Following a pair of disappointing movie debuts, MGM confirmed Tuesday that its first-quarter loss would be greater than previously anticipated, and also warned it now expects zero operating cash flow for the full year.
Though the Lion gave no indication regarding any specific new charges, it’s believed the studio will take writedowns on the underperforming pics totaling $50 million-$60 million.
MGM’s “Rollerball,” which bowed Feb. 8 with an opening-weekend box office of $9 million, had grossed just $17.6 million through Sunday. “Hart’s War,” which unspooled Feb. 15 with $8.9 million, had taken in $15 million through the same date.
As a result, MGM now forecasts a first-quarter loss of 35¢-37¢ a share, or 15¢ per share more red ink than had been forecast. For the year, the studio expects a loss of 46¢-48¢, or 22¢ per share more than before.
The new forecast of break-even cash flow compares with earlier expectations that last year’s $55 million in cash flow would rise 15% in 2002. Also, the studio now predicts a 20% boost in annual revenue rather than “in excess” of 20%, as stated previously.
Wall Streeters had said Lion’s underperforming pics would hurt quarterly financial results, but it was uncertain how much the bottom line would sag (Daily Variety, Feb. 22).
“This is eerily reminiscent of the second quarter of 2001 at MGM,” Sanders Morris Harris analyst David Miller observed.
That’s when MGM revised its quarterly forecast downward following theatrical misfires with laffer “What’s the Worst That Could Happen?” and Universal co-prod “Josie and the Pussycats.”
In both cases, MGM’s bottom was hurt more severely by the underperforming pics than would have been true at a more diversified entertainment conglom. On the other hand, a theatrical overachiever like last year’s “Legally Blonde” can more easily lift the studio’s bottom line as well.
Lion, which continues to cast about for opportunities to size up and broaden its business base, still has multiple opportunities for pics to catch fire in just such a way throughout the balance of 2002. Perhaps most notably, the studio has the John Woo-helmed military actioner “Windtalkers” bowing wide on June 14, and the 20th installment in its all-important Bond franchise skedded for Nov. 22.
MGM/UA hopes to wow exhibs with a 17-film product reel at next week’s ShoWest. Lion is hosting a luncheon at the annual trade show and will screen “Windtalkers,” a Nicolas Cage starrer bounced from last year’s release sked after the Sept. 11 attacks prompted marketing concerns.
“Rollerball” and “Hart’s War” have been MGM’s only wide releases so far this year. A spokesman said there were no other underperforming ops behind the outlook revision.
“We remain confident in the balance of our 2002 film slate, and our other core businesses (such as homevid and film licensing) continue to exceed our expectations,” said Dan Taylor, senior exec VP and chief financial officer.
MGM issued its revised estimates after the close of market trading. Lion shares closed down 28¢, or almost 2%, at $16.96 on Wednesday.