SOURCE: Peace Arch Entertainment Group Inc.

July 15, 2008 18:41 ET

Peace Arch® Entertainment Group Inc. Reports Third Quarter Fiscal 2008 Results

Year to Date Revenues Increase From $50.4 Million to $61.5 Million as Company Continues to Strengthen North American Distribution Operations

TORONTO--(Marketwire - July 15, 2008) - Peace Arch Entertainment Group Inc. (AMEX: PAE) (TSX: PAE) today announced operating results for its third quarter of fiscal 2008, ending May 31, 2008. The Company reported revenues of $23.5 million versus $18.8 million for the same period last year, with revenues for the nine months ended May 31, 2008 up $11.1 million to $61.5 million compared to $50.4 million last year.

Peace Arch reported a net loss of $(6.6) million or $(0.14) per diluted share for the three months ended May 31, 2008, compared to net earnings of $1.1 million, or $0.03 per diluted share for the same period last year. For the nine months ended May 31, 2008, the net loss was $(8.7) million or $(0.18) per diluted share, as compared to net earnings of $2.0 million, or $0.05 per diluted share last year. The loss during the quarter is largely due to a write-down of investment in film of $2.5 million, bad debt expense of $2.2 million and print and advertising expenditures of approximately $900,000.

"We are pleased to report continued revenue growth even as we complete our restructuring from a production oriented company into a leading independent distributor," said John Flock, President and Chief Operating Officer of Peace Arch Entertainment. "Our Home Entertainment and Television divisions have been profitable throughout the year, and we expect to keep building those operations through our new U.S. DVD distribution partnership with ContentFilm and the renewal of our series 'The Tudors' for a third season on Showtime. Our Motion Picture division has suffered from the poor market performance of direct-to-DVD titles produced by unaffiliated entities whose results we are obligated to consolidate, but we have wound down that aspect of our business since our change in management last November and we expect to see the positive results of that restructuring beginning in fiscal 2009."

Revenue for the Company's Home Entertainment division were up 167% compared to the same period last year, primarily due to the Company's expansion into the United States market through the acquisition of Trinity Home Entertainment in July 2007. Year-to-date Television revenues are up more than 7% compared to the first nine months of 2007, although quarterly revenues were down 17% due to the delivery of six new episodes of television programming during the quarter as opposed to twelve new episodes during the third quarter of fiscal 2007. The Motion Picture division took delivery of five new films during the quarter, compared to two films in the third quarter last year, as the Company completes its transition from high volume motion picture production to focus on direct distribution in the United States and Canada. Included in the Company's expenses for the quarter was $900,000 for theatrical print and advertising expenditures for films that the Company will exploit on DVD and in other markets next year.

Peace Arch achieved several key milestones during the third quarter in support of its strategic growth initiatives:

--  Released the feature films "Chapter 27" and "The Babysitters"
    theatrically in the United States, solidifying the Company's position as a
    rapidly emerging independent theatrical distribution company.
    
--  Completed licensing agreements for 31 motion pictures and television
    series in key international territories at the Cannes Film Festival &
    Market, increasing the Company's stature as a leading international sales
    company.
    
--  Debuted the mini-series "Guns" at the MIPTV international television
    sales market, resulting in the strongest MIPTV market in the Company's
    history.
    
--  Renewed "The Tudors" for a third season with Showtime Networks, on
    which production began in June.
    
--  Acquired North American distribution rights to the feature film "What
    We Do Is Secret," starring Shane West and Bijou Phillips, to be released
    theatrically in New York, Chicago and Los Angeles in August.
    

Significant events that occurred following the end of the quarter include:

--  On June 23, 2008, the Company announced the signing of an agreement
    with London-based ContentFilm plc that will integrate both companies' U.S.
    home entertainment distribution businesses effective July 1, 2008. The new
    operation combines Peace Arch Home Entertainment and Allumination
    Filmworks, creating one of the largest independent DVD distributors in the
    U.S. marketplace.
    
--  On July 7, 2008, the Company announced that Gerry Noble has been named
    Chief Executive Officer of the Company, effective July 21, 2008. Mr. Noble
    replaces interim CEO Jeff Sagansky, who has served in the post since
    November 2007.
    

As at May 31, 2008, Peace Arch's total shares outstanding was 49,131,698 Common Shares (excluding 222,689 shares in escrow) and 4,347,825 Series I Preference Shares and 4,347,825 Series II Preference Shares. The Company also has outstanding 801,000 Common Share purchase warrants.

Peace Arch will hold an investor conference call on Thursday, July 17, 2008, at 9 am Eastern, to discuss the Company's financial performance for the third quarter ending May 31, 2008. Callers within the United States can access the conference call by calling (877) 407-9205; when prompted tell the operator you would like to connect to the "Peace Arch Entertainment conference call." International callers can dial (201) 689-8054.

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 1000 classic and contemporary titles. For additional information, please visit www.peacearch.com.

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.


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Peace Arch Entertainment Group Inc.
Consolidated Balance Sheet Highlights
Unaudited - Prepared by Management
-------------------------------------------------------------------------
(In thousands of Canadian dollars)
                                                  May 31       August 31
                                                    2008            2007

Assets                                           166,423         150,207
                                                --------       ---------
Liabilities                                      127,116         103,091
                                                --------       ---------
Shareholders' Equity                              39,307          47,116
                                                --------       ---------


Peace Arch Entertainment Group Inc.
Consolidated Statements of Earnings (Loss)
Unaudited - Prepared by Management
-------------------------------------------------------------------------
(In thousands of Canadian dollars, except per share amounts)

                                    Three Months Ended  Nine Months Ended
                                   May 31       May 31 May 31      May 31
                                     2008         2007   2008        2007
                                              Restated           Restated

Revenues
Motion Picture                      1,759        2,389  5,105      13,094
Television                          9,811       11,876 22,046      20,538
Home Entertainment                 11,978        4,488 34,346      16,727
                                  ---------------------------------------
                                   23,548       18,753 61,497      50,359
                                  ---------------------------------------
Expenses
Amortization of investment in
film and television programming,
and other production costs         11,008        9,562 23,675      24,849
Home entertainment direct costs     9,364        3,563 24,929      12,059
Selling, general and
administrative                      4,228        2,884 12,751       7,021
Bad debt expense                    2,162           70  2,280         147
Stock and warrant-based
compensation costs                    965          366  1,496         963
Other amortization                    362          140  1,072         463
                                  ---------------------------------------
                                   28,089       16,585 66,203      45,502
                                  ---------------------------------------

(Loss) earnings before the
undernoted                         (4,541)       2,168 (4,706)      4,857

Interest income                       286          408  1,024       1,075
Interest expense                   (1,114)      (1,384)(4,012)     (3,437)
Foreign exchange gain (loss)         (538)         861     20         196
Legal settlement                        -            -      -         957
Loss on settlement of obligations       -         (396)     -        (409)
                                  ---------------------------------------
(Loss) earnings before income
taxes                              (5,907)       1,657 (7,674)      3,239

Income tax expense                   (700)        (519)  (994)     (1,238)
                                  ---------------------------------------
(Loss) earnings for the period     (6,607)       1,138 (8,668)      2,001
                                  ---------------------------------------
Net (loss) earnings per common
share
Basic                               (0.14)        0.03  (0.18)       0.05
Diluted                             (0.14)        0.03  (0.18)       0.05
                                  ---------------------------------------

Peace Arch Entertainment Group Inc.
Consolidated Statements of Deficit
Unaudited - Prepared by Management
-------------------------------------------------------------------------
(In thousands of Canadian dollars)

                                    Three Months Ended  Nine Months Ended
                                   May 31       May 31 May 31      May 31
                                     2008         2007   2008        2007
                                              Restated           Restated

Deficit - beginning of period     (17,623)      (8,523)(15,309)    (9,182)

Adjustment for implementation of
new accounting standards               -            -      (67)        -
Preference share dividends           (105)        (111)   (291)      (315)
Net (loss) earnings for the
period                             (6,607)       1,138  (8,668)     2,001
                                  ---------------------------------------
Deficit - end of period           (24,335)      (7,496)(24,335)    (7,496)
                                  ---------------------------------------

Consolidated Statements of Comprehensive (loss) Income
Unaudited - Prepared by Management
-------------------------------------------------------------------------
(In thousands of Canadian dollars)

                                    Three Months Ended  Nine Months Ended
                                   May 31       May 31 May 31      May 31
                                     2008         2007   2008        2007
                                              Restated           Restated

Net (loss) earnings for the period (6,607)       1,138 (8,668)      2,001

Other comprehensive loss

Unrealized foreign currency
translation gains (losses) on net
assets of self-sustaining foreign
operations                            160            - (1,422)          -
                                   --------------------------------------

Comprehensive (loss) income for
the period                         (6,447)       1,138(10,090)      2,001
                                   --------------------------------------

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Contact Information

  • Contact:
    Roy Bodner
    Senior Vice President Marketing and Communications
    Peace Arch Entertainment
    310-776-7208
    Email Contact