Jakks Pacific to Restate 2002, 2003 Net Income

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Jakks Pacific Inc. said Tuesday it will restate 2002 and 2003 net income because it misclassified assets related to several acquisitions.


The Securities and Exchange Commission’s chief accountant’s office instructed the Malibu-based toy maker to restate its results because it treated some of the purchase price as goodwill, when it should have been classified as acquired product rights and possibly other intangible assets. Goodwill can be written down over a longer period.


Adjusting for the amortization or impairment of these assets will reduce Jakks Pacific’s previously reported net income for 2002 and 2003, but not its revenue, the company said in a press release. It said the changes to net income are not likely to be material.


Jakks Pacific also said it expects to report net income of $11.1 million (37 cents per diluted share) for the fourth quarter ended Dec. 31. The results assume the conversion of convertible notes and include non-cash stock-based compensation charges of $5.1 million, as well as amortization charges of $8.6 million related to Jakks Pacific’s acquisition of Play Along. Net income for the year-ago period is being restated.


Jakks Pacific expects to report fourth-quarter revenues of $184.8 million, up from $84.4 million in the year-earlier period.


For all of 2004, Jakks said it expects to report net income of $45.9 million ($1.57 per diluted share), including pre-tax charges of $13.6 million related to non-cash stock-based compensation, amortization and convertible notes. Revenue increased 82 percent to $574.3 million.


Jakks Pacific shares fell 17 cents, or 0.8 percent, to close at $20.98 on Tuesday.

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