Welcome to the JAKKS Pacific third quarter results teleconference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now like turn the call over to Ms. Genna Rosenberg. Ms. Rosenberg, you may begin.

Thank you, operator. Good morning, ladies and gentlemen. This is Genna Rosenberg, we apologize for the delay in getting this call started. Thank you for joining our teleconference with management of JAKKS Pacific today to review the results for our third quarter and first nine months ended September 30, 2009 . On the call today are Jack Friedman, Chairman and Co-Chief Executive Officer of JAKKS Pacific; Stephen Berman, our President and Co-CEO; Joel Bennett, Executive Vice President and CFO. 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 the prepared portion of the call with highlights of the current business trends prior to opening up 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 2009, as well as any other forward-looking statements, are subject to Safe Harbor protection under the federal security 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 afternoon, ladies and gentlemen. This is Jack Friedman. Thank you for joining us this afternoon. Today we announced our results for the third quarter and first nine months of 2009 for JAKKS Pacific. While this year has been extremely challenging on many levels, sales for the third quarter met our expectations. Last quarter we announced we will be implementing a company-wide restructuring plan and comprehensive cost saving initiatives in light of lower than expected sales and we have been diligently working on this implementation process. We’ve been working closely with key management in every area of business around the world to implement changes that confront these obstacles affecting our top and bottom line and turn to our outlook for 2010 in a very positive direction. On a non-GAAP basis, third quarter 2009 net sales were $351.4 million compared with sales of $357.8 million for the third quarter of 2008 and for the first nine months of 2009, sales on a non-GAAP basis were $605 million compared with $634.1 million for the first nine months of 2008. These non-GAAP net sales figures exclude one-time charges related to the recall of one of our products. On a non-GAAP we had earnings for the third quarter of $35.9 million or $1.13 per share and net income on a non-GAAP basis of $24.3 million or $0.83 per share for the first nine months. We began shipping many of our new items in the third quarter, including Halloween products from our Disguise division and continue shipping reorders and spring orders in the fourth quarter. Our Halloween portfolio is doing quite well with items based on popular licenses including Transformers, Marvel characters, Sesame Street and Toy Story leading the way and we have many value-driven toy items that have good placement at retail, including a…

Thank you, Jack and good afternoon everyone. Net sales for the third quarter were $351.4 million compared to $357.8 million reported in the third quarter of 2008, and net sales for the first nine months of 2009 were $604.9 million, compared to $634.1 million for the first nine months of 2008. Net income for the third quarter of 2009 was $33.7 million or $1.06 per diluted share, compared to net income of $54.1 million or $1.70 per diluted share reported in the third quarter of 2008. For the nine-month period, we reported a net loss of $383.7 million, or $14.11 per share, compared to earnings in the first nine months of 2008 of $59.2 million, or $1.88 per diluted share. The loss primarily related to the write-off of the goodwill on a non-cash basis in the second quarter to the amount of $415 million. On a non-GAAP basis 2009 net sales for the third quarter were $351.4 million and $605.5 million for the nine month period, compared to non-GAAP net sales of $357.8 million and $634.1 million for the third quarter and nine months of 2008 respectively. On a non-GAAP basis, JAKKS reported net income for the third quarter of $35.9 million, or $1.13 per diluted share, compared to non-GAAP net income of $46.6 million, or $1.47 per diluted share in the third quarter of 2008. Non-GAAP net income for the first nine months of 2009 was $24.3 million, or $0.83 per diluted share, compared to non-GAAP net income of $53.4 million, or $1.70 per diluted share for the first nine months of 2008. 2009 GAAP results include the following, which were excluded from the non-GAAP results I just spoke of. Pre-tax non-cash goodwill impairment charge of $407.1 million, due to the sustained decline in the company's market capitalization taken…

Thank you Joe. We are approaching the most crucial shopping season of the year for the toy business and so far things are looking pretty good. We expect to benefit from some strategic value-pricing initiatives as consumers are increasingly cost conscious. We are trending higher on items like our line of novelty toys and have been to looking to such of our low cost electronics products Girl Gourmet and Pretend Play products to drive sales in the portfolio. With the restructuring and cost savings initiatives we are implementing, we expect to begin to see normal benefits by the end of this year. These cost saving efforts are intended to reduce spending, given the lower than expected sales forecast across a number of product lines in the portfolio, and lower gross margins overall and will include headcount reductions, a consolidation of office spaces and other efficiencies that will be implemented during the remainder of 2009. The annual savings are expected to be in the vicinity or upwards of $40 million on an ongoing basis. While there is no certainty about the level of sales for the holiday season, at this point we still believe that our previously announced guidance is achievable. For the 2009 fiscal year, the company is expecting GAAP net sales of approximately $810 million with a net loss on a GAAP basis of $378 million or $13.72 a share, and is expecting non-GAAP net sales of approximately $810.7 million with net income on a non-GAAP basis of $30 million or $1.01 per diluted share. Despite the uncertainties related to the US recession, we remain committed to running a profitable JAKKS Pacific and are working hard to execute on our strategy on behalf of our shareholders for 2009 and beyond. With that, I will open the call to questions.

Thank you. We will now begin the question and answer session. (Operator Instructions) Our first question comes from Edward Woo of Wedbush Securities.

Yeah, good quarter. I had a question. Was there any impact from foreign exchange?

No. Our FOB sales are done in US dollars and our international operations have not gotten to the point of any significant local currency sales.

For 2010, we are going to be doing a great deal more of direct selling through our offices in the UK, and we will have to get savvy in terms of exchange after this year.

I guess Joel has lot of work cutout for him.

We all do.

The other question is about the $40 million annual savings, do you ever disclose what this split out would be between may be operating costs and product cost savings?

It doesn’t reflect product costs.

No, that’s primarily operating costs.

The product cost would come out in margin, Edward.

Our next question comes from Drew Crum of Stifel Nicolaus.

I wonder if you could spend a minute on the revenue contributions from the acquisitions in the quarter or year-to-date if you have that available?

We’ll come back to that. Why don’t you go to your next question?

Okay. Joel, just a question on the craft and activity segment. I know you guys have anniversaried Girl Gourmet and Spa Factory. If I’ve heard you correctly, it looks like that segment was down about 37% year-on-year. Can you just touch on that and what drove the decline?

On the year-to-date, we may have flipped-flopped the numbers. It should have been $45.8 million for 2009 compared to $37.3, so we were up $8.5 million.

I didn’t see any restructuring charges in the quarter. Are you still anticipating $0.25 to $0.30 for 2009?

Yes, we are looking at taking the charge when we actually exit the premises on the leases, and so the dollar range was about $12 million to $15 million. So, since the people were notified in the last couple of weeks all of those charges will hit in Q4.

One last question. What’s your expectations on legal costs for the balance of the year?

We have been running in the $3 million to $5 million range historically, and it’s all reliant upon how the activity runs and is based on the timing of judges’ decisions and requests. So, we’ve pretty much allotted in that range for Q4. Again, that’s subject to change as Discovery and other activities related to the ongoing cases go on.

The next question comes from Sean McGowan of Needham & Company. Sean McGowan - Needham & Company: I have a couple of questions as well. If you look at your guidance for the year, it implies another year-on-year decline in the fourth quarter. Can you give us a sense of when we might be able to look for a year-on-year increase in sales? I am not getting into the specific number but when would you expect year-on-year and quarterly sales to show an increase?

In terms of the comp, Q4 ‘08 was huge for Hannah Montana and also for wrestling. What we’re looking for with the addition of Disguise with about 85% of their sales is in the third quarter, which is of a higher seasonality than the lines that it replaced on the core line. So, our expectation is, certainly in 2010, although we are not prepared to give that guidance yet, but certainly within the next year or so we would certainly be on track to build the business, which would then imply ongoing year-over-year growth. Sean McGowan - Needham & Company: Okay. Can you just give us a little color as to why there was an additional adjustment to the accounts receivable related to the joint venture? Why wasn't everything captured in the second quarter?

We would guess, sales or we were getting limited sales information from THQ during the period of the arbitration and related disputes, so we had basically our best guess and when they gave us the final accounting of the sales, it came up lighter than we’d expected. We got the cash after we reported second quarter, otherwise we would have, everything would have flushed through that second quarter. Sean McGowan - Needham & Company: So there's nothing left from that chunk, but doesn't sound like you guys have the coziest of relationships now, so what do you think the ongoing impact would be from future payments that you're expecting?

The payments were withheld only because we had not settled on a - although the rate is settled, and they paid. As an example, they paid the second quarter preferred return very timely, if not early. So the adjustment was related to the period through March 31, 2009, which was during the dispute. So we have expectation that they'll report timely and then we've happened to have better communication since then. So… Sean McGowan - Needham & Company: Okay. So the loss taken in the joint venture then in the quarter is really related to that piece primarily right?

That was about $1 million, and also, we have the ongoing dispute in Connecticut, and those legal fees are reflected in that line as well. Sean McGowan - Needham & Company: Okay. So from an operating, you know actual business of selling games would you expect the fourth quarter to be a lot better?

Yes. We’ve got a new game coming out across the platforms and that’s typically the largest quarter. Sean McGowan - Needham & Company: Okay. Looking at the balance sheet also, how much of the increase in accounts receivable year-over-year was due to the inclusion of Disguise, which wasn’t there a year ago.

Sales year-over-year was somewhat comparable, but with Halloween they have little bit longer dating, so where they started shipping in the second quarter, those sales, the terms are typically longer on the costume side. So part of it is not so much the dollars that they’ve contributed, but the terms associated with those sales. Sean McGowan - Needham & Company: There wasn’t any Disguise in the numbers in ’08, right?

I pointed that the sales are comparable, about $350 million for the quarter. Sean McGowan - Needham & Company: Right

I pointed that the terms are longer on their sales and they were on the sales that they replace on the JAKKS side. Sean McGowan - Needham & Company: In addition to that, isn’t there also the fact that those receivables weren’t there at all a year ago?

Correct. Sean McGowan - Needham & Company: Okay. Regarding the inventory charge that’s been taken so far this year, what happens to these goods when you sell them from an accounting standpoint?

When they are sold the inventory is released and the related reserve is released and basically the losses taken when the inventory is impaired, so when it’s sold we make either nominal gain or nominal loss depending on what the final price is. Sean McGowan - Needham & Company: So they are not written down and then sold at normal margin, its sort of like implies a low margin.

No, the written down basically they cover any royalties, selling cost that we might have, but they are not written down to get the normal profit. Sean McGowan - Needham & Company: The final question is more of a philosophical one, probably also better for your Joel. In an ongoing way, there was a lot of stuff this year that is truly onetime, and rather large and extraordinary, but when you talk about things like inventory impairment and licenses that maybe didn’t work out, that’s clearly an ongoing normal part of every toy companies’ business. Do you plan to exclude those types of expenses and charges forever going forward?

We called them out because of the magnitude and they were related to the licenses. Again, you are right, on an ongoing basis we review these things but we are in sort of an unchartered territory in terms of competition, the close out space, and the general economy. It was more the magnitude as opposed to just the charge. Sean McGowan - Needham & Company: I don’t want to put words in your mouth but assuming we get to the point next year where we have anniversaried these, at least on a year-on-year basis, do you expect this time next year to be calling out things like minor, relatively small inventory impairment?

No, only if it’s something that doesn’t relate to the fundamental business on a go-forward basis, again, because of the magnitude. The products that we are selling, we are generating, and we hope to improve margins on the new products that we are selling. So, we don’t want those types of things to mask I guess what I will call our successes at selling the product that gives margins.

Our next question comes from Scott Hamann of KeyBanc Capital Markets.

On the gross margin drivers for the quarter, can you kind of give us a magnitude of what some of those big buckets were? I believe in the last quarter you said you thought margins would be kind of flattish for the back half of the year and I am just curious what your updated assumptions are going to be?

Excluding the close out, it was 190 basis point difference all-in year-over-year and excluding close out it, it would be probably 100, 110 basis points. Disguise has average margins in the low 30s, and as the quarter played out, it's really our best guess as we had some shift from Q4 sales into Q3 and Q3 sales into Q4, so within sort of that margin of error, but fundamentally we're still on track.

Okay, and on the three big product lines, WWE, Hannah, and Pokémon, can you kind of give a magnitude of how much those sales were down year-of-year?

Pretty significantly, I mean, the overall reduction in the, what I’ll call the non-recently acquired businesses was on the order of $200 million. It was spread across that and Pokémon as well. So, it was pretty significant. We don’t breakout specifics on the product lines.

Okay. Then direct selling, it looks like it was down a little bit in dollar terms?

Yeah, just back to those product lines, Hannah in particular was losing support at retail, in an analogy, it just fell of a cliff basically.

So is this level of direct selling to be expected like in the fourth quarter as well?

Could you repeat that please?

The direct selling expense, I mean, is this lower level kind of sustainable here or is there a reason it should tick back up in the fourth quarter?

It will typically tick back up because that's when we advertise. We sell in the goods in Q3 and then we support those with advertising, but we review both commitments and also what makes sense for the product and we’ve had other initiatives put in place unrelated to headcount reduction and we sold [abandonments] that will have a benefit. So the lower levels are sustainable and will help us achieve the annual savings that we indicated previously.

Okay. Just to be clear, did you realize any benefit from some of these initiatives during the quarter and how much was it?

We haven’t quantified it, but we have eliminated outside services and things like that, but the bigger chunks will be the balance of Q4 and starting in 2010, so it’s pretty much nominal.

So you still think that the first quarter 2010 is a good target for achieving that annualized run rate of $40 million?

The run rate was expected to be achieved by the end of Q1.

[Operator Instruction] Next question comes from Jeff Blaeser of Morgan Joseph.

Couple questions. One of the gross margin with Disguise, could you repeat what that was and do you expect that that number to go up or is that just a nature of the business because it’s a lower gross margin than the rest of the toy business?

The Disguise is now in the low 30s and because they had some financial constraint because of the parent company’s international operation, there weren’t able to get concessions from their factory. So in addition to help them provide better sourcing and better financial support, we hope that going forward barring any increases or price changes in the commodities that go into the product, we would expect to have a positive impact on them. One of the questions that was asked earlier in terms of the revenue for the acquisitions. We have information now and it was $84 million for Disguise, $17 million and other [ticked] categories were $24 million. So the total for the acquisitions were $108 million.

Okay and how much third quarter was, was it 85% I think you mentioned is that right? Unidentified Company Representative Yes.

So 85% and rest is in the fourth quarter or [splitting] with that with the other three?

Other than third quarter, I mean there is some reorders but because of the nature of Halloween it’s just it ends very quickly. So there isn’t much reaction time. There are some reorders but most ofit starts in second and ends in third pretty much.

Then did you sell any lines or they are just similar sales to what it was before you acquired it?

Selling what?

Sell any lines, are the sales of year-over-year comparable prior to acquisition?

Yes.

Okay and then finally just quick on the $40 million - $45 million. On the cost side, does that include CDI, Play Along, a earn-out potential , or any cost cutting?

They are all related because when we pick up the acquisitions there is certain functional areas whether its marketing or product development that are value-added to the company as whole.

They’re not earn-outs but..

Earn-outs don’t hit the P&L but some of the efficiencies in back office combinations are part of that number.

Right, but you are restricted in terms of what you can do in terms of cost cutting and that’s part of?

On historically deals where they had that - but that was Play Along and CDI The most recent ones don't have those same provisions.

We have no any further questions at this time. Mr. Friedman, would you like to make any closing remarks?

Yes. Thank you all for your attention today and your interest in JAKKS. On behalf of JAKKS and all its employees, I can assure you and all of our shareholders that we will be breaking our breaks to return to the profitability we had in the past and beyond. With that, thank you all very much.

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