JAKKS Pacific Reports First Quarter 2018 Financial Results
First Quarter 2018 Financial Results
Net sales for the first quarter were
Gross margin in the first quarter was 24.7%, down from 31.8% last year
as a result of reserves for anticipated contractual royalty shortfalls
attributed to the recently announced liquidation of
Management Commentary
JAKKS Chairman and CEO
“The investments in C’est Moi™ and Morfboard™ are off to a great start
and sales are growing rapidly week after week. Our Morfboard product
line, for example, has become the No.1 selling scooter at
“As we look ahead to the next few quarters, we will continue to focus on
margin improvement and our long term strategic goals. Our fall lines are
moving forward as planned and we have a strong line-up of new product
introductions that are a balanced mix of owned IP and licensed brands,
including Morfboard Xtensions, Real Workin’ Buddies™ Mr. Banks, Pop A
Zit™, Fancy Nancy,
Cash and Cash Equivalents
The Company’s cash and cash equivalents (including restricted cash)
totaled
2018 Outlook
While the Company anticipates some market disruption in
Convertible Senior Note Retirement
The Company continues to make a high priority the retirement of the
remaining
Expression of Interest from
On
Use of Non-GAAP Financial Information
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 Adjusted EBITDA which is a non-GAAP metric that excludes various items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the 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 financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operating 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 measures. See the attached “Reconciliation of Non-GAAP Financial Information.”
Conference Call Live Webcast
A replay of the call will be available on JAKKS’ website approximately
one hour following completion of the call through
About
©2018
Forward Looking Statements
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, Inc. and Subsidiaries | ||||||||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||||||||
March 31, |
December 31, | |||||||||||||
2018 |
2017 |
|||||||||||||
(In thousands) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ |
46,779 |
$ |
64,977 |
||||||||||
Accounts receivable, net |
93,928 |
142,457 |
||||||||||||
Inventory |
53,997 |
58,432 |
||||||||||||
Prepaid expenses and other |
20,812 |
16,803 |
||||||||||||
Total current assets |
215,516 |
282,669 |
||||||||||||
|
||||||||||||||
Property and equipment |
143,036 |
141,357 |
||||||||||||
Less accumulated depreciation and amortization |
120,080 |
118,130 |
||||||||||||
Property and equipment, net |
22,956 |
23,227 |
||||||||||||
Goodwill |
35,592 |
35,384 |
||||||||||||
Intangibles and other assets, net |
39,827 |
29,069 |
||||||||||||
Total assets | $ |
313,891 |
$ |
370,349 |
||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||||
Current liabilities: |
||||||||||||||
Accounts payable and accrued expenses |
$ |
76,217 |
$ |
92,061 |
||||||||||
Reserve for sales returns and allowances |
15,343 |
17,622 |
||||||||||||
Short term debt |
21,119 |
26,075 |
||||||||||||
Total current liabilities |
112,679 |
135,758 |
||||||||||||
Long term debt, net |
134,716 |
133,497 |
||||||||||||
Other liabilities |
4,426 |
4,537 |
||||||||||||
Income taxes payable |
1,327 |
1,261 |
||||||||||||
Deferred tax liability, net |
781 |
783 |
||||||||||||
Total liabilities |
253,929 |
275,836 |
||||||||||||
Stockholders' equity: |
||||||||||||||
Common stock, $.001 par value |
30 |
27 |
||||||||||||
Additional paid-in capital |
216,398 |
215,809 |
||||||||||||
Treasury stock |
(24,000 |
) |
(24,000 |
) |
||||||||||
Accumulated deficit |
(121,477 |
) |
(85,233 |
) |
||||||||||
Accumulated other comprehensive loss |
(12,009 |
) |
(13,059 |
) |
||||||||||
Total JAKKS Pacific, Inc. stockholders' equity |
58,942 |
93,544 |
||||||||||||
Non-controlling interests |
1,020 |
969 |
||||||||||||
Total stockholders' equity |
59,962 |
94,513 |
||||||||||||
Total liabilities and stockholders' equity |
313,891 |
370,349 |
||||||||||||
JAKKS Pacific, Inc. and Subsidiaries | |||||||||||||
Condensed Statements of Operations (Unaudited) |
|||||||||||||
Three Months Ended March 31, |
|||||||||||||
2018 |
2017 |
||||||||||||
(In thousands, except per share data) |
|||||||||||||
|
|
||||||||||||
Net sales |
$ |
93,004 |
$ |
94,505 |
|||||||||
Less cost of sales |
|
||||||||||||
Cost of goods |
53,258 |
52,317 |
|||||||||||
Royalty expense |
15,291 |
10,365 |
|||||||||||
Amortization of tools and molds |
1,496 |
1,802 |
|||||||||||
Cost of sales |
70,045 |
64,484 |
|||||||||||
Gross profit |
22,959 |
30,021 |
|||||||||||
Direct selling expenses |
12,487 |
10,719 |
|||||||||||
Selling, general and administrative expenses |
44,530 |
32,448 |
|||||||||||
Depreciation and amortization |
1,600 |
2,578 |
|||||||||||
Loss from operations |
(35,658 |
) |
(15,724 |
) |
|||||||||
Other income (expense): |
|||||||||||||
Income from joint ventures |
22 |
- |
|||||||||||
Other income |
50 |
23 |
|||||||||||
Change in fair value of convertible senior notes |
(1,021 |
) |
- |
||||||||||
Interest income |
14 |
4 |
|||||||||||
Interest expense |
(1,936 |
) |
(2,932 |
) |
|||||||||
Loss before benefit from income taxes |
(38,529 |
) |
(18,629 |
) |
|||||||||
Benefit from income taxes |
(2,336 |
) |
(344 |
) |
|||||||||
Net loss |
(36,193 |
) |
(18,285 |
) |
|||||||||
Net income attributable to non-controlling interests |
51 |
31 |
|||||||||||
Net loss attributable to JAKKS Pacific, Inc. |
$ |
(36,244 |
) |
$ |
(18,316 |
) |
|||||||
Loss per share - basic and diluted |
$ |
(1.57 |
) |
$ |
(1.01 |
) |
|||||||
Shares used in loss per share - basic and diluted |
23,100 |
18,104 |
|||||||||||
|
|
|
JAKKS Pacific, Inc. and Subsidiaries |
||||||||||||
Reconciliation of Non-GAAP Financial Information (Unaudited) |
||||||||||||
|
||||||||||||
Reconciliation of GAAP to Non-GAAP measures: |
||||||||||||
This press release and accompanying schedules provide certain information regarding Adjusted EBITDA and Adjusted Net Income (Loss), which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring and non-cash charges, such as reorganization expenses and restricted stock compensation expense. Net income (loss) is similarly adjusted and tax-effected to arrive at Adjusted Net Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) are not recognized financial measures under GAAP, but we believe that they are useful in measuring our operating performance. We believe that the use of the non-GAAP financial measures enhances an overall understanding of the Company's past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis. |
||||||||||||
Investors should not consider these measures in isolation or as a substitute for net income, operating income, or any other measure for determining the Company's operating performance that is calculated in accordance with GAAP. In addition, because these measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. |
||||||||||||
Three Months Ended March 31, |
||||||||||||
2018 |
2017 |
|||||||||||
(In thousands) |
||||||||||||
|
||||||||||||
Net loss |
|
$ |
(36,193 |
) |
$ |
(18,285 |
) |
|||||
Income from joint ventures |
|
(22 |
) |
- |
||||||||
Other income |
|
(50 |
) |
(23 |
) |
|||||||
Interest income |
(14 |
) |
(4 |
) |
||||||||
Interest expense |
1,936 |
2,932 |
||||||||||
Benefit from income taxes |
(2,336 |
) |
(344 |
) |
||||||||
Depreciation and amortization |
3,096 |
4,380 |
||||||||||
Restricted stock compensation expense |
676 |
748 |
||||||||||
Bad debt write-offs |
13,794 |
- |
||||||||||
Change in fair value of convertible senior notes |
1,021 |
- |
||||||||||
Minimum guarantee shortfalls |
3,468 |
- |
||||||||||
Adjusted EBITDA |
$ |
(14,624 |
) |
$ |
(10,596 |
) |
||||||
Three Months Ended March 31, |
||||||||||||
2018 |
2017 |
|||||||||||
(In thousands, except per share data) |
||||||||||||
Net loss attributable to JAKKS Pacific, Inc. |
$ |
(36,244 |
) |
$ |
(18,316 |
) |
||||||
Restricted stock compensation expense |
676 |
748 |
||||||||||
Bad debt write-offs |
13,794 |
- |
||||||||||
Change in fair value of convertible senior notes |
1,021 |
- |
||||||||||
Minimum guarantee shortfalls |
3,468 |
- |
||||||||||
Tax impact of additional changes |
(2,348 |
) |
- |
|||||||||
Adjusted net loss attributable to JAKKS Pacific, Inc. |
(19,633 |
) |
(17,568 |
) |
||||||||
Adjusted loss per share - basic and diluted |
$ |
(0.85 |
) |
$ |
(0.97 |
) |
||||||
Shares used in adjusted loss per share - basic and diluted |
23,100 |
18,104 |
||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180426005591/en/
Source:
JAKKS Pacific
Brent Novak,
(424) 268-9450
Chief Financial Officer
or
Rachel Griffin,
(424) 268-9553
Vice President, Communications
or
Liolios
Investor Relations
Sean McGowan, (949) 574-3860
Managing
Director
JAKK@liolios.com