Mattel in Talks to Buy HIT
It has been widely reported that Mattel could buy HIT Entertainment from private equity firm Apax Partners for a reported $800 million. The deal could go through as early as this week. Apax purchased HIT in 2005 for $890 million, according to The Wall Street Journal. Mattel is currently a licensee of HIT’s Thomas & Friends brand with an extensive line featured under its Fisher-Price division.
Jakks Reports Q3
Jakks Pacific, Inc., reported results for its third quarter and first nine months ended September 30, 2011. Net sales for the third quarter of 2011 were $332.4 million, compared to $348.7 million reported in the comparable period in 2010. Net income for the third quarter was $34.8 million, or $1.10 per diluted share, which includes $0.7 million, or $0.01 per diluted share, related to legal and financial advising fees and expenses in conjunction with the unsolicited indication of interest to acquire the company. This compares to $40.4 million, or $1.23 per share, which included a tax benefit of $5.9 million, or $0.17 per diluted share reported in the comparable period in 2010. Gross margins held steady year over year and operating margins expanded 30 basis points with decreases in operating costs though offset in part by the legal and financial advising fees incurred in 2011.
Net sales for the nine months were $536.7 million, compared to $549.3 million in 2010. Net income reported for the nine month period was $28.5 million, or $0.97 per diluted share, which includes fees and expenses related to the unsolicited indication of interest of $1.8 million, or $0.04 per diluted share. This compares to net income for the first nine months of 2010 of $38.2 million, or $1.22 per diluted share, which includes a one-time pre-tax charge relating to the benefit payment of $2.8 million, or $0.06 per diluted share, to the estate of Jack Friedman pursuant to his employment agreement and tax benefits of $10.8 million, or $0.31 per diluted share. Excluding the legal and financial advising fees in 2011 and the tax benefit and one-time charge in 2010, the nine month earnings would have been $29.9 million, or $1.01 per diluted share, compared to $29.3 million, or $0.97 per diluted share in 2010.
Consistent with the seasonality of the toy business, operations used cash of $2.6 million for the first nine months of 2011 with inventory and accounts receivable at seasonal highs, and as of September 30, 2011, the company’s working capital was $401.4 million, including cash and equivalents and marketable securities of $232.5 million, compared to working capital of $407.8 million including cash and equivalents and marketable securities of $218.8 million, as of September 30, 2010.
Jakks reaffirmed that it expects to report for the full year 2011 net sales of between $770 and $775 million and earnings per share in the range of $1.32 to $1.35 per diluted share.
In a separate announcement on Monday, Jakks said that it completed its acquisition of Moose Mountain Toymakers. The company makes foot-to-floor ride-ons, wagons, tents, soft play environments, arcade pinball games, and sports arcade products.
Hasbro Reports Q3
Hasbro reported revenue and earnings growth for the third quarter 2011. It reported 5 percent net revenues growth to $1.38 billion compared to $1.31 billion in the third quarter 2010. Third quarter 2011 net revenues include a positive $37.1 million impact of foreign exchange. The company reported a 10 percent increase in net earnings for the third quarter 2011 to $171 million or $1.27 per diluted share compared to $155.2 million or $1.09 per diluted share in 2010.
In the third quarter, worldwide net revenues in the Boys product category increased 15 percent to $534.6 million; the Games and Puzzles category decreased 6 percent to $364.7 million; the Girls category declined 4 percent to $259.1 million; and the Preschool category was up 12 percent to $217.4 million.
U.S. and Canada segment net revenues declined 7 percent to $764.6 million compared to $825.5 million in 2010; however, the company’s products experienced an 8 percent increase year-over-year in point-of-sale at the top four U.S. accounts. The reported results reflect growth in the Preschool category, which was offset by declines in the Boys, Girls, and Games and Puzzles categories. The U.S. and Canada segment reported an operating profit of $128.8 million, compared to $158.8 million in 2010.
International segment net revenues grew 23 percent to $563.3 million, an increase of $104.4 million compared to $458.9 million in 2010. Net revenues in the International segment grew 15 percent absent the positive $35.2 million impact of foreign exchange. Revenue in the International segment reflects growth in the Boys category, which offset slight declines in the other product categories. The International segment reported a 42 percent increase in operating profit to $100.7 million, compared to an operating profit of $70.8 million in 2010.
Entertainment and Licensing segment net revenues increased 69 percent to $46.3 million, compared to $27.5 million in 2010. Revenue in the Entertainment and Licensing segment reflected growth in licensing revenue associated with the sale of television programming globally, movie and merchandise-related revenue from Transformers: Dark of the Moon as well as a onetime payment from Universal Studios. The Entertainment and Licensing segment reported an operating profit of $15.3 million compared to $5.9 million in 2010.
Hasbro repurchased a total of 5.6 million shares of common stock during the third quarter 2011 at a total cost of $211 million and an average price of $37.74 per share. For the first three quarters in 2011, it repurchased a total of 9.4 million shares at a total cost of $386.7 million and an average price of $40.97. At quarter-end, $263.5 million remained available under the current share repurchase authorization.
Mattel Reports Q3
Mattel, Inc., reported 2011 third quarter financial results. For the quarter, the company reported net income of $300.8 million, or $0.86 per share, compared to last year’s third quarter net income of $283.3 million, or $0.77 per share.
For the quarter, net sales were $2 billion, up 9 percent compared to $1.83 billion last year, including favorable changes in currency exchange rates of 2 percentage points. On a regional basis, third quarter gross sales increased 6 percent in the U.S. and increased 13 percent in international markets, including favorable changes in currency exchange rates of 5 percentage points. Operating income for the quarter was $397.6 million, compared to prior year’s operating income for the quarter of $358.6 million.
The company’s debt-to-total-capital ratio was 33 percent. Consistent with the seasonality of the business, net cash flows used for operating activities were approximately $322 million in the first nine months of 2011, a decrease of $106 million, compared with a use of approximately $428 million in the same period in 2010.
Cash flows used for financing and other activities were $586 million in the first nine months of 2011, compared to cash flows from financing and other activities of approximately $361 million in the same period in 2010, primarily reflecting increased debt repayments consistent with scheduled maturities, dividend payments, and increased share repurchases in 2011, as well as the issuance of $500 million of senior unsecured notes in the third quarter of 2010.
During the third quarter of 2011, the company repurchased approximately 6.6 million shares of its common stock at a cost of approximately $173 million.
Sales by Business Unit Mattel Girls and Boys Brands
For the third quarter, worldwide gross sales for the Mattel Girls & Boys Brands business unit were $1.34 billion, up 15 percent versus a year ago. Worldwide gross sales for the Barbie brand were up 17 percent. Worldwide gross sales for Other Girls Brands were up 32 percent, driven by the Monster High and Disney Princess doll lines. Worldwide gross sales for the Wheels business, which includes the Hot Wheels, Matchbox, and Tyco R/C brands, were up 2 percent. Worldwide gross sales for the Entertainment business, which includes Radica and Games and Puzzles, were up 14 percent for the quarter, primarily driven by growth in the Cars 2 property.
Third quarter worldwide gross sales for the Fisher-Price Brands business unit, which includes Fisher-Price Core, Fisher-Price Friends, and Power Wheels brands, were $748.9 million, up 1 percent versus the prior year, primarily driven by sales of Infant products.
American Girl Brands
Third quarter gross sales for the American Girl Brands business unit, which offers American Girl-branded products directly to consumers, were $87.6 million, up 4 percent versus last year, primarily reflecting sales of products related to Kanani, the 2011 Girl of the Year.
Additionally, the company announced that its Board of Directors declared a fourth quarter cash dividend of $0.23 per share on Mattel’s common stock. The dividend will be payable on December 16, 2011, to stockholders of record on November 30, 2011. The dividend is the fourth of four quarterly dividends the company will pay this year, reflecting an annualized dividend of $0.92 per share, which represents an increase of $0.09 per share, or 11 percent, versus last year’s annual dividend of $0.83 per share.
The Mattel Board of Directors authorized the company to increase its previously announced share repurchase program by $500 million. The share repurchase program is one component of the company’s capital and investment framework, which was announced in February 2003. Under the program, Mattel has repurchased approximately 144.7 million shares of its common stock for an aggregate of approximately $3 billion.
Paul Frank in 7-Eleven Hong Kong Promotion
Fresh on the heels of opening its flagship Paul Frank stores in China, Saban Brands has secured a promotional agreement for the Paul Frank brand with 7-Eleven convenience stores throughout Hong Kong.
The nine-week Paul Frank promotion kicked off in Hong Kong’s 7-Eleven stores on September 21 and will continue through November 22, 2011.
7-Eleven stores in Hong Kong are projected to distribute more than one million pieces during the nine-week event. 7-Eleven stores are also using special in-store displays and posters to promote the Paul Frank promotion and are also advertising the promotion on billboards, public trains, outdoor, and social media.
Saban Brands opened the doors to its flagship Paul Frank store in China at the Joy City Mall in Xidan, Beijing on September 9, 2011.
Working in partnership with Shanghai Romma, a subsidiary of the Jun Yao Corporation, Saban Brands plans to launch at least 60 additional Paul Frank Stores throughout China over the next five years. To date, Saban Brands has established Paul Frank Stores throughout Asia, in Thailand, Taiwan, Singapore, and Malaysia.
Henson Signs TOMY for Pajanimals
The Jim Henson Company has appointed TOMY International (formerly RC2/Learning Curve Brands) as the master toy licensee in the U.S. for its Pajanimals brand and characters. Under the terms of the multi-year agreement, TOMY International will develop an assortment of innovative and comforting toys and juvenile products for the U.S. market. Among the Pajanimals’ products and merchandise to be developed are plush, nighttime projectors, monitors, nightlights, nap mats, and playmats for an anticipated delivery date of spring 2013.