JAKKS Pacific, Inc. [NASDAQ: JAKK] today reported financial results for the full year ending December 31, 2015.

Net sales for full year ended December 31, 2015 were $745.7 million compared to $810.1 million in 2014. The year-to-year revenue difference is consistent with the Company’s guidance which reflects the stellar performance in 2014 of one of the Company’s key product lines. Reported net income for the 12-month period was $23.2 million, or $0.71 per diluted share. This compares to net income for full year 2014 of $21.5 million, or $0.70 per diluted share. Adjusted EBITDA for full year 2015 was $50.9 million, compared to $52.9 million for full year 2014. See note below on “Use of Non-GAAP Financial Information.”

Net sales for the fourth quarter were $163.4 million, compared to $254.0 million reported in the comparable period in 2014. The reported net loss for the fourth quarter was $9.4 million, or $0.50 per diluted share. This compares to net income of $2.8 million, or $0.11 per diluted share, reported in the comparable period in 2014. Adjusted EBITDA for the fourth quarter was negative $2.1 million, compared to Adjusted EBITDA of $10.6 million in 2014.

Stephen Berman, Chairman and Chief Executive Officer stated, “I’m pleased with the Company’s overall 2015 performance, especially our continued growth in the International division. The strength of our Disney Princess, Star Wars and Seasonal businesses, combined with our expansion in the international markets helped achieve our 2015 guidance. With the momentum we see across the entire portfolio, I’m very confident about our anticipated performance in 2016 and beyond.”

“Our alliance with strategic licensing partners has provided us with a strong entertainment-licensed slate for 2016 including Batman v. Superman: Dawn of Justice, Teenage Mutant Ninja Turtles: Out of the Shadows, Captain America: Civil War, and Finding Dory. To support these terrific franchises, we are creating BIG-FIGS in a variety of scales ranging from 18-inch to 48-inch, radio controlled vehicles, and Seasonal products inspired by these movies. We will continue to ship new waves of Star Wars BIG-FIGS throughout 2016, as well as bring the World of Nintendo characters to life in new and exciting ways,” Mr. Berman said.

Adding to its Disney Princess business and Frozen business, JAKKS now has the rights to large dolls, role-play and dress-up for Moana, a new Disney/Pixar animated movie slated to be released in theaters later in 2016. JAKKS will also introduce new movie-inspired “Alice in Wonderland: Through the Looking Glass” toys, as well as Disguise costumes. The line of Tsum Tsum stackable, collectible figures featuring hundreds of stylized Disney characters, which had a limited launch late in 2015, will be in broad distribution in 2016.

JAKKS also has several proprietary intellectual properties rounding out its product portfolio including Max Tow™ and Friends which continues to grow and climb with a new buddy, Cliff Climber, to be introduced later this fall. Gift ‘Ems, a new brand for girls, will be launching later this Fall along with a dedicated mobile game app. In addition, the Company also re-launched its Real Construction® brand with all-new products, an app and digital campaign.

“We have fully integrated Maui Toys, Moose Mountain and Kids Only! into a more cohesive business unit that is poised to create a more robust Seasonal division comprised of leading evergreen brands in their respective categories. In 2016, we are excited about our Disguise division’s global launch of the first official LEGO licensed costumes for Halloween and everyday role-play, and the addition of the Shopkins license for Halloween costumes,” said Mr. Berman.

“This year we are focused on continuing to build our leadership position within several important categories by continuing to launch innovative new products. Our entire portfolio received incredible customer support at Hong Kong, Nuremberg and New York toys fairs,” he added.

Working Capital

As of December 31, 2015, the Company’s working capital was $252.2 million, including cash and equivalents and marketable securities of $102.5 million, compared to working capital of $246.2 million including cash and equivalents and marketable securities of $71.7 million as of December 31, 2014.

2016 Guidance

For 2016, Jakks is currently forecasting net sales to increase approximately 7.0%; diluted earnings per share to increase approximately 10.0%; and Adjusted EBITDA to increase approximately 28.0%. This guidance reflects anticipated gross margin expansion and operating leverage offset in part by higher marketing costs resulting in overall operating margin growth in 2016. On an annual basis the Company’s effective tax rate will remain at approximately 15%. Reflected in this forecast is net sales for the first quarter of 2016 is anticipated to be in the range of $95.0 million to $100.0 million with a net loss in the range of $0.90 to $1.00 per diluted share due in part to increased marketing expenses in 2016 including the shift caused by Easter falling in the first quarter of 2016 as opposed to the second quarter in 2015.

Share Repurchase

In June 2015, the Board of Directors authorized the Company to repurchase up to $30 million worth of shares of the Company’s outstanding common stock and/or convertible notes through open market repurchases or in privately negotiated transactions from time to time through March 31, 2016. Approximately 1,547,000 shares of common stock were repurchased through the end of the fourth quarter at an aggregate cost of $13.2 million.

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 fourth quarter and full year 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 March 23, 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 “4182 7545” 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 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' 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
       
 
December 31, December 31,
2015 2014
(In thousands)
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 102,528 $ 71,525
Marketable securities - 220
Accounts receivable, net 163,387 234,516
Inventory, net 60,544 78,827
Income taxes receivable 24,008 24,008
Deferred income taxes - 3,358
Prepaid expenses and other   31,901     25,139  
Total current assets 382,368 437,593
 
Property and equipment 112,088 107,080
Less accumulated depreciation and amortization   93,653     95,984  
Property and equipment, net 18,435 11,096
 
Deferred tax asset 446 -
Goodwill 44,199 44,492
Trademarks & other assets, net 53,452 61,601
Investment in DreamPlay, LLC   7,000     7,000  
Total assets $ 505,900   $ 561,782  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable and accrued expenses $ 89,067 $ 143,087
Reserve for sales returns and allowances 17,267 24,477
Income taxes payable 21,067 23,784
Deferred income taxes   2,739     -  
Total current liabilities 130,140 191,348
 
Long term debt 215,000 215,000
Other liabilities 5,155 1,874
Income taxes payable 2,199 2,496
Deferred tax liability   -     5,980  
Total liabilities 352,494 416,698
 
Stockholders' equity:
Common stock, $.001 par value 21 23
Additional paid-in capital 194,743 202,051
Treasury stock (28,322 ) (24,000 )
Accumulated deficit (3,391 ) (26,645 )
Accumulated other comprehensive loss   (10,051 )   (6,835 )
Total JAKKS Pacific, Inc. stockholders' equity 153,000 144,594
Non-controlling interests   406     490  
Total stockholders' equity   153,406     145,084  
Total liabilities and stockholders' equity $ 505,900   $ 561,782  
 
Working Capital $ 252,228   $ 246,245  
 

 
JAKKS Pacific, Inc. and Subsidiaries
Fourth Quarter Earnings Announcement, 2015
Condensed Statements of Operations (Unaudited)
 
 
    Three Months Ended December 31,     Twelve Months Ended December 31,

2015

    

2014

2015

    

2014

(In thousands, expect per share data) (In thousands, expect per share data)
 
Net sales $ 163,407 $ 254,016 $ 745,741 $ 810,060
Less cost of sales
Cost of goods 87,102 137,567 404,132 455,756
Royalty expense 24,418 35,871 103,484 109,406
Amortization of tools and molds   2,312     881     9,556     9,091  
Cost of sales   113,832     174,319     517,172     574,253  
Gross profit 49,575 79,697 228,569 235,807
Direct selling expenses 20,264 31,103 59,090 66,525
Selling, general and administrative expenses 33,874 39,381 129,645 126,921
Reorganization charges - - - 1,154
Depreciation and amortization   2,328     1,955     9,304     9,880  
Income (loss) from operations (6,891 ) 7,258 30,530 31,327
Other income (expense):
Income from joint ventures 1,017 - 2,761 314
Other income - - 5,642 5,932
Interest income 11 23 62 112
Interest expense   (3,215 )   (3,303 )   (12,402 )   (12,461 )
Income (loss) before provision for income taxes (9,078 ) 3,978 26,593 25,224
Provision for income taxes   308     1,180     3,423     3,715  
Net income (loss) (9,386 ) 2,798 23,170 21,509
Net loss attributable to non-controlling interests   (56 )   -     (84 )   -  
Net income (loss) attributable to Jakks Pacific, Inc. $ (9,330 ) $ 2,798   $ 23,254   $ 21,509  
Earnings per share - basic $ (0.50 ) $ 0.14   $ 1.20   $ 1.03  
Shares used in earnings per share - basic   18,781     19,570     19,435     20,948  
Earnings per share - diluted $ (0.50 ) $ 0.11   $ 0.71   $ 0.70  
Shares used in earnings per share - diluted   18,781     44,060     43,321     41,516  
 

 
JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Adjusted EBITDA
For the Three and Twelve Months Ended December 31, 2015 and 2014
               
 

Reconciliation of GAAP to Non-GAAP measures:

 

This press release and accompanying schedules provide certain information regarding Adjusted EBITDA, which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring charges incurred, primarily related to reorganization expenses and certain non-cash charges for restricted stock compensation expense. Adjusted EBITDA is not a recognized financial measure under GAAP, but we believe that it is useful in measuring our operating performance. We believe that the use of the non-GAAP financial measure Adjusted EBITDA enhances an overall understanding of the Company’s past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis and the use of Adjusted EBITDA by other comparable companies as a measure of performance.

 

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 December 31, Twelve Months Ended December 31,

2015

2014

2015

2014

(In thousands) (In thousands)
 
Income (loss) from operations $ (6,891 ) $ 7,258 $ 30,530 $ 31,327
 
Depreciation and amortization 4,640 2,836 18,860 18,971
Reorganization charges - - - 1,154
Restricted stock compensation expense   108     476   1,559   1,473
 
Adjusted EBITDA $ (2,143 ) $ 10,570 $ 50,949 $ 52,925