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Image Narrows Q4 Loss on Feature Film Slate

25 Jun, 2009 By: Erik Gruenwedel

Star appeal apparently is recession proof. Just ask Image Entertainment.

The Chatsworth, Calif.-based distributor’s decision to focus on cast-driven, under-the-radar feature films helped it streamline a fiscal year 2009 fourth-quarter (ended March 31) net loss to $3.3 million, compared to a net loss of $14.7 million during the previous year period.

Net revenue increased 2.3% to $26.6 million from $26 million last year. Blu-ray Disc revenue topped $1.3 million, up 83% from $222,000 last year. Electronic distribution revenue increased 177% to $1.5 million from $535,000 last year.

Top selling feature films in the quarter included In the Electric Mist starring Tommy Lee Jones and My Name Is Bruce with Bruce Campbell (USA Network’s “Burn Notice”), in addition to TV series title Ghost Hunters: Season 4 Part 2.

The release of Sidney Lumet’s Before the Devil Knows You’re Dead with Ethan Hawke, Philip Seymour Hoffman, Albert Finney and Marisa Tomei helped Image narrow the fiscal-year net loss to $1.8 million compared to a loss of $23 million in fiscal 2008.

Fiscal-year revenue increased 36% to a record $130.7 million (including a 23.2% increase in standard DVD revenue), compared to $95.8 million in fiscal 2008. Blu-ray revenue increased nearly 94% to $8.1 million from $508,000. Electronic distribution revenue increased 95% to $4.1 million from $2.1 million.

Image generated $5.4 million in income from settlement agreements and closing extension payments from BTP and Nyx, respectively.

Significant costs in the quarter included $979,000 in retirement payments and related costs to former CEO Martin Greenwald; $744,000 for belated failed merger costs with BTP Acquisition Co.; $507,000 associated with the terminated merger with Nyx Acquisitions; $499,000 severance payment to former president David Borshell; $439,000 in severance payments to 14 employee layoffs, excluding $246,000 related to the departure of an unnamed executive.

Despite the positive reaction to feature films, Image said the ongoing economic climate prevented issuing fiscal 2010 guidance. The company reported it was working with financial advisor Houlihan Lokey Howard & Zukin Capital to explore “various alternatives,” including the sale of the company.

President Jeff Framer, in a call with investors, said the recession didn’t affect the company until the first three months of 2009.

“Since January, we have experienced a significant reduction in purchases by our retail customers and increased product returns,” Framer said. “Our customers seem to be aggressively conserving their cash, reducing their orders and inventories.”

Framer said the distributor’s auditors included language in the forthcoming fiscal-year 2009 annual report that warned about Image’s ability to continue operations due to liquidity issues and access to credit. Image has two $4 million credit payments due in the next 12 months.

Framer said Image June 23 amended its loan agreement with Wachovia that negated a possible automatic default of the agreement triggered by the auditor’s “qualified opinion” on Image’s financial status.

“We are extremely glad Wachovia worked with us in reaching such resolution,” Framer said.

Image expects to generate the majority (27%) of Blu-ray Disc and DVD revenue in fiscal 2010 from feature film releases Incendiary with Ewan McGregor and Michelle Williams, and erotic thriller Powder Blue with Forest Whitaker and Jessica Biel, which are both out; and upcoming titles The Edge of Love (July 14) with Keira Knightley and Sienna Miller; Management (Sept. 29), produced by and starring Jennifer Aniston, with Steve Zahn; and quirky comedy $5 a Day (date TBA) with Christopher Walken and Amanda Peet.

The distributor also has high hopes for the September release from hit ventriloquist Terry Fator’s show for the first time on Blu-ray and DVD.

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