Despite the unprecedented corporate and financing crisis at Cinar, the Montreal-based children’s program producer is pushing ahead with day-to-day operations.
‘Nothing has been cancelled, nothing has been put on `go slow,” says Peter Moss, president of Cinar Entertainment.
The crisis has slowed Cinar’s aggressive acquisition activities, but not operations in the busy entertainment division says Moss. ‘I had meetings with PBS, CBC, YTV and Family Channel and nobody has blinked or lost confidence in us.’ Moss is joined at MIP-TV 2000 by David Ferguson, president of London-based Cinar Europe and Annick Poirier, a senior sales executive with the company.
‘There is no question we are facing a lot of corporate restructuring and a lot of corporate auditing, and there’s also no question at the end of this process, we will have the cleanest balance sheet of any company in the world. Everyone recognizes the operational departments are still very strong and healthy,’ says Moss.
Moss says absolutely no orders have been affected by the corporate crisis at Cinar, and commitments to PBS for new episodes of Arthur, Prix Jeunesse nominee Zoboomafoo and the new Caillou series are all being met. Caillou, a reformatted mix of live action, puppets and traditional animation, is one of the company’s banner series at MIP-TV. It launches this fall on PBS. Cinar and a U.S. partner are currently filming a new family film called Forgotten Attic in Montreal; the movie’s based on the well-known kids book The Velveteen Rabbit. At press time, Canada’s principal funding agencies Telefilm Canada and the Canadian Television Fund had suspended business with Cinar pending the outcome of investigations. Programs that may require refinancing include Mona the Vampire and Treasure, a new co-venture with BBC, says Moss.
On the corporate front, Cinar fortunes hit a low point a month ago when founders Micheline Charest and Ronald A. Weinberg announced they would take a complete ‘administrative leave’ from day-to-day operations, following the announcement they had resigned their shared co-executive officer positions.
The restructuring left a newly constituted corporate management committee dealing with a full-fledged fiasco. Headed by president and CEO Barrie Usher, a Canadian banking and insurance executive and board member, the committee was charged with restating all financial reports dating back to December `96, cooperating with formal investigations by security officials at both the Toronto Stock Exchange and NASDAQ in the U.S., and finally, coming up with some answers on tens of millions of dollars reported to be missing from the treasury.
Trading on both the Toronto and NASDAQ exchanges was stopped March 8, following the revelation US$122 million had been invested without the knowledge of Cinar’s board. Of that total, Usher subsequently said US$36 million had been invested in Government of Canada bonds. An additional US$10 million was found in the days that followed (in mid-March), and the remaining US$76 million was also subsequently located in the Bahamas in investment grade securities; its recovery is the subject of a lawsuit.
Cinar’s management committee consists of Usher, veteran children’s producer and former YTV program executive Moss, U.S.-based school supply executive Steve Carson, president of Cinar Education, and Ferguson.
Class action suits on behalf of investors in Canada and the U.S. were formally filed last month, while a feeding frenzy in the Canadian press included calls for the sale of the company’s assets by unnamed investors and brokers.
Cinar reported net earnings of US$8.8 million in `97 and US$14.8 million in `98, along with strong earnings for much of `99. Top-line revenues for the last year reported, ending November `98, was US$102.9 million. In the past couple of years, Cinar has been on an aggressive acquisition course, buying three U.S. companies, HighReach Learning, Carson-Dellosa Publishing and Twin Sister Productions, a children’s music company, and Tel Aviv-based multimedia producer Edusoft. Cinar also made a major investment in on-line U.S. educational provider Lightspan.com. In a communiqué released in March, Cinar said it has ‘sufficient cash resources to meet its current operating needs.’