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Rainmaker Reports Results for the Three and Nine Months Ended September 30, 2011

(November 14, 2011)

VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 11/15/11 -- Rainmaker Entertainment Inc. (TSX:RNK) announced today its results for the three and nine months ended September 30, 2011.

Highlights for the Three Months Ended September 30, 2011:

-- Total earnings for the quarter decreased by $0.3 million resulting in total earnings for the quarter of $0.3 million compared to of $0.6 million in 2010. -- Revenues remained consistent at $4.7 million and Adjusted EBITDA for the quarter was $0.2 million a reduction of $0.7 million reduction from 2010.

Highlights for the Nine Months Ended September 30, 2011:


-- Total earnings for the nine months ended improved $1.0 million to $1.0 million from the same period in 2010. -- Revenues decreased $1.3 million to $13.7 million over the same period in 2010. -- Adjusted EBITDA for the nine months ended September 30, 2011 was $1.4 million a decrease of $0.4 million from 2010. -- Adjusted EBITDA and Total Earnings for the nine months ended September 30, 2011 included a one time reduction of operating costs of $1.1 million related to certain film tax credit filings.

During the quarter, Rainmaker was in various stages of production on three DVD films and continued in full production on the feature film Escape from Planet Earth. An all-star voice cast list was recently announced for the film which includes; Brendan Fraser, Sarah Jessica Parker, Jessica Alba, Rob Corddry, James Gandolfini and Craig Robinson.

Catherine Winder, President of the Company is quoted, "The studio is solidly positioned within the industry as an innovative work-for-hire company. Its development of original intellectual properties including The Upgrade and two other theatrical movies Ogo and Ting & Juma: The Movie based on Rainmaker's proprietary characters as well as two recently announced properties, Tigers Apprentice and Fergus Crane is building a highly creative slate of branded content for the company to move forward as a next generation digital media company."

Selected Information

Below is selected information derived from the unaudited condensed consolidated interim financial statements which have been prepared in accordance with IAS 34.

All amounts are in thousands of Canadian dollars, except per share figures Three months Nine months ended September 30, ended September 30, 2011 2010 2011 2010 ------------------------------------------- Revenue $ 4,657 $ 4,746 $ 13,704 $ 15,050 --------------------------------------------------------------------------- Expenses Operating 4,172 3,849 11,480 12,568 Depreciation and amortization 282 532 1,236 2,129 General and administration 303 236 872 734 --------------------------------------------------------------------------- 4,757 4,617 13,588 15,431 --------------------------------------------------------------------------- Earnings (loss) from operations (100) 129 116 (381) --------------------------------------------------------------------------- Gain on sale of Base 10 Group Inc. - - (590) (274) Share of income from equity investment in Base 10 Group Inc. (505) (432) (429) (193) Gain on sale of property, plant and equipment - - - (1) Interest expense 112 84 310 269 Interest income (19) (9) (41) (37) --------------------------------------------------------------------------- (412) (357) (750) (236) --------------------------------------------------------------------------- Earnings (loss) from continuing operations 312 486 866 (145) Gain on sale of discontinued operations 30 137 95 115 --------------------------------------------------------------------------- Total earnings and comprehensive earnings (loss) for the period $ 342 $ 623 $ 961 $ (30) --------------------------------------------------------------------------- Total earnings (loss) from continuing operations per share - basic and diluted $ 0.02 $ 0.03 $ 0.05 $ (0.01) --------------------------------------------------------------------------- Total comprehensive earnings (loss) per share - basic and diluted $ 0.02 $ 0.04 $ 0.05 $ (0.00) --------------------------------------------------------------------------- Weighted average number of shares outstanding Basic and diluted 17,485,175 17,485,175 17,485,175 17,485,175 ---------------------------------------------------------------------------

Non-IFRS Financial Measure

Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS. Rainmaker believes that adjusted EBITDA is a measure used by investors in assessing the performance of Rainmaker and its ability to generate sufficient cash flow. As adjusted EBITDA is a term not defined under IFRS it may not be comparable to a similar term used in documents of other public entities.

Rainmaker defines adjusted EBITDA as earnings from continuing operations before interest expense, interest income, income taxes, depreciation and amortization of property, plant and equipment, amortization of intangible assets, share of income from equity investment in Base 10, gain on sale of property, plant and equipment and compensation costs related to stock options.

The following is a reconciliation of adjusted EBITDA to earnings for the period as calculated in accordance with IFRS:

All amounts in thousands of Canadian dollars Three months Nine months ended September 30, ended September 30, 2011 2010 2011 2010 ----------------------------------------- Earnings (loss) from continuing operations $ 312 $ 486 $ 866 $ (145) Add / (deduct): Depreciation and amortization 282 532 1,236 2,129 Interest expense 112 84 310 269 Interest income (19) (9) (41) (37) --------------------------------------------------------------------------- EBITDA $ 687 $ 1,093 $ 2,371 $ 2,216 --------------------------------------------------------------------------- Stock-based compensation expense 5 5 13 11 Gain on sale of Base 10 Group Inc. - - (590) (274) Share of income from equity investment in Base 10 Group Inc. (505) (432) (429) (193) Gain on sale of property, plant and equipment - - - (1) --------------------------------------------------------------------------- Adjusted EBITDA $ 187 $ 666 $ 1,365 $ 1,759 ---------------------------------------------------------------------------

Results of Operations

Three months ended September 30, 2011 compared to 2010

Revenue

Revenues were $4.7 million in 2011 consistent with the same levels in 2010. An increase in revenues of $0.1 million relating to the feature film division as compared to 2010, was fully offset by one fewer gaming cinematic production and start time delays for the DVD productions in 2011.

Operating expenses

Operating expenses increased $0.4 million to $4.2 million in 2011 from $3.8 million in 2010. The 2011 increase in operating expenses is comprised of an increase in film labour production expenses of $0.8 million offset by increased film tax credits of $0.5 million on the additional labour costs.

General and administration expenses

General and administration expenses increased $0.1 million to $0.3 million in 2011 from $0.2 million in 2010. The increase relates to increased professional fees during quarter as compared to 2010. Included in general and administration expenses is a foreign exchange gain of $0.1 million in both periods.

Depreciation and amortization

Depreciation and amortization of property, plant and equipment, and intangible assets decreased $0.2 million in 2011 to $0.3 million as compared to $0.5 million in 2010 due to decreasing carrying value of tangible assets in 2011 from 2010.

Interest expense

Interest expense was consistent at $0.1 million for both reporting periods.

Share of income in equity investment in Base 10 Group Inc.

Rainmaker's interest in Base 10 Group Inc. ("Base 10") is reported using the equity method. For the three months ended September 30, 2011, Rainmaker reported equity income of $0.5 million compared to $0.4 million for 2010. Base 10 reported net income of $1.8 million for 2011 as compared to $1.5 million for 2010.

Earnings from continuing operations

Earnings from continuing operations decreased $0.2 million in 2011 to earnings of $0.3 million from $0.5 million in 2010. This decrease was the result of the Company's increased operating expenses during the quarter.

Gain on sale of discontinued operations

The gain on sale of discontinued operations decreased $0.1 million in 2011. This represents the receipt of contingent consideration with the use of service credits from the purchasers.

Total earnings and comprehensive earnings for the period

The total earnings and comprehensive earnings for the three months ended September 30, 2011 decreased $0.3 million to $0.3 million from $0.6 million in 2010.

Nine months ended September 30, 2011 compared to 2010

Revenue

Revenue decreased $1.3 million to $13.7 million in 2011 from $15.0 million in 2010. The feature film division saw an increase of $1.1 million in 2011 compared to 2010. This was offset by a $1.5 million reduction from game cinematics and other short film projects as compared to 2010. The DVD revenues also saw a decrease of approximately $0.7 million relating to lower average foreign exchange rates on contracts denominated in USD compared to 2010. In addition, there was a decrease of approximately $0.2 million in library distribution revenues compared to sales in 2010.

Operating expenses

Operating expenses decreased $1.1 million to $11.5 million in 2011 from $12.6 million in 2010. Film related production costs increased by $1.1 million as compared to 2010. These costs were offset by $0.6 million of additional tax credits associated with these costs and other reductions of $0.6 million in operating expenses as compared to 2010. In addition, a one time reduction of $1.1 million of operating costs was recognized in the first quarter of 2011. This reduction was related to a successful application of production tax credits relating to productions from prior periods that were previously thought to be unavailable.

General and administration expenses

General and administration expenses increased $0.2 million to $0.9 million in 2011 from $0.7 million in 2010. The increase relates to additional professional fees in 2011 as compared to 2010.

Depreciation and amortization

Depreciation and amortization of property, plant and equipment, and intangible assets decreased $0.9 million in 2011 to $1.2 million as compared to $2.1 million in 2010 due to decreasing book value of the assets in 2011 from 2010.

Share of income from equity investment in Base 10 Group Inc.

Rainmaker's interest in Base 10 is reported on an equity basis. For the nine months ended September 30, 2011, Rainmaker reported an equity income of $0.4 million from this investment compared to $0.2 million for 2010.

In February 2011 Base 10 repurchased 130,000 shares from one of its shareholders. On March 31, 2011 Base 10 issued 919,500 new common shares under option agreements reducing Rainmaker's investment to 29.07%. Base 10 reported net income of $1.8 million for the nine months ended September 30, 2011 as compared to $0.5 million for 2010.

Gain on sale of Base 10 Group Inc.

The gain on sale of Base 10 increased $0.3 million to $0.6 million in 2011 from $0.3 million in 2010. These gains are the result of certain revenue targets being met resulting in an earn-out for Rainmaker. Details of the earn-outs are more fully described in Note 6 of the accompanying financial statements.

Earnings from continuing operations

Earnings from continuing operations increased $1.0 million to earnings of $0.9 million in 2011 from a loss of $0.1 million in 2010. This increase was the result of the Company's reduced operating expenses during the quarter and the increase in the gain on sale as a result of the earn-out from Base 10.

Gain on sale of discontinued operations

The gain on sale of discontinued operations remained consistent in both years at $0.1 million. This represents the receipt of contingent consideration with the use of service credits from the purchasers.

Total earnings and comprehensive earnings for the period

The total earnings and comprehensive earnings for the nine months ended September 30, 2011 increased $0.07 million to earnings of $1.0 million in 2011 from a loss of $0.03 million in 2010.

Other

Additional information and other publicly filed documents relating to Rainmaker, including the Annual Information Form, are available through the internet on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval ("SEDAR"), which can be accessed at www.sedar.com.

This press release and any related attachments may contain forward-looking statements that involve a number of risks and uncertainty. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are market and general economic conditions and the risk factors detailed from time to time in the periodic reports and documents filed by the Company with The Toronto Stock Exchange and other regulatory authorities. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made, and the Company undertakes no obligation to update the forward-looking statements should there be a change in conditions, or in management's estimates or opinions.

The contents of this press release have neither been approved nor disapproved by any regulatory authority.

Contacts:
Rainmaker Entertainment Inc.
Bryant Pike
(604) 714-2600
(604) 714-5990 (FAX)
investor@rainmaker.com
www.rainmaker.com


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