JAKKS Pacific, Inc. (JAKK)

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JAKKS Pacific Inc. (JAKK)

Q2 2008 Earnings Call

July 23, 2008 9:30 am ET


Genna Rosenberg - SVP of Corporate Communications and IR

Jack Friedman - Chairman and CEO

Joel Bennett - EVP and CFO

Stephen Berman - President and COO


Drew Crum - Stifel Nicolaus

Tony Gikas - Piper Jaffray

Arvind Bhatia - Sterne

Todd Schwartzman - Sidoti & Co

Ed Woo - Wedbush Morgan Securities

Jeff Blaeser - Morgan Joseph

Gerrick Johnson - BMO Capital Markets

Sean McGowan - Needham & Co



At this time, I would like to welcome everyone to the JAKKS Pacific second quarter results for 2008 conference call. (Operator Instructions).

Thank you. Ms. Rosenberg, you may begin your conference.

Genna Rosenberg

Thank you, operator. Good morning, ladies and gentlemen. This is Genna Rosenberg, Senior Vice President of Communications and Investor Relations for JAKKS Pacific. Thank you for joining our teleconference with management of JAKKS Pacific to review the results for our second quarter and first six months of 2008, ended June 30. On the call today are Jack Friedman, Chairman, and Chief Executive Officer of JAKKS Pacific, Stephen Berman, our President and Chief Operating Officer, and Joel Bennett, Executive Vice President and Chief Financial Officer.

Mr. Friedman will first provide an overview of the quarter and our operational results and then Mr. Bennett will provide detailed comments regarding our financial results. Mr. Friedman will then conclude the prepared portion of the call with highlights of our product lines and current business trends, prior to opening up the call for your one-on-one questions.

Before we begin, I would like to point out that any comments made about our future performance, events, or circumstances, including the estimates of sales and earnings per share for 2008, as well as any forward-looking statements are subject to the Safe Harbor protection under Federal Security Laws.

These statements reflect our best judgment based on current market trends and conditions today and are subject to the certain risks and uncertainties which could cause actual results to differ materially from those projected in our forward-looking statements. For details concerning these and other such risks and uncertainties you should consult our most recent 10-K and 10-Q filings with the SEC as well as company's other reports, subsequently filed with the SEC from time to time.

With that, I will turn the call over to Mr. Friedman.

Jack Friedman

Good morning, ladies and gentlemen. This is Jack Friedman. Thank you for joining us this morning to discuss our results for the second quarter and first six months of 2008. For JAKKS Pacific second quarter 2008, net sales increased 12.2% to $145.3 million, compared to $129.5 million last year's second quarter. And sales for the first six months of 2008 increased 8.9% to $276.2 million, versus $253.6 million for the first six months of 2007. Traditional choice, from our diverse product portfolio, were the largest contributors to the first half of 2008, the time period that is traditionally the lower volume portion of our year.

While our nation deals with concerns over rising prices and economic stability, we remain optimistic that our 2008 product portfolio is still with an exciting lineup of new products that we believe will continue to perform within our expectations and lead to another year of record sales for JAKKS. We experienced continued strong sales again in the second quarter in action figures, dolls, plush electronics, and pretend play products and expect continued strength in these areas, as we enter into our busiest shipping period, the third and fourth quarters.

We begin to ship some of our new [fall] items in the second quarter, and with small quantities, with the majority of shipments on the new items shipping in the third quarter, as retailers begin to stock the shelves for the holiday season. We are particularly excited about many new items in the lineup including our new real working EyeClops Night Vision goggles, the Girl Gourmet Cupcake Maker, the plug and play wireless motion gaming system called Ulti-Motion, our plug and play Hannah Montana Pop Tour Guitar and our Hannah Montana products. New WWE Pokemon and other action figures, Spa Factory, Activity Toys, a vast portfolio of new pretend play products and several other new JAKKS programs hit retail shelves later this year.

Pursuant to the stock purchase program announced this February of this year, we completed the $30 million buyback in the second quarter as reported in our last 10-Q filed with the SEC. Purchasing an aggregate of 1,259,300 shares of common stock at an average price of $23.82 per share, representing approximately 4.4% of JAKKS Pacific outstanding shares.

Our financial position remains extremely strong with working capital of approximately $331.2 million, including cash, equivalents and marketable securities of $177.4 million, as of June 30, leaving us with tremendous ability to execute our acquisition strategy. Before I get more into details of our outlook for the future, I would like to turn the call over to Joel Bennett for a review of our financial performance for the first quarter of 2008.

Joel Bennett

Thank you, Jack, and good morning, everyone. Second quarter 2008 net sales were $145.3 million, compared to $129.5 million in the same period last year, an increase of 12.2%. Net income for the second quarter was $4.2 million, or $0.15 per diluted share, compared to the second quarter of 2007, when we had net income of $5 million or $0.17 per diluted share. Net sales for the first six months of 2008 were $276.2 million, compared to $253.6 million in the same period last year, an increase of 8.9%. Net income for the first six months of 2008 was $5 million or $0.18 per diluted share, compared to the first six months of 2007 when we had net income of $8.3 million or $0.30 per diluted share.

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