4Kids Entertainment

4Kids Entertainment Reports 2009 First Quarter

Monday 11 May 2009

 
 
INVESTOR CONTACTS:                                        MEDIA CONTACT:
Todd Fromer / Garth Russell                                         Barry Stagg
KCSA Strategic Communications                                 4Kids Entertainment
(212) 896-1215 / (212) 896-1250                               (646) 822-4257
tfromer@kcsa.com / grussell@kcsa.com                       bstagg@4kidsent.com
 
 
4Kids Entertainment Reports 2009 First Quarter
Results
 
 
NEW YORK, May 11, 2009 – 4Kids Entertainment, Inc. (NYSE: KDE), the global children’s entertainment and merchandise licensing company, today announced financial results for the first quarter ended March 31, 2009.
 
Net revenues for the three months ended March 31, 2009 totaled $10.2 million, compared to $15.0 million for the same period in 2008. The Company’s net loss attributable to 4Kids Entertainment for the three months ended March 31, 2009 was $(2.0) million, or $(0.15) per diluted share, as compared to a net loss of $(6.4) million, or $(0.48) 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.
 
“Our first quarter results reflect a number of positive developments. Our licensing revenue was flat year over year with Monster Jam, Yu-Gi-Oh! and Cabbage Patch Kids being our top earning properties. We also benefited from reducing our expenses and from the termination of our agreement with Fox. We are on track to realize substantial cost savings in 2009 as we expect additional cost cuts to further reduce expenses as the year goes on,” stated Alfred R. Kahn, Chairman and Chief Executive Officer, 4Kids Entertainment.
 
“Our trading card business, however, continued to be negatively impacted by the economic recession and the erosion of customer spending and confidence that began in October 2008.  Revenue from the sale of Chaotic® trading cards for the quarter ended March 31, 2009 was approximately $437,000 compared to $2.4 million for the same period last year. The substantial decline in Chaotic trading card sales resulted from our distributors focusing on selling through existing Chaotic trading card inventory rather than ordering new product. We are, however, beginning to see a pickup in Chaotic trading card sales in the second quarter, which we expect will continue assuming economic conditions stabilize or improve,” said Kahn.
 
“I am pleased to report that we have just concluded a deal for Cartoon Network to broadcast Chaotic and Yu-Gi-Oh! 5D’s as a strip beginning in June, which we believe will bolster both brands. Chaotic will also be supported by the planned fourth quarter 2009 release of a Chaotic videogame by Activision and a Chaotic toy line by Spin Master,” said Kahn.
 
“In the first quarter, the Chaotic TV series debuted on television in the UK and France, with German TV expected to begin airing the series late in the second quarter.  In support of Chaotic’s expansion into Europe, we’ve launched a new and improved Chaoticgame.com Website during the first quarter that is available in English, French, German, Spanish and Italian. European based Chaotic Website traffic is increasing as European fans of the game register and upload their cards. European sales of Chaotic trading cards should grow as the Chaotic TV series receives more broadcast exposure,” Kahn commented.  
 
“We are also excited at the prospect of a new Teenage Mutant Ninja Turtles theatrical film in late 2011. The movie deal, along with the Turtles’ 25th anniversary “Shellebration” have triggered additional licensing interest in the property,” 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
MARCH 31, 2009 and DECEMBER 31, 2008
(In thousands of dollars, except share data)
 
ASSETS:
 
2009
 
2008
 
Current assets:
 
(Unaudited)
 
 
 
 
   Cash and cash equivalents
 
$
9,467
 
$
13,503
 
   Accounts receivable - net
 
 
14,375
 
 
22,818
 
   Inventories - net
 
 
5,459
 
 
4,241
 
   Prepaid income taxes
 
 
100
 
 
137
 
   Prepaid expenses and other current assets
 
 
3,567
 
 
1,876
 
   Deferred income taxes
 
 
124
 
 
127
 
Total current assets
 
 
33,092
 
 
42,702
 
 
 
 
 
 
 
 
 
   Property and equipment - net
 
 
3,951
 
 
4,287
 
   Long term investments
 
 
19,454
 
 
21,617
 
   Accounts receivable - noncurrent, net
 
 
187
 
 
655
 
   Film and television costs - net
 
 
17,079
 
 
16,661
 
   Other assets - net (includes related party amounts of $7,304 and $6,638, respectively)
 
 
16,861
 
 
14,652
 
Total assets
 
$
90,624
 
$
100,574
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY:
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
   Due to licensors
 
$
5,822
 
$
5,651
 
   Accounts payable and accrued expenses
 
 
12,927
 
 
16,202
 
   Deferred revenue
 
 
2,696
 
 
3,270
 
Total current liabilities
 
 
21,445
 
 
25,123
 
 
 
 
 
 
 
 
 
Deferred rent        
 
 
419
 
 
460
 
Total liabilities
 
 
21,864
 
 
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, 15,246,579 shares; outstanding 13,227,019 shares in both 2009 and 2008
 
 
152
 
 
152
 
      Additional paid-in capital
 
 
65,107
 
 
65,107
 
      Accumulated other comprehensive loss
 
     
(19,578
)
 
(17,396
)
      Retained earnings
 
 
61,464
 
 
63,504
 
       
 
 
107,145
 
 
111,367
 
Less cost of 2,019,560 treasury shares in both 2009 and 2008
 
 
36,376
 
 
36,376
 
Total shareholders’ equity of 4Kids Entertainment, Inc.
 
 
70,769
 
 
74,991
 
Noncontrolling interests
 
 
(2,009
)
 
—
 
Total equity
 
 
68,760
 
 
74,991
 
Total liabilities and equity
 
$
90,624
 
$
100,574
 
 
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(In thousands of dollars, except share data)
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2009
 
 
2008
 
 
 
 
 
 
 
 
Net revenues:
 
 
 
 
 
 
   Service revenue
$
9,755
 
$
12,611
 
   Product revenue
 
437
 
 
2,428
 
          Total net revenues
 
10,192
 
 
15,039
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
   Selling, general and administrative                                    
 
11,799
 
 
12,608
 
   Production service costs                                                
 
1,092
 
 
1,545
 
   Cost of sales of trading cards                                                
 
502
 
 
1,016
 
   Amortization of television and film costs                                
 
1,191
 
 
1,708
 
   Amortization of 4Kids TV broadcast fee                                
 
—
 
 
5,203
 
          Total costs and expenses                                        
 
14,584
 
 
22,080
 
 
 
 
 
 
 
 
Loss from operations                                        
 
(4,392
)
 
(7,041
)
 
 
 
 
 
 
 
Interest income                                                                    
 
401
 
 
670
 
Impairment on investment securities
 
(89
)
 
—
 
          Total other income
 
312
 
 
670
 
 
 
 
 
 
 
 
Loss before income taxes                                  
 
(4,080
)
 
 (6,371
)
 
 
 
 
 
 
 
(Provision for) benefit from income taxes                        
 
—
 
 
(28
)
 
 
 
 
 
 
 
Net loss
 
(4,080
)
 
 (6,399
)
 
 
 
 
 
 
 
Net loss attributable to noncontrolling interests
 
2,040
 
 
—
 
 
 
 
 
 
 
 
Net loss attributable to 4Kids Entertainment, Inc.
$
(2,040
)
$
(6,399
)
 
 
 
 
 
 
 
Per share amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic loss per share attributable to 4Kids Entertainment Inc. common shareholders                           
$
(0.15
)
$
(0.48
)
 
 
 
 
 
 
 
Diluted loss per share attributable to 4Kids Entertainment Inc. common shareholders                  
$
(0.15
)
$
(0.48
)
 
 
 
 
 
 
 
Weighted average common shares  
 
 
 
 
 
 
      outstanding - basic                                              
 
13,227,019
 
 
13,226,618
 
 
 
 
 
 
 
 
Weighted average common shares 
 
 
 
 
 
 
      outstanding - diluted                                         
 
13,227,019
 
 
13,226,618
 
 
 
 
 
 
 
 
 
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