View Filing Data

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2011	Jul. 29, 2011
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Trading Symbol	JAKK
Entity Registrant Name	JAKKS PACIFIC INC
Entity Central Index Key	0001009829
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		27,198,671

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands

Jun. 30, 2011

Dec. 31, 2010

Current assets

Cash and cash equivalents

$ 246,846

$ 278,346

^[1]

Marketable securities

210

207

^[1]

Accounts receivable, net of allowance for uncollectible accounts of $2,778 and $3,314, respectively

109,327

122,476

^[1]

Inventory

55,257

43,230

^[1]

Income tax receivable

18,871

19,052

^[1]

Deferred income taxes

23,882

23,576

^[1]

Prepaid expenses and other

34,109

25,275

^[1]

Total current assets

488,502

512,162

^[1]

Property and equipment

Office furniture and equipment

12,306

12,127

^[1]

Molds and tooling

60,373

57,103

^[1]

Leasehold improvements

6,483

6,920

^[1]

Total

79,162

76,150

^[1]

Less accumulated depreciation and amortization

58,506

59,204

^[1]

Property and equipment, net

20,656

16,946

^[1]

Deferred income taxes

58,856

58,848

^[1]

Intangibles

20,231

23,437

^[1]

Other long term assets

15,505

12,643

^[1]

Investment in joint venture

1,846

^[1]

Goodwill, net

6,988

^[1]

Trademarks, net

2,308

^[1]

Total assets

614,892

633,406

^[1]

Current liabilities

Accounts payable

51,537

35,886

^[1]

Accrued expenses

37,853

54,476

^[1]

Reserve for sales returns and allowances

16,888

28,378

^[1]

Capital lease obligations

^[1]

Income taxes payable

9,382

6,143

^[1]

Total current liabilities

115,660

124,910

^[1]

Convertible senior notes, net

90,823

89,458

^[1]

Other liabilities

1,579

1,625

^[1]

Income taxes payable

4,497

5,005

^[1]

Total liabilities

212,559

220,998

^[1]

Commitments and Contingencies

^[1]

Stockholders' equity

Preferred shares, $.001 par value; 5,000,000 shares authorized; nil outstanding

^[1]

Common stock, $.001 par value; 100,000,000 shares authorized; 27,610,952 and 27,198,671 shares issued respectively; 27,319,624 and 27,198,671shares outstanding, respectively

^[1]

Additional paid-in capital

293,082

302,425

^[1]

Treasury Stock at cost; 291,328 and nil shares, respectively

^[1]

(5,641)

Retained earnings

113,549

119,884

^[1]

Accumulated other comprehensive loss

(4,325)

(4,288)

^[1]

Total stockholders' equity

402,333

412,408

^[1]

Total liabilities and stockholders' equity

$ 614,892

$ 633,406

^[1]

[1]	Derived from audited financial statements

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands

Jun. 30, 2011

Dec. 31, 2010

^[1]

Accounts receivable, allowance for uncollectible accounts

$ 3,314

$ 2,778

Preferred shares, par value

$ 0.001

Preferred shares, shares authorized

5,000,000

Preferred shares, outstanding

Common stock, par value

$ 0.001

Common stock, shares authorized

100,000,000

Common stock, shares issued

27,198,671

27,610,952

Common stock, shares outstanding

27,198,671

27,319,624

Treasury Stock, shares

291,328

[1]	Derived from audited financial statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net sales	$ 131,930	$ 123,255	$ 204,253	$ 200,600
Cost of sales	86,838	80,026	134,890	132,138
Gross profit	45,092	43,229	69,363	68,462
Selling, general and administrative expenses	43,094	41,955	82,155	80,816
Income (Loss) from operations	1,998	1,274	(12,792)	(12,354)
Profit from video game joint venture	6,000	6,000	6,000	6,000
Equity in net income (loss) of joint venture	(8)		1
Interest income	122	95	227	152
Interest expense, net of benefit	(2,025)	(3,007)	(4,065)	(4,204)
Income (Loss) before provision (benefit) for income taxes	6,087	4,362	(10,629)	(10,406)
Provision (Benefit) for income taxes	1,847	1,387	(4,294)	(8,224)
Net income (loss)	$ 4,240	$ 2,975	$ (6,335)	$ (2,182)
Income (Loss) per share - basic	$ 0.16	$ 0.11	$ (0.23)	$ (0.08)
Income (Loss) per share - diluted	$ 0.16	$ 0.11	$ (0.23)	$ (0.08)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands

6 Months Ended

Jun. 30, 2011

Jun. 30, 2010

CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss

$ (6,335)

$ (2,182)

Adjustments to reconcile net loss to net cash provided (used) by operating activities:

Depreciation and amortization

9,819

10,792

Share-based compensation expense

1,118

2,090

Loss (gain) on disposal of property and equipment

(35)

Deferred income taxes

(314)

(6,130)

Writedown of deferred offering cost

495

Changes in operating assets and liabilities:

Accounts receivable

13,149

27,074

Inventory

(12,027)

(12,927)

Prepaid expenses and other current assets

(12,177)

(1,648)

Investment in joint venture

(1,772)

6,727

Income tax receivable

181

12,443

Accounts payable

19,193

16,271

Accrued expenses

(16,623)

(16,322)

Income taxes payable

2,731

502

Reserve for sales returns and allowances

(11,490)

(13,511)

Other liabilities

(46)

375

Total adjustments

(8,241)

26,196

Net cash provided (used) by operating activities

(14,576)

24,014

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

(8,633)

(6,570)

Change in other assets

(1,348)

Proceeds from sale of property and equipment

Cash paid for net assets of business acquired

(3,542)

(1,875)

Net purchase of marketable securities

(3)

(2)

Net cash used in investing activities

(12,076)

(9,728)

CASH FLOWS FROM FINANCING ACTIVITIES

Retirement of convertible notes

(20,257)

Proceeds from stock options exercised

134

Proceeds from warrants exercised

1,135

Common stock surrendered

(1,041)

Common stock repurchased

(5,049)

Decrease in capital lease obligations

(27)

(114)

Net cash used in financing activities

(4,848)

(20,371)

Net decrease in cash and cash equivalents

(31,500)

(6,085)

Cash and cash equivalents, beginning of period

278,346

^[1]

254,837

Cash and cash equivalents, end of period

246,846

248,752

Cash paid (received) during the period for:

Income taxes

(6,784)

678

Interest

$ 2,250

$ 2,630

[1]	Derived from audited financial statements

Non cash investing and financing activity

6 Months Ended

Jun. 30, 2011

Non cash investing and financing activity

Non cash investing and financing activity:

In January and February 2011, an executive officer surrendered an aggregate of 57,096 shares of restricted stock at a value of $1.0 million to cover his income taxes due on the 2011 vesting of restricted shares granted to him in 2010 and 2011. This restricted stock was subsequently retired by the Company.

See Notes 8 and 9 for additional supplemental information to the condensed consolidated statements of cash flows.

See notes to condensed consolidated financial statements.

Basis of Presentation

6 Months Ended

Jun. 30, 2011

Basis of Presentation

Note 1 — Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to prevent the information presented from being misleading. These financial statements should be read in conjunction with Management’s Discussion and Analysis of financial condition and results of operations and the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K, which contains audited financial information for the three years in the period ended December 31, 2010.

The information provided in this report reflects all adjustments (consisting solely of normal recurring items) that are, in the opinion of management, necessary to present fairly the financial position and the results of operations for the periods presented. Interim results are not necessarily indicative of results to be expected for a full year.

Certain reclassifications have been made to prior year balances in order to conform to the current year presentation.

The condensed consolidated financial statements include the accounts of JAKKS Pacific, Inc. and its wholly-owned subsidiaries (collectively “the Company”).

- Definition

The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 2-6
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Name Statement of Position (SOP)
-Publisher AICPA
-Number 94-6
-Paragraph 10
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Number 46R
-Paragraph 4, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details

Business Segments, Geographic Data, Sales by Product Group, and Major Customers

6 Months Ended

Jun. 30, 2011

Business Segments, Geographic Data, Sales by Product Group, and Major Customers

Note 2 — Business Segments, Geographic Data, Sales by Product Group, and Major Customers

The Company is a worldwide producer and marketer of children’s toys and other consumer products, principally engaged in the design, development, production, marketing and distribution of its diverse portfolio. In the fourth quarter of 2010, the Company re-aligned its products into two new categories to better reflect the operation of the business. The Company’s reportable segments are Traditional Toys and Electronics, and Role Play, Novelty and Seasonal Toys, each of which includes worldwide sales.

The Traditional Toys and Electronics segment includes action figures, vehicles, playsets, plush products, dolls, accessories, electronic products, construction toys, infant and pre-school toys, pet products and related products.

Role Play, Novelty and Seasonal Toys includes role play and dress-up products, Halloween and everyday costume play, novelty toys, seasonal and outdoor products, and indoor and outdoor kid’s furniture.

Segment performance is measured at the operating income level. All sales are made to external customers, and general corporate expenses have been attributed to the various segments based on sales volumes. Segment assets are comprised of accounts receivable and inventories, net of applicable reserves and allowances, goodwill and other assets.

Results are not necessarily those that would be achieved were each segment an unaffiliated business enterprise. Information by segment and a reconciliation to reported amounts as of December 31, 2010 and June 30, 2011 and for the three and six months ended June 30, 2010 and 2011 are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2011		2010		2011

Net Sales
Traditional Toys and Electronics	$	63,512	$	67,733	$	102,162		$	105,897
Role Play, Novelty and Seasonal Toys		59,743		64,197		98,438			98,356
	$	123,255	$	131,930	$	200,600		$	204,253

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2011		2010			2011

Operating Income (Loss)
Traditional Toys and Electronics	$	504	$	1,231	$	(7,235	)	$	(7,125	)
Role Play, Novelty and Seasonal Toys		770		767		(5,119	)		(5,667	)
	$	1,274	$	1,998	$	(12,354	)	$	(12,792	)

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2011		2010		2011

Depreciation and Amortization Expense
Traditional Toys and Electronics	$	4,322	$	3,932	$	7,354	$	6,904
Role Play, Novelty and Seasonal Toys		1,884		2,003		3,438		2,915
	$	6,206	$	5,935	$	10,792	$	9,819

	December 31,		June 30,
	2010		2011
Assets
Traditional Toys and Electronics	$	252,107	$	255,821
Role Play, Novelty and Seasonal Toys		381,299		359,071
	$	633,406	$	614,892

The following tables present information about the Company by geographic area as of December 31, 2010 and June 30, 2011 and for the three and six months ended June 30, 2010 and 2011 (in thousands):

	December 31, 2010		June 30, 2011
Long-lived Assets
United States	$	16,023	$	19,767
Hong Kong		923		889
	$	16,946	$	20,656

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2011		2010		2011
Net Sales by Geographic Area
United States	$	104,445	$	109,766	$	168,920	$	167,233
Europe		6,895		8,551		12,053		14,812
Canada		4,062		3,240		7,189		6,847
Hong Kong		1,569		631		3,012		1,472
Other		6,284		9,742		9,426		13,889
	$	123,255	$	131,930	$	200,600	$	204,253

Major Customers

Net sales to major customers for the three and six months ended June 30, 2010 and 2011 were as follows (in thousands, except for percentages):

	Three Months Ended June 30,											Six Months Ended June 30,
	2010					2011						2010					2011
	Amount		Percentage of Net Sales			Amount		Percentage of Net Sales				Amount		Percentage of Net Sales			Amount		Percentage of Net Sales

Wal-Mart	$	25,840		21.0	%	$	20,154		15.3	%	$		45,238		22.5	%	$	39,630		19.4	%
Toys ‘R’ Us		11,192		9.1			11,669		8.8				21,018		10.5			21,046		10.3
Target		23,881		19.3			28,203		21.4				36,281		18.1			38,132		18.7
	$	60,913		49.4	%	$	60,026		45.5	%	$		102,537		51.1	%	$	98,808		48.4	%

No other customer accounted for more than 10% of the Company’s total net sales.

At December 31, 2010 and June 30, 2011, the Company’s three largest customers accounted for approximately 52.5% and 47.3%, respectively, of net accounts receivable. The concentration of the Company’s business with a relatively small number of customers may expose the Company to material adverse effects if one or more of its large customers were to experience financial difficulty. The Company performs ongoing credit evaluations of its top customers and maintains an allowance for potential credit losses.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 131
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Inventory

6 Months Ended

Jun. 30, 2011

Inventory

Note 3 — Inventory

Inventory, which includes the ex-factory cost of goods, in-bound freight, duty and warehouse costs, is stated at the lower of cost (first-in, first-out) or market and consists of the following (in thousands):

	December 31, 2010		June 30, 2011

Raw materials	$	3,340	$	8,369
Finished goods		39,890		46,888
	$	43,230	$	55,257

Revenue Recognition and Reserve for Sales Returns and Allowances

6 Months Ended

Jun. 30, 2011

Revenue Recognition and Reserve for Sales Returns and Allowances

Note 4 — Revenue Recognition and Reserve for Sales Returns and Allowances

Revenue is recognized upon the shipment of goods to customers or their agents, depending on terms, provided that there are no uncertainties regarding customer acceptance, the sales price is fixed or determinable, and collectability is reasonably assured and not contingent upon resale.

Generally, the Company does not allow product returns. It provides a negotiated allowance for breakage or defects to its customers, which is recorded when the related revenue is recognized. However, the Company does make occasional exceptions to this policy and consequently accrues a return allowance in gross sales based on historic return amounts and management estimates. The Company also will occasionally grant credits to facilitate markdowns and sales of slow moving merchandise. These credits are recorded as a reduction of gross sales at the time of occurrence.

The Company also participates in cooperative advertising arrangements with some customers, whereby it allows a discount from invoiced product amounts in exchange for customer purchased advertising that features the Company’s products. Typically, these discounts range from 1% to 6% of gross sales, and are generally based on product purchases or on specific advertising campaigns. Such amounts are accrued when the related revenue is recognized or when the advertising campaign is initiated. These cooperative advertising arrangements are accounted for as direct selling expenses.

The Company’s reserve for sales returns and allowances amounted to $28.4 million as of December 31, 2010, compared to $16.9 million as of June 30, 2011. This decrease was primarily due to certain customers taking their year-end allowances related to 2010 during 2011.

Convertible Senior Notes

6 Months Ended

Jun. 30, 2011

Convertible Senior Notes

Note 5 — Convertible Senior Notes

In November 2009, the Company sold an aggregate of $100.0 million principal amount of 4.50% Convertible Senior Notes due 2014 (the “Notes”). The Notes, which are senior unsecured obligations of the Company, pay cash interest semi-annually at a rate of 4.50% per annum and will mature on November 1, 2014. The conversion rate is 63.2091 shares of JAKKS common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $15.82 per share of common stock), subject to adjustment in certain circumstances. Prior to August 1, 2014, holders of the Notes may convert their Notes only upon specified events. Upon conversion, the Notes may be settled, at the Company’s election, in cash, shares of its common stock, or a combination of cash and shares of its common stock. Holders of the Notes may require the Company to repurchase for cash all or some of their Notes upon the occurrence of a fundamental change (as defined).

In accordance with ASC 470-20, “Debt with Conversion and Other Options,” the Company allocated $13.7 million of the $100.0 million principal amount of the Notes to the equity component, which represents a discount to the debt and is being amortized to interest expense through November 1, 2014. Interest expense associated with the amortization of the equity component was $0.7 million and $0.7 million in the three months ended June 30, 2010 and 2011, respectively, and $1.4 million and $1.4 million for the six months ended June 30, 2010 and 2011, respectively.

Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Note 6 — Income Taxes

The Company's income tax expense of $1.8 million for the three months ended June 30, 2011 reflects an effective tax rate of 30.3%. The Company's income tax expense for the three months ended June 30, 2010 was $1.4 million and reflects an effective tax rate of 32.2%.

The Company’s income tax benefit of $4.3 million for the six months ended June 30, 2011 reflects an effective tax benefit rate of 40.4%. Included in the tax benefit of $4.3 million is a tax benefit of $1.5 million related to a reduction in tax reserves resulting from closed statutes and an adjustment to record various outstanding state tax refunds. The Company’s income tax benefit for the six months ended June 30, 2010 was $8.2 million and reflects an effective tax benefit of 79.0%, including a discrete benefit of $4.9 million. Absent this discrete tax benefit, the Company’s effective tax rate for the six months ended June 30, 2010 was 31.7%.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 740
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-Section 50
-Paragraph 15
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

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-Publisher FASB
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-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

+ Details

Earnings/(Loss) Per Share

6 Months Ended

Jun. 30, 2011

Earnings/(Loss) Per Share

Note 7 — Earnings/(Loss) Per Share

The following table is a reconciliation of the weighted average shares used in the computation of earnings and loss per share for the periods presented (in thousands, except per share data):

	Three Months Ended June 30,
	2010					2011
	Income		Weighted Average Shares	Per-Share		Income		Weighted Average Shares	Per-Share

Earnings per share – basic
Income available to common stockholders	$	2,975	27,382	$	0.11	$	4,240	26,947	$	0.16
Effect of dilutive securities:

Options and warrants		-	28				-	20
Unvested restricted stock grants		-	262				-	129
Earnings per share – diluted
Income available to common stockholders plus assumed exercises and conversion	$	2,975	27,672	$	0.11	$	4,240	27,096	$	0.16

	Six Months Ended June 30,
	2010						2011
	Income/(Loss)		Weighted Average Shares	Per-Share			Income/(Loss)			Weighted Average Shares	Per-Share

Loss per share - basic
Income available to common stockholders	$	(2,182)	27,388	$	(0.08	)	$	(6,335	)	27,095	$	(0.23	)
										-

Basic loss per share has been computed using the weighted average number of common shares outstanding. Diluted loss per share has been computed using the weighted average number of common shares and common share equivalents outstanding (which consist of warrants, options and convertible debt to the extent they are dilutive). For the three and six months ended June 30, 2011, the convertible notes interest and related common share equivalent of 6,320,910, diluted options and unvested restricted stock grants outstanding of 259,572 and 243,389 respectively were excluded from the diluted loss per share calculation because they were anti-dilutive. Potentially dilutive stock options of 319,852 and 20,118 for the three months ended June 30, 2010 and 2011, respectively, were excluded from the computation of diluted loss per share as the average market price of the Company’s common stock did not exceed the weighted average exercise price of such options and to have included them would have been anti-dilutive. Potentially dilutive stock options of 342,145 and 33,107 for the six months ended June 30, 2010 and 2011, respectively, were excluded from the computation of diluted loss per share as the average market price of the Company’s common stock did not exceed the weighted average exercise price of such options and to have included them would have been anti-dilutive. Potentially dilutive unvested restricted stock of nil and 128,745 for the three months ended June 30, 2010 and 2011, respectively, and 207,253 and 105,564 for the six months ended June 30, 2010 and 2011, respectively, were excluded from the computation of diluted loss per share as to have included them would have been anti-dilutive.

Common Stock and Preferred Stock

6 Months Ended

Jun. 30, 2011

Common Stock and Preferred Stock

Note 8 — Common Stock and Preferred Stock

The Company has 105,000,000 authorized shares of stock consisting of 100,000,000 shares of $.001 par value common stock and 5,000,000 shares of $.001 par value preferred stock.

In January 2011, the Company issued 27,442 shares of restricted stock at a value of $0.5 million to an executive officer, which vest, subject to certain company financial performance criteria, over a six year period beginning in February 2012. In addition, an aggregate of 26,480 shares of restricted stock was issued to its five non-employee directors, which vest in January 2012, at an aggregate value of approximately $0.5 million. In February 2011, the Company issued an aggregate of 65,363 shares of restricted stock at a value of $1.2 million to certain employees including an executive officer, which vest over a three-year period beginning in December 2011. In addition, the company issued 18,238 shares of restricted stock at a value of $0.3 million to an executive officer, which vest, subject to certain company financial performance criteria, over a six year period beginning in February 2011. In March 2011, the Company cancelled an aggregate of 5,000 shares of restricted stock due to the termination of an employee and the refusal of a grant by a current employee. During the first quarter of 2011, an executive officer surrendered an aggregate of 57,096 shares of restricted stock at a value of $1.0 million to cover income taxes on the 2011 vesting of his restricted shares.

In April 2011, the Company issued 5,500 shares of common stock on the exercise of options at a value of $73,480. Also, in April 2011, the Company cancelled an aggregate of 19,362 shares of restricted stock due to the termination of two employees. In May 2011, the Company issued 4,500 shares of common stock on the exercise of options at a value of $60,120. In June 2011, the Company cancelled 13,013 shares of restricted stock due to the termination of an employee.

In October 2010, the Company’s Board of Directors authorized it to repurchase up to $30.0 million of its common stock. As of December 31, 2010, 291,328 shares at a value of $5.6 million were repurchased and held in Treasury, and during the first quarter of 2011, an additional 274,005 shares at a value of $5.1 million were repurchased. All such shares totaling 565,333 shares represented approximately 2.0% of the Company’s outstanding shares of common stock at the time of repurchase, and were retired by the Company during the first quarter of 2011. As of June 30, 2011, $19.3 million remained authorized and available for common stock repurchases. There is no expiration date for the authorized repurchases.

All issuances of common stock, including those issued pursuant to stock option and warrant exercises, restricted stock grants and acquisitions, are issued from the Company’s authorized but not issued and outstanding shares.

Business Combinations

6 Months Ended

Jun. 30, 2011

Business Combinations

Note 9 — Business Combinations

The Company acquired the following entities to further enhance its existing product lines and to continue diversification into other toy categories and seasonal businesses:

In October 2008, the Company acquired substantially all of the assets of Tollytots Limited. The total initial consideration of $26.8 million consisted of $12.0 million in cash and the assumption of liabilities in the amount of $14.8 million, and resulted in goodwill of $4.1 million, of which $3.1 million has been determined to be impaired and was written off in the quarter ended June 30, 2009. In addition, the Company agreed to pay an earn-out of up to an aggregate amount of $5.0 million in cash over the three calendar years following the acquisition based on the achievement of certain financial performance criteria, which will be recorded as goodwill when and if earned. In the first two earn-out periods ended December 31, 2009 and 2010, nil and $1.7 million, respectively, of the earn-out was earned. Tollytots is a leading designer and producer of licensed baby dolls and baby doll pretend play accessories based on well-known brands, and was included in our results of operations from the date of acquisition.

In October 2008, the Company acquired all of the stock of Kids Only, Inc. and a related Hong Kong company, Kids Only Limited (collectively, “Kids Only”). The total initial consideration of $23.8 million consisted of $20.4 million in cash and the assumption of liabilities in the amount of $3.4 million, and resulted in goodwill of $13.2 million, of which $12.7 million has been determined to be impaired and was written off in the quarter ended June 30, 2009. In addition, the Company agreed to pay an earn-out of up to an aggregate amount of $5.6 million in cash over the three calendar years following the acquisition based on the achievement of certain financial performance criteria, which will be recorded as goodwill when and if earned. In the first two earn-out periods ended September 30, 2009 and 2010 the full earn-out amounts of $1.9 million each were earned. Kids Only is a leading designer and producer of licensed indoor and outdoor kids’ furniture, and has an extensive portfolio which also includes baby dolls and accessories, room decor and a myriad of other children’s toy products, and was included in its results of operations from the date of acquisition.

During the first quarter of, 2011, an aggregate of $3.6 million of earn-out was paid in connection with the Tollytots and Kids Only acquisitions.

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 88-16
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141
-Paragraph 51, 52
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Appendix F
-Paragraph F4
-Subparagraph e

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Paragraph 67-73
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6911361&loc=d3e6927-128479

Reference 6: http://www.xbrl.org/2003/role/presentationRef
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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Reference 14: http://www.xbrl.org/2003/role/presentationRef
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Reference 19: http://www.xbrl.org/2003/role/presentationRef
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-URI http://asc.fasb.org/extlink&oid=6972119&loc=d3e1383-128463

+ Details

Joint Ventures

6 Months Ended

Jun. 30, 2011

Joint Ventures

Note 10 — Joint Ventures

The Company owned a fifty percent interest in a joint venture with THQ Inc. (“THQ”), which developed, published and distributed interactive entertainment software for the leading hardware game platforms in the home video game market. Pursuant to a Settlement Agreement and Mutual Release dated December 22, 2009, the joint venture was terminated on December 31, 2009 and THQ is obligated to pay the Company fixed payments in the aggregate amount of $20.0 million payable $6.0 million on each of June 30, 2010 (payment received in June 2010) and 2011 (payment received in June 2011) and $4.0 million on each of June 30, 2012 and 2013 which the Company will record as income on a cash basis when received.

The Company owns a fifty percent interest in a joint venture with the U.S. entertainment subsidiary of a leading Japanese advertising and animation production company. The joint venture was created to develop and produce a boys animated television show which it intends to license worldwide for television broadcast as well as consumer products. The joint venture has already licensed the right to the Company to develop and market toys based on the television program and certain other merchandising rights to third-parties. The Company is responsible for fifty percent of the operating expenses of the joint venture and for twenty-five percent of the production costs of the television show. The joint venture has approved the production of 52 episodes of the show for which the Company is responsible for an aggregate of $3.4 million. Production has commenced on the first 26 episodes for which the Company has paid an aggregate amount of approximately $1.7 million in 2011. The Company’s investment is being accounted for using the equity method. For the three and six months ended June 30, 2011, the Company recognized a loss of $8,035 and income of $919, respectively, from the joint venture. Operations of the joint venture commenced in the fourth quarter of 2010. Accordingly, there was no activity in the three and six months ended June 30, 2010.

As of December 31, 2010 and June, 2011, the balance of the investment in the joint venture includes the following components (in thousands):

	December 31,			June 30,
	2010			2011
Capital Contributions	$	130		$	1,901
Equity in cumulative net income/(loss)		(56	)		(55)
Investment in joint venture, net	$	74		$	1,846

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

+ References + Details

Goodwill

6 Months Ended

Jun. 30, 2011

Goodwill

Note 11 — Goodwill

The changes in the carrying amount of goodwill for the six months ended June 30, 2011 are as follows (in thousands):

	Traditional Toys and Electronics		Role Play, Novelty and Seasonal Toys		Total
Balance at beginning of the period	$	2,445	$	4,543	$	6,988
Adjustments to goodwill during the period		—		—		—
Balance, June 30, 2011	$	2,445	$	4,543	$	6,988

The Company applies a fair value-based impairment test to the net book value of goodwill and indefinite-lived intangible assets on an annual basis and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. The analysis of potential impairment of goodwill requires a two-step process. The first step is the estimation of fair value. If step one indicates that an impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Goodwill impairment exists when the estimated fair value of goodwill is less than its carrying value.

Intangible Assets Other Than Goodwill

6 Months Ended

Jun. 30, 2011

Intangible Assets Other Than Goodwill

Note 12 — Intangible Assets Other Than Goodwill

Intangible assets consist primarily of licenses, product lines, customer relationships, and trademarks. Amortized intangible assets are included in Intangibles, in the accompanying balance sheets. Trademarks are disclosed separately in the accompanying balance sheets. Debt offering costs from the issuance of the Company’s convertible senior notes are included in the accompanying balance sheets. Intangible assets and debt issuance costs are as follows (in thousands, except for weighted useful lives):

			December 31, 2010							June 30, 2011
	Weighted Useful Lives		Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
	(Years)

Amortized Intangible Assets:
Acquired order backlog		.50	$	2,393	$	(2,393	)	$	—	$	2,393	$	(2,393)	$	—
Licenses		4.84		85,788		(65,435	)		20,353		85,788		(68,234)		17,554
Product lines		3.62		19,100		(18,592	)		508		19,100		(18,637)		463
Customer relationships		5.32		6,296		(3,902	)		2,394		6,296		(4,199)		2,097
Non-compete/Employment contracts		3.84		3,133		(2,951	)		182		3,133		(3,016)		117
Total amortized intangible assets				116,710		(93,273	)		23,437		116,710		(96,479)		20,231
Deferred Costs:
Debt issuance costs		5.00		3,678		(856	)		2,822		3,678		(1,224)		2,454
Unamortized Intangible Assets:
Trademarks	indefinite			2,308		—			2,308		2,308				2,308
			$	122,696	$	(94,129	)	$	28,567	$	122,696	$	(97,703)	$	24,993

Amortization expense related to limited life intangible assets and debt offering costs was $2.5 million and $2.4 million for the three months ended June 30, 2010 and 2011, respectively, and $4.0 million and $3.6 million for the six months ended June 30, 2010 and 2011, respectively.

Comprehensive Income /(Loss)

6 Months Ended

Jun. 30, 2011

Comprehensive Income /(Loss)

Note 13 — Comprehensive Income /(Loss)

The table below presents the components of the Company’s comprehensive loss for the three and six months ended June 30, 2010 and 2011 (in thousands):

	Three Months Ended June 30,					Six months Ended June 30,
		2010			2011		2010			2011
Net Income/Loss	$	2,975		$	4,240	$	(2,182	)	$	(6,335	)
Other comprehensive income (loss):
Foreign currency translation adjustment		(32	)		19		(32	)		(37	)
Comprehensive income/( loss)	$	2,943		$	4,259	$	(2,214	)	$	(6,372	)

- Definition

The entire disclosure for comprehensive income. Includes, but is not limited to, the following: 1) the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, 2) the reclassification adjustments for each classification of other comprehensive income and 3) the ending accumulated balances for each component of comprehensive income. Components of comprehensive income include: (1) foreign currency translation adjustments; (2) gains (losses) on foreign currency transactions that are designated as, and are effective as, economic hedges of a net investment in a foreign entity; (3) gains (losses) on intercompany foreign currency transactions that are of a long-term-investment nature, when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting enterprise's financial statements; (4) change in the market value of a futures contract that qualifies as a hedge of an asset reported at fair value; (5) unrealized holding gains (losses) on available-for-sale securities and that resulting from transfers of debt securities from the held-to-maturity category to the available-for-sale category; (6) a net loss recognized as an additional pension liability not yet recognized as net periodic pension cost; and (7) the net gain (loss) and net prior service cost or credit for pension plans and other postretirement benefit plans.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 130
-Paragraph 14-26
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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+ Details

Litigation	6 Months Ended
Litigation	Jun. 30, 2011
Litigation	Note 14— Litigation The Company is a party to, and certain of its property is the subject of, various pending claims and legal proceedings that routinely arise in the ordinary course of its business. The Company does not believe that any of these claims or proceedings will have a material effect on its business, financial condition or results of operations.

Share-Based Payments

6 Months Ended

Jun. 30, 2011

Share-Based Payments

Note 15 — Share-Based Payments

The Company’s 2002 Stock Award and Incentive Plan (the “Plan”) provides for the awarding of stock options and restricted stock to employees, officers and non-employee directors. The Plan is more fully described in Notes 14 and 16 to the Consolidated Financial Statements in the Company’s 2010 Annual Report on Form 10-K.

The following table summarizes the total share-based compensation expense and related tax benefits recognized for the three and six months ended June 30, 2010 and 2011 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
		2010			2011		2010			2011
Stock option compensation expense	$	(262	)	$	—	$	(223	)	$	—
Tax benefit related to stock option compensation	$	(96	)	$	—	$	(82	)	$	—
Restricted stock compensation expense	$	1,172		$	270	$	2,313		$	1,118
Tax benefit related to restricted stock compensation	$	441		$	92	$	872		$	413

Stock option activity pursuant to the Plan for six months ended June 30, 2011 is summarized as follows:

	Plan Stock Options (*)
	Number of Shares			Weighted Average Exercise Price
Outstanding, December 31, 2010		318,265		$	19.23
Granted		—		$	—
Exercised		(10,000	)	$	13.36
Cancelled		(118,100	)	$	20.02
Outstanding, June 30, 2011		190,165		$	19.04

* The stock option activity excludes 100,000 shares underlying fully vested warrants issued in 2003 with an exercise price of $11.35 per share, which were exercised in full on March 10, 2011. There are no warrants outstanding as of June 30, 2011.

Restricted stock award activity pursuant to the Plan for the six months ended June 30, 2011 is summarized as follows:

	Restricted Stock Awards
	Number of Shares			Weighted Average Grant Price

Outstanding, December 31, 2010		324,635		$	14.99
Awarded		137,523		$	18.29
Released		(166,261	)	$	12.36
Forfeited		(35,875	)	$	18.34
Outstanding, June 30, 2011		260,022		$	17.96

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

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+ Details