Hannah improves Jakks' hand in Q1

By Staff -- Playthings, 4/25/2008 11:32:00 AM

MALIBU, Calif.—Jakks Pacific said this week that Hannah Montana toys helped the company’s first quarter sales grow 5.5 percent to $130.9 million, compared to the corresponding period of 2007.

The results, measuring the three months ended March 31, 2008, were hampered by $2.6 million in pre-tax litigation costs, product testing costs of $0.8 million and restructuring costs of $0.6 million, resulting in net income for the period of $0.9 million, or $0.03 per diluted share, well off the $3.2 million, or $0.12 per diluted share, profit reported in the first quarter of 2007.

“With increased costs related to litigation, product testing, and marketing, promotion and advertising, as well as some closeout sales that affected gross margins and the bottom-line versus last year’s first quarter, we are still on track to achieve our previous guidance of at least 4 percent growth over 2007, leaving us poised for another record year,” said Jack Friedman, Jakks’ chairman and CEO.

“During the first quarter, we finalized the integration of our Play Along division and expect to benefit beginning in the second quarter from the operating efficiencies as a result,” he added.

In addition to its Hannah Montana toys, Jakks’ action figures and Plug It In & Play electronic products were also credited with helping drive revenue, according to Friedman. Conversely, sales of Jakks' craft and activity writing products—primarily the PenTech and Flying Colors product lines—fell by nearly a third to approximately $6.1 million in the first quarter of 2008, compared to approximately $9.2 million in the comparable period of 2007.

Internationally, its business benefited from "strong" sales of WWE wrestling and Chronicles of Narnia Prince Caspian action figures, and Plug It In & Play products during the first quarter, added Stephen Berman, Jakks president and chief operating officer. "We expect the momentum to continue in the second quarter, as well.”

Cash flow from operations in the quarter was $15.4 million. As of March 31, Jakks had working capital worth $359.2 million, including cash and equivalents of $238.3 million. The company “continue(s) to evaluate potential acquisition opportunities and expect to continue to grow our business by actively pursuing complementary acquisitions and executing on internal growth initiatives, in the near future,” Berman said.

Looking forward, Berman added, “We continue to have momentum in our top licensed and non-licensed brands, which we expect to drive our business this year, and are pleased with the development of many new innovative toys slated to begin shipping in the second quarter.”

The company “remains confident” that it will achieve its 2008 forecast of at least $891.4 million in net sales, $93.6 million in net income and $2.91 diluted EPS, “despite the recession affecting the US economy and some challenges that are affecting our industry and others who manufacture in China.”

Pictured above: Play Along's Holiday Pop Star Hannah Montana doll