Rainmaker Income Fund
TSX : RNK.UN

Rainmaker Income Fund

May 11, 2006 17:29 ET

Rainmaker Income Fund Reports Results for the First Quarter Ended March 31, 2006 and Announces Distribution for the Month of May 2006

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 11, 2006) - Rainmaker Income Fund (the "Fund") (TSX:RNK.UN) reports net earnings of $203 thousand or $0.01 per unit for the first quarter ended March 31, 2006. All amounts are in Canadian dollars.

Selected financial results

All amounts are in 000's of dollars, except per unit figures



Three months ended
March 31,
Statement of Operations 2006 2005
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Revenue
Rainmaker LP
Video post 2,036 1,562
Visual effects 4,482 568
Film lab 459 292
Other 105 317
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7,082 2,739

EP Canada LP 1,349 -
Canada Film Capital LP 822 -
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9,253 2,739
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Expenses
Operating 7,024 3,438
General and administration 582 191
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7,606 3,629
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Earnings (loss) before undernoted items 1,647 (890)

Depreciation and amortization 1,405 845
Other 15 95
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Earnings (loss) before income taxes and non-
controlling interest 227 (1,830)

Income tax expense (recovery) 20 (186)
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Earnings (loss) before non-controlling interest 207 (1,644)

Non-controlling interest (4) 91
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Net earnings (loss) for the period 203 (1,553)
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Distributable cash 2,982 (1,444)
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Distributable cash per unit 0.17 (0.13)
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Distributions declared per unit 0.12 0.12
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Distributable cash is not a term defined under Canadian generally
accepted accounting principles. The Fund defines distributable cash
as cash flow from operations before the change in non-cash operating
working capital items adjusted for certain investing activities,
including purchases and proceeds on sale of property, plant and
equipment and for certain financing activities including repayment
of and proceeds from capital leases. The Fund believes that
distributable cash is a useful measure used by investors in
assessing performance of the Fund and its ability to generate
sufficient cash flow to pay distributions.


Results of Operations

Revenue

Revenue increased $6.5 million to $9.3 million in 2006 from $2.7 million in 2005. The increase in 2006 was due principally to the turnaround in Rainmaker LP as all services reported higher revenue in 2006 resulting in revenue increasing $4.4 million to $7.1 million from $2.7 million in 2005. Within Rainmaker LP visual effects increased $3.9 million to a record $4.5 million in 2006 as services on "The Da Vinci Code" were completed and services on "Garfield 2" continued. In addition EP Canada LP and Canada Film Capital LP, which were acquired in August 2005, together accounted for revenue of $2.2 million.

Operating and general and administration expenses

Operating costs increased $3.6 million to $7.0 million in 2006 from $3.4 million in 2005. EP Canada LP and Canada Film Capital LP, which were not acquired until August 4, 2005, accounted for $2.2 million of the increase, while Rainmaker LP had an increase in operating expenses of $1.4 million to $4.9 million, which directly resulted from higher revenue.

General and administration expenses increased $391 thousand to $582 thousand in 2006 from $191 thousand in 2005. EP Canada LP and Canada Film Capital LP together directly accounted for $188 thousand of the increase and the balance was due to higher audit and accounting costs resulting from the acquisitions and higher legal costs associated with corporate governance matters.

Depreciation and Amortization

Depreciation and amortization of property, plant and equipment increased $266 thousand in 2006 to $1.1 million as compared to $845 thousand in 2005. EP Canada LP, which was not acquired until August 4, 2005, accounted for $230 thousand of the increase. The amortization of intangible assets of $294 thousand for 2006 also related to EP Canada LP and Canada Film Capital LP.

Net earnings for the period

Net earnings for the period increased $1.7 million to $203 thousand in 2006 from a loss of $1.5 million in 2005. The increase was principally attributable to the higher revenue in Rainmaker LP offset by the operations of EP Canada LP which produced a net loss of $896 thousand for the first quarter of 2006, which is historically the slowest quarter for EP Canada LP. Canada Film Capital LP contributed $236 thousand in net earnings for the quarter.

A reconciliation of distributable cash is as follows:



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All in 000's of dollars, except per unit figures
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Three months ended
March 31,
2006 2005
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Cash flow from operations, before change in
non-cash operating working capital items 1,691 (782)
Purchase of property, plant and equipment
(Note 1) (1,846) (198)
Proceeds of capital lease 1,623 -
Proceeds on sale of property, plant and equipment 1,809 -
Repayment of capital leases (295) (464)
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Distributable cash 2,982 (1,444)
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Distributable cash per unit (Note 2) 0.17 (0.13)
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Note 1 The consolidated statement of cash flows for the three
months ended March 31, 2006 shows the purchase of property,
plant and equipment of $223, which is the proceeds of capital
lease netted against the purchase of property, plant and
equipment shown above.
Note 2 Distributable cash per unit is determined based on the
weighted average number of Trust Units of the Fund and Class
B LP Units of RNK Capital LP outstanding during each period.


The calculation of distributable cash includes the proceeds of $1.8 million from the sale of an office building, which the Fund is leasing back. This transaction is not expected to recur and if excluded from the calculation, distributable cash for the three months ended March 31, 2006 would have been $1.2 million or $0.07 per unit.

May 2006 Distribution

Rainmaker announces a cash distribution for the month of May 2006 of $0.04 per unit payable on June 15, 2006 to unitholders of record at the close of business on May 31, 2006.

Holders of units who are non-residents of Canada will be required to pay all withholding taxes payable in respect of any distribution of income by Rainmaker.

The Fund is an unincorporated open-ended limited purpose trust located in Vancouver, British Columbia. The Fund indirectly owns three operating limited partnerships. Rainmaker Limited Partnership is one of North America's leading film and video post production organizations, providing superior service, using innovative technology and world-class talent to design, build and shape content for film, television and new media productions. EP Canada Limited Partnership is a leading provider of payroll services for the film and television industry across Canada. Canada Film Capital Limited Partnership provides tax credit administration services and financing of tax credits through factoring for film and television productions across Canada.

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 Fund 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 Fund 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.

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