EX-99 2 pressrelease31708.htm PRESS RELEASE DATED MARCH 17,2008


 

 

 

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 2007 Fourth Quarter and Year End Results

---

 

NEW YORK, March 17, 2008 – 4Kids Entertainment, Inc. (NYSE: KDE), a global provider of children’s entertainment and merchandise licensing, today announced financial results for the fourth quarter and year ended December 31, 2007.

 

Net revenues in the fourth quarter of 2007 totaled $16.5 million from continuing operations as compared to $18.3 million for the same period in 2006. The Company’s net loss for the quarter ended December 31, 2007 was $(16.8) million, or $(1.26) per diluted share. The Company had a net loss of approximately $(2.3) million, or $(0.18) per diluted share, in the same period in 2006 (consisting of a loss from continuing operations for the fourth quarter of 2006 of $(2.5) million, or $(0.19) per diluted share, and income from discontinued operations of $0.2 million, or $0.01 per diluted share). The Company has reported the results of Summit Media, its media buying subsidiary, as a discontinued operation since its operation ceased in June 2006.

 

For the year ended December 31, 2007, net revenues totaled $55.6 million from continuing operations compared to $71.8 million for the same period in 2006. The Company’s net loss for the year ended December 31, 2007 was $(23.3) million, or $(1.77) per diluted share, as compared to a net loss for the year ended December 31, 2006 of $(1.0) million, or $(0.08) per diluted share (consisting of a loss from continuing operations of $(1.7) million, or $(0.13) per diluted share, and income from discontinued operations of $0.7 million, or $0.05 per diluted share). The diluted weighted average common shares outstanding for the year ended December 31, 2007 were 13,209,495 shares compared with 13,104,051 shares in 2006.

 

Alfred R. Kahn, Chairman and CEO of 4Kids Entertainment, stated: “Our 2007 results were negatively impacted when the Company recorded an $11.9 million reserve against its deferred tax assets in accordance with SFAS No. 109, Accounting for Income Taxes. The reserve increased the Company’s loss by $.90 per diluted share. In addition, in 2007, we incurred approximately $7.8 million in net losses attributable to start up costs for our Chaotic trading card and website subsidiaries, TC Digital Games LLC and TC Websites LLC, which added about another $.60 per diluted share to the Company’s loss.”

 

“The Company, however, did achieve a number of significant milestones in 2007 which I

 

believe provide 4Kids with a solid foundation for the future,” continued Kahn. “We expanded our business beyond licensing by launching the Chaotic trading card game and companion website, www.chaoticgame.com. We expect Chaotic trading card revenues to contribute to the Company’s results in 2008 and beyond. In October 2007, we also entered into a five-year deal with The CW Television Network which will provide 4Kids with television distribution for its content through at least 2013.”

 

“I am also encouraged by the initial marketplace response to the Chaotic trading card game. Since the commercial launch nationwide to the comic and hobby channel on October 24, 2007, Chaotic has rolled out nationally to over 15,000 retail locations across North America, including Target, Toys"R"Us, Wal-Mart, GameStop, Kmart, f.y.e. and Suncoast. TC Digital has received reorders from many of these retailers as the trading card game, supported by a national advertising campaign, gains traction. The Chaotic website also continues to attract purchasers of the Chaotic trading card game who wish to upload the cards and play the game online. We are also seeing Chaotic ratings improve on 4Kids TV with Chaotic being the highest rated Saturday morning show for boys 6-11 on broadcast television in two of the last three weeks,” concluded Kahn.

 

About 4Kids Entertainment

 

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 wholly owned 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, and operates Web sites to support 4Kids’ owned or represented properties. Through its majority owned trading card company and website company, 4Kids produces and markets collectible trading card games. Additionally, the Company programs and sells the national advertising time in a four-hour “4KidsTV” block which airs on nearly 200 affiliated FOX television stations Saturday mornings. Beginning in September 2008, the Company will also program and sell the national advertising time in the five-hour Saturday morning block on The CW Television Network.

 

Additional information is available on the www.4kidsentertainment.com corporate web site 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.

 

(Tables follow)

4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007 and 2006

(In thousands of dollars, except share data)

 

ASSETS:

 

2007

 

2006

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,872

 

$

18,066

 

Investments

 

 

36,106

 

 

92,910

 

Total cash, cash equivalents and investments

 

 

60,978

 

 

110,976

 

 

 

 

 

 

 

 

 

Accounts receivable - net

 

 

21,403

 

 

27,944

 

Inventories

 

 

611

 

 

—

 

Prepaid income taxes

 

 

1,159

 

 

5,924

 

Prepaid expenses and other current assets

 

 

2,985

 

 

3,916

 

Current assets from discontinued operations

 

 

372

 

 

326

 

Deferred income taxes

 

 

—

 

 

707

 

Total current assets

 

 

87,508

 

 

149,793

 

 

 

 

 

 

 

 

 

Property and equipment - net

 

 

4,255

 

 

2,126

 

Long term investments

 

 

31,806

 

 

—

 

Accounts receivable - noncurrent, net

 

 

208

 

 

138

 

Investment in unconsolidated affiliate

 

 

—

 

 

2,702

 

Film and television costs - net

 

 

14,352

 

 

14,827

 

Non-current assets from discontinued operations

 

 

926

 

 

1,333

 

Deferred income taxes - noncurrent

 

 

—

 

 

1,733

 

Other assets - net (includes related party amounts of $4,265 and $2,664, respectively)

 

 

12,024

 

 

8,743

 

Total assets

 

$

151,079

 

$

181,395

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Due to licensors

 

$

4,420

 

$

6,536

 

Accounts payable and accrued expenses

 

 

14,969

 

 

14,317

 

Current liabilities from discontinued operations

 

 

—

 

 

20

 

Deferred revenue

 

 

2,984

 

 

5,014

 

Total current liabilities

 

 

22,373

 

 

25,887

 

 

 

 

 

 

 

 

 

Deferred rent

 

 

618

 

 

771

 

Total liabilities

 

 

22,991

 

 

26,658

 

 

 

 

 

 

 

 

 

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, 15,099,812 and 14,933,218 shares; outstanding 13,332,207 and         13,183,218 shares in 2007 and 2006, respectively

 

 

151

 

 

149

 

Additional paid-in capital

 

 

63,679

 

 

62,859

 

Accumulated other comprehensive (loss) income

 

 

(2,562)

 

 

1,329

 

Retained earnings

 

 

100,323

 

 

123,649

 

 

 

161,591

 

 

187,986

 

Less cost of 1,767,605 and 1,750,000 treasury shares in 2007 and 2006, respectively

 

 

33,503

 

 

33,249

 

 

 

 

128,088

 

 

154,737

 

Total liabilities and stockholders’ equity

 

$

151,079

 

$

181,395

 

 

 

4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(In thousands of dollars, except share data)

 

 

 

2007

 

 

2006

 

 

2005

 

 

 

 

 

 

 

 

 

 

 

Net revenues

$

55,609

 

$

71,781

 

$

80,607

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

44,180

 

 

39,155

 

 

33,835

 

Production service costs

 

7,195

 

 

11,259

 

 

8,851

 

Cost of sales of trading cards

 

352

 

 

—

 

 

—

 

Amortization of television and film costs

 

8,179

 

 

8,041

 

 

9,790

 

Amortization of 4Kids TV broadcast fee

 

21,472

 

 

22,462

 

 

26,408

 

Total costs and expenses

 

81,378

 

 

80,917

 

 

78,884

 

 

 

 

 

 

 

 

 

 

 

(Loss) Income from operations

 

(25,769

)

 

(9,136

)

 

1,723

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

5,281

 

 

4,143

 

 

2,834

 

Gain on sale of investment in equity securities

 

—

 

 

—

 

 

234

 

Total other income

 

5,281

 

 

4,143

 

 

3,068

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before income taxes

 

(20,488

)

 

(4,993

)

 

4,791

 

 

 

 

 

 

 

 

 

 

 

(Provision for) benefit from income taxes

 

(2,436)

 

 

3,506

 

 

(1,762

)

 

 

 

 

 

 

 

 

 

 

Loss from unconsolidated operations –

 

 

 

 

 

 

 

 

 

net of a tax benefit

 

—

 

 

(280

)

 

—

 

Loss on previously unconsolidated affiliate

 

(498)

 

 

—

 

 

—

 

Minority interest

 

96

 

 

39

 

 

—

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

(23,326

)

 

(1,728

)

 

3,029

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

—

 

 

722

 

 

2,040

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

$

(23,326

)

$

(1,006

)

$

5,069

 

 

 

 

 

 

 

 

 

 

 

Per share amounts:

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per common share

 

 

 

 

 

 

 

 

 

Continuing operations

$

(1.77

)

$

(0.13

)

$

0.23

 

Discontinued operations

 

—

 

 

0.05

 

 

0.16

 

Basic (loss) earnings per common share

$

(1.77

)

$

(0.08

)

$

0.39

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per common share

 

 

 

 

 

 

 

 

 

Continuing operations

$

(1.77

)

$

(0.13

)

$

0.22

 

Discontinued operations

 

—

 

 

0.05

 

 

0.15

 

Diluted (loss) earnings per common share

$

(1.77

)

$

(0.08

)

$

0.37

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares

 

 

 

 

 

 

 

 

 

outstanding - basic

 

13,209,495

 

 

13,104,051

 

 

13,115,687

 

Weighted average common shares

 

 

 

 

 

 

 

 

 

outstanding - diluted

 

13,209,495

 

 

13,104,051

 

 

13,536,830