4Kids Entertainment Reports Third Quarter 2006 Results
NEW YORK--(BUSINESS WIRE)--4Kids Entertainment, Inc. (NYSE: KDE - News), a global provider of children's entertainment and merchandise licensing, today announced financial results for the quarter ended September 30, 2006.
ADVERTISEMENT
Net revenues in the third quarter of 2006 totaled $17.6 million from continuing operations as compared to $19.5 million for the same period last year. The Company's net loss for the quarter ended September 30, 2006 was $(265,000), or $(0.02) per diluted share (consisting of a loss from continuing operations for the third quarter of $(231,000), or $(0.02) per diluted share and a loss from discontinued operations of $(34,000), or $0.00 per diluted share), as compared to net income of $2.0 million, or $0.15 per diluted share, for the third quarter of 2005 (consisting of income from continuing operations of $1.8 million, or $0.14 per diluted share and income from discontinued operations of $180,000, or $0.01 per diluted share). The diluted weighted average common shares outstanding for the quarter ended September 30, 2006 were 13,100,477 shares as compared with 13,424,913 shares for the quarter ended September 30, 2005. Since the Company's media buying subsidiary, The Summit Media Group, Inc., ceased operations as of June 30, 2006, the Company reports Summit's results as a discontinued operation.
For the nine months ended September 30, 2006, net revenues totaled $53.5 million from continuing operations compared to $57.1 million for the same period last year. The Company's net income for the nine months ended September 30, 2006 was $1.3 million, or $0.10 per diluted share (consisting of income from continuing operations of $775,000, or $0.06 per diluted share and income from discontinued operations of $542,000, or $0.04 per diluted share), as compared to net income for the nine months ended September 30, 2005 of $4.6 million, or $0.33 per diluted share (consisting of income from continuing operations of $4.2 million, or $0.31 per diluted share and income from discontinued operations of $359,000, or $0.02 per diluted share). The diluted weighted average common shares outstanding for the nine months ended September 30, 2006 were 13,373,422 shares compared with 13,651,572 shares for the nine months ended September 30, 2005.
Alfred R. Kahn, 4Kids Entertainment's Chairman and Chief Executive Officer, said, "During the third quarter, our revenues declined by $2.0 million compared with the same period in 2005. The Company's lower revenues in the third quarter of 2006 resulted principally from declines in merchandise licensing revenues from our more established properties, Yu-Gi-Oh!(TM) and Teenage Mutant Ninja Turtles(TM). The Company has not yet realized any of the expected merchandise licensing revenues from its new properties, Viva Pinata(TM) and Chaotic(TM). In addition, we did not realize any revenues in the third quarter of 2006 from the long term extension of the Cabbage Patch Kids(TM) master toy agreement that was signed with Play Along, a division of Jakks Pacific in October, 2006." said Kahn.
"We look forward to 2007 when our promising new properties, "Viva Pinata" and "Chaotic," are expected to be among the significant contributors to the Company's revenues. Next week, Microsoft will release the first "Viva Pinata" videogame exclusively for Xbox 360. In January 2007, "Chaotic," our new animated TV series featuring cards imprinted with codes that enable the cards to be digitally uploaded to the "Chaotic" website, returns to 4Kids TV(TM) with new episodes. We also expect the "Chaotic" trading card game to be available at retail by late spring 2007 along with the "Chaotic" website. The Company should also benefit from the scheduled March 23, 2007 theatrical release by Warner Bros. and The Weinstein Company of TMNT, the highly-anticipated CG-animated movie featuring the Teenage Mutant Ninja Turtles. We further anticipate that significant savings from our cost-cutting initiatives will begin to impact the bottom-line beginning in the fourth quarter of 2006 and continuing into 2007," said Kahn.
"With $116.3 million in total cash and investments and no debt, we continue to be well situated to take advantage of opportunities to expand our content and distribution and build shareholder value," concluded Kahn.
About 4Kids Entertainment
Headquartered in New York City with an international office in London, 4Kids Entertainment, Inc. (NYSE: KDE - News), is a global provider of children's entertainment and merchandise licensing. 4Kids, through its wholly owned subsidiaries, provides domestic and international merchandise licensing; product development; television, film, music and home video production and distribution; media planning and buying; and Web site development. For further information, please visit the Company's Web site at www.4KidsEntertainment.com.
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.
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 and DECEMBER 31, 2005
(In thousands of dollars, except share data)
Assets 2006 2005
Current assets: (Unaudited)
Cash and cash equivalents $18,666 $35,142
Investments 97,600 78,383
-----------------
Total cash and investments 116,266 113,525
Accounts receivable - net 24,699 32,193
Prepaid 4Kids TV broadcast fee, net of
accumulated amortization of $105,886
and $90,714 in 2006 and 2005,
respectively --- 6,606
Prepaid income taxes 4,135 2,312
Prepaid expenses and other current
assets 4,838 1,683
Current assets from discontinued
operations 1,667 2,316
Deferred income taxes 610 466
-----------------
Total current assets 152,215 159,101
Property and equipment - net 2,057 2,853
Other assets:
Accounts receivable - noncurrent, net 528 891
Film and television costs - net 16,103 12,208
Deferred income taxes - noncurrent 1,024 1,971
Other assets - net 7,685 6,914
-----------------
Total assets $179,612 $183,938
=========================
Liabilities and Stockholders' Equity
Current liabilities:
Due to licensors $ 6,839 $ 13,503
Accounts payable and accrued expenses 10,750 9,239
Current liabilities from discontinued
operations 150 1,486
Deferred revenue 4,975 5,297
-----------------
Total current liabilities 22,714 29,525
Deferred rent 835 1,016
-----------------
Total liabilities 23,549 30,541
-----------------
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,
14,884,368 and 14,826,643 shares;
outstanding 13,134,368 and 13,076,643
shares in 2006 and 2005, respectively 149 148
Additional paid-in capital 62,185 61,415
Accumulated other comprehensive income 1,006 428
Retained earnings 125,972 124,655
-----------------
189,312 186,646
Less- cost of 1,750,000 treasury shares
in 2006 and 2005 33,249 33,249
-----------------
156,063 153,397
Total liabilities and stockholders' equity $179,612 $183,938
=========================
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(In thousands of dollars, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net revenues $17,562 $19,492 $53,487 $57,100
----------------------- -----------------------
Costs and expenses:
Selling, general and
administrative 9,278 8,117 27,840 24,610
Production service
costs 3,225 2,093 9,256 6,215
Amortization of
television and film
costs 1,759 2,144 4,776 5,989
Amortization of
4Kids TV broadcast
fee 5,490 5,104 15,172 15,662
----------------------- ----------- -----------
Total costs and
expenses 19,752 17,458 57,044 52,476
----------------------- ----------- -----------
(Loss) income from
operations (2,190) 2,034 (3,557) 4,624
Interest income 1,114 654 3,010 2,054
----------------------- ----------- -----------
(Loss) income before
income taxes (1,076) 2,688 (547) 6,678
(Benefit) provision
for income taxes (845) 890 (1,322) 2,464
----------- ----------- ----------- -----------
(Loss) income from
continuing
operations ($231) $1,798 $775 $4,214
(Loss) income from
discontinued
operations ($34) $180 $542 $359
----------- ----------- ----------- -----------
Net (loss) income ($265) $1,978 $1,317 $4,573
=========== =========== =========== ===========
Per share amounts:
Basic (loss)
earnings per common
share
Continuing
Operations ($0.02) $0.14 $0.06 $0.32
Discontinued
Operations $0.00 $0.01 $0.04 $0.03
----------- ----------- ----------- -----------
Basic (loss)earnings
per common share ($0.02) $0.15 $0.10 $0.35
=========== =========== =========== ===========
Diluted (loss)
earnings per common
share
Continuing
Operations ($0.02) $0.14 $0.06 $0.31
Discontinued
Operations $0.00 $0.01 $0.04 $0.02
----------- ----------- ----------- -----------
Diluted (loss)
earnings per common
share ($0.02) $0.15 $0.10 $0.33
=========== =========== =========== ===========
Weighted average
common shares
outstanding - basic 13,100,477 13,000,418 13,089,511 13,209,094
=========== =========== =========== ===========
Weighted average
common shares
outstanding -
diluted 13,100,477 13,424,913 13,373,422 13,651,572
=========== =========== =========== ===========
ADVERTISEMENT
Net revenues in the third quarter of 2006 totaled $17.6 million from continuing operations as compared to $19.5 million for the same period last year. The Company's net loss for the quarter ended September 30, 2006 was $(265,000), or $(0.02) per diluted share (consisting of a loss from continuing operations for the third quarter of $(231,000), or $(0.02) per diluted share and a loss from discontinued operations of $(34,000), or $0.00 per diluted share), as compared to net income of $2.0 million, or $0.15 per diluted share, for the third quarter of 2005 (consisting of income from continuing operations of $1.8 million, or $0.14 per diluted share and income from discontinued operations of $180,000, or $0.01 per diluted share). The diluted weighted average common shares outstanding for the quarter ended September 30, 2006 were 13,100,477 shares as compared with 13,424,913 shares for the quarter ended September 30, 2005. Since the Company's media buying subsidiary, The Summit Media Group, Inc., ceased operations as of June 30, 2006, the Company reports Summit's results as a discontinued operation.
For the nine months ended September 30, 2006, net revenues totaled $53.5 million from continuing operations compared to $57.1 million for the same period last year. The Company's net income for the nine months ended September 30, 2006 was $1.3 million, or $0.10 per diluted share (consisting of income from continuing operations of $775,000, or $0.06 per diluted share and income from discontinued operations of $542,000, or $0.04 per diluted share), as compared to net income for the nine months ended September 30, 2005 of $4.6 million, or $0.33 per diluted share (consisting of income from continuing operations of $4.2 million, or $0.31 per diluted share and income from discontinued operations of $359,000, or $0.02 per diluted share). The diluted weighted average common shares outstanding for the nine months ended September 30, 2006 were 13,373,422 shares compared with 13,651,572 shares for the nine months ended September 30, 2005.
Alfred R. Kahn, 4Kids Entertainment's Chairman and Chief Executive Officer, said, "During the third quarter, our revenues declined by $2.0 million compared with the same period in 2005. The Company's lower revenues in the third quarter of 2006 resulted principally from declines in merchandise licensing revenues from our more established properties, Yu-Gi-Oh!(TM) and Teenage Mutant Ninja Turtles(TM). The Company has not yet realized any of the expected merchandise licensing revenues from its new properties, Viva Pinata(TM) and Chaotic(TM). In addition, we did not realize any revenues in the third quarter of 2006 from the long term extension of the Cabbage Patch Kids(TM) master toy agreement that was signed with Play Along, a division of Jakks Pacific in October, 2006." said Kahn.
"We look forward to 2007 when our promising new properties, "Viva Pinata" and "Chaotic," are expected to be among the significant contributors to the Company's revenues. Next week, Microsoft will release the first "Viva Pinata" videogame exclusively for Xbox 360. In January 2007, "Chaotic," our new animated TV series featuring cards imprinted with codes that enable the cards to be digitally uploaded to the "Chaotic" website, returns to 4Kids TV(TM) with new episodes. We also expect the "Chaotic" trading card game to be available at retail by late spring 2007 along with the "Chaotic" website. The Company should also benefit from the scheduled March 23, 2007 theatrical release by Warner Bros. and The Weinstein Company of TMNT, the highly-anticipated CG-animated movie featuring the Teenage Mutant Ninja Turtles. We further anticipate that significant savings from our cost-cutting initiatives will begin to impact the bottom-line beginning in the fourth quarter of 2006 and continuing into 2007," said Kahn.
"With $116.3 million in total cash and investments and no debt, we continue to be well situated to take advantage of opportunities to expand our content and distribution and build shareholder value," concluded Kahn.
About 4Kids Entertainment
Headquartered in New York City with an international office in London, 4Kids Entertainment, Inc. (NYSE: KDE - News), is a global provider of children's entertainment and merchandise licensing. 4Kids, through its wholly owned subsidiaries, provides domestic and international merchandise licensing; product development; television, film, music and home video production and distribution; media planning and buying; and Web site development. For further information, please visit the Company's Web site at www.4KidsEntertainment.com.
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.
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 and DECEMBER 31, 2005
(In thousands of dollars, except share data)
Assets 2006 2005
Current assets: (Unaudited)
Cash and cash equivalents $18,666 $35,142
Investments 97,600 78,383
-----------------
Total cash and investments 116,266 113,525
Accounts receivable - net 24,699 32,193
Prepaid 4Kids TV broadcast fee, net of
accumulated amortization of $105,886
and $90,714 in 2006 and 2005,
respectively --- 6,606
Prepaid income taxes 4,135 2,312
Prepaid expenses and other current
assets 4,838 1,683
Current assets from discontinued
operations 1,667 2,316
Deferred income taxes 610 466
-----------------
Total current assets 152,215 159,101
Property and equipment - net 2,057 2,853
Other assets:
Accounts receivable - noncurrent, net 528 891
Film and television costs - net 16,103 12,208
Deferred income taxes - noncurrent 1,024 1,971
Other assets - net 7,685 6,914
-----------------
Total assets $179,612 $183,938
=========================
Liabilities and Stockholders' Equity
Current liabilities:
Due to licensors $ 6,839 $ 13,503
Accounts payable and accrued expenses 10,750 9,239
Current liabilities from discontinued
operations 150 1,486
Deferred revenue 4,975 5,297
-----------------
Total current liabilities 22,714 29,525
Deferred rent 835 1,016
-----------------
Total liabilities 23,549 30,541
-----------------
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,
14,884,368 and 14,826,643 shares;
outstanding 13,134,368 and 13,076,643
shares in 2006 and 2005, respectively 149 148
Additional paid-in capital 62,185 61,415
Accumulated other comprehensive income 1,006 428
Retained earnings 125,972 124,655
-----------------
189,312 186,646
Less- cost of 1,750,000 treasury shares
in 2006 and 2005 33,249 33,249
-----------------
156,063 153,397
Total liabilities and stockholders' equity $179,612 $183,938
=========================
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(In thousands of dollars, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net revenues $17,562 $19,492 $53,487 $57,100
----------------------- -----------------------
Costs and expenses:
Selling, general and
administrative 9,278 8,117 27,840 24,610
Production service
costs 3,225 2,093 9,256 6,215
Amortization of
television and film
costs 1,759 2,144 4,776 5,989
Amortization of
4Kids TV broadcast
fee 5,490 5,104 15,172 15,662
----------------------- ----------- -----------
Total costs and
expenses 19,752 17,458 57,044 52,476
----------------------- ----------- -----------
(Loss) income from
operations (2,190) 2,034 (3,557) 4,624
Interest income 1,114 654 3,010 2,054
----------------------- ----------- -----------
(Loss) income before
income taxes (1,076) 2,688 (547) 6,678
(Benefit) provision
for income taxes (845) 890 (1,322) 2,464
----------- ----------- ----------- -----------
(Loss) income from
continuing
operations ($231) $1,798 $775 $4,214
(Loss) income from
discontinued
operations ($34) $180 $542 $359
----------- ----------- ----------- -----------
Net (loss) income ($265) $1,978 $1,317 $4,573
=========== =========== =========== ===========
Per share amounts:
Basic (loss)
earnings per common
share
Continuing
Operations ($0.02) $0.14 $0.06 $0.32
Discontinued
Operations $0.00 $0.01 $0.04 $0.03
----------- ----------- ----------- -----------
Basic (loss)earnings
per common share ($0.02) $0.15 $0.10 $0.35
=========== =========== =========== ===========
Diluted (loss)
earnings per common
share
Continuing
Operations ($0.02) $0.14 $0.06 $0.31
Discontinued
Operations $0.00 $0.01 $0.04 $0.02
----------- ----------- ----------- -----------
Diluted (loss)
earnings per common
share ($0.02) $0.15 $0.10 $0.33
=========== =========== =========== ===========
Weighted average
common shares
outstanding - basic 13,100,477 13,000,418 13,089,511 13,209,094
=========== =========== =========== ===========
Weighted average
common shares
outstanding -
diluted 13,100,477 13,424,913 13,373,422 13,651,572
=========== =========== =========== ===========
bookmark/share with:
