Torstar Cuts Expected Proceeds from CSEP Sale in Half

Blaming a collapse in the supplementary educational materials market as well as a poor fourth quarter for its own division, Torstar CEO David Galloway told analysts in a conference call last week that the company expects to receive only about C$100 million for its Children's Supplementary Education Publishing group. Torstar placed the division, which includes Frank Schaffer Publications, Tom Snyder Productions and Delta Education, up for sale in November (News, Nov. 13, 2000) and had hoped to receive more than C$200 million for the unit.

As a result of its lower sale proceeds, Torstar took a C$90-million write-down in its first quarter ended March 31, 2001. Galloway said the company had considered pulling the properties from the market, but decided it was best to "get CSEP behind us." The first deal for one of the group's units is expected to close by mid-May with the second transaction to be completed by the end of June.

Things were much brighter at Torstar's Harlequin division, which reported a 27.5% increase in operating profit, to C$31 million, on a 4.6% sales gain, to C$142.7 million. The improved profit performance was attributed to higher retail sales in North America as well as lower new product development costs due mainly to Harlequin's exit from the newsletter business. Two New York Times bestsellers added $2 million to profits in the quarter, offsetting a decline in direct marketing results. Galloway said some of the decline in the direct marketing group was due to customers shifting to eHarlequin, the company's online marketing effort, which had sales of about C$3 million in the quarter and had 700,000 members compared to 80,000 at the end of last year's first quarter.