4Kids Entertainment Reports 2009 Second Quarter Results

Aug 10th 2009
NEW YORK, August 10, 2009 – 4Kids Entertainment, Inc. (NYSE: KDE), the global children's entertainment and merchandise licensing company, today announced financial results for the second quarter ended June 30, 2009.

Net revenues for the three months ended June 30, 2009 totaled $4.4 million, compared to $16.5 million for the same period in 2008. The Company's net loss attributable to 4Kids Entertainment for the three months ended June 30, 2009 was $(13.8) million, or $(1.04) per diluted share, as compared to a net loss of $(5.5) million, or $(0.42) per diluted share, for the same period in 2008. The Company's results reflect the adoption of SFAS No. 160 requiring losses attributable to non-controlling interests of the Company to be excluded in their entirety from the computation of the Company's net losses beginning in 2009.

For the six months ended June 30, 2009, net revenues totaled $14.6 million, compared to $31.6 million for the same period in 2008. The Company's net loss attributable to 4Kids Entertainment for the six months ended June 30, 2009 was $(15.8) million, or $(1.18) per diluted share, as compared to a net loss of $(11.9) million, or $(0.91) per diluted share, for the same period in 2008.

“Our second-quarter results were negatively impacted by a number of factors,” stated Alfred R. Kahn, Chairman and Chief Executive Officer, 4Kids Entertainment. First, the Company realized a non-recurring loss of $(7.25) million or $(0.55) per diluted share on the sale of one of its auction rate securities. Second, Chaotic trading card sales contributed no revenue in the second quarter. Although we shipped $2.6 million of Chaotic trading card sales in the second quarter, we were unable to recognize the majority of those sales as second quarter revenue as we would have in past quarters. Rather "pay on scan" sales are recorded as revenue when the cards are purchased by the consumer not when the cards are shipped to the distributor. We, therefore, expect to record revenue on these sales later in the year," said Kahn.

"While we are disappointed in the results for this quarter, I am pleased to report that sales of Chaotic trading cards in the US have steadily increased since the debut of the Chaotic television series on Cartoon Network in June. Over the past eight weeks, Chaotic trading card sales in the US have more than doubled. We are also receiving orders from “pay on

scan” distributors who are seeking to restock lean inventories. We look forward to Chaotic trading card sales making a substantial contribution to 4Kids revenue in the second half of the year," commented Kahn.

"As we announced on August 5, the Board of Directors has retained Montgomery & Co. to evaluate its strategic alternatives. The Company remains committed to taking the necessary steps to build shareholder value," concluded Kahn.

About 4Kids Entertainment, Inc.
With U.S. headquarters in New York City, regional offices for its trading card business in San Diego, California and international offices in London, 4Kids Entertainment, Inc. (NYSE: KDE) is a global organization devoted to the creation, development, production, broadcasting, distribution, licensing and manufacturing of children's entertainment products.

Through its subsidiaries, 4Kids produces animated television series and films, distributes 4Kids' produced or licensed animated television series for the domestic and international television and home video markets, licenses merchandising rights worldwide to 4Kids' owned or represented properties, operates Websites to support 4Kids' owned or represented properties, and produces and markets collectible trading card games. Additionally, the Company programs and sells the national advertising time in “TheCW4Kids” five-hour Saturday morning block on The CW television network.

Additional information is available on the www.4KidsEntertainment.com corporate Website and at the www.4Kids.tv game station site.

The information contained in this press release, other than historical information, consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors beyond the Company's control, including general economic conditions, consumer spending levels, competition from toy companies, motion picture studios and other licensing companies, the uncertainty of public response to the Company's properties and other factors could cause actual results to differ materially from the Company's expectations.

(Financial tables below)



4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2009 and DECEMBER 31, 2008
(In thousands of dollars, except share data)

ASSETS:

June 30,
2009

December 31, 2008

Current assets:

(Unaudited)




Cash and cash equivalents

$
6,971

$
13,503

Accounts receivable - net


11,999


22,818

Inventories - net


5,410


4,241

Prepaid income taxes


87


137

Prepaid expenses and other current assets


3,163


1,876

Deferred income taxes


142


127

Total current assets


27,772


42,702









Property and equipment - net


3,746


4,287

Long term investments


13,773


21,617

Accounts receivable - noncurrent, net


195


655

Film and television costs - net


17,586


16,661

Other assets - net (includes related party amounts of $7,625 and $6,638, respectively)


17,403


14,652

Total assets

$
80,475

$
100,574









LIABILITIES AND EQUITY:







Current liabilities:







Due to licensors

$
4,479

$
5,651

Accounts payable and accrued expenses


14,190


16,202

Deferred revenue


2,042


3,270

Total current liabilities


20,711


25,123









Deferred rent


375


460

Total liabilities


21,086


25,583









Commitments and contingencies







4Kids Entertainment, Inc. shareholders' equity







Preferred stock, $.01 par value - authorized, 3,000,000 shares; none issued







Common stock, $.01 par value - authorized, 40,000,000 shares;
issued, 15,411,099 and 15,246,579 shares; outstanding 13,352,053 and
13,227,019 shares in 2009 and 2008, respectively


154


152

Additional paid-in capital


66,991


65,107

Accumulated other comprehensive loss


(14,589
)

(17,396
)
Retained earnings


47,714


63,504



100,270


111,367

Less cost of 2,059,046 and 2,019,560 treasury shares in 2009 and 2008, respectively


36,434


36,376

Total shareholders' equity of 4Kids Entertainment, Inc.


63,836


74,991

Noncontrolling interests


(4,447
)



Total equity


59,389


74,991

Total liabilities and equity

$
80,475

$
100,574



4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(In thousands of dollars, except share data)



Three Months Ended


Six Months Ended



June 30,


June 30,



2009


2008


2009


2008














Net revenues:












Service revenue
$
4,586

$
11,475

$
14,341

$
24,086

Product revenue

(185
)

5,065


252


7,493

Total net revenues

4,401


16,540


14,593


31,579














Costs and expenses:












Selling, general and administrative

10,942


13,347


22,741


25,955

Production service costs

929


1,990


2,021


3,535

Cost of sales of trading cards

762


1,897


1,264


2,913

Amortization of television and film costs

1,066


1,697


2,257


3,405

Amortization of 4Kids TV broadcast fee




3,906





9,109

Total costs and expenses

13,699


22,837


28,283


44,917














Loss from operations

(9,298
)

(6,297
)

(13,690
)

(13,338
)













Interest income

346


737


747


1,407

Impairment on investment securities

(9
)




(98
)



Loss on sale of investment securities

(7,250
)




(7,250
)



Total other (expense) income

(6,913
)

737


(6,601
)

1,407














Loss before income taxes

(16,211
)

(5,560
)

(20,291
)

(11,931
)













Benefit from income taxes




28




















Net loss

(16,211
)

(5,532
)

(20,291
)

(11,931
)













Net loss attributable to noncontrolling interests

2,461





4,501

















Net loss attributable to 4Kids Entertainment, Inc.
$
(13,750
)
$
(5,532
)
$
(15,790
)
$
(11,931
)













Per share amounts:

























Basic loss per share attributable to 4Kids Entertainment Inc. common shareholders
$
(1.04
)
$
(0.42
)
$
(1.19
)
$
(0.91
)













Diluted loss per share attributable to 4Kids Entertainment Inc. common shareholders
$
(1.04
)
$
(0.42
)
$
(1.19
)
$
(0.91
)













Weighted average common shares












outstanding - basic

13,279,733


13,119,718


13,253,522


13,172,738














Weighted average common shares












outstanding - diluted

13,279,733


13,119,718


13,253,522


13,172,738

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