Hannah Montana performs for Jakks

Licensed merchandise drives sales but increased costs hampers income.
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Jakks first quarter net sales to March 31st increased 5.5 per cent to $130.9 million, compared to $124.1 million recorded in the comparable period last year.

However, increased litigation, product testing and restructuring costs saw its net income drop from $3.2 million to just $0.9 million.

Jack Friedman, chairman and CEO, said: "Sell-through continued strong in the first quarter, with sales driven by our Hannah Montana toys, action figures and Plug It In & Play electronic products.

"With increased costs related to litigation, product testing, and marketing, promotion and advertising, as well as some closeout sales that affected gross margins and the bottom-line versus last year's first quarter, we are still on track to achieve our previous guidance of at least 4 per cent growth over 2007, leaving us poised for another record year for Jakks Pacific.

“During the first quarter, we finalised the integration of our Play Along division and expect to benefit beginning in the second quarter from the operating efficiencies as a result."

Stephen Berman, president and chief operating officer, expects licensed products to help drive the rest of the year’s business.

“Cash flow from operations in the quarter was $15.4 million, and our financial position remains very strong. As of March 31, 2008, our working capital was $359.2 million, including cash and equivalents of $238.3 million, and we continue to evaluate potential acquisition opportunities and expect to continue to grow our business by actively pursuing complementary acquisitions and executing on internal growth initiatives, in the near future,” he added.

Friedman concluded that the firm is confident it will achieve its 2008 forecast of at least $891.4 million in net sales and $93.6 million in net income.

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