% negative impact from changes in currency exchange rates. In the U.S. segment, net sales were $25.3 million, down 35% compared to $39.1 million last year. In the International segment, net sales were $8.6 million, down 51% compared to $17.7 million last year, and included a 5% negative impact from changes in currency exchange rates.

 

Operating expenses for the fourth fiscal quarter were $78.8 million, up 98% compared to $39.8 million last year. The increase in operating expenses is due primarily to a non-cash $36.5 million permanent impairment of long-lived assets following a FASB ASC 360 review. Our long-lived assets, which include property and equipment, such as our new ERP system, which will be put in service next quarter, and website development costs, were deemed impaired as the carrying value exceeded the fair value of the assets.

 

Net loss for the fourth fiscal quarter was $76.2 million, or $1.08 per basic and diluted share, compared to net loss of $11.8 million, or $0.17 per basic and diluted share, in the prior year period.

 

Non-GAAP adjusted net loss¹ for the fourth fiscal quarter was $39.7 million, or $0.56 per basic and diluted share, compared to non-GAAP adjusted net loss of $11.8 million, or $0.17 per basic and diluted share a year ago. Non-GAAP adjusted EBITDA² for the quarter was negative $28.6 million compared to negative EBITDA² of $10.4 million a year ago.

 

Financial Overview for the Fiscal Year Ended March 31, 2015 Compared to the Year Ended March 31, 2014

 

Full-year 2015 net sales were $339.1 million, down 36% compared to $527.6 million last year, and included a 1% negative impact from changes in currency exchange rates. Net sales declined primarily due to decreased consumer demand for our LeapPad line and associated content, later than planned shipment and promotion of LeapTV and higher than desired inventory levels at retail stores. Net sales were also impacted by the very challenging retail and promotional environment. In the U.S. segment, net sales were $232.7 million, down 37% compared to $368.0 million last year. In the International segment, net sales were $106.4 million, down 33% compared to $159.5 million last year, and included a 2% negative impact from changes in currency exchange rates.

 

² Adjusted EBITDA is a non-GAAP financial measure. It is described below and reconciled to its comparable GAAP measure in the accompanying financial tables.

 

 

LeapFrog Enterprises, Inc.

Page 3 of 6

 

Operating expenses for the full year 2015 were $235.1 million, up 28% compared to $183.0 million in the prior year. The increase in operating expenses is due to the non-cash permanent impairment of $19.5 million of goodwill and $36.5 million of long-lived assets.

 

Net loss for the full year 2015 was $218.8 million, or $3.12 per basic and diluted share, compared to net income of $75.2 million, or $1.09 per basic share and $1.07 per diluted share last year. Basic and diluted net loss per share for the year ended March 31, 2015 included a net non-cash charge of $0.22 per share for goodwill impairment, $0.52 per share for impairment of long-lived assets and $1.30 per share for additional deferred tax asset valuation allowance. The full year 2014 net income per share included a non-cash benefit related to a release of valuation allowance previously set against our deferred tax assets of $0.91 per basic share and $0.89 per diluted share.

 

Non-GAAP adjusted net loss¹ for the full-year 2015 was $75.8 million, or $1.08 per basic and diluted share, compared to non-GAAP adjusted net income of $12.5 million, or $0.18 per basic and diluted share a year ago. Non-GAAP adjusted EBITDA² for the full-year 2015 was negative $45.9 million compared to positive EBITDA² of $53.0 million a year ago.

 

Guidance

 

"We are committed to positioning the Company for long-term growth. We took meaningful steps in the fourth quarter to realign our sales, marketing and product strategies to regain momentum in our business. While we continue to make good progress on our new product initiatives, most of these will not be impactful until the fiscal 2017 holiday season. We continue to work through the impact of retail space losses, inventory overhang and significant competitive pressures,” said Ray Arthur, Chief Financial Officer.

 

“This will be a year of rebuilding. We will continue to prudently manage expenses and cash as we stabilize the business and position LeapFrog for long-term growth. We expect fiscal year 2016 sales to contract considerably relative to the prior year, and operating losses for fiscal year 2016 to be similar to or greater than fiscal year 2015 losses, excluding goodwill and long-lived asset impairments,” added Mr. Arthur.

 

Conference Call and Webcast

 

LeapFrog will hold a conference call to discuss fiscal fourth quarter and full year 2015 financial results on June 11, 2015, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call will be webcast live and can be accessed at LeapFrog's investor relations web site at www.leapfroginvestor.com. An archive of the webcast will be available on the web site approximately three hours after completion of the call. In addition, more information about LeapFrog, including this press release and other financial and investor information, is also available on the investor relations web site.

 

To participate in the call, please dial (855) 717-7665 and request conference ID 59227730. A telephonic replay of the call will be available for one month. To access the replay, please dial (404) 537-3406 and use conference ID 59227730.

 

 

LeapFrog Enterprises, Inc.

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About LeapFrog

 

LeapFrog Enterprises, Inc. is the leader in educational entertainment for children. For 20 years, LeapFrog has created award-winning learning solutions that combine educational expertise, innovative technology and a child’s love for fun. With experiences that are personalized to each child’s level, LeapFrog helps children achieve their potential through LeapFrog’s proprietary learning tablets, its innovative new active video gaming system LeapTV, learn to read and write systems, interactive learning toys and more, all designed or approved by LeapFrog’s full-time in-house team of learning experts. LeapFrog’s Learning Path, the ultimate guide for parents on early childhood, is designed specifically to help support and guide their child's learning with personalized ideas and feedback, fun activities and expert advice. LeapFrog is based in Emeryville, California, and was founded in 1995 by a father who revolutionized technology-based learning solutions to help his child learn how to read. Learn more at www.leapfrog.com.  

 

TM & © 2015 LeapFrog Enterprises, Inc. All rights reserved.

 

Use of Non-GAAP Financial Information

 

This press release includes non-GAAP financial measures, specifically adjusted net income (loss) per basic and diluted share and adjusted EBITDA.

 

Adjusted net income (loss) is calculated as net income (loss) adjusted to exclude goodwill impairment, tax benefit associated with goodwill impairment, impairment of long-lived assets and deferred tax valuation allowance adjustment. Adjusted net income (loss) per basic and diluted share is calculated as adjusted net income (loss) divided by weighted-average basic and diluted shares outstanding, as applicable. As required by SEC rules, we have provided a schedule with a reconciliation of adjusted net income (loss) and adjusted net income (loss) per basic and diluted share to the most directly comparable GAAP measures, net income (loss) and net income (loss) per basic and diluted share.

 

Management believes that adjusted net income (loss) and adjusted net income (loss) per basic and diluted share are some of the appropriate measures for evaluating the operating performance of the Company because of the significant swing in net income (loss) and net income (loss) per basic and diluted share as a result of deferred tax valuation allowance adjustment, impairment of long-lived assets and goodwill impairment, and therefore, provides a more comparable measure of year-over-year operating results.

 

Adjusted EBITDA is defined as earnings (or net income (loss)) before interest, income taxes, depreciation and amortization, goodwill impairment, impairment of long-lived assets, other expenses (income) and stock-based compensation. As required by SEC rules, we have provided an attached schedule with a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income.

 

Management believes adjusted EBITDA is one of the appropriate measures for evaluating the operating performance of the Company because it reflects the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet and make strategic acquisitions.

 

However, these non-GAAP measures should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP as more fully discussed in the Company's financial statements and filings with the SEC. Additionally, these non-GAAP measures may not be comparable to similarly-titled measures used by other companies. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America.

 

 

LeapFrog Enterprises, Inc.

Page 5 of 6

 

Forward-Looking Statements

 

This news release contains forward-looking statements that involve risks and uncertainties, including statements regarding our belief that by responding effectively to the changing needs of parents and leveraging our unique assets we can transform our business and deliver enduring growth, more parents around the world being concerned about their children’s educational, emotional, and creative development and the associated growth in the demand for fun experiences that engage, inspire and enrich a child’s intellectual curiosity, our recent research into millennial parents and caregivers, education remaining a core need for millennial parents and caregivers, millennial parents and caregivers searching for solutions that expand their child’s world and help them develop to be more holistic and well rounded, our unique positioning to take advantage of this opportunity through the extension and evolution of the LeapFrog brand, products, and services, the key elements of our strategic transformation, the amount of consumer interest in having access to our content on the wide variety of platforms that are in homes today, our focus as we broaden our portfolio with new products, our commitment to position the Company for long-term growth, the meaningfulness of the steps we took in the fourth quarter to realign our sales, marketing and product strategies to regain momentum in our business, our progress on our new product initiatives and when these will be impactful, our expectations for our financial performance in our 2016 fiscal year, the tablet and related content market, our belief that this will be a year of rebuilding for us and that we will continue to prudently manage expenses and cash as we stabilize the business and position LeapFrog for long-term growth. Our actual results may differ materially from those expressed or implied by such forward-looking statements. The risks that could cause our results to differ include, without limitation, our ability to correctly predict highly changeable consumer preferences and product trends, our ability to continue to develop new products and services, our ability to compete effectively with competitors, deterioration of global economic conditions, our reliance on a small group of retailers for the majority of our gross sales, the effectiveness of our marketing and advertising efforts, the seasonality of our business, system failures in our online services or web store, our dependence on our suppliers for our components and raw materials, our reliance on a limited number of manufacturers, our ability to maintain adequate inventory levels, our ability to maintain or acquire licenses, our ability to protect or enforce our intellectual property rights, defects in our products, the risks associated with international operations, costs or changes associated with compliance with laws and regulations, negative political developments, changes in trade relations, armed hostilities, terrorism, labor strikes, natural disasters or public health issues, our dependence on our officers and other employees, the sufficiency of our liquidity, impacts from acquisitions, mergers or dispositions, continued ownership by a few stockholders of a significant percentage of the voting power in the company, the volatility of our stock price, the impact of potential impairment charges or valuation allowances and failure to successfully implement new strategic operating initiatives. These risks and others are discussed under “Risk Factors” in our filings with the U.S. Securities and Exchange Commission, including our most recent Form 10-K and Form 10-Q. All information provided in this release is as of the date hereof, and we undertake no obligation to update this information.

 

 

LeapFrog Enterprises, Inc.

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Contact Information

 

Investors:	Media:
Nancy Lee	Danielle Cantrell
Investor Relations	Public Relations
(510) 420-5150	(510) 420-4886
[email protected]	[email protected]

 

LEAPFROG ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

		Three Months Ended March 31,								Twelve Months Ended March 31,
		2015				2014				2015				2014
Net sales		$	33,929			$	56,886			$	339,149			$	527,564
Cost of sales			30,424				35,763				244,667				323,703
Gross profit			3,505				21,123				94,482				203,861
Operating expenses:
Selling, general and administrative			24,166				24,699				88,869				89,026
Research and development			12,023				9,122				35,990				36,047
Advertising			3,388				3,258				42,919				47,388
Goodwill impairment			-				-				19,549				-
Impairment of long-lived assets			36,461				-				36,461				-
Depreciation and amortization			2,759				2,686				11,330				10,569
Total operating expenses			78,797				39,765				235,118				183,030
Income (loss) from operations			(75,292	)			(18,642	)			(140,636	)			20,831
Other income (expense):
Interest income			19				19				90				63
Interest expense			-				(1	)			(16	)			(1	)
Other, net			79				(231	)			(667	)			(872	)
Total other income (expense), net			98				(213	)			(593	)			(810	)
Income (loss) before income taxes			(75,194	)			(18,855	)			(141,229	)			20,021
Provision for (benefit from) income taxes			972				(7,072	)			77,543				(55,216	)
Net income (loss)		$	(76,166	)		$	(11,783	)		$	(218,772	)		$	75,237
Net income (loss) per share:
Class A and B - basic		$	(1.08	)		$	(0.17	)		$	(3.12	)		$	1.09
Class A and B - diluted		$	(1.08	)		$	(0.17	)		$	(3.12	)		$	1.07
Weighted average shares used to calculate net income (loss) per share:
Class A and B - basic			70,291				69,408				70,071				68,800
Class A and B - diluted			70,291				69,408				70,071				70,618

 

 

LEAPFROG ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

		March 31,
		2015				2014
ASSETS
Current assets:
Cash and cash equivalents		$	127,176			$	231,988
Accounts receivable, net of allowances for doubtful accounts of $854 and $306, respectively			19,618				29,920
Inventories			71,927				52,293
Prepaid expenses and other current assets			10,012				10,416
Deferred income taxes			553				22,553
Total current assets			229,286				347,170
Deferred income taxes			1,792				53,998
Property and equipment, net			1,676				30,765
Capitalized content costs, net			22,510				19,058
Goodwill			-				19,549
Other intangible assets, net			3,453				3,805
Other assets			1,475				1,473
Total assets		$	260,192			$	475,818
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	16,578			$	19,146
Accrued liabilities			21,582				23,930
Deferred revenue			11,921				12,808
Deferred income taxes			1,630				-
Income taxes payable			267				689
Total current liabilities			51,978				56,573
Long-term deferred income taxes			323				-
Other long-term liabilities			1,365				1,125
Total liabilities			53,666				57,698
Stockholders' equity:
Class A Common Stock, par value $0.0001; Authorized - 139,500 shares; Outstanding: 66,084 and 65,229, respectively			7				7
Class B Common Stock, par value $0.0001; Authorized - 40,500 shares; Outstanding: 4,394 and 4,396, respectively			-				-
Treasury stock			(185	)			(185	)
Additional paid-in capital			434,728				422,678
Accumulated other comprehensive loss			(5,450	)			(578	)
Accumulated deficit			(222,574	)			(3,802	)
Total stockholders’ equity			206,526				418,120
Total liabilities and stockholders’ equity		$	260,192			$	475,818

 

 

LEAPFROG ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		Three Months Ended March 31,								Twelve Months Ended March 31,
		2015				2014				2015				2014
Operating activities:
Net income (loss)		$	(76,166	)		$	(11,783	)		$	(218,772	)		$	75,237
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			7,613				5,466				27,482				21,128
Goodwill impairment			-				-				19,549				-
Impairment of long-lived assets			36,461				-				36,461				-
Deferred income taxes			432				(6,041	)			75,963				(56,900	)
Stock-based compensation expense			2,610				2,797				11,286				11,051
Write off of long-term assets			170				-				170				-
Allowance for doubtful accounts			140				99				1,094				(192	)
Other changes in operating assets and liabilities:
Accounts receivable, net			82,386				102,731				8,840				26,593
Inventories			4,527				1,795				(23,277	)			(7,174	)
Prepaid expenses and other current assets			18				(791	)			(502	)			(313	)
Other assets			(145	)			(448	)			(16	)			(250	)
Accounts payable			(7,496	)			(3,549	)			(554	)			468
Accrued liabilities			(9,447	)			(16,958	)			(265	)			(2,148	)
Deferred revenue			(482	)			(1,628	)			(616	)			5,170
Other long-term liabilities			(116	)			(450	)			(1,026	)			(1,344	)
Income taxes payable			(150	)			(404	)			(370	)			173
Net cash provided by (used in) operating activities			40,355				70,836				(64,553	)			71,499
Investing activities:
Purchases of property and equipment and other intangible assets			(2,902	)			(3,819	)			(23,987	)			(19,086	)
Capitalization of product costs			(2,869	)			(3,841	)			(15,938	)			(14,101	)
Net cash used in investing activities			(5,771	)			(7,660	)			(39,925	)			(33,187	)
Financing activities:
Proceeds from stock option exercises and employee stock purchase plan			439				1,094				1,951				5,326
Cash paid for payroll taxes on restricted stock unit releases			(125	)			(374	)			(1,065	)			(1,280	)
Common stock repurchased			-				-				(38	)			-
Excess tax benefits from stock-based compensation			-				1				11				12
Net cash provided by financing activities			314				721				859				4,058
Effect of exchange rate changes on cash			(1,742	)			38				(1,193	)			(92	)
Net change in cash and cash equivalents			33,156				63,935				(104,812	)			42,278
Cash and cash equivalents, beginning of period			94,020				168,053				231,988				189,710
Cash and cash equivalents, end of period		$	127,176			$	231,988			$	127,176			$	231,988

 

 

LEAPFROG ENTERPRISES, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands)

(Unaudited)

  

		Three Months Ended March 31,								Twelve Months Ended March 31,
		2015				2014				2015				2014
Net sales		$	33,929			$	56,886			$	339,149			$	527,564
Cost of sales (1)			30,424				35,763				244,667				323,703
Gross profit			3,505				21,123				94,482				203,861
Operating expenses: (2)
Selling, general and administrative			24,166				24,699				88,869				89,026
Research and development			12,023				9,122				35,990				36,047
Advertising			3,388				3,258				42,919				47,388
Goodwill impairment			-				-				19,549				-
Impairment of long-lived assets			36,461				-				36,461				-
Depreciation and amortization			2,759				2,686				11,330				10,569
Total operating expenses			78,797				39,765				235,118				183,030
Income (loss) from operations			(75,292	)			(18,642	)			(140,636	)			20,831
Other income (expense):
Interest income			19				19				90				63
Interest expense			-				(1	)			(16	)			(1	)
Other, net			79				(231	)			(667	)			(872	)
Total other income (expense), net			98				(213	)			(593	)			(810	)
Income (loss) before income taxes			(75,194	)			(18,855	)			(141,229	)			20,021
Provision for (benefit from) income taxes			972				(7,072	)			77,543				(55,216	)
Net income (loss)		$	(76,166	)		$	(11,783	)		$	(218,772	)		$	75,237
(1)  Includes depreciation and amortization			4,854				2,780				16,152				10,559
(2)  Includes stock-based compensation as follows:
Selling, general and administrative			2,278				2,479				9,825				9,766
Research and development			332				318				1,461				1,285
(3)  Includes severance costs as follows:
Selling, general and administrative			657				105				688				321
Research and development			725				-				741				-
Segment data:
Net sales:
U.S. segment			25,287				39,145				232,736				368,031
International segment			8,642				17,741				106,413				159,533
Income (loss) from operations*:
U.S. segment			(73,481	)			(19,782	)			(147,457	)			(11,788	)
International segment			(1,811	)			1,140				6,821				32,619

 

*

Certain corporate-level operating expenses associated with sales and marketing, product support, human resources, legal, finance, information technology, corporate development, procurement activities, research and development, legal settlements and other corporate costs are charged entirely to our U.S. segment, rather than being allocated between the U.S. and International segments.

 

 

  

LEAPFROG ENTERPRISES, INC.

SUPPLEMENTAL DISCLOSURE REGARDING NON-GAAP FINANCIAL INFORMATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

(Unaudited)

  

The following table presents a reconciliation of net income (loss), a GAAP measure, to adjusted net income (loss), a non-GAAP measure, where available. Adjusted net income (loss) is defined as net income (loss) before goodwill impairment, tax benefit associated with goodwill impairment, impairment of long-lived assets and deferred tax valuation allowance adjustment. Adjusted net income (loss) per share is calculated as adjusted net income (loss) divided by weighted-average basic or diluted shares outstanding, as applicable.

 

		Three Months Ended March 31,								Twelve Months Ended March 31,
		2015				2014				2015				2014
Net income (loss) - GAAP		$	(76,166	)		$	(11,783	)		$	(218,772	)		$	75,237
Exclude:
Goodwill impairment			-				-				19,549				-
Tax benefit associated with goodwill impairment			-				-				(3,812	)			-
Impairment of long-lived assets			36,461				-				36,461				-
Deferred tax valuation allowance adjustment			-				-				90,769				(62,759	)
Adjusted net income (loss) - Non-GAAP		$	(39,705	)		$	(11,783	)		$	(75,805	)		$	12,478
Net income (loss) per share - GAAP:
Class A and B - basic		$	(1.08	)		$	(0.17	)		$	(3.12	)		$	1.09
Class A and B - diluted		$	(1.08	)		$	(0.17	)		$	(3.12	)		$	1.07
Adjusted net income (loss) per share - Non-GAAP:
Class A and B - basic and diluted		$	(0.56	)		$	(0.17	)		$	(1.08	)		$	0.18
Weighted-average shares used to calculate net income (loss) per share:
Class A and B - basic			70,291				69,408				70,071				68,800
Class A and B - diluted			70,291				69,408				70,071				70,618

 

The following table presents a reconciliation of net income (loss), a GAAP measure, to adjusted EBITDA, a non-GAAP measure. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, goodwill impairment, impairment of long-lived assets, other expenses (income), and stock-based compensation.

 

		Three Months Ended March 31,								Twelve Months Ended March 31,
		2015				2014				2015				2014
Net (loss) income - GAAP		$	(76,166	)		$	(11,783	)		$	(218,772	)		$	75,237
(Less) add:
Interest income			(19	)			(19	)			(90	)			(63	)
Interest expense			-				1				16				1
Provision for (benefit from) income taxes			972				(7,072	)			77,543				(55,216	)
Depreciation and amortization			7,613				5,466				27,482				21,128
Goodwill impairment			-				-				19,549				-
Impairment of long-lived assets			36,461				-				36,461				-
Other, net			(79	)			231				667				872
Stock-based compensation			2,610				2,797				11,286				11,051
Adjusted EBITDA - Non-GAAP		$	(28,608	)		$	(10,379	)		$	(45,858	)		$	53,010

  

 

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