TORONTO, May 1 /PRNewswire-FirstCall/ -- Cinram International Income Fund ("Cinram" or the "Fund") (TSX: CRW.UN) today reported its 2009 first quarter financial results. The Fund recorded a 19 per cent decrease in revenue to $303.2 million in the 2009 first quarter from $373.8 million in the first quarter of 2008. Earnings before interest, taxes and amortization (EBITA(1)) were $26.7 million in 2009, down from $48.2 million in the first quarter of 2008. The decline in EBITA was the result of lower average selling prices for DVDs, which coupled with lower unit volumes are the two main drivers of Cinram's profit margins. The Fund reported a net loss from continuing operations for the 2009 first quarter of $17.6 million or $0.32 per unit (basic) compared with net earnings from continuing operations of $7.6 million or $0.13 per unit (basic) in 2008.
On February 13, 2009 the Fund announced that David Rubenstein, its Chief Executive Officer, decided to resign as a trustee and officer of the Fund effective March 31, 2009.
On March 30, 2009 the Fund announced that its lenders have approved an amendment to its subsidiaries' senior secured credit facility to permit Cinram to use up to US$150.0 million to repurchase term advances outstanding under the senior secured credit facility at prices below par through one or more "modified Dutch auctions" during a one-year period commencing on March 31, 2009. In connection with this amendment Cinram agreed (i) to make a US$35.0 million prepayment at par of term advances on the effective date of the amendment (ii) to make quarterly prepayments at par of US$10.0 million commencing with the second quarter of 2009 (iii) to reduce the revolving credit commitment under the senior credit facility by US$50.0 million on the date of the amendment, and (iv) not to pay any unitholder distributions for the balance of the term of the facility, subject to certain limited exceptions. Subsequent to quarter end, the Fund repurchased $33.8 million of debt for an amount equal to $20.1 million.
On April 9, 2009, the Fund completed the sale of substantially all of Ivy Hill's assets and liabilities. Ivy Hill's results were excluded from Cinram's continuing operations for the three months ended March 31, 2009 and 2008.
Segment revenue ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- (in thousands of US$) 2009 2008 ------------------------------------------------------------------------- Home Video $220,629 73% $279,542 75% CD 37,098 12% 52,767 14% Video Game 23,612 8% 21,831 6% Other 21,815 7% 19,622 5% ------------------------------------------------------------------------- $303,154 100% $373,762 100% -------------------------------------------------------------------------
First quarter Home Video revenue (which includes replication and distribution of DVDs and high-definition discs) was down 21 per cent to $220.6 million from $279.5 million in 2008 due to lower DVD replication volumes in North America combined with lower selling prices globally. Cinram replicated 215.6 million DVDs in the first quarter of 2009, including units associated with the DVD contract signed with Universal Europe in 2008, compared to 262.0 million units in 2008. High-definition disc replication revenue increased to $4.4 million in the first quarter of 2009 from $4.3 million in the comparable 2008 period.
CD segment revenue (which includes replication and distribution of CDs) was down 30 per cent in the first quarter to $37.1 million from $52.8 million in 2008 in line with a corresponding decline in replication volumes.
Revenue from the Video Game segment was up eight per cent to $23.6 million in the first quarter of 2009 from $21.8 million in 2008 reflecting organic growth in this market.
Revenue from our Other segment, which includes the Motorola distribution business in both North America and Europe, combined with revenue from Vision Worldwide Management LLC (Vision) increased to $21.8 million in the first quarter of 2009 from $19.6 million in 2008.
Geographic revenue
First quarter North American revenue decreased 26 per cent to $184.3 million from $247.4 million in 2008, principally as a result of lower DVD volumes and prices. North America accounted for 61 per cent of first quarter consolidated revenue compared with 66 per cent in 2008.
European revenue was down six per cent in the first quarter to $118.9 million from $126.4 million in 2008, due to the foreign exchange impact associated with the strengthening of the U.S. dollar relative to the Euro and the British Pound. Excluding the impact of foreign currency translation, European revenue increased by 14% in the 2009 first quarter compared to the prior year period. First quarter European revenue represented 39 per cent of consolidated sales compared with 34 per cent in the first quarter of 2008.
Other financial highlights
Gross profit for the quarter ended March 31, 2009, decreased to $44.8 million from $62.7 million in 2008, and gross profit margins were 15 per cent in the first quarter of 2009, down from 17 per cent in the corresponding 2008 period. During the 2009 first quarter, the Fund recorded $4.0 million of severance charges associated with general workforce reductions across several facilities in Canada and the United States. The Fund also recorded amortization expense relating to capital assets (included in the cost of goods sold) of $22.0 million compared to $24.7 million in the first quarter of 2008. This reduction in amortization results from the lower net book value of property, plant and equipment due to the impairment charge of $57.2 million recorded at the end of 2008 as part of Cinram's annual impairment test.
Selling, general and administrative expenses for the quarter ended March 31, 2009 decreased slightly to $38.8 million from $39.1 million in 2008. During the 2009 first quarter, the Fund recorded $4.8 million of severance charges. Excluding these charges, selling, general and administrative expenses were 11.2% of revenue in the 2009 first quarter, compared to 10.5% in the prior year period.
Balance sheet and liquidity
The Fund had cash and cash equivalents on hand of $103.6 million and debt of $610.4 million (excluding unamortized transaction costs and loan fees), resulting in a net debt position of $506.8 million at March 31, 2009, compared with a net debt position of $573.8 million at the end of 2008. During the 2009 first quarter, the Fund made a debt repayment of $35.0 million in connection with the amendment to the credit agreement and working capital decreased to $142.4 million at March 31, 2009, from $186.9 million at December 31, 2008. During the 2009 first quarter, Cinram paid $17.4 million for property, plant and equipment, including cash payments on DVD and wireless equipment previously purchased.
Unit data
For the three-month period ended March 31, 2009, the basic weighted average number of units and exchangeable limited partnership units outstanding was 55.3 million compared with 57.1 million in 2008. During the first quarter of 2009, the Fund did not repurchase any units under its normal course issuer bid. Reconciliation of EBITA and EBIT to net earnings (loss) from continuing operations
------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- (unaudited, in thousands of U.S. dollars) 2009 2008 ------------------------------------------------------------------------- EBITA excluding other items $ 28,041 $48,328 ------------------------------------------------------------------------- Other charges, net 1,300 171 ------------------------------------------------------------------------- EBITA(1) $ 26,741 $48,157 ------------------------------------------------------------------------- Amortization of property, plant and equipment 22,014 24,733 Amortization of intangible assets 10,167 10,600 ------------------------------------------------------------------------- EBIT(2) $ (5,440) $12,824 ------------------------------------------------------------------------- Interest expense 10,417 12,498 Foreign exchange loss (gain) 5,838 (3,760) Investment income (276) (646) Income taxes (recovery) (3,813) (2,874) ------------------------------------------------------------------------- Net earnings (loss) from continuing operations $(17,606) $ 7,606 ------------------------------------------------------------------------- (1) EBITA is defined as earnings from continuing operations before impairment charges, interest expense, investment income, income taxes, amortization and foreign exchange gain/loss. It is a standard measure that is commonly reported and widely used in the industry to assist in understanding and comparing operating results. EBITA is not a defined term under generally accepted accounting principles (GAAP). Accordingly, this measure may not be comparable with other issuers and should not be considered as a substitute or alternative for net earnings or cash flow, in each case as determined in accordance with GAAP. See reconciliation of EBITA to net earnings under GAAP as found in the table above. (2) EBIT is defined as earnings from continuing operations before impairment charges, interest expense, investment income, foreign exchange gain/loss and income taxes, and is a standard measure that is commonly reported and widely used in the industry to assist in understanding and comparing operating results. EBIT is not a defined term under GAAP. Accordingly, this measure may not be comparable with other issuers and should not be considered as a substitute or alternative for net earnings or cash flow, in each case as determined in accordance with GAAP. See reconciliation of EBIT to net earnings under GAAP as found in the table above. About Cinram
Cinram International Inc., an indirect, wholly-owned subsidiary of the Fund, is the world's largest provider of pre-recorded multimedia products and related logistics services. With facilities in North America and Europe, Cinram International Inc. manufactures and distributes pre-recorded DVDs, audio CDs, and CD-ROMs for motion picture studios, music labels, publishers and computer software companies around the world. Cinram also provides distribution and logistics services to the telecommunications industry in North America and Europe through its wireless subsidiaries. The Fund's units are listed on the Toronto Stock Exchange under the symbol CRW.UN. For more information, visit our website at http://www.cinram.com/.
Certain statements included in this release constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund, or results of the multimedia duplication/ replication industry, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, among others, the following: general economic and business conditions, which will, among other things, impact the demand for the Fund's products and services; multimedia replication industry conditions and capacity; the ability of the Fund to implement its business strategy; the Fund's ability to retain major customers; the Fund's ability to invest successfully in new technologies and other factors which are described in the Fund's filings with the securities commissions.
INTERIM CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- March 31 December 31 2009 2008 (unaudited) ------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $103,582 $73,349 Accounts receivable 335,994 495,604 Inventories 46,677 48,987 Income taxes receivable 20,540 18,235 Prepaid expenses 17,947 21,913 Future income taxes 1,742 1,827 ------------------------------------------------------------------------- 526,482 659,915 Property, plant and equipment 326,040 361,804 Goodwill 62,091 64,737 Intangible assets 83,193 94,423 Other assets 22,561 24,557 ------------------------------------------------------------------------- $1,020,367 $1,205,436 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Unitholders' Equity (deficiency) Current liabilities: Accounts payable $109,999 $203,619 Accrued liabilities 218,942 247,968 Income taxes payable 12,301 11,581 Current portion of long-term debt 40,000 6,750 Current portion of obligations under capital leases 2,863 3,094 ------------------------------------------------------------------------- 384,105 473,012 Long-term debt 565,518 636,299 Obligations under capital leases 3,247 3,926 Other long-term liabilities 47,725 43,625 Derivative instruments 25,130 26,586 Future income taxes 2,973 5,208 Unitholders' equity (deficiency) (8,331) 16,780 ------------------------------------------------------------------------- $1,020,367 $1,205,436 ------------------------------------------------------------------------- ------------------------------------------------------------------------- INTERIM CONSOLIDATED STATEMENTS OF EARNINGS (unaudited, in thousands of U.S. dollars, except per unit/exchangeable LP unit amounts) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended March 31 2009 2008 ------------------------------------------------------------------------- Revenue $303,154 $373,762 Cost of goods sold 258,343 311,099 ------------------------------------------------------------------------- Gross profit 44,811 62,663 Selling, general and administrative expenses 38,784 39,068 Amortization of intangible assets 10,167 10,600 Other charges, net 1,300 171 ------------------------------------------------------------------------- Earnings (loss) before the undernoted (5,440) 12,824 Interest on long-term debt 9,837 11,731 Other interest expense 580 767 Foreign exchange (gain) loss 5,838 (3,760) Investment income (276) (646) ------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes (21,419) 4,732 ------------------------------------------------------------------------- Income taxes (recovery) (3,813) (2,874) ------------------------------------------------------------------------- Earnings (loss) from continuing operations (17,606) 7,606 Loss from discontinued operations (4,694) (10,993) ------------------------------------------------------------------------- Net loss (22,300) (3,387) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings (loss) per unit from continuing operations: Basic $(0.32) $0.13 Diluted $(0.32) $0.13 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss per unit: Basic $(0.40) $(0.06) Diluted $(0.40) $(0.06) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of units and exchangeable limited partnership units outstanding, (in thousands): Basic 55,256 57,115 Diluted 55,256 57,172 ------------------------------------------------------------------------- ------------------------------------------------------------------------- INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited, in thousands of U.S. dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended March 31 2009 2008 ------------------------------------------------------------------------- Net loss for the period $ (22,300) $ (3,387) Other comprehensive income, net of tax: Unrealized gain (loss) on translating financial statements of self-sustaining foreign operations (922) 18,171 Unrealized gain (loss) on hedges of net investment in self-sustaining foreign operations (3,618) (9,904) Partial release of cumulative translation adjustment - 171 ------------------------------------------------------------------------- Unrealized foreign exchange translation gain (loss), net of hedging activities (4,540) 8,438 Net unrealized gain (loss) on derivatives designated as cash flow hedges 1,653 (12,514) ------------------------------------------------------------------------- Other comprehensive loss (2,887) (4,076) ------------------------------------------------------------------------- Comprehensive loss, net of tax $ (25,187) $ (7,463) ------------------------------------------------------------------------- ------------------------------------------------------------------------- INTERIM CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY (DEFICIENCY) (unaudited, in thousands of U.S. dollars) Three months ended March 31, 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exchangeable limited Fund units partnership units Amount Number Amount Number ------------------------------------------------------------------------- (000s) (000s) ------------------------------------------------------------------------- Balance, January 1, 2008 $ 181,660 57,021 $ 298 98 Loss for the quarter - - - - Deferred units issued - - - - Repurchase of units (414) (130) - - Limited partnership units exchanged for Fund units 104 34 (104) (34) Other comprehensive loss - - - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance, March 31, 2008 $ 181,350 56,925 $ 194 64 ------------------------------------------------------------------------- Three months ended March 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance, January 1, 2009 $ 175,990 55,223 $ 100 33 Loss for the quarter - - - - Deferred units issued - - - - Other comprehensive loss - - - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance, March 31, 2009 $ 175,990 55,223 $ 100 33 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated Total other unit- comprehensive holders' Contributed income equity surplus Deficit (loss) (deficiency) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance, January 1, 2008 $ - (223,854) $ 111,966 $ 70,070 Loss for the quarter - (3,387) - (3,387) Deferred units issued 87 - - 87 Repurchase of units - (315) - (729) Limited partnership units exchanged for Fund units - - - - Other comprehensive loss - - (4,076) (4,076) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance, March 31, 2008 $ 87 $ (227,556) $ 107,890 $ 61,965 ------------------------------------------------------------------------- Three months ended March 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance, January 1, 2009 $ - (258,425) $ 99,115 $ 16,780 Loss for the quarter - (22,300) - (22,300) Deferred units issued 76 - - 76 Other comprehensive loss - - (2,887) (2,887) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance, March 31, 2009 $ 76 $ (280,725) $ 96,228 $ (8,331) ------------------------------------------------------------------------- INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands of U.S. dollars) ------------------------------------------------------------------------- Three months ended March 31 2009 2008 ------------------------------------------------------------------------- Cash provided by (used in): Operating Activities: Net earnings (loss) from continuing operations $(17,606) $7,606 Items not involving cash: Amortization 32,181 35,333 Future income taxes (2,150) 2,464 Release of cumulative translation adjustment - 171 Non-cash interest expense 666 444 Hedge ineffectiveness 196 294 Gain on disposition of property, plant and equipment (2,097) (93) Other 76 87 Change in non-cash operating working capital 49,820 63,101 ------------------------------------------------------------------------- 61,086 109,407 Financing Activities: Transaction costs (1,521) - Repayment of long-term debt and bank indebtedness (36,688) (28,311) Decrease in obligations under capital leases (910) (343) Repurchase of units - (729) Distributions paid - (9,247) ------------------------------------------------------------------------- (39,119) (38,630) Investing Activities: Purchase of property, plant and equipment (17,368) (11,556) Proceeds on disposition of property, plant and equipment 23,004 95 Increase in other assets 1,996 760 Increase (decrease) in other long-term liabilities (3,220) 1,379 ------------------------------------------------------------------------- 4,412 (9,322) Cash provided by (used in) discontinued operating activities 3,124 (2,835) Cash provided by (used in) discontinued investing activities (11) (386) Foreign currency translation gain on cash held in foreign currencies 741 3,549 ------------------------------------------------------------------------- Increase in cash and cash equivalents 30,233 61,783 Cash and cash equivalents, beginning of period 73,349 68,406 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $103,582 $130,189 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash and cash equivalents are comprised of: Cash $77,647 $84,404 Cash equivalents 25,935 45,785 ------------------------------------------------------------------------- 103,582 130,189 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $11,077 $12,437 Income taxes paid 145 11,549 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Cinram International Income Fund
CONTACT: John H. Bell, Tel: (416) 332-2902, johnbell@cinram.com
