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Press release from Business Wire

JAKKS Pacific® Reports Fourth Quarter and Year-End Results for 2011

<p class='bwalignc'> <b>Declares Cash Dividend for Q1 2012</b> </p>

Tuesday, February 21, 2012

JAKKS Pacific® Reports Fourth Quarter and Year-End Results for 201106:30 EST Tuesday, February 21, 2012 MALIBU, Calif. (Business Wire) -- JAKKS Pacific, Inc. (NASDAQ:JAKK) reported results for the Company's fourth quarter and full year ended December 31, 2011. Net sales for the fourth quarter of 2011 were $141.1 million, compared to $198.0 million reported in the comparable period in 2010. The reported net loss for the fourth quarter was $20.0 million, or a loss of $0.77 per diluted share, which includes $1.9 million, or $0.05 per diluted share, related to financial and legal advisory fees and expenses in conjunction with the unsolicited indication of interest to acquire the Company. This compares to net income of $8.9 million, or $0.30 per diluted share, which included a tax benefit of $5.9 million, or $0.17 per diluted share reported in the comparable period in 2010. Excluding the advisory fees and expenses in 2011 and tax benefit in 2010, the fourth quarter net loss in 2011 would have been $18.8 million, or $0.72 per diluted share, compared to earnings of $3.0 million, or $0.13 per diluted share, in 2010. Net sales for the full year of 2011 were $677.8 million, compared to $747.3 million in 2010. Net income reported for the full year period was $8.5 million, or $0.32 per diluted share, which includes advisory fees and expenses related to the unsolicited indication of interest of $3.8 million, or $0.09 per diluted share. This compares to net income for the full year of 2010 of $47.0 million, or $1.52 per diluted share, which includes a one-time pre-tax charge relating to the benefit payment of $2.8 million, or $0.06 per diluted share, to the estate of Jack Friedman pursuant to his employment agreement and tax benefits of $10.8 million, or $0.31 per diluted share. Excluding the advisory fees and expenses in 2011 and the tax benefits and one-time charge in 2010, the full year earnings in 2011 would have been $10.9 million, or $0.41 per diluted share, compared to $38.2 million, or $1.27 per diluted share in 2010. “The difficult retail sales environment for toys, especially during the important year-end 2011 holiday season contributed to lower than expected sales for the year,” commented Stephen Berman, President and CEO. “This resulted in higher markdown allowances and higher royalty expenses relating to license guarantee shortfalls. We anticipate an improved retail sales environment in 2012 and will continue to closely manage our supply chain while maintaining momentum by focusing on the development and placement of our product lines.” The Company noted that it has experienced a strong reception to its 2012 portfolio, and looked forward to the premiere of its Monsuno boys action entertainment on Nicktoons and the launch of the toy line in March in retail channels throughout the U.S and internationally. The Company anticipates contributions to its projected 2012 sales growth from all JAKKS divisions, including its Winx Club dolls and role play toys, its extensive line of Disney dolls, role play and Halloween costumes and accessories, and its Marvel plush and boys role play lines based on The Amazing Spiderman and The Avengers feature films to be released this year. The Company looks forward to creating new products under its recently announced agreement with Warner Brothers Consumer Products to create figures and plush of DC Comics Super Heroes and Villains. The Company also plans to launch a line of novelty and large scale figures and plush based on The Dark Knight Rises, one of this summer's most anticipated films. In addition, the Company has a robust electronics line-up including the Action Cam video camera and The Walking Dead Deluxe TV Games. In its Preschool category, JAKKS is launching ride-on vehicles, including the return of the iconic Original Big Wheel ride-on toy, wagons, outdoor furniture and more. As of December 31, 2011, the Company's working capital was $374.7 million, including cash and equivalents and marketable securities of $257.5 million, compared to working capital of $387.3 million including cash and equivalents and marketable securities of $278.6 million as of December 31, 2010. 2012 Guidance & Dividend For 2012, the Company anticipates an increase in net sales of 6.2% to 7.4% to approximately $720 million to $728 million, with diluted earnings per share in the range of approximately $1.01 to $1.07, excluding any financial and legal advisory fees. This guidance anticipates first-quarter 2012 net sales in the range of $63 to $70 million, with a loss per share in the range of $0.61 to $0.64, which includes incremental operating expenses associated with the recent acquisition of Moose Mountain in a seasonally low sales volume quarter, and marketing expenses associated with the launch of the Monsuno product line. This is compared to net sales of $72.3 million and a loss per share of $0.39 in the first quarter of 2011, which included advisory fees of $0.3 million, or $0.01 per share. The JAKKS Board of Directors has declared a regular quarterly cash dividend of $0.10 per common share. The dividend is payable on April 2, 2012, to shareholders of record at the close of business on March 15, 2012. Conference Call JAKKS Pacific will webcast its fourth-quarter and full-year earnings conference call today at 9:00 a.m. ET (6:00 a.m. PT). To listen to the live webcast, go to investors.jakks.com, and click on the earnings webcast link under Events and Presentations at least 10 minutes prior to register, download and install any necessary audio software. A telephonic playback will be available from 11:00 a.m. ET and concludes through March 21, 2012. The playback can be accessed by calling 800.638.4930, or 617.614.3944 for international callers, pass code 32981071. About JAKKS Pacific, Inc. JAKKS Pacific, Inc. (NASDAQ: JAKK) is a leading designer and marketer of toys and consumer products with a wide range of products that feature popular brands and children's toy licenses. JAKKS' diverse portfolio includes Action Figures, Electronics, Dolls, Dress-Up, Role Play, Halloween Costumes, Kids Furniture, Vehicles, Plush, Art Activity Kits, Seasonal Products, Infant/Pre-School, Construction Toys, Ride-On Vehicles, Wagons, Inflatable Environments and Tents, and Pet Toys sold under various proprietary brands including JAKKS Pacific®, Creative Designs International™, Road Champs®, Funnoodle®, JAKKS Pets™, Plug It In & Play TV Games™, Kids Only!™, Tollytots®, Disguise® and Moose Mountain® and Monsuno™, JAKKS is an award-winning licensee of several hundred nationally and internationally known trademarks including Nickelodeon®, Warner Bros.®, Ultimate Fighting Championship®, Hello Kitty®, Graco®, Cabbage Patch Kids® and Pokémon®. www.jakks.com 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's business based partly on assumptions made by its management. These statements are not guarantees of 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 statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS' products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, and difficulties with integrating acquired businesses. Continued payment of the quarterly cash dividend will depend on depend on many factors, including, but not limited to, JAKKS' earnings, financial condition, business development needs, and is at the discretion of the Board of Directors. The forward-looking statements contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release. © 2012 JAKKS Pacific, Inc. All rights reserved.   JAKKS Pacific, Inc. and SubsidiariesCondensed Consolidated Balance Sheets             December 31,         December 31,20112010(In thousands)   ASSETS   Current assets: Cash and cash equivalents $ 257,258 $ 278,346 Marketable securities 214 207 Accounts receivable, net 103,637 122,476 Inventory, net 47,019 43,230 Income taxes receivable 24,166 19,052 Deferred income taxes 34,505 23,576 Prepaid expenses and other current assets   30,686     25,275   Total current assets   497,485     512,162     Property and equipment 81,399 76,150 Less accumulated depreciation and amortization   65,213     59,204   Property and equipment, net   16,186     16,946     Goodwill 24,015 6,988 Trademarks & other assets, net 27,731 38,388 Deferred income taxes 47,081 58,848 Investment in joint venture   2,736     74   Total assets $ 615,234   $ 633,406       LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable and accrued expenses $ 77,210 $ 90,389 Reserve for sales returns and allowances 43,440 28,378 Income taxes payable   2,183     6,143   Total current liabilities   122,833     124,910     Long term debt 92,188 89,458 Other liabilities 1,630 1,625 Income taxes payable   4,992     5,005   Total liabilities   221,643     220,998     Stockholders' equity: Common stock, $.001 par value 26 28 Additional paid-in capital 274,532 302,425 Treasury Stock - (5,641 ) Retained earnings 123,174 119,884 Accumulated other comprehensive income (loss)   (4,141 )   (4,288 )   393,591     412,408   Total liabilities and stockholders' equity $ 615,234   $ 633,406     Working Capital $ 374,652 $ 387,252     JAKKS Pacific, Inc. and SubsidiariesFourth Quarter Earnings Announcement, 2011Condensed Statements of Income (Unaudited)           Three Months Ended December 31,       Twelve Months Ended December 31,             2011201020112010(In thousands, expect per share data)(In thousands, expect per share data)   Net sales $ 141,079 $ 197,991 $ 677,751 $ 747,268 Less cost of sales Cost of goods 86,878 108,310 379,573 412,104 Royalty expense 32,920 21,492 92,830 77,544 Amortization of tools and molds   2,324     2,658     11,358     12,670   Cost of sales   122,122     132,460     483,761     502,318   Gross profit 18,957 65,531 193,990 244,950 Direct selling expenses 20,639 24,606 53,078 58,549 Selling, general and administrative expenses 32,189 27,630 128,525 123,683 Depreciation and amortization   2,125     2,323     11,107     12,521   Income from operations (35,996 ) 10,972 1,280 50,197 Other income (expense): Income from video game joint venture - - 6,000 6,000 Equity in net loss of joint venture (9 ) (56 ) (34 ) (56 ) Interest income 83 82 412 333 Interest expense, net of benefit   (2,068 )   (981 )   (8,196 )   (6,732 ) Income before provision for income taxes (37,990 ) 10,017 (538 ) 49,742 Provision for income taxes   (17,972 )   1,146     (9,010 )   2,693   Net income $ (20,018 ) $ 8,871   $ 8,472   $ 47,049   Earnings per share $ (0.77 ) $ 0.30 $ 0.32 $ 1.52 Shares used in earnings per share 25,839 33,880 26,893 34,513 JAKKS Pacific, Inc.Joel Bennett, 310-455-6210orAnne-Marie Feliciano, 310-455-6235