CINRAM INTERNATIONAL INC. FOURTH QUARTER AND 2003 YEAR-END RESULTS CONFERENCE
CALL AND WEBCAST
TORONTO, Mar. 10 /CNW/ - Cinram International Inc. (TSX: CRW) will issue
its fourth quarter and year-end financial results on Tuesday, March 9, 2004.
The news release will be available on Cinram's Web site (www.cinram.com) and at
www.newswire.ca after 4 p.m. on March 9.
Conference call
Cinram's management team will host a conference call to review the results
at 11 a.m. on Wednesday, March 10. Supplementary information will also be posted
on www.cinram.com shortly before the call. To participate, please dial:
- In Toronto: (416) 640-1907
- Toll-free: 1 800 814-4853
Replay:
A replay of the call will be available starting 1 p.m. on Wednesday until
midnight on Friday, March 12. To access the replay, please dial:
- In Toronto: (416) 640-1917 (access code 21036787 followed by the
number sign)
- Toll-free: 1 877 289-8525 (access code 21036787 followed by the
number sign)
Webcast
The conference call will also be webcast live, and archived at:
- www.cinram.com
- http://webevents.broadcast.com/cnw/cinram20040310
About Cinram
Cinram International Inc. is one of the world's largest independent
providers of pre-recorded multimedia products and logistics services. With
facilities in North America and Europe, Cinram manufactures and distributes
pre-recorded DVDs, VHS videocassettes, audio CDs, audiocassettes and CD-ROMs for
motion picture studios, music labels, publishers and computer software companies
around the world. The Company's shares are listed on the Toronto Stock Exchange
(CRW) and are included on the S&P/ TSX Composite Index. For more information,
visit our Web site at www.cinram.com
For further information: Lyne Beauregard, (416) 321-7930,
lynebeauregard@cinram.com
News release via Canada NewsWire, Toronto 416-863-9350
Attention Business/Financial Editors:
Cinram posts record fourth quarter and 2003 year-end earnings
(All figures in Canadian dollars unless otherwise indicated)
TORONTO, March 9 /CNW/ - For the year ended December 31, 2003,
Cinram International Inc. (TSX: CRW) today reported consolidated revenue of
$1,152.6 million up from $878.7 million in 2002. Earnings before interest and
taxes (EBIT(1)) were $123.3 million up from $76.9 million in the prior year. Net
earnings also increased to $73.9 million, or $1.33 per share, from $54.5 million
or $0.99 per share in 2002. Cinram's consolidated results include the Time
Warner acquired businesses as of October 24, 2003.
"Cinram is now the number one optical disc replicator in the world.
The Company's 2003 performance across all indicators was in line with our
expectations, with earnings showing strong year-over-year growth," said Cinram
chief executive officer Isidore Philosophe. "Despite having undertaken the
largest acquisition in the Company's history, and absorbing a $9 million impact
on net earnings -- relating to foreign currency translation, December start-up
costs for our new MGM agreement, and a restructuring charge for the
rationalization of our sites in France -- we kept our focus and delivered
another year of solid performance. We plan to capitalize on our size and scale
to further enhance our business and shareholder value in the years to come."
For the fourth quarter, Cinram reported revenue of $561.8 million,
up from $301.0 million in 2002. EBIT was $60.4 million, up from 36.7 million,
and net earnings increased to $32.2 million or $0.58 per share, from $28.1
million or $0.51 per share in the comparable quarter last year.
Since U.S. revenue now represents the largest segment of Cinram's
consolidated sales, the Company will be moving to U.S. dollar reporting to
lessen the impact of currency fluctuations on its results starting with the
first quarter of 2004. Cinram's quoted share price and dividend payments will
remain in Canadian dollars.
Including production from the acquired Time Warner businesses,
Cinram's total DVD unit shipments for 2003 increased by nearly 200 per cent over
last year. According to the DVD Report, an industry newsletter, there are now
some 31,000 titles available on DVD. Industry association The Digital
Entertainment Group (DEG) reported that industry-wide retail sales of DVDs in
the U.S. grew by 33 per cent in 2003, with U.S. DVD player sales increasing 34
per cent over last year. The DEG estimates that U.S. DVD household penetration
reached 57 per cent in 2003. They also project that two out of every three U.S.
homes will own a DVD player by the end of 2004, and that player penetration in
the United States will rise to 65 per cent in 2004. With European DVD markets
trends trailing by a year, the Company expects similarly strong growth in Europe
ramping up in 2004 and beyond.
Cinram's strong cash position along with its undrawn U.S.$150
million revolving credit line will provide ample liquidity for the Company to
make its debt repayments, meet planned capital expenditure requirements and
pursue additional business opportunities.
Cinram invested $111.8 million in capital expenditures in 2003, up
from $69.3 million in 2002, primarily to increase DVD capacity and to expand its
distribution facilities.
Industry segments
DVD sales for the year ended December 31, 2003, were up 120 per cent
over last year, representing 47 per cent of Cinram's consolidated revenue. This
jump in sales was principally fuelled by an increase in demand for DVDs, and the
nine-week contribution from the acquired Timer Warner businesses.
In contrast, sales of video cassettes continued to decline relative
to Cinram's total sales, accounting for only 12 per cent of 2003 consolidated
revenue. "While we enjoyed the success of VHS in the past, DVD has unleashed a
much more powerful growth curve, spurred by unparalleled levels of consumer
adoption," said Philosophe. "Cinram almost tripled its DVD unit shipments in
2003, and continues to gear up for another banner year. We are bullish about our
customers' 2004 release schedules."
CD shipments accounted for 20 per cent of consolidated revenue in
2003, down from 24 per cent from 2002.
As part of the Time Warner transaction, Cinram acquired printing and
packaging company, Ivy Hill Inc., and entertainment merchandising provider Giant
Merchandising Inc. Both these businesses are included in Cinram's "other
revenue" along with distribution. The performance of these businesses for the
nine-week period was consistent with management's expectations.
For the year ended December 31, 2003, "other revenue" accounted for
21 per cent of Cinram's consolidated sales, up from 13 per cent in 2002. The
sharp increase in "other revenue" was driven by an overall increase in units
distributed and the nine-week contribution from Ivy Hill and Giant
Merchandising. As a percentage of sales, distribution services revenue increased
to nine per cent, up from eight per cent in 2002.
Geographic segments
U.S. sales represented 60 per cent of consolidated revenue in 2003.
In U.S. dollar terms, 2003 revenue from the United States excluding the acquired
businesses grew by 17 per cent over last year, led by a significant increase in
DVD unit shipments and higher distribution services revenue. After foreign
exchange translation, U.S. revenue excluding the acquired businesses increased
by three per cent.
In Europe, revenue increased by nine per cent primarily due to the
Time Warner acquisition. This increase was largely offset by reduced VHS video
cassettes and CD-ROM shipments in France and the United Kingdom and the sale of
the Company's facility in the Netherlands in early 2003.
In the fourth quarter, Cinram recorded a $3.8 million restructuring
provision related to the rationalization of its three facilities in France to
two.
As a percentage of consolidated revenue, Canadian sales decreased to
16 from 19 per cent in 2002, largely as a result of the non-Canadian revenue
contribution from the acquired businesses.
Other financial highlights
As a result of the dramatic shift in product mix to DVDs, gross
profit margins for the year expanded to 21 per cent, up from 18 per cent in
2002. Selling, general and administrative expense as a percentage of
consolidated sales for the year decreased to eight per cent from nine per cent
last year. Depreciation and amortization increased to $104.8 million from $75.0
million in 2003, largely due to the acquired businesses and a $14.9 million
non-cash charge related to the amortization of the Time Warner contracts.
Interest expense for the year was also higher at $19.2 million as a result of
the debt incurred by the Company during the fourth quarter to fund the
acquisition.
For the fourth quarter of 2003, the weighted average number of
shares outstanding was 56.0 million compared to 55.1 million in 2002. For the
year, the weighted average number of Cinram shares outstanding was 55.6 million
compared to 55.1 million in 2002.
MGM announcement
On March 1, 2004, Cinram announced the signature of a multi-year
agreement with Metro-Goldwyn-Mayer Studios for VHS and DVD manufacturing and
distribution in North America. The Company incurred start-up costs in the fourth
quarter related to its investment in a new distribution facility for MGM in
Tennessee.
Dividend
The Board of Directors has declared a quarterly dividend of $0.03
per share, payable on March 31, 2004, to the shareholders of record at the close
of business on March 15, 2004.
2004 guidance
Cinram offers the following guidance with respect to 2004 revenue
and EBITDA(2). This guidance is provided in U.S. dollars since the Company will
be reporting in U.S. dollars beginning with the first quarter of 2004. Subject
to the timing of studio releases, Cinram expects to generate revenue in the
U.S.$1.8 to U.S.$2.0 billion range, and EBITDA in the U.S.$390 to U.S.$410
million range for the full year in 2004. Cinram will not be providing quarterly
financial guidance because of the seasonality of its business.
March 10 conference call and webcast
Cinram's management team will host a conference call to discuss the
fourth quarter and 2003 year-end results on Wednesday, March 10, at 11 a.m. To
participate, please dial (416) 640-1907 or 1 800 814-4853. The call will also be
webcast live at www.cinram.com.
Certain statements included in this release constitute "forward
looking statements" within the meaning of the 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 Company, 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 Company's products and services; multimedia
duplication/replication industry conditions and capacity; the ability of the
Company to implement its business strategy; the Company's ability to retain
major customers; the Company's ability to invest successfully in new
technologies; the effective integration of the Time Warner businesses; and other
factors which are described in the Company's filings with the securities
commissions.
<<
-------------------------------------------------------------------------
Three Months 12 months
(in $'000) ended December 31 ended December 31
-------------------------------------------------------------------------
2003 2002 2003 2002
-------------------------------------------------------------------------
EBIT(1) $ 60,377 $ 36,653 $ 123,309 $ 76,949
Interest expense 16,226 1,328 19,156 5,193
Investment Income (1,636) (1,249) (4,994) (4,538)
Income taxes 13,564 8,506 35,241 21,823
-------------------------------------------------------------------------
Net earnings $ 32,223 $ 28,068 $ 73,906 $ 54,471
-------------------------------------------------------------------------
(1) EBIT is defined herein as earnings before interest expense, investment
income 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 generally
accepted accounting principles ("GAAP"). Accordingly, this measure
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.
(2) EBITDA is defined herein as earnings before interest expense, investment
income, income taxes, depreciation and amortization, and
is a standard measure that is commonly reported and widely used in the
industry to assist in understanding and comparing operating results.
EBITDA is not a defined term under generally accepted accounting
principles ("GAAP"). Accordingly, this measure should not be considered
as a substitute or alternative for net earnings or cash flow, in each
case as determined in accordance with GAAP.
About Cinram
Cinram International Inc. is the world's largest independent
provider of pre-recorded multimedia products and logistics services. With
facilities in North America and Europe, Cinram manufactures and distributes
pre-recorded DVDs, VHS video cassettes, audio CDs, audiocassettes and CD-ROMs
for motion picture studios, music labels, publishers and computer software
companies around the world. The Company's shares are listed on the Toronto Stock
Exchange (CRW) and are included on the S&P/TSX Composite Index. For more
information, visit our Web site at www.cinram.com.
CONSOLIDATED BALANCE SHEETS
(stated in thousands of Canadian dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
December 31, 2003 and December 31, 2002 2003 2002
-------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 328,218 $ 164,216
Accounts receivable 478,319 223,385
Inventories 57,680 63,063
Prepaid expenses 14,665 11,137
Future income taxes 28,361 8,905
-------------------------------------------------------------------------
-------------------------------------------------------------------------
907,243 470,706
Capital assets 827,057 298,345
Assets under capital leases 9,014 13,300
Goodwill 361,326 6,789
Intangible assets 486,714 -
Deferred financing fees 36,314 -
Other assets 29,079 40,553
Future income taxes 6,022 -
-------------------------------------------------------------------------
$2,662,769 $ 829,693
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 249,296 $ 90,684
Accrued liabilities 485,292 166,780
Income taxes payable 2,756 13,602
Current portion of long-term debt 123,384 11,977
Current portion of obligations under
capital leases 1,368 1,569
------------------------------------------------------------------------
862,096 284,612
Long-term debt 1,234,206 42,012
Obligations under capital leases 7,643 16,318
Other long-term liabilities 22,276 -
Future income taxes 38,338 26,581
Shareholders' equity:
Capital stock 248,892 240,408
Contributed surplus 182 182
Retained earnings 260,955 193,734
Foreign currency translation adjustment (11,819) 25,846
------------------------------------------------------------------------
498,210 460,170
------------------------------------------------------------------------
$2,662,769 $ 829,693
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
-------------------------------------------------------------------------
(stated in thousands of
Canadian dollars, except
per share amounts) (unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months Twelve months
ended Dec 31 ended Dec 31
2003 2002 2003 2002
-------------------------------------------------------------------------
Revenue $ 561,808 $ 300,950 $1,152,631 $ 878,679
Cost of goods sold 439,823 235,751 913,545 718,485
-------------------------------------------------------------------------
Gross profit 121,985 65,199 239,086 160,194
Selling, general and
administrative expenses 41,849 26,270 96,018 80,969
Amortization of intangible
assets and deferred
financing fees 15,959 - 15,959 -
Unusual items 3,800 2,276 3,800 2,276
-------------------------------------------------------------------------
Earnings before
the undernoted 60,377 36,653 123,309 76,949
Interest on long-term debt 16,081 1,022 18,489 3,580
Interest on capital leases 135 267 570 979
Other interest 10 39 97 634
Investment (income) (1,636) (1,249) (4,994) (4,538)
-------------------------------------------------------------------------
Earnings before income taxes 45,787 36,574 109,147 76,294
Income taxes 13,564 8,506 35,241 21,823
Net earnings 32,223 28,068 73,906 54,471
-------------------------------------------------------------------------
Retained earnings,
beginning of period 230,415 166,769 193,734 143,670
Dividends declared (1,683) (1,103) (6,685) (4,407)
-------------------------------------------------------------------------
Retained earnings,
end of period $ 260,955 $ 193,734 $ 260,955 $ 193,734
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share
Basic $ 0.58 $ 0.51 $ 1.33 $ 0.99
Diluted $ 0.57 $ 0.50 $ 1.31 $ 0.98
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
(stated in thousands of
Canadian dollars) (unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months Twelve months
ended Dec 31 ended Dec 31
2003 2002 2003 2002
-------------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net earnings $ 32,223 $ 28,068 $ 73,906 $ 54,471
Items not involving cash:
Amortization 52,291 19,294 104,762 75,043
Write-down of carrying
value of capital assets - 4,604 - 4,604
Future income taxes 21,152 9,085 21,152 9,085
Gain on disposition of
capital assets (18) (79) (203) (79)
Unrealized foreign
exchange (gain) loss 5,779 (94) 2,229 4,453
Change in non-cash
operating working capital 336,921 (20,530) 335,320 4,733
-------------------------------------------------------------------------
448,348 40,348 537,166 152,310
Financing:
Decrease in bank
operating loans - - - (8,517)
Increase in long-term debt 1,338,856 3,252 1,338,856 22,057
Repayment of long-term debt (4,730) (5,709) (12,859) (9,055)
Deferred financing fees (37,393) - (37,393) -
Increase (decrease) in
obligations under
capital leases 35 (392) (880) (1,522)
Issuance of common shares 3,001 5 8,484 1,943
Change in other long-term
liabilities 63 - 63 -
Dividends paid (1,683) (1,103) (6,685) (4,407)
-------------------------------------------------------------------------
1,298,149 (3,947) 1,289,586 499
Investments:
Acquisition, net of cash
acquired of $1,843 (1,535,778) - (1,535,778) -
Purchase of capital assets (46,447) (25,599) (111,830) (69,309)
Proceeds on disposition
of capital assets 638 6,237 1,339 6,237
Decrease (increase)
in other assets (7,400) (8,920) 4,210 (19,915)
-------------------------------------------------------------------------
(1,588,987) (28,282) (1,642,059) (82,987)
Foreign exchange gain
(loss) on cash held in
foreign currencies (8,091) 3,825 (20,691) 2,515
-------------------------------------------------------------------------
Increase in cash and
cash equivalents 149,419 11,944 164,002 72,337
Cash and cash equivalents,
beginning of period 178,799 152,272 164,216 91,879
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 328,218 $ 164,216 $ 328,218 $ 164,216
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>
%SEDAR: 00002065E
/For further information: Lyne Beauregard, Cinram International
Inc., Tel: (416) 321-7930, lynebeauregard@cinram.com/
(CRW.)
CO: Cinram International Inc.
CNW 16:43e 09-MAR-04