Loss Widens at 4Kids

NEW YORK: With its second quarter revenues down from $16.5 million to $4.4 million, 4Kids Entertainment has recorded a wider loss for the period, of $13.8 million, as compared with the year-ago net loss of $5.5 million.

The results come a few days after 4Kids announced that it had retained Montgomery & Co. to help the board explore its options for the future, including the sale of the company.

“Our second-quarter results were negatively impacted by a number of factors,” stated Alfred R. Kahn, the chairman and CEO of 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."

Kahn continued: "While we are disappointed in the results for this quarter, I am pleased to report 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. Over the past eight weeks, Chaotic trading card sales in the U.S. 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."