T
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the Fiscal Year Ended December 31, 2007
|
£
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
95-4527222
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
22619
Pacific Coast Highway
|
|
Malibu,
California
|
90265
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Title
of each class
|
Name
of each exchange
on
which registered
|
Common
Stock, $.001 par value per share
|
Nasdaq
Global Select
|
|
|
Page
|
|
PART
I
|
|
Item
1.
|
Business
|
4
|
Item
1A.
|
Risk
Factors
|
12
|
Item
1B.
|
Unresolved
Staff Comments
|
None
|
Item
2.
|
Properties
|
19
|
Item
3.
|
Legal
Proceedings
|
19
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
None
|
|
PART
II
|
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
23
|
Item
6.
|
Selected
Financial Data
|
25
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
26
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
35
|
Item
8.
|
Financial
Statements and Supplementary Data
|
37
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
None
|
Item
9A.
|
Controls
and Procedures
|
64
|
Item
9B.
|
Other
Information
|
None
|
|
PART
III
|
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
66
|
Item
11.
|
Executive
Compensation
|
68
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
81
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
83
|
Item
14.
|
Principal
Accountant Fees and Services
|
83
|
|
PART
IV
|
|
Item
15.
|
Exhibits
and Financial Statement Schedules
|
85
|
Signatures
|
87
|
|
Certifications
|
90
|
•
|
Action
figures and accessories, including licensed characters, principally
based
on World
Wrestling Entertainment®
(“WWE”), The Chronicles of Narnia: Prince Caspian™ and Pokemon®
franchises;
|
•
|
Toy vehicles, including Road Champs®, RC Racers™ and MXS® toy vehicles and accessories, as well as those based on Nascar®; |
•
|
Electronics
products, including Plug
It In & Play TV Games™,
EyeClops™ Bionic Eye products,
and Laser
Challenge®,
as well as others based on Disney® and Discovery Kids® brands;
|
•
|
Role-play,
dress-up and novelty products featuring entertainment and consumer
products properties such as Dirt Devil®, Subway®,
Pizza Hut® and McDonalds® pretend play products,
Disney
Princess®,
Hannah
Montana™,
Barbie®
and Dora
the Explorer®
playsets for girls and Black
& Decker®
and Pirates
of the Caribbean™
playsets for boys;
|
•
|
Infant
and pre-school toys and plush toys featuring Care
Bears®,
Barney®,
The Wiggles®, Curious George®, and slumber
bags;
|
•
|
Dolls
including large, fashion and mini dolls and related accessories based
on
Cabbage
Patch Kids®,
Hannah
Montana,
The
Cheetah Girls™,
Puppy
in My Pocket and Friends™,
Hairspray™
the movie and Disney
Princess® dolls
and private label fashion dolls for other
retailers;
|
•
|
Seasonal
and outdoor toys and leisure products, including Go
Fly A Kite®,
Air
Creations®,
and other kites, Funnoodle®
pool toys, The
Storm®
water guns and Fly
Wheels®
XPV® and
Flight™
vehicles; and
|
•
|
Junior
sports and toy paintball products, including Gaksplat®
and
The
Storm.
|
•
|
Craft,
activity and stationery products, including Flying
Colors®
activity sets, compounds, playsets and lunch boxes based on
Nickelodeon®, Dora the Explorer, Pokémon, The Littlest
Petshop® and others, and Color
Workshop®
craft products such as Blopens®,
Vivid
Velvet®,
and Pentech®
writing instruments, stationery and activity products, and non-licensed
brands including Girl Gourmet™ and The Spa
Factory™.
|
•
|
Pet
products, including toys, consumables, beds, clothing and accessories,
with licenses used in conjunction with these products, including
American
Kennel Club®,
The
Cat Fanciers’ Association™,
Arm & Hammer® and The Humane Society of the United
States® brands, as well as entertainment properties, including
Disney and Snoop Dogg®, and private label brands
including Totally My
Pet™.
|
•
|
creating
innovative products under established brand names;
|
•
|
focusing
our marketing efforts to enhance consumer recognition and retailer
interest;
|
•
|
linking
them with our evergreen portfolio of brands;
|
•
|
adding
new items to the branded product lines that we expect will enjoy
greater
popularity; and
|
•
|
adding
simple innovation and technology to make them more appealing to today’s
kids.
|
•
|
Toy
and activity vehicles
|
•
|
Road
Champs® die-cast collectible and toy
vehicles
|
•
|
Extreme
sports die-cast collectibles and toy vehicles and action
figures
|
•
|
Slumber
bags
|
|
New
Game Titles
|
Profit
from
|
||||||||
|
Console
Platforms
|
Hand-
held
Platforms
|
video
game
joint
venture
(1)
|
|||||||
|
|
|
(In
millions)
|
|||||||
1999
|
1
|
1
|
$
|
3.6
|
||||||
2000
|
4
|
1
|
15.9
|
|||||||
2001
|
1
|
2
|
6.7
|
|||||||
2002
|
3
|
1
|
8.0
|
|||||||
2003
|
5
|
—
|
7.4
|
|||||||
2004
|
2
|
1
|
7.9
|
|||||||
2005
|
3
|
1
|
9.4
|
|||||||
2006
|
2
|
1
|
13.2
|
|||||||
2007
|
4
|
2
|
21.2
|
(1)
|
Profit
from the video game joint venture reflects our preferred return on
joint
venture revenue less certain costs incurred directly by us and payments
made by us to THQ for their share of the profit on Plug
It In & Play
TV
Games based on WWE
content.
|
•
|
engaged
representatives to oversee sales in certain territories,
|
•
|
engaged
distributors in certain territories,
|
•
|
established
direct relationships with retailers in certain territories, and
|
•
|
expanded
in-house resources dedicated to product development and marketing
of our
lines internally.
|
•
|
The
phenomenon of children outgrowing toys at younger ages, particularly
in
favor of interactive and high technology
products;
|
•
|
Increasing
use of technology;
|
•
|
Shorter
life cycles for individual products;
and
|
•
|
Higher
consumer expectations for product quality, functionality and
value.
|
•
|
our
current products will continue to be popular with
consumers;
|
•
|
the
product lines or products that we introduce will achieve any significant
degree of market acceptance;
or
|
•
|
the
life cycles of our products will be sufficient to permit us to recover
licensing, design, manufacturing, marketing and other costs associated
with those products.
|
•
|
media
associated with our character-related and theme-related product lines
will
be released at the times we expect or will be
successful;
|
•
|
the
success of media associated with our existing character-related and
theme-related product lines will result in substantial promotional
value
to our products;
|
•
|
we
will be successful in renewing licenses upon expiration on terms
that are
favorable to us; or
|
•
|
we
will be successful in obtaining licenses to produce new character-related
and theme-related products in the
future.
|
•
|
Our
current licenses require us to pay minimum
royalties
|
•
|
Some
of our licenses are restricted as to
use
|
•
|
New
licenses are difficult and expensive to
obtain
|
•
|
A
limited number of licensors account for a large portion of our net
sales
|
•
|
greater
financial resources;
|
•
|
larger
sales, marketing and product development
departments;
|
•
|
stronger
name recognition;
|
•
|
longer
operating histories; and
|
•
|
greater
economies of scale.
|
•
|
attractiveness
of products;
|
•
|
suitability
of distribution channels;
|
•
|
management
ability;
|
•
|
financial
condition and results of operations;
and
|
•
|
the
degree to which acquired operations can be integrated with our
operations.
|
•
|
difficulties
in integrating acquired businesses or product lines, assimilating
new
facilities and personnel and harmonizing diverse business strategies
and
methods of operation;
|
•
|
diversion
of management attention from operation of our existing
business;
|
•
|
loss
of key personnel from acquired companies;
and
|
•
|
failure
of an acquired business to achieve targeted financial
results.
|
•
|
currency
conversion risks and currency
fluctuations;
|
•
|
limitations,
including taxes, on the repatriation of
earnings;
|
•
|
political
instability, civil unrest and economic
instability;
|
•
|
greater
difficulty enforcing intellectual property rights and weaker laws
protecting such rights;
|
•
|
complications
in complying with laws in varying jurisdictions and changes in
governmental policies;
|
•
|
greater
difficulty and expenses associated with recovering from natural
disasters;
|
•
|
transportation
delays and interruptions;
|
•
|
the
potential imposition of tariffs;
and
|
•
|
the
pricing of intercompany transactions may be challenged by taxing
authorities in both Hong Kong and the United States, with potential
increases in income taxes.
|
•
|
product
liability claims;
|
•
|
loss
of sales;
|
•
|
diversion
of resources;
|
•
|
damage
to our reputation;
|
•
|
increased
warranty costs; and
|
•
|
removal
of our products from the
market.
|
Property
|
Location
|
|
Approximate
Square
Feet
|
|
Lease
Expiration
Date
|
|||||
Domestic
|
|
|
|
|||||||
Corporate
Office
|
Malibu,
California
|
29,500
|
February
28, 2015
|
|||||||
Design
Center
|
Malibu,
California
|
16,800
|
August,
31, 2008
|
|||||||
Distribution
Center
|
City of Industry, California
|
800,000
|
January 31, 2013
|
|||||||
JDC East
|
St.
Clair, Michigan
|
69,000
|
January
31, 2013
|
|||||||
Play
Along U.S.
|
Deerfield
Beach, Florida
|
21,000
|
February
28, 2009
|
|||||||
Creative
Designs
|
Trevose,
Pennsylvania
|
14,700
|
June
30, 2009
|
|||||||
Sales
Office / Showroom
|
New
York, New York
|
11,500
|
April
30, 2012
|
|||||||
Sales
Offices
|
Bentonville,
Arkansas
|
4,400
|
November 30, 2008
|
|||||||
|
Colchester,
CT
|
2,400
|
May
31, 2008
|
|||||||
|
Palatine,
Illinois
|
2,100
|
Month-to
Month
|
|||||||
International
|
||||||||||
JAKKS
/ Play Along Hong Kong
|
Kowloon,
Hong Kong
|
36,600
|
March
31, 2009
|
|||||||
Arbor
Toys Hong Kong
|
Kowloon,
Hong Kong
|
23,100
|
June
30, 2009
|
|||||||
Production Inspection Office
|
Shanghai,
China
|
1,700
|
April
30, 2008
|
|||||||
Shenzhen
Office
|
Shenzhen,
China
|
2,900
|
June
30, 2008
|
|
Price
Range of
Common
Stock
|
||||||
|
High
|
Low
|
|||||
2006:
|
|
|
|||||
First
quarter
|
$
|
27.10
|
$
|
19.23
|
|||
Second
quarter
|
28.50
|
17.06
|
|||||
Third
quarter
|
20.24
|
15.26
|
|||||
Fourth
quarter
|
23.38
|
17.17
|
|||||
2007:
|
|||||||
First
quarter
|
25.96
|
19.31
|
|||||
Second
quarter
|
28.93
|
23.58
|
|||||
Third
quarter
|
31.42
|
18.19
|
|||||
Fourth
quarter
|
28.48
|
23.12
|
|
December 31,
2003
|
December 31,
2004
|
December 31,
2005
|
December 31,
2006
|
December 31,
2007
|
|||||||||||
JAKKS
Pacific
|
(2.37
|
)%
|
68.15
|
%
|
(5.29
|
)%
|
4.30
|
%
|
8.10
|
%
|
||||||
Peer
Group
|
48.65
|
14.65
|
(10.08
|
)
|
18.18
|
8.93
|
||||||||||
Russell
2000
|
47.25
|
18.33
|
4.56
|
18.35
|
(1.55
|
)
|
|
January 1,
2003
|
|
December 31,
2003
|
|
December 31,
2004
|
|
December 31,
2005
|
|
December 31,
2006
|
|
December 31,
2007
|
||||||||
JAKKS
Pacific
|
$
|
100.00
|
$
|
97.63
|
$
|
164.16
|
$
|
155.49
|
$
|
162.17
|
$
|
175.31
|
|||||||
Peer
Group
|
100.00
|
148.65
|
170.44
|
153.26
|
181.13
|
197.31
|
|||||||||||||
Russell
2000
|
100.00
|
147.25
|
174.25
|
185.20
|
215.62
|
212.29
|
Plan
Category
|
Number of
Securities to
be Issued
upon
Exercise of
Outstanding
Options,
Warrants
and Rights
(a)
|
Weighted-
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights
(b)
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a)) (c)
|
|||||||
Equity
compensation plans approved by security holders
|
836,178
|
$
|
17.27
|
807,876
|
||||||
Equity
compensation plans not approved by security holders
|
100,000
|
11.35
|
—
|
|||||||
Total
|
936,178
|
$
|
16.63
|
807,876
|
|
Years
Ended December 31,
|
|||||||||||||||
|
2003
|
2004
|
2005
|
2006
|
2007
|
|||||||||||
|
(In
thousands, except per share data)
|
|||||||||||||||
Consolidated
Statement of Income Data:
|
||||||||||||||||
Net
sales
|
$
|
315,776
|
$
|
574,266
|
$
|
661,536
|
$
|
765,386
|
$
|
857,085
|
||||||
Cost
of sales
|
189,334
|
348,259
|
394,829
|
470,592
|
533,435
|
|||||||||||
Gross
profit
|
126,442
|
226,007
|
266,707
|
294,794
|
323,650
|
|||||||||||
Selling,
general and administrative expenses
|
113,053
|
172,282
|
178,722
|
202,482
|
216,652
|
|||||||||||
Acquisition
shut-down and product recall costs
|
2,000
|
—
|
—
|
—
|
—
|
|||||||||||
Income
from operations
|
11,389
|
53,725
|
87,985
|
92,312
|
106,998
|
|||||||||||
Profit
from video game joint venture
|
7,351
|
7,865
|
9,414
|
13,226
|
21,180
|
|||||||||||
Other
expense
|
—
|
—
|
(1,401
|
)
|
—
|
—
|
||||||||||
Interest
income
|
1,131
|
2,052
|
5,183
|
4,930
|
6,819
|
|||||||||||
Interest
expense
|
(2,536
|
)
|
(4,550
|
)
|
(4,544
|
)
|
(4,533
|
)
|
(5,456
|
)
|
||||||
Income
before provision for income taxes
|
17,335
|
59,092
|
96,637
|
105,935
|
129,541
|
|||||||||||
Provision
for income taxes
|
1,440
|
15,533
|
33,144
|
33,560
|
40,550
|
|||||||||||
Net
income
|
$
|
15,895
|
$
|
43,559
|
$
|
63,493
|
$
|
72,375
|
$
|
88,991
|
||||||
Basic
earnings per share
|
$
|
0.66
|
$
|
1.69
|
$
|
2.37
|
$
|
2.66
|
$
|
3.22
|
||||||
Basic
weighted average shares outstanding
|
24,262
|
25,797
|
26,738
|
27,227
|
27,665
|
|||||||||||
Diluted
earnings per share
|
$
|
0.66
|
$
|
1.49
|
$
|
2.06
|
$
|
2.30
|
$
|
2.77
|
||||||
Diluted
weighted average shares and equivalents outstanding
|
27,426
|
31,406
|
32,193
|
32,714
|
33,149
|
|
At
December 31,
|
|||||||||||||||
|
2003
|
2004
|
2005
|
2006
|
2007
|
|||||||||||
|
(In
thousands)
|
|||||||||||||||
Consolidated
Balance Sheet Data:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
118,182
|
$
|
176,544
|
$
|
240,238
|
$
|
184,489
|
$
|
241,250
|
||||||
Working
capital
|
232,601
|
229,543
|
301,454
|
280,363
|
355,678
|
|||||||||||
Total
assets
|
529,997
|
696,762
|
753,955
|
881,894
|
982,688
|
|||||||||||
Long-term
debt, net of current portion
|
98,042
|
98,000
|
98,000
|
98,000
|
98,000
|
|||||||||||
Total
stockholders’ equity
|
377,900
|
451,485
|
524,651
|
609,288
|
690,997
|
·
|
significant
underperformance relative to expected historical or projected future
operating results;
|
·
|
significant
changes in the manner of our use of the acquired assets or the strategy
for our overall business; and
|
·
|
significant
negative industry or economic
trends.
|
|
Years
Ended December 31,
|
|||||||||||||||
|
2003
|
2004
|
2005
|
2006
|
2007
|
|||||||||||
Net
Sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
Cost
of
Sales
|
60.0
|
60.6
|
59.7
|
61.5
|
62.2
|
|||||||||||
Gross
profit
|
40.0
|
39.4
|
40.3
|
38.5
|
37.8
|
|||||||||||
Selling,
general and administrative expenses
|
35.8
|
30.0
|
27.0
|
26.5
|
25.3
|
|||||||||||
Acquisition
shut-down and product recall costs
|
0.6
|
—
|
—
|
—
|
—
|
|||||||||||
Income
from operations
|
3.6
|
9.4
|
13.3
|
12.0
|
12.5
|
|||||||||||
Profit
from video game joint venture
|
2.3
|
1.4
|
1.4
|
1.7
|
2.5
|
|||||||||||
Other
expense
|
—
|
—
|
(0.2
|
)
|
—
|
—
|
||||||||||
Interest
income
|
0.4
|
0.4
|
0.8
|
0.6
|
0.7
|
|||||||||||
Interest
expense
|
(0.8
|
)
|
(0.8
|
)
|
(0.7
|
)
|
(0.6
|
)
|
(0.6
|
)
|
||||||
Income
before income taxes
|
5.5
|
10.4
|
14.6
|
13.7
|
15.1
|
|||||||||||
Provision
for income taxes
|
0.5
|
2.7
|
5.0
|
4.4
|
4.7
|
|||||||||||
Net
income
|
5.0
|
%
|
7.7
|
%
|
9.6
|
%
|
9.3
|
%
|
10.4
|
%
|
|
Years
Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
|
|
|
||||||||
Net
Sales
|
||||||||||
Traditional
Toys
|
$
|
589,715
|
$
|
692,498
|
$
|
792,998
|
||||
Craft/Activity/Writing
Products
|
62,058
|
52,834
|
39,632
|
|||||||
Pet
Products
|
9,763
|
20,054
|
24,455
|
|||||||
|
661,536
|
765,386
|
857,085
|
|||||||
Cost
of Sales
|
||||||||||
Traditional
Toys
|
348,626
|
429,411
|
490,279
|
|||||||
Craft/Activity/Writing
Products
|
39,928
|
29,044
|
26,970
|
|||||||
Pet
Products
|
6,275
|
12,137
|
16,186
|
|||||||
|
394,829
|
470,592
|
533,435
|
|||||||
Gross
Margin
|
||||||||||
Traditional
Toys
|
241,089
|
263,087
|
302,719
|
|||||||
Craft/Activity/Writing
Products
|
22,130
|
23,790
|
12,662
|
|||||||
Pet
Products
|
3,488
|
7,917
|
8,269
|
|||||||
|
$
|
266,707
|
$
|
294,794
|
$
|
323,650
|
|
2006
|
|
2007
|
|
|||||||||||||||||||||
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
||||||||
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
||||||||
Net
sales
|
$
|
107,244
|
$
|
124,041
|
$
|
295,789
|
$
|
238,312
|
$
|
124,062
|
$
|
129,547
|
$
|
318,391
|
$
|
285,085
|
|||||||||
As
a % of full year
|
14.0
|
%
|
16.2
|
%
|
38.7
|
%
|
31.1
|
%
|
14.5
|
%
|
15.1
|
%
|
37.1
|
%
|
33.3
|
%
|
|||||||||
Gross
Profit
|
44,163
|
49,280
|
112,883
|
88,468
|
45,508
|
45,295
|
124,050
|
108,797
|
|||||||||||||||||
As
a % of full year
|
15.0
|
%
|
16.7
|
%
|
38.3
|
%
|
30.0
|
%
|
14.1
|
%
|
14.0
|
%
|
38.3
|
%
|
33.6
|
%
|
|||||||||
As
a % of net sales
|
41.2
|
%
|
39.7
|
%
|
38.2
|
%
|
37.1
|
%
|
36.7
|
%
|
35.0
|
%
|
39.0
|
%
|
38.2
|
%
|
|||||||||
Income
(loss) from operations
|
2,244
|
8,963
|
58,204
|
22,901
|
3,324
|
6,488
|
65,057
|
32,129
|
|||||||||||||||||
As
a % of full year
|
2.4
|
%
|
9.7
|
%
|
63.1
|
%
|
24.8
|
%
|
3.1
|
%
|
6.1
|
%
|
60.8
|
%
|
30.0
|
%
|
|||||||||
As
a % of net sales
|
2.1
|
%
|
7.2
|
%
|
19.7
|
%
|
9.6
|
%
|
2.7
|
%
|
5.0
|
%
|
20.4
|
%
|
11.3
|
%
|
|||||||||
Income
before income taxes and minority interest
|
3,283
|
9,135
|
57,855
|
35,662
|
4,762
|
7,403
|
67,087
|
50,289
|
|||||||||||||||||
As
a % of net sales
|
3.1
|
%
|
7.4
|
%
|
19.6
|
%
|
15.0
|
%
|
3.8
|
%
|
5.7
|
%
|
21.1
|
%
|
17.6
|
%
|
|||||||||
Net
income
|
2,331
|
6,361
|
40,499
|
23,184
|
3,238
|
5,034
|
47,318
|
33,401
|
|||||||||||||||||
As
a % of net sales
|
2.2
|
%
|
5.1
|
%
|
13.7
|
%
|
9.7
|
%
|
2.6
|
%
|
3.9
|
%
|
14.9
|
%
|
11.7
|
%
|
|||||||||
Diluted
earnings per share
|
$
|
0.09
|
$
|
0.22
|
$
|
1.26
|
$
|
0.73
|
$
|
0.12
|
$
|
0.17
|
$
|
1.45
|
$
|
1.03
|
|||||||||
Weighted
average shares and equivalents outstanding
|
32,617
|
32,790
|
32,736
|
32,803
|
27,985
|
33,133
|
33,145
|
33,251
|
|
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
Total
|
|||||||||||||||
Long-term
debt
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
98,000
|
$
|
98,000
|
||||||||
Operating
leases
|
9,662
|
6,796
|
5,736
|
5,779
|
5,451
|
4,034
|
37,458
|
|||||||||||||||
Minimum
guaranteed license/royalty
payments
|
21,260
|
10,224
|
5,001
|
1,175
|
500
|
—
|
38,160
|
|||||||||||||||
Employment
contracts
|
5,919
|
3,789
|
2,280
|
—
|
—
|
—
|
11,988
|
|||||||||||||||
Total
contractual cash obligations
|
$
|
36,841
|
$
|
20,809
|
$
|
13,017
|
$
|
6,954
|
$
|
5,951
|
$
|
102,034
|
$
|
185,606
|
/s/
BDO Seidman, LLP
|
|
BDO
Seidman, LLP
|
|
Los
Angeles, California
|
|
/s/
PKF
|
|
December 31,
|
||||||
|
2006
|
2007
|
|||||
|
(In thousands, except
|
||||||
|
share data)
|
||||||
Assets
|
|||||||
Current
assets
|
|||||||
Cash
and
cash equivalents
|
$
|
184,489
|
$
|
241,250
|
|||
Marketable
securities
|
210
|
218
|
|||||
Accounts
receivable, net of allowance for uncollectible accounts of $1,206
and
$1,354, respectively
|
153,116
|
174,451
|
|||||
Inventory
|
76,788
|
75,486
|
|||||
Deferred
income taxes
|
10,592
|
12,945
|
|||||
Prepaid
expenses and other
|
26,543
|
21,733
|
|||||
Total
current assets
|
451,738
|
526,083
|
|||||
Property
and equipment
|
|||||||
Office
furniture and equipment
|
8,299
|
9,961
|
|||||
Molds
and tooling
|
36,600
|
44,333
|
|||||
Leasehold
improvements
|
4,882
|
5,186
|
|||||
Total
|
49,781
|
59,480
|
|||||
Less
accumulated depreciation and amortization
|
32,898
|
38,073
|
|||||
Property
and equipment, net
|
16,883
|
21,407
|
|||||
Intangibles
and other, net
|
40,833
|
26,200
|
|||||
Investment
in video game joint venture
|
14,873
|
36,090
|
|||||
Goodwill,
net
|
337,999
|
353,340
|
|||||
Trademarks,
net
|
19,568
|
19,568
|
|||||
Total
assets
|
$
|
881,894
|
$
|
982,688
|
|||
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable
|
$
|
65,574
|
$
|
52,287
|
|||
Accrued
expenses
|
54,664
|
70,085
|
|||||
Reserve
for sales returns and allowances
|
32,589
|
26,036
|
|||||
Income
taxes payable
|
18,548
|
21,997
|
|||||
Total
current liabilities
|
171,375
|
170,405
|
|||||
Convertible
senior notes
|
98,000
|
98,000
|
|||||
Other
liabilities
|
854
|
6,432
|
|||||
Income
taxes payable
|
—
|
11,294
|
|||||
Deferred
income taxes
|
2,377
|
5,560
|
|||||
Total
liabilities
|
272,606
|
291,691
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders’
equity
|
|||||||
Preferred
shares, $.001 par value; 5,000,000 shares authorized; nil
outstanding
|
—
|
—
|
|||||
Common
stock, $.001 par value; 100,000,000 shares authorized;
27,776,947 and 28,275,116 shares issued and outstanding,
respectively
|
28
|
28
|
|||||
Additional
paid-in capital
|
300,255
|
312,127
|
|||||
Retained
earnings
|
312,432
|
382,288
|
|||||
Accumulated
other comprehensive loss
|
(3,427
|
)
|
(3,446
|
)
|
|||
Total
stockholders’ equity
|
609,288
|
690,997
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
881,894
|
$
|
982,688
|
|
Years Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
|
(In thousands, except per share amounts)
|
|||||||||
Net
sales
|
$
|
661,536
|
$
|
765,386
|
$
|
857,085
|
||||
Cost
of sales
|
394,829
|
470,592
|
533,435
|
|||||||
Gross
profit
|
266,707
|
294,794
|
323,650
|
|||||||
Selling,
general and administrative expenses
|
178,722
|
202,482
|
216,652
|
|||||||
Income
from operations
|
87,985
|
92,312
|
106,998
|
|||||||
Profit
from video game joint venture
|
9,414
|
13,226
|
21,180
|
|||||||
Other
expense
|
(1,401
|
)
|
—
|
—
|
||||||
Interest
income
|
5,183
|
4,930
|
6,819
|
|||||||
Interest
expense
|
(4,544
|
)
|
(4,533
|
)
|
(5,456
|
)
|
||||
Income
before provision for income taxes
|
96,637
|
105,935
|
129,541
|
|||||||
Provision
for income taxes
|
33,144
|
33,560
|
40,550
|
|||||||
Net
income
|
$
|
63,493
|
$
|
72,375
|
$
|
88,991
|
||||
Basic
earnings per share
|
$
|
2.37
|
$
|
2.66
|
$
|
3.22
|
||||
Basic
weighted number of shares
|
26,738
|
27,227
|
27,665
|
|||||||
Diluted
earnings per share
|
$
|
2.06
|
$
|
2.30
|
$
|
2.77
|
||||
Diluted
weighted number of shares
|
32,193
|
32,714
|
33,149
|
|
Years Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
|
(In thousands)
|
|||||||||
Other
comprehensive income:
|
||||||||||
Net
income
|
$
|
63,493
|
$
|
72,375
|
$
|
88,991
|
||||
Foreign
currency translation adjustment
|
(1,042
|
)
|
(638
|
)
|
(19
|
)
|
||||
Other
comprehensive income
|
$
|
62,451
|
$
|
71,737
|
$
|
88,972
|
|
Common Stock
|
|
|
Accumulated
|
|
||||||||||||||
|
|
Additional
|
|
Other
|
Total
|
||||||||||||||
|
Number
|
|
Paid-in
|
Retained
|
Comprehensive
|
Stockholders’
|
|||||||||||||
|
of Shares
|
Amount
|
Capital
|
Earnings
|
Loss
|
Equity
|
|||||||||||||
Balance,
December 31, 2004
|
26,234
|
$
|
26
|
$
|
276,642
|
$
|
176,564
|
$
|
(1,747
|
)
|
$
|
451,485
|
|||||||
Exercise
of options
|
567
|
1
|
4,872
|
—
|
—
|
4,873
|
|||||||||||||
Stock
option income tax benefit
|
—
|
—
|
4,119
|
—
|
—
|
4,119
|
|||||||||||||
Restricted
stock grants
|
245
|
—
|
5,130
|
—
|
—
|
5,130
|
|||||||||||||
Compensation
for vested stock options
|
—
|
—
|
(1,706
|
)
|
—
|
—
|
(1,706
|
)
|
|||||||||||
Retirement
of common stock
|
(101
|
)
|
—
|
(1,701
|
)
|
—
|
—
|
(1,701
|
)
|
||||||||||
Net
income
|
—
|
—
|
—
|
63,493
|
—
|
63,493
|
|||||||||||||
Foreign
currency translation adjustment
|
—
|
—
|
—
|
—
|
(1,042
|
)
|
(1,042
|
)
|
|||||||||||
Balance,
December 31, 2005
|
26,945
|
27
|
287,356
|
240,057
|
(2,789
|
)
|
524,651
|
||||||||||||
Exercise
of options
|
333
|
—
|
4,382
|
—
|
—
|
4,382
|
|||||||||||||
Stock
option income tax benefit
|
—
|
—
|
1,509
|
—
|
—
|
1,509
|
|||||||||||||
Restricted
stock grants
|
473
|
1
|
4,579
|
—
|
—
|
4,580
|
|||||||||||||
Compensation
for vested stock options
|
—
|
—
|
1,902
|
—
|
—
|
1,902
|
|||||||||||||
Retirement
of common stock
|
(124
|
)
|
—
|
(2,798
|
)
|
—
|
—
|
(2,798
|
)
|
||||||||||
Issuance
of common stock for Creative Designs
|
150
|
—
|
3,325
|
—
|
—
|
3,325
|
|||||||||||||
Net
income
|
—
|
—
|
—
|
72,375
|
—
|
72,375
|
|||||||||||||
Foreign
currency translation adjustment
|
—
|
—
|
—
|
—
|
(638
|
)
|
(638
|
)
|
|||||||||||
Balance,
December 31, 2006
|
27,777
|
28
|
300,255
|
312,432
|
(3,427
|
)
|
609,288
|
||||||||||||
Adoption
of FIN 48
|
—
|
—
|
—
|
(19,135
|
)
|
—
|
(19,135
|
)
|
|||||||||||
Exercise
of options
|
391
|
—
|
6,470
|
—
|
—
|
6,470
|
|||||||||||||
Stock
option income tax benefit
|
—
|
—
|
1,053
|
—
|
—
|
1,053
|
|||||||||||||
Restricted
stock grants
|
323
|
—
|
8,082
|
—
|
—
|
8,082
|
|||||||||||||
Compensation
for vested stock options
|
—
|
—
|
972
|
—
|
—
|
972
|
|||||||||||||
Retirement
of common stock
|
(191
|
)
|
—
|
(4,675
|
)
|
—
|
—
|
(4,675
|
)
|
||||||||||
Retirement
of Restricted Stock
|
(25
|
)
|
—
|
(30
|
)
|
—
|
—
|
(30
|
)
|
||||||||||
Net
income
|
—
|
—
|
—
|
88,991
|
—
|
88,991
|
|||||||||||||
Foreign
currency translation adjustment
|
—
|
—
|
—
|
|
(19
|
)
|
(19
|
)
|
|||||||||||
Balance,
December 31, 2007
|
28,275
|
$
|
28
|
$
|
312,127
|
$
|
382,288
|
$
|
(3,446
|
)
|
$
|
690,997
|
|
Years Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
|
(In thousands)
|
|||||||||
Cash
flows from operating activities
|
||||||||||
Net
income
|
$
|
63,493
|
$
|
72,375
|
$
|
88,991
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||||
Depreciation
and amortization
|
15,527
|
26,166
|
26,663
|
|||||||
Share-based
compensation expense
|
3,424
|
6,482
|
9,054
|
|||||||
Profit
from video game joint venture
|
(548
|
)
|
(5,147
|
)
|
(21,856
|
)
|
||||
Loss
on disposal of property and equipment
|
104
|
48
|
1,781
|
|||||||
Write-off
of investment in Chinese Joint Venture
|
1,401
|
—
|
—
|
|||||||
Changes
in operating assets and liabilities Accounts
receivable
|
16,697
|
(52,885
|
)
|
(21,334
|
)
|
|||||
Inventory
|
(13,272
|
)
|
(8,352
|
)
|
1,329
|
|||||
Prepaid
expenses and other
|
1,088
|
(8,293
|
)
|
4,817
|
||||||
Accounts
payable
|
(9,437
|
)
|
12,608
|
(13,061
|
)
|
|||||
Accrued
expenses
|
(1,915
|
)
|
1,882
|
14,493
|
||||||
Income
taxes payable
|
(2,936
|
)
|
14,756
|
(891
|
)
|
|||||
Reserve
for sales returns and allowances
|
1,732
|
5,253
|
(6,489
|
)
|
||||||
Other
liabilities
|
995
|
(140
|
)
|
1,519
|
||||||
Deferred
income taxes
|
(5,292
|
)
|
(1,043
|
)
|
2,644
|
|||||
Total
adjustments
|
7,568
|
(8,665
|
)
|
(1,331
|
)
|
|||||
Net
cash provided by operating activities
|
71,061
|
63,710
|
87,660
|
|||||||
Cash
flows from investing activities
|
||||||||||
Purchases
of property and equipment
|
(8,270
|
)
|
(11,204
|
)
|
(18,116
|
)
|
||||
Change
in other assets
|
(123
|
)
|
46
|
(6
|
)
|
|||||
Sale
(Purchases) of deposits
|
241
|
(701
|
)
|
17
|
||||||
Cash
paid for net assets
|
(20,362
|
)
|
(109,845
|
)
|
(15,605
|
)
|
||||
Net
(purchases) sales of marketable securities
|
19,047
|
(210
|
)
|
(7
|
)
|
|||||
Net
cash used by investing activities
|
(9,467
|
)
|
(121,914
|
)
|
(33,717
|
)
|
||||
Cash
flows from financing activities
|
||||||||||
Proceeds
from stock options exercised (net of cash-less exercises of $1.7
million,
$2.8 million and $4.7 million in 2005, 2006 and 2007,
respectively)
|
3,173
|
1,584
|
1,765
|
|||||||
Tax
benefit from stock options exercised
|
—
|
1,509
|
1,053
|
|||||||
Net
cash provided by financing activities
|
3,173
|
3,093
|
2,818
|
|||||||
Impact
of foreign currency translation
|
(1,073
|
)
|
(638
|
)
|
—
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
63,694
|
(55,749
|
)
|
56,761
|
||||||
Cash
and cash equivalents, beginning of year
|
176,544
|
240,238
|
184,489
|
|||||||
Cash
and cash equivalents, end of year
|
$
|
240,238
|
$
|
184,489
|
$
|
241,250
|
||||
Cash
paid during the period for:
|
||||||||||
Interest
|
$
|
4,533
|
$
|
4,533
|
$
|
4,533
|
||||
Income
taxes
|
$
|
41,284
|
$
|
19,496
|
$
|
32,198
|
|
December 31,
|
||||||
|
2006
|
2007
|
|||||
Raw
materials
|
$
|
3,845
|
$
|
1,694
|
|||
Finished
goods
|
72,943
|
73,792
|
|||||
|
$
|
76,788
|
$
|
75,486
|
Office
equipment
|
5
years
|
Automobiles
|
5
years
|
Furniture
and fixtures
|
5
-
7 years
|
Molds
and tooling
|
2
-
4 years
|
Leasehold
improvements
|
Shorter
of length of lease or 10 years
|
|
2005
|
|||||||||
|
|
Weighted
|
|
|||||||
|
|
Average
|
|
|||||||
|
Income
|
Shares
|
Per
Share
|
|||||||
Basic
EPS
|
||||||||||
Income
available to common stockholders
|
$
|
63,493
|
26,738
|
$
|
2.37
|
|||||
Effect
of dilutive securities
|
||||||||||
Assumed
conversion of convertible senior notes
|
2,978
|
4,900
|
||||||||
Options
and warrants
|
—
|
555
|
||||||||
Diluted
EPS
|
||||||||||
Income
available to common stockholders plus assumed exercises and
conversion
|
$
|
66,471
|
32,193
|
$
|
2.06
|
|
2006
|
|||||||||
|
|
Weighted
|
|
|||||||
|
|
Average
|
|
|||||||
|
Income
|
Shares
|
Per
Share
|
|||||||
Basic
EPS
|
||||||||||
Income
available to common stockholders
|
$
|
72,375
|
27,227
|
$
|
2.66
|
|||||
Effect
of dilutive securities
|
||||||||||
Assumed
conversion of convertible senior notes
|
2,946
|
4,900
|
||||||||
Options
and warrants
|
—
|
362
|
||||||||
Unvested
restricted stock grants
|
—
|
225
|
||||||||
Diluted
EPS
|
||||||||||
Income
available to common stockholders plus assumed exercises and
conversion
|
$
|
75,321
|
32,714
|
$
|
2.30
|
|
2007
|
|||||||||
|
|
Weighted
|
|
|||||||
|
|
Average
|
|
|||||||
|
Income
|
Shares
|
Per
Share
|
|||||||
Basic
EPS
|
||||||||||
Income
available to common stockholders
|
$
|
88,991
|
27,665
|
$
|
3.22
|
|||||
Effect
of dilutive securities
|
||||||||||
Assumed
conversion of convertible senior notes
|
2,946
|
4,900
|
||||||||
Options
and warrants
|
—
|
328
|
||||||||
Unvested
restricted stock grants
|
—
|
256
|
||||||||
Diluted
EPS
|
||||||||||
Income
available to common stockholders plus assumed exercises and
conversion
|
$
|
91,937
|
33,149
|
$
|
2.77
|
|
Years Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
Net
Sales
|
||||||||||
Traditional
Toys
|
$
|
589,715
|
$
|
692,498
|
$
|
792,998
|
||||
Craft/Activity/Writing
Products
|
62,058
|
52,834
|
39,632
|
|||||||
Pet
Products
|
9,763
|
20,054
|
24,455
|
|||||||
|
$
|
661,536
|
$
|
765,386
|
$
|
857,085
|
|
Years Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
Operating
Income
|
||||||||||
Traditional
Toys
|
$
|
78,433
|
$
|
83,521
|
$
|
100,227
|
||||
Craft/Activity/Writing
Products
|
8,254
|
6,372
|
4,079
|
|||||||
Pet
Products
|
1,298
|
2,419
|
2,692
|
|||||||
|
$
|
87,985
|
$
|
92,312
|
$
|
106,998
|
|
Years Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
Depreciation
and Amortization Expense
|
||||||||||
Traditional
Toys
|
$
|
14,430
|
$
|
24,780
|
$
|
25,339
|
||||
Craft/Activity/Writing
Products
|
1,085
|
995
|
829
|
|||||||
Pet
Products
|
12
|
391
|
495
|
|||||||
|
$
|
15,527
|
$
|
26,166
|
$
|
26,663
|
|
December 31,
|
||||||
|
2006
|
2007
|
|||||
Assets
|
|||||||
Traditional
Toys
|
$
|
743,946
|
$
|
840,848
|
|||
Craft/Activity/Writing
Products
|
119,883
|
115,034
|
|||||
Pet
Products
|
18,065
|
26,806
|
|||||
|
$
|
881,894
|
$
|
982,688
|
|
December 31,
|
||||||
|
2006
|
2007
|
|||||
Long-lived
Assets
|
|||||||
United
States
|
$
|
13,451
|
$
|
19,372
|
|||
Hong
Kong
|
3,432
|
2,035
|
|||||
|
$
|
16,883
|
$
|
21,407
|
|
Years Ended December 31,
|
|||||||||
|
2005
|
2006
|
2007
|
|||||||
Net
Sales by Geographic Area
|
||||||||||
United
States
|
$
|
562,396
|
$
|
666,294
|
$
|
730,971
|
||||
Europe
|
38,620
|
30,169
|
37,585
|
|||||||
Canada
|
20,589
|
27,067
|
29,155
|
|||||||
Hong
Kong
|
24,388
|
17,500
|
30,175
|
|||||||
Other
|
15,543
|
24,356
|
29,199
|
|||||||
|
$
|
661,536
|
$
|
765,386
|
$
|
857,085
|
|
2005
|
2006
|
2007
|
||||||||||||||||
|
|
Percentage of
|
|
Percentage of
|
|
Percentage of
|
|||||||||||||
|
Amount
|
Net
Sales
|
Amount
|
Net
Sales
|
Amount
|
Net
Sales
|
|||||||||||||
Wal-Mart
|
$
|
212,620
|
32.1
|
%
|
$
|
210,758
|
27.5
|
%
|
$
|
165,574
|
19.3
|
%
|
|||||||
Target
|
95,716
|
14.5
|
134,347
|
17.6
|
124,089
|
14.5
|
|||||||||||||
Toys
‘R’ Us
|
82,732
|
12.5
|
104,392
|
13.6
|
120,873
|
14.1
|
|||||||||||||
|
$
|
391,068
|
59.1
|
%
|
$
|
449,497
|
58.7
|
%
|
$
|
410,536
|
47.9
|
%
|
|
December 31,
|
||||||
|
2006
|
2007
|
|||||
Preferred
return receivable
|
$
|
13,482
|
$
|
35,338
|
|||
Investment
costs, net
|
1,391
|
752
|
|||||
|
$
|
14,873
|
$
|
36,090
|
Estimated
fair value of net assets:
|
||||
Current
assets acquired
|
$
|
15,655
|
||
Property
and equipment, net
|
1,235
|
|||
Other
assets
|
103
|
|||
Liabilities
assumed
|
(6,081
|
)
|
||
Intangible
assets other than
goodwill
|
40,488
|
|||
Goodwill
|
67,186
|
|||
|
$
|
118,586
|
|
Year Ended
December 31,
2006
|
|||
Net
sales
|
$
|
778,269
|
||
Net
income
|
$
|
75,221
|
||
Basic
earnings per share
|
$
|
2.73
|
||
Weighted
average shares outstanding
|
27,512
|
|||
Diluted
earnings per share
|
$
|
2.38
|
||
Weighted
average shares and equivalents outstanding
|
32,777
|
|
Traditional
Toys
|
Craft/Activity
/Writing
Products
|
Pet
Products
|
Total
|
|||||||||
Balance, December
31, 2005
|
$
|
181,868
|
$
|
82,826
|
$
|
4,604
|
$
|
269,298
|
|||||
Adjustments
to goodwill during the year
|
67,181
|
—
|
1,520
|
68,701
|
|||||||||
Balance,
December 31, 2006
|
249,049
|
82,826
|
6,124
|
337,999
|
|||||||||
Adjustments
to goodwill during the year
|
13,341
|
—
|
2,000
|
15,341
|
|||||||||
Balance
at end of the year
|
$
|
262,390
|
$
|
82,826
|
$
|
8,124
|
$
|
353,340
|
|
|
December 31, 2006
|
December 31, 2007
|
|||||||||||||||||||
|
Weighted
Useful
Lives
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Amount
|
|||||||||||||||
|
(Years)
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Amortized
Intangible Assets:
|
||||||||||||||||||||||
Acquired
order backlog
|
0.50
|
$
|
1,298
|
$
|
(1,298
|
)
|
$
|
—
|
$
|
1,298
|
$
|
(1,298
|
)
|
$
|
—
|
|||||||
Licenses
|
4.77
|
58,699
|
(25,821
|
)
|
32,878
|
58,699
|
(39,091
|
)
|
19,608
|
|||||||||||||
Product
lines
|
3.45
|
17,700
|
(17,700
|
)
|
—
|
17,700
|
(17,700
|
)
|
—
|
|||||||||||||
Customer
relationships
|
6.23
|
3,646
|
(1,239
|
)
|
2,407
|
3,646
|
(1,805
|
)
|
1,841
|
|||||||||||||
Non-compete/Employment
contracts
|
4.00
|
2,748
|
(1,753
|
)
|
995
|
2,748
|
(2,348
|
)
|
400
|
|||||||||||||
Debt
offering costs
|
20.00
|
3,705
|
(662
|
)
|
3,043
|
3,705
|
(847
|
)
|
2,858
|
|||||||||||||
Total
amortized intangible assets
|
87,796
|
(48,473
|
)
|
39,323
|
87,796
|
(63,089
|
)
|
24,707
|
||||||||||||||
Unamortized
Intangible Assets:
|
||||||||||||||||||||||
Trademarks
|
indefinite
|
19,568
|
N/A
|
19,568
|
19,568
|
N/A
|
19,568
|
|||||||||||||||
|
$
|
107,364
|
$
|
(48,473
|
)
|
$
|
58,891
|
$
|
107,364
|
$
|
(63,089
|
)
|
$
|
44,275
|
2008
|
$
|
8,568
|
||
2009
|
5,578
|
|||
2010
|
3,048
|
|||
2011
|
2,011
|
|||
2012
|
2,043
|
|
2006
|
2007
|
|||||
Royalties
|
$
|
17,829
|
$
|
25,318
|
|||
Bonuses
|
7,172
|
17,223
|
|||||
Acquisition
earn-out
|
13,598
|
13,333
|
|||||
Employee
salaries and benefits
|
1,616
|
1,273
|
|||||
Promotional
commitment
|
1,341
|
—
|
|||||
Sales
commissions
|
1,764
|
2,225
|
|||||
Molds
and tools
|
1,489
|
1,952
|
|||||
Other
|
9,855
|
8,761
|
|||||
|
$
|
54,664
|
$
|
70,085
|
|
2006
|
2007
|
|||||
4.625%
Convertible senior notes
|
$
|
98,000
|
$
|
98,000
|
|
2005
|
2006
|
2007
|
|||||||
Federal
|
$
|
20,821
|
$
|
22,031
|
$
|
23,931
|
||||
State
and local
|
4,326
|
4,310
|
6,016
|
|||||||
Foreign
|
13,290
|
8,204
|
8,719
|
|||||||
|
38,437
|
34,545
|
38,666
|
|||||||
APIC
|
—
|
58
|
1,053
|
|||||||
Deferred
|
(5,293
|
)
|
(1,043
|
)
|
831
|
|||||
$
|
33,144
|
$
|
33,560
|
$
|
40,550
|
|
2006
|
2007
|
|||||
Net
deferred tax assets/(liabilities):
|
|||||||
Current:
|
|||||||
Reserve
for sales allowances and possible losses
|
$
|
881
|
$
|
115
|
|||
Accrued
expenses
|
2,404
|
4,915
|
|||||
Restricted
stock grant
|
1,882
|
3,076
|
|||||
Federal
and state net operating loss carryforwards
|
2,993
|
2,993
|
|||||
Uncertain
tax positions
|
—
|
624
|
|||||
Deductible
intangible assets
|
2,079
|
—
|
|||||
State
income taxes
|
1,302
|
2,272
|
|||||
Other
|
(29
|
)
|
(130
|
)
|
|||
|
11,512
|
13,865
|
|||||
Long
Term:
|
|||||||
Property
and equipment
|
(608
|
)
|
1,064
|
||||
Original
issue discount interest
|
(8,816
|
)
|
(12,249
|
)
|
|||
Deductible
goodwill and intangibles
|
1,873
|
1,678
|
|||||
Foreign
tax credit
|
2,718
|
2,718
|
|||||
Stock
options
|
686
|
802
|
|||||
Section
481(a) adjustments
|
—
|
(2,312
|
)
|
||||
Income
from joint venture
|
1,770
|
1,763
|
|||||
Uncertain
tax positions
|
—
|
976
|
|||||
|
(2,377
|
)
|
(5,560
|
)
|
|||
Valuation
allowance related to federal and state net operating loss
carryforwards
|
(920
|
)
|
(920
|
)
|
|||
Total
net deferred tax assets/(liabilities)
|
$
|
8,215
|
$
|
7,385
|
|
2005
|
2006
|
2007
|
|||||||
Federal
income tax expense
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
||||
State
income tax expense, net of federal tax effect
|
2.1
|
2.6
|
3.3
|
|||||||
One
time dividend from foreign subsidiaries
|
8.3
|
—
|
—
|
|||||||
Effect
of differences in U.S. and Foreign statutory rates
|
(9.0
|
)
|
(5.4
|
)
|
(5.1
|
)
|
||||
Other,
including adjustments to previously accrued taxes for statute
expirations
|
(2.1
|
)
|
(0.5
|
)
|
(1.9
|
)
|
||||
|
34.3
|
%
|
31.7
|
%
|
31.3
|
%
|
|
2005
|
2006
|
2007
|
|||||||
Domestic
|
$
|
24,953
|
$
|
58,227
|
$
|
73,115
|
||||
Foreign
|
71,684
|
47,708
|
56,426
|
|||||||
|
$
|
96,637
|
$
|
105,935
|
$
|
129,541
|
Balance,
January 1, 2007
|
$
|
22.8
|
||
Current
year additions
|
0.3
|
|||
Current
year reduction due to lapse of applicable statute of
limitations
|
(2.8
|
)
|
||
Balance,
December 31, 2007
|
$
|
20.3
|
2008
|
$
|
9,662
|
||
2009
|
6,796
|
|||
2010
|
5,736
|
|||
2011
|
5,779
|
|||
2012
|
5,451
|
|||
Thereafter
|
4,034
|
|||
|
$
|
37,458
|
|
|
Weighted
|
|||||
|
|
Average
|
|||||
|
Number
|
Exercise
|
|||||
|
of Shares
|
Price
|
|||||
Outstanding,
December 31, 2007
|
100,000
|
$
|
11.35
|
2008
|
$
|
21,260
|
||
2009
|
10,224
|
|||
2010
|
5,001
|
|||
2011
|
1,175
|
|||
2012
|
500
|
|||
|
$
|
38,160
|
2008
|
$
|
5,919
|
||
2009
|
3,789
|
|||
2010
|
2,280
|
|||
|
$
|
11,988
|
Group Type
|
# Shares
Granted
|
Grant Price Range
|
Vest Schedule Range
|
|||||||
Executives
|
255,000
|
$
|
21.84 –
31.04
|
2 –
3 years
|
||||||
Board
of directors
|
27,340
|
$
|
21.84
|
1
year
|
||||||
Employees
|
41,000
|
$
|
24.60
– 26.86
|
3 –
5 years
|
||||||
Total
|
323,340
|
$
|
21.84
– 31.04
|
1
to 5 years
|
|
Year Ended December 31,
|
||||||
|
2006
|
2007
|
|||||
|
|
|
|||||
Stock
option compensation expense
|
$
|
1,903
|
$
|
972
|
|||
Tax
benefit related to stock option compensation
|
$
|
623
|
$
|
314
|
|||
Restricted
stock compensation expense
|
$
|
4,580
|
$
|
8,082
|
|||
Tax
benefit related to restricted stock compensation
|
$
|
1,404
|
$
|
2,859
|
|
|
Weighted
|
|||||
|
|
Average
|
|||||
|
Number
|
Exercise
|
|||||
|
of Shares
|
Price
|
|||||
Outstanding,
December 31, 2004
|
2,088,006
|
$
|
13.28
|
||||
Granted
|
360,000
|
21.74
|
|||||
Exercised
|
(566,546
|
)
|
8.60
|
||||
Canceled
|
(77,354
|
)
|
15.74
|
||||
Outstanding,
December 31, 2005
|
1,804,106
|
16.33
|
|||||
Granted
|
—
|
—
|
|||||
Exercised
|
(333,228
|
)
|
13.15
|
||||
Canceled
|
(8,500
|
)
|
17.23
|
||||
Outstanding,
December 31, 2006
|
1,462,378
|
$
|
17.05
|
||||
Granted
|
—
|
—
|
|||||
Exercised
|
(391,200
|
)
|
16.54
|
||||
Canceled
|
(235,000
|
)
|
17.10
|
||||
Outstanding,
December 31, 2007
|
836,178
|
$
|
17.27
|
Outstanding
|
Exercisable
|
|||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||
Number
|
Life
|
Exercise
|
Number
|
Exercise
|
||||||||||||
Option
Price Range
|
of Shares
|
in Years
|
Price
|
of Shares
|
Price
|
|||||||||||
$ 7.875
— $13.39
|
280,063
|
3.55
|
$
|
11.20
|
276,313
|
$
|
11.19
|
|||||||||
$ 13.47
— $20.55
|
281,100
|
4.39
|
$
|
18.69
|
201,050
|
$
|
18.31
|
|||||||||
$ 20.94
— $22.11
|
275,015
|
3.85
|
$
|
21.99
|
95,469
|
$
|
21.96
|
Number
of options outstanding
|
836,178
|
|||
Weighted-average
exercise price
|
$
|
17.27
|
||
Aggregate
intrinsic value of options outstanding
|
$
|
5,304,576
|
||
Weighted-average
contractual term of options outstanding
|
3.9
years
|
|||
Number
of options currently exercisable
|
572,832
|
|||
Weighted-average
exercise price of options currently exercisable
|
$
|
15.48
|
||
Aggregate
intrinsic value of options currently exercisable
|
$
|
4,656,208
|
||
Weighted-average
contractual term of currently exercisable
|
4.34
years
|
|
Year Ended
December 31,
2005
|
|||
|
|
|||
Net
income, as reported
|
$
|
63,493
|
||
Add
(Deduct): Stock-based employee compensation expense (income) included
in
reported net income net of related tax effects
|
(1,121
|
)
|
||
Deduct:
Total stock-based employee compensation expense determined under
fair
value method for all awards net of related tax effects
|
(2,343
|
)
|
||
Pro
forma net income
|
$
|
60,029
|
||
Earnings
per share:
|
||||
Basic
— as reported
|
$
|
2.37
|
||
Basic
— pro forma
|
$
|
2.25
|
||
Diluted
— as reported
|
$
|
2.06
|
||
Diluted
— pro forma
|
$
|
1.96
|
|
2006
|
2007
|
|||||||||||||||||||||||
|
First
|
Second
|
Third
|
Fourth
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||||||
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||||||
|
(in
thousands, except per share data)
|
||||||||||||||||||||||||
Net
sales
|
$
|
107,244
|
$
|
124,041
|
$
|
295,789
|
$
|
238,312
|
$
|
124,062
|
$
|
129,547
|
$
|
318,391
|
$
|
285,085
|
|||||||||
Gross
profit
|
$
|
44,163
|
$
|
49,280
|
$
|
112,883
|
$
|
88,468
|
$
|
45,508
|
$
|
45,295
|
$
|
124,050
|
$
|
108,797
|
|||||||||
Income
from operations
|
$
|
2,244
|
$
|
8,963
|
$
|
58,204
|
$
|
22,901
|
$
|
3,324
|
$
|
6,488
|
$
|
65,057
|
$
|
32,129
|
|||||||||
Income
before income taxes
|
$
|
3,283
|
$
|
9,135
|
$
|
57,855
|
$
|
35,662
|
$
|
4,762
|
$
|
7,403
|
$
|
67,087
|
$
|
50,289
|
|||||||||
Net
income
|
$
|
2,331
|
$
|
6,361
|
$
|
40,499
|
$
|
23,184
|
$
|
3,238
|
$
|
5,034
|
$
|
47,318
|
$
|
33,401
|
|||||||||
Basic
earnings per share
|
$
|
0.09
|
$
|
0.23
|
$
|
1.46
|
$
|
0.85
|
$
|
0.12
|
$
|
0.18
|
$
|
1.71
|
$
|
1.20
|
|||||||||
Weighted
average shares outstanding
|
27,310
|
27,536
|
27,694
|
27,298
|
27,498
|
27,631
|
27,733
|
27,738
|
|||||||||||||||||
Diluted
earnings per share
|
$
|
0.09
|
$
|
0.22
|
$
|
1.26
|
$
|
0.73
|
$
|
0.12
|
$
|
0.17
|
$
|
1.45
|
$
|
1.03
|
|||||||||
Weighted
average shares and equivalents outstanding
|
32,617
|
32,790
|
32,736
|
32,803
|
27,985
|
33,133
|
33,145
|
33,251
|
/s/
BDO Seidman, LLP
|
BDO
Seidman, LLP
|
Los
Angeles, California
|
February
28, 2008
|
Balance at
|
Charged to
|
Charged to
|
Balance
|
|||||||||||||
Beginning
|
Costs and
|
Other
|
at End
|
|||||||||||||
of Period
|
Expenses
|
Accounts
|
Deductions
|
of Period
|
||||||||||||
(In
thousands)
|
||||||||||||||||
Year
ended December 31, 2005:
|
||||||||||||||||
Allowance
for:
|
||||||||||||||||
Uncollectible
accounts
|
$
|
7,058
|
$
|
902
|
$
|
(1,291
|
)(a)
|
$
|
(4,333
|
)
|
$
|
2,336
|
||||
Reserve
for potential product obsolescence
|
8,042
|
6,981
|
—
|
(7,576
|
)
|
7,447
|
||||||||||
Reserve
for sales returns and allowances
|
23,173
|
54,767
|
218
|
(b)
|
(53,035
|
)
|
25,123
|
|||||||||
|
$
|
38,273
|
$
|
62,650
|
$
|
(1,073
|
)
|
$
|
(64,944
|
)
|
$
|
34,906
|
||||
Year
ended December 31, 2006:
|
||||||||||||||||
Allowance
for:
|
||||||||||||||||
Uncollectible
accounts
|
$
|
2,336
|
$
|
37
|
$
|
—
|
$
|
(1,167
|
)
|
$
|
1,206
|
|||||
Reserve
for potential product obsolescence
|
7,447
|
3,412
|
—
|
(3,504
|
)
|
7,355
|
||||||||||
Reserve
for sales returns and allowances
|
25,123
|
49,951
|
2,213
|
(c)
|
(44,698
|
)
|
32,589
|
|||||||||
|
$
|
34,906
|
$
|
53,400
|
$
|
2,213
|
$
|
(49,369
|
)
|
$
|
41,150
|
|||||
Year
ended December 31, 2007:
|
||||||||||||||||
Allowance
for:
|
||||||||||||||||
Uncollectible
accounts
|
$
|
1,206
|
$
|
(269
|
)
|
$
|
—
|
$
|
417
|
$
|
1,354
|
|||||
Reserve
for potential product obsolescence
|
7,355
|
2,788
|
—
|
(5,072
|
)
|
5,071
|
||||||||||
Reserve
for sales returns and allowances
|
32,589
|
40,193
|
—
|
(46,746
|
)
|
26,036
|
||||||||||
|
$
|
41,150
|
$
|
42,712
|
$
|
—
|
$
|
(51,401
|
)
|
$
|
32,461
|
|
Evaluation
of Disclosure Controls and Procedures.
|
|
Changes
in Internal Control over Financial Reporting.
|
BDO
Seidman, LLP
|
Name
|
Age
|
Positions
with the Company
|
Jack
Friedman
|
68
|
Chairman
and Chief Executive Officer
|
Stephen
G. Berman
|
43
|
Chief
Operating Officer, President, Secretary and Director
|
Joel
M. Bennett
|
46
|
Executive
Vice President and Chief Financial Officer
|
Dan
Almagor
|
54
|
Director
|
David
C. Blatte
|
43
|
Director
|
Robert
E. Glick
|
62
|
Director
|
Michael
G. Miller
|
60
|
Director
|
Murray
L. Skala
|
61
|
Director
|
·
|
to
offer a competitive total compensation opportunity that will allow
us to
continue to retain and motivate highly talented individuals to
fill key
positions;
|
·
|
to
align a significant portion of each executive’s total compensation with
our annual performance and the interests of our stockholders; and
|
·
|
reflect
the qualifications, skills, experience and responsibilities of
our
executives
|
·
|
Activision,
Inc.
|
·
|
Electronic
Arts, Inc.
|
·
|
EMak
Worldwide, Inc.
|
·
|
Hasbro,
Inc.
|
·
|
Leapfrog
Enterprises, Inc.
|
·
|
Marvel
Enterprises, Inc.
|
·
|
Mattel,
Inc.
|
·
|
RC2
Corp.
|
·
|
Russ
Berrie and Company, Inc.
|
·
|
Take-Two
Interactive, Inc.
|
·
|
THQ
Inc.
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($) (3)
|
Total
($)
|
|||||||||||||||||||
Jack
Friedman
|
2007
|
1,065,000
|
2,662,500
|
3,421,400
|
(1)
|
—
|
—
|
—
|
28,000
|
7,176,900
|
||||||||||||||||||
Chairman
and Chief Executive Officer
|
2006
|
1,040,000
|
250,000
|
1,884,600
|
(2)
|
—
|
—
|
—
|
28,000
|
3,202,000
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Stephen
G. Berman
|
2007
|
1,065,000
|
2,662,500
|
3,421,400
|
(1)
|
—
|
—
|
—
|
25,500
|
7,176,900
|
||||||||||||||||||
Chief
Operating Officer, President and Secretary
|
2006
|
1,040,000
|
250,000
|
1,884,600
|
(2)
|
—
|
—
|
—
|
25,500
|
3,199,500
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Joel
M. Bennett
|
2007
|
400,000
|
300,000
|
155,200
|
—
|
—
|
—
|
19,500
|
874,700
|
|||||||||||||||||||
Executive
Vice President and Chief Financial Officer
|
2006
|
360,000
|
300,000
|
—
|
—
|
—
|
—
|
14,700
|
674,700
|
(1)
|
Pursuant
to the 2002 Plan, on January 1, 2007, 120,000 shares of restricted
stock
were granted to the Named Officer, of which 50% vest on January
1, 2008
and 50% vest on January 1, 2009, subject to acceleration. Based
on the
Company’s 2007 financial performance, the vesting of 45,000 of the January
1, 2009 vesting shares were accelerated. The amount in this column
reflects the expense recorded in the Company’s 2007 financial statements
and was calculated as the product of (a) 105,000 shares of restricted
stock multiplied by (b) $21.84, the last sales price of our common
stock,
as reported by Nasdaq on January 1, 2007, the date the shares were
granted, reflecting the 60,000 shares vested on January 1, 2008
and 45,000
of the remaining 60,000 shares whose vesting accelerated based
on the
Company’s 2007 financial performance. See “— Critical Accounting
Policies.” Also reflects the expense recorded in the Company’s 2007
financial statements and was calculated as the product of (a) 30,000
shares of restricted stock multiplied by (b) $20.94, the last sales
price
of our common stock, as reported by Nasdaq on January 1, 2006,
the date
the shares were granted, reflecting the 30,000 shares vested on
January 1,
2007. Also includes stock award of $500,000 of restricted stock
as
additional bonus compensation granted on February 14,
2008.
|
(2)
|
Pursuant
to the 2002 Plan, on January 1, 2006, 120,000 shares of restricted
stock
were granted to the Named Officer, of which 50% vest on January
1, 2007
and 50% vest on January 1, 2008, subject to acceleration. Based
on the
Company’s 2006 financial performance, the vesting of 30,000 of the January
1, 2008 vesting shares were accelerated. The amount in this column
reflects the expense recorded in the Company’s 2006 financial statements
and was calculated as the product of (a) 90,000 shares of restricted
stock
multiplied by (b) $20.94, the last sales price of our common stock,
as
reported by Nasdaq on January 1, 2006, the date the shares were
granted,
reflecting the 60,000 shares vested on January 1, 2007 and 30,000
of the
remaining 60,000 shares whose vesting accelerated based on the
Company’s
2006 financial performance. See “— Critical Accounting Policies.”
|
(3)
|
Represents
automobile allowances paid in the amount of $18,000 to each of
Messrs.
Friedman and Berman and $7,200 and $12,000 for 2006 and 2007,
respectively, to Mr. Bennett and matching contributions made by
us to the
Named Officer’s 401(k) defined contribution plan in the amount of $10,000,
$7,500 and $7,500, respectively, for Messrs. Friedman, Berman and
Bennett.
See “— Employee Pension Plan.”
|
Estimated
Possible Payouts
Under Non-Equity
Incentive Plan Awards
|
Estimated
Future Payouts
Under Equity
Incentive Plan Awards
|
All
Other
Stock
Awards:
Number of
Shares
of
Stock
|
All
Other
Options
Awards:
Number of
Securities
Underlying
|
Exercise
or Base
Price
of
Option
|
Closing
Price of
Stock
on
Grant
|
Grant
Date
Fair Value
Of Stock and
Option
|
|||||||||||||||||||||||||||||||
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Or Units
(#)
|
Options
(#)
|
Awards
($/Sh)
|
Date
($)
|
Awards
($) (1)
|
|||||||||||||||||||||||||
Jack
Friedman
|
1/1/07
|
—
|
—
|
—
|
—
|
—
|
—
|
120,000
|
—
|
—
|
21.84
|
2,620,800
|
|||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Stephen
G. Berman
|
1/1/07
|
—
|
—
|
—
|
—
|
—
|
—
|
120,000
|
—
|
—
|
21.84
|
2,620,800
|
|||||||||||||||||||||||||
Joel
M. Bennett
|
7/17/07
|
—
|
—
|
—
|
—
|
—
|
—
|
15,000
|
—
|
—
|
31.04
|
465,600
|
|||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Jack
Friedman
|
—
|
426,000
|
1,065,000
|
2,662,500
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Stephen
G. Berman
|
—
|
426,000
|
1,065,000
|
2,662,500
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Option Awards
|
Stock Awards
|
||||||||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock
that
Have
Not Vested
(#)
|
Market
Value of
Shares or
Units of
Stock
that
Have
Not Vested
($) (1)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
|
|||||||||||||||||||
Jack
Friedman
|
—
|
—
|
—
|
—
|
—
|
150,000
|
3,541,500
|
—
|
—
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Stephen
G. Berman
|
—
|
—
|
—
|
—
|
—
|
150,000
|
3,541,500
|
—
|
—
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Joel
M. Bennett
|
—
|
—
|
—
|
—
|
—
|
10,000
|
236,100
|
—
|
—
|
(1)
|
The
product of (x) $23.61 (the closing sale price of the common stock
on
December 31, 2007) multiplied by (y) the number of unvested restricted
shares outstanding.
|
|
Option Awards
|
Stock Awards
|
|||||||||||
Name
|
Number of
Shares
Acquired on
Exercise (#)
|
Value
Realized on
Exercise
($) (1)
|
Number of
Shares
Acquired on
Vesting (#)
|
Value
Realized on
Vesting ($)
(2)
|
|||||||||
Jack
Friedman
|
175,000
|
1,779,750
|
90,000
|
2,005,500
|
|||||||||
|
|||||||||||||
Stephen
G. Berman
|
—
|
—
|
90,000
|
2,005,500
|
|||||||||
|
|||||||||||||
Joel
M. Bennett
|
20,000
|
135,800
|
5,000
|
118,050
|
(1)
|
Represents
the product of (x) the difference between the closing sale price
of the
common stock on the date of exercise less the exercise price, multiplied
by (y) the number of shares acquired on
exercise.
|
(2) |
Represents
the product of (x) the closing sale price of the common stock on
the date
of vesting multiplied by (y) the number of restricted shares vested.
|
|
Upon
Retirement
|
Quits For
“Good
Reason”
(3)
|
Upon
Death
|
Upon
“Disability”
(4)
|
Termination
Without
“Cause”
|
Termination
For “Cause”
(6)
|
Involuntary
Termination
In
Connection
with Change
of
Control(7)
|
|||||||||||||||
Base
Salary
|
$
|
-
|
$
|
1,397,813
|
$
|
-
|
$
|
(5)
|
$
|
1,397,813
|
$
|
-
|
$
|
3,184,350
|
(8)
|
|||||||
Retirement
Benefit (1)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Restricted
Stock - Performance-Based
|
-
|
-
|
-
|
-
|
-
|
-
|
2,833,200
|
(9)
|
||||||||||||||
Annual
Cash Incentive Award (2)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Upon
Retirement
|
Quits For
“Good
Reason”
(3)
|
Upon
Death
|
Upon
“Disability”
(4)
|
Termination
Without
“Cause”
|
Termination
For “Cause”
(6)
|
Involuntary
Termination
In
Connection
with Change
of
Control(7)
|
|||||||||||||||
Base
Salary
|
$
|
-
|
$
|
1,397,813
|
$
|
-
|
$
|
-
|
$
|
1,397,813
|
$
|
-
|
$
|
3,184,350
|
(8)
|
|||||||
Restricted
Stock - Performance-Based
|
-
|
-
|
-
|
-
|
-
|
-
|
2,833,200
|
(9)
|
||||||||||||||
Annual
Cash Incentive Award (2)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Upon
Retirement
|
Quits For
“Good
Reason”
(3)
|
Upon
Death
|
Upon
“Disability”
(4)
|
Termination
Without
“Cause”
|
Termination
For “Cause”
(6)
|
Involuntary
Termination
In
Connection
with Change
of
Control(7)
|
|||||||||||||||
Base
Salary
|
$
|
-
|
$
|
400,000 |
$
|
200,000
|
$
|
200,000
|
$
|
400,000 |
$
|
-
|
$ | 200,000 | ||||||||
Restricted
Stock - Performance-Based
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Annual
Cash Incentive Award (2)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Name
|
Year
|
Fees Earned
or
Paid in
Cash
($)
|
Stock Awards
($) (1)
|
Option Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||
Dan
Almagor
|
2007
|
67,000
|
120,996
|
—
|
—
|
—
|
—
|
187,996
|
|||||||||||||||||
David
Blatte
|
2007
|
55,000
|
120,996
|
—
|
—
|
—
|
—
|
175,996
|
|||||||||||||||||
Robert
Glick
|
2007
|
67,000
|
120,996
|
—
|
—
|
—
|
—
|
187,996
|
|||||||||||||||||
Michael
Miller
|
2007
|
50,000
|
120,996
|
—
|
—
|
—
|
—
|
170,996
|
|||||||||||||||||
Murray
Skala
|
2007
|
30,000
|
120,996
|
—
|
—
|
—
|
—
|
150,996
|
Name
and Address of
Beneficial
Owner(1)(2)
|
Amount and
Nature of
Beneficial
Ownership
(s)(3)
|
Percent of
Outstanding
Shares(4)
|
|||||
Third
Avenue Management LLC
|
2,549,525
|
(5)
|
8.9
|
%
|
|||
Barclays
Global Investors, NA.
|
2,000,117
|
(6)
|
7.0
|
||||
Dimensional
Fund Advisors LP
|
2,433,579
|
(7)
|
8.5
|
||||
AXA
Financial, Inc.
|
1,590,238
|
(8)
|
5.6
|
||||
Jack
Friedman
|
614,101
|
(9)
|
2.1
|
||||
Stephen
G. Berman
|
290,567
|
(10)
|
*
|
||||
Joel
M. Bennett
|
47,773
|
(11)
|
*
|
||||
Dan
Almagor
|
47,222
|
(12)
|
*
|
||||
David
C. Blatte
|
95,768
|
(13)
|
*
|
||||
Robert
E. Glick
|
117,289
|
(14)
|
*
|
||||
Michael
G. Miller
|
107,914
|
(15)
|
*
|
||||
Murray
L. Skala
|
116,042
|
(16)
|
*
|
||||
All
directors and executive officers as a group (8 persons)
|
1,436,673
|
(17)
|
5.0
|
%
|
(1)
|
Unless
otherwise indicated, such person’s address is c/o JAKKS Pacific, Inc.,
22619 Pacific Coast Highway, Malibu, California 90265.
|
(2)
|
The
number of shares of common stock beneficially owned by each person
or
entity is determined under the rules promulgated by the Securities
and
Exchange Commission. Under such rules, beneficial ownership includes
any
shares as to which the person or entity has sole or shared voting
power or
investment power. The percentage of our outstanding shares is calculated
by including among the shares owned by such person any shares which
such
person or entity has the right to acquire within 60 days after
February
27, 2008. The inclusion herein of any shares deemed beneficially
owned
does not constitute an admission of beneficial ownership of such
shares.
|
(3)
|
Except
as otherwise indicated, exercises sole voting power and sole investment
power with respect to such shares.
|
(4)
|
Does
not include any shares of common stock issuable upon the conversion
of
$98.0 million of our 4.625% convertible senior notes due 2023,
initially
convertible at the rate of 50 shares of common stock per $1,000
principal
amount at issuance of the notes (but subject to adjustment under
certain
circumstances as described in the notes).
|
(5)
|
The
address of Third Avenue Management LLC is 622 Third Avenue, New
York, NY
10017. All the information presented in this Item with respect
to this
beneficial owner was extracted solely from the Schedule 13G/A filed
on
February 11, 2008.
|
(6)
|
The
address of Barclays Global Investors, NA. is 45 Fremont Street,
San
Francisco, CA 94105. Possesses sole voting power with respect to
1,612,442
of such shares and sole dispositive power with respect to all of
such
2,000,117 shares. All the information presented in this Item with
respect
to this beneficial owner was extracted solely from the Schedule
13G/A
filed on February 5, 2008.
|
(7)
|
The
address of Dimensional Fund Advisors LP (formerly known as Dimensional
Fund Advisors, Inc.) is 1299 Ocean Avenue, 11th Floor, Santa Monica,
CA
90401. All the information presented in this Item with respect
to this
beneficial owner was extracted solely from the Schedule 13G/A filed
on
February 6, 2008.
|
(8)
|
The
address of AXA Financial, Inc. is 1290 Avenue of the Americas,
New York,
NY 10104. Possesses sole voting power with respect to 737,414 of
such
shares and sole dispositive power with respect to all of such 1,590,238
shares. All the information presented in this Item with respect
to this
beneficial owner was extracted solely from the Schedule 13G filed
on
February 14, 2008.
|
(9)
|
Includes
3,186 shares held in trusts for the benefit of children of Mr. Friedman.
Also includes 120,000 shares of common stock issued on January 1,
2008
pursuant to the terms of Mr. Friedman’s January 1, 2003 Employment
Agreement, which shares are further subject to the terms of our January
1,
2008 Restricted Stock Award Agreement with Mr. Friedman (the “Friedman
Agreement”). The Friedman Agreement provides that Mr. Friedman will
forfeit his rights to all 120,000 shares unless certain conditions
precedent are met prior to January 1, 2009, including the condition
that
our Pre-Tax Income (as defined in the Friedman Agreement) for 2008
exceeds
$2,000,000, whereupon the forfeited shares will become authorized
but
unissued shares of our common stock. The Friedman Agreement, as modified
by a subsequent agreement with our Board of Directors as a condition
to
receiving the 20,567 restricted share grant described below, further
prohibits Mr. Friedman from selling, assigning, transferring, pledging
or
otherwise encumbering (a) 50,000 of the 120,000 shares prior to January
1,
2009 and 10,000 until January 1, 2011, (b) of the remaining 60,000
shares,
50,000 shares prior to January 1, 2010; provided, however, that if
our
Pre-Tax Income for 2008 exceeds $2,000,000 and our Adjusted EPS Growth
(as
defined in the Friedman Agreement) for 2008 increases by certain
percentages as set forth in the Friedman Agreement, the vesting of
some or
all of the 50,000 shares that would otherwise vest on January 1,
2010 will
be accelerated to the date the Adjusted EPS Growth is determined
and (c)
the remaining 10,000 shares until two years after the vesting date
of all
of the 50,000 shares described in (b). Mr. Friedman is
prohibited from selling, assigning, transferring, pledging or otherwise
encumbering 15,000 shares issued him on January 1, 2007 until January
1,
2009. Also includes 20,567 shares granted on February 14, 2008 which
are
subject to a three-year restriction on sale and 175,000 shares subject
to
restriction on sale until June 11, 2009 of which shares not more
than
87,500 shares may be sold prior to June 11,
2010.
|
(10)
|
Includes
120,000 shares of common stock issued on January 1, 2008 pursuant
to the
terms of Mr. Berman’s January 1, 2003 Employment Agreement, which shares
are further subject to the terms of our January 1, 2008 Restricted
Stock
Award Agreement with Mr. Berman (the “Berman Agreement”). The Berman
Agreement provides that Mr. Berman will forfeit his rights to all
120,000
shares unless certain conditions precedent are met prior to January
1,
2009, including the condition that our Pre-Tax Income (as defined
in the
Berman Agreement) for 2008 exceeds $2,000,000, whereupon the forfeited
shares will become authorized but unissued shares of our common stock.
The
Berman Agreement, as modified by a subsequent agreement with our
Board of
Directors as a condition to receiving the 20,567 restricted share
grant
described below, further prohibits Mr. Berman from selling, assigning,
transferring, pledging or otherwise encumbering (a) 50,000 of the
120,000
shares prior to January 1, 2009 and 10,000 until January 1, 2011,
(b) of
the remaining 60,000 shares, 50,000 shares prior to January 1, 2010;
provided, however, that if our Pre-Tax Income for 2008 exceeds $2,000,000
and our Adjusted EPS Growth (as defined in the Berman Agreement)
for 2008
increases by certain percentages as set forth in the Berman Agreement,
the
vesting of some or all of the 50,000 shares that would otherwise
vest on
January 1, 2010 will be accelerated to the date the Adjusted EPS
Growth is
determined and (c) the remaining 10,000 shares until two years after
the
vesting date of all of the 50,000 shares described in (b). Mr.
Berman is prohibited from selling, assigning, transferring, pledging
or
otherwise encumbering 15,000 shares issued him on January 1, 2007
until
January 1, 2009. Also includes 20,567 shares granted on February
14, 2008
which are subject to a three-year restriction on sale and 175,000
shares
subject to restriction on sale until June 11, 2009 of which shares
not
more than 87,500 shares may be sold prior to June 11,
2010.
|
(11)
|
Includes
10,000 shares of restricted common stock granted by our Board of
Directors
to Mr. Bennett upon the execution of his new employment agreement
(see
“Executive Compensation- Employment Agreements”), which restricted shares
vest in equal annual installments of 5,000 shares each on December
31,
2008 and 2009. Does not include 3,593 restricted shares on February
29,
2008 and which vest 50% on March 1, 2009 and the balance on March
1,
2010.
|
(12)
|
Includes
29,644 shares which Mr. Almagor may purchase upon the exercise of
certain
stock options and 17,578 shares of common stock issued pursuant to
our
2002 Stock Award and Incentive Plan, pursuant to which 5,068 shares
may
not be sold, mortgaged, transferred or otherwise encumbered prior
to
January 1, 2009.
|
(13)
|
Includes
82,500 shares which Mr. Blatte may purchase upon the exercise of
certain
stock options and 13,268 shares of common stock issued pursuant to
our
2002 Stock Award and Incentive Plan, pursuant to which 5,068 of such
shares may not be sold, mortgaged, transferred or otherwise encumbered
prior to January 1, 2009.
|
(14)
|
Includes
99,021 shares which Mr. Glick may purchase upon the exercise of certain
stock options and 18,268 shares of Common Stock issued pursuant to
our
2002 Stock Award and Incentive Plan, pursuant to which 5,068 of such
shares may not be sold, mortgaged, transferred or otherwise encumbered
prior to January 1, 2009.
|
(15)
|
Includes
89,646 shares which Mr. Miller may purchase upon the exercise of
certain
stock options and 18,268 shares of Common Stock issued pursuant to
our
2002 Stock Award and Incentive Plan, pursuant to which 5,068 of such
shares may not be sold, mortgaged, transferred or otherwise encumbered
prior to January 1, 2009.
|
(16)
|
Includes
97,771 shares which Mr. Skala may purchase upon the exercise of certain
stock options and 18,268 shares of common stock issued pursuant to
our
2002 Stock Award and Incentive Plan, pursuant to which 5,068 of such
shares may not be sold, mortgaged, transferred or otherwise encumbered
prior to January 1, 2009.
|
(17)
|
Includes
3,186 shares held in trust for the benefit of Mr. Friedman’s children,
20,567 shares 41,134 shares granted to each of Messrs. Friedman and
Berman
but are unissued on the date hereof and an aggregate of 398,582 shares
which the directors and executive officers may purchase upon the
exercise
of certain stock options.
|
(a)
|
Transactions
with Related Persons
|
(b)
|
Review,
Approval or Ratification of Transactions with Related Persons
|
(c)
|
Director
Independence
|
|
2006
|
2007
|
|||||
Audit Fees
|
$
|
1,015,700
|
$
|
1,026,500
|
|||
Audit Related Fees
|
$
|
—
|
$
|
—
|
|||
Tax Fees
|
$
|
—
|
$
|
—
|
|||
All Other Fees
|
$
|
—
|
$
|
—
|
(1)
|
Financial
Statements (included in Item 8):
|
•
|
Reports
of Independent Registered Public Accounting Firms
|
•
|
Consolidated
Balance Sheets as of December 31, 2006 and 2007
|
•
|
Consolidated
Statements of Operations for the years ended December 31, 2005, 2006
and
2007
|
•
|
Consolidated
Statements of Other Comprehensive Income for the years ended December
31,
2005, 2006 and 2007
|
•
|
Consolidated
Statements of Stockholders’ Equity for the years ended December 31, 2005,
2006 and 2007
|
•
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2005, 2006
and
2007
|
•
|
Notes
to Consolidated Financial Statements
|
(2)
|
Financial
Statement Schedules (included in Item 8):
|
•
|
Schedule
II — Valuation and Qualifying Accounts
|
(3) |
Exhibits:
|
Exhibit
Number
|
Description
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Company
(1)
|
|
3.2.1
|
By-Laws
of the Company (2)
|
|
3.2.2
|
Amendment
to By-Laws of the Company (3)
|
|
10.1.1
|
Third
Amended and Restated 1995 Stock Option Plan (4)
|
|
10.1.2
|
1999
Amendment to Third Amended and Restated 1995 Stock Option Plan
(5)
|
|
10.1.3
|
2000
Amendment to Third Amended and Restated 1995 Stock Option Plan
(6)
|
|
10.1.4
|
2001
Amendment to Third Amended and Restated 1995 Stock Option Plan
(7)
|
|
10.2
|
2002
Stock Award and Incentive Plan (8)
|
|
10.3
|
Amended
and Restated Employment Agreement between the Company and Jack Friedman,
dated as of March 26, 2003 (9)
|
|
10.4
|
Amended
and Restated Employment Agreement between the Company and Stephen
G.
Berman dated as of March 26, 2003 (9)
|
|
10.5
|
Office
Lease dated November 18, 1999 between the Company and Winco Maliview
Partners (10)
|
|
10.6
|
Form
of Restricted Stock Agreement (9)
|
|
10.7
|
Employment
Agreement between the Company and Joel M. Bennett, dated July 17,
2007
(11)
|
|
14
|
Code
of Ethics (11)
|
|
21
|
Subsidiaries
of the Company (*)
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Jack Friedman (*)
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Joel Bennett (*)
|
|
32.1
|
Section
1350 Certification of Jack Friedman (*)
|
|
32.2
|
Section
1350 Certification of Joel Bennett
(*)
|
(1)
|
Filed
previously as Appendix 2 to the Company’s Schedule 14A Proxy Statement,
filed August 23, 2002, and incorporated herein by reference.
|
(2)
|
Filed
previously as an exhibit to the Company’s Registration Statement on Form
SB-2 (Reg. No. 333-2048-LA), effective May 1, 1996, and incorporated
herein by reference.
|
(3)
|
Filed
previously as an exhibit to the Company’s Registration Statement on Form
SB-2 (Reg. No. 333-22583), effective May 1, 1997, and incorporated
herein
by reference.
|
(4)
|
Filed
previously as Appendix A to the Company’s Schedule 14A Proxy Statement,
filed June 23, 1998, and incorporated herein by reference.
|
(5)
|
Filed
previously as an exhibit to the Company’s Registration Statement on Form
S-8 (Reg. No. 333-90055), filed November 1, 1999, and incorporated
herein
by reference.
|
(6)
|
Filed
previously as an exhibit to the Company’s Registration Statement on Form
S-8 (Reg. No. 333-40392), filed June 29, 2000, and incorporated herein
by
reference.
|
(7)
|
Filed
previously as Appendix B to the Company’s Schedule 14A Proxy Statement,
filed June 11, 2001, and incorporated herein by reference.
|
(8)
|
Filed
previously as an exhibit to the Company’s Registration Statement on Form
S-8 (Reg. No. 333-101665), filed December 5, 2002, and incorporated
herein
by reference.
|
(9)
|
Filed
previously as an exhibit to the Company’s Annual Report on Form 10-K for
its fiscal year ended December 31, 2002, filed March 31, 2003, and
incorporated herein by reference.
|
(10)
|
Filed
previously as an exhibit to the Company’s Annual Report on Form 10-K for
its fiscal year ended December 31, 1999, filed March 30, 2000, and
incorporated herein by reference.
|
(11) |
Filed
previously as an exhibit to the Company’s Current Report on Form
8-K filed July 17, 2007, and incorporated herein by reference.
|
(12)
|
Filed
previously as an exhibit to the Company’s Annual Report on Form 10-K for
its fiscal year ended December 31, 2003, filed March 15, 2004, and
incorporated herein by reference.
|
(*)
|
Filed
herewith.
|
Dated:
February 29, 2008
|
JAKKS
PACIFIC, INC.
|
|
|
|
|
|
By:
|
/s/
JACK FRIEDMAN
|
|
|
Jack
Friedman
|
|
|
Chairman
and
|
|
|
Chief
Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/
JACK FRIEDMAN
|
Chairman
of the Board
|
February
29, 2008
|
||
Jack
Friedman
|
of
Directors and
|
|
||
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
||
/s/
JOEL M. BENNETT
|
Chief
Financial Officer
|
February
29, 2008
|
||
Joel
M. Bennett
|
(Principal
Financial Officer and
|
|
||
|
Principal
Accounting Officer)
|
|
||
/s/
STEPHEN G. BERMAN
|
Director
|
February
29, 2008
|
||
Stephen
G. Berman
|
|
|
||
/s/
DAN ALMAGOR
|
Director
|
February
29, 2008
|
||
Dan
Almagor
|
|
|
||
/s/
DAVID C. BLATTE
|
Director
|
February
29, 2008
|
||
David
C. Blatte
|
|
|
||
/s/
ROBERT E. GLICK
|
Director
|
February
29, 2008
|
||
Robert
E. Glick
|
|
|
||
/s/
MICHAEL G. MILLER
|
Director
|
February
29, 2008
|
||
Michael
G. Miller
|
|
|
||
/s/
MURRAY L. SKALA
|
Director
|
February
29, 2008
|
||
Murray
L. Skala
|
|
|
Exhibit
Number
|
Description
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Company
(1)
|
|
3.2.1
|
By-Laws
of the Company (2)
|
|
3.2.2
|
Amendment
to By-Laws of the Company (3)
|
|
10.1.1
|
Third
Amended and Restated 1995 Stock Option Plan (4)
|
|
10.1.2
|
1999
Amendment to Third Amended and Restated 1995 Stock Option Plan
(5)
|
|
10.1.3
|
2000
Amendment to Third Amended and Restated 1995 Stock Option Plan
(6)
|
|
10.1.4
|
2001
Amendment to Third Amended and Restated 1995 Stock Option Plan
(7)
|
|
10.2
|
2002
Stock Award and Incentive Plan (8)
|
|
10.3
|
Amended
and Restated Employment Agreement between the Company and Jack Friedman,
dated as of March 26, 2003 (9)
|
|
10.4
|
Amended
and Restated Employment Agreement between the Company and Stephen
G.
Berman dated as of March 26, 2003 (9)
|
|
10.5
|
Office
Lease dated November 18, 1999 between the Company and Winco Maliview
Partners (10)
|
|
10.6
|
Form
of Restricted Stock Agreement (9)
|
|
10.7
|
Employment
Agreement between the Company and Joel M. Bennett, dated July 17,
2007
(11)
|
|
14
|
Code
of Ethics (11)
|
|
21
|
Subsidiaries
of the Company (*)
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Jack Friedman (*)
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Joel Bennett (*)
|
|
32.1
|
Section
1350 Certification of Jack Friedman (*)
|
|
32.2
|
Section
1350 Certification of Joel Bennett
(*)
|
(1)
|
Filed
previously as Appendix 2 to the Company’s Schedule 14A Proxy Statement,
filed August 23, 2002, and incorporated herein by reference.
|
(2) |
Filed
previously as an exhibit to the Company’s Registration Statement on Form
SB-2 (Reg. No. 333-2048-LA), effective May 1, 1996, and incorporated
herein by reference.
|
(3) |
Filed
previously as an exhibit to the Company’s Registration Statement on Form
SB-2 (Reg. No. 333-22583), effective May 1, 1997, and incorporated
herein
by reference.
|
(4) |
Filed
previously as Appendix A to the Company’s Schedule 14A Proxy Statement,
filed June 23, 1998, and incorporated herein by reference.
|
(5) |
Filed
previously as an exhibit to the Company’s Registration Statement on Form
S-8 (Reg. No. 333-90055), filed November 1, 1999, and incorporated
herein
by reference.
|
(6) |
Filed
previously as an exhibit to the Company’s Registration Statement on Form
S-8 (Reg. No. 333-40392), filed June 29, 2000, and incorporated
herein by
reference.
|
(7) |
Filed
previously as Appendix B to the Company’s Schedule 14A Proxy Statement,
filed June 11, 2001, and incorporated herein by reference.
|
(8) |
Filed
previously as an exhibit to the Company’s Registration Statement on Form
S-8 (Reg. No. 333-101665), filed December 5, 2002, and incorporated
herein
by reference.
|
(9) |
Filed
previously as an exhibit to the Company’s Annual Report on Form 10-K for
its fiscal year ended December 31, 2002, filed March 31, 2003,
and
incorporated herein by reference.
|
(10)
|
Filed
previously as an exhibit to the Company’s Annual Report on Form 10-K for
its fiscal year ended December 31, 1999, filed March 30, 2000, and
incorporated herein by reference.
|
(11)
|
Filed
previously as an exhibit to the Company’s Current Report on Form
8-K filed July 17, 2007, and incorporated herein by reference.
|
(12)
|
Filed
previously as an exhibit to the Company’s Annual Report on Form 10-K for
its fiscal year ended December 31, 2003, filed March 15, 2004, and
incorporated herein by reference.
|
(*) |
Filed
herewith.
|