Lionsgate expects second half to roar back

Studio needs to overcome boxoffice underperformers

TORONTO -- Despite a disappointing second-quarter film slate, Lionsgate Entertainment told analysts Tuesday that it remains on track to meet fiscal 2009 targets in the second half. It just faces a steeper climb to do so after its early film slate.

Vancouver-based Lionsgate forecast fiscal 2009 revenue of $1.5 billion-$1.6 billion, free cash flow of $100 million and EBITIDA at break even.

To get there, they need to overcome poor boxoffice for second-quarter releases like "Bangkok Dangerous," "Disaster Movie" and "My Best Friend's Girl," which left Lionsgate with an eventual $15 million loss this year.

The three underperforming titles led Lionsgate on Monday to post a larger-than-anticipated second-quarter loss of $48.1 million on lower theatrical boxoffice revenue.

The studio also faces an added $15 million P&A spend this year after it moved up the releases of "Crank 2" and "The Haunting in Connecticut" to April. And it anticipates higher film marketing expenses from the expansion of Lionsgate U.K., and Maple Pictures' landing of a Canadian output deal with Miramax Pictures.

"We've put a lot of pressure on the overperformance of our already heavily back-loaded slate," Lionsgate vice chairman Michael Burns told analysts as he looked to the second half of the year and beyond when he predicted EBITIDA will eventually exceed $50 million in 2010.

Lionsgate executives also were bullish on second-half prospects for their home entertainment, TV and international divisions, despite worsening market conditions.

Company chairman and CEO Jon Feltheimer told analysts that Lionsgate remained on the acquisitions trails, given fire-sale prices available amid the current market meltdown.

Lionsgate ended the second quarter with $249 million in cash and cash equivalents, and an undrawn $340 million JPMorgan credit facility.

And the studio expects a break on its forecast $400 million in P&A expenditure during fiscal 2009 as advertising rates continue to fall in the current climate, Feltheimer said.

On the home entertainment front, where Lionsgate has a current market share of 7.5%, the company forecast $700 million in revenue for fiscal 2009 and library revenue of $300 million.