CINAR Corporation Reports On Fiscal 2000 Activities in a Letter to Shareholders and Announces a Legal Claim by Twin Sisters Productions.Business Editors MONTREAL--(BUSINESS WIRE)--April 9, 2001 CINAR Corporation has released a letter to shareholders (see attached document) providing its financial information for the past fiscal year ended November 30, 2000. The letter also offers an update of the company's continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the in its Entertainment and Education Divisions. The letter mailed to shareholders and made public today acts as the Company's semi-monthly status update in compliance with orders from the Quebec Securities Commission (Commission des valeurs mobilieres du Quebec). The Company was informed on April 3, 2001, that the former shareholders of Twin Sisters Productions brought legal action against the Company in the United States District Court United States District Court In the U.S., any of the 94 trial courts of general jurisdiction in the federal judicial system. Each state, as well as the District of Columbia and the Commonwealth of Puerto Rico, has at least one federal district court. - Eastern District of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of alleging misrepresentations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc earn-out clauses as well as other considerations negotiated during the acquisition by CINAR of Twin Sisters Productions Inc. and Twin Sisters Licensing on February 22, 2000. The claim should not affect Twin Sisters' day-to-day operations, nor should it affect the subsidiary's projects in support of CINAR's ongoing business. CINAR will continue to issue its semi-monthly status report by way of news releases, as it has since April 20, 2000. CINAR Corporation is an integrated entertainment and education company involved in the development, production, post-production and worldwide distribution of non-violent, quality programming and educational products for children and families. CINAR's web site is www.cinar.com. This release may include information that could constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provision of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 (U.S.). Forward-looking statements are identified by words such as "believe", "anticipate", "expect", "intend", "plan", "will", "may" and other similar expressions. Actual results or conditions may differ from those anticipated by these and other forward-looking statements. Such forward-looking statements are subject to a number of known or unknown risks and uncertainties. April 6, 2001 Dear Shareholder, The purpose of this report is to provide you with CINAR's financial information for the past fiscal year ended November 30, 2000, and, at the same time, to bring you up to date on CINAR's ongoing operations. Please note that, as was the November 30, 1999 financial information released this past January, the financial information in this Report is unaudited because current senior management cannot currently provide the required assurances with respect to financial periods prior to its appointment. As previously indicated, senior management may be in a position to provide these assurances after completion of the 2001 financial year. HIGHLIGHTS OF THE FINANCIAL INFORMATION Readers are cautioned that the financial information, including the restated information provided by the Company including that summarized below, may not fairly and accurately present the financial position of the Company or the results of its operations and cash flows for the years ended November 30, 2000 and November 30, 1999, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). The Company believes that the financial information provided herein has been prepared on the basis of the best information presently available to the Company. However, neither the Company nor any of its directors, officers, employees, agents or advisors makes any representations regarding the accuracy or completeness of such financial information. The following unaudited financial information includes results for the fiscal years ended November 30, 2000 and November 30, 1999. Revenues for the year ended November 30, 2000 were $153.1 million, a decrease of 11% from the $172.6 million of revenues earned by the Company during the year ended November 30, 1999. The decrease is mainly a result of lower revenues in the Company's Entertainment Division. [pilcrow (paragraph sign)] The consolidated cost of sales was $84.3 million in 2000 compared to $111.4 million in 1999 representing a decrease of 24%. The decrease is largely attributable to a foreign exchange gain of $4.8 million realized in fiscal 2000 as opposed to a foreign exchange loss of $13.7 million realized in fiscal 1999 mainly due to fluctuations in the U.S. dollar. In addition, the Company acquired certain rights with respect to a film property, which it expensed in fiscal 1999. No such rights were acquired in fiscal 2000. Selling, general and administrative expenses rose to $59.1 million in fiscal 2000, an increase of 11% from the $53.4 million incurred in fiscal 1999. The increase is attributable to higher marketing related expenses in our Education Division to support the continued growth of our product lines. For the fiscal year ended November 30, 2000, the Company suffered a loss of $55.8 million essentially due to a number of unusual items that adversely affected its earnings for the period, resulting in the Company taking a non-recurring charge of $53.3 million. The unusual items are briefly described below:
1. On October 29, 1999, the Company acquired shares of Lightspan Inc.,
a San Diego-based company, specializing in curriculum-based
educational software, for cash consideration of $18.5 million. On
February 15, 2000, CINAR made a further investment in shares of
Lightspan for cash consideration of $15.7 million. As at November
2000, the Company's investment had an aggregate market value of
$3.3 million. The impairment in value of the investment is not
considered to be temporary and management has recorded a non-cash
charge of $30.9 million to write down the investment to its net
realizable value;
2. Professional fees in the amount of $14 million were incurred
related to issues surrounding the Company, which have been
discussed in earlier press releases;
3. Interest and penalties in the amount of $7.4 million were incurred
pursuant to the tax settlements entered into with both the federal
and provincial governments;
4. During fiscal 1999, the Company reserved for amounts not yet
received from Globe-X Management Limited ("Globe-X") as at the date
of issue of the November 30, 1999 financial information totaling
$63 million. Subsequent to this date, the Company has recovered
certain amounts from Globe-X related to amounts previously reserved
for. As a result, the Company has realized a recovery of $2.4
million against such previous provisions;
5. A reserve in the amount of $2.7 million was established for
transactions with related parties;
6. The Company has taken a non-cash charge of $649,000 to write down
its 50% shareholding in SMEC, an animation studio located in China,
to its estimated net realizable value.
Detailed financial data and accompanying notes related to it are attached to this report. HIGHLIGHTS OF OPERATING ACTIVITIES CINAR ENTERTAINMENT Despite the difficulties CINAR has faced these past 18 months, the one thing that has not changed, is the quality of programming being produced by the company on an ongoing basis. We were advised recently we have been nominated nom·i·nate tr.v. nom·i·nat·ed, nom·i·nat·ing, nom·i·nates 1. To propose by name as a candidate, especially for election. 2. To designate or appoint to an office, responsibility, or honor. for four more Emmy awards Emmy award Annual presentation for outstanding achievement in U.S. television. Its name is taken from the nickname “immy” for the image orthicon, a television camera tube. , two for Arthur(R) (outstanding children's animated program and outstanding achievement in sound mixing) and two for Zoboomafoo(TM) (outstanding directing in a children's series and outstanding achievement in single camera editing). Arthur(R) has also most recently received a Peabody Award The George Foster Peabody Awards, more commonly referred to as the Peabody Awards, are annual international awards given for excellence in radio and television broadcasting. , the most prestigious recognition of excellence in broadcasting and cable. This speaks volumes I believe for the people at CINAR and the quality work they continue to produce in what are not the easiest of times. I take my hat off to them. In the year 2000, we produced 226 half-hours of programming, increasing the size of our library to 2,074 half-hours in total, representing 152 titles. In 2001, we plan to complete the production of 72 half-hours which were started last year, and to date in fiscal 2001 we have begun production of 49 new half hours for a total production commitment to date of 121 half-hours. Clearly our 2001 production volume will be at a substantially lower level than in the recent past and there are two reasons for that. First, our suspension from funding and certification by Telefilm tel·e·film n. A film produced for television broadcasting. Noun 1. telefilm - a movie that is made to be shown on television Canada makes it impossible to do co-productions with our traditional partners. CINAR's share of production costs are financed internally out of available cash. We presently have approximately CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $40 million in cash, however, we have significant seasonal cash needs in the Education Division and prudence dictates we manage our cash carefully. Second, in keeping our 2001 production volume at a reduced, yet still substantial level, we have tried to keep a balance, recognizing the future direction of CINAR may change in the coming months as a result of the Company's continuing sale process. As well, we are being prudent in the area of development. We are in negotiation on some properties, have secured the rights on others, and are completely developed in others in order to be poised to proceed with well-positioned properties. The shows continue to enjoy popular support among children and parents. Arthur(R), of course, with WGBH in Boston for PBS PBS in full Public Broadcasting Service Private, nonprofit U.S. corporation of public television stations. PBS provides its member stations, which are supported by public funds and private contributions rather than by commercials, with educational, cultural, maintains its standing as one of the most watched children's shows on television and Caillou(R), which launched on PBS Kids PBS Kids (often styled all-caps as "PBS KIDS") is the umbrella brand for children's programming aired by the Public Broadcasting Service in the United States. As with all PBS programming, PBS Kids programming is non-commercial. Ready-to-Learn Service this past September, now reaches 96% of U.S. households. Child Magazine calls Caillou(R) "one of the best new preschool series to come along in years" and rates it a perfect "4 out of 4". In Canada, Caillou(R) is the number one rated show on Teletoon's English network with kids 2 to 5. It is also among the top 10 shows on Teletoon's French language network. Zoboomafoo(TM) is tremendously popular as well with nearly four million children viewing it on PBS Kids each week. Although it is still very much in its early stages, thanks to our popular properties on PBS such as Arthur(R), Caillou(R) and Zoboomafoo(TM), our merchandising business continues to grow nicely as a key initiative within CINAR. CINAR EDUCATION CINAR Education had another year of positive growth in 2000 with revenues of $77.2 million increasing 16.5% compared with 1999. Revenue included 9 months results of Twin Sisters Productions which we acquired in February 2000. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (Earnings Before Interest, Taxes, Depreciation and Amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Carson-Dellosa has added over 120 new products for the 2001 back-to-school season. HighReach launched its first National Head Start Association co-branded product recently, the Wimzie's House Wimzie's House was a Canadian produced children's television program which ran on YTV from 1995 to 1996 and in the United States on PBS from 1997 to 2001[1]. (R) character education set and was instrumental in producing the PBS outreach Outreach is an effort by an organization or group to connect its ideas or practices to the efforts of other organizations, groups, specific audiences or the general public. caregivers guides for Caillou(R) and Zoboomafoo(TM). The Twin Sisters Album, Mozart Before You Were Born, was chosen as a recipient of the coveted cov·et v. cov·et·ed, cov·et·ing, cov·ets v.tr. 1. To feel blameworthy desire for (that which is another's). See Synonyms at envy. 2. To wish for longingly. See Synonyms at desire. 2000 NAPPA (National Parenting Publication Award) Gold Award and Multiplication multiplication, fundamental operation in arithmetic and algebra. Multiplication by a whole number can be interpreted as successive addition. For example, a number N multiplied by 3 is N + N + N. received Dr. Toy's 1000 Best Educational Products Award for 2000. EDUSOFT Edusoft has been a disappointment since being acquired by CINAR two years ago. Sales in 2001 totaled $5.8 million resulting in negative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $2.0 million. We are exploring ways by which we can resolve operating issues, but, in view of results to date, we are reluctant to contribute additional capital to this business. There are two other issues I feel it is important to report on. These are Government Relations and Investments. GOVERNMENT RELATIONS Since settling the tax credit issues with Canada Customs and Revenue Agency Canada Customs and Revenue Agency was a department of the government of Canada. It split up into:
CRTC Combat Readiness Training Center CRTC Cathode Ray Tube Controller CRTC China Railway Telecommunications Center CRTC Cold Region Test Center CRTC Continuously Regenerated Trap Column ) in an effort to regularize reg·u·lar·ize tr.v. reg·u·lar·ized, reg·u·lar·iz·ing, reg·u·lar·iz·es To make regular; cause to conform. reg matters with them. The discussions have been constructive and we expect to reach final resolutions with them shortly. INVESTMENTS The funds invested with Globe-X Management continue to flow back to CINAR, at a slower pace than contemplated in the agreement signed in October 2000. Since that October agreement was executed, we have received U.S.$5.7 million, leaving a balance owing of U.S.$45.2 million. Globe-X Management is, we are told, endeavoring to monetize Monetize 1. To convert into money. 2. To convert from securities into currency that can be used to purchase goods and services. Notes: For example, you'll often hear Internet marketers talk about "monetizing website visitors. certain assets in order to retire its debt owed to CINAR. It is communicating with the Company on a weekly basis to allow us to monitor the situation. In closing, I want to thank and express my very sincere appreciation to all CINAR employees for their commitment to the company in the past year. Despite the challenges we have faced, we have continued to record significant achievements in our businesses and our talented, dedicated people have made that happen. Yours sincerely, Barrie Usher USHER. This word is said to be derived from a huissier, and is the name of an inferior officer in some English courts of law Archb. Pr. 25. President and Chief Executive Officer |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion