4Kids Entertainment

4Kids Entertainment Reports 2009 Fourth Quarter and Year End Results

Tuesday 16 March 2010

INVESTOR CONTACTS:                                                MEDIA CONTACT:       
Todd Fromer / Garth Russell                                           Barry Stagg
KCSA Strategic Communications                                    4Kids Entertainment
(212) 896-1215 / (212) 896-1250                                      (310) 880-3193
tfromer@kcsa.com / grussell@kcsa.com                         bstagg@4kidsent.com
  
 
NEW YORK, March 16, 2010 – 4Kids Entertainment, Inc. (NYSE: KDE), the global children’s entertainment and merchandise licensing company, today announced financial results for the fourth quarter and year ended December 31, 2009.
 
Net revenues for the three months ended December 31, 2009 totaled $17.0 million, compared to $12.8 million for the same period in 2008. Fourth quarter revenues included $9.8 million that the Company received as part of its agreement to terminate its right to serve as the merchandise licensing agent for the Teenage Mutant Ninja Turtles property (“TMNT”). The Company’s net loss attributable to 4Kids Entertainment for the three months ended December 31, 2009 was $(21.3) million, or $(1.59) per diluted share, as compared to a net loss of $(19.6) million, or $(1.48) per diluted share, for the same period in 2008.  Net loss for the fourth quarter included $20.2 million in impairment charges attributable to the Chaotic property. The Company's fourth quarter 2009 results also included losses and impairment charges of $6.0 million relating to the Company's portfolio of auction rate securities, $2.9 million in severance costs relating to the reduction in force and an additional $3.8 million in amortization of capitalized film costs related to the fourth quarter 2009 sale of the TMNT property.
 
For the year ended December 31, 2009, net revenues totaled $36.8million, compared to $57.2 million for the same period in 2008. The Company’s net loss attributable to 4Kids Entertainment for the year ended December 31, 2009 was $(42.1) million, or $(3.16) per diluted share, as compared to a net loss of $(36.8) million, or $(2.79) per diluted share, for the same period in 2008. The Company’s results reflect the adoption of authoritative guidance from the FASB 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.
 
“In 2009 we looked to realign our business with current trends in the market and made significant adjustments throughout our operations,” said Alfred R. Kahn, Chairman and Chief Executive Officer of 4Kids Entertainment. "We have substantially reduced our cost structure and have revised the valuation or amortization of certain assets on our balance sheet. With these financial hurdles now behind us, we have entered 2010 with a much lower annual expense base which is projected to be under $25 million for 2010,” said Mr. Kahn.
 
"We believe that we have a stronger pipeline of new properties than in recent years, which we hope will benefit the Company in the years ahead. We are also working on a number of other deals which we expect will result in additional licenses and opportunities for 4Kids in 2010. As of March 15, 2010, the Company had over $10.7 million in cash and an additional $14.1 million in investment securities at their fair market value which we believe should provide the Company withsufficient liquidity to run its business, promote its current properties, invest in new properties and generally rebuild the business of 4Kids. While working to strengthen our business, the Company is also continuing to pursue potential strategic transactions that could potentially have a positive effect on shareholder value,” Kahn concluded.
 
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
DECEMBER 31, 2009 AND 2008
(In thousands of dollars, except share data)
                                                                                                                                                                                                                             
ASSETS:
 
2009
 
2008
 
Current assets:
 
 
 
 
 
 
   Cash and cash equivalents
 
$
3,621
 
$
13,503
 
   Accounts receivable - net
 
 
14,470
 
 
22,818
 
   Inventories - net
 
 
1,273
 
 
4,241
 
   Income taxes receivable
 
 
4,044
 
 
137
 
   Prepaid expenses and other current assets
 
 
2,612
 
 
1,876
 
   Deferred income taxes
 
 
—
 
 
127
 
Total current assets
 
 
26,020
 
 
42,702
 
 
 
 
 
 
 
 
 
   Property and equipment - net
 
 
2,898
 
 
4,287
 
   Long term investments
 
 
14,180
 
 
21,617
 
   Accounts receivable – noncurrent, net
 
 
153
 
 
655
 
   Film and television costs - net
 
 
6,832
 
 
16,661
 
   Other assets - net (includes related party amounts of $1,215 and $6,638, respectively)
 
 
6,570
 
 
14,652
 
Total assets
 
$
56,653
 
$
100,574
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
   Due to licensors
 
$
6,578
 
$
5,651
 
   Accounts payable and accrued expenses
 
 
12,304
 
 
16,202
 
   Deferred revenue
 
 
2,279
 
 
3,270
 
Total current liabilities
 
 
21,161
 
 
25,123
 
 
 
 
 
 
 
 
 
Deferred rent        
 
 
375
 
 
460
 
Total liabilities
 
 
21,536
 
 
25,583
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Stockholders’ 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
 
     
(4,644
)
 
(17,396
)
      Retained earnings
 
 
19,298
 
 
63,504
 
       
 
 
81,799
 
 
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.
 
 
45,365
 
 
74,991
 
Noncontrolling interests
 
 
(10,248
)
 
—
 
Total equity
 
 
35,117
 
 
74,991
 
Total liabilities and stockholders’ equity
 
$
56,653
 
$
100,574
 
 
 
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of dollars, except share data)
 
 
 
2009
 
 
2008
 
 
2007
 
Net revenues:
 
 
 
 
 
 
 
 
 
   Service revenue
$
24,394
 
$
41,925
 
$
48,428
 
   Product revenue
 
2,603
 
 
15,276
 
 
776
 
   Other revenue
 
9,786
 
 
—
 
 
—
 
          Total net revenues
 
36,783
 
 
57,201
 
 
49,204
 
 
 
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
 
 
   Selling, general and administrative                                   
 
48,190
 
 
54,564
 
 
44,970
 
   Cost of sales of trading cards                                                
 
8,167
 
 
10,625
 
 
352
 
   Amortization of television and film costs                                
 
21,511
 
 
7,707
 
 
8,179
 
   Amortization of 4Kids TV broadcast fee                                
 
—
 
 
16,022
 
 
21,472
 
   Impairment of investment in international
 
 
 
 
 
 
 
 
 
      trading card subsidiary
 
2,430
 
 
—
 
 
—
 
          Total costs and expenses                                        
 
80,298
 
 
88,918
 
 
74,973
 
 
 
 
 
 
 
 
 
 
 
Loss from operations                                        
 
(43,515)
 
(31,717)
 
(25,769)
 
 
 
 
 
 
 
 
 
 
Interest income
 
1,076
 
 
2,722
 
 
5,281
 
Impairment of investment securities
 
(6,175
)
 
(7,834
)
 
—
 
Loss on sale of investment securities
 
(7,647
)
 
—
 
 
—
 
         Total other (expense) income                                                                     
 
(12,746)
 
(5,112)
  
 
5,281
 
 
 
 
 
 
 
 
 
 
 
Loss before income taxes                                  
 
(56,261)
 
(36,829)
 
(20,488)
 
 
 
 
 
 
 
 
 
 
Benefit from (provision for) income taxes                        
 
3,805
 
 
(300)
 
(2,436)
 
 
 
 
 
 
 
 
 
 
Loss on previously unconsolidated affiliate
 
—
 
 
—
 
 
(498
)
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest
 
—
 
 
310
 
 
96
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
(52,456
)
 
(36,819
)
 
(23,326
)
 
 
 
 
 
 
 
 
 
 
Net loss attributable to noncontrolling interests
 
10,380
 
 
—
 
 
—
 
 
 
 
 
 
 
 
 
 
 
Net loss attributable to 4Kids Entertainment, Inc.
$
(42,076)
$
(36,819)
$
(23,326)
 
 
 
 
 
 
 
 
 
 
Basic loss per share attributable to 4Kids Entertainment, Inc. common shareholders      
$
(3.16
)
$
(2.79
)
$
(1.77
)
 
 
 
 
 
 
 
 
 
 
Diluted loss per share attributable to 4Kids Entertainment, Inc. common shareholders
$
(3.16
)
$
(2.79
)
$
(1.77
)
 
 
 
 
 
 
 
 
 
 
Weighted average common shares  
 
 
 
 
 
 
 
 
 
      outstanding - basic                                              
 
13,303,192
 
 
13,181,549
 
 
13,209,495
 
Weighted average common shares 
 
 
 
 
 
 
 
 
 
      outstanding - diluted                                         
 
13,303,192
 
 
13,181,549
 
 
13,209,495
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
# # #