What changed in JAKKS PACIFIC INC's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of JAKKS PACIFIC INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+177 added−169 removedSource: 10-K (2025-03-06) vs 10-K (2024-03-15)
Top changes in JAKKS PACIFIC INC's 2024 10-K
177 paragraphs added · 169 removed · 153 edited across 7 sections
- Item 1. Business+57 / −53 · 48 edited
- Item 7. Management's Discussion & Analysis+55 / −51 · 46 edited
- Item 1A. Risk Factors+52 / −51 · 47 edited
- Item 5. Market for Registrant's Common Equity+7 / −6 · 6 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+3 / −5 · 3 edited
Item 1. Business
Business — how the company describes what it does
48 edited+9 added−5 removed50 unchanged
Item 1. Business
Business — how the company describes what it does
48 edited+9 added−5 removed50 unchanged
2023 filing
2024 filing
Biggest changeWe have acquired the rights to use many familiar brand and character names and logos from third parties that we use with our primary trademarks and brands. Currently, among others, we have license agreements with Nickelodeon®, Disney®, Pixar®, Marvel®, NBC Universal®, Microsoft®, Sega®, Sony®, Netflix® and WarnerMedia®, as well as with the licensors of many other popular characters.
Biggest changeCurrently, among others, we have license agreements with Nickelodeon®, Disney®, Pixar®, Marvel®, NBC Universal®, Microsoft®, Sega®, Sony®, Netflix® and WarnerMedia®, as well as with the licensors of many other popular characters. We also license IP from other toy companies for categories in which they do not offer products found within our core product lines.
To date, a majority of all of our sales has been to customers based in the United States.
To date, a majority of all our sales has been to customers based in the United States.
We publicize and advertise our products online and on mobile, in trade and consumer magazines and other publications, market our products at international, national and regional toy and other specialty trade shows, conventions and exhibitions and carry on cooperative advertising programs with toy and mass market retailers and other customers which include the use of print, online, mobile and television ads and via in-store displays.
We publicize and advertise our products online and on mobile devices, in trade and consumer magazines and other publications, market our products at international, national and regional toy and other specialty trade shows, conventions and exhibitions and carry on cooperative advertising programs with toy and mass market retailers and other customers which include the use of print, online, mobile and television ads and via in-store displays.
We endeavor to generate growth within these lines by: ● creating innovative products under our established licenses and brand names; ● adding new items to the branded product lines that we expect will enjoy greater popularity; ● infusing innovation and technology when appropriate to make products more appealing to today’s kids; and ● expanding our international product offering either sold directly to retailers or via third-party distributors. 5 Table of Contents Our Business Strategy In addition to developing our own proprietary brands, properties and marks, licensing popular IP enables us to use these high-profile marks at a lower cost than we would incur if we purchased these marks or funded the development of comparable marks on our own.
We endeavor to generate growth within these lines by: ● creating innovative products under our established licenses and brand names; ● adding new items to the branded product lines that we expect will enjoy greater popularity; ● infusing innovation and technology when appropriate to make products more appealing to today’s kids; and ● expanding our international product offering either sold directly to retailers or via third-party distributors. 4 Table of Contents Our Business Strategy In addition to developing our own proprietary brands, properties and marks, licensing popular IP enables us to use these high-profile marks at a lower cost than we would incur if we purchased these marks or funded the development of comparable marks on our own.
Furthermore, we cannot assure you that we can identify attractive acquisition candidates or negotiate acceptable acquisition terms, and our failure to do so may adversely affect our results of operations and our ability to sustain growth.
Furthermore, we cannot assure you that we can identify attractive acquisition candidates or negotiate acceptable acquisition terms, and our failure to do so may adversely affect the results of our operations and our ability to sustain growth.
We believe that our current infrastructure and operating model can accommodate growth without a proportionate increase in our operating and administrative expenses, thereby increasing our operating margins. 6 Table of Contents The execution of our growth strategy, however, is subject to several risks and uncertainties and we cannot assure you that we will continue to experience growth in or maintain our present level of net sales (see “Risk Factors,” in Item 1A).
We believe that our current infrastructure and operating model can accommodate growth without a proportionate increase in our operating and administrative expenses, thereby increasing our operating margins. 5 Table of Contents The execution of our growth strategy, however, is subject to several risks and uncertainties and we cannot assure you that we will continue to experience growth in or maintain our present level of net sales (see “Risk Factors,” in Item 1A).
Our principal products are highlighted above in our Company Overview. 7 Table of Contents Sales, Marketing and Distribution We sell all of our products through our own in-house sales staff and independent sales representatives to toy and mass-market retail chain stores, department stores, office supply stores, drug and grocery store chains, club stores, dollar stores, toy specialty stores and wholesalers.
Our principal products are highlighted above in our Company Overview. 6 Table of Contents Sales, Marketing and Distribution We sell all our products through our own in-house sales staff and independent sales representatives to toy and mass-market retail chain stores, department stores, office supply stores, drug and grocery store chains, club stores, dollar stores, toy specialty stores and wholesalers.
The lingering impact of the pandemic has created volatility in costs associated with the sourcing and importation of product, in particular due to changes in factor inputs (labor, oil) and market demand for services (transport). In addition, our third-party manufacturers have seen increases in foreign exchange rate exposure during this time.
The lingering impact of the pandemic has created volatility in costs associated with the sourcing and importation of products, in particular due to changes in factor inputs (labor, oil) and market demand for services (transport). In addition, our third-party manufacturers have seen increases in foreign exchange rate exposure during this time.
Although we have the capability to create and develop products from inception to production, we also use third-parties to provide a portion of the sculpting, sample making, illustration and package design required for our products in order to accommodate our increasing product innovations and introductions as well as accelerate our speed-to-market.
Although we have the capability to create and develop products from inception to production, we also use third-parties to provide a portion of the sculpting, sample making, illustration and package design required for our products to accommodate our increasing product innovations and introductions as well as accelerate our speed-to-market.
No other customer accounted for more than 10% of our net sales in 2022. We generally sell products to our customers on open account with payment terms typically varying from 30 to 90 days or, in some cases, pursuant to letters of credit.
No other customer accounted for more than 10% of our net sales in 2023. We generally sell products to our customers on open account with payment terms typically varying from 30 to 90 days or, in some cases, pursuant to letters of credit.
We may also incur costs or other losses as a result of not placing orders consistent with our forecasts for product to be manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand.
We may also incur costs or other losses as a result of not placing orders consistent with our forecasts for products to be manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand.
Our telephone number is (424) 268-9444 and our Internet Website address is www.jakks.com. The contents of our website are not incorporated in or deemed to be a part of this Annual Report on Form 10-K. 12 Table of Contents
Our telephone number is (424) 268-9444 and our Internet Website address is www.jakks.com. The contents of our website are not incorporated in or deemed to be a part of this Annual Report on Form 10-K. 11 Table of Contents
The in-house manager identifies and evaluates inventor products and concepts and other opportunities to enhance or expand existing product lines or to enter new product categories. In addition, we create proprietary products to fully exploit our concept and character licenses.
The in-house lead identifies and evaluates inventor products and concepts and other opportunities to enhance or expand existing product lines or to enter new product categories. In addition, we create proprietary products to fully exploit our concept and character licenses.
Substantially all of these assets are located in China. 9 Table of Contents Patents, Trademarks, Copyrights and Licenses We routinely pursue protection of our products through some form or combination of intellectual property right(s).
Substantially all of these assets are located in China. 8 Table of Contents Patents, Trademarks, Copyrights and Licenses We routinely pursue protection of our products through some form or combination of intellectual property right(s).
Generally, our license agreements for products and concepts call for royalties ranging from 1% to 22% of net sales, and some may require minimum royalty guarantees and up-front or advanced royalty payments against those guarantees.
Generally, our license agreements for products and concepts call for royalties ranging from 1% to 25% of net sales, and some may require minimum royalty guarantees and up-front or advanced royalty payments against those guarantees.
Cancellations generally are made in writing, and we take appropriate steps to notify our manufacturers of these cancellations. We may incur costs or other losses as a result of cancellations. We maintain a full-time sales and marketing staff, many of whom make on-site visits to customers for the purpose of showing products and soliciting orders for products.
Cancellations generally are made in writing, and we take appropriate steps to notify our manufacturers of these cancellations. We may incur costs or other losses because of cancellations. We maintain a full-time sales and marketing staff, many of whom make on-site visits to customers for the purpose of showing products and soliciting orders for products.
Typically, the development process takes from nine to eighteen months from concept to production and shipment to our customers, but given our Company’s size and structure, we have demonstrated the ability to shrink that down to three to nine months successfully when the opportunity requires. We employ a staff of designers for all of our product lines.
Typically, the development process takes from nine to eighteen months from concept to production and shipment to our customers, but given our Company’s size and structure, we have demonstrated the ability to shrink that down to three to nine months successfully when the opportunity requires. We employ a staff of product designers.
Health and Safety We are committed to providing a safe, healthy and productive working environment for all of our employees globally. 11 Table of Contents Environmental Issues We may be subject to legal and financial obligations under environmental, health and safety laws in the United States and in other jurisdictions where we operate.
Health and Safety We are committed to providing a safe, healthy and productive working environment for all of our employees globally. Environmental Issues We may be subject to legal and financial obligations under environmental, health and safety laws in the United States and in other jurisdictions where we operate.
Our results of operations may also fluctuate as a result of factors such as the timing of new products (and related expenses) introduced by us or our competitors, the theatrical/entertainment-led releases of licensed brands, the advertising activities of our competitors, delivery schedules set by our customers and the emergence of new market entrants.
Our results of operations may also fluctuate because of factors such as the timing of new products (and related expenses) introduced by us or our competitors, the theatrical/entertainment-led releases of licensed brands, the advertising activities of our competitors, delivery schedules set by our customers and the emergence of new market entrants.
Our products include: ● Action figures and accessories, including licensed characters based on the Nintendo®, Sonic the Hedgehog® and Apex Legends® franchises and our own proprietary brands including Creepy Crawlers®; ● Toy vehicles, including Xtreme Power Dozer®, Xtreme Power Dump Truck®, XPV®, Road Champs®, Fly Wheels® and AirTitans® inflatable remote-control dinosaur; ● Dolls and accessories, including small dolls, large dolls, fashion dolls and baby dolls based on licenses, including Disney Wish®, Disney Encanto®, Disney ILY 4EVER™, Disney Frozen®, Disney Princess® and Minnie Mouse®, and infant and pre-school toys based on TV shows like PBS’s Daniel Tiger’s Neighborhood® as well as in-house brands such as Perfectly Cute® and collectable plush Ami Amis®; ● Private label products developed exclusively for certain retail customers in various product categories; ● Foot-to-floor ride-on products, including those based on Fisher-Price®, Nickelodeon®, and Hasbro® licenses and inflatable play environments, tents and wagons; ● Role play, dress-up, pretend play and novelty products for boys and girls based on well-known brands and entertainment properties such as Disney Frozen® , Black & Decker® , Disney Princess®, and Disney Encanto®, as well as those based on our own proprietary brands; ● Indoor and outdoor kids’ furniture, activity trays and tables and room décor; seasonal and outdoor products, including those based on Disney® characters, Nickelodeon® and Hasbro® licenses; ● Halloween and everyday costumes for all ages based on licensed and proprietary non-licensed brands, including Super Mario Bros.®, Microsoft’s Halo®, Disney-Pixar Toy Story®, Harry Potter®, Minions®, Sesame Street®, Power Rangers®¸ Hasbro® brands and Disney Frozen®, Disney Princess® and related Halloween accessories; ● Outdoor activity toys including ReDo Skateboard Co.® and junior sports toys including Sky Ball® hyper-charged balls, SportsZone™ sport sets and Wave Hoop® toy hoops marketed under our Maui® brand; and ● Board games under the brand JAKKS Wild Games®, including Temple Raider®, K.O.
Our products include: ● Action figures and accessories, including licensed characters based on the Nintendo®, Sonic the Hedgehog®, The Simpsons TM and Apex Legends® franchises and our own proprietary brands including Creepy Crawlers®; ● Toy vehicles, including Xtreme Power Dozer®, Xtreme Power Dump Truck®, XPV®, Road Champs®, Fly Wheels® and AirTitans® inflatable remote-control dinosaur; ● Dolls and accessories, including small dolls, large dolls, fashion dolls and baby dolls based on licenses, including Disney Wish®, Disney Encanto®, Disney Moana 2, Disney ILY 4EVER™, Disney Frozen®, Disney Princess® and Minnie Mouse®, and infant and pre-school toys based on TV shows like PBS’s Daniel Tiger’s Neighborhood® as well as in-house brands such as Perfectly Cute® and collectable plush Ami Amis®; ● Private label products developed exclusively for certain retail customers in various product categories; ● Foot-to-floor ride-on products, including those based on BBC’s Bluey, Fisher-Price®, Nickelodeon®, and Hasbro® licenses and inflatable play environments, tents and wagons; ● Role play, dress-up, pretend play and novelty products for boys and girls based on well-known brands and entertainment properties such as Disney Frozen® , Black & Decker® , Disney Princess®, and Disney Encanto®, as well as those based on our own proprietary brands; ● Indoor and outdoor kids’ furniture, activity trays and tables and room décor, seasonal and outdoor products, including those based on Disney® characters, Nickelodeon® and Hasbro® licenses; ● Halloween and everyday costumes for children and in some cases teens and adults based on licensed and proprietary non-licensed brands, including Super Mario Bros.®, Microsoft’s Halo®, Disney-Pixar Toy Story®, Harry Potter®, Minions®, Sesame Street®, Power Rangers®¸ Pokemon TM , Hasbro® brands, Universal’s Wicked TM and Disney Frozen®, Disney Princess® and related Halloween accessories; ● Outdoor activity toys including ReDo Skateboard Co.® and junior sports toys including Sky Ball® hyper-charged balls, SportsZone™ sport sets and Wave Hoop® toy hoops marketed under our Maui® brand; and ● Board games under the brand JAKKS Wild Games®, including Temple Raider®, K.O.
Industry Overview According to Toy Association, Inc., the leading toy industry trade group, the United States is the world’s largest toy market, followed by China, Japan and Western Europe. Total retail sales of toys, excluding video games, in the United States, were approximately $28.0 billion in 2023.
Industry Overview According to Toy Association, Inc., the leading toy industry trade group, the United States is the world’s largest toy market, followed by China, Japan and Western Europe. Total retail sales of toys, excluding video games, in the United States, were approximately $28.3 billion in 2024.
We also produce and broadcast television commercials for several of our product lines, if we expect that the resulting increase in our net sales will justify the relatively high cost of television/media advertising. 8 Table of Contents Product Development Each of our product lines has an in-house manager responsible for product development.
We also produce and broadcast television commercials for several of our product lines, if we expect that the resulting increase in our net sales will justify the relatively high cost of television/media advertising. 7 Table of Contents Product Development Each of our product lines has an in-house lead responsible for product development.
We intend to continue expanding distribution of our products into foreign territories and, accordingly, we have: ● engaged representatives to oversee sales in certain foreign territories; ● engaged distributors in certain foreign territories; ● established direct relationships with retailers in certain foreign territories; ● opened sales offices in Canada, Europe and Mexico; and ● opened distribution centers in the UK, Netherlands, Italy and Mexico.
We intend to continue trying to expand distribution of our products into foreign territories and, accordingly, we have: ● engaged representatives to oversee sales in certain foreign territories; ● engaged distributors in certain foreign territories; ● established direct relationships with retailers in certain foreign territories; ● opened sales offices in Canada, Europe and Mexico; ● opened distribution centers in the UK, the Netherlands, Italy, Belgium, Spain and Mexico.
The COVID-19 pandemic, in particular, created some short-term delays as manufacturing capacity both dropped during the peak of the China outbreak and then again was stretched when consumer demand for different categories of products spiked as a result of the unprecedented level of households operating under confined-to-home/social distancing guidelines.
The COVID-19 pandemic created some short-term delays as manufacturing capacity both dropped during the peak of the outbreak and then again was stretched when consumer demand for different categories of products spiked because of the unprecedented level of households operating under confined-to-home/social distancing guidelines.
Currently, we have ongoing relationships with over 50 different manufacturers. We believe that alternative sources of supply are available to us although we cannot be assured that we can obtain adequate supplies of manufactured products on short notice.
Currently, we have ongoing relationships with over 50 different manufacturers. We believe that alternative sources of supply are available to us although we cannot be assured that we can obtain adequate supplies of manufactured products on short notice in a cost neutral manner.
As of December 31, 2023, we had approximately 659 employees (including temporary and seasonal employees) working in over 10 countries worldwide to create innovative products and experiences that inspire, entertain, and develop children through play, with approximately 277 employees (42% of the total workforce) located outside the U.S. Employee Engagement One of our main focuses is employee retention.
As of December 31, 2024, we had approximately 680 employees (including temporary and seasonal employees) working in over 10 countries worldwide to create innovative products and experiences that inspire, entertain, and develop children through play, with approximately 320 employees (47% of the total workforce) located outside the U.S. Employee Engagement One of our main focuses is employee retention.
We also contract the manufacture of certain products from Hong Kong Meisheng Cultural Company Limited (“Meisheng”), which involved payments to Meisheng of approximately $75.7 million and $120.5 million for the years ended December 31, 2023 and 2022, respectively.
We also contract the manufacture of certain products from Hong Kong Meisheng Cultural Company Limited (“Meisheng”), which involved payments to Meisheng of approximately $98.4 million and $75.7 million for the years ended December 31, 2024 and 2023, respectively.
Finally, the longer delivery time resulted in a slower cash conversion cycle for us as the net impact was a longer holding period for finished goods inventory between manufacture and sale to customer. 10 Table of Contents Government and Industry Regulation Our products are subject to the provisions of the Consumer Product Safety Act (“CPSA”), the Federal Hazardous Substances Act (“FHSA”), the Flammable Fabrics Act (“FFA”) and the regulations promulgated thereunder, and various other regulations in the European Union and other jurisdictions.
Finally, the longer delivery time resulted in a slower cash conversion cycle for us as the net impact was a longer holding period for finished goods inventory between manufacture and sale to customer. 9 Table of Contents Government and Industry Regulation Our products are subject to the provisions of the Consumer Product Safety Act (“CPSA”) as amended by the Consumer Product Safety Improvement Act (“CPSIA”), the Federal Hazardous Substances Act (“FHSA”), the Flammable Fabrics Act (“FFA”) and regulations promulgated thereunder.
Tools, dies and molds represent a substantial portion of our property and equipment with a net book value of $13.7 million and $14.1 million as of December 31, 2023 and 2022, respectively.
Tools, dies and molds represent a substantial portion of our property and equipment with a net book value of $13.5 million and $13.7 million as of December 31, 2024, and 2023, respectively.
Outside of the United States, we currently sell our products primarily in Europe, Australia, Canada, Latin America and Asia. Sales of our products abroad accounted for approximately $153.7 million, or 21.6% of our net sales in 2023 and approximately $151.9 million, or 19.1% of our net sales in 2022.
Outside of the United States, we currently sell our products primarily in Europe, Australia, Canada, Latin America and Asia. Sales of our products abroad accounted for approximately $146.0 million, or 21.1% of our net sales in 2024 and approximately $153.7 million, or 21.6% of our net sales in 2023.
In addition, we compete in our Halloween costume lines with Rubies II. We also compete with numerous smaller domestic and foreign toy manufacturers, importers and marketers in each of our product categories. Seasonality and Backlog In 2023, 61.4% of our net sales were made in the third and fourth quarters.
In addition, we compete in our Halloween costume lines with Rubies II®. We also compete with numerous smaller domestic and foreign toy manufacturers, importers and marketers in each of our product categories. Seasonality and Backlog In 2024, 68.0% of our net sales were made in the second and third quarters.
Item 1. Business In this report, “JAKKS,” the “Company,” “we,” “us” and “our” refer to JAKKS Pacific, Inc., its subsidiaries and our majority-owned joint venture.
Item 1. Business In this report, “JAKKS,” the “Company,” “we,” “us” and “our” refer to JAKKS Pacific, Inc. and its subsidiaries.
Generally, the first quarter is the period of lowest shipments and sales in our business and in the toy industry and therefore it is also the least profitable quarter due to various fixed costs. Seasonality factors cause our operating results to fluctuate significantly from quarter to quarter. However, our outdoor/seasonal products are primarily sold in the spring and summer seasons.
Generally, the first quarter is the period of lowest shipments and sales in our business and in the toy industry and therefore it is also the least profitable quarter due to various fixed costs. Seasonality factors cause our operating results to fluctuate significantly from quarter to quarter.
Our three largest customers are Target®, Walmart® and Amazon®, which accounted for 30.3%, 20.8% and 10.5%, respectively, of our net sales in 2023. No other customer accounted for more than 10% of our net sales in 2023. Our Growth Strategy Key elements of our growth strategy include: ●Expand Core Product Lines.
Our three largest customers are Target®, Walmart® and Amazon®, which accounted for 29.6%, 24.2% and 10.6%, respectively, of our net sales in 2024. No other customer accounted for more than 10% of our net sales in 2024. Our Growth Strategy Key elements of our growth strategy include: ● Expand Core Product Lines.
Our three largest customers are Target®, Walmart® and Amazon®, which accounted for 30.3%, 20.8% and 10.5%, respectively, of our net sales in 2023. No other customer accounted for more than 10% of our net sales in 2023. In 2022, our two largest customers, Walmart® and Target®, accounted for 28.4% and 25.5%, respectively, of our net sales.
Our three largest customers are Target®, Walmart® and Amazon®, which accounted for 29.6%, 24.2% and 10.6%, respectively, of our net sales in 2024. No other customer accounted for more than 10% of our net sales in 2024. In 2023, our three largest customers, Target®, Walmart® and Amazon®, accounted for 30.3%, 20.8% and 10.5%, respectively, of our net sales.
Human Capital Our success comes from recruiting, retaining and motivating talented individuals around the world. JAKKS Pacific, Inc. continuously strives to create a safe, healthy, productive and harmonious work environment.
We maintain a quality control program designed to reasonably ensure compliance with all applicable laws. Human Capital Our success comes from recruiting, retaining and motivating talented individuals around the world. JAKKS Pacific, Inc. continuously strives to create a safe, healthy, productive and harmonious work environment.
We employ quality control inspectors who rotate among our manufacturers’ factories to monitor the production of substantially all of our products.
We employ quality control inspectors who rotate among our manufacturers’ factories to monitor the production of substantially all our products. Some of our customers might also conduct their own product quality testing.
This includes both online and instructor-led training covering a variety of topics including: career-related, federally- and locally-mandated, JAKKS Pacific, Inc. Company policy and legal, financial services and health/wellness-related. Nearly all employees take advantage of these learning opportunities.
Annually, employees are offered various types of training and the opportunity to continue their education. This includes both online and instructor-led training covering a variety of topics ranging from career-related, to federally- and locally-mandated, to JAKKS Pacific, Inc. Company policy, to financial services and health/wellness-related. Nearly all employees take advantage of some if not all of these optional learning opportunities.
We use our extensive experience in the toy and other consumer product industries to evaluate products and licenses in new product categories and to develop additional product lines.
Our marketing teams and product designers strive to develop new products or product lines to offer added technological, aesthetic and functional improvements to our extensive portfolio. ● Enter New Product Categories. We use our extensive experience in the toy and other consumer product industries to evaluate products and licenses in new product categories and to develop additional product lines.
As of December 31, 2023, Meisheng owns 5.2% of our outstanding common stock, and Zhao Xiaoqiang, one of our directors, is executive director of Meisheng. A portion of our sales originate in the United States, so we hold certain inventory in a US warehouse and fulfillment facility.
As of December 31, 2024, Meisheng owns 4.8% of our outstanding common stock and until our 2024 annual meeting a designee of Meisheng was a member of our board of directors. A portion of our sales originate in the United States, so we hold certain inventory in a US warehouse and fulfillment facility.
In 2020, we migrated from a distributor model to selling direct in Spain, Italy, France and Mexico. Third-party distributors remain a core component of our international business, and we are constantly assessing how to expand our mutual businesses. We currently utilize warehouses in the United Kingdom, the Netherlands and Italy (opened in 2023) to support sales expansion in Europe.
In 2024, our sales generated outside the United States were approximately $146.0 million, or 21.1% of total net sales. In 2020, we migrated from a distributor model to selling direct in Spain, Italy, France and Mexico. Third-party distributors remain a core component of our international business, and we are constantly assessing how to expand our mutual businesses.
By licensing IP and trademarks from world-class brand owners and content creators, we have access to a far greater range of marks than would be available for purchase. It also helps to credibly assure licensors that we will prioritize their brands, properties and IP rather than explicitly competing with them with a broad range of self-developed content-led offerings.
By licensing IP and trademarks from world-class brand owners and content creators, we have access to a far greater range of marks than would be available for purchase.
We also intend to continue to secure additional inventions and product concepts through our existing network of inventors and product developers. ●Expand International Sales. We believe that non-US markets: Europe, Australia, Canada, Latin America and Asia, offer us significant growth opportunities. In 2023, our sales generated outside the United States were approximately $153.7 million, or 21.6% of total net sales.
We intend to continue to pursue new licenses from these media & entertainment companies along with other licensors. We also intend to continue to secure additional inventions and product concepts through our existing network of inventors and product developers. ● Expand International Sales. We believe that non-US markets: Europe, Australia, Canada, Latin America and Asia, offer us significant growth opportunities.
Holding various events and workshops throughout the year, employees are encouraged to voice any concerns and/or to bring forth their ideas and suggestions. Diversity and Inclusion We are committed to fostering, cultivating and preserving a culture of diversity, equity and inclusion.
We hold various events and workshops throughout the year and employees are encouraged to voice any concerns and/or to bring forth their ideas and suggestions. Culture and Environment We are dedicated to developing and maintaining a workplace culture that celebrates and values the unique contributions of every individual.
We manage our existing and new brands through strategic product development initiatives, including introducing new products, modifying existing products and extending existing product lines to maximize their longevity. Our marketing teams and product designers strive to develop new products or product lines to offer added technological, aesthetic and functional improvements to our extensive portfolio. ●Enter New Product Categories.
We manage our existing and new brands through strategic product development initiatives, including introducing new products, modifying existing products and extending existing product lines to maximize their longevity and expand their retail channel reach.
Our diversity initiatives are applicable—but not limited—to practices and policies on recruitment and selection; compensation and benefits; professional development and training; and promotions and transfers. Training and Development We take pride in offering the opportunity for employees to continuously learn and to grow their careers. Annually, employees are offered various types of training and the opportunity to continue their education.
These include, but are not limited to, our approaches to recruitment and hiring, compensation packages and benefits, professional growth opportunities and training programs, as well as our processes for internal promotions and transfers. 10 Table of Contents Training and Development We take pride in offering the opportunity for employees to continuously learn and to grow their careers.
In recent years, we entered the skateboard space at a retailer’s request and have since expanded into related protective gear and accessories. ●Pursue Strategic Acquisitions. We have supplemented our internal growth with selected strategic acquisitions. Most of the product lines we market today were originally acquired via acquisition over the past 20+ years. ●Acquire Additional Character and Product Licenses.
In recent years, we entered the skateboard space at a retailer’s request and have since expanded into related protective gear and accessories. ● Acquire Additional Character and Product Licenses. We have acquired the rights to use many familiar brand and character names and logos from third parties that we use with our primary trademarks and brands.
The FFA enables the CPSC to regulate and enforce flammability standards for fabrics used in consumer products. The CPSC may also require the repurchase by the manufacturer of articles. Similar laws exist in some states and cities and in various international markets. We maintain a quality control program designed to ensure compliance with all applicable laws.
Failure to comply with such requirements can result in the CPSC banning such products. The CPSC also may require the recall to repair and/or repurchase by the manufacturer of articles that it deems noncompliant. Similar laws exist in some states and cities and in various international markets.
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We also license IP from other toy companies for categories in which they do not offer products found within our Core Product Lines. We intend to continue to pursue new licenses from these media & entertainment companies along with other licensors.
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Licensors ultimately are responsible for the franchise management of their IP, and we by extension leverage their related investment in content and promotion, which we hope in turn will create a robust market for our related toy, consumer products and costume product lines.
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We also have warehouse capacity in Mexico. ●Capitalize On Our Operating Efficiencies.
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Licensors often also invest resources in engaging our largest customers directly to keep them aware of new initiatives and content to facilitate our sell-in of product. It also helps to credibly assure licensors that we will prioritize their brands, properties and IP rather than explicitly competing with them with a broad range of self-developed content-led offerings.
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The CPSA and the FHSA enable the Consumer Products Safety Commission (“CPSC”) to exclude from the market consumer products that fail to comply with applicable product safety regulations or otherwise create a substantial risk of injury, and articles that contain excessive amounts of a banned hazardous substance.
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We currently utilize warehouses in the United Kingdom, the Netherlands, Italy, Belgium and Spain (the latter two opened in 2024) to support sales expansion in Europe. We also have warehouse capacity in Mexico. ● Pursue Strategic Acquisitions. We have supplemented our internal growth with selected strategic acquisitions.
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The collective sum of the individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities and talent that our employees invest in their work represents a significant part of the culture.
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Most of the product lines we market today were originally acquired via acquisition over the past 20+ years. ● Capitalize On Our Operating Efficiencies.
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We embrace and encourage employees’ differences in age, color, ability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics.
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However, our outdoor/seasonal products are primarily sold in the spring and summer seasons, and our year-round costume business does ship most of its volume focused on consumer sales taking place just before Halloween at the end of October.
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Additionally, our products may be subject to various other regulations in the United States, European Union, and other jurisdictions. The CPSIA, FHSA, and FFA are administered by the United States Consumer Products Safety Commission (“CPSC”) which requires independent third-party testing by accredited laboratories of products we sell in the United States.
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Our organization’s ethos is significantly shaped by the collective blend of distinct perspectives, life journeys, expertise, creativity, innovative thinking, self-expression, exceptional skills, and talents that our team members bring to their roles. We wholeheartedly welcome and encourage the rich tapestry of differences among our employees.
Added
This includes, but is not limited to, variations in age, skin tone, physical and cognitive abilities, ethnic background, family composition, gender identity or expression, linguistic heritage, national origin, political views, racial identity, religious beliefs, sexual orientation, socio-economic background, military service history, and other personal characteristics.
Added
Our initiatives to promote a varied and representative workforce encompass a wide range of practices and policies.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
47 edited+5 added−4 removed121 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
47 edited+5 added−4 removed121 unchanged
2023 filing
2024 filing
Biggest changeFor our products, a majority of retail sales for the entire year generally occur in the fourth quarter, close to the holiday season. As a consequence, the majority of our sales to our customers occur in the third and fourth quarters, as our customers do not want to maintain large on-hand inventories throughout the year ahead of consumer demand.
Biggest changeFor our products, a majority of retail sales for the entire year generally occur in the fourth quarter, close to the holiday season.
Our failure to achieve any or all of the foregoing benchmarks may cause the infrastructure of our operations to fail, thereby adversely affecting our business, results of operations and financial condition.
Our failure to achieve any or all the foregoing benchmarks may cause the infrastructure of our operations to fail, thereby adversely affecting our business, results of operations and financial condition.
Restructuring our workforce can be disruptive and harm our results of operations and financial condition. We have in the past restructured or made other adjustments to our workforce in response to the economic environment, performance issues, acquisitions, and other internal and external considerations.
Restructuring our workforce can be disruptive and harm the results of our operations and financial condition. We have in the past restructured or made other adjustments to our workforce in response to the economic environment, performance issues, acquisitions, and other internal and external considerations.
Claims from tax authorities related to these differences could have an adverse impact on our results of operations and financial condition. In addition, legislative bodies in the various countries in which we do business may from time to time adopt new tax legislation that could have a material adverse effect on our business, results of operations and financial condition.
Claims from tax authorities related to these differences could have an adverse impact on the results of our operations and financial condition. In addition, legislative bodies in the various countries in which we do business may from time to time adopt new tax legislation that could have a material adverse effect on our business, results of operations and financial condition.
If we encounter any disruptions to our operations within these buildings, or if they were to shut down for any reason, including by fire or other natural disaster, or as a result of another pandemic, then we may be prevented from effectively operating, shipping and processing our merchandise.
If we encounter any disruptions to our operations within these buildings, or if they were to shut down for any reason, including by earthquake, fire or other natural disaster, or as a result of another pandemic, then we may be prevented from effectively operating, shipping and processing our merchandise.
Restructurings can among other things result in a temporary lack of focus, reductions in net sales and reduced productivity. In addition, we may be unable to realize the anticipated cost savings from our previously announced restructuring efforts or may incur additional and/or unexpected costs in order to realize the anticipated savings.
Restructurings can among other things result in a temporary lack of focus, reductions in net sales and reduced productivity. In addition, we may be unable to realize the anticipated cost savings from our previously announced restructuring efforts or may incur additional and/or unexpected costs to realize the anticipated savings.
In June 2021, we entered into and consummated a binding definitive agreement with JPMorgan Chase (for an asset-based credit line) with the objective of increasing our overall liquidity. 15 Table of Contents All outstanding borrowings under the revolving credit line are accelerated and become immediately due and payable (and the revolving credit line terminates) in the event of a default, which includes, among other things, failure to comply with certain financial covenants or breach of representations contained in the credit line documents, defaults under other loans or obligations, involvement in bankruptcy proceedings, an occurrence of a change of control or an event constituting a material adverse effect on us (as such terms are defined in the credit line documents).
In June 2021, we entered into and consummated a binding definitive agreement with JPMorgan Chase (for an asset-based credit line) with the objective of increasing our overall liquidity. 14 Table of Contents All outstanding borrowings under the revolving credit line are accelerated and become immediately due and payable (and the revolving credit line terminates) in the event of a default, which includes, among other things, failure to comply with certain financial covenants or breach of representations contained in the credit line documents, defaults under other loans or obligations, involvement in bankruptcy proceedings, an occurrence of a change of control or an event constituting a material adverse effect on us (as such terms are defined in the credit line documents).
Often times, licensors require cash advance payments upon signing agreements against future minimum royalty obligations, which requires us to pay out cash several quarters prior to our ability to ship, invoice and ultimately collect revenue from the related product sales.
Often, licensors require cash advance payments upon signing agreements against future minimum royalty obligations, which requires us to pay out cash several quarters prior to our ability to ship, invoice and ultimately collect revenue from the related product sales.
Additionally, we use third-party manufacturers, located principally in China, and are subject to the risks normally associated with operations, including: ● currency conversion risks and currency fluctuations; ● limitations, including taxes, on the repatriation of earnings; ● political instability, including wars and 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, such as earthquakes, hurricanes and floods; ● transportation delays and interruption, inclusive of raw material ’ s sourcing to our third-party manufacturers as well as finished goods delivery through to our customers and ultimate consumers; ● work stoppages; ● the potential imposition of tariffs; and ● the pricing of intercompany transactions may be challenged by taxing authorities in both foreign jurisdictions and the United States, with potential increases in income and other taxes.
Additionally, we use third-party manufacturers, located principally in China, and are subject to the risks normally associated with operations, including: ● currency conversion risks and currency fluctuations; ● limitations, including taxes, on the repatriation of earnings; ● political instability, including wars and 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, such as earthquakes, hurricanes and floods; ● transportation delays and interruption, inclusive of raw material ’ s sourcing to our third-party manufacturers as well as finished goods delivery through to our customers and ultimate consumers; ● work stoppages; ● trade wars in general and the potential imposition of tariffs specifically; and ● the pricing of intercompany transactions may be challenged by taxing authorities in both foreign jurisdictions and the United States, with potential increases in income and other taxes.
To the extent legal proceedings continue for long time periods or are adversely resolved, our business, results of operations, and financial condition could be significantly harmed. 20 Table of Contents Our business is subject to extensive government regulation and any violation by us of such regulations could result in product liability claims, loss of sales, diversion of resources, damage to our reputation, increased warranty costs or removal of our products from the market, and we cannot assure you that our product liability insurance for the foregoing will be sufficient.
To the extent legal proceedings continue for long time periods or are adversely resolved, our business, results of operations, and financial condition could be significantly harmed. 19 Table of Contents Our business is subject to extensive government regulation and any violation by us of such regulations could result in product liability claims, loss of sales, diversion of resources, damage to our reputation, increased warranty costs or removal of our products from the market, and we cannot assure you that our product liability insurance for the foregoing will be sufficient.
In the event that errors or omissions were made in our normal course of business that resulted in underpayment of royalties, shipping product to an unlicensed territory or channel of distribution, or a variety of other technical infractions, we could be liable for past due royalties, accrued interest and other financial penalties as outlined in the agreement. 14 Table of Contents The failure of our character-related and theme-related products to become and/or remain popular with children may materially and adversely impact our business, results of operations and financial condition.
In the event that errors or omissions were made in our normal course of business that resulted in underpayment of royalties, shipping product to an unlicensed territory or channel of distribution, or a variety of other technical infractions, we could be liable for past due royalties, accrued interest and other financial penalties as outlined in the agreement. 13 Table of Contents The failure of our character-related and theme-related products to become and/or remain popular with children may materially and adversely impact our business, results of operations and financial condition.
Market conditions and other third-party conduct could negatively impact our margins and implementation of other business initiatives. Economic conditions, such as decreased consumer confidence, inflation or a recession, may adversely impact our business, results of operations and financial condition.
Market conditions and other third-party conduct could negatively impact our margins and the implementation of other business initiatives. Economic conditions, such as decreased consumer confidence, inflation or a recession, may adversely impact our business, results of operations and financial condition.
By extension, any sudden disruption in that calendar can have negative repercussions to our business, both in terms of recouping our investments to date, as well as, monetizing those investments at the profit margins we have planned.
By extension, any sudden disruption in that calendar can have negative repercussions for our business, both in terms of recouping our investments to date, as well as monetizing those investments at the profit margins we have planned.
Although that incident did not result in material damage to our operations or cash flow, there is no assurance that any future material breach of the security of our computer systems would not occur, and such occurrences could have a material and adverse effect on our financial position, results of operations and cash flows. 22 Table of Contents We rely extensively on information technology in our operations, and any material failure, inadequacy, or interruption of that technology could have a material adverse impact on our business.
Although that incident did not result in material damage to our operations or cash flow, there is no assurance that any future material breach of the security of our computer systems would not occur, and such occurrences could have a material and adverse effect on our financial position, results of operations and cash flows. 21 Table of Contents We rely extensively on information technology in our operations, and any material failure, inadequacy, or interruption of that technology could have a material adverse impact on our business.
If one or more of these analysts cease coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause the price of our common stock and trading volume to decline. 24 Table of Contents We have a small public float compared to other larger publicly-traded companies, which may result in price swings in our common stock or make it difficult to acquire or dispose of our common stock.
If one or more of these analysts cease coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause the price of our common stock and trading volume to decline. 23 Table of Contents We have a small public float compared to other larger publicly-traded companies, which may result in price swings in our common stock or make it difficult to acquire or dispose of our common stock.
These impacts, among others, could occur in connection with previously announced restructuring efforts, or related to future acquisitions and other restructurings and, as a result, our results of operations and financial condition could be negatively affected. 21 Table of Contents The inability to successfully defend claims from taxing authorities or the adoption of new tax legislation could adversely affect our results of operations and financial condition.
These impacts, among others, could occur in connection with previously announced restructuring efforts, or related to future acquisitions and other restructurings and, as a result, our results of operations and financial condition could be negatively affected. 20 Table of Contents The inability to successfully defend claims from taxing authorities or the adoption of new tax legislation could adversely affect the results of our operations and financial condition.
In that event, the predictable flow of product at the prices we expect could be disrupted, and we may not have adequate time to source comparable product elsewhere in time to avoid disruptions in our selling cycle. 18 Table of Contents The toy industry is highly competitive and our inability to compete effectively may materially and adversely impact our business, results of operations and financial condition.
In that event, the predictable flow of product at the prices we expect could be disrupted, and we may not have adequate time to source comparable product elsewhere in time to avoid disruptions in our selling cycle. 17 Table of Contents The toy industry is highly competitive and our inability to compete effectively may materially and adversely impact our business, results of operations and financial condition.
Although all employees are required to use work infrastructure and our secure VPN, we cannot be completely certain that we will not have increased exposure to security considerations in this environment. 23 Table of Contents If we are unable to acquire and integrate companies and new product lines successfully, we will be unable to implement a significant component of our growth strategy.
Although all employees are required to use work infrastructure and our secure VPN, we cannot be completely certain that we will not have increased exposure to security considerations in this environment. 22 Table of Contents If we are unable to acquire and integrate companies and new product lines successfully, we will be unable to implement a significant component of our growth strategy.
Our acquisition strategy involves a number of risks, each of which could adversely affect our operating results, including: ● 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 and institutional knowledge from acquired companies; ● failure of an acquired business to achieve targeted financial results, inclusive of working capital needs; ● limited capital to finance acquisitions and/or fund appropriate working capital post-acquisition; and ● inability to maintain or secure relevant licenses to maintain or expand the net sales of acquired business.
Our acquisition strategy involves several risks, each of which could adversely affect our operating results, including: ● 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 and institutional knowledge from acquired companies; ● failure of an acquired business to achieve targeted financial results, inclusive of working capital needs; ● limited capital to finance acquisitions and/or fund appropriate working capital post-acquisition; and ● inability to maintain or secure relevant licenses to maintain or expand the net sales of acquired business.
In addition, it is possible that our business operations will be adversely impacted by future climate changes, albeit in ways we cannot predict or quantify at this time. 19 Table of Contents We have substantial sales and manufacturing operations outside of the United States, subjecting us to risks common to international operations.
In addition, it is possible that our business operations will be adversely impacted by future climate changes, albeit in ways we cannot predict or quantify at this time. 18 Table of Contents We have substantial sales and manufacturing operations outside of the United States, subjecting us to risks common to international operations.
Even though we have had no significant acquisitions since 2012, comparing our future period-to-period operating results may not be meaningful and results of operations from prior periods may not be indicative of future results. We cannot assure that we will continue to experience growth in, or maintain our present level of, net sales.
Even though we have had no significant acquisitions since 2012, comparing our future period-to-period operating results may not be meaningful and results of operations from prior periods may not be indicative of future results. We cannot assure that we will be able to experience growth in, or maintain our present level of, net sales.
Either scenario could have a negative impact on our overall business performance. 17 Table of Contents Our Costume (Disguise) business is even more seasonal than our core Toy/Consumer Products business as Halloween remains the primary purchase occasion for our costumes.
Either scenario could have a negative impact on our overall business performance. 16 Table of Contents Our Costume (Disguise) business is even more seasonal than our core Toy/Consumer Products business as Halloween remains the primary purchase occasion for our costumes.
Declines in our profitability may impact the fair value of our reporting units, which could result in a write-down of our goodwill and consequently harm our results of operations. We did not record any goodwill impairment charges during 2023, 2022 or 2021.
Declines in our profitability may impact the fair value of our reporting units, which could result in a write-down of our goodwill and consequently harm the results of our operations. We did not record any goodwill impairment charges during 2024, 2023 or 2022.
We may also incur costs or other losses as a result of not placing orders consistent with our forecasts for product manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand.
We may also incur costs or other losses as a result of not placing orders consistent with our forecasts for products manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand.
Furthermore, restrictions on nearly all of our customers’ operating hours in 2020 at one point in the year or another, limited consumers’ ability to discover our products through traditional in-store browsing and unplanned purchase.
Furthermore, restrictions on nearly all of our customers’ operating hours in 2020 at one point in the year or another limited consumers’ ability to discover our products through traditional in-store browsing and unplanned purchases.
In the future, if we do not maintain our profitability and growth targets, the carrying value of our goodwill may become impaired, resulting in impairment charges. 25 Table of Contents Item 1B. Unresolved Staff Comments None.
In the future, if we do not maintain our profitability and growth targets, the carrying value of our goodwill may become impaired, resulting in impairment charges. 24 Table of Contents Item 1B. Unresolved Staff Comments None.
Berman is under contract through 2026, we cannot assure you that we would be able to find an appropriate replacement for Mr. Berman should the need arise, and any loss or interruption of the services of Mr. Berman could adversely affect our business, results of operations and financial condition.
Berman is under contract through March 2029, we cannot assure you that we would be able to find an appropriate replacement for Mr. Berman should the need arise, and any loss or interruption of the services of Mr. Berman could adversely affect our business, results of operations and financial condition.
Our corporate headquarters, distribution center and information technology systems are in Santa Monica and the City of Industry, California, and the majority of our U.S.-based staff lives in Southern California.
Our corporate headquarters, distribution center and information technology systems are in Santa Monica and the City of Industry, California, and most of our U.S.-based staff lives in Southern California.
Contractual minimal royalty payments are almost always fixed and determined upon signing, so these sorts of shocks could have a negative impact on our business, results of operations and financial condition for multiple years given the nature and timing of the shock. ● Some of our licenses are restricted as to use and include other restrictive provisions.
Contractual minimal royalty payments are almost always fixed and determined upon signing, so these sorts of shocks could have a negative impact on our business, results of operations and financial condition for multiple years given the nature and timing of the shock. ● Some of our licenses are restricted in terms of use and include other restrictive provisions.
In the event that some unexpected shock to the market (like the COVID-19 pandemic) were to suddenly drastically change demand for product anticipated to be procured from our third-party manufacturers, we may incur some costs relating to raw materials they have ordered on our behalf, and/or finished goods that were not shipped due to last-minute cancelled orders from our customers buying FOB from China.
In the event that some unexpected shock to the market (like the COVID-19 pandemic or a sudden trade war) were to suddenly drastically change demand or costing for product anticipated to be procured from our third-party manufacturers, we may incur some costs relating to raw materials they have ordered on our behalf, and/or finished goods that were not shipped due to last-minute cancelled orders from our customers buying FOB from China.
Because of the importance of international sales and international sourcing of manufacturing to our business, our results of operations and financial condition could be significantly and adversely affected if any of the risks described above were to occur. Legal proceedings may harm our business, results of operations, and financial condition.
Because of the importance of international sales and international sourcing of manufacturing to our business, our results of operations and financial condition could be significantly and adversely affected if any of the risks described above or similar type of risks were to occur. Legal proceedings may harm our business, results of operations, and financial condition.
We sell products and operate facilities in numerous countries outside the United States. Sales to our international customers comprised approximately 21.6% of our net sales for the year ended December 31, 2023 and approximately 19.1% of our net sales for year ended December 31, 2022.
We sell products and operate facilities in numerous countries outside the United States. Sales to our international customers comprised approximately 21.1% of our net sales for the year ended December 31, 2024, and approximately 21.6% of our net sales for year ended December 31, 2023.
The COVID-19 virus was ultimately declared a global pandemic by the World Health Organization and has been spreading throughout the world, including the United States, resulting in emergency measures, including travel bans, closure of retail stores, and restrictions on gatherings of more than a maximum number of people.
The COVID-19 virus was ultimately declared a global pandemic by the World Health Organization and spread throughout the world, including the United States, resulting in emergency measures, including travel bans, closure of retail stores, and restrictions on gatherings of more than a maximum number of people.
Our tools, dies and molds are located at the facilities of our third-party manufacturers. Although we own the majority of those tools, dies and molds, our ability to retrieve them and move them to a new manufacturer might be limited by lack of manufacturing equipment compatibility.
Our tools, dies and molds are located at the facilities of our third-party manufacturers. Although we own the majority of those tools, dies and molds, our ability to retrieve them and move them to a new manufacturer in a cost-neutral manner might be limited by lack of manufacturing equipment compatibility.
Any such sale of common stock will dilute our other equity holders and may adversely affect the market price of the common stock. Under our currently existing ATM Agreement with B. Riley, as of March 15, 2024, we have not sold any shares of the common stock.
Any such sale of common stock will dilute our other equity holders and may adversely affect the market price of the common stock. Under our currently existing ATM Agreement with B. Riley, as of March 6, 2025, we have not sold any shares of our common stock.
Any such sale of stock or convertible securities will, or have the potential to, dilute our other equity holders and may adversely affect the market price of the common stock. As of March 15, 2024, we have not sold any securities pursuant to our shelf registration statement.
Any such sale of stock or convertible securities will, or have the potential to, dilute our other equity holders and may adversely affect the market price of the common stock. As of March 6, 2025, we have not sold any securities pursuant to our shelf registration statement.
Goodwill is the amount by which the cost of an acquisition exceeds the fair value of the net assets we acquire. Goodwill is not amortized and is required to be evaluated for impairment at least annually. At December 31, 2023, $35.1 million, or 8.8% of our total assets represented goodwill.
Goodwill is the amount by which the cost of an acquisition exceeds the fair value of the net assets we acquire. Goodwill is not amortized and is required to be evaluated for impairment at least annually. At December 31, 2024, $35.1 million, or 7.9% of our total assets represented goodwill.
Globally, certain of our competitors have financial and strategic advantages over us, including: ● greater financial resources; ● larger sales, marketing and product development departments; ● stronger brand name recognition and/or well-established owned brands/trademark; ● broader international sales and marketing infrastructure; ● longer operating histories; and ● greater economies of scale, inclusive of purchasing power and leverage of their investments across a range of areas, inclusive but not limited to research, technology, data analytics and strategic sourcing.
Globally, certain of our competitors have financial and strategic advantages over us, including: ● greater financial resources; ● larger sales, marketing and product development departments; ● stronger brand name recognition and/or well-established owned brands/trademark; ● broader international sales and marketing infrastructure; ● greater financial resources derived by higher-margin, higher-growth ancillary (non-toy) businesses; ● lower overhead costs due to operating as a privately-owned company; ● longer operating histories; and ● greater economies of scale, inclusive of purchasing power and leverage of their investments across a range of areas, inclusive but not limited to research, technology, data analytics and strategic sourcing.
Our reliance upon external sources of manufacturing can be shifted, over a period of time, to alternative sources of supply, should such changes be necessary.
Our reliance upon external sources of manufacturing can be shifted, over a period of time, to alternative sources of supply, should such changes be necessary, but not in a cost-neutral manner.
For all of these reasons, at this time we cannot quantify the extent of the impact this disease will have on our sales, net income and cash flows, but it could be quite significant. Our business is seasonal and therefore our annual operating results will depend, in large part, on our sales during the relatively brief holiday shopping season.
By extension it is difficult to quantify the extent of the impact this type of disease would have on our sales, net income and cash flows, but it could be quite significant. Our business is seasonal and therefore our annual operating results will depend, in large part, on our sales during the relatively brief holiday shopping season.
Our three largest customers, Target®, Walmart® and Amazon®, accounted for 61.6% of our net sales in 2023.
Our three largest customers, Target®, Walmart® and Amazon®, accounted for 64.4% of our net sales in 2024.
Any or all of the foregoing factors may adversely affect our business, results of operations and financial condition. 13 Table of Contents There are risks associated with our license agreements. ● Our current licenses require us to pay minimum royalties.
Any or all the foregoing factors may adversely affect our business, results of operations and financial condition. 12 Table of Contents There are risks associated with our license agreements. ● Our current licenses require us to pay minimum royalties. Sales of products under trademarks or trade or brand names licensed from others account for substantially all of our net sales.
If we or our customers determine that one of our products is more popular at retail than was originally anticipated, we may not have sufficient time to produce and ship enough additional products to fully meet consumer demand.
The level of inventory carried by retailers may also reduce or delay retail sales resulting in lower revenues for us. If we or our customers determine that one of our products is more popular at retail than was originally anticipated, we may not have sufficient time to produce and ship enough additional products to fully meet consumer demand.
In addition, the current COVID-19 pandemic has made on-site engagement of our vendor base more challenging. Although we do not purchase the raw materials used to manufacture our products, we are potentially subject to variations in the prices we pay our third-party manufacturers for products, depending upon what they pay for their raw materials.
Although we do not purchase the raw materials used to manufacture our products, we are potentially subject to variations in the prices we pay our third-party manufacturers for products, depending upon what they pay for their raw materials.
We cannot assure you that defects in our products will not be alleged or found. Any such allegations or findings could result in: ● product liability claims; ● loss of sales; ● diversion of resources; ● damage to our reputation; ● increased warranty and insurance costs; and ● removal of our products from the market and/or destruction of existing inventory.
Any such allegations or findings could result in: ● product liability claims; ● loss of sales; ● diversion of resources; ● damage to our reputation; ● loss of licensed rights; ● removal of our products from the market and/or destruction of existing inventory and/or write-off of existing-related tooling.
Sales of products under trademarks or trade or brand names licensed from others account for substantially all of our net sales. Product licenses allow us to capitalize on characters, designs, concepts and inventions owned by others or developed by toy inventors and designers.
Product licenses allow us to capitalize on characters, designs, concepts and inventions owned by others or developed by toy inventors and designers.
Increases in the costs of raw materials and shipping and other transportation costs and delays in the delivery of finished goods, if not offset by higher prices, could adversely impact our sales. 16 Table of Contents We face risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt our supply chain and impact our operating results.
Increases in the costs of raw materials and shipping and other transportation costs and delays in the delivery of finished goods, if not offset by higher prices, could adversely impact our sales.
Removed
At this time, we still cannot predict with any certainty the further duration and depth of the impact in the United States or other places worldwide where we sell our products or manufacture our products. Accordingly, it is extremely challenging to estimate the extent by which we will be negatively impacted by this disease.
Added
Further, actions US trade authorities have taken, and/or may take, around tariffs and related trade policies and the associated uncertainty of how such actions may be implemented add instability to our supply-chain.
Removed
Uncertainty surrounds the length of time this disease will continue to spread, and the extent governments will continue to impose, or add additional, quarantines, curfews, travel restrictions and closures of retail stores.
Added
Our ability to offer products at the same levels of margins our customers have grown to expect and the same level of price-value our consumers have come to expect may be impeded as a result. 15 Table of Contents We face risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt our supply chain and impact our operating results.
Removed
In addition, even following control of the disease and the end of the pandemic, the economic dislocation caused by the disease to so many people may linger and be so significant that consumers’ focus could be directed away from consumer discretionary spending for products such as ours for an extended period of time.
Added
Despite the experience of COVID-19, we cannot be assured that some future potential health-related event will not appear and be just as, or even more, disruptive to our business.
Removed
While these techniques reduce a retailer’s investment in inventory, they increase pressure on suppliers like us to fill orders promptly and thereby shift a significant portion of inventory risk and carrying costs to the supplier. The level of inventory carried by retailers may also reduce or delay retail sales resulting in lower revenues for us.
Added
In addition, our FOB business model means that our sale takes place in conjunction with the shipping of our product out of Mainland China extending the time a customer needs to import the product into their respective country. As a consequence, the majority of our sales to our customers occur in the second and third quarters.
Added
We cannot assure you that defects in our products will not be alleged or found.
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
2 edited+0 added−0 removed9 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
2 edited+0 added−0 removed9 unchanged
2023 filing
2024 filing
Biggest changeA summary of the principal activities JAKKS has undertaken to strengthen its cybersecurity posture and mitigate its cybersecurity risks: ● A subcommittee of the Board of Directors has been established to oversee and manage the company’s risk, response, and recovery policies, processes, and procedures related to, and stemming from, cyber-related issues; ● Purchased cybersecurity risk insurance to protect against potential losses arising from a cybersecurity incident; ● Implementation of quarterly vulnerability and penetration tests to identify, and if necessary, remediate, any potential risk to the organization; ● Engaged two (2) third-party service providers to monitor JAKKS systems for anomalous activity (24 hours a day, 365 days a year); ● Conduct disaster recovery exercise on a yearly basis; ● Implemented a revised and updated phishing email training program; and ● Retained a consultant to act as the Company’s Virtual Chief Information Security Officer (VCISO), who has more than 20 years of experience in various cybersecurity roles (e.g., managing information security, developing cybersecurity strategies, implementing cybersecurity and incident response programs, etc.) to oversee the implementation and performance of the Company’s cybersecurity program.
Biggest changeA summary of the principal activities JAKKS has undertaken to strengthen its cybersecurity posture and mitigate its cybersecurity risks: ● A subcommittee of the Board of Directors has been established to oversee and manage the company’s risk, response, and recovery policies, processes, and procedures related to, and stemming from, cyber-related issues; ● Purchased cybersecurity risk insurance to protect against potential losses arising from a cybersecurity incident; ● Implementation of quarterly vulnerability and penetration tests to identify, and if necessary, remediate, any potential risk to the organization; ● Engaged two (2) third-party service providers to continuously monitor JAKKS systems for anomalous activity (24 hours a day, 365 days a year); ● Conduct disaster recovery exercise on a yearly basis; ● Implemented a revised and updated phishing email training program; and ● Retained a consultant to act as the Company’s Virtual Chief Information Security Officer (VCISO), who has more than 20 years of experience in various cybersecurity roles (e.g., managing information security, developing cybersecurity strategies, implementing cybersecurity and incident response programs, etc.) to oversee the implementation and performance of the Company’s cybersecurity program.
The Company has not identified any material damage suffered from the incident. 26 Table of Contents
The Company has not identified any material damage suffered from the incident. 25 Table of Contents
Item 2. Properties
Properties — owned and leased real estate
1 edited+0 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
1 edited+0 added−0 removed0 unchanged
2023 filing
2024 filing
Biggest changeProperties The following is a listing of the principal leased offices maintained by us as of March 15, 2024 Approximate Lease Expiration Property Location Square Feet Date US Distribution Center City of Industry, California 800,000 April 30, 2025 Disguise Office Poway, California 24,200 June 30, 2028 Corporate Headquarters/Showroom Santa Monica, California 65,858 January 31, 2029 International Europe Office Bracknell, United Kingdom 8,957 January 19, 2027 Hong Kong Headquarters Kowloon, Hong Kong 18,500 June 30, 2025 Italy Office and Warehouse Piacenza, Italy 26,189 August 31, 2029 We believe our facilities are suitable for their intended uses and, in conjunction with our third-party contract manufacturing agreements, provide adequate capacity and are sufficient to meet our expected needs.
Biggest changeProperties The following is a listing of the principal leased offices maintained by us as of March 6, 2025 Approximate Lease Expiration Property Location Square Feet Date US Distribution Center City of Industry, California 800,000 August 31, 2029 Disguise Office Poway, California 24,200 June 30, 2028 Corporate Headquarters/Showroom Santa Monica, California 65,858 January 31, 2029 International Europe Office Bracknell, United Kingdom 8,957 January 19, 2027 Hong Kong Headquarters Kowloon, Hong Kong 18,500 June 30, 2025 Italy Office and Warehouse Piacenza, Italy 26,189 August 31, 2029 We believe our facilities are suitable for their intended uses and, in conjunction with our third-party contract manufacturing agreements, provide adequate capacity and are sufficient to meet our expected needs.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+1 added−0 removed1 unchanged
2023 filing
2024 filing
Biggest changeDividends The payment of dividends on common stock is at the discretion of the Board of Directors and is subject to customary limitations and may be subject to certain restrictions under our credit facility and through March 10, 2024 were also subject to certain restrictions pursuant to the terms of our preferred stock.
Biggest changeDividends The payment of dividends on common stock is at the discretion of the Board of Directors and is subject to customary limitations and may be subject to certain restrictions under our credit facility. No dividends were declared or paid in 2024.
Compensation Plan Information The table below sets forth the following information as of the year ended December 31, 2023 for (i) all compensation plans previously approved by our stockholders and (ii) all compensation plans not previously approved by our stockholders, if any: (a) the number of securities to be issued upon the exercise of outstanding options, warrants and rights; (b) the weighted-average exercise price of such outstanding options, warrants and rights; and (c) other than securities to be issued upon the exercise of such outstanding options, warrants and rights, the number of securities remaining available for future issuance under the plans.
Compensation Plan Information The table below sets forth the following information as of the year ended December 31, 2024, for (i) all compensation plans previously approved by our stockholders and (ii) all compensation plans not previously approved by our stockholders, if any: (a) the number of securities to be issued upon the exercise of outstanding options, warrants and rights; (b) the weighted-average exercise price of such outstanding options, warrants and rights; and (c) other than securities to be issued upon the exercise of such outstanding options, warrants and rights, the number of securities remaining available for future issuance under the plans.
Additionally, no shares subject to restricted stock awards remained unvested and no restricted stock awards have been issued as of December 31, 2023. Disclosures with respect to equity issuable to certain of our executive officers pursuant to the terms of their employment agreements are disclosed below under Item 11.
Additionally, no shares subject to restricted stock awards and no stock options remained unvested and no restricted stock awards and no stock options have been issued as of December 31, 2024. Disclosures with respect to equity issuable to certain of our executive officers pursuant to the terms of their employment agreements are disclosed below under Item 11.
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 (c) Equity compensation plans approved by security holders — — 1,847,686 Equity compensation plans not approved by security holders — — — Total — — 1,847,686 Equity compensation plans approved by our stockholders consist of the 2002 Stock Award and Incentive Plan.
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 (c) Equity compensation plans approved by security holders — — 1,793,551 Equity compensation plans not approved by security holders — — — Total — — 1,793,551 Equity compensation plans approved by our stockholders consist of the 2002 Stock Award and Incentive Plan.
Issuer Purchases of Equity Securities There were no issuer purchases of equity securities in the fourth quarter of 2023. Issuer Unregistered Sale of Equity Securities There were no issuer sales of unregistered equity securities in the fourth quarter of 2023.
Issuer Purchases of Equity Securities There were no issuer purchases of equity securities in the fourth quarter of 2024. Issuer Unregistered Sale of Equity Securities There were no issuer sales of unregistered equity securities in the fourth quarter of 2024.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select exchange under the symbol “JAKK.” Security Holders To the best of our knowledge, as of March 08, 2024, there were 53 holders of record of our common stock.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select exchange under the symbol “JAKK.” Security Holders To the best of our knowledge, as of February 18, 2025, there were 48 holders of record of our common stock.
Added
However, on February 20, 2025, we issued a press release announcing that our Board of Directors declared a quarterly cash dividend of $0.25 per common share. The dividend will be payable on March 31, 2025 to shareholders of record at the close of business on March 3, 2025.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
46 edited+9 added−5 removed59 unchanged
2023 filing
2024 filing
Biggest changeThe seasonality of our business is reflected in this quarterly presentation. 2023 2022 First Second Third Fourth First Second Third Fourth (Unaudited) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Net Sales $ 107,484 $ 166,933 $ 309,744 $ 127,396 $ 120,881 $ 220,422 $ 322,998 $ 131,886 As a % of full year 15.1 % 23.5 % 43.5 % 17.9 % 15.2 % 27.7 % 40.6 % 16.5 % Gross profit $ 31,437 $ 51,198 $ 106,985 $ 33,733 $ 29,917 $ 60,890 $ 91,911 $ 28,568 As a % of full year 14.1 % 22.9 % 47.9 % 15.1 % 14.2 % 28.8 % 43.5 % 13.5 % As a % of net sales 29.2 % 30.7 % 34.5 % 26.5 % 24.7 % 27.6 % 28.5 % 21.7 % Income (loss) from operations $ (4,400 ) $ 16,448 $ 62,399 $ (15,340 ) $ (734 ) $ 23,660 $ 53,741 $ (15,697 ) As a % of full year (7.4 )% 27.8 % 105.6 % (26.0 )% (1.2 )% 38.8 % 88.1 % (25.7 )% As a % of net sales (4.1 )% 9.9 % 20.1 % (12.0 )% (0.7 )% 10.7 % 16.7 % (11.9 )% Income (loss) before provision for (benefit from) income taxes $ (6,701 ) $ 7,660 $ 60,502 $ (16,515 ) $ (3,492 ) $ 27,541 $ 42,248 $ (16,221 ) As a % of net sales (6.3 )% 4.6 % 19.5 % (13.0 )% (2.9 )% 12.4 % 13.1 % (12.3 )% Net income (loss) $ (5,318 ) $ 6,182 $ 48,121 $ (10,872 ) $ (3,909 ) $ 26,207 $ 30,676 $ 38,109 As a % of net sales (5.0 )% 3.7 % 15.5 % (8.5 )% (3.2 )% 11.8 % 9.5 % 28.9 % Net income (loss) attributable to non-controlling interests $ (5 ) $ (273 ) $ (11 ) $ (4 ) $ (100 ) $ (353 ) $ (17 ) $ 140 As a % of net sales — % (0.2 )% — % — % (0.1 )% (0.2 )% — % 0.1 % Net income (loss) attributable to JAKKS Pacific, Inc. $ (5,313 ) $ 6,455 $ 48,132 $ (10,868 ) $ (3,809 ) $ 26,560 $ 30,693 $ 37,969 As a % of net sales (5.0 )% 3.9 % 15.5 % (8.5 )% (3.1 )% 12.0 % 9.5 % 28.8 % Net income (loss) attributable to common stockholders $ (5,680 ) $ 6,082 $ 47,754 $ (11,252 ) $ (4,155 ) $ 26,209 $ 30,336 $ 37,607 As a % of net sales (5.3 )% 3.6 % 15.4 % (8.8 )% (3.4 )% 11.9 % 9.4 % 28.5 % Diluted earnings (loss) per share $ (0.58 ) $ 0.58 $ 4.53 $ (1.12 ) $ (0.43 ) $ 2.73 $ 2.96 $ 3.66 Weighted average shares and equivalents outstanding 9,871 10,532 10,542 10,084 9,588 10,037 10,260 10,263 Quarterly and year-to-date computations of income (loss) per share amounts are made independently.
Biggest changeThe seasonality of our business is reflected in this quarterly presentation. 2024 2023 First Second Third Fourth First Second Third Fourth (Unaudited) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Net Sales $ 90,076 $ 148,619 $ 321,606 $ 130,741 $ 107,484 $ 166,933 $ 309,744 $ 127,396 As a % of full year 13.0 % 21.6 % 46.5 % 18.9 % 15.1 % 23.5 % 43.5 % 17.9 % Gross profit $ 21,052 $ 47,585 $ 108,831 $ 35,553 $ 31,437 $ 51,198 $ 106,985 $ 33,733 As a % of full year 9.9 % 22.3 % 51.1 % 16.7 % 14.1 % 22.9 % 47.9 % 15.1 % As a % of net sales 23.4 % 32.0 % 33.8 % 27.2 % 29.2 % 30.7 % 34.5 % 26.5 % Income (loss) from operations $ (21,324 ) $ 7,643 $ 68,083 $ (14,718 ) $ (4,400 ) $ 16,448 $ 62,399 $ (15,340 ) As a % of full year (53.7 )% 19.2 % 171.6 % (37.1 )% (7.4 )% 27.8 % 105.6 % (26.0 )% As a % of net sales (23.7 )% 5.1 % 21.2 % (11.3 )% (4.1 )% 9.9 % 20.1 % (12.0 )% Income (loss) before provision for (benefit from) income taxes $ (20,953 ) $ 7,547 $ 67,697 $ (14,559 ) $ (6,701 ) $ 7,660 $ 60,502 $ (16,515 ) As a % of net sales (23.3 )% 5.0 % 21.0 % (11.2 )% (6.3 )% 4.6 % 19.5 % (13.0 )% Net income (loss) $ (14,225 ) $ 5,266 $ 52,272 $ (9,113 ) $ (5,318 ) $ 6,182 $ 48,121 $ (10,872 ) As a % of net sales (15.8 )% 3.5 % 16.3 % (7.0 )% (5.0 )% 3.7 % 15.5 % (8.5 )% Net income (loss) attributable to non-controlling interests $ 280 $ — $ — $ — $ (5 ) $ (273 ) $ (11 ) $ (4 ) As a % of net sales 0.3 % — % — % — % — % (0.2 )% — % — % Net income (loss) attributable to JAKKS Pacific, Inc. $ (14,505 ) $ 5,266 $ 52,272 $ (9,113 ) $ (5,313 ) $ 6,455 $ 48,132 $ (10,868 ) As a % of net sales (16.1 )% 3.5 % 16.3 % (7.0 )% (5.0 )% 3.9 % 15.5 % (8.5 )% Net income (loss) attributable to common stockholders $ (13,175 ) $ 5,266 $ 52,272 $ (9,113 ) $ (5,680 ) $ 6,082 $ 47,754 $ (11,252 ) As a % of net sales (14.6 )% 3.5 % 16.3 % (7.0 )% (5.3 )% 3.6 % 15.4 % (8.8 )% Diluted earnings (loss) per share $ (1.27 ) $ 0.47 $ 4.64 $ (0.83 ) $ (0.58 ) $ 0.58 $ 4.53 $ (1.12 ) Weighted average shares and equivalents outstanding 10,354 11,245 11,275 11,008 9,871 10,532 10,542 10,084 Quarterly and year-to-date computations of income (loss) per share amounts are made independently.
We value our inventory at the lower of cost or net realizable value. Based upon a consideration of quantities on hand, actual and projected sales volume, anticipated product selling prices and product lines planned to be discontinued, slow-moving and obsolete inventory is written down to its net realizable value.
We value our inventory at the lower of cost or net realizable value. Based upon consideration of quantities on hand, actual and projected sales volume, anticipated product selling prices and product lines planned to be discontinued, slow-moving and obsolete inventory is written down to its net realizable value.
In June 2023 we had fully paid off our first-lien secured term loan (the “2021 BSP Term Loan Agreement”). 35 Table of Contents The First Lien Term Loan Facility Credit Agreement (the “2021 BSP Term Loan Agreement”) and the Credit Agreement with JPMorgan Chase Bank, N.A., as agent and lender (the “JPMorgan ABL Credit Agreement”) each contained negative covenants that, subject to certain exceptions, limited our ability and our subsidiaries ability to, among other things, incur additional indebtedness, make restricted payments, pledge our assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.
In June 2023 we had fully paid off our first-lien secured term loan (the “2021 BSP Term Loan Agreement”). 34 Table of Contents The First Lien Term Loan Facility Credit Agreement (the “2021 BSP Term Loan Agreement”) and the Credit Agreement with JPMorgan Chase Bank, N.A., as agent and lender (the “JPMorgan ABL Credit Agreement”) each contained negative covenants that, subject to certain exceptions, limited our ability and our subsidiaries ability to, among other things, incur additional indebtedness, make restricted payments, pledge our assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.
Management’s estimates are monitored on a quarterly basis, and a further adjustment to reduce inventory to its net realizable value is recorded as an increase to cost of sales when deemed necessary under the lower of cost or net realizable value standard.
Management’s estimates are monitored on a quarterly basis, and a further adjustment to reduce inventory to its net realizable value is recorded as an increase in the cost of sales when deemed necessary under the lower of cost or net realizable value standard.
If our actual revenue generated differs from our projections, recoverability of our minimum guarantees would be impacted and could materially affect key financial measures, including gross profit, net income and prepaid assets. Fair value measurements.
If our actual revenue generated differs from our projections, the recoverability of our minimum guarantees would be impacted and could materially affect key financial measures, including gross profit, net income and prepaid assets. Fair value measurements.
We recognize current period interest expense and penalties and the reversal of previously recognized interest expense and penalties that has been determined to not be assessable due to the expiration of the related audit period or other compelling factors on the income tax liability for unrecognized tax benefits as a component of the income tax provision recognized in the consolidated statements of operations. 30 Table of Contents Recent Accounting Pronouncements.
We recognize current period interest expense and penalties and the reversal of previously recognized interest expense and penalties that has been determined to not be assessable due to the expiration of the related audit period or other compelling factors on the income tax liability for unrecognized tax benefits as a component of the income tax provision recognized in the consolidated statements of operations. 29 Table of Contents Recent Accounting Pronouncements.
Provision for Income Taxes During 2023, our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $6.8 million, or an effective tax rate of 15.2%. The 2023 tax expense included a discrete tax benefit of $2.7 million primarily comprised of valuation allowance adjustments.
During 2023, our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $6.8 million, or an effective tax rate of 15.2%. The 2023 tax expense included a discrete tax benefit of $2.7 million primarily comprised of valuation allowance adjustments.
Given the conditions in the toy industry environment in general, vendors, including licensors, may seek further assurances or take actions to protect against non-payment of amounts due to them. Changes in this area could have a material adverse impact on our liquidity. As of December 31, 2023, off-balance sheet arrangements include letters of credit issued by JPMorgan of $9.4 million.
Given the conditions in the toy industry environment in general, vendors, including licensors, may seek further assurances or take actions to protect against non-payment of amounts due to them. Changes in this area could have a material adverse impact on our liquidity. As of December 31, 2024, off-balance sheet arrangements include letters of credit issued by JPMorgan of $4.4 million.
Based on our evaluation of all positive and negative evidence, as of December 31, 2023, a valuation allowance of $0.7 million has been recorded against the deferred tax assets that more likely than not will not be realized.
Based on our evaluation of all positive and negative evidence, as of December 31, 2024, a valuation allowance of $0.7 million has been recorded against the deferred tax assets that more likely than not will not be realized.
However, we may incur costs or other losses as a result of not placing orders consistent with our forecasts for product manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand.
However, we may incur costs or other losses as a result of not placing orders consistent with our forecasts for products manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand.
The decrease in cash flows provided by operating activities, year-over-year, was primarily due to a lower net income and higher working capital usage, partially offset by higher non-cash charges related to valuation adjustments for our preferred stock derivative liability and an increase in deferred income tax assets due to inventory cost and other expense capitalization matters, offset by income tax activities payable.
The decrease in cash flows provided by operating activities, year-over-year, was primarily due to a lower net income and higher working capital usage, partially offset by higher non-cash charges related to valuation adjustments for our preferred stock derivative liability and an increase in deferred income tax assets due to inventory cost and other expense capitalization matters, both in 2023.
If an event of default occurs under the Agreement, the maturity of the amounts owed under the JPMorgan ABL Agreement may be accelerated. We were in compliance with the financial covenants under the JPMorgan ABL Agreement as of December 31, 2023.
If an event of default occurs under the Agreement, the maturity of the amounts owed under the JPMorgan ABL Agreement may be accelerated. We were in compliance with the financial covenants under the JPMorgan ABL Agreement as of December 31, 2024.
Any such repatriation may result in foreign withholding taxes, which we expect would not be significant as of December 31, 2023. 36 Table of Contents Our primary sources of working capital are cash flows from operations and borrowings under our JPMorgan ABL Facility (See Item 8 “Consolidated Financial Statements and Supplementary Data Note 10 – Credit Facilities”).
Any such repatriation may result in foreign withholding taxes, which we expect would not be significant as of December 31, 2024. 35 Table of Contents Our primary sources of working capital are cash flows from operations and borrowings under our JPMorgan ABL Facility (See Item 8 “Consolidated Financial Statements and Supplementary Data Note 10 – Credit Facilities”).
The net deferred tax asset change of $10.3 million consists of the net deferred tax asset changes in the US and foreign jurisdictions, where we are in a cumulative income position.
The net deferred tax asset change of $2.3 million consists of the net deferred tax asset changes in the US and foreign jurisdictions, where we are in a cumulative income position.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability (see Item 8 "Consolidated Financial Statements and Supplementary Data Note 15 - Fair Value Measurements” for further information). 29 Table of Contents Reserve for Inventory Obsolescence.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability (see Item 8 “Consolidated Financial Statements and Supplementary Data Note 15 - Fair Value Measurements” for further information). 28 Table of Contents Reserve for Inventory Obsolescence.
On July 1, 2022, we filed a Form S-3 shelf registration statement (File No. 333-266009) with the SEC. On Aug 1, 2022, the SEC declared the Form S-3 shelf registration statement filed by us to be effective. As of March 15, 2024, we have not sold any shares of common stock under the ATM Agreement.
On July 1, 2022, we filed a Form S-3 shelf registration statement (File No. 333-266009) with the SEC. On Aug 1, 2022, the SEC declared the Form S-3 shelf registration statement filed by us to be effective. As of March 6, 2025, we have not sold any shares of common stock under the ATM Agreement.
As of December 31, 2023, our income tax reserves were approximately $3.2 million and relate to federal and state income taxes.
As of December 31, 2024, our income tax reserves were approximately $3.2 million and relate to federal and state income taxes.
As of December 31, 2023, we had no outstanding indebtedness under our senior secured revolving credit facility (the “JPMorgan ABL Facility”), aside from utilizing $9.4 million in letters of credit.
As of December 31, 2024, we had no outstanding indebtedness under our senior secured revolving credit facility (the “JPMorgan ABL Facility”), aside from utilizing $4.4 million in letters of credit.
Year Ended December 31, 2023 2022 Net sales 100.0 % 100.0 % Less: Cost of sales Cost of goods 50.9 56.5 Royalty expense 16.5 15.9 Amortization of tools and molds 1.2 1.1 Cost of sales 68.6 73.5 Gross profit 31.4 26.5 Direct selling expenses 5.2 4.2 General and administrative expenses 17.8 14.4 Depreciation and amortization 0.1 0.2 Selling, general and administrative expenses 23.1 18.8 Income from operations 8.3 7.7 Loss from joint ventures (0.1 ) — Other income (expense), net 0.1 0.1 Change in fair value of preferred stock derivative liability (1.1 ) (0.1 ) Loss on debt extinguishment (0.1 ) — Interest income 0.2 — Interest expense (0.9 ) (1.4 ) Income (loss) before provision for (benefit from) income taxes 6.4 6.3 Provision for (benefit from) income taxes 1.0 (5.2 ) Net income (loss) 5.4 11.5 Net income (loss) attributable to JAKKS Pacific, Inc. 5.4 % 11.5 % Net income (loss) attributable to common stockholders 5.2 % 11.3 % The following table summarizes, for the periods indicated, certain statement of operations data by segment (in thousands).
Year Ended December 31, 2024 2023 Net sales 100.0 % 100.0 % Less: Cost of sales Cost of goods 52.3 50.9 Royalty expense 15.5 16.5 Amortization of tools and molds 1.4 1.2 Cost of sales 69.2 68.6 Gross profit 30.8 31.4 Direct selling expenses 5.8 5.2 General and administrative expenses 19.2 17.8 Depreciation and amortization 0.1 0.1 Selling, general and administrative expenses 25.1 23.1 Income from operations 5.7 8.3 Loss from joint ventures — (0.1 ) Other income (expense), net 0.1 0.1 Change in fair value of preferred stock derivative liability — (1.1 ) Loss on debt extinguishment — (0.1 ) Interest income 0.1 0.2 Interest expense (0.2 ) (0.9 ) Income before provision for income taxes 5.7 6.4 Provision for income taxes 0.8 1.0 Net income 4.9 5.4 Net income attributable to JAKKS Pacific, Inc. 4.9 % 5.4 % Net income attributable to common stockholders 5.1 % 5.2 % The following table summarizes, for the periods indicated, certain statement of operations data by segment (in thousands).
A discussion of the operating results for 2022 can be found in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on April 14, 2023, in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.
A discussion of the operating results for 2023 can be found in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 15, 2024, in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.
On a quarterly basis, we evaluate the recoverability of minimum guarantee amounts based on forecasted revenues to be received for the products and record a shortfall reserve for expected un-recoverable amounts.
On a quarterly basis, we evaluate the recoverability of minimum guarantee amounts based on forecast revenues to be received for the products and record a shortfall reserve for expected unrecoverable amounts.
Cash, and cash equivalents, including restricted cash held outside of the United States, in various foreign subsidiaries totaled $21.5 million and $39.4 million as of December 31, 2023 and 2022, respectively.
Cash, and cash equivalents, including restricted cash held outside of the United States, in various foreign subsidiaries totaled $16.5 million and $21.5 million as of December 31, 2024 and 2023, respectively.
As part of our strategy to develop and market new products, we have entered into various character and product licenses with royalties/obligations generally ranging from 1% to 22% payable on net sales of such products. As of December 31, 2023, these agreements required future aggregate minimum royalty guarantees of $53.1 million, exclusive of $1.5 million in advances already paid.
As part of our strategy to develop and market new products, we have entered into various character and product licenses with royalties/obligations generally ranging from 1% to 25% payable on net sales of such products. As of December 31, 2024, these agreements required future aggregate minimum royalty guarantees of $74.6 million, exclusive of $0.9 million in advances already paid.
As of March 15, 2024, we have not sold any securities pursuant to our shelf registration statement. The nature of our business is a number of factors influence the price we offer product to our customers, and by extension they sell to our end customer.
As of March 6, 2025, we have not sold any securities pursuant to our shelf registration statement. The nature of our business is several factors influence the price we offer product to our customers, and by extension they sell to our end customer.
(See Item 8 “Consolidated Financial Statements and Supplementary Data, Note 9 – Debt and Note 10 – Credit Facilities” for additional information pertaining to our Debt and Credit Facilities.) As of December 31, 2023 and 2022, we held cash and cash equivalents, including restricted cash, of $72.4 million and $85.5 million, respectively.
(See Item 8 “Consolidated Financial Statements and Supplementary Data, Note 9 – Debt and Note 10 – Credit Facilities” for additional information pertaining to our Debt and Credit Facilities.) As of December 31, 2024 and 2023, we held cash and cash equivalents, including restricted cash, of $70.1 million and $72.6 million, respectively.
Absent these discrete tax benefits, our effective tax rate for 2022 was 17.6%, primarily due to taxes on federal, state, and foreign income. 32 Table of Contents We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets by jurisdiction.
Absent these discrete tax benefits, our effective tax rate for 2023 was 21.3%, primarily due to taxes on federal, state, and foreign income. We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets by jurisdiction.
Therefore, the sum of the per share amounts for the quarters may not agree with the per share amounts for the year. 34 Table of Contents Liquidity and Capital Resources As of December 31, 2023, we had working capital of $106.1 million compared to $101.9 million as of December 31, 2022.
Therefore, the sum of the per share amounts for the quarters may not agree with the per share amounts for the year. 33 Table of Contents Liquidity and Capital Resources As of December 31, 2024, we had working capital of $119.3 million compared to $106.1 million as of December 31, 2023.
Of this $53.1 million future minimum royalty guarantee, $45.1 million is due over the next twelve months. Investing activities used net cash of $8.9 million and $10.4 million for the years ended December 31, 2023 and 2022, respectively, and consisted primarily of cash paid for the purchase of molds and tooling used in the manufacture of our products.
Of this $74.6 million future minimum royalty guarantee, $53.7 million is due over the next twelve months. Investing activities used net cash of $12.9 million and $8.9 million for the years ended December 31, 2024 and 2023, respectively, and consisted primarily of cash paid for the purchase of molds and tooling used in the manufacture of our products.
Financing activities used net cash of $72.3 million in 2023 and $31.0 million in 2022. The cash used in 2023 primarily consists of the repayment of our 2021 BSP Term Loan of $69.2 million and the repurchase of common stock for employee tax withholding of $3.1 million.
The cash used in 2023 primarily consists of the repayment of our 2021 BSP Term Loan of $69.2 million and the repurchase of common stock for employee tax withholding of $3.1 million.
Interest income earned is primarily due to the Company’s money market investments. Interest Expense Interest expense was $6.5 million for the year ended December 31, 2023, as compared to $11.2 million in the prior year period.
Interest Income Interest Income was $0.8 million for the year ended December 31, 2024, as compared to $1.3 million in the prior year period. Interest income earned is primarily due to the Company’s money market investments. Interest Expense Interest expense was $1.1 million for the year ended December 31, 2024, as compared to $6.5 million in the prior year period.
We cannot assure you that the exchange rate between the United States and Hong Kong currencies will continue to be fixed or that exchange rate fluctuations between the United States and Hong Kong, or all other currencies will not have a material adverse effect on our business, financial condition or results of operations. 37 Table of Contents
We cannot assure you that the exchange rate between the United States and other currencies will not have a material adverse effect on our business, financial condition or results of operations. 36 Table of Contents
Net sales of our Costumes segment were $130.9 million in 2023, compared to $148.9 million in 2022, representing a decrease of $18.0 million, or 12.1%. The decrease in net sales was primarily driven by US customers recalibrating their order levels down based on Halloween 2022 sell-through. Cost of Sales Toys/Consumer Products.
Net sales of our Costumes segment were $121.0 million in 2024, compared to $130.9 million in 2023, representing a decrease of $9.9 million, or 7.6%. The decrease in net sales was primarily driven by US customers recalibrating their order levels down based on Halloween 2023 sell-through.
Operating activities provided net cash of $66.4 million in 2023 and $86.1 million in 2022.
Operating activities provided net cash of $38.9 million in 2024 and $66.4 million in 2023.
Net sales of our Toys/Consumer Products segment were $580.7 million in 2023, compared to $647.3 million in 2022, representing a decrease of $66.6 million, or 10.3%. The decrease in net sales was primarily due to lower sales in our Dolls, Role Play and Dress Up Division, partially offset by increased sales in our Action Play & Collectibles Division. Costumes.
Net sales of our Toys/Consumer Products segment were $570.0 million in 2024, compared to $580.7 million in 2023, representing a decrease of $10.7 million, or 1.8%. The decrease in net sales was primarily due to lower sales in the 1-2% range in each of our Dolls, Role Play and Dress Up Division, Action Play & Collectibles Division and Seasonal Division.
Cost of sales of our Costumes segment was $99.9 million, or 76.3% of related net sales for 2023 compared to $119.5 million, or 80.3% of related net sales for 2022 representing a decrease of $19.6 million, or 16.4%. The decrease in dollars is due to lower overall sales in 2023.
Cost of sales of our Costumes segment was $88.5 million, or 73.1% of related net sales for 2024 compared to $99.9 million, or 76.3% of related net sales for 2023 representing a decrease of $11.4 million, or 11.4%. The year-over-year decrease in dollars is directly attributable to lower volume.
Loss on Debt Extinguishment In 2023, we recognized a loss on debt extinguishment of $1.0 million in connection with the extinguishment of the 2021 BSP Term Loan in June 2023. Interest Income Interest Income was $1.3 million for the year ended December 31, 2023, as compared to $0.1 million in the prior year period.
Loss on Debt Extinguishment In 2023, we recognized a loss on debt extinguishment of $1.0 million in connection with the extinguishment of the 2021 BSP Term Loan in June 2023.
Cost of sales of our Toys/Consumer Products segment was $388.3 million, or 66.9% of related net sales in 2023 compared to $465.4 million, or 71.9% of related net sales in 2022 representing a decrease of $77.1 million or 16.6%.
Cost of sales of our Toys/Consumer Products segment was $389.5 million, or 68.3% of related net sales in 2024 compared to $388.3 million, or 66.9% of related net sales in 2023 representing an increase of $1.2 million or 0.3%.
Accordingly, we cannot quantify at this time if, or the extent, this conflict will adversely impact our business operations. 33 Table of Contents Quarterly Fluctuations and Seasonality We have experienced significant quarterly fluctuations in operating results and anticipate these fluctuations in the future. The operating results for any quarter are not necessarily indicative of results for any future period.
Lower sales could negatively impact our profitability and cash flows. 32 Table of Contents Quarterly Fluctuations and Seasonality We have experienced significant quarterly fluctuations in operating results and anticipate these fluctuations in the future. The operating results for any quarter are not necessarily indicative of results for any future period.
The following is a summary of our significant contractual cash obligations for the periods indicated that existed as of December 31, 2023 and is based upon information appearing in the notes to the consolidated financial statements (in thousands): 2024 2025 2026 2027 2028 Thereafter Total Operating leases $ 8,713 $ 6,432 $ 4,525 $ 4,274 $ 4,384 $ 127 $ 28,455 Minimum guaranteed license/royalty payments 45,066 7,013 1,059 — — — 53,138 Employment contracts 7,560 6,467 3,700 — — — 17,727 Total contractual cash obligations $ 61,339 $ 19,912 $ 9,284 $ 4,274 $ 4,384 $ 127 $ 99,320 The above table excludes any potential uncertain income tax liabilities that may become payable upon examination of our income tax returns by taxing authorities.
The following is a summary of our significant contractual cash obligations for the periods indicated that existed as of December 31, 2024 and is based upon information appearing in the notes to the consolidated financial statements (in thousands): 2025 2026 2027 2028 2029 Thereafter Total Operating leases $ 11,702 $ 15,935 $ 15,832 $ 15,823 $ 6,715 $ 36 $ 66,043 Minimum guaranteed license/royalty payments 53,682 18,757 2,170 — — — 74,609 Employment contracts 6,864 4,406 — — — — 11,270 Total contractual cash obligations $ 72,248 $ 39,098 $ 18,002 $ 15,823 $ 6,715 $ 36 $ 151,922 The above table excludes any potential uncertain income tax liabilities that may become payable upon examination of our income tax returns by taxing authorities.
In 2023, we recorded interest expense of $3.2 million related to our 2021 BSP Term Loan, $0.7 million related to our revolving credit facility and $2.6 million related to other borrowing costs.
In 2023, we recorded interest expense of $3.2 million related to our 2021 BSP Term Loan, $0.7 million related to our revolving credit facility and $2.6 million related to other borrowing costs. 31 Table of Contents Provision for Income Taxes During 2024, our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $5.5 million, or an effective tax rate of 13.9%.
Year Ended December 31, 2023 2022 Net Sales Toys/Consumer Products $ 580,686 $ 647,317 Costumes 130,871 148,870 711,557 796,187 Cost of Sales Toys/Consumer Products 388,260 465,405 Costumes 99,944 119,496 488,204 584,901 Gross Profit Toys/Consumer Products 192,426 181,912 Costumes 30,927 29,374 $ 223,353 $ 211,286 31 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Net Sales Toys/Consumer Products.
Year Ended December 31, 2024 2023 Net Sales Toys/Consumer Products $ 570,018 $ 580,686 Costumes 121,024 130,871 691,042 711,557 Cost of Sales Toys/Consumer Products 389,534 388,260 Costumes 88,487 99,944 478,021 488,204 Gross Profit Toys/Consumer Products 180,484 192,426 Costumes 32,537 30,927 $ 213,021 $ 223,353 30 Table of Contents Comparison of the Years Ended December 31, 2024 and 2023 Net Sales Toys/Consumer Products.
In 2022, we recorded interest expense of $9.3 million related to our 2021 BSP Term Loan, $0.6 million related to our revolving credit facility and $1.3 million related to other borrowing costs.
In 2024, we recorded interest expense of $1.1 million related to our revolving credit facility.
Absent these discrete tax benefits, our effective tax rate for 2023 was 21.3%, primarily due to taxes on federal, state, and foreign income. During 2022, our income tax benefit was $41.0 million, or an effective tax rate of (81.9)%.
The 2024 tax expense included a discrete tax benefit of $1.4 million primarily comprised of return to provision adjustments. Absent these discrete tax benefits, our effective tax rate for 2024 was 17.4%, primarily due to taxes on federal, state, and foreign income.
The decrease in dollars is due to lower overall sales in 2023, while the decrease in percentage of net sales, year-over-year is due to lower inbound freight costs. Costumes.
Although royalty rates were lower year-over-year, the increase in the cost of sales percentage of net sales, year-over-year is due to higher inventory obsolescence costs. Costumes.
The cash used in 2022 primarily consists of the repayment of our 2021 BSP Term loan of $29.6 million and repurchase of common stock for employee tax withholding of $1.4 million.
Financing activities used net cash of $26.9 million in 2024 and $72.3 million in 2023. The cash used in 2024 primarily consists of the cash portion for the redemption of the Series A Preferred stock of $20 million and the repurchase of common stock for employee tax withholding of $6.9 million.
The decrease as a percentage of net sales, year-over-year, is due to lower inbound freight costs. Selling, General and Administrative Expenses Selling, general and administrative expenses were $164.2 million in 2023 and $150.0 million in 2022, constituting 23.1% and 18.8% of net sales, respectively.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $173.3 million in 2024 and $164.2 million in 2023, constituting 25.1% and 23.1% of net sales, respectively. Selling, general and administrative expenses increased from the prior year primarily driven by higher media costs, product development expenses and employee compensation.
Removed
Selling, general and administrative expenses increased from the prior year primarily driven by higher outbound freight and warehouse expenses for 3 rd party warehouses and less scale at operated warehouses coupled with lower capitalization of such cost, as well as higher compensation expense.
Added
Movie properties such as Sonic the Hedgehog 3 and Disney’s Moana 2 helped sales in 2024, but were offset by lower shipping from prior year movie properties such as The Super Mario Bros. Movie, Disney’s The Little Mermaid, Disney’s Wish and Disney’s Encanto. Costumes.
Removed
The 2022 tax benefit of $41.0 million included a discrete tax benefit of $49.8 million primarily comprised of a valuation allowance release.
Added
Despite the lower sales in the US, our International sales grew in 2024 to the highest year ever. Cost of Sales Toys/Consumer Products.
Removed
On June 27, 2022, as permitted by the terms within the 2021 BSP Term Loan Agreement, we made a voluntary fee-free $10.0 million prepayment towards the outstanding principal amount of the 2021 BSP Term Loan.
Added
The decrease in percent of net sales is attributable lower royalty expense due to lower royalty guarantee shortfalls and marginal improvements in product cost of goods attributable to mix and design for improved margin.
Removed
On September 28, 2022, as permitted by the terms within the 2021 BSP Term Loan Agreement, we made a voluntary $17.5 million prepayment towards the outstanding principal amount of the 2021 BSP Term Loan and incurred a $0.5 million prepayment penalty.
Added
Change in fair value of the preferred stock derivative liability The change in fair value of the preferred stock derivative liability for year ended December 31, 2024, was nil, as the Company had redeemed all the outstanding preferred shares on March 11, 2024.
Removed
The exchange rate of the Hong Kong dollar to the U.S. dollar has been linked to the U.S. dollar by the Hong Kong Monetary Authority at HK$7.75 - HK$7.85 to US$1.00 since 2005 and, accordingly, has not represented a meaningful currency exchange risk to the U.S. dollar.
Added
The change in fair value for the year ended December 31, 2023, was $8.0 million reflecting the results of the fair value estimation driven mainly by the accrual of dividends and changes in unobservable inputs such as discount rate and change-in-control-assumptions.
Added
Accordingly, we cannot quantify at this time if, or the extent, this conflict will adversely impact our business operations. The suggestion that the U.S. will take unilateral action to impose tariffs on products imported from China creates significant uncertainty about our ability to source products with a cost structure consistent with our recent history.
Added
The additional suggestion that the U.S. will take unilateral action to impose tariffs on products imported from Canada and/or Mexico also creates significant uncertainty about which additional markets could be targeted for new tariffs.
Added
It also increases the possibility that markets outside the U.S. could institute retaliatory tariffs that would ultimately increase the cost of our doing business in those markets where we import product. In addition, our customer base may face significant increased costs in importing our product from Hong Kong into their home markets.
Added
In the event our customers choose to raise consumer prices to offset these costs, negative consumer reaction could substantially reduce unit demand for our product line, and by extension lower sales.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
3 edited+0 added−2 removed10 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
3 edited+0 added−2 removed10 unchanged
2023 filing
2024 filing
Biggest changeWe do not believe that near-term changes in these exchange rates, if any, will result in a material effect on our future earnings, fair values or cash flows. Therefore, we have chosen not to enter into foreign currency hedging transactions.
Biggest changeChanges in the U.S. dollar exchange rates may positively or negatively affect our results of operations. We do not believe that near-term changes in these exchange rates, if any, will result in a material effect on our future earnings, fair values or cash flows. Therefore, we have chosen not to enter into foreign currency hedging transactions.
We cannot assure you that this approach will be successful, especially in the event of a significant and sudden change in the value of these foreign currencies. 38 Table of Contents
We cannot assure you that this approach will be successful, especially in the event of a significant and sudden change in the value of these foreign currencies. 37 Table of Contents
During the twelve-month period ended December 31, 2023, the maximum amount borrowed under the revolving credit facility was $10 million and the average amount of borrowings outstanding was $0.5 million. As of December 31, 2023, the amount of total borrowings outstanding under the revolving credit facility was nil.
During the twelve-month period ended December 31, 2024, the maximum amount borrowed under the revolving credit facility was $36 million and the average amount of borrowings outstanding was $5.6 million. As of December 31, 2024, the amount of total borrowings outstanding under the revolving credit facility was nil.
Removed
Changes in the U.S. dollar exchange rates may positively or negatively affect our results of operations.
Removed
The exchange rate of the Hong Kong dollar to the U.S. dollar has been linked to the U.S. dollar by the Hong Kong Monetary Authority at HK$7.75 – HK$7.85 to US$1.00 since 2005 and, accordingly, has not represented a meaningful currency exchange risk to the U.S. dollar.