UPDATE 2-Lionsgate 4th quarter results hit by costs

Wed May 30, 2012 6:49pm EDT

* Studio posts net loss of 17 cents per share

* Revenue rose to $645 million from $377 million year prior

* Shares down 6 percent after hours

By Malathi Nayak and Ronald Grover

SAN FRANCISCO/LOS ANGELES, May 30 (Reuters) - Lionsgate Entertainment Corp swallowed hefty quarterly costs linked to marketing its 2013 films and buying studio Summit Entertainment, resulting in a huge earnings miss and sending its stock price down 6 percent in after-hours trading on Wednesday.

The studio reported a net loss of $22.7 million, or 17 cents per diluted share, in its fiscal fourth quarter compared with a profit of $48.7 million, or 34 cents per diluted share, a year before.

Analysts were expecting Lionsgate to earn 26 cents per diluted share in the quarter, according to Thomson-Reuters I/B/E/S.

Lionsgate shares fell to $12.05 in after hours trading on Wednesday after closing the regular session on the New York Stock Exchange at $12.85.

"It looks like the company recognized less 'Hunger Games' profit than I was expecting," said Evercore Partners analyst Alan Gould, referring to the hit movie.

However, Gould added that he thinks the after market decline was "overdone and a reaction to headline numbers without enough detail to fully understand the quarter."

The quarter was not all negative for Lionsgate, with the studio growing its top-line results.

Revenue for the fourth-quarter rose to $645.2 million from an adjusted revenue of $376.92 million a year earlier. That was in line with Wall Street's expectations of $643.1 million, according to Thomson-Reuters I/B/E/S.

'The Hunger Games' was released on March 23 and has grossed $396 million domestically and $643 million worldwide. But only one week of the film's box office gross was factored into the studio's fourth quarter results, with the remainder going towards the current quarter. All of the costs associated with marketing the movie, which are estimated at more than $50 million, were absorbed during the fourth quarter.

The marketing costs for 'The Hunger Games,' combined with charges related to Lions Gate's January acquisition of Summit Entertainment for $412.5 million are chiefly responsible for the studio's large fourth quarter earnings loss.

Lions Gate racked up $51 million in charges related to the Summit deal, broken out into $38 million in costs and another $13 million in increased stock appreciation rights. Taken together, the total equates to a charge of just under 37 cents per share.

As a result of the Summit deal, Lions Gate will inherit the final installment in the 'Twilight' vampire movie franchise, which is slated for release in November. A 'Hunger Games' sequel is due a year later, in November 2013.

Prior to the blockbuster success of the two films, Lions Gate was primarily known for small budget horror films such as the "Saw" franchise, as well as Oscar winners 'Precious' and 'The Hurt Locker.' The studio also serves as the home for the films of comedian Tyler Perry.

In recent years, Lions Gate has also built a thriving television production operation. 'Mad Men,' 'Weeds' and 'Nurse Jackie' are among the television shows it is behind.

Lions Gate faced a years-long battle with activist investor Carl Icahn, who opposed management's strategy and launched an unsuccessful proxy fight to take control of the studio. Icahn sold all his shares and abandoned Lions Gate in 2011.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.