Leapfrog Enterprises (LF) 8-K Increases Sales and Earnings Guidance for Fourth Quarter and Reaffirms Full Year Guidance

Exhibit 99.1

Contacts:
	Jim Curley	Christopher Bunn
	Chief Financial Officer	Director, Investor Relations
	(510) 420-5000	(510) 420-5150

LeapFrog Earns $0.55 per share in Third Quarter, Net Income up 25%

Increases Sales and Earnings Guidance for Fourth Quarter and Reaffirms Full Year Guidance

Emeryville, Calif. – October 21, 2003 – LeapFrog Enterprises, Inc. (NYSE:LF), a leading developer of innovative technology-based educational products, today reported financial results for the third quarter ended September 30, 2003. The company also increased its sales and earnings guidance for the fourth quarter and reaffirmed its guidance for the full year 2003.

Net Income Up 25% For 3^rd Quarter and Up 102% YTD

The company recorded increased net income for the third quarter of 2003 of $33.4 million, or $0.55 per share, up 25% from net income of $26.7 million, or $0.50 per share over the same period in 2002. In the first nine months of 2003, net income was $28.5 million, or $0.47 per share, up 102% from net income of $14.1 million, or $0.30 per share, in the first nine months of 2002.

Net Sales Up 12% For 3^rd Quarter and Up 23% YTD

Net sales for the third quarter of 2003 were $203.9 million, up 12% over the same period in 2002. For the first nine months of 2003, net sales were $348.7 million, up 23% over the same period in 2002.

Segment Results

Net sales from the U.S. Consumer segment were $167.1 million in the third quarter, up 4% over the same period in 2002. Net sales from the International segment were $29.5 million in the third quarter, up 86% over the same period in 2002. Net sales from the Education and Training segment (which consists predominantly of the company’s SchoolHouse division) were $7.3 million in the third quarter, up 36% over the same period in 2002.

In the first nine months of 2003, net sales from the U.S. Consumer segment were $272.6 million, up 14% over the same period in 2002. Net sales from the International segment were $49.8 million in the first nine months of 2003, up 68% over the same period in 2002. Net sales from the Education and Training segment were $26.3 million in the first nine months of 2003, up 86% over the same period in 2002.

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“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. This resulted in a shift of deliveries from the third quarter to the benefit of the fourth quarter,” said Mike Wood, President and Chief Executive Officer. “Our underlying sell-through at the retail level remained very strong throughout the third quarter. The strength of our U.S. retail sell-through across all of our product lines, coupled with the anticipated fourth quarter launch of our Leapster platform product, has led us to revise our fourth quarter guidance upward and to reiterate our full year guidance.”

“This demand for engaging learning products remains high among children, teachers and parents, and leads us to believe we will have a strong holiday season,” Wood concluded.

Guidance for the Fourth Quarter and 2003

The company is increasing its guidance for the final quarter and reaffirming its guidance for full year 2003 as follows:

Fourth Quarter 2003

• Net sales $316 million to $334 million

• Net income $42 million to $47 million

• Diluted net income per share $0.69 to $0.76

Full Year 2003

• Net sales $665 million to $683 million

• Gross profit margin 51% to 52% of net sales

• Net income $70 million to $75 million

• Fully diluted share count of 61 million shares

• Diluted net income per share $1.17 to $1.25

Conference Call

A conference call will be held tomorrow, Wednesday, October 22 at 9:00 a.m. Eastern time (6:00 a.m. Pacific time) to discuss these announcements and to provide further discussion of results for the quarter and outlook for the remainder of 2003. A live web cast of the conference call will be offered on LeapFrog’s investor relations website atwww.leapfroginvestor.comand onwww.ccbn.com. A replay of the web cast will be available on these websites through February 29, 2004. To participate in the call, please dial (706) 634-0183.

About LeapFrog

LeapFrog Enterprises, Inc. (NYSE: LF) is a leading designer, developer and marketer of innovative, technology-based learning products and related proprietary content, dedicated to making learning effective and engaging for all ages, at home and in schools, around the world. The company was founded in 1995 and is based in Emeryville, California. LeapFrog has developed nine learning platforms that come to life with more than 90 interactive software titles, covering important subjects such as phonics, reading, math, music, geography, social studies, spelling, vocabulary and science. In addition, the

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company has created more than 35 stand-alone educational products for ages from six months to 16 years. LeapFrog’s award-winning U.S. consumer products are available at major retailers in more than 25 countries around the world. The LeapFrog SchoolHouse curriculum programs are currently in over 15,000 classrooms in the U.S. with over 200 interactive books and over 290 skill cards representing more than 5,500 pages of educational content. LeapFrog’s SchoolHouse products have won numerous awards from the education industry, including the Golden Lamp Award and Distinguished Achievement Award from the Association of Educational Publishers, the Award of Excellence from Technology & Learning magazine and the Teacher’s Choice Award from Learning magazine.

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LEAPFROG, The LeapFrog Logo, LEAPPAD, LEAPSTER, LEAPTRACK and QUANTUM PAD are trademarks of LeapFrog Enterprises, Inc.

Forward-Looking Statements

Cautionary Statement Under The Private Securities Litigation Reform Act Of 1995:

Except for the historical information contained herein, this news release contains forward-looking statements, including the company’s sales, earnings and performance expectations for the quarter ending December 31, 2003, planned new product introductions such as the Leapster platform, and expected market acceptance of the company’s consumer and SchoolHouse learning products, including expected U.S. retail sales. These forward-looking statements involve risks and uncertainties, including the company’s ability to invent, develop, introduce, market and deliver products, the acceptance of the company’s products in U.S. schools and international markets. These and other risks and uncertainties detailed from time to time in the company’s SEC filings, including its 2002 annual report on Form 10-K filed on March 28, 2003 and its quarterly report on From 10-Q filed on August 12, 2003, could cause the company’s actual results to differ materially from those discussed in this release. All forward-looking statements are based on information available to the company on the date hereof, and the company assumes no obligation to update such statements.

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LEAPFROG ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	September 30,				December 31, 2002
	2003		2002
	(Unaudited)				(1)
ASSETS
Current assets:
Cash and cash equivalents	$	84,728	$	57,848	$	73,327
Short term investments		13,115		—		—
Accounts receivable, net		155,447		130,137		169,670
Inventories, net		119,508		92,337		84,460
Prepaid expenses and other current assets		9,847		8,976		4,065
Notes receivable due from related parties		—		595		595
Deferred income taxes		26,121		10,201		16,783
Total current assets		408,766		300,094		348,900
Property and equipment, net		22,028		20,449		20,239
Other long term assets		185		631		484
Deferred income taxes		9,332		5,889		4,867
Intangible assets, net		25,359		23,353		23,192
Total assets	$	465,670	$	350,416	$	397,682
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	64,230	$	68,031	$	58,844
Accrued liabilities		32,700		26,106		40,533
Deferred revenue		1,027		3,853		3,006
Income taxes payable		2,440		13,730		21,832
Total current liabilities		100,397		111,720		124,215
Long term debt		—		—		—
Deferred rent and other long term liabilities		575		478		550
Deferred income taxes		3,595		4,390		4,119
Commitments and contingencies
Redeemable convertible series A preferred stock		—		24,139		—
Total stockholders’ equity		361,103		209,689		268,798
Total liabilities and stockholders’ equity	$	465,670	$	350,416	$	397,682

(1) Derived from audited financial statements.

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LEAPFROG ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended Sep 30,						Nine Months Ended Sep 30,
	2003			2002			2003			2002
Net sales	$	203,888		$	182,127		$	348,651		$	283,325
Cost of sales		99,066			87,071			167,367			140,050
Gross profit		104,822			95,056			181,284			143,275
Operating expenses:
Selling, general and administrative		22,750			22,865			66,175			53,958
Research and development		14,003			14,137			41,679			39,810
Advertising		13,545			11,925			26,230			20,953
Depreciation and amortization		1,943			1,751			6,103			4,804
Total operating expenses		52,241			50,678			140,187			119,525
Income from operations		52,581			44,378			41,097			23,750
Interest expense		(3	)		(127	)		(8	)		(822	)
Interest income		250			259			958			459
Other income (expense)		412			(38	)		3,034			85
Income before provision for income taxes		53,240			44,472			45,081			23,472
Provision for income taxes		19,836			17,789			16,572			9,389
Net Income	$	33,404		$	26,683		$	28,509		$	14,083
Net income per common share—basic	$	0.58		$	0.65		$	0.50		$	0.39
Net income per common share—diluted	$	0.55		$	0.50		$	0.47		$	0.30
Shares used in calculating net income per share—basic		58,045,325			41,274,608			56,691,770			36,275,667
Shares used in calculating net income per share—diluted		61,086,489			53,384,455			60,168,609			47,221,080

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LEAPFROG ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2003			2002
Net income	$	28,509		$	14,083
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and Amortization		12,208			8,245
Other noncash items		32,411			10,744
Other changes in operating assets and liabilities:
Accounts receivable		3,556			(24,619	)
Inventory		(35,048	)		(46,234	)
Prepaid and other current assets		(5,782	)		(6,918	)
Notes receivable due from related parties		595			94
Other assets		99			(283	)
Accounts payable		5,386			33,620
Accrued liabilities		(7,833	)		12,317
Income taxes payable		(19,392	)		4,096
Net cash provided by operating activities		14,709			5,145
Investing activities:
Purchases of property and equipment		(13,183	)		(11,368	)
Purchase of intangible assets		(3,000	)		(250	)
Purchases of short term investments		(19,738	)		—
Sale of short term investments		6,510			—
Investment in related party		181			—
Net cash used for investing activities		(29,230	)		(11,618	)
Financing activities:
Borrowings under credit agreement		—			182,000
Repayments under credit agreement		—			(243,163	)
Proceeds from the payment of notes receivable from stockholders		2,624			505
Proceeds from the exercise of stock options and employee stock purchase plan		23,199			1,501
Proceeds from the issuance of common stock		—			115,116
Net cash provided by financing activities		25,823			55,959
Effect of exchange rate changes on cash		99			93
Increase in cash and cash equivalents		11,401			49,579
Cash and cash equivalents at beginning of year		73,327			8,269
Cash and cash equivalents at end of period	$	84,728		$	57,848

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