Image Entertainment Q4 loss widens

Company expects 2009 profitability on direct-to-DVD movies

By Danny King -- Video Business, 6/26/2008

JUNE 26 | Image Entertainment’s fiscal fourth-quarter earnings loss quadrupled as the supplier took a write-down on a reduced forecast for sales from its catalog-film inventory because of limited shelf space provided by retailers.

The shares rose in extended trading after the company, which terminated an acquisition bid from BTP Acquisition Co. in February, said its turnaround would include a profitable current fiscal year on its own direct-to-DVD titles.

The company’s net loss for the three months ended March 31 widened to $14.7 million, or 68¢ a share, from $3.05 million, or 10¢, a year earlier, the company said today. Revenue fell 14% to $26 million as titles such as The Last Emperor and Suburban Girl failed to keep pace with year-earlier DVDs.

Image took a $10.4 million charge to amortize for declining sales expectations of its 3,500 catalog titles. The company said it will reach profitability for the fiscal year ending March 31, 2009, on as much as a 30% jump in revenue from such movies as the Andy Garcia-starring The Air That I Breathe and Helen Hunt’s Then She Found Me.

“As a non-hit distributor, we are subject to shelf-space constraints more than other companies,” Image chief financial officer Jeff Framer said on a conference call today. “It was a very tough fiscal 2008 that was full of distractions.”

The company said in April that it would start releasing as many as five direct-to-DVD titles a month, and that its film acquisitions drive would boost fiscal 2009 sales by $30 million. Image also said that its digital delivery business for fiscal 2009 would jump more than 80% to $1.8 million.

CEO David Borshell said today that the company this week settled a lawsuit with BTP, whose merger agreement with Image that commenced last July was terminated in February. Last March, Image agreed to be acquired by BTP for $132 million after rebuffing a hostile takeover attempt by Lionsgate in 2006.

Image also said today that it boosted its credit line from Wachovia to $20 million from $15 million.