Lions Gate Entertainment Corporation (LGF) recently delivered lower-than-expected first quarter 2011 results, hurt by the fall in the top line and rise in theatrical marketing costs.
The company delivered a quarterly loss of 54 cents a share, reflecting a sharp drop from the earnings of 25 cents posted in the prior-year quarter. The year-ago quarter excludes a gain on extinguishment of debt. Analysts surveyed by Zacks had expected Lions Gate to earn 3 cents a share.
Total revenue for the quarter tumbled 14% to $326.6 million from the prior-year quarter, reflecting a fall in Mandate Pictures and Home Entertainment revenues, non-inclusion of TV Guide Network revenues and the timing of deliveries of the television programming. Total revenue also missed the Zacks Consensus Revenue Estimate of $404 million.
Lions Gate delivered an adjusted EBITDA loss of $13.7 million for the quarter compared with an EBITDA of $53.4 million in the year-ago quarter. By segment, Motion Pictures revenues of $272.7 million remained flat compared with the prior-year quarter. Within Motion Pictures, revenues declined across Home Entertainment (down 21% to $111.3 million) and Mandate Pictures (down 75% to $13.3 million). However, the decrease was offset by gains in Theatrical (up 214% to $71.3 million), Television (up 46% to $30 million), International (up 66% to $29.1 million), and Lions Gate UK (up 9% to $16.3 million).
Television Production revenues dipped 38% to $53.9 million, reflecting a 37% decline in domestic series licensing revenues to $40.2 million due to a fall in the number of episodes delivered. Home entertainment revenues from television production slipped 41% to $5.8 million. Lions Gate hinted that revenues from Television Production for fiscal 2011 are expected to surpass $351 million generated in fiscal 2010.
Lions Gate ended the quarter with cash and cash equivalents of $78.6 million with film obligations and production loans of $285.7 million, and shareholders’ equity deficit of $1.6 million, primarily on account of a accumulated deficit of $524.7 million. Although the company generated negative free cash flows of $113.2 million in the quarter, but it improved substantially from negative free cash flows of $141 million reported in the previous year.
Lions Gate is a film studio, which produces and distributes motion pictures for theater and straight-to-video release, and television programming for the cable and broadcast networks. The company has a strong track record of producing small and mid-budget specialty films.
However, the company is currently the subject of a hostile takeover bid from billionaire investor Carl Icahn, who has a stake of 33.5% in Lions Gate. The investor’s renewed attempt to acquire the remaining shares of the company for $6.50 per share, 50 cents less than his previous offer of $7.00 was unanimously rejected by the company’s board.
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