JAKKS Pacific Inc. Reports Record Third-Quarter Results; Repurchases Common Stock.Business Editors MALIBU, Calif.--(BUSINESS WIRE)--Oct. 25, 2000 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) today reported its 17th consecutive quarter of record year-over-year revenues and earnings. The Company also reported that between August 18, 2000 and October 23, 2000 it repurchased in the open market 1,193,600 shares of common stock. For the third quarter ended September 30, 2000, 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 of $91.8 million were 53% higher than the $60.2 million reported in the third quarter of 1999. Third-quarter net income increased by 28% to $9.8 million, or $0.48 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 (on 20.3 million weighted average common and equivalent shares outstanding), from $7.6 million, or $0.44 per diluted share (on 17.5 million weighted average common and equivalent shares outstanding), in the same period a year ago. On a 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 basis, assuming the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of the Company's stock as of July 1, 2000, third quarter 2000 earnings per share would have been $0.50 per diluted share. For the nine months ended September 30, 2000, net sales of $193.2 million were 59% higher than the $121.2 million in net sales reported in the first nine months of 1999. Net income during the period increased by 74% to $22.6 million, or $1.11 per diluted share (on 20.4 million weighted average common and equivalent shares outstanding), from $13.0 million, or $0.86 per diluted share (on 15.2 million weighted average common and equivalent shares outstanding), in the first nine months of 1999. Excluding previously announced second-quarter non-recurring pre-tax charges of $1.4 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the voluntary recall of one of the Company's products, and assuming the repurchase of the Company's stock as of January 1, 2000, net income for the first nine months of 2000 would have been $23.5 million, or $1.20 per diluted share. As announced on August 2, 2000, the Company's Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase of up to 1.5 million shares of the Company's outstanding common stock. At September 30, 2000, there were approximately 19.2 million common shares outstanding, and as of October 23, 2000, the number has been further reduced to 18.3 million. Jack Friedman, chairman and chief executive officer of JAKKS Pacific Inc., said, "In a relatively soft year for the toy industry overall, we believe it is a great accomplishment for us to have sustained our strong top-line and bottom-line growth. "Third-quarter results reflect strong sales within the Company's 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" and 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 divisions, tempered by a slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in sales of wrestling wrestling, sport in which two unarmed opponents grapple with one another. The object is to secure a fall, i.e., cause the opponent to lose balance and fall to the floor, and ultimately to pin the supine opponent's shoulders to the floor, through the use of body action figures and accessories in the quarter. However, recently, we have seen a resurgence re·sur·gence n. 1. A continuing after interruption; a renewal. 2. A restoration to use, acceptance, activity, or vigor; a revival. of our WWF See Windows Workflow Foundation. product line, driven by the introduction of our REAL SCAN figures and other new playsets as these WWF products have reemerged on the Toy Book's WHAT'S HOT! list for the month of November," noted Friedman. "Sales of WWF video games See video game console. through our joint venture with THQ THQ Toy Headquarters THQ Territorial Headquarters THQ Tehsil Headquarters (Pakistan) THQ The Holy Quran THQ Theater Headquarters Inc. did well, and we look forward to very strong sales of our video games in the fourth quarter." "With a wealth of talent, exciting new products due for release over the next several months, and a balance sheet that will support further acquisitions, we are clearly poised for further growth," added 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. of JAKKS. "The Pentech acquisition during the quarter is but the most recent example of the Company's program to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. its product offerings and thereby introduce greater stability and predictability into future top- and bottom-line performance. We now have what we believe is one of the strongest design and management teams in the industry, and we remain dedicated to strengthening our position as one of the leading toy companies." At the end of the third quarter the Company had $103.5 million in working capital, $55.3 million in cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has , $100,000 in short term debt, $1.4 million in long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. , and shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. of $207.9 million. The change in cash and marketable securities from $94 million at the end of the second quarter reflects the acquisition of Pentech International Inc., completed on July 28, 2000. Because the acquisition was completed after the peak back-to-school selling season, it had no material effect on the Company's third-quarter sales. JAKKS Pacific is a multi-brand toy company that designs, develops, produces and markets toys and related products under various brand names (including Flying Colors(R), Road Champs(R), Remco(R), Child Guidance(R), Color Club(R), and Pentech(R)) in multiple product categories, including: Wheels; Action Figures; Crafts/Activities/Stationery; Infant/Pre-School; Trading Cards/Games; Plush; and Dolls. The Company also participates in a joint venture that has exclusive worldwide rights to publish and market World Wrestling Federation(R) (WWF) video games. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under 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: 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. . Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, should one or more of these risks or uncertainties materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or should underlying assumptions prove incorrect, actual future results or events may vary materially from those described herein.
JAKKS PACIFIC, INC. AND SUBSIDIARIES
Third Quarter Earnings Announcement, 2000
Condensed Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
Net sales $60,235,407 $91,838,086 $121,176,908 $193,197,882
Less costs
of sales
Cost of goods 28,682,366 44,341,506 57,663,248 90,743,087
Royalty
expense 6,364,645 8,687,570 12,083,361 19,552,573
Amortization
of
tools/molds 429,592 1,136,676 1,258,842 3,378,402
Cost of sales 35,476,603 54,165,752 71,005,451 113,674,062
Gross profit 24,758,804 37,672,334 50,171,457 79,523,820
Direct selling
expenses 6,285,979 12,446,826 13,663,991 27,014,438
Depreciation and
amortization 338,825 905,370 936,418 2,451,624
Selling, general
and
administrative
expenses 8,241,520 13,118,721 18,710,503 28,136,786
Income from
operations 9,892,480 11,201,417 16,860,545 21,920,972
Other (income)
expense:
Income from
Joint Venture -- (1,382,539) -- (8,167,676)
Interest, net (534,553) (939,073) (895,677) (3,099,361)
Other -- (91,670) -- 980,705
Pre-tax income 10,427,033 13,614,699 17,756,222 32,207,304
Provision for
income taxes 2,784,993 3,838,603 4,754,048 9,591,014
Net income $ 7,642,040 $ 9,776,096 $ 13,002,174 $ 22,616,290
EPS-Diluted(a) $ 0.44 $ 0.48 $ 0.86 $ 1.11
Weighted
average shares
outstanding 17,541,175 20,330,197 15,248,785 20,361,011
Preferred
dividends $ -- $ -- $ 437,500 $ --
(a) Includes the
effect of the
add-back of
interest, net
of tax, on
debentures as
if converted $ -- $ -- $ 116,867 $ --
JAKKS PACIFIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1999 2000
ASSETS
Current assets:
Cash and cash equivalents $ 57,546,406 $ 48,302,536
Marketable securities 39,333,944 7,004,289
Accounts receivable, net 38,024,903 72,726,946
Acquired Pentech accounts
receivable, net -- 6,036,491
Inventory, net 19,863,508 32,799,750
Advance royalty payments 1,137,238 1,931,059
Prepaid expenses and other
current assets 1,617,692 3,363,905
Deferred income taxes
Total current assets 157,523,691 172,164,976
Property and equipment 16,860,542 27,823,081
Less accumulated depreciation
and amortization 5,320,103 9,082,261
Property and equipment, net 11,540,439 18,740,820
Notes receivable - officers -- 2,863,462
Goodwill, net 46,020,232 69,001,885
Trademarks & other intangibles, net 12,633,248 12,236,721
Investment in joint venture 3,658,339 2,261,505
Other assets 1,502,147 1,212,842
Total assets $ 232,878,096 $ 278,482,211
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses $ 41,137,161 $ 60,753,537
Current portion of
long term debt 4,967 100,000
Income taxes payable 3,211,926 7,844,707
Total current liabilities 44,354,054 68,698,244
Long term debt 8,713 1,400,000
Deferred income taxes 1,013,834 470,383
1,022,547 1,870,383
Total liabilities 45,376,601 70,568,627
Stockholders' equity:
Preferred stock, $.001 par value,
1,000,000 shares authorized; nil
issued and outstanding -- --
Common stock, $.001 par value,
25,000,000 shares authorized;
19,272,692 and 19,412,830 issued
and outstanding, respectively 19,273 19,476
Additional paid-in capital 155,172,781 156,292,384
Treasury Stock, at cost -- (3,324,007)
Retained earnings 32,309,441 54,925,731
187,501,495 207,913,584
Total liabilities and
stockholders' equity $ 232,878,096 $ 278,482,211
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