M8 Entertainment Inc. (TSX: MEE.MV.A and MEE.SV.B), a leading film entertainment company engaged in the production, financing, acquisition, and worldwide licensing of theatrical feature films in a variety of genres, reported today financial results of operations for the fiscal year ended December 31, 2005. Due to a change in year-end, the fiscal year was comprised of five quarters beginning October 1, 2004.
For the fiscal year ended December 31, 2005, net loss was $17.4 million, as compared to net earnings of $3.0 million for the fiscal year ended September 30, 2004. Loss before income taxes was $17.1 million for the year ended December 31, 2005, as compared to earnings of $138,000 for the preceding fiscal year.
Operating revenue decreased to $34.1 million for the fiscal year ended December 31, 2005 as compared to $45.1 million for the preceding fiscal year.
"The net loss reported by the Corporation resulted primarily from writedowns of estimated proceeds from films produced in the previous two fiscal years," stated Devin Cutler, Vice President of Finance and Controller. "A number of these films were expected to be released theatrically in the domestic marketplace, but ended up being released directly to video."
"In addition," Mr. Cutler continued, "a change in the Corporation's revenue recognition policies adopted for the current fiscal year has resulted in revenue for several of our newer films being delayed until the subsequent fiscal year."
Total assets of the Corporation decreased from $104.8 million as of September 30, 2004 to $58.5 million as of December 31, 2005. Likewise, total liabilities of the Corporation decreased from $68.2 million as of September 30, 2004 to $41.7 million as of December 31, 2005.
"The decrease in the assets of the Corporation are a result of the financial recognition of several films during the fiscal year, as well as a writedown of films to net realizable value," continued Mr. Cutler. "This has resulted in a significant decrease in capitalized film costs. In addition, the Corporation has focused on reducing its contractual obligations to participants and co-producers and to paying off its production loans, resulting in a decrease in liabilities."
Shareholder's Equity decreased from $36.6 million as at September 30, 2004 to $16.8 million as at December 31, 2005. However, Shareholder's Equity would have been $2.4 million higher if the effects of exchange rate fluctuations between the US Dollar, which is the primary functional currency of the Corporation's continuing business operations, and the Canadian Dollar, which is the reporting currency for the Corporation's consolidated financial statements, were removed. During fiscal 2005, the US Dollar fell by nearly 8% against the Canadian Dollar, resulting in a cumulative currency translation adjustment, which reduced 2005 Shareholders' Equity by a total of $9.2 million.
"While the loss for the year is unfortunate, we remain quite upbeat about the future of the Corporation," stated Sammy Lee, Chairman of the Corporation. "The Corporation has altered its operating strategy, in response to the lessons learned during the past fiscal year, and along with our strong slate of upcoming films, we are confident in a turn around going forward."
"Whereas, in the past, the Corporation would often wait to license certain major territories, including North America, until after each film was completed, we now have closer domestic distribution partners and are more likely to secure a domestic distributor before a film goes into production," stated Jenna Sanz-Agero, President. "In this way, we can increase our chances that the Corporation's films receive a wide theatrical release by a major US distributor, which will result in increased revenues and profits. In addition, we intend to step up our acquisition of films produced by third parties. These acquisitions will bolster the Corporation's cash flow and revenue streams without the need to put significant amounts of its own capital at risk."
This press release contains forward-looking statements. These statements are forward-looking as they are based on our current expectations about our business and the markets we operate in, and on various estimates and assumptions. Such statements include words such as "anticipate", "believe", "plan", "estimate", "expect", "intend", "will", "should", "may", and other similar expressions. Our actual results could materially differ from our expectations if known or unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. Some factors that could cause actual results to differ materially from those set forth in the forward- looking statements are: audience acceptance of our filmed entertainment, actions of our competitors, cost of production financing, the loss of key personnel, and our relationship with filmed entertainment content suppliers and distributors. Other risks and factors that could cause actual results to differ are described in Management's Discussion and Analysis ("MD&A") for the periods ended December 31, 2005 under the headings "Risk and Uncertainties". The company undertakes no obligation to publicly update or revise any forward- looking statements or information, whether as a result of new information, future events or otherwise. |
