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Main Topics Financials Business strategy Valuation of units Koch Q & A Session.

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Presentation on theme: "Main Topics Financials Business strategy Valuation of units Koch Q & A Session."— Presentation transcript:


2 Main Topics Financials Business strategy Valuation of units Koch Q & A Session

3 Demonstrated Record of Growth E1 has a strong track record of financial performance and growth 2005 revenue and EBITDA of $519.8M and $26.0M, respectively Includes the acquisition of Video One from August 1, 2004 & Koch Entertainment from June 1, 2005 Historical Revenues 1 (C$ millions) Historical EBITDA 1 (C$ millions) Revenue GrowthEBITDA Margin 1 2000 to 2003 – Year ended March 31.

4 Summary 2005 Results (C$ thousands except as noted) 20052004 Sales519,797332,827 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% EBITDA25,98129,114 Interest expense Distributable cash adjustments & taxes (3,103) (2,095) (1,103) (1,452) Distributable Cash20,78326,559 Per Unit$0.84$1.30 Factors: Poor DVD Release Schedule Weak fulfillment due to Cdn vs. US dollar One time costs

5 Summary Q1 2006 Results (C$ thousands except as noted) 20062005 Sales137,02691,819 Gross Margin As % 28,573 20.9% 16,358 17.8% Operating Expenses, excl amort. & interest As % 23,251 17.0% 12,095 13.2% EBITDA5,0644,263 Interest expense Bank Principal Repayment (1,037) (2,350) (562) 0 Distributable cash adjustments1,077(445) Distributable Cash2,7543,256 Distributable Cash Excluding Bank Repayment5,1043,256 Per Unit0.180.17

6 Distributions Reasons for reduction to $.90: –Poor results in 2005 –Increase working capital

7 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

8 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

9 % of Exclusive Sales

10 Expand Exclusive Distribution Agreements Koch Entertainment Universal Home Video Sheridan Square Entertainment National Film Board Library

11 Expand Licensed Music & 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

12 Capitalize on Growing Video-Game Market Game sales are increasing Boost to bottom line despite lower margins Leverage existing customer base

13 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

14 Valuation – Canadian Operations *dollar amounts expressed in millions April 2006April 2005 Unit Price3.5011.00 # Units32.723.2 Valuation$114$255 Koch Value included(94)0 Valuation of Canadian Operations$20$255 Distributable Cash From Canadian Operations - 2005 $12

15 #1 in Canada We are Canadas #1 Home Entertainment Products Wholesaler We set the standard for Wholesaling in Canada

16 Canadas #1 DVD Wholesaler Annual volume approximately $350 million Exclusive distributor for Universal Home Video 30,000 titles 3,000 customers

17 Canadas #1 CD Wholesaler Largest on-hand CD inventory Largest CD Catalogue – at 12,000 items 25+ year relationships with the industrys largest music producers

18 #1 Internet Fulfillment Wholesaler Serving consumers through our partnerships with the Worlds largest On-Line retailers

19 Canadas #1 Specialty Retailer 90+ CD Plus retail stores Specialize in CDs, DVDs, and Video Games

20 Management Darren Throop President & CEO Michael Koch CEO Koch US Chris Jamieson CFO Terry Stevens Senior Vice President & General Manager

21 #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

22 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

23 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

24 KOCHs 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:

25 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.

26 Sheridan Square Deal Major multi-year exclusive distribution deal for Koch Covers all Sheridans labels except one Anticipate additional $30 million (U.S.) in revenues annually Began May 22, 2006

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