Good morning, ladies and gentlemen. Thank you for joining the JAKKS Pacific Second Quarter 2014 Earnings Call with management. Today, JAKKS will review the results for the second quarter ended June 30, 2014, which the company released earlier today. On the call today are Stephen Berman, President and Chief Executive Officer; and Joel Bennett, Executive Vice President and Chief Financial Officer. Mr. Berman will first provide an overview of the quarter; then Mr. Bennett will provide the detailed comments regarding JAKKS Pacific's financial and operational results. Mr. Berman will then conclude the prepared portion of the call with highlights of the product lines and current business trends prior to opening up the call for questions. Your line will be placed on mute for the first portion of the call. (Operator Instructions) Before we begin, the company would like to point out that any comments made about JAKKS Pacific's future performance, events or circumstances, including the estimates of sales and earnings per share for 2014, as well as other forward-looking statements concerning 2014 and beyond are subject to Safe Harbor protection under federal security laws. These statements reflect the company's best judgments based on current market trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in forward-looking statements. For details concerning these and other and such risks and uncertainties, you should consult JAKKS' most recent 10-K and 10-Q filings with the SEC, as well as the company's other reports subsequently filed with the SEC from time to time. With that, I will turn the call over to Mr. Berman.

Good morning, everyone and thank you for joining us today. We are pleased with our sales and earnings results for the second quarter of 2014 as we continue with the positive momentum generated from the first quarter of the year. We have exceeded our sales forecast for the quarter and are upbeat about the outlook for 2014 increasing our previously announced sales and earnings forecast on a comparative basis for the full year. Highlights of our second quarter sales include dolls, dress-up and role play in our Frozen line, Disney Princess dolls and dress-up, seasonal outdoor and water toys for Maui toys, foot-to-floor ride-ons and ball pits from Moose Mountain and Disguise Halloween costumes among others. Our fall lines are proceeding this plan with excitement around our new Frozen offerings, Disney license dress-up and role play including princess, fairies and Sofia the First Disguise Halloween costumes and our preschool foot-to-floor ride-ons, and ball pits from Moose Mountain. For boys, we are strongly looking forward to launch in the large scale figures such as Teenage Mutant Ninja Turtles and Star Wars Rebels, our new Hero Portal Plug It In & Play TV Games titles based on Power Rangers, Teenage Mutant Ninja Turtles and DC Comics, Nintendo plush and figures and Max Tow Truck vehicles with our DreamPlay app technology. In addition, the expansion of our miWorld physical play sets products with the DreamPlay digital enhancement and our first in-app purchase component which is just the beginning with many more to follow. And now I would like to turn the call over to Mr. Joel Bennett to review our financial results for the second quarter of 2014 and then I will give a further update of our business this year and beyond. Joel?

Thank you, Stephen and good morning everyone. We are very pleased to report that net sales for the second quarter of 2014 increased 16.9% to $124.2 million up from net sales of $106.2 million reported in 2013. The reported net loss for the second quarter was $9.1 million or $0.43 per diluted share which includes pretax restructuring charges of $1.2 million or $0.05 per diluted share higher than anticipated product testing and development cost of $2.1 million or $0.10 per diluted share due to higher sales in the quarter and to support new products being developed in response to increasing consumer demand for some of our licensed product lines. And the dilutive impact of both increased interest expense on the recently completed convertible note issuance and the reduction to the share count for the 3.1 million shares repurchased of an aggregate of $0.03 per diluted share. This compares to the 2013 reported net loss of $46.9 million or $2.14 per diluted share which included charges for license minimum guarantee shortfalls of $14.1 million and inventory impairment of $12.2 million. Net sales for the six months ending June 30, 2014 increased 12.1% to $206.7 million compared to $184.3 million in 2013. The reported net loss for the six month period was $25.4 million or $1.17 per diluted share which included the restructuring charges higher than anticipated product development and testing charges and the impact of the stock buyback and convertible note issuance. This compares to a net loss for the first six months of 2013 of $74.4 million or $3.40 per diluted share which included charges for license minimum guarantee shortfalls of $14.4 million and inventory impairment of $14.9 million. Worldwide sales of products in our traditional toys and electronic segment which includes dolls, action figures vehicles, electronics plush and pet…

Thank you, Joel. We are extremely pleased with our performance in the second quarter of 2014 despite the continued challenge in retail environment. Let's begin with the highlights in our Disney Girls division this quarter, which includes Disney dolls, dress-up and role-play categories including Frozen, Disney Princess, Sofia the First and Disney Fairies. The Frozen crates continues and our product sale-through is quickly as to hit store shelves. We have aggressively across the board ramped up production and demand still exceeds supply. We expect our fall Frozen lineup to continue to drive significant sales through the remainder of the year and includes the magical light-up dresses and our feature doll Snow Glow Elsa both of which play the award winning song from the movie Let it Go. Snow Glow Elsa will be bilingual in the U.S., U.K. and Canada with international versions in 25 different languages to maximize its global potential. We have also added new products that play on the popularity of the breakout character Olaf including a Sno-Cone Machine and Tea Set just to name a few. During a recent earnings call, Disney identified Frozen as one of the company's top five franchises from music videos, live single long stage shows to Frozen on Ice shows and to interstitial on the Disney channel. We are excited and pleased of all the promotional support from Disney for the franchise making Frozen one of our evergreen licenses in our Disney portfolio for this year and many years to come. As consumers flocked to buy Frozen products, we continue to focus on Disney's core Princess with promotional plans for fall to drive our Princess Royal Kingdom Kitchen and our Princess Toddler Dolls with royal reflection ice. The latest ratings indicates Sofia the First is still holding the number one cable program…

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Scott Hamann from KeyBanc Capital. Please go ahead.

Hey, thanks. Good morning guys.

Good morning Scott.

In terms of the – some of the cannibalization you had talked about in the release and the Frozen was taken away from some of the other lines. Can you kind of elaborate on that and if that's something that potentially as a concern in your planning with the other lines for the balance of the year?

No. What it is – as we also want to be clearly transparent, so it's not just taking away from I would say just specific areas in our line which is moderate, but it's taken away business from other competitive doll brands in the market. So for us it's just – it's taken away from certain parts of our business but not dramatic but it is such a big property and the focus that Disney has put behind it. There has to be some type of drop off in certain areas, but it's not just in our JAKKS business, it's actually affecting other global brands. But it's part of what we expected, it's just doing it a little more because Frozen has become such a big brand around the world.

Okay. And then….

Also Scott it's also offsetting when we look at the orders coming in for fall, we see it did affect the spring part but it's not affecting the fall part as much.

Okay. It makes sense. And then just in terms of the guidance, the revenue lift was nice but EBITDA is only up about $1 million on like $28 million increase in sales, so I'm not sure exactly if you can kind of reconcile what some of the get backs, it just didn't look like the flow through would have been as strong as you would have thought?

Yes. The EBITDA was inclusive of the restructuring charge, so if you were to – as you may have read in the release it's got a little convoluted in terms of trying to be clear and showing apples-to-apples. And in general it's just overall conservatism, we provided for a number of different things that we don't it will happen. We are certainly very optimistic about going forward but it's just gives a little cushion in that. But anyway adjusted it would be $42 million to $44 million.

So the restructuring charges although over $1 million in the quarter is there anything else from the first quarter, are there anything in the third and fourth quarter that you are anticipating that would be in there?

No. That was pretty much the last of it and it's primarily relates to our Hong Kong showroom that because toy fair in Hong Kong occurred in January wasn't included in the charge from last year. We tried to get everything done in 2013. But that was the last piece and we are not expecting any going forward.

Okay. Thank you.

Thank you, Scott.

Thank you. Our next question comes from Gerrick Johnson from BMO Capital. Please go ahead.

Hey, good morning.

Hi, Gerrick.

Good morning. Can you just talk about the restructuring charge specifically what that was for? And then in your guidance just to be totally clear what does it include and exclude in terms of restructuring and the other items that you talked about in your press release?

Sure. Basically it was the buyout of a lease in Hong Kong basically by paying an amount we got out of the next two years of rent. So we have savings beginning in Q3 2014 – yes, 2014 to mid-2016. What was the other part of your question?

Well, as it pertains to guidance, does that include…

Okay.

Or exclude restructuring product testing all of those other things that you talked about in press release.

Yes. Everything is included in those numbers expect for the EBIT – the EBITDA included and then the EPS we were reflecting it both ways in terms of the financing and restructuring. The exact part was pretty clear; the only thing that we didn't specify was the EBITDA was after the reorg.

Okay. And then taxes can you talk about taxes $1.3 million hit earnings but if you put at that 20% rate it look like it should have been a benefit that would have been like swing of $0.13, so if you could explain what's going on there so we understand…

Sure. The actual tax provision is based off of where we have taxable income and in which quarters. In the U.S., we are still not a tax payer, in the U.K., Canada and Hong Kong they have taxable income and the provision basically flows with their income. So it has more to do with that and the group results. With the loss, you would either expect the benefit or no tax provisions. But it has to do with the territories that have tax – taxable income.

Okay. So that makes it a little bit more difficult for us to model going forward. I had my tax that are basically at 20% rate or so. So is that appropriate going forward or should I – or should we get some guidance as to what earnings are going to be and what your restrictions so we can better model that?

I think we can give more color on what – because if you are transfer pricing there is a lot of moving pieces so it would be difficult for you to model. So it will probably give more information and give – actually what we will do is, we will give quarterly effective rate which will have everything blended. Actually, I will come back to that later in the call maybe when Stephen is answering your question if not we can do it offline, I can get it to whoever has the question, but I will look at it during the call.

Okay. I will let few other guys ask some questions, but I will be back.

Okay.

Thank you. Our next question comes from Stephanie Wissink from Piper Jaffray. Please go ahead.

Hi, good morning everyone. Thanks for taking our questions.

Thank you, Steph.

Stephen if we could, I wanted to just rephrase Scott's earlier question, I think it's a good one on the cannibalization factor. Is that based on the way retailers are booking orders for back half, are you seeing something in the POS data that would classify the consumer…

It's more done -- first half is the POS data so this is an example and this is a simple one. If the child is going out to buy an Elsa dress, they may not go out and buy a Cinderella dress or whether it's a Barbie role-play Monster Hide dress-up. So we have seen it in the spring, but then for the first half but the bookings for fall are extremely strong on our core Disney products. So while the craze was happening and still is happening with Frozen, it did hit certain parts of our growth area but not just our, it hit a lot part of retail growth area. But our bookings for fall are right on track to what we expected. But there was some slip off of some cannibalization in certain areas of our core business called dress-up and some dolls.

Okay. That's really helpful. And then Joel, kind of on the incremental R&D spend, was that spend planned in your original before your guidance and it was pulled forward into the quarter is that additive spend that we should think about for the full year and what category the product lines will be benefiting from that incremental testing and development spend?

Yes. It was additive because originally we didn't expect Frozen to actually expand but with the prominence of all up and some of these others, we got I think – those analysts that came out and certainly the trade saw the huge expansion to the Frozen line which otherwise would have been just selling out what we had originally sold in at the end of last year. So it's additive and the other thing it's going to be something that's going to benefit into 2015 because with sales for a lot of those items aren't occurring until third and fourth quarter.

Steph, let me – to addition that we – while Frozen has expanded – we expanded into the correct areas, so I think – we mentioned it in the press release, you would remember Snoopy Sno-Cone Maker that was done years ago. We came out with the Olaf Sno-Cone Maker that will be a perennial and it was a new category, we came up with a whole line of switch him Olaf's, almost like a Mr. Potato had. But for today's children they understand a lot. So we expanded our rights with Disney and at the same time we had to do quick R&D to get these going for fall and spring 2014 and spring 2015.

That's really helpful. Thanks. And then Joel, if I could stir one more out there in the international sales, you went through the numbers really quickly but did I hear that the sales are actually down in the quarter and how should we think about the acceleration and the trajectory as you get back into stock as some of the Frozen items going into the back half.

Yes. International was down about $2 million year-over-year, last year we had Smurfs but with Frozen and some of the other licenses in our proprietary product like Max Tow that will be accelerating in the back half and then into 2016 and as Stephen mentioned all the other initiatives in his portion of the call. But, I think one of the big takeaways in the U.S. market where we have seen some challenges in the past and some of our peers more currently, it's been a big increase for us.

Okay. Thanks guys. Best of luck.

Thank you.

Thank you. Our next question comes from Linda Bolton-Weiser from B. Riley. Please go ahead.

Hi. I was just wondering if you could explain a little bit more about the special product development cost that were in the quarter and was they related to kind of like development of DreamPlay technology or what exactly. And I guess I'm wondering in the future if you have strong sales growth as you did this quarter, are we to expect that there would be sort of the special cost that come up each quarter. So I'm just kind of wondering, how we should think about the earnings power even with strong sales growth because it's not really coming through to the bottom line. So if you could explain what those costs were and the likelihood that the type of thing might reoccur? Thank you.

Well, for starters again with Frozen, we reacted very quickly and that's one of our competitive advantages and it reflects the broad expansion of the rights in Frozen in particular. As I just mentioned before, the sales for a lot those items will occur in the third and fourth quarter as a launch. But all of the R&D costs are pre-loaded. So in terms of the current period that we are scrambling essentially to get the goods developed we will have actually expanded profitability in 2015 since the – essentially the start-up cost for those initial items are already in the P&L from the prior year. So it's not a headwind per se in terms of fundamental change in the business, it's just how we're reacting to a huge opportunity.

Okay. Great. And then I kind of missed what you said the operating cash flow was for the six months of the quarter, could you repeat that number?

Yes. And used cash of $21.6 million versus $34.9 million last year and going back to the tax rate, the effective rate for Q3 is expected to be around 3% and about 15% in Q4.

Joel, could you also just to make everything really clear, could you also give us a little bit of direction on the interest expense and diluted share count for the third quarter and full year?

Sure. Diluted share count for Q3 and that would only be for the third quarter not for the year-to-date September 30th is about 45 million shares, 18.9 million shares for Q4 and 20.2 million for the full year. Interest Q3 $3.8 million, Q4 $3.3 million. And the big difference there is that pay off of the November maturities on November 1st.

Great. Thanks. And can you just clarify also, I mean did you actually meet your credit facility covenant requirements in the quarter and if so what was the EBITDA that you earned in the quarter and did the covenant facility allow the restructuring charge or, or could you exclude that from that?

It's all in. We did meet it. There is certain other add backs like foreign exchange, other non-cash charges like stock-based comp. The EBITDA covenant is only for Q2 and Q3, I'm sorry Q1 and Q2 beginning Q3, it reverts to a leverage ratio.

Okay. Great. Thanks a lot.

Thank you.

Thank you.

Thank you. Our next question comes from Sean McGowan from Needham & Company. Please go ahead. Sean McGowan - Needham & Company: Good morning. Hi, guys. I have a couple of questions and some of them are follow-ups. So on the product testing – with product testing cost is that a period cost or does that get put into inventory?

We do defer it on the Disguise because a lot of the testing is front loaded. So with increase in Disguise sales in the quarter we had a lot more testing cost. But, generally it's pay as you go because you have a normal flow of products. But with Disguise and the time that it takes to build up the inventory because they are such a seasonal business, it's essentially deferred and matched to those sales. Sean McGowan - Needham & Company: That's sounds like you are saying two different things though, if it's deferred and matched to the sales then it wouldn't be up front.

No, on that line. No, we paid for it up front. Sean McGowan - Needham & Company: So but it…

The increase this quarter is due to the higher sales of Disguise, so it was… Sean McGowan - Needham & Company: Okay.

In that sense it was a shift in product mix. Sean McGowan - Needham & Company: Okay. But for other – so much of this testing and product development cost, how much of that was testing and how much of it was other development cost?

It was about a million. Sean McGowan - Needham & Company: Was it primarily other development costs?

No, it's not a million a piece. Sean McGowan - Needham & Company: Okay. And so those expenses have been taken so back to earlier questions should we expect not to see that magnitude of higher than expected expenses in the subsequent periods or where we see that?

Correct. Because we have already developed the Frozen, so on R&D side we have already expense the development on what we are going to ship and on the testing it's essentially a shift, part of the shift from – well, two things one is based on the increase SKUs that we have developed, we will have more testing and there will be less testing associated with the earlier ship of certain Disguise orders. That make sense? Sean McGowan - Needham & Company: Well, I was asking A or B and you said correct. So it sounds like what you are saying is we won't see these unusually high expenses in the future…

Correct. Sean McGowan - Needham & Company: Is that the right way to read it?

Yes, correct. I was just trying to describe we have things moving in both directions. Sean McGowan - Needham & Company: Okay.

It's part of the business. Sean McGowan - Needham & Company: Another question is also follow-up, so international, I would be surprised that you would have head like Frozen and still have a decline in revenue, is it just their comparison on Smurfs?

Actually it's the time to roll it out. I mean we are still responding to the popularity. So we have I think 25 or 26 different languages that will be doing the doll in. I think that the U.S. markets tend to get the goods first. Sean McGowan - Needham & Company: When did the movie open in the markets that you have the rights in?

I'm sorry, Sean. Sean McGowan - Needham & Company: When did the movie open in the markets that you are selling in?

It opened during last year October last year throughout the latter part of 2013. Sean McGowan - Needham & Company: Okay. All right. So you are still chasing the demand…

And also Smurfs open last year and Smurfs is a really European property it's called Schtroumpfs from Belgium and it had a very successful second quarter and there was no movie content from it. So that was really the drop off of international in the second quarter. Sean McGowan - Needham & Company: Okay. And earlier in the call Joel, I think you said that the restructuring charge would have been something you would have liked to have taken in last year. But because Hong Kong Toy Fair happened this year you couldn't, why would that charge not have been taken in the first quarter then?

As we are very still in property, they can't take the charge until you are actually out of… Sean McGowan - Needham & Company: Okay. That makes sense. And I think that's it. I will leave it at that. Thank you.

Thank you. Our next question comes from Ed Woo from Ascendiant Capital. Please go ahead.

Yes. I had a question about some of your POS, your sell-in versus your sell-through, it looks like Frozen was very strong but what about for – all your other products?

We take kind of by category. On our foot-to-floor area of business which is Moose Mountain and are called spring business of Kids Only. We have had exceptional sell-through. Halloween we have had exceptional sell-in but it's not the time for the sell-throughs to occur for the Halloween component of our business. Going through the Nintendo, going through miWorld, all the areas that we have been shipping continuously, the sell-throughs are continuing, it's not just based off of just Frozen Godzilla, I think I have mentioned earlier in the call, we sold out even prior to the movie launch miWorld forecast and orders are increasing more than expected. Good example are large figure of Teenage Mutant Ninja Turtle, it increased dramatically in the sets of the forecast, our Hero Portals are shipping right now which is three property. So we are getting really great sell-through, a bear sell-through what we had last year, at the same time, the order flows and our bookings are stronger than they were over the past couple of years. So we are getting the sell-throughs that we need to continue the ordering that occurs throughout the year but we are well-ahead of our bookings and we expected even for third quarter and fourth. So without the sell-throughs we wouldn't be where we are at in bookings and that's why we are very confident with our increasing guidance. And we are still taking a look to see of just the marketplace itself because even though if our sell-throughs are great. And competitors items are not selling well that does affect the open to buys by retailers, but they still need items to drive consumers in and our mix of diversification in all the different segments we are in as really helped us to bode well going forward and we are not really relying on one segmentation to help our business.

Great. And there has been a lot of asking on the call about the special charges that you guys had with product development cost. But, how do you qualify overall profitability for some of your brands. I know last year internal brands you should be higher profits you don't pay like other brands such as your Disney property have much higher licensing cost, but other hand do get any leverage by having much higher sales and how should we really see, I guess kind of like looking at gross margin going forward. Are we going to see improvement, is it going to be weaker, how should we look at that for the rest of the year?

Yes. I mean a lot of the headwinds are really out of the business at this juncture based off of product mix it will have some variability but overall expanding. And as we have had new items where we are not tied to legacy pricing, we do take advantage of opportunities to expand margins. We also look at some of the legacy items where we don't have pricing power necessarily. But, we look at ways to cost reduce that and with the restructuring now essentially a complete we expect to leverage on the infrastructure as we achieve upside. Again, the guidance that we provided, it does – it is a conservative forecast since there are a lot of moving targets. But the underlying tone is that we are very optimistic about the business profitability on the items that we are selling. It was improving and as we continue to grow the businesses where we will experience the leverage.

Have you provided any update to your gross margin outlook for this year and as it changed at all with other mix of products towards Frozen?

They are new items and certainly hard items. We do have some pricing power but as percentage of the business we still have a lot of legacy item. The expansion in gross margin is a little slower going. But we expect each of the quarters to be north of 30% which is a big positive sign considering the last the more recent history.

Great. And one last housekeeping item, what is your cash balance and how much of it is offshore and how much would you be subject to taxes if you do bring it back to the U.S.?

We have about $163 million approximately $90 million or so in the U.S. We do have the maturity coming up in November of the 2014 notes of $39 million, but we can bring back $60 million range on the Hong Kong cash on a book and cash tax free basis. But, we don't expect to have to do that but we do have the GE line which will help us manage any need should they come up. Q3 is our big, big selling season. It's just under half of the annual volume, so that fourth quarter will throw-off tremendous cash going into Q4 and into 2015.

Great. Well, thank you. And good luck.

Thank you, Ed.

And I'm definitely waiting for my Princess dresses, I hope you make it in very extra large size. Thank you.

Thank you. Our next question comes from Andrew Crum from Stifel. Please go ahead.

Okay. Thanks. Good morning everyone.

Good morning, Andrew.

I had a question about the Disguise business, was there any anomalies with this quarter relative to shipping, did you ship earlier this year than last year that's the first question. And then secondly, I didn't hear any discussion or anything in the press release on the Marble properties, can you comment on how they performed during the quarter and its expectations for the balance of the year given you have got three film properties from Marvel in 2014? Thank you.

On Disguise, we actually ramped up the – we had a internal forecast that we believed in and actually there was upside that came out of that forecast in so many various segments from Mario to Marvel to Frozen and other Disney properties, our core Disney Princess. So what happened was a lot of the orders came in earlier in the second quarter, we wanted to do as to make sure we got more product out earlier, so we can get an extra churn or churn and a half on sell-throughs. And many retailers placed orders earlier, we shipped it FOB. So that was what happened with Disguise. On Marvel, we have it in different segmentations of our business, so we have it in our kids’ only area business. We have it in our boys role-play, I'm trying to go through and in some segments we have it in Disguise. And the Marvel boys properties and I will even use Transformers that we have in both our Halloween area of business and foot-to-floor was both boys properties were doing extremely strong they have held their own. But in various segmentations of our business, so we don't have the core property rights of the action figures for the Marvel but we do have some great ancillary rights that have performed – that have performed and continued to perform going forward.

Stephen just going back to the topic of Disguise, would that detract from third quarter shipments or demand strong enough where you don't see any impact.

We don't see any impact for the year, I don't have the total year forecast, but we do have growth in Disguise for the total year. And it may be there flattered detract a little bit but its offset by either areas of growth. So for the year, Disguise will be up year-over-year.

Got it. Okay. Thanks guys.

Thank you.

Thank you. We have a follow-up question from Gerrick Johnson from BMO Capital. Please go ahead.

Hey, there, told you will be back. How long does the Frozen license last and do you have rights, should there be a sequel?

A) We cannot discuss the period of licenses that we have just because of the confidentiality with our licensors and also for competitive reasons. But we have it for a very good period of time and the sequel I believe from what we gather again this is just not confirmed, but all from Disney (indiscernible) they have promoted it for the years to come to Disney on Ice and through interstitials. I think there will be a Frozen in 2017, I don't know – again, I don't want to speak for Disney. But they have also included in their TV show which they have once upon a time, they immediately included Elsa in that Sunday evening TV show. So they are promoting Frozen and Elsa throughout the year. So we have a broad license and for a good period of time. So there is Frozen – it's now actually going to be compelled to the core Disney property, so Frozen now is Elsa and Anna are now part going into next year as core Disney Princess' and that's how Disney is looking at Frozen going forward.

Thank you. Our next question comes from Sean McGowan with a follow-up from Needham & Company. Please go ahead. Sean McGowan - Needham & Company: Hi, also some follow-ups.

Sure. Sean McGowan - Needham & Company: So Joel, did I hear you right that your share count for the fourth quarter is 18.9?

Yes. Sean McGowan - Needham & Company: Does that imply then that the level of profitability is below that threshold that would give rise to the dilution and how does that square with the tax rate of 15%?

It's 15% of the pre-tax which we are actually projecting a loss for Q4. Sean McGowan - Needham & Company: So you would have a benefit…

Well, we have a tax rate so there is a provision not a benefit. So it's about 15% of the loss. Sean McGowan - Needham & Company: Is it a benefit or provision, so it's a provision that's 15% of the loss?

It's a provision at the group level there is a loss. But, at the Hong Kong, U.K. and Canada level there is taxable income that's why there is the provision. Sean McGowan - Needham & Company: So we would see a pretax loss but a positive tax number like an actual tax…

Yes. Like in Q2, we have a pretax loss at the group level. I guess I should have not said 15% but it's 15% of the pretax but it's… Sean McGowan - Needham & Company: Negative 15%.

Negative 15%. Sean McGowan - Needham & Company: Okay. Thank you for clarifying that. Anything in the inventory build that's related to concern over work stoppage or slowdown in the docks in LA?

Well, from what we get right now that was an issue that was during the first quarter and second quarter but we shipped early preparing for it. But, as we see today there is no issue with the docks in LA ports. But, we did prepare for it because there was a lot of talk going on. So those issues with the port seems like all the issues have been agreed upon with the unions. We are very close to the ports here. So we did prepare by bringing in goods early on. But, now we are actually are shipping as normal. Sean McGowan - Needham & Company: Right. I didn't know of inventory build still at the end of the second quarter reflects any of that anticipated issue?

Yes. It did without a doubt. We are preparing early on because it was that's extreme talks of – it's been close so we have dealt with it before. So but we actually then now since its resolved, are just planning as normal and in fact I'm leaving to Hong Kong and China next week because of just the demand and it's not just for Frozen we are seeing which is a positive at least in our industry is as there is less competition there is more demand for good product at retail and not does that retail call it on even online. So we are seeing a lot of growth whether it's nominal in so many areas of our business that it's a great effect that there is a lot – less competition out there and retailers are seeing healthy retail environment for good product not for just basic. So it's an exciting time and Frozen, it's terrific and it's a wonderful run and it will be a wonderful run next year. But we are also seeing really great traction across the board that even shows in our Disguise division, our Moose Mountain division, our boys division from the Hero Portal and the DreamPlay. So first, purchases starting in fall that we actually have a component going forward. So it's really exciting. Sean McGowan - Needham & Company: Okay, thanks. And then a last question I have, it goes back to the dynamics within Disguise, I think Joel you mentioned competitive pricing dynamics, so what's that about and is that part of why you are not seeing better gross margin leverage and expansion?

Well, in general I mean that's part of it. I mean Disguise is about 15%, 16% of the business. And just the competitive landscape in that area with one use garment if you will, it's just a lot of competition so we have a lot of moving pieces. Sean McGowan - Needham & Company: Okay. So then I guess I'm still left wondering why – when a time when you have some decent momentum you are not seeing a greater expansion in gross profit. I mean I know last year there were a lot of…

Well, in terms of Q2 proportionately made of more – so it has lower margin than some of our other areas of business. In the second quarter, their sales were up pretty dramatically. We did about $30 million last year and it was $42-ish million this year. So was more related to mix but for the pricing, I mean going into the year we are expecting a lot of competition. And so as Stephen mentioned it will be up year-over-year but there was a kind of a push in terms of the margin expansion. In Q3 where the sales for Disguise will be a smaller percentage one because the overall business will be up that's our peak season. But also the earlier ship-on in general through 2Q. Sean McGowan - Needham & Company: Okay. Thank you.

That is it from the Q&A portion of our call. We have no more questions. And we appreciate everybody's time. We will be doing calls to analyst and investors after the call today. So if anyone has any further questions or updates please give us a call directly and we have calls already scheduled. So thank you very much for your time. Bye-bye.

Thank you. And thank you ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.