LF » Topics » LIQUIDITY AND CAPITAL RESOURCES

This excerpt taken from the LF 10-Q filed May 5, 2009.

Liquidity and Capital Resources

Capital Resources

Our sources of capital include cash flows from operations and a credit facility with Bank of America. We believe we have sufficient resources available to finance our business plan, meet our working capital requirements and maintain an appropriate level of capital spending.

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.

The termination date of the agreement and the maturity date for any outstanding loans under the facility is November 8, 2010. The interest rate for our credit facility is, at our election, the Bank of America prime rate (or base rate) or a LIBOR rate defined in the credit agreement, plus in each case an applicable margin. The applicable margin for a loan depends on the average monthly usage and type of loan. The credit facility contains a covenant requiring that we maintain a ratio of EBITDA to fixed charges, as defined in the agreement, of at least 1.0 to 1.0 when the covenant is required to be tested. The ratio is measured only if certain borrowing-availability thresholds are not met.

The agreement also contains customary events of default and prohibits the payment of cash dividends on our common stock. In the event that default occurs, the lenders may terminate their commitments, declare all borrowings under the credit facility as due immediately, and foreclose on the collateral. As of March 31, 2009, we were in compliance with all covenants under this agreement. Bank of America is committed to lend up to 75% of the total borrowing and Wachovia Capital Finance Corporation is committed to lend the remaining 25%.

We had no borrowings outstanding under this agreement at March 31, 2009.

 

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Cash Sources and Uses

The table below shows our sources and uses of cash for the three months ended March 31, 2009 as compared to the same period in 2008.

 

     Three Months Ended March 31,   

% Change    

2009 vs 2008    

 
     2009    2008   
        

 (Dollars in millions)

        

Cash flows provided by (used in):

        

Operating activities

     $ 10.1        $ 18.6      -46%          

Investing activities

     (3.5)       (6.6)     47%          

Financing activities

     -          0.1      -100%          

Effect of exchange rate fluctuations on cash

     (0.4)       0.3      -233%          
                

Increase in cash and cash equivalents

     $ 6.2        $ 12.4      -50%          
                

Cash flow from operations for the three months ended March 31, 2009 decreased by $8.5 million or 46% as compared to the same period ended March 31, 2008. The decrease was driven primarily by higher payments to vendors made during the first quarter of 2009 compared to the same period of 2008 resulting from focused cash management efforts implemented in the fourth quarter of 2008. The increase in payments in the first quarter of 2009 was partially offset by a legal settlement and higher bonus amounts paid in the first quarter of 2008. As discussed in “Our Business” above, a severe decline in retail sales in the fourth quarter of 2009 has resulted in a departure from the normal seasonal pattern described above.

Net cash used in investing activities improved by $3.1 million or 47% for the three months ended March 31, 2009 over the same period of 2008 primarily due to a reduction in capitalized product costs.

Seasonal Patterns of Cash Provided By or Used in Operations

Our cash flow is very seasonal and a vast majority of our sales historically occurred in the last two quarters of the year as retailers expanded inventories for the holiday selling season. Our accounts receivable balances are generally the highest in the last two months of the fourth quarter as payments are not due until the first quarter of the following year. Cash used in operations is typically the highest in the third quarter as we increase inventory to meet the holiday season demand.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We included in our Annual Report on Form 10-K for the year ended December 31, 2008 a discussion of our critical accounting policies most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We have not made any material changes to any of our critical accounting policies or to estimates, assumptions or judgments made in applying such policies during the first quarter of 2009.

 

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New Accounting Pronouncements

This excerpt taken from the LF 10-Q filed May 8, 2008.

Liquidity and Capital Resources

LeapFrog’s primary source of liquidity during the three months ended March 31, 2008 was cash received from the collection of accounts receivable balances generated from sales in the fourth quarter of 2007 and the first quarter of 2008, partially offset by operating losses and higher payments of accounts payable.

This excerpt taken from the LF 10-K filed Mar 13, 2008.

Liquidity and Capital Resources

In 2007, highlights of our cash flow included:

 

   

Operating losses of $101.3 million in 2007 were partially offset by inventory reductions of $20.6 million.

 

 

   

Gross fixed assets increased $8.7 million from the $108.0 million at the end of 2006 to the $116.7 million at the end of 2007. Effectively all of the $8.9 million change was due to the capitalization of costs for content for our existing and new products.

This excerpt taken from the LF 10-Q filed Nov 9, 2007.

LIQUIDITY AND CAPITAL RESOURCES

LeapFrog’s primary source of liquidity during the three and nine months ended September 30, 2007 was cash received from the collection of accounts receivable balances generated from sales in the fourth quarter of 2006 and the first half of 2007, partially offset by operating losses.

 

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Cash and related balances are:

 

     September 30,  
     2007(1)     2006(1)     Change (1)  

Cash and cash equivalents

   $ 71.7     $ 42.6     $ 29.1  

Short-term investments

     25.8       92.3       (66.5 )
                        

Total

   $ 97.5     $ 134.9     $ (37.4 )
                        

% of total assets

     23 %     25 %  

Total Assets

   $ 427.2     $ 528.4    
                  

(1) In millions
This excerpt taken from the LF 10-Q filed Aug 7, 2007.

LIQUIDITY AND CAPITAL RESOURCES

LeapFrog’s primary source of liquidity during the three and six months ended June 30, 2007 was cash received from the collection of accounts receivable balances generated from sales in the fourth quarter of 2006 and the first half of 2007, partially offset by operating losses.

 

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Cash and related balances are:

 

     June 30,  
     2007(1)     2006(1)     Change(1)  

Cash and cash equivalents

   $ 64.3     $ 69.7     $ (5.4 )

Short-term investments

     89.5       111.0       (21.5 )
                        

Total

   $ 153.8     $ 180.7     $ (26.9 )
                        

% of total assets

     39 %     33 %  

Total Assets

   $ 390.2     $ 539.6    
                  

(1) In millions

This excerpt taken from the LF 10-Q filed May 4, 2007.

LIQUIDITY AND CAPITAL RESOURCES

LeapFrog’s primary source of liquidity during the three months ended March 31, 2007 has been cash received from the collection of accounts receivable balances generated from sales in the fourth quarter of 2006 and the first quarter of 2007, partially offset by operating losses.

 

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Cash and related balances are:

 

     March 31,  
     2007(1)     2006(1)     Change (1)  

Cash and cash equivalents

   $ 81.4     $ 97.6     $ (16.2 )

Short-term investments

     114.1       104.7       9.4  
                        

Total

   $ 195.5     $ 202.3     $ (6.8 )
                        

% of total assets

     48 %     39 %  

Total Assets

   $ 409.6     $ 523.4    
                  

(1) In millions
This excerpt taken from the LF 10-K filed Mar 8, 2007.

Liquidity and Capital Resources

LeapFrog’s primary sources of liquidity in 2006 and 2005 have been:

 

   

Net cash flows provided by operating activities in 2006.

 

   

Proceeds from the exercise of employee stock options and the employee stock purchase plan in 2006 and 2005.

Cash and related balances are:

 

     December 31,  
     2006(1)     2005(1)     Change(1)  

Cash and cash equivalents

   $ 67.3     $ 48.4     $ 18.9  

Short-term investments

     80.8       23.7       57.1  
                        

Total

   $ 148.1     $ 72.1     $ 76.0  
                        

% of total assets

     33 %     12 %  

Restricted Cash

      

Short-term

   $ —       $ 0.2     $ (0.2 )

(1) In millions
This excerpt taken from the LF 10-Q filed Nov 3, 2006.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity during the nine months ended September 30, 2006 have been:

 

    Existing cash and cash equivalents balances.

 

    Cash received from the collection of accounts receivable balances generated from sales in the fourth quarter of 2005 and the nine months ended September 30, 2006.

Cash and related balances are:

 

     September 30,     Change (1)
     2006(1)     2005(1)    

Cash and cash equivalents

   $ 42.6     $ 42.5     $ 0.1

Short-term investments

     92.3       31.7       60.6
                      
   $ 134.9     $ 74.2     $ 60.7
                      

% of total assets

     25.4 %     12.0 %  

(1) In millions
This excerpt taken from the LF 10-Q filed Aug 7, 2006.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity during the six months ended June 30, 2006 have been:

 

    Existing cash and cash equivalents balances.

 

    Cash received from the collection of accounts receivable balances generated from sales in the fourth quarter of 2005 and the six months ended June 30, 2006.

Cash and related balances are:

 

     June 30,        
     2006(1)     2005(1)     Change (1)  

Cash and cash equivalents

   $ 69.7     $ 36.0     $ 33.7  

Short-term investments

     111.0       123.6       (12.6 )
                        
   $ 180.7     $ 159.6     $ 21.1  
                        

% of total assets

     33.5 %     30.0 %  

(1) In millions

 

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This excerpt taken from the LF 10-Q filed May 9, 2006.

LIQUIDITY AND CAPITAL RESOURCES

LeapFrog’s primary sources of liquidity during the three months ended March 31, 2006 have been:

 

    Existing cash and cash equivalents balances.

 

    Cash received from the collection of accounts receivable balances generated from sales in the fourth quarter of 2005 and the first quarter of 2006.

Cash and related balances are:

 

      March 31,        
      2006(1)     2005(1)     Change(1)  

Cash and cash equivalents

   $ 97.6     $ 35.3     $ 62.3  

Short-term investments

     104.7       150.8       (46.1 )
                        
   $ 202.3     $ 186.1     $ 16.2  
                        

% of total assets

     39 %     38 %  

(1) In millions.
This excerpt taken from the LF 10-K filed Mar 7, 2006.

Liquidity and Capital Resources

 

LeapFrog’s primary sources of liquidity in 2005 and 2004 have been:

 

    Net cash flows used in operating activities: Increases in net working capital which were partially offset by net income in 2005 and non-cash charges.

 

    Net cash flows provided by investing activities: Net proceeds from sales and purchases of investments totaling $16.7 million and $26.7 million in 2005 and 2004, respectively.

 

    Net cash flows provided by financing activities: Proceeds from the exercise of employee stock options and the employee stock purchase plan of $10.6 million and $13.0 million in 2005 and 2004, respectively.

 

Cash and related balances are:

 

     December 31,

 
     2005(1)

    2004(1)

    Change(1)

 

Cash and cash equivalents

   $ 48.4     $ 60.6     $ (12.2 )

Short-term investments

     23.7       28.2       (4.5 )
    


 


 


Total

   $ 72.1     $ 88.8     $ (16.7 )
    


 


 


% of total assets

     12 %     16 %        

Restricted Cash

                        

Short-term

   $ 0.2     $ 8.4     $ (8.2 )
    


 


 


Long-term investments

   $ —       $ 3.7     $ (3.7 )
    


 


 



(1) In millions.

 

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