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4Kids' losses widen

By Staff -- Gifts and Dec, 8/11/2008 10:33:00 AM

NEW YORK—Higher costs and lower licensing revenue outpaced overall sales gains for the Chaotic trading card game, leading children’s programmer 4Kids Entertainment’s to report a wider net loss during the quarter ended on June 30, 2008.

Net revenues for the three months ended June 30, 2008 totaled $16.5 million, up from $12.0 million for the same period in 2007. Revenue for 2008’s second quarter included approximately $5.1 million from the sale of Chaotic trading cards at major retailers and comic and hobby stores across the U.S. and Canada.

The company’s net loss for the quarter was $5.5 million, or $0.42 per diluted share, as compared to a net loss of $2.2 million, or $0.17 per diluted share, for the same period in 2007.

“Our second quarter results reflect increasing Chaotic trading card sales, which we expect will ramp up considerably in the second half of the year,” said Alfred R. Kahn, 4Kids’ chairman and CEO. “We believe that we are on track to meet our previously announced target of $20-$30 million in Chaotic trading card sales for 2008. We have made several scheduled improvements to the Chaotic website … We expect that these initiatives will result in faster growth for the Chaotic online community. However, in the short term, expenditures related to improvements on the Chaotic Website and trading card company operations contributed to higher SG&A costs for the quarter as compared to the second quarter of 2007.”

Kahn added that, “although Chaotic trading card sales came in on plan, the second quarter was negatively impacted by lower licensing revenue attributable to our core properties—Yu-Gi-Oh!, Teenage Mutant Ninja Turtles and Cabbage Patch Kids—as compared to the second quarter of 2007.”

In order to diversify its licensing portfolio, 4Kids recently signed agreements to represent two additional properties: a popular Russian animated series that 4Kids is calling GOGORiKi and the Kooky Klickers brand of novelty pens. “We expect these new properties, along with Dinosaur King, to begin to contribute to licensing revenues starting in the second half of 2008,” Kahn said.

For the six months ended June 30, 2008, 4Kids’ net revenues totaled $31.6 million, up from $26.9 million for the same period in 2007. Revenue for the period included approximately $7.5 million from the sale of Chaotic trading cards.

The company’s net loss for the six months ended June 30, 2008, was $11.9 million, up from a net loss of $2.4 million for the corresponding period in 2007.

The company is “optimistic about the second half and excited by our prospects in 2009,” said Kahn. That outlook is in part fueled by the expansion of its children’s television programming to a combined nine hours of Saturday mornings on both The CW Network and on Fox, including three shows slated to debut in the first quarter of 2009: Kamen Rider–Dragon Knight, Huntik and RollBots.

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