JAKKS PACIFIC INC - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by JAKKS PACIFIC INC on April 2, 2009, reporting events occurring on March 31, 2009. The filing addresses Item 5.02 regarding the establishment of bonus criteria for the company's principal officers for the 2009 fiscal year.
Key Financial Metrics
The filing does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity. It focuses exclusively on the methodology for calculating executive compensation based on Adjusted Earnings Per Share (EPS) growth targets.
Material Changes and Executive Compensation
The Compensation Committee has established the 2009 bonus criteria for Chairman and Co-CEO Jack Friedman and President, Co-CEO, and COO Stephen Berman. Bonuses are calculated as a percentage of their respective 2009 base salaries based on Adjusted EPS growth or decline:
- Decline Scenarios: A decline in Adjusted EPS of 8% results in a 27% bonus; a 7% decline results in a 55% bonus; a 6% decline results in a 70% bonus; a 5% decline results in a 75% bonus; a 4% decline results in an 80% bonus; a 3% decline results in an 83% bonus; a 2% decline results in an 85% bonus; and a 1% decline results in a 90% bonus.
- Baseline and Growth: Zero percent growth results in a 100% bonus. Growth of 1% yields 110%; 2% yields 120%; 3% yields 130%; 4% yields 150%; 5% yields 165%; 6% yields 180%; and 7% yields 200%.
Definition of Adjusted EPS: Defined as net income per share on a fully-diluted basis per GAAP, adjusted at the sole discretion of the Compensation Committee for extraordinary or special items.
Outlook, Risks, and Contingencies
The Compensation Committee reserved the right to exercise negative discretion to reduce bonus targets or amounts based on:
- New acquisitions concluded in 2009.
- The effect on Adjusted EPS of earnings and adjustments from the video game joint venture with THQ.
- Outcomes of the arbitration with THQ regarding the "preferred return."
Investor Verification Checklist
- Verify the final Adjusted EPS for fiscal year 2009 to determine actual bonus payouts.
- Monitor the status of the arbitration with THQ regarding the "preferred return" and its potential impact on executive compensation.
- Review any new acquisitions announced in 2009 that may trigger the Committee's negative discretion clause.
- Confirm the base salaries for Jack Friedman and Stephen Berman for 2009 to calculate the absolute dollar value of the bonuses.