Delaware
|
95-4527222
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
22619 Pacific Coast Highway
Malibu, California
|
90265
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Large accelerated filer
o
|
Accelerated filer
x
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
¨
|
Page
|
||
Part I
|
FINANCIAL INFORMATION
|
|
Item 1.
|
Financial Statements
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
None
|
Item 3.
|
Defaults Upon Senior Securities
|
None
|
Item 4.
|
Mine safety disclosures
|
None
|
Item 5.
|
Other Information
|
None
|
Exhibit 31.1
|
||
Exhibit 31.2
|
||
Exhibit 32.1
|
||
Exhibit 32.2
|
Assets
|
December 31,
2011
(*)
|
March 31, 2012
(Unaudited)
|
||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 257,258 | $ | 254,555 | ||||
Marketable securities
|
214 | 214 | ||||||
Accounts receivable, net of allowance for uncollectible accounts of $3,069 and $2,087, respectively
|
103,637 | 58,403 | ||||||
Inventory
|
47,019 | 44,998 | ||||||
Income tax receivable
|
24,166 | 24,008 | ||||||
Deferred income taxes
|
34,505 | 34,723 | ||||||
Prepaid expenses and other
|
30,686 | 34,404 | ||||||
Total current assets
|
497,485 | 451,305 | ||||||
Property and equipment
|
||||||||
Office furniture and equipment
|
13,606 | 13,590 | ||||||
Molds and tooling
|
61,005 | 64,055 | ||||||
Leasehold improvements
|
6,788 | 6,704 | ||||||
Total
|
81,399 | 84,349 | ||||||
Less accumulated depreciation and amortization
|
65,213 | 66,804 | ||||||
Property and equipment, net
|
16,186 | 17,545 | ||||||
Deferred income taxes
|
47,081 | 47,101 | ||||||
Intangibles
|
21,753 | 21,288 | ||||||
Other long term assets
|
3,670 | 3,473 | ||||||
Investment in joint venture
|
2,736 | 3,400 | ||||||
Goodwill, net
|
24,015 | 24,725 | ||||||
Trademarks, net
|
2,308 | 2,308 | ||||||
Total assets
|
$ | 615,234 | $ | 571,145 | ||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 26,430 | $ | 20,063 | ||||
Accrued expenses
|
50,780 | 39,215 | ||||||
Reserve for sales returns and allowances
|
43,440 | 29,547 | ||||||
Capital lease obligations
|
― | ― | ||||||
Income taxes payable
|
2,183 | 7,767 | ||||||
Total current liabilities
|
122,833 | 96,592 | ||||||
Convertible senior notes, net
|
92,188 | 92,870 | ||||||
Other liabilities
|
1,630 | 1,858 | ||||||
Income taxes payable
|
4,992 | 4,550 | ||||||
Total liabilities
|
221,643 | 195,870 | ||||||
Commitments and Contingencies
|
||||||||
Stockholders’ equity
|
||||||||
Preferred shares, $.001 par value; 5,000,000 shares authorized; nil outstanding
|
— | — | ||||||
Common stock, $.001 par value; 100,000,000 shares authorized; 25,943,214 and 26,014,835 shares issued and outstanding, respectively
|
26 | 25 | ||||||
Additional paid-in capital
|
274,532 | 274,856 | ||||||
Retained earnings
|
123,174 | 104,587 | ||||||
Accumulated other comprehensive loss
|
(4,141 | ) | (4,193 | ) | ||||
Total stockholders’ equity
|
393,591 | 375,275 | ||||||
Total liabilities and stockholders’ equity
|
$ | 615,234 | $ | 571,145 |
Three Months Ended
March 31,
(Unaudited)
|
||||||||
2011
|
2012
|
|||||||
Net sales
|
$ | 72,323 | $ | 73,405 | ||||
Cost of sales
|
48,052 | 49,839 | ||||||
Gross profit
|
24,271 | 23,566 | ||||||
Selling, general and administrative expenses
|
39,061 | 42,976 | ||||||
Loss from operations
|
(14,790 | ) | (19,410 | ) | ||||
Equity in net income from joint venture
|
9 | 54 | ||||||
Interest income
|
105 | 199 | ||||||
Interest expense, net
|
(2,040 | ) | (2,035 | ) | ||||
Loss before benefit for income taxes
|
(16,716 | ) | (21,192 | ) | ||||
Benefit for income taxes
|
(6,141 | ) | (5,192 | ) | ||||
Net loss
|
$ | (10,575 | ) | $ | (16,000 | ) | ||
Loss per share – basic and diluted
|
$ | (0.39 | ) | $ | (0.62 | ) | ||
Comprehensive loss
|
$ | (10,631 | ) | $ | (16,052 | ) |
Three Months Ended
March 31,
(Unaudited)
|
||||||||
2011
|
2012
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$
|
(10,575)
|
$
|
(16,000)
|
||||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
3,884
|
3,171
|
||||||
Share-based compensation expense
|
848
|
338
|
||||||
Loss (gain) on disposal of property and equipment
|
(26)
|
17
|
||||||
Deferred income taxes
|
(309)
|
(238)
|
||||||
Equity in net income from joint venture
|
(9)
|
(54)
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
65,044
|
45,234
|
||||||
Inventory
|
(1,928)
|
2,021
|
||||||
Prepaid expenses and other current assets
|
(6,228)
|
(3,718)
|
||||||
Income tax receivable
|
9
|
158
|
||||||
Accounts payable
|
(10,313)
|
(4,700)
|
||||||
Accrued expenses
|
(21,420)
|
(11,565)
|
||||||
Income taxes payable
|
1,024
|
5,142
|
||||||
Reserve for sales returns and allowances
|
(10,396)
|
(13,893)
|
||||||
Other liabilities
|
(5)
|
228
|
||||||
Total adjustments
|
20,175
|
22,141
|
||||||
Net cash provided by operating activities
|
9,600
|
6,141
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase of property and equipment
|
(3,222)
|
(3,216)
|
||||||
Change in other assets
|
(26)
|
(39)
|
||||||
Proceeds from sale of property and equipment
|
26
|
―
|
||||||
Investment in joint venture
|
(1,731)
|
(610)
|
||||||
Cash paid for net assets of business acquired
|
(3,542)
|
(2,377)
|
||||||
Net purchase of marketable securities
|
(2)
|
―
|
||||||
Net cash used in investing activities
|
(8,497)
|
(6,242)
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from warrants exercised
|
1,135
|
―
|
||||||
Common stock surrendered
|
(1,041)
|
(15)
|
||||||
Common stock repurchased
|
(5,049)
|
―
|
||||||
Dividends paid
|
―
|
(2,587)
|
||||||
Decrease in capital lease obligations
|
(27)
|
―
|
||||||
Net cash used in financing activities
|
(4,982)
|
(2,602)
|
||||||
Net decrease in cash and cash equivalents
|
(3,879)
|
(2,703)
|
||||||
Cash and cash equivalents, beginning of period
|
278,346
|
257,258
|
||||||
Cash and cash equivalents, end of period
|
$
|
274,467
|
$
|
254,555
|
||||
Cash paid (received) during the period for:
|
||||||||
Income taxes
|
$
|
(7,043)
|
$
|
(12,083)
|
||||
Interest
|
$
|
―
|
$
|
―
|
Three Months Ended
March 31,
|
||||||||
|
2011
|
2012
|
||||||
Net Sales
|
||||||||
Traditional Toys and Electronics
|
$ | 38,164 | $ | 41,578 | ||||
Role Play, Novelty and Seasonal Toys
|
34,159 | 31,827 | ||||||
$ | 72,323 | $ | 73,405 |
Three Months Ended
March 31,
|
||||||||
|
2011
|
2012
|
||||||
Loss from Operations
|
||||||||
Traditional Toys and Electronics
|
$ | (8,356 | ) | $ | (10,856 | ) | ||
Role Play, Novelty and Seasonal Toys
|
(6,434 | ) | (8,554 | ) | ||||
$ | (14,790 | ) | $ | (19,410 | ) |
Three Months Ended
March 31,
|
||||||||
|
2011
|
2012
|
||||||
Depreciation and Amortization Expense
|
||||||||
Traditional Toys and Electronics
|
$ | 2,971 | $ | 2,236 | ||||
Role Play, Novelty and Seasonal Toys
|
913 | 935 | ||||||
$ | 3,884 | $ | 3,171 |
December 31,
|
March 31,
|
|||||||
2011
|
2012
|
|||||||
Assets
|
||||||||
Traditional Toys and Electronics
|
$
|
269,411
|
$
|
287,617
|
||||
Role Play, Novelty and Seasonal Toys
|
345,823
|
283,528
|
||||||
$
|
615,234
|
$
|
571,145
|
December 31,
2011
|
March 31,
2012
|
|||||||
Long-lived Assets
|
||||||||
United States
|
$
|
15,274
|
$
|
16,716
|
||||
Hong Kong
|
912
|
829
|
||||||
$
|
16,186
|
$
|
17,545
|
Three Months Ended
March 31,
|
||||||||
2011
|
2012
|
|||||||
Net Sales by Geographic Area
|
||||||||
United States
|
$
|
57,467
|
$
|
63,871
|
||||
Europe
|
6,261
|
3,209
|
||||||
Canada
|
3,607
|
2,779
|
||||||
Hong Kong
|
841
|
229
|
||||||
Other
|
4,147
|
3,317
|
||||||
$
|
72,323
|
$
|
73,405
|
Three Months Ended March 31,
|
||||||||||||||||
2011
|
2012
|
|||||||||||||||
Amount
|
Percentage of
Net Sales
|
Amount
|
Percentage of
Net Sales
|
|||||||||||||
Wal-Mart
|
$ | 19,476 | 26.9 | % | $ | 16,126 | 22.0 | % | ||||||||
Target
|
9,377 | 13.0 | 6,651 | 9.1 | ||||||||||||
Toys ‘R’ Us
|
9,929 | 13.7 | 10,575 | 14.4 | ||||||||||||
$ | 38,782 | 53.6 | % | $ | 33,352 | 45.5 | % |
December 31,
2011
|
March 31,
2012
|
|||||||
Raw materials
|
$
|
2,428
|
$
|
2,635
|
||||
Finished goods
|
44,591
|
42,363
|
||||||
$
|
47,019
|
$
|
44,998
|
Three Months Ended March 31,
|
||||||||||||||||||||||||
2011
|
2012 | |||||||||||||||||||||||
Income
|
Weighted
Average
Shares
|
Per-Share
|
Income
|
Weighted
Average
Shares
|
Per-Share
|
|||||||||||||||||||
Loss per share – basic and diluted
|
||||||||||||||||||||||||
Net loss available to common stockholders
|
$ | (10,575 | ) | 27,217 | $ | (0.39 | ) | $ | (16,000 | ) | 25,831 | $ | (0.62 | ) |
December 31,
|
March 31,
|
|||||||
2011
|
2012
|
|||||||
Capital Contributions, net
|
$
|
2,826
|
$
|
3,514
|
||||
Equity in cumulative net (loss)
|
(90)
|
(114)
|
||||||
Investment in joint venture
|
$
|
2,736
|
$
|
3,400
|
Traditional
Toys and
Electronics
|
Role Play,
Novelty
and Seasonal
Toys
|
Total
|
||||||||||
Balance at beginning of the period
|
$
|
17,597
|
$
|
6,418
|
$
|
24,015
|
||||||
Adjustments to goodwill during the period
|
710
|
—
|
710
|
|||||||||
Balance, March 31, 2012
|
$
|
18,307
|
$
|
6,418
|
$
|
24,725
|
December 31, 2011
|
March 31, 2012
|
|||||||||||||||||||||||||||
Weighted
Useful
Lives
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Amount
|
||||||||||||||||||||||
(Years)
|
||||||||||||||||||||||||||||
Amortized Intangible Assets:
|
||||||||||||||||||||||||||||
Acquired order backlog
|
0.50 | $ | 2,393 | $ | (2,393 | ) | $ | — | $ | 2,393 | $ | (2,393 | ) | $ | — | |||||||||||||
Licenses
|
4.96 | 91,488 | (72,797 | ) | 18,691 | 91,488 | (73,135 | ) | 18,353 | |||||||||||||||||||
Product lines
|
3.65 | 19,500 | (18,787 | ) | 713 | 19,500 | (18,806 | ) | 694 | |||||||||||||||||||
Customer relationships
|
5.28 | 7,096 | (4,800 | ) | 2,296 | 7,096 | (4,876 | ) | 2,220 | |||||||||||||||||||
Non-compete/Employment contracts
|
3.84 | 3,133 | (3,080 | ) | 53 | 3,133 | (3,112 | ) | 21 | |||||||||||||||||||
Total amortized intangible assets
|
123,610 | (101,857 | ) | 21,753 | 123,610 | (102,322 | ) | 21,288 | ||||||||||||||||||||
Deferred Costs:
|
||||||||||||||||||||||||||||
Debt issuance costs
|
5.00 | 3,678 | (1,592 | ) | 2,086 | 3,678 | (1,776 | ) | 1,902 | |||||||||||||||||||
Unamortized Intangible Assets:
|
||||||||||||||||||||||||||||
Trademarks
|
indefinite
|
2,308 | 2,308 | 2,308 | 2,308 | |||||||||||||||||||||||
$ | 129,596 | $ | (103,449 | ) | $ | 26,147 | $ | 129,596 | $ | (104,098 | ) | $ | 25,498 |
Three Months
Ended March 31,
|
||||||||
2011
|
2012
|
|||||||
Net loss
|
$
|
(10,575)
|
$
|
(16,000)
|
||||
Other comprehensive income (loss):
|
||||||||
Foreign currency translation adjustment
|
(56)
|
(52)
|
||||||
Comprehensive loss
|
$
|
(10,631)
|
$
|
(16,052)
|
Three Months Ended March 31,
|
||||||||
2011
|
2012
|
|||||||
Stock option compensation expense
|
$ | ― | $ | — | ||||
Tax benefit related to stock option compensation
|
$ | ― | $ | ― | ||||
Restricted stock compensation expense
|
$ | 848 | $ | 338 | ||||
Tax benefit related to restricted stock compensation
|
$ | 333 | $ | 127 |
Plan Stock Options (*)
|
||||||||
Number of
Shares
|
Weighted
Average
Exercise
Price
|
|||||||
Outstanding, December 31, 2011
|
182,665
|
$
|
19.11
|
|||||
Granted
|
―
|
$
|
―
|
|||||
Exercised
|
―
|
$
|
―
|
|||||
Cancelled
|
(25,021)
|
$
|
18.95
|
|||||
Outstanding, March 31, 2012
|
157,644
|
$
|
19.14
|
Restricted Stock Awards
|
||||||||
Number of
Shares
|
Weighted
Average
Grant
Price
|
|||||||
Outstanding, December 31, 2011
|
142,184
|
$
|
18.15
|
|||||
Awarded
|
75,560
|
$
|
14.11
|
|||||
Released
|
(29,125)
|
$
|
18.23
|
|||||
Forfeited
|
(2,928)
|
$
|
18.26
|
|||||
Outstanding, March 31, 2012
|
185,691
|
$
|
16.49
|
●
|
significant underperformance relative to expected historical or projected future operating results;
|
|
●
|
significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and
|
|
●
|
significant negative industry or economic trends.
|
Three Months Ended
March 31,
|
||||||||
2011
|
2012
|
|||||||
Net sales
|
100.0 | % | 100.0 | % | ||||
Cost of sales
|
66.4 | 67.9 | ||||||
Gross profit
|
33.6 | 32.1 | ||||||
Selling, general and administrative expenses
|
54.0 | 58.5 | ||||||
Loss from operations
|
(20.4 | ) | (26.4 | ) | ||||
Profit from video game joint venture
|
||||||||
Equity in net income of joint venture
|
― | 0.1 | ||||||
Interest income
|
0.1 | 0.2 | ||||||
Interest expense, net
|
(2.8 | ) | (2.8 | ) | ||||
Loss before benefit for income taxes
|
(23.1 | ) | (28.9 | ) | ||||
Benefit for income taxes
|
(8.5 | ) | (7.1 | ) | ||||
Net Loss
|
(14.6 | )% | (21.8 | )% |
Three Months Ended
March 31,
|
||||||||
2011
|
2012
|
|||||||
Net Sales
|
||||||||
Traditional Toys and Electronics
|
$ | 38,164 | $ | 41,578 | ||||
Role Play, Novelty and Seasonal Toys
|
34,159 | 31,827 | ||||||
72,323 | 73,405 | |||||||
Cost of Sales
|
||||||||
Traditional Toys and Electronics
|
28,605 | 27,305 | ||||||
Role Play, Novelty and Seasonal Toys
|
19,447 | 22,534 | ||||||
48,052 | 49,839 | |||||||
Gross Profit
|
||||||||
Traditional Toys and Electronics
|
9,559 | 14,273 | ||||||
Role Play, Novelty and Seasonal Toys
|
14,712 | 9,293 | ||||||
$ | 24,271 | $ | 23,566 |
●
|
Age Compression: The phenomenon of children outgrowing toys at younger ages, particularly in favor of interactive and high technology products;
|
|
●
|
Increasing use of technology;
|
|
●
|
Shorter life cycles for individual products; and
|
|
●
|
Higher consumer expectations for product quality, functionality and value.
|
●
|
our current products will continue to be popular with consumers;
|
|
●
|
the product lines or products that we introduce will achieve any significant degree of market acceptance; or
|
|
●
|
the life cycles of our products will be sufficient to permit us to recover licensing, design, manufacturing, marketing and other costs associated with those products.
|
●
|
media associated with our character-related and theme-related product lines will be released at the times we expect or will be successful;
|
|
●
|
the success of media associated with our existing character-related and theme-related product lines will result in substantial promotional value to our products;
|
|
●
|
we will be successful in renewing licenses upon expiration on terms that are favorable to us; or
|
|
●
|
we will be successful in obtaining licenses to produce new character-related and theme-related products in the future.
|
●
|
Our current licenses require us to pay minimum royalties
|
●
|
Some of our licenses are restricted as to use
|
●
|
New licenses are difficult and expensive to obtain
|
●
|
A limited number of licensors account for a large portion of our net sales
|
●
|
greater financial resources;
|
|
●
|
larger sales, marketing and product development departments;
|
|
●
|
stronger name recognition;
|
|
●
|
longer operating histories; and
|
|
●
|
greater economies of scale.
|
●
|
attractiveness of products;
|
|
●
|
suitability of distribution channels;
|
|
●
|
management ability;
|
|
●
|
financial condition and results of operations; and
|
|
●
|
the degree to which acquired operations can be integrated with our operations.
|
●
|
difficulties in integrating acquired businesses or product lines, assimilating new facilities and personnel and harmonizing diverse business strategies and methods of operation;
|
|
●
|
diversion of management attention from operation of our existing business;
|
|
●
|
loss of key personnel from acquired companies; and
|
|
●
|
failure of an acquired business to achieve targeted financial results.
|
●
|
currency conversion risks and currency fluctuations;
|
|
●
|
limitations, including taxes, on the repatriation of earnings;
|
|
●
|
political instability, civil unrest and economic instability;
|
|
●
|
greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;
|
|
●
|
complications in complying with laws in varying jurisdictions and changes in governmental policies;
|
|
●
|
greater difficulty and expenses associated with recovering from natural disasters;
|
|
●
|
transportation delays and interruptions;
|
|
●
|
the potential imposition of tariffs; and
|
|
●
|
the pricing of intercompany transactions may be challenged by taxing authorities in both Hong Kong and the United States, with potential increases in income taxes.
|
●
|
product liability claims;
|
|
●
|
loss of sales;
|
|
●
|
diversion of resources;
|
|
●
|
damage to our reputation;
|
|
●
|
increased warranty and insurance costs; and
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●
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removal of our products from the market.
|
Number
|
Description
|
|
3.1
|
Amended and Restated Certificate of Incorporation of the Company(1)
|
|
3.2
|
Amended and Restated By-Laws of the Company(2)
|
|
4.3
|
Indenture, dated November 10, 2009, by and between the Registrant and Wells Fargo Bank, N.A. (4)
|
|
4.4
|
Form of 4.50% Senior Convertible Note (3)
|
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer(4)
|
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer(4)
|
|
32.1
|
Section 1350 Certification of Chief Executive Officer(4)
|
|
32.2
|
Section 1350 Certification of Chief Financial Officer(4)
|
|
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
(1)
|
Filed previously as Appendix 2 to the Company’s Schedule 14A Proxy Statement filed August 23, 2002 and incorporated herein by reference.
|
(2)
|
Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 21, 2011, and incorporated herein by reference.
|
(3)
|
Filed previously as an exhibit to the Company’s Current Report on Form 8-K, filed on November 10, 2009, and incorporated herein by reference.
|
(4)
|
Filed herewith.
|
JAKKS PACIFIC, INC.
|
||
Date: May 10, 2012
|
By:
|
/s/ JOEL M. BENNETT
|
Joel M. Bennett
|
||
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
|
Number
|
Description
|
|
3.1
|
Amended and Restated Certificate of Incorporation of the Company(1)
|
|
3.2
|
Amended and Restated By-Laws of the Company(2)
|
|
4.3
|
Indenture, dated November 10, 2009, by and between the Registrant and Wells Fargo Bank, N.A. (3)
|
|
4.4
|
Form of 4.50% Senior Convertible Note (3)
|
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer(4)
|
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer(4)
|
|
32.1
|
Section 1350 Certification of Chief Executive Officer(4)
|
|
32.2
|
Section 1350 Certification of Chief Financial Officer(4)
|
|
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
(1)
|
Filed previously as Appendix 2 to the Company’s Schedule 14A Proxy Statement filed August 23, 2002 and incorporated herein by reference.
|
(2)
|
Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 21, 2011, and incorporated herein by reference.
|
(3)
|
Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on November 10, 2009, and incorporated herein by reference.
|
(4)
|
Filed herewith.
|
By:
|
/s/ Stephen G. Berman
|
|
Stephen G. Berman
|
||
Director and Chief Executive Officer
|
By:
|
/s/ Joel M. Bennett
|
|
Joel M. Bennett
|
||
Chief Financial Officer
|
/s/ Stephen G. Berman
|
|
Stephen G. Berman
|
|
Director and Chief Executive Officer
|
/s/ Joel M. Bennett
|
|
Joel M. Bennett
|
|
Chief Financial Officer
|
Revenue Recognition and Reserve for Sales Returns and Allowances
|
3 Months Ended |
---|---|
Mar. 31, 2012
|
|
Revenue Recognition and Reserve for Sales Returns and Allowances |
Note 4
— Revenue Recognition and Reserve for Sales Returns and
Allowances
Revenue is recognized upon the shipment of goods to customers or
their agents, depending on terms, provided that there are no
uncertainties regarding customer acceptance, the sales price is
fixed or determinable, and collectability is reasonably assured and
not contingent upon resale.
Generally, the Company does not allow product returns. It provides
a negotiated allowance for breakage or defects to its customers,
which is recorded when the related revenue is recognized. However,
the Company does make occasional exceptions to this policy and
consequently accrues a return allowance in gross sales based on
historic return amounts and management estimates. The Company also
will occasionally grant credits to facilitate markdowns and sales
of slow moving merchandise. These credits are recorded as a
reduction of gross sales at the time of
occurrence.
The Company also participates in cooperative advertising
arrangements with some customers, whereby it allows a discount from
invoiced product amounts in exchange for customer purchased
advertising that features the Company’s products. Typically,
these discounts range from 1% to 6% of gross sales, and are
generally based on product purchases or on specific advertising
campaigns. Such amounts are accrued when the related revenue is
recognized or when the advertising campaign is initiated. These
cooperative advertising arrangements are accounted for as direct
selling expenses.
The Company’s reserve for sales returns and allowances
amounted to $43.4 million as of December 31, 2011, compared to
$29.5 million as of March 31, 2012. This decrease was primarily due
to certain customers taking their year-end allowances related to
2011 sales during 2012.
|
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