Image Entertainment Inc. late Thursday reported a fiscal fourth quarter loss that was 77 percent lower than a year ago. But shares plunged 18 percent after the DVD distributor warned that its auditor likely would issue a warning about the company's ability to continue as a going concern.
The Chatsworth licensee and distributor of home entertainment reported a fourth-quarter net loss of $3.3 million (-15 cents per share) for the quarter ended March 31, compared with a loss of $14.7 million (-68 cents) a year ago.
Net revenues rose 2.3 percent to $26.6 million. Net revenues from digital distribution increased 177 percent to $1.5 million. Chief Financial Officer Jeff M. Framer noted that the company continues to transition from DVD to digital distribution and has made several feature film acquisitions that raised its profile with other feature film suppliers.
Image last month retained Houlihan Lokey Howard & Zukin Capital, Inc. to explore strategic alternatives after a second attempt to merge with a better financed partner fell through.
The fourth quarter's bottom line benefitted by $1 million that Image received from Nyx Acquisition Inc. related to the failed merger, as well as $1.6 million related to termination of an agreement with a content supplier.
"In what is perhaps the most challenging retail climate we have ever faced, Image Entertainment continues to navigate through a series of financial and post-merger related challenges," Framer said in a statement. "Our digital business has grown significantly as we continue to exploit many forms of content delivery to consumers."
For the full fiscal year, the company reported a net loss was $1.8 million (-8 cents), compared with a net loss of $23 million (-$1.06) in fiscal 2008. Net revenues rose 36 percent to nearly $131 million.
Despite the improvement, the company said it anticipates its fiscal 2009 regulatory filing with the Securities and Exchange Commission will include a "going concern" clause from its auditor.
Image shares, which close up 2 cents, or 2 percent, to $1.06 on the Nasdaq, dropped 18 percent in after-market trading.
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