Jakks moves to stem losses
By Staff -- Playthings, 7/28/2009 12:52:00 PM
MALIBU, Calif.—Jakks Pacific reported a charge-related net loss for the second quarter worth $406.5 million, despite only a modest sales drop, and plans a round of cost-cutting in order to help turn its financial fortunes around.
The company’s $14.96 per share loss for the three month period ended on June 30, 2009, compared to net income of $4.2 million, or $0.15 per diluted share, reported in the second quarter of 2008. The net loss for the six month period was $417.3 million, or $15.35 per share, compared to earnings for the first six months of 2008 of $5.0 million, or $0.18 per diluted share.
Net sales for the quarter were $144.8 million, down from the $145.3 million reported in the comparable period last year. Traditional toy sales made up $126.4 million of the quarter's total. Net sales for the six months were $253.5 million, compared to $276.2 million during the same period in 2008. Traditional toys represented $224 million of the first half's total.
On a non-GAAP basis, Jakks reported a net loss for the second quarter of $0.9 million, or $0.03 per share, compared to net income of $4.8 million, or $0.17 per diluted share in the second quarter of 2008. The non-GAAP net loss for the first six months of 2009 was $11.7 million, or $0.43 per share, compared to non-GAAP net income of $6.8 million, or $0.24 per diluted share for the first six months of 2008.
On a non-GAAP basis, net sales for the second quarter of 2009 were $145.4 million and $254.1 million for the six month period, compared to $145.3 million and $276.2 million for the second quarter and first six months of 2008 on a non-GAAP basis.
Second quarter and six month 2009 GAAP results include the following, which were excluded in the non-GAAP results:
• Pre-tax non-cash goodwill impairment charge of $407.1 million due to the “sustained decline in the company’s market capitalization pursuant to the applicable accounting rule, SFAS 142.”
• Pre-tax non-cash impairment charge of $8.2 million related to certain of the company’s under-utilized trademarks.
• Pre-tax charge to royalty expense of $33.2 million related to abandoned or underperforming licenses; $19.5 million is non-cash and $13.7 million is expected to be paid out to third parties through 2011.
• Pre-tax charge to cost of goods of $23.3 million related to the impairment of inventory, of which $14.5 million is non-cash and $8.8 million is expected to be paid out to third parties during the remainder of 2009.
• Pre-tax non-cash charge of $2.3 million related to the write-off of obsolete tools and molds.
• Pre-tax charge of $1.3 million related to the recall of one of the company’s products.
• Pre-tax non-cash charge of $22.5 million related to the reduction to the receivable from Jakks’ video game joint venture with THQ as a result of the recent arbitration decision, which reduced Jakks’ preferred return payment rate from 10 percent to 6 percent of the joint venture’s net sales.
Stephen Berman, Jakks’ co-CEO and president, said the company will implementing “significant cost-reduction measures company-wide,” in reaction to the first half results and to forecasts for lower than expected sales for the rest of the year.
“The company is evaluating its business operations and will institute a restructuring plan to streamline operations, reduce costs and lower capital expenditures to position the company for future enhanced profitability and growth,” Berman said. “These cost-saving efforts are intended to reduce spending given the lower than expected sales forecasts across a number of product lines in the portfolio and lower gross margins overall, and will include headcount reductions, a consolidation of office spaces and other efficiencies that will be implemented during the remainder of 2009.”
“Underperforming” lines in Jakks' current portfolio include Hannah Montana, WWE, Pokémon and Cabbage Patch Kids, according to Jack Friedman, chairman and co-CEO.
After taking into consideration lower than expected sales and gross margins, lower preferred return rate in the payment to the company from its video game joint venture with THQ and the overall world economic climate, the company has reduced its guidance for the 2009 fiscal year. Jakks now expects GAAP net sales of approximately $810 million, with a net loss on a GAAP basis of $375.6 million, or $13.54 per share, and is expecting non-GAAP net sales of approximately $810.7 million, with net income on a non-GAAP basis of $30.0 million, or $1.01 per diluted share, according to Berman.
Talkback
Related Content
Related Content
