Lionsgate swings to Q1 loss

Due in part to mini-studio's Carl Icahn defense costs

TORONTO -- The legal bill at Lionsgate for trench warfare with Carl Icahn is putting big dents in the mini-studio's bottom line.

Lionsgate on Monday posted a first quarter loss of $64.1 million to June 30, against a year-earlier profit of $36.3 million.

The reversal was due in part to $7.3 million in "corporate defense costs related to shareholder activist activities."

With Icahn looking to oust the company's top management and board of directors, Vancouver-based Lionsgate recorded $23.3 million in additional stock-based compensation caused by change of control provisions in senior executive contracts.

And Lionsgate piled on $71.2 million in additional theatrical marketing costs during the first quarter to release three wide releases, Tyler Perry's "Why Did I Get Married Too?," "Killers" and "Kick-Ass," against one wide release during the same period of 2010, "Crank 2."

Lionsgate's release of "Killers," which stars Ashton Kutcher and Katherine Heigl, also disappointed at the boxoffice.

Lionsgate CEO Jon Feltheimer in a statement said the mini-studio's upcoming theatrical slate, and "continued strength" from its TV, library and channel businesses, meant Lionsgate was on track to meet its current financial guidance.

With Icahn breathing down their necks, Feltheimer and other senior executives at Lionsgate will discuss their latest financial results with analysts during a Tuesday call.

During the latest frame, the mini-studio's total revenue plunged 14% to $326.6 million, due mainly to losing some revenue recognition at TV Guide Network after selling off part of the channel, timing on TV deliveries, and a 75% fall in Mandate Pictures revenue to $13.3 million.

And as Lionsgate deals with an industry-wide decline in DVD revenue, the mini-studio posted a 22% decline in home entertainment revenue to $117.1 million, due to a smaller theatrical slate in fiscal 2010.

Overall motion picture revenue during the latest quarter was unchanged at $272.7 million, with theatrical revenue rising 214% to $71.3 million.

TV in the motion picture segment rose 46% to$30 million, while the international motion picture revenue rose 66% to $29.1 million, excluding Lionsgate U.K.

And TV production revenue was off 38% to $53.9 million, due to timing of deliveries. At the same time, Debmar-Mercury's revenue rose 55% to $31.8 million on increased revenue from "Tyler Perry's House of Payne," "Meet The Browns" and "The Wendy Williams Show."

The latest earnings report from Lionsgate comes as it continues to fend off a hostile takeover bid from Icahn, its largest shareholder with a 33% stake.

Among Icahn's latest complaints is Lionsgate converting debt into new stock to reduce his holding and boost that of Mark Rachesky, a major company investor aligned with senior management and the board of directors.

Lionsgate's board last week recommended that stockholders reject Icahn's latest tender offer for outstanding company shares, this time at $6.50 apiece.