Cinram Reports 2009 First Quarter Results



    (All figures in U.S. dollars unless otherwise indicated)

    TORONTO, May 1 /CNW/ - 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 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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: John H. Bell, Tel: (416) 332-2902,
johnbell@cinram.com

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