Chaotic stars in Q2 for 4Kids

Revenues boosted by success of trading cards, but core properties Yu-Gi-Oh, TMNT and Cabbage Patch Kids slow.
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4Kids Entertainment has reported net revenues of $16.5 million for the three months ending June 30th, compared to $12.0 million for the same period in 2007.

This revenue included approximately $5.1 million from the sale of Chaotic trading cards at major retailers and comic and hobby stores across the UK and Canada. Revenue for the six month period ending June 30th (which was $31.6 million) included approximately $7.5 million from the sale of Chaotic cards.

"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, chairman and CEO at 4Kids Entertainment. "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, including adding attack animation and sound effects to gameplay, reintroducing the simpler 1 Creature vs 1 Creature gameplay for Chaotic beginners and adding the more demanding 6 vs 6 gameplay for the more experienced Chaotic players.

"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 attributed to higher SG&A costs for the quarter as compared to the second quarter of 2007."

However, despite the success of Chaotic, the second quarter was negatively impacted by lower licensing revenue attributable to 4Kids' core properties, Yu-Gi-Oh, Teenage Mutant Ninja Turtles and Cabbage Patch Kids, Kahn added.

"In order to diversify our licensing business, we have signed agreements to represent two new properties, a popular Russian animated series which we are calling Gogoriki, and a successful specialty store brand called Kooky Klickers," said Kahn. "We expect these new properties, along with Dinosaur King, to begin to contribute to licensing revenues starting in the second half of 2008."

Net loss for Q2 was $5.5 million, as compared with $2.2 million for the same period in 2007. Meanwhile, for the six months ending June 30th, the net loss was $11.9 million, compared to $2.4 million previously.


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