Tuesday, June 02, 2009

Lionsgate Caution Flags

Lionsgate (NYSE:LGF) Reports Record Revenues of $1.47 Billion for Fiscal 2009, up 8% From Previous Year; Net Loss is $163.0 Million. I usually find it difficult to understand movie production houses. Its quite similar to wildcat exploration. You win some you lose some. But when revenues are up 8% and you still print red ink you have to look at the caution flags.

This is what I see.

Cash is down from $372 million to $138 million. The company points out correctly that This is prior to the sale of a 49% equity interest in TV Guide Network and TV Guide.com to global private equity investment fund One Equity Partners for $123 million in cash on May 28, 2009. They fail to point out what they did with that sizeable amount of cash.

Good will is up from $225 million to $379 million. Bank loans are up from zero to $225 million. These are all seriously bad problems in the hundreds of millions. Anyone show or movie will not solve this. So enough with the show biz and lets talk wealth creation.