Loss at 4Kids Widens

NEW YORK: Net revenues at 4Kids Entertainment for 2008 were up 14.6 percent to $63.7 million, but the company’s loss widened from $23.3 million in 2007 to $36.8 million.

In the fourth quarter, meanwhile, revenues fell to $14.3 million from $16.5 million, with a net loss of $19.6 million, up from the year-ago loss of $16.8 million.

“The sharp economic downturn and associated severe deterioration of consumer confidence starting in September 2008 deeply impacted our licensing revenue and trading-card game sales in the fourth quarter," said Alfred R. Kahn, the chairman and CEO of 4Kids Entertainment. "Our results were also impacted by declining licensing revenue throughout the year from some of our more established properties. While we are extremely disappointed by our results for 2008, we implemented significant cost -cutting initiatives in the fourth quarter of 2008 and the first quarter of 2009 that we expect to reduce our operating costs by $25 million in 2009 as compared with 2008."

Kahn continued: “While Chaotic trading card sales for the first nine months of 2008 were in line with our expectations, sales for fourth quarter fell well below our expectations at $0.5 million. This decline in sales is primarily due to retailers and distributors reducing, canceling or returning orders in an effort to reduce their inventory as they respond to the rapid, steep economic decline. In addition to impacting sales, it also triggered an increase in our reserve for returns and allowances and a $3 million write-down of our trading card inventory. Despite the fourth quarter sales numbers, Chaotic finished the year as the number three selling trading card game in the U.S. behind Pokémon and Yu-Gi-Oh!. Looking forward, we believe Chaotic still offers a tremendous opportunity for 4Kids in the future as we roll out the Chaotic trading cards in the U.K., France and Germany during the first half of 2009. Chaotic will also be bolstered by the revised and improved Chaoticgame.com website that went live on March 3 and is now available in English, French, German, Spanish and Italian. We also expect additional Chaotic licensed products to be available from our master toy licensee, Spin Master, and our videogame partner, Activision Publishing, which is scheduled to release a Chaotic video game on the Wii, Nintendo DS, Xbox 360, and PlayStation 3 platforms in fall 2009.”

Commenting on the results, Bruce Foster, CFO at 4Kids, also cited fourth quarter payments to Fox and The CW network of approximately $15 million, as well as an impairment of approximately $13.5 million.