Exhibit 99.1
JAKKS Pacific(R) Reports Preliminary Fourth Quarter and Year-End Results
for 2006
Record Sales and Earnings Results Expected for 2006
Company Provides Guidance for First Quarter and Fiscal 2007
MALIBU, Calif.--(BUSINESS WIRE)--Feb. 26, 2007--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
preliminary results for the fourth quarter and year-ended December 31, 2006.
Fourth quarter net sales increased 43.3% to $238.3 million in 2006, compared
to $166.3 million in the comparable period last year. Excluding non-cash
stock-based compensation and acquisition-related amortization charges, net
income for the fourth quarter of 2006 is expected to be $26.9 million, or $0.84
per diluted share, compared to $12.7 million, or $0.41 per diluted share, for
the same period last year. Reported net income for the fourth quarter of 2006,
including pre-tax non-cash stock-based compensation charges of $1.7 million and
acquisition-related amortization charges of $4.1 million, is expected to be
$23.2 million, or $0.73 per diluted share, compared to $9.0 million, or $0.30
per diluted share, for the same period last year, which included charges of $4.2
million for stock-based compensation and $1.8 million for acquisition-related
amortization.
The Company's net sales for the year ended December 31, 2006 increased 15.7%
to $765.4 million, from $661.5 million in 2005. Excluding non-cash stock-based
compensation and acquisition-related amortization charges, net income for the
year ended December 31, 2006 is expected to have increased 23.2% to $86.7
million, or $2.74 per diluted share, compared to $70.4 million, or $2.28 per
diluted share, for the same period last year. Reported net income for the year
ended December 31, 2006, including pre-tax non-cash stock-based compensation
charges of $6.5 million and $14.5 million for acquisition-related amortization,
is expected to be $72.4 million, or $2.30 per diluted share, compared to $63.5
million, or $2.06 per diluted share, for the same period last year, which
included charges of $3.4 million for stock-based compensation and $7.0 million
for acquisition-related amortization.
As noted above, the foregoing results are preliminary pending the completion
of the review of the Company's annual goodwill valuation by its outside
auditors. The valuation pursuant to SFAS 142 was performed by a third-party
valuation consultant and the review is expected to be completed by March 16,
2007. Any impairment of the book value of the Company's goodwill may result in a
non-cash charge to earnings in 2006.
"The fourth quarter successfully concluded a record year of strong sales and
earnings growth," said Jack Friedman, Chairman and Chief Executive Officer,
JAKKS Pacific. "We had robust sales in several of our traditional toy segments,
including dress-up and role play items, action figures, dolls and plush based on
classic brands and well-known evergreen licenses due to our innovative products
and prime retail placement throughout the year. As we look to 2007, we believe
that our solid diversified portfolio will continue to drive revenue and earnings
growth."
Stephen Berman, President and Chief Operating Officer, stated, "We have an
excellent mix of new consumer products planned for 2007 based on entertainment
content that is popular with young kids of today, including Pokemon, which airs
ten times per week on Cartoon Network; Hannah Montana and The Cheetah Girls, two
hit Disney "tween" sensations; Nickelodeon's Dora the Explorer, which remains a
top-rated preschool property; and the new hit game show on NBC, Deal or No
Deal."
"We have meaningful line extensions planned across many of JAKKS' divisions
for this year, including new licensed and non-licensed preschool products, large
and small doll and plush lines, an expanded line of XPV Xtreme Performance
Vehicles, action figures, large feature role-play sets and dress-up items, and
electronic gadgets that utilize our plug and play technology. Classic play
patterns infused with innovation remain at the forefront of our product
development, and we believe our product portfolio and expected retail support
will help make 2007 the strongest year yet for JAKKS Pacific.
"Cash flow from operations in 2006 was approximately $63.9 million, and our
financial position remains very strong. As of December 31, 2006, our working
capital was approximately $291.4 million, including cash and equivalents of
$184.5 million. We expect to continue to grow our business by actively pursuing
accretive and complementary acquisitions and executing on internal growth
initiatives, including creating new products and securing new licenses, to
provide continued growth for JAKKS Pacific."
Friedman concluded, "For our initial 2007 guidance, we expect net sales of
at least $800.0 million in 2007, with net income of $75.8 million, or $2.39
earnings per diluted share. This forecast anticipates first quarter net sales in
the range of $114.0 million to $120.0 million, and diluted earnings per share of
$0.07 to $0.10."
JAKKS Pacific is hosting a teleconference today at 7:30 a.m. PT (10:30 a.m.
ET) on February 26th, 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. A telephonic playback will be
available from 8:30 a.m. PT on February 26th through 12 a.m. PT on March 12th.
The playback can be accessed by calling 800-642-1687, or 706-645-9291 for
international callers, pass code "9745773."
About JAKKS Pacific, Inc.
JAKKS Pacific, Inc. (Nasdaq:JAKK) 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.
(C) JAKKS Pacific, Inc. All Right Reserved.
JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December December
31, 31,
2006 2005
----------- ---------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $184,489 $240,238
Marketable securities 210 -
Accounts receivable, net 153,116 87,199
Inventory, net 76,787 66,729
Deferred income taxes 13,654 13,618
Prepaid expenses and other current assets 26,543 17,533
----------- ---------
Total current assets 454,799 425,317
----------- ---------
Property and equipment 49,781 38,089
Less accumulated depreciation and amortization 32,899 25,394
----------- ---------
Property and equipment, net 16,882 12,695
----------- ---------
Goodwill, net 330,268 269,298
Trademarks & other assets, net 61,202 36,280
Investment in video game joint venture 14,873 10,365
----------- ---------
Total assets $878,024 $753,955
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $113,307 $94,948
Reserve for sales returns and allowances 32,589 25,123
Income taxes payable 17,477 3,792
----------- ---------
Total current liabilities 163,373 123,863
----------- ---------
Long term debt 98,000 98,000
Deferred rent liability 854 995
Deferred income taxes 6,690 6,446
----------- ---------
105,544 105,441
----------- ---------
Total liabilities 268,917 229,304
Stockholders' equity:
Common stock, $.001 par value 28 27
Additional paid-in capital 300,074 287,356
Retained earnings 312,432 240,057
Accumulated other comprehensive income (loss) (3,427) (2,789)
----------- ---------
609,107 524,651
----------- ---------
Total liabilities and stockholders' equity $878,024 $753,955
=========== =========
JAKKS Pacific, Inc. and Subsidiaries
Fourth Quarter Earnings Announcement, 2006
Condensed Statements of Income (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
--------- --------- --------- ---------
(In thousands, expect per share data)
Net sales $238,311 $166,270 $765,386 $661,536
Less cost of sales
Cost of goods 124,419 77,128 393,965 323,303
Royalty expense 23,756 16,835 70,634 67,069
Amortization of tools and
molds 1,667 1,337 5,993 4,457
--------- --------- --------- ---------
Cost of sales 149,842 95,300 470,592 394,829
--------- --------- --------- ---------
Gross profit 88,469 70,970 294,794 266,707
Direct selling expenses 30,662 26,031 78,794 78,982
Selling, general and
administrative expenses 29,854 29,859 105,650 89,638
Depreciation and amortization 5,052 2,603 18,038 10,102
--------- --------- --------- ---------
Income from operations 22,901 12,477 92,312 87,985
Other income (expense):
Profit (loss) from video game
joint venture 12,494 7,873 13,226 9,414
Interest income 1,400 1,763 4,930 5,182
Interest expense (1,133) (1,141) (4,533) (4,543)
Other expense - - - (1,401)
--------- --------- --------- ---------
Income before provision for
income taxes 35,662 20,972 105,935 96,637
Provision for income taxes 12,477 11,958 33,560 33,144
--------- --------- --------- ---------
Net income $23,185 $9,014 $72,375 $63,493
========= ========= ========= =========
Earnings per share -- diluted $0.73 $0.30 $2.30 $2.06
Shares used in earnings per
share -- diluted 32,803 32,197 32,714 32,193
CONTACT: JAKKS Pacific, Inc.
Genna Rosenberg, 310-455-6235
or
Integrated Corporate Relations
John Mills, 310-954-1100