Exhibit 99.1
JAKKS Pacific Reports Second Quarter 2003 Financial Results
MALIBU, Calif.--(BUSINESS WIRE)--July 22, 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
results for the three and six-month periods ended June 30, 2003.
Second quarter net sales were $73.3 million, compared to $79.0 million in
the comparable period last year. Excluding one-time charges, net income for the
period was $5.3 million, or $0.21 per diluted share, compared to $8.9 million,
or $0.41 per diluted share, for the second quarter of last year. Including
one-time charges, net income was $3.2 million, or $0.13 per diluted share in
2003, compared to $7.8 million, or $0.36 per diluted share, for the same period
last year. The Company recognized pre-tax charges of $2.7 million in 2003 and
$1.5 million in 2002 relating to the voluntary recalls of one of its products.
The Company had 24.7 million diluted shares outstanding in the second quarter of
2003, 12.4% more than the 22.0 million diluted shares outstanding in the second
quarter of 2002.
The Company's net sales for the six months ended June 30, 2003 were $141.0
million compared to $138.9 million during the same period in 2002. Excluding
one-time charges, net income during the period was $11.2 million, or $0.45 per
diluted share, compared to $15.9 million, or $0.76 per diluted share, for the
comparable period last year. Including the restructuring charges of $6.6 million
taken in the first quarter of 2002 and the one-time second quarter charges for
the aforementioned product recalls, net income for the first six months of 2003
was $9.2 million, or $0.37 per diluted share, compared to $10.0 million, or
$0.47 per diluted share, for the same period in 2002.
"The second quarter was a challenging one for JAKKS Pacific, as well as for
many of our peers," said Jack Friedman, Chairman and Chief Executive Officer.
"As a result of general economic conditions and unusually poor weather,
particularly in the Northeast section of the United States, cutbacks in orders
from some of our customers in late June had an adverse effect on our performance
for the quarter as a whole. This included sales of seasonal products, including
kites from our Go Fly a Kite line and water products from our Funnoodle and
Trendmaster/Storm brands. In addition, due to strict labor constraints in
factories throughout China as a result of the SARS epidemic, production
continued but was somewhat slowed during the second quarter, causing a delay in
the initial shipping of our NASCAR(R) line, as well as a key SpongeBob
SquarePants item, which we had expected to ship in June. As a result, we first
began to ship these items during the third quarter.
"While we believe 2003 will be another profitable year for JAKKS Pacific,
we have adjusted our expectations due to the continued challenging economic
environment. We now expect full year sales for 2003 to be at least $310 million
and diluted earnings per share, excluding one-time charges, to be in the range
of $1.30 to $1.35," Friedman concluded.
Stephen Berman, President and Chief Operating Officer, stated, "We are
encouraged by interest from our retailer partners for the upcoming holiday
selling season, and are pleased that a number of key items have emerged as
drivers, including our NASCAR line of action figures and vehicles, our Dragon
Ball, Yu Yu Hakusho(R) and World Wrestling Entertainment product lines, as well
as our TV Games line, Swap N' Bop SpongeBob SquarePants, and rolling activity
cases for Disney, Dora the Explorer and Hello Kitty, to name a few," stated Mr.
Berman, "We are also looking for continued growth from our candy line of
flavored tongue strips, Tongue Tape(TM), as we capitalize on new licensing
programs for this product and introduce multiple line extensions, including a
line of children's vitamins."
Mr. Berman concluded, "Because of our continued strong operating cash flow
and the successful placement of $98 million in convertible senior notes, we
believe our financial position is very solid with $220.9 million of working
capital, including cash of $144.4 million. Given the strength of our balance
sheet, we believe we are well positioned to take advantage of acquisition
opportunities and continue to grow our business through internal and external
developments that will further diversify our product offerings to our existing
and new retail accounts."
Anyone interested will be able to listen to the teleconference, scheduled
to begin at 5:00 p.m. EDT (2:00 p.m. PDT) on July 22, via the Internet at
www.jakkspacific.com or www.CompanyBoardroom.com. These websites will host an
archive of the teleconference for 30 days.
A telephonic playback will be available from 7:00 p.m. EDT on July 22nd
through 12:00 a.m. EDT on July 29th. Calling 800-642-1687 or 706-645-9291 for
international callers, password "1745410," can access the playback.
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),
Storm(R), Colorworkshop(R) and Blopen(R). 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
June 30, December 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $144,414,492 $68,412,826
Marketable Securities 219,733 -
Accounts receivable, net 72,814,416 56,195,578
Inventory, net 37,986,869 38,009,747
Notes receivable - officers - 1,113,000
Prepaid expenses and other current
assets 10,575,298 8,616,160
Deferred income taxes 4,445,658 4,445,658
Total current assets 270,456,466 176,792,969
Property and equipment 41,874,023 39,465,148
Less accumulated depreciation and
amortization 28,897,810 24,639,593
Property and equipment, net 12,976,213 14,825,555
Goodwill, net 205,042,344 189,335,933
Trademarks & other assets, net 23,238,149 19,736,847
Investment in joint venture 2,738,281 8,118,645
Total assets $514,451,453 $408,809,949
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $43,380,521 $41,967,851
Current portion of long term debt 8,608 17,805
Income taxes payable 6,138,185 5,624,532
Total current liabilities 49,527,314 47,610,188
Long term debt, net of current portion 98,060,126 59,683
Deferred income taxes 562,948 562,948
98,623,074 622,631
Total liabilities 148,150,388 48,232,819
Stockholders' equity:
Common stock, $.001 par value 24,587 24,473
Additional paid-in capital 240,878,034 240,101,458
Treasury Stock, at cost - 412,000 and
nil shares, respectively (4,220,773) -
Retained earnings 129,619,217 120,451,199
366,301,065 360,577,130
Total liabilities and stockholders'
equity $514,451,453 $408,809,949
JAKKS Pacific, Inc. and Subsidiaries
Second Quarter Earnings Announcement, 2003
Condensed Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Net sales $73,290,206 $78,991,479 $141,049,651 $138,886,969
Less cost of
sales
Cost of goods 39,161,677 37,970,980 75,219,415 66,091,975
Royalty expense 4,495,342 4,071,988 7,210,315 7,408,319
Amortization of
tools and molds 1,727,328 1,756,908 3,271,598 3,725,221
Cost of sales 45,384,347 43,799,876 85,701,328 77,225,515
Gross profit 27,905,859 35,191,603 55,348,323 61,661,454
Direct selling
expenses 10,500,951 12,051,915 18,004,692 20,136,756
Selling, general
and
administrative
expenses 10,196,481 11,166,321 22,030,453 21,052,150
Acquisition shut-
down and recall
costs 2,700,000 1,500,000 2,700,000 8,121,497
Depreciation and
amortization 443,641 560,959 1,044,819 1,019,210
Income from
operations 4,064,786 9,912,408 11,568,359 11,331,841
Other (income)
expense:
Profit from
Joint Venture (190,825) (672,170) (366,481) (1,968,865)
Interest, net 34,022 (264,346) (128,341) (532,941)
Other - - - -
Income before
provision for
income taxes
and minority
interest 4,221,589 10,848,924 12,063,181 13,833,647
Provision for
income taxes 1,013,181 2,929,210 2,895,163 3,735,085
Income before
minority
interest 3,208,408 7,919,714 9,168,018 10,098,562
Minority interest - 87,915 - 110,662
Net income $3,208,408 $7,831,799 $9,168,018 $9,987,900
Earnings per
share - diluted $0.13 $0.36 $0.37 $0.47
Shares used in
earnings per
share - diluted 24,683,412 21,953,168 24,788,514 21,080,870
CONTACT: JAKKS Pacific, Inc.
Genna Goldberg, 310-455-6235
or
Integrated Corporate Relations
John F. Mills, 562-256-7051