EX-99 3 a4573790_ex991.txt JAKKS EXHIBIT 99.1 Exhibit 99.1 JAKKS Pacific Reports Fourth Quarter and Year-End Results for 2003; Company Achieves Record Fourth Quarter Sales; Sales and Earnings Growth Expected in 2004 MALIBU, Calif.--(BUSINESS WIRE)--Feb. 17, 2004--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 fourth quarter and year ended December 31, 2003. For the fourth quarter of 2003, net sales increased to $84.4 million from $68.5 million in the comparable period last year. Excluding a pre-tax charge of $2.1 million, or $0.07 per diluted share, for the accounts receivable write-offs attributable to recent customer bankruptcies, net income for the fourth quarter of 2003 was $8.9 million, or $0.36 per diluted share, as compared to net income of $6.2 million, or $0.25 per diluted share, in the fourth quarter of 2002, which excludes a one-time pre-tax restructuring and recall benefit of $1.4 million. Reported net income for the fourth quarter of 2003 was $7.1 million, or $0.29 per diluted share, as compared to $7.3 million, or $0.30 per diluted share, for the fourth quarter of last year. The Company's net sales for the year increased to $315.8 million, as compared to $310.0 million in 2002. Excluding the one-time charge of $2.0 million for a product recall earlier in the year, the $2.1 million charge for the customer bankruptcies in 2003, and the net restructuring and recall charges of $6.7 million in 2002, net income for the year was $29.2 million, or $1.18 per diluted share, as compared to $36.5 million, or $1.61 per diluted share in 2002. Reported net income for 2003 was $25.9 million, or $1.05 per diluted share, as compared to $31.3 million, or $1.37 per diluted share in 2002. Jack Friedman, Chairman and Chief Executive Officer, said, "We are pleased to report another year of solid sales for 2003 including robust growth in the fourth quarter, with strong sell-through in our mass merchant and other retail distribution channels. While we continue to be affected by a challenging industry environment, including the recent bankruptcies of KB Toys, FAO Schwarz and others, we believe that with our diverse product offerings and categories, we are well positioned for growth in 2004. As the number of stores in our primary channel base has declined, we are working to place more SKUs on these shelves, while at the same time concentrating on expanding sales of our products beyond traditional toy retailers to other retail channels, including electronics, drug, convenience and office supply stores. "We were pleased with sales of our products featuring key licenses during the quarter, including WWE and Dragon Ball figure assortments, and our Atari and Namco TV Games. We have announced a number of new key licenses that we are adding to our TV Games line of product, including Ms. Pac-Man(R) and Spider-Man(R), and are pleased with strong initial sales of our two newest titles: a relaunch of Activision TV Games and a version based on SpongeBob SquarePants." JAKKS Pacific is forecasting 2004 net sales, excluding acquisitions, to be in the range of $330 to $340 million and diluted earnings per share of $1.20 to $1.30, excluding non-cash stock-based compensation expense of $9.3 million, of which $8.3 million is related to restricted stock grants, which the Company expects to incur in the first quarter. Stephen Berman, President and Chief Operating Officer, said, "As we look for additional ways to grow our business in 2004, we will continue to focus on the internal development of new licensed and proprietary concepts, as well as innovative extensions to product lines based on our top licenses. We are particularly excited about several new TV Games versions in the first half of the year, with many more to follow in the second half, a new scrapbook line for teens developed internally called My OverStuffed Life and the launch of our Mucha Lucha product at retail. Other highlights include toys for Universal Studios' Classic Monsters and new monsters based on their feature film Van Helsing, and new products for our WWE and other boys action product lines. "Our strategy for 2004 will be to increase our marketing endeavors to launch new and extend existing categories throughout the year, while maximizing our operating efficiencies and further leveraging our retail sales channels and international distribution efforts. In the first quarter of 2004, we will see nominal sales growth in conjunction with an increase in advertising and marketing spending, but expect to see results from these efforts beginning in the second quarter and moving forward with higher sales and profit growth. In addition, we will continue to actively pursue complementary and accretive acquisitions that provide both near and long-term growth potential and market-share expansion opportunities. "With our strong operating cash flow and working capital of $234.0 million, including cash and cash equivalents and marketable securities of $137.5 million, we are well-positioned to maintain our status as a leader in the toy, writing instruments and leisure products markets, and also well-positioned to evaluate meaningful acquisition opportunities," Mr. Berman concluded. Anyone interested will be able to listen to the teleconference, scheduled to begin at 8:30 a.m. EST (5:30 a.m. PST) on February 17th, via the Internet at www.jakkspacific.com. This website will host an archive of the teleconference for 30 days. A telephonic playback will be available from 9:30 a.m. EST on February 17th through 12:00 a.m. EST on February 24th. The playback can be accessed by calling 800-642-1687 or 706-645-9291 for international callers, passcode "5141623." 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 ColorWorkshop(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 December 31, December 31, 2003 2002 ---- ---- ASSETS Current assets: Cash and cash equivalents $118,182,099 $68,412,826 Marketable Securities 19,344,691 -- Accounts receivable, net 86,119,572 56,195,578 Inventory, net 44,399,886 38,009,747 Notes receivable - officers -- 1,113,000 Prepaid expenses and other current assets 12,240,167 8,616,160 Deferred income taxes 6,131,634 4,445,658 Total current assets 286,418,049 176,792,969 Property and equipment 43,685,401 39,465,148 Less accumulated depreciation and amortization 31,750,638 24,639,593 Property and equipment, net 11,934,763 14,825,555 Goodwill, net 206,951,576 189,335,933 Trademarks & other assets, net 24,793,330 19,736,847 Investment in joint venture 8,039,887 8,118,645 Total assets $538,137,605 $408,809,949 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $50,382,331 $41,967,851 Current portion of long term debt 19,036 17,805 Income taxes payable 2,021,437 5,624,532 Total current liabilities 52,422,804 47,610,188 Long term debt, net of current portion 98,042,108 59,683 Deferred income taxes 5,868,398 562,948 103,910,506 622,631 Total liabilities 156,333,310 48,232,819 Stockholders' equity: Common stock, $.001 par value 24,231 24,473 Additional paid-in capital 235,798,746 240,101,458 Retained earnings 146,330,441 120,451,199 Accumulated other comprehensive income (loss) (349,123) -- 381,804,295 360,577,130 Total liabilities and stockholders' equity $538,137,605 $408,809,949 JAKKS Pacific, Inc. and Subsidiaries Fourth Quarter Earnings Announcement, 2003 Condensed Statements of Operations (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2003 2002 2003 2002 ---- ---- ---- ---- Net sales $84,418,626 $68,477,943 $315,776,407 $310,004,747 Less cost of sales Cost of goods 42,349,604 35,431,358 160,517,978 151,916,303 Royalty expense 5,577,578 4,352,481 22,528,567 20,331,532 Amortization of tools and molds 1,430,886 1,628,332 6,095,237 7,217,392 Cost of sales 49,358,068 41,412,171 189,141,782 179,465,227 Gross profit 35,060,558 27,065,772 126,634,625 130,539,520 Direct selling expenses 14,496,461 12,435,069 42,396,557 42,016,429 Selling, general and administrative expenses 14,920,421 13,856,604 50,829,730 47,844,845 Acquisition shut-down and recall costs 2,091,986 (1,403,792) 4,091,986 6,717,705 Depreciation and amortization 465,572 419,930 2,083,690 1,975,937 Income from operations 3,086,118 1,757,961 27,232,662 31,984,604 Other (income) expense: Profit from Joint Venture (6,047,624) (5,423,286) (7,351,324) (8,003,925) Interest, net 611,108 (171,152) 1,405,471 (1,141,191) Other -- -- -- -- Income before provision for income taxes and minority interest 8,522,634 7,352,399 33,178,515 41,129,720 Provision for income taxes 1,381,862 (71,339) 7,299,273 9,048,538 Income before minority interest 7,140,772 7,423,738 25,879,242 32,081,182 Minority interest -- 94,573 -- 809,718 Net income $7,140,772 $7,329,165 $25,879,242 $31,271,464 Earnings per share - diluted $0.29 $0.30 $1.05 $1.37 Shares used in earnings per share - diluted 24,642,210 24,800,461 24,677,333 22,746,507 CONTACT: JAKKS Pacific, Inc. Genna Goldberg, 310-455-6235 or Integrated Corporate Relations John F. Mills, 310-395-2215