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LeapFrog Shares Drop 20% on Missed Forecast

Sales projected by the toy maker for the third quarter fail to come about but are expected to do so in this period.

October 22, 2003|From Reuters

Educational toy maker LeapFrog Enterprises Inc. reported third-quarter profit and sales well below Wall Street expectations Tuesday, triggering a 20% plunge in its share price during after-hours trading.

The Emeryville, Calif.-based company said that U.S. orders it had expected to receive in the quarter didn't materialize, and it now expected them in the fourth quarter.

"Basically, they missed the numbers," Pacific Growth Equities analyst Natalie Walrond said.

LeapFrog said earnings in the quarter ended Sept. 30 rose to $33.4 million, or 55 cents a share, from $26.7 million, or 50 cents, a year earlier. Analysts on average had been expecting it to earn 61 cents a share, according to Reuters Research and Thomson First Call.

Sales rose 12% to $203.9 million but were below analysts' average estimate of $236.4 million.

The company's stock, which ended the regular session up $2.45, or 5.6%, at $46.54 a share on the New York Stock Exchange, plummeted $9.64 to $36.90 in after-hours trading on Instinet.

"While we were satisfied with the sales growth in our international and education and training divisions, late-building demand from our key retailers resulted in lower net sales growth for the third quarter in our U.S. consumer business," LeapFrog Chief Executive Mike Wood said.

"This resulted in a shift of deliveries from the third quarter to the benefit of the fourth quarter."

The vast majority of the company's sales comes from its U.S. operations.

LeapFrog raised its fourth-quarter outlook for sales and nudged up its range for profit expectations.

It said it expected fourth-quarter net income of $42 million to $47 million, or diluted net income on a per-share basis of 69 cents to 76 cents.

The company expects fourth-quarter sales of $316 million to $334 million.

Earlier, the firm had forecast fourth-quarter profit per share of 68 cents to 74 cents on sales of $277 million to $297 million.

The company is scheduled to hold a conference call with analysts and investors today.

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