EMERYVILLE, Calif., Feb. 6, 2013 /PRNewswire/ --
LeapFrog Enterprises, Inc. (NYSE:LF) today announced financial results for the fourth quarter and full year ended December 31, 2012.
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Highlights of full year 2012 results compared to full year 2011 results:
- Consolidated net sales were up 28%.
- U.S. segment net sales were up 24%, and international segment net sales were up 38%.
- Income from operations was up 170%.
- Income from operations as a percentage of net sales was 11.0%, more than double the prior year.
- Net income was $86.5 million, up 334%.
- Net income per diluted share was $1.24, up $0.94.
- Adjusted EBITDA was $93.1 million, up 89%.1
- Cash and cash equivalents were $120.0 million as of December 31, 2012, up 67% compared to the balance as of December 31, 2011.
"The quality of execution from the LeapFrog team was exceptional this past year. Despite a tough global economy and a declining U.S. toy industry,2 we achieved a third straight year of sales growth and nearly tripled our income from operations, continuing to drive shareholder value," said John Barbour, Chief Executive Officer.
"Our focus on creating the best children's educational entertainment platforms and content resulted in our award-winning line of cartridge content becoming the #1 top-selling toy in the U.S. and a Top 10 selling toy in the U.K. in 2012 based on sales according to NPD data.2 In addition, net sales of digital download content from our curated selection of over 475 titles, including LeapFrog-developed content and content from 30 media partners, were nearly four times the prior year as families took advantage of our 24x7 online App Center.
"We had more products in NPD's list of U.S. 2012 Top 10 selling toys than any other manufacturer, with three of the top four and four of the Top 10.2 In the U.K., we also had two of the Top 10 selling toys.2 We also achieved significant market share growth in all the major markets in which we operate and built solid foundations for more growth in 2013."
"LeapFrog is in a very exciting position and I am optimistic about our continued growth in 2013," continued Mr. Barbour. "More and more parents around the world are searching for effective learning solutions to supplement their children's education. We have 18 years of experience creating the best learning solutions in the market and are uniquely positioned to take advantage of this opportunity.
"I am very excited about the quality of the team we have assembled and developed at LeapFrog over the last two years. I believe our market-leading performance in 2012 is a direct result of our world-class talent, our wonderful brand that is loved by millions of families, and the fun and engaging entertainment experiences we create that provide children with life-changing learning."
Financial Overview for the Fourth Quarter 2012 Compared to the Fourth Quarter 2011
Fourth quarter 2012 net sales were $244.7 million, up 16% compared to $210.2 million last year, and were not materially impacted by changes in currency exchange rates. Net sales growth was primarily driven by strong content sales, high consumer demand for the LeapPad learning tablets and accessories, and the introduction of the LeapsterGS game system. In the U.S. segment, net sales were $177.8 million, up 11% compared to $160.6 million last year. In the International segment, net sales were $67.0 million, up 35% compared to $49.6 million last year, and included a 2% positive impact from changes in currency exchange rates.
Income from operations for the fourth quarter was $43.2 million, up 28% compared to $33.7 million reported a year ago. Income from operations as a percentage of net sales was 17.7%, up 170 basis points compared to 16.0% a year ago.
Net income for the fourth quarter was $62.3 million, up 90% compared to $32.8 million a year ago. Net income per diluted share was $0.89, up 82% compared to $0.49 a year ago. Net income in the fourth quarter of 2012 included a tax benefit of $20.3 million, or $0.29 per diluted share, as a result of recording the expected tax benefit of a portion of the company's past accumulated net operating losses due to improved historical results and future prospects.
Adjusted EBITDA for the fourth quarter was $50.4 million, up 24% compared to $40.7 million a year ago.
Financial Overview for the Full Year 2012 Compared to the Full Year 2011
Full year 2012 net sales were $581.3 million, up 28% compared to $455.1 million last year, and were not materially impacted by changes in currency exchange rates. Net sales growth was primarily driven by strong content sales, high consumer demand for the LeapPad learning tablets and accessories, and the introduction of the LeapsterGS game system. In the U.S. segment, net sales were $424.8 million, up 24% compared to $342.0 million last year. In the International segment, net sales were $156.5 million, up 38% compared to $113.1 million last year, and included a 1% negative impact from changes in currency exchange rates.
Income from operations was $64.1 million in 2012, up $40.4 million or 170% compared to 2011. Income from operations as a percentage of net sales was 11.0%, up 112%, or 580 basis points, compared to 5.2% a year ago.
Net income was $86.5 million in 2012, more than four times the net income of $19.9 million in 2011. Net income per diluted share was $1.24, more than four times the net income per share of $0.30 in 2011. Net income in 2012 included a tax benefit of $20.3 million, or $0.29 per diluted share, as a result of recording the expected tax benefit of a portion of the company's past accumulated net operating losses due to improved historical results and future prospects. Net income in 2012 also included a $6.4 million, or $0.09 per diluted share, tax benefit due to expiring statute of limitations.
Adjusted EBITDA for the full year was $93.1 million, up 89% compared to $49.3 million a year ago.
"We delivered a terrific performance in 2012 with strong sales, earnings, and cash growth," said Ray Arthur, Chief Financial Officer. "Consumer demand for our educational entertainment was robust, resulting in good consumer sell-through and healthy year-end retail inventory levels. Our balance sheet also improved with inventory and receivables balances growing at a lower rate than our net sales growth, and our accounts payable balance actually declining. Working capital improved by 42%, allowing us to self-fund our operations without accessing our asset-based credit line."
Guidance
"We are excited about our market-leading portfolio and new product launches for 2013, including a new learn-to-read system, new iPhone and iPad app activity products and new LeapPad tablets," stated Mr. Arthur. "As a result, despite a global economy that remains sluggish and a U.S. toy industry that declined in 2012,2 we plan to continue to grow our business at a pace significantly ahead of the market and expect net sales to increase at a high single-digit percentage growth rate. Like 2012, we will be prepared to chase upside whenever possible.
"To support our market-leading growth and our ongoing business transformation, we plan to make long-term investments in content, international expansion, online communities, systems and new platforms. Even with this investment for the future, we expect our operating margin as a percentage of net sales to remain consistent with 2012.
"Additional guidance will be provided at a later date when we have more clarity regarding our book tax accounting position. The ultimate outcome of our book tax accounting position will have no impact on cash taxes paid. We do not expect to pay any significant amount of U.S. federal taxes in the next several years."3