CINAR Releases First Quarter Financial Results: Reports Improved Margins and Net Earnings From Core Businesses.Business Editors MONTREAL Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. , Quebec--(BUSINESS WIRE)--April 24, 2003 CINAR Corporation today released unaudited consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: financial information for the three-month period ended February February: see month. 28, 2003. The results indicate improved margins and net earnings from the core Entertainment and Education businesses as the Company gears up for product diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and growth. Education revenues, at $16 million, maintained the high level attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. in fiscal 2002 despite the loss of revenues entailed by the sale of Twin Sisters in December December: see month. 2002. Entertainment revenues decreased from $5.6 to $4.5 million due to the fact that the Company's production schedule called for no deliveries in the first quarter of 2003. As a result, consolidated revenues decreased 5.4% from $21.6 to $20.5 million. The consolidated gross margin increased by almost 10%, from $9.1 to $10 million. Education gross margin increased from $8.1 to $8.4 million largely due to sales of products with higher margins, whereas Entertainment gross margin increased from $1.1 to $1.6 million due to a reduction in distribution expenses as well as film cost write downs taken in the first quarter of 2002 which were not required in 2003. "Since joining CINAR in February, I am extremely encouraged by the Company's continued ability to generate excellent revenues as we work to create a fully integrated entertainment and education business," said Stuart Snyder Snyder, city (1990 pop. 12,195), seat of Scurry co., NW Tex., in a prairie and mesquite region; inc. 1907. Oil production is the city's main industry; natural gas is also refined and processed. , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "We will drive profits from a growing and diverse range of recognized brands and new programs addressing markets that we intend to expand to include 6- to 11-year-olds," he concluded. Consolidated selling general and administrative expenses decreased slightly from $9.3 to $9.2 million reflecting the Company's continued emphasis on tight budget controls. During the quarter, due to the strengthening of the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents relative to the U.S. dollar, the Company recorded an unrealized foreign exchange loss of $4.7 million compared to a foreign exchange gain of $1.2 million for the corresponding period of 2002. It is important to note that this foreign exchange loss is essentially related to a U.S.-denominated inter-company loan due by Education to CINAR Corporation, its parent. The Company recorded an unusual expense recovery of $.4 million compared to a recovery of $1.2 million for the corresponding period of 2002. The recovery in 2003 relates to the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. following the successful sub-leasing of office space no longer used in current operations. The recovery in 2002 related essentially to sums recovered from Globe-X. The Company's share of earnings in Teletoon Teletoon, a portmanteau of "television" and "cartoon", is a name used for three cable and satellite animation channels: Teletoon Channels from Canada
Thus, due to the foreign exchange loss discussed earlier, the Company recorded a net loss of $3 million or $ 0.08 per share for the 3 months ended February 28, 2003, compared to net income of $1.9 million or $0.05 per share for the corresponding quarter of 2002. The company used $25.9 million in operating activities, which largely consists of the payment of the class action settlement in December of 2002. The Company's cash position at February 28, 2003, amounted to $33.2 million. The financial information, which is the subject of this news release, is available on the Company's web site (www.cinar.com) and should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the year ended November November: see month. 30th 2002 as set out on pages 35 to 64 of Corporation's 2002 Annual Report. About CINAR CINAR Corporation is an integrated entertainment and education company involved in the development, production, post-production and worldwide distribution of non-violent non-violent Adjective using peaceful methods to bring about change nonviolence n , quality programming and educational products for children and families. 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.
CINAR CORPORATION
Consolidated Balance Sheets
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(Unaudited) February 28 November 30
(In thousands of CDN dollars) 2003 2002
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ASSETS
Cash $20,266 $2,517
Short-term money market investments 12,927 59,435
Accounts receivable 28,365 33,718
Tax credits and income taxes
receivable 35,561 35,780
Inventories 15,713 14,624
Film costs and acquired film libraries 11,026 10,961
Fixed assets 4,182 4,427
Goodwill 83,618 88,182
Other assets 8,613 7,622
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$220,271 $257,266
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued
liabilities 32,608 65,852
Deferred revenue 4,701 2,315
Future income taxes 4,825 4,888
Notes payable 11,847 12,494
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Total liabilities 53,981 85,549
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Shareholders' equity
Capital Stock 487,128 487,128
Issued and outstanding
5,233,402 Variable Multiple
Voting (Class A) and
34,735,998 Limited Voting
(Class B) shares
Cumulative translation adjustment (514) 1,883
Deficit (320,324) (317,294)
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Total shareholders' equity 166,290 171,717
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$220,271 $257,266
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CINAR CORPORATION
Consolidated Statements of Operations and Deficit
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(Unaudited) 3 months ended February 28
(In thousands of CDN dollars,
except earnings per share) 2003 2002
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Revenues
Entertainment $4,478 $5,616
Educational Products 15,998 16,027
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Total Revenues 20,476 21,643
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Cost of sales
Entertainment 2,853 4,563
Educational Products 7,645 7,957
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Total Cost of Sales 10,498 12,520
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Gross Margin 9,978 9,123
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Expenses
Selling, general and administrative 9,227 9,272
Foreign exchange 4,730 (1,247)
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Operating income (loss) before the
following items (3,979) 1,098
Amortization of fixed assets 439 595
Amortization of goodwill - 896
Interest (122) (124)
Unusual Items (373) (1,246)
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Earnings (loss) before the
following items: (3,923) 977
Share of net earnings of
equity investment 990 807
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Earnings (loss) before income
taxes (2,933) 1,784
Income taxes 97 (156)
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Net Earnings (Loss) (3,030) 1,940
Deficit - beginning of period (317,294) (293,000)
Claims settlement - (31,800)
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Deficit - end of period $(320,324) $(322,860)
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Basic earnings (loss) per
Variable Multiple Voting
(Class A) Share and Limited
Voting (Class B) Share (Note 3) $(0.08) $0.05
Weighted average number of
Variable Multiple Voting
(Class A) and Limited Voting
(Class B) shares outstanding
(in thousands) 39,969 40,984
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CINAR CORPORATION
Consolidated Statements of Cash Flows
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(Unaudited) 3 months
(In thousands of CDN dollars) ended February 28
2003 2002
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OPERATING ACTIVITIES
Net earnings (loss) $(3,030) $1,940
Items not affecting cash:
Amortization 439 1,491
Film costs and acquired film libraries
amortization 1,418 2,693
Share of net earnings of equity
investment (990) (807)
Decrease in allowance for Globe-X - (846)
Future income taxes 79 -
Foreign exchange 3,997 (1,103)
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1,913 3,368
Decrease in accounts receivable 5,353 5,929
Decrease (increase) in tax credits and
income taxes receivable 219 (212)
Increase in inventories (1,089) (3,837)
Additions to film costs (1,483) (1,184)
Decrease in trade payables and accrued
liabilities and related party
receivables (33,244) (4,179)
Increase (decrease) in deferred
revenues 2,386 (5)
Decrease in other assets - 21
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Cash used in operating activities (25,945) (99)
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INVESTING ACTIVITIES
Repayments from Globe-X - 1,722
Additions to fixed assets (194) (590)
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Cash provided by (used in) investing
activities (194) 1,132
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TRANSLATION ADJUSTMENT (2,620) (677)
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Increase (decrease) in cash and cash
equivalents (28,759) 356
Cash and cash equivalents - beginning
of period $61,952 $47,556
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Cash and cash equivalents - end of
period $33,193 $47,912
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Cash and cash equivalents are comprised of:
Cash $20,266 $10,724
Short-term money market investments 12,927 37,188
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$33,193 $47,912
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