JAKKS Pacific Reports First Quarter 2016 Financial Results
Company Reiterates 2016 Growth in Financial Guidance
SANTA MONICA, Calif.–(BUSINESS WIRE)–JAKKS Pacific, Inc. (NASDAQ: JAKK) today reported financial results for
the first quarter ended March 31, 2016.
First Quarter Highlights
- Company achieved second highest first quarter net sales in 7 years
- Gross margin improved 150 basis points year-over-year
- Operating margin impacted by marketing expenses due to earlier Easter
- Inventory level decreased 33 percent year-over-year
-
2016 guidance reiterated: net sales to increase 7 percent to
approximately $800.0 million and diluted EPS to increase 10 percent to
approximately $0.78 per share
Consistent with Company guidance issued on February 23, 2016, net sales
for the first quarter of 2016 were $95.8 million compared to $114.2
million reported in the comparable period in 2015. The net loss for the
first quarter of 2016 was $17.4 million, or $1.01 per diluted share.
This compares to a net loss of $7.6 million, or $0.40 per diluted share,
reported in the comparable period in 2015. Adjusted EBITDA for the first
quarter was negative $9.2 million, compared to Adjusted EBITDA of
negative $0.9 million in 2015. See note below on “Use of Non-GAAP
Financial Information.”
The year-over-year reduction in first quarter 2016 net sales and
earnings reflects a decline in sales of a product line in international
markets, and the increase in the quarterly loss also includes the impact
of a loss of $0.05 per share due to fewer common shares outstanding
during the quarter. The reduced share count is a direct result of the
Company’s ongoing stock buy-back program. On a static share count, the
Company’s earnings would have been a loss of $0.96 per share, in the
middle of the range of previously announced guidance for the quarter. As
reflected in the Company’s guidance for the quarter, higher marketing
expenses, including the timing of expenses associated with an earlier
Easter holiday season, contributed to the decline in earnings from the
year ago period.
“Our performance in the first quarter is in line with our expectations
going into 2016. We remain committed to maximizing the value of our
portfolio with customers and consumers,” Stephen Berman, Chairman and
Chief Executive Officer, stated. “As expected, our gross margin
continues to improve due to ongoing margin enhancement initiatives,”
said Berman.
Partnering with best-in-class content creators, this summer JAKKS
Pacific is launching several new entertainment-licensed products
inspired by major theatrical releases, including Batman vs. Superman:
Dawn of Justice, Captain America: Civil War, Teenage Mutant Ninja
Turtles: Out of the Shadows, Warcraft, Alice in Wonderland:
Through the Looking Glass and Finding Dory.
“Looking beyond summer, our Fall lines are proceeding as planned and we
expect our broad category of products to have wide placement at retail
in the second half,” said Berman.
Working Capital and Cash Flow
As of March 31, 2016, the Company’s working capital was $226.9 million,
including cash and cash equivalents of $118.9 million, compared to
working capital of $234.2 million, including cash and cash equivalents
of $105.3 million, as of March 31, 2015. Net cash provided by operating
activities for the first quarter was $32.6 million, compared to $38.8
million in the year ago period.
Reiterating 2016 Guidance
For 2016, JAKKS continues to forecast net sales to increase 7 percent to
approximately $800.0 million; diluted earnings per share to increase 10
percent to approximately $0.78 per share, subject to share count
changes; and Adjusted EBITDA to increase 28 percent to approximately
$65.0 million. This guidance reflects anticipated gross margin expansion
and operating margin growth in 2016.
Share Repurchase
In June 2015, the Board of Directors authorized the Company to
repurchase up to $30.0 million worth of shares of the Company’s
outstanding common stock and/or convertible notes through open market
purchases or in privately negotiated transactions. Approximately 2.9
million shares of common stock at an aggregate cost of $23.0 million and
$2.0 million face amount of our 2020 convertible notes at a cost of $1.9
million were repurchased through the end of the first quarter. At
quarter end, approximately $5.0 million remained available in the
current buy-back authorization.
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
JAKKS Pacific will webcast its first quarter earnings call at 9 a.m.
Eastern Time/6 a.m. Pacific Time today. To listen to the live webcast
and access the accompanying presentation slides, go to www.jakks.com/investors
and click on the earnings website link under Presentations at least 10
minutes prior to register, download and install any necessary audio
software. A replay of the call will be available on JAKK’s website
approximately one hour following completion of the call through May 21,
2016, ending at 11:59 p.m. Eastern Time/8:59 p.m. Pacific Time. The
playback can be accessed by calling 888-843-7419 or 630-652-3042 for
international callers, passcode “4232 5232#” for both playback numbers.
About JAKKS Pacific, Inc.
JAKKS Pacific, Inc. (NASDAQ: JAKK) is a leading designer, manufacturer
and marketer of toys and consumer products sold throughout the world,
with its headquarters in Santa Monica, California. JAKKS Pacific’s
popular proprietary brands include BIG-FIGS™, XPV®, Real Construction®,
Max Tow™ and Friends, Disguise®, Moose Mountain®, Funnoodle®, Maui®,
Kids Only!®, as well as a wide range of entertainment-inspired products
featuring premier licensed properties. DreamPlay Toys, LLC is a joint
venture between JAKKS and NantWorks LLC to develop, market and sell toys
and related consumer products incorporating NantWorks’ proprietary iD™
recognition technology. Through JAKKS Cares, the company’s commitment to
philanthropy, JAKKS is helping to make a positive impact on the lives of
children. Visit us at www.jakks.com and
follow us on Instagram (@jakkstoys),
Twitter (@jakkstoys)
and Facebook (JAKKS
Pacific).
© 2016 JAKKS Pacific, Inc. All rights reserved.
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’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 Pacific’s products, product mix, the timing of customer orders
and deliveries, the impact of competitive products and pricing, and
difficulties with integrating acquired businesses. 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.
| JAKKS Pacific, Inc. and Subsidiaries | |||||||||||||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||||||||||||
| March 31, | December 31, | ||||||||||||||||||||
| 2016 | 2015 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Current assets: | |||||||||||||||||||||
| Cash and cash equivalents | $ | 118,914 | $ | 102,528 | |||||||||||||||||
| Accounts receivable, net | 85,471 | 163,387 | |||||||||||||||||||
| Inventory, net | 53,470 | 60,544 | |||||||||||||||||||
| Income taxes receivable | 24,008 | 24,008 | |||||||||||||||||||
| Prepaid expenses and other | 32,912 | 31,901 | |||||||||||||||||||
| Total current assets | 314,775 | 382,368 | |||||||||||||||||||
| Property and equipment | 115,116 | 112,088 | |||||||||||||||||||
| Less accumulated depreciation and amortization | 95,256 | 93,653 | |||||||||||||||||||
| Property and equipment, net | 19,860 | 18,435 | |||||||||||||||||||
| Goodwill | 44,024 | 44,199 | |||||||||||||||||||
| Trademarks & other assets, net | 44,912 | 47,618 | |||||||||||||||||||
| Investment in DreamPlay, LLC | 7,000 | 7,000 | |||||||||||||||||||
| Total assets | $ | 430,571 | $ | 499,620 | |||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||
| Accounts payable and accrued expenses | $ | 52,988 | $ | 89,067 | |||||||||||||||||
| Reserve for sales returns and allowances | 13,104 | 17,267 | |||||||||||||||||||
| Income taxes payable | 21,741 | 21,067 | |||||||||||||||||||
| Total current liabilities | 87,833 | 127,401 | |||||||||||||||||||
| Long term debt, net | 207,797 | 209,166 | |||||||||||||||||||
| Other liabilities | 5,303 | 5,155 | |||||||||||||||||||
| Income taxes payable | 2,199 | 2,199 | |||||||||||||||||||
| Deferred tax liability | 2,199 | 2,293 | |||||||||||||||||||
| Total liabilities | 305,331 | 346,214 | |||||||||||||||||||
| Stockholders’ equity: | |||||||||||||||||||||
| Common stock, $.001 par value | 20 | 21 | |||||||||||||||||||
| Additional paid-in capital | 180,363 | 194,743 | |||||||||||||||||||
| Treasury stock | (24,000 | ) | (28,322 | ) | |||||||||||||||||
| Accumulated deficit | (20,806 | ) | (3,391 | ) | |||||||||||||||||
| Accumulated other comprehensive loss | (10,775 | ) | (10,051 | ) | |||||||||||||||||
| Total JAKKS Pacific, Inc. stockholders’ equity | 124,802 | 153,000 | |||||||||||||||||||
| Non-controlling interests | 438 | 406 | |||||||||||||||||||
| Total stockholders’ equity | 125,240 | 153,406 | |||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 430,571 | $ | 499,620 | |||||||||||||||||
| Working Capital | $ | 226,942 | $ | 254,967 | |||||||||||||||||
| JAKKS Pacific, Inc. and Subsidiaries | |||||||||||||||||||||
| First Quarter Earnings Announcement, 2016 | |||||||||||||||||||||
| Condensed Statements of Operations (Unaudited) | |||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||
| 2016 | 2015 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||
| Net sales | $ | 95,809 | $ | 114,201 | |||||||||||||||||
| Less cost of sales | |||||||||||||||||||||
| Cost of goods | 52,178 | 62,501 | |||||||||||||||||||
| Royalty expense | 11,234 | 15,517 | |||||||||||||||||||
| Amortization of tools and molds | 1,214 | 805 | |||||||||||||||||||
| Cost of sales | 64,626 | 78,823 | |||||||||||||||||||
| Gross profit | 31,183 | 35,378 | |||||||||||||||||||
| Direct selling expenses | 11,559 | 6,862 | |||||||||||||||||||
| Selling, general and administrative expenses | 30,618 | 30,757 | |||||||||||||||||||
| Depreciation and amortization | 2,822 | 1,958 | |||||||||||||||||||
| Loss from operations | (13,816 | ) | (4,199 | ) | |||||||||||||||||
| Other income (expense): | |||||||||||||||||||||
| Other income | 75 | – | |||||||||||||||||||
| Interest income | 16 | 19 | |||||||||||||||||||
| Interest expense | (3,226 | ) | (2,974 | ) | |||||||||||||||||
| Loss before provision for income taxes | (16,951 | ) | (7,154 | ) | |||||||||||||||||
| Provision for income taxes | 432 | 427 | |||||||||||||||||||
| Net loss | (17,383 | ) | (7,581 | ) | |||||||||||||||||
| Net income attributable to non-controlling interests | 32 | – | |||||||||||||||||||
| Net loss attributable to JAKKS Pacific, Inc. | $ | (17,415 | ) | $ | (7,581 | ) | |||||||||||||||
| Loss per share | $ | (1.01 | ) | $ | (0.40 | ) | |||||||||||||||
| Shares used in loss per share | 17,218 | 19,090 | |||||||||||||||||||
| JAKKS Pacific, Inc. and Subsidiaries | ||||||||||||
| Reconciliation of Adjusted EBITDA | ||||||||||||
| For the Three Months Ended March 31, 2016 and 2015 | ||||||||||||
|
Reconciliation of GAAP to Non-GAAP measures:
This press release and accompanying schedules provide certain
Investors should not consider these measures in isolation or as a |
||||||||||||
| Three Months Ended March 31, | ||||||||||||
| 2016 | 2015 | |||||||||||
| (In thousands) | ||||||||||||
| Loss from operations | $ | (13,816 | ) | $ | (4,199 | ) | ||||||
| Depreciation and amortization | 4,036 | 2,763 | ||||||||||
| Restricted stock compensation expense | 623 | 504 | ||||||||||
| Adjusted EBITDA | $ | (9,157 | ) | $ | (932 | ) | ||||||
Contacts
JAKKS Pacific, Inc.
Sara Rosales Montalvo, 424-268-9363
Joel
Bennett, 310-455-6210
