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Lions Gate posts $22.7-million loss, but its outlook is bright

The studio has yet to report the bulk of its revenue from the blockbuster 'The Hunger Games' and will release the next installment in the 'Twilight' series in November.

May 31, 2012|Los Angeles Times

Any Hollywood studio would kill to release "The Hunger Games" in theaters and the fourth "Twilight" movie on DVD within two months of each other, but doing so hurt Lions Gate Entertainment Corp.'s bottom line in the short run.

The Santa Monica studio on Wednesday disappointed Wall Street as it reported a net loss of $22.7 million, or 17 cents a share, on $645.2 million in revenue during the quarter that ended March 31.

The reason: $51 million in expenses related to its purchase of "Twilight" studio Summit Entertainment, as well as $53 million in costs to launch the blockbuster hit "The Hunger Games" at the end of the quarter.

Lions Gate shares fell 7% in after-hours trading Wednesday because the results were far below analysts' estimates. They had on average expected net income of 25 cents per share.

Lions Gate has yet to report most of the revenue and profit from "Hunger Games," which was released March 23 and went on to $396 million in domestic ticket sales. But it had to immediately account for the costs of advertisements and thousands of film prints.

In a statement, the company's chief executive, Jon Feltheimer, portrayed results from its fiscal fourth quarter as a temporary blip on the way to longer-term success from its teen movie franchises.

"With substantially all of the profitability of the first 'Hunger Games' film and this November's release of 'The Twilight Saga: Breaking Dawn — Part 2' still ahead of us, we have great visibility and have set the stage for anticipated strong [earnings before interest, taxes, depreciation and amortization], free cash flow and earnings in the year ahead," Feltheimer said.

Lions Gate's quarterly revenue grew 71% from a year earlier to $645.2 million. That was in large part the result of initial box office revenue from "The Hunger Games," which has generated $643 million in theaters worldwide, and home entertainment proceeds from "The Twilight Saga: Breaking Dawn — Part 1" which was released on DVD and digital platforms Feb. 11 and has since sold about 8 million copies.

But each came with their drawbacks. In addition to the "Hunger Games" marketing expenses, Lions Gate took a $26-million hit on the initial profitability of the "Twilight" DVD because of accounting related to its purchase of Summit during the same quarter. It paid $412.5 million for Summit, also based in Santa Monica, in January.

In addition, Lions Gate reported a $12-million charge for transaction and severance costs — it laid off about 80 people after the Summit acquisition — and $13 million in increased costs from stock-based compensation as its share price grew 67% from the beginning of the quarter to the end.

For the full fiscal year, Lions Gate revenue was virtually flat at $1.59 billion and its net loss grew to $39.1 million from $30.4 million the previous fiscal year.

ben.fritz@latimes.com

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