Montreal: Ongoing settlement payments, professional fees and current asset write-offs were among the primary factors in a $42-million net loss reported by Cinar Corp. for the fiscal year ending Nov. 30, 2001. The loss includes $9.9 million from the discontinued operations of Cinar Multimedia and related write-off of assets, and $32.1 million from continuing operations. Results for 2001 are fully audited. The company says no comparative information is provided as financial statements for 2000 and 1999 remain unaudited.

Revenues in 2001 totaled $131.7 million, $45.3 million from its low-gross margin (10.3%) entertainment division, including $25.1 million in library sales, and $86.4 million, an all-time high, from the high-margin (53.6%) education division. Cinar’s 20% equity share in Teletoon resulted in earnings of $2.1 million. Consolidated cost of sales was $79.2 million, resulting in consolidated gross profit of $50.8 million (39.1%).

Unusual items resulting in non-recurring charges in 2001 totaled $23.9 million, including a $13.7 million write-off in the balance of goodwill related to the acquisition of Twin Sisters, an Ohio-based producer and distributor of children’s audio products; and $9.8 million in salaries, severance costs and employee benefits related to the downsizing in the company’s Montreal, London and Ireland offices. Cinar also paid out $5.3 million in legal and financial advisory fees.

Despite the $42 million net loss, Cinar generated $20.6 million in cash from operations in 2001, ‘mainly through the careful management of working capital,’ and an additional $28.1 million in cash through the monetization of some of its short-term money market investments. The cash was primarily used to repay a $39.9 million bank debt.

In the period, Cinar says it recovered $6.8 million from Bahamian-based Globe-X Management, an affiliate of Norshield International, despite an out-of-court settlement to repay US$51 million by August 2001, and is still owed US$59.4 million from an original ‘unauthorized’ offshore investment of US$122 million. Cinar has also made an additional and legally contested claim against former company directors and officers totaling $29.2 million. The status of these receivables is described as uncertain.

Issued on March 22, the statement includes significant restatements for prior reporting periods, notably 1999 and 2000.

Numerous lawsuits are pending against Cinar in both the U.S. and Canada.

Last month, the Quebec Securities Commission fined former company directors and co-CEOs Micheline Charest and Ron Weinberg $1 million each, with the added five-year stipulation neither may hold directorship positions with a publicly traded Canadian company.

As of Nov. 30, 2001, Cinar held $12.1 million in cash reserves and $35.5 million in short-term investments, excluding amounts due from Globe-X. Shareholders’ equity is $212.3 million, with over 40.9 million shares outstanding.

A general meeting of shareholders is scheduled for April 29 in Montreal.

-www.cinar.com