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TV boosts Lions Gate quarterly earnings

Profit tops expectations. TV production revenue grew 112%, credited to new episodes of 'Weeds,' 'Nurse Jackie,' 'Tyler Perry's House of Payne,' 'Meet the Browns' and 'South Park.'

August 11, 2009|Claudia Eller

Lions Gate Entertainment Corp., boosted by stronger TV revenue and contributions from its recent acquisition of the TV Guide Network and its website, posted better-than-expected earnings results, with net income and revenue rising substantially over last year.

For the fiscal quarter that ended June 30, the Santa Monica movie and TV studio said net income jumped to $36.3 million, or 31 cents a share, compared with $3.5 million, or 3 cents, for the year-earlier period. Analysts had forecast a net loss of 5 cents a share, according to Thomson Reuters.

Investors appeared to welcome the news: Lions Gate shares, off about 40% in the last year, were up as much as 15% in after-hours trading.

Lions Gate, best known as the producer of the Tyler Perry movies and the cable TV series "Weeds" and "Mad Men," saw revenue rise 30% to $387.7 million, including $27.8 million from the first full-quarter results from TV Guide Network and TVGuide.com. Lions Gate owns 51% of TV Guide properties, having sold 49% this year to One Equity Partners.

Overall motion picture group revenue of $272.7 million was up 6% compared with $257.4 in the same quarter last year. The increase is mostly attributable to a strong performance by Lions Gate-owned Mandate Pictures, the production company behind the Fox Searchlight blockbuster "Juno" and Universal Pictures' recent "Drag Me to Hell."

However, Lions Gate's own theatrical revenue fell 26%. The studio released only one movie in the quarter: the action thriller "Crank: High Voltage," which grossed a disappointing $13.7 million in the U.S.

Lions Gate's home entertainment revenue was $151 million in the quarter, a 6% decline from a year earlier. "Madea Goes to Jail," "My Bloody Valentine 3-D," "New in Town," "The Spirit" and "Transporter 3" could not compete with "exceptional revenue" from last year's "Rambo" and with the western "3:10 to Yuma" and other titles.

The quarter was far and away driven by strong results in Lions Gate's TV division. TV production revenue increased to $87.2 million, up 112% from $41.1 million in the same period last year, credited to the delivery of new episodes of the cable series "Weeds"; "Nurse Jackie"; "Tyler Perry's House of Payne" and its spinoff "Meet the Browns"; and "South Park."

This is Lions Gate's first upbeat quarter in the last year. Activist shareholder Carl Icahn had been highly critical of management, accusing it of overspending as the company racked up losses and its stock tumbled.

Icahn, who recently increased his stake in the company to 17.7%, has been uncharacteristically quiet lately and has not tipped his hand about whether he will launch a proxy contest as he had threatened.

The clock is ticking for Icahn to put up his own slate of directors -- Lions Gate's annual shareholders meeting in mid-September is fast approaching.

In a defensive measure, last month Lions Gate nominated its largest shareholder, Mark Rachesky, to its 12-member board. Rachesky, a former associate of Icahn's who owns 19.8% of Lions Gate's common stock, has said he would support management's board nominees at the shareholders meeting.

Lions Gate has been attempting to shore up its balance sheet, promising to slash some $200 million of its production and marketing expenses. This summer the company sold 49% of the TV Guide cable channel for $123 million. Lions Gate recently announced that it had acquired the right to broadcast episodes of "Ugly Betty" -- the first scripted series to be aired on the TV Guide channel.

In recent weeks, the studio's popular cable shows "Mad Men" and "Weeds" earned a total of 22 Emmy nominations, and TBS ordered dozens of new episodes of "Tyler Perry's House of Payne" and "Meet the Browns."

Last week, Lions Gate also announced the launch of two new branded channels in Asia, the action channel KIX and the horror and suspense channel Thrill.

--

claudia.eller@latimes.com

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