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4Kids' losses rise on revenue drop

By Staff -- Gifts and Dec, 8/10/2009 8:56:00 AM

NEW YORK—4Kids Entertainment reported a 73 percent drop in second quarter revenue on its way to a nearly 14 million loss, its bottom line hampered by a one-time charge and delayed accounting for Chaotic trading card game sales.

Net revenues for the three months ended June 30, 2009, totaled $4.4 million, down from the $16.5 million tallied in the corresponding period of 2008. The company’s net loss attributable to 4Kids Entertainment for the time frame 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.

“Our second-quarter results were negatively impacted by a number of factors,” said Alfred R. Kahn, 4Kids’ chairman and CEO. "First, the company realized a non-recurring loss of $7.25 million, worth $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.”

According to Kahn, although 4Kids shipped $2.6 million of Chaotic trading card sales in the second quarter, the company was unable to recognize the majority of those sales as second quarter revenue as it 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," Kahn explained.

For the six months ended on June 30, net revenues totaled $14.6 million, down from $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.

Looking forward, Kahn noted that sales of Chaotic trading cards in the U.S. “have steadily increased since the debut of the Chaotic television series on Cartoon Network in June” and had more than doubled in the preceding eight weeks.

“We look forward to Chaotic trading card sales making a substantial contribution to 4Kids revenue in the second half of the year," Kahn said.

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