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WHV contract loss severely hit Cinram's 3rd quarter 2010 revenues

Toronto-headquartered optical disc replicator Cinram reported 2010 third quarter revenues of $254.1m compared to $348.8m from the same period last year – a sharp fall primarily attributed to the termination of the Warner Home Video contract in July. Gross earnings were $25.7m, down from last year’s $44.6m.

On a year-to-date basis, revenues were $808.7m compared with $948.1m in the prior year, while gross earnings excluding other charges decreased by 9% to $87.2m from $95.8m in 2009.

Third quarter home video revenues (which includes replication and distribution of DVDs and Blu-ray discs) were down 28% to $197.3m from $275.3m in 2009 as a result of lower DVD unit shipments given the loss of the WHV contract. Blu-ray disc replication revenues increased to $8.1m in the third quarter of 2010 from $4.7m in the comparable 2009 period.

The CD segment revenues (which include replication and distribution of CDs) were down 21% in the third quarter of 2010 to $32.7m from $41.3m in 2009 due primarily to lower unit shipments resulting from an expected decline in demand from its CD music label customers.

Video game revenues were $11.1m in the third quarter of 2010 compared with $18.2m in 2009 “due to continued softness in the gaming industry combined with the loss of several customers.”

As for geographic revenues,
third quarter North American revenues decreased 29% to $139.6m from $197.2m in 2009, principally as a result of lower revenues from the home video, video game distribution and CD segments. North America accounted for 55% of third quarter consolidated revenues compared with 57% in the prior year period.

European revenues were down 25% in the third quarter to $114.5m from $151.6m in 2009. Cinram says the decrease in revenues was due to several factors including the loss of the WHV business during the third quarter of 2010, combined with the foreign exchange impact associated with a weaker Euro relative to the US dollar during the third quarter of 2010 compared to the same period in the prior year.

Excluding the impact of foreign currency translation, European revenues decreased by 18% in the 2010 third quarter compared to the prior year period. Third quarter European revenues represented 45% of consolidated revenue compared with 43% in the third quarter of 2009.

CEO Steve Brown puts a brave face on the financial situation: “The results for the 2010 third quarter were generally above our expectations. While the termination of the Warner Home Video contract became effective July 31, results for the third quarter included a significant amount of WHV offload from our competitor. As anticipated, revenue and EBITA were below prior year levels as a result of the contract loss. However, our margins were better than expected as a result of the ongoing efficiency initiatives.”

The company says it is currently engaged in discussions with its lenders and respective advisors in a refinancing plan and expects to make an announcement of the refinancing plan in the near future.

Story filed 08.11.10

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