LeapFrog Enterprises Inc. (LF, Financial) filed Quarterly Report for the period ended 2009-03-31.
Leapfrog Enterprises is a leading designer developer and marketer of innovative technology-based educational products and related proprietary content dedicated to making learning effective and engaging. They currently design their products to help preschool through 8th grade children learn age- and skill-appropriate subject matter including phonics reading math spelling science geography history and music. LeapFrog Enterprises Inc. has a market cap of $132.7 million; its shares were traded at around $2.08 with and P/S ratio of 0.3.
Cash and cash equivalents totaled $85.3 million and $105.8 million at March 31, 2009 and 2008, respectively. At the end of 2007, we made a policy decision to invest our excess cash in short-term U.S. government obligations due to the continuing financial market crisis. As such, all cash equivalents were invested in certificates of deposit and money market funds that held only high-grade United States government obligations at March 31, 2009.
As of March 31, 2009, we held $4.9 million in auction rate securities (ARS) classified as long-term investments. Uncertainties in credit and financial markets since the fourth quarter of 2007 have prevented us from liquidating our ARS holdings as the number of securities submitted for sale in periodic auctions has exceeded the number of purchase orders. We have recorded a total unrealized loss of $9.1 million in the appropriate periods as loss on investments in our consolidated statements of operations reflecting the total decline in fair value of our ARS holdings from their original cost of $14.0 million. Due to the illiquidity of these investments, we have not included and do not intend to include them as potential sources of liquidity in our future cash flow projections for the foreseeable future. Therefore, we do not anticipate that further declines in value, if any, will have an adverse impact on our future ability to support our operations or meet our obligations as they come due. We also do not anticipate any material adverse impact on our overall capital position should the fair value of these investments decline to zero as the fair value of $4.9 million for the auction rate securities investment constitutes less than 3% of our total assets at March 31, 2009.
Our accounts receivable balance of $5.6 million at March 31, 2009 was down $84.3 million from the 2008 year end balance. This decrease was driven by aggressive cash collection efforts, the significant decline in sales and higher allowances. A majority of the allowances related to specific reserves established in the fourth quarter of 2008 as a result of the deteriorating economic environment and high retail inventory levels.
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 2009, including those for capitalized content and website development costs, will be funded with cash flows generated by operations and will be lower than in prior years. Capital expenditures were $3.5 million and $6.6 million for the three months ended March 31, 2009 and 2008 respectively.
In November 2005, we entered into a $75.0 million asset-based revolving credit facility with Bank of America. In May 2008 the credit facility agreement was amended increasing the maximum borrowing availability on the credit line from $75.0 million to $100.0 million and to include certain other financial institutions and institutional lenders. We granted security interests in substantially all of our assets as collateral for the loans under the amended credit facility agreement. Borrowing availability varies according to our level of eligible accounts receivable, eligible inventory and cash and investment securities deposited in secured accounts with the administrative agent or other lenders. Availability under this agreement was $31.4 million as of March 31, 2009.
Read the The complete ReportLF is in the portfolios of Third Avenue Management.
Leapfrog Enterprises is a leading designer developer and marketer of innovative technology-based educational products and related proprietary content dedicated to making learning effective and engaging. They currently design their products to help preschool through 8th grade children learn age- and skill-appropriate subject matter including phonics reading math spelling science geography history and music. LeapFrog Enterprises Inc. has a market cap of $132.7 million; its shares were traded at around $2.08 with and P/S ratio of 0.3.
Highlight of Business Operations:
Our provision for income taxes and our effective tax rates were $(0.05) million and $(0.6) million, and 0.2 % and 2.2% for the three months ended March 31, 2009 and 2008 respectively. Our pretax losses were $27.2 million and $28.1 million for the same periods, respectively. Calculation of the effective tax rates for all periods included a non-cash valuation allowance recorded against our domestic deferred tax assets.Cash and cash equivalents totaled $85.3 million and $105.8 million at March 31, 2009 and 2008, respectively. At the end of 2007, we made a policy decision to invest our excess cash in short-term U.S. government obligations due to the continuing financial market crisis. As such, all cash equivalents were invested in certificates of deposit and money market funds that held only high-grade United States government obligations at March 31, 2009.
As of March 31, 2009, we held $4.9 million in auction rate securities (ARS) classified as long-term investments. Uncertainties in credit and financial markets since the fourth quarter of 2007 have prevented us from liquidating our ARS holdings as the number of securities submitted for sale in periodic auctions has exceeded the number of purchase orders. We have recorded a total unrealized loss of $9.1 million in the appropriate periods as loss on investments in our consolidated statements of operations reflecting the total decline in fair value of our ARS holdings from their original cost of $14.0 million. Due to the illiquidity of these investments, we have not included and do not intend to include them as potential sources of liquidity in our future cash flow projections for the foreseeable future. Therefore, we do not anticipate that further declines in value, if any, will have an adverse impact on our future ability to support our operations or meet our obligations as they come due. We also do not anticipate any material adverse impact on our overall capital position should the fair value of these investments decline to zero as the fair value of $4.9 million for the auction rate securities investment constitutes less than 3% of our total assets at March 31, 2009.
Our accounts receivable balance of $5.6 million at March 31, 2009 was down $84.3 million from the 2008 year end balance. This decrease was driven by aggressive cash collection efforts, the significant decline in sales and higher allowances. A majority of the allowances related to specific reserves established in the fourth quarter of 2008 as a result of the deteriorating economic environment and high retail inventory levels.
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 2009, including those for capitalized content and website development costs, will be funded with cash flows generated by operations and will be lower than in prior years. Capital expenditures were $3.5 million and $6.6 million for the three months ended March 31, 2009 and 2008 respectively.
In November 2005, we entered into a $75.0 million asset-based revolving credit facility with Bank of America. In May 2008 the credit facility agreement was amended increasing the maximum borrowing availability on the credit line from $75.0 million to $100.0 million and to include certain other financial institutions and institutional lenders. We granted security interests in substantially all of our assets as collateral for the loans under the amended credit facility agreement. Borrowing availability varies according to our level of eligible accounts receivable, eligible inventory and cash and investment securities deposited in secured accounts with the administrative agent or other lenders. Availability under this agreement was $31.4 million as of March 31, 2009.
Read the The complete ReportLF is in the portfolios of Third Avenue Management.
