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Cinram reports positive Q3 results over Q2; still down over 2010

Toronto-headquartered optical disc replicator Cinram reported consolidated revenue of $209.2 million in the third quarter of 2011 exceeding Q2 2011 revenues of $147.5 million – an increase of $61.7 million or 42%, as studio orders returned to more normal levels. However, the figure is down over the third quarter 2010 – $254.1m. And for recollection the Q3 2009 was $348.8m. The sharp fall in 2010 was primarily attributed to the termination of the Warner Home Video contract in July of that year.

Revenue from the pre-recorded multimedia products of $182.1 million grew from $124.5 million in Q2 2011, primarily as a result of growth in new release revenue as well as a strong performance from CD volumes. Q3 2011 revenues were comparable with the prior year period, after adjusting for the loss of Warner Home Video. Third quarter home video revenues last year were $197.3m down 28% to from $275.3m in 2009 as a result of lower DVD unit shipments given the loss of the WHV contract.

Revenue from the video games segment in the third quarter of 2011 was $9.5 million, up 48% from Q2 2011 revenues of $6.4 million. The drop from the $11.1 million in Q3 2010 was due to the sale of certain customers to new owners and the subsequent cancellation of service contracts and a general decline in volume. The Q3 2009 figures were $18.2m.

Cinram replicated 169 million DVDs in the third quarter of 2011, over double the 82 million units replicated in the second quarter of 2011. By comparison, unit volume in Q3 2010 was 226 million, including approximately 50 million units for Warner Home Entertainment.

DVD revenue (which includes replication and distribution services) was $141.6 million for the third quarter of 2011, compared to $91.2 million in the second quarter of 2011.

Blu-ray disc replication revenue was $10.7 million in the third quarter of 2011, compared to $5.7 million in the second quarter, “reflecting the growing importance of high definition Blu-ray discs in the physical media segment.” However, it is a modest increase over Q3 2010 ($8.1m).

CD revenue (including replication and distribution of CDs) of $29.8 million was up slightly from the $27.6 million recorded in the second quarter, as demand for this format has been steady given the consumer price reductions recently offered at retail. Revenue in this quarter was down 9% from the $32.7 million reported in Q3 2010.
Late last month, Cinram said it had hired investment bank Moelis & Co. as a financial adviser to review the company's strategic options.

In August, three members of its board of trustees resigned as part of a plan to replace half the board – excluding the CEO – with new independent trustees. The change was part of the conditions made in a commitment to amend Cinram's senior secured credit line.

Story filed 10.11.11

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