Good morning and welcome to the JAKKS Pacific Third Quarter 2015 Earnings Conference Call with management who will review financial results for the quarter ending September 30, 2015. JAKKS issued its earnings release earlier this morning. Presentation slides containing information covered in both today's earnings release and call are available on our website in the Investor section. On the call this morning are Stephen Berman, who was recently named Chairman of the Board in addition to his responsibilities as Chief Executive Officer and Joel Bennett, Executive Vice President and Chief Financial Officer. Mr. Berman will first provide an overview of the quarter and then, Mr. Bennett will provide detailed comments regarding JAKKS Pacific's financial and operational results. Mr. Berman will then conclude the prepared portion of the call with highlights of product lines and current business trends prior to opening up the call for your 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 2015, as well as any other forward-looking statements concerning 2015 and beyond, are subject to Safe Harbor Protection under Federal Security laws. These statements reflect the company's best judgments based on the 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 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 would like to turn the call over to Stephen Berman.

Good morning everyone and thank you for joining us today. Third quarter financial performance is in line with the roadmap we set for the year and we are confident that we are on the right track to achieve our full year 2015 guidance. Beyond this year we are already excited and looking forward to 2016 and 2017. Our current momentum continues with margins steadily improving as we increase profitability on our planned sales projections. We are more profitable on current sales and more efficient with the operating expenses and what is shaping up to be a strong and solid year. We were up against unusually high comps from last fall with the meteoric sales of our Frozen toy product lines especially Snow Glow Elsa, an industry phenomenon. But we knew this going into the year and we planned accordingly. We continued to see strong demand for our broad array of categories, licenses, and brands and we are well positioned for the retail success this holiday season. Reiterating what I mentioned last quarter, we remain laser focused on the core aspects of our business strategies; leveraging our P&L by concentrating on margins, pursuing operational efficiencies, strategically growing international and emerging markets, and continuing to create consumer demand across our broad range of categories. Receiving an extra boost of consumer awareness, many of our key drivers such as Hulk Smash, Max Tow Truck Turbo, and Sing-A-Long Elsa have recently been in the spotlight with various retailers, industry experts, and media touting them as hot toys for this holiday season. The Big-Figs line is performing well and leading the pack is the wide assortment of Star Wars, the Force Awakens figures. JAKKS was a part of the Disney consumer products global unboxing event leading up to Force Friday on September 4 which marked…

Thank you Stephen and good morning everyone. Net sales for the third quarter of 2015 were $337 million compared to net sales of $349.4 million reported in 2014. Reported net income for the third quarter was $45.8 million or $1.12 per diluted share. This compares to reported net income for 2014 of $44.1 million or a $1.03 per diluted share. And adjusted EBITDA for the quarter was $52.5 million compared to $52.8 million achieved in 2014. Net sales for the 2015 nine month period increased 4.7% to $582.3 million compared to $556 million in 2014. Reported net income for 2015 was $32.6 million or $0.89 per diluted share compared to net income of $18.7 million or $0.61 per diluted share in 2014. And adjusted EBITDA for the nine month period was $53.1 million compared to $42.4 million in 2014. Worldwide sales of products in our traditional toys and electronics segment increased to $204.3 million for the third quarter of 2015 compared to $173.8 million in 2014. And traditional toy sales increased to $332.7 million for the first nine months of 2015 versus $259 million for the first nine months of 2014. Sales this quarter in this segment were led by Disney Frozen Toddler dolls, Nintendo plush toys and figures, and Star Wars figures driving the category to an overall increase this quarter. Worldwide sales from our role-play, novelty, and seasonal toys segment were $132.7 million in the third quarter of 2015 compared to $175.6 million in 2014. And sales for role-play novelty and seasonal toys for the first nine months of 2015 were $249.6 million compared to $297.2 million in 2014. Disney Princess dress-up and role-play including Frozen and Disguise Halloween costumes led sales in the category this quarter. Included in the category numbers are international sales of approximately $94.6…

Thank you, Joel. We just wrapped up our fall toy preview meetings a couple of weeks ago and we are even more encouraged by the fantastic response from retailers, licensors, and industry partners to our fall 2016 product lineup. This comes on the heels of the similar response received to our spring 2016 line which is shaping up JAKKS for a strong 2016 year. Disney Tsum Tsum based on the popular app which now has more than 50 million downloads have truly created a sensation. JAKKS highly anticipated collectibles Tsum Tsum figures will launch at Target this November and then will be in full mass distribution in early 2016. Next year JAKKS will be launching over 150 plus characters from Disney’s vast portfolio of properties. Retailers and consumers can’t wait to get their hands on these collectibles Tsum Tsum figures. Disney's publishing developed Star Darlings and launched with preteen chapter books, online content, and apps. In November our Star Darling line of dolls, accessories, and activity items will launch exclusively at Justice stores. The line will be in full mass distribution in early 2016, and as the property gains momentum Disney will support it with additional content such as music and much more. JAKKS has also taken over as a massive toy licensee for Sophia the First in EMEA and Latin America in 2016. We will launch a line of dolls, accessories, play sets, role play, and dress up items. Eleanor of Avalor Disney’s first Latina princess will be introduced in a 10 fold episode of Sophia the First next summer. We will launch a tight line of role play and dress up items for Eleanor of Avalor next year. The Star Wars Force Awakens movie premieres in December and new waves of Star Wars Big-Figs will continue to hit…

[Operator Instructions]. And our first question comes from Steph Wissink from Piper Jaffray. Please go ahead. Excuse me, your line is now open.

Hi, good morning everyone. Congratulations Stephen on the Chairmanship.

Thank you very much Steph.

Just a couple of questions from first I think, maybe Joel you mentioned briefly some shifting in some of the order flow and I just wanted to follow-up on that plan, if you could talk a little bit about maybe the magnitude of some of the shifts that you saw between Q3 and Q4, I mean if that related specifically to Disguise or another portion of the business? And then Stephen just your enthusiasm around some of the product initiatives, I am wondering if you can help us appreciate the trend line in the business and how that might shape up relative to your full-year guidance where you feel like you are trending within that range, thank you?

Just real briefly on the shifts, the buying patterns of the retailers have been shifting probably for the last decade. It is normal puts and takes based off of some times logistics and what not. But it was definitely within our range of expectations to be able to achieve the full year which we are highly confident about. But nothing remarkable about it this quarter.

And Stephen on the guidance, maybe talk a little bit about…

For the remaining part of this year actually going into the first half of next year actually it blends both together. Across the categories, it is tough because we may license like Hulk, we have probably one of the top 20s this year called Hulk Smash. But in addition the Hulk license goes through various segments of our business from Moose Mountain to Kids Only and so on that the depth of the line from our Sing-A-Long-Elsa, our general princess line, our Build the Snowman jewelry box, Ariel bath toy, and the seasonal area of Power Patrol, Minions, and Frozen. Halloween we have My Little Pony, Descendants. It is a sell out in our Halloween segment. It has done well beyond what we expected, Cinderella has done phenomenal. Inside Out, Power Rangers, just general Disney princess Zelda, there is a lot of excitement and we’ve met with a lot of our retailers worldwide over the last say six weeks. Not surprisingly but the retailers are very excited about the toy industry. There are areas of the industry that have slowed so our categories that aren't overall doing well so some of the open to buys and retailers have say slowed down for the moment but have nothing to do with JAKKS product per say. So overall our product in all of our overall categories except for maybe a couple are doing extremely well with sell through. The international segmentation of our business as you can see is growing exponentially not just from first quarter, second quarter. We had our best third quarter, going into fourth quarter is extremely strong. We are investing a lot of money internationally. I just recently came back from China which I have been there six times this year. A lot of things are really hitting…

And our next question comes from Sean McGowan from Oppenheimer. Please go ahead.

Thank you. I have a couple as well. First can you talk about how your Halloween sales are going. There have been some stories of Halloween costume sales being down and I know you have said in the past even though when Halloween falls on a Saturday it’s usually a good thing for you guys. So could you comment on that please?

Thank you, Sean. For JAKKS we are in our internal forecast, we are on track or probably will exceed our internal forecast. We had a drop off last year as Marvel wasn’t part of this year's line but it's also picked up in several areas like Descendants, Inside Out. But what we are looking at and I have been reviewing data, its earlier on I think this morning on CNBC that it looks like Halloween sales which means not just costumes it means decorations inside the house, outside the house, candy was tracking 7% below the year before through NRS, it was on CNBC. But for JAKKS itself we are right on track with what we expected or a little bit better than what we expected in our February internal forecasting. So for us we see things good but this is just a data point that we have deemed and remember Halloween sells the last 8 days of October is when the majority of the Halloween sales occur.

Alright, so in other words you are probably down versus last year but that’s because of Marvel?

That was because of more so Marvel than anything else. But we’re up from our internal forecast.

Okay, alright, thank you. And when you broke out -- when Joel broke out the segment sales data I was little surprised to see the traditional toy side doing much better than the role play side, so let me just ask you is Frozen up year-on-year in this quarter?

That’s a great question and understanding. So Frozen is up for us internationally dramatically year-over-year. Frozen is extremely strong for us this year in the U.S. but not as euphoric of the frenzy that we had last year. So, the cost of role-play, dress up we did extraordinary amount of various dresses, line of dresses, general dresses and the Snow Glow Elsa doll, those were really dramatic sales. But besides that everything else in those areas are strong. But we really had exceptional numbers in those two areas of businesses last year.

And our next question comes from Scott Hamann from KeyBanc Capital Markets. Please go ahead.

Hey good morning. Just in terms of the gross margin, the fourth quarter looks like it is implied up a little bit to get to your 31% numbers so I just wanted to make sure that, that was still a good number for you and with sales coming down, I guess implied almost $100 million bucks in the fourth quarter, what is kind of driving that gross margin to be better? And then secondly just in terms of your -- it sounds like you are doing a lot on the gross margin side but also on the operating expense side to make the business more profitable longer term, can you kind of give us a sense of where maybe from a gross margin or operating margin basis you expect this business to be over the next couple of years as you unroll those initiatives, thanks?

Sure, yes as far as the Q4 we started -- Q4 of 2014 was really an inflection point for us where we have started to really gain ground on improving margins from re-costing items. A lot of the legacy items have generally lower margins and we can't affect any price increases on a lot of that product. So, we have gone back to the factories naturally, switched factories in some cases too to achieve higher margins. And so we started with a lower hanging fruit and through those continued efforts we expect the 31% plus to be achievable to get to the 31 for the full year. So, we are very encouraged by again what we achieved beginning in Q4 of last year and we just see that continuing to roll out as we worked through the many, many SKUs that we have. As far as general guidance going forward, our expectation is that we can grow gross margin about 100 basis points per year and in 2015 we are actually ahead of target since we are expecting to hit North of 30% or call it approximately 30% in 2015, middle of 2014. Again hitting the inflection point we are seeing that we can achieve 31% for the full year.

As far as operating margins, our target for this year was in the mid single-digits and again through leveraging the infrastructure we expect to be able to lever that up as well. We don’t have the same scale as some of our bigger peers but we certainly think we can expect to get to high single-digits over the next three to five years.

And our next question comes from Drew Crum from Stifel. Please go ahead.

Okay, thanks, good morning everyone. So Stephen you had some fairly positive comments concerning the Disney business for 2016. I know it is little early to be giving forecast but do you think Disney can grow for the company in 2016 and then specifically to the Disney business, can you quantify what you are inheriting in terms of the Sofia the First license, thanks?

So Disney business is so broad because when we speak Disney we speak Disney as the Walt Disney company which is the owner of the Disney princess, the owner of Marvel, the owner of Lucas. So it is a very broad question. But where we picked up internationally, the master rights in EMEA for Sofia the First which is the doll, the dress up to role-play, so we picked up a broad array of categories for Sofia the First just internationally and we are excited as well as we had our retailers in from I would say Tesco, [indiscernible] I mean a bunch of the retailers around the world from Australia and they are excited. We also picked up which I think everyone should Google Tsum Tsum which means stack, stack and Disney has over 50 million downloads from the game in Japan. It is one of the hottest phenomenon in Japan and we are growing that which is outside of the normal called the Walt Disney company evergreen platforms with Alice in Wonderland which goes from the doll line to some I believe role play in addition to Halloween. And when Alice in Wonderland came out I believe it was five years ago, maybe I will find the timing it was one of our top selling Halloween costumes five years ago. We also have the Eleanor of Avalor. A lot of different areas from Descendants which I think will grow, Inside Out, Frozen is going to have a lot of momentum next year because Disney has a lot behind it, Cinderella, the Marvel platform which is just the machine in itself. We have in various segments from Moose Mountain, our Kids Only, Captain America next year. So you have Moana which is next year I think is November 23rd.…

Stephen, what markets do you have the Tsum Tsum license?

We have it in North America and some other markets. I don’t want to give the incorrect input on the other territories but I do know North America and still working on some specific other territories for the actual toys which are the figurines as well as the stationery. But we -- it’s a pretty broad line.

Okay. Just one last question Joel, can you remind us what you’re forecasting as far as free cash flow is concerned for 2015?

Yes, its 32 million to 35 million.

And our next question comes from Sean McGowan from Oppenheimer. Please go ahead.

Hi, I had a couple of those before I didn’t get a chance to ask, so when we were talking about the role play, what's really driving that decline then if it’s -- if your Frozen stuff is holding up well maybe the direct role play is not but what else is driving that decline?

I would say probably we shipped so many dresses last year in the Frozen category of business that that is probably driving the decline. It was a such a dramatic amount of dress up and we have dress up, we have the tiaras but it was a -- and you remember frenzy about it was on e-bay and the dresses were selling for so much. So I believe that’s probably the biggest decline in the role play. And then in just Frozen our Sing-A-Long Elsa doll, not Sing-A-Long Elsa doll, it was our Snow Glow Elsa doll hit such dramatic units that those were the two big areas of Frozen. But one thing I will tell you, Frozen is extremely strong. All the tertiary categories or peripherals those are when a license matures, kind of slow down. Our core Frozen line is so extremely strong it’s a business on its own.

Okay, thanks and then the last thing Joel, would you mind repeating what the depreciation and amortization was in the quarter, I missed them, just those quick numbers?

Well, to clarify I think the same thing happened in the second quarter, free cash flow for the year will be 130 million, 100 million from reduction of working capital and 32 million to 35 million from recurring year operations. D&A for the quarter was 7.4 million strong.

Okay, thank you.

And our next question comes from Gerrick Johnson from BMO Capital Markets. Please go ahead.

Good morning everybody. What is some of the key international markets you have added infrastructure in over the last year and where are you targeting going to in the future and also what was the currency impact on the top and the bottom line for you in the quarter?

Okay, so on the currency impact we really don’t get dramatically affected because we saw on a FOB basis the majority of the sales on the international basis and we do get affected slightly from the Canada currency, maybe little bit with Australia. But the areas in which we set up operations and hired people Germany was a brand new set up, Mexico was a brand new set up, China was a brand new set up, and UK was a built operation because UK actually served as called the central area for the Nordic with EMEA. So those were the ones that we put people on the ground, the opposites of showroom. The next areas that we are working on that we will have in place shortly is France, Spain, Australia, and Italy. So those are the ones that we are putting our people on the ground. The reason for that is now we have garnered a tremendous amount of product and when you open up opposite of the said territories we deal with employment laws, we deal with lot of different restrictions and taxations. So we needed to make sure that we had long-term product for each of these categories and now that we do in the many variations of the licenses that we extended, it allows us now to expand in these territories. And it allows us to expand really quickly. We are already doing really well, so we can have dramatic expansions as we have seen just by putting people on the ground.

Okay, so does this mean going forward there will be a shift from FOB shipments to these regions to more of a "domestic delivery"?

Well we will still keep it like we do in the U.S. We will still keep the majority of it being a FOB business. There will be back up like on TV supported items of domestic inventory. But I will still say like the way we have in the U.S. it will be primarily in FOB business.

Okay, and if I can ask one more please, for the quarter anticipate sales down what 35% to 40% year-over-year, should we see similar segment performance that we saw in the third quarter and the fourth?

Again that is good question, Gerrick I just don’t want to miss…

Yeah, in general just again the seasonality will be consistent this time last year we had the Frozen Frenzy now it is as we say jokingly Just Hot but all the categories are performing.

Yeah, except as we mentioned earlier how we will be slightly down so, there is a mix and I don’t want to give you the incorrect answer so, if you would call back it would probably be better for us to work it out. But there is a shift with -- there is a big pickup in boys because of the Star Wars and then there is a shift lower in Halloween. So, I just don’t want to give you an incorrect answer.

Alright, thank you very much.

Thank you.

And our next question comes from Linda Bolton Weiser from B. Riley. Please go ahead.

Hi.

Good morning.

Hi, I was just curious about the share repurchase pace, is there any reason why you wouldn’t get the $30 million done by March at the end of March 2016 and if you will get it done then that signifies an acceleration per quarter like over 10 million in the next couple of quarter, am I thinking of that the right way?

Well, I think the best way to put it is there is a few independent directors that when we put the purchase program in place that allows the company to purchase common stock and or negotiates the convert notes. And it's reviewed very often by the Independent Director. So it would be hard to say that it will be finished or won't be finished. We did put it in place and I know that the Independent Directors and Board have been working on the common stock as well as working on convert. So the goal is out there. We have the 30 million buyback I think through May. So there is a very good opportunity with us but it just depends on the markets and on the program.

To clarify the date was simply a back stop for our lender GE. We have no doubt that at that time if it hasn’t been done or if we’ve completed it by then that if the company wanted to do so we could do an additional buyback.

Okay, so it could be that you could get it done but through May rather than March?

No, it could be done within the period that we announced. I think it just depends on the purchase plan that has been in place but there is definitely a chance that it would be done by March. There is no reason for it not to but there is a specific plan and it may not just be again be common stock. It maybe also the convert so, its part and parcel. Does that answer the question Linda.

Yes, so then I know you said earlier I just didn’t catch what you said about the Maui earn out reversal, did you indicate there would or would not be a positive influence on earnings on that for the fourth quarter, I just didn’t catch what you said?

No, nothing in the fourth quarter.

Okay and then of course nothing in 2016 as well correct?

Correct.

Okay and then can you just talk about I guess you eluded to some increased investments on your SG&A line and then you talked about some measures that are being taken in the future to reengineer certain things that might reduce those costs, again were you referring to SG&A or was that more of a COGS thing in terms of the reengineering? And then when you think about going forward, how should we think about the SG&A. I guess I was hoping it would be flat at about 30 million to 32 million per quarter give or take but are we kind of going to see a creep up as you invest as your business continues to grow?

Well there are two things one, internationally I think I mentioned it earlier that we are invested in international and I think Gerrick asked the question about the new offices and so on which does take investment but if that investment will be offset by the growth in sales so, I don’t think that would be a impact to us of changing our true SG&A and probably be an immediate investment. But on an annual basis we will benefit from it because of the sales and profitability that we’ll see. Joel I believe was talking about re-costing of our legacy items. And we had additional cost at our warehouse which was the temporary help that was hired during this quarter and we have done some or in the process of investing to lower the actual temporary health which will then allow us stronger efficiencies and lower the cost on an annualized basis. So I think that’s what Joel was talking about. So on your question of does that -- change. Joel?

We expect to continue to lever some of the things that hit in the quarter were timing and we continue to expect to lever the infrastructure as we’ve reduced it over the last couple of years. And making targeted investments and a lot of it is people and we are doing it on a very cost efficient basis so we don’t expect SG&A to increase next year. I’d just say as a percentage we are adding proportionate investment in those areas but we expect to maintain the proportion going forward and actually levering the infrastructure that we have in place.

And our next question comes from Ed Woo from Ascendiant Capital. Please go ahead.

Yes, thanks, congratulation on the quarter as well. You said earlier that Q4 sales are better than expected is that what I heard correctly and also what are you seeing out there in terms of the retail environment. I saw quite a few of your peers have said that Q4 sales are likely to improve just because people are timing sales better and how do you feel about retail inventory right now?

As far as the Q4 sales we are very confident that we are going to achieve the guidance that we had set out. We did indicate that there are generally just the way the buying patterns of the retailers are some shift and that occurs on a regular basis. So I don’t know that we implied that Q4 was any better other than the normal shift that occurs between quarters. But we are still looking at the same guidance, we are very strong about that.

You know we feel very good about this upcoming holiday season looking into next the first half of next year and next year from where we stood today. And what was your other question?

About retail inventory, do you feel that you have enough inventory out there? You think -- with supply chain to get products in?

I’ll speak for JAKKS. We are extremely comfortable with our current production, our current inventories that we brought in for the fourth quarter and getting ready for Chinese New Year which is February which is a unique time prior to Easter. So for JAKKS we are feeling comfortable and very comfortable. And the other part is on the retail inventories. There are inventories of other companies at retail which slows down open to buys at specific retailers until they work down their inventories. So for us we are feeling very good and what we’ve heard from the various big retailers call it, around the world they call it Western Europe and North America that toy sales are strong. There are some areas that or some categories that aren't doing well for them but overall the toys sales they are excited about.

Great, well thank you, and good luck.

Thank you.

And our next question come from Jeffrey Thomison from Hilliard Lyons. Please go ahead.

Thanks and good morning.

Hi, Jeffrey.

Guys I was hoping you could discuss your current relationship with WWE and the scope of your recent deal with them and what this means for future opportunities with them?

First of all we are pleased to be back in business with them. We looked at it from both sides and let bygones be bygones and let's focus on what is needed and what is needed was they have a great brand. And what is great from JAKKS as we have a great vehicle to get their brand out in the market. And we went in to specific categories in which other people weren't working toward and we have a broad array of products that’s being launched for next year which is Halloween and role play. And we have I believe action figures in Asia Pacific which we’re excited about. And there is other categories in which we are looking at for 2017. So it was really kind of -- it was time for both of us to be working back together again. They have a terrific boys brand and we have a terrific development team that understands that brand for over I must say almost 20 years we been working with them. So it was time for us to get back into business and really business worked to built the business together. So we are very excited to be working with them again.

So are you saying that next year you will have presence in a certain number of categories and then in 2017 perhaps a little bit more in terms of categories.

Yes that’s correct.

Okay, great. That’s all for today guys, good luck for next quarter.

Thank you Jeffrey.

And our last question comes from Steph Wisink from Piper Jaffray. Please go ahead.

Thanks everyone. Hi, just one follow up on Tsum Tsum and Star Darling. I think in both cases you have exclusive this holiday season with specific retailers but then Stephen you mentioned in your prepared remarks that you’ll go full distribution in the first quarter. Can you just talk about the magnitude of the step up in the opportunities around those two properties, thank you/

Obviously we really did walk the showroom and listen to what people said. So we actually are launching Tsum Tsum this year with Target and then we have a complete roll out for starting in December-January-February to specific mass retailers and then all. They are just big because of capacity. The number of units are well in the millions. So we are launching with Target this fall and then North American and I am sure other territories early in the year. And then Star Darling is a collaboration between Disney, the Walt Disney company and JAKKS that we are launching first with Journeys during fall and then it has a complete wide launch with all major retailers for next year. So both of those are exclusive at the initial launch and then goes broad early in 2016. And very, I will tell you, people at Tsum Tsum itself and Star Darling and so I wish people got to see it as really exciting when you give it to children, when you show retailers it is exciting. We are really happy to have it and we believe it could become a phenomenon. It is terrific.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.