Jakks, NantWorks Create Joint Venture
Jakks Pacific, Inc., and tech company NantWorks, LLC, announced that they have signed a letter of intent to create a joint venture to develop, market, and sell next generation toys incorporating NantWorks’ proprietary image recognition technology. The new venture will be named DreamPlay Toys.
Jakks Pacific will begin transforming its product line to incorporate the new image recognition technology, and will present the first examples at its Toy Fair in Los Angeles in October. Children will be able to “activate” toys and interact with them using smart phones or tablet devices in their homes and in stores. The NantWorks platform enables instant connections between physical toys, video, posters, books, games, and all other forms of media.
Under the terms of the letter of intent, NantWorks will link Jakks’ toy products to content and animation on mobile devices through the image recognition platform, and Jakks will have the exclusive right to arrange for partnerships with other toy companies to make the platform available to them in the development, sale, and marketing of their toy products.
Jakks and NantWorks will have a profit-sharing arrangement for these third-party toy relationships, according to a statement from Jakks. Under the proposed arrangements, Jakks will be providing resources, including personnel and facilities and the services of its CEO, Stephen Berman. He will also serve as general manager of DreamPlay Consumer Products, which will extend image recognition technology to non-toy consumer products and applications. The parties intend to complete definitive agreements within the next 90 days, says Jakks.
Mattel Reports Q2 2012
Mattel, Inc., reported 2012 second quarter financial results. For the quarter, the company reported net income of $96.2 million, or $0.28 per share, compared to last year’s second quarter net income of $80.5 million, or $0.23 per share.
“In the second quarter, we delivered solid performance as we continued to build momentum with key brands, such as Barbie, Monster High, American Girl, and Hot Wheels, as well as the Batman The Dark Night Rises property, despite a continued cautious global retail environment and a strengthening U.S. dollar,” said Bryan Stockton, Mattel’s CEO, in a statement.
For the quarter, net sales were $1.16 billion, flat compared to last year, including an unfavorable change in currency exchange rates of 4 percentage points. On a regional basis, second quarter gross sales increased 1 percent in the North American region. For the International region, gross sales decreased 1 percent, including an unfavorable impact of currency exchange rates of 10 percentage points. Operating income for the quarter was $131.4 million, compared to prior year’s operating income for the quarter of $109.3 million.
The company’s debt-to-total-capital ratio was 38.1 percent. For the first half of the year, the company’s cash and equivalents declined by approximately $997 million, compared with a decline of approximately $863 million in last year’s first half.
For the first half of the year, cash flows used for operating activities were approximately $61 million, a decrease of $166 million compared to approximately $227 million of cash flows used for operating activities in the first half of 2011. The decrease is primarily due to lower working capital usage. Cash flows used for investing activities were approximately $816 million, an increase of $772 million, driven primarily by the acquisition of HIT Entertainment. Cash flows used for financing and other activities were approximately $120 million, a decrease of $472 million, compared to approximately $592 million in 2011, primarily due to the 2011 repayments of long-term debt and lower share repurchases.
The company announced that its Board of Directors declared a third quarter cash dividend of $0.31 per share on the company’s common stock. The dividend will be payable on September 21, 2012, to stockholders of record on August 29, 2012. The dividend is the third of four quarterly dividends the company expects to pay this year, reflecting an annualized dividend of $1.24 per share, which represents a 35 percent increase to last year’s total dividends. During the second quarter of 2012, the company repurchased 70,000 shares of its common stock at a cost of approximately $2 million.
Mattel Girls and Boys Brands:
For the second quarter, worldwide gross sales for Mattel Girls & Boys Brands were $781.6 million, down 1 percent versus the prior year. Worldwide gross sales for the Barbie brand were up 5 percent. Worldwide gross sales for Other Girls Brands were up 96 percent, primarily driven by Monster High. Worldwide gross sales for the Wheels category, which includes the Hot Wheels, Matchbox, and Tyco R/C brands, were up 9 percent, primarily driven by Hot Wheels. Worldwide gross sales for the Entertainment business, which also includes Radica and Games, were down 36 percent, primarily driven by decreases in the Cars 2 movie property.
Second quarter worldwide gross sales for Fisher-Price Brands, which includes Fisher-Price Core, Fisher-Price Friends, and Power Wheels brands, were $407.3 million, or up 2 percent versus the prior year, driven by strength in Fisher-Price Friends with the addition of the HIT Entertainment portfolio and Disney’s Jake and the Never Land Pirates property.
American Girl Brands:
Second quarter gross sales for American Girl were $68.7 million, up 3 percent versus the prior year, primarily driven by strong sales of McKenna, the 2012 Girl of the Year.
Jakks Reports Q2
Jakks Pacific, Inc., reported results for the company’s second quarter ended June 30, 2012.
Net sales for the second quarter of 2012 were $145.4 million, up from $131.9 million reported in the comparable period in 2011. Reported net income for the second quarter was $0.2 million, or $0.01 per diluted share, which includes $1.7 million of pre-tax charges, or $0.05 per diluted share, related to financial and legal advisory fees and expenses associated with the unsolicited indication of interest and activist shareholder activities. This compares to net income of $4.2 million, or $0.16 per diluted share, reported in the comparable period in 2011, which included $0.9 million, or $0.02 per diluted share, of financial and legal advisory fees and expenses. Excluding the legal and financial advising fees, second quarter earnings would have totaled $1.6 million, or $0.06 per diluted share, compared to $4.9 million, or $0.18 per diluted share, in 2011. The company agreed to modify the payment terms of the THQ settlement agreement resulting in a deferral of $2 million of income, or $0.06 per diluted share, from the second quarter to $1 million, or $0.03 per diluted share, to each of the third and fourth quarters of 2012.
Net sales for the six months ending June 30, 2012, were $218.8 million compared to $204.3 million in 2011. The net loss reported for the six-month period was $15.8 million, or $0.61 per diluted share, which included $3.1 million of pre-tax charges, or $0.09 per diluted share, of financial and legal advisory fees and expenses. This compares to a net loss for the first six months of 2011 of $6.3 million, or $0.23 per diluted share, which included $1.2 million, or $0.03 per diluted share, of financial and legal advisory fees and expenses. Excluding the financial and legal advisory fees and expenses, the six month loss would have totaled $13.5 million, or $0.52 per diluted share, compared to a loss of $5.6 million, or $0.20 per diluted share, in 2011. The first six months of 2012 was impacted by the deferral of the THQ income as noted above, says Jakks.
“We are pleased with the sales growth in the second quarter and year to date, and we are on track to meet our guidance ranges for the full year,” said Stephen Berman, president and CEO, Jakks Pacific, in a statement. “Highlights of our second quarter include the expansion of the Monsuno toys in the U.S. and the launch internationally of the animated series and related toy products, which has met the company’s expectations to date, and our Winx Club dolls and Big Wheel line launched at select major retailers, both of which are already showing strong momentum. Our outlook for the third quarter remains optimistic with contributions from a broad range of products including our growing pool of owned content.”
As of June 30, 2012, the company’s working capital was $353.5 million, including cash and equivalents and marketable securities of $221.6 million, compared to working capital of $372.8 million including cash and equivalents and marketable securities of $247.1 million as of June 30, 2011.
For 2012, the company continues to expect an increase in net sales of 6.2 percent to 7.4 percent to approximately $720 million to $728 million, with revised diluted earnings per share in the range of approximately $1.04 to $1.08, giving effect to the repurchase of common stock pursuant to the self-tender and the related anticipated financing costs and excluding the financial and legal advisory fees. The company’s previous guidance for diluted earnings per share was in the range of $1.01 to $1.07, excluding the financial and legal advisory fees.
The Jakks Board of Directors has declared a regular quarterly cash dividend of $0.10 per common share payable on October 1, 2012, to shareholders of record at the close of business on September 14, 2012.