Image narrows loss in Q3; plans for future

By Susanne Ault -- Video Business, 2/14/2008

FEB. 14 | Image Entertainment reported red ink for its third-quarter fiscal 2008, but the DVD supplier believes it will soon return to growth as it puts its failed merger with BTP Acquisition Co. behind it.

For the three months ended Dec. 31, Image recorded a net loss of $2.1 million, slimmed down from the $3.5 million net loss it incurred for the comparable period during the 2007 fiscal year. Total revenue climbed 12.2% to $27.3 million.

On a Thursday conference call with analysts, Image management downplayed its financial troubles by attributing losses to inescapable expenses, including $228,000 relating to its BTP merger. Following breach of contract accusations by both sides, Image’s planned purchase by BTP was called off earlier this month.

Other unavoidable expenses were pinned on Image’s ongoing restructuring efforts, including a $170,000 charge for terminating its Nevada distribution facility lease.

Image chief financial officer Jeff Framer acknowledged the company’s problematic $1.21 share price, sharply off its $4 share valuation in previous months. But as Image works to regain its footing as an independent supplier, including strengthened investment in star-driven feature film acquisitions, the company will improve its industry profile, promised Framer. On Image’s 2008 release slate are such titles as Suburban Girl with Sarah Michelle Gellar, Numb with Matthew Perry and In the Color of Freedom with Joseph Fiennes.

“People came out of our stock as they saw the merger faltering, and that’s why the share price is lower than it should be,” said Framer. “But we think we are better positioned than we have been in quite some time.”

Image hopes these films will help it break into the rental market and create a new revenue stream. Historically, Image has been best known as a non-feature sell-through specialist of such genres as stand-up comedy.

Additionally, Image recently succeeded in securing an interim distribution deal for several ThinkFilm titles, which have been the subject of a dispute with BTP affiliate CTI Holdings. The titles include Ethan Hawke’s Before the Devil Knows You’re Dead, Winona Ryder’s The Last Word, Al Pacino’s The Air I Breathe and space travel documentary In the Shadow of the Moon.

“Our senior management has embarked on a path that will bring Image back to prosperity,” said Image CEO Marty Greenwald. “We have a greater focus on the acquisition of programming to the rental customer. We are becoming an important supplier to retail, so we will expand market share in the coming quarter.”

The company is planning a formal presentation for analysts and investors to re-stress its viability. It has now suffered through two back-to-back collapsed corporate alliances, with BTP and Lionsgate.

Greenwald said that Image will continue to explore strategic alternatives.

“The company spent an extraordinary amount of time with BTP and the acquisition process,” said Greenwald. “The test before us now is forecasting the company’s future. During these trying times, Image has quietly been building a stronger acquisition [division] and we are committed to expanding our product mix.”