Rainmaker Entertainment Inc.
TSX VENTURE : RNK

Rainmaker Entertainment Inc.

November 13, 2009 19:51 ET

Rainmaker Reports Results for the Three and Nine Months Ended September 30, 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 13, 2009) - Rainmaker Entertainment Inc. (TSX:RNK) announces its results for the three and nine months ended September 30, 2009.

"The results for Q3 were disappointing but not unexpected due to external production delays. We have experienced a further loss from continuing operations for the third quarter of $939,000, compared to a loss of $908,000 for the same period of 2008," said Warren Franklin, Chief Executive Officer of Rainmaker Entertainment Inc.

"External production delays caused slower than anticipated production increases on current projects, as well as production starts expected for the quarter were delayed. The reduced production levels caused both revenue and earnings to be below expected levels. As announced in June, we are continuing to implement a revised production schedule."

Selected Information

Below is selected information derived from the unaudited interim consolidated financial statements which have been prepared in accordance with Canadian generally accepted accounting principles.



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

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
------ ------ ------ ------
Note 1 Note 1
Revenue
Rainmaker Entertainment - Animation 3,070 7,036 10,580 23,016
EP Canada - Payroll processing (Note 1) - 2,535 - 5,535
Canada Film Capital - Tax credit
services (Note 1) - 415 - 1,318
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3,070 9,986 10,580 29,869
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Expenses
Operating 3,715 8,829 13,046 26,357
General and administration 334 331 740 1,365
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4,049 9,160 13,786 27,722
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EBITDA (979) 826 (3,206) 2,147
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Depreciation and amortization 601 834 1,951 2,657
Amortization of intangible assets 222 500 631 1,435
Amortization of deferred gain on sale
of business interests (74) - (223) -
Equity investment (earnings) loss (339) - (45) -
Gain on settlement of accounts payable - - - (315)
Restructuring costs - 216 - 448
Interest expense 137 310 564 748
Foreign exchange (gain) loss (582) (35) (684) 28
Other (income) expense (5) (96) (53) (272)
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(40) 1,729 2,141 4,729
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Loss before non-controlling interest
and discontinued operations (939) (903) (5,347) (2,582)

Non-controlling interest - (5) - (45)
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Net loss from continuing operations (939) (908) (5,347) (2,627)
Gain on sale of discontinued operations 13 5 97 7,633
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Net earnings (loss) and comprehensive
income (loss) for the period (926) (903) (5,250) 5,006
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Loss from continuing operations per unit
/ share
- basic and diluted ($0.05) ($0.05) ($0.31) ($0.15)
Net (loss) earnings per share / unit
- basic ($0.05) ($0.05) ($0.30) $0.29
Net (loss) earnings per share / unit
- diluted ($0.05) ($0.05) ($0.30) $0.28

Note 1: The 2009 results do not include the operations of EP and CFC as
Rainmaker sold 70% of its interests in EP and CFC on November 13,
2008.

EBITDA is not a term defined under generally accepted accounting principles.
Rainmaker defines EBITDA as earnings from operations before interest
expense, interest income, income taxes, depreciation and amortization on
property, plant and equipment, amortization and write-down of intangible
assets, loss on sale of property, plant and equipment, restructuring costs
and non-cash compensation costs.


Consolidated Balance Sheet Data

September 30, December 31,
2009 2008
------------ -----------
Cash 2,100 6,886
Total assets 22,725 35,266
Total debt 4,388 6,997
Total liabilities 17,423 24,780
Shareholder equity 5,302 10,486
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Results of Operations

Three months ended September 30, 2009 compared to 2008

Revenue

Revenue decreased $6.9 million to $3.1 million in 2009 from $10.0 million in 2008. This decrease was due in part to the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008. No revenue was reported from either of these divisions in 2009. For the three months ending September 30, 2008 EP Canada and Canada Film Capital reported revenues of $2.5 million and $0.4 million, respectively. In 2009 Rainmaker's 30% interest in Canfilm Solutions Inc. (formerly 7028831 Canada Inc. and acquirer) is reported on an equity basis.

Rainmaker's animation operations reported a decrease in revenue of $3.9 million to $3.1 million in 2009 from $7.0 million in 2008. The decrease in revenue was due to fewer projects in the DVD division and external production delays on a feature film.

Operating and general and administration expenses

Operating expenses decreased $5.1 million to $3.7 million in 2009 from $8.8 million in 2008. As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008, there have been no operating expenses reported from either of these divisions in 2009. For 2008 EP Canada and Canada Film Capital reported operating expenses of $1.5 million and $0.3 million, respectively.

The decrease in expenses was also the result of lower production volumes caused by external production delays. Operating expenses which do not relate directly to the operating segments were similar to 2008 at $0.3 million.

General and administration expenses for both 2009 and 2008 were $0.3 million.

Depreciation and amortization of property, plant and equipment

Depreciation and amortization of property, plant and equipment decreased $0.2 million in 2009 to $0.6 million as compared to $0.8 million in 2008.

EP Canada and Canada Film Capital reported depreciation expenses of $0.2 million in 2008.

Amortization of intangible assets

Amortization of intangible assets decreased $0.3 million in 2009 to $0.2 million as compared to $0.5 million in 2008. This decrease was the result of the sale of EP Canada and Canada Film Capital.

Interest expense

Interest expense decreased $0.2 million in 2009 to $0.1 million from $0.3 million in 2008 resulted from $4.7 million of the subordinated debenture being paid June 30, 2009 and the remaining $2.5 million being paid in August 2009. Also the Company did not draw down on any of its working capital loan until August.

Foreign Exchange Gain (Loss)

There was an increase in the foreign exchange gain of $0.57 million to $0.6 million in 2009 compared to $0.03 million in 2008. The 2009 exchange gain is due to a $0.6 million unrealized gain from derivative contracts that expire in 2010.

Equity Earnings

Rainmaker's 30% interest in Canfilm Solutions Inc. is reported on an equity basis. For 2009 Rainmaker reported equity earnings of $0.3 million from this investment.

Earnings (Loss) from continuing operations

The loss from continuing operations was consistent for both years at $0.9 million.

As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008 there were no earnings or losses from either of these divisions in 2009. For 2008 EP Canada reported earnings of $0.6 million and Canada Film Capital reported earnings of $0.05 million.

Net earnings (loss) for the period

The net loss for both 2009 and 2008 was $0.9 million.

Nine months ended September 30, 2009 compared to 2008

Revenue

Revenue decreased $19.3 million to $10.6 million in 2009 from $29.9 million in 2008. This decrease was due in part to the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008. No revenue was reported from either of these divisions in 2009. For 2008 EP Canada and Canada Film Capital reported revenues of $5.5 million and $1.3 million, respectively. In 2009 Rainmaker's 30% interest in Canfilm Solutions Inc. is reported on an equity basis.

Rainmaker's animation operations reported a decrease in revenue of $12.4 million to $10.6 million in 2009 from $23.0 million in 2008. The decrease in revenue was due to fewer projects in the DVD division and external production delays on a feature film.

Operating and general and administration expenses

Operating expenses decreased $13.4 million to $13.0 million in 2009 from $26.4 million in 2008. As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008 there were no operating expenses reported from either of these divisions in 2009. For 2008 EP Canada and Canada Film Capital reported operating expenses of $4.4 million and $1.0 million, respectively.

The decrease in expenses was also the result of lower production volumes caused by external production delays. Operating expenses which do not relate directly to the operating segments decreased $0.3 million to $0.1 million from $1.3 million in 2008.

General and administration expenses decreased $0.7 million to $0.7 million in 2009 from $1.4 million in 2008. The decrease was the result of the sale of EP Canada and Canada Film Capital.

Depreciation and amortization of property, plant and equipment

Depreciation and amortization of property, plant and equipment decreased $0.7 million in 2009 to $2.0 million as compared to $2.7 million in 2008.

EP Canada and Canada Film Capital reported depreciation expenses of $0.6 million in 2008.

Amortization of intangible assets

Amortization of intangible assets decreased $0.8 million in 2009 to $0.6 million as compared to $1.4 million in 2008. This decrease was the result of the sale of EP Canada and Canada Film Capital.

Interest expense

Interest expense decreased $0.1 million in 2009 to $0.6 million from $0.7 million in 2008. This decrease resulted from $4.7 million of the subordinated debenture being repaid June 30, 2009 and the remaining $2.5 million being repaid in August 2009. The Company also had cash reserves so it did not draw down on any of the working capital loans until August 2009.

Foreign Exchange Gain (Loss)

There was an increase in the foreign exchange gain of $0.73 million to $0.7 million in 2009 from a loss of $0.03 million in 2008. The 2009 exchange gain is largely due to an unrealized foreign exchange gain of $0.6 million.

Equity Earnings

Rainmaker's 30% interest in Canfilm Solutions Inc. is reported on an equity basis. For 2009 Rainmaker reported equity earnings of $0.05 million from its investment in Canfilm Solutions Inc.

Earnings (Loss) from continuing operations

The loss from continuing operations increased $2.7 million in 2009 to $5.3 million from $2.6 million in 2008.

As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008 there were no earnings or losses from either of these divisions in 2009. For 2008 EP Canada reported a loss of $0.6 million and Canada Film Capital reported earnings of $0.2 million.

Gain on sale of discontinued operations

For 2008 there was a gain on sale of the post production and visual effects operations of $7.6 million.

Net earnings (loss) for the period

The net loss for 2009 increased $10.0 million for a loss of $5.0 million from earnings of $5.0 million in 2008.

Other

Additional information and other publicly filed documents relating to Rainmaker, including the annual audited consolidated financial statements and related management discussion and analysis plus 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.

Contact Information