4Kids Entertainment

4Kids Entertainment Reports 2009 Second Quarter Results

Monday 10 August 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 Second Quarter
Results
 
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
# # #