Lionsgate co-chairman/CEO Jon Feltheimer and vice chairman Michael Burns took a break from fending off Carl Icahn to send shareholders a letter touting the company's good financial health.
Drawing on the company's results for the 2010 fiscal year, the letter highlighted the strong performance of Lionsgate's library, which achieved its best year ever. In fiscal 2010 the library generated revenues of $323 million and cash flow of $110 million up by $44 million and $15 million, respectively, from the previous fiscal year.
It also noted the company's 7 percent market share in home entertainment and its strong television division, which has 15 shows currently on the air, including in syndication.
Lionsgate is the target of a long-running effort by Icahn to take over the company and dislodge its board. Friday's statement from Lionsgate came close on the heels of Icahn's letter threatening to push the company into bankruptcy, and seems calculated to contradict his dire statements about Lionsgate's financial condition.
The text of the Lionsgate letter is below:
June 11, 2010
Dear Fellow Lionsgate Shareholder:
We’d like to provide an update on Lionsgate’s businesses and thank you for your continued support of the Company. We’re coming off a great fiscal 2010, and right now we’re more energized than ever:
-- Our library achieved its best historical performance ever in fiscal 2010. As you know, our library is one of our most important assets, and in fiscal 2010 it generated:
- $323 million in revenues; and
- Approximately $110 million in cash flow.
We are pleased that our library revenues were up $44 million and cash flow up approximately $15 million, considering the difficult retail environment.
Our library performance also contributed meaningfully to our adjusted EBITDA of $128.5 million in fiscal 2010, which was 70% higher than our initial forecast.
Lionsgate remains the distributor of choice for many third-party catalogues who know the value we place on libraries in a world of abundant and increasing opportunities to monetize them. In fact, we recently licensed 139 of our theatrical films, including Precious, Crash, Monster’s Ball and the Saw franchise, to Rainbow Media’s IFC, Sundance, AMC and WE channels. We also announced an agreement to distribute the upcoming theatrical titles of Newmarket Films and its 250-title library, bringing the size of our library to nearly 13,000 titles.
-- Our home entertainment business remains strong. By focusing on the growth of Blu-ray and on-demand platforms and genres that outperform the broader industry, Lionsgate’s home entertainment business has grown to a more than 7% market share and is an industry leader in box office-to-DVD revenue conversion rate.
Our higher box office-to-DVD conversion rate results from releasing titles in our sweet spot (e.g., action, horror and prestige), as well as strong brand management. The TV-to-DVD business, which didn’t even exist a few years ago, remains a robust part of the packaged media landscape. We expect Weeds and Mad Men to each generate over $100 million from home entertainment sales alone on an ultimate basis.
-- Our TV business has one of the highest success rates in the industry from pilot to full series pickup.
