JAKKS Pacific(R) Reports Fourth Quarter and Year-End Results for 2005; Company Achieves 2005 Record Net Sales and Net Income; Company Provides Guidance of Continued Growth in Fiscal 2006.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 fourth quarter and year-ended December 31, 2005. Fourth quarter 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 $166.3 million in 2005, compared to $184.8 million in the comparable period last year. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income for the fourth quarter of 2005 was $16.7 million, or $0.53 per diluted share, excluding the tax impact of the repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of $175 million of undistributed Adj. 1. undistributed - (of investments) not distributed among a variety of securities undiversified - not diversified earnings from the Company's international subsidiaries under the American Jobs Creation Act of 2004 (AJC AJC Atlanta Journal & Constitution AJC American Jewish Committee AJC Arabian Jockey Club AJC American Jewish Congress AJC Australian Jockey Club (Sydney, Australia) AJC Anderson Junior College (Singapore) Act). Under the AJC Act, U.S. corporations receive a one-time 85% dividends-received deduction Dividends-received deduction A corporate tax deduction on income allowed by company A that is in ownership of shares of company B and receives dividends on the shares of company B. on the repatriation of undistributed foreign earnings conditioned upon specified reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. in the U.S. Reported net income for the fourth quarter of 2005, including the repatriation taxes, was $9.0 million, or $0.30 per diluted share, compared to $10.5 million, or $0.35 per diluted share, for the same period last year. The Company's net sales for the year ended December 31, 2005 increased 15.2% to $661.5 million, from $574.3 million in 2004. Pro forma net income for 2005, excluding the tax impact of the AJC Act repatriation noted above, was $71.2 million, or $2.30 per diluted share. Reported net income for the year ended December 31, 2005, including the repatriation taxes, was $63.5 million, or $2.07 per diluted share, compared to 2004 earnings of $43.6 million, or $1.49 per diluted share. "We are very pleased with our performance for the full year 2005," said Jack Friedman, Chairman and Chief Executive Officer, JAKKS Pacific. "Our net sales grew 15% over 2004 with our success largely attributable to our brand management skills, the strong performance of our acquired lines, our ability to consistently expand and reinvent re·in·vent tr.v. re·in·vent·ed, re·in·vent·ing, re·in·vents 1. To make over completely: "She reinvented Indian cooking to fit a Western kitchen and a Western larder" our diverse portfolio of licensed and non-licensed products and our continued strong relations with our licensors and retailers. The Company enters 2006 with the most diversified product line in our history and we expect to again achieve record revenue and earnings in 2006." 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, "Looking ahead to 2006, we believe our use of technology, coupled with simple innovation, will give JAKKS Pacific new opportunities around the globe. Our portfolio is full of many exciting new products and line extensions we expect to roll-out during the year, including Tele-Story, iPets and new TV Games. For TeleStory, which will be launched simultaneously in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and internationally, we have licensing rights for the entire Disney portfolio, Clifford The Big Red Dog(R), I SPY I spy is a guessing game usually played in families with young children, partly to assist in both observation and in alphabet familiarity. I spy is often played as a car game. (TM) and the new animated "Curious George Curious George inquisitive, mischievous monkey. [Children’s Lit.: Curious George] See : Curiosity " television series, to name just a few titles from our library of licenses. We're quite optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the response to iPets, which combines virtual pets with a completely new play pattern by incorporating our plug and play gaming technology. In addition, we are launching several new TV Games titles targeted to our core kids market, which are based on most of the popular children's entertainment properties of today, including "Winnie the Pooh," "Scooby-Doo," "SpongeBob SquarePants This article is about the series. For the title character, see SpongeBob SquarePants (character). For other uses, see SpongeBob SquarePants (disambiguation). SpongeBob SquarePants is an Emmy-nominated American animated television series and media franchise. ," "Disney Princesses" and "Thomas The Tank Engine This article is about the fictional tank engine. For the television series, see Thomas the Tank Engine and Friends. Thomas the Tank Engine is a fictional anthropomorphic tank locomotive created by the Rev. W. V. ." Mr. Berman continued, "Our acquisition of Creative Designs International, a leading manufacturer of girls' dress-up and role-play toys, was recently completed, and we will immediately focus on expanding their distribution both in North America and internationally. CDI's license relationships include Disney and many other household names History Formation (1998-2000) Household Names have been together since 1998, with various members rotating throughout the line-up with singer, Jason Garcia, until it was solidified in the summer of 2000 with bassist/keyboardist, Chris Peters, and drummer, C. J. , and we are extremely excited about the potential of this complementary line. "Play Along continues to contribute to the Company's rich portfolio with exciting introductions as well. We are in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of bringing back to the market a top-selling and well-known collectable from the past, Classic Trolls, and in Spring of 2006, we will introduce new "color change" cornsilk hair Cabbage Patch Kids Cabbage Patch Kids are a brand of doll created by Xavier Roberts in 1978. The original dolls were all cloth and were available at local craft shows, and later at Babyland General Hospital in Cleveland, Georgia. , more new Doodle Bear items and our new Speed Stacks(TM) line. "We are showcasing these and other products this week at the International Toy Fair in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , and we have already received very positive feedback from many of the large and small retailers worldwide. With the first year of our fast growing Pet Division in full swing, we are also excited with the new array of products and expanded distribution through our existing retail partnerships, as well as further expansion of new relationships for JAKKS with retailers like PetCo and Pet Smart." "Jakks Pacific, celebrating its tenth year in business, continues to build off of a solid base of diverse product lines, which we believe properly positions us for continued growth in 2006 and beyond. Our financial position remains very strong, with excellent cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses in 2005 of approximately $66.9 million. As of December 31, 2005, our working capital was approximately $300.7 million, including cash and equivalents of $240.2 million, and after giving effect to the CDI CDI compact disc interactive: a system for storing a mix of software, data, audio, and compressed video for interactive use under processor control acquisition, our cash and equivalents is approximately $135.7 million. We expect to continue to grow our business by actively pursuing accretive and complementary acquisitions and executing on internal growth initiatives, including creating new products and securing new licenses, to provide continued growth for JAKKS Pacific." Friedman concluded, "Including CDI, we expect to increase net sales to approximately $825 million in 2006, with net income of $82 million, or $2.63 per diluted share. This forecast anticipates first quarter net sales in the range of $102 million to $110 million, and 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 $0.13 to $0.18, which is less than first quarter 2005 results. We anticipate more than making it up in the balance of the year with the initiatives we have in place and based on the response from the trade on our lines." JAKKS Pacific is hosting a teleconference today at 8:30 a.m. PST PST Paroxysmal supraventricular tachycardia, see there (11:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy ) on February 15th, 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 will be available from 10:30 a.m. EST on February 14th through 12 a.m. EST on February 28th. The playback can be accessed by calling 888-843-8996 or 630-652-3044 for international callers, passcode "13796912." 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, Writing Instruments, Performance Kites, Water Toys, Sports Activity Toys, Vehicles, Infant/Pre-School, Plush, Dress-up, Role-play, Construction Toys, Electronics, Dolls and Pet Toys and Accessories. The products are sold under various brand names, including JAKKS Pacific(R), Play Along(R), Creative Designs International(TM), 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), Road Champs(R), Child Guidance(R), Pentech(R), Trendmasters(R), Toymax(R), Funnoodle(R), Go Fly a Kite(R), Color Workshop(R), Pet Pal(TM) and Plug It In & Play TV Games(TM). The Company also participates in a joint venture with THQ THQ Toy Headquarters THQ Territorial Headquarters THQ Tehsil Headquarters (Pakistan) THQ The Holy Quran THQ Theater Headquarters Inc. that has exclusive 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 (R) video games See video game console. . For further information, visit www.jakkspacific.com or www.tvgames.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 after the date of this release.
JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December December
31, 2005 31, 2004
-------- --------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $240,238 $176,544
Marketable Securities - 19,047
Accounts receivable, net 87,200 102,266
Inventory, net 66,730 50,000
Prepaid expenses and other current assets 26,603 24,682
-------- --------
Total current assets 420,771 372,539
-------- --------
Property and equipment 38,088 38,213
Less accumulated depreciation and amortization 25,394 27,273
-------- --------
Property and equipment, net 12,694 10,940
-------- --------
Goodwill, net 269,298 258,331
Trademarks & other assets, net 36,279 45,136
Investment in joint venture 10,365 9,816
-------- --------
Total assets $749,407 $696,762
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $94,948 $108,976
Reserve for sales returns and allowances 25,123 23,173
Income taxes payable - 10,847
-------- --------
Total current liabilities 120,071 142,996
-------- --------
Long term debt 98,000 98,000
Deferred rent liability 994 -
Deferred income taxes 5,690 4,281
-------- --------
104,684 102,281
-------- --------
Total liabilities 224,755 245,277
Stockholders' equity:
Common stock, $.001 par value 27 26
Additional paid-in capital 287,355 276,642
Retained earnings 240,058 176,564
Accumulated other comprehensive income (loss) (2,788) (1,747)
-------- --------
524,652 451,485
-------- --------
Total liabilities and stockholders' equity $749,407 $696,762
JAKKS Pacific, Inc. and Subsidiaries
Fourth Quarter Earnings Announcement, 2005
Condensed Statements of Income (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
---- ---- ---- ----
(In thousands, except per share data)
Net sales $166,270 $184,802 $661,537 $574,266
Less cost of sales
Cost of goods 77,128 92,835 323,303 286,955
Royalty expense 16,834 18,478 67,069 56,491
Amortization of tools and
molds 1,337 1,030 4,457 4,813
-------- -------- -------- --------
Cost of sales 95,299 112,343 394,829 348,259
-------- -------- -------- --------
Gross profit 70,971 72,459 266,708 226,007
Direct selling expenses 26,031 22,154 78,982 61,732
Selling, general and
administrative expenses 29,859 29,316 89,638 95,480
Depreciation and amortization 2,602 10,386 10,102 15,070
-------- -------- -------- --------
Income from operations 12,479 10,603 87,986 53,725
Other income (expense):
Profit from Joint Venture 7,873 6,590 9,414 7,865
Other expense - - (1,401) -
Interest, net 621 (544) 639 (2,498)
-------- -------- -------- --------
Income before provision for
income taxes 20,973 16,649 96,638 59,092
Provision for income taxes 11,958 6,140 33,144 15,533
-------- -------- -------- --------
Net income $9,015 $10,509 $63,494 $43,559
======== ======== ======== ========
Earnings per share -- diluted $0.30 $0.35 $2.07 $1.49
Shares used in earnings per
share -- diluted 32,197 31,855 32,193 31,406
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