Good day, ladies and gentlemen. Thank you for joining the JAKKS Pacific Fourth Quarter and Full Year 2011 Earnings Call with management. Today, JAKKS will review the results for the fourth quarter and full year ended December 31, 2011, which the company released earlier this morning. On the call today are Stephen Berman, President and Chief Executive Officer; and Joel Bennett, Executive Vice President and Chief Financial Officer. Mr. Berman will first provide an overview of the quarter and operational results, and then Mr. Bennett will provide detailed comments regarding JAKKS Pacific's financial 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. [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 2011, as well as any other forward-looking statements concerning 2012 and beyond, are subject to Safe Harbor protection under federal security laws. These statements reflect the company's 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 forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult JAKKS's most recent 10-K and 10-Q filings with the SEC, as well as the company's other reports subsequently filed with the SEC from time to time. With that, I will turn the call over to Mr. Berman.

Good morning, everyone, and thank you for joining us today. The tough economic climate combined with several underperforming product lines in our portfolio contributed to lower than expected sales in 2011. However, there were some shining stars in the 2011 portfolio, including our entertainment-based brand such as Disney Princess toddler dolls; Smurfs plush and figures, which performed above our expectation; Spy Net electronics; Disguise Halloween products; Kids Only! line of evergreen activity tables and outdoor furniture, both licensed and unlicensed; and Creepy Crawler activities also did well for us. We are well into the first quarter of 2012, and so far, we are pleased with the reaction from buyers, licensors and other industry partners on our 2012 line up. We're also pleased with recent sell-through data for the initial part of the quarter. We have some really terrific products in our portfolio, and we're optimistic for the year ahead, with contribution coming from an extremely broad range of toys and toy-related products and electronics for all ages and for the entire family. Our action-packed Monsuno line of figures and playsets are shipping now to virtually every major retailer in the U.S., and we'll ship internationally later this year. We are excited for the one-hour premiere, first episode this Thursday, February 23, at 8:00 p.m. on Nicktoons, and we hope you will all tune in and enjoy the show. We are particularly excited about our new high-tech offering such as the Action Cam mini-sport action video cameras, Walking Dead Deluxe TV Games, Baby Watch first-ever wearable video baby monitors and more. We are working toward expanding beyond the toy aisle and into the consumer-electronics aisle with these new items, targeting people of all ages and demographic profiles. We began showcasing and having -- had great response on our beautiful Dolls and…

Thank you, Stephen, and good morning, everyone. Net sales for the fourth quarter 2011 were $141.1 million compared to $198 million reported in the comparable period in 2010. The reported net loss for the fourth quarter was $20 million or a loss of $0.77 per diluted share, which includes $1.9 million or $0.05 per diluted share related to legal and financial advising fees and expenses, in conjunction with the unsolicited indication of interest to acquire the company. This compares to net income of $8.9 million or $0.30 per diluted share, which included a tax benefit of $5.9 million or $0.17 per diluted share reported in the comparable period in 2010. Excluding the legal and financial advising fees and expenses in 2011 and tax benefit in 2010, the fourth quarter net loss in 2011 would have been $18.8 million or $0.72 per diluted share compared to earnings of $3 million or $0.13 per diluted share in 2010. Gross and operating margins declined year-over-year with lower overall sales volume, as well as lower sell-through at retail, resulting in higher markdowns and higher royalty expenses, relating to license guarantee shortfalls, along with the legal and financial advising fees and expenses incurred in 2011. Net sales for the full year of 2011 were $677.8 million compared to $747.3 million in 2010. Net income reported for the full year period was $8.5 million or $0.32 per diluted share, which includes fees and expenses related to the unsolicited indication of interest of $3.8 million or $0.09 per diluted share. This compares to net income for the full year of 2010 of $47 million or $1.52 per diluted share, which includes the onetime pretax charge relating to the benefit payment of $2.8 million or $0.06 per diluted share to the estate of Jack Friedman pursuant to his…

We had some challenges in fourth quarter as I mentioned earlier. Sales were down on a number of our product lines, and late Christmas rush and a challenging economy, all contributing to our revised guidance. Lower-than-expected sales occurred in Pokémon, Golden Tee Golf TV games, I am T-Pain Mic and some of our private label lines to name a few. Our Singing and Storytelling Belle dolls did not perform to the expectations due to a variety of reasons, including the $80 price point in a tough economy. Tollytots Little Mommy product sales were also a disappointment in 2011. Despite some innovative new items, our sales dropped commensurate with the decline of the Mattel doll line, on which our products are based on. We are looking forward to Mattel's relaunch of the line in 2012, with all new dolls, a refreshed position and a vibrant new packaging. However, there were several bright spots, and we're optimistic in our outlook for the coming year, with the overall positive response we have received on a number of our product lines at the recent Hong Kong and New York toy fairs. Let's start with our juvenile products. Tollytots had a very strong year in 2011 with My First Disney Princess toddler and baby dolls, which continued to be a big success and have established itself as the #2 large doll brand, just behind Hasbro's Baby Alive. My First Disney Princess dolls were heavily promoted by all major retailers with the Rapunzel Toddler Dolls as a key driver for 2011. With more beautiful dolls at a good value slated for 2012 and a continued content and marketing support from Disney, we expect increases in sales and market share for this evergreen brand. Disney will be releasing the new animated feature Brave in 2012, which we…

[Operator Instructions] Your first question comes the line of Scott Hamman from Keybanc Capital Markets.

Just a couple of questions here. Number one, on inventory levels, can you kind of talk about where you stand in the channel right now, as well as with your own inventory in terms of some of the carryover stuff? And how that might be impacting your first quarter shipments?

Well, for the first quarter, actually, we're seeing sell-throughs quite nice in our initial first, say, 45 days into the quarter. And our inventories -- our inventory level for JAKKS are at a basically low level of inventory amongst the majority of our categories and brands. There may be a few small pockets here and there. But overall, as a company, we're very proud of the inventory levels. And that was due to heavily discounting in December, ensuring that we'd have dramatic sell-through going into 2012.

Okay. And Joel, just on the gross margin, can you kind of quantify the impact of some of these markdowns? And how we should be thinking about your gross margin expectations embedded in your guidance for 2012?

Sure. The effect on Q4 in an effort to clean up inventory retail, we have about $15 million over and above what we would consider our normal markdown levels. In addition, for 2012, we're looking at margin expectations of just under 33%. So we're back on track. And we're looking to expand in the coming years as JAKKS content becomes a bigger percentage of the overall business.

[Operator Instructions] Your next question comes from the line of Sean McGowan from Needham & Company.

A couple of questions. Could you be more specific about where the declines were in the Role Playing, Novelty and Seasonal category?

We went into the Role Play -- I would end up saying, the majority of that was on the Disney Fairies. Not -- it was a lower part of our forecasted number. It still did well for us. But due to that, there was not a new movie content or any new content and promotion on the Disney side. We actually had a higher expectation for the Disney Fairies, as we came off a great year in 2010. And then some of the private-label programs that we were working on in with various customers, in the Role Play segment, they came in lower than expected due to lower sales from some of those retailers.

Okay. And following up on the earlier question, could you be a little more specific on point-of-sale inventory year-over-year at year end? And how do you expect that to trend through the first half? Kind of where do you -- actually, throughout the whole year, do you expect that inventory level at retail to rise as the year goes on?

Well, I'd say due to our heavy discounting that occurred in December on -- primarily of some Pokémon, some of our higher-priced products, Real Steel, Golden Tee, various items, we did some -- I think the -- probably the largest in our history of cleaning up inventory for JAKKS. I can't speak amongst the other toy manufacturers. But our retail levels, since discounted heavily in December, the sell-throughs have been terrific. So we came into the year very clean. And a lot of new areas that we're launching into say the first half of the year are new segments. For instance, we launched Pirates of the Caribbean last year at this time. We're launching Monsuno this time. We have quite a few new areas and segments going into Easter. So we really are pretty clean at retail, both in North America and internationally.

Well, that's what I'm getting at. So you're clean going into the year, but you have a number of new launches planned, so should we expect to see that point-of-sale inventory level actually grow as these new lines get rolled out?

Yes, it would grow definitely at retail, and it is growing in order for us to achieve the, call it, the Easter, pre-Easter sales, gearing up for the Monsuno launch, and just our general everyday core business, for example, Kids Only! It's -- a very big part of their year is in Q1, getting ready for the spring, our Funnoodle, the promotional plans are all in place for Monsuno. So from the Moose Mountain, which is pretty much a nominal part of our business in Q1 but picks up much more in Q2, we're doing a lot of new shipping. So the inventory will increase. But at the same time sell-throughs that we've seen to date with the inventory that's increased is selling through at a very nice pace.

All right. And then last question. Can you just remind us from kind of a ballpark size how much was Moose Mountain, in terms of annual sales?

That's $35 million.

That's gross, so I'd say it's less than that in net.

I didn't hear the number. You're both speaking at the same time. What's the number?

About $34 million net.

Your next question comes from the line of Drew Crum from Stifel, Nicolaus.

Guys, I wonder if you could size the opportunity or what's embedded in guidance, with respect to Monsuno and Winx Club?

Well, as we've never done in the past, more so due to competition and retailers to give the size of what each of these categories or some of these categories are, we never break it out, because it's quite different to the penetration we have at all of our retailers major and minor. But we are taking a very strong but cautious, optimistic approach. There -- it has all of the mixing for both Monsuno separately, then to Winx that they could both be game changers for us. But due to the fall occurrences, really, in November, December, we -- Winx doesn't launch until August, but the ratings, as we said earlier in the call, but the #1 girls rating for Nickelodeon from 2 to, I think, 11. I don't have the exact data. Monsuno is launching on Thursday, and then stripping during fall. So as we can -- I know you would like to have it broken up, but we don't break out the -- each of our segments and it's more for really the licensors and the retailer in competition knowing.

Okay. Fair enough.

And I would tell you on an anecdotal bit, Beyblades and Bakugan, which launched pretty much the same time periods that we have with Monsuno. And both of those segments are truly trending down. The opportunity for Monsuno not having that kind of competition is tremendous, both Beyblades and Bakugan were great toys. And that's why it drove sales more than just the content. And Monsuno from the internal testing, external testing from the support that we have in retail both worldwide, the support we have gotten from Nickelodeon from our licensing partners, has all the mixings to be a game changer for JAKKS.

Okay. And just shifting gears, guys, you gave some color on gross margin guidance for 2012. A number of your competitors have discussed increasing pricing in 2012. What are you seeing in terms of input costs for your business? And what are your plans for pricing to offset some of those input costs?

I'm sorry, would you ask that again?

Sure. Just wanted to get a sense as to what your plans are with respect to pricing increases for 2012?

I'd say, we've actually have that put into our mix already for 2012. We don't believe besides labor issue that continue to be a concern through all of manufacturing. That the commodity prices, resins, steel, won't change or pretty much hold throughout the year. We've added in and already placed into our pricing any increases that we've foreseen. But remember, because of the segmentation that we're in from cut and sew which is Disguise to CDI, which is injection molding and cut and sew to JAKKS's core which is Electronics and injection molding to Kids Only! being steel and primarily material. There's different fluctuations in labor cost and commodity costs. So it really has a dynamic by each division, more than anything else.

Your next question comes from the line of Gerrick Johnson.

Where do you guys stand in terms of reorganization? Are you still in the process of closing or moving offices, particularly CDI? Is that complete? And is there any sort of expense for that in this quarter's SG&A?

We, actually, completed the move of CDI last year. We have the staff all in place there in our Santa Monica design center. And we're very fortunate opportunity opened up which is in the Yahoo! space, and we were able to take it at the right time. So the staffing has been completed, the -- all of the nominal costs were included in 2011's number. We do have, I think, 4 months left on our lease at CDI. So we picked up synergies amongst our packaging department and so on, so there won't be any added costs with regards to CDI. We are always looking at overhead and reduction of overhead or expenses. So that is an ongoing process of our company since over the last 10 years. So we've done some headcount reductions, some cost reductions in various areas of business, so that's always ongoing.

Okay. Switching gears to Monsuno. If this works out well and becomes something akin to Beyblade or Bakugan, would you have the ability to quickly ramp up production? Or would you be chasing demand? How would you be able to support that? And would you be able to do Beyblade or Bakugan-type numbers this year or next?

It's a great question. I'm going to answer that question today, and I also have Jeremy Padawer here, who's the Executive VP of JAKKS Marketing, as well as one of the co-creators of Monsuno. But assuming it takes off, we will be able to ramp up, but we will be ramping up -- we're not -- as we are the worldwide manufacturer of toys, we already have geared up for success. But assuming that it takes off to a Beyblade's capability or Bakugan, I believe we will end up chasing some of it, which we all believe internally, as management is very healthy to leave some of the shelves or product not at total levels or not trying to overship the product. We want to get years out of this line. And the way that we have a 2-, 3-year deal with Nickelodeon and the partnerships that we have from the Bandai's in Japan to GP to Hunter [ph]. We took the risk on to it already. So we are there, but we will have to chase it. We aren't gearing up with inventory. That's not the way we'll run our business. Again, we look at inventory year-over-year. We've ended up nominal to the following year in 2010. We're expecting growth for this year and also growth for the first half. But with that, I'd like to hit some very important highlights just for 3 minutes. And while Jeremy's here, he can give some quick anecdotal highlights more than I would be able to give color on. So Jeremy, please.

Yes. Absolutely. So just as Stephen mentioned, we've tooled this up for success. Our expectations -- we're cautiously optimistic, at the same time, we're making sure that we can cover the upside. After 3 years of toy and store development, we're very excited to announce that on Thursday night at 8:00 p.m., this is going to be on Nickelodeon's Nicktoons, 52 episodes guaranteed, worldwide pay TV is signed up with Nick, and that's very exciting. But we're also completing free TV deals all over the world to capture the viewers, who aren't traditionally your cable TV viewers. And that includes Canada, the U.K., Italy, Spain, Australia, Japan, the Nordic, South America, the Middle East, New Zealand and, really, all over the world. So this is a worldwide global opportunity. And we have not only -- the TV development, but the toy distribution. And I think we've done an awesome job on the storytelling. This is one of the bigger opportunities we've ever had. Now in terms of the storyline, this was all based on a terrific toy idea. But the storyline is also going to be great. I mean, in general, it's about kids that control the power of monsters. And these kids are unsuspecting heroes. 65 million years ago, the monster DNA basically crashed into our universe and slams into our atmosphere, and now we have a battle over this incredible DNA, which comes to life with our awesome toy line.

Gerrick, is there -- do you have -- that was just Jeremy's part on that. Do you have additional questions?

No, that's it.

And ladies and gentlemen, we have no more questions in queue. This concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.