FRV Média Inc.
TSX VENTURE : FRV

FRV Média Inc.

November 22, 2006 15:59 ET

FRV Media Trims Loss in Second Quarter 2007

MONTREAL, QUEBEC--(CCNMatthews - Nov. 22, 2006) - The Board of Directors of FRV MEDIA Inc. ("FRV" or the "Company") (TSX VENTURE:FRV) today approved the Company's audited financial statements for the first quarter ended September 30, 2006.

In the second quarter ended September 30, 2006, FRV Media slashed its loss by $662,971, from $864,092 in the first three months of fiscal 2007 to $201, 121.

"These results are in line with our business plan since almost $14 million in productions are in process and scheduled for delivery by March 31," explained chief executive Richard Laferriere.

Second quarter results

For the second quarter ended September 30, 2006, FRV Media achieved revenues of $5,582,207, delivering productions with a gross value of $7,685,347, compared with revenues of $4,573,418 in the comparable year-ago period and a gross production value of $8,007,193, including government assistance of $3,433,775.

Revenues were substantially higher in the second quarter. Gross profit decreased in absolute terms and in percentage due to the revenue mix, i.e., there were fewer productions in the second quarter of last year and three made up more than 70% of the gross margin in absolute terms or more than $700,000. Although there are more productions this year, gross profit is lower in absolute terms and in percentage.

Gross profit was $770,286 or 13.8% of sales in the second quarter, a proportion more representative of our revenue mix than last year, when it was $1,023,393 or 22.4% of sales.

The second quarter loss was $201,121, down $662,971 from the $864,092 loss recorded in the first quarter.

First-half year results

For the six months ended September 30, 2006, FRV Media achieved revenues of $6,682,993, delivering productions with a gross value of $9,151,105, compared with revenues of $5,178,987 and a gross production value of $12,144,231 in the comparable year-ago period. Government assistance was considerably less in the first half of this year.

Two factors explain the higher revenues but lower gross margin: the delivery mix and the financial structure of the productions delivered. The mix in the first half of this year includes revenues from distribution activities and from productions delivered by Altau Tuttifrutti (Les Enfants de Tchernobyl, Caporal Mark, Yippies, Batisseurs d'ailleurs) and Cite-Amerique (Bon Voyage, Termites, La Tour Infernale and five episodes of the Bob Gratton series) for which government assistance was much less and whose gross margins were considerably lower but more representative of our industry.

Halfway through the year, gross profit was $1,008,300 or 15.1% of sales. As mentioned earlier, this figure is more representative of our revenue mix than last year, when it was an exceptionally high 30.3%, for the same reasons explained earlier.

Capital resources

Operations generated $635,941 in cash in the second quarter, compared to $934,061 at the same time last year. The change in operating cash flow stems from a sharp increase in receivables associated with a greater number of productions in process. The situation was much the same and even more pronounced for the six-month period. Thus, operations used $2,830,123 in cash, whereas they generated a positive cash flow of $1,051,970 in fiscal 2006.



KEY FIGURES, SECOND QUARTER AND FIRST HALF YEAR
(In thousands of dollars except amounts per share. Amounts per share
are on a diluted basis.)
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Quarters ended: Six-month periods ended:
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September 30, September September 30, September
2006 30, 2005 2006 30, 2005
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Gross
production value 7,685 8,007 9,151 12,144
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Revenues 5,582 4,73 6,683 5,179
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Gross profit 770 1,023 1,008 1,572
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Net earnings (loss) (201) 28 (1,065) (308)
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Earnings (Loss) per share (0.01) - (0.03) (0.01)
($)
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A more detailed analysis of the Company's results can be found in the
second quarter MD&A available at www.sedar.com.


RECENT DEVELOPMENTS AND OUTLOOK

Excluding potential acquisitions, which are part of our development strategy, we expect organic growth to intensify. This growth will stem in part from the activities of our production subsidiaries (Cite-Amerique and Altau Tuttifrutti), where we will focus on improving our gross margins, and from our distribution and export activities via Delphis Films.

Cite-Amerique is working on a number of projects scheduled for delivery later in the year, namely, Dragon III (Treehouse), Ma tante Alline (Alliance) and the feature documentary La riviere aux Castors.

Altau Tuttifrutti also has several productions scheduled for delivery later this year, including Documentaire geologique (CBC /NFB), Pleins feux sur les entrepreneurs du Quebec (Canal Argent), Les Eveques (SRC/RDI) and 60 tonnes d'epinettes (Canal D).

Our development plan has four major thrusts:

- Increase delivery to mainstream and specialty broadcasters in Quebec, Canada and abroad. The impact of the Tutti Frutti acquisition was already felt in the first half of the year;

- Increase international co-productions. We already have solid achievements to our credit in this regard (Bon Voyage, Dragon, Isabelle Boulay, Dice, etc.) and new and ongoing projects are underway with foreign co-producers (Dragon III, Termites, La tour infernale, Bon Voyage, Les Castors, etc.);

- Step up distribution and export activities through our subsidiary Delphis Films by leveraging the recently acquired library and by adding production acquisitions with high commercial value in the family-youth market; and

- If applicable, make timely acquisitions that will not only increase business volume but also help create a coherent ensemble of operating units that complement each other by their respective focus and expertise.

FORWARD-LOOKING INFORMATION

This press release contains forward looking statements reflecting the objectives, estimates and expectations of FRV Media management. These statements are identified by the use of verbs such as "believe," "anticipate," "estimate" and "expect" as well as the use of the future or conditional tense. By their very nature, these types of statements involve risk and uncertainty. Consequently, results could differ materially from the Company's projections or expectations. For information on the nature of risk factors not specifically discussed in this press release, the reader can consult FRV Media's 2006 Annual Report under the heading "Risks and Uncertainties," page 20.

ADDITIONAL INFORMATION

The complete management's analysis and discussion of operating results and financial position for the quarter ended September 30, 2006 can be found on the SEDAR Web site at www.sedar.com. The Company regularly discloses complementary information by press release, quarterly financial statements and annual information form. This information is also available on SEDAR.

ABOUT FRV MEDIA

FRV Media Inc. is a producer, exporter and integrator of quality content deployed across multiple platforms: television, cinema, multimedia and publishing. Through its three wholly owned subsidiaries Cite-Amerique, Altau Tuttifrutti and Delphis Films, the Company creates and distributes dramatic content (TV series, made-for-TV movies and feature films), youth and children's programs, documentaries, sitcoms and magazine shows. It is also involved in dubbing and event coverage and recording.



FRV Media Inc.
Consolidated Earnings (unaudited)
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Three-month period ended Six-month period ended
September 30 September 30
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2006 2005 2006 2005
---------------------------------------------------------------------
$ $ $ $
Revenue 5,582,207 4,573,418 6,682,993 5,178,987
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Production costs 4,344,055 3,162,994 4,924,163 3,201,355
Direct
distribution costs 467,866 387,031 750,530 405,961
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4,811,921 3,550,025 5,674,693 3,607,316
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Gross profit 770,286 1,023,393 1,008,300 1,571,671
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Operating expenses 875,597 833,952 1,899,424 1,623,446
Financial expenses 71,047 43,188 125,090 62,747
Amortization of
property and
equipment 28,284 23,030 57,247 46,255
Loss on disposition
of fixed assets 32,013 32,013
Interest income (3,521) (9,285) (8,248) (38,313)
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971,407 922,898 2,073,513 1,726,148
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Net profit (net loss)
from continuing
operations (201,121) 100,495 (1,065,213) (154,477)
Net loss from
discontinued
operations (72,251) (153,322)
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Net profit
(net loss) (201,121) 28,244 (1,065,213) (307,799)
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Basic and diluted
profit (loss) per
Class "A" share
from continuing
operations (0.01) 0.00 (0.03) (0.00)

Basic and diluted
net profit (net loss)
per Class "A" share (0.01) 0.00 (0.03) (0.01)

Weighted average
number of basic
and diluted
Class "A" shares
outstanding 35,497,936 32,556,469 35,497,936 31,599,894

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The accompanying notes are an integral part of the consolidated
financial statements.



FRV Media Inc.
Consolidated Deficit (unaudited)

---------------------------------------------------------------------
Three-month period ended Six-month period ended
September 30 September 30
---------------------------------------------------------------------

2006 2005 2006 2005
---------------------------------------------------------------------
$ $ $ $
Balance, beginning
of period (7,060,092) (5,170,177) (6,196,000) (4,828,949)
Net profit
(net loss) (201,121) 28,244 (1,065,213) (307,799)
Share issue expenses (94,484) (2,204) (94,484) (7,389)
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Balance, end
of period (7,355,697) (5,144,137) (7,355,697) (5,144,137)
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The accompanying notes are an integral part of the consolidated
financial statements.



FRV Media Inc.
Consolidated Cash Flows (unaudited)

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Three-month period ended Six-month period ended
September 30 September 30
---------------------------------------------------------------------

2006 2005 2006 2005
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$ $ $ $
OPERATING ACTIVITIES
Net profit (net loss) (201,121) 28,244 (1,065,213) (307,799)
Non-cash items
Amortization
of television
and film
productions 4,344,055 3,162,994 4,924,163 3,204,250
Amortization of
distribution
rights and costs (14,509) 13,342 (87,886) 23,625
Stock-based
compensation 2,510 7,414 5,019 14,421
Interest premium
capitalized on
convertible
debentures 23,352 6,345 34,266 12,500
Interest on
liability component
of convertible
debentures 4,412 4,412
Loss on disposal
of property
and equipment 32,013 32,624
Amortization of
property and
equipment 28,284 27,409 57,247 55,135
Changes in
assets and
liabilities (3,551,042) (2,343,700) (6,702,131) (1,982,786)
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Cash flows
from operating
activities 635,941 934,061 (2,830,123) 1,051,970
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INVESTING ACTIVITIES
Short-term
investments (34,300) 192,500 (34,300) 392,500
Restricted
investments 125,000 127,702 515,392 852,702
Balance of sale 150,000 150,000
Property
and equipment (40,819) (44,720) (87,352) (173,261)
Distribution rights (400,033) (188,944) (675,743) (819,333)
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Cash flows from
investing activities (350,152) 236,538 (282,003) 402,608
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FINANCING ACTIVITIES
Deferred expenses 57,503 31,114 61,912
Short-term debt
and bank loans
for productions (760,514) (1,602,863) 1,948,242 (2,180,386)
Long-term debt 1,100,000
Repayment of
long-term debt (57,770) (45,161) (100,103) (89,631)
Issue of Class "A"
shares and warrants 500,000 500,000 300,000
Share issue expenses (94,484) (2,205) (94,484) (7,389)
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Cash flows
from financing
activities (355,265) (1,650,229) 3,384,769 (1,915,494)
---------------------------------------------------------------------
Net increase (net
decrease) in cash (69,476) (479,630) 272,643 (460,916)
Cash, beginning
of period 474,381 706,154 132,262 687,440
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Cash, end of period 404,905 226,524 404,905 226,524
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The accompanying notes are an integral part of the consolidated
financial statements.



FRV Media Inc.
Consolidated Balance Sheets
as of September 30, 2006 and March 31, 2006

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Sept. 30, 06 March 31, 06
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(unaudited) (audited)
$ $
ASSETS
Cash 404,905 132,262
Short-term investments 105,702 71,402
Restricted cash and investments 541,619 1,057,011
Accounts receivable 5,368,487 2,586,417
Prepaid expenses 205,331 197,481
Television and film productions 4,149,421 1,814,324
Distribution rights and costs 2,011,245 1,335,502
Balance of sale 250,000 250,000
Deferred expenses 29,939 61,053
Property and equipment 489,235 459,131
Goodwill 2,475,480 2,410,880
Future income taxes 499,325 499,325
Assets of discontinued operations 18,274
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16,530,689 10,893,062
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LIABILITIES
Short-term debt 924,987 1,227,021
Bank loans for productions 3,852,612 1,602,336
Accounts payable and accrued liabilities 3,196,373 2,305,184
Deferred revenue 3,038,180 604,777
Convertible debentures 1,237,477 148,798
Other long-term debt 495,433 595,537
Liabilities of discontinued operations 19,104
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12,745,062 6,502,757
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SHAREHOLDERS' EQUITY
Capital stock
Class "A" shares and warrants 10,831,291 10,331,291
Equity component of convertible debentures 50,000
Contributed surplus 260,033 255,014
Deficit (7,355,697) (6,196,000)
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3,785,627 4,390,305
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16,530,689 10,893,062
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---------------------------------------------------------------------

The accompanying notes are an integral part of the consolidated
financial statements.


Contact Information

  • FRV Media Inc.
    Alain Dufour
    Vice-President and Chief Financial Officer
    514-843-3355
    adufour@frvmedia.com