Image Entertainment Reports Second Quarter Fiscal 2009 Financial Results

--Fiscal 2009 Net Revenue Guidance Increased $5 Million to Expected Range of $120 Million to $130 Million

Image Entertainment, Inc. (NASDAQ: DISK), a leading independent licensee, producer and distributor of home entertainment programming in North America, today reported financial results for its second quarter of fiscal 2009, ended September 30, 2008.

"We continue to successfully execute our strategic growth plan of acquiring feature films for distribution across multiple platforms as evidenced by the 50% revenue increase for our second quarter over the same period last year and 53% revenue increase for the first six months of this fiscal year. We are certainly encouraged by our recent results and the fact that we see new and exciting content opportunities still coming our way," stated David Borshell, President of Image Entertainment. "Clearly, this year's financial performance is a dramatic improvement over last year, which was one of our main goals. While we remain cautiously optimistic that this positive trend will continue we also remain focused on our goal of achieving consistent profitability."

Fiscal 2009 Second Quarter Ended September 30, 2008 Financial Summary â?쳌 Net revenues increased 49.7% to $32.4 million, compared to $21.6 million for the second quarter of fiscal 2008, which were fueled by the Company's new strategy to release feature films on multiple formats. â?쳌 Net revenues from digital distribution were $975,000, a 63.0% increase when compared to $598,000 for the second quarter of fiscal 2008. â?쳌 Gross margins were 24.8%, compared to 16.4% for the second quarter of fiscal 2008. â?쳌 Selling expenses were $4.0 million, or 12.5% of net revenues, up from $2.2 million, or 10.1% of net revenues, for the second quarter of fiscal 2008 due to increased advertising and promotional expenses associated with the Company's new feature film distribution initiative. â?쳌 General and administrative expenses decreased 10.9% to $3.6 million, from $4.0 million for the second quarter of fiscal 2008, primarily due to lower legal expenses. â?쳌 Earnings from operations were $396,000, compared to a loss from operations of ($2.9 million) for the second quarter of fiscal 2008. â?쳌 Interest expense was $863,000, compared to $808,000 for the second quarter of fiscal 2008. â?쳌 Net loss was ($465,000), or ($0.02) per diluted share, compared to a net loss of ($3.7 million), or ($0.17) per diluted share, for the second quarter of fiscal 2008. Fiscal 2009 Six Months Ended September 30, 2008 Financial Summary â?쳌 Net revenues increased 52.8% to $65.0 million, compared to $42.5 million for the first six months of fiscal 2008. â?쳌 Net revenues from digital distribution were $1.7 million, a 58.4% increase when compared to $1.1 million for the first six months of fiscal 2008. â?쳌 Gross margins were 23.6%, compared to 20.8% for the first six months of fiscal 2008. â?쳌 Selling expenses were $7.8 million, or 12.0% of net revenues, up from $4.2 million, or 9.9% of net revenues, for first six months of fiscal 2008. â?쳌 General and administrative expenses decreased 14.1% to $7.6 million, from $8.8 million for the first six months of fiscal 2008. â?쳌 Earnings from operations were $15,000, compared to a loss from operations of ($4.6 million) for the first six months of fiscal 2008. â?쳌 Interest expense increased to $1.7 million, compared to $1.6 million for the first six months of fiscal 2008. â?쳌 Net earnings were $1.2 million, or $0.06 per diluted share, compared to a net loss of ($6.3 million), or ($0.29) per diluted share for the first six months of fiscal 2008.

Best selling DVD releases for the quarter included: Discovery Channel's When We Left Earth: NASA Missions and Shark Week: Ocean of Fear, and feature films Then She Found Me and The Secret.

Fiscal Year 2009 Guidance

The following statements are based on the Company's current expectations. These statements are forward-looking, and actual results may differ materially.

The Company is increasing its annual net revenue guidance for fiscal 2009 to an expected range of $120 million to $130 million, up from its previous guidance of $115 million to $125 million. The Company has not provided specific earnings guidance, but anticipates that it will be profitable for fiscal 2009 at the high end of the revenue range guidance.

Corporate Conference Call

Image Entertainment's management will host a conference call today, November 13, at 4:30 p.m. ET to review the fiscal 2009 second quarter financial results. Image executive management will be on-line to discuss these results and take part in a Q& A session. The call can be accessed by dialing (877) 419-6600 and requesting to join the conference call by stating the confirmation code 7492539, or by webcast at www.image-entertainment.com. Dial-ins begin at approximately 4:20 p.m. Eastern time, or at any time during the conference call. International participants please dial (719) 325-4900.

A replay of the conference call will be available beginning two hours after the call and for the following five business days by dialing (888) 203-1112 and entering the following pass code: 7492539. International participants please dial (719) 457-0820 using the same passcode.

About Image Entertainment:

Image Entertainment, Inc. is a leading independent licensee, producer and distributor of home entertainment programming in North America, with approximately 3,500 exclusive DVD titles and approximately 370 exclusive CD titles in domestic release and approximately 600 programs internationally via sublicense agreements. For many of its titles, the Company has exclusive audio and broadcast rights and, through its subsidiary Egami Media, Inc., has digital download rights to approximately 2,000 video programs and over 300 audio programs containing more than 4,500 tracks. The Company is headquartered in Chatsworth, California. For more information about Image Entertainment, Inc., please go to www.image-entertainment.com.

Forward-Looking Statements:

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to, among other things, our goals, plans and projections regarding our financial position, results of operations, market position, product development and business strategy. These statements may be identified by the use of words such as "will," "may," "estimate," "expect," "intend," "plan," "believe," and other terms of similar meaning in connection with any discussion of future operating or financial performance or other events or developments. All forward-looking statements are based on management's current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations.

These factors include, but are not limited to, (a) our ability to secure media content on acceptable terms, (b) our ability to service our principal and interest obligations on our outstanding debt, (c) the ability of our common stock to continue trading on NASDAQ, (d) changes in the retail DVD and digital media and entertainment industries, (e) changes in our business plan, (f) our inability to raise additional working capital on acceptable terms, (g) heightened competition, including with respect to pricing, entry of new competitors, the development of new products by new and existing competitors, (h) changes in general economic conditions, including the performance of financial markets and interest rates, (i) difficult, adverse and volatile conditions in the global and domestic capital and credit markets, (j) claims that we infringe other parties' intellectual property, (k) the performance of business partners upon whom we depend, (l) changes in accounting standards, practices or policies, (m) adverse results or other consequences from litigation, arbitration or regulatory investigations, and (n) further sales or dilution of our equity, which may adversely affect the market price of our common stock.

For further details and a discussion of these and other risks and uncertainties, see "Forward-Looking Statements" and "Risk Factors" in our most recent Annual Report on Form 10-K, and our most recent Quarterly Reports on Form 10-Q. Many of the factors that will determine the outcome of the subject matter of this press release are beyond Image Entertainment's ability to control or predict. Actual results for the periods identified may differ materially from management's expectations. Unless otherwise required by law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

IMAGE ENTERTAINMENT, INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (unaudited) September 30, 2008 and March 31, 2008 ASSETS (In thousands) September 30, 2008 March 31, 2008* Current assets: Cash and cash equivalents $ 753 $ 1,606 Accounts receivable, net of allowances of 22,089 17,873 $10,758 -- September 30, 2008; $8,548 -- March 31, 2008 Inventories 15,596 16,379 Royalty and distribution fee advances 16,757 13,939 Prepaid expenses and other assets 1,199 1,488 Total current assets 56,394 51,285 Noncurrent inventories, principally production costs 3,024 2,632 Noncurrent royalty and distribution advances 23,688 21,356 Property, equipment and improvements, net 2,658 3,089 Goodwill 5,715 5,715 Other assets 368 736 Total assets $ 91,847 $ 84,813

* The March 31, 2008 consolidated balance sheet has been derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008.

IMAGE ENTERTAINMENT, INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (unaudited) September 30, 2008 and March 31, 2008 LIABILITIES AND STOCKHOLDERS' EQUITY (In thousands, except share data) September 30, 2008 March 31, 2008* Current liabilities: Accounts payable $ 12,363 $ 11,387 Accrued liabilities 6,929 5,877 Accrued royalties and distribution fees 17,173 13,961 Accrued music publishing fees 6,010 5,971 Deferred revenue 7,190 10,598 Revolving credit facility 10,765 5,165 Current portion of long-term debt, net of debt discount 10,175 5,759 Total current liabilities 70,605 58,718 Long-term debt, net of debt discount and current portion 10,804 16,309 Other long-term liabilities, less current portion 1,952 2,560 Total liabilities 83,361 77,587 Stockholders' equity: Preferred stock, $.0001 par value, 25 million shares authorized; -- -- none issued and outstanding Common stock, $.0001 par value, 100 million shares authorized; 2 2 21,856,000 issued and outstanding at September 30, 2008 and March 31, 2008, respectively Additional paid-in capital 52,652 52,618 Accumulated other comprehensive loss (5 ) -- Accumulated deficit (44,163 ) (45,394 ) Total stockholders' equity 8,486 7,226 Total liabilities and stockholders' equity $ 91,847 $ 84,813

* The March 31, 2008 consolidated balance sheet has been derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008.

IMAGE ENTERTAINMENT, INC. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the Three Months Ended September 30, 2008 and 2007 Three Months Ended (In thousands, except per share data) September 30, 2008 September 30, 2007 NET REVENUES $ 32,389 100.0 % $ 21,633 100.0 % OPERATING COSTS AND EXPENSES: Cost of sales 24,356 75.2 18,083 83.6 Selling expenses 4,043 12.5 2,178 10.1 General and administrative expenses 3,594 11.1 4,035 18.7 Restructuring expenses -- -- 196 0.9 31,993 98.8 24,492 113.2 EARNINGS (LOSS) FROM OPERATIONS 396 1.2 (2,859 ) (13.2 ) OTHER EXPENSES (INCOME): Interest expense, net 863 2.7 808 3.7 Other (46 ) (0.1 ) -- -- 817 2.5 808 3.7 LOSS BEFORE INCOME TAXES (421 ) (1.3 ) (3,667 ) (17.0 ) INCOME TAX EXPENSE 44 0.1 16 0.0 NET LOSS $ (465 ) (1.4 ) % $ (3,683 ) (17.0 ) % NET LOSS PER SHARE: Net loss -- basic and diluted $ (.02 ) $ (.17 ) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted 21,856 21,739

IMAGE ENTERTAINMENT, INC. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the Six Months Ended September 30, 2008 and 2007 Six Months Ended (In thousands, except per share data) September 30, 2008 September 30, 2007 NET REVENUES $ 64,966 100.0 % $ 42,511 100.0 % OPERATING COSTS AND EXPENSES: Cost of sales 49,604 76.4 33,662 79.2 Selling expenses 7,765 12.0 4,221 9.9 General and administrative expenses 7,582 11.7 8,829 20.8 Restructuring expenses -- -- 442 1.0 64,951 100.0 47,154 110.9 EARNINGS (LOSS) FROM OPERATIONS 15 0.0 (4,643 ) (10.9 ) OTHER EXPENSES (INCOME): Interest expense, net 1,738 2.7 1,601 3.8 Other (3,016 ) (4.6 ) -- -- (1,278 ) (2.0 ) 1,601 3.8 EARNINGS (LOSS) BEFORE INCOME TAXES 1,293 2.0 (6,244 ) (14.7 ) INCOME TAXES 62 0.1 38 0.1 NET EARNINGS (LOSS) $ 1,231 1.9 % $ (6,282 ) (14.8 ) % NET EARNINGS (LOSS) PER SHARE: Net earnings (loss) -- basic and diluted $ .06 $ (.29 ) WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted 21,856 21,718

SOURCE: Image Entertainment, Inc.

Image Contact: Jeff Framer 818-407-9100 ext. 299 jframer@image-entertainment.com or IR Inquiries: MKR Group Charles Messman, Todd Kehrli 323-468-2300 disk@mkr-group.com