JAKKS Pacific Reports Second Quarter 2018 Financial Results
Second Quarter 2018 Financial Results
Net sales for the second quarter were
Gross margin in the second quarter was 26.4%, down from 28.2% last year, as a result of an increased level of sales reserves.
Management Commentary
JAKKS Chairman and CEO
“We saw expected declines in several properties that were driven by unusually strong entertainment content a year ago, but we were pleased with the performance of new product segments. The investments in the C’est Moi™ and MorfBoard® brands continue to show momentum as distribution broadens.”
“Despite the fact that international sales were negatively impacted by
the loss of
“As we look ahead to the second half, we will continue to focus on cost
management and on new product launches. 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,
Squish-Dee-Lish®, Perfectly Cute™, TP Blaster™, Fancy Nancy, Incredibles
2, and
Cash and Cash Equivalents
The Company’s cash and cash equivalents, including restricted cash,
totaled
Convertible Senior Note Retirement
On
On
Expression of Interest from
A committee of independent directors continues to evaluate Meisheng's expression of interest, which was recently reaffirmed, in buying additional shares to bring its holdings to 51% of JAKKS’ outstanding shares, as well as other possible interest.
2018 Outlook
The Company believes the market disruption and lingering effects of 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
©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) | |||||||||
June 30, | December 31, | ||||||||
2018 | 2017 | ||||||||
(In thousands) | |||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 36,824 | $ | 64,977 | |||||
Restricted cash | 26,167 | - | |||||||
Accounts receivable, net | 100,279 | 142,457 | |||||||
Inventory | 62,161 | 58,432 | |||||||
Prepaid expenses and other assets | 24,677 | 16,803 | |||||||
Total current assets | 250,108 | 282,669 | |||||||
Property and equipment | 140,050 | 141,357 | |||||||
Less accumulated depreciation and amortization | 115,344 | 118,130 | |||||||
Property and equipment, net | 24,706 | 23,227 | |||||||
Goodwill | 35,268 | 35,384 | |||||||
Intangibles and other assets, net | 38,799 | 29,069 | |||||||
Total assets | $ | 348,881 | $ | 370,349 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable and accrued expenses | $ | 103,593 | $ | 92,061 | |||||
Reserve for sales returns and allowances | 21,335 | 17,622 | |||||||
Short term debt, net | 40,211 | 26,075 | |||||||
Total current liabilities | 165,139 | 135,758 | |||||||
Long term debt, net | 137,323 | 133,497 | |||||||
Other liabilities | 4,346 | 4,537 | |||||||
Income taxes payable | 994 | 1,261 | |||||||
Deferred tax liability, net | 784 | 783 | |||||||
Total liabilities | 308,586 | 275,836 | |||||||
Stockholders' equity: | |||||||||
Common stock, $.001 par value | 30 | 27 | |||||||
Additional paid-in capital | 216,709 | 215,809 | |||||||
Treasury stock | (24,000 | ) | (24,000 | ) | |||||
Accumulated deficit | (140,036 | ) | (85,233 | ) | |||||
Accumulated other comprehensive loss | (13,399 | ) | (13,059 | ) | |||||
Total JAKKS Pacific, Inc. stockholders' equity | 39,304 | 93,544 | |||||||
Non-controlling interests | 991 | 969 | |||||||
Total stockholders' equity | 40,295 | 94,513 | |||||||
Total liabilities and stockholders' equity | $ | 348,881 | $ | 370,349 | |||||
JAKKS Pacific, Inc. and Subsidiaries | |||||||||||||||||
Condensed Statements of Operations (Unaudited) | |||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
(In thousands, except per share data) | (In thousands, except per share data) | ||||||||||||||||
Net sales | $ | 105,781 | $ | 119,565 | $ | 198,785 | $ | 214,070 | |||||||||
Less cost of sales | |||||||||||||||||
Cost of goods | 61,059 | 65,417 | 114,317 | 117,734 | |||||||||||||
Royalty expense | 14,344 | 17,258 | 29,635 | 27,623 | |||||||||||||
Amortization of tools and molds | 2,437 | 3,171 | 3,933 | 4,973 | |||||||||||||
Cost of sales | 77,840 | 85,846 | 147,885 | 150,330 | |||||||||||||
Gross profit | 27,941 | 33,719 | 50,900 | 63,740 | |||||||||||||
Direct selling expenses | 9,994 | 10,805 | 22,481 | 21,524 | |||||||||||||
Selling, general and administrative expenses | 27,859 | 34,460 | 72,389 | 66,908 | |||||||||||||
Depreciation and amortization | 1,895 | 2,562 | 3,495 | 5,140 | |||||||||||||
Acquisition related and other | 333 | - | 333 | - | |||||||||||||
Income (loss) from operations | (12,140 | ) | (14,108 | ) | (47,798 | ) | (29,832 | ) | |||||||||
Other income (expense): | |||||||||||||||||
Income from joint ventures | 205 | 105 | 227 | 105 | |||||||||||||
Other income | 31 | 159 | 81 | 182 | |||||||||||||
Change in fair value of convertible senior notes | (2,410 | ) | - | (3,431 | ) | - | |||||||||||
Interest income | 14 | 10 | 28 | 14 | |||||||||||||
Interest expense | (2,197 | ) | (2,537 | ) | (4,133 | ) | (5,469 | ) | |||||||||
Income (loss) before provision for (benefit from) income taxes | (16,497 | ) | (16,371 | ) | (55,026 | ) | (35,000 | ) | |||||||||
Provision for (benefit from) income taxes | 2,091 | 316 | (245 | ) | (28 | ) | |||||||||||
Net income (loss) | (18,588 | ) | (16,687 | ) | (54,781 | ) | (34,972 | ) | |||||||||
Net income (loss) attributable to non-controlling interests | (29 | ) | 55 | 22 | 86 | ||||||||||||
Net income (loss) attributable to JAKKS Pacific, Inc. | $ | (18,559 | ) | $ | (16,742 | ) | $ | (54,803 | ) | $ | (35,058 | ) | |||||
Income (loss) per share - basic and diluted | $ | (0.80 | ) | $ | (0.77 | ) | $ | (2.37 | ) | $ | (1.77 | ) | |||||
Shares used in income (loss) per share - basic and diluted | 23,106 | 21,616 | 23,103 | 19,865 | |||||||||||||
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 June 30, | Six Months Ended June 30, | |||||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||
Net income (loss) | $ | (18,588 | ) | $ | (16,687 | ) | $ | (54,781 | ) | $ | (34,972 | ) | ||||||
Income from joint ventures | (205 | ) | (105 | ) | (227 | ) | (105 | ) | ||||||||||
Other income | (31 | ) | (159 | ) | (81 | ) | (182 | ) | ||||||||||
Interest income | (14 | ) | (10 | ) | (28 | ) | (14 | ) | ||||||||||
Interest expense | 2,197 | 2,537 | 4,133 | 5,469 | ||||||||||||||
Provision for (benefit from) from income taxes | 2,091 | 316 | (245 | ) | (28 | ) | ||||||||||||
Depreciation and amortization | 4,332 | 5,733 | 7,428 | 10,113 | ||||||||||||||
Acquisition related and other | 333 | - | 333 | - | ||||||||||||||
Restricted stock compensation expense | 311 | 713 | 987 | 1,460 | ||||||||||||||
Bad debt write-offs (recoveries) | (1,326 | ) | 2,305 | 12,468 | 2,305 | |||||||||||||
Change in fair value of convertible senior notes | 2,410 | - | 3,431 | - | ||||||||||||||
Minimum guarantee shortfalls | - | - | 3,468 | - | ||||||||||||||
Adjusted EBITDA | $ | (8,490 | ) | $ | (5,357 | ) | $ | (23,114 | ) | $ | (15,954 | ) | ||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
(In thousands, except per share data) | (In thousands, except per share data) | |||||||||||||||||
Net income (loss) attributable to JAKKS Pacific, Inc. | $ | (18,559 | ) | $ | (16,742 | ) | $ | (54,803 | ) | $ | (35,058 | ) | ||||||
Restricted stock compensation expense | 311 | 713 | 987 | 1,460 | ||||||||||||||
Bad debt write-offs (recoveries) | (1,326 | ) | 2,305 | 12,468 | 2,305 | |||||||||||||
Acquisition related and other | 333 | - | 333 | - | ||||||||||||||
Change in fair value of convertible senior notes | 2,410 | - | 3,431 | - | ||||||||||||||
Minimum guarantee shortfalls | - | - | 3,468 | - | ||||||||||||||
Tax impact of additional charges | 162 | - | (2,185 | ) | - | |||||||||||||
Adjusted net income (loss) attributable to JAKKS Pacific, Inc. | $ | (16,669 | ) | $ | (13,724 | ) | $ | (36,301 | ) | $ | (31,293 | ) | ||||||
Adjusted income (loss) per share - basic and diluted | $ | (0.72 | ) | $ | (0.63 | ) | $ | (1.57 | ) | $ | (1.58 | ) | ||||||
Shares used in adjusted income (loss) per share- basic and diluted | 23,106 | 21,616 | 23,103 | 19,865 | ||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180726005238/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