Excerpt from Edgar Online 4/16/04
CANWEST REPORTS FINANCIAL IMPACT OF FIREWORKS REVIEW: Non-cash write-down to be recorded in second quarter
WINNIPEG: CanWest Global Communications Corp. today reported that an internal review of Fireworks Entertainment, the Company's program production and international distribution operation, has been completed. This review was initiated in response to continued and persistent weakness in demand for North American content in international markets. Given the current state of international film and television markets, and the likelihood of a prolonged downturn in those markets for Fireworks' product, Fireworks will no longer produce or acquire any new television programs. Fireworks will continue its distribution activities, pending the outcome of an ongoing divestiture process.
Fireworks Entertainment has taken a number of steps over the past year to reduce its financial exposure in the face of declining demand in international markets for its product. These steps included closure and outsourcing of its theatrical film development, production, acquisition and distribution activities and attendant staff reductions. Nevertheless, it has become clear that the steps taken to date have not been sufficient to restore Fireworks to profitability and ensure its long-term viability.
Fireworks is actively pursuing the sale of its film and television library and distribution operations, and is in discussion with a number of parties.
Accordingly, in its results for the second quarter and six months ended February 29, 2004, to be released April 21, 2004, the Company will report charges reflecting the revaluation of the Company's investment in Fireworks and the value of Fireworks' library, as well as amounts relating to the decision to discontinue Fireworks' operations. These charges, which are non-cash in nature, will total approximately $200 million. In future reporting, results of Fireworks will be segregated from results of continuing operations and reported as discontinued operations.
In commenting on the announcement, Leonard Asper, CanWest's President and Chief Executive Officer, expressed his disappointment with this outcome, however, "it has become clear that sound business principles could no longer justify the Fireworks business model. We believe that this action should contribute positively in future to the Company's improved free cash flow and further debt reduction. Global Television will continue to be active in support of Canadian production, including high quality series such as Wild Card and Strange Days at Blake Holesy High."
© Edgar Online
CBC News 4/21/04
Disposal of Fireworks hits CanWest Global's Q2 bottom line
Last Updated: Wednesday, April 21, 2004 | 4:06 PM ET
CanWest Global Communications (TSX:CGS.s) posted a second-quarter loss of $211 million, mainly due to losses and writedowns after the company decided to dispose of Fireworks Entertainment, its program production and international distribution arm.
The company said the loss was $1.19 a share. In the second quarter of last year, CanWest made a profit of $10 million (1 cent a share).
Consolidated revenues for the three-month period ended February 29, 2004 were $494 million, compared to $501 million for the same period in the previous year.
CanWest recorded a loss from discontinued operations – including Fireworks – of $170 million, including $143 million in non-cash charges to adjust the carrying value of those operations. The loss from the same operations in the same period last year was $4 million.
CanWest said it also took non-cash charges of $39 million to write down the value of Fireworks' library of Canadian film and television program rights.
Excluding the loss from discontinued operations and other charges, CanWest's loss in the current period would have been $2 million. Net earnings on the same basis last year would have been $13 million, which includes a gain of $21 million on the sale of the Ontario smaller-market newspapers.
"While we are disappointed with the outcome at Fireworks, this decision should be viewed as a positive step in conserving capital, and one which should contribute to improving the company's free cash flow and debt reduction ability," Leonard Asper, CanWest's president and CEO, said.
"The company continues to look at growth and expansion opportunities in Canada and elsewhere but, as before, our main priorities are to accelerate the reduction of corporate debt, improve operating margins and increase profits," Asper said.
CanWest's class S shares gained 76 cents on Wednesday, ending at $11.45.
© CBC News
Channel Ten's Canadian owner reports 'mutant' loss
Thursday, April 22, 2004
CanWest Global Communications, Canada's biggest media group and majority owner of Australia's Channel Ten network, has reported a hefty second-quarter loss after taking charges to shut down its Fireworks Entertainment arm.
CanWest warned last Friday the results would include a noncash charge of about C$200 million to shut down Fireworks Entertainment, which produced and distributed shows including Relic Hunter, Mutant X and Beastmaster.
The broadcaster and newspaper publisher reported a loss of C$211 million ($A212.8 million) for the quarter to February 29, compared with a profit of C$10 million a year earlier.
The company hopes to sell the Fireworks library of Canadian film and television program rights.
Consolidated revenues at CanWest fell to C$494 million from C$501 million.
Combined revenues, which include its foreign operations, rose to C$586 million from C$573 million.
In addition to its 57 per cent Network Ten stake, CanWest owns New Zealand's TV3 and C4, and stakes in Ireland's TV3 and Northern Ireland's UTV.
Revenues at its newspaper and online operations, which include Toronto's National Post, the Montreal Gazette, Ottawa Citizen and The Vancouver Sun, fell to C$275 million from C$280 million.
The Futon Critic: 4/26/04
'Mutant X' to End as Fireworks' Future Dims
Monday, April 26, 2004
By Brian Ford Sullivan (TFC)
CHICAGO (thefutoncritic.com) -- CanWest Global Communications has announced it is folding the remnants of Fireworks Entertainment, the company behind such series as "Wild Card," "Strange Days at Blake Holesy High", "Mutant X" and "Gene Roddenberry's Andromeda," with production and acquisition of all of its properties being shut down last week.
In addition, "Mutant X" cast member Karen Cliche has confirmed the series will not return for a fourth season.
The news comes just four months after fellow Canadian studio Alliance Atlantis pulled the plug on its production division, save for its involvement in the "C.S.I." franchise. Both moves are widely understood to be the result of the gradual drying up of the international syndication market. Said developments have hit the Canadian studios the hardest, leaving only a handful of independent companies.
As for Fireworks, the company had narrowed its focus to the North American market in recent years however "it has become clear that the steps taken to date have not been sufficient to restore Fireworks to profitability and ensure its long-term viability," the company said in a statement to the press.
CanWest will take a $149 million writedown to be reflected in its second-quarter fiscals. The company is currently looking for a buyer for Fireworks' film and television library.
As for the fates of its existing series, "Wild Card" and "Strange Days at Blake Holesy High's" production will shift to fellow CanWest subsidiary Global Television while "Mutant X" and "Andromeda's" futures remain uncertain.
Nevertheless, "Mutant X's" Cliche posted to her official web site that the cast was told last week they won't be returning for another season (click here to read the original post):
"Just thought I would be the first to let you know before it has been officially announced that 'Mutant X' is canceled. We are all very sad. Don't know when they will make it official, but we have [the cast] been advised that we aren't going [for] another season. We are all now trying to go on with our lives and careers, and who knows? This could be an opening of wonderful opportunities for many people. Always look at the bright side!"
The show's U.S. distributor, Tribune Entertainment, however has yet to confirm the news. Tribune had previously cleared the show in 85% of the U.S. through the 2004-05 season back in January.
"Andromeda," which like "Mutant X" is distributed in the U.S. by Tribune, may also suffer the same fate. Tribune had signed a deal cable's Sci Fi Channel to share the series' upcoming season in a 10-day split window earlier this year.
The Futon Critic 4/28/06
Legal Battle Could Determine Futures of 'Andromeda,' 'Mutant X'
By Brian Ford Sullivan (TFC) Wednesday, April 28, 2004
CHICAGO (thefutoncritic.com) -- The future of syndicated dramas "Gene Roddenberry's Andromeda" and "Mutant X" may be decided by the legal system, according to documents released by both series' U.S. distributor, Tribune Entertainment.
The news comes on the heels of last week's closing of Fireworks Entertainment, the Canadian company which produces both "Mutant X" and "Andromeda" (read the story). Said development caused production on both shows to be halted indefinitely, calling into question the fates of each.
Tribune had cleared both shows through the 2004-05 season on more than 140 local stations across the U.S. covering 85% of the country and in "Andromeda's" case, had also partnered with cable's Sci Fi Channel for shared airings of the series.
Nevertheless, without Fireworks' financial backing Tribune appears unwilling to go forward with the new seasons. As part of its 2003 Annual Report, Tribune noted that following in regards to both series:
"Tribune Entertainment has ordered production of 2004/2005 seasons of 'Andromeda' and 'Mutant X' and exercised contractual options requiring its financial partner to provide funding, however, Tribune Entertainment's financial partner has commenced litigation which seeks a determination that it is not obligated to participate in the further financing or production of either series."
While details about said litigation have yet to be released, it's obvious this development presents a major hurdle for both series to resume production.
© The Futon Critic
Playback Magazine 4/26/04
CanWest puts Fireworks on the block
by: Ian Edwards Apr 26, 2004
CanWest Global says it wants out of international production and will soon offload its challenged subsidiary Fireworks Entertainment, producer of Canadian-content action-adventure series including Mutant X and Gene Roddenberry's Andromeda. The media company says it will, however, continue to produce programs for the domestic market.
"We'll still be involved in production, but it will have to fit our Canadian program schedule," says CWG CFO John Maguire, following the divestiture announcement April 16.
Winnipeg-based CWG, which took action after Toronto-based Fireworks failed an internal review in the wake of "continued and persistent weakness in demand for North American content in international markets," will also record a $200-million write-down on its program and production division in its second quarter report (ended Feb. 29). That quarterly report was due out after Playback's press deadline.
According to CWG, Fireworks has taken a number of steps over the past year - including the closure and outsourcing of its theatrical film development, production, acquisition and distribution activities and staff reductions - to reduce its financial exposure in the face of declining demand in international markets for its product.
"It has become clear that sound business principles could no longer justify the Fireworks business model," says Leonard Asper, CWG's president and CEO, in a statement. "We believe that this action should contribute positively in future to the company's improved free cash flow and further debt reduction. Global Television will continue to be active in support of Canadian production, including high quality series such as [Zoe Busiek:] Wild Card and Strange Days at Blake Holsey High," both produced by Fireworks,.
CanWest paid $40 million to acquire Fireworks in 1998. However, Maguire refused to say what the sticker price of Fireworks' film and television library and distribution operation is today. Investment banking firm Salem Partners of Los Angeles has been hired to broker a deal "as soon as possible."
The Fireworks sale echoes the steps taken last year by Alliance Atlantis to abandon production of MOWs, miniseries and features - except for its money-making television franchise CSI.
"We didn't take our lead from them," says Maguire, referring to the AAC business change. "We're all in the same boat, facing the same issues."
International sales of programs like Relic Hunter are soft, he explains, and Andromeda has yet to sell into some markets.
Top-performing CanWest Global shows include the U.S.-sourced series The Apprentice and Survivor. The network recently announced the cancellation of its primetime Canadian series Blue Murder. Some Fireworks productions, while created for a more international audience, were CRTC-certified and fulfilled CanWest Global's Canadian-content requirements at home.
The fate of Fireworks' production slate - which had been halved to $50 million in value in 2004 - will be up to the new owner, says Maguire.
Trading in CanWest Global's A-class shares on the Toronto Exchange was in the $11 per share range on April 19. The year low for the stock was $7.25 per share, while the year high was $14.27 per share.