SOURCE: Peace Arch Entertainment Group Inc.

April 13, 2007 15:26 ET

Peace Arch Entertainment Reports Record Revenues of $20.3 Million for Q2 Fiscal 2007, Representing a 450% Increase in Revenues Over the Same Period in 2006

Unprecedented Financial Performance Highlighted by Record Net Earnings of $2.2 Million for Second Quarter Fiscal 2007 Results

TORONTO -- (MARKET WIRE) -- April 13, 2007 -- Peace Arch® Entertainment Group Inc. (AMEX: PAE) (TSX: PAE) today announced outstanding operating results for its second quarter of fiscal 2007, ending February 28, 2007, highlighted by the Company's unprecedented growth in revenues to $20.3 million from $3.7 million in the same period last year. The Company's revenues for the six months ended February 28, 2007 were a record $31.6 million, up 600% from $4.6 million during the same period in fiscal 2006, with all business segments reporting continued strong revenue growth.

Peace Arch reported net earnings of $2.2 million, or $0.06 per diluted share in the second quarter, compared to a net loss of $(0.7) million, or $(0.04) per diluted share for the same period last year. For the six months ended February 28, 2007, net earnings were $2.3 million, or $0.06 per diluted share, as compared to a net loss of $(1.4) million or $(0.07) per diluted share last year.

"Peace Arch's senior management team has been energized by delivering results," said Gary Howsam, Chief Executive Officer of Peace Arch Entertainment. "We executed on our strategic plan: to continually expand the quality and volume of our product supply and improve our worldwide distribution and sales capabilities. This quarter reflects the success of this business model and we plan to stay focused on this strategy."

The Company delivered 16 episodes of television programming during the quarter, including five episodes of the dramatic new series "The Tudors," which premiered to record audiences in the U.S. on Showtime Networks, 11 episodes of three lifestyle series and five movies. This is compared to the delivery of 13 episodes of a television series and no movies in the second quarter of last year. Peace Arch's Home Entertainment segment had the strongest quarter in its history including solid results from the holiday period. Included in Peace Arch's earnings for the quarter was an amount of $1.0 million representing a favorable settlement of an outstanding legal dispute.

During the second quarter the Company:

* Completed its acquisition of independent film companies Castle Hill Productions Inc. and Dream LLC., whose library of approximately 500 classic and contemporary motion pictures represents one of the largest independent film libraries in the world. This strategic transaction provides Peace Arch with a new inventory of available entertainment content for U.S. and worldwide distribution, and brings to the Company a proven U.S. distribution and licensing operation with an experienced executive team. The results of operations of Castle Hill Productions Inc. and Dream LLC have been included in the Company's results since December 21, 2006.

* Added industry veteran Mark Balsam as President of U.S. Distribution as part of the Castle Hill Productions Inc. and Dream LLC acquisition.

* Received a one-time payment of $1.0 million as settlement of an outstanding legal dispute concerning the co-financing of a television series.

* Produced or acquired several feature films for DVD and television exploitation, including the thrillers "Final Draft" starring James Van Der Beek, "The Cradle" starring Lukas Haas, "Harm's Way" starring Academy Award-winner Kathleen Quinlan, and the family film "Luna: Spirit of The Whale" starring Adam Beach and Jason Priestley.

* Licensed all distribution rights to the Company's feature film "Animal 2," starring Ving Rhames, to Genius Entertainment, one of the leading home entertainment distributors in the United States. "Animal 2" is a sequel to the sleeper hit "Animal," which grossed more than US$8 million in DVD revenues in 2005.

Subsequent to the second quarter ended February 28, 2007, the following significant transactions occurred:

* Peace Arch signed a licensing agreement for U.S. distribution rights for two of the Company's feature films, "Final Draft" and "The Cradle," to Genius Entertainment, one of the leading home entertainment distributors in the United States.

* The Company acquired worldwide rights to the feature films "Shred" and "Shred 2," snowboarding action comedies to be released during the next two ski and snowboarding seasons, starring popular comic actor Tom Green.

* The Company acquired worldwide rights to the feature film "The Deal," adapted from a best-selling book and starring Meg Ryan, William H. Macy, LL Cool J and Elliott Gould, currently in production in South Africa.

As at February 28, 2007, Peace Arch's total shares outstanding was 32,899,309 Common Shares (including 222,689 shares in escrow) and 4,347,827 Series I Preference Shares and 3,161,929 Series II Preference Shares. The Company also has outstanding 1,185,896 Series II Preference Share purchase warrants and 1,324,000 Common Share purchase warrants.

For full Financial Statements, Note Disclosure and MD&A, please refer to the Company's filings, which are available at: www.sedar.com and www.sec.gov/edgar.

About Peace Arch® Entertainment Group Inc.

Peace Arch Entertainment produces and acquires feature films, television and home entertainment content for distribution to worldwide markets. Peace Arch owns one of the largest libraries of top quality independent feature films in the world, featuring more than 500 classic and contemporary titles. Through its subsidiary, Peace Arch Home Entertainment, Peace Arch is also one of the leading distributors of DVDs and related products in Canada. For additional information, please visit www.peacearch.com.

For more investor-oriented information about Peace Arch Entertainment, visit http://www.trilogy-capital.com/tcp/peace-arch/. For current stock price quotes and news, visit http://www.trilogy-capital.com/tcp/peace-arch/quote.html. To view an Investor Fact Sheet, visit http://www.trilogy-capital.com/tcp/peace-arch/factsheet.html. To read a transcript of a recent Peace Arch investor conference call or listen to an archived recording, please visit http://www.trilogy-capital.com/tcp/peace-arch/conference.html.

Forward-Looking Statements

This press release includes statements that may constitute forward-looking statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products and services in the marketplace, competitive factors, dependence upon third-party vendors, availability of capital and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.



Peace Arch Entertainment Group Inc.
Consolidated Balance Sheets

(expressed in thousands of Canadian dollars)

                                              February 28 August 31
                                                     2007      2006
                                                        $         $
                                              (unaudited) (audited)
Assets
Cash and cash equivalents                           5,542     1,216
Accounts and other receivables                     37,581    21,471
Inventory                                           2,249     1,830
Investment in film and television programming      47,713    29,174
Prepaid expenses and deposits                         434       370
Property and equipment                                944       571
Intangible assets                                   3,479     1,875
Deferred costs                                        355       511
Goodwill                                            7,468     5,252
Restricted term deposits                           23,805    21,272
                                              ---------------------
                                                  129,570    83,542
                                              =====================
Liabilities
Bank credit facility                                2,050     1,811
Term loan                                           3,212         -
Production loans                                   45,387    29,762
Accounts payable and accrued liabilities           27,043    11,384
Deferred revenue                                    5,388       799
Future income tax liability                           764       883
Revenue guarantee obligation                       23,805    21,272
                                              ---------------------
                                                  107,649    65,911
                                              ---------------------
Shareholders' Equity
Capital stock                                      23,914    21,760
Contributed surplus                                 3,081     2,864
Warrants                                              808     1,010
Other paid-in capital                                 680       680
Deficit                                           (6,562)   (8,683)
                                              ---------------------
                                                   21,921    17,631
                                              ---------------------
                                                  129,570    83,542
                                              =====================


Peace Arch Entertainment Group Inc.
Consolidated Statements of Earnings (Loss)

(expressed in thousands of Canadian dollars, except per share amounts)

                            Three Months Ended      Six Months Ended
                                February 28            February 28
                            2007          2006     2007          2006
                               $             $        $             $
                      (unaudited)   (unaudited)(unaudited) (unaudited)

Revenue                   20,276         3,661   31,606         4,570
                       -----------------------------------------------

Expenses
Amortization of investment
in film and television
programming, and other
production costs          11,073          934    15,471         1,766
Home entertainment
direct costs               4,247        1,420     8,496         1,420
Selling, general
and administrative         2,630        1,559     4,520         2,579
Other amortization           199          182       323           202
                       -----------------------------------------------
                          18,149        4,095    28,810         5,967
                       -----------------------------------------------

Earnings (loss) from
operations before the
undernoted                 2,127         (434)    2,796        (1,397)

Interest income              407          244       667           496
Interest expense            (959)        (658)   (1,536)       (1,088)
Gain on sale of asset          -           10         -            43
Foreign exchange
gain (loss)                 (348)          97      (665)          506
Legal settlement             957            -       957             -
Loss on settlement
of obligations                 -            -       (13)            -
                       -----------------------------------------------

Earnings (loss) before
income taxes               2,184         (741)    2,206        (1,440)
Income tax recovery           55            -       119             -
                       -----------------------------------------------
Net earnings (loss)
for the period             2,239         (741)    2,325        (1,440)
                       ===============================================

Net earnings (loss) per common share
Basic                       0.07        (0.04)     0.07         (0.07)
                       ===============================================

Diluted                     0.06        (0.04)     0.06         (0.07)
                       ===============================================


Peace Arch Entertainment Group Inc.
Consolidated Statements of Deficit

(expressed in thousands of Canadian dollars)

                       Three Months Ended        Six Months Ended
                           February 28             February 28
                        2007         2006      2007          2006
                           $            $         $             $
                  (unaudited) (unaudited)(unaudited)   (unaudited)

Deficit -
Beginning of period  (8,697)       (5,013)  (8,683)        (4,255)

Preference share
Dividends              (104)          (76)    (204)          (135)
Net earnings (loss)
for the period        2,239          (741)   2,325         (1,440)
                   -----------------------------------------------

Deficit -
End of period       (6,562)        (5,830)  (6,562)        (5,830)
                   ===============================================


Peace Arch Entertainment Group Inc.
Consolidated Statements of Cash Flows

(expressed in thousands of Canadian dollars)

                        Three Months Ended       Six Months Ended
                            February 28            February 28
                         2007         2006      2007          2006
                            $            $         $             $
                  (unaudited)  (unaudited)(unaudited)   (unaudited)

Cash flows from operating activities
Net earnings (loss)
for the period          2,239        (741)     2,325       (1,440)

Items not affecting cash
Amortization of
film and television
programming             8,992         637     11,366        1,176
Income tax recovery      (55)           -      (119)            -
Other amortization        199         182        323          202
Stock-based compensation
and warrant costs         187         187        306          243
Loss on settlement
of obligations              -           -         13            -
Gain on sale of asset       -         (10)         -         (43)
Investment in film and
television
programming           (11,209)     (5,952)   (21,304)    (10,455)
Changes in non-cash
operating working
capital                (2,195)        829      2,184        2,706
                  -----------------------------------------------
                       (1,842)    (4,868)    (4,906)      (7,611)
                  -----------------------------------------------

Cash flows from investing activities
Acquisition of kaBOOM! Entertainment Inc.,
net of cash acquired         -    (3,176)          -      (3,176)

Acquisition of
Castle Hill Productions Inc.
and Dream LLC, net of bank
indebtedness acquired  (9,150)          -    (9,652)            -

Property and equipment
purchases                (367)       (95)      (415)         (127)
                   -----------------------------------------------
                       (9,517)    (3,271)   (10,067)       (3,303)
                   -----------------------------------------------

Cash flows from financing activities

Bank credit facility       517         -         239             -

Issuance of term loan    3,212     3,500       3,212         3,500

Issuance of preference shares
on exercise of warrants      -       827         277           827

Payment of preference share
dividends                    -      (76)           -         (135)

Issuance of common shares
upon exercise of
stock options               22        -           22            -

Issuance of common shares
on exercise of warrants    156        -          279            -

Deferred financing costs (355)     (416)       (355)         (416)

Production loans        23,884     6,638      38,999        13,076

Repayment of
production loans      (14,185)   (2,154)    (23,374)       (6,667)
                   -----------------------------------------------
                        13,251     8,319      19,299        10,185
                   -----------------------------------------------

Increase (decrease)in cash
and cash equivalents     1,892       180       4,326         (729)

Cash and cash equivalents -
Beginning of period      3,650       519       1,216         1,428
                   -----------------------------------------------
Cash and cash equivalents -
End of period            5,542       699       5,542           699
                   ===============================================
Supplemental cash flow information
Interest paid              866       261       1,496           838


Contact Information

  • Contact:

    Roy Bodner
    Vice President Public Relations
    Peace Arch Entertainment
    (310) 776.7208
    Email Contact

    Or

    Financial Communications
    Trilogy Capital Partners
    Ryon Harms
    (800) 592-6067
    Email Contact