At this time, I would like to welcome everyone to the JAKKS Pacific fourth quarter and yearend results for 2007 conference call. (Operator Instructions) Thank you. Ms. Rosenberg, you may begin your conference.

Thank you. Good morning, ladies and gentlemen. This is Genna Rosenberg, Senior Vice President of Communications and Investor Relations for JAKKS Pacific. Thank you for joining our teleconference this morning with JAKKS's management to review the results for our fourth quarter and fiscal year ended December 31, 2007. On the call today are Jack Friedman, our Chairman and Chief Executive Officer; Stephen Berman, our President and Chief Operating Officer; and Joel Bennett, our Executive Vice President and Chief Financial Officer. Mr. Friedman will first provide an overview of the quarter and our operational results, and then Mr. Bennett will provide detailed comments regarding our financial results. Mr. Friedman will then conclude with a prepared portion of the call with highlights of our product line and current business trends prior to opening the call for your one-on-one questions. Before we begin, I would like to point out that any comments made about our future performance, events or circumstances, including the estimates of sales and earnings per share for 2007, as well as any forward-looking statements, are subject to the Safe Harbor protection under federal securities laws. These statements reflect our best judgment 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 our forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult our most recent 10-K and 10-Q filings with the SEC as well as our company's other reports subsequently filed with the SEC from time to time. With that, I will turn the call over to Mr. Friedman.

Good morning, ladies and gentlemen. This is Jack Friedman. Thank you for joining us this morning to discuss our results for the fourth quarter and 2007 year fiscal. Fourth quarter 2007 sales for JAKKS Pacific increased 19.6% to a record $285.1 million, with net sales for the full year increasing 12% to a record $857.1 million. We are extremely proud to report that net income also increased to 48.3% for the quarter and 24.3% for the year overall. 2007 ended with an even more robust fourth quarter than expected, driven by strong sales of our Disney toys action figures and EyeClops Bionic Eye and a sizeable contribution from our WWE video joint venture, and we are very pleased with our results. To continue, we see strong sell-through into the first quarter of 2008 likely due to a combination of gift card purchases and the popularity of Tween pop star Hannah Montana who has continued to take the world by storm. America loves Miley Cyrus and Hannah Montana. With three recent Kids Choice Award nominations, a sellout major motion picture and recent appearances everywhere, from ringing in the New Year with Dick Clark in Time Square to being a presenter at the Grammy's earlier this year. And just this past weekend the toy industry celebrated Hannah Montana as Property of the Year. We couldn't be happier. We're reporting these earnings from the New York Toy Fair where so far the response to our 2008 line has mimic the excitement we heard from our retailers at the two recent major toy shows in Dallas and Hong Kong with new items such as our kids gourmet Cupcake Maker, EyeClops Night Vision Goggles, and of course, more Hannah Montana, resonating as favorites once again amongst just about everyone who tours through our lines. And…

Thank you, Jack, and good morning, everyone. As Jack said, we're very pleased with the results for our fourth quarter and the full year of 2007, which positions us well to achieve our 2008 forecast. Fourth quarter net sales for 2007 were $285.1 million compared to $238.3 million in the same period last year, an increase of 19.6%. Net income for the fourth quarter was $34.4 million or $1.06 per diluted share, representing an increase of 48.3% over the fourth quarter of 2006 when we have net income of $23.2 million or $0.73 per diluted share. Net sales for 2007 full year were $857.1 million compared to $765.4 million in 2006 representing an increase of 12%. Net income in 2007 increased 24.3% to $90 million or $2.80 per diluted share. This compares to net income of $72.4 million or $2.30 per diluted share in 2006. Now, for our sales by product category. Sales of traditional toys, which include action figures, vehicles, electronics, plush, role play, doll, kite, pool toys and outdoor promotional products, were $269 million for the fourth quarter of 2007 compared to $221.3 million in the fourth quarter of 2006. For the full year of 2007, sales of traditional toys represented $793 million versus $692.5 million in the comparable period last year. Traditional toys represented approximately 94.3% and 92.5% respectively of JAKKS overall sales in the fourth quarter and 12 months of 2007 versus approximately 92.8% and 90.5% of JAKKS overall sales in the fourth quarter and 12 months of 2006. Sales in the quarter were driven by our action figures, dolls, electronic toys and pretend-play products based on WWE wrestling, Hannah Montana, Pokemon, Disney characters and other popular licenses. Our craft activity writing products category, which consists primarily of our Pentech and Flying Colors product lines, had…

As we mentioned, we are feeling great about our lineup for 2008. There are a number of new products stemming from organic non-licensed product innovation, as well as strong initiatives based on stellar licensing portfolio. Now, I will fill you in on a number of lines from each of JAKKS divisions. Six years ago, JAKKS created a category that has generated more than $1 billion in sales and retail with our Plug It In and Play TV games line. Today, TV games are still going strong and has been a catalyst for growth into several terrific line extensions. From our core TV game lines, we have placement on our new and classic titles, including 1 vs. 100 and Are You Smarter Than a 5th Grader? TV games, as well as the new kid-driven title based on Disney movies Wally and Sleeping Beauty, Nickelodeon favorites, Dora the Explorer and SpongeBob SquarePants, Star Wars, and this year we will also bring back our top-selling classic Atari TV games, as well as our new G2: Game Girl titles have more advanced graphic and game play and are based on Disney's High School Musical and Hannah Montana. Our Hannah Montana TV games in the fourth quarter tapped into a new Tween buyer for our TV games, with the two previous Hannah Montana titles doing well at retail at the end of the year. Our EyeClops Bionic Eye further extended the plug-and-play category for JAKKS and with Media last year touting EyeClops as their favorite educational toy, the toy industry agreed with two nominations for EyeClops at this past weekend's Toy of the Year Awards for Most Innovative and Best Educational Toy of the Year for 2007. At the Consumer Electronic Show in January, we debut our new EyeClops BioniCam, which features a multi zoom…

(Operator Instructions) Your first question comes from the line of Tony Gikas.

Good morning, Tony.

Congratulations on a terrific year. Couple of questions for you. The joint venture income was a big change in the fourth quarter. Maybe you could just address that, was it purely increased units of THQ or is there any type of a change in the sport there, maybe you could address that? Also, maybe you could just talk a little bit about the exclusive business looking forward, what percent of sales might be coming from that business and the margin differences? And then in 2008, do you expect a change in legal expense on a year-over-year basis?

I'll start with the last one and work backward, Tony, this is Jack. We don't expect any significant difference in legal. We still have things to go through with our WWE lawsuit. We look at it as the year to clean it up, but there is a lot to go through until we get there. The next part of your question was the joint venture. It was the same margins that we've been working on for the past seven years. It was an increase in the WWE video game sales.

Okay. And then just a little bit on the exclusives business looking forward?

The exclusive business is a business that we thrive on. I can't give you enough percentage number on it. It's a healthy percentage, but I don't know the number and margins are usually in line.

Okay. But it's becoming a greater percentage of overall sales or relatively flat?

Our retailers look more and more for us to do those products for them. Most of the retailers think it's to their advantage to have exclusive products, which make people come to their stores for those specific products. And since we're a company that is quite nimble and can do things quite quickly and are always looking to increase our business, we're a great advocate of it.

Okay. Last question, maybe you could just address price increases and timing of those increases, and then related cost pressure. I know input costs continue to move higher for the industry. What do you expect gross margins to do over the course of the next year?

We hope and that's an area of business that's still a little muddled, not totally clear. But we expect with our price increases and changing around some of our products and working with our major factories that our margins will be in line with 2010.

And price increases?

Price increases, it's an item by item basis, and some items we've changed around. Some of them we did late last year. I couldn't really give you a percentage, but certainly there are price increases overall.

Okay. Thank you, guys.

You're welcome.

Your next question comes from the line of Todd Schwartzman. Todd Schwartzman - Sidoti & Company: Hi. Good morning, folks. Can you give us a brief update please on the arbitration with THQ?

Yes. This is Jack Friedman speaking. It's a very slow process, it's continuing. We have not been to arbitration yet. We will advise when we have any other updates on it. It has been a slow process for a host of reasons. And from JAKKS Pacific point of view, we're not at all nervous about it. We think we're in a wonderful position and all the economics are lined up in line that we should continue together, at least, if not more, the same rates than we've been getting in the past. Todd Schwartzman - Sidoti & Company: Okay. And looking at cost for a moment, could you talk a little bit about some of the challenges that are been posed by China and how you're essentially overcoming them?

We're in a new territory with the toy industry. Lots of things have been going on in China, increase in their currency, inflation, et cetera. The best I can answer is we think we run our business well. We've been changing some things around, some price increases, and if things don't get crazier, we think we'll be fine for 2008. But part of our conservative forecast for 2008 comes from certain things still could happen that we have no idea what those things are. So we're very positive about our business in 2008, but we're taking a conservative stance. Todd Schwartzman - Sidoti & Company: And in percentage terms, what kind of increase year-over-year did you see in labor, for example?

I don't think we can break that down. Todd Schwartzman - Sidoti & Company: Is that an inflation rate that you expect to remain stable or maybe creep up a little bit as the year progresses?

We don't really know. I neglected to say that we're forecasting at this time, we think our line is great. But because of the variables that are still going on in China, which could possibly slow down production and more inflation, we're going to start out with a forecast of both net income and sales of a minimum of 4% over 2008. Now, if all of those variables weren't there, we would probably be coming out with a higher guidance. But we need to run our business conservatively and prudently, particularly in forecasting. Todd Schwartzman - Sidoti & Company: Got it. Just a couple of housekeeping items, what was the actual share count either at December 31 or some later day?

We are going to give you that answer. The weighted shares were 33.251 million, which includes$4.9 million from the convert. Todd Schwartzman - Sidoti & Company: Okay. Lastly, the buyback plan, is that open ended?

Yes, it is. Todd Schwartzman - Sidoti & Company: Thanks.

Thank you.

The next question comes from the line of Sean McGowan. Sean McGowan - Needham & Company: Hi. A couple of questions.

Good morning, Sean. Sean McGowan - Needham & Company: Hi, how are you? Question regarding direct selling expenses. How is that flatter, even slightly down given the sales increase, could just give us some detail on that? And second, can you give us some ballpark sense of either Hannah in full year 2007. I got to think its pretty closer to 10% or more of sales and do you expect that to be the case in '08?

The components of direct selling are pretty significant. In terms of the biggest chunk, it was in the marketing plan. When you have a product like a Hannah or wrestling where there is a lot of built-in awareness, we don't need to advertise quite as much in dollars or the percentage. So that pretty much drove it. It's something that we evaluate. We look at marketing plans each quarter. So things are taking off on its own, we don't need to spend quite as much.

And Sean, we only began to ship Hannah in the back half of last year, so really only had less than six months of product on shelf for 2007. In 2008, of course, we're shipping on a full year basis plus we have many more SKUs and a full year of shipping and more customers. We were limited to what we could ship last year in addition to the short spacing on it, and she continues to be a phenom, and our sales currently at retail are nothing short of sensational for this time of year. Sean McGowan - Needham & Company: Yeah. It certainly is hot. So are you confirming then that Hannah Montana was not 10% of sales last year of total for your sales?

We're not commenting on that. Sean McGowan - Needham & Company: Okay. Thank you.

Thank you.

Your next question comes from the line Edward Woo.

Congratulations.

Thank you very much.

The question I had was on the WWE license that's going to Mattel, is that only for toys and there is no news yet on the video game piece?

There shouldn't be any news on the video game piece, we don't know of any news. We have a license on that for quite sometime. But yes, what they gave to Mattel was the toys beginning in 2010.

Great. And then, the next question I had is it seems that valuations in the toy industry, although the market has firmed up a little bit, is there any change to your views on M&A valuations right now for potential acquisitions?

Yes. We have been negotiating with some companies in the past few years and until about six months ago we thought that people had valuations for the businesses way too high for our taste. I think that came from all of the private equity money around and things of that nature. I think valuations have come down in people's mind considerably. And we are looking seriously at a few deals right now. Nothing to speak off.

Great. Thanks a lot.

Thank you.

The next question comes from the line of [Robert Markson].

HI, guys. Good morning and congratulations on a stunning quarter and an amazing year.

Thank you.

If I'm correct, you guided to at least 4% to 5% growth in 2007, is that correct?

Last year 4%.

4%? And you did double-digits top and bottomline?

Correct.

I was at your show. I saw the toys. I saw the Night Vision Goggles that Amazon thinks are going to be their top seller. I saw the Guitar Hero thing for Hannah Montana, the dolls, the plush, the action figures. And it seems to me as if your existing toy line is infinitely better positioned than it was last year. I would be, as one of your top three shareholders, very disappointed if there weren't double-digit top and bottomline gains this year as well. But I guess the question I have is how do you choose the 4%? Clearly, if you run a budget, are you literally running a budget at 4% in order to avoid any kind of major issues should the economy slow, or with all of the product momentum, the product awards, the press that the toy line is receiving at all of the major global toy fairs, couldn't there easily be a double-digit revenue and earnings growth year this year like there was last year?

Absolutely that could happen and we look forward to that happening. The reason for our ultra conservative forecast is twofold. Number one, we're better well forecasting conservative, but there are uncertainties in the Far East in terms of production and pricing. So we're just building that in to a conservative forecast. We are building our overhead, yes, against that conservative forecast, but we do hope if there aren't any crazy issues or crazy recession in this country that we would expect to, with all of the things you said, without me being repetitious, we have what we think and our retailers think is some sensational products, and we're looking forward to a great year. But once again, I want to say that we're doing it ultra conservative because there are still uncertainties like it have never existed before in the last year or so out of China and potential big recession here. Other than that, we would be forecasting a higher gain for 2008.

Okay. Have you ever forecasted anything higher than mid single digits in the few years you've been giving guidance?

No.

No? Okay. And yet, you keep delivering those kinds of top and bottomline growth. All right, guys, listen you can guide to 4% and do 14% or 15% or 16% I guess till the cows come home and eventually Wall Street analysts will figure it out and put it into their numbers. Thanks a lot. Congratulations on a great year.

Thanks.

Your next question comes from the line of Jeff Blaeser. Jeff Blaeser - Morgan Joseph & Company: Thanks and congratulations on a great year. On the new product lines you mentioned earlier, can you handicap which ones you think have the highest upside and do any have the potential to match a Pokemon, I won't even Hannah Montana, but anything that could come to that kind of size?

Yes. I think a few of them, if we use Pokemon as a comparable, our Night Vision, in terms of retail reaction, is probably the single best we've ever gotten as a reaction to a product line. So that's there. Not to just say Hannah Montana, but our Hannah Montana similar to Guitar Hero for a younger age kid, retailers, kind of kind of numbers they're throwing at us not committed to yet, are tremendous. NeoPets we have shipped to one retailer. They've had it on the shelf for two weeks. The numbers so far are amazing and we expect to have excellent international growth by this year with our business. We have an item called a Cupcake Maker and a Spa Factory in our new kids' activity line that are being viewed as excellent, excellent. And between the two, I think they will exceed Pokemon revenue. I think individually they'll fall short of Pokemon revenue. And last but not least, we have a new Discovery Kids line. That reaction has been excellent. That came on late. We probably will be later than we'd like to in shipping it, but long-term it has excellent potential. I don't think it will come anywhere as close to surpassing Pokemon this year. Jeff Blaeser - Morgan Joseph & Company: Great. And on the international side, which products are performing better in the international and what other opportunities do you see to grow that as a percentage of sales?

Firstly, we've certainly grown as a company. Here, in the US, we believe we are clearly the number three toy company. Internationally, we are getting more and more of our licenses and we have our own internal product like EyeClops, et cetera. But if I try to be kind of specific, I'll throw out a few to you. Our TV games are doing well. WWE particularly in the UK does wonderfully. Our EyeClops was a blowout last year where we shipped it. Our various electronic products are being picked up in big quantities. And last but not least, our Blow Pen line, 80% of our revenue of that line is in Europe as opposed to 20% here. Jeff Blaeser - Morgan Joseph & Company: Okay. Thank you very much.

Thank you.

Your next question comes from the line of Gerrick Johnson.

Hi. Good morning.

Good morning.

Several questions here. First can you discuss channel inventory, how that look at the end of the year?

I would say pretty clean. There are always a few pockets. I don't want to get specific on any of them, but not an issue.

Okay. And maybe touching on what Sean was trying to get at earlier, perhaps you can tell us what was larger in sales, WWE or Hannah Montana in 2007?

Yeah, we don't want to break that down.

Okay. Can you give us an update on the --

We prefer that our retailers don't know those breakdowns in various product lines. One retailer takes a much, much bigger position than the other, and for that reason, more than any other, we prefer not to elaborate on that.

Okay. Maybe we can discuss that at the analyst walkthrough later on. Can you tell us what the latest is on the Connecticut state court action with WWE?

No further update on it. Hopefully, by May it will be totally clarified, and hopefully, disappear.

Okay. And finally, you mentioned uncertainties related to cost increases which you've discussed already and also related to production issues. I was wondering what those production issues might be and what the uncertainties are surrounding the production issues?

We don't have any specific issues right now, none whatsoever. But everyday you read about problems and labor shortages during Chinese New Year. They had a huge snowstorm. Some of those employees still want to go back home when they should be back at work. I don't blame them. There is low electricity with all of the growth going on there. There are just a host of maybes out there that could possibly affect our and other people's businesses, and we prefer to take a personal look at it very diligently and plan the best that we can. But we prefer to take a conservative position with those uncertainties.

Okay. And last one, the seasonal category, is that no longer a category, is that in traditional toys now?

Yes.

Okay. Thank you.

Your next question comes from the line of Arvind Bhatia.

Good morning. Arvind Bhatia - Sterne, Agee & Leach: Good morning guys and I would like to add my congratulations as well.

Thank you. Arvind Bhatia - Sterne, Agee & Leach: I got on the call a little bit late, but I'm wondering if you addressed the forecast or if you could talk about the joint venture for 2008, what you are assuming in your growth forecast, so I can try and get an idea of just numbers without that? And then, also, if you could talk about the potential for TNA Wrestling? And then, Joel, I have a modeling question. What are you assuming for your amortization, the accounting adjustment? And I know that's going to be going down in terms of how we are modeling in 2008, what sort of assumptions you are thinking there? And then operating margins within that, what sort of the leverage, SG&A leverage and what sort of improvement we should be looking at going forward?

Okay. Regarding the JV, we did have a bang-up fourth quarter. We are forecasting lower sales and units not to front run or contradict anything that THQ might have indicated, but we're actually forecasting about 20% lower in 2008. Regarding operating leverage, we're expecting 40 to 60 basis point increase in operating income based on overhead leverage and just managing our controllable expenses. Depreciation on the acquisition-related assets is expected to drop by $2 million in 2008, and it drops more appreciably in 2009 and 2010.

And back to your product question, TNA and WWE, for the next two years it will be business as usual with WWE toys and they're continuing to sell very well for us. Regarding TNA, that's a wrestling association that has been making terrific progress over the last couple of years, and we hope that they continue to build their business and brand more of their characters. Not to sound conceited, I think JAKKS Pacific is by far the best company in the world at making wrestling toys. We've proven it with WWE. We took it from nothing to a leading brand of toys. We think we can do the same with TNA. It won't happen in one year. We're taking other initiatives in similar categories through that that we can't talk about today. We don't have signed deals. But we're quite confident that not to long that we can comfortably replace, if not all, a good portion of what we will lose in 2010 on WWE toys. We wish Mattel good luck with the venture from their part. Lastly on the modeling, we're modeling with a 32.5% effective tax rate in 2008. This is a little bit higher than 2007 because the FIN 48 benefits were expected to be higher in '07 versus '08. Arvind Bhatia - Sterne, Agee & Leach: And then, I wanted to follow-up on the acquisition multiple questions. I think you mentioned, Jack, that multiples had come down. Can you maybe give us some more color?

I said valuations, Arvind. I think the valuation is slightly different. But there is a slight difference to the two. Arvind Bhatia - Sterne, Agee & Leach: Got it. But can you give us some more color how that has changed for us to get a sense of the magnitude of the change through examples?

Yeah. I think people had very lofty ideas. I can talk to numbers on that. Some people were valuing their company, say, at 10 times EBIT and 9 times EBITDA. And I don't think JAKKS would find a company glamorous enough for us to pay that kind of a multiple. And they have to fit in as well. I will say, and I don't want to give anybody any hints of something to come, but we have been negotiating for sometime with a few companies that are looking like they very well might happen at prices that we think are fair to JAKKS. Arvind Bhatia - Sterne, Agee & Leach: And then last question was on the retail side. When you look at your retail partners, are you seeing any meaningful change in who is gaining market share versus another?

From what we hear Toys "R" Us has gained market share in 2007. I don't know if it's correct. Arvind Bhatia - Sterne, Agee & Leach: Great. Thanks guys, and again, great quarter.

Thank you. And we thank you all very much for your being on this call today. We hope we can continue to perform as well as we did in 2007 for our shareholders and look forward to a great year. Thank you all very much.

This concludes today conference call. You may now disconnect.