MALIBU, Calif.--(BUSINESS WIRE)--October 21, 2009--JAKKS Pacific, Inc. (NASDAQ: JAKK) reported results for the Company’s third quarter and first nine months ended September 30, 2009.

Net sales for the third quarter were $351.4 million, compared to $357.8 million in the third quarter of 2008; and net sales for the first nine months of 2009 were $604.9 million, compared to $634.1 million for the first nine months of 2008. Net income for the third quarter of 2009 was $33.7 million, or $1.06 per diluted share, compared to net income of $54.1 million, or $1.70 per diluted share, reported in the third quarter of 2008. For the nine month period JAKKS reported a net loss of $383.7 million, or $14.11 per diluted share, compared to earnings for the first nine months of 2008 of $59.2 million, or $1.88 per diluted share.

On a non-GAAP basis, 2009 net sales for the third quarter were $351.4 million and $605.5 million for the nine month period, compared to non-GAAP net sales of $357.8 million and $634.1 million for the third quarter and first nine months of 2008, respectively. On a non-GAAP basis, JAKKS net income for the third quarter was $35.9 million, or $1.13 per diluted share, compared to non-GAAP net income of $46.6 million, or $1.47 per diluted share in the third quarter of 2008. Non-GAAP net income for the first nine months of 2009 was $24.3 million, or $0.83 per diluted share, compared to non-GAAP net income of $53.4 million, or $1.70 per diluted share for the first nine months of 2008.

2009 GAAP results include the following, which were excluded from the non-GAAP results noted above:

2008 GAAP results include the following, which were excluded from the non-GAAP results noted above:

The goodwill impairment charge taken earlier this year does not affect the Company’s liquidity or business operations, and is not expected to limit or change its ability to continue to generate positive future cash flows from these intangible assets.

“In this challenging retail environment, we have been focused on executing on our restructuring plan,” said Jack Friedman, Chairman and Co-CEO. “In October we began consolidating operations in Hong Kong and New York, and also carried out headcount reductions Company-wide. Our goal is to streamline processes, reduce costs and lower capital expenditures in order to enhance profitability in this retail environment.”

Stephen Berman, JAKKS Co-CEO and president, continued, “We have been analyzing every area of our business, shipping our Fall line into retail, and developing our portfolio for 2010. We previewed next year’s line to buyers at JAKKS’ 2010 Fall Toy Preview held at our new Santa Monica Showroom during the past two weeks, and it was very well received by our licensors and retailer partners from every sales channel.”

Operations provided cash in the third quarter of $35.9 million. As of September 30, 2009, our working capital was $322.5 million, including cash and equivalents and marketable securities of $154.0 million, and we continue to evaluate potential acquisition opportunities while executing on extensive cost savings and internal growth initiatives.

While there is no certainty about the level of sales for the holiday season, at this point we still believe that our previously announced guidance is achievable. For the 2009 fiscal year the Company is expecting GAAP net sales of approximately $810 million, with a net loss on a GAAP basis of $378.0 million, or $13.72 per share, and is expecting non-GAAP net sales of approximately $810.7 million, with net income on a non-GAAP basis of $30.0 million, or $1.01 per diluted share.

In addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information, including net sales information that excludes recall items, and expense information that excludes intangible asset impairment charges and license and inventory impairment charges, among others. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because this information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these non-GAAP financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operation results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measure. See the attached “Reconciliation of Non-GAAP Financial Information.”

JAKKS Pacific will webcast its second quarter earnings conference call at 4:45 p.m. Eastern time (1:45 p.m. Pacific time) today. To listen to the live webcast, go to the Investors section of www.jakks.com, and click on the earnings webcast link under Events and Presentations at least 15 minutes early to register, download and install any necessary audio software. A telephonic playback can be accessed approximately one hour after the webcast ends by calling (888) 843-8996 or (630) 652-3044 for international callers, passcode “6636542.” The webcast and telephonic playback will be archived for 30 days.

JAKKS Pacific, Inc. (NASDAQ: JAKK) is a leading designer and marketer of toys and consumer products, with a wide range of products that feature some of the most popular children's toy licenses in the world. JAKKS’ diverse portfolio includes 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, sold under various proprietary brands including JAKKS Pacific®, Play Along®, Flying Colors®, Creative Designs International™, Road Champs®, Child Guidance®, Pentech®, Funnoodle®, Go Fly a Kite®, Color Workshop®, JAKKS Pets®, EyeClops®, Plug It In & Play TV Games™, Girl Gourmet®, Kids Only®, Tollytots® and Disguise. JAKKS is an award-winning licensee of several hundred nationally and internationally known trademarks including Disney®, Nickelodeon®, Warner Bros.®, World Wrestling Entertainment®, Ultimate Fighting Championship®, Graco® and Cabbage Patch Kids. 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.jakks.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,
			2009			2008
			(In thousands)

ASSETS

Current assets:
	Cash and cash equivalents		$	153,795		$	169,520
	Marketable securities			201			195
	Accounts receivable, net			251,631			147,587
	Inventory, net			71,145			87,944
	Income taxes receivable			26,823			22,288
	Deferred income taxes			83,884			17,993
	Prepaid expenses and other current assets			22,826			29,670
		Total current assets		610,305			475,197

Property and equipment				85,856			81,412
Less accumulated depreciation and amortization				60,117			52,914
	Property and equipment, net			25,739			28,498

Goodwill, net				-			427,693
Trademarks & other assets, net				45,035			43,552
Investment in video game joint venture				527			53,184
		Total assets	$	681,606		$	1,028,124


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
	Accounts payable and accrued expenses		$	154,346		$	119,629
	Reserve for sales returns and allowances			35,503			23,317
	Income taxes payable			-			7,190
	Short-term debt			98,000			-
		Total current liabilities		287,849			150,136

Long term debt				-			98,000
Other liabilities				6,732			2,112
Income taxes payable				4,686			4,686
Deferred income taxes				17,135			26,237
				28,553			131,035
		Total liabilities		316,402			281,171

Stockholders' equity:
	Common stock, $.001 par value			28			28
	Additional paid-in capital			294,711			292,809
	Retained earnings			74,693			458,345
	Accumulated other comprehensive income (loss)			(4,228	)		(4,229	)
				365,204			746,953
		Total liabilities and stockholders' equity	$	681,606		$	1,028,124


JAKKS Pacific, Inc. and Subsidiaries
Third Quarter Earnings Announcement, 2009
Condensed Statements of Income (Unaudited)


			Three Months Ended September 30,					Nine Months Ended September 30,

			2009			2008		2009			2008
			(In thousands, expect per share data)

Net sales			$	351,438		$	357,824	$	604,932		$	634,050
Less cost of sales
	Cost of goods			195,096			188,020		354,074			330,693
	Royalty expense			32,487			36,650		90,595			64,307
	Amortization of tools and molds			8,146			4,089		13,649			10,486
	Cost of sales			235,729			228,759		458,318			405,486
		Gross profit (loss)		115,709			129,065		146,614			228,564
Direct selling expenses				17,729			21,390		42,764			45,834
Selling, general and administrative expenses				38,255			38,433		116,014			103,250
Depreciation and amortization				7,379			2,828		12,895			8,392
Write-down of other intangible assets				-			9,076		8,221			9,076
Write-down of goodwill				-			-		407,125			-
		Income (loss) from operations		52,346			57,338		(440,405	)		62,012
Other income (expense):
	Profit from video game joint venture			(1,919	)		743		(21,924	)		4,470
	Interest income			29			709		277			2,802
	Interest expense, net of benefit			(1,267	)		2,013		(3,800	)		(1,187	)
Income (loss) before provision (benefit) for income taxes				49,189			60,803		(465,852	)		68,097
Provision (benefit) for income taxes				15,480			6,658		(82,200	)		8,919
Net income (loss)			$	33,709		$	54,145	$	(383,652	)	$	59,178
	Earnings (loss) per share - diluted (basic)		$	1.06		$	1.70	$	(14.11	)	$	1.88
	Shares used in earnings (loss) per share			32,505			32,257		27,193			32,728


JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of GAAP to non-GAAP Results
Condensed Statements of Income (Unaudited)


			Three Months Ended September 30,						Nine Months Ended September 30,

			2009			2008			2009			2008
			(In thousands, expect per share data)

Net sales			$	351,438		$	357,824		$	604,932		$	634,050
	Change in net sales - recall			610			-			610			-
	Non-GAAP net sales		$	352,048		$	357,824		$	605,542		$	634,050

Income (loss) from operations as reported			$	33,709		$	54,146		$	(383,652	)	$	59,178

Non-GAAP adjustments:
	Change in net sales - recall			-			-			610			-

	Changes in cost of sales:
		Impairment of inventory		2,186			2,663			25,534			3,878
		Impairment of inventory - recall		-			-			658			-
		Write-down of abandoned/underperforming licenses		143			1,949			33,366			2,381
		Total changes in cost of sales		2,329			4,611			59,558			6,259

	Other G&A Expenses
		Write-down of Other Intangible Assets		-			9,076			8,221			9,076
		Write-down of Joint Venture receivable		1,045			-			23,544			-
		Write-down of Goodwill		-			-			407,125			-
		Write-off of obsolete tools and molds		-			(1,975	)		2,316			(1,975	)
		Interest Expense					(3,147	)					(2,288	)
	Tax impact of above items			(1,146	)		(16,073	)		(93,432	)		(16,891	)

	Total non-GAAP adjustments			2,227			(7,508	)		407,942			(5,818	)

Non-GAAP income (loss) from continuing operations			$	35,936		$	46,638		$	24,290		$	53,360

Non-GAAP earnings (loss) per share - diluted:			$	1.128		$	1.469		$	0.826		$	1.698
		Shares used in earnings per share diluted		32,505			32,257			32,093			32,728


JAKKS Pacific, Inc. and Subsidiaries
Reconciliation GAAP to Non-GAAP Annual Guidance
Condensed Statements of Income (Unaudited)
(In thousands, expect per share data)



			FY 2009


Net sales			$	810,051
	Change in net sales - recall			610
	Non-GAAP net sales		$	810,661

Income (loss) from operations as reported			$	(378,000	)

Non-GAAP adjustments:
	Change in net sales- recall			610

	Changes in cost of sales:
		Impairment of inventory		25,534
		Impairment of inventory - recall		658
		Write-off of abandoned/underperforming licenses		33,366
		Total changes in cost of sales		59,558

	Other G&A Expenses
		Write-down of Other Intangible Assets		8,221
		Write-down of Joint Venture receivable		23,544
		Write-down of Goodwill		407,125
		Write-off of obsolete tools and molds		2,316
	Tax impact of above items			(93,432	)

	Total non-GAAP adjustments			407,942

Non-GAAP income (loss) from continuing operations			$	29,942

Non-GAAP earnings (loss) per share - diluted:			$	1.01
		Shares used in earnings per share diluted		32,444

CONTACT:
JAKKS Pacific, Inc.
Genna Rosenberg, 310-455-6235
Joel Bennett, 310-455-6210