EX-99 3 a4439373ex99.txt JAKKS PACIFIC EXHIBIT 99.1 Exhibit 99.1 JAKKS Pacific Reports Second Quarter 2003 Financial Results MALIBU, Calif.--(BUSINESS WIRE)--July 22, 2003--JAKKS Pacific, Inc. (Nasdaq:JAKK), a leading multi-brand company that designs and markets a broad range of toys, leisure products, crafts and writing instruments today announced results for the three and six-month periods ended June 30, 2003. Second quarter net sales were $73.3 million, compared to $79.0 million in the comparable period last year. Excluding one-time charges, net income for the period was $5.3 million, or $0.21 per diluted share, compared to $8.9 million, or $0.41 per diluted share, for the second quarter of last year. Including one-time charges, net income was $3.2 million, or $0.13 per diluted share in 2003, compared to $7.8 million, or $0.36 per diluted share, for the same period last year. The Company recognized pre-tax charges of $2.7 million in 2003 and $1.5 million in 2002 relating to the voluntary recalls of one of its products. The Company had 24.7 million diluted shares outstanding in the second quarter of 2003, 12.4% more than the 22.0 million diluted shares outstanding in the second quarter of 2002. The Company's net sales for the six months ended June 30, 2003 were $141.0 million compared to $138.9 million during the same period in 2002. Excluding one-time charges, net income during the period was $11.2 million, or $0.45 per diluted share, compared to $15.9 million, or $0.76 per diluted share, for the comparable period last year. Including the restructuring charges of $6.6 million taken in the first quarter of 2002 and the one-time second quarter charges for the aforementioned product recalls, net income for the first six months of 2003 was $9.2 million, or $0.37 per diluted share, compared to $10.0 million, or $0.47 per diluted share, for the same period in 2002. "The second quarter was a challenging one for JAKKS Pacific, as well as for many of our peers," said Jack Friedman, Chairman and Chief Executive Officer. "As a result of general economic conditions and unusually poor weather, particularly in the Northeast section of the United States, cutbacks in orders from some of our customers in late June had an adverse effect on our performance for the quarter as a whole. This included sales of seasonal products, including kites from our Go Fly a Kite line and water products from our Funnoodle and Trendmaster/Storm brands. In addition, due to strict labor constraints in factories throughout China as a result of the SARS epidemic, production continued but was somewhat slowed during the second quarter, causing a delay in the initial shipping of our NASCAR(R) line, as well as a key SpongeBob SquarePants item, which we had expected to ship in June. As a result, we first began to ship these items during the third quarter. "While we believe 2003 will be another profitable year for JAKKS Pacific, we have adjusted our expectations due to the continued challenging economic environment. We now expect full year sales for 2003 to be at least $310 million and diluted earnings per share, excluding one-time charges, to be in the range of $1.30 to $1.35," Friedman concluded. Stephen Berman, President and Chief Operating Officer, stated, "We are encouraged by interest from our retailer partners for the upcoming holiday selling season, and are pleased that a number of key items have emerged as drivers, including our NASCAR line of action figures and vehicles, our Dragon Ball, Yu Yu Hakusho(R) and World Wrestling Entertainment product lines, as well as our TV Games line, Swap N' Bop SpongeBob SquarePants, and rolling activity cases for Disney, Dora the Explorer and Hello Kitty, to name a few," stated Mr. Berman, "We are also looking for continued growth from our candy line of flavored tongue strips, Tongue Tape(TM), as we capitalize on new licensing programs for this product and introduce multiple line extensions, including a line of children's vitamins." Mr. Berman concluded, "Because of our continued strong operating cash flow and the successful placement of $98 million in convertible senior notes, we believe our financial position is very solid with $220.9 million of working capital, including cash of $144.4 million. Given the strength of our balance sheet, we believe we are well positioned to take advantage of acquisition opportunities and continue to grow our business through internal and external developments that will further diversify our product offerings to our existing and new retail accounts." Anyone interested will be able to listen to the teleconference, scheduled to begin at 5:00 p.m. EDT (2:00 p.m. PDT) on July 22, via the Internet at www.jakkspacific.com or www.CompanyBoardroom.com. These websites will host an archive of the teleconference for 30 days. A telephonic playback will be available from 7:00 p.m. EDT on July 22nd through 12:00 a.m. EDT on July 29th. Calling 800-642-1687 or 706-645-9291 for international callers, password "1745410," can access the playback. JAKKS Pacific, Inc. is a multi-brand company that designs and markets a broad range of toys and leisure products. The product categories include: Action Figures, Arts & Crafts Activity Kits, Stationery, Writing Instruments, Performance Kites, Water Toys, Sports Activity Toys, Vehicles, Infant/Pre-School, Plush and Dolls. The products are sold under various brand names including Flying Colors(R), Road Champs(R), Remco(R), Child Guidance(R), Pentech(R), Trendmasters(R), Toymax(R), Funnoodle(R), Go Fly a Kite(R), Storm(R), Colorworkshop(R) and Blopen(R). The Company also participates in a joint venture with THQ Inc. that has exclusive worldwide rights to publish and market World Wrestling Entertainment(TM) video games. For further information, visit www.jakkspacific.com. This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about JAKKS' business based, in part, on assumptions made by its management. These statements are not guarantees of JAKKS' 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 forward-looking statements due to numerous factors, including, but not limited to, those described above and the following: changes in demand for JAKKS' products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing and difficulties encountered in the integration of acquired businesses. The forward-looking statements contained herein speak only as of the date on which they are made, and JAKKS does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release. JAKKS Pacific, Inc. and Subsidiaries Condensed Consolidated Balance Sheets June 30, December 31, 2003 2002 ASSETS Current assets: Cash and cash equivalents $144,414,492 $68,412,826 Marketable Securities 219,733 - Accounts receivable, net 72,814,416 56,195,578 Inventory, net 37,986,869 38,009,747 Notes receivable - officers - 1,113,000 Prepaid expenses and other current assets 10,575,298 8,616,160 Deferred income taxes 4,445,658 4,445,658 Total current assets 270,456,466 176,792,969 Property and equipment 41,874,023 39,465,148 Less accumulated depreciation and amortization 28,897,810 24,639,593 Property and equipment, net 12,976,213 14,825,555 Goodwill, net 205,042,344 189,335,933 Trademarks & other assets, net 23,238,149 19,736,847 Investment in joint venture 2,738,281 8,118,645 Total assets $514,451,453 $408,809,949 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $43,380,521 $41,967,851 Current portion of long term debt 8,608 17,805 Income taxes payable 6,138,185 5,624,532 Total current liabilities 49,527,314 47,610,188 Long term debt, net of current portion 98,060,126 59,683 Deferred income taxes 562,948 562,948 98,623,074 622,631 Total liabilities 148,150,388 48,232,819 Stockholders' equity: Common stock, $.001 par value 24,587 24,473 Additional paid-in capital 240,878,034 240,101,458 Treasury Stock, at cost - 412,000 and nil shares, respectively (4,220,773) - Retained earnings 129,619,217 120,451,199 366,301,065 360,577,130 Total liabilities and stockholders' equity $514,451,453 $408,809,949 JAKKS Pacific, Inc. and Subsidiaries Second Quarter Earnings Announcement, 2003 Condensed Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 Net sales $73,290,206 $78,991,479 $141,049,651 $138,886,969 Less cost of sales Cost of goods 39,161,677 37,970,980 75,219,415 66,091,975 Royalty expense 4,495,342 4,071,988 7,210,315 7,408,319 Amortization of tools and molds 1,727,328 1,756,908 3,271,598 3,725,221 Cost of sales 45,384,347 43,799,876 85,701,328 77,225,515 Gross profit 27,905,859 35,191,603 55,348,323 61,661,454 Direct selling expenses 10,500,951 12,051,915 18,004,692 20,136,756 Selling, general and administrative expenses 10,196,481 11,166,321 22,030,453 21,052,150 Acquisition shut- down and recall costs 2,700,000 1,500,000 2,700,000 8,121,497 Depreciation and amortization 443,641 560,959 1,044,819 1,019,210 Income from operations 4,064,786 9,912,408 11,568,359 11,331,841 Other (income) expense: Profit from Joint Venture (190,825) (672,170) (366,481) (1,968,865) Interest, net 34,022 (264,346) (128,341) (532,941) Other - - - - Income before provision for income taxes and minority interest 4,221,589 10,848,924 12,063,181 13,833,647 Provision for income taxes 1,013,181 2,929,210 2,895,163 3,735,085 Income before minority interest 3,208,408 7,919,714 9,168,018 10,098,562 Minority interest - 87,915 - 110,662 Net income $3,208,408 $7,831,799 $9,168,018 $9,987,900 Earnings per share - diluted $0.13 $0.36 $0.37 $0.47 Shares used in earnings per share - diluted 24,683,412 21,953,168 24,788,514 21,080,870 CONTACT: JAKKS Pacific, Inc. Genna Goldberg, 310-455-6235 or Integrated Corporate Relations John F. Mills, 562-256-7051