Leaner Leapfrog readies itself for growth

Despite expected losses in its latest preliminary full year results LeapFrog says its necessary reduction in inventories has left it in good shape for the next two years
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The firm says it expects to report net sales for fiscal year 2006 of roughly $500 million and a net loss of approximately $2.30 to $2.35 per share. Impacting these results were increased costs associated with reducing retailer and LeapFrog inventories.

"The last half of the year has been all about preparing for 2007 and 2008," said president and CEO, Jeffrey Katz. "During the fourth quarter we took steps in the form of increased advertising spending and allowances to substantially reduce retailer and LeapFrog inventories. While our actions impacted sales trends unfavourably as retailers worked to reduce their inventories, and impacted earnings due to higher spending than earlier estimates, our inventories fell to about $75 million, less than half of year ago levels of $166 million.

“Inventories held by our US retail customers fell to $96 million, or 40 per cent below 2005 levels. Both LeapFrog and retailer inventories of Leapfrog products are at the lowest year-end levels since 2001. Our cash and investments more than doubled to about $148 million at year-end 2006 from $72 million the year prior."

Katz continued, "With these initiatives now behind us we have moved expeditiously beyond the 'fix' phase of the plan we announced last fall and are now preparing our new product introductions for 2007 and 2008. We are pleased to begin 2007 squarely in what we have termed the 'reload' phase of our plan. We look forward to providing additional details about our progress and outlook for 2007 in our earnings release and conference call in a few weeks."

The company expects to report fourth quarter and fiscal 2006 results on March 1st.

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