Rainmaker Entertainment Inc.
TSX VENTURE : RNK

Rainmaker Entertainment Inc.

May 14, 2009 21:00 ET

Rainmaker Reports Results for the Three Months Ended March 31, 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 14, 2009) - Rainmaker Entertainment Inc. (TSX:RNK) announces its results for the three months ended March 31, 2009.

"The first quarter of 2009 was a difficult one for Rainmaker," said Warren Franklin, Chief Executive Officer of Rainmaker Entertainment Inc. "External production delays on the animated feature film, "Escape from Planet Earth" caused both revenue and net income to be below expected levels. This delay represented a 31% decrease in animation revenues over the same period in 2008. The Client has tentatively indicated a new delivery date for the film of late fall 2010. We have implemented a revised production schedule that will see production increase over the summer to full production in the fall of this year. Other factors affecting the first quarter results were significant non-recurring severance amounts paid to former employees. The next three quarters will continue to be challenging but we expect our results to steadily improve over the coming year as production volumes increase."

Rainmaker is also pleased to announce that veteran animation producer and creative executive, Catherine Winder will be joining the Rainmaker team as President reporting to Mr. Franklin. Catherine was most recently at Lucasfilm Animation where she set-up the studio and produced the Cartoon Network series Star Wars: The Clone Wars, as well as the animated feature version which was released by Warner Bros. last summer. Over her distinguished career in animation, Catherine has worked in feature films, home video and television, in addition to running her own industry consulting business. She was Senior Vice President of Production at Fox Feature Animation, where she oversaw the production of the Oscar-nominated hit Ice Age. Winder has produced such series as Spawn and Spicy City for HBO and Aeon Flux for MTV. She began her animation career in Asia, working for Walt Disney Television Japan, followed by positions at Hanna-Barbera/Turner Pictures in both Taiwan and Los Angeles. Winder also co-authored Producing Animation which is used as a reference text in animation schools.

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 ending
March 31, March 31,
2009 2008
---------- -----------
Note 1
Revenue
Rainmaker Entertainment - Animation 3,929 7,240
EP Canada - Payroll processing (Note 1) - 1,104
Canada Film Capital - Tax credit services (Note 1) - 511
--------------------------------------------------------------------------

3,929 8,855
--------------------------------------------------------------------------

Expenses
Operating 4,960 7,464
General and administration 243 563
--------------------------------------------------------------------------

5,203 8,027
--------------------------------------------------------------------------

EBITDA (Note 2) (1,274) 828
--------------------------------------------------------------------------

Depreciation and amortization (Note 5) 684 882
Amortization of intangible assets (Note 5) 196 460
Amortization of deferred gain on
sale of business interests (74) -
Gain on settlement of accounts payable - (311)
Interest expense 216 204
Foreign exchange loss (Note 4) 121 28
Equity investment loss 375 -
Other (income) expense (28) (62)
--------------------------------------------------------------------------

1,490 1,201
--------------------------------------------------------------------------

Loss before non-controlling interest
and discontinued operations (2,764) (373)
Non-controlling interest - (59)
--------------------------------------------------------------------------

Net loss from continuing operations (2,764) (432)

Gain on sale of discontinued operations (Note 3) 25 7,628
Earnings (loss) from discontinued operations - -
--------------------------------------------------------------------------
Net earnings (loss) and comprehensive
income (loss) for the year (2,739) 7,196
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Loss from continuing operations per unit/share
- basic and diluted ($0.16) ($0.03)
Net (loss) earnings per share/unit - basic ($0.16) $ 0.42
Net (loss) earnings per share/unit - diluted ($0.16) $ 0.41
--------------------------------------------------------------------------
--------------------------------------------------------------------------

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

March 31, December 31,
2009 2008
---------- -----------

Cash 12,041 6,886
Total assets 30,830 35,266
Total debt 7,100 6,997
Total liabilities 23,056 24,780
Shareholder equity 7,774 10,486
--------------------------------------------------------------------------


Results of Operations

Three months ended March 31, 2009 compared to 2008

Revenue

Revenue decreased $4.9 million to $3.9 million in 2009 from $8.8 million in 2008. Rainmaker Animation reported a decrease in revenue of $3.3 million to $3.9 million in 2008 from $7.2 million in 2008. The decrease in revenue was due to fewer projects in the DVD division and production delays on a feature film.

As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008 there was no revenue reported from either of these divisions in 2009. Rainmaker's 30% interest in 7028831 Canada Inc. is reported on an equity basis. For 2008 EP Canada and Canada Film Capital reported revenues of $1.1 million and $0.5 million, respectively.

Operating and general and administration expenses

Operating expenses decreased $2.5 million to $5.0 million in 2009 from $7.5 million in 2008. Rainmaker Animation had a decrease of $0.7 million to $4.7 million from $5.4 million in 2008. The decrease in expenses was the result of lower revenues offset by higher operating costs as a result of production delays and a one time severance cost to a former executive of $0.5 million. Operating expenses which do not relate directly to the operating segments were similar to 2008 at $0.2 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 operating expenses reported from either of these divisions in 2009. For 2008 EP Canada and Canada Film Capital reported operating expenses $1.5 million and $0.3 million, respectively.

General and administration expenses decreased $0.3 million to $0.2 million in 2009 from $0.5 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 $0.2 million in 2009 to $0.7 million as compared to $0.9 million in 2008. Rainmaker Animation had an increase of $0.1 million to $0.7 million from $0.6 million in 2008. The increase is attributable to the acquisition of additional equipment and infrastructure in 2008.

EP Canada and Canada Film Capital reported depreciation expenses of $0.3 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 for both 2009 and 2008 was $0.2 million. While the interest on long-term debt and bank indebtedness decreased $0.04 million, interest on capital lease obligations increased by a corresponding amount.

Foreign Exchange Loss

There was an increase in the foreign exchange loss of $0.1 million to $0.1 million in 2009 from $0.0 million in 2008. The 2009 exchange loss is due to a $1.0 million unrealized loss from the write-down of derivative contracts that expire later in 2009.

Equity Loss

Rainmaker's 30% interest in 7028831 Canada Inc. is reported on an equity basis. For 2009 Rainmaker reported an equity loss of $0.4 million from its investment in 7028831 Canada Inc.

Earnings (Loss) from continuing operations

The loss from continuing operations increased $2.4 million in 2009 to $2.8 million from $0.4 million in 2008. The loss from Rainmaker Animation increased $3.1 million to $2.0 million in 2009 from earnings of $1.1 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 $1.0 million and Canada Film Capital reported earnings of $0.1 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 $9.9 million for a loss of $2.7 million from earnings of $7.2 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