JAKKS PACIFIC INC

Previous wording

Our critical accounting policies and estimates are included in the 2025 Annual Report on Form 10-K and did not materially change during the first six months of 2026.

Current wording

Our critical accounting policies and estimates are included in the 2025 Annual Report on Form 10-K and did not materially change during the first nine months of 2026.

Previous wording

*Toys/Consumer Products.*Net sales of our Toys/Consumer Products segment were $97.5 million for the three months ended June 30, 2026 compared to $80.4 million for the prior year period, representing an increase of $17.1 million, or 21.3%. The increase was driven by higher sales in the Action Play and Collectibles division, up 40.7% versus a year ago, driven by sales of Super Mario Movie and Nintendo products. Additionally, the Dolls, Role-Play/Dress Up division increased 11.8% compared to the same period a year ago.

Current wording

*Toys/Consumer Products.*Net sales of our Toys/Consumer Products segment were $192.0 million for the three months ended September 30, 2026 compared to $156.1 million for the prior year period, representing an increase of $35.9 million. The increase was driven by higher sales from our North America business. Increases stem from both our Dolls, Role-Play/Dress-up and our Action Play & Collectibles divisions which were up compared to prior year by 29.0% and 19.2%, respectively.

Previous wording

Costumes. Net sales of our Costumes segment were $41.7 million for the three months ended June 30, 2026 compared to $38.7 million for the prior year period, representing an increase of $3.0 million, or 7.8%. The increase was primarily due to reduced orders a year ago from select recurring customers as a result of the US tariffs.

Current wording

Costumes. Net sales of our Costumes segment were $62.3 million for the three months ended September 30, 2026 compared to $55.1 million for the prior year period, representing an increase of $7.2 million. The increase was primarily due to increased order volume from recurring customers.

Previous wording

Our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $0.9 million, or an effective tax rate of 35.1%, for the six months ended June 30, 2026. During the comparable period in 2025, our income tax benefit was $1.8 million, or an effective tax rate of 27.3%. The increase in the effective tax rate is primarily attributable to an increase in tax expense from discrete items recognized during the current-year period.

Current wording

Our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $7.7 million, or an effective tax rate of 20.5%, for the three months ended September 30, 2026. During the comparable period in 2025, our income tax expense was $9.8 million, or an effective tax rate of 33.1%. The decrease in the effective tax rate is primarily attributable to changes in projected taxable income and the resulting impact on certain U.S. international tax benefits.

Previous wording

*Toys/Consumer Products.*Net sales of our Toys/Consumer Products segment were $197.6 million for the six months ended June 30, 2026 compared to $187.8 million for the prior year period, representing an increase of $9.8 million, or 5.2%. The increase was driven by higher sales in the Action Play and Collectibles division, up 33.7% versus a year ago, due to higher sales related to the Super Mario Movie product, offset by 12.3% lower sales in the Dolls, Role-Play/Dress Up division.

Current wording

*Toys/Consumer Products.*Net sales of our Toys/Consumer Products segment were $389.6 million for the nine months ended September 30, 2026 compared to $343.9 million for the prior year period, representing an increase of $45.7 million. The increase was driven by the Dolls, Role-Play/Dress-up division which was up 7.4% and the Action Play & Collectibles division which was up 27.6% due to higher sales of Super Mario Movie products.

Previous wording

Costumes. Net sales of our Costumes segment were $48.3 million for the six months ended June 30, 2026 compared to $44.5 million for the prior year period, representing an increase of $3.8 million, or 8.5%. The increase was primarily due to reduced orders a year ago from select recurring customers as a result of the US tariffs.

Current wording

Costumes. Net sales of our Costumes segment were $110.6 million for the nine months ended September 30, 2026 compared to $99.7 million for the prior year period, representing an increase of $10.9 million. The increase was primarily due to increased order volume from recurring customers.

Previous wording

Other Income (Expense), net was $7.0 million for the six months ended June 30, 2026 compared to $30 thousand for the prior year period. The increase is due to refunded import tariff expenditures. A portion of the refund related to U.S. inventory still on hand as of June 30, 2026 was applied to these inventory items to reduce their cost basis.

Current wording

Other Income (Expense), net was $7.0 million for the nine months ended September 30, 2026 compared to $418 thousand for the prior year period. The increase is due to refunded import tariff expenditures in June 2026. A portion of the refund related to U.S. inventory still on hand as of June 30, 2026 was applied to these inventory items to reduce their cost basis.

Previous wording

Our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $1.7 million, or an effective tax rate of 22.5%, for the three months ended June 30, 2026. During the comparable period in 2025, our income tax benefit was $0.6 million, or an effective tax rate of 20.7%. The increase in the effective tax rate is primarily attributable to an increase in tax expense from discrete items recognized during the current-year period.

Current wording

Our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $8.6 million, or an effective tax rate of 21.4%, for the nine months ended September 30, 2026. During the comparable period in 2025, our income tax expense was $8.1 million, or an effective tax rate of 34.7%. The decrease in the effective tax rate is primarily attributable to changes in projected taxable income and the resulting impact on certain U.S. international tax benefits, partially offset by an increase in tax expense from discrete items recognized during the current-year period.

Previous wording

While we have taken steps to level sales over the entire year, sales are expected to remain heavily influenced by the seasonality of our toy and costume products. The result of these seasonal patterns is that operating results and the demand for working capital may vary significantly by quarter. Orders placed with us are generally cancellable until the date of shipment. The combination of seasonal demand and the potential for order cancellation makes accurate forecasting of future sales difficult and causes us to believe that backlog may not be an accurate indicator of our future sales. Similarly, financial results for a particular quarter may not be indicative of results for the entire year.

Current wording

While we have taken steps to level sales over the entire year, sales are expected to remain heavily influenced by the seasonality of our toy and costume products. The result of these seasonal patterns is that operating results and the demand for working capital may vary significantly by quarter. Orders placed with us are generally cancelable until the date of shipment. The combination of seasonal demand and the potential for order cancellation makes accurate forecasting of future sales difficult and causes us to believe that backlog may not be an accurate indicator of our future sales. Similarly, financial results for a particular quarter may not be indicative of results for the entire year.

Previous wording

As of June 30, 2026, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $116.0 million, compared to $121.0 million as of December 31, 2025, representing a decrease in working capital of $5.0 million during the six-month period ended June 30, 2026. The decrease in working capital is mainly attributable to cash used for investing and financing activities, offset with $11.1 million refunded by the federal government related to import tariffs levied under the International Emergency Economic Powers Act (IEEPA) and related interest.

Current wording

As of September 30, 2026, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $146.0 million, compared to $121.0 million as of December 31, 2025, representing an increase in working capital of $25.0 million during the nine-month period ended September 30, 2026. The increase in working capital is mainly attributable to improved net income results compared to prior year coupled with $11.1 million refunded by the federal government related to import tariffs levied under the International Emergency Economic Powers Act (IEEPA) and related interest.

Previous wording

Operating activities provided net cash of $26.1 million during the six months ended June 30, 2026, as compared to net cash used of $15.9 million in the prior year period. The increase in net cash provided by operating activities year-over-year is primarily due to refunds received related to IEEPA tariffs and income taxes, and lower overall inventory costs year-over-year. Other than open purchase orders issued in the normal course of business related to shipped product, we have no obligations to purchase inventory from our manufacturers. 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. 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 June 30, 2026, these agreements required future aggregate minimum royalty guarantees of $185.0 million exclusive of $3.8 million in advances already paid. Of this $185.0 million future minimum royalty guarantee, $60.7 million is due over the next twelve months.

Current wording

Operating activities provided net cash of $17.4 million during the nine months ended September 30, 2026, as compared to net cash used of $24.8 million in the prior year period. The increase in net cash provided from operating activities year-over-year is primarily due to a higher net income in 2026 and to refunds received related to IEEPA tariffs and income taxes. Other than open purchase orders issued in the normal course of business related to shipped product, we have no obligations to purchase inventory from our manufacturers. 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. 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 September 30, 2026, these agreements required future aggregate minimum royalty guarantees of $170.0 million exclusive of $2.7 million in advances already paid. Of this $170.0 million future minimum royalty guarantee, $57.4 million is due over the next twelve months.

Previous wording

Investing activities used net cash of $10.5 million and $6.0 million for the six months ended June 30, 2026 and 2025, respectively, and consisted primarily of cash paid for the purchase of molds and tooling used in the manufacture of our products and purchases of investments to fund our obligation to our employees stemming from our non-qualified deferred compensation plan.

Current wording

Investing activities used net cash of $13.8 million and $9.7 million for the nine months ended September 30, 2026 and 2025, respectively, and consisted primarily of cash paid for the purchase of molds and tooling used in the manufacture of our products and purchases of investments to fund our obligation to our employees stemming from our non-qualified deferred compensation plan.

Previous wording

Financing activities used net cash of $7.1 million and $9.4 million for the six months ended June 30, 2026 and 2025, respectively. The cash used in financing activities during the six months ended June 30, 2026, consists of $1.3 million used for the repurchase of our common stock for employee tax withholding and $5.7 million used to pay dividends. The cash used in financing activities during the six months ended June 30, 2025, consists of $3.8 million used for the repurchase of our common stock for employee tax withholding and $5.6 million used to pay dividends.

Current wording

Financing activities used net cash of $10.0 million and $12.8 million for the nine months ended September 30, 2026 and 2025, respectively. The cash used in financing activities during the nine months ended September 30, 2026, consists primarily of $1.3 million used for the repurchase of our common stock for employee tax withholding and $8.6 million used to pay dividends. The cash used in financing activities during the nine months ended September 30, 2025, consists primarily of $4.2 million used for the repurchase of our common stock for employee tax withholding and $8.4 million used to pay dividends.

Previous wording

In June 2025, we terminated our existing $67.5 million JPMorgan ABL revolving credit facility in connection with entering into a new senior secured facility with BMO Bank N.A. The prior facility had no outstanding borrowings at the time of termination. We recorded a non-cash charge of $0.3 million for the write-off of previously deferred financing costs associated with the JPMorgan facility.

Current wording

In June 2025, we terminated our existing $67.5 million JPMorgan ABL revolving credit facility in connection with entering into a new senior secured facility with BMO Bank N.A. The prior facility had no outstanding borrowings at the time of termination. We recorded a charge of $0.4 million associated with the extinguishment of the JPMorgan facility.

Previous wording

As of June 30, 2026 and December 31, 2025, we held cash and cash equivalents, including restricted cash, of $60.6 million and $54.1 million, respectively. Cash, and cash equivalents, including restricted cash held outside of the United States in various foreign subsidiaries totaled $9.4 million and $16.9 million as of June 30, 2026 and December 31, 2025, respectively. The cash and cash equivalents, including restricted cash balances in our foreign subsidiaries have either been fully taxed in the U.S. or tax has been accounted for in connection with the Tax Cuts and Jobs Act, or may be eligible for a full foreign dividends received deduction under such Act, and thus would not be subject to additional U.S. tax should such amounts be repatriated in the form of dividends or deemed distributions. As such, foreign withholding taxes on future repatriations are not expected to be significant.

Current wording

As of September 30, 2026 and December 31, 2025, we held cash and cash equivalents, including restricted cash, of $45.1 million and $54.1 million, respectively. Cash, and cash equivalents, including restricted cash held outside of the United States in various foreign subsidiaries totaled $18.3 million and $16.9 million as of September 30, 2026 and December 31, 2025, respectively. The cash and cash equivalents, including restricted cash balances in our foreign subsidiaries have either been fully taxed in the U.S. or tax has been accounted for in connection with the Tax Cuts and Jobs Act, or may be eligible for a full foreign dividends received deduction under such Act, and thus would not be subject to additional U.S. tax should such amounts be repatriated in the form of dividends or deemed distributions. As such, foreign withholding taxes on future repatriations are not expected to be significant.