Post on 01-Jan-2016
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Demonstrated Record of Growth
• E1 has a strong track record of financial performance and growth
• 2005 revenue and EBITDA of $519.8M and $26.0M, respectively
• Includes the acquisition of Video One from August 1, 2004 & Koch Entertainment from June 1, 2005
84.1 106.1155.0
186.3
332.8
519.8
2000 2001 2002 2003 2004 2005
Historical Revenues 1 (C$ millions) Historical EBITDA 1 (C$ millions)
Revenue Growth EBITDA Margin1 2000 to 2003 – Year ended March 31.
6.7
9.9
18.1
25.8
29.126.0
2000 2001 2002 2003 2004 2005
Summary 2005 Results
(C$ thousands except as noted)
2005 2004
Sales 519,797 332,827
Gross Margin
As %
109,512
21.1%
62,683
18.8%
Operating Expenses, excl amort. & interest
As %
86,210
16.6%
37,569
10.1%
EBITDA 25,981 29,114
Interest expense
Distributable cash adjustments & taxes
(3,103)
(2,095)
(1,103)
(1,452)
Distributable Cash 20,783 26,559
Per Unit $0.84 $1.30
Factors:Poor DVD Release ScheduleWeak fulfillment due to Cdn vs. US dollarOne time costs
Summary Q1 2006 Results
(C$ thousands except as noted)
2006 2005Sales 137,026 91,819Gross Margin
As %
28,573
20.9%
16,358
17.8%Operating Expenses, excl amort. & interest
As %
23,251
17.0%
12,095
13.2%EBITDA 5,064 4,263Interest expense
Bank Principal Repayment
(1,037)
(2,350)
(562)
0Distributable cash adjustments 1,077 (445)Distributable Cash 2,754 3,256
Distributable Cash Excluding Bank Repayment 5,104 3,256Per Unit 0.18 0.17
Distributions
• Reasons for reduction to $.90:
– Poor results in 2005
– Increase working capital
$0.00
$0.05
$0.10
$0.15
$0.20
Nov-2003
Dec-2003
Jan-Nov2004
Dec-2004
Jan-Oct2005
Nov-Dec2005
Jan-May2006
Distributions per unit
Special Distribution
Bank Debt
• Operating Loan - $27.75 mm
– Covers seasonal working capital needs
– Direct borrowings were fully repaid at Dec 31
• Term Loan - $52.9 mm
– Financed Video One & Koch acquisitions
– Minimum $4 mm repayment per year
• These loans are currently being restructured
Building the Business
• Enhance exclusivity – build sales and margins
• Expand exclusive music and video content
• Expand exclusive distribution arrangements
• Capitalize on growing video-game market
• Initiatives on Vendor Managed Inventory
% of Exclusive Sales
0% 3%
24%
49%
0%
20%
40%
60%
80%
100%
2003 2004 2005 Q1-2006
Sales Through Exclusive Arrangements
Expand Exclusive Distribution Agreements
• Koch Entertainment
• Universal Home Video
• Sheridan Square Entertainment
• National Film Board Library
Expand LicensedMusic & Video Content
• Koch US adds 30 new music labels since acquisition
• Koch Canada continuing to look for opportunities in Canada
• Paradox, a division of Entertainment One, also continues licensing exclusive video content in North America
Capitalize on Growing Video-Game Market
• Game sales are increasing
• Boost to bottom line despite lower margins
• Leverage existing customer base
Vendor Managed Inventory
• Moving beyond normal buy-sell arrangements
• New arrangements with national drug & grocery store chains
• Monitor consumer buying through point-of-sale terminals
• Expansion of reach in retail
Valuation – Canadian Operations
*dollar amounts expressed in millions
April 2006 April 2005
Unit Price 3.50 11.00
# Units 32.7 23.2
Valuation $114 $255
Koch Value included (94) 0
Valuation of Canadian Operations $20 $255
Distributable Cash FromCanadian Operations - 2005
$12
#1 in Canada
• We are Canada’s #1 Home Entertainment Products Wholesaler
• We set the standard for Wholesaling in Canada
Canada’s #1 DVD Wholesaler
• Annual volume approximately $350 million
• Exclusive distributor for Universal Home Video
• 30,000 titles
• 3,000 customers
Canada’s #1 CD Wholesaler
• Largest on-hand CD inventory
• Largest CD Catalogue – at 12,000 items
• 25+ year relationships with the industry’s largest music producers
#1 Internet Fulfillment Wholesaler
• Serving consumers through our partnerships with the World’s largest On-Line retailers
Canada’s #1 Specialty Retailer
• 90+ CD Plus retail stores
• Specialize in CDs, DVDs, and Video Games
Management
Darren ThroopPresident & CEO
Michael KochCEO Koch US
Chris JamiesonCFO
Terry StevensSenior Vice President & General Manager
• #1 Independent Record Label in U.S.
• 0.65% 2005 U.S. market share
• Largest number of Charted Titles among Independents for 5th consecutive year (25 titles in 2005)
• Consistent growth and accelerated profitability
• Diversified and growing artist roster:
– Jim Jones, Diplomats, D-Block, Snoop Dogg, Robert Earl Keen, Charlie Daniels, Bob James, Earl Klugh, Marcus Miller,
– Children's properties: The Wiggles, Strawberry Shortcake, Barney, Atomic Betty
DISTRIBUTION
• #1 Independent Distributor in the U.S. that is not owned by one of the majors, with 1.36% of the U.S. audio market in 2005
• In 2005, 49% of our distribution sales were from owned labels, up from 40% in 2004
• 30 music and video labels added for exclusive distribution since becoming a subsidiary of Entertainment One last June
• KOCH’s video sales up 26% from 2004 to 2005.
• KOCH Vision and KOCH Lorber Films represent 33% of overall KOCH video distribution sales.
• Multiple content providers:
DIGITAL
• 2005 revenues up 175% over 2004
• Content Aggregation: exclusively represents growing roster of third-party labels (35 presently)
• Close relationships with all major digital customers.