Company Quick10K Filing
Quick10K
Lions Gate Entertainment
10-Q 2019-06-30 Quarter: 2019-06-30
10-K 2019-03-31 Annual: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-K 2016-03-31 Annual: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-K 2015-03-31 Annual: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-K 2014-03-31 Annual: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-09-26 Officers
8-K 2019-09-10 Officers, Shareholder Vote, Exhibits
8-K 2019-08-08 Earnings, Exhibits
8-K 2019-06-17 Sale of Shares
8-K 2019-05-23 Earnings, Exhibits
8-K 2019-02-07 Earnings, Exhibits
8-K 2019-02-04 Other Events, Exhibits
8-K 2019-01-24 Regulation FD, Exhibits
8-K 2019-01-24 Other Events
8-K 2019-01-24 Regulation FD, Exhibits
8-K 2018-11-12 Officers
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-09-14 Regulation FD, Exhibits
8-K 2018-09-11 Shareholder Vote, Other Events
8-K 2018-08-22 Other Events
8-K 2018-08-09 Earnings, Exhibits
8-K 2018-07-19 Officers, Regulation FD
8-K 2018-07-11 Officers
8-K 2018-06-07 Regulation FD, Exhibits
8-K 2018-04-15 Other Events
8-K 2018-04-09 Other Events
8-K 2018-03-31 Other Events, Exhibits
8-K 2018-03-28 Enter Agreement, Other Events, Exhibits
8-K 2018-03-26 Other Events, Exhibits
8-K 2018-03-22 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-12 Regulation FD, Other Events, Exhibits
8-K 2018-03-05 Regulation FD, Exhibits
IBKR Interactive Brokers Group 3,388
LFIN Longfin 2,124
FXE Invesco Currencyshares Euro Trust 215
MDIT Medite Cancer Diagnostics 19
NDVN Ndivision 16
MKRS Mikros Systems 7
SKAS Saker Aviation Services 0
ITC ITC Holdings 0
AUSK Auscrete 0
DHCP Ditech Holding 0
LGF 2019-06-30
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.35 ex1035q1f2010-q.htm
EX-10.36 ex1036q1f2010-q.htm
EX-31.1 ex311q1f2010-q.htm
EX-31.2 ex312q1f2010-q.htm
EX-32.1 ex321q1f2010-q.htm

Lions Gate Entertainment Earnings 2019-06-30

LGF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________________
Form 10-Q 
____________________________________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ____________ to  ____________
 
Commission File No.: 1-14880
____________________________________________________________________________________________________
Lions Gate Entertainment Corp.
(Exact name of registrant as specified in its charter)
____________________________________________________________________________________________________
British Columbia, Canada
 
N/A
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
 Identification No.)
250 Howe Street, 20th Floor
Vancouver, British Columbia V6C 3R8
and
2700 Colorado Avenue
Santa Monica, California 90404
(Address of principal executive offices)
____________________________________________________________________________________________________
(877) 848-3866
(Registrant’s telephone number, including area code)
____________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Class A Voting Common Shares, no par value per share
 
LGF.A
 
New York Stock Exchange
Class B Non-Voting Common Shares, no par value per share
 
LGF.B
 
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
 
Accelerated filer
Non-accelerated filer
 
 
Smaller reporting company
 
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Title of Each Class
 
Outstanding at August 5, 2019
Class A Voting Shares, no par value per share
 
82,654,510 shares
Class B Non-Voting Shares, no par value per share
 
135,065,671 shares


Table of Contents

 
 
 
Item
Page
 
 
 
 
 
 
 
 


2

Table of Contents

FORWARD-LOOKING STATEMENTS

This report includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “potential,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “may,” “will,” “could,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on May 23, 2019, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. "Risk Factors" herein. These risk factors should not be construed as exhaustive and should be read with the other cautionary statements and information in our Annual Report on Form 10-K, and this report.
We caution you that forward-looking statements made in this report or anywhere else are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially and adversely from those made in or suggested by the forward-looking statements contained in this report as a result of various important factors, including, but not limited to: the substantial investment of capital required to produce and market films and television series; budget overruns; limitations imposed by our credit facilities and notes; unpredictability of the commercial success of our motion pictures and television programming; risks related to acquisition and integration of acquired businesses; the effects of dispositions of businesses or assets, including individual films or libraries; the cost of defending our intellectual property; technological changes and other trends affecting the entertainment industry; potential adverse reactions or changes to business or employee relationships; and the other risks and uncertainties discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 23, 2019, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. "Risk Factors" herein. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.
Any forward-looking statements, which we make in this report, speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
This Quarterly Report on Form 10-Q  may contain references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.
Unless otherwise indicated or the context requires, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” refer to Lions Gate Entertainment Corp., a corporation organized under the laws of the province of British Columbia, Canada, and its direct and indirect subsidiaries.


3

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30,
2019
 
March 31,
2019
 
(Amounts in millions)
ASSETS
 
 
 
Cash and cash equivalents
$
196.0

 
$
184.3

Accounts receivable, net
710.6

 
647.2

Program rights
274.3

 
295.7

Other current assets
178.6

 
267.2

Total current assets
1,359.5

 
1,394.4

Investment in films and television programs and program rights, net
1,619.5

 
1,672.0

Property and equipment, net
152.0

 
155.3

Investments
28.6

 
26.2

Intangible assets
1,843.3

 
1,871.6

Goodwill
2,833.5

 
2,833.5

Other assets
600.9

 
436.1

Deferred tax assets

 
19.8

Total assets
$
8,437.3

 
$
8,408.9

LIABILITIES
 
 
 
Accounts payable and accrued liabilities
$
539.8

 
$
531.2

Participations and residuals
488.0

 
408.5

Film obligations and production loans
469.3

 
512.6

Debt - short term portion
57.4

 
53.6

Deferred revenue
144.8

 
146.5

Total current liabilities
1,699.3

 
1,652.4

Debt
2,837.6

 
2,850.8

Participations and residuals
378.2

 
479.8

Film obligations and production loans
145.6

 
143.1

Other liabilities
282.2

 
114.0

Deferred revenue
67.6

 
62.8

Deferred tax liabilities
36.9

 
56.5

Redeemable noncontrolling interest
134.9

 
127.6

Commitments and contingencies (Note 16)

 

EQUITY
 
 
 
Class A voting common shares, no par value, 500.0 shares authorized, 82.6 shares issued (March 31, 2019 - 82.5 shares issued)
651.2

 
649.7

Class B non-voting common shares, no par value, 500.0 shares authorized, 135.0 shares issued (March 31, 2019 - 133.5 shares issued)
2,176.9

 
2,140.6

Retained earnings
149.2

 
208.7

Accumulated other comprehensive loss
(125.3
)
 
(80.3
)
Total Lions Gate Entertainment Corp. shareholders' equity
2,852.0

 
2,918.7

Noncontrolling interests
3.0

 
3.2

Total equity
2,855.0

 
2,921.9

Total liabilities and equity
$
8,437.3

 
$
8,408.9

See accompanying notes.

4

Table of Contents

LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Three Months Ended
 
June 30,
 
2019
 
2018
 
(Amounts in millions, except per share amounts)
Revenues
$
963.6

 
$
932.7

Expenses
 
 
 
Direct operating
568.0

 
530.0

Distribution and marketing
250.5

 
203.5

General and administration
102.6

 
110.2

Depreciation and amortization
40.1

 
40.3

Restructuring and other
5.6

 
10.5

Total expenses
966.8

 
894.5

Operating income (loss)
(3.2
)
 
38.2

Interest expense
 
 
 
Interest expense
(49.0
)
 
(35.4
)
Interest on dissenting shareholders' liability

 
(15.9
)
Total interest expense
(49.0
)
 
(51.3
)
Interest and other income
2.8

 
3.0

Other expense
(2.3
)
 

Gain (loss) on investments
0.1

 
(0.9
)
Equity interests loss
(7.9
)
 
(6.2
)
Loss before income taxes
(59.5
)
 
(17.2
)
Income tax benefit
1.1

 
5.8

Net loss
(58.4
)
 
(11.4
)
Less: Net loss attributable to noncontrolling interests
4.4

 
3.5

Net loss attributable to Lions Gate Entertainment Corp. shareholders
$
(54.0
)
 
$
(7.9
)
 
 
 
 
Per share information attributable to Lions Gate Entertainment Corp. shareholders:
 
 
 
Basic net loss per common share
$
(0.25
)
 
$
(0.04
)
Diluted net loss per common share
$
(0.25
)
 
$
(0.04
)
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
Basic
216.1

 
211.8

Diluted
216.1

 
211.8

 
 
 
 
Dividends declared per common share
$

 
$
0.09

See accompanying notes.

5

Table of Contents

LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 
Three Months Ended
 
June 30,
 
2019
 
2018
 
(Amounts in millions)
Net loss
$
(58.4
)
 
$
(11.4
)
Foreign currency translation adjustments, net of tax
0.9

 
(6.0
)
Net unrealized loss on cash flow hedges, net of tax
(45.9
)
 
(5.2
)
Comprehensive loss
(103.4
)
 
(22.6
)
Less: Comprehensive loss attributable to noncontrolling interests
4.4

 
3.5

Comprehensive loss attributable to Lions Gate Entertainment Corp. shareholders
$
(99.0
)
 
$
(19.1
)
See accompanying notes.


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LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY



 
Class A Voting
Common Shares
 
Class B Non-Voting
Common Shares
 
Retained Earnings
 
Accumulated
 Other
Comprehensive
Loss
 
Lions Gate Entertainment Corp. Shareholders' Equity
 
Noncontrolling Interests (a)
 
 Total Equity
 
Number
 
Amount
 
Number
 
Amount
 
 
 
 
 
 
(Amounts in millions)
Balance at March 31, 2019
82.5

 
$
649.7

 
133.5

 
$
2,140.6

 
$
208.7

 
$
(80.3
)
 
$
2,918.7

 
$
3.2

 
$
2,921.9

Exercise of stock options

 

 
0.1

 
0.5

 

 

 
0.5

 

 
0.5

Share-based compensation, net
0.1

 
1.5

 
0.1

 
7.7

 

 

 
9.2

 

 
9.2

Issuance of common shares related to acquisitions and other

 

 
1.3

 
28.1

 

 

 
28.1

 

 
28.1

Noncontrolling interests

 

 

 

 

 

 

 
(0.3
)
 
(0.3
)
Net income (loss)

 

 

 

 
(54.0
)
 

 
(54.0
)
 
0.1

 
(53.9
)
Other comprehensive loss

 

 

 

 

 
(45.0
)
 
(45.0
)
 

 
(45.0
)
Redeemable noncontrolling interests adjustments to redemption value

 

 

 

 
(5.5
)
 

 
(5.5
)
 

 
(5.5
)
Balance at June 30, 2019
82.6

 
$
651.2

 
135.0

 
$
2,176.9

 
$
149.2

 
$
(125.3
)
 
$
2,852.0

 
$
3.0

 
$
2,855.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2018
81.8

 
$
628.7

 
129.3

 
$
2,020.3

 
$
516.6

 
$
(9.7
)
 
$
3,155.9

 
$
1.0

 
$
3,156.9

Cumulative effect of accounting changes

 

 

 

 
21.3

 
(2.6
)
 
18.7

 

 
18.7

Exercise of stock options

 
0.3

 

 
0.3

 

 

 
0.6

 

 
0.6

Share-based compensation, net
0.2

 
7.1

 
0.2

 
6.1

 

 

 
13.2

 

 
13.2

Issuance of common shares related to acquisitions and other

 
0.1

 
2.5

 
55.7

 

 

 
55.8

 

 
55.8

Noncontrolling interests

 

 

 

 

 

 

 
1.4

 
1.4

Dividends declared

 

 

 

 
(19.2
)
 

 
(19.2
)
 

 
(19.2
)
Net loss

 

 

 

 
(7.9
)
 

 
(7.9
)
 
(1.0
)
 
(8.9
)
Other comprehensive loss

 

 

 

 

 
(11.2
)
 
(11.2
)
 

 
(11.2
)
Redeemable noncontrolling interests adjustments to redemption value

 

 

 

 
(4.6
)
 

 
(4.6
)
 

 
(4.6
)
Balance at June 30, 2018
82.0

 
$
636.2

 
132.0

 
$
2,082.4

 
$
506.2

 
$
(23.5
)
 
$
3,201.3

 
$
1.4

 
$
3,202.7

_____________________
(a)
Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 9).

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended
 
June 30,
 
2019
 
2018
 
(Amounts in millions)
Operating Activities:
 
 
 
Net loss
$
(58.4
)
 
$
(11.4
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
40.1

 
40.3

Amortization of films and television programs and program rights
436.6

 
385.5

Interest on dissenting shareholders' liability

 
15.9

Amortization of debt financing costs
4.0

 
2.9

Non-cash share-based compensation
9.6

 
15.1

Other non-cash items
8.3

 
3.7

Equity interests loss
7.9

 
6.2

Loss (gain) on investments
(0.1
)
 
0.9

Deferred income taxes (benefit)
0.2

 
(13.0
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net and other assets
4.1

 
126.3

Investment in films and television programs and program rights, net
(364.5
)
 
(358.0
)
Accounts payable and accrued liabilities
3.0

 
(70.2
)
Participations and residuals
(21.9
)
 
(29.4
)
Film obligations
(34.8
)
 
(11.3
)
Deferred revenue
3.2

 
9.8

Net Cash Flows Provided By Operating Activities
37.3

 
113.3

Investing Activities:
 
 
 
Investment in equity method investees
(0.9
)
 
(2.8
)
Business acquisitions, net of cash acquired of $5.5 (see Note 2)

 
(77.3
)
Increase in loans receivable

 
(4.0
)
Capital expenditures
(8.6
)
 
(9.2
)
Net Cash Flows Used In Investing Activities
(9.5
)
 
(93.3
)
Financing Activities:
 
 
 
Debt - borrowings
115.0

 
2,069.5

Debt - repayments
(128.2
)
 
(2,139.7
)
Production loans - borrowings
29.9

 
100.1

Production loans - repayments
(34.6
)
 
(90.7
)
Dividends paid

 
(19.0
)
Distributions to noncontrolling interest
(0.3
)
 
(0.8
)
Exercise of stock options
0.5

 
2.2

Tax withholding required on equity awards
(0.3
)
 
(2.5
)
Net Cash Flows Used In Financing Activities
(18.0
)
 
(80.9
)
Net Change In Cash, Cash Equivalents and Restricted Cash
9.8

 
(60.9
)
Foreign Exchange Effects on Cash, Cash Equivalents and Restricted Cash
1.9

 
(1.6
)
Cash, Cash Equivalents and Restricted Cash - Beginning Of Period
184.3

 
378.1

Cash, Cash Equivalents and Restricted Cash - End Of Period
$
196.0

 
$
315.6


See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General
Nature of Operations
Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a global content leader whose films, television series, digital products and linear and over-the-top platforms reach next generation audiences around the world. In addition to our filmed entertainment leadership, Lionsgate content drives a growing presence in interactive and location-based entertainment, video games, esports and other new entertainment technologies. Lionsgate's content initiatives are backed by a nearly 17,000-title film and television library and delivered through a global sales and licensing infrastructure.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Lionsgate and all of its majority-owned and controlled subsidiaries.
The unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to quarterly report on Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the three months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020. The balance sheet at March 31, 2019 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019.
Certain amounts presented in prior periods have been reclassified to conform to the current period presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The most significant estimates made by management in the preparation of the financial statements relate to ultimate revenue and costs used for the amortization of investment in films and television programs; estimates of sales returns and other allowances and provisions for doubtful accounts; estimates related to the revenue recognition of sales or usage-based royalties; fair value of equity-based compensation; fair value of assets and liabilities for allocation of the purchase price of companies acquired; income taxes including the assessment of valuation allowances for deferred tax assets; accruals for contingent liabilities; and impairment assessments for investment in films and television programs, property and equipment, equity investments, goodwill and intangible assets. Actual results could differ from such estimates.
Recent Accounting Pronouncements
Accounting Guidance Adopted in Fiscal 2020
Accounting for Leases: In February 2016, the Financial Accounting Standards Board ("FASB") issued guidance on accounting for leases which requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The new guidance also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The Company adopted the new standard on April 1, 2019 utilizing the modified retrospective approach, and therefore, results for reporting periods beginning after April 1, 2019 are presented under the new guidance, while prior periods have not been adjusted. Additionally, the Company elected to apply practical expedients allowing it to not reassess (1) whether any expired or existing contracts previously assessed as not containing leases are, or contain, leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any existing leases. The Company also elected to not separate lease components from non-lease components across all lease categories. Instead, each separate lease component and non-lease component are accounted for as a single lease component.

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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Upon adoption of the new guidance, the Company recognized lease liabilities on the Company's consolidated balance sheet for its operating leases of approximately $187.2 million, with a corresponding right-of-use assets balance of $157.4 million, net of existing lease incentives of $29.8 million which were previously classified in accounts payable and accrued liabilities and other liabilities, with no material impact on its consolidated statement of operations. See Note 6 for further information regarding the impact of the adoption of the new guidance on accounting for leases on the Company's financial statements.
Accounting Guidance Not Yet Adopted

Fair Value Measurement - Changes to Disclosure Requirements: In August 2018, the FASB issued guidance that eliminates, adds and modifies certain disclosure requirements for fair value measurements. This guidance eliminates the requirement that entities disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but requires public companies to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, among other changes. This guidance is effective for the Company's fiscal year beginning April 1, 2020, with early adoption permitted. The Company does not expect that the adoption of this guidance will have a material effect on its consolidated financial statements.

Improvements to Accounting for Costs of Films and License Agreements for Program Materials: In March 2019, the FASB issued guidance that aligns the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. Accordingly, the capitalization of production costs for episodic television series is no longer constrained until persuasive evidence of secondary market revenues exists. In addition, under the new guidance, a company will need to determine at the outset of production whether a film or television program is primarily monetized on its own or within a film group. A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements. In addition, under previous guidance, film and television programs accounted for under the broadcasting accounting standard were carried on the balance sheet at the lower of cost or net realizable value. The new guidance requires that an entity test a film or television program for impairment, when impairment indicators are present, at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. The impairment would be measured as the difference between the carrying value of the film group and its fair value rather than its net realizable value. This guidance requires that an entity provide new disclosures about content that is either produced or licensed, and classify cash flows for licensed content as cash flows from operating activities in the statement of cash flows. This guidance is effective for the Company's fiscal year beginning April 1, 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial statements.

Financial Instruments - Credit Losses: In June 2016, the FASB issued guidance that changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, from the incurred loss methodology under current U.S. GAAP to a new, forward-looking current expected credit loss model that would generally result in the earlier recognition of credit losses. This guidance is effective for the Company’s fiscal year beginning April 1, 2020, with early adoption permitted. Adoption of the standard will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align our credit loss methodology with the new standard. The Company is currently evaluating the impact of this standard on its consolidated financial statements, including accounting policies, processes, and systems.


2. Acquisitions

3 Arts Entertainment

On May 29, 2018, the Company purchased a 51% membership interest in 3 Arts Entertainment LLC, a talent management and television/film production company. The purchase price was approximately $166.6 million, of which 50% was paid in cash at closing, 32.5% was paid in the Company's Class B non-voting common shares at closing, and 17.5% was paid in the Company's Class B non-voting common shares on the one-year anniversary of closing. The number of shares issued was determined by dividing the dollar value of the portion of the purchase price to be paid by the daily weighted average closing price of the Company's Class B non-voting common shares on the New York Stock Exchange for the twenty (20) consecutive trading days immediately preceding the closing date. A portion of the purchase price, up to $38.3 million, may be recoupable for a five-year period commencing on the acquisition date of May 29, 2018, contingent upon the continued employment of certain employees, or the achievement of certain EBITDA targets, as defined in the 3 Arts Entertainment acquisition and related

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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



agreements. Accordingly, $38.3 million was initially recorded as a deferred compensation arrangement within other current and non-current assets and is being amortized in general and administrative expenses over a five-year period.

The acquisition was accounted for as a purchase, with the results of operations of 3 Arts Entertainment included in the Company's consolidated results from May 29, 2018. Based on the purchase price allocation, $92.7 million was allocated to goodwill, $47.0 million was allocated to the fair value of finite-lived intangible assets and $38.3 million was allocated to deferred compensation arrangements, as discussed above. The remainder of the purchase price was primarily allocated to cash and cash equivalents, accounts receivable, other assets, and accounts payable and accrued liabilities, and $15.8 million was recorded as a redeemable noncontrolling interest, representing the noncontrolling interest holders' 49% equity interest in 3 Arts Entertainment (see Note 9). The acquired finite-lived intangible assets primarily represent customer relationships and are being amortized over a weighted average estimated useful life of 12 years.

The Company used discounted cash flows ("DCF") analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation, including acquired intangible assets and the redeemable noncontrolling interest. The acquisition goodwill arises from the opportunity for synergies of the combined companies to grow and strengthen the Company's television operations by expanding the Company's talent relationships, and improving the Company's television production capabilities. The goodwill recorded as part of this acquisition is included in the Television Production segment. The goodwill is not amortized for financial reporting purposes, but is deductible for federal tax purposes.


3. Investment in Films and Television Programs and Program Rights
 
June 30,
2019
 
March 31,
2019
 
(Amounts in millions)
Motion Picture Segment - Theatrical and Non-Theatrical Films
 
 
 
Released, net of accumulated amortization
$
459.6

 
$
376.7

Acquired libraries, net of accumulated amortization
1.8

 
1.8

Completed and not released
18.8

 
80.6

In progress
173.8

 
250.4

In development
47.3

 
45.0

 
701.3

 
754.5

Television Production Segment - Direct-to-Television Programs
 
 
 
Released, net of accumulated amortization
193.8

 
186.1

In progress
277.4

 
295.6

In development
19.4

 
17.6

 
490.6

 
499.3

Media Networks Segment
 
 
 
Released program rights, net of accumulated amortization
613.7

 
591.0

In progress
67.4

 
106.8

In development
44.1

 
56.2

 
725.2

 
754.0

 
 
 
 
Intersegment eliminations
(23.3
)
 
(40.1
)
 
 
 
 
Investment in films and television programs and program rights, net
1,893.8

 
1,967.7

Less current portion of program rights
(274.3
)
 
(295.7
)
Non-current portion
$
1,619.5

 
$
1,672.0


During the three months ended June 30, 2019 and 2018, the Company performed fair value measurements related to films having indicators of impairment. In determining the fair value of its films, the Company employs a DCF methodology that includes cash flow estimates of a film’s ultimate revenue and costs as well as a discount rate. The discount rate utilized in the

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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



DCF analysis is based on the Company’s weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement (see Note 8). During the three months ended June 30, 2019, the Company recorded $1.6 million of fair value film write-downs (2018 - $4.5 million).

4. Investments
The Company's investments consisted of the following:
 
 
June 30,
2019
 
March 31,
2019
 
 
(Amounts in millions)
Investments in equity method investees
 
$
26.8

 
$
24.5

Other investments
 
1.8

 
1.7

 
 
$
28.6

 
$
26.2



Equity Method Investments:
The Company has investments in various equity method investees with ownership percentages ranging from approximately 12% to 49%. These investments include:
STARZPLAY Arabia. STARZPLAY Arabia (Playco Holdings Limited) offers a STARZ-branded online subscription video-on-demand service in the Middle East and North Africa.
Roadside Attractions. Roadside Attractions is an independent theatrical distribution company.
Pantelion Films. Pantelion Films is a joint venture with Videocine, an affiliate of Televisa, which produces, acquires and distributes a slate of English and Spanish language feature films that target Hispanic moviegoers in the U.S.
Atom Tickets. Atom Tickets is the first-of-its-kind theatrical mobile ticketing platform and app.
Other. In addition to the equity method investments discussed above, the Company holds ownership interests in other immaterial equity method investees.
Summarized Financial Information. Summarized financial information for the Company's equity method investees owned at June 30, 2019 and March 31, 2019, respectively, is set forth below:
 
June 30,
2019
 
March 31,
2019
 
(Amounts in millions)
Current assets
$
120.2

 
$
189.8

Non-current assets
$
66.0

 
$
55.7

Current liabilities
$
139.7

 
$
167.8

Non-current liabilities
$
51.3

 
$
46.7



 
Three Months Ended
 
June 30,
 
2019
 
2018
 
(Amounts in millions)
Revenues
$
25.9

 
$
22.7

Gross profit
$
10.1

 
$
4.3

Net loss
$
(16.9
)
 
$
(18.7
)

Pop. Pop was the Company's joint venture with CBS. On March 15, 2019, the Company sold its 50.0% interest in Pop to CBS. Prior to the sale of its interest in Pop, the Company had accounted for such interest as an equity method investment.

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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Pop Financial Information:

The following table presents the summarized statements of operations for the three months ended June 30, 2018 for Pop and a reconciliation of the net loss reported by Pop to equity interest loss recorded by the Company:
 
 
Three Months Ended
 
June 30,
 
2018
 
 
Revenues
$
25.6

Expenses:
 
Cost of services
13.1

Selling, marketing, and general and administration
11.9

Depreciation and amortization
2.0

Operating loss
(1.4
)
Interest expense, net
0.5

Accretion of redeemable preferred stock units(1)
21.7

Total interest expense, net
22.2

Net loss
$
(23.6
)
Reconciliation of net loss reported by Pop to equity interest loss:
 
Net loss reported by Pop
$
(23.6
)
Ownership interest in Pop
50
%
The Company's share of net loss
(11.8
)
Accretion of dividend and interest income on redeemable preferred stock units(1)
10.9

Elimination of the Company's share of profits on licensing sales to Pop

Realization of the Company’s share of profits on licensing sales to Pop
0.1

Total equity interest loss recorded
$
(0.8
)
 ___________________
(1)
Accretion of mandatorily redeemable preferred stock units represents Pop's 10% dividend and the amortization of discount on its mandatorily redeemable preferred stock units previously held by the Company and the other interest holder. The Company recorded its share of this expense as income from the accretion of dividend and discount on mandatorily redeemable preferred stock units within equity interest loss.


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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



5. Debt

Total debt of the Company, excluding film obligations and production loans, was as follows as of June 30, 2019 and March 31, 2019:

 
June 30,
2019
 
March 31,
2019
 
(Amounts in millions)
Corporate debt:
 
 
 
Revolving Credit Facility
$

 
$

Term Loan A(1)
740.6

 
750.0

Term Loan B(1)
1,104.4

 
1,107.5

5.875% Senior Notes
520.0

 
520.0

6.375% Senior Notes
550.0

 
550.0

Total corporate debt
2,915.0

 
2,927.5

Finance lease obligations
44.7

 
45.4

Total debt
2,959.7

 
2,972.9

Unamortized debt issuance costs, net of fair value adjustment on finance lease obligations
(64.7
)
 
(68.5
)
Total debt, net
2,895.0

 
2,904.4

Less current portion
(57.4
)
 
(53.6
)
Non-current portion of debt
$
2,837.6

 
$
2,850.8


_____________________
(1)
To manage interest rate risk on certain of its LIBOR-based floating-rate corporate debt, as of June 30, 2019, the Company has entered into interest rate swaps to effectively convert the floating interest rates to fixed interest rates on a $1.7 billion notional amount, which as of June 30, 2019 converts the effective rate on our LIBOR-based corporate debt to 4.882% (see Note 17 for further information).

Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B)
Revolving Credit Facility Availability of Funds & Commitment Fee. The revolving credit facility provides for borrowings and letters of credit up to an aggregate of $1.5 billion, and at June 30, 2019 there was $1.5 billion available. However, borrowing levels are subject to certain financial covenants as discussed below. There were no letters of credit outstanding at June 30, 2019. The Company is required to pay a quarterly commitment fee on the revolving credit facility of 0.250% to 0.375% per annum, depending on the achievement of certain leverage ratios, as defined in the credit and guarantee agreement dated December 8, 2016, as amended (the "Amended Credit Agreement"), on the total revolving credit facility of $1.5 billion less the amount drawn.
Maturity Date:
Revolving Credit Facility & Term Loan A: March 22, 2023.
Term Loan B: March 24, 2025.
Interest:
Revolving Credit Facility & Term Loan A: Initially bore interest at a rate per annum equal to LIBOR plus 1.75% (or an alternative base rate plus 0.75%) margin, with a LIBOR floor of zero. The margin is subject to potential increases of up to 50 basis points (two (2) increases of 25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the Amended Credit Agreement (effective interest rate of 4.15% as of June 30, 2019, before the impact of interest rate swaps).
Term Loan B: As of March 22, 2018, pursuant to the Amended Credit Agreement, the Term Loan B bears interest at a rate per annum equal to LIBOR plus 2.25% margin, with a LIBOR floor of zero (or an alternative base rate plus 1.25% margin) (effective interest rate of 4.65% as of June 30, 2019, before the impact of interest rate swaps).

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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Required Principal Payments:
Term Loan A: Quarterly principal payments, at quarterly rates of 1.25% beginning June 30, 2019, 1.75% beginning June 30, 2020, and 2.50% beginning June 30, 2021 through December 31, 2022, with the balance payable at maturity.
Term Loan B: Quarterly principal payments at a quarterly rate of 0.25%, with the balance payable at maturity.
The Term Loan A and Term Loan B also require mandatory prepayments in connection with certain asset sales, subject to certain significant exceptions, and the Term Loan B is subject to additional mandatory repayment from specified percentages of excess cash flow, as defined in the Amended Credit Agreement.
Optional Prepayment:
Revolving Credit Facility & Term Loan A: The Company may voluntarily prepay the Revolving Credit Facility and Term Loan A at any time without premium or penalty.
Term Loan B: The Company may voluntarily prepay the Term Loan B at any time.
Security. The Senior Credit Facilities are guaranteed by the Guarantors (as defined in the Amended Credit Agreement) and are secured by a security interest in substantially all of the assets of Lionsgate and the Guarantors (as defined in the Amended Credit Agreement), subject to certain exceptions.
Covenants. The Senior Credit Facilities contain representations and warranties, events of default and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant exceptions, restrictions on the ability to declare or pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. In addition, a net first lien leverage maintenance covenant and an interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested quarterly. As of June 30, 2019, the Company was in compliance with all applicable covenants.
Change in Control. The Company may also be subject to an event of default upon a change in control (as defined in the Amended Credit Agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50% of the Company’s common shares.

5.875% Senior Notes and 6.375% Senior Notes

Interest:
5.875% Senior Notes: Bears interest at 5.875% annually (payable semi-annually on May and November 1 of each year).
6.375% Senior Notes: Bears interest at 6.375% annually (payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2019).

Maturity Date:
5.875% Senior Notes: November 1, 2024.
6.375% Senior Notes: February 1, 2024.

Optional Redemption:
5.875% Senior Notes:
(i)
Prior to November 1, 2019, the 5.875% Senior Notes are redeemable by the Company under certain circumstances (as defined in the indenture governing the 5.875% Senior Notes), in whole at any time or in part from time to time, at a price equal to 100% of the principal amount, plus the Applicable Premium (as defined in the indenture governing the 5.875% Senior Notes). The Applicable Premium is the greater of (i) 1.0% of the principal amount redeemed and (ii) the excess of the present value of the redemption amount at November 1, 2019 (see below) of the notes redeemed plus interest through November 1, 2019 (discounted at the treasury rate on the redemption date plus 50 basis points) over the principal amount of the notes redeemed on the redemption date.
(ii)
On and after November 1, 2019, redeemable by the Company, in whole or in part, at the redemption prices set forth as follows (as a percentage of the principal amount redeemed), plus accrued and unpaid interest to the redemption date: (i) on or after November 1, 2019 - 104.406%; (ii) on or after November 1, 2020 - 102.938%; (iii) on or after November 1, 2021 - 101.439%; and (iv) on or after November 1, 2022 - 100%.
6.375% Senior Notes:
(i)
Prior to February 1, 2021, the 6.375% Senior Notes are redeemable by the Company under certain circumstances (as defined in the indenture governing the 6.375% Senior Notes), in whole at any time, or in part

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Table of Contents
LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



from time to time, at a price equal to 100% of the principal amount of the Notes to be redeemed plus the Applicable Premium (as defined in the indenture governing the 6.375% Senior Notes). The Applicable Premium is the greater of (i) 1.0% of the principal amount redeemed and (ii) the excess of the present value of the redemption amount at February 1, 2021 (see below) of the notes redeemed plus interest through February 1, 2021 (discounted at the treasury rate on the redemption date plus 50 basis points) over the principal amount of the notes redeemed on the redemption date.
(ii)
On and after February 1, 2021, redeemable by the Company, in whole or in part, at the redemption prices set forth as follows (as a percentage of the principal amount redeemed), plus accrued and unpaid interest to the redemption date: (i) on or after February 1, 2021 - 103.188%; (ii) on or after February 1, 2022 - 101.594%; (iii) on or after February 1, 2023 - 100%.

Security. The 5.875% Senior Notes and 6.375% Senior Notes are unsubordinated, unsecured obligations of the Company.

Covenants. The 5.875% Senior Notes and 6.375% Senior Notes contain certain restrictions and covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations. As of June 30, 2019, the Company was in compliance with all applicable covenants.
Change in Control. The occurrence of a change of control will be a triggering event requiring the Company to offer to purchase from holders all of the 5.875% Senior Notes and 6.375% Senior Notes, at a price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase. In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the 5.875% Senior Notes and 6.375% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.
Capacity to Pay Dividends
At June 30, 2019, the capacity to pay dividends under the Senior Credit Facilities and the 5.875% Senior Notes and the 6.375% Senior Notes significantly exceeded the amount of the Company's retained earnings or net loss, and therefore the Company's net loss of $58.4 million and retained earnings of $149.2 million were deemed free of restrictions at June 30, 2019.

Interest Expense
The table below sets forth the composition of the Company’s interest expense for the three months ended June 30, 2019 and 2018:

 
Three Months Ended
 
June 30,
 
2019
 
2018
 
(Amounts in millions)
Interest expense
 
 
 
Cash interest
$
45.2

 
$
32.5

Amortization of debt financing costs
3.8

 
2.9

 
49.0

 
35.4

Interest on dissenting shareholders' liability(1)

 
15.9

Total interest expense
$
49.0

 
$
51.3

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