Everyone on this board keeps suggesting that management buyback the converts, don't do M&A, sell themselves, etc. Do you know why these things never happen? READ THE PROXY! The CFO owns only 36,000 shares ($200k worth of stock) and the CEO, who was been with the company for two decades, only owns stock through options and/or RSUs. The CEO's compensation program is vaguely worded and allows enormous discretion by the board to reset milestones. Oh by the way, the Board is a bunch of Berman's cronies, including a lawyer who was been on the board for 30 years whose firm earns $3mm per year from JAKK. Two of the Board Members are leaving -- with no mention of why? In Q4, JAKK notes higher legal expenses due to shareholder legal matters - no additional commentary. Add this all up and we all know what is going on. Management is not concerned about shareholder value maximization. If they were, they would be crushed by the fact that they passed on $20 several years ago with the stock languishing around $6-7. But guess what? It has not impacted their salaries and bonuses, which have been modified so they can own more. Read the proxy... it explains why everyone keeps saying the same thing over and over.
Not always true. Look at AR as % of sales. It has doubled in Q4-14 versus all Q4s of the past ten years. I know sales are up. But A/R is up 135% YOY and sales YOY are up 30-40%. Some could be explained by heavy December ordering by why would vendors be ordering heavily in late December?
While it is true that A/R continues to decline in the March quarter each year, cash from operations is usually low or negative in this quarter due to A/P also declining + income taxes + other working capital changes. Q4 has always been the company's highly free cash flow generative quarter, and this quarter (arguably the mother of all quarters), JAKK generated only $38mm or so in cash from operations. Q1/15 will be very revealing, either positively or negatively. The 10-k will also be helpful.
The elephant in the room is the lack of cash generation. Yes, sales and earnings were great, but where is the cash flow? A/R ballooned to $235mm versus $125mm a year ago (and had never been higher than $174mm even when sales were near a billion). Either Q1-15 is going to be a huge cash collection period of this is starting to smell funny. I cannot believe that none of the sell side analysts thought to ask about this. They don't look past the income statement when all of the real clues are in the balance sheet and cash flow statement. Also note that JAKK did not provide a cash flow statement.