JAKKS Pacific(R) Reports 2006 Second Quarter Results; Revises 2006 Sales and Earnings Guidance.MALIBU, Calif. -- JAKKS Pacific JAKKS Pacific, Inc. NASDAQ: JAKK is is a multi-brand company that designs and markets a broad range of toys and consumer products and is based in Malibu, California. Its product categories include action figures, art activity kits, stationery, writing instruments, performance , Inc. (Nasdaq:JAKK), a leading multi-brand company that designs and markets a broad range of toys, writing instruments and other consumer products, today announced results for the second quarter and first six months ended June 30, 2006. Second quarter 2006 net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $124.0 million, compared to $127.1 million recorded in the comparable period last year. Net income for the second quarter was $6.4 million, or $0.22 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $11.6 million, or $0.38 per diluted share, reported in the second quarter of 2005. Included in the results were non-cash, stock based compensation charges of $1.4 million in the second quarter of 2006 compared to a credit of $0.6 million in the second quarter of 2005 and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. overhead and acquisition amortization charges of $5.4 million in the second quarter 2006 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the acquisition of Creative Designs International. The Company's net sales for the six months ended June 30, 2006 were $231.3 million, compared to $261.8 million during the same period in 2005. Net income for the first six months of 2006 was $8.7 million, or $0.31 per diluted share, compared to the first six months 2005 earnings of $21.7 million or $0.72 per diluted share. Included in the results were non-cash, stock based compensation charges of $3.7 million in the first six months of 2006 compared to a credit of $0.2 million in the first six months of 2005 and incremental overhead and acquisition amortization charges of $9.5 million in the first six months of 2006 relating to the acquisition of Creative Designs International. "During the second quarter we continued to successfully integrate our recently acquired Creative Designs(TM) product line, which contributed to the second quarter's sales, offsetting certain shortfalls in international sales and sales in our Fly Wheels(TM) and TV Games(TM) lines," said Jack Friedman, Chairman and Chief Executive Officer, JAKKS Pacific. "We will be introducing several new products at retail during the second half of the year to complement our rich portfolio of items, and we anticipate they will be favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. received by retailers and customers this holiday season and beyond. We continue to be pleased with our growth and accomplishments over our ten year history and believe that our ability to adapt and consistently cultivate cul·ti·vate tr.v. cul·ti·vat·ed, cul·ti·vat·ing, cul·ti·vates 1. a. To improve and prepare (land), as by plowing or fertilizing, for raising crops; till. b. our product portfolio with a compelling and diversified diversified (di·verˑ·s product mix will enable us to build long-term value for our shareholders." Stephen Berman, President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , stated, "We began shipping our TeleStory(TM), Tuta Bella(TM) and Speed Stacks(TM) product lines at the end of the second quarter and worked diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d to complete the development of our flying XPV XPV Xeroderma Pigmentosum, Variant type (TM) (Xtreme Performance Vehicle(TM)), which we began shipping at the very end of the quarter. We also shipped new TV Games titles, including Super Pac-Man(R), Power Rangers This article lists fictional characters from the Power Rangers universe who have served as Power Rangers. Unlike the List of Power Rangers characters, which lists serving Power Rangers alphabetically alongside other characters from the same fictional universe, this article lists only (R) and Superman Superman invincible scourge of crime. [Comics: Horn, 642–643] See : Crime Fighting Superman superhero under guise of Clark Kent, mild-mannered reporter. (R), and started shipping classic Trolls figures to mass market accounts. As our pet product line continues to gain momentum in the marketplace, we began a soft launch of our new White Bites(TM) oral care treats for dogs, and our American Kennel Club American Kennel Club (AKC), national organization in the United States devoted to the advancement and welfare of pure-bred dogs. It is comprised of approximately 500 autonomous clubs. (R) licensed dog products are strong sellers at an increasing number of retailers. "Our Vmigo virtual pet gaming system will begin to ship to retailers around the world in the third quarter, and TeleStory(TM), our interactive plug and play reading system for preschoolers, will continue to ship to new retailers in the third quarter. New role play items from our Creative Designs International division, highlighted by the Disney Ariel Underwater Underwater 1. The condition a call option is in when its strike price is higher than the market price of the underlying stock. 2. The condition a put option is in when its strike price is lower than the market price of the underlying stock. Beauty Salon and Black & Decker(R) Power Tool Workshop for boys, which ships in the fourth quarter, have been sold in to many major retail outlets retail outlet n → punto de venta retail outlet n → point m de vente retail outlet retail n → . Our collectible collectible An asset of limited supply that is sought for a variety of reasons including, it is hoped, an increase in value. Stamps, antiques, coins, and works of art are among the many things usually classified as collectibles. line of Rocky(TM) action figures join our line-up in late 2006, with a launch event in the city of Philadelphia with Sylvester Stallone planned for September to help build awareness. We will be rolling out a number of new pet items to various retail channels, including drug, pet specialty, mass and club stores, and will ship a Meow Mix(R) line, created especially for grocers to merchandise with cat food, later this year, all of which position us favorably for the second half of the year." Berman continued, "We also announced new master toy licenses for Pokemon(R) and Barney(R) in the quarter, both of which were the most comprehensive rights each property had ever granted to one U.S. company, which we believe is a testament to our overall product development and marketing strength. Both of these lines, along with many others, are being developed for spring 2007, and the initial retailer response to JAKKS'(TM) toys created for both Pokemon and Barney has been excellent, as a whole new generation is discovering the magic of these two distinct properties." At June 30, 2006, JAKKS Pacific had approximately $110.3 million in cash and cash equivalents and $239.4 million in working capital. Mr. Friedman said that, "We are revising our guidance to reflect an increase in net sales of approximately 17.2% and an increase in diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of approximately 12.7% for the current fiscal year versus 2005. The Company's forecast for net sales is now approximately $775 million, down from approximately $825 million, and the earnings per share target is now approximately $2.32 down from approximately $2.63. The decrease in projected sales is attributable to several factors, including delays in production and shipment relating to several of the Company's products and a shortfall in sales of several items in our Fly Wheels category as well as in our international business." Conference Call JAKKS Pacific is hosting a teleconference today at 6 a.m. PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT (9 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ) on July 19th, via the Internet at www.jakkspacific.com, www.CompanyBoardroom.com or www.StreetEvents.com. These websites will host an archive of the teleconference for 30 days. A telephonic playback Playback could mean:
About JAKKS Pacific, Inc. JAKKS Pacific, Inc. is a multi-brand company that designs and markets a broad range of toys and consumer products. The product categories include: Action Figures, Art Activity Kits, Stationery The term for boilerplate in the Eudora mail client, starting with Version 3.0. Stationery files are stored on disk and brought into new messages or added to replies. See boilerplate. , Writing Instruments, Performance Kites, Water Toys, Sports Activity Toys, Vehicles, Infant/Pre-School, Plush, Construction Toys, Electronics, Dolls, Dress-Up, Role Play, and Pet Toys and Accessories. The products are sold under various brand names, including JAKKS Pacific(R), Play Along(R), Flying Colors Noun 1. flying colors - complete success; "they passed inspection with flying colors" flying colours success - an attainment that is successful; "his success in the marathon was unexpected"; "his new play was a great success" (R), Creative Designs International(TM), Road Champs CHAMPS Capitol Hill Association of Merchants and Professionals CHAMPS CHemometrics Applied to Metabonomics Proteomics and SAR CHAMPS Cleanliness-Hospitality-Accuracy-Maintenance-Product-Service CHAMPS Characteristics of Hardware Assemblies & Mission-build Planning System (R), Child Guidance(R), Pentech(R), Trendmasters(R), Toymax(R), Funnoodle(R), Go Fly a Kite kite, in aviation and recreation kite, in aviation, aircraft restrained by a towline and deriving its lift from the aerodynamic action of the wind flowing across it. (R), Color Workshop(R), JPI JPI Justice Policy Institute JPI Java Platform Interface JPI Japan Petroleum Institute JPI Joint Packaging Instrumentation JPI Jinnah Polytechnic Institute (Karachi, Pakistan) JPI Joint Packaging Instruction (TM) and Plug It In & Play TV Games(TM). JAKKS and THQ THQ Toy Headquarters THQ Territorial Headquarters THQ Tehsil Headquarters (Pakistan) THQ The Holy Quran THQ Theater Headquarters Inc. participate in a joint venture that has worldwide rights to publish and market World Wrestling Entertainment World Wrestling Entertainment, Inc. (WWE) is a publicly traded, privately controlled integrated media (focusing in television, Internet, and live events), and sports entertainment company dealing primarily in the professional wrestling industry, with major revenue sources video games See video game console. . For further information, visit www.jakkspacific.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. (within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific's business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS' products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, and difficulties with integrating acquired businesses. The forward-looking statements contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of this release.
JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June December
30, 31,
2006 2005
-------- --------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $110,289 $240,238
Accounts receivable, net 85,483 87,199
Inventory, net 76,834 66,729
Deferred income taxes 14,609 13,618
Prepaid expenses and other current assets 43,671 17,533
-------- --------
Total current assets 330,886 425,317
-------- --------
Property and equipment 43,317 38,089
Less accumulated depreciation and amortization 28,842 25,394
-------- --------
Property and equipment, net 14,475 12,695
-------- --------
Goodwill, net 314,957 269,298
Trademarks & other assets, net 78,207 36,280
Investment in video game joint venture 2,376 10,365
-------- --------
Total assets $740,901 $753,955
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $70,147 $94,948
Reserve for sales returns and allowances 21,339 25,123
Income taxes payable - 3,792
-------- --------
Total current liabilities 91,486 123,863
-------- --------
Long term debt 98,000 98,000
Deferred rent liability 924 995
Deferred income taxes 7,241 6,446
-------- --------
106,165 105,441
-------- --------
Total liabilities 197,651 229,304
Stockholders' equity:
Common stock, $.001 par value 28 27
Additional paid-in capital 299,822 287,356
Retained earnings 248,749 240,057
Deferred compensation from restricted stock
grants (2,699) -
Accumulated other comprehensive income (loss) (2,650) (2,789)
-------- --------
543,250 524,651
-------- --------
Total liabilities and stockholders' equity $740,901 $753,955
======== ========
- -
Working capital 239,400 301,454
JAKKS Pacific, Inc. and Subsidiaries
Second Quarter Earnings Announcement, 2006
Condensed Statements of Income (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
-------- -------- -------- --------
(In thousands, expect per share data)
Net sales $124,041 $127,091 $231,285 $261,767
Less cost of sales
Cost of goods 61,872 66,521 114,079 130,352
Royalty expense 11,469 11,589 21,084 27,130
Amortization of tools and
molds 1,420 908 2,679 2,000
-------- -------- -------- --------
Cost of sales 74,761 79,018 137,842 159,482
-------- -------- -------- --------
Gross profit 49,280 48,073 93,443 102,285
Direct selling expenses 12,093 13,807 26,224 32,869
Selling, general and
administrative expenses 24,036 17,055 47,300 36,184
Depreciation and amortization 4,188 2,597 8,712 4,943
-------- -------- -------- --------
Income from operations 8,963 14,614 11,207 28,289
Other income (expense):
Profit from video game joint
venture 220 1,153 977 1,303
Other expense - - - -
Interest, net (48) (35) 234 (233)
-------- -------- -------- --------
Income before provision for
income taxes 9,135 15,732 12,418 29,359
Provision for income taxes 2,774 4,090 3,726 7,633
-------- -------- -------- --------
Net income $6,361 $11,642 $8,692 $21,726
======== ======== ======== ========
Earnings per share -- diluted $0.22 $0.38 $0.31 $0.72
Shares used in earnings per
share -- diluted 32,789 32,229 32,753 32,239
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