LeapFrog sales fall in Q1

Firm reports sales for the first quarter of 2008 are down by 49 per cent.
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Net sales for the quarter were $29.9 million, down 49 per cent compared to $58.3 million in the same quarter a year ago.

Net loss for the quarter was $27.1 million, or 43 cents per share, compared to $27.4 million, or 43 cents per share, a year ago.

Operating cash flow was $10.1 million in the quarter, and the company's cash position increased by $6.2 million from December 31st 2008.

Cash and equivalents at the end of the quarter were $85.3 million, and the company had no debt outstanding.

Net sales from the United States segment for the quarter were $22.3 million, down 51 per cent compared to $45.6 million a year ago.

Net sales from the international segment were $7.6 million, down 40 per cent compared to $12.7 million a year ago. Excluding the impact of currency fluctuations, the decline in international sales would have been 27 per cent.

Jeffrey Katz, chairman and CEO said: "First quarter results were as we anticipated given the seasonally low sales period and high retailer inventory levels at the end of 2008.

"Our objective over the next few months is to reduce retailer inventory to appropriate levels while bolstering our sales through the introduction of new and attractively-priced products.

“This spring, we are launching Tag Junior, which will make our award-winning Tag Reading System available to a younger age group. We are also launching the Scout line.”

Bill Chiasson, Chief Financial Officer added: "LeapFrog's financial position remains solid. We ended the quarter with a strong cash position, no debt and positive cash flow.

“Over the past year, we have significantly reduced our cost structure, and, as a result, our net loss was flat year-over-year despite a $28 million decrease in net sales."

For the second quarter of 2009, LeapFrog expects net sales to rise slightly to between $35 and $45 million, with a gross margin between 30 and 33 per cent.

For the third quarter LeapFrog expects net sales to rise again to between $100 and $120 million with a gross margin of between 37 and 41 per cent.

Mr. Chiasson added: "As indicated in our guidance, we expect second and third quarter net sales to be down 35 to 50 per cent relative to last year as we continue to work with retailers to reduce inventory levels.

"Retailer inventory levels are expected to reach satisfactory levels by early in the third quarter and we expect year-over-year sales growth to resume in the fourth quarter.

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