JAKKS Pacific Inc. (JAKK, Financial) filed Quarterly Report for the period ended 2010-03-31.
Jakks Pacific Inc. has a market cap of $410.2 million; its shares were traded at around $14.7 with a P/E ratio of 13 and P/S ratio of 0.5. JAKK is in the portfolios of David Dreman of Dreman Value Management, Third Avenue Management, Diamond Hill Capital of Diamond Hill Capital Management Inc, Paul Tudor Jones of The Tudor Group, Charles Brandes of Brandes Investment, Kenneth Fisher of Fisher Asset Management, LLC, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.
Selling, general and administrative expenses were $38.9 million in the three months ended March 31, 2010 and $54.6 million in the prior year period, constituting 50.2% and 50.2% of net sales, respectively. Selling, general and administrative expenses decreased $15.7 million from the prior year period primarily due to the favorable effect of cost controls and restructuring initiatives, coupled with the effect of lower sales on certain volume-sensitive expenses specifically, product development ($4.7 million), salary and benefits ($3.6 million), direct selling costs ($2.5 million), rent ($1.2 million), marketing ($1.0 million), legal ($0.7 million), stock compensation ($0.7 million), outside services and temporary labor ($0.7 million) and commissions ($0.6 million), partially offset by increased bad debt expense ($0.4 million) and bonus expense ($0.6 million).
Interest expense was $1.2 million in the three months ended March 31, 2010, as compared to $1.3 million in the prior period. In the three months ended March 31, 2010, we booked interest expense of $2.2 million related to our convertible senior notes payable, offset in part by a net benefit of $1.0 million related to uncertain tax positions taken or expected to be taken in a tax return and net interest expense of $0.1 million related to uncertain tax positions taken or expected to be taken in a tax return. In the three months ended March 31, 2009, we booked interest expense of $1.1 million related to our convertible senior notes payable and net interest expense of $0.1 million related to uncertain tax positions taken or expected to be taken in a tax return.
Our investing activities used net cash of $0.8 million in the three months ended March 31, 2010, as compared to $15.5 million in the prior year period, consisting primarily of cash paid for the purchase of office furniture and equipment and molds and tooling of $1.3 million used in the manufacture of our products, offset in part by the change in other assets of $0.4 million. As part of our strategy to develop and market new products, we have entered into various character and product licenses with royalties generally ranging from 1% to 14% payable on net sales of such products. As of March 31, 2010, these agreements required future aggregate minimum guarantees of $84.7 million, exclusive of $58.8 million in advances already paid. Of this $84.7 million future minimum guarantee, $59.4 million is due over the next twelve months.
In October 2008, we acquired substantially all of the assets of Tollytots Limited. The total initial consideration of $26.8 million consisted of $12.0 million in cash and the assumption of liabilities in the amount of $14.8 million, and resulted in goodwill of $4.1 million, of which $3.1 million has been determined to be impaired and was written off in the quarter ended June 30, 2009. In addition, we agreed to pay an earn-out of up to an aggregate amount of $5.0 million in cash over the three calendar years following the acquisition based on the achievement of certain financial performance criteria, which will be recorded as goodwill when and if earned. In the first earn-out period ended December 31, 2009, no portion of the earn-out was earned. Tollytots is a leading designer and producer of licensed baby dolls and baby doll pretend play accessories based on well-known brands and was included in our results of operations from the date of acquisition.
In October 2008, we acquired substantially all of the stock of Kids Only, Inc. and a related Hong Kong company, Kids Only Limited (collectively, “Kids Only”). The total initial consideration of $23.5 million consisted of $20.4 million in cash and the assumption of liabilities in the amount of $3.4 million, and resulted in goodwill of $13.2 million, of which $12.7 million has been determined to be impaired and was written off in the quarter ended June 30, 2009. In addition, we agreed to pay an earn-out of up to an aggregate amount of $5.6 million in cash over the three calendar years following the acquisition based on the achievement of certain financial performance criteria, which will be recorded as goodwill when and if earned. The first earn-out period ended September 30, 2009 and the full earn-out amount was earned for the first earn-out period. Kids Only is a leading designer and producer of licensed indoor and outdoor kids furniture, and has an extensive portfolio which also includes baby dolls and accessories, room décor and a myriad of other children s toy products and was included in our results of operations from the date of acquisition.
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Jakks Pacific Inc. has a market cap of $410.2 million; its shares were traded at around $14.7 with a P/E ratio of 13 and P/S ratio of 0.5. JAKK is in the portfolios of David Dreman of Dreman Value Management, Third Avenue Management, Diamond Hill Capital of Diamond Hill Capital Management Inc, Paul Tudor Jones of The Tudor Group, Charles Brandes of Brandes Investment, Kenneth Fisher of Fisher Asset Management, LLC, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
In October 2008, we acquired substantially all of the assets of Tollytots Limited. The total initial consideration of $26.8 million consisted of $12.0 million in cash and the assumption of liabilities in the amount of $14.8 million, and resulted in goodwill of $4.1 million, of which $3.1 million has been determined to be impaired and was written off in the quarter ended June 30, 2009. In addition, we agreed to pay an earn-out of up to an aggregate amount of $5.0 million in cash over the three calendar years following the acquisition based on the achievement of certain financial performance criteria, which will be recorded as goodwill when and if earned. In the first earn-out period ended December 31, 2009, no portion of the earn-out was earned. Tollytots is a leading designer and producer of licensed baby dolls and baby doll pretend play accessories based on well-known brands and was included in our results of operations from the date of acquisition.Selling, general and administrative expenses were $38.9 million in the three months ended March 31, 2010 and $54.6 million in the prior year period, constituting 50.2% and 50.2% of net sales, respectively. Selling, general and administrative expenses decreased $15.7 million from the prior year period primarily due to the favorable effect of cost controls and restructuring initiatives, coupled with the effect of lower sales on certain volume-sensitive expenses specifically, product development ($4.7 million), salary and benefits ($3.6 million), direct selling costs ($2.5 million), rent ($1.2 million), marketing ($1.0 million), legal ($0.7 million), stock compensation ($0.7 million), outside services and temporary labor ($0.7 million) and commissions ($0.6 million), partially offset by increased bad debt expense ($0.4 million) and bonus expense ($0.6 million).
Interest expense was $1.2 million in the three months ended March 31, 2010, as compared to $1.3 million in the prior period. In the three months ended March 31, 2010, we booked interest expense of $2.2 million related to our convertible senior notes payable, offset in part by a net benefit of $1.0 million related to uncertain tax positions taken or expected to be taken in a tax return and net interest expense of $0.1 million related to uncertain tax positions taken or expected to be taken in a tax return. In the three months ended March 31, 2009, we booked interest expense of $1.1 million related to our convertible senior notes payable and net interest expense of $0.1 million related to uncertain tax positions taken or expected to be taken in a tax return.
Our investing activities used net cash of $0.8 million in the three months ended March 31, 2010, as compared to $15.5 million in the prior year period, consisting primarily of cash paid for the purchase of office furniture and equipment and molds and tooling of $1.3 million used in the manufacture of our products, offset in part by the change in other assets of $0.4 million. As part of our strategy to develop and market new products, we have entered into various character and product licenses with royalties generally ranging from 1% to 14% payable on net sales of such products. As of March 31, 2010, these agreements required future aggregate minimum guarantees of $84.7 million, exclusive of $58.8 million in advances already paid. Of this $84.7 million future minimum guarantee, $59.4 million is due over the next twelve months.
In October 2008, we acquired substantially all of the assets of Tollytots Limited. The total initial consideration of $26.8 million consisted of $12.0 million in cash and the assumption of liabilities in the amount of $14.8 million, and resulted in goodwill of $4.1 million, of which $3.1 million has been determined to be impaired and was written off in the quarter ended June 30, 2009. In addition, we agreed to pay an earn-out of up to an aggregate amount of $5.0 million in cash over the three calendar years following the acquisition based on the achievement of certain financial performance criteria, which will be recorded as goodwill when and if earned. In the first earn-out period ended December 31, 2009, no portion of the earn-out was earned. Tollytots is a leading designer and producer of licensed baby dolls and baby doll pretend play accessories based on well-known brands and was included in our results of operations from the date of acquisition.
In October 2008, we acquired substantially all of the stock of Kids Only, Inc. and a related Hong Kong company, Kids Only Limited (collectively, “Kids Only”). The total initial consideration of $23.5 million consisted of $20.4 million in cash and the assumption of liabilities in the amount of $3.4 million, and resulted in goodwill of $13.2 million, of which $12.7 million has been determined to be impaired and was written off in the quarter ended June 30, 2009. In addition, we agreed to pay an earn-out of up to an aggregate amount of $5.6 million in cash over the three calendar years following the acquisition based on the achievement of certain financial performance criteria, which will be recorded as goodwill when and if earned. The first earn-out period ended September 30, 2009 and the full earn-out amount was earned for the first earn-out period. Kids Only is a leading designer and producer of licensed indoor and outdoor kids furniture, and has an extensive portfolio which also includes baby dolls and accessories, room décor and a myriad of other children s toy products and was included in our results of operations from the date of acquisition.
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