25JUL201322550356
To Our Shareholders:
Fiscal 2016 was a year in which we achieved tremendous operating and strategic momentum
as we continued to build one of the largest content platforms in the world and positioned
ourselves closer to our consumers.
It was a year of organic growth in which our television business significantly increased its
scale, diversified its programming and achieved record-breaking results for the third year in a
row. We also continued to roll out a suite of over-the-top (“OTT”) platforms for targeted
audiences, expanded our nascent location-based entertainment, gaming and virtual reality
businesses and deepened a portfolio of brands and franchises that we expect to drive the
profitable growth of our film business for years to come.
We complemented this internal growth with a number of strategic initiatives culminating in
our announcement on June 30th that we entered into an agreement to acquire Starz for
$4.4 billion in cash and stock, the largest and potentially most transformative transaction in
our Company’s history. We expect the transaction to close by the end of 2016.
Combination of Lionsgate & Starz Creates a Global Content Powerhouse
Starz President and CEO Chris Albrecht and his team have built a powerful brand and a robust
platform. The combination of Lionsgate, a premier next generation content leader, and Starz, a
leading integrated media and entertainment company, will create a global powerhouse.
The combined entity will generate a tremendous amount of content across all platforms,
giving us the scale to compete successfully in today’s fast-changing global marketplace. Our
company will encompass approximately 40 films annually, including 14-18 wide releases, and
nearly 90 television series on more than 40 networks, enhancing what is already one of the
industry’s elite television businesses, all driven by world-class brands and backed by a 16,000-
title library.
Following the close of the transaction, the combination of Lionsgate and Starz will invest in
nearly $1.8 billion of new content each year. By coupling our intellectual property creation
machine with the STARZ/STARZ ENCORE premium distribution platforms serving
24 million and 32 million subscribers, respectively, we will create an integrated content
creation and distribution company with massive reach, increased optionality and
unprecedented opportunities for growth.
Lionsgate and Starz are both young companies that grew up in the digital age. By marshalling
our resources and leveraging our focus on next generation audiences, we will create a new
entertainment paradigm with the ability to deliver content directly to consumers through an
expanding infrastructure of location-based entertainment, gaming, virtual reality, cutting edge
apps and a suite of five OTT platforms, with more in the works.
These strategic benefits will be complemented by significant operational cost savings and
additional annual cash savings. The combination of Lionsgate and Starz is also expected to
1
diversify our revenue stream, increase the visibility of profit contributions from a stable
network business and generate strong and consistent free cash flow that will enable us to de-
lever our balance sheet quickly.
Additional Partnerships Drive Opportunities
We also launched a number of other strategic initiatives during the fiscal year designed to
expand our reach and build our strength in key areas of the business.
In November 2015, Discovery Communications and Liberty Global each acquired a 3.4%
stake in our Company, and the addition of Discovery CEO David Zaslav and Liberty Global
CEO Mike Fries has brought valuable expertise to our Board of Directors. The transaction
aligned Lionsgate with two of the pre-eminent programming and distribution platforms in the
world, and we are already seeing the operational benefits.
We have partnered with Discovery on a U.S. home entertainment distribution agreement and
the launch of a new documentary film division. We will soon begin production on the event
series Manifesto for them as well.
Also in November, we acquired a majority stake in Pilgrim Media Group, a leading producer
and supplier of unscripted programming. The investment is a key element of our
diversification strategy as we continue to build a nonfiction television business alongside our
leadership in premium scripted programming.
Pilgrim has already become an important platform for our entry into new businesses, and we
recently orchestrated a partnership between Pilgrim and e-sports leader ESL to create and
distribute original e-sports entertainment content for television and digital platforms.
Pilgrim also launched the ground-breaking competition reality series The Runner on Verizon’s
Go90 platform in June, a broadcast quality series that has achieved tremendous levels of social
engagement and reflects the changing way that content is being viewed by millennial
audiences.
Throughout the year, Lionsgate continued to build its global distribution infrastructure by
partnering with leading third-party content suppliers around the world. In January, the
Company created a production and distribution alliance with New Regency to capitalize on
global content opportunities. We are also managing international licensing for New Regency’s
prestigious catalogue of more than 130 blockbuster films, and we’re launching a television
joint venture with them to develop and co-produce A-list talent-driven premium scripted series
for global audiences.
Lionsgate Television Achieves 3rd Straight Record-Breaking Year
Our television business continued its record-breaking growth during the year, solidifying its
position as a leader in delivering premium series to cable and broadcast networks and
emerging as a supplier of choice for streaming services. During the past three years, we have
2
more than tripled our roster of shows, and we expect the growth of our scalable television
business to continue.
We are fueling this growth by licensing original series to an ever-expanding array of buyers
and continuing to convert these opportunities into hits.
We are planning to develop and produce original new series for Amazon (the Bob Dylan-
themed Time Out of Mind), Hulu (the sci-fi anthology series Dimension 404) and YouTube
Red (the high-end scripted series Step Up, based on our hit franchise).
We’re also beginning production on a second original series for Netflix, Dear White People,
based on Roadside Attractions’ critically-acclaimed film, another example of the synergies
between our film and television businesses.
Our strong roster of current series continues our tradition of helping to define the brands of
our network partners. Greenleaf, featuring Oprah Winfrey in her first recurring role in a
scripted series in 20 years, is a breakout performer on OWN and has already been renewed for
a second season. Casual, the Golden Globe-nominated comedy from Jason Reitman, is a top-
rated series on Hulu, and The Royals remains the number one drama series on E!
The ground-breaking Orange is the New Black, the most watched series on Netflix, has
already been renewed for three more seasons, and the transition of fan favorite Nashville to
CMT and Hulu brings our brand-defining content to new partners.
We’re also continuing to build our unscripted business not only through acquisitions but
organic growth as well. Our first broadcast network reality show, the competition series
Kicking & Screaming from Fear Factor creator Matt Kunitz, will premiere on Fox in January
2017. We have retained all international format and distribution rights to what we believe
could become our first unscripted global brand.
Deep Portfolio of Brands & Franchises Positions Film Slate for Profitable Growth
After three straight blockbuster years, our film business underperformed our expectations in
fiscal 2016 even though our slate grossed over $1.6 billion at the global box office and turned
in another profitable performance.
The fiscal 2017 theatrical slate is larger, more diversified, deep in areas of proven strength and
positioned to build momentum for the rest of the year and set the stage for profitable growth in
the years to come.
We enter the Toronto Film Festival in September with our strongest line-up ever, including
the action thriller Deepwater Horizon, the original musical La La Land, which has earned the
coveted opening night slot at the Venice International Film Festival, and the incredibly
moving drama American Pastoral, adapted from the Pulitzer Prize-winning novel.
3
Comprising a strong and diverse mix of targeted films, our fiscal 2017 slate also features the
return of Tyler Perry in Boo! A Madea Halloween, his 17th film in a Lionsgate franchise that
has grossed nearly $800 million at the box office; Academy Award® winning director Mel
Gibson’s war drama Hacksaw Ridge, based on a true story and an early contender for year-end
awards; Blair Witch, a return to one of the Company’s iconic horror franchises; the drama
thriller Patriots Day from our partners at CBS Films; and The Shack, a faith-based drama
adapted from the runaway global bestseller.
Building on our legacy of blockbuster franchises, we continue to partner with the leading
owners of intellectual property around the world to deepen our pipeline. We end fiscal 2017
with the global launch of Saban’s Power Rangers, based on one of the most popular and
recognizable entertainment brands in the world.
Our focus on premium branded content leveraging valuable IP continues with a slate that
includes Wonder, The Glass Castle, Chaos Walking, Monopoly, My Little Pony, MacGyver,
Borderlands, Naruto and Robin Hood: Origins—all titles based on coveted brands with large
built-in fan bases and multiplatform appeal. And no discussion of franchise properties would
be complete without mentioning Saw, returning for Halloween 2017.
Lionsgate Content Drives Global Opportunities
Lionsgate content touches people all over the world, whether it’s Now You See Me 2 achieving
a record-breaking performance of nearly $100 million at the box office in China or Orange is
the New Black ranking as Netflix’s top series globally.
During the year we expanded our reach into new markets, built our presence in key
international territories and continued the globalization of our television business.
We invested in Kindle Entertainment and Primal Media in the UK as we continue to diversify
our operations there. Our investment in Primal Media, an unscripted content producer led by
two seasoned UK reality creators, represents an exciting opportunity to extend our nonfiction
business into the largest television market outside the U.S.
In May 2016, we partnered with a group of entertainment executives to form Globalgate, a
consortium of leading international producers, distributors and co-financing partners who will
identify and provide priority access to intellectual property for production as local-language
films in territories worldwide. Our unique approach to building a presence in the fast-growing
local-language film business has already attracted world-class partners including Televisa in
Latin America, Gaumont in France, Nordisk Film in Scandinavia, Kadokawa in Japan and
Lotte in Korea.
We’re also exploring partnerships for local-language film production in China, where we have
already invested in two local-language films and are finalizing investments in four others that
we will distribute both internationally and in the U.S. In India, another market with untapped
potential, we’re remaking the action comedy Red following our successful Hindi-language
remake of the film Warrior.
4
Extending Our Platform into Location-Based Entertainment and Games
Fiscal 2016 was an active year in continuing to ramp businesses that extend the reach of our
content, bring us closer to our consumers and are designed to deliver significant incremental
profits.
Our brands continue to drive the growth of our location-based entertainment as we announced
plans during the year to partner on two major new theme park developments—one a Lionsgate
branded zone in an outdoor theme park in metro Atlanta and the other an immersive Lionsgate
branded entertainment center in Hengqin, China, near Macau being developed by Hong Kong
developer eSun Holdings. The partnership with eSun extends our location-based entertainment
to three continents, and we expect eight million consumers to visit Lionsgate’s growing
network of theme park attractions, rides and exhibitions each year by 2020.
We’re also extending our intellectual property onto fast-growing gaming platforms,
collaborating with powerhouses such as Starbreeze for a John Wick virtual reality game,
Saban and nWay to produce a Power Rangers mobile game, Fifth Journey to develop a Kevin
Hart social adventure game, and IGT and DoubleDown Casino to launch an Orange is the
New Black casino game. Within the next three years, we expect to roll out over 20 mobile, PC
and virtual reality games as we continue to identify exciting new ways to monetize our
content.
Lionsgate has become a partner of choice for leading technology platforms that play a
growing role in our content ecosystem. We became one of the first studios to license our films
to the Steam platform and the first studio to partner with Google on its Daydream VR
initiative. We also plan to launch location-based VR content within the next year as part of our
unique collaboration with IMAX and Starbreeze.
A Leader in New Entertainment Technologies
We continued our leadership in incubating new entertainment technologies, launching Atom
Tickets, a revolutionary approach to movie-going, with partners Disney and Fox in June. We
have already brought aboard Regal Cinemas and AMC Theatres, the two largest exhibition
chains in North America, and expect to reach nearly half of the screens in the U.S. by the end
of the year.
Our OTT platforms represent another way to deliver our content directly to consumers. We
launched Tribeca Shortlist in partnership with Tribeca Enterprises last October, debuted
Comic-Con HQ in July and plan to roll out Kevin Hart’s Laugh Out Loud platform by the end
of 2016. All three services are targeted at affinity audiences, distinguished by their curation
and backed by our vast film and television library.
5
Positioned for the Next Level of Performance
Though the global environment for content owners has never been stronger, it is also in the
midst of profound change. We are a disruptive company that has always benefitted from
change. We enter fiscal 2017 poised to capitalize on the opportunities offered by a dynamic
marketplace with one of our deepest film and television pipelines, our stature as a leading
premium content supplier to new and traditional platforms alike and a culture that fosters our
ability to be agile, flexible and opportunistic in our strategic initiatives.
Our acquisition of Starz enhances our existing strengths while adding new ones. It diversifies
our Company, increases our flexibility and streamlines our pathways to the consumer.
Combining our assets with Starz’s own premium brands and distribution is a natural and
robust evolution of our content business, expanding our platform, creating new strategic
growth opportunities and unlocking long-term value for our shareholders.
Sincerely,
Jon Feltheimer
Chief Executive Officer
Michael Burns
Vice Chairman
6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2016
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
(State or Other Jurisdiction of
Incorporation or Organization)
250 Howe Street, 20th Floor
Vancouver, British Columbia V6C 3R8
(877) 848-3866
N/A
(I.R.S. Employer
Identification No.)
2700 Colorado Avenue
Santa Monica, California 90404
(310) 449-9200
(Address of Principal Executive Offices, Zip Code)
Registrant’s telephone number, including area code:
(877) 848-3866
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Shares, without par value
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
___________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 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 and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted 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 and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2015 (the last business day of
the registrant’s most recently completed second fiscal quarter) was approximately $3,650,313,330, based on the closing sale price as reported
on the New York Stock Exchange.
As of May 23, 2016, 147,227,797 shares of the registrant’s no par value common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A and relating to the registrant’s 2016 annual meeting of shareholders are incorporated by reference into Part III.
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits, Financial Statement Schedules
PART IV
Page
4
20
32
32
32
32
33
36
38
75
77
77
77
80
80
80
80
80
80
80
2
FORWARD-LOOKING STATEMENTS
This report includes statements that are, or may 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”. These factors should not be construed as exhaustive and should be
read with the other cautionary statements and information in the 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, increased costs for producing and marketing feature 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 our 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, and the other risks and uncertainties discussed
under Part I, Item 1.A. “Risk Factors”. 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.
Unless otherwise indicated, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” include reference to our
subsidiaries as well.
3
PART I
ITEM 1. BUSINESS.
Overview
Lionsgate is a premier next generation global content leader with a diversified presence in motion picture production and
distribution, television programming and syndication, home entertainment, international distribution and sales, branded channel
platforms, interactive ventures and games, and location-based entertainment.
Although our business is both global and diverse, we classify our operations through two reporting segments: Motion Pictures
and Television Production.
Motion Pictures
Our Motion Pictures segment includes revenues derived from the following:
•
Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to
theatrical exhibitors on a picture-by-picture basis (distributed by us directly in the United States and through a
sub-distributor in Canada).
• Home Entertainment. Home entertainment revenues are derived from the sale and rental of our film productions
and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases)
on packaged media and through digital media platforms. We distribute a library of approximately 16,000 motion
picture titles and television episodes and programs.
•
•
Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired
films to the linear pay, basic cable and free television markets.
International. International revenues are derived from the licensing of our productions, acquired films, our
catalog product and libraries of acquired titles from our international subsidiaries and revenues from our
distribution to international distributors, on a territory-by-territory basis. International revenues also include
revenues from the direct distribution of our productions, acquired films and our catalog product and libraries of
acquired titles in the United Kingdom.
• Motion Pictures-Other. Other revenues are derived from, among others, our interactive ventures and games
division, our global franchise management and strategic partnerships division (which includes location-based
entertainment), the sales and licensing of music from the theatrical exhibition of our films and the television
broadcasts of our productions, and from the licensing of our films and television programs to ancillary markets.
Television Production
Our Television Production segment includes revenues derived from the following:
• Domestic Television. Domestic television revenues are derived from the licensing and syndication to domestic
markets of one-hour and half-hour scripted and unscripted series, television movies, mini-series and non-fiction
programming.
•
International. International revenues are derived from the licensing and syndication to international markets of
one-hour and half-hour scripted and unscripted series, television movies, mini-series and non-fiction
programming.
• Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production
movies or series on packaged media and through digital media platforms. We distribute a library of approximately
16,000 motion picture titles and television episodes and programs.
4
•
Television Production-Other. Other revenues are derived from, among others, product integration in our
television episodes and programs, the sales and licensing of music from the television broadcasts of our
productions, and from the licensing of our television programs to ancillary markets.
Segment Revenue
For the year ended March 31, 2016, contributions to the Company’s consolidated revenues from its reporting segments included
Motion Pictures 71.5% and Television Production 28.5%.
28.5%
Motion Pictures
71.5%
Television Production
Within the Motion Pictures segment, revenues were generated from the following: Theatrical 18.7%, Home Entertainment
34.6%, Television 12.2%, International 32.7% and Motion Pictures-Other 1.8%.
1.8%
32.7%
18.7%
12.2%
34.6%
Theatrical
Home Entertainment
Television
International
Other
Within the Television Production segment, revenues were generated from the following: Domestic Television 62.0%,
International 28.4%, Home Entertainment 9.0% and Television Production-Other 0.6%.
9.0% 0.6%
28.4
62.0%
Domestic Television
International
Home Entertainment
Other
Business Strategy
We continue to grow and diversify our portfolio of content to capitalize on demand from emerging and traditional platforms
throughout the world. We maintain a disciplined approach to acquisition, production and distribution of product, by balancing our
financial risks against the probability of commercial success for each project. We pursue the same disciplined approach to
investments in, and acquisition of, libraries and other assets complementary to our business. We believe that our strategic focus
on content and creation of innovative content distribution strategies will enhance our competitive position in the industry, ensure
optimal use of our capital, build a diversified foundation for future growth and generate significant long-term value for our
shareholders.
Motion Pictures - Theatrical
Theatrical Production
Theatrical production consists of “greenlighting” (proceeding with production) and financing motion pictures, as well as the
development of screenplays, filming activities and the post-filming editing/post-production process.
We take a disciplined approach to theatrical production with the goal of producing content that can be distributed through
various domestic and international platforms. We typically attempt to mitigate the financial risk associated with production by
negotiating co-financing development and co-production agreements (which provide for joint efforts and cost-sharing between
us and one or more third-party companies) and pre-selling international distribution rights on a selective basis, including through
5
international output agreements (which refers to licensing the rights to distribute a film in one or more media generally for a limited
term, in one or more specific territories prior to completion of the film). We also often attempt to minimize production exposure
by structuring agreements with talent that provide for them to participate in the financial success of the motion picture in exchange
for reducing guaranteed amounts to be paid, regardless of the film's success (referred to as “up-front payments”). In addition,
many states and foreign countries have implemented incentive programs designed to attract film production as a means of economic
development. Government incentives typically take the form of sales tax refunds, transferable tax credits, refundable tax credits,
low interest loans, direct subsidies or cash rebates, which are generally calculated based on the amount of money spent in the
particular jurisdiction in connection with the production. Each jurisdiction determines the regulations that must be complied with,
as well as the conditions that must be satisfied, in order for a production to qualify for the incentive. We use such incentives and/
or programs and other structures to further reduce our financial risk in theatrical production.
Our approach to acquiring films for theatrical release is similar to our approach to film production. We generally seek to limit
our financial exposure in acquiring films while adding films of quality and commercial viability to our release schedule and library.
Theatrical Distribution
In general, the economic life of a motion picture consists of its exploitation in theaters, on packaged media and on various
digital and television platforms in territories around the world.
Theatrical distribution refers to the marketing and commercial or retail exploitation of motion pictures. We distribute motion
pictures directly to U.S. movie theaters. Generally, distributors and exhibitors (theater owners) will enter into agreements whereby
the exhibitor retains a portion of the “gross box office receipts,” which are the admissions paid at the box office. The balance is
remitted to the distributor. Successful motion pictures may continue to play in theaters for more than three months following their
initial release. Concurrent with their release in the U.S., motion pictures are generally released in Canada and may also be released
in one or more other foreign markets. After the initial theatrical release, distributors seek to maximize revenues by releasing movies
in sequential release date windows, which may be exclusive against other non-theatrical distribution channels.
In most territories, international theatrical distribution (outside of the U.S. and Canada) generally follows the same cycle as
domestic theatrical distribution. Historically, the international distribution cycle would begin a few months after the start of the
domestic distribution cycle. However, due, in part, to international box office growth, as well as film piracy in international markets,
a much higher percentage of films are being released simultaneously in the U.S. and international markets, or even earlier in certain
international markets.
We construct release schedules taking into account moviegoer attendance patterns and competition from other studios'
scheduled theatrical releases. We use either wide (generally, more than 2,000 screens nationwide) or limited initial releases,
depending on the film. We believe that we generally spend significantly less on prints and advertising for a given film than other
studios and design our marketing plans to cost-effectively reach a large audience.
Producing, marketing and distributing a motion picture can involve significant risks and costs, and can cause our financial
results to vary depending on the timing of a motion picture’s release. For example, marketing costs are generally incurred before
and throughout the theatrical release of a film and, to a lesser extent, other distribution windows, and are expensed as incurred.
Therefore, we typically incur losses with respect to a particular film prior to and during the film’s theatrical exhibition, and
profitability for the film may not be realized until after its theatrical release window.
We may revise the release date of a motion picture as the production schedule changes or in such a manner as we believe is
likely to maximize revenues or for other business reasons. Additionally, there can be no assurance that any of the motion pictures
scheduled for release will be completed, that completion will occur in accordance with the anticipated schedule or budget, or that
the film will ever be released.
6
Theatrical Releases
In fiscal 2016 (i.e., the twelve-month period ended March 31, 2016), we released the following 14 films theatrically in the
U.S., which included both Lionsgate and Summit Entertainment label films developed and produced in-house, films co-developed
and co-produced and films acquired from third parties:
Fiscal 2016 Theatrical Releases
Lionsgate/Summit
Title
Child 44
Age of Adaline
Shaun The Sheep Movie
American Ultra
Sicario
Freeheld
The Last Witch Hunter
Love the Coopers
The Hunger Games: Mockingjay - Part 2
Norm of the North
Dirty Grandpa
The Choice
Gods of Egypt
The Divergent Series: Allegiant
Release Date
April 17, 2015
April 24, 2015
August 5, 2015
August 21, 2015
September 18, 2015
October 2, 2015
October 23, 2015
November 13, 2015
November 20, 2015
January 1, 2016
January 22, 2016
February 5, 2016
February 26, 2016
March 18, 2016
Label
Summit
Lionsgate
Lionsgate
Lionsgate
Lionsgate
Summit
Summit
Lionsgate
Lionsgate
Lionsgate
Lionsgate
Lionsgate
Summit
Summit
In fiscal 2016, we also released the following films “day & date” from our new specialty film distribution label, Lionsgate
Premiere, which encompasses a diverse slate of films released in theatres as well as across a broad spectrum of digital platforms.
Lionsgate Premiere focuses on customizing innovative multiplatform and other release strategies for its slate of films in order to
capitalize on the fast-changing motion picture environment, reach affinity audiences with branded content and targeted marketing,
and enhance the profitability of individual films.
Fiscal 2016 Releases
Lionsgate Premiere
Title
She's Funny That Way
Dragon Blade
Cooties
Knock Knock
Heist
Don Verdean
Extraction
Exposed
Misconduct
Get A Job*
Release Date
August 21, 2015
September 4, 2015
September 18, 2015
October 9, 2015
November 13, 2015
December 11, 2015
December 18, 2015
January 22, 2016
February 5, 2016
March 25, 2016
* Through our partnership with CBS Films (with which we have a multi-year partnership that includes distribution
initiatives by us across all media, including theatrical and home entertainment platforms (except U.S. pay
television), as well as sales in international markets).
7
Finally, in fiscal 2016, the following films were released theatrically through CodeBlack Films, Pantelion Films (our joint
venture with Televisa), and through our partnership with Roadside Attractions:
Fiscal 2016 Theatrical Releases
CodeBlack/Pantelion/Roadside
Title
Beyond The Reach
Maggie
Where Hope Grows
Love and Mercy
Mr. Holmes
The Vatican Tapes
Z for Zachariah
Un Gallo Con Muchos Huevos
Stonewall
Ladrones
Miss You Already
Chi-Raq
600 Miles (aka 600 Millas)
Busco Novio Para Mi Mujer
The Perfect Match
Hello My Name is Doris
Summer Camp
Release Date
August 17, 2015
May 8, 2015
May 15, 2015
June 5, 2015
July 17, 2015
July 24, 2015
August 21, 2015
September 4, 2015
September 25, 2015
October 9, 2015
November 6, 2015
December 4, 2015
February 5, 2016
February 19, 2016
March 11, 2016
March 11, 2016
March 18, 2016
Partnership/ Label
Roadside Attractions
Roadside Attractions
Roadside Attractions
Roadside Attractions
Roadside Attractions
Pantelion Films
Roadside Attractions
Pantelion Films
Roadside Attractions
Pantelion Films
Roadside Attractions
Roadside Attractions
Roadside Attractions
Pantelion Films
CodeBlack Films
Roadside Attractions
Pantelion
Over the last 15 years, Lionsgate, Summit Entertainment and affiliated companies have distributed films that have earned 90
Academy Award ® nominations, won 20 Academy Awards and have been nominated for and won numerous Golden Globe ®
Awards, Screen Actors Guild Awards ®, BAFTA Awards and Spirit Awards.
Motion Pictures - Home Entertainment
Our U.S. home entertainment distribution operation exploits our film and television content library of approximately 16,000
motion picture titles and television episodes and programs, consisting of titles from, among others, Lionsgate, our subsidiaries,
affiliates and joint ventures (such as Summit Entertainment, Artisan Entertainment, CodeBlack Films, Grindstone Entertainment
Group, Modern Entertainment, Trimark, Pantelion Films and Roadside Attractions), as well as titles from third parties such as
A&E, LeapFrog Entertainment, Marvel, MGA Entertainment, Miramax, Saban Entertainment, StudioCanal, Tyler Perry Studios
and Zoetrope Corporation. Home entertainment revenue consists of packaged media and digital revenue.
Packaged Media
Packaged media distribution involves the marketing, promotion and sale and/or lease of DVDs and Blu-ray discs to wholesalers
and retailers who then sell or rent the DVDs and Blu-ray discs to consumers for private viewing.
For new theatrical titles, home entertainment distribution has traditionally occurred within three to four months of initial
theatrical release. However, due in part to new methods of distribution and the rise of new digital platforms and networks, select
titles are now being released on video-on-demand (“VOD”) and other digital formats on the same day as the title is theatrically
released (a so called “day & date” release strategy). These titles typically release on a modest number of screens for the purpose
of positioning VOD and other ancillary platforms. We have also experimented with various other windowing strategies, where,
for instance, a title may be released theatrically on several hundred screens, followed by an electronic-sell-through (“EST”) and
premium priced interactive VOD window, followed by release on packaged media, regular priced cable VOD, and later, subscription
video-on-demand (“SVOD”). Importantly, these release strategies are not applicable to every film, and may change based on
release patterns, new technologies and product flow.
We distribute or sell content directly to retailers such as Wal-Mart, Best Buy, Target, Costco and others who buy large volumes
of our DVDs and Blu-ray discs to sell directly to consumers. Sales to Wal-Mart accounted for approximately 42% of net home
entertainment packaged media revenue in fiscal 2016. We also directly distribute content to the rental market through Netflix,
8
Amazon, Redbox and others. The DVDs and Blu-ray discs for new titles in the U.S. include an UltraViolet digital copy, a home
entertainment industry standard that allows consumers who have purchased film and television content to access their content at
any time by downloading or streaming it from the cloud to various devices supported by participating UltraViolet retailers.
Of these titles, certain are released through our subsidiary, Grindstone Entertainment Group, which acquires and/or produces
titles as finished pictures and as “pre-buys” based on script, cast and genres, and creates targeted key art, marketing materials and
release plans, which is then distributed direct-to-video, VOD and through other media. In fiscal 2016, Grindstone Entertainment
Group released 38 titles.
Additionally, we distribute television product including series such as Mad Men, Orange Is The New Black, The Royals,
Weeds, Nurse Jackie, Duck Dynasty, Hannibal, Blue Mountain State, and the upcoming Narcos and Grace and Frankie, library
titles such as Alf and Little House on the Prairie, certain Disney-ABC Domestic Television series, as well as premiere children's
brands including our Alpha and Omega franchise, Saban Entertainment’s Power Rangers, Aardman’s Shaun the Sheep library,
LeapFrog Entertainment's LeapFrog, MGA Entertainment's LalaLoopsy and Bratz, American Greetings' Care Bears, and our
catalog of Teenage Mutant Ninja Turtles and Marvel Animated Features.
In fiscal 2016, four of our theatrical releases debuted at number one on DVD and Blu-ray - The Divergent Series: Insurgent
(which held the number one spot for two weeks), The Hunger Games: Mockingjay - Part 2, The Last Witch Hunter and Sicario.
We shipped approximately 80 million DVD and Blu-ray finished units during fiscal 2016. In calendar 2015, we had an
approximate 10% market share for home entertainment (packaged media, VOD and digital combined) making us the number
five studio in market share overall. We also maintained a box office-to-home entertainment conversion rate of approximately
15% above that of the industry average in calendar 2015. Box office-to-home entertainment conversion rate is calculated as the
ratio of the total of both first cycle DVD release revenues and total digital platform revenues for a theatrical release compared
to the total North American box-office revenues from such theatrical release.
Digital Media
Digital media distribution involves delivering content (including certain titles not available on packaged media) by electronic
means directly to consumers through in-home devices (such as set-top boxes from cable, satellite and telco companies, connected
or “smart” devices, game consoles and HDMI dongles) and mobile devices (such as smart phones, tablets and personal computers).
The key distribution methods today, of which Lionsgate is an active participant, include transactional distribution (such as pay-
per-view (“PPV”), EST and transaction video-on-demand (“TVOD”)), non-transactional distribution (such as SVOD), advertiser-
supported video-on-demand (“AVOD”) and free video-on-demand (“FVOD”)) and distribution through various linear pay, basic
cable and free television platforms.
Distribution on pay networks include, among others, EPIX, HBO, Starz and Showtime. Distribution on basic cable networks
include, among others, USA Networks, FX, Turner Networks, BET, Pop, SyFy, Lifetime, MTV, Comedy Central, Spike, AMC
Networks, Freeform (formerly known as ABC Family), Reelz, Telemundo, UniMás and Mundo Fox. We also license library content
to digital platforms and networks such as iTunes, iQIYI, Amazon, Wal-Mart's Vudu, Microsoft's Xbox, Sony's PlayStation Network,
Google Play, Netflix, Best Buy/Cinema Now, Hulu, EPIX, Barnes & Noble/Nook, M-Go and, most recently, Valve Corporation’s
Steam platform, and directly distribute (including, in some cases, our home entertainment rights, VOD, PPV and EST content) to
multichannel video programming distributors such as Comcast, DirecTV/AT&T, Dish Network, Cablevision, Cox
Communications, Charter Communications and Verizon Communications.
Transactional digital media distribution of theatrically released motion pictures generally occurs within three to six months
of the initial theatrical release. Pay television distribution and/or digital SVOD distribution usually follows within nine months
of a movie’s initial theatrical release. Finally, all other linear television and non-transactional digital models commence throughout
various windows thereafter. While these current release patterns may not remain static in the future and may change based on
release patterns, new technologies and product flow, a film’s lifecycle remains long. A release pattern may look as follows:
9
We also distribute our original and acquired television programming across a variety of digital platforms on an EST basis,
often the day after an episode airs on television in the territory. Television content is usually made available on digital SVOD,
FVOD and AVOD platforms years after such content first airs, generating additional revenues for the Company and supplementing
those revenues earned from traditional linear television distribution.
In fiscal 2016, three of our titles debuted at number one on the Rentrak On-Demand VOD charts - The Duff, The Divergent
Series: Insurgent and Sicario.
In fiscal 2016, five Lionsgate titles achieved the number one ranking on iTunes’ Top Movies chart - The Duff, The Divergent
Series: Insurgent, Sicario, Blue Mountain State: The Rise of Thadland and The Hunger Games: Mockingjay Part 2.
The Company also licenses its product outside of the U.S. The typical windowing sequence is generally consistent with the
domestic cycle; however, windowing strategies are developed in response to local market practices and conditions, and the exact
sequence and length of each window can vary by country and by title.
Over-The-Top Initiatives
We also distribute content through Tribeca ShortList, Comic-Con HQ and, shortly, Laugh Out Loud, our suite of over-the-
top services which feature branded, targeted content for affinity audiences.
10
Tribeca Short List, our SVOD service with Tribeca Enterprises, a diversified global media
company which owns and operates the Tribeca Film Festival, encompasses a prestigious
selection of Lionsgate and Tribeca titles as well as critically-acclaimed films drawn from
around the world. The films are curated by Tribeca and leading voices in contemporary
culture and are refreshed on a weekly basis.
Comic-Con HQ, our SVOD service with Comic-Con International, a nonprofit educational
organization dedicated to creating awareness of, and appreciation for, comics and related
popular artforms, primarily through the presentation of conventions and events that celebrate
the historic and ongoing contribution of comics to art and culture, features an evolving slate
of programming. This slate includes original scripted and unscripted series, recurring daily
and weekly entertainment commentary, plus unique access to a growing library of live and
archival programming from world-class events, a highly-curated selection of film and
television genre titles, and behind-the-scenes access and bonus features from genre titles that
defy and define pop culture.
In March 2016, we announced that we had formed a partnership with Kevin Hart and his
company, Hartbeat Digital, to launch a new video-on-demand service, Laugh Out Loud, and
create a new social adventure mobile tablet game. The new service will serve as the exclusive
home for all content created by Kevin Hart outside his theatrical and live touring activities
and will include original series starring Kevin Hart. Laugh Out Loud will also showcase
content curated by Kevin Hart along with shows featuring social media stars and up and
coming comedians.
Motion Pictures - Television
We license our theatrical productions and acquired films to the domestic linear pay, basic cable and free television markets.
For additional information, see Motion Pictures-Home Entertainment-Digital Media above.
Motion Pictures - International
Our international sales operations are headquartered at our offices in London, England. The primary components of our
international business are, on a territory by territory basis through third parties or directly through our international divisions: (i)
the licensing of rights in all media of our in-house feature film product on an output basis; (ii) the licensing of rights in all media
of our in-house product on a pre-sales basis; (iii) the licensing and sale of third party feature films on an agency basis; and (iv)
direct distribution.
We sell or license rights in all media on a territory by territory basis (other than the territories where Lionsgate self-distributes)
of (i) our in-house Lionsgate and Summit Entertainment feature film product, and (ii) films produced by third parties such as
Alcon Entertainment, Black Label Media, CBS Films, River Road Entertainment, Thunder Road Pictures and other independent
producers. Films licensed and/or released by us in fiscal 2016 included such in-house productions as The Hunger Games:
Mockingjay Part 2, The Divergent Series: Allegiant, Sicario, The Last Witch Hunter, Gods of Egypt, Child 44, Now You See Me
2, Deepwater Horizon, La La Land, Nerve, The Shack, John Wick: Chapter 2, Power Rangers, The Glass Castle, Robin Hood:
Origins and Stronger. Third party films for which we were engaged as exclusive sales agent and/or released by us in fiscal 2016
included Love & Mercy, A Little Chaos, Pawn Sacrifice, Love the Coopers, The Last Face, A Monster Calls and Middle School.
Through our pre-sales and output arrangements, we generally cover the majority of the production budget or acquisition cost
of new theatrical releases we distribute internationally. Our output agreements for Lionsgate and Summit feature films currently
cover 11 territories including Australia/New Zealand, Benelux (Belgium/Netherlands/Luxembourg), Canada, CIS (Commonwealth
of Independent States), Eastern Europe, France, Germany/Austria, Italy, Poland, Scandinavia and Spain. These output agreements
generally include all rights for all media (including home entertainment and television rights). We also distribute theatrical titles
in Latin America through our partnership with IDC, certain theatrical titles in China through our financing relationship with Hunan
TV & Broadcast Intermediary Co., and certain television and library titles in Asia through our Celestial Tiger Entertainment joint
venture. In all, we currently have 17 output arrangements covering 13 major territories and 80% of the movie going population
(excluding China and India).
11
We self-distribute motion pictures in the United Kingdom and Ireland through Lionsgate UK (formerly Redbus Film
Distribution), which we acquired in October 2005. Lionsgate UK has since established a reputation in the United Kingdom as a
leading producer and distributor and acquirer of commercially successful and critically acclaimed product. In fiscal 2016, Lionsgate
UK released the following 18 films theatrically:
Fiscal 2016 Theatrical Releases
Lionsgate UK
Title
A Little Chaos
Stonehearst Asylum
A Royal Night Out
Survivor
Slow West
She's Funny That Way
The Gift
Absolutely Nothing
Good People
Sicario
Paper Planes
Brooklyn
The Hunger Games: Mockingjay Part 2
Dirty Grandpa
Pride & Prejudice & Zombies
London Has Fallen
The Choice
Sing Street
Release Date
April 17, 2015
April 24, 2015
May 8, 2015
June 5, 2015
June 26, 2015
June 26, 2015
August 7, 2015
August 14, 2015
August 21, 2015
October 9, 2015
October 23, 2015
November 6, 2015
November 29, 2015
January 25, 2016
February 11, 2016
March 3, 2016
March 4, 2016
March 17, 2016
Production/
Acquisition
Production
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Production
Acquisition
Acquisition
Production
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
12
Motion Pictures - Other
Interactive Ventures and Games
Our Interactive Ventures and Games division develops our digital investment strategy as well as our operational initiatives
for both our own and third party intellectual property for traditional and digital media adaptation through, among other things, the
production and global distribution of multi-platform games, the licensing of content for games and mobile devices, and development
of branded online services and experiences including virtual and augmented reality.
Over the past few years, we have invested in interactive storytellers Telltale Games, Finnish mobile game developer/publisher
Next Games, live mobile gaming platform Mobcrush, and formed a strategic partnership with Hong Kong based mobile game
developer/publisher Fifth Journey.
In gaming, we have announced an Orange Is The New Black slot machine with International Game Technology (which was
simultaneously released into their DoubleDown Casino app), partnered with Alcon Entertainment and Starbreeze to create Point
Break game pack extensions for Payday 2, released a Norm of the North edutainment app with Hong Kong based Animoca (to be
followed by a Norm of the North runner game), and collaborated with Flashman Games on interactive Hunger Games PlayStation
4 themes. We also announced a deeper integration of John Wick into Payday 2, an Expendables mobile game in partnership with
Avi Lerner's Millennium Films and Hong Kong-based mobile game developer and publisher Fifth Journey, a Kevin Hart social
adventure game with Fifth Journey, and a story driven Now You See Me game with Kiwi. We anticipate significantly building this
slate over the next several years.
In the past year, we have also launched a broad range of virtual reality ("VR") initiatives building upon our reputation as early
definers of new content platforms and markets. We became one of the first studios to invest in a AAA VR game for tethered
headsets (e.g., Vive, Oculus and PlayStation VR) with our soon-to-be released John Wick: The Impossible Task VR Game, a first-
person shooter game in collaboration with Starbreeze. We also partnered with Side-Kick VR to develop one of the first-ever
premium IP based mobile VR games based on the Now You See Me film franchise. Finally, we produced Hulu’s first original VR
experience in collaboration with RocketJump and became one of the first two studios to provide EST and VOD titles to Oculus
for the launch of their video platform.
Global Franchise Management and Strategic Partnerships
Our Global Franchise Management and Strategic Partnership division broadly covers all theatrical and television promotions
and branded partnerships, licensed consumer products and location-based entertainment initiatives. Our goal is to drive incremental
revenue and deepen fan engagement across our entire portfolio of properties via meaningful brand extensions, a direct model
consumer products business and location-based entertainment destinations around the world.
Recent initiatives include strategic alliances with Samsung, Kellogg's and Fiat Chrysler Automobiles to support the release
of The Hunger Games: Mockingjay - Part 2, a Lionsgate theme park zone featuring multiple attractions scheduled to open at
Motiongate Dubai in late 2016, and a Lionsgate branded indoor entertainment experience scheduled to open in Hengqin, China.
Music
Our film and television music departments creatively oversee music for our theatrical and television slates, respectively. Our
music strategy is to service the Company’s creative division’s music needs, while providing music for use in marketing our films
and television shows. For our theatrical slate, the work of the music department includes overseeing songs, scores and soundtracks
for all of our productions, co-productions and acquisitions. For our television slate, the work of the music department includes
overseeing music staffing, scores and soundtracks for all of our television productions. Music revenues are derived from the sales
and licensing of music from our films and television programs, and the theatrical exhibition of our films and the television broadcasts
of our productions.
Ancillary Revenues
Ancillary revenues are derived from the licensing of non-theatrical uses of our films and television programs to distributors
who, in turn, make a motion picture or television program available to airlines, hotels, schools, oil rigs, public libraries, prisons,
community groups, the armed forces, ships at sea and others.
13
Television Production - Domestic Television
Our television business consists of the development, production, syndication and distribution of television programming. We
principally generate revenue from the licensing and distribution of such programming to broadcast television networks, pay and
basic cable networks, digital platforms and syndicators of first-run programming, which license programs on a station-by-station
basis and pay in cash or via barter (i.e., trade of programming for airtime). Each of these platforms may acquire a mix of original
and library programming.
After initial exhibition, we distribute programming to subsequent buyers, both domestically and internationally, including
basic cable network, premium subscription services or digital platforms (known as “off-network syndicated programming”). Off-
network syndicated programming can be sold in successive cycles of sales which may occur on an exclusive or non-exclusive
basis. In addition, television programming is sold on home video (packaged media and via digital delivery) and across all other
applicable ancillary revenue streams including music publishing, touring and integration.
As with film production, we use tax credits, subsidies, and other incentive programs for television production in order to
maximize our returns and ensure fiscally responsible production models.
In November 2015, we acquired a 62.5% interest in Pilgrim Media Group, one of the world's leading producers of unscripted
programming. Following this transaction, we currently produce, syndicate and distribute over 80 television shows on more than
40 networks.
In fiscal 2016, syndication (through our subsidiary, Debmar-Mercury), scripted and unscripted programming produced, co-
produced or distributed by us and our affiliated entities included, among others, the following:
Fiscal 2016
Scripted Television
Title
Casual
Chasing Life
Deadbeat
Graves
Greenleaf
Guilt
Manhattan
Nashville
Orange Is The New Black
The Royals
Network
Hulu
Freeform (fka ABC Family)
Hulu
EPIX
OWN
Freeform
WGN America
ABC
Netflix
E!
Fiscal 2016
Unscripted Television - Lionsgate
Title
Hellevator
Join or Die
Kicking & Screaming
Monica the Medium
Rocket Jump: The Show
Revenge Body
Network
GSN
History
FOX
Freeform
Hulu
E!
14
Fiscal 2016
Unscripted Television - Pilgrim Studios
Network
Title
Lifetime
Bring It!
WE tv
Celebrity Newlyweds
WE tv
David Tutera's CELEBrations
Discovery
Fast & Loud
Destination America
Ghost Brothers
Syfy
Ghost Hunters
FYI
Kocktails with Khloe
Discovery
Misfits Garage
TLC
My Big Fat Fabulous Life
OWN
Raising Whitley
Amazon
Somebody's Got To Do It
Discovery
Street Outlaws
OWN
Welcome to Sweetie Pie's
FS1
Ultimate Fighter
National Geographic Channel
Wicked Tuna
National Geographic Channel
Wicked Tuna: Outer Banks
Fiscal 2016
Syndication - Debmar-Mercury
Title
Celebrity Name Game
Family Feud
The Wendy Williams Show
Are We There Yet?
Anger Management
House of Payne
Meet The Browns
Network
First Run Syndication
First Run Syndication
First Run Syndication
Syndication
Syndication
Syndication
Syndication
Television Production- International
We continue to expand our television business internationally through sales and distribution of original Lionsgate television
series, third party television programming and format acquisitions. Lionsgate UK has also acquired a 25% interest in British
independent television and film production company Kindle Entertainment, marking Lionsgate UK’s entry into the television
business as well as the continued globalization of Lionsgate’s television operations.
Television Production-Home Entertainment
For information regarding television production home entertainment revenue, see Motion Pictures - Home Entertainment
above.
Television Production- Other
Other revenues are derived from, among others, product integration in our television episodes and programs, the sales and
licensing of music from the television broadcasts of our productions, and from the licensing of our television programs to ancillary
markets. For additional information, see Motion Pictures - Other above.
Joint Ventures, Partnerships and Ownership Interests
Our joint ventures, partnerships and ownership interests support our strategy of diversifying our company as a multiplatform
global industry leader in entertainment. We regularly evaluate our existing properties, libraries and other assets and businesses in
order to determine whether they continue to enhance our competitive position in the industry, have the potential to generate
15
significant long-term returns, represent an optimal use of our capital and are aligned with our goals. When appropriate, we discuss
potential strategic transactions with third parties for purchase of our properties, libraries or other assets or businesses that factor
into these evaluations. As a result, we may, from time to time, determine to sell individual properties, libraries or other assets or
businesses or enter into additional joint ventures, strategic transactions and similar arrangements for individual properties, libraries
or other assets or businesses.
Atom Tickets. In August 2014, we acquired an interest in Atom Tickets, a theatrical movie
discovery service. Atom Tickets is an Android and iOS app designed to make movie-going simple
that can be used to pre-purchase tickets and concessions, coordinate and invite friends without
having to pay for them and skip the lines at the theater. It’s movie-going for the twenty-first
century. We own an approximately 19.5% interest in Atom Tickets.
Celestial Tiger Entertainment. In January 2012, we formed Celestial Tiger Entertainment, a joint
venture with Saban Capital Group, Inc. and Celestial Pictures, a company wholly-owned by
Astro Overseas Limited. Celestial Tiger Entertainment is a leading independent media company
that focuses on the operation of branded pay television channels and content creation targeted
at Asian consumers. It operates a powerful bouquet of distinct pay television channels including:
CELESTIAL MOVIES, a premier 24-hour first-run Chinese movie channel in Asia backed by
output deals with the top Hong Kong movie studios and distributors; CELESTIAL CLASSIC
MOVIES, one of the most widely-distributed Chinese movie channels in the world showcasing
Chinese movie masterpieces; CELESTIAL MOVIES PINOY, a Chinese movie channel that is
programmed, dubbed and promoted specifically to Filipino viewers; cHK, a general
entertainment channel offering cool, chic, and contemporary celebrity-powered Hong Kong
entertainment; KIX, the ultimate destination for action entertainment in Asia; KIX 360, the
dedicated Over-The-Top linear feed for KIX; MIAO MI, the Mandarin edutainment channel
created for preschool kids across Asia; THRILL, Asia's only regional horror, thriller and suspense
movie channel; and THRILL 360, the dedicated Over-The-Top linear feed for THRILL. As one
of Asia's largest vertically integrated independent entertainment companies, Celestial Tiger
Entertainment also produces original content which complements its channels business. We own
a 16% interest in Celestial Tiger Entertainment.
DEFY Media. In June 2007, we acquired an interest in Break Media, a multi-platform digital
media company and a leader in male-targeted content creation and distribution. In October 2013,
Break Media merged with Alloy Digital to create DEFY Media. DEFY Media is a top creator
of original content for digital consumers. Across popular comedy, lifestyle, and gaming brands-
SMOSH, Clevver, ScreenJunkies, AWE me, Made Man, and Break-DEFY’s in-house created
content generates 700 million monthly video views and reaches 125 million viewers on the most
relevant and popular platforms. With a social following of more than 100 million, and uniquely
integrated capabilities in content development, studio production, and distribution, many of the
world’s top brands partner with DEFY to build immersive advertising solutions that deliver
access to this influential audience. We own an approximately 15.8% economic interest in DEFY
Media.
16
EPIX. In April 2008, we formed EPIX, a joint venture with Viacom, its Paramount Pictures unit
and MGM. The fastest growing premium network in 2015, EPIX delivers the latest movie
releases, classic film franchises, original series, documentaries, comedy and music events on
television, on demand, online and on devices. EPIX has pioneered the development and
proliferation of “TV Everywhere.” It was the first premium network to provide multi-platform
access to its content online at EPIX.com and was the first premium network to launch on Xbox,
PlayStation®, Android phones and tablets, Windows 8.1 and Roku® players. EPIX is also
available across Chromecast, Apple® iPads® and iPhones® Android TV and more, delivering
more movies than any other premium network with thousands of titles available for streaming.
Through relationships with cable, satellite, telco and digital partners, EPIX is available to over
50 million homes nationwide. As reported by SNL Kagan, EPIX grew 39% in 2015 and drove
75% of net unit growth in the category. We own a 31.2% interest in EPIX.
Globalgate Entertainment. In May 2016, reflecting the growing popularity of local-language
films in markets around the world, we partnered with international entertainment executives Paul
Presburger, William Pfeiffer and Clifford Werber to launch Globalgate Entertainment. Globalgate
has built a consortium of leading international producers, distributors and co-financing partners
who will identify and provide priority access to intellectual property for production as local-
language films in territories worldwide. In addition to properties controlled by its partners,
Globalgate will identify third-party properties in the U.S. and internationally for development
and production as local-language films. These films will be distributed by the consortium's
partners and co-financed by the affiliated Globalgate Fund. Globalgate's consortium partners
include Belga (Benelux), Gaumont (France), Kadokawa (Japan), Lotte (Korea), Nordisk Film
(Scandinavia), Televisa/Videocine (Mexico), TME (Turkey) and Tobis (Germany). Globalgate
expects partners to join soon in territories such as China, India, and other key markets. We own
an 30% interest in Globalgate Entertainment.
Next Games. In July 2014, we entered into a strategic partnership and acquired an interest in
mobile games developer Next Games. Next Games, founded in 2013 and headquartered in
Helsinki, Finland, focuses on crafting visually impressive, highly engaging games. We invested
$2.0 million in Next Games for a small minority ownership interest.
Pantelion Films. In September 2010, we launched Pantelion Films, 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. Pantelion Films,
the first major Latino Hollywood studio and the face of Hispanic entertainment, provides
Hispanic moviegoers with a steady source of exciting and original films, including world-class
Latino actors, directors and writers. From comedies and dramas to family movies and romantic
comedies, Pantelion Films produces and acquires movies that speak directly to acculturated and
Spanish-dominant Hispanics alike. Pantelion Films’ fiscal 2016 theatrical slate included the
following films: Un Gallo Con Muchos Huevos, the highest grossing Spanish Language animated
film in the U.S.; Ladrones, the sequel to Lionsgate’s Ladron Que Roba a Ladrón; Busco Novio
Para Mi Mujer; The Vatican Tapes; and Summer Camp. In fiscal 2016, Pantelion Films also
wrapped principal photography on No Manches Frida, a Spanish language remake in association
with Alcon Entertainment, based on the German blockbuster film Fack Ju Göhte; and began pre-
production on How to be a Latin Lover, the studio’s first production under its first look deal with
Eugenio Derbez. We own a 49% interest in Pantelion Films.
Pilgrim Media Group. In November 2015, we acquired a 62.5% interest in Craig Piligian’s
Pilgrim Media Group. Pilgrim Media Group produces a wide variety of unscripted and scripted
programming for television, including David Tutera's CELEBrations for WE tv; Bring It! and
spin-off Step It Up! for Lifetime; Fast N' Loud, Misfit Garage, and Street Outlaws for Discovery;
Ghost Hunters for Syfy; The Ultimate Fighter for FOX Sports 1; Welcome to Sweetie Pie's and
Raising Whitley for OWN; Wicked Tuna and Wicked Tuna: Outer Banks for National Geographic
Channel; Somebody's Gotta Do It with Mike Rowe for CNN; My Big Fat Fabulous Life for TLC;
and Missing in Alaska for History. Pilgrim Media Group also produces the FYI talk show series
Kocktails with Khloe, hosted by Khloe Kardashian. In the scripted realm, Pilgrim Media Group
is completing production on the new series Recovery Road for Freeform (formerly known as
ABC Family). The company's original movies for Lifetime include Amanda Knox: Murder On
Trial In Italy; Abducted: The Carlina White Story, which earned a 2012 NAACP Image Award
for Outstanding Writing In A Motion Picture; and the crime thriller Stalkers. We own a 62.5%
membership interest in Pilgrim Media Group.
17
Pop. Entered into in March 2013, Pop (formerly TV Guide Network), our joint venture with
CBS, is an entertainment television destination seen in approximately 80 million homes with
programming that celebrates fandom and what’s popping in culture. The partnership combines
CBS’s programming, production and marketing assets with our resources in motion pictures,
television and digitally delivered content. Pop’s ownership structure is comprised of the company
with the number one broadcast network and many of the top first-run syndication series
(Entertainment Tonight, The Insider) and the studio that produced and distributes the blockbuster
Hunger Games, Twilight and Divergent franchises and produces such award-winning TV series
as Mad Men and Orange is the New Black. We own a 50% interest in Pop.
Roadside Attractions. In July 2007, we acquired an interest in Roadside Attractions, an
independent theatrical distribution company. In just over a decade, Roadside Attractions’ films
have grossed over $200 million and garnered 13 Academy Award® nominations. Roadside has
released such critical and commercially successful films as Mr. Holmes, Love & Mercy, A Most
Wanted Man, Dear White People, The Skeleton Twins, All Is Lost, Mud, Winter’s Bone, The Cove,
Arbitrage, Margin Call and Super Size Me. Its upcoming slate includes A Hologram for the King,
Love & Friendship, Genius, Our Kind of Traitor, Indignation, Southside with You and Manchester
by the Sea. We own a 43% interest in Roadside Attractions.
Starz. Starz (NASDAQ: STRZA, STRZB) is a leading integrated global media and entertainment
company with operating units that provide premium subscription video programming on
domestic U.S. pay television networks (Starz Networks) and global content distribution (Starz
Distribution), www.starz.com. The Starz Networks operating unit is home to the flagship
STARZ® brand with 23.6 million subscribers in the United States as of December 31, 2015, with
the STARZ ENCORESM network at 32.2 million subscribers. Through STARZ, the company
provides high quality, entertaining premium subscription video programming with 17 premium
pay TV channels and associated on-demand and online services. STARZ is sold through U.S.
multichannel video distributors, including cable operators, satellite television providers,
telecommunications companies, and other online and digital platforms. Starz offers subscribers
more than 5,000 distinct premium television episodes and feature films every year and up to
1,500 every month, including STARZ Original series, first-run movies and other popular movie
and television programming. The Starz Distribution operating unit is home to the Anchor Bay
Entertainment, Starz Digital, and Starz Worldwide Distribution divisions. In addition to STARZ
Original series, Starz Distribution develops, produces and acquires movies, television and other
entertainment content for worldwide home video, digital, and television licensing and sales. We
currently own approximately 4.8% of Starz common stock outstanding and 15.0% of the total
voting power of Starz common stock.
Telltale Games. In February 2015, we acquired an interest in Telltale Games, a leading and award-
winning independent developer and publisher of games for every major interactive platform
from home consoles and PC to mobile and tablet devices, and pioneer of the episodic delivery
of digital gaming content. By successfully developing games as an episodic series and frequently
releasing in the format of a game season, Telltale Games creates longer consumer engagement
than traditional games for each release. Founded in 2004 by games industry veterans with decades
of experience, Telltale Games has quickly become an industry leader with numerous honors and
awards from the Academy of Interactive Arts and Sciences, BAFTA, the IMGA, and more, as
well as being named Studio of the Year across multiple years. Telltale Games’ reputation for
quality has been established across more than two dozen different product releases over the years
with recognition and acclaim from publications like IGN, The New York Times, and Variety,
including over 100 "Game of the Year" awards from publications like USA Today, Yahoo! Games,
Wired, Spike TV VGAs, E!, Official Xbox Magazine, The Telegraph, Metacritic, and more.
Telltale is a fully licensed third party publisher on consoles from Microsoft, Sony, and Nintendo,
and also publishes games on the PC, Mac, iOS, and Android-based platforms. We own an
approximately 14% economic interest in Telltale Games.
Intellectual Property
We currently use a number of trademarks, service marks, copyrights, domain names and similar intellectual property in
connection with our business and own registrations and applications to register them both domestically and internationally. We
believe that ownership of such trademarks, service marks, copyrights, domain names and similar intellectual property is an important
factor in our business and that our success does depends, in part, on such ownership.
Motion picture and television piracy is extensive in many parts of the world, including South America, Asia and certain Eastern
European countries, and is made easier by technological advances and the conversion of content into digital formats. This trend
18
facilitates the creation, transmission and sharing of high quality unauthorized copies of content on packaged media and through
digital formats. The proliferation of unauthorized copies of these products has had and will likely continue to have an adverse
effect on our business, because these products reduce the revenue we receive from our products. Our ability to protect and enforce
our intellectual property rights is subject to certain risks and from time to time, we encounter disputes over rights and obligations
concerning intellectual property. We cannot provide assurance that we will prevail in any intellectual property disputes.
This Annual Report on Form 10-K contains references to our trademarks and to trademarks belonging to other entities. Solely
for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K, 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.
Competition
Television and motion picture production and distribution are highly competitive businesses. We face competition from
companies within the entertainment business and from alternative forms of leisure entertainment, such as travel, sporting events,
outdoor recreation, video games, the internet and other cultural related activities. We compete with the major studios, numerous
independent motion picture and television production companies, television networks, pay television systems and digital media
platforms for the acquisition of literary and film properties, the services of performing artists, directors, producers and other creative
and technical personnel and production financing, all of which are essential to the success of our entertainment businesses. In
addition, our motion pictures compete for audience acceptance and exhibition outlets with motion pictures produced and distributed
by other companies. Likewise, our television product faces significant competition from independent distributors as well as major
studios. As a result, the success of any of our motion pictures and television product is dependent not only on the quality and
acceptance of a particular film or program, but also on the quality and acceptance of other competing motion pictures or television
programs released into the marketplace at or near the same time.
Given such competition, we attempt to operate with a different business model than many others. We typically emphasize a
lower cost structure, risk mitigation, reliance on financial partnerships and innovative financial strategies. Our cost structures are
designed to utilize our flexibility and agility as well as the entrepreneurial spirit of our employees, partners and affiliates, in order
to provide creative entertainment content to serve diverse audiences worldwide.
Social Responsibility
We are committed to acting responsibly and making a positive difference in the local and global community through Lionshares,
the umbrella for our companywide commitment to our communities. Lionshares is a volunteer program that seeks to provide
opportunities for employees within the Lionsgate family to partner with a diverse range of charitable organizations. The program
not only enriches the Lionsgate work experience through cultural and educational outreach, but also positively interacts and invests
in the local and global community. Specifically, Lionshares strives to:
•
Provide diverse activities intended to appeal to a broad range of interests, including: literacy, elderly visits, food
banks, animal interactions, disaster relief, community relations, environmental activities, health/fitness, cancer
awareness and charitable fundraising.
Partner with leading organizations with expertise in these areas.
•
• Create an effectual and influential impact through human contact.
•
Share time and experience, not just among Lionsgate employees, but with the greater community as well.
For further information about our social responsibility initiatives, see www.lionsgate.com/corporate/volunteer.
Employees
As of May 23, 2016, we had 795 full-time employees in our worldwide operations, including full-time and part-time employees
of our wholly-owned subsidiaries and consolidated ventures. We also utilize many consultants in the ordinary course of our business
and hire additional employees on a project-by-project basis in connection with the production of our motion pictures and television
programming.
Corporate History
19
We are a corporation organized under the laws of the Province of British Columbia, resulting from the merger of Lions Gate
Entertainment Corp. and Beringer Gold Corp. on November 13, 1997. Beringer Gold Corp. was incorporated under the Business
Corporation Act (British Columbia) on May 26, 1986 as IMI Computer Corp. Lions Gate Entertainment Corp. was incorporated
under the Canada Business Corporations Act using the name 3369382 Canada Limited on April 28, 1997, amended its articles on
July 3, 1997 to change its name to Lions Gate Entertainment Corp., and on September 24, 1997, continued under the Business
Corporation Act (British Columbia).
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and
amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act, are available, free of
charge, on our website at www.lionsgate.com as soon as reasonably practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission (the “SEC”). The Company's Disclosure Policy, Corporate Governance
Guidelines, Standards for Director Independence, Code of Business Conduct and Ethics for Directors, Officers and Employees,
Code of Ethics for Senior Financial Officers, Policy on Shareholder Communications, Related Person Transaction Policy, Charter
of the Audit & Risk Committee, Charter of the Compensation Committee and Charter of the Nominating and Corporate Governance
Committee and any amendments thereto are also available on the Company's website, as well as in print to any shareholder who
requests them. The information posted on our website is not incorporated into this Annual Report on Form 10-K.
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC at www.sec.gov. The public may read and copy any materials we file with the SEC at
the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
ITEM 1A. RISK FACTORS.
You should carefully consider the risks described below as well as other information included in, or incorporated by reference
into in this Form 10-K. The risks described below are not the only ones facing the Company. Additional risks that we are not
presently aware of, or that we currently believe are immaterial, may also become important factors that affect us. All of these
risks and uncertainties could adversely affect our business, financial condition, operating results, liquidity and prospects.
We face substantial capital requirements and financial risks.
Our business requires a substantial investment of capital. The production, acquisition and distribution of motion pictures and
television programs require a significant amount of capital. A significant amount of time may elapse between our expenditure of
funds and the receipt of revenues from our motion pictures or television programs. This time lapse may require us to fund a
significant portion of our capital requirements from our credit facilities or other financing sources. Although we intend to continue
to reduce the risks of our production exposure through financial contributions from broadcasters and distributors, tax credit
programs, government and industry programs, other studios and co-financiers and other sources, we cannot assure you that we
will continue to successfully implement these arrangements or that we will not be subject to substantial financial risks relating to
the production, acquisition, completion and release of future motion pictures and television programs. In addition, if we increase
(through internal growth or acquisition) our production slate or our production budgets, we may be required to increase overhead
and/or make larger up-front payments to talent and, consequently, bear greater financial risks. Any of the foregoing could have a
material adverse effect on our business, financial condition, operating results, liquidity and prospects.
The costs of producing and marketing feature films is high and may increase in the future, which may make it more difficult for a
film to generate a profit or compete against other films. The costs of producing and marketing feature films generally increase
from year to year, which may make it more difficult for our films to generate a profit or compete against other films. A continuation
of this trend would leave us more dependent on other media, such as packaged media, digital media, television and international
markets, which revenues may not be sufficient to offset an increase in the cost of motion picture production and marketing. If we
cannot successfully exploit these other media, it could have a material adverse effect on our business, financial condition, operating
results, liquidity and prospects.
Budget overruns may adversely affect our business. While our business model requires that we be efficient in the production of
our motion pictures and television programs, actual motion picture and television production costs may exceed their budgets. The
20
production, completion and distribution of motion pictures and television productions can be subject to a number of uncertainties,
including delays and increased expenditures due to disruptions or events beyond our control. As a result, if a motion picture or
television production incurs substantial budget overruns, we may have to seek additional financing from outside sources to complete
production or fund the overrun ourselves. We cannot make assurances regarding the availability of such financing or on terms
acceptable to us, nor can we assure you that we will recoup these costs. For instance, increased costs incurred with respect to a
particular film may result in any such film not being ready for release at the intended time and the postponement to a potentially
less favorable date, all of which could cause a decline in box office performance, and, thus, the overall financial success of such
film. Budget overruns could also prevent a picture from being completed or released. Any of the foregoing could have a material
adverse effect on our business, financial condition, operating results, liquidity and prospects.
We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to take other actions
to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance,
which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond
our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to
pay the principal, premium, if any, and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund
our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional
capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, that
these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be
permitted under the terms of our existing or future debt agreements, including our credit facilities and the indenture governing
our senior secured notes. In the absence of such cash flows or capital resources, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to meet our debt service and other obligations. Our credit facilities
and the indenture governing our senior secured notes restrict our ability to dispose of assets and use the proceeds from such
dispositions. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them
and these proceeds may not be adequate to meet any debt service obligations then due.
If we cannot make scheduled payments on our debt, we will be in default and, as a result:
our debt holders could declare all outstanding principal and interest to be due and payable;
the lenders under our credit facilities could terminate their commitments to lend us money;
the holders of our secured debt could foreclose against the assets securing their borrowings; and/or
•
•
•
• we could be forced into bankruptcy or liquidation.
If our level of corporate debt increases, it could adversely affect our ability to raise additional capital to fund our operations,
require us to dedicate substantial capital to servicing our debt obligations, expose us to interest rate risk, limit our ability to
pursue strategic business opportunities, affect our ability to react to changes in the economy or our industry and prevent us
from meeting our debt obligations.
As of March 31, 2016, our corporate debt was $887.9 million (carrying value - $886.1 million). In addition, our production
loan obligations were $690.4 million.
On July 19, 2013, we redeemed $432.0 million of our 10.25% Senior Secured Second-Priority Notes (the “10.25% Senior Notes”),
issued $225.0 million of our 5.25% Senior Secured Second-Priority Notes (the “5.25% Senior Notes”) and borrowed $225.0
million under our Second Lien Credit and Guarantee Agreement dated July 19, 2013 (the “Term Loan Due 2020”). On March 17,
2015, we redeemed the Term Loan Due 2020 and borrowed $375 million under our Second Lien Credit and Guarantee Agreement
dated March 17, 2015 (the "Term Loan Due 2022"). On March 17, 2015, the April 2009 3.625% Notes were called for redemption
and in April 2015, the holders of the notes converted substantially all of the outstanding principal amounts into common shares.
On May 4, 2015, we amended the Term Loan Due 2022 to increase the aggregate principal amount to $400 million.
A substantial degree of leverage could have important consequences, including the following:
•
•
it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, motion picture
and television development, production and distribution, debt service requirements, acquisitions or general corporate or other
purposes, or limit our ability to obtain such financing on terms acceptable to us;
a portion of our cash flows from operations will be dedicated to the payment of principal and interest on our indebtedness
and will not be available for other purposes, including funding motion picture and television production, development and
distribution and other operating expenses, capital expenditures and future business opportunities;
21
•
•
•
the debt service requirements of our indebtedness could make it more difficult for us to satisfy our financial obligations;
certain of our borrowings, including borrowings under our secured credit facilities are at variable rates of interest, exposing
us to the risk of increased interest rates;
it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our
competitors that have less debt;
it may limit our ability to pursue strategic acquisitions and other business opportunities that may be in our best interests;
•
• we may be vulnerable to a downturn in general economic conditions or in our business; and/or
• we may be unable to carry out capital spending that is important to our growth.
Despite our current indebtedness levels, we and our subsidiaries may be able to incur additional debt in the future.
Although each of our credit facilities and the indentures governing our senior secured notes contains covenants that, among other
things, limit our ability to incur additional indebtedness, including guarantees, make restricted payments and investments, and
grant liens on our assets, the covenants contained in such debt documents provide a number of important exceptions and thus, do
not prohibit us or our subsidiaries from doing so. Such exceptions will provide us substantial flexibility to incur indebtedness,
grant liens and expend funds to operate our business. For example, under the terms of the indenture governing our senior secured
notes (i) with few restrictions, we may incur indebtedness in connection with certain film and television financing arrangements,
including without limitation, purchasing or acquiring rights in film or television productions or financing print and advertising
expenses, and such indebtedness may be secured by liens senior to the liens in respect of our senior secured notes, and (ii) in
limited circumstances, we may make investments in assets that are not included in the borrowing base supporting our senior
secured notes, in each case, without having to meet the leverage ratio tests for debt incurrence or to fit such investments within
the restricted payments “build up basket” or within other categories of funds applicable to making investments and other restricted
payments under the indenture governing our senior secured notes.
In addition, we may incur additional indebtedness through our senior secured credit facility. We may borrow up to $800 million
under the senior secured credit facility. At March 31, 2016, we have $161.0 million of borrowings under our senior secured
credit facility, and no letters of credit outstanding. We could borrow some or all of the remaining permitted amount in the
future. The amount we have available to borrow under this facility depends upon our borrowing base, which in turn depends on
the value of our existing library of films and television programs, as well as accounts receivable and cash held in collateral
accounts. If new debt is added to our and our subsidiaries' existing debt levels, this has the potential to magnify the risks
discussed above relating to our ability to service our indebtedness and the potential adverse impact our high level of
indebtedness could have on us.
An increase in the ownership of our common shares by certain shareholders could trigger a change in control under the
agreements governing our long-term indebtedness.
The agreements governing certain of our long-term indebtedness contain change in control provisions that are triggered when any
of our shareholders, directly or indirectly, acquires ownership or control in excess of a certain percentage of our common shares.
As of May 23, 2016, five of our shareholders, Mark H. Rachesky, M.D., Capital World Investors, FMR, LLC, Capital Research
Global Investors and Vanguard Group and their respective affiliates, beneficially owned approximately 20.5%, 6.0%, 5.8%, 5.3%,
and 5.0%, respectively, of our outstanding common shares.
Under certain circumstances, including the acquisition of ownership or control by a person or group in excess of 50% of our
common shares, the holders of our senior secured notes and our convertible senior subordinated notes may require us to repurchase
all or a portion of such notes upon a change in control and the holders of our convertible senior subordinated notes may be entitled
to receive a make whole premium based on the price of our common shares on the change in control date. We may not be able to
repurchase these notes upon a change in control because we may not have sufficient funds. Further, we may be contractually
restricted under the terms of our secured credit facilities from repurchasing all of the notes tendered by holders upon a change in
control. Our failure to repurchase our senior secured notes upon a change in control would cause a default under the indentures
governing the senior secured notes and the convertible senior subordinated notes and a cross-default under our secured credit
facilities.
Our secured credit facilities also provide that a change in control, which includes a person or group acquiring ownership or control
in excess of 50% of our outstanding common shares, will be an event of default that permits lenders to accelerate the maturity of
borrowings thereunder and to enforce security interests in the collateral securing such debt, thereby limiting our ability to raise
cash to purchase our outstanding senior secured notes and convertible senior subordinated notes. Any of our future debt agreements
may contain similar provisions.
22
Restrictive covenants may adversely affect our operations.
Our credit facilities and the indenture governing our senior secured notes contain various covenants that, subject to certain
exceptions, limit our ability to, among other things:
incur or assume additional debt or provide guarantees in respect of obligations of other persons;
issue redeemable stock and preferred stock;
pay dividends or distributions or redeem or repurchase capital stock;
prepay, redeem or repurchase debt that is junior in right of payment to our senior secured notes;
•
•
•
•
• make loans, investments and capital expenditures;
•
•
•
•
•
•
•
incur liens;
engage in sale/leaseback transactions;
restrict dividends, loans or asset transfers from our subsidiaries;
sell or otherwise dispose of assets, including capital stock of subsidiaries;
consolidate or merge with or into, or sell substantially all of our assets to, another person;
enter into transactions with affiliates; and
enter into new lines of business.
These covenants may prevent us from raising additional financing, competing effectively or taking advantage of new business
opportunities. In addition, the restrictive covenants in our credit facilities require us to maintain specified financial ratios and
satisfy other financial condition tests and the indenture governing our senior secured notes, outside of specified exceptions, requires
us to satisfy certain financial tests in order to engage in activities such as incurring debt or making restricted payments. Our ability
to comply with these covenants or meet those financial ratios and tests can be affected by events beyond our control (such as a
change in control event), and we cannot assure you that we will meet them. See “An increase in the ownership of our common
shares by certain shareholders could trigger a change in control under the agreements governing our long-term indebtedness.”
Upon the occurrence of an event of default under our credit facilities, the indenture governing our senior secured notes or the
agreements governing our other financing arrangements, the holders of such debt could elect to declare all amounts outstanding
to be immediately due and payable and the lenders under our credit facilities could terminate all commitments to extend further
credit. Further, the holders of our secured debt that is secured by a first priority or other senior lien, could proceed against the
collateral granted to them to secure that indebtedness, which collateral represents substantially all of our assets. If the holders of
our debt accelerate the repayment of borrowings, we cannot assure you that we will have sufficient cash flow or assets to repay
our debt, or borrow sufficient funds to refinance such indebtedness. Even if we are able to obtain new financing, it may not be on
commercially reasonable terms, or terms that are acceptable to us.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly.
Certain of our borrowings, primarily borrowings under our senior credit facility, are at variable rates of interest and expose us
to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even
though the amount borrowed remained the same. The applicable margin with respect to loans under our senior secured credit
facility is a percentage per annum equal to 2.50% plus an adjusted rate based on LIBOR.
Assuming that our senior secured credit facility is fully drawn, based on the applicable LIBOR in effect as of March 31, 2016,
each quarter point change in interest rates would result in a $2.0 million change in annual interest expense. In the future, we
may enter into interest rate swaps, involving the exchange of floating for fixed rate interest payments, to reduce interest rate
volatility.
We have had losses in the past, and we cannot assure future profitability.
Even though we have reported operating income for fiscal years 2010 through 2015, we had operating losses for fiscal year
2009 and 2016. We have also reported net losses for the fiscal years 2009 through 2012. Our retained earnings were $7.6
million at March 31, 2016. We cannot assure you that we will operate profitably in future periods and, if we do not, we may not
be able to meet our debt service requirements, working capital requirements, capital expenditure plans, production slate,
acquisition and releasing plans or other cash needs. Our inability to meet those needs could have a material adverse effect on
our business, financial condition, operating results, liquidity and prospects.
23
We may incur significant write-offs if our feature films and other projects do not perform well enough to recoup production,
marketing and distribution costs.
We are required to amortize capitalized production costs over the expected revenue streams as we recognize revenue from the
associated films or other projects. The amount of production costs that will be amortized each quarter depends on, among other
things, how much future revenue we expect to receive from each project. Unamortized production costs are evaluated for
impairment each reporting period on a project-by-project basis. If estimated remaining revenue is not sufficient to recover the
unamortized production costs, the unamortized production costs will be written down to fair value. In any given quarter, if we
lower our previous forecast with respect to total anticipated revenue from any individual feature film or other project, we may
be required to accelerate amortization or record impairment charges with respect to the unamortized costs, even if we have
previously recorded impairment charges for such film or other project. Such impairment charges could adversely impact our
business, operating results and financial condition.
Our revenues and results of operations may fluctuate significantly.
Our results of operations are difficult to predict and depend on a variety of factors. Our results of operations depend significantly
upon the commercial success of the motion pictures and television programming that we distribute, which cannot be predicted
with certainty. In particular, the underperformance at the box office of one or more motion pictures in any period may cause our
revenue and earnings results for that period (and potentially, subsequent periods) to be less than anticipated, in some instances to
a significant extent. Accordingly, our results of operations may fluctuate significantly from period to period, and the results of any
one period may not be indicative of the results for any future periods.
Our results of operations also fluctuate due to the timing, mix, number and availability of our theatrical motion picture and home
entertainment releases, as well as license periods for our content. Our operating results may increase or decrease during a particular
period or fiscal year due to differences in the number and/or mix of films released compared to the corresponding period in the
prior year or prior fiscal year.
Moreover, our results of operations may be impacted by the success of all of our theatrical releases, including critically acclaimed
and award winning films. We cannot assure you that we will manage the production, acquisition and distribution of all future
motion pictures successfully including critically acclaimed, award winning and/or commercially popular films or that we will
produce or acquire motion pictures that will receive critical acclaim or perform well commercially. Any inability to achieve such
commercial success could have a material adverse effect on our business, financial condition, operating results, liquidity and
prospects.
Our operating results also fluctuate due to our accounting practices (which are standard for the industry) which may cause us to
recognize the production and marketing expenses in different periods than the recognition of related revenues, which may occur
in later periods. For example, in accordance with generally accepted accounting principles and industry practice, we are required
to expense film advertising costs as incurred, but are also required to recognize the revenue from any motion picture or television
program over the entire revenue stream expected to be generated by the individual picture or television program. In addition, we
amortize film and television programming costs using the "individual-film-forecast" method. Under this accounting method, we
amortize film and television programming costs for each film or television program based on the following ratio:
Revenue earned by title in the current period
Estimated total future revenues by title as of the beginning of the year
We regularly review, and revise when necessary, our total revenue estimates on a title-by-title basis. This review may result in a
change in the rate of amortization and/or a write-down of the film or television asset to its estimated fair value. Results of operations
in future years depend upon our amortization of our film and television costs. Periodic adjustments in amortization rates may
significantly affect these results.
In addition, the comparability of our results may be affected by changes in accounting guidance or changes in our ownership of
certain assets and businesses. Accordingly, our results of operations from year to year may not be directly comparable to prior
reporting periods.
As a result of the foregoing and other factors, our results of operations may fluctuate significantly from period to period, and the
results of any one period may not be indicative of the results for any future period.
We have few output agreements with cable and broadcast channels. We distribute our library of motion picture titles and television
episodes and programs through EPIX, certain broadcast channels such as Pop (which exhibit our films, but license such rights on
24
a film-by-film, rather than an output basis) and, specifically, for certain Summit Entertainment motion picture titles, through
Showtime Networks and HBO. We cannot assure you that we will be able to secure other output agreements on acceptable terms,
if at all. Without multiple output agreements that typically contain guaranteed minimum payments, our revenues may be subject
to greater volatility, which could have a material adverse effect on our business, financial condition, operating results, liquidity
and prospects.
We do not have long-term arrangements with many of our production or co-financing partners. We typically do not enter into
long term production contracts with the creative producers of the films we produce, acquire or distribute. Moreover, we generally
have certain derivative rights that provide us with distribution rights to, for example, prequels, sequels and remakes of certain
films we produce, acquire or distribute. However, there is no guarantee that we will produce, acquire or distribute future films by
any creative producer or co-financing partner, and a failure to do so could adversely affect our business, financial condition,
operating results, liquidity and prospects.
We rely on a few major retailers and distributors and the loss of any of those retailers or distributors could reduce our revenues
and operating results. Netflix represented approximately 12% of our revenues in fiscal 2016. In addition, a small number of other
retailers and distributors account for a material percentage of our revenues. We do not have long-term agreements with retailers.
We cannot assure you that we will continue to maintain favorable relationships with our retailers and distributors or that they will
not be adversely affected by economic conditions. If any of these retailers or distributors reduces or cancels a significant order or
becomes bankrupt, it could have a material adverse effect on our business, financial condition, operating results, liquidity and
prospects.
Our revenues and results of operations are vulnerable to currency fluctuations. We report our revenues and results of operations
in U.S. dollars, but a significant portion of our revenues is earned outside of the U.S. Our currency exposure is primarily between
Canadian dollars, British pound sterling, Euros, Australian dollars and U.S. dollars. We cannot accurately predict the impact of
future exchange rate fluctuations on revenues and operating margins, and fluctuations could have a material adverse effect on our
business, financial condition, operating results, liquidity and prospects. From time to time, we may experience currency exposure
on distribution and production revenues and expenses from foreign countries, which could have a material adverse effect on our
business, financial condition, operating results, liquidity and prospects.
Failure to manage future growth may adversely affect our business.
We are subject to risks associated with possible acquisitions, business combinations, or joint ventures. From time to time, we
engage in discussions and activities with respect to possible acquisitions, sale of assets, business combinations, or joint ventures
intended to complement or expand our business, some of which may be significant transactions for us. We may not realize the
anticipated benefit from any of the transactions we pursue. Regardless of whether we consummate any such transaction, the
negotiation of a potential transaction, as well as the integration of the acquired business, could require us to incur significant costs
and cause diversion of management's time and resources. Any such transaction could also result in impairment of goodwill and
other intangibles, development write-offs and other related expenses. Any of the foregoing could have a material adverse effect
on our business, financial condition, operating results, liquidity and prospects.
We may be unable to integrate any business that we acquire or have acquired or with which we combine or have combined.
Integrating any business that we acquire or have acquired or with which we combine or have combined may be distracting to our
management and disruptive to our business and may result in significant costs to us. We could face several challenges in the
consolidation and integration of information technology, accounting systems, personnel and operations. If any such integration is
unsuccessful, or if the integration takes longer than anticipated, there could be a material adverse effect on our business, financial
condition, operating results, liquidity and prospects. We may have difficulty managing the combined entity in the short term if we
experience a significant loss of management personnel during the transition period after a significant acquisition.
Claims against us relating to any acquisition or business combination may necessitate our seeking claims against the seller for
which the seller may not indemnify us or that may exceed the seller's indemnification obligations. There may be liabilities assumed
in any acquisition or business combination that we did not discover or that we underestimated in the course of performing our due
diligence. Although a seller generally will have indemnification obligations to us under an acquisition or merger agreement, these
obligations usually will be subject to financial limitations, such as general deductibles and maximum recovery amounts, as well
as time limitations. We cannot assure you that our right to indemnification from any seller will be enforceable, collectible or
sufficient in amount, scope or duration to fully offset the amount of any undiscovered or underestimated liabilities that we may
incur. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition,
operating results, liquidity and prospects.
25
We may not be able to obtain additional funding to meet our requirements. Our ability to grow through acquisitions, business
combinations and joint ventures, to maintain and expand our development, production and distribution of motion pictures and
television programs, and to fund our operating expenses depends upon our ability to obtain funds through equity financing, debt
financing (including credit facilities) or the sale or syndication of some or all of our interests in certain projects or other assets or
businesses. If we do not have access to such financing arrangements, and if other funds do not become available on terms acceptable
to us, there could be a material adverse effect on our business, financial condition, operating results, liquidity and prospects.
Our dispositions may not aid our future growth. If we determine to sell individual properties, libraries or other assets or businesses,
we will benefit from the net proceeds realized from such sales. However, our revenues may suffer in the long term due to the
disposition of a revenue generating asset, or the timing of such dispositions may be poor, causing us to fail to realize the full value
of the disposed asset, all of which may diminish our ability to service our indebtedness and repay our notes and our other indebtedness
at maturity. Furthermore, our goal of building a diversified platform for future growth may be inhibited if the disposed asset
contributed in a significant way to the diversification of our business platform.
Limitations on control of joint ventures may adversely impact our operations.
We hold our interests in certain businesses as a joint venture or in partnership with non-affiliated third parties. As a result of such
arrangements, we may be unable to control the operations, strategies and financial decisions of such joint venture or partnership
entities which could, in turn, result in limitations on our ability to implement strategies that we may favor and may limit our ability
to transfer our interests. Consequently, any losses experienced by these entities could adversely impact our results of operations
and the value of our investment.
A significant portion of our film and television content library revenues comes from a small number of titles.
We depend on a limited number of titles in any given fiscal quarter for the majority of the revenues generated by our film and
television content library. In addition, many of the titles in our library are not presently distributed and generate substantially no
revenue. If we cannot acquire new product and the rights to popular titles through production, distribution agreements, acquisitions,
mergers, joint ventures or other strategic alliances, it could have a material adverse effect on our business, financial condition,
operating results, liquidity and prospects.
We are limited in our ability to exploit a portion of our film and television content library.
Our rights to the titles in our film and television content library vary; in some cases, we have only the right to distribute titles in
certain media and territories for a limited term. We cannot assure you that we will be able to renew expiring rights on acceptable
terms and that any failure to renew titles generating a significant portion of our revenue would not have a material adverse effect
on our business, financial condition, operating results, liquidity and prospects.
Our success depends on external factors in the motion picture and television industry.
Our success depends on the commercial success of motion pictures and television programs, which is unpredictable. Generally,
the popularity of our motion pictures and television programs depends on many factors, including the critical acclaim they receive,
the format of their initial release (for example, theatrical or direct-to-video), their actors and other key talent, their genre and their
specific subject matter, audience reaction, the quality and acceptance of motion pictures or programs that our competitors release
into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure
activities, general economic conditions and other tangible and intangible factors, many of which we do not control and all of which
may change. We cannot predict the future effects of these factors with certainty. In addition, because a motion picture's or television
program's performance in ancillary markets, such as home video and pay and free television, is often directly related to its box
office performance or television ratings, poor box office results or poor television ratings may negatively affect future revenue
streams. Our success will depend on the experience and judgment of our management to select and develop new investment and
production opportunities. We cannot make assurances that our motion pictures and television programs will obtain favorable
reviews or ratings, that our motion pictures will perform well at the box office or in ancillary markets or that broadcasters will
license the rights to broadcast any of our television programs in development or renew licenses to broadcast programs in our
library. The failure to achieve any of the foregoing could have a material adverse effect on our business, financial condition,
operating results, liquidity and prospects.
Global economic turmoil and regional economic conditions in the U.S. could adversely affect our business. Global economic
turmoil may cause a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy,
levels of intervention from the U.S. federal government and other foreign governments, decreased consumer confidence, overall
slower economic activity and extreme volatility in credit, equity and fixed income markets. A decrease in economic activity in the
26
U.S. or in other regions of the world in which we do business could adversely affect demand for our films, thus reducing our
revenues and earnings. A decline in economic conditions could reduce performance of our theatrical, television and home
entertainment releases. In addition, an increase in price levels generally could result in a shift in consumer demand away from the
entertainment we offer, which could also adversely affect our revenues and, at the same time, increase our costs. Moreover, financial
institution failures may cause us to incur increased expenses or make it more difficult to finance any future acquisitions, or engage
in other financing activities. We cannot predict the timing or the duration of any downturn in the economy and we are not immune
to the effects of general worldwide economic conditions.
Licensed distributors' failure to promote our programs may adversely affect our business. We generally do not control the timing
and manner in which our licensed distributors distribute our motion pictures or television programs; their decisions regarding the
timing of release and promotional support are important in determining success. Any decision by those distributors not to distribute
or promote one of our motion pictures, television programs or related products or to promote our competitors' motion pictures,
television programs or related products to a greater extent than they promote ours could have a material adverse effect on our
business, financial condition, operating results, liquidity and prospects.
We could be adversely affected by strikes or other union job actions. We are directly or indirectly dependent upon highly specialized
union members who are essential to the production of motion pictures and television programs. A strike by, or a lockout of, one
or more of the unions that provide personnel essential to the production of motion pictures or television programs could delay or
halt our ongoing production activities, or could cause a delay or interruption in our release of new motion pictures and television
programs, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.
Business interruptions could adversely affect our operations.
Our operations are vulnerable to outages and interruptions due to fire, floods, power loss, telecommunications failures and similar
events beyond our control. In addition, we currently have our offices in Southern California. This area in California is subject to
earthquakes. Although we have developed certain plans to respond in the event of a disaster, there can be no assurance that they
will be effective in the event of a specific disaster. In the event of a short-term power outage, we have installed UPS (uninterrupted
power source) equipment designed to protect our equipment. A long-term power outage, however, could disrupt our operations.
Prices for electricity have in the past risen dramatically and may increase in the future. An increase in prices would increase our
operating costs, which could in turn adversely affect our profitability. Although we currently carry business interruption insurance
for potential losses (including earthquake-related losses), there can be no assurance that such insurance will be sufficient to
compensate us for losses that may occur or that such insurance may continue to be available on affordable terms. Any losses or
damages incurred by us could have a material adverse effect on our business and results of operations.
We face substantial competition in all aspects of our business.
We are smaller and less diversified than many of our competitors. Unlike us, an independent distributor and producer, most of the
major U.S. studios are part of large diversified corporate groups with a variety of other operations, including television networks
and cable channels that can provide both the means of distributing their products and stable sources of earnings that may allow
them to better offset fluctuations in the financial performance of their motion picture and television operations. In addition, the
major studios have more resources with which to compete for ideas, storylines and scripts created by third parties as well as for
actors, directors and other personnel required for production. The resources of the major studios may also give them an advantage
in acquiring other businesses or assets, including film libraries, that we might also be interested in acquiring.
The motion picture industry is highly competitive and at times may create an oversupply of motion pictures in the market. The
number of motion pictures released by our competitors, particularly the major studios, may create an oversupply of product in the
market, reduce our share of box office receipts and make it more difficult for our films to succeed commercially. The limited
supply of motion picture screens compounds this product oversupply problem. Oversupply may become most pronounced during
peak release times, such as school holidays and national holidays, when theater attendance is expected to be highest. As a result
of changes in the theatrical exhibition industry, including reorganizations and consolidations, and major studio releases occupying
more screens, the number of screens available to us when we want to release a picture may decrease. If the number of motion
picture screens decreases, box office receipts, and the correlating future revenue streams, such as from home entertainment and
pay and free television, of our motion pictures may also decrease. Moreover, we cannot guarantee that we can release all of our
films when they are otherwise scheduled due to production or other delays, or a change in the schedule of a major studio. Any
such change could adversely impact a film's financial performance. In addition, if we cannot change our schedule after such a
change by a major studio because we are too close to the release date, the major studio's release and its typically larger promotion
budget may adversely impact the financial performance of our film.
27
We must successfully respond to rapid technological changes and alternative forms of delivery or storage to remain competitive.
The entertainment industry continues to undergo significant developments as advances in technologies and new methods of product
delivery and storage, and certain changes in consumer behavior driven by these developments emerge. New technologies affect
the demand for our content, the manner in which our content is distributed to consumers, the sources and nature of competing
content offerings and the time and manner in which consumers acquire and view our content. We and our distributors must adapt
our businesses to shifting patterns of content consumption and changing consumer behavior and preferences through the adoption
and exploitation of new technologies. If we cannot successfully exploit these and other emerging technologies, it could have a
material adverse effect on our business, financial condition, operating results, liquidity and prospects.
We face risks from doing business internationally.
We distribute motion picture and television productions outside the U.S. and derive revenues from international sources. As a
result, our business is subject to certain risks inherent in international business, many of which are beyond our control. These risks
may include:
•
•
•
•
•
laws and policies affecting trade, investment and taxes, including laws and policies relating to the repatriation of funds and
withholding taxes, and changes in these laws;
anti-corruption laws and regulations such as the Foreign Corrupt Practices Act and the U.K. Bribery Act that impose stringent
requirements on how we conduct our foreign operations and changes in these laws and regulations;
changes in local regulatory requirements, including restrictions on content; differing cultural tastes and attitudes;
international jurisdictions where laws are less protective of intellectual property and varying attitudes towards the piracy of
intellectual property;
financial instability and increased market concentration of buyers in foreign television markets, including in European pay
television markets;
the instability of foreign economies and governments;
fluctuating foreign exchange rates;
the spread of communicable diseases in such jurisdictions, which may impact business in such jurisdictions; and
•
•
•
• war and acts of terrorism.
Events or developments related to these and other risks associated with international trade could adversely affect our revenues
from non-U.S. sources, which could have a material adverse effect on our business, financial condition, operating results, liquidity
and prospects.
Protecting and defending against intellectual property claims may have a material adverse effect on our business.
Our ability to compete depends, in part, upon successful protection of our intellectual property. We attempt to protect proprietary
and intellectual property rights to our productions through available copyright and trademark laws and licensing and distribution
arrangements with reputable international companies in specific territories and media for limited durations. Despite these
precautions, existing copyright and trademark laws afford only limited practical protection in certain countries where we distribute
our products. As a result, it may be possible for unauthorized third parties to copy and distribute our productions or certain portions
or applications of our intended productions, which could have a material adverse effect on our business, financial condition,
operating results, liquidity and prospects.
Litigation may also be necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity
and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation,
infringement or invalidity claims could result in substantial costs and the diversion of resources and could have a material adverse
effect on our business, financial condition, operating results, liquidity and prospects. We cannot assure you that infringement or
invalidity claims will not materially adversely affect our business, financial condition, operating results, liquidity and prospects.
Our more successful and popular film or television products or franchises may experience higher levels of infringing activity,
particularly around key release dates. Alleged infringers have claimed and may claim that their products are permitted under fair
use or similar doctrines, that they are entitled to compensatory or punitive damages because our efforts to protect our intellectual
property rights are illegal or improper, and that our key trademarks or other significant intellectual property are invalid. Such
claims, even if meritless, may result in adverse publicity or costly litigation. We vigorously defend our copyrights and trademarks
from infringing products and activity, which can result in litigation. We may receive unfavorable preliminary or interim rulings
in the course of litigation, and there can be no assurance that a favorable final outcome will be obtained in all cases. Regardless
of the validity or the success of the assertion of any such claims, we could incur significant costs and diversion of resources in
28
enforcing our intellectual property rights or in defending against such claims, which could have a material adverse effect on our
business, financial condition, operating results, liquidity and prospects.
Others may assert intellectual property infringement claims against us.
One of the risks of the film and television production business is the possibility that others may claim that our productions and
production techniques misappropriate or infringe the intellectual property rights of third parties with respect to their previously
developed films and televisions series, stories, characters, other entertainment or intellectual property. Irrespective of the validity
or the successful assertion of such claims, we could incur significant costs and diversion of resources in defending against them,
which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.
Our business involves risks of liability claims for media content, which could adversely affect our business, results of operations
and financial condition.
As a distributor of media content, we may face potential liability for:
•
•
•
•
•
defamation;
invasion of privacy;
negligence;
copyright or trademark infringement (as discussed above); and
other claims based on the nature and content of the materials distributed.
These types of claims have been brought, sometimes successfully, against producers and distributors of media content. Any
imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect
on our business, financial condition, operating results, liquidity and prospects.
Piracy of motion pictures may reduce the gross receipts from the exploitation of our films.
Motion picture piracy is extensive in many parts of the world, including South America, Asia, and certain Eastern European
countries, and is made easier by technological advances and the conversion of motion pictures into digital formats. This trend
facilitates the creation, transmission and sharing of high quality unauthorized copies of motion pictures in theatrical release on
DVDs, Blu-ray discs, from pay-per-view through set-top boxes and other devices and through unlicensed broadcasts on free
television and the internet. The proliferation of unauthorized copies of these products has had and will likely continue to have an
adverse effect on our business, because these products reduce the revenue we receive from our products. Additionally, in order to
contain this problem, we may have to implement elaborate and costly security and anti-piracy measures, which could result in
significant expenses and losses of revenue. We cannot assure you that even the highest levels of security and anti-piracy measures
will prevent piracy.
In particular, unauthorized copying and piracy are prevalent in countries outside of the U.S., Canada and Western Europe, whose
legal systems may make it difficult for us to enforce our intellectual property rights. While the U.S. government has publicly
considered implementing trade sanctions against specific countries that, in its opinion, do not make appropriate efforts to prevent
copyright infringements of U.S. produced motion pictures, there can be no assurance that any such sanctions will be enacted or,
if enacted, will be effective. In addition, if enacted, such sanctions could impact the amount of revenue that we realize from the
international exploitation of motion pictures. If no embargoes or sanctions are enacted, or if other measures are not taken, we may
lose revenue as a result of motion picture piracy.
We face cybersecurity and similar risks, which could result in the disclosure of confidential information, disruption of our
businesses, damage to our brands and reputation, legal exposure and financial losses.
Our online, mobile and app offerings, as well as our internal systems, involve the storage and transmission of our proprietary and
personal information, and we and our partners rely on various technology systems in connection with the production and distribution
of programming. Although we monitor our security measures regularly, they may be breached due to employee error, computer
malware, viruses, hacking and phishing attacks, or otherwise. Additionally, outside parties may attempt to fraudulently induce
employees or users to disclose sensitive or confidential information in order to gain access to our data. Because the techniques
used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized
until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
Any such breach or unauthorized access could result in a loss of our proprietary information, a disruption of our distribution
business or a reduction of the revenues we are able to generate from such distribution, damage to our brands and reputation, and
29
significant legal and financial exposure, including from regulatory or consumer actions related to consumer data collection and
other data privacy concerns, each of which could potentially have an adverse effect on our business.
Our success depends on attracting and retaining key personnel.
Our success depends upon the continued efforts, abilities and expertise of our corporate and divisional executive teams and other
key employees, including production and creative personnel. Our success also continues to depend on our ability to identify, attract,
hire, train and retain such qualified professional, creative, technical and managerial personnel.
We have entered into employment agreements with our top executive officers and production executives but do not currently have
significant “key person” life insurance policies for any of our employees. However, although it is standard in the motion picture
industry to rely on employment agreements as a method of retaining the services of key employees, these agreements cannot assure
us of the continued services of such employees. In addition, competition for the limited number of business, production and creative
personnel necessary to create and distribute our entertainment content is intense and may grow in the future. We cannot assure
you that we will be successful in identifying, attracting, hiring, training and retaining such personnel in the future. Our inability
to retain or successfully replace, where necessary, members of our executive teams and other key employees could have a material
adverse effect on our business, financial condition, operating results, liquidity and prospects.
While we believe we currently have adequate internal control over financial reporting, we are required to assess our internal
control over financial reporting on an annual basis and any future adverse results from such assessment could result in a loss
of investor confidence in our financial reports and have an adverse effect on our securities.
Section 404 of the Sarbanes-Oxley Act of 2002 and the accompanying rules and regulations promulgated by the SEC to implement
it, require us to include in our Annual Report on Form 10-K an annual report by our management regarding the effectiveness of
our internal control over financial reporting. The report includes, among other things, an assessment of the effectiveness of our
internal control over financial reporting as of the end of our fiscal year. This assessment must include disclosure of any material
weaknesses in our internal control over financial reporting identified by management. During this process, if our management
identifies one or more material weaknesses in our internal control over financial reporting that cannot be remediated in a timely
manner, we will be unable to assert such internal control is effective. While we currently believe our internal control over financial
reporting is effective, the effectiveness of our internal controls in future periods is subject to the risk that our controls may become
inadequate because of changes in conditions, and, as a result, the degree of compliance of our internal control over financial
reporting with the applicable policies or procedures may deteriorate. If we are unable to conclude that our internal control over
financial reporting is effective (or if our independent auditors disagree with our conclusion), we could lose investor confidence
in the accuracy and completeness of our financial reports, which would have an adverse effect on our securities.
Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect
our effective tax rates.
We are subject to income taxes in the U.S. and foreign tax jurisdictions. We also conduct business and financing activities between
our entities in various jurisdictions and we are subject to complex transfer pricing regulations in the countries in which we operate.
Although uniform transfer pricing standards are emerging in many of the countries in which we operate, there is still a relatively
high degree of uncertainty and inherent subjectivity in complying with these rules. Our future effective tax rates could be affected
by changes in tax laws or the interpretation of tax laws, by changes in the amount of revenue or earnings that we derive from
international sources in countries with high or low statutory tax rates, or by changes in the valuation of our deferred tax assets and
liabilities. Unanticipated changes in our tax rates could affect our future results of operations.
In addition, we may be subject to examination of our income tax returns by federal, state, and foreign tax jurisdictions. We regularly
assess the likelihood of outcomes resulting from possible examinations to determine the adequacy of our provision for income
taxes. In making such assessments, we exercise judgment in estimating our provision for income taxes. While we believe our
estimates are reasonable, we cannot assure you that final determinations from any examinations will not be materially different
from those reflected in our historical income tax provisions and accruals. Any adverse outcome from any examinations may have
an adverse effect on our business and operating results, which could cause the market price of our securities to decline.
As of March 31, 2013, we concluded that it was more likely than not that our deferred tax assets were realizable and that a significant
portion of the related valuation allowance previously established was no longer needed. This conclusion was based upon our
expectation of sufficient future taxable income to fully utilize these assets. Based on our current assessment, we continue to believe
that substantially all of our deferred tax assets will be realized. There is no assurance that we will attain our future expected levels
of taxable income or that a valuation allowance against new or existing deferred tax assets will not be necessary in the future.
30
Certain shareholders own a majority of our outstanding common shares.
As of May 23, 2016, five of our shareholders beneficially owned an aggregate of 62,745,944 of our common shares, or approximately
42.6% of the outstanding shares. In addition, one of these shareholders, Mark H. Rachesky, M.D., the beneficial owner of
approximately 20.5% of our outstanding common shares, currently serves as the Chairman of our Board of Directors. Accordingly,
these five shareholders, collectively, have the power to exercise substantial influence over us and on matters requiring approval
by our shareholders, including the election of directors, the approval of mergers and other significant corporate transactions. This
concentration of ownership may make it more difficult for other shareholders to effect substantial changes in our company and
may also have the effect of delaying, preventing or expediting, as the case may be, a change in control of our company.
Sales of a substantial number of shares of our common shares, or the perception that such sales might occur, could have an
adverse effect on the price of our common shares, and therefore our ability to raise additional capital to fund our operations.
As of May 23, 2016, approximately 42.6% of our common shares were held beneficially by certain individuals and institutional
investors who each had ownership of equal to or greater than 5% of our common shares. We also filed resale registration statements
to enable certain shareholders who received our common shares in connection with acquisitions and certain holders of debt
convertible into our common shares, to resell our common shares. Sales by such individuals and institutional investors of a
substantial number of shares of our common shares into the public market, or the perception that such sales might occur, could
have an adverse effect on the price of our common shares, which could materially impair our ability to raise capital through the
sale of common shares or debt that is convertible into our common shares.
Our online activities are subject to a variety of laws and regulations relating to privacy and child protection, which, if violated,
could subject us to an increased risk of litigation and regulatory actions.
In addition to our company websites and applications, we use third-party applications, websites, and social media platforms to
promote our projects and engage consumers, as well as monitor and collect certain information about users of our online forums.
A variety of laws and regulations have been adopted in recent years aimed at protecting children using the internet such as the
Children's Online Privacy and Protection Act of 1998 (“COPPA”). COPPA sets forth, among other things, a number of restrictions
on what website operators can present to children under the age of 13 and what information can be collected from them. There
are also a variety of laws and regulations governing individual privacy and the protection and use of information collected from
such individuals, particularly in relation to an individual's personally identifiable information (e.g., credit card numbers). Many
foreign countries have adopted similar laws governing individual privacy, including safeguards which relate to the interaction
with children. If our online activities were to violate any applicable current or future laws and regulations, we could be subject to
litigation and regulatory actions, including fines and other penalties.
Any decisions to reduce or discontinue paying cash dividends to our shareholders or repurchase our common shares pursuant
to our previously announced share repurchase program could cause the market price for our common shares to decline.
Our payment of quarterly cash dividends and repurchases of our common shares pursuant to our share purchase program will be
subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements,
and other factors. Any reduction or discontinuance by us of the payment of quarterly cash dividends or repurchases of our common
shares pursuant to our share repurchase program could cause the market price of our common shares to decline. Moreover, in the
event our payment of quarterly cash dividends or repurchases of our common shares are reduced or discontinued, our failure or
inability to resume paying cash dividends or repurchasing our common shares at historical levels could result in a lower market
valuation of our common shares.
The directional guidance we provide from time to time is subject to a number of factors that we may not be successful in
achieving.
From time to time, we provide directional guidance for certain financial periods. Our directional guidance depends on a number
of factors that we may not be successful in achieving, including, but not limited to, the timing and commercial success of the
motion pictures and television programming that we distribute, which cannot be predicted with certainty. In particular,
underperformance at the box office of one or more motion pictures in any period may cause our revenue and earnings results for
that period (and potentially, subsequent periods) to be less than anticipated, in some instances to a significant extent. Accordingly,
our results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative
of the results for any future periods. The directional guidance is prepared by management on the basis of available information at
such time. Management believes such estimates are prepared on a reasonable basis. However, such estimates should not be relied
on as necessarily indicative of our actual financial results. Our inability to achieve directional guidance could have a material
adverse effect on our business, financial condition, operating results, liquidity and prospects.
31
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
Our corporate office is located at 250 Howe Street, 20th Floor, Vancouver, BC V6C 3R8. Our principal executive offices are located
at 2700 Colorado Avenue, Santa Monica, California, 90404. At the Santa Monica address, we occupy approximately 189,186
square feet. Our lease expires in August 2023. We also lease a 9,123 square foot space in Santa Monica (per a lease that expires
in March 2017) and a 7,803 square foot space in New York (per a lease that expires in August 2022). Our international office is
located at 45 Mortimer St, London W1W 8HJ, United Kingdom, where we occupy 11,243 square feet (per a lease that expires in
July 2029).
We believe that our current facilities are adequate to conduct our business operations for the foreseeable future. We believe that
we will be able to renew these leases on similar terms upon expiration. If we cannot renew, we believe that we could find other
suitable premises without any material adverse impact on our operations.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business.
While the resolution of these matters cannot be predicted with certainty, we do not believe, based on current knowledge, that the
outcome of any currently pending legal proceedings in which the Company is currently involved will have a material adverse
effect on the Company's consolidated financial position, results of operations or cash flow.
For a discussion of certain claims and legal proceedings, see Note 17 - Commitments and Contingencies to our consolidated
financial statements, which discussion is incorporated by reference into this Part I, Item 3, Legal Proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
32
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Market Information
Our common shares are listed on the NYSE under the symbol “LGF.”
As of May 23, 2016, the closing price of our common shares on the NYSE was $19.59.
The following table presents the high and low sale prices of our common shares on the NYSE for each period, based on
inter-dealer prices that do not include retail mark-ups, mark-downs or commissions, and cash dividends declared for each
period:
Common shares (per share)
2017 fiscal year
First quarter (through May 23, 2016)
2016 fiscal year
Fourth quarter
Third quarter
Second quarter
First quarter
2015 fiscal year
Fourth quarter
Third quarter
Second quarter
First quarter
Holders
Market prices
High
22.62
$
High
32.00
$
41.41
40.74
38.25
$
High
34.87
35.75
34.15
29.82
$
$
$
Low
19.37
Low
16.21
31.90
27.51
30.27
Low
27.55
29.00
27.46
24.80
Dividends
Declared
—
$
Dividends
Declared
0.09
$
0.09
0.09
0.07
Dividends
Declared
0.07
$
0.07
0.07
0.05
As of May 23, 2016, there were approximately 582 shareholders of record.
Dividends
The Company declared a quarterly dividend of $0.07, $0.09, $0.09 and $0.09 per share of common shares for the four
quarters of the year ended March 31, 2016, respectively. The most recent dividend is payable May 27, 2016 to shareholders of
record as of March 31, 2016. We expect to pay quarterly dividends each quarter; however, the amount of dividends, if any, that
we pay to our shareholders is determined by our Board of Directors, at its discretion, and is dependent on a number of factors,
including our financial position, results of operations, cash flows, capital requirements and restrictions under our credit
agreements, and shall be in compliance with applicable law. We cannot guarantee the amount of dividends paid in the future, if
any.
Lionsgate is also limited in its ability to pay dividends on its common shares by restrictions under the Business
Corporations Act (British Columbia) relating to the solvency of Lionsgate before and after the payment of a dividend and by
the terms of its credit facility and indentures governing certain of its notes.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item is incorporated by reference to our Proxy Statement for our 2016 Annual General
Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2016.
33
Taxation
The following is a general summary of certain Canadian federal income tax consequences to U.S. Holders (who, at all relevant
times, deal at arm's length with the Company) of the purchase, ownership and disposition of common shares. For the purposes
of this Canadian income tax discussion, a “U.S. Holder” means a holder of common shares who (1) for the purposes of the
Income Tax Act (Canada) (the "ITA") is not, has not, and will not be, or deemed to be, resident in Canada at any time while he,
she or it holds common shares, (2) at all relevant times is a resident of the United States under the Canada-United States Tax
Convention (1980) (the “Convention”) and is eligible for benefits under the Convention, (3) is not a “foreign affiliate” as
defined in the ITA of a person resident in Canada, and (4) does not and will not use or be deemed to use the common shares in
carrying on a business in Canada. This summary does not apply to a U.S. Holder that is an insurer or an “authorized foreign
bank” within the meaning of the ITA. Such U.S. Holders should seek tax advice from their advisors.
This summary is not intended to be, and should not be construed to be, legal or tax advice and no representation with respect to
the tax consequences to any particular investor is made. The summary does not address any aspect of any provincial, state or
local tax laws or the tax laws of any jurisdiction other than Canada or the tax considerations applicable to non-U.S. Holders.
Accordingly, prospective investors should consult with their own tax advisors for advice with respect to the income tax
consequences to them having regard to their own particular circumstances, including any consequences of an investment in
common shares arising under any provincial, state or local tax laws or the tax laws of any jurisdiction other than Canada.
This summary is based upon the current provisions of the ITA, the regulations thereunder and the proposed amendments thereto
publicly announced by the Department of Finance, Canada before the date hereof and our understanding of the current
administrative policies and assessing practices of the Canada Revenue Agency published in writing prior to the date hereof. No
assurance may be given that any proposed amendment will be enacted in the form proposed, if at all. This summary does not
otherwise take into account or anticipate any changes in law, whether by legislative, governmental or judicial action.
The following summary applies only to U.S. Holders who hold their common shares as capital property. In general, common
shares will be considered capital property of a holder where the holder is neither a trader nor dealer in securities, does not hold
the common shares in the course of carrying on a business and is not engaged in an adventure in the nature of trade in respect
thereof. This summary does not apply to a U.S. Holder that is a “financial institution” within the meaning of the mark-to-
market rules contained in the ITA or to holders who have entered into a “derivative forward agreement” or a “synthetic
disposition arrangement” as these terms are defined in the ITA.
Amounts in respect of common shares paid or credited or deemed to be paid or credited as, on account or in lieu of payment of,
or in satisfaction of, dividends to a shareholder who is not a resident of Canada within the meaning of the ITA will generally be
subject to Canadian non-resident withholding tax. Canadian withholding tax applies to dividends that are formally declared and
paid by the Company and also to deemed dividends that may be triggered by a cancellation of common shares if the
cancellation occurs otherwise than as a result of a simple open market transaction. For either deemed or actual dividends,
withholding tax is levied at a basic rate of 25%, which may be reduced pursuant to the terms of an applicable tax treaty
between Canada and the country of residence of the non-resident shareholder. Under the Convention, the rate of Canadian non-
resident withholding tax on the gross amount of dividends received by a U.S. Holder, which is the beneficial owner of such
dividends, is generally 15%. However, where such beneficial owner is a company that owns at least 10% of the voting shares of
the company paying the dividends, the rate of such withholding is 5%. For these purposes, a company that is a resident of the
United States for the purposes of the Convention and which holds an interest in an entity (other than an entity that is resident in
Canada) that is fiscally transparent under the laws of the United States will be considered to own the voting shares of the
Company owned by that fiscally transparent entity in proportion to the company’s ownership interest in the fiscally transparent
entity.
In addition to the Canadian withholding tax on actual or deemed dividends, a U.S. Holder also needs to consider the potential
application of Canadian income tax on capital gains. A U.S. Holder will generally not be subject to tax under the ITA in respect
of any capital gain arising on a disposition of common shares (including, generally, on a purchase by the Company on the open
market) unless at the time of disposition such shares constitute taxable Canadian property of the holder for purposes of the ITA
and such U.S. Holder is not entitled to relief under the Convention. If the common shares are listed on a designated stock
exchange (which includes the NYSE) at the time they are disposed of, they will generally not constitute taxable Canadian
property of a U.S. Holder unless, at any time during the 60-month period immediately preceding the disposition of the common
shares, the U.S. Holder, persons with whom he, she or it does not deal at arm's length, or the U.S. Holder together with such
non-arm's length persons, owned 25% or more of the issued shares of any class or series of the capital stock of the Company
and at any time during the immediately preceding 60-month period, the shares derived their value principally from one or any
combination of (i) real or immovable property situated in Canada, (ii) Canadian resource properties, (iii) timber resource
properties, and (iv) options in respect of, or interests in, such properties. Assuming that the common shares have never derived
34
their value principally from any of the items listed in (i)-(iv) above, capital gains derived by a U.S. Holder from the disposition
of common shares will generally not be subject to tax in Canada.
Issuer Purchases of Equity Securities
On May 31, 2007, our Board of Directors authorized the repurchase of up to $50 million of our common shares. On each of May
29, 2008 and November 6, 2008, our Board of Directors authorized additional repurchases up to an additional $50 million of our
common shares. On December 17, 2013, our Board of Directors authorized the Company to increase its stock repurchase plan to
$300 million and on February 2, 2016, our Board of Directors authorized the Company to further increase its stock repurchase
plan to $468 million. To date, approximately $283.2 million (or 15,729,923) of our common shares have been purchased, leaving
approximately $184.7 million of authorized potential purchases. The remaining $184.7 million of our common shares may be
purchased from time to time at the Company’s discretion, including quantity, timing and price thereof, and will be subject to market
conditions. Such purchases will be structured as permitted by securities laws and other legal requirements. The share repurchase
program has no expiration date.
The following table sets forth information with respect to our common shares purchased by us during the three months ended
March 31, 2016:
ISSUER PURCHASES OF EQUITY SECURITIES
(a) Total
Number of
Shares
Purchased
267,806
2,841,975
490,614
3,600,395
(b) Average
Price Paid
per Share
$
$
29.48
19.19
21.92
20.33
(c) Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
(d) Approximate
Dollar Value of
Shares that May Yet
Be Purchased Under
the Plans or
Programs
267,806
2,841,975
490,614
3,600,395
$
$
82,037,803
195,466,789
184,713,820
184,713,820
Period
January 1, 2016 - January 31, 2016
February 1, 2016 - February 29, 2016
March 1, 2016 - March 31, 2016
Total
Additionally, during the three months ended March 31, 2016, 84,989 common shares were withheld upon the vesting of
restricted share units and restricted share issuances to satisfy minimum statutory federal, state and local tax withholding
obligations.
Stock Performance Graph
The following graph compares our cumulative total shareholder return with those of the NYSE Composite Index and the S&P
Movies & Entertainment Index for the period commencing March 31, 2011 and ending March 31, 2016. All values assume that
$100 was invested on March 31, 2011 in our common shares and each applicable index and all dividends were reinvested.
The comparisons shown in the graph below are based on historical data and we caution that the stock price performance shown
in the graph below is not indicative of, and is not intended to forecast, the potential future performance of our common shares.
35
Lions Gate Entertainment
Corporation
NYSE Composite
S&P Movies & Entertainment
_______
3/11
3/12
3/13
3/14
3/15
3/16
100.00
100.00
100.00
222.72
100.11
106.76
380.32
114.12
151.82
429.20
135.21
198.08
549.16
143.35
241.22
357.74
137.74
214.82
The graph and related information are being furnished solely to accompany this Form 10-K pursuant to Item 201(e) of Regulation
S-K. They shall not be deemed “soliciting materials” or to be “filed” with the SEC (other than as provided in Item 201), nor shall
such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the
extent that we specifically incorporate it by reference into such filing.
ITEM 6. SELECTED FINANCIAL DATA.
The consolidated financial statements for all periods presented in this Form 10-K are prepared in conformity with U.S.
GAAP.
The Selected Consolidated Financial Data below includes the results of Pilgrim Studios from its acquisition date of
November 12, 2015 onwards, and Summit Entertainment from its acquisition date of January 13, 2012 onwards. The Selected
Consolidated Financial Data below also includes the results of Maple Pictures from the date of consolidation through the date
36
of sale of August 10, 2011. Due to the acquisitions of Pilgrim Studios, Summit Entertainment and the consolidation and
subsequent sale of our interest in Maple Pictures, the Company’s results of operations for the years ended March 31, 2016,
2015, 2014, 2013, and 2012 and financial positions as at March 31, 2016, 2015, 2014, 2013, and 2012 are not directly
comparable to prior reporting periods.
Statement of Operations Data:
Revenues
Expenses:
Direct operating
Distribution and marketing
General and administration
Gain on sale of asset disposal group
Depreciation and amortization
Total expenses
Operating income (loss)
Other expenses (income):
Interest expense
Cash interest
Amortization of debt discount and deferred
financing costs
Total interest expense
Interest and other income
Loss on extinguishment of debt
Total other expenses, net
Income (loss) before equity interests and income taxes
Equity interests income (loss)
Income (loss) before income taxes
Income tax provision (benefit)
Net income (loss)
Less: Net loss attributable to noncontrolling interest
Net income (loss) attributable to Lions Gate
Entertainment Corp. shareholders
Per share information attributable to Lions Gate
Entertainment Corp. shareholders:
Basic net income (loss) per common share
Diluted net income (loss) per common share
Weighted average number of common shares
outstanding:
Basic
Diluted
Dividends declared per common share
Balance Sheet Data (at end of period):
Cash and cash equivalents
Year Ended March 31,
2016
2015
2014
2013
2012
(Amounts in thousands, except per share amounts)
$ 2,347,419
$ 2,399,640
$ 2,630,254
$ 2,708,141
$ 1,587,579
1,415,344
661,789
282,232
—
13,084
2,372,449
(25,030)
1,315,775
591,491
263,507
—
6,586
2,177,359
222,281
1,369,381
739,461
254,925
—
6,539
2,370,306
259,948
1,390,569
817,862
218,341
—
8,290
2,435,062
273,079
908,402
483,513
168,864
(10,967)
4,276
1,554,088
33,491
45,695
39,657
48,960
75,322
62,430
9,184
54,879
(1,851)
—
53,028
(78,058)
44,231
(33,827)
(76,527)
42,700
7,509
12,819
52,476
(2,790)
11,664
61,350
160,931
52,477
213,408
31,627
181,781
—
17,210
66,170
(6,030)
39,572
99,712
160,236
24,724
184,960
32,923
152,037
—
18,258
93,580
(4,036)
24,089
113,633
159,446
(3,075)
156,371
(75,756)
232,127
—
15,681
78,111
(2,752)
967
76,326
(42,835)
8,412
(34,423)
4,695
(39,118)
—
$
50,209
$
181,781
$
152,037
$
232,127
$
(39,118)
$
$
$
$
0.34
0.33
$
$
1.31
1.23
$
$
1.11
1.04
$
$
1.73
1.61
$
$
(0.30)
(0.30)
148,480
154,088
139,048
151,778
137,468
154,415
134,514
149,370
132,226
132,226
0.34
$
0.26
$
0.10
$
— $
—
57,742
$
102,697
$
25,692
$
62,363
$
64,298
Investment in films and television programs
1,478,296
1,381,829
1,274,573
1,244,075
1,329,053
37
Total assets
Corporate debt:
3,855,508
3,292,089
2,851,632
2,760,869
2,787,995
Senior revolving credit facility
Other senior debt
Convertible senior subordinated notes and other
financing obligations
Total liabilities
Redeemable noncontrolling interests
Total shareholders’ equity
161,000
625,000
—
600,000
97,619
447,753
338,474
432,277
99,750
909,024
100,050
2,914,710
90,525
850,273
114,126
2,449,802
—
842,287
131,788
2,267,094
—
584,538
87,167
2,404,343
—
356,526
108,276
2,698,210
—
89,785
38
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Overview
Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a premier next generation global
content leader with a diversified presence in motion picture production and distribution, television programming and
syndication, home entertainment, international distribution and sales, branded channel platforms, interactive ventures and
games, and location-based entertainment.
Although our business is both global and diverse, we classify our operations through two reporting segments: Motion
Pictures and Television Production.
Revenues
Our revenues are derived from the Motion Pictures and Television Production segments, as described below. Our revenues
are derived from the U.S., Canada, the United Kingdom and other foreign countries. None of the non-U.S. countries
individually comprised greater than 10% of total revenues for the years ended March 31, 2016, 2015 and 2014.
Motion Pictures
Our Motion Pictures segment includes revenues derived from the following:
•
Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to
theatrical exhibitors on a picture-by-picture basis (distributed by us directly in the U.S. and through a sub-distributor in
Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-
distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we
receive a percentage of the box office results and are negotiated on a picture-by-picture basis.
• Home Entertainment. Home Entertainment revenues are derived from the sale or rental of our film productions and
acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) on
packaged media and through digital media platforms. In addition, we have revenue sharing arrangements with certain
digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, we share in
the rental or sales revenues generated by the platform on a title-by-title basis. We distribute a library of approximately
16,000 motion picture titles and television episodes and programs. We categorize our Home Entertainment revenue as
follows:
• Packaged media revenue: Packaged media revenue consists of the sale or rental of DVDs and Blu-ray discs.
• Digital media revenue: Digital media revenue consists of revenues generated from pay-per-view and video-on-
demand platforms, electronic sell-through (“EST”), and digital rental.
Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired
films to the linear pay, basic cable and free television markets.
International. International revenues are derived from the licensing of our productions, acquired films, our catalog
product and libraries of acquired titles from our international subsidiaries, and revenues from our distribution to
international distributors, on a territory-by-territory basis. International revenues also includes revenues from the direct
distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United
Kingdom.
•
•
• Motion Pictures - Other. Other revenues are derived from, among others, our interactive ventures and games division,
our global franchise management and strategic partnerships division (which includes location-based entertainment),
the sales and licensing of music from the theatrical exhibition of our films and the television broadcasts of our
productions, and from the licensing of our films and television programs to ancillary markets.
39
Television Production
Our Television Production segment includes revenues derived from the following:
• Domestic Television. Domestic television revenues are derived from the licensing and syndication to domestic markets
of one-hour and half-hour scripted and unscripted series, television movies, mini-series and non-fiction programming.
•
International. International revenues are derived from the licensing and syndication to international markets of one-
hour and half-hour scripted and unscripted series, television movies, mini-series and non-fiction programming.
• Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies
or series on packaged media and through digital media platforms. We distribute a library of approximately 16,000
motion picture titles and television episodes and programs. Home entertainment revenue consists of packaged media
revenue and digital media revenue.
•
Television Production - Other. Other revenues are derived from, among others, product integration in our television
episodes and programs, the sales and licensing of music from the television broadcasts of our productions, and from
the licensing of our television programs to ancillary markets.
Expenses
Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and
administration expenses.
Direct operating expenses include amortization of film and television production or acquisition costs, participation and
residual expenses, provision for doubtful accounts, and foreign exchange gains and losses. Participation costs represent
contingent consideration payable based on the performance of the film to parties associated with the film, including producers,
writers, directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild,
Directors Guild of America, and Writers Guild of America, based on the performance of the film in certain ancillary markets or
based on the individual’s (i.e., actor, director, writer) salary level in the television market.
Distribution and marketing expenses primarily include the costs of theatrical “prints and advertising” (“P&A”) and of
DVD/Blu-ray duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical
exhibitors and the advertising and marketing cost associated with the theatrical release of the picture. DVD/Blu-ray duplication
represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products.
DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special
promotional advertising.
General and administration expenses include salaries and other overhead.
CRITICAL ACCOUNTING POLICIES
The preparation of our financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. The application of the following accounting policies, which are important to our
financial position and results of operations, requires significant judgments and estimates on the part of management. As
described more fully below, these estimates bear the risk of change due to the inherent uncertainty of the estimate. In some
cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results
could differ materially from our estimates. To the extent that there are material differences between these estimates and actual
results, our financial condition or results of operations will be affected. We base our estimates on past experience and other
assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. For a
summary of all of our accounting policies, including the accounting policies discussed below, see Note 2 to our consolidated
financial statements.
Accounting for Films and Television Programs. We capitalize costs of production and acquisition, including financing
costs and production overhead, to investment in films and television programs. These costs for an individual film or television
program are amortized and participation and residual costs are accrued to direct operating expenses in the proportion that
current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the current year expected to
be recognized from the exploitation, exhibition or sale of such film or television program. Ultimate revenue includes estimates
over a period not to exceed ten years following the date of initial release of the motion picture. For an episodic television series,
the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first
episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. For previously released
40
film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed twenty
years from the date of acquisition.
Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates
have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition,
in the normal course of our business, some films and titles are more successful than anticipated and some are less successful
than anticipated. Management regularly reviews and revises when necessary its ultimate revenue and cost estimates, which may
result in a change in the rate of amortization of film costs and participations and residuals and/or write-down of all or a portion
of the unamortized costs of the film or television program to its estimated fair value. Management estimates the ultimate
revenue based on experience with similar titles or title genre, the general public appeal of the cast, actual performance (when
available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of
motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general
economic conditions and other tangible and intangible factors, many of which we do not control and which may change.
An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film
and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a
higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results
in an impairment requiring a write-down of the film cost to the title’s fair value. These write-downs are included in
amortization expense within direct operating expenses in our consolidated statements of operations. Investment in films and
television programs is stated at the lower of amortized cost or estimated fair value. The valuation of investment in films and
television programs is reviewed on a title-by-title basis, when an event or change in circumstances indicates that the fair value
of a film or television program is less than its unamortized cost. In determining the fair value of our films and television
programs, we employ a discounted cash flows ("DCF") methodology with assumptions for cash flows. Key inputs employed in
the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate
utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk
associated with producing a particular film or television program. The fair value of any film costs associated with a film or
television program that we plan to abandon is zero. As the primary determination of fair value is determined using a DCF
model, the resulting fair value is considered a Level 3 measurement (as defined in Note 10 to our consolidated financial
statements). Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value
of the film or television program. Estimates of future revenue involve measurement uncertainty and it is therefore possible that
reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in
our future revenue estimates.
Revenue Recognition. Revenue from the theatrical release of feature films is recognized at the time of exhibition based on
our participation in box office receipts. Revenue from the sale of DVDs and Blu-ray discs in the retail market, net of an
allowance for estimated returns and other allowances, is recognized on the later of receipt by the customer or “street
date” (when it is available for sale by the customer). Under revenue sharing arrangements, including digital and EST
arrangements, such as download-to-own, download-to-rent, video-on-demand, and subscription video-on-demand, revenue is
recognized when we are entitled to receipts and such receipts are determinable. Revenues from television or digital licensing
for fixed fees are recognized when the feature film or television program is available to the licensee for telecast. For television
licenses that include separate availability “windows” during the license period, revenue is allocated over the “windows.”
Revenue from sales to international territories are recognized when access to the feature film or television program has been
granted or delivery has occurred, as required under the contract, and the right to exploit the feature film or television program
has commenced. For multiple media rights contracts with a fee for a single film or television program where the contract
provides for media holdbacks (defined as contractual media release restrictions), the fee is allocated to the various media based
on our assessment of the relative fair value of the rights to exploit each media and is recognized as each holdback is released.
For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on our assessment of the relative fair
value of each title. The primary estimate involving revenue recognition is the estimate of sales returns associated with our
revenue from the sale of DVD’s/Blu-ray discs in the retail market, which is discussed separately below under the caption “Sales
Returns Allowance.”
Sales Returns Allowance. Revenues are recorded net of estimated returns and other allowances. We estimate reserves for
DVD/Blu-ray returns based on previous returns experience, point-of-sale data available from certain retailers, current economic
trends, and projected future sales of the title to the consumer based on the actual performance of similar titles on a title-by-title
basis in each of the DVD/Blu-ray businesses. Factors affecting actual returns include, among other factors, limited retail shelf
space at various times of the year, success of advertising or other sales promotions, and the near term release of competing
titles. We believe that our estimates have been materially accurate in the past; however, due to the judgment involved in
establishing reserves, we may have adjustments to our historical estimates in the future. Our estimate of future returns affects
reported revenue and operating income. If we underestimate the impact of future returns in a particular period, then we may
record less revenue in later periods when returns exceed the estimated amounts. If we overestimate the impact of future returns
41
in a particular period, then we may record additional revenue in later periods when returns are less than estimated. An
incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related
product) for home entertainment products would have had an impact of approximately $5.4 million, $6.6 million and $8.6
million on our total revenue in the fiscal years ended March 31, 2016, 2015, and 2014, respectively.
Provisions for Accounts Receivable. We estimate provisions for accounts receivable based on historical experience and
relevant facts and information regarding the collectability of the accounts receivable. In performing this evaluation, significant
judgments and estimates are involved, including an analysis of specific risks on a customer-by-customer basis for our larger
customers and an analysis of the length of time receivables have been past due. The financial condition of a given customer and
its ability to pay may change over time or could be better or worse than anticipated and could result in an increase or decrease
to our allowance for doubtful accounts, which is recorded in other direct operating expenses.
Income Taxes. We are subject to federal and state income taxes in the U.S. and in several foreign jurisdictions. We record
deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves. We
recognize a future tax benefit to the extent that realization of such benefit is more likely than not, otherwise a valuation
allowance is applied. In order to realize the benefit of our deferred tax assets, we will need to generate sufficient taxable
income in the future. In previous years, we had historically provided a full valuation allowance against our net deferred tax
assets because of our historical operating losses. Due to the profitability achieved in our fiscal year ended March 31, 2013,
which resulted in a cumulative positive three year pre-tax income, and our current projections of profitability in the next few
years, we determined that it was more likely than not that we will realize the benefit of certain of our deferred tax assets,
including our net operating loss carryforwards, and, accordingly, the valuation allowance related to those assets was reversed as
of March 31, 2013. In addition, due to certain financing transactions in the year ended March 31, 2014, we determined that it
was more likely than not that we will realize the benefit of certain of our deferred tax assets in our Canadian tax jurisdiction,
and accordingly, the valuation allowance related to those assets was reversed during the year ended March 31, 2014. However,
the assessment as to whether there will be sufficient taxable income to realize our net deferred tax assets is an estimate which
could change in the future depending primarily upon the actual performance of our Company. We will be required to
continually evaluate the more likely than not assessment that our net deferred tax assets will be realized, and if operating results
deteriorate, we may need to reestablish all or a portion of the valuation allowance through a charge to our income tax provision.
Our net unreserved deferred tax assets at March 31, 2016 amounted to $134.4 million.
Our income tax provision (benefit) differs from the federal statutory rate multiplied by pre-tax income (loss) and could
fluctuate significantly in the future as it is affected by many factors, including the overall level of pre-tax income, mix of our
pre-tax income generated across the various jurisdictions in which we operate, changes in tax laws and regulations in those
jurisdictions, changes in valuation allowances on our deferred tax assets, tax planning strategies available to us and other
discrete items.
Goodwill. Goodwill is reviewed for impairment each fiscal year or between the annual tests if an event occurs or
circumstances change that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value.
We perform our annual impairment test as of January 1 in each fiscal year. We performed our last annual impairment test on our
goodwill as of January 1, 2016 by first assessing qualitative factors to determine whether it was necessary to perform the two-
step annual goodwill impairment test. Based on our qualitative assessments, including, but not limited to, the results of our
most recent quantitative impairment test, consideration of macroeconomic conditions, industry and market conditions, cash
flows, and changes in our share price, we concluded that it was more likely than not that the fair value of our reporting units
was greater than their carrying value.
Consolidation. We consolidate entities in which we own more than 50% of the voting stock and control operations and also
variable interest entities for which we are the primary beneficiary. Investments in nonconsolidated affiliates in which we own
more than 20% of the voting stock or otherwise exercise significant influence over operating and financial policies, but not
control of the nonconsolidated affiliate, are accounted for using the equity method of accounting. Investments in
nonconsolidated affiliates in which we own less than 20% of the voting stock are accounted for using the cost method of
accounting.
Business Combinations. We account for our business combinations under the acquisition method of accounting.
Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as
of the acquisition date at fair value. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair
value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the
identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and
noncontrolling interest requires management’s judgment and often involves the use of significant estimates and assumptions,
including assumptions with respect to future cash flows, discount rates and asset lives among other items.
42
Recent Accounting Pronouncements
See Note 2 to the accompanying consolidated financial statements for a discussion of recent accounting guidance.
RESULTS OF OPERATIONS
Fiscal 2016 Compared to Fiscal 2015
The following table sets forth segment information by business unit, and as a percentage of segment revenues, for the
fiscal years ended March 31, 2016 and 2015. Due to the acquisition of Pilgrim Media Group, LLC ("Pilgrim Studios"), the
results of operations for the Television Production segment for the fiscal year ended March 31, 2016 includes revenues of $52.5
million and gross contribution of $10.9 million (excluding purchase accounting impact of $6.5 million) from Pilgrim Studios
from the acquisition date of November 12, 2015 through March 31, 2016 (see Note 11 to our consolidated financial statements).
Year Ended March 31,
2016
2015
Increase (Decrease)
Amount
% of
Segment
Revenues
% of
Segment
Revenues
Amount
(Amounts in millions)
$
$
$
$
1,677.5
669.9
2,347.4
184.3
104.0
288.3
11.0%
15.5
12.3%
$
$
$
$
1,820.1
579.5
2,399.6
449.8
55.1
504.9
24.7%
9.5
21.0%
Amount
Percent
$ (142.6)
90.4
(52.2)
$
$ (265.5)
48.9
$ (216.6)
(7.8)%
15.6 %
(2.2)%
(59.0)%
88.7 %
(42.9)%
Segment revenues
Motion Pictures
Television Production
Gross segment contribution(1)
Motion Pictures
Television Production
_________________________________________
(1) Gross segment contribution is defined as segment revenue less segment direct operating and distribution and
marketing expenses, and excludes purchase accounting and related adjustments, start-up costs of new business
initiatives, a non-cash imputed interest charge of $5.3 million in fiscal 2016, and backstopped prints and advertising
("P&A") expense (see Note 16 to our consolidated financial statements). Gross segment contribution amounts for
fiscal 2015 reflect the reclassification of certain distribution and marketing expenses in order to be consistent with the
current fiscal year presentation (see Distribution and Marketing Expenses below).
A significant component of revenue comes from home entertainment. The following table sets forth total home
entertainment revenue for both the Motion Pictures and Television Production reporting segments for the fiscal years ended
March 31, 2016 and 2015:
Home Entertainment Revenue
Motion Pictures
Television Production
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
$
$
579.8
60.3
640.1
$
$
662.7
44.8
707.5
$
$
(82.9)
15.5
(67.4)
(12.5)%
34.6 %
(9.5)%
43
Motion Pictures Revenue
The table below sets forth Motion Pictures revenue by media for the fiscal years ended March 31, 2016 and 2015:
Motion Pictures
Theatrical
Home Entertainment
Television
International
Other
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
$
$
314.1
579.8
205.1
548.2
30.3
1,677.5
$
$
354.0
662.7
270.2
495.0
38.2
1,820.1
$
$
(39.9)
(82.9)
(65.1)
53.2
(7.9)
(142.6)
(11.3)%
(12.5)%
(24.1)%
10.7 %
(20.7)%
(7.8)%
Motion Pictures — Theatrical Revenue
The following table sets forth the titles released from our Fiscal 2016 and Fiscal 2015 Theatrical Slates and other titles that
represented a significant portion of theatrical revenue for the fiscal years ended March 31, 2016 and 2015, respectively:
2016
2015
Year Ended March 31,
Theatrical Release Date
Theatrical Release Date
Fiscal 2015 Theatrical Slate:
The Divergent Series: Insurgent March 2015
The D.U.F.F.
Fiscal 2016 Theatrical Slate:
The Divergent Series: Allegiant
Gods of Egypt
The Choice
March 2016
February 2016
February 2016
January 2016
Dirty Grandpa
Norm of the North
The Hunger Games: Mockingjay - Part 2 November 2015
Love the Coopers
November 2015
October 2015
January 2016
The Last Witch Hunter
Freeheld*
Sicario**
Shaun the Sheep Movie
American Ultra
The Age of Adaline
Child 44*
October 2015*
September 2015**
August 2015
August 2015
April 2015
April 2015*
Mortdecai
The Hunger Games:
Mockingjay - Part 1
John Wick
Addicted*
The Expendables 3
Step Up All In
The Quiet Ones
Draft Day
February 2015
January 2015
November 2014
October 2014
October 2014*
August 2014
August 2014
April 2014
April 2014
Fiscal 2015 Theatrical Slate:
Fiscal 2014 Theatrical Slate:
The Divergent Series: Insurgent
March 2015
The Hunger Games: Mockingjay - Part 1 November 2014
___________________
Divergent
The Hunger Games: Catching
Fire
March 2014
November 2013
* Limited release
** Initially a limited release through September 30, 2015, with a wide release in October 2015.
44
The following table sets forth the components of theatrical revenue by product category for the fiscal years ended
March 31, 2016 and 2015:
Theatrical revenues
Feature Film(1)
Managed Brands(2)
Other(3)
___________________
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
$
$
296.5
11.5
6.1
314.1
$
$
338.4
8.5
7.1
354.0
$
$
(41.9)
3.0
(1.0)
(39.9)
(12.4)%
35.3 %
(14.1)%
(11.3)%
(1) Feature Film includes releases through our Lionsgate and Summit Entertainment film labels. We released 14 films in
fiscal 2016 and 10 films in fiscal 2015 theatrically in the U.S. from these labels, which included films developed and
produced in-house, films co-developed and co-produced and films acquired from third parties.
(2) Managed Brands represents direct-to-DVD motion pictures, acquired and licensed brands, third-party library product
and ancillary-driven platform theatrical releases. These theatrical releases included releases through our specialty films
distribution labels, Lionsgate Premiere, and through CodeBlack films, and with our equity method investee, Roadside
Attractions.
(3) Represents certain specialty theatrical releases with our equity method investee, Pantelion Films, and other titles.
Theatrical revenue of $314.1 million decreased $39.9 million, or 11.3%, in fiscal 2016, as compared to fiscal 2015,
primarily due to the relative performance of our feature films, as listed in the table above, and in particular, the lower box office
generated from The Hunger Games: Mockingjay - Part 2 and The Divergent Series: Allegiant as compared to The Hunger
Games: Mockingjay - Part 1 and The Divergent Series: Insurgent in fiscal 2015. To a lesser extent, the decrease was also driven
by the limited releases of Child 44 and Freeheld in fiscal 2016, and while The Age of Adaline had a strong performance at the
box office, under the terms of our distribution arrangement, we recorded only our distribution fee as theatrical revenue.
45
Motion Pictures — Home Entertainment Revenue
The following table sets forth our feature film titles released on home entertainment in the fiscal years ended March 31,
2016 and 2015, in addition to other titles which contributed a significant amount of home entertainment revenue in fiscal 2016
and fiscal 2015, respectively:
2016
2015
Year Ended March 31,
Packaged Media
Release Date
Packaged Media
Release Date
Fiscal 2016 Theatrical Slate:
Fiscal 2015 Theatrical Slate:
The Hunger Games: Mockingjay -
Part 2
Love the Coopers
The Last Witch Hunter
Freeheld
Sicario
American Ultra
Shaun the Sheep Movie
The Age of Adaline
Child 44
March 2016
February 2016
February 2016
February 2016
January 2016
November 2015
November 2015
September 2015
August 2015
The Hunger Games: Mockingjay -
Part 1
March 2015
John Wick
Addicted
The Expendables 3
Step Up All In
Draft Day
The Quiet Ones
February 2015
February 2015
November 2014
November 2014
September 2014
August 2014
Fiscal 2015 Theatrical Slate:
Fiscal 2014 Theatrical Slate:
The Divergent Series: Insurgent
The D.U.F.F.
Mortdecai
The Hunger Games: Mockingjay -
Part 1
John Wick
August 2015
June 2015
May 2015
March 2015
February 2015
Tyler Perry's A Madea Christmas November 2014
Divergent
The Single Moms Club
August 2014
July 2014
I, Frankenstein
May 2014
April 2014
The Legend of Hercules
The Hunger Games: Catching Fire March 2014
The following table sets forth the components of home entertainment revenue by product category for the fiscal years
ended March 31, 2016 and 2015:
Year Ended March 31,
2016
2015
Packaged
Media
Digital
Media(1)
Total
Packaged
Media
Digital
Media(1)
Total
Total
Increase
(Decrease)
(Amounts in millions)
Home entertainment revenues(2)
Feature Film:
Fiscal 2016 Theatrical Slate
$
110.3
$
Fiscal 2015 Theatrical Slate
Fiscal 2014 Theatrical Slate
Prior Theatrical Slates
Total Feature Film
Managed Brands
Other
67.7
17.1
31.3
226.4
131.7
4.8
$
36.9
67.4
7.7
23.7
135.7
78.2
3.0
147.2
135.1
24.8
55.0
362.1
209.9
7.8
$
— $
— $
— $
128.4
106.6
45.8
280.8
147.5
4.3
35.8
88.0
28.7
152.5
74.9
2.7
164.2
194.6
74.5
433.3
222.4
7.0
$
362.9
$
216.9
$
579.8
$
432.6
$
230.1
$
662.7
$
147.2
(29.1)
(169.8)
(19.5)
(71.2)
(12.5)
0.8
(82.9)
(1) Digital media revenue consists of revenues generated from pay-per-view and video-on-demand platforms, EST, and digital
rental.
(2) Certain amounts in fiscal 2015 have been reclassified between product types in order to be consistent with the current
fiscal year classification.
46
Home entertainment revenue of $579.8 million decreased $82.9 million, or 12.5%, in fiscal 2016, as compared to fiscal
2015. The decrease was primarily driven by the performance of our Feature Film titles released on packaged media from our
Fiscal 2016 and Fiscal 2015 Theatrical Slates in fiscal 2016 (as listed in the table above), compared to the revenue from the
titles released on packaged media from our Fiscal 2015 and Fiscal 2014 Theatrical Slates in fiscal 2015 (as listed in the table
above). In particular, significant home entertainment revenues were generated in fiscal 2015 from The Hunger Games:
Mockingjay - Part 1 and Divergent, which compared to lower home entertainment revenues generated in fiscal 2016 from The
Hunger Games: Mockingjay - Part 2 and The Divergent Series: Insurgent. Additionally, Managed Brands decreased $12.5
million, driven by lower packaged media revenue and slightly offset by increased digital media revenue in fiscal 2016, as
compared to fiscal 2015.
Motion Pictures — Television Revenue
The following table sets forth the titles contributing significant motion pictures television revenue for the fiscal years
ended March 31, 2016 and 2015:
Fiscal 2015 Theatrical Slate:
Fiscal 2014 Theatrical Slate:
2016
2015
Year Ended March 31,
John Wick
The Divergent Series: Insurgent
The Hunger Games: Mockingjay - Part 1
Prior Theatrical Slates:
The Twilight Saga: Breaking Dawn - Part 2
Divergent
Ender's Game
Red 2
The Hunger Games: Catching Fire
Prior Theatrical Slates:
The Hunger Games
The Twilight Saga: Breaking Dawn - Part 1
The following table sets forth the components of television revenue by product category for the fiscal years ended
March 31, 2016 and 2015:
Television revenues(1)
Feature Film:
Fiscal 2016 Theatrical Slate
Fiscal 2015 Theatrical Slate
Fiscal 2014 Theatrical Slate
Prior Theatrical Slates
Total Feature Film
Managed Brands
Other
Year Ended March 31,
Increase (Decrease)
2016
2015
(Amounts in millions)
Amount
Percent
$
$
9.2
58.2
15.4
83.4
166.2
35.7
3.2
205.1
$
— $
16.3
98.3
110.7
225.3
41.9
3.0
270.2
$
$
9.2
41.9
(82.9)
(27.3)
(59.1)
(6.2)
0.2
(65.1)
n/m
257.1 %
(84.3)%
(24.7)%
(26.2)%
(14.8)%
6.7 %
(24.1)%
n/m - Percentage not meaningful.
(1) Certain amounts in fiscal 2015 have been reclassified between product types in order to be consistent with the current
fiscal year classification.
Television revenue decreased in fiscal 2016 as compared to fiscal 2015, primarily driven by our feature films. In particular,
there were a fewer number of titles with television windows opening in the current fiscal year from our smaller Fiscal 2015
Theatrical Slate as compared to our Fiscal 2014 Theatrical Slate, and lower revenue was generated from those titles.
Additionally, revenue decreased in fiscal 2016 from our Prior Theatrical Slates category, largely driven by a significant
contribution from The Hunger Games in fiscal 2015.
47
Motion Pictures — International Revenue
The following table sets forth the titles contributing significant motion pictures international revenue for the fiscal years
ended March 31, 2016 and 2015:
2016
Fiscal 2016 Theatrical Slate:
Child 44
Gods of Egypt
Sicario
The Divergent Series: Allegiant
The Hunger Games: Mockingjay - Part 2
The Last Witch Hunter
Fiscal 2015 Theatrical Slate:
Mortdecai
The Divergent Series: Insurgent
Year Ended March 31,
Fiscal 2015 Theatrical Slate:
2015
Step Up All In
The Divergent Series: Insurgent
The Hunger Games: Mockingjay - Part 1
Fiscal 2014 Theatrical Slate:
Divergent
The Hunger Games: Catching Fire
The following table sets forth the components of international revenue by product category for the fiscal years ended
March 31, 2016 and 2015:
International revenues(1)
Feature Film:
Fiscal 2016 Theatrical Slate
Fiscal 2015 Theatrical Slate
Fiscal 2014 Theatrical Slate
Prior Theatrical Slates
Total Feature Film
UK Third Party Product(2)
Managed Brands
Other
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
$
281.8
96.4
17.7
48.2
444.1
72.4
22.9
8.8
$
— $
209.7
99.4
84.1
393.2
66.8
22.3
12.7
$
548.2
$
495.0
$
281.8
(113.3)
(81.7)
(35.9)
50.9
5.6
0.6
(3.9)
53.2
n/m
(54.0)%
(82.2)%
(42.7)%
12.9 %
8.4 %
2.7 %
(30.7)%
10.7 %
n/m - Percentage not meaningful.
(1) Certain amounts in fiscal 2015 have been reclassified between product types in order to be consistent with the current
fiscal year classification.
(2) UK Third Party Product represents titles acquired separately for self-distribution in the United Kingdom.
International motion pictures revenue increased in fiscal 2016 as compared to fiscal 2015, primarily driven by our feature
films, and in particular, a higher contribution from our Fiscal 2016 Theatrical Slate in the current fiscal year as compared to the
revenue generated by our Fiscal 2015 Theatrical Slate in the prior fiscal year, due to a greater number of titles generating
revenue. This was partially offset by lower revenue from our Prior Theatrical Slates category, which included significant
contributions from The Hunger Games, The Twilight Saga: Breaking Dawn - Part 1 and The Twilight Saga: Breaking Dawn -
Part 2 in fiscal 2015.
Motion Pictures —Other Revenue
Other revenue included in motion pictures revenue decreased in fiscal 2016 as compared to fiscal 2015, primarily due to a
licensing arrangement made in fiscal 2015.
48
Television Production Revenue
The following table sets forth the components and the changes in the components of revenue that make up television
production revenue for the fiscal years ended March 31, 2016 and 2015:
Television Production
Domestic television
International
Home entertainment revenue
Digital
Packaged Media
Total home entertainment revenue
Other
Television Production - Domestic Television
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
$
$
$
415.5
190.2
$
415.2
112.4
48.8
11.5
60.3
3.9
669.9
$
34.3
10.5
44.8
7.1
579.5
$
0.3
77.8
14.5
1.0
15.5
(3.2)
90.4
0.1 %
69.2 %
42.3 %
9.5 %
34.6 %
(45.1)%
15.6 %
Domestic television revenue increased slightly in fiscal 2016, as compared to fiscal 2015, primarily due to television
revenue in fiscal 2016 of $52.5 million from the November 12, 2015 acquisition of Pilgrim Studios, which was mostly offset by
a decrease in revenue driven by fewer television episodes delivered in fiscal 2016, as compared to fiscal 2015, and in particular,
significant revenue in fiscal 2015 from Mad Men - Season 7. Television episodes delivered for original exhibition during fiscal
2016 and 2015 included the episode deliveries as shown in the table below:
Year Ended
March 31, 2016
Casual - Season 1
Greenleaf - Season 1
1/2hr
1hr
Manhattan - Season 2
1hr
Monica the Medium - Season 1 1hr
Monica the Medium - Season 2 1hr
Nashville - Season 3
1hr
Nashville - Season 4
Orange Is The New Black -
Season 3
Orange Is The New Black -
Season 4
The Royals - Season 2
Other(1)
1hr
1hr
1hr
1hr
1/2hr &
1hr
Episodes
10
3
10
10
1
5
16
1
13
10
77
Hours
5.0 Anger Management
3.0 Ascension
10.0 Houdini
10.0 Mad Men - Season 7
1.0 Manhattan - Season 1
5.0 Nashville - Season 2
16.0 Nashville - Season 3
1/2hr
1hr
1hr
1hr
1hr
1hr
1hr
1.0 Nurse Jackie - Season 7
1/2hr
Orange Is The New Black -
Season 3
13.0
10.0 Rosemary's Baby
47.5 The Royals - Season 1
1hr
1hr
1hr
Other(1)
1/2hr & 1hr
______________________
156
121.5
Year Ended
March 31, 2015
Episodes
35
6
4
11
13
3
17
12
12
4
9
112
238
Hours
17.5
6.0
4.0
11.0
13.0
3.0
17.0
6.0
12.0
4.0
9.0
65.5
168.0
(1) Other in fiscal 2016 includes episodes delivered for Christina Milian Turned Up (Season 2), Deadbeat (Seasons 2 &
3), Deion's Family Playbook, DeSean Jackson: Home Team (Season 1), Flea Market Flip (Seasons 6 & 7), Rocket
Jump: The Show, among others. Other in fiscal 2015 includes episodes delivered for Alaska: Battle on the Bay,
Christina Milian Turned Up (Season 1), Deadbeat (Season 2), Deal With It (Season 2), Deion's Family Playbook, Flea
Market Flip (Seasons 4 & 5), Partners, and Way Out West.
49
In addition to the titles mentioned in the table above, significant domestic television revenue was contributed in fiscal 2016
from Family Feud (Seasons 8 & 9), The Wendy Williams Show (Seasons 6 & 7), House of Payne, Celebrity Name Game, and
Anger Management, and in fiscal 2015, from Are We There Yet, Family Feud (Seasons 7 & 8), and The Wendy Williams Show
(Season 5).
Television Production - International Revenue
International revenue in fiscal 2016 increased as compared to fiscal 2015, primarily driven by a significant contribution of
revenue from Orange Is The New Black (Seasons 1, 2, 3 & 4), and to a lesser extent, contributions from Blue Mountain State
(Seasons 1, 2 & 3) and The Royals (Seasons 1 & 2) in fiscal 2016, partially offset by decreases in revenues from Anger
Management and Mad Men.
Television Production - Home Entertainment Revenue
The increase in home entertainment revenue is primarily due to an increase in digital media revenue, largely driven by
revenues from Mad Men (Season 7), Manhattan (Season 2), The Royals (Season 1), and Blue Mountain State (Seasons 1,2 & 3)
in fiscal 2016, compared to revenues from Mad Men (Season 7) and Manhattan (Season 1) in fiscal 2015.
Direct Operating Expenses
The following table sets forth direct operating expenses by segment for the fiscal years ended March 31, 2016 and 2015:
Year Ended
March 31, 2016
Year Ended
March 31, 2015
Motion
Pictures
Television
Production
Total
Motion
Pictures
Television
Production
Total
(Amounts in millions)
$ 659.3
214.9
$ 360.5
166.9
$ 1,019.8
381.8
$ 545.7
270.8
$ 354.3
131.4
$ 900.0
402.2
0.1
874.3
4.4
531.8
—
$ 874.3
—
$ 531.8
4.5
1,406.1
9.2
$ 1,415.3
11.0
827.5
2.6
488.3
—
$ 827.5
—
$ 488.3
13.6
1,315.8
—
$ 1,315.8
52.1%
79.4%
60.3%
45.5%
84.3%
54.8%
Direct operating expenses
Amortization of films and television
programs
Participation and residual expense
Provision for doubtful accounts and
foreign exchange losses
Other(1)
Total direct operating expenses
Direct operating expenses as a percentage of
segment revenues
______________________
(1) Other direct operating expenses primarily consist of the incremental amortization expense of the purchase accounting
fair value adjustments on television assets related to the acquisition of Pilgrim Studios, and direct operating costs
related to our new direct-to-consumer business initiatives including our subscription video-on-demand platforms.
Direct operating expenses of the Motion Pictures segment of $874.3 million for fiscal 2016 were 52.1% of motion pictures
revenue, compared to $827.5 million, or 45.5% of motion pictures revenue for fiscal 2015. Direct operating expenses increased
by $46.8 million, even though motion pictures revenue decreased $142.6 million primarily due to the higher amortization rates
of our Fiscal 2016 and Fiscal 2015 Theatrical Slates in the current fiscal year as compared to the amortization rates of our
Fiscal 2015 and Fiscal 2014 Theatrical Slates in the prior fiscal year. In particular, the amortization rates in the current fiscal
year for The Hunger Games: Mockingjay - Part 2 and to a lesser extent, The Divergent Series: Insurgent and The Last Witch
Hunter, were higher as compared to the amortization rates in the prior fiscal year for The Hunger Games: Mockingjay - Part 1
and to a lesser extent, Divergent and The Hunger Games: Catching Fire. Included in direct operating expenses are investment
in film write-downs of approximately $22.2 million in fiscal 2016, compared to approximately $17.3 million in fiscal 2015.
Foreign exchange losses decreased in fiscal 2016 as compared to fiscal 2015, and this decrease was offset partially by an
increase in the provision for doubtful accounts.
Direct operating expenses of the Television Production segment of $531.8 million for fiscal 2016 were 79.4% of television
production revenue, compared to $488.3 million, or 84.3%, of television production revenue for fiscal 2015. The increase in
direct operating expense is primarily due to an increase in television production revenue. The decrease in direct operating
50
expenses as a percentage of television production revenue is primarily due to the mix of titles generating revenue in fiscal 2016
as compared to fiscal 2015, and was primarily driven by the significant contribution of revenue in fiscal 2016 from Orange Is
The New Black (which carries a lower amortization rate as compared to the amortization rate of the total Television Production
segment), relative to total television production revenue. This decrease was offset partially by an increase attributable to a
greater number of new television programs in fiscal 2016 compared to fiscal 2015, which typically result in higher amortization
expenses in relation to revenues initially, until there are a sufficient number of subsequent seasons ordered and episodes
produced, such that revenue can be generated from syndication in domestic and international markets.
Distribution and Marketing Expenses
The following table sets forth distribution and marketing expenses by segment for the fiscal years ended March 31, 2016
and 2015:
Distribution and marketing expenses
Theatrical
Home Entertainment
International
Television
Other(1)
Year Ended
March 31, 2016
Year Ended
March 31, 2015
Motion
Pictures
Television
Production
Total
Motion
Pictures
Television
Production
Total
(Amounts in millions)
$
392.1
$
— $
142.9
69.3
14.6
618.9
—
8.3
15.3
15.8
39.4
—
392.1
151.2
84.6
30.4
658.3
3.5
$
289.6
$
— $
166.4
80.8
6.1
542.9
—
6.7
12.8
16.6
36.1
289.6
173.1
93.6
22.7
579.0
12.5
Total distribution and marketing expenses $
618.9
$
39.4
$
661.8
$
542.9
$
36.1
$
591.5
______________________
(1) Other distribution and marketing expenses in fiscal 2016 consist of distribution and marketing costs related to our new
direct-to-consumer business initiatives, including our subscription video-on-demand platforms, and backstopped P&A
expense, which represents the amount of theatrical marketing expense for third party titles that we funded and
expensed for which a third party provides a first dollar loss guarantee (subject to a cap) that such expense will be
recouped from the performance of the film (which results in minimal risk of loss to the Company). The amount
represents the P&A expense incurred net of the impact of expensing the P&A costs over the revenue streams similar to
a participation expense. We do not consider these costs part of segment distribution and marketing expense and have
reclassified the fiscal 2015 amount of backstopped P&A from the Motion Pictures segment to Other to be consistent
with the current fiscal year presentation.
The majority of distribution and marketing expenses relate to the Motion Pictures segment. Theatrical P&A in the Motion
Pictures segment in fiscal 2016 of $392.1 million increased $102.5 million, compared to $289.6 million in fiscal 2015. The
increase was primarily driven by higher P&A spending on our theatrical releases, in part due to a greater number of wide
releases requiring P&A in fiscal 2016. In addition, the increase was driven to a lesser extent, by higher P&A incurred in
advance for films to be released in fiscal 2017. In fiscal 2016, approximately $16.6 million of P&A was incurred in advance for
films to be released in fiscal 2017, such as Criminal, Now You See Me 2, and Deepwater Horizon. In fiscal 2015, approximately
$5.9 million of P&A was incurred in advance for films to be released in fiscal 2016, such as The Hunger Games: Mockingjay
Part 2 and Child 44.
Home entertainment distribution and marketing costs on motion pictures and television product in fiscal 2016 of $151.2
million decreased $21.9 million, or 12.7%, compared to $173.1 million in fiscal 2015, primarily due to lower motion pictures
home entertainment revenue. Home entertainment distribution and marketing costs as a percentage of home entertainment
revenues in fiscal 2016 were 23.6%, and were comparable to home entertainment distribution and marketing costs as a
percentage of home entertainment revenues in fiscal 2015 of 24.5%.
International distribution and marketing expenses in the Motion Pictures segment in fiscal 2016 of $69.3 million decreased
from $80.8 million in fiscal 2015, primarily driven by higher spending in fiscal 2015 on our theatrical slate releases, including
The Expendables 3 and The Hunger Games: Mockingjay - Part 1.
51
Gross Segment Contribution
Gross segment contribution is defined as segment revenue less segment direct operating and segment distribution and
marketing expenses. Consistent with how management reviews the Television Production gross segment contribution, the
Television Production segment also excludes a non-cash imputed interest charge of $5.3 million in fiscal 2016 for the interest
cost of certain long-term accounts receivable for Television Production licensed product that become due beyond one-year.
The following table sets forth gross segment contribution for the fiscal years ended March 31, 2016 and 2015:
Gross segment contribution
Motion Pictures
Television Production
Year Ended March 31,
Increase (Decrease)
% of
Segment
Revenues
2016
% of
Segment
Revenues
2015
(Amounts in millions)
Amount
Percent
$
$
184.3
104.0
288.3
11.0%
15.5
12.3%
$
$
449.8
55.1
504.9
24.7%
9.5
21.0%
$ (265.5)
48.9
$ (216.6)
(59.0)%
88.7 %
(42.9)%
Gross segment contribution of the Motion Pictures segment for fiscal 2016 of $184.3 million decreased $265.5 million, or
59.0%, as compared to fiscal 2015. The decrease in gross segment contribution and gross contribution margin of the Motion
Pictures segment was primarily driven by our theatrical slates, and is due to lower motion pictures revenue, higher direct
operating expenses as a percentage of motion pictures revenue, and to a lesser extent, higher distribution and marketing
expenses as a percentage of motion pictures revenue.
Gross segment contribution of the Television Production segment for fiscal 2016 increased $48.9 million, or 88.7% as
compared to fiscal 2015. The increase in gross segment contribution and gross contribution margin of the Television Production
segment is due to an increase in television production revenue and lower direct operating expenses as a percentage of television
production revenue.
General and Administrative Expenses
The following table sets forth general and administrative expenses by segment for the fiscal years ended March 31, 2016
and 2015:
General and administrative expenses
Motion Pictures
Television Production
Shared services and corporate expenses,
excluding items below
General and administrative expenses before items
below:
Year Ended March 31,
Increase (Decrease)
2016
% of
Revenues
2015
% of
Revenues
Amount
Percent
(Amounts in millions)
$
81.0
19.8
76.4
$
73.5
13.3
85.7
$
7.5
6.5
10.2 %
48.9 %
(9.3)
(10.9)%
177.2
7.5%
172.5
7.2%
Share-based compensation expense
Restructuring and other items
Purchase accounting and related adjustments
Start-up costs of new business initiatives
78.5
19.8
1.9
4.8
80.3
10.7
—
—
Total general and administrative expenses
$
282.2
12.0% $
263.5
11.0% $
18.7
4.7
(1.8)
9.1
1.9
4.8
2.7 %
(2.2)%
85.0 %
n/m
n/m
7.1 %
Total General and Administrative Expenses
General and administrative expenses increased by $18.7 million, or 7.1%, as reflected in the table above and further
discussed below.
52
General and administrative expenses of the Motion Pictures segment increased by $7.5 million, or 10.2%, primarily due to
increases in salaries and related expenses associated with the move of our international sales and distribution organization to
the United Kingdom, new product lines and franchise extension activity.
General and administrative expenses of the Television Production segment increased $6.5 million, or 48.9%, primarily due
to increases in salaries and related expenses associated with the move of our international sales and distribution organization to
the United Kingdom and to a lesser extent increases in salaries and related expenses associated with our Television syndication
activities. Additionally, the fiscal year ended March 31, 2016 includes general and administrative expenses of Pilgrim Media
Group, acquired in November 2015.
Shared services and corporate expenses excluding share-based compensation expense decreased $9.3 million, or 10.9%,
primarily due to a decrease in incentive compensation partially offset by increases in rent and facilities costs.
Share-Based Compensation Expense. The following table sets forth share-based compensation expense included in shared
services and corporate expenses for the fiscal years ended March 31, 2016 and 2015:
Share-Based Compensation Expense:
Stock options
Restricted share units and other share-based compensation
Share appreciation rights
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
$
$
31.0
47.2
0.3
78.5
$
$
33.5
42.8
4.0
80.3
$
$
(2.5)
4.4
(3.7)
(1.8)
(7.5)%
10.3 %
(92.5)%
(2.2)%
Restructuring and Other Items. Restructuring and other items includes restructuring and severance costs, certain transaction
related costs, and certain unusual items, when applicable. Amounts in fiscal 2016 represent professional fees associated with certain
strategic transactions including, among others, the acquisition of Pilgrim Studios and certain shareholder transactions, and certain
transactional costs of $7.7 million of Pilgrim Studios attributable to the noncontrolling shareholder (see Note 11 to our
consolidated financial statements). Pursuant to the profit sharing provisions in the Pilgrim Studios operating agreement, the
transactional costs of $7.7 million are included in net loss attributable to noncontrolling interest in our consolidated statement
of operations. In addition, amounts in fiscal 2016 include pension withdrawal costs of $2.7 million related to an underfunded
multi-employer pension plan in which the Company is no longer participating.
Amounts in fiscal 2015 primarily represent costs related to the move of our international sales and distribution organization to the
United Kingdom, and severance costs associated with the integration of the marketing operations of our Lionsgate and Summit
Entertainment film labels, of which approximately $1.2 million are non-cash charges resulting from the acceleration of vesting of
stock awards (see Note 13 to our consolidated financial statements). In addition, amounts in fiscal 2015 also include transaction
costs related to a certain shareholder transaction (see Note 22 to our consolidated financial statements), and costs related to the
Starz Exchange transaction (see Note 5 to our consolidated financial statements).
Purchase accounting and related adjustments. Purchase accounting and related adjustments represent the charge for the
accretion of the noncontrolling interest discount that is included in general and administrative expense (see Note 12 to our
consolidated financial statements).
Start-up costs of new business initiatives. Start-up costs of new business initiatives represent general and administrative
expense associated with the Company's direct to consumer initiatives including its subscription video-on-demand platforms.
Depreciation, Amortization and Other Expenses (Income)
Depreciation and amortization was $13.1 million in fiscal 2016, compared to $6.6 million in fiscal 2015, primarily due to
an increase in capital assets, including computer equipment and software, leasehold improvements and additions from the
acquisition of Pilgrim Studios.
Interest expense in fiscal 2016 increased $2.4 million from fiscal 2015. The following table sets forth the components of
interest expense for the fiscal years ended March 31, 2016 and 2015:
53
Interest Expense
Cash Based:
Senior revolving credit facility
Convertible senior subordinated notes
5.25% Senior Notes
Term Loans
Other
Non-Cash Based:
Amortization of discount and deferred financing costs
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
$
$
$
5.4
2.4
11.8
20.2
5.9
45.7
$
6.7
3.5
11.8
11.7
6.0
39.7
9.2
54.9
$
12.8
52.5
$
(1.3)
(1.1)
—
8.5
(0.1)
6.0
(3.6)
2.4
(19.4)%
(31.4)%
— %
72.6 %
(1.7)%
15.1 %
(28.1)%
4.6 %
Interest and other income was $1.9 million in fiscal 2016, compared to $2.8 million in fiscal 2015.
The following table represents our portion of the income or (loss) of our equity method investees based on our percentage
ownership for the fiscal years ended March 31, 2016 and 2015:
EPIX(1)
Pop(1)
Other(2)
______________________
March 31, 2016
Ownership
Percentage
Year Ended March 31,
Increase (Decrease)
2016
2015
Amount
Percent
(Amounts in millions)
31.2%
50.0%
Various
$
$
52.1
(1.8)
(6.1)
44.2
$
$
48.7
(9.6)
13.4
52.5
$
$
3.4
7.8
(19.5)
(8.3)
7.0 %
(81.3)%
(145.5)%
(15.8)%
(1) We license certain of our theatrical releases and other films and television programs to EPIX and Pop. A portion of the
profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity
interest income (loss) of the venture. These profits are recognized as they are realized by the venture (see Note 5 to our
consolidated financial statements).
(2) On April 14, 2014, we sold all of our 34.5% interest in FEARnet, which resulted in a gain on sale of $11.4 million in the
fiscal year ended March 31, 2015 included in our other equity method investments income shown above. See Note 5 to
our consolidated financial statements.
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $11.7 million for the fiscal year ended March 31, 2015, with no comparable loss for
the fiscal year ended March 31, 2016. Amounts in fiscal 2015 primarily resulted from the March 2015 early redemption of the
Term Loan Due 2020, which carried a variable rate of LIBOR, subject to a 1% floor, plus 4%, in connection with the issuance
of the Term Loan Due 2022, which carries a fixed interest rate of 5%. See Note 7 to our consolidated financial statements.
Income Tax Provision (Benefit)
We had an income tax benefit of $76.5 million in fiscal 2016, compared to an expense of $31.6 million in fiscal 2015. Our
income tax provision (benefit) differs from the federal statutory rate multiplied by pre-tax income (loss) and has changed from
the prior fiscal year. Our income tax provision (benefit) is affected by many factors, including the overall level of pre-tax
income, the mix of pre-tax income generated across the various jurisdictions in which we operate, changes in tax laws and
regulations in those jurisdictions, changes in valuation allowances on our deferred tax assets, tax planning strategies available
to us, and other discrete items.
The decrease in our income tax provision in fiscal 2016 as compared to fiscal 2015 is driven by lower pre-tax income and a
change in the mix of pre-tax income (loss) generated across the various jurisdictions in which we operate which reflects the
impact of the implementation of certain business and financing strategies. This includes a favorable permanent book-tax
54
difference in our Canadian jurisdiction for certain foreign affiliate dividends. Canadian tax law permits such dividends to be
received without being subject to tax. The impact is reflected in Note 14 to our consolidated financial statements in the table
that reconciles income taxes computed at U.S. statutory income tax rates to the income tax provision (benefit).
We expect that with the utilization of our net operating loss carryforwards and other tax attributes, our cash tax
requirements will not increase significantly in fiscal 2017 as compared to fiscal 2016. At March 31, 2016, we had U.S. net
operating loss carryforwards of approximately $285.2 million available to reduce future federal income taxes which expire
beginning in 2028 through 2036, state net operating loss carryforwards of approximately $254.1 million available to reduce
future state income taxes which expire in varying amounts beginning 2024, and Canadian loss carryforwards of $22.5 million,
which will expire beginning in 2034. At March 31, 2016, the Company had U.K. loss carryforwards of $6.7 million which do
not expire. In addition, at March 31, 2016, we had U.S. credit carryforwards related to foreign taxes paid of approximately
$44.7 million to offset future federal income taxes that will expire beginning in 2021.
Net Income Attributable to Lions Gate Entertainment Corp. Shareholders
Net income attributable to our shareholders for the fiscal year ended March 31, 2016 was $50.2 million, or basic net
income per common share of $0.34 on 148.5 million weighted average common shares outstanding and diluted net income per
common share of $0.33 on 154.1 million weighted average common shares outstanding. This compares to net income
attributable to our shareholders for the fiscal year ended March 31, 2015 of $181.8 million, or basic net income per common
share of $1.31 on 139.0 million weighted average common shares outstanding and diluted net income per common share of
$1.23 on 151.8 million weighted average common shares outstanding.
Fiscal 2015 Compared to Fiscal 2014
The following table sets forth segment information by business unit, and as a percentage of segment revenues, for the fiscal
years ended March 31, 2015 and 2014:
Year Ended March 31,
2015
2014
Increase (Decrease)
Amount
% of
Segment
Revenues
% of
Segment
Revenues
Amount
(Amounts in millions)
$
$
$
$
1,820.1
579.5
2,399.6
449.8
55.1
504.9
24.7%
9.5
21.0%
$
$
$
$
2,182.9
447.4
2,630.3
491.8
29.6
521.4
22.5%
6.6
19.8%
Amount
Percent
$ (362.8)
132.1
$ (230.7)
$
$
(42.0)
25.5
(16.5)
(16.6)%
29.5 %
(8.8)%
(8.5)%
86.1 %
(3.2)%
Segment revenues
Motion Pictures
Television Production
Gross segment contribution(1)
Motion Pictures
Television Production
_________________________________________
(1) Gross segment contribution is defined as segment revenue less segment direct operating and segment distribution and
marketing expenses. Gross segment contribution amounts for fiscal 2015 reflect the reclassification of certain
distribution and marketing expenses in order to be consistent with the current fiscal year presentation (see Distribution
and Marketing Expenses section below).
A significant component of revenue comes from home entertainment. The following table sets forth total home entertainment
revenue for both the Motion Pictures and Television Production reporting segments for the fiscal years ended March 31, 2015
and 2014:
55
Home Entertainment Revenue
Motion Pictures
Television Production
Motion Pictures Revenue
Year Ended March 31,
Increase (Decrease)
2015
2014
Amount
Percent
(Amounts in millions)
$
$
662.7
44.8
707.5
$
$
829.6
34.3
863.9
$
$
(166.9)
10.5
(156.4)
(20.1)%
30.6 %
(18.1)%
The table below sets forth Motion Pictures revenue by media for the fiscal years ended March 31, 2015 and 2014.
Motion Pictures
Theatrical
Home Entertainment
Television
International
Other
Year Ended March 31,
Increase (Decrease)
2015
2014
Amount
Percent
(Amounts in millions)
$
$
354.0
662.7
270.2
495.0
38.2
1,820.1
$
$
524.7
829.6
225.3
543.4
59.9
2,182.9
$
$
(170.7)
(166.9)
44.9
(48.4)
(21.7)
(362.8)
(32.5)%
(20.1)%
19.9 %
(8.9)%
(36.2)%
(16.6)%
Motion Pictures — Theatrical Revenue
The following table sets forth the titles released from our Fiscal 2015 and Fiscal 2014 Theatrical Slates and other titles that
represented a significant portion of theatrical revenue for the fiscal years ended March 31, 2015 and 2014, respectively:
56
2015
2014
Year Ended March 31,
Fiscal 2015 Theatrical Slate:
Fiscal 2014 Theatrical Slate:
Theatrical Release Date
Theatrical Release Date
The Divergent Series: Insurgent March 2015
The D.U.F.F.
Mortdecai
The Hunger Games: Mockingjay -
Part 1
John Wick
February 2015
January 2015
November 2014
October 2014
Addicted*
The Expendables 3
Step Up All In
The Quiet Ones
Draft Day
October 2014*
August 2014
August 2014
April 2014
April 2014
Divergent
The Single Moms Club
I, Frankenstein
March 2014
March 2014
January 2014
January 2014
The Legend of Hercules
Tyler Perry's A Madea Christmas December 2013
The Hunger Games: Catching
Fire
Ender's Game
Escape Plan
You're Next
Red 2
Now You See Me
Peeples
November 2013
November 2013
October 2013
August 2013
July 2013
May 2013
May 2013
April 2013
Fiscal 2014 Theatrical Slate:
The Big Wedding
Fiscal 2013 Theatrical Slate:
Divergent
March 2014
The Hunger Games: Catching
Fire
November 2013
* Limited release.
Temptation: Confessions of a
Marriage Counselor
March 2013
The following table sets forth the components of theatrical revenue by product category for the fiscal years ended
March 31, 2015 and 2014:
Theatrical revenues
Feature Film(1)
Managed Brands(2)
Other(3)
___________________
Year Ended March 31,
Increase (Decrease)
2014
2015
(Amounts in millions)
Amount
Percent
$
$
338.4
8.5
7.1
354.0
$
$
468.4
30.1
26.2
524.7
$
$
(130.0)
(21.6)
(19.1)
(170.7)
(27.8)%
(71.8)%
(72.9)%
(32.5)%
(1) Feature Film includes our releases through our Lionsgate and Summit Entertainment film labels. We released 10 films
in fiscal 2015 and 13 films in fiscal 2014 theatrically in the U.S. from these labels, which included films developed
and produced in-house, films co-developed and co-produced and films acquired from third parties.
(2) Managed Brands represents direct-to-DVD motion pictures, acquired and licensed brands, third-party library product
and ancillary-driven platform theatrical releases. These theatrical releases include releases through our specialty films
distribution labels, Lionsgate Premiere and through CodeBlack films, and with our equity method investee, Roadside
Attractions.
(3) Represents certain specialty theatrical releases with our equity method investee, Pantelion Films, and other titles.
Theatrical revenue of $354.0 million decreased $170.7 million, or 32.5%, in fiscal 2015, as compared to fiscal 2014.
Approximately $130.0 million of this decrease was driven by fewer films (as listed above) released from our Fiscal 2015
Theatrical Slate compared to our Fiscal 2014 Theatrical Slate and the relative performance of those films released. In particular,
the box office performance of The Hunger Games: Mockingjay - Part 1 in fiscal 2015 was lower than the box office
performance of The Hunger Games: Catching Fire and fiscal 2014 included the strong box office performance of Now You See
Me. In addition, theatrical revenue from Managed Brands declined $21.6 million, due primarily to significant revenue from
57
Kevin Hart: Let Me Explain and Mud in fiscal 2014, and Other theatrical revenue declined $19.1 million due primarily to
significant theatrical revenue from Instructions Not Included in fiscal 2014.
Motion Pictures — Home Entertainment Revenue
The following table sets forth our feature film titles released on home entertainment in the fiscal years ended March 31,
2015 and 2014, in addition to other titles which contributed a significant amount of home entertainment revenue in fiscal 2015
and fiscal 2014, respectively:
2015
2014
Year Ended March 31,
Packaged Media
Release Date
Packaged Media
Release Date
Fiscal 2015 Theatrical Slate:
Fiscal 2014 Theatrical Slate:
The Hunger Games: Mockingjay -
Part 1
John Wick
Addicted
The Expendables 3
Step Up All In
Draft Day
The Quiet Ones
March 2015
February 2015
February 2015
November 2014
November 2014
September 2014
August 2014
The Hunger Games: Catching Fire March 2014
Escape Plan
Ender's Game
You're Next
Red 2
Now You See Me
Peeples
The Big Wedding
February 2014
February 2014
January 2014
November 2013
September 2013
September 2013
August 2013
Fiscal 2014 Theatrical Slate:
Fiscal 2013 Theatrical Slate:
Tyler Perry's A Madea Christmas November 2014
Divergent
August 2014
July 2014
The Single Moms Club
I, Frankenstein
May 2014
The Legend of Hercules
April 2014
The Hunger Games: Catching Fire March 2014
Temptation: Confessions of A
Marriage Counselor
Snitch
Warm Bodies
The Last Stand
Texas Chainsaw 3D
The Impossible
July 2013
June 2013
June 2013
May 2013
May 2013
April 2013
The Twilight Saga: Breaking Dawn
- Part 2
March 2013
Prior Theatrical Slates:
The Hunger Games
Managed Brands:
August 2012
Mud
Duck Dynasty (multiple seasons)
August 2013
Various
58
The following table sets forth the components of home entertainment revenue by product category for the fiscal years
ended March 31, 2015 and 2014:
Year Ended March 31,
2015
2014
Packaged
Media
Digital
Media(1)
Total
Packaged
Media
Digital
Media(1)
Total
Total
Increase
(Decrease)
(Amounts in millions)
Home entertainment revenues(2)
Feature Film:
$
Fiscal 2015 Theatrical Slate
Fiscal 2014 Theatrical Slate
Fiscal 2013 Theatrical Slate
Prior Theatrical Slates
Total Feature Film
Managed Brands
Other
$
$
128.4
106.6
14.0
31.8
280.8
147.5
4.3
35.8
88.0
6.2
22.5
152.5
74.9
2.7
$
432.6
$
230.1
$
164.2
194.6
20.2
54.3
433.3
222.4
7.0
662.7
$
— $
— $
209.7
101.2
71.4
382.3
199.5
8.6
49.5
83.9
23.0
156.4
80.6
2.2
$
590.4
$
239.2
$
— $
164.2
(64.6)
(164.9)
(40.1)
(105.4)
(57.7)
(3.8)
$ (166.9)
259.2
185.1
94.4
538.7
280.1
10.8
829.6
___________________
(1) Digital media revenue consists of revenues generated from pay-per-view and video-on-demand platforms, EST, and digital
rental.
(2) Certain amounts in fiscal 2015 and fiscal 2014 have been reclassified between product types in order to be consistent with
the current fiscal year classification.
Home entertainment revenue of $662.7 million decreased $166.9 million, or 20.1%, in fiscal 2015 as compared to fiscal
2014. Of the $166.9 million decrease, approximately $105.4 million was from our feature films, and $57.7 million was from
Managed Brands. The decrease in home entertainment revenues from our feature films was largely driven by the performance
of the titles released in fiscal 2015 from our Fiscal 2015 Theatrical Slate, as compared to the titles released in fiscal 2014 from
our Fiscal 2014 Theatrical Slate, which included significant revenues from the release of The Hunger Games: Catching Fire,
Now You See Me and Red 2 in fiscal 2014. The decrease was also, to a lesser extent, driven by fewer titles released on packaged
media from our feature films in fiscal 2015 as compared to fiscal 2014. These decreases in revenue were partially offset by
contributions from our Fiscal 2014 Theatrical Slate in fiscal 2015, driven by the performance of Divergent and The Hunger
Games: Catching Fire in fiscal 2015. The decrease in Managed Brands revenue was primarily due to the number and
performance of titles released in fiscal 2015, as compared to the titles released in fiscal 2014, and in particular, a significant
contribution from Mud in fiscal 2014.
Motion Pictures — Television Revenue
The following table sets forth the titles contributing significant motion pictures television revenue for the fiscal years
ended March 31, 2015 and 2014:
59
Fiscal 2014 Theatrical Slate:
2015
Divergent
Ender's Game
Red 2
The Hunger Games: Catching Fire
Prior Theatrical Slates:
The Hunger Games
The Twilight Saga: Breaking Dawn - Part 1
Year Ended March 31,
Fiscal 2014 Theatrical Slate:
Now You See Me
2014
Fiscal 2013 Theatrical Slate:
Snitch
Temptation: Confessions of a Marriage Counselor
The Twilight Saga: Breaking Dawn - Part 2
The Possession
Warm Bodies
The following table sets forth the components of television revenue by product category for the fiscal years ended
March 31, 2015 and 2014:
Television revenues(1)
Feature Film:
Fiscal 2015 Theatrical Slate
Fiscal 2014 Theatrical Slate
Fiscal 2013 Theatrical Slate
Prior Theatrical Slates
Total Feature Film
Managed Brands
Other
___________________
n/m - Percentage not meaningful.
Year Ended March 31,
Increase (Decrease)
2015
2014
(Amounts in millions)
Amount
Percent
$
$
16.3
98.3
17.6
93.1
225.3
41.9
3.0
270.2
$
— $
24.4
94.4
76.4
195.2
29.2
0.9
225.3
$
$
16.3
73.9
(76.8)
16.7
30.1
12.7
2.1
44.9
n/m
n/m
(81.4)%
21.9 %
15.4 %
43.5 %
233.3 %
19.9 %
(1) Certain amounts in fiscal 2015 and fiscal 2014 have been reclassified between product types in order to be consistent with
the current fiscal year classification.
Television revenue increased in fiscal 2015 as compared to fiscal 2014 due primarily to an increase in the contribution of
revenue from our feature films as listed above, and in particular, contributions from our Prior Theatrical Slates category
reflecting television window openings for The Twilight Saga: Breaking Dawn - Part 1 and The Hunger Games and also, to a
lesser extent, an increase in the contribution of revenue from our Managed Brands category reflecting the timing of television
windows opening in fiscal 2015.
60
Motion Pictures — International Revenue
The following table sets forth the titles contributing significant motion pictures international revenue for the fiscal years
ended March 31, 2015 and 2014:
Fiscal 2015 Theatrical Slate:
Fiscal 2014 Theatrical Slate:
2015
2014
Year Ended March 31,
Step Up All In
The Divergent Series: Insurgent
The Hunger Games: Mockingjay - Part 1
Escape Plan
Now You See Me
Red 2
The Hunger Games: Catching Fire
Fiscal 2014 Theatrical Slate:
Fiscal 2013 Theatrical Slate:
Divergent
The Hunger Games: Catching Fire
The Twilight Saga: Breaking Dawn - Part 2
The following table sets forth the components of international revenue by product category for the fiscal years ended
March 31, 2015 and 2014:
International revenues(1)
Feature Film:
Fiscal 2015 Theatrical Slate
Fiscal 2014 Theatrical Slate
Fiscal 2013 Theatrical Slate
Prior Theatrical Slates
Total Feature Film
UK Third Party Product(2)
Managed Brands
Other
Year Ended March 31,
Increase (Decrease)
2015
2014
Amount
Percent
(Amounts in millions)
$
209.7
$
— $
99.4
29.0
55.1
393.2
66.8
22.3
12.7
273.9
109.9
67.2
451.0
61.8
21.8
8.8
$
495.0
$
543.4
$
209.7
(174.5)
(80.9)
(12.1)
(57.8)
5.0
0.5
3.9
(48.4)
n/m
(63.7)%
(73.6)%
(18.0)%
(12.8)%
8.1 %
2.3 %
44.3 %
(8.9)%
___________________
n/m - Percentage not meaningful.
(1) Certain amounts in fiscal 2015 and fiscal 2014 have been reclassified between product types in order to be consistent with
the current fiscal year classification.
(2) UK Third Party Product represents titles acquired separately for self-distribution in the United Kingdom.
International motion pictures revenue decreased in fiscal 2015 as compared to fiscal 2014, due primarily to a decrease in
revenues from our feature films, offset in part by increases in our UK Third Party Product and Other categories. The decrease in
our feature films was primarily driven by a decrease in revenue from our Fiscal 2015 Theatrical Slate in fiscal 2015 as
compared to the revenue from our Fiscal 2014 Theatrical Slate in fiscal 2014, due primarily to significant revenues from Now
You See Me, Red 2 and Escape Plan in fiscal 2014, which were partially offset by higher international revenues from The
Hunger Games: Mockingjay - Part 1 in fiscal 2015 as compared to The Hunger Games: Catching Fire in fiscal 2014.
Motion Pictures —Other Revenue
Other revenue included in motion pictures revenue decreased in fiscal 2015 as compared to fiscal 2014. Other revenue in
fiscal 2014 primarily included revenue from the sale of a portion of our music catalog.
61
Television Production Revenue
The following table sets forth the components and the changes in the components of revenue that make up television
production revenue for the fiscal years ended March 31, 2015 and 2014:
Television Production
Domestic television
International
Home entertainment revenue
Digital
Packaged media
Total home entertainment revenue
Other
Television Production - Domestic Television
Year Ended March 31,
Increase (Decrease)
2015
2014
Amount
Percent
(Amounts in millions)
$
$
$
415.2
112.4
$
326.1
82.3
89.1
30.1
34.3
10.5
44.8
7.1
579.5
$
22.8
11.5
34.3
4.7
447.4
$
11.5
(1.0)
10.5
2.4
132.1
27.3 %
36.6 %
50.4 %
(8.7)%
30.6 %
51.1 %
29.5 %
Domestic television revenue increased in fiscal 2015 as compared to fiscal 2014, primarily due to an increase in television
episodes delivered in fiscal 2015, as compared to fiscal 2014. Television episodes delivered for original exhibition during fiscal
2015 and 2014 included the episode deliveries as shown in the table below:
Year Ended
March 31, 2015
Episodes
35
6
4
11
13
3
17
12
12
4
9
Hours
17.5 Anger Management
6.0 Mad Men - Season 6
4.0 Mad Men - Season 7
11.0 Nashville - Season 1
13.0 Nashville - Season 2
3.0 Nurse Jackie - Season 6
Orange Is The New Black -
Season 1
Orange Is The New Black -
Season 2
17.0
6.0
1/2hr
1hr
1hr
1hr
1hr
1/2hr
1hr
1hr
12.0 Other(1)
4.0
9.0
1/2hr & 1hr
1/2hr
1hr
1hr
1hr
1hr
1hr
1hr
1/2hr
1hr
1hr
1hr
1/2hr & 1hr
112
238
65.5
168.0
Year Ended
March 31, 2014
Episodes
38
11
3
6
19
12
5
13
69
Hours
19.0
11.0
3.0
6.0
19.0
6.0
5.0
13.0
40.0
176
122.0
Anger Management
Ascension
Houdini
Mad Men - Season 7
Manhattan - Season 1
Nashville - Season 2
Nashville - Season 3
Nurse Jackie - Season 7
Orange Is The New Black -
Season 3
Rosemary's Baby
The Royals - Season 1
Other(1)
______________________
(1) Other in fiscal 2015 includes episodes delivered for Alaska: Battle on the Bay, Christina Milian Turned Up (Season 1),
Deadbeat (Season 2), Deal With It (Season 2), Deion's Family Playbook, Flea Market Flip (Seasons 4 & 5), Partners,
and Way Out West. Other in fiscal 2014 includes episodes delivered for Saint George, Deadbeat, Deion's Family
Playbook, Deal With It (Seasons 1 & 2) and Flea Market Flip (Season 3).
In addition to the titles mentioned in the table above, significant domestic television revenue was contributed in fiscal 2015
from Are We There Yet, Family Feud (Seasons 7 & 8), and The Wendy Williams Show (Season 5), and in fiscal 2014, from
Family Feud (Season 6) and The Wendy Williams Show (Season 4).
62
Television Production - International Revenue
International revenue in fiscal 2015 increased as compared to fiscal 2014. International revenue in fiscal 2015 primarily
included revenue from Anger Management, Mad Men (Season 6), Nashville (Seasons 2 & 3), and Orange Is The New Black
(Seasons 1, 2 & 3). International revenue in fiscal 2014 primarily included revenue from Anger Management, Mad Men
(Seasons 5 & 6), Nashville (Seasons 1 & 2), and Orange Is The New Black (Season 1).
Television Production - Home Entertainment Revenue
The increase in home entertainment revenue in fiscal 2015 as compared to fiscal 2014 is due to an increase in digital media
revenue, largely driven by revenues from Mad Men (Season 7) and Manhattan (Season 1), offset in part by a slight decrease in
packaged media revenue.
Direct Operating Expenses
The following table sets forth direct operating expenses by segment for the fiscal years ended March 31, 2015 and 2014:
Direct operating expenses
Amortization of films and television
programs
Participation and residual expense
Provision for doubtful accounts and
foreign exchange losses (gains)
Year Ended
March 31, 2015
Year Ended
March 31, 2014
Motion
Pictures
Television
Production
Total
Motion
Pictures
Television
Production
Total
(Amounts in millions)
$ 545.7
270.8
$ 354.3
131.4
$ 900.0
402.2
$ 624.0
359.4
$ 297.3
89.9
$ 921.3
449.3
11.0
2.6
13.6
$ 827.5
$ 488.3
$ 1,315.8
(2.3)
$ 981.1
1.1
$ 388.3
(1.2)
$ 1,369.4
Direct operating expenses as a percentage of
segment revenues
45.5%
84.3%
54.8%
44.9%
86.8%
52.1%
Direct operating expenses of the Motion Pictures segment of $827.5 million for fiscal 2015 were 45.5% of motion pictures
revenue, compared to $981.1 million, or 44.9% of motion pictures revenue for fiscal 2014. The decrease in direct operating
expenses of $153.6 million was primarily due to a decrease in motion pictures revenue in the fiscal year ended March 31, 2015,
as compared to the fiscal year ended March 31, 2014. Included in direct operating expenses are investment in film write-downs
of approximately $17.3 million in the fiscal year ended March 31, 2015, compared to $17.3 million in the fiscal year ended
March 31, 2014. Foreign exchange losses and the provision for doubtful accounts in fiscal 2015 compared to primarily foreign
exchange gains, offset in part by the provision for doubtful accounts in fiscal 2014.
Direct operating expenses of the Television Production segment of $488.3 million for fiscal 2015 were 84.3% of television
production revenue, compared to $388.3 million, or 86.8%, of television production revenue for fiscal 2014. The increase in
direct operating expenses of $100.0 million is primarily due to an increase in television production revenue in fiscal 2015, as
compared to fiscal 2014. The slight decrease in direct operating expenses as a percentage of television production revenue is
primarily due to the revenue contributions on shows such as Orange Is The New Black, Mad Men and The Wendy Williams
Show, relative to total television production revenue in fiscal 2015 as compared to fiscal 2014.
63
Distribution and Marketing Expenses
The following table sets forth distribution and marketing expenses by segment for the fiscal years ended March 31, 2015
and 2014:
Year Ended
March 31, 2015
Year Ended
March 31, 2014
Motion
Pictures
Television
Production
Total
Motion
Pictures
Television
Production
Total
(Amounts in millions)
289.6
166.4
80.8
6.1
542.9
—
542.9
$
$
— $
6.7
12.8
16.6
36.1
—
36.1
$
289.6
173.1
93.6
22.7
579.0
12.5
591.5
$
$
431.5
200.5
69.4
8.6
710.0
—
710.0
$
$
0.3
6.5
9.7
13.0
29.5
—
29.5
$
$
431.8
207.0
79.1
21.6
739.5
—
739.5
Distribution and marketing expenses
Theatrical
Home Entertainment
International
Television
Other(1)
$
Total distribution and marketing expenses $
______________________
(1) Other distribution and marketing expenses consist of backstopped P&A, which represents the amount of theatrical
marketing expense for third party titles that we funded and expensed for which a third party provides a first dollar loss
guarantee (subject to a cap) that such expense will be recouped from the performance of the film (which results in
minimal risk of loss to the Company). The amount represents the P&A expense incurred net of the impact of
expensing the P&A costs over the revenue streams similar to a participation expense. We do not consider these costs
part of segment distribution and marketing expense and have reclassified the fiscal 2015 amount of backstopped P&A
from the Motion Pictures segment to Other to be consistent with the current fiscal year presentation (none in fiscal
2014).
The majority of distribution and marketing expenses relate to the Motion Pictures segment. Theatrical P&A in the Motion
Pictures segment in fiscal 2015 of $289.6 million decreased $141.9 million, compared to $431.5 million in fiscal 2014. The
decrease was primarily driven by lower P&A spending in the fiscal year ended March 31, 2015 on our feature films as a result
of only ten wide releases from our Fiscal 2015 Theatrical Slate, compared to 13 wide releases from our Fiscal 2014 Theatrical
Slate. In addition, the decrease was to a lesser extent due to lower P&A incurred on ancillary driven platform theatrical releases
in fiscal 2015 as compared to fiscal 2014, which included the releases of All Is Lost, Mud and Kevin Hart: Let Me Explain, and
a decrease in P&A incurred in advance for films to be released in fiscal 2016. In fiscal 2015, approximately $5.9 million of
P&A was incurred in advance for films to be released in fiscal 2016, such as The Hunger Games: Mockingjay - Part 2 and
Child 44. In fiscal 2014, approximately $22.9 million of P&A was incurred in advance for films to be released in fiscal 2015,
such as Draft Day, The Quiet Ones, The Hunger Games: Mockingjay -Part 1 and The Expendables 3.
Home entertainment distribution and marketing costs on motion pictures and television product in fiscal 2015 of $173.1
million decreased $33.9 million, or 16.4%, compared to $207.0 million in fiscal 2014, primarily due to lower motion pictures
home entertainment revenues. Home entertainment distribution and marketing costs as a percentage of home entertainment
revenues in fiscal 2015 were 24.5%, and were comparable to home entertainment distribution and marketing costs as a
percentage of home entertainment revenues in fiscal 2014 of 24.0%.
International distribution and marketing expenses in the Motion Pictures segment in fiscal 2015 of $80.8 million increased
from $69.4 million in fiscal 2014.
Gross Segment Contribution
Gross segment contribution is defined as segment revenue less segment direct operating and segment distribution and
marketing expenses. The following table sets forth gross segment contribution for the fiscal years ended March 31, 2015 and
2014:
64
Gross segment contribution
Motion Pictures
Television Production
Year Ended March 31,
Increase (Decrease)
% of
Segment
Revenues
2015
% of
Segment
Revenues
2014
(Amounts in millions)
Amount
Percent
$
$
449.8
55.1
504.9
24.7%
9.5
21.0%
$
$
491.8
29.6
521.4
22.5%
6.6
19.8%
$
$
(42.0)
25.5
(16.5)
(8.5)%
86.1 %
(3.2)%
Gross segment contribution of the Motion Pictures segment for fiscal 2015 of $449.8 million decreased $42.0 million, or
8.5%, as compared to fiscal 2014. The gross segment contribution of the Motion Pictures segment decreased only 8.5% despite
a 16.6% decrease in Motion Pictures segment revenue due to lower direct operating expenses and lower distribution and
marketing expenses incurred relative to motion pictures segment revenue in the fiscal year ended March 31, 2015 as compared
to the fiscal year ended March 31, 2014.
Gross segment contribution of the Television Production segment for fiscal 2015 increased $25.5 million, or 86.1% as
compared to fiscal 2014. The increase in gross segment contribution of the television production segment is primarily due to an
increase in television production segment revenues, particularly driven by the success of shows, such as Orange Is The New
Black.
General and Administrative Expenses
The following table sets forth general and administrative expenses by segment for the fiscal years ended March 31, 2015
and 2014:
Year Ended March 31,
Increase (Decrease)
2015
% of
Revenues
2014
% of
Revenues
Amount
Percent
(Amounts in millions)
General and administrative expenses
Motion Pictures
Television Production
Shared services and corporate expenses,
excluding items below
General and administrative expenses before items
below:
Share-based compensation expense
Restructuring and other items
$
73.5
13.3
85.7
$
66.8
12.7
95.8
172.5
7.2%
175.3
6.7%
80.3
10.7
91.0
72.1
7.5
79.6
Total general and administrative expenses
$
263.5
11.0% $
254.9
9.7% $
$
6.7
0.6
10.0 %
4.7 %
(10.1)
(10.5)%
(2.8)
8.2
3.2
11.4
8.6
(1.6)%
11.4 %
42.7 %
14.3 %
3.4 %
Total General and Administrative Expenses
General and administrative expenses of the Motion Pictures segment increased $6.7 million, or 10.0%, primarily due to
increases in salaries and related expenses, rent and facilities costs and professional fees.
General and administrative expenses of the Television Production segment increased slightly from the fiscal year ended
March 31, 2014.
Shared services and corporate expenses excluding share-based compensation expense and restructuring and other items
decreased compared to the fiscal year ended March 31, 2014, primarily due to a reduction of cash-based incentive
compensation, which was partially offset by an increase in share-based incentive compensation as reflected in the table below.
65
Share-Based Compensation Expense. The following table sets forth share-based compensation expense included in shared
services and corporate expenses for the fiscal years ended March 31, 2015 and 2014:
Share-Based Compensation Expense:
Stock options
Restricted share units and other share-based compensation
Share appreciation rights
Year Ended March 31,
Increase (Decrease)
2015
2014
Amount
Percent
(Amounts in millions)
$
$
33.5
42.8
4.0
80.3
$
$
22.5
33.2
16.4
72.1
$
$
11.0
9.6
(12.4)
8.2
48.9 %
28.9 %
(75.6)%
11.4 %
Restructuring and Other Items. Restructuring and other items includes restructuring and severance costs, certain
transaction related costs, and certain unusual items, when applicable. Amounts in fiscal 2015 primarily represent costs related
to the move of our international sales and distribution organization to the United Kingdom, and severance costs associated with
the integration of the marketing operations of our Lionsgate and Summit Entertainment film labels, of which approximately
$1.2 million were non-cash charges resulting from the acceleration of vesting of stock awards (see Note 13 to our consolidated
financial statements). In addition, amounts in fiscal 2015 also include transaction costs related to a certain shareholder
transaction (see Note 22 to our consolidated financial statements), and costs related to the Starz Exchange transaction (see Note
5 to our consolidated financial statements). Amounts in fiscal 2014 represent the settlement of an administrative order.
Depreciation, Amortization and Other Expenses (Income)
Depreciation and amortization was $6.6 million in fiscal 2015, compared to $6.5 million in fiscal 2014.
Interest expense in fiscal 2015 decreased from fiscal 2014, primarily due to the fiscal 2014 redemption of $432.0 million
principal amount of the 10.25% Senior Notes and contemporaneous issuance of $225.0 million principal amount of 5.25%
Senior Notes and borrowings of $222.5 million (net of an original issuance discount of $2.5 million) under the Term Loan Due
2020 (see Note 7 to our consolidated financial statements). The following table sets forth the components of interest expense for
the fiscal years ended March 31, 2015 and 2014:
Interest Expense
Cash Based:
Senior revolving credit facility
Convertible senior subordinated notes
5.25% Senior Notes and 10.25% Senior Note (year ended
March 31, 2014 only)
Term Loans
Other
Non-Cash Based:
Amortization of discount and deferred financing costs
Year Ended March 31,
Increase (Decrease)
2015
2014
Amount
Percent
(Amounts in millions)
$
$
6.7
3.5
$
9.2
4.8
11.8
11.7
6.0
39.7
21.6
8.0
5.4
49.0
(2.5)
(1.3)
(9.8)
3.7
0.6
(9.3)
(27.2)%
(27.1)%
(45.4)%
46.3 %
11.1 %
(19.0)%
12.8
52.5
$
17.2
66.2
$
(4.4)
(13.7)
(25.6)%
(20.7)%
$
Interest and other income was $2.8 million in fiscal 2015, compared to $6.0 million in fiscal 2014.
66
The following table represents our portion of the income or (loss) of our equity method investees based on our percentage
ownership for the fiscal years ended March 31, 2015 and 2014:
EPIX(1)
Pop(1)
Other(2)
March 31, 2015
Ownership
Percentage
31.2%
50.0%
Various
Year Ended March 31,
Increase (Decrease)
2015
2014
Amount
Percent
(Amounts in millions)
$
$
48.7
(9.6)
13.4
52.5
$
$
32.3
(2.6)
(5.0)
24.7
$
$
16.4
(7.0)
18.4
27.8
50.8%
269.2%
n/m
112.6%
______________________
n/m - Percentage not meaningful.
(1) We license certain of our theatrical releases and other films and television programs to EPIX and Pop. A portion of the
profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity
interest income (loss) of the venture. These profits are recognized as they are realized by the venture (see Note 5 to our
consolidated financial statements).
(2) On April 14, 2014, we sold all of our 34.5% interest in FEARnet, which resulted in a gain on sale of $11.4 million in the
fiscal year ended March 31, 2015 included in our other equity method investments income shown above. See Note 5 to our
consolidated financial statements.
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $11.7 million for the fiscal year ended March 31, 2015, primarily resulting from the
March 2015 early redemption of the Term Loan Due 2020, which carried a variable rate of LIBOR, subject to a 1% floor, plus
4%, in connection with the issuance of new Term Loan Due 2022, which carries a fixed interest rate of 5%. For the fiscal year
ended March 31, 2014, loss on extinguishment of debt was $39.6 million, primarily resulting from the 10.25% Senior Notes
that were redeemed on August 19, 2013. See Note 7 to our consolidated financial statements.
Income Tax Provision
We had an income tax expense of $31.6 million in fiscal 2015, compared to an expense of $32.9 million in fiscal 2014. Our
tax provision for the fiscal years ended March 31, 2015 and March 31, 2014 included certain unusual and discrete tax items
(see below). Excluding these items, our tax provision for fiscal 2015 was $31.8 million compared to $59.6 million for fiscal
2014. The decrease in our tax provision in fiscal 2015 as compared to fiscal 2014 reflects the implementation of certain
business and financing strategies in and among our operations in the various tax jurisdictions in which we operate. This
includes a favorable permanent book-tax difference in our Canadian jurisdiction for certain foreign affiliate dividends.
Canadian tax law permits such dividends to be received without being subject to tax.
In fiscal 2015, the income tax provision included the effect at the applicable statutory rate from the impact of the loss on
early extinguishment of debt, and other discrete tax items, which contributed a tax benefit of $0.2 million. In fiscal 2014, the
income tax provision included a discrete benefit of $12.0 million from the reversal of a valuation allowance related to the
Company's net deferred tax assets in the Canadian tax jurisdiction, and the impact of the loss on early extinguishment of debt,
which contributed a tax benefit of $14.7 million.
Net Income Attributable to Lions Gate Entertainment Corp. Shareholders
Net income attributable to our shareholders for the fiscal year ended March 31, 2015 was $181.8 million, or basic net
income per common share of $1.31 on 139.0 million weighted average common shares outstanding and diluted net income per
common share of $1.23 on 151.8 million weighted average common shares outstanding. This compares to net income
attributable to our shareholders for the fiscal year ended March 31, 2014 of $152.0 million, or basic net income per common
share of $1.11 on 137.5 million weighted average common shares outstanding and diluted net income per common share of
$1.04 on 154.4 million weighted average common shares outstanding.
67
Liquidity and Capital Resources
Sources and Uses of Cash
Our liquidity and capital resources have been provided principally through cash generated from operations, corporate debt,
and our production loans. Our corporate debt at March 31, 2016 primarily consisted of our senior revolving credit facility,
5.25% Senior Notes, Term Loan Due 2022, and our convertible senior subordinated notes.
Our principal uses of cash in operations include the funding of film and television productions, film rights acquisitions, and
the distribution and marketing of films and television programs. We also use cash for debt service (i.e., principal and interest
payments) requirements, equity or cost method investments, quarterly cash dividends, the purchase of common shares under
our share repurchase program, capital expenditures, and acquisitions of businesses. The Company also has a redeemable
noncontrolling interest balance of $90.5 million, which may require the use of cash in the event the holders of the
noncontrolling interests put their interests to the Company.
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for
equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if
any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The
amounts involved may be material.
Anticipated Cash Requirements. The nature of our business is such that significant initial expenditures are required to
produce, acquire, distribute and market films and television programs, while revenues from these films and television programs
are earned over an extended period of time after their completion or acquisition. We believe that cash flow from operations,
cash on hand, senior revolving credit facility availability, tax-efficient financing, and available production financing will be
adequate to meet known operational cash, quarterly cash dividends and debt service (i.e., principal and interest payments)
requirements for the foreseeable future, including the funding of future film and television production, film rights acquisitions
and theatrical and video release schedules, future equity or cost method investment funding requirements, and the purchase of
common shares under our share repurchase program. We monitor our cash flow liquidity, availability, fixed charge coverage,
capital base, film spending and leverage ratios with the long-term goal of maintaining our credit worthiness.
Our current financing strategy is to fund operations and to leverage investment in films and television programs through
our cash flow from operations, our senior revolving credit facility, single-purpose production financing, government incentive
programs, film funds, and distribution commitments. In addition, we may acquire businesses or assets, including individual
films or libraries that are complementary to our business. Any such transaction could be financed through our cash flow from
operations, credit facilities, equity or debt financing. If additional financing beyond our existing cash flows from operations and
credit facilities cannot fund such transactions, there is no assurance that such financing will be available on terms acceptable to
us. We may also dispose of businesses or assets, including individual films or libraries, and use the net proceeds from such
dispositions to fund operations or such acquisitions, or to repay debt.
Share Repurchase Plan. On February 2, 2016, our Board of Directors authorized to increase our previously announced
share repurchase plan from $300 million to $468 million. To date, approximately $283.2 million of our common shares have
been purchased, leaving approximately $184.7 million of authorized potential purchases. The remaining $184.7 million of our
common shares may be purchased from time to time at the Company's discretion, including quantity, timing and price thereof,
and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal
requirements.
Dividends. During fiscal 2016, 2015 and 2014, the Company paid dividends of $47.4 million, $33.4 million, and $6.9
million, respectively, and on March 17, 2016, our Board of Directors declared a quarterly cash dividend of $0.09 per common
share, payable on May 27, 2016 to shareholders of record as of March 31, 2016. See Note 13 to our consolidated financial
statements for dividends declared during fiscal 2016, 2015 and 2014. The amount of dividends, if any, that we pay to our
shareholders is determined by our Board of Directors, at its discretion, and is dependent on a number of factors, including our
financial position, results of operations, cash flows, capital requirements and restrictions under our credit agreements, and shall
be in compliance with applicable law. We cannot guarantee the amount of dividends paid in the future, if any.
68
Discussion of Operating, Investing, Financing Cash Flows
Cash and cash equivalents decreased by $45.3 million for the fiscal year ended March 31, 2016, increased by $75.5 million
for the fiscal year ended March 31, 2015, and decreased by $35.4 million for the fiscal year ended March 31, 2014, before
foreign exchange effects on cash. Components of these changes are discussed below in more detail.
Operating Activities. Cash flows provided by (used in) operating activities for the years ended March 31, 2016, 2015 and
2014 were as follows:
Operating Activities:
Operating income (loss)
Amortization of films and television programs
Non-cash share-based compensation
Cash interest
Current income tax provision
Other non-cash charges included in operating activities
Cash flows from operations before changes in
operating assets and liabilities
Changes in operating assets and liabilities:
Accounts receivable, net
Investment in films and television programs
Other changes in operating assets and liabilities
Changes in operating assets and liabilities
Net Cash Flows Provided By (Used In) Operating
Activities
Year Ended March 31,
2015
2016
2014
2016 vs. 2015
2015 vs. 2014
Net Change
(Amounts in thousands)
$
(25,030) $
1,029,077
77,906
(45,695)
(8,542)
16,966
$
222,281
899,951
79,938
(39,657)
(17,693)
17,164
$
259,948
921,289
60,492
(48,960)
(17,010)
28,648
$
(247,311)
129,126
(2,032)
(6,038)
9,151
(198)
(37,667)
(21,338)
19,446
9,303
(683)
(11,484)
1,044,682
1,161,984
1,204,407
(117,302)
(42,423)
(144,910)
(1,066,403)
147,625
(1,063,688)
(13,968)
(1,012,294)
(39,213)
(1,065,475)
(93,503)
(948,082)
89,690
(951,895)
(130,942)
(54,109)
186,838
1,787
79,535
(64,212)
(128,903)
(113,580)
$
(19,006) $
96,509
$
252,512
$
(115,515)
$
(156,003)
Fiscal 2016 as Compared to Fiscal 2015. Cash flows used in operating activities for the year ended March 31, 2016 were
$19.0 million compared to cash flows provided by operating activities for the year ended March 31, 2015 of $96.5 million. The
increase in cash used in operating activities in fiscal 2016 as compared to fiscal 2015 was primarily due to lower operating
income (loss), greater increases in accounts receivable and increased investment in films and television programs production
activity, including the production of Deepwater Horizon, The Divergent Series: Allegiant, Power Rangers, John Wick: Chapter
Two, and Orange Is The New Black - Season 4. These changes were partially offset by higher amortization of films and
television programs, and increases in changes in other operating assets and liabilities primarily driven by increases in
participations and residuals, deferred revenue and accounts payable and accrued liabilities in fiscal 2016 as compared to fiscal
2015.
Fiscal 2015 as Compared to Fiscal 2014. Cash flows provided by operating activities for the year ended March 31, 2015
were $96.5 million compared to cash flows provided by operating activities for the year ended March 31, 2014 of $252.5
million. The decrease in cash provided by operating activities in fiscal 2015 as compared to fiscal 2014 was primarily due to
changes in other operating assets and liabilities primarily driven by decreases in deferred revenue and participations and
residuals as compared to fiscal 2014, increases in investment in films and television programs production activity, including the
production of The Divergent Series: Insurgent, The Hunger Games: Mockingjay - Part 2, Now You See Me 2, Gods of Egypt,
and The Last Witch Hunter, and lower cash flows from operations before changes in operating assets and liabilities offset by
smaller increases in accounts receivable as compared to fiscal 2014.
69
Investing Activities. Cash flows used in investing activities for the years ended March 31, 2016, 2015 and 2014 were as
follows:
Investing Activities:
Proceeds from the sale of equity method investees
Investment in equity method investees
Purchase of Pilgrim Studios, net of cash acquired of $15,816
Purchases of property and equipment
Other investing activities
Net Cash Flows Used In Investing Activities
2016
Year Ended March 31,
2015
(Amounts in thousands)
2014
$
$
— $
(15,989)
(126,892)
(18,433)
(750)
(162,064) $
$
14,575
(22,730)
—
(17,013)
(30,000)
(55,168) $
9,000
(17,250)
—
(8,799)
8,444
(8,605)
Fiscal 2016 as Compared to Fiscal 2015. Cash used in investing activities of $162.1 million for the year ended March 31,
2016 compared to cash used in investing activities of $55.2 million for the year ended March 31, 2015, as reflected above. The
change was primarily due to cash used for the purchase of Pilgrim Studios of $126.9 million, net of cash acquired in fiscal
2016. In addition, fiscal 2015 included proceeds from the sale of equity method investees, due to the sale of our interest in
FEARnet, with no comparable proceeds in fiscal 2016. These were partially offset by lower cash used in "other investing
activities" in fiscal 2016 as compared to fiscal 2015, primarily driven by a cash investment in Telltale Games of $28.0 million
along with a $2.0 million investment in Next Games in fiscal 2015, and lower investments in equity method investees in fiscal
2016 as compared to fiscal 2015, primarily related to investments in Pop ($8.8 million in fiscal 2016 compared to $15.0 million
in fiscal 2015) (see Note 5 to our consolidated financial statements).
Fiscal 2015 as Compared to Fiscal 2014. Cash used in investing activities of $55.2 million for the year ended March 31,
2015 compared to cash used in investing activities of $8.6 million for the year ended March 31, 2014, as reflected above. The
most significant change from fiscal 2014 was from "other investing activities", which in fiscal 2015 included a cash investment
in Telltale Games of $28.0 million along with a $2.0 million investment in Next Games, and in fiscal 2014 included
distributions received from EPIX in excess of earnings of $4.2 million and payments against loans receivable. In fiscal 2015,
purchases of property and equipment increased primarily related to leasehold improvements of the Company's headquarters and
computer equipment and software. In addition, investments in equity method investees increased in fiscal 2015 compared to
fiscal 2014. These increases in cash used in investing activities were offset by higher proceeds from the sale of equity method
investees, which in fiscal 2015 included the sale of our interest in FEARnet (see Note 5 to our consolidated financial
statements), compared to the sale of our interest in TVGuide.com in fiscal 2014.
70
Financing Activities. Cash flows provided by (used in) financing activities for the years ended March 31, 2016, 2015 and
2014 were as follows:
Senior revolving credit facility - borrowings
Senior revolving credit facility - repayments
2016
Year Ended March 31,
2015
(Amounts in thousands)
2014
$
605,500
$
778,500
$
872,220
(444,500)
(876,119)
(1,113,075)
Net borrowings under (repayments of) senior revolving credit facility
161,000
(97,619)
(240,855)
Term Loans and 5.25% Senior Notes - borrowings, net of deferred financing costs of
$4,315 and $6,860 for the years ended March 31, 2015 and 2014, respectively
Term Loans - repayments
10.25% Senior Notes - repurchases and redemptions
Convertible senior subordinated notes - borrowings
Convertible senior subordinated notes - repurchases
24,036
—
—
—
(5)
370,685
(229,500)
—
—
(16)
440,640
—
(470,584)
60,000
—
Net proceeds from (repayments of) corporate debt
185,031
43,550
(210,799)
Production loans - borrowings
Production loans - repayments
Pennsylvania Regional Center credit facility - repayments
Net proceeds from (repayments of) production loans
Repurchase of common shares
Other financing activities
572,572
631,709
532,416
(483,145)
(449,648)
(517,874)
—
89,427
(73,180)
(65,555)
—
182,061
(144,840)
(46,576)
(65,000)
(50,458)
—
(18,005)
Net Cash Flows Provided By (Used In) Financing Activities
$
135,723
$
34,195
$
(279,262)
Fiscal 2016. Cash flows provided by financing activities of $135.7 million for the year ended March 31, 2016 increased
from $34.2 million for the year ended March 31, 2015. Cash flows provided by financing activities for fiscal 2016 primarily
reflects net borrowings under our senior revolving credit facility of $161.0 million, production loan borrowings in order to fund
productions and production loan repayments, and net proceeds of $24.0 million from additional borrowings under the Term
Loan Due 2022, offset by cash used for share repurchases and other financing activities which includes dividend payments of
$47.4 million and tax withholding of $24.2 million required on equity awards offset by the proceeds from the exercise of stock
options.
Fiscal 2015. Cash flows provided by financing activities of $34.2 million for the year ended March 31, 2015 increased
from cash used in financing activities of $279.3 million for the year ended March 31, 2014. Cash flows provided by financing
activities for fiscal 2015 primarily reflects net proceeds of $370.7 million from the issuance of our Term Loan Due 2022 in
connection with the redemption of the Term Loan Due 2020 for $229.5 million (see discussion under Corporate Debt
Transactions below), and net repayments under our line of credit of $97.6 million. Cash flows provided by financing activities
in fiscal 2015 also included production loan borrowings in order to fund productions and production loan repayments, offset by
cash used for share repurchases and other financing activities which includes dividend payments of $33.4 million and tax
withholding of $20.1 million required on equity awards offset by the exercise of stock options.
Fiscal 2014. Cash flows used in financing activities of $279.3 million for the year ended March 31, 2014 primarily reflects
net repayments of our senior revolving credit facility of $240.9 million, and net proceeds of $440.6 million from the issuance of
our Term Loan Due 2020 and 5.25% Senior Notes, which were used together with cash on hand and borrowings under our
senior revolving credit facility to fund the $470.6 million repurchase and redemption of our 10.25% Senior Notes (see
discussion under Corporate Debt Transactions below). Cash flows used in financing activities for fiscal 2014 also reflects net
proceeds of $60.0 million from the issuance of our April 2013 1.25% Notes, net borrowings under production loans of $14.5
million, and the $65.0 million repayment of our Pennsylvania Regional Center credit facility.
71
Corporate Debt
See Note 7 to our consolidated financial statements for a discussion of our corporate debt. The principal amounts
outstanding under our corporate debt as of March 31, 2016 and 2015 were as follows:
Senior revolving credit facility(1)
5.25% Senior Notes(2)
Term Loan Due 2022(3)
Principal amounts of convertible senior subordinated notes
April 2009 3.625% Notes
January 2012 4.00% Notes
April 2013 1.25% Notes
Maturity Date
September 2017
August 2018
March 2022
N/A
January 2017
April 2018
Conversion
Price Per
Share as of
March 31,
2016
Principal Amounts Outstanding
March 31,
March 31,
2016
2015
N/A
N/A
N/A
N/A
$10.26
$29.32
$
(Amounts in thousands)
161,000
225,000
400,000
$
—
225,000
375,000
—
41,850
60,000
16,167
41,850
60,000
$
887,850
$
718,017
______________________
(1) Senior Revolving Credit Facility: The senior revolving credit facility provides for borrowings up to $800.0 million,
limited by a borrowing base and also reduced by outstanding letters of credit, if any. At March 31, 2016, there was $639.0
million available (March 31, 2015 — $800.0 million). Interest is payable at an alternative base rate, as defined, plus 1.5%
or LIBOR plus 2.5% as designated by us (effective interest rate of approximately 2.94% at March 31, 2016; 2.68% at
March 31, 2015). We are required to pay a quarterly commitment fee of 0.375% to 0.5% per year on our unused capacity
for the period. Obligations are secured by collateral (as defined in the credit agreement) granted by us and certain of our
subsidiaries, as well as a pledge of equity interests in certain of our subsidiaries. The senior revolving credit facility
contains a number of covenants, and as of March 31, 2016, we were in compliance with all applicable covenants.
(2) 5.25% Senior Notes: The 5.25% Senior Notes contain a number of certain restrictions and covenants, and as of March 31,
2016, we were in compliance with all applicable covenants. Interest is payable semi-annually on February 1 and August 1
of each year at a rate of 5.25% per year.
(3) Term Loan Due 2022: The Term Loan Due 2022 contains a number of certain restrictions and covenants, and as of
March 31, 2016, we were in compliance with all applicable covenants. Interest is payable on the last business day of each
April, July, October and January at a rate of 5.00% per year.
Corporate Debt Transactions
Fiscal 2016
Amendment of Term Loan Due 2022. In May 2015, we amended the credit agreement governing our Term Loan Due
2022, and pursuant to the amended credit agreement, borrowed an additional aggregate amount of $25.0 million.
Fiscal 2015
Issuance of Term Loan Due 2022 and Redemption of Term Loan Due 2020. On March 17, 2015, we entered into a
second lien credit and guarantee agreement (the "Credit Agreement") and borrowed a term loan of $375 million (the "Term
Loan Due 2022"). Contemporaneously with the issuance of the Term Loan Due 2022 (which carries a fixed interest rate of
5.00%), we used a portion of the proceeds to redeem our Term Loan Due 2020 (see below for definition) (which carried a
variable interest rate of LIBOR, subject to a 1.00% floor, plus 4.00%). In conjunction with the early redemption of the
Term Loan Due 2020, we paid a call premium pursuant to the terms of the agreement governing the Term Loan Due 2020
of $4.5 million.
Fiscal 2014
Issuance of 5.25% Senior Notes, Term Loan Due 2020 and Redemption of 10.25% Senior Notes. On July 19, 2013, we
issued $225.0 million aggregate principal amount of 5.25% Senior Secured Second-Priority Notes (the "5.25% Senior
Notes"), and entered into a seven-year $225.0 million term loan agreement (the "Term Loan Due 2020").
Contemporaneously with these issuances, we called for early redemption of the $432.0 million remaining outstanding
principal amount of the then outstanding 10.25% Senior Secured Second-Priority Notes (the "10.25% Senior Notes").
72
The proceeds from the issuance of the 5.25% Senior Notes and Term Loan Due 2020, whose principal amount
collectively totaled $450.0 million, together with cash on hand and borrowings under our senior revolving credit facility,
were used to fund the discharge of the 10.25% Senior Notes. In conjunction with the early redemption of the 10.25%
Senior Notes, we paid $34.3 million, representing the present value of interest through the first call date of November 1,
2013 and related call premium pursuant to the terms of the indenture governing the 10.25% Senior Notes.
Other Repurchases of 10.25% Senior Notes. In June 2013, Lions Gate Entertainment, Inc. ("LGEI"), our wholly-
owned subsidiary, paid $4.3 million to repurchase $4.0 million of aggregate principal amount (carrying value - $4.0
million) of the 10.25% Senior Notes. We recorded a loss on extinguishment during the year ended March 31, 2014 of $0.5
million, which included $0.2 million of deferred financing costs written off.
Convertible Senior Subordinated Notes Conversions. During the years ended March 31, 2016, 2015 and 2014, there were
various conversions of our convertible senior subordinated notes. The table below summarizes the total principal amount
converted, common shares issued upon conversion and weighted average conversion price per share (see Note 7 to our
consolidated financial statements for detailed information by debt instrument):
Year Ended March 31,
2016
2015
2014
Principal amount converted
Common shares issued upon conversion
Weighted average conversion price per share
(Amounts in thousands, except share amounts)
27,672
$
16,162
24,152
$
1,983,058
8.15
$
2,945,730
8.20
$
3,263,892
8.48
$
Production Loans
The amounts outstanding under our production loans as of March 31, 2016 and 2015 were as follows:
Production loans(1)
March 31,
2016
March 31,
2015
(Amounts in thousands)
$
690,371
$
600,944
______________________
(1) Represents individual loans for the production of film and television programs that we produce. Production loans have
contractual repayment dates either at or near the expected film or television program completion date, with the exception
of certain loans containing repayment dates on a longer term basis, and incur interest at rates ranging from 3.37% to
3.87%.
73
Table of Debt and Contractual Commitments
The following table sets forth our future annual repayment of debt, and our contractual commitments as of March 31, 2016:
Year Ended March 31,
2017
2018
2019
2020
2021
Thereafter
Total
(Amounts in thousands)
Future annual repayment of debt
recorded as of March 31, 2016 (on-
balance sheet arrangements)
Senior revolving credit facility
$
5.25% Senior Notes
Term Loan Due 2022
Film obligations and production loans(1)
Principal amounts of convertible senior
subordinated notes
Contractual commitments by expected
repayment date (off-balance sheet
arrangements)
Film obligation and production loan
commitments(2)
Interest payments(3)
Operating lease commitments
Other contractual obligations
$
— $
— $ 161,000
—
—
663,174
— 225,000
—
—
1,000
51,295
41,850
705,024
—
212,295
60,000
286,000
— $
—
—
—
—
—
— $ 161,000
— $
225,000
—
—
400,000
— 400,000
715,469
—
—
—
—
— 400,000
101,850
1,603,319
290,411
221,842
34,237
14,532
71,043
32,563
14,183
43,212
410,223
311,800
10,385
26,281
14,579
19,718
70,963
—
20,000
14,975
6,927
41,902
—
20,000
14,912
3,650
38,562
—
22,444
34,235
6,395
63,074
522,638
155,525
107,416
150,945
936,524
Total future commitments under
contractual obligations(4)
$1,115,247
$ 524,095
$ 356,963
$ 41,902
$ 38,562
$ 463,074
$2,539,843
________________________________
(1) Film obligations include minimum guarantees and theatrical marketing obligations. Production loans represent loans for
the production of film and television programs that we produce. Repayment dates are based on anticipated delivery or
release date of the related film or contractual due dates of the obligation.
(2) Film obligation commitments include distribution and marketing commitments and minimum guarantee commitments.
Distribution and marketing commitments represent contractual commitments for future expenditures associated with
distribution and marketing of films which we will distribute. The payment dates of these amounts are primarily based on
the anticipated release date of the film. Minimum guarantee commitments represent contractual commitments related to the
purchase of film rights for pictures to be delivered in the future. Production loan commitments represent amounts
committed for future film production and development to be funded through production financing and recorded as a
production loan liability when incurred. Future payments under these commitments are based on anticipated delivery or
release dates of the related film or contractual due dates of the commitment. The amounts include future interest payments
associated with the commitment.
(3) Includes cash interest payments on our corporate debt, excluding the interest payments on the senior revolving credit
facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.
(4) Not included in the amounts above are $90.5 million of redeemable noncontrolling interest, as future amounts and timing
are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future
payments (see Note 12 to our consolidated financial statements).
Theatrical Slate Participation
On March 10, 2015, we entered into a theatrical slate participation arrangement with TIK Films (U.S.), Inc. and TIK Films
(Hong Kong) Limited (collectively, "TIK Films"), both wholly owned subsidiaries of Hunan TV & Broadcast Intermediary Co.
Ltd. Under the arrangement, TIK Films, in general and subject to certain limitations including per picture and annual caps, will
contribute a minority share of 25% of our production or acquisition costs of “qualifying” theatrical feature films, released
during the three-year period ending January 23, 2018, and participate in a pro-rata portion of the pictures’ net profits or losses
similar to a co-production arrangement based on the portion of costs funded. The arrangement excludes among others, any
theatrical feature film incorporating any elements from the Twilight, Hunger Games, or Divergent franchises. The percentage of
the contribution could vary on certain pictures.
74
Amounts provided from TIK Films are reflected as a participation liability in our consolidated balance sheet and amounted
to $61.3 million at March 31, 2016 (March 31, 2015 - $13.6 million). The difference between the ultimate participation
expected to be paid to TIK Films and the amount provided by TIK Films is amortized as a charge to or a reduction of
participation expense under the individual-film-forecast method.
Filmed Entertainment Backlog
Backlog represents the amount of future revenue not yet recorded from contracts for the licensing of films and television
product for television exhibition and in international markets. Backlog at March 31, 2016 and March 31, 2015 was $1.5 billion
and $1.1 billion, respectively.
Off-Balance Sheet Arrangements
We do not have any transactions, arrangements and other relationships with unconsolidated entities that will affect our
liquidity or capital resources. We have no special purpose entities that provided off-balance sheet financing, liquidity or market
or credit risk support, nor do we engage in leasing, hedging or research and development services, that could expose us to
liability that is not reflected on the face of our consolidated financial statements. Our commitments to fund operating leases,
minimum guarantees, production loans, equity method investment funding requirements and all other contractual commitments
not reflected on the face of our consolidated financial statements are presented in the table above.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Currency and Interest Rate Risk Management
Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency
exchange rates. Our exposure to interest rate risk results from the financial debt instruments that arise from transactions entered
into during the normal course of business. As part of our overall risk management program, we evaluate and manage our
exposure to changes in interest rates and currency exchange risks on an ongoing basis. Hedges and derivative financial
instruments will be used in the future in order to manage our interest rate and currency exposure. We have no intention of
entering into financial derivative contracts, other than to hedge a specific financial risk.
Currency Rate Risk. We enter into forward foreign exchange contracts to hedge our foreign currency exposures on future
production expenses denominated in various foreign currencies. As of March 31, 2016, we had the following outstanding
forward foreign exchange contracts (all outstanding contracts have maturities of less than 24 months from March 31, 2016):
Foreign Currency
March 31, 2016
Foreign
Currency
Amount
(Amounts in
millions)
Weighted Average
Exchange Rate Per
$1 USD
US Dollar
Amount
(Amounts in
millions)
British Pound Sterling
Australian Dollar
Canadian Dollar
£17.5 in exchange for
A$56.8 in exchange for
C$4.4 in exchange for
$24.7
$50.6
$2.6
£0.71
A$1.12
C$1.69
Changes in the fair value representing a net unrealized fair value loss on foreign exchange contracts that qualified as
effective hedge contracts outstanding during the year ended March 31, 2016 were losses, net of tax, of $0.2 million (2015 -
gains, net of tax, of $2.8 million; 2014 - gains, net of tax, of $0.8 million) and are included in accumulated other
comprehensive income (loss), a separate component of shareholders’ equity. Changes in the fair value representing a net
unrealized fair value gain on foreign exchange contracts that did not qualify as effective hedge contracts outstanding were $1.3
million during the year ended March 31, 2016 (2015 - $0.4 million and 2014 - nil), and were included in direct operating
expenses in the consolidated statement of income. These contracts are entered into with major financial institutions as
counterparties. We are exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of
replacing the contracts, at current market rates. We do not require collateral or other security to support these contracts.
Interest Rate Risk. Certain of our borrowings, primarily borrowings under our amended and restated senior revolving credit
facility and certain production loans, are, and are expected to continue to be, at variable rates of interest and expose us to
interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even
though the amount borrowed remained the same, and our net income would decrease. The applicable margin with respect to
loans under the amended and restated senior revolving credit facility is a percentage per annum equal to 2.50% plus an adjusted
75
rate based on LIBOR. Assuming the amended and restated senior revolving credit facility is drawn up to its maximum
borrowing capacity of $800 million, based on the applicable LIBOR in effect as of March 31, 2016, each quarter point change
in interest rates would result in a $2.0 million change in annual interest expense on the amended and restated senior revolving
credit facility.
The variable interest production loans incur interest at rates ranging from approximately 3.37% to 3.87% and applicable
margins ranging from 2.25% over the one, two, or three-month LIBOR to 3.0% over the one, three or six-month LIBOR. A
quarter point increase of the interest rates on the outstanding principal amount of our variable rate production loans would
result in $1.7 million in additional costs capitalized to the respective film or television asset.
At March 31, 2016, our 5.25% Senior Notes, Term Loan Due 2022 and convertible senior subordinated notes had an
aggregate outstanding carrying value of $725.1 million, and an estimated fair value of $725.7 million. A 1% increase or
decrease in the level of interest rates would increase or decrease the fair value of the 5.25% Senior Notes, Term Loan Due 2022
and convertible senior subordinated notes by approximately $26.2 million and $27.4 million, respectively.
The following table presents our financial instruments that are sensitive to changes in interest rates. The table also presents
the cash flows of the principal amounts of the financial instruments with the related weighted-average interest rates by expected
maturity dates and the fair value of the instrument as of March 31, 2016:
Year Ended March 31,
2017
2018
2019
2020
2021
Thereafter
Total
Fair Value
March 31,
2016
Variable Rates:
Senior Revolving
Credit Facility(1)
$
— $ 161,000
$
— $
— $
— $
— $
161,000
$
161,000
Average Interest Rate
—
2.94%
Production loans(2)
641,076
49,295
Average Interest Rate
3.56%
3.62%
—
—
—
Fixed Rates:
5.25% Senior Notes(3)
Average Interest Rate
Term Loan Due 2022(4)
Average Interest Rate
Principal Amounts of
Convertible Senior
Subordinated Notes(5):
January 2012 4.00%
Notes
Average Interest
Rate
April 2013 1.25%
Notes
Average Interest
Rate
—
—
—
—
41,850
4.00%
—
—
—
—
—
—
—
—
—
—
225,000
5.25%
—
—
—
—
60,000
1.25%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
690,371
690,371
225,000
229,500
— 400,000
400,000
400,500
—
5.00%
—
—
—
—
—
—
—
—
41,850
41,477
60,000
54,188
$ 682,926
$ 210,295
$ 285,000
$
— $
— $ 400,000
$ 1,578,221
$ 1,577,036
____________________
(1) Amended and restated senior revolving credit facility, which expires September 27, 2017 and bears interest of 2.50% over
the Adjusted LIBOR rate.
(2) Represents amounts owed to film production entities on anticipated delivery date or release date of the titles or the
contractual due dates of the obligation, that incur interest at rates ranging from approximately 3.37% to 3.87%.
(3) Senior secured second-priority notes with a fixed interest rate equal to 5.25%.
(4) Term loan maturing on March 17, 2022 with a fixed interest rate equal to 5.00%.
76
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Auditors’ Report and our Consolidated Financial Statements and Notes thereto appear in a separate section of this
report (beginning on page F-1 following Part IV). The index to our Consolidated Financial Statements is included in Item 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. We periodically review the design and effectiveness of our disclosure controls and internal control
over financial reporting. We make modifications to improve the design and effectiveness of our disclosure controls and internal
control structure, and may take other corrective action, if our reviews identify a need for such modifications or actions.
As of March 31, 2016, the end of the period covered by this report, the Company's management had carried out an evaluation
under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness
of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e). Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective as of March 31,
2016.
Internal Control Over Financial Reporting
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the
Company. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. Internal control over financial reporting includes policies and procedures that:
• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company;
• provide reasonable assurance that (a) transactions are recorded as necessary to permit preparation of financial statements
in accordance with U.S. generally accepted accounting principles, and (b) that our receipts and expenditures are being
recorded and made only in accordance with authorizations of management and directors of the Company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a materially effect on the financial statements.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Because of the inherent limitations, internal controls over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of the effectiveness of internal control over financial reporting to
future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Our management has made an assessment of the effectiveness of our internal control over financial reporting as of March 31,
2016. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee
77
of Sponsoring Organizations of the Treadway Commission (2013 Framework). On November 12, 2015, we purchased 62.5% of
the membership interests in Pilgrim Media Group, LLC ("Pilgrim Studios") and, as a result, we have begun integrating the processes,
systems and controls relating to Pilgrim Studios into our existing system of internal control over financial reporting in accordance
with our integration plans. Our evaluation and conclusion on the effectiveness of internal control over financial reporting as of
March 31, 2016 did not include the internal controls of Pilgrim Studios because of the timing of this acquisition. As of March 31,
2016, Pilgrim Studios represented $321.2 million of total assets, $52.5 million of revenues and $7.2 million of net loss for the
year then ended.
Based on this assessment, our management has concluded that, as of March 31, 2016, the Company maintained effective
internal control over financial reporting. The effectiveness of the Company's internal control over financial reporting has been
audited by the Company's independent auditor, Ernst & Young LLP, a registered public accounting firm. Their report is included
below.
Changes in Internal Control over Financial Reporting
We acquired Pilgrim Studios on November 12, 2015, and the addition of Pilgrim Studios' financial systems and processes
represent a change in our internal controls over financial reporting. There were no other changes in internal control over financial
reporting during the fiscal fourth quarter ended March 31, 2016, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
78
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Lions Gate Entertainment Corp.
We have audited Lions Gate Entertainment Corp.’s internal control over financial reporting as of March 31, 2016, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). Lions Gate Entertainment Corp.’s management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management's Report on Internal Control over Financial Reporting, management's
assessment of and conclusion of the effectiveness of internal control over financial reporting did not include the internal
controls of Pilgrim Studios, which is included in the fiscal 2016 consolidated financial statements of Lions Gate Entertainment
Corp. and constituted $321.2 million of total assets as of March 31, 2016, and $52.5 million of revenues and $7.2 million of net
loss for the year then ended. Our audit of internal control over financial reporting of Lions Gate Entertainment Corp. also did
not include an evaluation of the internal control over financial reporting of Pilgrim Studios.
In our opinion, Lions Gate Entertainment Corp. maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Lions Gate Entertainment Corp. as of March 31, 2016 and 2015, and the related consolidated
statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period
ended March 31, 2016 of Lions Gate Entertainment Corp. and our report dated May 25, 2016 expressed an unqualified opinion
thereon.
Los Angeles, California
May 25, 2016
/s/ Ernst & Young LLP
79
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item is incorporated by reference to our Proxy Statement for our 2016 Annual General
Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2016.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference to our Proxy Statement for our 2016 Annual General
Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2016.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS.
The information required by this Item is incorporated by reference to our Proxy Statement for our 2016 Annual General
Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2016.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this Item is incorporated by reference to our Proxy Statement for our 2016 Annual General
Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2016.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is incorporated by reference to our Proxy Statement for our 2016 Annual General
Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2016.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this report:
(1) Financial Statements
The financial statements listed on the accompanying Index to Financial Statements are filed as part of this report at
pages F-1 to F-57.
(2) Financial Statement Schedules
Schedule II. Valuation and Qualifying Accounts
80
All other Schedules are omitted since the required information is not present or is not present in amounts sufficient
to require submission of the schedule.
(3) and (b) Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.
81
Item 15(a).
Schedule II. Valuation and Qualifying Accounts
Lions Gate Entertainment Corp.
March 31, 2016
(In Thousands)
Additions
Description
Year Ended March 31, 2016:
Reserves:
Returns and allowances
Provision for doubtful accounts
Deferred tax valuation allowance
Year Ended March 31, 2015:
Reserves:
Returns and allowances
Provision for doubtful accounts
Deferred tax valuation allowance
Year Ended March 31, 2014:
Reserves:
Returns and allowances
Provision for doubtful accounts
Deferred tax valuation allowance
____________________________
Balance at
Beginning of
Period
Charged to Costs
and Expenses(1)
Charged to
Other
Accounts
Deductions
Balance at
End of Period
$
$
$
$
$
$
$
$
$
64,362
4,120
9,284
106,680
4,876
8,925
103,418
4,494
25,836
$
$
$
$
$
$
$
$
$
136,790
1,926
$
$
—
—
— $
819
162,303
$
(454) $
— $
—
—
359
185,373
421
$
$
— $
—
—
—
$
$
$
$
$
$
$
$
$
(149,343) (2)
(32) (3)
—
(204,621) (2)
(302) (3)
—
(182,111) (2)
(39) (3)
(16,911) (4)
$
$
$
$
$
$
$
$
$
51,809
6,014
10,103
64,362
4,120
9,284
106,680
4,876
8,925
(1) Charges for returns and allowances are charges against revenue.
(2) Actual returns and fluctuations in foreign currency exchange rates.
(3) Uncollectible accounts written off and fluctuations in foreign currency exchange rates.
(4) Release of a portion of the valuation allowance previously held against the Company's deferred tax assets.
82
Item 15(b).
Exhibit
Number
3.1(1)
3.2(2)
3.3(3)
3.4(3)
10.4(4)*
10.7*x
10.62(5)
10.67(6)
10.68(7)
10.80(8)
10.83(9)
10.84(10)
10.91(11)*
INDEX TO EXHIBITS
Description of Documents
Articles
Notice of Articles
Vertical Short Form Amalgamation Application
Certificate of Amalgamation
Lions Gate Entertainment Corp. 2012 Performance Incentive Plan
Director Compensation Summary
Form of Director Indemnity Agreement
Letter Agreement between Mark H. Rachesky and Lions Gate Entertainment Corp. dated July 9, 2009
Registration Rights Agreement, dated as of October 22, 2009, by and among Lions Gate Entertainment Corp. and the
persons listed on the signature pages thereto.
Refinancing Exchange Agreement, dated July 20, 2010, by Lions Gate Entertainment Inc. and Kornitzer Capital
Management, Inc.
Membership Interest Purchase Agreement, dated as of January 13, 2012, among Lions Gate Entertainment Corp.,
LGAC 1, LLC, LGAC 3, LLC, Summit Entertainment, LLC, S Representative, LLC and the several sellers party
thereto
Purchase Agreement, dated January 11, 2012 by and among Lions Gate Entertainment Inc., Lions Gate Entertainment
Corp. and Kornitzer Capital Management, Inc.
Third Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated September 27, 2012 with
JPMorgan Chase Bank, N.A., as administrative agent and issuing bank, J.P. Morgan Securities LLC, Barclays Bank
PLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Royal Bank of Canada, as co-syndication agents, joint
bookrunners and joint lead arrangers, Wells Fargo Bank, National Association, as co-syndication agent, SunTrust Bank
and Union Bank, N.A., as co-documentation agents, and the other guarantors and lenders that are parties thereto
10.92(12)*
Employment Agreement dated October 30, 2012 between the Company and Michael Burns
10.95(13)
10.97(14)*
10.98(15)*
Purchase Agreement, dated April 15, 2013 by and among Lions Gate Entertainment Inc., Lions Gate Entertainment
Corp. and Kornitzer Capital Management, Inc.
Executive Annual Bonus Program
Employment Agreement, dated May 30, 2013, between the Company and Jon Feltheimer
10.101(16)*
Employment Agreement between the Company and James W. Barge dated as of September 16, 2013
10.102(17)
10.105(18)
10.106(19)
Amendment No. 1 to the Third Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated
December 20, 2013
Stock Exchange Agreement, dated as of February 10, 2015, by and between Lions Gate Entertainment Corp., LG
Leopard Canada LP and the stockholders listed on Schedule 1 thereto.
Second Lien Credit and Guarantee Agreement, dated March 17, 2015, among Lions Gate Entertainment Corp., as
borrower, the guarantors referred to therein, the lenders referred to therein and JPMorgan Chase Bank, N.A., as
administrative agent.
10.108(20)*
Employment Agreement between Lions Gate Films, Inc. and Steve Beeks dated May 6, 2015
10.109(21)
10.110(22)
10.111(23)
10.112(24)
10.113(25)
10.114(26)
Investor Rights Agreement, dated as of November 10, 2015, by and among Lions Gate Entertainment Corp., Liberty
Global plc, Discovery Communications, Inc., Liberty Global Incorporated Limited, Discovery Lightning Investments
Ltd. and affiliates of MHR Fund Management, LLC
Voting and Standstill Agreement, dated as of November 10, 2015, by and among Lions Gate Entertainment Corp.,
Liberty Global plc, Discovery Communications, Inc., Liberty Global Incorporated Limited, Discovery Lightning
Investments Ltd., Dr. John C. Malone and affiliates of MHR Fund Management, LLC
Registration Rights Agreement, dated as of November 10, 2015, by and among Lions Gate Entertainment Corp. and
Liberty Global Incorporated Limited
Registration Rights Agreement, dated as of November 10, 2015, by and among Lions Gate Entertainment Corp. and
Discovery Lightning Investments Ltd.
Amendment No. 2 to the Third Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated
November 12, 2015
Underwriting Agreement, dated November 12, 2015, by and among Lions Gate Entertainment Corp., J.P. Morgan
Securities LLC, Liberty Global Incorporated Limited, Discovery Lightning Investments Ltd. And Bank of America,
N.A.
10.115(27)*
Employment Agreement between Lions Gate Films, Inc. and Brian Goldsmith dated November 13, 2015
83
Exhibit
Number
10.116(28)*
10.117(29)
21.1x
23.1x
23.2x
23.3x
24.1x
31.1x
31.2x
32.1x
99.1x
99.2x
101
Employment Agreement between Lions Gate Entertainment, Inc. and Wayne Levin dated November 13, 2015
Amendment No. 1, dated as of February 3, 2016, to Registration Rights Agreement, dated as of October 22, 2009, by and
among Lions Gate Entertainment Corp. and the persons listed on the signature pages thereto.
Description of Documents
Subsidiaries of the Company
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (with respect to financial statements
of Lions Gate Entertainment Corp.)
Consent of Ernst & Young LLP, Independent Auditors (with respect to financial statements of Pop Media Group, LLC)
Consent of PricewaterhouseCoopers LLP, Independent Auditors
Power of Attorney (Contained on Signature Page)
Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002
Studio 3 Partners LLC Audited Financial Statements for the years ended September 30, 2015, 2014 and 2013
Pop Media Group, LLC Audited Consolidated Financial Statements as of March 31, 2016 and 2015, and for each of
the three fiscal years ended March 31, 2016
The following materials from the Company's Annual Report on Form 10-K for the year ended March 31, 2016
formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the
Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated
Statements of Shareholder's Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated
Financial Statements
__________________________
(1)
(2)
(3)
Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2005 as filed on June
29, 2005.
Incorporated by reference as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q as filed on February 9, 2011.
Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 as filed on May
30, 2007.
Incorporated by reference as Exhibit A to the Company's Definitive Proxy Statement dated July 29, 2014.
(4)
Incorporated by reference to the Company's Quarterly Report on Form 10-Q as filed on February 9, 2009.
(5)
Incorporated by reference as Exhibit 10.65 to the Company's Current Report on Form 8-K as filed on July 10, 2009.
(6)
Incorporated by reference to the Company's Current Report on Form 8-K as filed on October 23, 2009.
(7)
Incorporated by reference to the Company's Current Report on Form 8-K as filed on July 20, 2010.
(8)
(9)
Incorporated by reference as Exhibit 2.1 to the Company's Current Report on Form 8-K as filed on January 17, 2012.
(10) Incorporated by reference as Exhibit 4.1 to the Company's Current Report on Form 8-K as filed on January 17, 2012.
(11) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2012.
(12) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on November 5, 2012.
(13) Incorporated by reference as Exhibit 4.1 to the Company's Current Report on Form 8-K as filed on April 15, 2013.
(14) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on May 31, 2013.
(15) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on June 3, 2013.
(16) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2013.
(17) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on December 24, 2013.
(18) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on February 11, 2015.
(19) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on March 17, 2015.
(20) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on May 7, 2015.
(21) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on November 10, 2015.
(22) Incorporated by reference as Exhibit 10.2 to the Company's Current Report on Form 8-K as filed on November 10, 2015.
(23) Incorporated by reference as Exhibit 10.3 to the Company's Current Report on Form 8-K as filed on November 10, 2015.
(24) Incorporated by reference as Exhibit 10.4 to the Company's Current Report on Form 8-K as filed on November 10, 2015.
(25) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on November 12, 2015.
(26) Incorporated by reference as Exhibit 1.1 to the Company's Current Report on Form 8-K as filed on November 13, 2015.
(27) Incorporated by reference as Exhibit 10.1 to the Company's Current Report on Form 8-K as filed on November 19, 2015.
(28) Incorporated by reference as Exhibit 10.2 to the Company's Current Report on Form 8-K as filed on November 19, 2015.
(29) Incorporated by reference as Exhibit 10.116 to the Company's Quarterly Report on Form 10-Q as filed on February 4, 2016.
_____________________________
*
x
Management contract or compensatory plan or arrangement.
Filed herewith
84
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 25, 2016.
SIGNATURES
LIONS GATE ENTERTAINMENT CORP.
By: /s/ James W. Barge
James W. Barge
Chief Financial Officer
DATE: May 25, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in
the capacities and on the dates so indicated.
Each person whose signature appears below authorizes each of Jon Feltheimer, Michael Burns, Wayne Levin and James W.
Barge, severally and not jointly, to be his or her true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in such person’s name, place and stead, in any and all capacities, to sign any amendments to
the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016; granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for
all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
85
Signature
Title
Date
/s/ JAMES W. BARGE
James W. Barge
Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
May 25, 2016
/s/ MICHAEL BURNS
Michael Burns
/s/ GORDON CRAWFORD
Gordon Crawford
/s/ ARTHUR EVRENSEL
Arthur Evrensel
Director
Director
Director
/s/ JON FELTHEIMER
Jon Feltheimer
Chief Executive Officer (Principal Executive Officer)
and Director
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
Director
Director
Director
Director
Director
/s/ EMILY FINE
Emily Fine
/s/ MICHAEL T. FRIES
Michael T. Fries
/s/ HARALD LUDWIG
Harald Ludwig
/s/ DR. JOHN C. MALONE
Dr. John C. Malone
/s/ G. SCOTT PATERSON
G. Scott Paterson
/s/ MARK H. RACHESKY, M.D.
Mark H. Rachesky, M.D.
/s/ DARYL SIMM
Daryl Simm
/s/ HARDWICK SIMMONS
Hardwick Simmons
/s/ PHYLLIS YAFFE
Phyllis Yaffe
/s/ DAVID M. ZASLAV
David M. Zaslav
Chairman of the Board of Directors
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
May 25, 2016
Director
Director
Director
Director
86
INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets — March 31, 2016 and 2015
Consolidated Statements of Income — Years Ended March 31, 2016, 2015 and 2014
Consolidated Statements of Comprehensive Income — Years Ended March 31, 2016, 2015 and 2014
Consolidated Statements of Shareholders’ Equity — Years Ended March 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows — Years Ended March 31, 2016, 2015 and 2014
Notes to Audited Consolidated Financial Statements
Page
Number
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Lions Gate Entertainment Corp.
We have audited the accompanying consolidated balance sheets of Lions Gate Entertainment Corp. as of March 31, 2016 and
2015, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of
the three years in the period ended March 31, 2016. Our audits also included the financial statement schedule listed in the Index
at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Lions Gate Entertainment Corp. at March 31, 2016 and 2015, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended March 31, 2016, in conformity with U.S. generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Lions
Gate Entertainment Corp.’s internal control over financial reporting as of March 31, 2016, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated May 25, 2016 expressed an unqualified opinion thereon.
Los Angeles, California
May 25, 2016
/s/ Ernst & Young LLP
F-2
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net of reserves for returns and allowances of $51,809 (March 31, 2015
- $64,362) and provision for doubtful accounts of $6,014 (March 31, 2015 - $4,120)
Investment in films and television programs, net
Property and equipment, net
Investments
Goodwill
Other assets
Deferred tax assets
Total assets
LIABILITIES
Senior revolving credit facility
5.25% Senior Notes
Term Loan
Accounts payable and accrued liabilities
Participations and residuals
Film obligations and production loans
Convertible senior subordinated notes
Deferred revenue
Total liabilities
Commitments and contingencies (Note 17)
Redeemable noncontrolling interests
Common shares, no par value, 500,000,000 shares authorized, 146,785,940 shares issued
(March 31, 2015 - 145,532,978 shares)
SHAREHOLDERS’ EQUITY
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes.
$
$
$
March 31,
2016
March 31,
2015
(Amounts in thousands,
except share amounts)
$
57,742
2,906
102,697
2,508
1,049,289
1,478,296
43,384
464,346
534,780
90,344
134,421
3,855,508
161,000
225,000
400,000
377,698
607,358
715,360
100,050
328,244
$
$
891,880
1,381,829
26,651
438,298
323,328
74,784
50,114
3,292,089
—
225,000
375,000
332,473
471,661
656,755
114,126
274,787
2,914,710
2,449,802
90,525
—
885,800
7,584
(43,111)
850,273
830,786
13,720
(2,219)
842,287
$
3,855,508
$
3,292,089
F-3
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF INCOME
Revenues
Expenses:
Direct operating
Distribution and marketing
General and administration
Depreciation and amortization
Total expenses
Operating income (loss)
Other expenses (income):
Interest expense
Cash interest
Amortization of debt discount and deferred financing costs
Total interest expense
Interest and other income
Loss on extinguishment of debt
Total other expenses, net
Income (loss) before equity interests and income taxes
Equity interests income
Income (loss) before income taxes
Income tax provision (benefit)
Net income
Less: Net loss attributable to noncontrolling interest
Net income attributable to Lions Gate Entertainment Corp.
shareholders
Per share information attributable to Lions Gate Entertainment Corp.
shareholders:
Basic net income per common share
Diluted net income per common share
Weighted average number of common shares outstanding:
Basic
Diluted
Year Ended March 31,
2016
2015
2014
(Amounts in thousands, except per share amounts)
$
2,347,419
$
2,399,640
$
2,630,254
1,415,344
661,789
282,232
13,084
2,372,449
(25,030)
1,315,775
591,491
263,507
6,586
2,177,359
222,281
1,369,381
739,461
254,925
6,539
2,370,306
259,948
45,695
9,184
54,879
(1,851)
—
53,028
(78,058)
44,231
(33,827)
(76,527)
42,700
7,509
39,657
12,819
52,476
(2,790)
11,664
61,350
160,931
52,477
213,408
31,627
181,781
—
48,960
17,210
66,170
(6,030)
39,572
99,712
160,236
24,724
184,960
32,923
152,037
—
50,209
$
181,781
$
152,037
0.34
0.33
$
$
1.31
1.23
$
$
1.11
1.04
148,480
154,088
139,048
151,778
137,468
154,415
$
$
$
Dividends declared per common share
$
0.34
$
0.26
$
0.10
See accompanying notes.
F-4
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended March 31,
2016
2015
2014
Net income
$
(Amounts in thousands)
$
$
181,781
(6,391)
42,700
(3,056)
(37,643)
(193)
1,808
7,509
2,705
2,842
180,937
—
152,037
4,294
—
808
157,139
—
$
9,317
$
180,937
$
157,139
Foreign currency translation adjustments, net of tax
Net unrealized gain (loss) on available-for-sale securities, net of tax charge
(benefit) of ($403) and $404 in 2016 and 2015, respectively
Net unrealized gain (loss) on foreign exchange contracts, net of tax
Comprehensive income
Less: Comprehensive loss attributable to noncontrolling interest
Comprehensive income attributable to Lions Gate Entertainment Corp.
shareholders
See accompanying notes.
F-5
l
a
t
o
T
d
e
t
a
l
u
m
u
c
c
A
r
e
h
t
O
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
e
m
o
c
n
I
d
e
n
i
a
t
e
R
s
g
n
i
n
r
a
E
d
e
t
a
l
u
m
u
c
c
A
)
t
i
c
i
f
e
D
(
t
n
u
o
m
A
r
e
b
m
u
N
s
e
r
a
h
S
n
o
m
m
o
C
.
P
R
O
C
T
N
E
M
N
I
A
T
R
E
T
N
E
E
T
A
G
S
N
O
I
L
Y
T
I
U
Q
E
’
S
R
E
D
L
O
H
E
R
A
H
S
F
O
S
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
6
2
5
6
5
3
,
$
)
7
7
4
6
(
,
$
)
2
1
9
9
0
3
(
,
$
5
1
9
,
2
7
6
$
9
9
8
,
2
8
8
,
5
3
1
)
s
t
n
u
o
m
a
e
r
a
h
s
t
p
e
c
x
e
,
s
d
n
a
s
u
o
h
t
n
i
s
t
n
u
o
m
A
(
7
2
4
2
7
9
1
1
,
9
1
4
3
5
,
)
9
3
3
8
(
,
0
6
3
7
2
,
)
6
6
9
,
3
1
(
7
3
0
,
2
5
1
8
0
8
4
9
2
,
4
9
3
8
6
,
8
3
5
4
8
5
,
9
7
4
7
4
,
1
3
0
4
2
,
6
1
9
0
7
1
,
1
2
5
)
1
0
5
6
3
1
(
,
)
3
7
4
6
3
(
,
1
8
7
,
1
8
1
)
1
9
3
,
6
(
5
0
7
,
2
2
4
8
,
2
7
8
2
2
4
8
,
7
9
0
6
,
5
5
5
8
4
,
2
6
1
6
1
,
7
7
3
3
0
0
7
5
,
)
0
8
1
3
7
(
,
)
9
6
4
0
5
(
,
)
6
5
0
,
3
(
9
0
2
,
0
5
)
3
4
6
,
7
3
(
)
3
9
1
(
)
6
7
8
,
5
(
—
—
—
—
—
—
—
8
0
8
4
9
2
,
4
)
5
7
3
1
(
,
—
—
—
—
—
—
—
—
)
1
9
3
,
6
(
5
0
7
,
2
2
4
8
,
2
)
9
1
2
2
(
,
—
—
—
—
—
—
—
—
—
)
3
9
1
(
)
6
5
0
,
3
(
)
3
4
6
,
7
3
(
—
—
—
—
—
—
—
—
7
3
0
,
2
5
1
)
5
7
8
7
5
1
(
,
—
—
—
—
—
—
—
—
)
6
8
1
0
1
(
,
1
8
7
,
1
8
1
7
2
4
2
7
9
,
1
1
9
1
4
,
3
5
)
9
3
3
,
8
(
0
6
3
,
7
2
)
6
6
9
,
3
1
(
—
—
—
9
3
8
,
6
8
8
7
,
3
4
7
9
7
4
,
7
4
1
3
0
,
4
2
6
1
9
,
0
7
1
1
2
5
)
7
8
2
,
6
2
(
)
1
0
5
,
6
3
1
(
—
—
—
—
—
—
—
—
7
1
0
,
4
1
4
2
3
,
4
6
9
5
3
0
,
8
9
1
,
1
)
6
0
7
,
5
1
3
(
2
9
8
,
3
6
2
,
3
9
6
0
,
1
8
4
6
1
9
,
7
7
7
0
9
3
,
8
1
0
3
7
,
5
4
9
,
2
4
2
9
,
8
2
3
,
5
)
2
1
5
,
6
2
0
,
5
(
1
6
4
,
7
0
0
,
1
4
1
—
—
—
—
—
—
—
—
—
—
—
)
9
6
4
0
5
(
,
9
0
2
,
0
5
—
—
—
)
6
7
8
,
5
(
—
—
—
—
—
—
—
—
—
—
—
—
7
9
0
,
6
5
5
5
,
8
4
2
6
1
,
6
1
7
7
3
3
0
0
,
7
5
8
0
0
,
2
0
4
6
9
0
,
0
4
9
4
4
7
,
0
1
8
5
0
,
3
8
9
,
1
1
5
4
,
7
1
5
,
1
)
0
8
1
,
3
7
(
)
5
9
3
,
0
0
6
,
3
(
0
2
7
3
1
,
6
8
7
,
0
3
8
8
7
9
,
2
3
5
,
5
4
1
3
7
2
0
5
8
,
$
)
1
1
1
3
4
(
,
$
4
8
5
7
,
$
0
0
8
,
5
8
8
$
0
4
9
,
5
8
7
,
6
4
1
.
s
e
t
o
n
g
n
i
y
n
a
p
m
o
c
c
a
e
e
S
6
-
F
7
7
0
,
3
2
$
f
o
s
n
o
i
t
a
g
i
l
b
o
x
a
t
g
n
i
d
l
o
h
h
t
i
w
f
o
t
e
n
,
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
S
s
e
c
i
v
r
e
s
r
o
f
s
r
o
t
c
e
r
i
d
o
t
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
s
e
t
o
N
%
0
0
.
4
2
1
0
2
y
r
a
u
n
a
J
d
n
a
.
s
e
t
o
N
%
5
2
6
3
9
0
0
2
l
i
r
p
A
f
o
n
o
i
s
r
e
v
n
o
C
s
r
e
d
l
o
h
e
r
a
h
s
.
p
r
o
C
t
n
e
m
n
i
a
t
r
e
t
n
E
e
t
a
G
s
n
o
i
L
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
m
o
c
n
i
t
e
N
x
a
t
f
o
t
e
n
,
s
t
c
a
r
t
n
o
c
e
g
n
a
h
c
x
e
n
g
i
e
r
o
f
n
o
n
i
a
g
d
e
z
i
l
a
e
r
n
u
t
e
N
x
a
t
f
o
t
e
n
,
s
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
e
u
l
a
v
r
a
p
o
n
,
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
s
a
h
c
r
u
p
e
R
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
4
1
0
2
,
1
3
h
c
r
a
M
t
a
e
c
n
a
l
a
B
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
s
e
t
o
N
%
5
2
6
.
3
9
0
0
2
l
i
r
p
A
d
n
a
.
s
e
t
o
N
%
5
7
3
9
2
4
0
0
2
r
e
b
o
t
c
O
f
o
n
o
i
s
r
e
v
n
o
C
7
5
6
,
0
2
$
f
o
s
n
o
i
t
a
g
i
l
b
o
x
a
t
g
n
i
d
l
o
h
h
t
i
w
f
o
t
e
n
,
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
S
s
r
e
d
l
o
h
e
r
a
h
s
.
p
r
o
C
t
n
e
m
n
i
a
t
r
e
t
n
E
e
t
a
G
s
n
o
i
L
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
m
o
c
n
i
t
e
N
x
a
t
f
o
t
e
n
,
s
e
i
t
i
r
u
c
e
s
e
l
a
s
-
r
o
f
-
e
l
b
a
l
i
a
v
a
n
o
n
i
a
g
d
e
z
i
l
a
e
r
n
u
t
e
N
x
a
t
f
o
t
e
n
,
s
t
c
a
r
t
n
o
c
e
g
n
a
h
c
x
e
n
g
i
e
r
o
f
n
o
n
i
a
g
d
e
z
i
l
a
e
r
n
u
t
e
N
x
a
t
f
o
t
e
n
,
s
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
5
1
0
2
,
1
3
h
c
r
a
M
t
a
e
c
n
a
l
a
B
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
2
8
1
,
4
2
$
f
o
s
n
o
i
t
a
g
i
l
b
o
x
a
t
g
n
i
d
l
o
h
h
t
i
w
f
o
t
e
n
,
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
S
n
o
i
t
i
s
i
u
q
c
a
s
o
i
d
u
t
S
m
i
r
g
l
i
P
o
t
d
e
t
a
l
e
r
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
s
e
c
i
v
r
e
s
r
o
f
s
r
o
t
c
e
r
i
d
o
t
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
.
s
e
t
o
N
%
5
2
6
3
9
0
0
2
l
i
r
p
A
f
o
n
o
i
s
r
e
v
n
o
C
s
r
e
d
l
o
h
e
r
a
h
s
.
p
r
o
C
t
n
e
m
n
i
a
t
r
e
t
n
E
e
t
a
G
s
n
o
i
L
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
m
o
c
n
i
t
e
N
e
u
l
a
v
r
a
p
o
n
,
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
s
a
h
c
r
u
p
e
R
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
x
a
t
f
o
t
e
n
,
s
e
i
t
i
r
u
c
e
s
e
l
a
s
-
r
o
f
-
e
l
b
a
l
i
a
v
a
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
u
t
e
N
x
a
t
f
o
t
e
n
,
s
t
c
a
r
t
n
o
c
e
g
n
a
h
c
x
e
n
g
i
e
r
o
f
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
u
t
e
N
e
u
l
a
v
n
o
i
t
p
m
e
d
e
r
o
t
s
t
n
e
m
t
s
u
j
d
a
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
N
x
a
t
f
o
t
e
n
,
s
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
6
1
0
2
,
1
3
h
c
r
a
M
t
a
e
c
n
a
l
a
B
s
e
c
i
v
r
e
s
r
o
f
s
r
o
t
c
e
r
i
d
o
t
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
s
t
n
e
m
t
s
e
v
n
i
o
t
d
e
t
a
l
e
r
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
e
u
l
a
v
r
a
p
o
n
,
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
s
a
h
c
r
u
p
e
R
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
3
1
0
2
,
1
3
h
c
r
a
M
t
a
e
c
n
a
l
a
B
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
Amortization of films and television programs
Amortization of debt discount and deferred financing costs
Non-cash share-based compensation
Other non-cash items
Distribution from equity method investee
Loss on extinguishment of debt
Equity interests income
Deferred income taxes (benefit)
Changes in operating assets and liabilities:
Restricted cash
Accounts receivable, net
Investment in films and television programs
Other assets
Accounts payable and accrued liabilities
Participations and residuals
Film obligations
Deferred revenue
Net Cash Flows Provided By (Used In) Operating Activities
Investing Activities:
Proceeds from the sale of equity method investees
Investment in equity method investees
Distributions from equity method investee in excess of earnings
Purchase of Pilgrim Studios, net of cash acquired of $15,816 (see Note 11)
Purchases of other investments
Repayment of loans receivable
Purchases of property and equipment
Net Cash Flows Used In Investing Activities
Financing Activities:
Senior revolving credit facility - borrowings
Senior revolving credit facility - repayments
Term Loans and 5.25% Senior Notes - borrowings, net of deferred financing costs of $964,
$4,315 and $6,860 for the years ended March 31, 2016, 2015 and 2014, respectively
Term Loans - repayments
10.25% Senior Notes - repurchases and redemptions
Convertible senior subordinated notes - borrowings
Convertible senior subordinated notes - repurchases
Production loans - borrowings
Production loans - repayments
Pennsylvania Regional Center credit facility - repayments
Repurchase of common shares
Dividends paid
Exercise of stock options
Tax withholding required on equity awards
Net Cash Flows Provided By (Used In) Financing Activities
Net Change In Cash And Cash Equivalents
Foreign Exchange Effects on Cash
Cash and Cash Equivalents - Beginning Of Period
Cash and Cash Equivalents - End Of Period
See accompanying notes.
F-7
2016
Year Ended March 31,
2015
(Amounts in thousands)
2014
$
42,700
$
181,781
$
152,037
13,084
1,029,077
9,184
77,906
2,031
—
—
(44,231)
(85,069)
(398)
(144,910)
(1,066,403)
(13,413)
28,916
134,884
(30,711)
28,347
(19,006)
—
(15,989)
—
(126,892)
(750)
—
(18,433)
(162,064)
605,500
(444,500)
24,036
—
—
—
(5)
572,572
(483,145)
—
(73,180)
(47,447)
6,097
(24,205)
135,723
(45,347)
392
102,697
57,742
$
6,586
899,951
12,819
79,938
—
7,788
11,664
(52,477)
13,934
6,417
(13,968)
(1,012,294)
(5,331)
(5,086)
2,704
(24,977)
(12,940)
96,509
14,575
(22,730)
—
—
(30,000)
—
(17,013)
(55,168)
6,539
921,289
17,210
60,492
—
16,079
39,572
(24,724)
15,913
1,775
(93,503)
(948,082)
(3,768)
17,628
59,207
(19,187)
34,035
252,512
9,000
(17,250)
4,169
—
—
4,275
(8,799)
(8,605)
778,500
(876,119)
872,220
(1,113,075)
370,685
(229,500)
—
—
(16)
631,709
(449,648)
—
(144,840)
(33,353)
6,839
(20,062)
34,195
75,536
1,469
25,692
102,697
$
440,640
—
(470,584)
60,000
—
532,416
(517,874)
(65,000)
—
(6,900)
11,972
(23,077)
(279,262)
(35,355)
(1,316)
62,363
25,692
$
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations
Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a premier next generation global
content leader with a strong and diversified presence in motion picture production and distribution, television programming and
syndication, home entertainment, digital distribution, channel platforms and international distribution and sales.
2. Significant Accounting Policies
(a) Generally Accepted Accounting Principles
These consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted
accounting principles (“GAAP”).
(b) Principles of Consolidation
The accompanying consolidated financial statements of the Company include the accounts of Lionsgate and its majority-
owned and controlled subsidiaries. The Company reviews its relationships with other entities to identify whether it is the
primary beneficiary of a variable interest entity (“VIE”). If the determination is made that the Company is the primary
beneficiary, then the entity is consolidated in accordance with accounting guidance.
All significant intercompany balances and transactions have been eliminated in consolidation.
(c) 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 for
investment in films and television programs; estimates of sales returns and other allowances and provisions for doubtful
accounts; fair value of equity-based compensation; fair value of assets and liabilities for allocation of the purchase price of
companies acquired; income taxes; and 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.
(d) Reclassifications
Certain amounts presented in prior years have been reclassified to conform to the current year’s presentation.
(e) Revenue Recognition
Revenue from the theatrical release of feature films is recognized at the time of exhibition based on the Company's
participation in box office receipts. Revenue from the sale of DVDs and Blu-ray discs in the retail market, net of an allowance
for estimated returns and other allowances, is recognized on the later of receipt by the customer or “street date” (when it is
available for sale by the customer). Under revenue sharing arrangements, including digital and electronic-sell-through ("EST")
arrangements, such as download-to-own, download-to-rent, video-on-demand and subscription video-on-demand, revenue is
recognized when the Company is entitled to receipts and such receipts are determinable. Revenues from television or digital
licensing for fixed fees are recognized when the feature film or television program is available to the licensee for telecast. For
television licenses that include separate availability “windows” during the license period, revenue is allocated over the
“windows.” Revenue from sales to international territories are recognized when access to the feature film or television program
has been granted or delivery has occurred, as required under the sales contract, and the right to exploit the feature film or
television program has commenced. For multiple media rights contracts with a fee for a single film or television program where
the contract provides for media holdbacks (defined as contractual media release restrictions), the fee is allocated to the various
media based on the Company's assessment of the relative fair value of the rights to exploit each media and is recognized as
each holdback is released. For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on the
Company's assessment of the relative fair value of each title.
Cash payments received are recorded as deferred revenue until all the conditions of revenue recognition have been met.
Long-term, non-interest bearing receivables are discounted to present value. Such unamortized discounts were $14.0 million
and $10.2 million at March 31, 2016 and 2015, respectively. At March 31, 2016, $222.1 million of accounts receivable are due
F-8
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
beyond one year. The accounts receivable are due as follows: $128.5 million in fiscal 2018, $65.2 million in fiscal 2019, $20.3
million in fiscal 2020, $6.6 million in fiscal 2021 and $1.5 million in fiscal 2022.
(f) Cash and Cash Equivalents
Cash and cash equivalents consist of cash deposits at financial institutions and investments in money market mutual funds.
(g) Restricted Cash
Restricted cash primarily consists of amounts that are contractually designated for certain theatrical marketing obligations.
(h) Investment in Films and Television Programs
Investment in films and television programs includes the unamortized costs of completed films and television programs
which have been produced by the Company or for which the Company has acquired distribution rights, libraries acquired as
part of acquisitions of companies, films and television programs in progress and in development and home entertainment
product inventory.
For films and television programs produced by the Company, capitalized costs include all direct production and financing
costs, capitalized interest and production overhead. For the years ended March 31, 2016, 2015, and 2014, total capitalized
interest was $19.9 million, $15.6 million, and $13.8 million, respectively. For acquired films and television programs,
capitalized costs consist of minimum guarantee payments to acquire the distribution rights.
Costs of acquiring and producing films and television programs and of acquired libraries are amortized using the
individual-film-forecast method, whereby these costs are amortized and participations and residuals costs are accrued in the
proportion that current year’s revenue bears to management’s estimate of ultimate revenue at the beginning of the current year
expected to be recognized from the exploitation, exhibition or sale of the films or television programs.
Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion
picture. For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years
following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most
recent episode, if later. For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed
twenty years following the date of acquisition.
Investment in films and television programs is stated at the lower of amortized cost or estimated fair value. The valuation of
investment in films and television programs is reviewed on a title-by-title basis, when an event or change in circumstances
indicates that the fair value of a film or television program is less than its unamortized cost. During the years ended March 31,
2016 and 2015, the Company recorded impairment charges of $25.0 million and $23.5 million, respectively, on film and
television programs. In determining the fair value of its films and television programs, the Company employs a discounted cash
flows ("DCF") methodology with assumptions for cash flows. Key inputs employed in the DCF methodology include estimates
of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on the
weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a
particular film or television program. The fair value of any film costs associated with a film or television program that
management plans to abandon is zero. 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 10). Additional amortization is recorded in the amount by
which the unamortized costs exceed the estimated fair value of the film or television program. Estimates of future revenue
involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and
television programs may be required as a consequence of changes in management’s future revenue estimates.
Films and television programs in progress include the accumulated costs of productions which have not yet been
completed.
Films and television programs in development include costs of acquiring film rights to books, stage plays or original
screenplays and costs to adapt such projects. Such costs are capitalized and, upon commencement of production, are transferred
to production costs. Projects in development are written off at the earlier of the date they are determined not to be recoverable
or when abandoned, or three years from the date of the initial investment.
Home entertainment product inventory consists of DVDs and Blu-ray discs and is stated at the lower of cost or market
value (first-in, first-out method). Costs of DVDs and Blu-ray discs sales, including shipping and handling costs, are included in
distribution and marketing expenses.
F-9
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(i) Property and Equipment, net
Property and equipment is carried at cost less accumulated depreciation. Depreciation is provided for on a straight line basis
over the following useful lives:
Computer equipment and software
Furniture and equipment
Leasehold improvements
Land
2 — 5 years
2 — 10 years
Lease term or the useful life, whichever is shorter
Not depreciated
The Company periodically reviews and evaluates the recoverability of property and equipment. Where applicable, estimates
of net future cash flows, on an undiscounted basis, are calculated based on future revenue estimates. If appropriate and where
deemed necessary, a reduction in the carrying amount is recorded.
(j) Investments
Investments include investments accounted for under the equity method of accounting, fair value method and cost method.
Equity Method Investments: The Company uses the equity method of accounting for investments in companies in which it
has a minority equity interest and the ability to exert significant influence over operating decisions of the companies.
Significant influence is generally presumed to exist when the Company owns between 20% and 50% of the voting interests in
the investee, holds substantial management rights or holds an interest of less than 20% in an investee that is a limited liability
partnership or limited liability corporation that is treated as a flow-through entity.
Under the equity method of accounting, the Company's share of the investee's earnings (losses), net of intercompany
eliminations, are included in the "equity interest income (loss)" line item in the consolidated statement of income. The
Company records its share of the net income or loss of certain other equity method investments (see Note 5) on a one quarter
lag and, accordingly, during the years ended March 31, 2016, 2015 and 2014, the Company recorded its share of the income or
loss generated by these entities for the years ended December 31, 2015, 2014 and 2013, respectively.
Profit Eliminations. The Company licenses theatrical releases and other films and television programs to certain equity
method investments. A portion of the profits of these licenses reflecting the Company's ownership share in the venture are
eliminated through an adjustment to the equity interest income (loss) of the venture. These profits are recognized as they are
realized by the equity method investee through the amortization of the related asset, recorded on the equity method investee's
balance sheet, over the license period.
Dividends and Other Distributions. Dividends and other distributions from equity method investees are recorded as a
reduction of the Company's investment. Distributions received up to the Company's interest in the investee's retained earnings
are considered returns on investments and are classified within cash flows from operating activities in the consolidated
statement of cash flows. Distributions from equity method investments in excess of the Company's interest in the investee's
retained earnings are considered returns of investments and are classified within cash flows provided by investing activities in
the statement of cash flows.
Fair Value and Cost Method Investments: Investments in companies in which the Company does not have a controlling
voting interest or over which it is unable to exert significant influence are generally accounted for at fair value if the
investments are publicly traded. If the investment or security is not publicly traded, the investment is accounted for at cost
because its fair value is not readily determinable. Fair value investments are considered available-for-sale by the Company.
Unrealized gains and losses on investments, which are available-for-sale and accounted for at fair value, are reported net of tax
in accumulated other comprehensive income or loss.
All of the Company’s investments are periodically reviewed to determine whether there has been a loss in value that is
other than a temporary decline. If the Company determines that an investment has sustained an other-than-temporary decline in
its value, the investment is written down to its fair value by a charge to earnings.
(k) Goodwill
Goodwill represents the excess of acquisition costs over the tangible and intangible assets acquired and liabilities assumed
in various business acquisitions by the Company. The Company has two reporting units with goodwill: Motion Pictures and
Television Production. Goodwill is not amortized but is reviewed for impairment annually each fiscal year or between the
annual tests if an event occurs or circumstances change that indicate it is more-likely-than-not that the fair value of a reporting
unit is less than its carrying value. The impairment test follows a two-step approach. The first step determines if the goodwill is
potentially impaired, and the second step measures the amount of the impairment loss, if necessary. Under the first step,
F-10
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
goodwill is considered potentially impaired if the fair value of the reporting unit is less than the reporting unit’s carrying
amount, including goodwill. Under the second step, the impairment loss is then measured as the excess of recorded goodwill
over the fair value of the goodwill, as calculated. The fair value of goodwill is calculated by allocating the fair value of the
reporting unit to all the assets and liabilities of the reporting unit as if the reporting unit was purchased in a business
combination and the purchase price was the fair value of the reporting unit. However, entities are permitted to first assess
qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount as a basis for determining whether it is necessary to perform the two-step impairment test. The Company performs its
annual impairment test as of January 1 in each fiscal year. The Company elected to first assess qualitative factors to determine
whether it is necessary to perform the two-step annual goodwill impairment test in fiscal 2016. Based on the Company's
qualitative assessments including, but not limited to, the results of the most recent quantitative impairment test, consideration
of macroeconomic conditions, industry and market conditions, cash flows, and the Company's share price, the Company
concluded that it is more likely than not that the fair value of our reporting units is greater than their carrying value.
(l) Other Assets
Other assets include deferred financing costs, prepaid expenses and other, and finite-lived intangible assets.
Deferred Financing Costs. Amounts incurred in connection with obtaining debt financing that is not deemed to be a
modification of terms of an existing borrowing are deferred and amortized using the effective interest method, as a component
of interest expense, over the period to the earlier of the date of the earliest put option or term to maturity of the related debt
obligation. Debt financing costs associated with a debt issuance deemed to be a modification of terms of an existing borrowing
are charged to expense at the time of modification.
Prepaid Expenses and Other. Prepaid expenses and other primarily include prepaid expenses, security deposits, and other
assets.
Finite-lived Intangible Assets. Finite-lived intangible assets consist primarily of noncompete agreements, trademarks and
tradenames, and sales agency relationships, which are amortized over their anticipated revenue stream and reviewed for
impairment when events and circumstances indicate that the intangible asset might be impaired.
(m) Prints, Advertising and Marketing Expenses
The costs of advertising and marketing expenses are expensed as incurred. Advertising expenses for the year ended
March 31, 2016 were $470.2 million (2015 — $400.0 million, 2014 — $520.0 million) which were recorded as distribution and
marketing expenses. The costs of film prints are capitalized as prepaid expenses and expensed upon theatrical release and are
included in distribution and marketing expenses.
(n) Income Taxes
Income taxes are accounted for using an asset and liability approach for financial accounting and reporting for income taxes
and recognition and measurement of deferred assets are based upon the likelihood of realization of tax benefits in future years.
Under this method, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are
established when management determines that it is more likely than not that some portion or all of the net deferred tax asset
will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment.
From time to time, the Company engages in transactions in which the tax consequences may be subject to uncertainty.
Significant judgment is required in assessing and estimating the tax consequences of these transactions. In determining the
Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless
such positions are determined to be more likely than not of being sustained upon examination, based on their technical merits.
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
(o) Government Assistance
The Company has access to government programs that are designed to promote film and television production and
distribution in Canada and Australia. The Company also has access to similar programs in certain states within the U.S. that are
designed to promote film and television production in those states.
Tax credits earned with respect to expenditures on qualifying film and television productions are included as an offset to
investment in films and television programs when the qualifying expenditures have been incurred provided that there is
reasonable assurance that the credits will be realized (see Note 15).
F-11
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(p) Foreign Currency Translation
Monetary assets and liabilities denominated in currencies other than the functional currency are translated at exchange rates
in effect at the balance sheet date. Resulting unrealized and realized gains and losses are included in the consolidated
statements of income.
Foreign company assets and liabilities in foreign currencies are translated into U.S. dollars at the exchange rate in effect at
the balance sheet date. Foreign company revenue and expense items are translated at the average rate of exchange for the fiscal
year. Gains or losses arising on the translation of the accounts of foreign companies are included in accumulated other
comprehensive income or loss, a separate component of shareholders’ equity.
(q) Derivative Instruments and Hedging Activities
Derivative financial instruments are used by the Company in the management of its foreign currency exposures. The
Company’s policy is not to use derivative financial instruments for trading or speculative purposes.
The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production
expenses denominated in various foreign currencies. The Company evaluates whether the foreign exchange contracts qualify
for hedge accounting at the inception of the contract. The fair value of the forward exchange contracts is recorded on the
consolidated balance sheets. Changes in the fair value of the foreign exchange contracts that are effective hedges are reflected
in accumulated other comprehensive income or loss, a separate component of shareholders’ equity, and changes in the fair
value of foreign exchange contracts that are ineffective hedges are reflected in the consolidated statements of income. Gains
and losses realized upon settlement of the foreign exchange contracts that are effective hedges are amortized to the consolidated
statements of income on the same basis as the production expenses being hedged.
(r) Share-Based Compensation
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the
grant date fair value of the award. The fair value is recognized in earnings over the period during which an employee is
required to provide service. See Note 13 for further discussion of the Company’s share-based compensation.
(s) Net Income Per Share
Basic net income per share is calculated based on the weighted average common shares outstanding for the period. Basic
net income per share for the years ended March 31, 2016, 2015 and 2014 is presented below:
Basic Net Income Per Common Share:
Numerator:
Net income attributable to Lions Gate Entertainment Corp. shareholders
Denominator:
Weighted average common shares outstanding
Basic net income per common share
Year Ended March 31,
2016
2015
2014
(Amounts in thousands, except per share amounts)
$
$
50,209
$
181,781
$
152,037
148,480
139,048
137,468
0.34
$
1.31
$
1.11
Diluted net income per common share reflects the potential dilutive effect, if any, of the conversion of convertible senior
subordinated notes under the "if converted" method. Diluted net income per common share also reflects share purchase options,
including equity-settled share appreciation rights and restricted share units ("RSUs") using the treasury stock method when
dilutive, and any contingently issuable shares when dilutive. Diluted net income per common share for the years ended
March 31, 2016, 2015 and 2014 is presented below:
F-12
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended March 31,
2016
2015
2014
(Amounts in thousands, except per share amounts)
Diluted Net Income Per Common Share:
Numerator:
Net income attributable to Lions Gate Entertainment Corp. shareholders
Add:
Interest on convertible notes, net of tax
Numerator for diluted net income per common share
$
$
50,209
$
181,781
$
152,037
450
5,515
8,573
50,659
$
187,296
$
160,610
Denominator:
Weighted average common shares outstanding
Effect of dilutive securities:
Conversion of notes
Share purchase options
Restricted share units
Adjusted weighted average common shares outstanding
148,480
139,048
137,468
2,098
3,129
381
154,088
9,508
2,773
449
151,778
13,736
2,593
618
154,415
Diluted net income per common share
$
0.33
$
1.23
$
1.04
For the years ended March 31, 2016, 2015 and 2014, the outstanding common shares issuable presented below were
excluded from diluted net income per common share because their inclusion would have had an anti-dilutive effect.
Anti-dilutive shares issuable
Conversion of notes
Share purchase options
Restricted share units
Contingently issuable shares
Total weighted average anti-dilutive shares issuable excluded from diluted net
income per common share
(t) Recent Accounting Pronouncements
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
4,047
4,660
179
624
9,510
—
4,312
147
322
4,781
—
2,759
87
457
3,303
Revenue Recognition: In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standard
update relating to the recognition of revenue from contracts with customers, which will supersede most current U.S. GAAP
revenue recognition guidance, including industry-specific guidance. The new revenue recognition standard provides a five-step
analysis of transactions to determine when and how revenue is recognized. Based on the current guidance, the new framework
will become effective on either a full or modified retrospective basis for the Company on April 1, 2018. The Company is
currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial statements.
Presentation of Debt Issuance Costs: In April 2015, the FASB issued an accounting standards update relating to the
presentation of debt issuance costs. The accounting update requires companies to present debt issuance costs related to a
recognized debt liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts,
rather than as an asset. The guidance is effective for the Company's fiscal year beginning April 1, 2016, with early adoption
permitted. The Company plans to adopt the new guidance effective April 1, 2016. The adoption of this guidance is not expected
to have a material impact on the Company's consolidated financial statements.
Business Combinations - Accounting for Measurement Period Adjustments: In September 2015, the FASB issued new
guidance on adjustments to provisional amounts recognized in a business combination, which are currently recognized on a
retrospective basis. Under the new requirements, adjustments will be recognized in the reporting period in which the
adjustments are determined. The effects of changes in depreciation, amortization, or other income arising from changes to the
F-13
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
provisional amounts, if any, are included in earnings of the reporting period in which the adjustments to the provisional
amounts are determined. An entity is also required to present separately on the face of the income statement or disclose in the
notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous
reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The guidance is
effective for the Company's fiscal year beginning April 1, 2016, with early adoption permitted, and is required to be
implemented on a prospective basis. The Company adopted the new guidance effective October 1, 2015 and it did not have a
material impact on the Company's consolidated financial statements.
Recognition and Measurement of Financial Instruments: In January 2016, the FASB issued new guidance that addresses
certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other provisions, the
new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that
result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. For
investments without readily determinable fair values, entities have the option to either measure these investments at fair value
or at cost adjusted for changes in observable prices minus impairment. The guidance is effective for the Company's fiscal year
beginning April 1, 2018. Early adoption is not permitted, except for certain provisions relating to financial liabilities. The
Company is currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial
statements.
Accounting for Leases: In February 2016, the 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 guidance is effective for the Company's fiscal year beginning April 1, 2019, with early adoption is permitted,
and is required to be implemented using a modified retrospective approach. The Company is currently evaluating the impact
that the adoption of this new guidance will have on its consolidated financial statements.
Employee Share-Based Payment Accounting: In March 2016, the FASB issued amended guidance related to employee
share-based payment accounting. The guidance requires all income tax effects of awards to be recognized in the income
statement when the awards vest or are settled, to be implemented on a prospective basis. The guidance also requires
presentation of excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity, and
can be applied retrospectively or prospectively. The guidance increases the amount companies can withhold to cover income
taxes on awards without triggering liability classification for shares used to satisfy statutory income tax withholding obligations
and requires application of a modified retrospective transition method. The guidance is effective for the Company's fiscal year
beginning April 1, 2017, 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.
Equity Method of Accounting: In March 2016, the FASB issued guidance that changes the requirements for equity method
accounting when an investment qualifies for use of the equity method as a result of an increase in the investor’s ownership
interest in or degree of influence over an investee. The guidance (i) eliminates the need to retroactively apply the equity method
of accounting upon qualifying for such treatment, (ii) requires that the cost of acquiring the additional interest in an investee be
added to the basis of the previously held interest and (iii) requires that unrealized holding gains or losses for available-for-sale
equity securities that qualify for the equity method of accounting be recognized in earnings at the date the investment becomes
qualified for use of the equity method of accounting. The guidance is effective for the Company's fiscal year beginning April 1,
2017, 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.
F-14
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. Investment in Films and Television Programs
Motion Pictures Segment - Theatrical and Non-Theatrical Films
Released, net of accumulated amortization
Acquired libraries, net of accumulated amortization
Completed and not released
In progress
In development
Product inventory
Television Production Segment - Direct-to-Television Programs
Released, net of accumulated amortization
In progress
In development
March 31,
2016
March 31,
2015
(Amounts in thousands)
$
$
584,419
3,612
33,806
421,687
28,148
20,693
1,092,365
189,246
191,161
5,524
385,931
507,628
9,357
76,968
478,879
21,054
23,023
1,116,909
231,470
28,585
4,865
264,920
$
1,478,296
$
1,381,829
The Company expects approximately 49% of completed films and television programs, net of accumulated amortization,
will be amortized during the one-year period ending March 31, 2017. Additionally, the Company expects approximately 81% of
completed and released films and television programs, net of accumulated amortization and excluding acquired libraries, will
be amortized during the three-year period ending March 31, 2019.
4. Property and Equipment
Leasehold improvements
Property and equipment
Computer equipment and software
Less accumulated depreciation and amortization
Land
March 31,
2016
March 31,
2015
(Amounts in thousands)
$
20,509
$
15,402
52,261
88,172
(45,994)
42,178
1,206
43,384
$
$
13,788
7,149
43,605
64,542
(39,097)
25,445
1,206
26,651
During the year ended March 31, 2016, depreciation expense amounted to $8.9 million (2015 - $4.8 million; 2014 - $2.8
million).
F-15
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. Investments
The carrying amounts of investments, by category, at March 31, 2016 and March 31, 2015 were as follows:
March 31,
2016
March 31,
2015
Equity method investments
Available-for-sale securities
Cost method investments
Equity Method Investments:
$
$
(Amounts in thousands)
297,546
$
234,202
123,978
42,822
464,346
$
162,024
42,072
438,298
The carrying amounts of equity method investments at March 31, 2016 and March 31, 2015 were as follows:
Equity Method Investee
EPIX
Pop
Other
March 31,
2016
Ownership
Percentage
31.2%
50.0%
Various
$
$
March 31,
2016
March 31,
2015
(Amounts in thousands)
171,837
$
119,688
98,719
26,990
91,683
22,831
297,546
$
234,202
Equity interests from equity method investments for the years ended March 31, 2016, 2015 and 2014 were as follows
(income (loss)):
Equity Method Investee
EPIX
Pop
Other(1)
____________________
$
$
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
$
$
48,718
(9,615)
13,374
$
52,477
$
52,149
(1,763)
(6,155)
44,231
32,308
(2,610)
(4,974)
24,724
(1) The Company records its share of the net income or loss of other equity method investments on a one quarter lag.
Equity interest income from other equity method investments for the year ended March 31, 2015 includes a gain on
sale of the Company's investment in FEARnet of $11.4 million.
EPIX. In April 2008, the Company formed a joint venture with Viacom, its Paramount Pictures unit, and Metro-Goldwyn-
Mayer Studios to create a premium television channel and subscription video-on-demand service named “EPIX”. The
Company invested $80.4 million through September 30, 2010, and no additional amounts have been funded since. During the
years ended March 31, 2016, 2015 and 2014, the Company received distributions from EPIX of nil, $7.8 million and $20.2
million, respectively. Since the Company's original investment in April 2008, the Company has received distributions from
EPIX of $28.0 million.
EPIX Financial Information:
The following table presents summarized balance sheet data as of March 31, 2016 and March 31, 2015 for EPIX:
F-16
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
$
$
$
$
March 31,
March 31,
2016
2015
(Amounts in thousands)
355,735
360,441
90,837
23,948
285,819
277,887
121,451
6,753
$
$
$
$
The following table presents the summarized statement of operations for the years ended March 31, 2016, 2015 and 2014
for EPIX and a reconciliation of the net income reported by EPIX to equity interest income recorded by the Company:
Year Ended March 31,
2016
2015
2014
Revenues
Expenses:
Operating expenses
Selling, general and administrative expenses
Operating income
Interest and other expense
Net income
Reconciliation of net income reported by EPIX to equity interest
income:
$ 413,760
(Amounts in thousands)
$ 442,793
$ 353,439
221,586
24,028
168,146
(2,180)
$ 165,966
252,896
23,305
166,592
(1,993)
$ 164,599
239,933
22,835
90,671
(304)
90,367
$
Net income reported by EPIX
Ownership interest in EPIX
The Company's share of net income
Eliminations of the Company’s share of profits on licensing sales to
EPIX(1)
Realization of the Company’s share of profits on licensing sales to
EPIX(2)
Total equity interest income recorded
$ 165,966
$ 164,599
$
90,367
31.15%
51,698
31.15%
51,273
31.15%
28,149
(7,314)
(10,159)
(9,638)
7,765
7,604
13,797
$
52,149
$
48,718
$
32,308
__________________
(1) Represents the elimination of the gross profit recognized by the Company on licensing sales to EPIX in proportion to the
Company's ownership interest in EPIX.
(2) Represents the realization of a portion of the profits previously eliminated. This profit remains eliminated until realized by
EPIX. EPIX initially records the license fee for the title as inventory on its balance sheet and amortizes the inventory over
the license period. Accordingly, the profit is realized as the inventory on EPIX's books is amortized.
Pop. The Company’s investment interest in Pop consists of an equity investment in its common stock units and
mandatorily redeemable preferred stock units. The Company's partner in Pop, CBS TVG Inc. ("CBS"), has a call option to
purchase a portion of the Company's ownership interest in Pop at fair market value, which would result in CBS owning 80% of
Pop, exercisable beginning March 26, 2018 for a period of 30 days. During the year ended March 31, 2016, the Company made
contributions to Pop of $8.8 million (2015 - $15.0 million; 2014 - $6.5 million).
The mandatorily redeemable preferred stock units carry a dividend rate of 10% compounded annually and are mandatorily
redeemable in May 2019 at the stated value plus the dividend return and any additional capital contributions less previous
distributions. The mandatorily redeemable preferred stock units were initially recorded based on their estimated fair value, as
determined using an option pricing model. The mandatorily redeemable preferred stock units and the 10% dividend are being
accreted up to their redemption amount over the ten-year period to the redemption date, which is recorded as income within
equity interest.
F-17
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Pop Financial Information:
The following table presents summarized balance sheet data as of March 31, 2016 and March 31, 2015 for Pop:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Redeemable preferred stock
March 31,
2016
March 31,
2015
(Amounts in thousands)
$
$
$
$
$
38,278
192,461
29,090
8,198
466,501
$
$
$
$
$
28,612
192,188
26,048
7,196
399,247
The following table presents the summarized statement of operations for the years ended March 31, 2016, 2015 and 2014
for Pop and a reconciliation of the net loss reported by Pop to equity interest loss recorded by the Company:
Year Ended March 31,
2016
2015
2014
Revenues
Expenses:
Cost of services
Selling, marketing, and general and administration
Depreciation and amortization
Operating loss
Other expense
Interest expense, net
Accretion of redeemable preferred stock units(1)
Total interest expense, net
Loss from continuing operations
Loss from discontinued operations
Net loss
Reconciliation of net loss reported by Pop to equity interest loss:
Net loss reported by Pop
Ownership interest in Pop
The Company's share of net loss
Gain on sale of the Company's 50% share of TVGuide.com(2)
Accretion of dividend and interest income on redeemable preferred stock
units(1)
Eliminations of the Company’s share of profit on licensing sales to Pop
Realization of the Company’s share of profits on licensing sales to Pop
Total equity interest loss recorded
$
86,437
(Amounts in thousands)
$
79,048
$
39,683
42,145
7,777
(3,168)
14
523
57,654
58,191
(61,359)
—
(61,359)
(61,359)
50%
(30,680)
—
28,827
(813)
903
(1,763)
$
$
$
38,757
49,524
7,814
(17,047)
385
683
48,546
49,614
(66,661)
—
(66,661)
(66,661)
50%
(33,331)
—
24,273
(920)
363
(9,615)
$
$
$
$
$
$
78,407
36,866
43,967
8,031
(10,457)
(1,213)
1,205
40,342
40,334
(50,791)
(2,799)
(53,590)
(53,590)
50%
(26,795)
3,960
20,171
—
54
(2,610)
___________________
(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 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 income (loss).
(2) Represents the gain on the May 31, 2013 sale of the Company's 50% interest in TVGuide.com. As a result of the sale,
TVGuide.com is considered a discontinued operation by Pop, and accordingly, the revenues and expenses of TVGuide.com
F-18
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
prior to the transaction for all periods presented, are reflected net within the discontinued operations section of the
summarized statement of operations for Pop.
Other Equity Method Investments
Defy Media. In June 2007, the Company acquired an interest in Break Media, a multi-platform digital media company and
a leader in male-targeted content creation and distribution. In October 2013, Break Media merged with Alloy Digital, a multi-
platform digital media company with a strong presence in the youth market, to create Defy Media. The Company's effective
economic interest in Defy Media through its investment in Break Media and its direct investment in Defy Media is
approximately 15.8%. The Company is accounting for its investment in Defy Media, a limited liability company, under the
equity method of accounting due to the Company's board representation that provides significant influence over the investee.
Roadside Attractions. Roadside Attractions is an independent theatrical distribution company. The Company owns a 43.0%
interest in Roadside Attractions.
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. The Company
owns a 49.0% interest in Pantelion Films.
Atom Tickets. Atom Tickets is the first-of-its-kind theatrical mobile ticketing platform and app. The Company made initial
investments totaling $4.3 million in Atom Tickets during the year ended March 31, 2015. During the year ended March 31,
2016, the Company participated in an equity offering of Atom Tickets and subscribed for an additional $7.9 million. The
Company owns an interest of approximately 19.5% in Atom Tickets. The Company is accounting for its investment in Atom
Tickets, a limited liability company, under the equity method of accounting due to the Company's board representation that
provides significant influence over the investee.
Tribeca Short List. Tribeca Short List is a subscription video-on-demand service. The Company made an initial investment
of $2.1 million during the year ended March 31, 2015, and during the year ended March 31, 2016, the Company made capital
contributions to Tribeca Short List of $2.4 million, net of cash acquired of $0.4 million (see below). The Company holds a
75.0% economic interest. Through October 17, 2015, the power to direct the activities that most significantly impact the
economic performance of Tribeca Short List was shared equally with Tribeca Enterprises, and accordingly through October 17,
2015, the Company's interest in Tribeca Short List was accounted for under the equity method of accounting. Subsequent to
October 17, 2015, the terms of the arrangement increased the Company's power to control the board, and the Company now has
the power to direct the activities that most significantly impact the economic performance of Tribeca Short List. Accordingly,
the Company has consolidated Tribeca Short List beginning in the quarter ended December 31, 2015, with no gain or loss
recognized upon consolidation since the carrying value of the net assets approximated the fair value.
F-19
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Available-for-Sale Securities:
The cost basis, unrealized gains (losses) and fair market value of available-for-sale securities are set forth below:
March 31,
2016
March 31,
2015
Cost basis
Gross unrealized gain (loss)
Fair value
$
$
$
(Amounts in thousands)
158,916
(34,938)
123,978
$
158,916
3,108
162,024
Starz. At March 31, 2016 and March 31, 2015, available-for-sale securities consisted of the Company's minority interest in
Starz. On March 27, 2015, pursuant to the terms of a stock exchange agreement entered into on February 10, 2015 (the
"Exchange Agreement"), the Company exchanged 4,967,695 of its newly issued common shares for 2,118,038 shares of Series
A common stock of Starz and 2,590,597 shares of Series B common stock of Starz held by certain affiliates of Dr. John C.
Malone, a Director of the Company. The Exchange Agreement placed certain restrictions on the ability to transfer the shares
issued by the Company. The Starz shares acquired by the Company represent approximately 15.0% of the total voting power of
the issued and outstanding Starz common stock as of March 31, 2016. However, under the Exchange Agreement, the Company
granted an irrevocable proxy to Dr. Malone and the affiliates of Dr. Malone to vote the shares the Company acquired except
with respect to proposals related to extraordinary transactions, including any proposals related to any sale or issuance of
securities, or any business combination, merger, consolidation, liquidation, reorganization, recapitalization, sale or disposition
of all or substantially all of Starz's assets or similar extraordinary transaction, whether or not involving the Company.
The Company classifies the Series A common stock of Starz within Level 1 of the fair value hierarchy as the valuation
inputs are based on quoted prices in active markets (see Note 10). The Series B common stock of Starz are considered a Level 2
security because the quoted market prices are based on infrequent transactions. Therefore, the fair value of the Series B
common stock, which is convertible, at the holder’s option, into Series A common stock of Starz is based on the quoted market
price of the Series A common stock, which is an equivalent security other than for the voting rights.
As of March 31, 2016, the Company's investment in Starz was in an unrealized loss position; however, due to the
fluctuation of the security's market price in an active market and the short-term duration of the unrealized loss, the Company
has the intent and ability to hold the securities until the fair value recovers. As of May 24, 2016, the fair value of the Company's
minority interest in Starz was $124.7 million, compared to the Company's original cost basis of $158.9 million.
Cost Method Investments:
Telltale. Telltale Games ("Telltale") is a creator, developer and publisher of interactive software episodic games based upon
popular stories and characters across all major gaming and entertainment platforms. In February 2015, the Company invested
$40.0 million in Telltale, which consisted of a cash investment in Telltale of $28.0 million in exchange for 2,628,072 of Series
D convertible preferred stock, and 361,229 newly issued common shares of the Company with a fair value of approximately
$12.0 million in exchange for approximately 1,126,316 existing common shares of Telltale, representing in the aggregate an
approximately 14% economic interest in Telltale.
Next Games. Next Games is a mobile games development company headquartered in Helsinki, Finland, with a focus on
crafting visually impressive, highly engaging games. In July 2014, the Company invested $2.0 million in Next Games for a
small minority ownership interest, and during the year ended March 31, 2016, the Company invested an additional $0.2 million
in Next Games.
6. Other Assets
The composition of the Company’s other assets is as follows as of March 31, 2016 and March 31, 2015:
F-20
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred financing costs, net of accumulated amortization
Prepaid expenses and other
Finite-lived intangible assets
March 31,
2016
March 31,
2015
(Amounts in thousands)
$
$
21,269
$
57,725
11,350
90,344
$
28,060
45,537
1,187
74,784
Deferred Financing Costs. Deferred financing costs primarily include costs incurred in connection with the Company's
various debt issuances (see Note 7).
Prepaid Expenses and Other. Prepaid expenses and other primarily include prepaid expenses, security deposits, and other
assets.
Finite-lived Intangible Assets. Finite-lived intangible assets consist primarily of noncompete agreements, trademarks and
tradenames, and sales agency relationships. The composition of the Company's finite-lived intangible assets and the associated
accumulated amortization is as follows as of March 31, 2016 and March 31, 2015:
Finite-lived intangible assets:
Noncompete agreements
Trademarks and trade names
Sales agency relationships
March 31, 2016
March 31, 2015
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
(Amounts in thousands)
$
9,500
8,600
6,200
$ 24,300
$
$
449
6,451
6,050
12,950
$
9,051
2,149
150
$ 11,350
$
— $
— $
6,600
6,200
$ 12,800
5,913
5,700
$ 11,613
$
—
687
500
1,187
The increase in the carrying value of finite-lived intangible assets from March 31, 2015 was primarily due to the November
12, 2015 acquisition of Pilgrim Studios (see Note 11). Amortization expense associated with the Company's intangible assets for
the years ended March 31, 2016, 2015 and 2014 was approximately $1.3 million, $1.8 million and $3.7 million, respectively.
Amortization expense remaining relating to intangible assets for each of the years ending March 31, 2017 through 2021 is
approximately $1.8 million, $1.4 million, $1.4 million, $1.4 million, and $1.4 million, respectively.
7. Corporate Debt
The total carrying values of corporate debt of the Company, excluding film obligations and production loans, were as
follows as of March 31, 2016 and March 31, 2015:
Senior revolving credit facility
5.25% Senior Notes
Term Loan Due 2022
Convertible senior subordinated notes, net of unamortized discount of $1,800 (March
31, 2015 - $3,891)
March 31, 2016
March 31, 2015
(Amounts in thousands)
$
$
161,000
225,000
400,000
100,050
886,050
$
$
—
225,000
375,000
114,126
714,126
F-21
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table sets forth future annual contractual principal payment commitments of corporate debt as of March 31,
Conversion
Price Per
Share at
March 31,
2016
N/A
N/A
N/A
2016:
Debt Type
Senior revolving credit
facility
5.25% Senior Notes
Term Loan Due 2022
Principal amounts of
convertible senior
subordinated notes:
January 2012 4.00%
Notes
April 2013 1.25%
Notes
Maturity Date
2017
2018
2019
2020
2021
Thereafter
Total
(Amounts in thousands)
Year Ended March 31,
September 2017
$ — $161,000
$
— $ — $ — $
— $ 161,000
August 2018
March 2022
—
—
— 225,000
—
—
—
—
—
—
—
— 225,000
— 400,000
400,000
—
—
—
—
41,850
60,000
$10.26
January 2017
41,850
$29.32
April 2018
—
—
—
—
60,000
Less aggregate unamortized discount
Senior Revolving Credit Facility
$41,850
$161,000
$285,000
$ — $ — $ 400,000
887,850
(1,800)
$ 886,050
Availability of Funds. The senior revolving credit facility provides for borrowings and letters of credit up to an aggregate
of $800 million, and at March 31, 2016, there was $639.0 million available (March 31, 2015 — $800.0 million). The
availability of funds is limited by a borrowing base and also reduced by outstanding letters of credit, if any. There were no
letters of credit outstanding at March 31, 2016 (March 31, 2015 — none).
Maturity Date. September 27, 2017.
Interest. Interest is payable at an alternative base rate, as defined, plus 1.5%, or LIBOR plus 2.5% as designated by the
Company. As of March 31, 2016, borrowings under the senior revolving credit facility bore interest of 2.5% over the LIBOR
rate (effective interest rate of 2.94% and 2.68% on borrowings outstanding as of March 31, 2016 and March 31, 2015,
respectively).
Commitment Fee. The Company is required to pay a quarterly commitment fee of 0.375% to 0.5% per annum, depending
on the average balance of borrowings outstanding during the period, on the total senior revolving credit facility of $800 million
less the amount drawn.
Security. Obligations are secured by collateral (as defined in the credit agreement) granted by the Company and certain
subsidiaries of the Company, as well as a pledge of equity interests in certain of the Company's subsidiaries.
Covenants. The senior revolving credit facility contains a number of covenants that, among other things, require the
Company to satisfy certain financial covenants and restrict the ability of the Company to incur additional debt, pay dividends,
make certain investments and acquisitions, repurchase its stock, prepay certain indebtedness, create liens, enter into agreements
with affiliates, modify the nature of its business, enter into sale-leaseback transactions, transfer and sell material assets and
merge or consolidate. As of March 31, 2016, 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
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.
5.25% Senior Notes
F-22
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Issuance Date. On July 19, 2013, Lions Gate Entertainment Corp. issued $225.0 million aggregate principal amount of
5.25% Senior Secured Second-Priority Notes (the "5.25% Senior Notes").
Interest. Interest is payable semi-annually on February 1 and August 1 of each year at a rate of 5.25% per year, and
commenced on February 1, 2014.
Maturity Date. August 1, 2018.
Optional Redemption. Redeemable by the Company, in whole or in part, at a price equal to 100% of the principal amount,
plus the Applicable Premium, as defined in the indenture governing the 5.25% Senior Notes, plus accrued and unpaid interest,
if any, to the date of redemption. The Applicable Premium amounts to the greater of (i) 1.0% of the principal amount redeemed
and (ii) the excess of the present value of the principal amount of the notes redeemed plus interest through the maturity date
over the principal amount of the notes redeemed on the redemption date.
Guarantees. The 5.25% Senior Notes are guaranteed by all of the restricted subsidiaries of the Company that guarantee any
material indebtedness of the Company or any other guarantor, subject, in the case of certain special purpose producers, to
receipt of certain consents.
Security Interest and Ranking. The 5.25% Senior Notes and the guarantees are secured by second-priority liens on
substantially all of the Company’s and the guarantors’ tangible and intangible personal property, subject to certain exceptions
and permitted liens. The 5.25% Senior Notes rank equally in right of payment with all of the Company’s existing and future
debt that is not subordinated in right of payment to the 5.25% Senior Notes, including the Company’s existing convertible
senior subordinated notes. The 5.25% Senior Notes are structurally subordinated to all existing and future liabilities (including
trade payables) of the subsidiaries that do not guarantee the 5.25% Senior Notes.
Change of Control. The occurrence of a change of control will be a triggering event requiring the Company to offer to
purchase from holders some or all of the 5.25% 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 5.25% Senior Notes at
100% of their principal amount, plus accrued and unpaid interest, if any to the date of purchase.
Covenants. The 5.25% 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
March 31, 2016, the Company was in compliance with all applicable covenants.
Term Loan Due 2022
Issuance Date. On March 17, 2015, the Company entered into a second lien credit and guarantee agreement (the "Credit
Agreement"), and pursuant to the Credit Agreement, borrowed a term loan in an aggregate amount of $375 million (the "Term
Loan Due 2022"). In May 2015, the Company amended the Credit Agreement governing its Term Loan Due 2022, and pursuant
to the amended Credit Agreement, borrowed an additional aggregate amount of $25.0 million.
Interest. Interest on the Term Loan Due 2022 is payable on the last business day of each April, July, October and January at
a rate of 5.00% per year.
Maturity Date. The Term Loan Due 2022 matures on March 17, 2022.
Optional Prepayment. The Company may voluntarily prepay the Term Loan Due 2022 at any time, provided that if prepaid
(i) prior to March 17, 2016, the Company shall pay to the lenders the present value of all interest payable on the principal
amount repaid through March 17, 2016, using a discount rate equal to the one-year treasury rate plus 0.50%; (ii) on or before
March 17, 2017, the Company shall pay to lenders a prepayment premium of 2.0% on the principal amount prepaid; (iii) after
March 17, 2017 and on or before March 17, 2018, the Company shall pay to lenders a prepayment premium of 1.0% on the
principal amount prepaid; and (iv) on or after March 17, 2018, no prepayment premium shall be payable.
Guarantees. Substantially similar to the 5.25% Senior Notes discussed above.
F-23
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Security Interest and Ranking. Substantially similar to the 5.25% Senior Notes discussed above.
Change of Control. Substantially similar to the 5.25% Senior Notes discussed above.
Covenants. Substantially similar to the 5.25% Senior Notes discussed above. As of March 31, 2016, the Company was in
compliance with all applicable covenants.
Redemption and Repurchase Transactions
Redemption of Term Loan Due 2020. On March 17, 2015, contemporaneously with the issuance of the Term Loan Due
2022, the Company used a portion of the proceeds to redeem its previous Term Loan Due 2020 (see below for definition)
(which carried a variable interest rate of LIBOR, subject to a 1.00% floor, plus 4.00%). In conjunction with the early
redemption of the Term Loan Due 2020, the Company paid a call premium pursuant to the terms of the agreement governing
the Term Loan Due 2020 of $4.5 million.
Redemption of 10.25% Senior Notes. On July 19, 2013, contemporaneously with the issuance of the 5.25% Senior Notes,
and a seven-year $225.0 million term loan agreement (the "Term Loan Due 2020"), the Company called for early redemption of
the $432.0 million remaining outstanding principal amount of the then outstanding 10.25% Senior Secured Second-Priority
Notes (the "10.25% Senior Notes"). In conjunction with the early redemption of the 10.25% Senior Notes, we paid $34.3
million, representing the present value of interest through the first call date of November 1, 2013 and related call premium
pursuant to the terms of the indenture governing the 10.25% Senior Notes.
In accounting for each contemporaneous issuance and redemption transaction discussed above, a portion of the issuance
and redemption was considered a modification of terms with creditors who participated in both the new issuances and the
redeemed debt, and a portion was considered a debt extinguishment. To the extent a portion of the issuance and redemption was
considered a modification, the call premium plus the remaining unamortized deferred financing costs and debt discount on the
redeemed debt will be amortized over the life of the new issuance, and to the extent a portion of the issuance and redemption
was considered an extinguishment, these costs were expensed as a loss on extinguishment of debt. The new issuance costs
related to each issuance were capitalized and will be amortized over the life of the new issuance to the extent the issuance and
redemption was considered an extinguishment, and expensed as a loss on extinguishment of debt to the extent considered to be
a modification of terms.
The tables below set forth the applicable costs associated with (i) the redemption of the Term Loan Due 2020 and (ii) the
redemption of the 10.25% Senior Notes, respectively (as discussed above), and the applicable accounting for such:
Redemption of Term Loan Due 2020:
Early redemption/ call premium on Term Loan Due 2020
Previously incurred unamortized discount and deferred financing
costs of Term Loan Due 2020
Third party costs incurred to issue the Term Loan Due 2022
Total
Total
Amortize Over
Life of Term
Loan Due 2022
Loss on
Extinguishment
of Debt
(Amounts in thousands)
$
4,500
$
2,834
$
1,666
14,420
18,920 (1)
4,931 (2)
23,851
$
8,803
11,637
1,826
13,463
$
$
5,617
7,283
3,105
10,388
F-24
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Redemption of 10.25% Senior Notes:
Early redemption/ call premium on 10.25% Senior Notes
Previously incurred unamortized net discount/premium and deferred
financing costs of 10.25% Senior Notes
Third party costs incurred to issue the 5.25% Senior Notes and Term
Loan Due 2020
Total
Amortize Over
Life of 5.25%
Senior Notes
and Term Loan
Due 2020
Loss on
Extinguishment
of Debt
Total
(Amounts in thousands)
$
34,304
$
13,218
$
21,086
19,825
54,129 (1)
6,748 (2)
60,877
$
7,639
20,857
4,148
$
25,005
$
12,186
33,272
2,600
35,872
(1) Amounts related to the portion of the debt redemption deemed to be a modification of terms, as discussed above, were
accounted for as deferred costs, with the remaining amounts expensed as a loss on extinguishment of debt.
(2) Third party costs incurred to issue the new debt related to the portion of the debt redemption deemed to be a
modification of terms, as discussed above, were expensed as a loss on extinguishment of debt, with the remaining amount
capitalized as deferred financing costs of the new issuances.
Other Repurchases of 10.25% Senior Notes. In June 2013, Lions Gate Entertainment, Inc. ("LGEI"), the Company's
wholly-owned subsidiary, paid $4.3 million to repurchase $4.0 million of aggregate principal amount (carrying value - $4.0
million) of the 10.25% Senior Notes. The Company recorded a loss on extinguishment during the year ended March 31,
2014 of $0.5 million, which included $0.2 million of deferred financing costs written off.
Convertible Senior Subordinated Notes
Outstanding Amount and Terms. The following table sets forth the convertible senior subordinated notes outstanding and
certain key terms of these notes at March 31, 2016 and March 31, 2015:
Convertible Senior
Subordinated Notes
Maturity Date
Conversion
Price Per
Share at
March 31,
2016
March 31, 2016
March 31, 2015
Principal
Unamortized
Discount
Net
Carrying
Amount
Principal
Unamortized
Discount
Net
Carrying
Amount
(Amounts in thousands)
April 2009
3.625% Notes(1)
January 2012
4.00% Notes
April 2013
1.25% Notes
N/A
N/A
$
— $
— $
— $ 16,167
$
— $ 16,167
January 11, 2017
$10.26
41,850
(1,800)
40,050
41,850
(3,891)
37,959
April 15, 2018
$29.32
60,000
$ 101,850
$
—
60,000
(1,800) $ 100,050
60,000
$ 118,017
$
—
60,000
(3,891) $ 114,126
_______________
(1) On March 17, 2015, the April 2009 3.625% Notes were called for redemption and in April 2015, the holders of the notes
converted substantially all of the outstanding principal amounts into common shares.
January 2012 4.00% Notes: In January 2012, LGEI issued approximately $45.0 million of January 2012 4.00% Notes, of
which $10.1 million was allocated to the equity component. Interest is payable semi-annually on January 15 and July 15 of
each year.
April 2013 1.25% Notes: In April 2013, LGEI issued approximately $60.0 million in aggregate principal amount of April
2013 1.25% Notes. Interest is payable semi-annually on April 15 and October 15 of each year.
F-25
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Conversion Features: The convertible senior subordinated notes are convertible, at any time, into the number of common
shares of the Company determined by the principal amount being converted divided by the conversion price, subject to
adjustment in certain circumstances.
The January 2012 4.00% Notes provide that upon conversion, the Company has the option to deliver, in lieu of common
shares, cash or a combination of cash and common shares of the Company. Convertible debt instruments that may be settled in
cash upon conversion (including partial cash settlement) are recorded by separately accounting for the liability and equity
component (i.e., conversion feature), thereby reducing the principal amount with a debt discount that is amortized as interest
expense over the expected life of the note using the effective interest method. The effective interest rate on the liability
component of the January 2012 4.00% Notes is 9.56%.
The April 2013 1.25% Notes are convertible only into the Company's common shares and do not carry an option to be
settled in cash upon conversion, and accordingly, have been recorded at their principal amount (not reduced by a debt discount
for the equity component).
Conversions. The following conversions were completed with respect to the Company's convertible senior subordinated
notes, which resulted in a loss on extinguishment of debt in the years ended March 31, 2015 and 2014 of $1.3 million and $3.3
million, respectively (2016 - none):
Year Ended March 31,
2016
2015
2014
(Amounts in thousands, except share amounts)
April 2009 3.625% Notes
Principal amount converted
Common shares issued upon conversion
Weighted average conversion price per share
October 2004 2.9375% Notes
Principal amount converted
Common shares issued upon conversion
Weighted average conversion price per share
January 2012 4.00% Notes
Principal amount converted
Common shares issued upon conversion
Weighted average conversion price per share
Total
Principal amount converted
Common shares issued upon conversion
Weighted average conversion price per share
$
$
$
$
$
$
$
$
16,162
1,983,058
8.15
$
$
24,053
2,937,096
8.19
$
$
$
$
24,289
2,943,634
8.25
233
20,259
11.50
99
8,634
11.46
— $
3,150
—
299,999
— $
10.50
— $
—
—
— $
—
— $
16,162
1,983,058
8.15
$
$
24,152
2,945,730
8.20
27,672
3,263,892
8.48
$
Interest Expense. Interest expense recognized for the convertible senior subordinated notes for the years ended March 31,
2016, 2015 and 2014 is presented below:
Year Ended March 31,
2016
2015
2014
Contractual interest coupon
Amortization of discount on liability component and debt issuance costs
$
$
F-26
(Amounts in thousands)
$
3,458
$
2,367
2,141
5,200
4,751
8,845
4,508
$
8,658
$
13,596
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. Participations and Residuals
The Company expects approximately 72% of accrued participations and residuals will be paid during the one-year period
ending March 31, 2017.
Theatrical Slate Participation
On March 10, 2015, the Company entered into a theatrical slate participation arrangement with TIK Films (U.S.), Inc. and
TIK Films (Hong Kong) Limited (collectively, "TIK Films"), both wholly owned subsidiaries of Hunan TV & Broadcast
Intermediary Co. Ltd. Under the arrangement, TIK Films, in general and subject to certain limitations including per picture and
annual caps, will contribute a minority share of 25%, of the Company’s production or acquisition costs of “qualifying”
theatrical feature films, released during the three-year period ending January 23, 2018, and participate in a pro-rata portion of
the pictures’ net profits or losses similar to a co-production arrangement based on the portion of costs funded. The arrangement
excludes among others, any theatrical feature film incorporating any elements from the Twilight, Hunger Games or Divergent
franchises. The percentage of the contribution could vary on certain pictures.
Amounts provided from TIK Films are reflected as a participation liability in the Company's consolidated balance sheet
and amounted to $61.3 million at March 31, 2016 (March 31, 2015 - $13.6 million). The difference between the ultimate
participation expected to be paid to TIK Films and the amount provided by TIK Films is amortized as a charge to or a reduction
of participation expense under the individual-film-forecast method.
9. Film Obligations and Production Loans
Film obligations
Production loans
Total film obligations and production loans
March 31,
2016
March 31,
2015
(Amounts in thousands)
$
$
24,989
690,371
715,360
$
$
55,811
600,944
656,755
The following table sets forth future annual repayment of film obligations and production loans as of March 31, 2016:
2017
2018
2019
2020
2021
Thereafter
Total
Year Ended March 31,
Film obligations
Production loans
$
$
22,098
$
2,000
641,076
663,174
49,295
$ 51,295
$
$
Less imputed interest on film
obligations
(Amounts in thousands)
— $
1,000
$
—
1,000
$
—
— $
— $
—
— $
— $ 25,098
— 690,371
— 715,469
(109)
$ 715,360
Film Obligations
Film obligations include minimum guarantees, which represent amounts payable for film rights that the Company has
acquired and certain theatrical marketing obligations for amounts received from third parties that are contractually committed
for theatrical marketing expenditures associated with specific titles.
Production Loans
Production loans represent individual loans for the production of film and television programs that the Company produces.
The majority of production loans have contractual repayment dates either at or near the expected completion date, with the
exception of certain loans containing repayment dates on a longer term basis, and incur interest at rates ranging from 3.37% to
3.87%.
F-27
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
10. Fair Value Measurements
Fair Value
Accounting guidance and standards about fair value define fair value as the price that would be received from selling an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair Value Hierarchy
Fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. The accounting guidance and standards establish three
levels of inputs that may be used to measure fair value:
• Level 1 — Quoted prices in active markets for identical assets or liabilities.
• Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations
in which all significant inputs are observable or can be derived principally from or corroborated by observable market
data for substantially the full term of the assets or liabilities. Level 2 liabilities that are not required to be measured at
fair value on a recurring basis include the Company’s convertible senior subordinated notes, production loans, 5.25%
Senior Notes, and Term Loan, which are priced using discounted cash flow techniques that use observable market
inputs, such as LIBOR-based yield curves, swap rates, and credit ratings.
• Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of
assets or liabilities. The Company measures the fair value of its investment in Pop's Mandatorily Redeemable
Preferred Stock Units using primarily a discounted cash flow analysis based on the expected cash flows of the
investment. The analysis reflects the contractual terms of the investment, including the period to maturity, and uses a
discount rate commensurate with the risk associated with the investment.
The following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of March 31,
2016 and March 31, 2015:
Assets:
Available-for-sale securities (see Note 5):
Starz Series A common stock
Starz Series B common stock
March 31, 2016
March 31, 2015
Level 1
Level 2
Total
Level 1
Level 2
Total
(Amounts in thousands)
$ 55,768
—
$
— $ 55,768
68,210
68,210
$ 72,882
—
$
— $ 72,882
89,142
89,142
Forward exchange contracts (see Note 18)
—
9,417
9,417
—
8,335
8,335
Liabilities:
Forward exchange contracts (see Note 18)
—
$ 55,768
(748)
$ 76,879
(748)
$ 132,647
—
$ 72,882
(2,024)
$ 95,453
(2,024)
$ 168,335
F-28
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table sets forth the carrying values and fair values of the Company’s investment in Pop's mandatorily
redeemable preferred stock units and outstanding debt at March 31, 2016 and March 31, 2015:
Assets:
Investment in Pop's Mandatorily Redeemable Preferred Stock
Units
$
98,719
$
114,500
$
91,683
$
110,000
March 31, 2016
March 31, 2015
(Amounts in thousands)
Carrying Value
Fair Value
Carrying Value
Fair Value
(Level 3)
(Level 3)
Liabilities:
April 2009 3.625% Notes
January 2012 4.00% Notes
April 2013 1.25% Notes
Production loans
5.25% Senior Notes
Term Loan
11. Acquisition
Carrying Value
Fair Value
Carrying Value
Fair Value
(Level 2)
(Level 2)
—
40,050
60,000
690,371
225,000
400,000
$ 1,415,421
—
41,477
54,188
690,371
229,500
400,500
$ 1,416,036
16,167
37,959
60,000
600,944
225,000
375,000
$ 1,315,070
16,167
41,473
53,241
600,944
233,438
375,938
$ 1,321,201
Acquisition of Pilgrim Studios. On November 12, 2015, the Company purchased 62.5% of the membership interests in
Pilgrim Media Group, LLC ("Pilgrim Studios"), a worldwide independent reality television producer and distributor. The
aggregate purchase price was approximately $201.7 million, net of $7.7 million allocated to certain transactional costs
attributable to the noncontrolling shareholder. These costs are included in the general and administrative expense of Pilgrim
Studios; however, pursuant to the profit sharing provisions in the operating agreement, the amount is included in net loss
attributable to noncontrolling interest in our consolidated statement of income and thus does not impact earnings per share
attributable to Lions Gate Entertainment Corp. shareholders.
The purchase price consisted of $144.7 million in cash and 1,517,451 of the Company's common shares, valued at $57.0
million. These shares were valued based on the closing price of the Company’s common shares on the date of closing of the
acquisition, discounted to the fair value of the shares considering certain transfer restrictions. The Company incurred
approximately $3.4 million of acquisition-related costs that were expensed in general and administrative expenses during the
year ended March 31, 2016.
The acquisition was accounted for as a purchase, with the results of operations of Pilgrim Studios included in the
Company's consolidated results from November 12, 2015. Revenues and net loss for the period from November 12, 2015
through March 31, 2016 of Pilgrim Studios were $52.5 million and $7.2 million, respectively. The Company made a
preliminary allocation of the estimated purchase price of Pilgrim Studios to the tangible and intangible assets acquired and
liabilities assumed based on their estimated fair value. Since the initial allocation of the estimated purchase price, the Company
has adjusted the preliminary purchase price allocation for new information obtained about facts and circumstances that existed
as of the acquisition date, that, if known, would have affected the measurements of the amounts recognized at that date. The
preliminary purchase price allocation is subject to revision, as a more detailed analysis of investment in television programs and
intangible assets is completed and additional information on the fair value of assets and liabilities becomes available, including
receipt of final appraisals of the net assets acquired. A change in the fair value of the net assets may change the amount of the
purchase price allocable to goodwill, and could impact the amounts of amortization expense. The Company used DCF analyses,
which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation. The preliminary
allocation of the purchase price, including the fair value of redeemable noncontrolling interest recognized, is as follows:
F-29
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Preliminary allocation of the total purchase consideration (1):
Cash and cash equivalents
Accounts receivable, net
Investment in films and television programs, net
Other assets acquired
Finite-lived intangible assets:
Noncompete agreements
Trade name
Other liabilities assumed
Fair value of net assets acquired
Goodwill
Redeemable noncontrolling interest (Note 12)
(Amounts in
thousands)
15,816
15,248
63,387
7,019
9,500
2,000
(32,638)
80,332
211,452
(90,128)
201,656
$
$
____________________________________________
(1) Since the initial preliminary purchase price allocation, the Company has made purchase price allocation adjustments
for an increase in the purchase consideration of $2.9 million, of which $2.0 million represents additional cash consideration
as a result of finalizing the valuation of working capital acquired pursuant to the terms of the purchase agreement, and $0.9
million from finalizing the valuation of the Company's shares issued. These adjustments resulted in a decrease to accounts
receivable of $0.5 million, increase to intangible assets of $0.2 million, decrease to other liabilities assumed of $4.2 million
and an increase in redeemable noncontrolling interest of $1.6 million resulting in a net increase of $0.6 million to goodwill.
These adjustments had no material impact on the consolidated statement of income.
Goodwill of $211.5 million represents the excess of the purchase price over the preliminary estimate of the fair value of the
underlying tangible and identifiable intangible assets acquired and liabilities assumed. The acquisition goodwill arises from the
opportunity for synergies of the combined companies to grow and diversify the Company's television operations by adding
nonfiction programming to complement its existing scripted production and syndication operations and leverage the strength of
the Company's global distribution infrastructure. The goodwill recorded as part of this acquisition is included in the Television
Production segment. Although the goodwill will not be amortized for financial reporting purposes, it is anticipated that
substantially all of the goodwill will be deductible for federal tax purposes over the statutory period of 15 years. The
noncompete agreements and trade name have a weighted average estimated useful life of eight years.
The following unaudited pro forma condensed consolidated statements of income presented below illustrate the results of
operations of the Company as if the acquisition of Pilgrim Studios as described above occurred on April 1, 2014. The
information below is based on a preliminary estimate of the purchase price allocation to the assets and liabilities acquired. The
statements of income information below includes the statements of income of Pilgrim Studios for the years ended December 31,
2015 and 2014 combined with the Company's statements of income for the years ended March 31, 2016 and 2015.
Revenues
Net income attributable to Lions Gate Entertainment Corp. shareholders
Basic Net Income Per Common Share attributable to Lions Gate Entertainment Corp.
shareholders
Diluted Net Income Per Common Share attributable to Lions Gate Entertainment Corp.
shareholders
Year Ended March 31,
2016
2015
(Amounts in thousands, except per
share amounts)
$
$
$
$
2,468,062
52,777
0.35
0.34
$
$
$
$
2,537,694
178,691
1.27
1.20
The unaudited pro forma condensed consolidated statements of income do not include adjustments for any restructuring
activities, operating efficiencies or cost savings, and exclude certain one-time transactional costs of $7.7 million attributable to
the noncontrolling shareholder (see Note 12) expensed in connection with the transaction, as well as $3.4 million of acquisition-
related costs that were expensed in general and administrative expenses.
F-30
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Goodwill. The changes in the carrying amount of goodwill by reporting segment in the years ended March 31, 2016 and
2015 were as follows:
Motion
Pictures
Television
Production
Total
Balance as of March 31, 2014 and 2015
Acquisition of Pilgrim Studios
Measurement period adjustments for Pilgrim Studios
$
(Amounts in thousands)
$
28,961
$
294,367
—
—
210,815
637
323,328
210,815
637
Balance as of March 31, 2016
$
294,367
$
240,413
$
534,780
12. Redeemable Noncontrolling Interests
In connection with the acquisition of a controlling interest in Pilgrim Studios on November 12, 2015, the Company
recorded a redeemable noncontrolling interest of $90.1 million, representing 37.5% of Pilgrim Studios. The noncontrolling
interest holder has a right to put and the Company has a right to call a portion of the noncontrolling interest, equal to 17.5% of
Pilgrim Studios, at fair value, subject to a cap, exercisable five years after the acquisition date of November 12, 2015. In
addition, the noncontrolling interest holder has a right to put and the Company has a right to call the remaining amount of
noncontrolling interest at fair value, subject to a cap, exercisable seven years after the acquisition date of November 12, 2015.
The put and call options have been determined to be embedded in the noncontrolling interest, and because the put rights are
outside the control of the Company and require partial cash settlement, the noncontrolling interest holder's interest is presented
as redeemable noncontrolling interest outside of shareholders' equity on the Company's unaudited condensed consolidated
balance sheet.
In addition, the noncontrolling interest holder is the President and CEO of Pilgrim Studios, who will continue in this role
pursuant to an employment contract entered into at the time of closing. Pursuant to the operating agreement, if the employment
of the noncontrolling interest holder is terminated before certain dates, under certain circumstances as defined in the operating
agreement, the Company can call and the noncontrolling interest holder can put the noncontrolling interest at a discount to fair
value. The amount of the discount related to the 17.5% noncontrolling interest is being expensed through the five-year call
period, and the portion of the discount related to the remaining noncontrolling interest is being expensed over the seven-year
call period. The amounts are included in general and administrative expense of Pilgrim Studios and reflected as an addition to
redeemable noncontrolling interest.
Redeemable noncontrolling interest is measured at the greater of (i) the redemption amount that would be paid if settlement
occurred at the balance sheet date less the amount attributed to unamortized noncontrolling interest discount, as discussed
above, or (ii) the historical value resulting from the original acquisition date value plus or minus any earnings or loss
attribution, plus the amount of unamortized noncontrolling interest discount as discussed above. The amount of the redemption
value in excess of the historical values of the noncontrolling interest, if any, is recognized as an increase to noncontrolling
interest and a charge to retained earnings.
The table below presents the reconciliation of changes in redeemable noncontrolling interest:
Beginning balance
Initial fair value of redeemable noncontrolling interest
Net loss of Pilgrim Studios attributable to noncontrolling interest
Noncontrolling interest discount accretion
Adjustments to redemption value
Ending balance
F-31
Year Ended
March 31,
2016
(Amounts in
thousands)
$
$
—
90,128
(7,509)
2,030
5,876
90,525
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The net loss of Pilgrim Studios attributable to noncontrolling interest includes certain transactional costs of $7.7 million of
Pilgrim Studios attributable to the noncontrolling shareholder (see Note 11). These costs are included in the general and
administrative expense of Pilgrim Studios, however, pursuant to the profit sharing provisions in the operating agreement, the
amount is included in net loss attributable to noncontrolling interest in our consolidated statement of income and thus does not
impact earnings per share attributable to Lions Gate Entertainment Corp. shareholders.
13. Capital Stock
(a) Common Shares
The Company had 500 million authorized common shares at March 31, 2016 and March 31, 2015. The table below outlines
common shares reserved for future issuance:
Stock options outstanding, average exercise price $24.55 (March 31, 2015 - $22.22)
Restricted share units — unvested
Share purchase options and restricted share units available for future issuance
Shares issuable upon conversion of April 2009 3.625% Notes at conversion price of $8.15
per share at March 31, 2015
Shares issuable upon conversion of January 2012 4.00% Notes at conversion price of $10.26
per share (March 31, 2015 - $10.38)
Shares issuable upon conversion of April 2013 1.25% Notes at conversion price of $29.32
per share (March 31, 2015 - $29.65)
Shares reserved for future issuance
(b) Share Repurchases
March 31,
2016
March 31,
2015
(Amounts in thousands)
15,332
1,647
2,093
—
4,079
2,046
25,197
12,215
1,662
7,163
1,984
4,032
2,024
29,080
Share Repurchase Plan. On December 17, 2013, our Board of Directors authorized the Company to increase our previously
announced share repurchase plan from a total authorization of $150 million to $300 million, and on February 2, 2016, our
Board of Directors authorized the Company to further increase its share repurchase plan to $468 million. For the years ended
March 31, 2016, 2015 and 2014, the common shares repurchased under the Company's share repurchase plan were as follows:
Fiscal Year Ended
Shares Repurchased
Aggregate
Cost of
Shares
(in thousands)
Weighted Average Repurchase
Price Per Share
March 31, 2016
March 31, 2015
March 31, 2014
Total from December 17, 2013 authorization
3,600,395
5,026,512
315,706
8,942,613
$
$
73,180
136,501
8,339
218,020
$20.33
$27.16
$26.41
$24.38
Prior to the year ended March 31, 2013, the Company repurchased 6,787,310 common shares at a cost of approximately
$65.2 million. To date, approximately $283.2 million of the Company's common shares have been repurchased, leaving
approximately $184.7 million of authorized potential purchases.
(c) Dividends
During fiscal years 2016, 2015 and 2014, the Company's Board of Directors declared the following quarterly cash dividends
(first quarterly cash dividend declared during the third quarter ended December 31, 2013):
F-32
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fiscal Year 2016:
Fourth quarter ended March 31, 2016(2)
Third quarter ended December 31, 2015
Second quarter ended September 30, 2015
First quarter ended June 30, 2015
Total cash dividends declared in fiscal year 2016
Fiscal Year 2015:
Fourth quarter ended March 31, 2015(2)
Third quarter ended December 31, 2014
Second quarter ended September 30, 2014
First quarter ended June 30, 2014
Total cash dividends declared in fiscal year 2015
Fiscal Year 2014:
Total cash dividends declared in fiscal year 2014
Total cash dividends declared
____________________________________________
Dividends Declared
Per Common Share
Total Amount(1)
(in thousands)
Payment Date
$0.09 $
$0.09
$0.09
$0.07
$0.34
$0.07
$0.07
$0.07
$0.05
$0.26
13,209
13,520
13,364
10,376
50,469
10,186
9,817
9,590
6,880
36,473
May 27, 2016
February 5, 2016
November 10, 2015
August 7, 2015
May 22, 2015
February 6, 2015
November 7, 2014
August 8, 2014
$0.10
$0.70
$
13,966
100,908
(1) The Company had an accumulated deficit through December 31, 2014 at the time the dividends were declared;
therefore, these dividends were recorded as a reduction to common shares with the dividends declared in the fourth quarter
ended March 31, 2015 recorded as a reduction of retained earnings.
(2) As of March 31, 2016 and March 31, 2015, the Company had $13.2 million and $10.2 million, respectively, of cash
dividends payable included in accounts payable and accrued liabilities on the consolidated balance sheet.
(d) Share-based Compensation
The Company's stock option and long-term incentive plans permit the grant of stock options and other equity awards to
certain employees, officers, non-employee directors and consultants.
2012 Performance Incentive Plan: In September 2012, the Company adopted the 2012 Performance Incentive Plan, as
amended on September 9, 2014 (the "2012 Plan"). The 2012 Plan provides for the issuance of up to 27.6 million common
shares of the Company, stock options, share appreciation rights, restricted shares, stock bonuses and other forms of awards
granted or denominated in common shares or units of common shares of the Company, as well as certain cash bonus awards to
eligible directors, officers or employees of the Company or any of its subsidiaries, and certain consultants and advisors to the
Company or any of its subsidiaries. At March 31, 2016, 2,092,785 common shares were available for grant under the 2012 Plan.
The measurement of all share-based awards uses a fair value method and the recognition of the related share-based
compensation expense in the consolidated financial statements is recorded over the requisite service period. Further, the
Company estimates forfeitures for share-based awards that are not expected to vest. As share-based compensation expense
recognized in the Company’s consolidated financial statements is based on awards ultimately expected to vest, it has been
reduced for estimated forfeitures.
F-33
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company recognized the following share-based compensation expense during the years ended March 31, 2016, 2015,
and 2014:
Compensation Expense:
Stock Options
Restricted Share Units and Other Share-based Compensation
Share Appreciation Rights
Impact of accelerated vesting on stock options and restricted share units(1)
Total share-based compensation expense
Tax impact(2)
Reduction in net income
____________________________
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
$
$
$
31,015
47,163
287
78,465
—
78,465
(28,632)
49,833
$
$
$
33,452
42,831
4,027
80,310
1,194
81,504
(29,676)
51,828
$
$
$
22,514
33,221
16,384
72,119
—
72,119
(26,684)
45,435
(1) Represents the impact of the acceleration of certain vesting schedules for stock options and restricted share units pursuant
to the severance arrangements related to the integration of the marketing operations of the Company's Lionsgate and
Summit film labels.
(2) Represents the income tax benefit recognized in the statements of income for share-based compensation arrangements.
Stock Options
A summary of option and equity-settled share appreciation rights activity under the various plans as of March 31, 2016,
2015 and 2014 and changes during the years then ended is presented below:
Options:
Outstanding at April 1, 2013
Granted
CSARs converted to options
Exercised
Forfeited or expired
Outstanding at March 31, 2014
Granted
Exercised
Forfeited or expired
Outstanding at March 31, 2015
Granted
Exercised
Forfeited or expired
Outstanding at March 31, 2016
Outstanding as of March 31, 2016, vested or expected to vest in
the future
Exercisable at March 31, 2016
F-34
Weighted-
Average
Exercise
Weighted
Average
Remaining
Contractual
Aggregate
Intrinsic
Value as of
March 31,
Price
Term In Years
2016
12.87
29.40
7.56
9.86
15.68
19.70
29.49
14.39
17.69
21.26
31.50
13.01
26.54
23.83
23.82
19.00
5.94
$
54,088,481
5.92 $
54,067,625
4.80
$
50,968,223
Number of
Shares
8,021,382
4,955,889
733,334
(1,598,035)
(18,560)
12,094,010
1,765,809
(609,160)
(35,963)
13,214,696
3,538,346
(640,008)
(19,138)
16,093,896
16,002,844
8,840,250
$
$
$
$
$
$
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair value of each option award is estimated on the date of grant using a closed-form option valuation model (Black-
Scholes). The following table presents the weighted average grant-date fair value of options granted in the years ended March
31, 2016, 2015 and 2014, and the weighted average applicable assumptions used in the Black-Scholes option-pricing model for
stock options granted during the years then ended:
Weighted average fair value of grants
Weighted average assumptions:
Risk-free interest rate(1)
Expected option lives (in years)(2)
Expected volatility for options(3)
Expected dividend yield(4)
Year Ended March 31,
2016
$7.64
2015
$10.49
2014
$12.38
0.9% - 1.9% 0.3% - 2.0% 0.4% - 2.7%
3 - 6 years
1 - 6 years
2 - 8 years
35%
35% - 38%
38% - 45%
0.8% - 1.8% 0.8% - 1.0% 0.0% - 0.8%
____________________________
(1) The risk-free rate assumed in valuing the options is based on the U.S. Treasury Yield curve in effect applied against the
expected term of the option at the time of the grant.
(2) The expected term of options granted represents the period of time that options granted are expected to be outstanding.
(3) Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of
the Company’s stock and other factors.
(4) The expected dividend yield is estimated by dividing the expected annual dividend by the market price of the Company's
stock at the date of grant.
The total intrinsic value of options exercised as of each exercise date during the year ended March 31, 2016 was $15.6
million (2015 — $11.2 million, 2014— $28.0 million).
During the year ended March 31, 2016, 93,210 shares (2015 — 70,243 shares, 2014 — 143,912 shares) were cancelled to
fund withholding tax obligations upon exercise of options.
Restricted Share Units
A summary of the status of the Company’s restricted share units as of March 31, 2016, 2015 and 2014, and changes during
the years then ended is presented below:
Restricted Share Units:
Outstanding at April 1, 2013
Granted
Vested
Forfeited
Outstanding at March 31, 2014
Granted
Vested
Forfeited
Outstanding at March 31, 2015
Granted
Vested
Forfeited
Outstanding at March 31, 2016
Number of
Shares
2,076,801
1,455,754
(1,358,856)
(34,524)
2,139,175
901,611
(1,360,524)
(18,234)
1,662,028
1,461,521
(1,438,207)
(37,910)
1,647,432
$
$
$
$
Weighted
Average
Grant Date
Fair Value
13.61
28.50
14.24
11.04
23.38
29.55
22.05
19.41
28.10
32.36
28.22
30.36
31.74
The fair values of restricted share units are determined based on the market value of the shares on the date of grant.
F-35
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the total remaining unrecognized compensation cost as of March 31, 2016 related to non-
vested stock options and restricted share units and the weighted average remaining years over which the cost will be
recognized:
Stock Options
Restricted Share Units
Total
Total
Unrecognized
Compensation
Cost
(Amounts in
thousands)
$
$
45,486
30,717
76,203
Weighted
Average
Remaining
Years
1.4
1.8
Under the Company’s stock option and long term incentive plans, the Company withholds shares to satisfy minimum
statutory federal, state and local tax withholding obligations arising from the vesting of restricted share units. During the year
ended March 31, 2016, 636,136 shares (2015 — 615,111 shares, 2014 — 577,399 shares) were withheld upon the vesting of
restricted share units.
The Company becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the
holders of the stock options and restricted share units when vesting or exercise occurs, the restrictions are released and the
shares are issued. Restricted share units are forfeited if the employees are terminated prior to vesting.
There were no excess tax benefits realized from tax deductions associated with option exercises and RSU activity for the
year ended March 31, 2016 (2015 and 2014 — nil).
Cash-Settled Share-Appreciation Rights
A summary of the status of the Company’s cash-settled share-appreciation rights ("CSARs") as of March 31, 2016, 2015
and 2014, and changes during the years then ended is presented below:
Cash-Settled Share-Appreciation Rights
Outstanding at March 31, 2013
Granted
Exercised
CSARs converted to options
Outstanding at March 31, 2014
Granted
Exercised
Number of
Shares
958,334
Weighted-
Average
Exercise Price
7.04
$
Weighted
Average
Grant Date
Fair Value
$
17.02
—
(150,000)
(733,334)
75,000
—
(75,000)
$
—
5.45
7.56
5.17
—
5.17
$
—
32.16
27.52
21.56
—
27.91
—
Outstanding at March 31, 2015 and March 31, 2016
— $
— $
CSARs require that upon their exercise, the Company pay the holder the excess of the market value of the Company's
common stock at the time over the exercise price of the CSAR multiplied by the number of CSARs exercised. During the year
ended March 31, 2016, there were no CSAR exercises. During the years ended March 31, 2015 and March 31, 2014, the
Company paid $1.7 million and $4.0 million, respectively, for the exercise of CSAR shares.
Other Share-Based Compensation
Pursuant to the terms of certain employment agreements, during the year ended March 31, 2016, the Company granted the
equivalent of $1.3 million (2015 - $1.7 million; 2014 - $2.0 million) in common shares to certain employees through the term
of their employment contracts, which were recorded as compensation expense in the applicable period. Pursuant to this
arrangement, for the year ended March 31, 2016, the Company issued 19,578 shares (2015 - 32,503 shares; 2014 - 34,638
shares), net of shares withheld to satisfy minimum tax withholding obligations.
F-36
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14. Income Taxes
The components of pretax income, net of intercompany eliminations, are as follows:
Year Ended March 31,
2016
2015
2014
United States
International
$ (244,178) $
210,351
(33,827) $
$
(Amounts in thousands)
$
67,423
145,985
122,464
62,496
213,408
$
184,960
The Company’s current and deferred income tax provision (benefits) are as follows:
Year Ended March 31,
2016
2015
2014
Current provision (benefit):
Federal
States
International
Total current provision
Deferred provision (benefit):
Federal
States
International
Total deferred provision (benefit)
Total provision (benefit) for income taxes
$
$
$
$
(Amounts in thousands)
$
12,000
$
6,217
2,480
(155)
8,542
630
5,063
$
17,693
(77,399) $
(7,632)
(38)
(85,069)
(76,527) $
12,335
3,415
(1,816)
13,934
31,627
$
32,923
9,694
2,366
4,950
17,010
22,417
1,784
(8,288)
15,913
The differences between income taxes expected at U.S. statutory income tax rates and the income tax provision are as set
forth below:
Year Ended March 31,
2016
2015
2014
Income taxes computed at Federal statutory rate of 35%
Foreign affiliate dividends
Foreign and provincial operations subject to different income tax rates
State income tax
Permanent differences
Other
Increase (decrease) in valuation allowance
$
$
(Amounts in thousands)
$
(11,840) $
(59,448)
(7,142)
(3,809)
6,583
(871)
—
(76,527) $
74,693
(44,715)
(1,830)
1,432
3,074
(1,027)
—
31,627
64,736
(13,027)
(283)
3,304
(7,618)
(2,159)
(12,030)
32,923
$
$
$
For the years ended March 31, 2014, 2015, and 2016, the tax provision includes a favorable permanent book-tax difference
in our Canadian jurisdiction for certain foreign affiliate dividends. Canadian tax law permits such dividends to be received
without being subject to tax.
For the year ended March 31, 2014, the tax provision included a discrete benefit of $12.0 million from the reversal of a
valuation allowance against the Company's net deferred tax assets in the Canadian tax jurisdiction and other discrete items.
Although the Company is incorporated under Canadian law, the majority of its global operations are currently subject to tax
in the U.S. As a result, the Company believes it is more appropriate to use the U.S. Federal statutory rate in its reconciliation of
the statutory rate to its reported income tax rate.
F-37
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The income tax effects of temporary differences between the book value and tax basis of assets and liabilities are as
follows:
Deferred tax assets:
Net operating losses
Foreign tax credits
Investment in film and television obligations
Accounts payable
Other assets
Reserves
Total deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Liabilities
Accounts receivable
Subordinated notes
Other
Total deferred tax liabilities
Net deferred tax assets
March 31, 2016 March 31, 2015
(Amounts in thousands)
$
$
$
$
77,787
44,672
93,699
42,235
27,535
17,077
303,005
(10,103)
292,902
17,273
40,371
70,338
33,687
17,538
13,070
192,277
(9,284)
182,993
—
(140,941)
(1,728)
(15,812)
(158,481) $
—
(113,026)
(2,849)
(17,004)
(132,879)
134,421
$
50,114
The Company has recorded valuation allowances for certain deferred tax assets, which are primarily related to state credits
and unrealized capital losses in Canada recorded through other comprehensive income, as sufficient uncertainty exists
regarding the future realization of these assets.
At March 31, 2016, the Company had U.S. net operating loss carryforwards of approximately $285.2 million available to
reduce future federal income taxes which expire beginning in 2028 through 2036. At March 31, 2016, the Company had state
net operating loss carryforwards of approximately $254.1 million available to reduce future state income taxes which expire in
varying amounts beginning 2024. At March 31, 2016, the Company had Canadian loss carryforwards of $22.5 million which
will expire beginning in 2034. At March 31, 2016, the Company had U.K. loss carryforwards of $6.7 million which do not
expire. In addition, at March 31, 2016, we had U.S. credit carryforwards related to foreign taxes paid of approximately $44.7
million to offset future federal income taxes that will expire beginning in 2021.
Approximately $133.8 million of net operating loss carryforwards consist of excess tax benefits. An excess tax benefit
occurs when the actual tax deduction in connection with a share-based award exceeds the compensation cost expensed for the
award. The Company recognizes excess tax benefits associated with the exercise of stock options and vesting of restricted share
units directly to shareholders’ equity only when realized. Accordingly, deferred tax assets are not recognized for net operating
loss carryforwards resulting from excess tax benefits. At March 31, 2016, deferred tax assets do not include the tax effect of
$133.8 million of loss carryovers from these excess tax benefits.
F-38
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the changes to the gross unrecognized tax benefits for the years ended March 31, 2016,
2015, and 2014:
Gross unrecognized tax benefits at March 31, 2013
Increases related to prior year tax positions
Decreases related to prior year tax positions
Settlements
Lapse in statute of limitations
Gross unrecognized tax benefits at March 31, 2014
Increases related to prior year tax positions
Decreases related to prior year tax positions
Settlements
Lapse in statute of limitations
Gross unrecognized tax benefits at March 31, 2015
Increases related to prior year tax positions
Decreases related to prior year tax positions
Settlements
Lapse in statute of limitations
Gross unrecognized tax benefits at March 31, 2016
$
Amounts
in millions
0.9
2.2
(0.9)
—
—
2.2
2.3
—
—
—
4.5
—
—
—
—
4.5
$
For the years ended March 31, 2016, 2015, and 2014, interest and penalties were not significant. The Company is subject to
taxation in the U.S. and various state and foreign jurisdictions. With a few exceptions, the Company is subject to income tax
examination by U.S. and state tax authorities for the fiscal years ended March 31, 2008 and forward. However, to the extent
allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses (“NOLs”) were
generated and carried forward, and make adjustments up to the amount of the NOLs. The Company is not currently subject to
examination by the U.K. or Canada tax authorities. Currently, audits are occurring in federal and various state and local tax
jurisdictions.
The total amount of unrecognized tax benefits as of March 31, 2015 and March 31, 2016 that, if realized, would affect the
Company's effective tax rate are $2.9 million.
Any changes to unrecognized tax benefits recorded as of March 31, 2016 that are reasonably possible to occur within the
next 12 months are not expected to be material.
15. Government Assistance
Tax credits earned for film and television production activity for the year ended March 31, 2016 totaled $156.1 million
(2015 — $208.2 million; 2014 — $82.0 million) and are recorded as a reduction of the cost of the related film and television
program. Accounts receivable at March 31, 2016 includes $257.1 million with respect to tax credits receivable (2015 — $219.2
million).
The Company is subject to routine inquiries and review by regulatory authorities of its various incentive claims which have
been received or are receivable. Such inquiries have not resulted in material adjustments.
F-39
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
16. Segment Information
The Company’s reportable segments are determined based on the distinct nature of their operations and each segment is a
strategic business unit that offers different products and services and is managed separately. The Company has two reportable
business segments as of March 31, 2016: Motion Pictures and Television Production.
Motion Pictures consists of the development and production of feature films, acquisition of North American and
worldwide distribution rights, North American theatrical, home entertainment and television distribution of feature films
produced and acquired, and worldwide licensing of distribution rights to feature films produced and acquired.
Television Production consists of the development, production and worldwide distribution of television productions
including television series, television movies and mini-series and non-fiction programming.
Segment information by business unit is as follows:
Segment revenues
Motion Pictures
Television Production
Gross segment contribution
Motion Pictures
Television Production
Segment general and administration
Motion Pictures
Television Production
Segment profit
Motion Pictures
Television Production
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
$
$
$
$
$
$
$
$
1,677,482
669,937
2,347,419
184,308
103,998
288,306
80,952
19,783
100,735
103,356
84,215
187,571
$
$
$
$
$
$
$
$
1,820,149
579,491
2,399,640
449,760
55,123
504,883
73,501
13,346
86,847
376,259
41,777
418,036
$
$
$
$
$
$
$
$
2,182,902
447,352
2,630,254
491,779
29,633
521,412
66,768
12,747
79,515
425,011
16,886
441,897
Gross segment contribution is defined as segment revenue less segment direct operating and distribution and marketing
expenses, and excludes purchase accounting and related adjustments, start-up costs of new business initiatives, non-cash
imputed interest charge, and backstopped prints and advertising ("P&A") expense. Gross segment contribution amounts for
fiscal 2015 reflect the reclassification of $12.5 million of backstopped prints and advertising expense from Motion Pictures
distribution and marketing expenses in order to be consistent with the current fiscal year presentation (2014 - none).
Segment profit is defined as gross segment contribution less segment general and administration expenses. The
reconciliation of total segment profit to the Company's income (loss) before income taxes is as follows:
F-40
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended March 31,
2016
2015
2014
Company’s total segment profit
$
Share-based compensation expense
Restructuring and other items(1)
Non-cash imputed interest charge(2)
Purchase accounting and related adjustments(3)
Start-up losses of new business initiatives(4)
Backstopped prints and advertising expense(5)
General and administrative expenses for corporate and shared services
Depreciation and amortization
Operating income (loss)
Interest expense
Interest and other income
Loss on extinguishment of debt
Equity interests income
Income (loss) before income taxes
(Amounts in thousands)
$
$
187,571
(78,465)
(19,834)
(5,270)
(8,430)
(10,017)
(997)
(76,504)
(13,084)
(25,030)
(54,879)
1,851
—
44,231
(33,827) $
$
418,036
(80,310)
(10,725)
—
—
—
(12,509)
(85,625)
(6,586)
222,281
(52,476)
2,790
(11,664)
52,477
213,408
$
441,897
(72,119)
(7,500)
—
—
—
—
(95,791)
(6,539)
259,948
(66,170)
6,030
(39,572)
24,724
184,960
____________________________
(1) Restructuring and other items includes restructuring and severance charges, certain transaction related costs, the settlement
of an administrative order, and certain unusual items when applicable.
Amounts in the year ended March 31, 2016 represent professional fees associated with certain strategic transactions
including, among others, the acquisition of Pilgrim Studios and certain shareholder transactions, and certain transactional
costs of $7.7 million of Pilgrim Studios attributable to the noncontrolling interest shareholder (see Note 11). Pursuant to the
profit sharing provisions in the Pilgrim Studios operating agreement, the transactional costs of $7.7 million are included in
net loss attributable to noncontrolling interest in the consolidated statement of income and thus does not impact earnings
per share attributable to Lions Gate Entertainment Corp. shareholders. In addition, amounts in the year ended March 31,
2016 include pension withdrawal costs of $2.7 million related to an underfunded multi-employer pension plan in which the
Company is no longer participating.
Amounts in the year ended March 31, 2015 primarily represent costs related to the move of our international sales and
distribution organization to the United Kingdom, and severance costs associated with the integration of the marketing
operations of our Lionsgate and Summit film labels, of which approximately $1.2 million are non-cash charges resulting
from the acceleration of vesting of stock awards (see Note 13). In addition, the year ended March 31, 2015 includes
transaction costs related to a certain shareholder transaction (see Note 22), and costs related to the Starz Exchange
transaction (see Note 5).
Amounts in the year ended March 31, 2014 represent the settlement of an administrative order.
(2) Non-cash imputed interest charge represents a charge associated with the interest cost of long-term accounts receivable for
Television Production licensed product that become due beyond one-year.
(3) Purchase accounting and related adjustments represent the incremental amortization expense associated with the non-cash
fair value adjustments on television assets of $6.5 million included in direct operating expense resulting from the
application of purchase accounting and the charge of $1.9 million included in general and administrative expense related to
the accretion of the noncontrolling interest discount (see Note 12).
(4) Start-up losses of new business initiatives represent losses associated with the Company's direct to consumer initiatives
including its subscription video-on-demand platforms, of which $4.8 million is included in the Company's consolidated
general and administrative expense.
(5) Backstopped P&A represents the amount of theatrical marketing expense for third party titles that the Company funded and
expensed for which a third party provides a first dollar loss guarantee (subject to a cap) that such expense will be recouped
from the performance of the film (which results in minimal risk of loss to the Company). The amount represents the P&A
expense incurred net of the impact of expensing the P&A cost over the revenue streams similar to a participation expense
(i.e., the P&A under these arrangements are being expensed similar to a participation cost for purposes of measuring
segment profit).
F-41
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table sets forth revenues by media as broken down by segment for the years ended March 31, 2016, 2015,
and 2014:
Segment revenues:
Motion Pictures
Theatrical
Home Entertainment
Television
International
Other
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
$
314,082
$
354,050
$
579,802
205,148
548,200
30,250
662,685
270,214
494,981
38,219
524,669
829,580
225,338
543,435
59,880
Total Motion Pictures revenues
$ 1,677,482
$
1,820,149
$
2,182,902
Television Production
Domestic Television
International
Home Entertainment
Other
Total Television Production revenues
$
415,486
190,208
60,231
4,012
669,937
Total revenues
$ 2,347,419
415,204
112,385
44,796
7,106
579,491
2,399,640
$
$
326,061
82,295
34,296
4,700
447,352
2,630,254
$
$
The following table sets forth significant assets as broken down by segment and other unallocated assets as of March 31,
2016 and March 31, 2015:
Significant assets by segment
Accounts receivable
Investment in films and television
programs, net
Goodwill
Other unallocated assets (primarily
cash, other assets, and investments)
Total assets
March 31, 2016
March 31, 2015
Motion
Pictures
Television
Production
Total
Motion
Pictures
Television
Production
Total
(Amounts in thousands)
$
557,532
$
491,757
$ 1,049,289
$
538,515
$
353,365
$
891,880
1,092,365
385,931
1,478,296
1,116,909
294,367
$ 1,944,264
240,413
$ 1,118,101
534,780
$ 3,062,365
294,367
$ 1,949,791
$
264,920
28,961
647,246
1,381,829
323,328
$ 2,597,037
793,143
$ 3,855,508
695,052
$ 3,292,089
The following table sets forth acquisition of investment in films and television programs as broken down by segment for
the years ended March 31, 2016, 2015, and 2014:
F-42
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Acquisition of investment in films and television programs
Motion Pictures
Television Production
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
$
$
639,875
426,528
1,066,403
$
$
688,555
323,739
1,012,294
$
$
597,083
350,999
948,082
Purchases of property and equipment amounted to $18.4 million, $17.0 million and $8.8 million for the years ended
March 31, 2016, 2015, and 2014, respectively, all primarily pertaining to purchases for the Company’s corporate headquarters.
Revenue by geographic location, based on the location of the customers, with no other foreign country individually
comprising greater than 10% of total revenue, is as follows:
Year Ended March 31,
2016
2015
2014
Canada
United States
Other foreign
Tangible assets by geographic location are as follows:
$
$
Canada
United States
Other foreign
(Amounts in thousands)
$
68,969
$
55,080
1,550,207
742,132
2,347,419
$
1,712,087
618,584
2,399,640
$
68,599
1,917,615
644,040
2,630,254
March 31,
2016
March 31,
2015
(Amounts in thousands)
172,574
$
214,303
$
2,863,075
2,550,713
139,308
$ 3,174,957
152,444
$ 2,917,460
Total amount of revenue from one individual customer representing greater than 10% of consolidated revenues for the year
ended March 31, 2016 was $290.4 million. No individual customer represented greater than 10% of consolidated revenues for
the years ended March 31, 2015 and 2014. Accounts receivable due from one customer was approximately 25% of consolidated
gross accounts receivable at March 31, 2016, representing a total amount of gross accounts receivable due from this customer
of approximately $272.5 million. At March 31, 2015, accounts receivable due from this customer was approximately 15% of
consolidated gross accounts receivable, representing a total amount of gross accounts receivable due from this customer of
approximately $144.4 million.
17. Commitments and Contingencies
The following table sets forth our future annual repayment of contractual commitments as of March 31, 2016:
F-43
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended March 31,
2017
2018
2019
2020
2021
Thereafter
Total
(Amounts in thousands)
Contractual commitments by expected
repayment date (off-balance sheet
arrangements)
Film obligation and production loan
commitments(1)
Interest payments(2)
Operating lease commitments
Other contractual obligations
Total future commitments under
contractual obligations(3)
____________________________
$ 290,411
$ 221,842
$
10,385
$
— $
— $
— $ 522,638
34,237
14,532
71,043
32,563
14,183
43,212
26,281
14,579
19,718
20,000
14,975
6,927
20,000
14,912
3,650
22,444
34,235
6,395
155,525
107,416
150,945
$ 410,223
$ 311,800
$
70,963
$
41,902
$
38,562
$
63,074
$ 936,524
(1) Film obligation commitments include distribution and marketing commitments and minimum guarantee commitments.
Distribution and marketing commitments represent contractual commitments for future expenditures associated with
distribution and marketing of films which we will distribute. The payment dates of these amounts are primarily based on
the anticipated release date of the film. Minimum guarantee commitments represent contractual commitments related to the
purchase of film rights for pictures to be delivered in the future. Production loan commitments represent amounts
committed for future film production and development to be funded through production financing and recorded as a
production loan liability when incurred. Future payments under these commitments are based on anticipated delivery or
release dates of the related film or contractual due dates of the commitment. The amounts include estimated future interest
payments associated with the commitment.
(2) Includes cash interest payments on the Company's corporate debt, excluding the interest payments on the senior revolving
credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.
(3) Not included in the amounts above are $90.5 million of redeemable noncontrolling interest, as future amounts and timing
are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future
payments (see Note 12).
Operating Leases. The Company has operating leases for offices and equipment. Certain of the Company's operating leases
for its Corporate and United Kingdom offices include certain lease and leasehold improvement incentives. These amounts and
the required lease payments are aggregated and amortized on a straight line basis to rent expense over the lease period.
The operating lease for the Company's principal office expires in August 2023. The Company incurred rental expense of
$14.2 million during the year ended March 31, 2016 (2015— $13.5 million; 2014 — $10.0 million). The Company earned
sublease income of $0.2 million during the year ended March 31, 2016 (2015 — $0.4 million; 2014 — $1.2 million).
Multiemployer Benefit Plans. The Company contributes to various multiemployer pension plans under the terms of
collective bargaining agreements that cover its union-represented employees. The Company makes periodic contributions to
these plans in accordance with the terms of applicable collective bargaining agreements and laws but does not sponsor or
administer these plans. The Company does not participate in any multiemployer benefit plans that are considered to be
individually significant, and the largest plans in which the Company participates are funded at a level of 80% or greater. Total
contributions made by the Company to multiemployer pension and other benefit plans for the years ended March 31, 2016,
2015 and 2014 were $38.0 million, $20.5 million, and $24.4 million, respectively.
If the Company ceases to be obligated to make contributions or otherwise withdraws from participation in any of these
plans, applicable law requires the Company to fund its allocable share of the unfunded vested benefits, which is known as a
withdrawal liability. In addition, actions taken by other participating employers may lead to adverse changes in the financial
condition of one of these plans, which could result in an increase in the Company's withdrawal liability.
Contingencies. Two purported Lions Gate stockholders initiated legal proceedings in the United States District Court for
the Southern District of New York relating to the March 13, 2014 announcement that the Company had entered into an
administrative order with the United States Securities and Exchange Commission (the "SEC") that resolved the SEC’s
investigation into transactions that the Company announced on July 20, 2010. These actions were captioned Laborers Pension
Trust Fund-Detroit & Vicinity v. Lions Gate Entertainment Corp., et al., Case No. 14 CV 5197 (filed July 11, 2014) and Barger
v. Lions Gate Entertainment Corp., Case No. 14 CV 5477 (filed July 21, 2014). The actions alleged, among other things, that
the Company and certain of its current and former officers and directors violated the federal securities laws by failing to
disclose the SEC’s investigation prior to March 13, 2014. On October 28, 2014, the court consolidated the actions under the
caption In re Lions Gate Entertainment Corp. Securities Litigation, Case No. 1:14-cv-05197-JGK, and appointed lead plaintiff
F-44
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and lead counsel. Lead plaintiff filed a consolidated amended complaint on December 29, 2014 and a second consolidated
amended complaint on March 30, 2015. On April 30, 2015, defendants moved to dismiss the action. The court held oral
argument on November 5, 2015. On January 22, 2016, the court granted the defendants’ motion to dismiss.
In addition, on May 16, 2014, the Company received a letter from another purported stockholder, Arkansas Teacher
Retirement System, demanding that the Company seek to recover damages, including the costs associated with the SEC
investigation, and the fine paid, from the directors who were on the Board of Directors (and certain officers) at the time the July
20, 2010 transactions occurred. On August 6, 2014, the Board of Directors created a Special Committee of independent
directors (composed of Mr. Frank Giustra and Mr. Gordon Crawford) to consider the demand. On October 1, 2014, the
Arkansas Teacher Retirement System filed a petition in the Supreme Court of British Columbia seeking an order granting it
leave to prosecute the claims in the name and on behalf of Lions Gate. The Special Committee concluded that commencing an
action in British Columbia against the proposed defendants (or any of them) as demanded by the Arkansas Teacher Retirement
System would not be in the best interests of the Company, and the Company has taken steps to oppose the petition, including
through filing materials in opposition in December 2014 and January 2015. The Arkansas Teacher Retirement System filed
materials in reply. The petition was heard on February 1 to 4, 2016. On March 11, 2016, the court found that granting leave to
permit a derivative action would not be in the best interests of the Company and dismissed the action.
From time to time, the Company is involved in other claims and legal proceedings arising in the normal course of business.
While the resolution of these matters cannot be predicted with certainty, we do not believe, based on current knowledge, that
the outcome of any currently pending legal proceedings in which the Company is currently involved will have a material
adverse effect on the Company's consolidated financial position, results of operations, or cash flow.
18. Financial Instruments
(a) Credit Risk
Concentration of credit risk with the Company’s customers is limited due to the Company’s customer base and the diversity
of its sales throughout the world. The Company performs ongoing credit evaluations and maintains a provision for potential
credit losses. The Company generally does not require collateral for its trade accounts receivable. Accounts receivable include
amounts receivable from governmental agencies in connection with government assistance for productions as well as amounts
due from customers. Amounts receivable from governmental agencies amounted to 24.5% of accounts receivable, net at
March 31, 2016 (2015 — 24.7%).
(b) Forward Contracts
The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production
expenses denominated in various foreign currencies. As of March 31, 2016, the Company had the following outstanding
forward foreign exchange contracts (all outstanding contracts have maturities of less than 24 months from March 31, 2016):
Foreign Currency
British Pound Sterling
Australian Dollar
Canadian Dollar
March 31, 2016
Foreign
Currency
Amount
(Amounts in
millions)
Weighted Average
Exchange Rate Per
$1 USD
US Dollar
Amount
(Amounts in
millions)
£17.5 in exchange for
A$56.8 in exchange for
C$4.4 in exchange for
$24.7
$50.6
$2.6
£0.71
A$1.12
C$1.69
Changes in the fair value representing a net unrealized fair value loss on foreign exchange contracts that qualified as
effective hedge contracts outstanding during the year ended March 31, 2016 were losses, net of tax of $0.2 million (2015 -
gains, net of tax, of $2.8 million; 2014 - gains, net of tax, of $0.8 million) and are included in accumulated other
comprehensive loss, a separate component of shareholders’ equity. Changes in the fair value representing a net unrealized fair
value gain on foreign exchange contracts that did not qualify as effective hedge contracts outstanding were $1.3 million during
the year ended March 31, 2016 (2015 - $0.4 million and 2014 - nil), and are included in direct operating expenses in the
consolidated statements of income. The Company monitors its positions with, and the credit quality of, the financial institutions
that are party to its financial transactions.
F-45
As of March 31, 2016, $9.4 million was included in other assets and $0.7 million in accounts payable and accrued liabilities
(March 31, 2015 - $8.3 million in other assets and $2.0 million in accounts payable and accrued liabilities) in the
accompanying consolidated balance sheets related to the Company's use of foreign currency derivatives. The Company
classifies its forward foreign exchange contracts within Level 2 as the valuation inputs are based on quoted prices and market
observable data of similar instruments.
During the year ended March 31, 2016, the Company reclassified $3.1 million of gains out of accumulated other
comprehensive loss into earnings. As of March 31, 2016, based on the current release schedule, the Company estimates
approximately $4.3 million of gains associated with cash flow hedges in accumulated other comprehensive loss to be
reclassified into earnings during the one-year period ending March 31, 2017.
19. Supplementary Cash Flow Statement Information
(a) Interest paid during the fiscal year ended March 31, 2016 amounted to $42.7 million (2015 — $38.8 million; 2014 —
$63.9 million).
(b) Income taxes paid during the fiscal year ended March 31, 2016 amounted to $10.2 million (2015 — $15.3 million; 2014
— $15.5 million).
The supplemental schedule of non-cash investing and financing activities is presented below:
Non-cash investing activities:
Issuance of common shares related to Pilgrim Studios acquisition (see Note 11) $
$
Investment in available-for-sale securities (see Note 5)
57,003
$
— $
— $
$
158,916
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
— $
12,000
$
—
—
—
13,209
$
10,186
$
— $
— $
7,066
8,339
16,162
$
24,152
$
27,672
Investment in cost method investments (see Note 5)
Non-cash financing activities:
Accrued dividends (see Note 13)
Accrued share repurchases (see Note 13)
Conversions of convertible senior subordinated notes (see Note 7)
$
$
$
$
F-46
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
20. Quarterly Financial Data (Unaudited)
Certain quarterly information is presented below:
2016
Revenues
Operating income (loss)
Net income (loss)(1)
Net income (loss) attributable to Lions Gate
Entertainment Corp. shareholders(1)
Per share information attributable to Lions Gate
Entertainment Corp. shareholders:
Basic income (loss) per share
Diluted income (loss) per share
2015
Revenues
Operating income
Net income(2)(3)(4)
Net income attributable to Lions Gate Entertainment
Corp. shareholders
Per share information attributable to Lions Gate
Entertainment Corp. shareholders:
Basic income per share
Diluted income per share
________________________________________
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(Amounts in thousands, except per share amounts)
408,941
44,165
40,684
40,684
0.28
0.26
$
$
$
$
$
$
476,759
$
(39,288) $
(42,069) $
670,522
$
(9,720) $
$
32,598
791,197
(20,187)
11,487
(42,069) $
40,717
$
10,877
(0.28) $
(0.28) $
0.27
0.26
$
$
0.07
0.07
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(Amounts in thousands, except per share amounts)
449,383
47,764
43,261
43,261
0.31
0.30
$
$
$
$
$
$
552,876
30,488
20,781
20,781
0.15
0.15
$
$
$
$
$
$
751,299
116,169
98,185
98,185
0.70
0.65
$
$
$
$
$
$
646,082
27,860
19,554
19,554
0.14
0.14
$
$
$
$
$
$
$
$
$
$
$
$
(1) During the second, third and fourth quarter of fiscal 2016, net income included restructuring and other items, net of tax,
of $2.7 million, $11.7 million, and $1.5 million, respectively (see Note 16). For the third quarter of fiscal 2016, net
income attributable to Lions Gate Entertainment Corp. shareholders included restructuring and other items, net of tax, of
$4.0 million.
(2) During the first, second, third and fourth quarter of fiscal 2015, net income included restructuring and other items, net of
tax, of $3.1 million, $0.9 million, $0.5 million, and $3.0 million, respectively (see Note 16).
(3) During the first quarter of fiscal 2015, net income included a gain on sale of equity method investment, net of tax, of
$7.2 million (see Note 5).
(4) During the second, third and fourth quarter of fiscal 2015, net income included a loss on extinguishment of debt, net of
tax, of $0.4 million, $0.4 million, and $8.1 million, respectively.
21. Consolidating Financial Information — Convertible Senior Subordinated Notes
The January 2012 4.00% Notes and the April 2013 1.25% Notes by their terms, are fully and unconditionally guaranteed by
the Company. LGEI, the issuer of the January 2012 4.00% Notes and the April 2013 1.25% Notes that are guaranteed by the
Company, is 100% owned by the parent company guarantor, Lions Gate Entertainment Corp.
F-47
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following tables present condensed consolidating financial information as of March 31, 2016 and March 31, 2015, and
for the years ended March 31, 2016, 2015 and 2014 for (1) the Company, on a stand-alone basis, (2) LGEI, on a stand-alone
basis, (3) the non-guarantor subsidiaries of the Company (including the subsidiaries of LGEI), on a combined basis
(collectively, the “Non-guarantor Subsidiaries”) and (4) the Company, on a consolidated basis.
As of
March 31, 2016
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Investment in films and television programs, net
Property and equipment, net
Investments
Goodwill
Other assets
Deferred tax assets
Subsidiary investments and advances
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility
5.25% Senior Notes
Term Loan
Accounts payable and accrued liabilities
Participations and residuals
Film obligations and production loans
Convertible senior subordinated notes
Deferred revenue
Intercompany payable
Redeemable noncontrolling interests
Shareholders’ equity (deficiency)
$
654
$
28,091
$
28,997
$
— $
—
676
—
—
40,072
10,172
7,225
1,502
2,906
1,579
6,407
36,171
15,354
—
56,159
121,725
—
1,047,034
1,471,889
7,213
408,920
524,608
32,357
11,194
—
—
—
—
—
—
(5,397)
—
1,504,398
3,094,974
(6,197,509)
1,772,790
$
6,627,186
$
(6,202,906) $
3,855,508
$
$
$
$
1,598,137
1,658,438
161,000
225,000
400,000
22,165
—
—
—
—
—
—
— $
— $
— $
—
—
89,903
3,663
—
100,050
4,833
—
—
265,630
603,695
715,360
—
323,411
—
—
—
—
—
—
—
1,906,899
2,415,792
(4,322,691)
—
90,525
—
57,742
2,906
1,049,289
1,478,296
43,384
464,346
534,780
90,344
134,421
—
161,000
225,000
400,000
377,698
607,358
715,360
100,050
328,244
—
90,525
850,273
850,273
(332,558)
2,212,773
(1,880,215)
$
1,658,438
$
1,772,790
$
6,627,186
$
(6,202,906) $
3,855,508
F-48
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
STATEMENT OF INCOME
Revenues
EXPENSES:
Direct operating
Distribution and marketing
General and administration
Depreciation and amortization
Total expenses
OPERATING INCOME (LOSS)
Other expenses (income):
Interest expense
Interest and other income
Loss on extinguishment of debt
Total other expenses (income)
INCOME (LOSS) BEFORE EQUITY INTERESTS
AND INCOME TAXES
Equity interests income (loss)
INCOME (LOSS) BEFORE INCOME TAXES
Income tax provision (benefit)
NET INCOME (LOSS)
Less: Net loss attributable to noncontrolling
interests
Net income (loss) attributable to Lions Gate
Entertainment Corp. shareholders
STATEMENT OF COMPREHENSIVE INCOME
(LOSS)
NET INCOME (LOSS)
Foreign currency translation adjustments, net of tax
Net unrealized loss on available-for-sale securities,
net of tax benefit of ($403)
Net unrealized gain on foreign exchange contracts,
net of tax
COMPREHENSIVE INCOME (LOSS)
Less: Comprehensive loss attributable to
noncontrolling interest
Comprehensive income (loss) attributable to Lions
Gate Entertainment Corp. shareholders
Year Ended
March 31, 2016
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
$
— $
23,683
$
2,324,170
$
(434) $
2,347,419
—
—
6,530
—
6,530
(6,530)
38,609
(209,419)
—
563
6,497
159,128
9,284
175,472
(151,789)
220,609
(172)
—
(170,810)
220,437
164,280
(113,199)
51,081
872
50,209
(372,226)
182,694
(189,532)
(76,333)
(113,199)
1,414,781
655,292
118,123
3,800
2,191,996
132,174
175,975
(172,056)
—
3,919
128,255
46,719
174,974
65,526
109,448
—
—
(1,549)
—
(1,549)
1,115
(380,314)
379,796
—
(518)
1,633
(71,983)
(70,350)
(66,592)
(3,758)
1,415,344
661,789
282,232
13,084
2,372,449
(25,030)
54,879
(1,851)
—
53,028
(78,058)
44,231
(33,827)
(76,527)
42,700
—
—
—
7,509
7,509
$
50,209
$
(113,199) $
109,448
$
3,751
$
50,209
Year Ended
March 31, 2016
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
50,209
(3,056)
(37,643)
(193)
9,317
—
(113,199)
(4,334)
109,448
(6,457)
(3,758)
10,791
42,700
(3,056)
—
—
(117,533)
(37,643)
37,643
(37,643)
(193)
65,155
193
44,869
—
—
7,509
(193)
1,808
7,509
$
9,317
$
(117,533) $
65,155
$
52,378
$
9,317
F-49
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
INVESTING ACTIVITIES:
Investment in equity method investees
Purchase of Pilgrim Studios, net of cash
acquired of $15,816
Purchases of other investments
Purchases of property and equipment
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES
FINANCING ACTIVITIES:
Senior revolving credit facility - borrowings
Senior revolving credit facility - repayments
Term Loan - borrowings, net of deferred
financing costs of $964
Convertible senior subordinated notes -
repurchases
Production loans - borrowings
Production loans - repayments
Repurchase of common shares
Dividends paid
Exercise of stock options
Tax withholding required on equity awards
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES
NET CHANGE IN CASH AND CASH
EQUIVALENTS
FOREIGN EXCHANGE EFFECTS ON CASH
CASH AND CASH EQUIVALENTS —
BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS — END OF
PERIOD
Year Ended
March 31, 2016
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
$
(49,146) $
7,730
$
22,410
$
— $
(19,006)
—
—
—
—
—
605,500
(444,500)
24,036
—
—
—
(73,180)
(47,447)
6,097
(24,205)
46,301
(2,845)
—
(7,863)
(8,126)
—
(750)
(18,311)
(126,892)
—
(122)
(26,924)
(135,140)
—
—
—
(5)
—
—
—
—
—
—
(5)
—
—
—
—
572,572
(483,145)
—
—
—
—
89,427
(19,199)
(23,303)
—
392
3,499
47,290
51,908
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(15,989)
(126,892)
(750)
(18,433)
(162,064)
605,500
(444,500)
24,036
(5)
572,572
(483,145)
(73,180)
(47,447)
6,097
(24,205)
135,723
(45,347)
392
102,697
$
654
$
28,091
$
28,997
$
— $
57,742
F-50
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
BALANCE SHEET
Assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Investment in films and television programs, net
Property and equipment, net
Investments
Goodwill
Other assets
Deferred tax assets
As of
March 31, 2015
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
$
3,499
$
47,290
$
51,908
$
— $
102,697
—
617
—
—
40,072
10,172
8,109
10,524
2,508
7,933
6,402
24,938
9,229
—
61,409
32,252
—
883,330
1,375,427
1,713
388,997
313,156
11,180
7,338
—
—
—
—
—
—
(5,914)
—
2,508
891,880
1,381,829
26,651
438,298
323,328
74,784
50,114
—
Subsidiary investments and advances
1,385,522
1,378,571
2,571,801
(5,335,894)
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility
5.25% Senior Notes
Term Loan
Accounts payable and accrued liabilities
Participations and residuals
Film obligations and production loans
Convertible senior subordinated notes
Deferred revenue
Intercompany payable
Redeemable noncontrolling interests
Shareholders’ equity (deficiency)
$
$
1,458,515
$
1,570,532
$
5,604,850
$
(5,341,808) $
3,292,089
— $
— $
— $
— $
225,000
375,000
16,228
—
—
—
—
—
—
—
—
86,472
3,417
—
114,126
7,722
—
—
229,773
468,244
656,755
—
267,065
—
—
—
—
—
—
—
1,530,299
2,547,928
(4,078,227)
—
—
—
—
225,000
375,000
332,473
471,661
656,755
114,126
274,787
—
—
842,287
(171,504)
1,435,085
(1,263,581)
842,287
$
1,458,515
$
1,570,532
$
5,604,850
$
(5,341,808) $
3,292,089
F-51
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
STATEMENT OF INCOME
Revenues
EXPENSES:
Direct operating
Distribution and marketing
General and administration
Depreciation and amortization
Total expenses
OPERATING INCOME (LOSS)
Other expenses (income):
Interest expense
Interest and other income
Loss on extinguishment of debt
INCOME (LOSS) BEFORE EQUITY INTERESTS
AND INCOME TAXES
Equity interests income (loss)
INCOME (LOSS) BEFORE INCOME TAXES
Income tax provision
NET INCOME (LOSS)
Less: Net loss attributable to noncontrolling
interests
Net income (loss) attributable to Lions Gate
Entertainment Corp. shareholders
Total other expenses (income)
(131,951)
190,833
Year Ended
March 31, 2015
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
$
— $
29,631
$
2,370,730
$
(721) $
2,399,640
—
—
11,325
—
11,325
(11,325)
33,830
(172,520)
6,739
6,909
1,243
159,908
4,048
172,108
(142,477)
188,789
(2,881)
4,925
120,626
59,327
179,953
(1,828)
181,781
(333,310)
402,959
69,649
10,322
59,327
1,308,866
590,248
92,754
2,538
1,994,406
376,324
134,054
(131,112)
—
2,942
373,382
52,988
426,370
63,447
362,923
—
—
(480)
—
(480)
(241)
(304,197)
303,723
—
(474)
233
(462,797)
(462,564)
(40,314)
(422,250)
1,315,775
591,491
263,507
6,586
2,177,359
222,281
52,476
(2,790)
11,664
61,350
160,931
52,477
213,408
31,627
181,781
—
—
—
—
—
$
181,781
$
59,327
$
362,923
$
(422,250) $
181,781
Year Ended
March 31, 2015
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
STATEMENT OF COMPREHENSIVE INCOME
(LOSS)
NET INCOME (LOSS)
Foreign currency translation adjustments, net of tax
Net unrealized gain on available-for-sale securities,
net of tax charge of $404
Net unrealized gain (loss) on foreign exchange
contracts, net of tax
COMPREHENSIVE INCOME (LOSS)
Less: Comprehensive loss attributable to
noncontrolling interest
Comprehensive income (loss) attributable to Lions
Gate Entertainment Corp. shareholders
181,781
(844)
59,327
(3,554)
—
—
—
—
180,937
55,773
362,923
(1,902)
2,705
2,842
366,568
(422,250)
(91)
—
—
(422,341)
181,781
(6,391)
2,705
2,842
180,937
—
—
—
—
—
$
180,937
$
55,773
$
366,568
$
(422,341) $
180,937
F-52
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
INVESTING ACTIVITIES:
Proceeds from the sale of equity method
investees
Investment in equity method investees
Purchases of other investments
Purchases of property and equipment
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES
FINANCING ACTIVITIES:
Senior revolving credit facility - borrowings
Senior revolving credit facility - repayments
Term Loan - borrowings, net of deferred
financing costs of $4,315
Term Loan - repayments
Convertible senior subordinated notes -
repurchases
Production loans - borrowings
Production loans - repayments
Repurchase of common shares
Dividends paid
Exercise of stock options
Tax withholding required on equity awards
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES
NET CHANGE IN CASH AND CASH
EQUIVALENTS
FOREIGN EXCHANGE EFFECTS ON CASH
CASH AND CASH EQUIVALENTS —
BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS — END OF
PERIOD
Year Ended
March 31, 2015
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
$
171,222
$
62,901
$
(137,614) $
— $
96,509
—
—
(28,000)
—
—
(4,655)
(2,000)
(14,939)
14,575
(18,075)
—
(2,074)
(28,000)
(21,594)
(5,574)
778,500
(876,119)
370,685
(229,500)
—
—
—
(144,840)
(33,353)
6,839
(20,062)
—
—
—
—
(16)
—
—
—
—
—
—
—
—
—
—
—
631,709
(449,648)
—
—
—
—
(147,850)
(16)
182,061
(4,628)
(1)
41,291
—
38,873
1,470
8,128
5,999
11,565
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
14,575
(22,730)
(30,000)
(17,013)
(55,168)
778,500
(876,119)
370,685
(229,500)
(16)
631,709
(449,648)
(144,840)
(33,353)
6,839
(20,062)
34,195
75,536
1,469
25,692
$
3,499
$
47,290
$
51,908
$
— $
102,697
F-53
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
STATEMENT OF INCOME
Revenues
EXPENSES:
Direct operating
Distribution and marketing
General and administration
Depreciation and amortization
Total expenses
OPERATING INCOME (LOSS)
Other expenses (income):
Interest expense
Interest and other income
Loss on extinguishment of debt
Total other expenses (income)
INCOME (LOSS) BEFORE EQUITY
INTERESTS AND INCOME TAXES
Equity interests income (loss)
INCOME (LOSS) BEFORE INCOME TAXES
Income tax provision
NET INCOME (LOSS)
Less: Net loss attributable to noncontrolling
interests
Net income (loss) attributable to Lions Gate
Entertainment Corp. shareholders
Year Ended
March 31, 2014
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
$
6,748
$
26,113
$ 2,606,551
$
(9,158) $2,630,254
(254)
2
9,968
—
9,716
(2,968)
18,718
(69,552)
2,600
(48,234)
45,266
98,244
143,510
(8,527)
152,037
(3,331)
3,058
163,110
2,218
165,055
(138,942)
111,956
(3,945)
36,972
144,983
(283,925)
403,443
119,518
21,274
98,244
1,372,199
736,401
82,309
4,321
2,195,230
411,321
43,349
(40,027)
—
3,322
407,999
29,467
437,466
78,086
359,380
767
1,369,381
—
(462)
—
305
(9,463)
739,461
254,925
6,539
2,370,306
259,948
(107,853)
107,494
—
(359)
(9,104)
(506,430)
(515,534)
(57,910)
(457,624)
66,170
(6,030)
39,572
99,712
160,236
24,724
184,960
32,923
152,037
—
—
—
—
—
$
152,037
$
98,244
$
359,380
$ (457,624) $ 152,037
Year Ended
March 31, 2014
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
STATEMENT OF COMPREHENSIVE
INCOME (LOSS)
NET INCOME (LOSS)
152,037
98,244
359,380
(457,624)
152,037
Foreign currency translation adjustments, net of
tax
Net unrealized gain on foreign exchange contracts,
net of tax
COMPREHENSIVE INCOME (LOSS)
Less: Comprehensive loss attributable to
noncontrolling interest
Comprehensive income (loss) attributable to Lions
Gate Entertainment Corp. shareholders
5,102
1,665
26,348
(28,821)
4,294
—
157,139
(661)
99,248
1,469
387,197
—
(486,445)
808
157,139
—
—
—
—
—
$
157,139
$
99,248
$
387,197
$ (486,445) $ 157,139
F-54
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Senior revolving credit facility - borrowings
Senior revolving credit facility - repayments
409,120
(311,501)
463,100
(801,574)
Term Loan and 5.25% Senior Notes - borrowings,
net of deferred financing costs of $6,860
440,640
—
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
INVESTING ACTIVITIES:
Proceeds from the sale of equity method investees
Investment in equity method investees
Distributions from equity method investee in
excess of earnings
Repayment of loans receivable
Purchases of property and equipment
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES
FINANCING ACTIVITIES:
10.25% Senior Notes - repurchases and
redemptions
Convertible senior subordinated notes -
borrowings
Production loans - borrowings
Production loans - repayments
Pennsylvania Regional Center credit facility -
repayments
Dividends paid
Exercise of stock options
Tax withholding required on equity awards
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES
NET CHANGE IN CASH AND CASH
EQUIVALENTS
FOREIGN EXCHANGE EFFECTS ON CASH
CASH AND CASH EQUIVALENTS —
BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS — END OF
PERIOD
Year Ended
March 31, 2014
Lions Gate
Entertainment
Corp.
Lions Gate
Entertainment
Inc.
Non-guarantor
Subsidiaries
Consolidating
Adjustments
Lions Gate
Consolidated
(Amounts in thousands)
$
(512,508) $
727,357
$
37,663
$
— $ 252,512
—
—
—
—
—
—
—
(750)
—
—
(8,384)
(9,134)
—
—
—
—
—
(6,900)
11,972
(23,077)
(470,584)
60,000
—
—
—
—
—
—
9,000
(16,500)
4,169
4,275
(415)
529
—
—
—
—
—
532,416
(517,874)
(65,000)
—
—
—
520,254
(749,058)
(50,458)
7,746
(30,835)
(12,266)
(210)
592
—
(1,106)
36,834
24,937
—
—
—
—
—
—
9,000
(17,250)
4,169
4,275
(8,799)
(8,605)
872,220
—
— (1,113,075)
—
—
—
—
—
—
—
—
—
—
—
—
—
440,640
(470,584)
60,000
532,416
(517,874)
(65,000)
(6,900)
11,972
(23,077)
(279,262)
(35,355)
(1,316)
62,363
$
8,128
$
5,999
$
11,565
$
— $
25,692
F-55
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
22. Related Party Transactions
MHR Affiliates
As per the terms of that certain registration rights agreement dated as of October 22, 2009 by and among the Company and
certain investment funds of Mark Rachesky (collectively, the “MHR Affiliates”), as amended on February 3, 2016, the
Company has reimbursed the MHR Affiliates for certain costs related to the registration and offering of the Company’s
common shares offered by the MHR Affiliates on Form S-3 dated April 7, 2015. Such costs, amounting to approximately $1.0
million, are included in general and administration expense in the consolidated statement of income for the year ended March
31, 2015. The registration and offering was disclosed by the Company on a Current Report on Form 8-K dated April 7, 2015.
In November 2015, the Company was advised that each of Liberty Global Incorporated Limited (“Liberty”), a limited
company organized under the laws of the United Kingdom and a wholly-owned subsidiary of Liberty Global plc, and
Discovery Lightning Investments Ltd. (“Discovery”), a limited company organized under the laws of the United Kingdom and
a wholly-owned subsidiary of Discovery Communications, Inc., agreed to each purchase 5,000,000 common shares, no par
value per share, of the Company (“common shares”) from funds affiliated with MHR Fund Management, LLC (“MHR Fund
Management”). In connection with the purchases, the Company entered into separate registration rights agreements with each
of Liberty and Discovery, and amended the registration rights agreement with MHR Fund Management, which provide Liberty,
Discovery and MHR Fund Management (together with certain of their affiliates) with certain registration rights, subject to the
terms and conditions set forth therein. The Company also entered into an underwriting agreement with J.P. Morgan Securities
LLC, as underwriter, Liberty, Discovery and Bank of America, N.A. in connection with a registered underwritten secondary
public offering of the common shares. Among other transaction costs, the Company has incurred expenses on behalf of MHR
Fund Management for certain costs related to the registration and offering of the common shares. Such costs, amounting to
approximately $0.8 million, are included in general and administration expense in the consolidated statement of income for the
year ended March 31, 2016. Mark H. Rachesky, the Chairman of the Board of the Company, is the principal of MHR Fund
Management, which holds approximately 20.5% of the Company’s outstanding common stock as of May 23, 2016. The
registration and offering were disclosed by the Company on Current Reports on Form 8-K dated November 10, 2015 and
November 13, 2015.
Atom Tickets
During the year ended March 31, 2015, the Company made initial investments of approximately $4.3 million in
MovieFriends, LLC ("Atom Tickets"), a theatrical movie discovery service. During the year ended March 31, 2016, the
Company participated in an equity offering of Atom Tickets and subscribed for an additional $7.9 million. The Company owns
an interest of approximately 19.5% in Atom Tickets. Gordon Crawford, a director of the Company, is an investor in Atom
Tickets. Additionally, Phyllis Yaffe, a director of the Company, was appointed to its board of directors as a result of the
Company's investment.
F-56
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Transactions with Equity Method Investees
In the ordinary course of business, we are involved in related party transactions with equity method investees. These related
party transactions primarily relate to the licensing and distribution of the Company's films and television programs, for which
the impact on the Company's consolidated balance sheets and consolidated statements of income is as follows (see Note 2 and
Note 5):
Consolidated Balance Sheets
Accounts receivable(1)
Accounts payable and accrued liabilities(2)
Participations and residuals(3)
Deferred revenue(4)
Total due to related parties
Consolidated Statements of Income
Revenues(1)
Direct operating expense(3)
Distribution and marketing expenses(5)
__________________________________
March 31,
2016
2015
(Amounts in thousands)
$
$
14,573
4,000
11,716
63,442
79,158
$
27,218
—
9,929
18,123
28,052
Year Ended March 31,
2016
2015
2014
(Amounts in thousands)
47,682
12,309
1,210
$
$
$
59,819
13,904
827
$
$
$
51,919
32,700
2,132
$
$
$
$
$
$
(1) Represents primarily revenues and accounts receivable from EPIX and Pop from the licensing of films and television
programs. Also includes revenues from FEARnet for fiscal 2014.
(2) Represents accrued capital contributions to Pop.
(3) Represents participation expense and participations payable associated with the distribution of certain theatrical titles
for Roadside Attractions and Pantelion Films.
(4) Represents deferred revenue from licensing arrangements discussed in footnote 1 above for EPIX.
(5) Represents distribution fees incurred related to Roadside Attractions in connection with the theatrical release of certain
films.
F-57