Atlantis awash on earnings rewrite

Three year's worth of pre-tax coin to shrink by $47 mil

TORONTO — Alliance Atlantis is busily shoring up its public image after it announced a restatement of earnings and an analyst issued a critical corporate governance report.

On Wednesday the company announced that it would change the way it treats its interest in successful franchise “CSI” on the books and restate its earnings for the last three years.

The company’s share price, which has been in the doldrums for close to five years, had climbed a hefty 70% due to sales of “CSI,” which it co-produces with CBS. Shares have risen C$8 ($5.96) to about $14.89 since April.

“It’s very arcane,” AAC prexy and CEO Michael MacMillan told Daily Variety of the accounting changes.

Alliance Atlantis will have to rewrite the books, which doesn’t look good. Pre-tax earnings for the past three years will shrink by $47 million and increase in the future.

“It’s obviously awkward to be restating earnings or changing any kind of accounting,” he said, “but the good news is, there’s a hell of a lot of earnings, and they’re bigger than they would have been.”

Just a week earlier, a report from Montreal-based Desjardins Securities ranked Alliance Atlantis last in a study of the governance practices of 10 companies in the Canadian media sector. AAC was dinged for having a combined prexy and CEO, and the study claims that more than half of the company’s directors are not independent.

Not so, acccording to a swift reply delivered in the form of a letter to the editor in the Globe & Mail from AAC chief financial officer Judson Martin. “The Desjardins report contains a factual inaccuracy and an error of omission, as well as one area where the analyst’s interpretation does not align with regulations,” wrote Martin.

“The whole study was ridiculous,” said MacMillan, reiterating the report’s shortcomings and pointing out a raft of changes the company has made in the last year to tighten its corporate governance practices, including reducing the size of the board and expensing stock options.