Good morning. And welcome to the JAKKS Pacific Third Quarter 2016 Earnings Conference Call with management who will review financial results for the quarter ending September 30, 2016. 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, Chairman 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 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 the 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 2016, as well as any other forward-looking statements concerning 2016 and beyond, are subject to the 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' 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. This morning we are going to review our performance during the third quarter, highlight some of the products we believe will allow us to have a strong fourth quarter, and bring solid momentum into 2017. And a number of initiatives we have undertaken to further our goal of transforming JAKKS Pacific from a toy company to a kids consumer products company. Although most of our products perform as expected during the third quarter, our overall financial performance came in below our expectations with sales and EPS declining. We continue to expect much better year-over-year performance in the fourth quarter but we have reduced our full year outlook. What we saw in the quarter was a host of cross currents. On one hand overall year-to-date toy industry sales remain pretty strong, although some toy categories are decelerating and we have several top sellers such as Elena of Avalor, Tsum Tsum, Nintendo and Gift 'ems brands. Our role-play segment got a boost from the addition of LEGO theme costumes which we believe will become a staple. On the other hand in recent months we have seen retailer to retailer and multiple non-toy product categories report weak results and lowered their outlook for the year. Overall retail traffic in stores is weak and while toys sales have been good overall, experience shows that when retailers see weakness in several categories they sometimes cut purchases even in the categories that are selling well. One of the biggest drivers of our sales expectations shortfall was a decision we made in third quarter to suspend shipments to a major U.S. customer. This decision was difficult but we felt it was the right thing to do. This not only had an impact on our third quarter but…

Thank you Steven and good morning everyone. Net sales for the third quarter of 2016 were $302.8 million compared $337 million in 2015 with reported net income of $30.6 million or $0.82 per diluted share versus $45.9 million or $1.12 per diluted share in the year ago period. Included in the 2015 earnings was non cash income of $5.6 million or $0.09 per diluted share related to the reversal of previous earn-out accruals from our 2012 acquisition of Maui Toys. And adjusted EBITDA for the third quarter this year was $42.7 million, compared to $52.5 million in the third quarter of 2015. Now moving on to our sales performance by category, worldwide sales of products in our traditional toys and electronics category decreased to $163.5 million for the third quarter of 2016 compared with $204.3 million in 2015. Sales in this category were driven by Disney Princess Dolls and Star Wars BIG-FIGS along with private label products. But there was an overall decrease caused by a suspension of shipments to a major U.S. customer, declines in the UK and Western Europe that accompanied the recent plunge in the British Pound, and by lower than expected sales of some movie license products. Worldwide sales from our role play novelty and seasonal toys category were $139.3 million in the third quarter of 2016 up 5% compared to $132.7 million in 2015. This increase was driven by the popularity of Tsum Tsum collectible figures, Black & Decker role play products, and the initial sales of LEGO costumes partially offset by lower than expected sales of some movie license products. Included in these category numbers are international sales of approximately $72.9 million for the third quarter of 2016 down from $94.6 million in 2015. Again this was driven by declines in the UK and…

Thank you, Joel. Before opening the call for questions I wanted to talk about a number of initiatives we have recently announced as well as other factors that leave us feeling good about our prospects in 2017 and beyond. Last week we announced the formation of Studio JP, a content development joint venture we have formed with Rising Anime, the Animation Studio of Meisheng Cultural & Creative Corp. Meisheng is one of China's leading creators and licensee of entertainment content. In addition they are our consumer product distribution partner in China. The goal of this new JV is to produce high quality animated content that will be owned by the joint venture and for which JAKKS will have the merchandizing rights at all markets outside of China. We believe it is very important to expand our own IP and we have seen how valuable high quality animation content can be over many years and we are excited about this move. The objective of this joint venture is to create intellectual properties whose animated stories will provide revenue generating opportunities in the areas of toys, apps, media, and other consumer products. The content created will be owned by the joint venture and for which JAKKS will have the merchandizing rights in all markets outside of China but in China the products will be distributed by our joint venture with JAKKS Meisheng. We believe it is extremely important to expand our own brands and IP and we have seen how valuable it is to expand in this direction. In addition the content that Studio JP will create will also support our own IP. You will see animated shorts featuring some of our new products beginning next year. Overtime we will be able to monetize the content in a way that produces very…

Thank you. [Operator Instructions]. Our first question comes from Stephanie Wissink from Piper Jaffray. Please go ahead.

Thanks, good morning everyone. Stephen I’m wondering if you can just talk a little bit about your decision to suspend shipments to that large retailer. I understand it was a hard decision but just talk through your conversations internally as a team about isolating that risk? And then maybe Joel if you could just tie that to the inventory balance, I would assume that the inventory would have been down potentially even a little bit more without that suspension and you are seeing some nice improvement in your product margins, so maybe just help to tie together those elements around concentrating the risks, minimizing some of the disruption, and also seeing some improvement in your working capital?

Thanks Steph, I’ll answer the first question regarding the suspending the shipments to a large U.S. retailer. We been discussing it internally as well as we’ve been discussing it with advisors, some of which are large banks and we came to the conclusion that at this time based off of what we have seen and what we have read with regards to the retailer that it would be best served for our company to suspend shipments to this retailer to minimize any risk going forward.

As far as the inventory Steph, one thing, more than half of our business is done FOB China so we typically don’t have inventory produced for them. So on that side of the business we were able to reallocate the production capacity to other orders, other customers. But you are correct that we did have some inventory domestically allocated for them so inventory would have been down a little bit more and that will be sold in the ordinary course. So we are not expecting any close out based on those inventory quantities.

Thanks so much, really helpful. And Stephen this second question is for you, on the Nintendo partnership. I know you didn’t spend a lot of time on it your prepared remarks but it is a pretty important partnership doing some innovative things. Can you just talk a little bit about what transacts for Q4 and 2017 related to that partnership in particular?

We are actually extremely excited with Nintendo. Our line has increased three times to what it was for 2016 going into 2017. Today actually I think it is selling across Pacific Standard Time, Nintendo has an announcement being announced that should have some even more positive news that is coming out from it. They actually have a new game coming out December which is Mario Run which will be on the iPhone. They are launching a system, the NES system November 16th in the U.S. and the following week in the UK. They have two mobile games coming out in March and all of this is a positive to where Nintendo is really, really focusing on the marketing efforts and we have seen it happen with the Pokémon GO and what happened with the toys afterward. And we see retailers around the world, we have the master toy rights globally with Nintendo excluding Japan but -- Japan was a distributor. But we believe next year will be probably the biggest year we have with Nintendo because of all the new efforts and marketing that they are doing around their brand which have been very quiet for the past couple of years but they are really having a strong push and we have geared up, retailers have geared up with us. So we are really excited for Nintendo next year.

That is great Stephen, thank you. And then just final question related to C’est Moi, we are somewhat familiar with this brand just given our coverage of beauty, but talk a little bit about it with respect to the development platform and personal care that you are seeing in that end market that has been a strong growth market? And then also how you expect to use your portfolio of your own brands or licenses or even the IP that exists, I can start to expand into new distribution end markets?

This is great, C’est Moi for us is a category in which we are extremely excited about. The makeup skin care category is one of the fastest growing segments globally. And we believe we tapped into exactly the right brand, the right methodology for kids today. Years ago it was taboo for children to wear makeup and with the YouTube influences and the way that kids are now utilizing makeup at a younger age, we hit the right product line, the right makeup of the product line which is organic and non-toxic. And it is really performance makeup and skin care and we have shown this to a broad array of retailers both overseas and in the U.S. and there is nothing but I would say accolades and receptiveness of people wanting it now. But what we are doing is we have hired staff and we continue to hire staff in the skin care and makeup field to make sure we launch it appropriately. It is one of the fastest growing segments as I mentioned with all sorts of support, the Walgreen, all of the retailers, the Targets, everybody is entering into these categories and giving it more space. And they are giving space to kids skin care and makeup. So, it is something that we are really extremely excited about going forward. We also have shown it to some of our largest licensors and going forward there will be two initiatives, one is C’est Moi as a brand which we believe could be a separate segment of our company and the other will be a tie-in with our licensor partners where we see fit and where it is appropriate for the brand. But there I think this is just a start to something very big for our company and not just the company is excited but our retail partners and new retail partners and distribution partners are excited that we have this brand and what it looks like for the future.

Thank you guys, best of luck.

Thank you.

Thank you. Our next question comes from Drew Crum from Stifel. Please go ahead.

Okay, thanks, good morning everyone. Stephen I wondered if you could address the performance of Disguise during the quarter, you mentioned the LEGO costume line doing well where I think you had a number of puts and takes in the quarter, Halloween being a Monday this year, I think in the past you have said that the business tends to perform better when Halloween is on a weekend, not the case this year, just to address the performance of Disguise in the quarter?

Sure, Disguise will be flat year-over-year possibly or slightly up. There has been some nice areas of business, as you mentioned LEGO was a terrific new launch where the LEGO Batman product that was shipped in Q4 which is non- Halloween related but is role play related. And there is a movie that’s coming out in February but there are some misses that didn’t perform well such as War Craft, Alice in Wonderland. So there are some expectations for some of these to do better but on the reverse side Elena of Avalor has done extremely well. So it kind of became a mixed bag but we stay flat-to-up slightly year-over-year. And having Halloween on a Monday has been good buts it’s much better to have it on a Saturday or Sunday but what it have done or what it has done, it allows people to have Halloween parties both male and female throughout the weekend. Both, I am sorry, children and adults but it really didn’t have a major impact of growth when you see it like on a Saturday or Sunday.

Got it, okay and then shifting to Star Wars, I didn’t hear much comment on the performance of that business in the quarter just given the timing of the retail promotions this year versus last year, how much did that impact sales for the company during the third quarter?

Because marketing hasn’t really started for a Rogue One we really didn’t have much of a forecast internally for Q3. Everyone is excited for the Star Wars movie Rogue One in December and it works out with what we have in place at retail globally except Japan. We have strong commitments and now we’re just waiting for the movie but it really didn’t impact the quarter itself and the movie is not until December. And Disney with their huge marketing campaign and their PR behind it retailers and ourselves believe it they are very strongly. Again we only have a small portion of the Star Wars business in our BIG-FIGS so we are not a huge -- we’re don’t have a huge category of Star Wars product in our portfolio.

Got it, okay. Last question Stephen I think you mentioned that you are seeing weak traffic, I presume that’s Bricks and Mortar retail, just to remind us what your exposure is to the online channel?

Online is actually growing well over double-digit this year and it’s not just online with online retailers its online with the brick and mortars. So it maybe online with the Walmart, the Costco, the Toys"R"Us, the Target, the Cole's not just the Amazon’s or the like. So we actually have increased our online sales as retailers, the brick and mortar retailers are really focusing on online sales. For instance Walmart is doing online and in store pickups and they are very focused on that. Costco is very focused on online. So we’re getting -- its growing at a extremely fast rate year-over-year. The foot traffic at retail and its everything that we hear from retailers or we hear from stories of retailers earnings or speaking with several investment banking firms, or banking firms that traffic has just been slow for call it -- it was seasonal as well as the month of October. Not in the toy segmentation. Toys are actually performing well but having less traffic just means less sales overall. So we’re hearing that there is just less traffic to date in primarily brick and mortar outlets not naming one in particular just in general.

Got it, okay, thanks guys.

Thank You.

Thank you. Our next question comes from Gerrick Johnson from BMO Capital Markets. Please go ahead.

Hey, good morning. So these retailers facing challenges how much do they represent of total sales, is there any risk for any accounts receivable write downs, and then if you exclude this retailer what was your retail takeaway or POS in the quarter?

We can’t disseminate what each retailer does more for a competitive reasons but this retailer itself was one of the largest U.S. retailers which we suspended shipments on. And our exposure of our receivables is nominal, so did that answer -- there was another part of your question Gerrick that I don’t think I answered.

Yes, it was just if we just exclude the retailers what was your POS in the quarter?

POS throughout let’s say actually what we just previously mentioned several of the movie based properties did not perform to our expectation as well as the movies they performed to the expectations that everyone believed. Our sell through is from the Elena of Avalor across the Board. I don’t want to name if this Whimsy & Wonder which is our private label program at Target, [indiscernible] Daniel Tiger. We’ve had really, really strong sell through. Gift 'ems we had a successful launch and its expanded at few of our major retailers and it is just growing and growing so far to date. But there are so many categories it is hard to list to sell through in each of our areas.

No Stephen, I was more or less looking for just like a number, up 5%, flat something like that for your total portfolio?

No, again it’s such a vast portfolio in so many different channels that there isn’t a number that we can calculate and what we can do is give a general feel across all of the lines.

Okay.

But Gerrick to answer sell through have been strong, have been very decent and we’re excited for fourth quarter and beyond.

Okay and just have a couple more here. The litigation charges can you remind us what that was for?

We had a suit with a former licensor and this relates to not our legal cost but actual settlement that we paid in connection with that.

Okay and then JP Studios, is this I think you said that JP Studios in conjunction with some other things will be accretive next year but what is this cost on the frontend, are there startup cost we have to consider and when do you see income from this specific endeavor?

In our previous statement we talked about Studio JP and C’est Moi of being accretive in next year. There will be a little bit over a couple of million dollars in startup fees and with regards to more staffing than anything else and a kind of presentations whether it’s at a makeup, the shows as well as having the show at other type of conferences. But it will all be built into our next year’s forecast.

Okay, thank You.

Thank you. [Operator Instructions]. Our next question comes from Ed Woo from Ascendiant Capital. Please go ahead.

Yes, thanks for taking my question. I had a question about you mentioned there is a lot of I guess attack from the BREXIT devaluation of the Pound. Do you see that as a concern that’s going to linger well into 2017?

It’s something that I think part of it was sort of the collateral aspect of just general sentiment. But to remind everybody, our general exposure is that not that we sell in local currency and we have a translation gain, it’s that most of our international sales are done in U.S. dollars so our goods become relatively more expensive. And I think that overtime as that settles in we think that people will get back to their normal buying patterns.

Great, then you mentioned there are some pockets of weakness in certain European areas and then you also mentioned that in the U.S. that there were some categories that were not performing as well within the overall strong toy industry. How does that affect your outlook heading to this holiday, you think you are much more prepared [ph] then you were three months ago or do you think you’re about the same?

We mentioned earlier that there are several movie based properties, products that didn’t perform well to our expectation due to the movie itself or movies themselves that did not perform as well in the box office. So that actually had a hindrance in our future forecast of those product lines within those movie based products. Everything else we see across the board our seasonal business has done well. As I mentioned Halloween is flat to up slightly so we’re seeing really the toy history I believe has pockets of areas that are doing better than expected. Our growth area which includes Tsum Tsum, Gift 'ems, Disney Princess which includes Frozen, all are seeing very strong and great sell through. So it’s a little bit of a mixed bag but the ones that are impacting us the most are the movie based properties that did perform well.

Great, well thank you and best of luck for this holiday.

Thank you.

Thank you, our next question comes from Jeffrey Thomison from Hilliard Lyons. Please go ahead.

Thanks, good morning everybody. Had a question several questions that you’ve already answered so it only leaves me one housekeeping question for Joel and that is you gave some third quarter numbers on share count and interest add back. Given your guidance what does that imply for fourth quarter on a basic count and for the year would be a fully diluted count I guess?

Yes, basic is expected to be 16.5 million and fully diluted 40 million shares.

40?

Yes.

Okay, what would the interest add back be for the year, do you have that?

Yes, 1.8 million net of tax, per quarter.

Okay, great. I’ll follow up later.

Okay, good day. Thank you.

Thank you. Our next question comes from Linda Bolton Weiser from B. Riley. Please go ahead.

Hi, sorry if I missed this but can you give the operating cash flow number for either of the quarter or the nine months?

Yes, we can that was in the call it was about $40 million both 2016 and 2015, use of cash for both quarters year-over-year.

So use of cash of 40 million in the third quarter of 2016?

And 15 correct.

Okay and then just on C’est Moi, I’m just sort of interested in I mean you in your press release you kind of named the cosmetics beauty market being something like 15 billion or something in the U.S., do you envision expanding your capabilities in this area to enter the adult cosmetics market at some point and then on C’est Moi what channels do you envision at being sold then in the U.S., like do you envision at being in department stores or like Toys"R"Us or both?

So C’est Moi is actually a kids focused brand that we will tell you just from having people use it and we have been working on this, working on the kind of the skincare cosmetic field for almost two years looking at companies and getting to educate on this area. We’re focused more for kids performance and makeup more than adult. The adult area is a mature area, many companies have tried to get into the kids markets. I know some people collectively that are very strong in this area of business. Our format of distribution plans are in the makeup field, so it would be like Ultra Sephora, it could be in the segmentation at Target or Tesco or in Nordic where we been speaking to various customers it is in the makeup area of business. It’s not toy makeup, it’s in a new I call it distribution channel for JAKKS which is a growing channel at retail. So if you’re looking it that way, it is not going to be at a kids area of focus that is solely focused like in toy or solely focused in clothing. It is really in the makeup department. We have met with several large companies both in North America and in the U.S. and they are -- if we were able to gear up faster we’d be able to get it on shelf earlier. But there is different time tables when you’re dealing with actually the manufacturing of the product, there is different testing procedures. Our normal way we are so quick to market we would have this in the market in the first of the year but we are planning the second half of the year. We have YouTube influences lined up that will help us market to kids. So it’s a broad long-term launch and if you look at the companies that are currently out there the makeup industry not just proceed with the information we have, it is one of the fastest growing areas of business globally. So we could be more excited. We met with retailers, they want it faster than we could actually produce it. But we want to launch it and market it correctly so this is a long term process and an initiative for JAKKS.

Okay that’s helpful thanks and then on the Maui earn outs the words I guess is that a benefit in the quarter and is that included in the 42.8 million of EBITDA?

That was related to the third quarter in 2015. And it was not in the calculation of EBITDA.

Okay, and is that -- that will not occur in 2017 will it?

No, Linda it was from -- it was in the comparison, it was in Q3 2015 not in 2016. The earn out ended -- the earn out period ended in 2015.

Okay, got you. Okay, that is all from me. Thank you.

Thank you.

Thank you. I will now turn the call back over to Stephen Berman for closing comments.

Thank you everybody. We appreciate the time that everyone was on the call and we look forward to our upcoming Analyst Meeting and continuing Investor Meetings throughout the year and looking forward to 2017 and beyond. Thank you very much.

Thank you. And thank you ladies and gentlemen, this concludes today's conference. Thank you for participating, you may now disconnect.