Jakks reports profit slump

Jakks Pacific yesterday announced a 49 per cent drop in profit in the fourth quarter.
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The firm’s net sales for the fourth quarter fell by six per cent to $269.3 million, compared to $285.1 million in the same period in 2007.

Q4’s net profit fell by 49 per cent to $16.9 million, or 55 cents per share, compared to $33.4 million, or $1.03 per share year-on-year.

Net sales for the full-year was up slightly by 5.4 per cent to $903.4 million, compared to $857.1 million during the same period in 2007. Net income for the year, however, fell 15 per cent to $76.1 million, or $2.42 per share, from $89 million, or $2.77 per share in 2007.

Jack Friedman, chairman and CEO commented: "In 2008, we continued to have top-selling items in our portfolio that performed well for our retail partners, including our award-winning EyeClops Night Vision Goggles, Girl Gourmet product line, Disney pretend play products and others.

“However, sales in the fourth quarter were impacted by a challenging economy, particularly in the retail sectors in which we experienced declines in some lines, including Hannah Montana and Care Bears. Earnings in the year were also adversely impacted by rising costs of labour, raw materials and testing that affected margins across the board.”

The firm reported cash flow from operations in 2008 was $58.7 million. As of December 31st, 2008, its working capital was $329.6 million, including cash and equivalents of $169.7 million.

Jakks acquired three new companies in late 2008, Tollytots, Kids Only and Disguise and announced yesterday it will continue to evaluate potential acquisition opportunities.
In order to meet the needs of this growth and acquisition strategy, Stephen Berman has been named to serve alongside Jack Friedman as co-CEO, with Friedman continuing as chairman and Berman continuing as president.

Looking forward to 2009, the firm plans to provide value lines, with the majority of its product lines retailing for under $20. Jakks will also continue to implement a cost savings plan and create improvements to margins.

Berman commented: "As for our 2009 guidance, given the state of the economy and the retail environment, we are anticipating growth in revenue above 2008 levels to $920 million with earnings of $2.25 per diluted share, which results anticipate lower gross margins and increased acquisition amortization attributable to our recently acquired businesses and higher product testing charges.

“Because our newly acquired businesses, particularly the Disguise Halloween business, will not significantly contribute to revenues and profitability until later in the year, our forecast anticipates first quarter net sales in the range of $105 million to $115 million and an overall loss per share in the range of 29 cents to 36 cents, approximately 27 cents per share of which is attributable to the cumulative net loss after increased amortization charges and overhead costs related to the new acquisitions."


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