Montreal: Two senior executives with Behaviour Communications have left the company as it unveiled a major financial loss for the second consecutive year.

Andy Myers, senior vp distribution in Toronto, was released Friday, Jan. 31 by president and ceo Bernard Legendre following Myers’ return from the Sundance Film Festival. A week earlier, Behaviour announced producer Nicolas Clermont, vp production and president of Filmline International, was leaving the company, apparently on ‘amicable’ terms. Some of Myers responsibilities have been picked up by senior distribution vp Pierre Brousseau.

For fiscal ’98 ending Sept. 30, Behaviour reported a net loss of $18.7 million (an eps of $0.53). The previous year, the troubled integrated production and distribution company, launched with the acquisition of Malofilm Communications in late ’97, declared net losses of $45.4 million.

Matthew Carson, Behaviour’s vp and cfo, says the company has operated without a credit facility for the past 12 months and is now actively negotiating a new line of credit. Behaviour has asked for extensions for a term loan of $4.2 million, from Jan. 31 to March 31, and for a revolving credit facility of us$5 million, the latter due April 9, 1999. Available cash resources stand at close to $6 million.

Revenue in ’98 is $83.8 million, up from $77.6 million in ’97, and includes $78 million from filmed entertainment, or 93% of all revenues.

Behaviour raised $30 million in a rights offering in January of last year and another $14 million in May. Carson says the funds were used to pay down a Canadian bank loan in the order of $14 million, for day-to-day operations, and to complete the acquisition of MDP Worldwide, headed by president Mark Damon.

‘The point we’re making here is that we are negotiating with another lender for a operating line of credit,’ says Carson. ‘We have obtained the extension through to April 9 and that’s because we believe we will be able to complete this new financing facility within the time frame.’

He says the new line of credit will be ‘much more significant’ than the amount of the outstanding loans. However, if the company is unable to complete the refinancing, Carson says Behaviour has options beyond the existing negotiations.

‘It’s not an issue of defaulting on the existing facility,’ he says. ‘As we’ve demonstrated, we have been able to obtain the support of our existing lenders.’

Losses in ’98

Behaviour points to three main areas of losses in ’98: production subsidiary Filmline International, the domestic Behaviour Distribution operation, and the new media division.

The write-down associated with Filmline includes $3.9 million in ‘the balance of goodwill’ triggered by Clermont’s departure, and $2.8 million in the anticipated loss of distribution revenues associated with three movies, Free Money, This is My Father and Monument Avenue.

The other $12 million in losses includes $3 million related to ‘accelerated write-downs in our Canadian distribution operations’ and a $1.9-million operating loss associated with the new media division, an improvement against the $4.2 million loss in fiscal ’97.

‘The missing ingredient [about $7 million] is what I would call more non-cash charges, being interest, appreciation and amortization, as well as some corporate costs,’ says Carson.

Filmline’s performance

Clermont says despite the wholesale write-off against anticipated distribution revenues, all three Filmline films – produced for combined budgets of $50 million – have sold to the major u.s. market. The films have had only limited exploitation to date. Clermont says he told Behaviour management he wanted to leave the company ‘at some point in 1998.’

In distribution terms, Free Money, produced for $22 million, has been picked up by Encore for a u.s. cable premiere in March, with all other u.s. rights held by Lions Gate. Behaviour has Canadian rights on Free Money and some distribution in Europe.

This Is My Father, produced for $13 million, is currently playing in theaters in Dublin, Ireland, where it has been picked up by Buena Vista (Disney). In the u.s., the film premiered at the Sundance Film Festival and Sony Classic Pictures has bought all u.s. rights, with a theatrical release set for April. A Canadian release date from Behaviour has not been announced.

‘Let’s talk principle,’ says Clermont. ‘Here’s a movie [Father] that is brand new. It has been delivered. It has u.s. distribution. It has been praised around the world and invited to six international festivals. And you write it off completely? Don’t you let it run for two or three years before you make a write-off for whatever you are out of pocket then?’

As for Monument Avenue, produced for $15 million, it was also showcased at Sundance, is currently in repertory in Canada, and was given a limited theatrical release in the u.s. by Lions Gate, bowing to what Clermont says were strong critical reviews. Miramax has picked up u.s. video and tv rights.

With three of the four films delivered in the past 12 months having succeeded in acquiring u.s. theatrical distribution, Clermont asks, ‘What do you attribute that to? How many Canadian films have that?’

In the ’99 pipeline

Behaviour’s Los Angeles-based presales and distribution division Behaviour Worldwide reported gross profits of $2.6 million during the last two quarters of ’98.

bw has acquired 10 movie projects in development including Love and Sex, Alison Anders’ Things Behind the Sun and an adaptation of the James Ellroy novel The Black Dahlia.

Lux Films, Behaviour’s Quebec production arm headed by Nicole Robert, is developing four projects with combined budgets of $11 million, including three feature films, Saint-Jude, Claire’s Hat and Le Nouveau Pauvre starring top comic Daniel Lemire, and a tv series, La Vie, La Vie.

New product in the Behaviour Distribution pipeline includes the thriller Table for One, Dog of Flanders (set for a 1,250-print release this spring by Warner Bros.), the Filmline suspense Eye of the Beholder (delivered last month) and the drama Grizzly Falls (currently in post).

Asked about further layoffs – beyond Myers and a couple of staffers in Toronto – Carson says, ‘We have been through two years of restructuring and the company’s position is that we are constantly re-evaluating our situation. The goal is to turn the company around.’

Behaviour employs about 200.