Press Release

JAKKS Pacific® Reports Fourth Quarter and Year-End Results for 2010

MALIBU, Calif.–(BUSINESS WIRE)– JAKKS Pacific, Inc. (NASDAQ: JAKK) reported results for the Company’s fourth quarter and full year ended December 31, 2010.

Net sales for the fourth quarter of 2010 were $198.0 million compared to $198.8 million reported in the comparable period last year; and net sales for the full year of 2010 were $747.3 million compared to $803.7 million in 2009. Reported net income for the fourth quarter was $8.9 million, or $0.30 per diluted share, compared to a loss of $1.9 million, or $0.07 per share, in the fourth quarter of 2009. Reported net income for the full year of 2010 was $47.0 million, or $1.52 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 one-time tax benefits of $10.8 million, or $0.31 per diluted share, compared to a loss of $385.5 million, or $14.02 per share, reported in 2009.

On a non-GAAP basis, net sales for the fourth quarter of 2010 were $198.0 million compared to $198.8 million, and $747.3 million for the full year of 2010 compared to $804.3 million reported in the full year of 2009. On a non-GAAP basis, net income for the fourth quarter of 2010 was $8.9 million, or $0.30 per diluted share, compared to $6.4 million, or $0.22 per diluted share, in the fourth quarter of 2009. Non-GAAP earnings for the full year of 2010 were $47.0 million, or $1.52 per diluted share including the one-time charge and tax benefits noted above, compared to $30.2 million, or $1.03 per diluted share, reported in 2009.

Fourth quarter and full year GAAP results include the following, which were excluded in the non-GAAP results above for 2009:

2010

* There were no adjustments to the 2010 GAAP results.

2009

* Pre-tax charge to cost of goods of $23.3 million was taken in the second quarter and $2.9 million in the third quarter related to the impairment of inventory.
* Pre-tax charge to royalty expense of $33.2 million was taken in the second quarter and $0.2 million in the third quarter related to abandoned or underperforming licenses.
* Pre-tax non-cash goodwill and other intangible asset impairment charges of $415.3 million taken in the second quarter.
* Pre-tax non-cash charge of $2.3 million related to the write-off of obsolete tools and molds taken in the second quarter.

* Pre-tax charge of $1.3 million related to a product recall taken in the second quarter.
* Pre-tax non-cash charge of $23.5 million related to the reduction of our preferred return from our video game joint venture with THQ as a result of the arbitration decision, of which $22.5 million was taken in the second quarter and $1.0 million was taken in the third quarter.
* Pre-tax charge of $13.0 million taken in the fourth quarter related to the reorganization of the Company’s operations, including termination of lease obligations, severance, fixed asset write-offs and other contract terminations.

“We finished 2010 with robust sales that were ahead of plan,” commented Stephen Berman, President and CEO, JAKKS Pacific. “We are pleased that we also achieved the top end of our earnings guidance, despite continuing cost pressures and product mix shift that affected margin on those sales. We continue to closely manage our supply chain and maintain momentum on the development and placement of our product lines for 2011, giving us cautious optimism for this year.

“Our 2011 portfolio has been well-received and is broadly placed in virtually all retail channels. We are expecting to achieve growth this year, with the contributions coming from across all JAKKS divisions, including role play toys, action figures, Halloween costumes, electronics, kids furniture, dolls and more.”

“While we successfully reduced operating costs in 2010, we continue to be challenged with increases in labor, raw materials and transportation,” commented Joel Bennett, Executive Vice President and CFO. “However, barring any further substantial increases, we believe we will be able to keep these pressures in line with our expectations for the year.”

Operations provided cash of $67.5 million for the full year of 2010, and as of December 31, 2010, the Company’s working capital was $389.8 million, including cash and equivalents and marketable securities of $278.6 million.

Bennett continued, “We continue to actively evaluate potential acquisition targets and apply our disciplined approach to obtain the best deal for JAKKS Pacific and our Stockholders. In addition, we purchased 291 thousand shares of our common stock during the quarter at a cost of $5.6 million pursuant to our previously announced stock buy-back program of up to $30.0 million of the Company’s common stock.”

Berman concluded, “For our initial 2011 guidance we are anticipating an increase in net sales of 3% to 4% to approximately $770 to $775 million, with diluted EPS in the range of $1.32 to $1.35, an increase of 4% to 6% excluding the one-time tax benefits and benefit payment in 2010. This guidance anticipates first quarter 2011 net sales in the range of $60 to $65 million, with a loss per share in the range of $0.39 to $0.45 versus net sales of $77.3 million and a loss per share of $0.19 in the first quarter of 2009, which included a one-time tax benefit of $4.9 million, or $0.18 per share.”

Use of Non-GAAP Financial information

In addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information, including net sales information that excludes recall items, and expense information that excludes intangible asset impairment charges and license and inventory impairment charges, among others. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because this information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these non-GAAP financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operation results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measure. See the attached “Reconciliation of Non-GAAP Financial Information.”

Conference Call

JAKKS Pacific will webcast its fourth quarter earnings conference call today at 8:30a.m. ET (5:30a.m. PT) today. To listen to the live webcast, go to investors.jakks.com, and click on the earnings webcast link under Events and Presentations at least 10 minutes prior to register, download and install any necessary audio software. A telephonic playback will be available from approximately one hour after the call concludes through March 15, 2011. The playback can be accessed by calling 888-203-1112, or 719-457-0820 for international callers, pass code “9068258”

About JAKKS Pacific, Inc.

JAKKS Pacific, Inc. (NASDAQ: JAKK) is a leading designer and marketer of toys and consumer products, with a wide range of products that feature some of the most popular brands and children’s toy licenses in the world. JAKKS’ diverse portfolio includes Action Figures, Electronics, Dolls, Dress-Up, Role Play, Halloween Costumes, Kids Furniture, Vehicles, Plush, Art Activity Kits, Seasonal Products, Infant/Pre-School, Construction Toys and Pet Toys sold under various proprietary brands including JAKKS Pacific®, Creative Designs International™, Road Champs®, Funnoodle®, JAKKS Pets™, Plug It In & Play TV Games™, Kids Only!™, Tollytots® and Disguise™. JAKKS is an award-winning licensee of several hundred nationally and internationally known trademarks including Disney®, Nickelodeon®, Pokémon®, Warner Bros.®, Ultimate Fighting Championship®, Hello Kitty®, Graco® and Cabbage Patch Kids®. www.jakks.com

This press release may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific’s business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS’ products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, and difficulties with integrating acquired businesses. The forward-looking statements contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release.