Disc Manufacturer Cinram’s Financial Troubles

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Disc Manufacturer Cinram’s Financial Troubles

Cinram, a major international manufacturer of Blu-rays, DVDs and CDs, conducted significant discussions with lenders after the company posted a $97 million operating loss for the second quarter of 2011.

Their financial report indicates that the company experienced a considerable drop in revenue from pre-record multimedia products, which fell from $234.4 million in the second quarter of 2010 to $124.5 million in the corresponding quarter of this year.

Cinram cites this “primarily as a result of the loss of the Warner Home Video contract in 2010 and a general softness in new releases in the second quarter of 2011 compared with the second quarter of 2010.”

Cinram only replicated 81.9 million DVDs in the second quarter of 2011 compared to the 203.4 million discs in the second quarter of last year. While DVD production was the most significant decline, Blu-ray and CD replication revenue also dropped.

In August of 2010, Warner Home Video, who provided 28% of Cinram’s corporate revenue, sent Cinram a notice terminating their service agreement and transferred their DVD replication work to Paris-based Technicolor.

Even though Warner Music Group remained with Cinram and entered into a new agreement in November of 2010, the notice was a devastating blow that resulted in the layoff of thousands of employees and put the company in a distressing financial situation.

To combat the revenue loss, Cinram has been able to procure new business from companies, such as Relativity Media, TF1, and Twentieth Century Fox Home Entertainment. The disc manufacturer had reportedly engaged in a successful refinancing plan, which resulted in a $120 million reduction of its gross senior debt.

However, this year’s second quarter losses still drew the company into discussion with lenders about their financial obligations this August. Cinram quickly gained lender support to make amendments to their credit agreements, which helped Cinram avoid a default on its debt.

Shortly after Cinram and lenders concluded the new agreements, three members of Cinram’s board of trustees, James MacDonald, Robert Normandeau and Andrew Brenton, resigned as part of the conditions in the new amendments, which stipulated that the CD and DVD manufacturer must replace half of the board (excluding the CEO) with new independent trustees.

While Cinram’s financial troubles largely stem from its loss of the Warner Home Video DVD contract, its continued losses in other areas, such as CD and Blu-ray production, demonstrate the endemic decline that appears symptomatic across the industry due to the poor economy. Many other major discs replicators are also experiencing similar financial troubles or have simply gone out of business.

About Arthur Pignotti

Before joining CD-Info in 2010, Pignotti worked as a video editor, a multimedia designer, and a multimedia development manager at US Digital Media for 6 years. He has two BAs in journalism and history from Arizona State University and will be receiving an MA in history from Arizona State next year.

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