EX-99.1 2 a5253375ex991.txt JAKKS PACIFIC EXHIBIT 99.1 Exhibit 99.1 JAKKS Pacific(R) Reports 2006 Third Quarter Results --- Achieves Record Third Quarter Sales and Reiterates Guidance for 2006 --- MALIBU, Calif.--(BUSINESS WIRE)--Oct. 19, 2006--JAKKS Pacific, 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 third quarter and nine months ended September 30, 2006. Third quarter 2006 net sales were $295.8 million, compared to $233.5 million recorded in the comparable period last year. Net income for the third quarter was $40.5 million, or $1.26 per diluted share, compared to $32.8 million, or $1.05 per diluted share, reported in the third quarter of 2005. Included in the results were non-cash charges for stock-based compensation of $1.1 million and acquisition-related amortization of $3.3 million in the third quarter of 2006, compared to a credit of $0.6 million and charge of $1.8 million, respectively, in the third quarter of 2005. Pro forma net income excluding these non-cash charges was $43.6 million, or $1.35 per diluted share, in 2006 and $33.5 million, or $1.07 per diluted share, in 2005. Net sales for the nine months ended September 30, 2006 were $527.1 million, compared to $495.3 million during the same period in 2005. Net income for the first nine months of 2006 was $49.2 million, or $1.57 per diluted share, compared to the first nine months 2005 earnings of $54.5 million, or $1.77 per diluted share. Included in the results were non-cash charges for stock-based compensation of $4.8 million and acquisition-related amortization of $10.4 million in the first nine months of 2006, compared to a credit of $0.8 million and charge of $5.3 million, respectively, in the first nine months of 2005. Pro forma net income excluding these non-cash charges was $59.8 million, or $1.90 per diluted share, in 2006 and $57.7 million, or $1.87 per diluted share, in 2006. "The holiday season is officially underway," said Jack Friedman, Chairman and Chief Executive Officer, JAKKS Pacific. "With strong initial orders for the holidays, we achieved record third quarter sales and have positive momentum heading into the fourth quarter. Many of our core traditional toys continue to be solid contributors, including our Doodle Bear(R) line, WWE(R) action figures, Cabbage Patch Kids(R) and TV Games lines. In addition, we benefited from the significant contribution from our Creative Designs International(TM) division, which is new for us in 2006." Stephen Berman, President and Chief Operating Officer, stated, "We remain focused on traditional play patterns and basic fun in the toy area, adding innovation and appropriate licenses, and continuously enhancing our diverse portfolio of products. Our Fly Wheels XPV(TM) (Xtreme Performance Vehicle(TM)), which soars up over 20 stories high, Ariel(TM) Magical Beauty Salon and Speed Stacks(R) StackPack(R) products appeal to even the most sophisticated of today's kids, who, we believe, love vehicles, pretend play and active sports that stimulate their minds and increase their activity levels. "We are well into the final development stages of our 2007 product lines, which will feature many well-known and established licensed brands, such as Doodle Bear(R), WWE, Cabbage Patch Kids, Dora the Explorer, Deal or No Deal, Barney(R) and Jelly Belly. "We continue to strive to grow both organically and through acquisitions, while simultaneously maximize synergies in meaningful ways throughout our organization. We leverage our strong licensing relationships and channel product categories to our various teams based on expertise, which enables JAKKS to develop multi-category merchandised lines across brands. This has been a key benefit of our acquired portfolio of brands over the past 11 years and several of our 2007 introductions, such as Pokemon(R), Bratz(R) and multiple Disney(R) initiatives, will involve numerous JAKKS divisions, including CDI, Play Along, JPI Pets, Flying Colors, JAKKS Electronics and Go Fly A Kite, working together. "We are showcasing our 2007 product line-up this week at the Fall International Toy Show in New York, and we are confident in our established product formula and that our new offerings will be well-received by both retailers and today's kids." At September 30, 2006, JAKKS Pacific had approximately $133.0 million in cash and cash equivalents and $284.0 million in working capital. The Company is reiterating its 2006 guidance of net sales of approximately $775 million and fully diluted earnings per share of approximately $2.32, which represents an increase in net sales of approximately 17.2% and an increase in diluted earnings per share of approximately 12.7% for the current fiscal year versus 2005. Conference Call JAKKS Pacific is hosting a teleconference today at 6:00 a.m. PDT (9:00 a.m. EDT) on October 19th, 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. You can also listen to the call live via the Internet at www.jakkspacific.com, www.CompanyBoardroom.com or www.StreetEvents.com, where the call will be archived for 30 days. A telephone playback will be available from 7:00 a.m. Pacific on October 19th through 12:00 a.m. Pacific on November 2nd. The playback can be accessed by calling 888-266-2081 or 703-925-2533 for international callers, passcode "984333". 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, Construction Toys, Electronics, Dolls, Dress-Up, Role Play, and Pet Toys and Accessories. The products are sold under various brand names, including JAKKS Pacific(R), Play Along(R), Flying Colors(R), Creative Designs International(TM) Road Champs(R), Child Guidance(R), Pentech(R), Trendmasters(R), Toymax(R), Funnoodle(R), Go Fly a Kite(R), Color Workshop(R), JPI(TM) and Plug It In & Play TV Games(TM). JAKKS and THQ Inc. participate in a joint venture that has worldwide rights to publish and market World Wrestling Entertainment video games. For further information, visit www.jakkspacific.com. This press release may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act 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 September 30, December 31, 2006 2005 ------------- ------------ (In thousands) ASSETS Current assets: Cash and cash equivalents $132,966 $240,238 Accounts receivable, net 182,818 87,199 Inventory, net 86,676 66,729 Deferred income taxes 12,315 13,618 Prepaid expenses and other current assets 32,515 17,533 ------------- ------------ Total current assets 447,290 425,317 ------------- ------------ Property and equipment 46,869 38,089 Less accumulated depreciation and amortization 31,136 25,394 ------------- ------------ Property and equipment, net 15,733 12,695 ------------- ------------ Goodwill, net 315,315 269,298 Trademarks & other assets, net 74,255 36,280 Investment in video game joint venture 1,936 10,365 ------------- ------------ Total assets $854,529 $753,955 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $134,058 $94,948 Reserve for sales returns and allowances 24,838 25,123 Income taxes payable 4,441 3,792 ------------- ------------ Total current liabilities 163,337 123,863 ------------- ------------ Long term debt 98,000 98,000 Deferred rent liability 889 995 Deferred income taxes 7,358 6,446 ------------- ------------ 106,247 105,441 ------------- ------------ Total liabilities 269,584 229,304 Stockholders' equity: Common stock, $.001 par value 28 27 Additional paid-in capital 298,190 287,356 Retained earnings 289,247 240,057 Accumulated other comprehensive income (loss) (2,520) (2,789) ------------- ------------ 584,945 524,651 ------------- ------------ Total liabilities and stockholders' equity $854,529 $753,955 ============= ============ JAKKS Pacific, Inc. and Subsidiaries Third Quarter Earnings Announcement, 2006 Condensed Statements of Income (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 --------- --------- --------- --------- (In thousands, expect per share data) Net sales $295,789 $233,500 $527,074 $495,266 Less cost of sales Cost of goods 155,467 115,823 269,546 246,175 Royalty expense 25,793 23,105 46,877 50,234 Amortization of tools and molds 1,647 1,120 4,326 3,120 --------- --------- --------- --------- Cost of sales 182,907 140,048 320,749 299,529 --------- --------- --------- --------- Gross profit 112,882 93,452 206,325 195,737 Direct selling expenses 21,908 20,082 48,132 52,951 Selling, general and administrative expenses 28,496 23,595 75,796 59,779 Depreciation and amortization 4,275 2,557 12,987 7,499 --------- --------- --------- --------- Income from operations 58,203 47,218 69,410 75,508 Other income (expense): Profit (loss) from video game joint venture (245) 238 732 1,541 Interest income 1,030 1,387 3,530 3,419 Interest expense (1,133) (1,136) (3,399) (3,402) Other expense - (1,401) - (1,401) --------- --------- --------- --------- Income before provision for income taxes 57,855 46,306 70,273 75,665 Provision for income taxes 17,357 13,553 21,083 21,186 --------- --------- --------- --------- Net income $40,498 $32,753 $49,190 $54,479 ========= ========= ========= ========= Earnings per share - diluted $1.26 $1.05 $1.57 $1.77 Shares used in earnings per share - diluted 32,736 32,088 32,731 32,182 CONTACT: JAKKS Pacific, Inc. Genna Rosenberg, 310-455-6235 or Integrated Corporate Relations John Mills, 310-954-1105