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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 19, 2004 (October 19, 2004)
JAKKS PACIFIC, INC.
(Exact Name of registrant as specified in its charter)
Delaware 0-28104 95-4527222
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
22619 Pacific Coast Highway 90265
Malibu, California (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (310) 456-7799
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
JAKKS PACIFIC, INC.
INDEX TO FORM 8-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
October 19, 2004
ITEMS IN FORM 8-K
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Page
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Facing Page 1
Item 2.02 Results of Operations and Financial Condition 3
Item 9.01 Financial Statements and Exhibits 3
Signatures 4
Exhibit Index 5
Item 2.02. Results of Operations and Financial Condition.
On October 19, 2004, we issued a press release announcing our results
of operations for the quarter ended September 30, 2004. A copy of such release
is annexed as an exhibit and is incorporated by reference hereto in its
entirety.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
Exhibit
Number Description
- ------- -----------
99.1* October 19, 2004 Press Release
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* Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 19, 2004 JAKKS PACIFIC, INC.
By: /s/ Jack Friedman
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Jack Friedman
Chairman and Chief Executive Officer
Exhibit Index
Exhibit
Number Description
- ------- -----------
99.1* October 19, 2004 Press Release
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* Filed herewith
Exhibit 99.1
JAKKS Pacific Reports Third Quarter 2004 Financial Results
MALIBU, Calif.--(BUSINESS WIRE)--Oct. 19, 2004--
Reported Revenue and Net Income Surge 128.2% and 148.8%
Company Raises 2004 Revenue and Earnings Guidance
JAKKS Pacific, Inc. (NASDAQ:JAKK), a leading multi-brand company that
designs and markets a broad range of consumer products, including toys and
writing instruments, today announced record results for the three- and
nine-month periods ended September 30, 2004.
Third quarter net sales increased 128.2% to $206.1 million in 2004, compared
to $90.3 million in the comparable period last year. Excluding non-cash,
stock-based compensation charges and also a one-time gain in 2003, net income
for the period increased 195.8% to $25.7 million, or $0.95 per diluted share,
compared to $8.7 million, or $0.35 per diluted share, for the third quarter of
last year. Reported net income for the third quarter 2004, including pre-tax
non-cash, stock-based compensation charges of $2.5 million, was $23.8 million,
or $0.88 per diluted share, in 2004, an increase of 148.8% over the $9.6
million, or $0.39 per diluted share, for the same period last year, after a
one-time, pre-tax gain of $0.7 million relating to recoveries on a recall of one
of the Company's products.
The Company's net sales for the nine months ended September 30, 2004,
increased 68.3% to $389.5 million, from $231.4 million during the same period in
2003. Excluding pre-tax, non-cash, stock-based compensation charges and a
one-time net product recall charge, net income for the nine-month period was
$41.3 million, or $1.57 per diluted share, an increase of 106.7% from $20.0
million, or $0.81 per diluted share, in the comparable period last year.
Reported net income for the first nine months of 2004, including pre-tax charges
of $8.5 million for non-cash, stock-based compensation in 2004 and a one-time
net charge of $2.0 million for the voluntary product recall in 2003, was $34.7
million, or $1.32 per diluted share, compared to first nine-month 2003 earnings
of $18.7 million, or $0.76 per diluted share.
"We are extremely pleased with our third quarter results and the dramatic
success of our TV Games line of products," said Jack Friedman, Chairman and
Chief Executive Officer, JAKKS Pacific. "Our strategy to build an extensive
portfolio of innovative non-licensed and licensed products, while simultaneously
improving operating efficiencies, is reflected in the strength of our record
revenue and net income for the third quarter. We continue to expand our category
offerings and believe our marketing programs are fueling sales and product
placement, even in the face of a challenging retail environment. The current
pace of our business is robust as we head into the holiday season, and due to
this continuing strength, we are raising our 2004 guidance. We now anticipate
revenue for 2004 to be approximately $500 million and earnings to be in the
range of $1.85 to $1.90 per diluted share before non-cash stock-based
compensation charges, up from $440 million in sales and earnings in the range of
$1.75 to $1.80 per diluted share.
"We are pleased with the performance of our new products obtained through
the acquisition of Play Along, including our new Cabbage Patch Kids(R) dolls and
Care Bears(R) plush and preschool learning toys."
Stephen Berman, President and Chief Operating Officer, stated, "Our ability
to reinvent and expand our portfolio of brands is most evident in our
traditional toys segment, which includes action figures, wheels, TV Games and
plush dolls. We have maintained our industry-leading position in TV Games, and
expect to continue to capitalize on this growing market in the coming quarters
through innovation and new products based on top current and retro licenses. By
the end of 2004, we will have a total of 12 TV Games(TM) products in the market,
up from four at the end of 2003. We have also begun to expand our distribution
of the games to international markets, including Europe, Australia and New
Zealand. Looking to 2005, JAKKS will be introducing over 20 new exciting
titles."
Mr. Berman continued, "We are very encouraged about the upcoming holiday
season based on early responses from our retail partners. We anticipate that
Care Bears, Cabbage Patch Kids and TV Games will top several `Hot Toy' lists for
the 2004 holiday season, as they have been named to several already. We have
secured prime placement at retailers nationwide for our TV Games line in the
fourth quarter of this year, and expect our plush toys and World Wrestling
Entertainment product lines, as well as other lines, to perform very well."
Mr. Berman concluded, "Our strong performance led to $86.4 million in cash
flow from operations during the first nine months of 2004. We have over $218.5
million of working capital, including cash and equivalents and marketable
securities of $151.9 million. Given the increasing strength of our balance
sheet, we are well positioned to take advantage of acquisition opportunities and
to continue to deliver both sales and earning expansion throughout 2004 and
beyond."
The Company also announced that it is engaged in discussions with WWE
concerning the restructuring of its toy license and with WWE and THQ with
respect to the restructuring of the JAKKS THQ Joint Venture video games license
agreement with WWE. The discussions are an outgrowth of certain litigation that
has been pending between WWE and a former licensing consultant to WWE and a
former employee of WWE, to which the Company is not a party. WWE has raised
questions about the validity of the licenses as a result of certain transactions
between the Company and that licensing consultant that occurred more than six
years ago. The Company has denied any wrongdoing in connection with the
transactions with the licensing consultant and maintains that they were
unrelated to either the toy or video game license. If the discussions are
satisfactorily concluded, the restructuring of the licenses may have an impact
on the Company's future revenues and net income to an extent that is presently
unknown. If the discussions with WWE and THQ are not satisfactorily concluded,
the Company anticipates that litigation is likely to be commenced by WWE
challenging the validity of the licenses and seeking compensatory and punitive
damages, in which event the Company intends to vigorously defend itself against
claims which it believes are without merit.
Anyone interested will be able to listen to the teleconference, scheduled to
begin at 9:00 a.m. EDT (6:00 a.m. PDT) on October 19, 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 11:00 a.m. EDT on October 19
through 12:00 a.m. EDT on November 2. Calling 800-642-1687 or 706-645-9291 for
international callers, password "271443," 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 & 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 Flying Colors(R), Play Along(R), Road Champs(R), Remco(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
September 30, December 31,
2004 2003
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(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $131,796 $118,182
Marketable Securities 20,091 19,345
Accounts receivable, net 129,041 86,119
Inventory, net 49,315 44,400
Prepaid expenses and other current
assets 27,989 16,762
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Total current assets 358,232 284,808
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Property and equipment 44,632 43,473
Less accumulated depreciation and
amortization 32,786 31,751
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Property and equipment, net 11,846 11,722
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Goodwill, net 291,179 206,952
Trademarks & other assets, net 24,347 24,785
Investment in joint venture 4,265 9,097
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Total assets $689,869 $537,364
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $126,712 $50,168
Current portion of long-term debt - 19
Income taxes payable 13,021 2,021
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Total current liabilities 139,733 52,208
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Long-term debt, net of current portion 98,000 98,042
Deferred income taxes 1,164 1,164
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99,164 99,206
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Total liabilities 238,897 151,414
Stockholders' equity:
Common stock, $.001 par value 26 25
Additional paid-in capital 275,624 245,219
Retained earnings 175,774 141,055
Accumulated other comprehensive
income (loss) (452) (349)
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450,972 385,950
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Total liabilities and stockholders'
equity $689,869 $537,364
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JAKKS Pacific, Inc. and Subsidiaries
Third Quarter Earnings Announcement, 2004
Condensed Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
--------- -------- --------- ---------
(In thousands, except per share data)
Net sales $206,083 $90,308 $389,463 $231,358
Less cost of sales
Cost of goods 100,754 42,949 194,120 118,169
Royalty expense 22,661 9,741 38,013 16,951
Amortization of tools and
molds 867 1,392 3,783 4,664
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Cost of sales 124,282 54,082 235,916 139,784
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Gross profit 81,801 36,226 153,547 91,574
Direct selling expenses 19,258 9,895 39,578 27,900
Selling, general and
administrative expenses 30,961 13,879 66,166 35,909
Acquisition shut-down and
recall costs - (700) - 2,000
Depreciation and amortization 784 573 2,037 1,618
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Income from operations 30,798 12,579 45,766 24,147
Other (income) expense:
Profit from Joint Venture (911) (936) (1,274) (1,303)
Interest, net 785 922 1,954 794
Other - - - -
--------- -------- --------- ---------
Income before provision for
income taxes 30,924 12,593 45,086 24,656
Provision for income taxes 7,112 3,023 10,367 5,918
--------- -------- --------- ---------
Net income $23,812 $9,570 $34,719 $18,738
========= ======== ========= =========
Earnings per share - diluted $0.88 $0.39 $1.32 $0.76
Shares used in earnings per
share - diluted 27,019 24,629 26,343 24,716
CONTACT: JAKKS Pacific, Inc.
Genna Goldberg, 310-455-6235
or
Integrated Corporate Relations
John Mills, 310-395-2215