4Kids Entertainment reported a net income of $34,000 for the second quarter with revenues for the quarter dropping 9% from $18 million in Q2 2005 to $16.7 million in the most recent quarter. Analysts had predicted a quarterly profit of 6 cents per share, and the break-even results announced by 4Kids sent the company's share price plummeting some 11.67%. 4Kids Chairman and CEO Alfred R. Kahn blamed declines in revenue from the company's Teenage Mutant Ninja Turtles and American Kennel Club brands, as well as a $2.2 million one-time charge for severance costs resulting from attempts to lower overhead and reduce costs in the future.
Kahn reported revenue gains from 4Kids' Yu-Gi-Oh!, Cabbage Patch Kids, and The Winx Club brands. Kahn also attributed the slow quarter to 4Kids' new long term strategy, which involves owning intellectual property rather than just licensing it. This fall the company will launch two major initiatives, Chaotic, which 4Kids owns, and Viva Pinata, which 4Kids developed with Microsoft. Chaotic (see '4Kids Launching Chaotic in the Fall'), debuts as an animated series in late September, preparing the way for the launch of the Chaotic Interactive Trading Card Game, which will be introduced in spring of 2007. Viva Pinata also debuts on the 4Kids TV block in the fall, a launch that Microsoft will support with the release of a Viva Pinata videogame for the Xbox 360 during the fourth quarter.
4Kids will also bring its Yu-Gi-Oh! brand into its 4Kids Saturday morning cartoon block for the first time with the Yu-Gi-Oh! Capsule Monsters anime series (see 'Yu-Gi-Oh! Capsule Monsters'), which joins the company's animation block in September -- and those faltering Turtles are getting a sci-fi makeover in the new Teenage Mutant Ninja Turtles Fast Forward cartoon series, which is set 99 years in the future.
4Kids remains well-heeled financially with $113.5 million in the bank and no long term debut, so the company, which should benefit long term from its current cost-cutting measures, can afford to wait and see how some of its new initiatives pan out.
