JAKKS Pacific Reports First Quarter 2019 Financial Results
First Quarter 2019 Overview vs. Same Period Last Year
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Net sales for the first quarter were
$70.8 million compared to$93.0 million reported in the comparable period in 2018. Sales in the 2019 first quarter were negatively impacted, as expected, by the Toys “R” Us liquidation in March of 2018 and the success of Incredibles 2 last year, as well as the late Easter in 2019. - Gross margin was 20.2%, compared to 24.7% in the first quarter of 2018.
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Net loss attributable to
JAKKS Pacific was$29.2 million , or$1.24 per diluted share. This compares to a net loss attributable toJAKKS Pacific of$36.2 million , or$1.57 per diluted share, reported in the comparable period in 2018. -
Adjusted EBITDA was negative
$17.1 million , compared to Adjusted EBITDA of negative$14.6 million in the 2018 first quarter. See note below on “Use of Non-GAAP Financial Information.”
Management Commentary
“As expected, our results for the first quarter showed the impact of the
loss of Toys “R” Us as a significant customer, and the impact of a later
Easter holiday,” said
“We are looking forward to stronger sales in the second half of the year, which should benefit from a strong slate of entertainment content, notably Frozen 2, as well as Toy Story 4, the 30th Anniversary of the release of Disney’s The Little Mermaid, and Disney’s Gigantosaurus animated TV series. In addition, we expect strong contributions from products based on some of our own IP, including TP Blaster: Sheet Storm, Slap Ninja, Pinata Fiesta and Power Dozer. Consistent with our strategy, we continue to see our sales through online channels increase as a percent of total sales, which we expect will help us in a shifting retail landscape.”
Cash and Cash Equivalents
The Company’s cash and cash equivalents (including restricted cash)
totaled
2019 Outlook
Our goal for 2019 is to grow sales by approximately 5% on a year-over-year basis with improved levels of Adjusted EBITDA compared to 2018.
Expression of Interest from
As previously announced in the Current Report on Form 8-K dated
In addition to the negotiation of the Meisheng proposal, the Company and
its advisors have also explored other alternative transactions with the
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
©2019
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, | |||||||||
2019 | 2018 | |||||||||
(In thousands) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 42,431 | $ | 53,282 | ||||||
Restricted cash | 4,974 | 4,923 | ||||||||
Accounts receivable, net | 67,793 | 122,278 | ||||||||
Inventory | 44,685 | 53,880 | ||||||||
Prepaid expenses and other assets | 28,030 | 15,780 | ||||||||
Total current assets | 187,913 | 250,143 | ||||||||
Property and equipment | 123,841 | 128,049 | ||||||||
Less accumulated depreciation and amortization | 103,685 | 107,147 | ||||||||
Property and equipment, net | 20,156 | 20,902 | ||||||||
Operating lease right-of-use assets | 35,132 | - | ||||||||
Goodwill | 35,083 | 35,083 | ||||||||
Intangibles and other assets, net | 33,691 | 36,713 | ||||||||
Total assets | $ | 311,975 | $ | 342,841 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable and accrued expenses | $ | 57,897 | $ | 87,488 | ||||||
Reserve for sales returns and allowances | 26,009 | 29,403 | ||||||||
Short term operating lease liabilities | 8,817 | - | ||||||||
Short term debt, net | 20,000 | 27,211 | ||||||||
Total current liabilities | 112,723 | 144,102 | ||||||||
Long term operating lease liabilities | 29,628 | - | ||||||||
Long term debt, net | 142,411 | 139,792 | ||||||||
Other liabilities | 128 | 4,409 | ||||||||
Income taxes payable | 1,461 | 1,458 | ||||||||
Deferred tax liability, net | 1,430 | 1,431 | ||||||||
Total liabilities | 287,781 | 291,192 | ||||||||
Stockholders' equity: | ||||||||||
Common stock, $.001 par value | 30 | 30 | ||||||||
Additional paid-in capital | 218,524 | 218,155 | ||||||||
Treasury stock | (24,000 | ) | (24,000 | ) | ||||||
Accumulated deficit | (156,759 | ) | (127,601 | ) | ||||||
Accumulated other comprehensive loss | (14,544 | ) | (15,847 | ) | ||||||
Total JAKKS Pacific, Inc. stockholders' equity | 23,251 | 50,737 | ||||||||
Non-controlling interests | 943 | 912 | ||||||||
Total stockholders' equity | 24,194 | 51,649 | ||||||||
Total liabilities and stockholders' equity | $ | 311,975 | $ | 342,841 | ||||||
JAKKS Pacific, Inc. and Subsidiaries | ||||||||||
Condensed Consolidated Statements of Operations (Unaudited) | ||||||||||
Three Months Ended March 31, | ||||||||||
2019 |
2018 |
|||||||||
(In thousands, except per share data) | ||||||||||
Net sales | $ | 70,826 | $ | 93,004 | ||||||
Less cost of sales | ||||||||||
Cost of goods | 45,108 | 53,258 | ||||||||
Royalty expense | 9,841 | 15,291 | ||||||||
Amortization of tools and molds | 1,537 | 1,496 | ||||||||
Cost of sales | 56,486 | 70,045 | ||||||||
Gross profit | 14,340 | 22,959 | ||||||||
Direct selling expenses | 8,228 | 12,487 | ||||||||
Selling, general and administrative expenses | 25,341 | 44,530 | ||||||||
Depreciation and amortization | 1,697 | 1,600 | ||||||||
Restructuring charge | 248 | - | ||||||||
Acquisition related and other | 2,867 | - | ||||||||
Loss from operations | (24,041 | ) | (35,658 | ) | ||||||
Other income (expense): | ||||||||||
Income from joint ventures | - | 22 | ||||||||
Other income (expense), net | 83 | 50 | ||||||||
Change in fair value of convertible senior notes | (2,423 | ) | (1,021 | ) | ||||||
Interest income | 27 | 14 | ||||||||
Interest expense | (3,018 | ) | (1,936 | ) | ||||||
Loss before benefit from income taxes | (29,372 | ) | (38,529 | ) | ||||||
Benefit from income taxes | (245 | ) | (2,336 | ) | ||||||
Net loss | (29,127 | ) | (36,193 | ) | ||||||
Net income attributable to non-controlling interests | 31 | 51 | ||||||||
Net loss attributable to JAKKS Pacific, Inc. | $ | (29,158 | ) | $ | (36,244 | ) | ||||
Loss per share - basic and diluted | $ | (1.24 | ) | $ | (1.57 | ) | ||||
Shares used in loss per share - basic and diluted | 23,557 | 23,100 | ||||||||
Income (loss) per share - diluted | $ | (1.24 | ) | $ | (1.57 | ) | ||||
Shares used in income (loss) per share - diluted | 23,557 | 23,100 | ||||||||
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
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, | |||||||||
2019 |
2018 |
||||||||
(In thousands) | |||||||||
Net loss | $ | (29,127 | ) | $ | (36,193 | ) | |||
Income from joint ventures | - | (22 | ) | ||||||
Other income (expense), net | (83 | ) | (50 | ) | |||||
Interest income | (27 | ) | (14 | ) | |||||
Interest expense | 3,018 | 1,936 | |||||||
Benefit from income taxes | (245 | ) | (2,336 | ) | |||||
Depreciation and amortization | 3,234 | 3,096 | |||||||
Acquisition related and other | 2,867 | - | |||||||
Restricted stock compensation expense | 618 | 674 | |||||||
Bad debt write-offs | - | 13,794 | |||||||
Change in fair value of convertible senior notes | 2,423 | 1,021 | |||||||
Restructuring charge | 248 | - | |||||||
Minimum guarantee shortfalls | - | 3,468 | |||||||
Adjusted EBITDA | $ | (17,074 | ) | $ | (14,626 | ) | |||
Three Months Ended March 31, | |||||||||
2019 |
2018 |
||||||||
(In thousands, except per share data) | |||||||||
Net loss attributable to JAKKS Pacific, Inc. | $ | (29,158 | ) | $ | (36,244 | ) | |||
Restricted stock compensation expense | 618 | 674 | |||||||
Bad debt write-offs | - | 13,794 | |||||||
Acquisition related and other | 2,867 | - | |||||||
Change in fair value of convertible senior notes | 2,423 | 1,021 | |||||||
Restructuring charge | 248 | - | |||||||
Minimum guarantee shortfalls | - | 3,468 | |||||||
Tax impact of additional charges | (15 | ) | (2,348 | ) | |||||
Adjusted net loss attributable to JAKKS Pacific, Inc. | $ | (23,017 | ) | $ | (19,635 | ) | |||
Adjusted loss per share - basic and diluted | $ | (0.98 | ) | $ | (0.85 | ) | |||
Shares used in adjusted loss per share- basic and diluted | 23,557 | 23,100 | |||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190509005844/en/
Source:
JAKKS Pacific
Brent Novak,
(424) 268-9450
Chief Financial Officer
Rachel Griffin, (424) 268-9553
Vice President, Communications
Liolios Investor Relations
Sean
McGowan, (949) 574-3860
Managing Director
JAKK@liolios.com