'SHREK' PRODUCTS PACE RECORD EARNINGS FOR TDK.

Byline: Gregory J. Wilcox Staff Writer

CALABASAS - Strong sales of ``Shrek''-related products sent third- quarter earnings skyrocketing 329 percent at software maker TDK Mediactive Inc., company officials said Tuesday.

The Calabasas-based company earned $827,825, or 4 cents per share, on record sales of $16.5 million during the quarter that ended Dec. 31. This compares with earnings of $142,446, or 1 cent per share, on revenue of $3.8 million in the like period a year earlier.

Last month company officials predicted quarterly sales of 310 percent, the first time they issued guidance to the investment community.

More good news is apparently in the offing.

``For 2002, we expect to see an acceleration of video game hardware system penetration and anticipate that our licensing agreements with DreamWorks, Mattel, DC Comics and Hallmark will provide even more momentum going into what we believe will be a period of significant growth for our industry,'' Vincent Bitetti, the company's chief executive officer, said in writing.

The first nine months of the fiscal year have been equally impressive.

For the period that ended Dec. 31, TDK reported revenues of $24.9 million, a 347 percent increase from $5.6 million in the year-earlier period.

Net income totaled $357,071, or 2 cents per share, versus a net loss of $549,838, equal for 4 cents per share, in the prior year.

The company has not issued specific earnings guidance but expects to finish the fiscal year in the black.

``We're pleased with the volume, and we're pleased with the bottom line. It's a pretty good result,'' said chief financial officer Marty Paravato.

During the 2001 third quarter TDK's cost of sales made an equally impressive jump to $12.2 million from $2.4 million in the year-ago period.

That reflected a different product mix, Paravato explained.

A year ago the company was making products for personal computers.

Now it also is into current and next generation video games based on content derived from major motion pictures, video franchises, popular literature and popular culture.

So license fees contribute to the higher cost of sales, he said.

``PC products required a small diskette. Now you're not only paying for the cost of the diskette but also the royalty to Sony or Microsoft depending on where the product is coming from,'' he said.

The company currently has nine titles in its product lineup and will increase the number to 17 in the next fiscal year, Paravato said.

The company is also trying to generate interest in the analyst community and resume trading on the Nasdaq.

TDK's stock was delisted from the Nasdaq in 1999 and now traded on the OTC's bulletin board.

To get back to the Nasdaq the stock must trade over $4 a share for 90 days, Paravato said.

TDK's shares closed Tuesday at $1.90, down 10 cents or 5 percent.

The company technology and content licenses partners include Sony Computer Entertainment America Inc., Microsoft Corp., Nintendo of America Inc., DreamWorks SKG, Universal Studios, Mattel, Classic Media, R & S Trading, Signatures Network, BKN International, DC Comics and Hallmark.