EX-99 3 a4497370ex991.txt JAKKS PACIFIC, INC. PRESS RELEASE Exhibit 99.1 JAKKS Pacific Reports Third Quarter 2003 Financial Results MALIBU, Calif.--(BUSINESS WIRE)--Oct. 21, 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 its results for the three and nine-month periods ended September 30, 2003. Third quarter net sales were $90.3 million, compared to $102.6 million in the comparable period last year. Net income for the period was $9.6 million, or $0.39 per diluted share, compared to $14.0 million, or $0.58 per diluted share, for the third quarter of last year. Excluding a one-time gain, net income was $9.0 million, or $0.37 per diluted share in 2003. The Company recognized a pre-tax gain of $0.7 million in the third quarter of 2003 relating to recoveries on a recall of one of its products. The Company's net sales for the nine months ended September 30, 2003 were $231.4 million, compared to $241.5 million during the same period in 2002. Excluding one-time net charges, net income during the period was $20.3 million, or $0.82 per diluted share, compared to $29.9 million, or $1.35 per diluted share, for the comparable period last year. Including the one-time net charges of $2.0 million for the product recall in 2003, and the restructuring and recall charges of $8.1 million in 2002, net income for the nine months of 2003 was $18.7 million, or $0.76 per diluted share, compared to $23.9 million, or $1.09 per diluted share for the same period in 2002. Mr. Jack Friedman, Chairman and Chief Executive Officer, stated: "Sales declined in the third quarter from the 2002 third quarter primarily due to the decline in the popularity of certain product items such as our Singing Starz(TM) Karaoke Machine and Equalizer Radio Controlled Vehicle, both of which were higher priced items. We believe that these products are being replaced with new products such as plug and play TV Games and the Road Champs NASCAR RC vehicle line, which are being received well by our customers, and which we believe may have better longevity and present better opportunities for growth and expansion. "Turning to the balance of the year, our booked orders for the fourth quarter of this year so far are running more than 20% ahead of the fourth quarter last year at this time, and we are pleased with our line-up of products and the overall sell-through at retail. We therefore believe that our fourth quarter sales will exceed last year's fourth quarter and expect to wind-up the year with net sales to be in the range of $300 to $310 million, with diluted earnings per share, before one-time charges, of $1.20 to $1.30." Mr. Friedman continued, "We remain committed to building long-term growth and profitability for JAKKS Pacific. Looking ahead, we intend to devote more attention and resources to internal development, building evergreen lines, and building brand identity while providing retailers and consumers with the high quality product lines at reasonable prices they have come to expect from JAKKS since our inception." Stephen Berman, President and Chief Operating Officer, stated, "Our objective for 2004 and 2005 is to devote more of our resources to building and marketing a bigger and stronger JAKKS Pacific, and also to explore new acquisition opportunities, with a hope that this will bring a stronger value for our company in the long term. "Because of our strong operating cash flow, working capital of $229.6 million, including cash and cash equivalents and marketable securities of $151.2 million, we believe we are well positioned to execute on our strategy." Anyone interested will be able to listen to the teleconference, scheduled to begin at 8:30 a.m. EDT (5:30 a.m. PDT) on October 21, via the Internet at www.jakkspacific.com. The webcast is also being distributed over CCBN's Investor Distribution Network. Individual investors can listen to the call at www.FullDisclosure.com. Institutional investors can access the call via www.streetevents.com. These websites will host an archive of the teleconference for 30 days. A telephonic playback will be available from 9:30 a.m. Eastern on October 21st through 12:00 a.m. Eastern on October 28th. The playback can be accessed by calling 800-642-1687 or 706-645-9291 for international callers, pass code is "3253794". 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) and JPI Color Workshop(TM). 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 September 30, December 31, 2003 2002 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $132,833,696 $68,412,826 Marketable Securities 18,320,894 -- Accounts receivable, net 86,579,868 56,195,578 Inventory, net 43,510,656 38,009,747 Notes receivable - officers -- 1,113,000 Prepaid expenses and other current assets 10,981,469 8,616,160 Deferred income taxes 4,445,658 4,445,658 Total current assets 296,672,241 176,792,969 Property and equipment 42,574,822 39,465,148 Less accumulated depreciation and amortization 30,630,240 24,639,593 Property and equipment, net 11,944,582 14,825,555 Goodwill, net 205,176,652 189,335,933 Trademarks & other assets, net 23,357,061 19,736,847 Investment in joint venture 3,840,574 8,118,645 Total assets $540,991,110 $408,809,949 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $58,304,219 $41,967,851 Current portion of long term debt 18,720 17,805 Income taxes payable 8,780,842 5,624,532 Total current liabilities 67,103,781 47,610,188 Long term debt, net of current portion 98,039,020 59,683 Deferred income taxes 562,948 562,948 98,601,968 622,631 Total liabilities 165,705,749 48,232,819 Stockholders' equity: Common stock, $.001 par value 24,591 24,473 Additional paid-in capital 236,229,874 240,101,458 Retained earnings 139,189,669 120,451,199 Accumulated other comprehensive income (loss) (158,773) -- 375,285,361 360,577,130 Total liabilities and stockholders' equity $540,991,110 $408,809,949 JAKKS Pacific, Inc. and Subsidiaries Third Quarter Earnings Announcement, 2003 Condensed Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Net sales $90,308,130 $102,639,835 $231,357,781 $241,526,804 Less cost of sales Cost of goods 42,948,959 50,392,970 118,168,374 116,484,945 Royalty expense 9,740,674 8,570,732 16,950,989 15,979,051 Amortization of tools and molds 1,392,753 1,863,839 4,664,351 5,589,060 Cost of sales 54,082,386 60,827,541 139,783,714 138,053,056 Gross profit 36,225,744 41,812,294 91,574,067 103,473,748 Direct selling expenses 9,895,404 9,444,604 27,900,096 29,581,360 Selling, general and administrative expenses 13,878,856 12,936,091 35,909,309 33,988,241 Acquisition shut-down and recall costs (700,000) -- 2,000,000 8,121,497 Depreciation and amortization 573,299 536,797 1,618,118 1,556,007 Income from operations 12,578,185 18,894,802 24,146,544 30,226,643 Other (income) expense: Profit from Joint Venture (937,219) (611,774) (1,303,700) (2,580,639) Interest, net 922,704 (437,098) 794,363 (970,039) Income before provision for income taxes and minority interest 12,592,700 19,943,674 24,655,881 33,777,321 Provision for income taxes 3,022,248 5,384,792 5,917,411 9,119,877 Income before minority interest 9,570,452 14,558,882 18,738,470 24,657,444 Minority interest -- 604,483 -- 715,145 Net income $9,570,452 $13,954,399 $18,738,470 $23,942,299 Earnings per share - diluted $0.39 $0.58 $0.76 $1.09 Shares used in earnings per share - diluted 24,628,719 24,058,599 24,715,770 22,058,483 CONTACT: JAKKS Pacific, Inc. Genna Goldberg, 310-455-6235 or Integrated Corporate Relations John F. Mills, 562-256-7051