Rainmaker Entertainment Inc.
TSX VENTURE : RNK

Rainmaker Entertainment Inc.

November 09, 2010 18:46 ET

Rainmaker Reports Results for the Three and Nine Months Ended September 30, 2010

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 9, 2010) - Rainmaker Entertainment Inc. (TSX:RNK) announces its results for the three and nine months ended September 30, 2010.

The results for the third quarter of 2010 showed a marked improvement over the same period in 2009 and show continued improvement on a quarterly basis compared to the first two quarters of 2010. Revenues have increased $1.7 million or 55% over the same period in 2009. The earnings before undernoted items improved to $0.6 million for the quarter, an improvement of $1.6 million for the same period in 2009. Net earnings also improved by $1.6 million resulting in net earnings for the quarter of $0.6 million and earnings per share of $0.04 per share compared to a loss of ($0.05) per share for the same period in 2009.

For the nine months ended September 30, 2010 revenue increased $4.5 million or 42% over the same period in 2009. Earnings before undernoted items improved $4.9 million to earnings of $1.7 million from a loss of $3.2 million for the same period in 2009. Net earnings have improved by $5.3 million over the nine month period compared to 2009 resulting in net earnings for the period of $0.1 million and earnings per share of $0.01 per share compared to a loss of $5.3 million and a loss of ($0.30) per share for the same period in 2009.

During the quarter, Rainmaker was in various stages of production on three DVD films for its client Mattel as well as beginning in production on a gaming cinematic project for Ubisoft. Rainmaker continued work on the feature film Escape from Planet Earth and is working with its client on a production plan to complete the film.

Rainmaker continues to develop its own proprietary properties with the goal of retaining ownership in them. The Company has retained the services of a financial advisor to assist in identifying and developing financing sources for these proprietary productions.

Selected Information

Below is selected information derived from the unaudited 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 figures              
  Three months ended September 30,   Nine months ended September 30,  
  2010   2009   2010   2009  
                         
Revenue $ 4,746   $ 3,070   $ 15,050   $ 10,580  
Expenses                        
    Operating   3,845     3,715     12,558     13,046  
    General and administration   299     334     828     740  
    4,144     4,049     13,386     13,786  
Earnings (loss) before undernoted items   602     (979 )   1,664     (3,206 )
    Depreciation and amortization   404     601     1,533     1,951  
    Amortization of intangible assets   128     222     596     631  
    Amortization of deferred gain on sale of business interests   (75 )   (74 )   (208 )   (223 )
    Equity investment earnings   (445 )   (339 )   (155 )   (45 )
    Foreign exchange gain   (63 )   (582 )   (94 )   (684 )
    Gain on sale to Base 10 Group Inc.   -     -     (290 )   -  
    Gain on sale of property, plant and equipment   -     -     (1 )   -  
    Interest expense   84     137     269     564  
    Stock-based compensation   21     30     58     62  
    Interest income   (9 )   (35 )   (37 )   (115 )
    45     (40 )   1,671     2,141  
Net earnings (loss) from continuing operations   557     (939 )   (7 )   (5,347 )
Gain on sale of discontinued operations   137     13     115     97  
Net earnings (loss) and comprehensive earnings (loss) for the period $ 694   $ (926 ) $ 108   $ (5,250 )
Earnings (loss) from continuing operations per share - basic and diluted $ 0.03   $ (0.05 ) $ 0.00   $ (0.31 )
Net earnings (loss) per share - basic and diluted $ 0.04   $ (0.05 ) $ 0.01   $ (0.30 )
       
Consolidated Balance Sheet Data      
  September 30,   December 31,
  2010   2009
Cash 1,289   2,800
Total assets 16,959   18,742
Total liabilities 11,116   13,065
Shareholder equity 5,843   5,677

Results of Operations

Three months ended September 30, 2010 compared to 2009

Revenue

Revenue increased $1.6 million to $4.7 million in 2010 from $3.1 million in 2009. The increase in revenue was due to increased production volumes in both the DVD division and on a feature film. There was also $0.3 million in revenue from licensing contracts of the Company's film library, compared to $0.04 million in 2009.

Operating and general and administration expenses

Operating expenses increased $0.1 million to $3.8 million in 2010 from $3.7 million in 2009. Operating expenses increased by $0.3 million due to increased production volumes but was offset by $0.2 million as a result of increased tax credit incentives enacted by the BC Government in March 2010.

General and administration expenses for both 2010 and 2009 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 2010 to $0.4 million as compared to $0.6 million in 2009 due to decreased capital expenditures for 2010 and 2009.

Amortization of intangible assets

Amortization of intangible assets decreased $0.1 million in 2010 to $0.1 million from $0.2 million in 2009. This decrease was due to decreased software purchases for 2010 and 2009.

Interest expense

Interest expense for both 2010 and 2009 was $0.1 million.

Foreign exchange gain

There was a decrease in the foreign exchange gain of $0.5 million to $0.1 million in 2010 from a $0.6 million gain in 2009. Included in the 2010 exchange gain is a $0.03 million unrealized gain from the revaluation of a derivative contract that expires December 31, 2010.

Equity earnings

Rainmaker's 30% interest in Base 10 Group Inc. is reported on an equity basis. The equity earnings increased $0.1 million in 2010 to $0.4 from $0.3 million in 2009.

Earnings from continuing operations

Earnings from continuing operations increased $1.5 million in 2010 to $0.6 million from a loss of $0.9 million in 2009. The increase was the result of increased production volumes in the DVD division and on the feature film as well increased tax credit subsidies.

Gain on sale of discontinued operations

The gain on sale of discontinued operations for 2010 was $0.1 million as compared to $0.01 million in 2009. This gain represents the use of service credits from Deluxe more fully described in Note 4 of the accompanying financial statements.

Net earnings for the period

The net earnings for 2010 increased $1.6 million to $0.7 million from a loss of $0.9 million in 2009.

Nine months ended September 30, 2010 compared to 2009

Revenue

Revenue increased $4.5 million to $15.1 million in 2010 from $10.6 million in 2009. The increase in revenue was due to increased production volumes in both the DVD division and on the feature film. There was also $0.3 million in revenue from licensing contracts of the Company's film library, compared $0.05 million in 2009.

Operating and general and administration expenses

Operating expenses decreased $0.4 million to $12.6 million in 2010 from $13.0 million in 2009. Operating expenses increased by $0.1 million due to increased production volumes but was offset by $0.3 million as a result of increased tax credit incentives enacted by the BC Government in March 2010.

General and administration expenses increased $0.1 million in 2010 to $0.8 from $0.7 million in 2009, due to increased legal costs in 2010.

Depreciation and amortization of property, plant and equipment

Depreciation and amortization of property, plant and equipment decreased $0.5 million in 2010 to $1.5 million as compared to $2.0 million in 2009.

Amortization of intangible assets

Amortization of intangible assets for both 2010 and 2009 was $0.6 million.

Interest expense

Interest expense decreased $0.3 million in 2010 to $0.3 million from $0.6 million in 2009. The interest on long-term debt decreased $0.2 million as the outstanding debentures were paid off in August 2009.

Foreign exchange gain

There was a decrease in the foreign exchange gain of $0.6 million to $0.1 million in 2010 from $0.7 million in 2009. Included in the 2010 exchange gain is a $0.03 million unrealized gain from the revaluation of a derivative contract that expires December 31, 2010.

Equity Gain

Rainmaker's 30% interest in Base 10 Group Inc. is reported on an equity basis. The equity gain increased $0.15 million to $0.2 million in 2010 from $0.05 in 2009.

Gain on sale to Base 10 Group Inc.

There was a $0.3 million gain on sale to Base 10 Group Inc. as certain revenue targets were met resulting in an earn-out for Rainmaker. Details of this earn-out are more fully described in Note 5 of the accompanying financial statements.

Loss from continuing operations

The loss from continuing operations decreased $5.3 million in 2010 to $0.007 million from $5.3 million in 2009. The decrease was due to increased production volumes and decreased operating expenses.

Gain on sale of discontinued operations

The gain on sale of discontinued operations was $0.1 million for both 2010 and 2009. The gain for 2010 represents the use of service credits netted against a loss of $0.03 million. This loss was the result of expenses relating to a provision in the sale contract and a claim with respect to environmental contamination on a site where a predecessor Company formerly leased operating space. This claim is more fully described in Note 12(b) of the accompanying financial statements. The gain in 2009 represents the use of service credits more fully described in Note 4 of the accompanying financial statements.

Net earnings for the period

The net earnings for 2010 increased $5.4 million to $0.1 million from a loss of $5.3 million in 2009.

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.

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