TCH Technicolor

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of March 2011

Commission File Number: 001-14974

1-5, rue Jeanne d'Arc

92130 Issy-les-Moulineaux

France

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ý    Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1): o

Note: Regulation S-T Rule 101 (b) (1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7): o

Note: Regulation S-T Rule 101 (b) (7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rule of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o     No ý

If “yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) : 82- ______

 

 

 

Exhibits

Exhibit 1    Press Release, “ Fourth quarter 2010 revenues, Second Half and Full Year 2010 Results (unaudited)", dated February 28, 2011.

 

 

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

•

For the full year 2010, Group share of net result amounted to a loss of €(69) million, including a loss on discontinued operations of €(225) million.

•

In 2010, the Group’s cash position decreased by €237 million, resulting from negative Free Cash Flow of €(100) million, €(76) million related to the costs of the Group’s balance sheet restructuring, €(49) million related to cash repayment of debt net of disposal proceeds, €(41) million impact of disposals, and other including positive forex impact of €29 million.

Dividend

 

The Board proposes no dividend for the fiscal year 2010.

Priorities and objectives for 2011

 

Based on our commercial and technological achievements in the second half of 2010, the Group intends to accelerate organic investments in 2011 in the following areas:

•

Technology Licensing – MediaNavi – following a successful service introduction at CES and the announcement of a trial with TalkTalk in the UK, we are engaged in discussions with a number of additional customers and partners. In this context, we expect to accelerate our related research investments in 2011.

•

Digital Home – We have recently been awarded our first material order from a tier 1 European operator for a next generation set-top box based on our new software platform. Additional customers are also expected in 2011. The Group has therefore accelerated its software development investments to ensure that it is able to deliver material volumes in 2012. We also expect to announce in 2011 our first customer for the MediaEncore solution (integrated access gateway and media server).

•

Digital Production – Given the strength of the market and our fast and profitable growth in this business, we intend to accelerate investments in 2011 to both increase capacity and develop new software with the objective to more than double turnover by 2013. Additional physical expansions will occur principally in London, Vancouver, New York and Bangalore.

•

Digital Cinema – Building on our over 60% market share in North American Digital Cinema distribution and the accelerated migration of screens to digital, the Group will accelerate investments to expand our satellite network with a view to reach over 1,500 sites by end 2012.

 

In parallel, we will continue to manage our operational performance and cost structure in 2011. The Group will focus specifically on photochemical film rationalization, operational performance and quality, particularly in Connect and DVD services, and continued efforts on cost improvements and cash generation.

 

The Group’s objective is to achieve in 2011 slight revenue growth overall at constant rates. More specifically, we expect Entertainment Services and Digital Delivery to grow faster than the market. With regard to Licensing, following a very strong 2010 performance and given our exposure to the global consumer electronics market, we expect a small decline in revenue in 2011 linked to global consumer electronics volumes.

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Our focus in 2011 is to favor organic growth and innovation to ensure a solid foundation is laid for the coming years. Notwithstanding this focus, the Group’s objective is to be able to generate an Adjusted EBITDA in 2011 comparable or slightly up compared with the level achieved in 2010.

Technicolor intends to voluntarily delist its shares from the NYSE and deregister with the SEC

 

Technicolor intends to apply for the voluntary delisting of its American Depositary Shares (ADSs) from the New York Stock Exchange (NYSE) and voluntarily terminate the registration of its securities under the U.S. Securities Exchange Act of 1934. Technicolor expects to file its Form 25 with the NYSE and with the SEC to delist its ADSs on or about March 11, 2011. The delisting will become effective at the close of trading on March 21, 2011, and the ADSs will trade in the OTC market beginning March 22, 2011. Technicolor expects to file its Form 15-F to deregister with the SEC on or about March 22, 2011, and its deregistration is expected to become effective 90 days thereafter.

 

Technicolor’s rationale for delisting and deregistration is based on the following:

•

The primary market for Technicolor's shares is the NYSE Euronext, where the average trading volume has accounted for more than 99% of Technicolor's worldwide trading volume over the last three years;

•

Technicolor's ADS trading volume has declined over the past three years and has accounted for approximately 0.5% of the total volume of shares traded over the last year (adjusted to reflect Technicolor's June 2010 ten-for-one reverse share split);

•

Technicolor is continuously seeking to optimize its operating costs. Following its delisting and deregistration, Technicolor will maintain its American Depositary Receipt (ADR) program as a "level one" program to enable investors to retain their ADRs, which they may trade in the U.S. over-the- counter market. The delisting and deregistration will have no impact on Technicolor's primary listing of its ordinary shares on NYSE Euronext.

 

Technicolor will continue to publish English language financial reports, financial statements, press releases and shareholder information, which will be available on its website (www.technicolor.com) in accordance with Rule 12g3-2(b) under the U.S. Securities Exchange Act of 1934.

 

Technicolor considers that U.S. investors are an important part of its investor base and will maintain its relationship with them, as well as maintaining and continuing to develop its business operations in the United States. The Company will continue to provide a high standard of corporate governance, information and disclosure for all investors, including those in the United States, and intends to maintain high standards of financial reporting discipline and to capitalize on the work undertaken to comply with the Sarbanes Oxley Act embedding internal controls within operational management, by keeping an annual program to monitor the quality of its internal control going forward.

10

Fourth quarter and second half 2010 business review

 

 

Technology

In the fourth quarter of 2010, Technology revenues were up 40.2% at current currency and up 38.5% at constant currency compared with the fourth quarter of 2009.

•

In the fourth quarter of 2010, Research & Innovation contributed organic 3D innovation into the technology underpinning the Technicolor Certifi3D 3D certification service launched at the end of 2010 and demonstrated at CES in January 2011. Also at CES, enabling technologies from Research & Innovation figured in new product and services showcased around the Digital Home.

•

In the fourth quarter 2010, Licensing activities benefited from a strong increase in revenues from MPEGLA and from the sustained performance of the other licensing programs, driven by continuing growth in worldwide consumer electronic products shipments. The company has also launched litigations against Chimei, Qisda and Au Optronics in the US for infringement of its LCD monitor patents following lengthy unfruitful negotiations.

•

Technicolor presented at CES 2011 a new service platform named MediaNavi, simplifying and enhancing the media consumption experience, whilst aggregating operator, web and each customer's personal media. MediaNavi has been designed to run as an application for tablets and smartphones, supporting Android, WebOS, Windows7, MeeGo and iOS operating systems. It operates a set of web services in connection with not just Technicolor Set Top Boxes, but also third party Set Top Boxes and connected TVs. It is also underpinned by several patent families developed by Technicolor in these domains. The MediaNavi platform commercialization is therefore based on a technology licensing model.

Due to the close link with the Digital Home Products (set-top boxes and gateways) and Media Services activities of the Digital Delivery Group, MediaNavi was initially developed within that business. Given the chosen business model, validated by the first feedback provided by potential clients and partners, and the Group’s initiative in the later part of 2010 to set-up a technology licensing practice within the Technology business, MediaNavi was transferred accordingly from the Digital Delivery segment to the Technology segment. Further details on the financial impacts of this change in reporting are disclosed in appendix.

Technicolor announced early January a partnership with TalkTalk, a leading UK broadband provider, to trial MediaNavi on tablets as a personalized and enriched second screen video experience. In further collaboration, the two companies are working together on the future integration of MediaNavi into TalkTalk’s set-top-boxes.

 

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In the second half of 2010, Technology revenues were up 33.9% at current currency and up 35.0% at constant currency compared with the same period of 2009. Adjusted EBITDA margin in the second half of 2010 for the Technology business was up 5.5 points of revenue, mainly resulting from the increase in Licensing revenues and from continuing optimization in patent prosecution, filing and annuities costs.

Technology financial indicators

In € million		4Q 2009	4Q 2009		2H 2009	2H 2010
Revenues		97	136		195	261
Change, as reported (%)			+40.2%			+33.9%
Change at constant currency (%)			+38.5%			+35.0%
Of which Licensing revenues		96	135		194	260
Change, as reported (%)			+40.3%			+34.0%
Change at constant currency (%)			+38.6%			+35.1%
Adjusted EBITDA					139	201
Change, as reported (%)						+44.2%
Adjusted EBITDA margin (%)					71.5%	77.0%
EBIT					103	199
EBIT margin (%)					52.9%	76.0%
Adjusted EBIT					129	195
Adjusted EBIT margin (%)					66.3%	74.5%

 

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Entertainment Services

As indicated above, the PRN (Premier Retail Networks) business, previously accounted as part of discontinued operations, is now accounted as part of continuing operations. Further details on the financial impacts of this change in consolidation are disclosed in appendix (pages 20 and 21).

In the fourth quarter of 2010, Entertainment Services revenues were up 28.5% at current currency and up 20.6% at constant currency compared with the fourth quarter of 2009. Creation Services benefited from strong levels of activity resulting from market share gains, increased digital production capacities and improved market conditions in postproduction. The acceleration in Digital Cinema installation of theaters in the US and Europe weighed significantly on photochemical film volumes, but continued to strongly benefit our Digital Cinema distribution business. DVD Services benefited from a notable acceleration in Blu-ray™ growth and recorded very strong volume increase overall, mainly due to the Warner Bros. agreement and to higher-than-expected orders from other existing and new customers. PRN recorded a strong increase in overall advertizing sales to other customers and by the addition of two new retail clients in the course of the year. PRN revenues were however lower in the second half of 2010 compared with the second half of 2009 due to a change in the scope of the relationship with Walmart as per the contract renewal at the end of 2009.

In the second half of 2010, Entertainment Services revenues were up 19.7% at current currency and up 11.8% at constant currency compared with the second half of 2009. Entertainment Services Adjusted EBITDA was slightly up at €157 million, a decrease of 2.7 points compared with the second half of 2009. The DVD Services margin decreased due to higher than expected customer orders in the fourth quarter of 2010, which led to an increase in the level of replication volume subcontracted to third parties and higher distribution costs. In addition, the DVD Services margin was negatively impacted by non-recurring transition and on-boarding costs for the Warner Bros. agreement. Creation Services margins continued to improve and Theatrical Services margin was stable despite the revenue drop.

Entertainment Services financial indicators  

In € million		4Q 2009	4Q 2010		2H 2009	2H 2010
Revenues		464	596		860	1,029
Change, as reported (%)			+28.5%			+19.7%
Change at constant currency (%)			+20.6%			+11.8%
Adjusted EBITDA					154	157
Change, as reported (%)						+1.6%
Adjusted EBITDA margin (%)					18.0%	15.3%
EBIT					21	(49)
EBIT margin (%)					2.5%	(4.7)%
Adjusted EBIT					69	42
Adjusted EBIT margin (%)					8.0%	4.1%

 

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Creation and Theatrical Services

•

Creation Services

Creation Services posted strong revenue growth in the fourth quarter of 2010 compared with the fourth quarter of 2009.

o

Digital Production activities continued to grow at a fast pace during the fourth quarter of 2010, mainly as a result of market share gains in visual effects (VFX) for commercials, in an improved advertizing market environment. VFX for Film continued to perform well, with the launch during the quarter of new projects including Pirates of the Caribbean 4 Harry Potter 8 and X-Men 4 Animation activities also continued to deliver a solid performance during the quarter, with continued work on Nickelodeon’s TV series Penguins of Madagascar , Kung Fu Panda and Fanboy .

o

Postproduction revenues increased in the fourth quarter of 2010 compared with the fourth quarter of 2009, mainly driven by favorable market trends for TV broadcast in Canada, the United States and the UK.

Theatrical Services

Revenues from Theatrical Services decreased in the fourth quarter of 2010 compared with the fourth quarter of 2009.

o

Digital Cinema distribution activities recorded a strong increase in revenue in the fourth quarter of 2010, reflecting the continued growth in digital screen penetration in the US and in Europe.

o

Photochemical Film footage declined by 27% in the fourth quarter of 2010 compared to the fourth quarter of 2009, driven primarily by the acceleration in Digital Cinema installation of theaters, particularly in North America where Digital Cinema accounts for approximately 36% of screens as of the end of 2010. In addition, Technicolor terminated its film printing contract with Universal Studios in the fourth quarter 2010. Consequently, Theatrical Services recorded lower revenues compared with the fourth quarter of 2009. The Group is continuing to align its cost structure with lower revenues. As a result of these continuing efforts and of an improved volume mix, Adjusted EBITDA of Theatrical Services was flat for the fourth quarter of 2010 compared to the fourth quarter of 2009.

o

Following the comments made in the Q3 2010 revenues press release in relation with the Group’s plans in the photochemical film business, Technicolor is exiting its North Hollywood location upon completion of its lease in 2011 and is focusing North America release printing in Mirabel (Canada). Technicolor will maintain, however, a Los Angeles lab presence to provide required front-end, pre- release and limited release printing capabilities, consistent with market volume requirements in the context of increasing Digital Cinema conversion. The Group has also announced plans to downsize its European film lab operations as a result of growing Digital Cinema penetration in these markets.

 

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Photochemical Film footage
		Q4 2009	Q4 2010		H2 2009	H2 2010
Film footage (bn feet)		1.1	0.8		2.0	1.5
Change (%)			(27)%			(24)%

PRN

Premier Retail Networks (PRN) provides digital place-based media services that enable retailers, marketers and in-venue owners to reach consumers in more than 8,500 locations in the United States and Mexico. PRN works with leading retailers, advertisers, content and technology companies to create and deliver place-based media that engages, informs and motivates consumers where they shop.

•

PRN’s customers include SuperValu, Sam’s Club, Walmart, Costco and Target retail locations

•

PRN’s competitors include CBS Outernet, Captivate and Reach Media Group

PRN revenue were lower in the second half and for the full year 2010 compared with 2009 due to a change in the scope of the relationship with Walmart which occurred when the long term agreement with this key customer was renewed at the end of 2009. The impact of this change in business model with Walmart on revenues was partly offset by a strong increase in overall advertizing sales to other customers and by the addition of two new retail clients in the course of the year.

DVD Services

In the fourth quarter 2010, combined DVD and Blu-ray™ volumes increased by 54%, due to the start of the Warner Bros. agreement in August and strong growth in Blu-ray™ volumes.

Even excluding the Warner Bros. volumes impact, Technicolor volumes increased in the mid-single digit range in the fourth quarter 2010 compared with 2009. The Group benefited from continuing improvements in consumer DVD purchasing and from the acceleration in Blu-ray™ growth driven by increased household penetration of Blu-ray™ players and by growing Blu-ray™ catalog business. During the fourth quarter, the DVD Services business won several new contracts from existing and new customers, including for 3D Blu-ray™.

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DVD volumes

		Q4 2009	Q4 2010		H2 2009	H2 2010
DVD volumes (million units)		341	524		622	866
Change (%)			+54%			+39%
o/w SD DVD (Standard Definition)		289	441		531	733
Change (%)			+54%			+38%
o/w Blu-ray™		21	47		36	73
Change (%)			+121%			+105%
o/w Games and Kiosk		31	36		55	60
Change (%)			+15%			+9%

Digital Delivery

Digital Delivery revenues increased 12.5% at current currency and 5.9% at constant currency in the fourth quarter of 2010 compared with the fourth quarter of 2009, reflecting strong growth in Digital Home Product volumes and Media Services activities. In the second half of 2010, Digital Delivery revenues rose 13.4% at current currency and 6.9% at constant currency compared with the same period of 2009.

Digital Delivery Adjusted EBITDA margin partly recovered in the second half of the year following a significant drop in the first half, but was 3.1 points below the second half of 2009 level. The decrease reflected a less favorable overall mix year-over-year within Connect, ramp up development costs of new contracts as well as significant investments in major new growth initiatives which were unveiled at CES 2011.

Digital Delivery financial indicators

As mentioned above, MediaNavi revenues and associated costs are now excluded from Digital Delivery and are reported within Technology. Further details on the financial impacts of this change in reporting are disclosed in appendix.

In € million		Q4 2009*	Q4 2010*		H2 2009*	H2 2010*
Revenues		376	423		690	783
Change, as reported (%)			+12.5%			+13.4%
Change, at constant currency (%)			+5.9%			+6.9%
Adjusted EBITDA					60	45
Change, as reported (%)						(25.8)%
Adjusted EBITDA margin (%)					8.8%	5.7%
EBIT					22	(91)
EBIT margin (%)					3.1%	(11.7)%
Adjusted EBIT					26	5
Adjusted EBIT margin (%)					3.8%	0.7%
* excluding MediaNavi, now reported within Technology

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Connect

In the fourth quarter of 2010, Connect activities recorded stronger revenues compared with the same period of 2009, principally driven by increased shipments of Digital Home Products, particularly Cable and Satellite set-top boxes, as well as broadband Telecom gateways, partially offset by a less favorable overall mix year-over-year.

•

In Satellite, growth in set-top box volumes was strong and mix improved compared with the same period in 2009, in line with the trend experienced in the third quarter of 2010, mainly as a result of increased shipments of higher-end products such as HD-PVRs to a key customer in North America, and stronger deliveries to other customers based in Europe and in South America.

•

In Cable, volumes increased significantly year-over-year, primarily driven by higher deliveries of digital-to-analog adapters to a key customer in North America, as well as continued growth in shipments of cable modems, especially in South America. Cable product mix was nevertheless less favorable than in the same period in 2009.

•

In Telecom, volumes were slightly up year-over-year, with strong growth in shipments of broadband gateways but lower deliveries of IP set-top boxes and basic DSL modems.

Technicolor has introduced at CES 2011 its next generation digital home platform, MediaEncore, which seamlessly integrates home gateway, personal home storage, and set-top box functions, serving video and services to all home devices. MediaEncore relies on a common digital home software foundation that is being developed across all divisions' products to address the deployment of next generation services in the home. It also leverages the ‘Connect excellence’ program that is being expanded to all Digital Delivery’s products and services in order to guarantee the highest level of quality and processes efficiency when delivering integrated hardware and software platforms. The Group has also integrated the MediaNavi muti-screen content platform across its portfolio of Digital Home Products to simplify and enhance the user experience and increase content consumption in the digital home environment.

Digital Home Products Indicators

KPIs		Q4 2009	Q4 2010		H2 2009	H2 2010
Cable (m)		1.7	2.3		2.9	4.4
Satellite (m)		2.0	2.6		3.7	4.7
Telecom (m)		2.6	2.7		5.0	5.0
Total Digital Home Products (m)		6.4	7.6		11.6	14.1
Change			+19%			+22%

Digital Content Delivery Services

In the fourth quarter of 2010, revenues from Digital Content Delivery Services activities rebounded strongly compared with the same period in 2009, driven by a continuing recovery in Media Services,

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reflecting market share gains and an improvement in the overall market environment, and despite slightly lower revenues from Broadcast Services year-over-year.

•

Media Services revenues primarily benefited from increased volumes for Compression & Authoring and Localization (dubbing and subtitling) services, reflecting a pickup in demand and customer wins, while tape duplication and other digital services recorded broadly stable revenues compared with 2009. In the fourth quarter of 2010, Technicolor launched its 3D certification program, Certifi3D, an advanced 3D analysis software tool that was developed by the Group’s Research & Innovation team and that is geared towards broadcasters and network service providers with the goal of delivering quality and comfortable 3D experiences to end consumers.

•

Broadcast Services revenues were slightly lower year-over-year. Market conditions were stable in the quarter, with a continuing migration of TV broadcast networks to High Definition, as reflected by the launch of four new HD channels for key customers in the UK.

Other continuing operations

Adjusted EBITDA for the “Other” segment amounted to €(40) million in the second half of 2010 compared with €(65) million in the second half of 2009, resulting from an improvement in the level of unallocated corporate costs, driven by cost-saving actions, one-off costs in 2009 not recurring in 2010 and the exit of the retail telephony business in 2009.

An analyst conference call hosted by Frederic Rose, CEO and Stephane Rougeot, CFO will be held on Tuesday 1 March 2011 at 15:00 CET. The presentation document will be made available on the Technicolor website prior to the call.

Financial Calendar

Q1 2011 Revenues	28 April 2011
H1 2011 Results	28 July 2011
Q3 2011 Revenues	27 October 2011

 

Technicolor is a company listed on NYSE Euronext Paris and NYSE stock exchanges, and this press release contains certain statements that constitute "forward-looking statements" within the meaning of the "safe harbor" of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed, forecasted or implied by such forward-looking statements. For a more complete list and description of such risks and uncertainties, refer to Technicolor’s filings with the U.S. Securities and Exchange Commission and its filings with the French Autorité des marchés financiers.

***

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About Technicolor

Technicolor is home to industry-leading creative and technology professionals committed to the creation, management and delivery of entertainment content to consumers around the world. Propelled by a culture of innovation and underpinned by a dedicated research organization, the company’s thriving licensing business possesses an extensive intellectual property portfolio focused on imaging and sound technologies. Serving motion picture, television, and other media clients, the company is a leading provider of high-end visual effects, animation, and postproduction services. In support of network service providers and broadcasters globally, Technicolor ranks among the worlds’ leading suppliers of digital content delivery services and home access devices, including set-top boxes and gateways. The company also remains a large physical media service provider, being one of the world’s largest film processors and independent manufacturers and distributors of DVDs and Blu-ray™ discs.

Euronext Paris: TCH n NYSE: TCH n www.technicolor.com

Press contacts : +33 1 41 86 53 93

technicolorpressoffice@technicolor.com

Investor relations : +33 1 41 86 55 95

investor.relations@technicolor.com

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APPENDICES

…

 

 

RESTATEMENT OF FINANCIAL INDICATORS: BREAKDOWN BY OPERATING SEGMENT

Following the change in consolidation perimeter relating to PRN (previously included in Discontinued Operations and now included in Entertainment Services) and the change in reporting of the MediaNavi activities (previously included in Digital Delivery and now included in Technology), the Group is presenting below the quarterly financial indicators for 2009 and 2010 reflecting these changes.

 

In € million		Q1 2009	Q2 2009	H1 2009		Q3 2009	Q4 2009	H2 2009	FY 2009
Group revenues from continuing activities		937	906	1,843		825	951	1,776	3,619
of which:	Technology		93	102	196		98	97	195	391
	Entertainment Services		377	355	733		396	464	860	1,593
	Digital Delivery		422	417	839		314	376	690	1,529
Adjusted EBITDA from continuing activities				209				289	499
of which:	Technology				137				139	276
	Entertainment Services				65				154	219
	Digital Delivery				63				60	123
Adjusted EBIT from continuing activities				91				165	256
of which:	Technology				129				129	258
	Entertainment Services				5				69	74
	Digital Delivery				10				26	36
EBIT from continuing activities				5				94	99
of which:	Technology				113				103	217
	Entertainment Services				(55)				21	(34)
	Digital Delivery				6				22	28

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In € million		Q1 2010	Q2 2009	H1 2010		Q3 2010	Q4 2010	H2 2010	FY 2010
Group revenues from continuing activities		704	795	1,499		920	1,155	2,075	3,574
of which:	Technology		93	95	188		126	136	261	450
	Entertainment Services		326	342	668		433	596	1,029	1,697
	Digital Delivery		283	357	641		360	423	783	1,423
Adjusted EBITDA from continuing activities				142				363	505
of which:	Technology				126				201	327
	Entertainment Services				60				157	217
	Digital Delivery				10				45	55
Adjusted EBIT from continuing activities				34				200	234
of which:	Technology				120				195	315
	Entertainment Services				(7)				42	35
	Digital Delivery				(26)				5	(20)
EBIT from continuing activities				22				15	38
of which:	Technology				117				199	315
	Entertainment Services				(13)				(49)	(62)
	Digital Delivery				(27)				(91)	(118)

 

The Group reminds that, as announced in its first half of 2010 results press release (29 July 2010), it has established a new business group —Digital Delivery— to increase its capability to capture the growth resulting from the shift to digital distribution. Digital Delivery brings together the Connect business and the Digital Content Delivery (DCD) Services Business (which was formerly part of Entertainment Services) to enable the Group to adapt to the changing needs of its Network Services Operator customer base, which is increasingly expanding its focus from delivery platforms to electronic media distribution.

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

			Year ended December 31,
(€ in millions)			2010			2009		2008
Continuing operations
Revenues			3,574			3,619		4,192
Cost of sales			(2,795)			(2,804)		(3,422)
Gross margin			779			815		770
Selling and administrative expenses			(397)			(404)		(482)
Research and development expenses			(148)			(155)		(171)
Restructuring costs			(41)			(41)		(166)
Net impairment losses on non-current operating assets			(183)			(128)		(700)
Other income (expense)			28			12		(25)
Profit (loss) from continuing operations before tax
and net finance costs			38			99		(774)
Interest income			6			8		16
Interest expense			(145)			(51)		(89)
Gain on Technicolor’s debt restructuring on May 26, 2010			381			-		-
Other financial income (expense)			(126)			(25)		(301)
Net finance costs			116			(68)		(374)
Share of profit (loss) from associates			-			-		(4)
Income tax			2			(35)		(105)
Profit (loss) from continuing operations			156			(4)		(1,257)
Discontinued operations
Net loss from discontinued operations			(225)			(338)		(676)
Net income (loss)			(69)			(342)		(1,933)
Attributable to:
- Equity Holders			(69)			(342)		(1,930)
- Non-controlling interests			-			-		(3)
			Year ended December 31,
(in euro, except number of shares)			2010			2009		2008
Weighted average number of shares outstanding (basic
net of treasury stock)			104,817,755			26,308,997		26,294,015
Earnings (loss) per share from continuing operations
- basic			1.3			(0.2)		(48.4)
- diluted			1.0			(0.2)		(48.4)
Earnings (loss) per share from discontinued operations
- basic			(2.1)			(12.8)		(25.7)
- diluted			(1.5)			(12.8)		(25.7)
Total earnings (loss) per share
- basic			(0.8)			(13.0)		(74.1)
- diluted			(0.5)			(13.0)		(74.1)

 

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(€ in millions)			December 31, 2010		December 31, 2009		December 31, 2008
ASSETS
Non-current assets:
Property, plant and equipment			430		431		541
Goodwill			644		746		926
Other intangible assets			512		456		673
Investments in associates			12		7		7
Investments and available-for-sale financial assets			4		42		52
Derivative financial instruments			6		-		-
Contract advances and up-front prepaid discount			73		60		131
Deferred tax assets			488		426		515
Income tax receivable			48		20		21
Other non-current assets			63		37		41
Cash collateral and security deposits			19		13		-
Total non-current assets			2,299		2,238		2,907
Current assets:
Inventories			153		97		270
Trade accounts and notes receivable			666		555		968
Current accounts with associates and joint ventures			4		5		4
Derivative financial instruments			-		7		85
Income tax receivable			17		15		32
Other current assets			318		316		485
Cash collateral and security deposits			55		82		38
Cash and cash equivalents			332		569		769
Assets classified as held for sale			90		436		33
Total current assets			1,635		2,082		2,684
Total assets			3,934		4,320		5,591

 

 

23

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(€ in millions)			December 31, 2010		December 31, 2009		December 31, 2008
EQUITY AND LIABILITIES
Shareholders' equity:
Common stock (174,846,625 shares at
December 31, 2010 with nominal value of			175		1,012		1,012
€1 per share)
Treasury shares			(156)		(156)		(159)
Additional paid in capital			641		1,643		1,643
Subordinated perpetual notes			500		500		500
Notes redeemable in shares			278		-		-
Other reserves			87		112		139
Retained earnings (accumulated deficit)			(791)		(3,340)		(2,998)
Cumulative translation adjustment			(231)		(226)		(272)
Shareholders’ equity (deficit)			503		(455)		(135)
Non-controlling interests			2		2		1
Total equity (deficit)			505		(453)		(134)
Non-current liabilities:
Borrowings			1,278		16		22
Retirement benefits obligations			332		310		332
Restructuring provisions			7		16		17
Derivative financial instruments			-		-		-
Other provisions			97		92		103
Deferred tax liabilities			193		198		284
Other non-current liabilities			131		60		45
Total non-current liabilities			2,038		692		803

Current liabilities :
Borrowings			47		2,727		2,862
Derivative financial instruments			-		4		46
Retirement benefits obligations			46		60		71
Restructuring provisions			49		48		115
Other provisions			69		68		102
Trade accounts and notes payable			528		435		968
Accrued employee expenses			158		128		155
Income tax payable			17		7		32
Other current liabilities			374		345		548
Payables on acquisition of companies			-		2		1
Liabilities classified as held for sale			103		257		22
Total current liabilities			1,391		4,081		4,922
Total liabilities			3,429		4,773		5,725
Total equity (deficit) and liabilities			3,934		4,320		5,591

24

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(€ in millions)		Year ended December 31
		2010		2009		2008
Net income (loss)		(69)		(342)		(1,933)
Loss from discontinued operations		(225)		(338)		(676)
Profit (loss) from continuing operations		156		(4)		(1,257)
Summary adjustments to reconcile profit from continuing operations to cash generated from continuing operations
Depreciation and Amortization		284		273		466
Impairment of assets		184		129		745
Net changes in provisions		(22)		(80)		94
(Profit) / loss on asset sales		(31)		(13)		(1)
Interest (Income) and Expense		139		43		56
Gain on Technicolor’s debt restructuring on May 26, 2010		(381)		-		-
Other non cash items (including tax)		39		42		186
Changes in working capital and other assets and liabilities		(93)		(117)		(337)
Cash generated from / (used in) continuing operations		275		273		(48)
Interest paid		(138)		(51)		(70)
Interest received		4		8		5
Income tax paid		(21)		(35)		(30)
Net operating cash generated from / (used in) continuing activities		120		195		(143)
Net operating cash used in discontinued operations		(55)		(97)		(175)
Net cash from / (used in) operating activities (I)		65		98		(318)
Acquisition of subsidiaries, associates and investments, net of cash		(4)		(5)		(14)
Net cash impact  from sale of investments		37		23		5
Purchases of property, plant and equipment (PPE)		(135)		(121)		(167)
Proceeds from sale of PPE and intangible assets		11		17		3
Purchases of intangible assets including capitalization of development		(41)		(45)		(69)
Cash collateral and security deposits granted to third parties		(7)		(58)		35
Cash collateral and security deposits reimbursed by third parties		41		3		-
Loans (granted to) / reimbursed by third parties		(1)		(8)		(3)
Net investing cash generated / (used) in continuing activities		(99)		(194)		(280)
Net investing cash generated from / (used in) discontinued operations		(5)		(34)		(71)
Net cash used in investing activities (II)		(104)		(228)		(351)
Increase of capital		203		-		-
Purchases of treasury shares and others		-		-		1
Repayment of convertible bonds		-		-		(367)
Proceeds from borrowings		4		3		1,611
Repayments of borrowings		(338)		(50)		(338)
Fees paid  linked to the debt and capital restructuring		(51)		(27)		-
Payment of the interests claims of TSS holders		(25)		-		-
Dividends and distributions paid to Group’s shareholders		-		-		(29)
Net financing cash generated from/ (used in) continuing activities		(207)		(74)		878
Net financing cash used in discontinued operations		(2)		(1)		(8)
Net cash provided by / (used) in financing activities (III)		(209)		(75)		870
Net (decrease) / increase in cash and cash equivalents (I+II+III)		(248)		(205)		201
Cash and cash equivalents at beginning of year		569		769		572
Exchange losses on cash and cash equivalents		11		5		(4)
Cash and cash equivalents at end of year		332		569		769

25

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Reconciliation of adjusted indicators

Technicolor is presenting, in addition to published results and with the aim to provide a more comparable view of the evolution of its operating performance vs. the second half and the full year of 2009, a set of adjusted indicators which exclude the following items as per the statement of operations of our consolidated financial statements:

•

Restructuring charges

•

Net impairment charges

•

Other income and expenses (other non-current items)

 

 

These adjustments, the reconciliation of which is presented in the following table, amount to an impact on the Group EBIT from continuing operations of €(185) million for second half of 2010, compared to an impact of €(71) million for the second half 2009.

 

These adjustments amount to an impact on the Group EBIT from continuing operations of €(196) million for the year 2010, compared to an impact of €(157) million for the year 2009.

 

 

In € million	H2 2009	H2 2010	Change	FY 2009	FY 2010	Change
EBIT from continuing operations	94	15	(79)	99	38	(61)
Restructuring charges, net	(38)	(27)	+11	(41)	(41)	0
Net impairment losses on non-current operating assets	(49)	(183)	(134)	(128)	(183)	(55)
Other income / (expense)	16	25	+9	12	28	+16
Adjusted EBIT from continuing operations	165	200	+35	256	234	(22)
As a % of revenues	+9.3%	+9.6%	+0.3pt	7.1%	6.5%	(0.6)pt
Depreciation and amortization (D&A)*	124	163	+39	243	271	+28
Adjusted EBITDA from continuing operations	289	363	+74	499	505	+6
As a % of revenues	+16.3%	17.5%	+1.2pts	13.8%	14.1%	+0.3pt
* including impact of provisions for risks, litigations and warranties

26

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CAPITAL STRUCTURE

Pursuant to the May 2010 rights issue, the July 2010 10:1 reverse split, the redemption of NRS I and the DPN repayment in December 2010, the total number of shares of the Company amounted to 174,846,625 on 31 December 2010. Including the redemption of all outstanding NRSs, and assuming that tranche IIC is fully redeemed in shares, the total number of shares of the Company is expected to amount to 226,369,751 on 31 December 2011.

	Total number of shares
Total number of shares at 31 December 2009 (a)	26.989.003
Rights issue May 2010 (a)	52,660,878
Total number of shares at 30 June 2010	79,649,881
Repayment of DPN maturing 31 December 2010	50,000,000
Redemption of NRS I maturing 31 December 2010 (conversion ratio 0.144)	45,196,744
Total number of shares at 31 December 2010	174,846,625
NRS II and IIC maturing 31 December 2011 (conversion ratio 0.159), (b)	51,523,126
Number of shares including outstanding NRS redemption (b) (c)	226,369,751
(a) adjusted for 10:1 reverse split (b) including 5,328,181 NRS I deferred to 31 December 2011 (c) assuming the Company does not exercise its option to repay part or all of NRS IIC in cash

 

27

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