Exhibit 99.1 JAKKS Pacific Reports Second Quarter 2004 Financial Results; Company Achieves Record Sales and Earnings; Revenue Increased 49% to $109.4M and Net Income Increased 62% to $9.9M MALIBU, Calif.--(BUSINESS WIRE)--July 20, 2004--JAKKS Pacific, Inc. (Nasdaq:JAKK), a leading multi-brand company that designs and markets a broad range of toys, leisure products, art activities and writing instruments, today announced record sales and earnings results for the three- and six-month periods ended June 30, 2004. Second quarter net sales increased 49% to $109.4 million in 2004, compared to $73.3 million in the comparable period last year. Excluding non-cash stock-based compensation and restricted stock charges and also a one-time charge in 2003, net income for the period increased 62% to $9.9 million, or $0.38 per diluted share, compared to $6.1 million, or $0.25 per diluted share, for the second quarter of last year. Reported net income for the second quarter of 2004, including pre-tax non-cash stock-based compensation and restricted stock charges of $4.3 million, was $6.6 million, or $0.25 per diluted share, in 2004, compared to $3.2 million, or $0.13 per diluted share, for the same period last year, after a charge of $1.1 million for stock-based compensation and a one-time pre-tax charge of $2.7 million relating to a voluntary product recall. The Company's net sales for the six months ended June 30, 2004 increased 30% to $183.4 million, from $141.0 million during the same period in 2003. Excluding pre-tax non-cash stock-based compensation and restricted stock charges, net income for the six-month period was $15.5 million, or $0.60 per diluted share, an increase of 38% compared to $11.3 million, or $0.45 per diluted share, for the comparable period last year. Reported net income for the first six months of 2004, including pre-tax charges of $6.0 million for non-cash stock-based compensation and restricted stock charges, was $10.9 million or $0.42 per diluted share, compared to first six month 2003 earnings of $9.2 million, or $0.37 per diluted share, which includes the one-time second quarter 2003 charge for the aforementioned product recall. "We are very excited to report record revenue and net income for the second quarter and believe that we are on track to achieve the upper range of our increased 2004 guidance," said Jack Friedman, Chairman and Chief Executive Officer of JAKKS Pacific. "We believe our strong sales and earnings growth results from increased product advertising and marketing, as well as keen focus on product innovation and operating efficiencies, and the phenomenal success of our TV Games line of plug it in and play video games. "In addition to TV Games, a number of our brands performed particularly well, including our WWE action figures and Vivid Velvet in our art activities category. Our International sales also increased." Stephen Berman, "During the second quarter, we also completed the accretive acquisition of Play Along. This acquisition brings a management team with years of experience to our organization and serves to strengthen our category offerings while expanding our shelf space at all our major customers. Play Along adds such well-known brands and licenses as Cabbage Patch Kids(R) for dolls, Care Bears(R) for plush and preschool learning, Teletubbies(R) for preschool and playsets and DC Comic's(R) Batman(R) and Justice League of America(R) for construction toys." Mr. Berman continued, "Despite the record results, we continue to focus on areas of our business that can be improved. Our Storm product line of water guns and foam balls will be relaunched next year and some of our art activities and writing instruments products are being enhanced with new product concepts and licenses. With these changes, we expect these categories to improve over the latter half of this year and in 2005. "We are enthusiastic about the opportunity to grow our business and are very encouraged about the upcoming holiday season based on early responses from our retailer partners. We believe that we will have prime placement for our TV Games line in the third and fourth quarters of this year, and expect our Dragon Ball, World Wrestling Entertainment and extreme sports product lines, as well as other lines to also do well." Mr. Berman continued, "Especially noteworthy is our line of TV Games(TM) products, which has quickly become the industry leader in plug it in and play video games, with its #1 ranking in The Toy Book for three months in a row. We believe we have secured the top licenses with premier companies such as Atari(R), Namco(R) for Pac-Man(TM) and Ms.Pac-Man(R), Midway(R), Capcom(R), Activision(R), Nickelodeon(R), Disney(R) and Marvel(R) and have alliances with top video game developers. We have begun to expand our distribution of the games to international markets, including Europe, Australia and New Zealand, and expect to announce several additional significant TV Games licenses later this year. Our goal is to make this product line, which both children and adults enjoy, a staple product offering of our company for years to come." Mr. Berman concluded, "Our financial position remains very solid, even after our recent acquisition of Play Along. We have approximately $192 million of working capital, including cash and marketable securities of $105 million. Given the strength of our balance sheet, we remain 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 20, 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 can be accessed by calling 800-642-1687 or 706-645-9291 for international callers, pass code "8740174." 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 & Activity Kits, Stationery, Writing Instruments, Performance Kites, Water Toys, Sports Activity Toys, Vehicles, Infant/Pre-School, Plush, Construction Toys and Dolls. The products are sold under various brand names including Play Along(R), Flying Colors(R), Road Champs(R), Child Guidance(R), Pentech(R), Trendmasters(R), Toymax(R), Funnoodle(R), Go Fly a Kite(R) and 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 June 30, December 31, 2004 2003 ----------- --------- (In thousands) ASSETS Current assets: Cash and cash equivalents $87,079 $118,182 Marketable Securities 17,947 19,345 Accounts receivable, net 92,096 86,119 Inventory, net 56,713 44,400 Prepaid expenses and other current assets 27,435 16,762 ----------- --------- Total current assets 281,270 284,808 ----------- --------- Property and equipment 42,182 43,473 Less accumulated depreciation and amortization 31,139 31,751 ----------- --------- Property and equipment, net 11,043 11,722 ----------- --------- Goodwill, net 290,799 206,952 Trademarks & other assets, net 25,279 24,785 Investment in joint venture 3,487 9,097 ----------- --------- Total assets $611,878 $537,364 =========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $82,868 $50,168 Current portion of long term debt - 19 Income taxes payable 6,052 2,021 ----------- --------- Total current liabilities 88,920 52,208 ----------- --------- Long term debt, net of current portion 98,000 98,042 Deferred income taxes 1,164 1,164 ----------- --------- 99,164 99,206 ----------- --------- Total liabilities 188,084 151,414 Stockholders' equity: Common stock, $.001 par value 26 25 Additional paid-in capital 272,324 245,219 Retained earnings 151,962 141,055 Accumulated other comprehensive income (loss) (518) (349) ----------- --------- 423,794 385,950 ----------- --------- Total liabilities and stockholders' equity $611,878 $537,364 =========== ========= JAKKS Pacific, Inc. and Subsidiaries Second Quarter Earnings Announcement, 2004 Condensed Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 --------- -------- --------- --------- (In thousands, expect per share data) Net sales $109,394 $73,291 $183,380 $141,050 Less cost of sales Cost of goods 57,146 39,162 93,366 75,220 Royalty expense 9,528 4,495 15,352 7,210 Amortization of tools and molds 1,440 1,728 2,916 3,272 --------- -------- --------- --------- Cost of sales 68,114 45,385 111,634 85,702 --------- -------- --------- --------- Gross profit 41,280 27,906 71,746 55,348 Direct selling expenses 11,619 10,502 20,320 18,005 Selling, general and administrative expenses 19,813 10,196 35,205 22,030 Acquisition shut-down and recall costs - 2,700 - 2,700 Depreciation and amortization 646 444 1,253 1,045 --------- -------- --------- --------- Income from operations 9,202 4,064 14,968 11,568 Other (income) expense: Profit from Joint Venture (3) (191) (363) (367) Interest, net 688 34 1,169 (128) --------- -------- --------- --------- Income before provision for income taxes 8,517 4,221 14,162 12,063 Provision for income taxes 1,957 1,013 3,255 2,895 --------- -------- --------- --------- Net income $6,560 $3,208 $10,907 $9,168 ========= ======== ========= ========= Earnings per share - diluted $0.25 $0.13 $0.42 $0.37 Shares used in earnings per share - diluted 26,223 24,683 25,990 24,789 CONTACT: JAKKS Pacific, Inc. Genna Goldberg, 310-455-6235 gennag@jakks.net or Integrated Corporate Relations John F. Mills, 310-395-2215 jmills@icrinc.com