Year end results
Rainmaker Digital Pictures Corp
RNK
Shares issued 10311373
1998-03-18 close $4.8
Thursday Mar 19 1998
Mr Bob Cabral reports
Consolidated revenue for the 1997 fiscal year was $24.3 million, an increase of
50% over prior year revenue of $16.1 million, which resulted in earnings before
interest, taxes, depreciation, and amortization increasing $2.1 million to $8.0
million, or a gain of 35% from $5.9 million in 1996. Earnings before income taxes,
excluding unusual items for 1997 were $4.2 million, as compared to $3.1 million in
1996, or an increase of 35%. After unusual charges of $2.1 million, the company's
net earnings in 1997 were $632,000, a decrease of $1.4 million over the same
period last year. As a result, basic earnings per share were $0.06, down from
$0.22 per share for the same period in 1996.
Review of Operations
The results of operations for the year ended December 31 1997 include $2.1
million in unusual charges, of which $1.8 million were adjustments and writeoffs
relating to the fourth quarter. The significant items include the writeoffs of the
development costs associated with the LIVE software engine of $681,000 the
expensing of the start up costs for the company's Digital Video Disc business of
$699,000, the writeoff of advances for equipment under development of
$171,000 and the writeoff of start up costs associated with the company's MPEG
1 compression business of $107,000. In the fourth quarter, the company engaged
a consultant to either sell or licence LIVE. While there was interest in the product,
the company was unable to secure an arrangement to produce revenue. As a
result, management felt that there was some uncertainty as to the recoverability of
the costs and the writedown was taken. During the second and third quarters, the
company was developing its DVD business to the point that it is now ready for
commercial production. Start up costs of $495,000 were deferred in the accounts
to September 30 1997. The company expected that the commercial market for
DVD would be fully developed by the fourth quarter, however, it is only now that
the market appears to be developing. The company believes that it is well
positioned for this emerging market, however, there is uncertainty regarding the
recoverability of the start-up costs. As a result, all DVD costs have been fully
expensed.
Rainmaker's Vancouver and Los Angeles-based digital visual effects divisions
experienced the strongest growth of all of the divisions. Of the company's $8.1
million increase in 1997 revenue, $7 million (or 86% of the total increase) was
generated from the Vancouver and Los Angeles effects operations. The Los
Angeles division moved into a newly re-fit 14,000 square foot facility during the
fourth quarter of 1997, and acquired $2.5 million in operating equipment in 1997.
There was an unanticipated disruption of operations for the Los Angeles facility
during the fourth quarter as the move into the new facility took longer than
expected. The company's revenue growth in 1997 is a result of the successful
sales and marketing of the company's digital visual effects services in Vancouver,
as well as the incremental revenue generated from the Los Angeles digital visual
effects facility.
The company's new media division generated $1.25 million in revenue in 1997,
which is an increase of $700,000 over last year's revenue of $546,000. The
company's DVD digital compression operations in Los Angeles and Vancouver
completed work on numerous projects during the year, as well as a number of
MPEG 1 projects for a video on demand client during the first six months of
1997. The new media division's work includes the compressing, encoding, and
authoring of content for DVD distribution, as well as MPEG 1 low bit-rate
encoding for the Internet and MPEG encoding for VOD. The company will focus
on maximizing the return on its investment in existing new media markets, while
simultaneously exploring numerous developing markets for new media
opportunities.
The digital post and transfer division generated $10.3 million in revenue in 1997,
an increase of about 5% compared to the same period last year. In anticipation of
growing demand on the Post division's equipment, two new Ursa-Gold telecine
machines were added during 1997, while one older telecine machine was retired
out of service. The film lab division generated $3.2 million in revenue in 1997, or
an increase of 1% over prior year. A new film processor was added to the film lab
during 1997 to make operations more efficient and increase the film lab's capacity.
Highlights from the company's balance sheet at the end of 1997 as compared to
1996 include: an increase in working capital of 30% to $9.7 million, cash of $11.7
million, total assets increased 45% to $37.3 million, capital assets increased of
45% to $19.7 million, and net book value per share increased 20% to $1.82.
STATEMENT OF EARNINGS
Year ended December 31
($ 000s)
1997 1996
Revenue $24,286 $16,100
Expenses
Amortization of
deferred costs 394 274
Depreciation and
amortization 3,663 2,154
General and
administrative 1,753 1,382
Interest 899 404
Operating 13,398 8,758
------- -------
Earnings Before
Unusual Items
and taxes 4,179 3,128
Unusual Items 2,121 -
------- -------
Earnings before
taxes 2,058 3,128
Taxes 1,425 1,088
------- -------
Earnings after
taxes 632 2,040
======= =======
Earnings per share $0.06 $0.22
(c) Copyright 1997 Canjex Publishing Ltd. canada-stockwatch.com
old url (better for printing) |
