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JVC Sells CD/DVD Replication Business to Cinram

JVC KENWOOD Corporation announced that it has sold its U.S. optical disc (CD/DVD) replication, packaging and fulfillment business to Cinram Group for an undisclosed price.

With a manufacturing facility in Tuscaloosa, AL and fulfillment centre in Kennesaw, GA, JVC promotes that it can replicate over 13 million CDs and 11 million DVDs per month, as well as assemble over one million retail packages per day.

JVC America History
1987 – Opened replication plant in Tuscaloosa, AL
1996 – Opened fulfilment centre in Kennesaw, Georgia
1997 – Opened replication plant in Sacramento, CA and started DVD production
2000 – Expanded Sacramento, CA plant and selected as Microsoft Xbox launch partner
2002 – Closed replication plant in Sacramento, CA
2005 – Expanded fulfillment operations in Kennesaw
2008 – Expanded warehouse in Kennesaw, changed name from JVC Disc America to JVC America and became subsidiary of JVC Kenwood
2014 – Sold to Cinram Group

For more information visit: www.jvc-america.com ; www.cinram.com

Related News: Cinram Acquires JVC Video Game Software Division (14 May 2014)


Unedited press release follows:

Notice of Transfer of Shares of a Subsidiary and Incurrence of Extraordinary Loss

JVC KENWOOD Corporation (JVCKENWOOD) reached an agreement, as described below, with Cinram Group Inc. (Cinram Group), which manufactures and sells CD/DVD/Blu-Ray disks, on the transfer of shares of JVC America, Inc. (JAI), which also manufactures and sells CD/DVD disks, owned by JVC Americas Corp. (JAC), a fully consolidated US sales subsidiary of JVCKENWOOD. JVCKENWOOD and Cinram Group concluded the stock purchase agreement as of today.

JVCKENWOOD is also expected to post an extraordinary loss of approximately JPY 1.2 billion for the fiscal year ending March 2015 as a “Loss on sales of stocks of subsidiaries” in relation to this share transfer. After study of the possible impact to the Consolidated Earning by this transfer of shares, the Consolidated Earnings Forecast for the Fiscal Year Ending March 2015 released on April 30, 2014 will not be revised.

1. Reasons for transfer of shares

JAI has mainly engaged in the manufacturing and sale of CD/DVD disks for personal computers and game software. In addition to manufacturing disks, JAI has conducted fulfillment operations such as packaging, shipping, and inventory management in recent years, satisfying the supply chain needs of software content providers.

However, the market for packaged software products (e.g. CD/DVD) has seen a noticeable shrinking trend, particularly in overseas markets, due to the widespread culture of downloarding content and the penetration of broadband within the Internet environment, and this trend is expected to continue.

In response to such change in the environment surrounding the industry, JVCKENWOOD has decided to transfer the shares of JAI to Cinram Group, which engages in manufacturing, sales, and fulfillment operations of CD/DVD disks, as does JAI. Through this transfer, we expect the condition of over-supply in the industry will improve, and JAI will improve its capacity utilization and maintain its employees.

With the transfer of the shares, JVCKENWOOD will further advance its focus on core businesses, increase the focus of the JVCKENWOOD group’s efforts on the next generation of business and transforming the “shape of the company”, and accelerate the recovery in earnings.

2. Overview of subsidiary whose shares will be transferred (As of May 14, 2014)

(1) Name: JVC America, Inc.

(2) Address: No. 2 JVC Road, Tuscaloosa, Alabama, 35405, United States

(3) Representative’s Name and Title: Shigeru Hirano, President

(4) Business: Manufacture, sales and product fulfilment of CD/DVD disks

(5) Established: January 9, 1986

(6) Major Shareholders and Percentage of Holding: JVC Americas Corp. 100%

(7) Relationship between JVCKENWOOD and JAI:

Capital relationship: JVCKENWOOD owns 100% of JAI’s shares through JVC Americas Corp., a consolidated subsidiary of JVCKENWOOD.

Personnel relationship: Four JAI directors are concurrently JVCKENWOOD directors or employees. JVCKENWOOD has also dispatched one employee to JAI.

Transactional relationship: There are no significant transactional relationships between JVCKENWOOD and JAI. Financial transactions (lending/borrowing) have been made between JVCKENWOOD’s consolidated subsidiary and JAI.

3. Overview of transferee (As of May 14, 2014)

(1) Name: Cinram Group Inc.

(2) Address: 2255 Markham Road Toronto, Ontario, Canada

(3) Representative’s Name and Title: President and Chief Executive Officer Steve Brown

(4) Business Blu-ray/DVD/CD replication, sales and product fulfillment

(5) Major Shareholders and Percentage of Holding :CAI Holdings Inc 100%

(6) Relationship between JVCKENWOOD and Cinram Group:

Capital relationship: There are no significant capital relationships between JVCKENWOOD and Cinram Group. In addition, there are no noteworthy capital relationships between the interested parties and affiliated companies of JVCKENWOOD and Cinram
Group.

Personnel relationship: There are no significant personnel relationships between JVCKENWOOD and Cinram Group. In addition, there are no noteworthy personnel relationships between the interested parties and affiliated companies of JVCKENWOOD and Cinram Group.

Transactional relationship: There are no significant transactional relationships between JVCKENWOOD and Cinram Group. In addition, there are no noteworthy transactional relationships between the interested parties and affiliated companies of JVCKENWOOD and Cinram Group.

Related party relationships: Cinram Group is not considered to be a related party of JVCKENWOOD. In addition, interested parties and affiliated companies of Cinram Group do not fall under the related parties of JVCKENWOOD.

4. Number of shares to be transferred and status of shares holding before and after

(1) Number of Shares Holding Before Transfer: 794,000 shares
(Number of Voting Rights: 794,000 units)
(Percentage of Holding: 100.0%)

(2) Number of Shares to be Transferred: 794,000 shares
(Number of Voting Rights: 794,000 units)

(3) Number of Shares Holding After Transfer: None
(Number of Voting Rights: None)
(Percentage of Holding: 0.0%)

*The purchase price was negotiated with Cinram Group with reference to an analysis of value of JAI prepared by a third party independent both from Cinram Group and us, and comprehensive consideration of various other conditions surrounding the transaction, and was ultimately agreed. By agreement with the Cinram Group, the purchase price will not be disclosed.

5. Schedule

(1) Board of Directors Resolution on May 14, 2014

(2) The contract concluded on May 14, 2014

(3) Share Transfer to be implemented Middle of June 2014 (scheduled)

6. Posting of the extraordinary loss on the share transfer

JVCKENWOOD is expected to post an extraordinary loss of approximately JPY 1.2 billion as a “Loss on sales of stocks of subsidiaries” in relation to this share transfer.

After study of the possible impact to the Consolidated Earning by this transfer of shares, the Consolidated Earnings Forecast for the Fiscal Year Ending March 2015, released on April 30, 2014 as part of the “Summary of Accounting Report for the Fiscal Year Ending March 2014 (based on Japanese standards) (consolidated),” will not be revised.

7. Future Prospects

As described in #5 above, JVCKENWOOD and Cinram Group will proceed with the various procedures towards the implementation of the share transfer in middle of June 2014.

TRANSLATION – FOR REFERENCE ONLY

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