Cinram International Income Fund (CRWFF) Inactive
Filed: 8 May 07, 12:00am
Exhibit 99.1
News release via Canada NewsWire, Toronto 416-863-9350 Attention Business/Financial Editors: Cinram Reports First Quarter 2007 Results - DVD Unit Volume Up Nine Per Cent (All figures in U.S. dollars unless otherwise indicated) TORONTO, May 7 /CNW/ - Cinram International Income Fund ("Cinram" or the "Fund") (TSX: CRW.UN) today reported first quarter revenue of $443.9 million compared with $447.8 million in 2006, and earnings before interest, taxes and amortization (EBITA(1)) of $69.6 million compared with $72.0 million in the first quarter of 2006. Cash flow from operations increased to $119.4 million in the first quarter of 2007 from $83.8 million in the comparable 2006 period. "First quarter DVD unit volumes were in line with our expectations and were indicative of our customers' healthy release schedules and the overall strength of the market for DVDs," said Cinram chief executive officer Dave Rubenstein. "Cinram's first quarter DVD unit volumes were up nine per cent over 2006; however, the positive impact of this increase was offset by lower prices, a decline in our printing business and lower CD volume during the period." As a percentage of consolidated sales, first quarter EBITA margins were in line with 2006 at 16 per cent. Excluding unusual items, EBITA decreased to $70.6 million from $81.7 million in 2006, and margins declined to 16 per cent from 18 per cent in 2006. Cinram's first quarter 2007 EBITA included $1.0 million of charges related to the February consolidation of distribution and certain warehousing and packaging departments within existing facilities in the United States. By comparison, 2006 first quarter EBITA included charges of $9.7 million primarily related to one-time transaction costs associated with the income trust conversion and facility restructuring charges for the closure of our Commerce, California, facility and CD operations in Louviers, France. In the first quarter, we generated distributable cash of $39.9 million and paid distributions of $40.7 million resulting in a payout ratio of 102 per cent. However, Cinram's first quarter payout ratio is not indicative of our annual payout ratio as distributable cash varies by quarter in line with the seasonal fluctuations in our business. Net earnings for the quarter decreased to $7.2 million or $0.12 per unit (basic) from $8.0 million or $0.14 per share (basic) for the first quarter of 2006. "We have made significant strides on the business development front since the beginning of the year, including the acquisition of Ditan Corporation," added Rubenstein. "We are aggressively moving forward with our plans to leverage our core competencies and continue to pursue strategic initiatives that will be accretive to our unitholders and which will ensure the long-term growth of our company." On April 30, 2007, Cinram acquired substantially all of the assets of Ditan
Corporation, the leading third-party interactive software and games distribution company in the United States, for $50 million in cash plus additional cash consideration upon the achievement of certain future performance metrics. The Ditan acquisition provides Cinram with a strategic entry point into the growing video game market as well as the opportunity to take advantage of a number of synergies in manufacturing and distribution. Product revenue First quarter DVD revenue was up seven per cent to $242.0 million from $225.5 million in 2006 as a result of a nine per cent increase in volume which was driven by a strong release slate for certain of our major customers, which was partially offset by price declines. Cinram also recorded first quarter high-definition disc revenue of $1.9 million. << ------------------------------------------------------------------------- Three months ended March 31 (in thousands of US$) 2007 2006 ------------------------------------------------------------------------- DVD $241,998 55% $225,481 50% High-definition 1,876 - 66 - VHS 157 - 3,562 1% CD 50,511 11% 65,698 15% Printing 38,558 9% 41,975 10% Distribution 77,009 17% 77,376 17% Merchandising 29,235 7% 27,318 6% Other 4,602 1% 6,351 1% ------------------------------------------------------------------------- $443,946 100% $447,827 100% ------------------------------------------------------------------------- ------------------------------------------------------------------------- >> CD revenue was down 23 per cent in the first quarter to $50.5 million from $65.7 million in 2006 on a 20 per cent decline in CD unit volumes, a portion of which was related to the closure of our CD manufacturing operations in France in early 2006. Printing revenue for the first quarter declined eight per cent to $38.6 million from $42.0 million in 2006 principally as a result of a change in product mix due to the decline in CD related printing business. We recorded distribution revenue of $77.0 million in the first quarter of 2007 compared with $77.4 million in 2006, and Giant Merchandising's revenue was up seven per cent to $29.2 million from $27.3 million in 2006. Geographic revenue North American revenue was up two per cent to $333.0 million in the first quarter, compared with $327.0 million in 2006, principally as a result of higher DVD sales which were partially offset by lower CD and printing sales. North America accounted for 75 per cent of first quarter consolidated revenue compared with 73 per cent in 2006. European revenue declined eight per cent in the first quarter of 2007 to $111.0 million from $120.8 million in 2006 due to a decrease in DVD and CD sales. First quarter European revenue represented 25 per cent of consolidated revenue compared with 27 per cent in the first quarter of 2006. Other financial highlights Gross profit for the quarter ended March 31, 2007, declined six per cent to $76.5 million from $81.8 million in 2006. The favourable gross profit impact of increased DVD units during the quarter was more than offset by lower DVD pricing, product mix and a reduction in CD and printing sales. As a percentage of consolidated revenue, first quarter gross profit margins decreased to 17 per cent from 18 per cent in 2006. Amortization expense from capital assets, which is included in the cost of goods sold, decreased to $35.3 million from $36.8 million in the first quarter of 2006. Balance sheet and liquidity Cinram's cash and cash equivalent position increased to $197.3 million at quarter end from $152.7 million at December 31, 2006. With debt of $664.6 million, the Fund had a net debt position of $467.3 million at March 31, 2007, compared with a net debt position of $522.8 million at the end of 2006. Cinram's $150-million revolving line of credit was not used in the first quarter and currently remains undrawn. Working capital decreased to $265.7 million at March 31, 2007, from $282.5 million at December 31,
2006, as we used funds for capital spending and debt repayments. Subsequent to quarter end, we used $50 million in cash to finance the acquisition of Ditan Corporation. Distributions The Fund paid distributions of $40.7 million in the first quarter. Cinram's current annual distribution policy remains unchanged at C$3.25 per unit, to be paid in monthly distributions of C$0.2708 on or about the 15th day of the month to unitholders of record on the last business day of each previous month. The Fund's Trustees declared a cash distribution of C$0.2708 per unit for the month of May 2007, payable on June 15, 2007, to unitholders of record at the close of business on May 31, 2007. Cinram International Limited Partnership also declared a cash distribution of C$0.2708 per Class B limited partnership unit for the month of May 2007, payable on June 15, 2007, to unitholders of record at the close of business on May 31, 2007. Unit repurchase program Cinram received regulatory approval and satisfactory amendments to the Fund's credit facilities on March 30, 2007, enabling it to proceed with the normal course issuer bid (NCIB) that was first announced on March 5, 2007. Under the NCIB, Cinram may purchase up to a total of 5 million units (approximately 8% of the "public float") for cancellation through the facilities of the TSX during the 12-month period starting March 30, 2007. The actual number of units which may be purchased pursuant to the NCIB and the timing of any such purchases will be determined by Cinram's management and in accordance with applicable securities legislation. To date, Cinram has not made any purchases under the NCIB as the Fund has been in a blackout period as prescribed by its corporate disclosure policy. Unit data For the three-month period ended March 31, 2007, the basic weighted average number of units/shares and exchangeable limited partnership units outstanding was 58.4 million compared with 57.3 million in the first quarter of 2006. << Reconciliation of EBITA and EBIT to net earnings ------------------------------------------------------------------------- Three months ended March 31 (unaudited, in thousands of U.S. dollars) 2007 2006 ------------------------------------------------------------------------- EBITA excluding unusual items $70,601 $81,673 ------------------------------------------------------------------------- Unusual items 1,020 9,665 ------------------------------------------------------------------------- EBITA(1) $69,581 $72,008 ------------------------------------------------------------------------- Amortization of capital assets 35,336 36,750 Amortization of intangible assets 16,227 15,906 Amortization of deferred financing fees - 1,507 ------------------------------------------------------------------------- EBIT(2) $18,018 $17,845 ------------------------------------------------------------------------- Interest expense 12,557 11,737 Foreign exchange (gain) loss (496) (2,373) Investment income (1,615) (855) Income taxes 400 1,311 ------------------------------------------------------------------------- Net earnings $7,172 $8,025 ------------------------------------------------------------------------- (1) EBITA is defined herein as earnings before interest expense, interest income, income taxes, amortization, foreign exchange gain/loss and a write-off of deferred financing fees, and is a 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 herein as earnings before interest expense, interest income, income taxes and foreign exchange gain/loss, and is a 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. >> Distributable cash Distributable cash is defined herein as adjusted cash flow from operations less the sum of capital expenditures and debt repayments and is a measure that is commonly reported and widely used in the industry to assist in understanding and comparing operating results. Distributable cash 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. The Fund excludes changes in non-cash working capital from the distributable cash amount due to the significant impact of the seasonality of the business. The Fund believes this is the most meaningful presentation to the unitholders. << ------------------------------------------------------------------------- Three months ended (unaudited, in thousands of U.S. dollars) March 31, 2007 ------------------------------------------------------------------------- Cash flow from operations $119,408 Deduct changes in non-cash working capital (61,957) -------------------- Adjusted cash flow from operations $57,451 Less: Capital expenditures (13,969) Debt repayments (3,608) -------------------- Distributable cash $39,874 Distributions declared $40,722 Payout ratio 102% ------------------------------------------------------------------------- >> May 8 conference call and webcast Cinram's management team will host a conference call to discuss its results on Tuesday, May 8, 2007, at 10:00 a.m. (ET). To participate, dial (416) 644-3423 or 1-800-590-1817. The call will also be webcast live at http://investors.cinram.com/. About Cinram Cinram International Inc., an indirect wholly-owned subsidiary of the Fund, is one of 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, CDs and CD-ROMs for motion picture studios, music labels, publishers and computer software companies around the world. The Fund's units are listed on the Toronto Stock Exchange under the symbol CRW.UN and are included in the S&P/TSX Composite Index. For more information, visit our website at 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 duplication/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 2007 2006 (unaudited) ------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 197,340 $ 152,681 Accounts receivable 383,248 535,377 Inventories 47,005 50,974 Prepaid expenses 18,705 22,796 Future income taxes 21,571 21,494 ------------------------------------------------------------------------- 667,869 783,322 Property, plant and equipment 492,580 509,727 Goodwill 329,923 329,949 Intangible assets 166,853 182,582 Deferred financing fees - 5,147 Other assets 17,055 2,548 Future income taxes 17,315 17,346 ------------------------------------------------------------------------- $ 1,691,595 $ 1,830,621 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND UNITHOLDERS' EQUITY Current liabilities: Accounts payable $ 129,334 $ 152,793 Accrued liabilities 245,920 308,471 Distributions payable 13,689 13,620 Income taxes payable 5,571 14,485 Current portion of long-term debt 6,914 10,617 Current portion of obligations under capital leases 742 812 ------------------------------------------------------------------------- 402,170 500,798 Long-term debt 657,690 664,875 Obligations under capital leases 3,333 3,412 Other long-term liabilities 31,207 31,025 Derivative instruments 11,319 - Future income taxes 61,078 62,428 Unitholders' equity: Fund units 181,978 181,880 Exchangeable limited partnership units 3,268 3,273 Contributed surplus 4,967 4,967 Retained earnings 226,326 260,030 Accumulated other comprehensive income 108,259 117,933 ------------------------------------------------------------------------- 524,798 568,083 ------------------------------------------------------------------------- $ 1,691,595 $ 1,830,621 ------------------------------------------------------------------------- -------------------------------------------------------------------------
INTERIM CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (unaudited, in thousands of U.S. dollars, except per share/unit/exchangeable LP unit amounts) ------------------------------------------------------------------------- Three months ended March 31 March 31 2007 2006 ------------------------------------------------------------------------- Revenue $ 443,946 $ 447,827 Cost of goods sold 367,405 366,036 ------------------------------------------------------------------------- Gross profit 76,541 81,791 Selling, general and administrative expenses 41,276 36,868 Amortization of intangible assets 16,227 15,906 Amortization of deferred financing fees - 1,507 Unusual items 1,020 9,665 ------------------------------------------------------------------------- Earnings before the undernoted 18,018 17,845 Interest on long-term debt 12,272 11,620 Other interest 285 117 Foreign exchange (gain) loss (496) (2,373) Investment income (1,615) (855) ------------------------------------------------------------------------- Earnings before income taxes 7,572 9,336 ------------------------------------------------------------------------- Income taxes 400 1,311 ------------------------------------------------------------------------- Net earnings 7,172 8,025 Retained earnings, beginning of period as previously reported 260,030 317,121 Change in accounting policy related to financial instruments (154) - ------------------------------------------------------------------------- Retained earnings, beginning of period as restated 259,876 317,121 Distributions declared (40,722) - Dividends declared - (1,487) ------------------------------------------------------------------------- Retained earnings, end of period $ 226,326 $ 323,659 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per unit or share: Basic $ 0.12 $ 0.14 Diluted 0.12 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of units and exchangeable LP units outstanding, (common shares up to May 5, 2006) (in thousands): Basic 58,358 57,304 Diluted 58,411 57,998 ------------------------------------------------------------------------- -------------------------------------------------------------------------
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited, in thousands of U.S. dollars) ------------------------------------------------------------------------- Three months ended March 31 March 31 2007 2006 ------------------------------------------------------------------------- Net earnings for the period $ 7,172 $ 8,025 Other comprehensive income, net of tax: Unrealized gains (losses) on translating financial statements of self-sustaining foreign operations 159 (529) Gains (losses) on hedges of unrealized foreign currency translation gains 1,309 (54) ------------------------------------------------------------------------- Unrealized foreign exchange translation gain (loss), net of hedging activities 1,468 (583) Net unrealized loss on derivatives designated as cash flow hedges (1,546) - Net unrealized gain on derivatives designated as net investment hedges 583 - ------------------------------------------------------------------------- Other comprehensive income (loss) 505 (583) ------------------------------------------------------------------------- Comprehensive Income $ 7,677 $ 7,442 ------------------------------------------------------------------------- -------------------------------------------------------------------------
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, In thousands of U.S. dollars) ------------------------------------------------------------------------- Three months ended March 31 March 31 2007 2006 ------------------------------------------------------------------------- Cash provided by (used in): Operating Activities: Net earnings $ 7,172 $ 8,025 Items not involving cash: Amortization 51,563 54,163 Future income taxes (1,557) 1,444 Release of cumulative translation adjustment - (4,090) Non-cash interest expense 297 - Other (24) 80 Change in non-cash operating working capital 61,957 24,175 ------------------------------------------------------------------------- 119,408 83,797 Financing Activities: Transaction costs (2,414) - Repayment of long-term debt (3,608) (41,893) Decrease in obligations under capital leases (169) (179) Issuance of units/common shares 93 55 Dividends paid - (1,487) Distributions paid (40,722) - ------------------------------------------------------------------------- (46,820) (43,504) Investing Activities: Purchase of property, plant and equipment (13,969) (12,927) Proceeds on disposition of property, plant and equipment 53 28 Decrease (increase) in other assets (14,507) 3,788 Decrease (increase) in other long-term liabilities 182 (290) ------------------------------------------------------------------------- (28,241) (9,401) Foreign exchange loss on cash held in foreign currencies 312 845 ------------------------------------------------------------------------- Increase in cash and cash equivalents 44,659 31,737 Cash and cash equivalents, beginning of period 152,681 89,921 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 197,340 $ 121,658 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 12,423 $ 12,088 Income taxes paid 11,274 10,623 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash and cash equivalents are defined as cash and short-term deposits, which have an original maturity of less than 90 days. >> %CIK: 0000908262 /For further information: Lyne Beauregard Fisher, Tel: (416) 321-7930, lynefisher(at)cinram.com/ (CRW.UN.) CO: Cinram International Income Fund CNW 18:13e 07-MAY-07