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Television delivers strong quarter for Lions Gate

August 10, 2009 |  3:42 pm

Lions Gate Entertainment posted better-than-expected results for the fiscal first quarter: Revenue grew 30%, thanks in large part to gains from television production and first full-quarter revenue from its recent TV Guide Network and TVGuide.com acquisition.

Lionsgatelogo For the quarter ended June 30, Lions Gate reported revenue of $387.7 million and net income of $36.3 million, or 31 cents a share, up from net income of $3.5 million, or three cents, for the same quarter last year. Analysts had forecast a loss of five cents a share, according to Thompson/First Call.

Investors welcomed the news: Lions Gate shares were up as much as 11% in after-hours trading.

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

However, Lions Gate's own theatrical revenue fell by 26% as the studio released only one movie in the quarter: "Crank: High Voltage." The action thriller 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 last year. Titles "Madea Goes To Jail," "My Bloody Valentine 3-D," "New in Town," "The Spirit" and "Transporter 3"  could not compete with "exceptional revenue" from the 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."

Lions Gate also realized $27.8 million in new revenue from its recently acquired assets TV Guide Network and TVGuide.com.

This is Lions Gate's first upbeat quarter in the last year, during which activist shareholder Carl Icahn has been highly critical of management for overspending as the company racked up losses and its stock continued to tumble.

Icahn, who recently increased his stake in the independent studio to 17.7%, has been uncharacteristically quiet lately and has not tipped his hand about whether he plans to 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.

Meanwhile, as a defensive measure against Icahn, 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 the company's common stock, has said he would support management's board nominees at the shareholders meeting.

Lions Gate's other "friendly" major shareholders include Michael Steinberg, whose Steinberg Asset Management owns 14.6%, and Gordon Crawford, whose Capital Research Global Investors holds about 9.5%.

Lions Gate has been attempting to shore up its balance sheet, promising to slash some $200 million out of its production and marketing expenses. Earlier 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 horror and suspense channel Thrill.

-- Claudia Eller

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