Nelvana writedown creates $190-million loss at Corus

10/23/2002

Toronto, - A $200-million writedown of TV-cartoon maker Nelvana dropped Corus Entertainment Inc. to a net loss of $190 million in the final quarter of its financial year, the media company disclosed Wednesday.

Reporting "strong operating performances across all three divisions," Corus said revenue in the three months ended Aug. 31 was $165.7 million, down from $166.6 million a year ago. Excluding the sale of the Klutz publishing business and pay-per-view service Viewer's Choice, pro forma consolidated revenue rose six per cent.

The Nelvana writedown came amid continuing problems at the animation unit, whose products include Franklin the Turtle, Babar, Rupert and Tintin. Corus paid $540 million for Nelvana in the fall of 2000.

"The market for television programming continued to impact the operations of Nelvana," Corus said in a statement.

"As a result, the company re-evaluated Nelvana's goodwill and other intangible assets during the fourth quarter, and recorded a $200-million non-cash pre-tax writedown, of which $40 million was designated as a writedown in the library, reflected in EBITDA, and $160 million for goodwill and other intangibles."

Corus also said that Michael Hirsh "has advised that he plans to step aside as CEO of Nelvana and assume advisory responsibilities with the company."

The quarter's net loss of $189.9 million, $4.45 per share, compared with a year-earlier loss of $1.9 million, four cents a share. Excluding accounting items, profits rose to $21.5 million from $8.5 million.

Fourth-quarter revenue for the Corus television operations was $66.9 million, up 18 per cent. The TV division includes specialty channels YTV, Treehouse and W Network, and Ontario broadcasters CHEX in Peterborough and CKWS in Kingston.

Radio revenue was $55.5 million, up one per cent. Corus is the country's largest radio operator, with about 50 stations in Ontario, Quebec and the West.

Content revenue, including Nelvana, was $45.5 million, down 18 per cent. Corus said it continues "to review all options for addressing current market conditions impacting the content division, including further reducing costs and capital spending and increasing merchandising revenues."

Production will be cut in the current financial year to fewer than 150 episodes, from 252 in the year ended Aug. 31.

For the full 2002 financial year, the net loss was $166 million, $3.90 per share, on revenue of $652.8 million.

This compared with the previous year's earnings of $128.2 million, which included a $103-million gain primarily from the sale of The Family Channel, on revenue of $556.8 million.

"Our radio and television units performed very well this past year. Despite a well publicized advertising downturn we had organic growth in our top line, strong EBITDA growth as a result of our cost-reduction initiatives and we increased our industry-leading operating margins," stated John Cassaday, president and CEO of Corus.

"It was a tougher year for Nelvana but we have taken the necessary steps to put the business on a solid footing for the future."

Corus's thinly traded shares (TSX:CJR.B) were down 34 cents to $20.16 at midafternoon Wednesday. The stock has a 52-week high and low of $38.75 and $18.02.

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