Lions Gate Entertainment Annual Report 2019

FY2019 Annual Report · Lions Gate Entertainment

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2019 Annual Report

July 26, 2019

To Our Shareholders:

We’re pleased to report that fiscal 2019 was a year in which we refilled our film and television content

pipelines with exciting new properties, grew our existing franchises and created new ones, and continued the
robust growth of our domestic streaming business at Starz while expanding our STARZPLAY premium
branded platform around the world. It was also a year in which we cut costs and reduced overhead
Company-wide, streamlining and modernizing our business in order to continue to compete effectively in a
changing world. As a result, we believe that all of the building blocks are in place for strong and profitable
growth in fiscal 20 and growing recognition of the value we’re creating for our shareholders as we move
forward.

Financially, we reported fiscal 2019 revenue of $3.68 billion, operating income of $130 million, net loss

attributable to shareholders of $284 million or $1.33 diluted net loss per share, adjusted diluted EPS of
$0.87 per share, adjusted OIBDA of $520 million and adjusted free cash flow of $638 million, reflecting
continued strong free cash flow generation that is expected to enable us to de-lever our balance sheet as we
have done in the past.

Investing in the Future — 3 Arts Entertainment

In May 2018 we took a majority stake in 3 Arts Entertainment, a collaboration that is generating
strong results with an influx of top-tier talent across our business. We’re already partnering with 3 Arts on
over two dozen television projects, with the critically-acclaimed Florida Girls for Pop, Mythic Quest: Raven’s
Banquet for Apple and Silicon Valley creator Mike Judge’s Qualityland for HBO leading the way.

To allow us to focus ever more sharply on our core businesses and growth opportunities going forward,

we also continued to monetize our non-core assets during the year, selling our 50% stake in Pop to CBS
while continuing to supply the network with breakout new series like Florida Girls.

Strong Growth at Starz

Fiscal 2019 was a strong growth year at Starz as we grew revenues by 3% and increased overall
domestic subscribers from 23.5 million to 24.7 million. During the year, we accelerated the integration of
our two companies, widened the creative aperture to add exciting new global properties to Starz’s original
programming slate, and continued to stand up a vibrant domestic over-the-top business that launched
successfully on Apple, Hulu, Roku, YouTube TV and other platforms with over 4 million over-the-top
subscribers to date.

It was also a year in which Starz continued its international expansion with global streaming platforms

like Apple and Amazon, top local distributors including Bell Media (Canada), Liberty Global’s Virgin
Media (UK), Vodafone and Orange (Spain), and our Starzplay Arabia joint venture that has become the
top subscription video-on-demand service in the Middle East and North Africa, tapping into a nascent and
under-served market with enormous growth potential.

With over 7 million new subscribers added to our over-the-top and international businesses in the past
3 years, Starz has been transformed from a domestic linear channel into a modern global platform that has
become one of the world’s leading pure play subscription services. The combination of Starz original series,
Lionsgate films and television shows from our 17,000-title library, exclusive first-run acquired product,
unparalleled speed to market and relative freedom from legacy constraints will continue making us a launch
partner of choice, and we expect these benefits to translate into 15 to 25 million new international
subscribers by 2025, adding enormous value for our Company and our shareholders.

On the programming front, Starz has carved out a unique and resonant identity as the premium pay

platform for women, African-American, Latinx, LGBTQ and other historically underserved audiences. We
continued to strengthen that identity during the year, readying perennial ratings leader Power for a
15-episode sixth season while expanding the Power cinematic universe. The first Power spinoff, which
continues the stories of several of the franchise’s most provocative characters while incorporating exciting
new additions like Academy Award® nominee Mary J. Blige, has already been ordered to series. A Power
prequel and additional spinoffs are in development, all shepherded by Power creator and showrunner
Courtney A. Kemp.

The epic tale Outlander, currently in production on its fifth season, continues to deliver upscale,
premium female audiences. American Gods returned with its loyal and passionate fan base in March 2019
and has been renewed for a third season. The critically-praised, award-winning series Vida has also been
picked up for a third season as it continues to build its audience and generate fresh acclaim. The series
recently launched on our premium Spanish-language streaming service PANTAYA as we continue to
expand our content across our Latinx vertical.

Starz continues to bolster its slate with the recent debut of the supernatural thriller The Rook from

Lionsgate and Liberty Global, the planned return of the edgy and acclaimed series The Girlfriend
Experience for a third season, and provocative new shows like Dangerous Liaisons from Lionsgate
Television, a sexy thriller about seduction and betrayal that heads a line-up of newcomers currently in
production. We will continue to invest in bold, original new content and cutting edge marketing to create a
diverse and balanced slate year-round, deep in areas of proved strength, one that offers a compelling value
proposition for domestic and international, streaming and traditional MVPD partners alike.

John Wick 3 Leads Rebound in the Motion Picture Group

Following a year of transition, our new Motion Picture Group leadership team has refocused our film
content strategy and realigned our development slate, streamlined our Motion Picture Group organization
to enable it to change more quickly with a changing world, and established major talent partnerships with
Seth Rogen, Evan Goldberg and James Weaver’s Point Grey Pictures, leading faith-based producers The
Erwin Brothers (I Can Only Imagine) and filmmaker Jonathan Levine (Warm Bodies, 50/50).

The results are already evident. Our domestic box office revenues for the first six months of calendar
2019 increased 93% from the comparable period last year. In May, we again showed our ability to deliver
iconic entertainment to a global audience by launching John Wick: Chapter 3 — Parabellum to over
$300 million at the worldwide box office, doubling the performance of the last installment, an almost
unprecedented feat among movie franchises, and establishing John Wick as one of the premier action
franchises in the world.

And in true Lionsgate fashion, we’ve already expanded the John Wick universe to include an upcoming

television spinoff for Starz, The Continental, a first-of-its-kind game integration with Fortnite, and the
successful virtual reality game John Wick Chronicles.

The resurgence of our Motion Picture Group is also evident in an upcoming slate that returns the
studio to its roots: a diverse portfolio of bold, original, star-driven films and new and returning franchises
that includes Sylvester Stallone’s Rambo: Last Blood, Roland Emmerich’s epic action film Midway, Star
Wars director Rian Johnson’s whodunit Knives Out, Jay Roach’s timely sexual harassment drama starring
Nicole Kidman, Charlize Theron and Margot Robbie, I Still Believe, the follow-up to the Erwin Brothers’
faith-based hit I Can Only Imagine, a mind-bending re-imagining of Saw starring Chris Rock, Hitman’s
Bodyguard 2 and John Wick 4.

Television Group Assembles One of its Strongest Development Slates Ever, Several New Series Ordered

As the television landscape continues to evolve, we saw an opportunity to turn to our top-tier

production partnerships with 3 Arts, Courtney A. Kemp, Universal Music Group, BBC Studios, the
Tannenbaum Company, Point Grey and Paul Feig for new series, leveraging their talent relationships and
expertise while reducing our reliance on infrastructure. The strategy has led to our most prolific
development slate ever, with 44 of 57 new projects placed with network partners coming from our producer
“pods.”

Lionsgate Television is in production on a growing roster of high-profile new series for a broad array

of streaming, cable and broadcast platforms, including the ground-breaking musical drama Zoey’s
Extraordinary Playlist for NBC, Mythic Quest: Raven’s Banquet, one of the first original series for Apple,
Love Life, featuring Anna Kendrick in her first major television role, for the new HBO Max streaming
platform, Chasing the Cure, a highly-anticipated crowd-solving medical detective series anchored by Ann
Curry for Turner, and three original series, The Rook, Dangerous Liaisons and Ghost, for Starz. In an
increasingly fragmented television universe, one of our strongest line-ups of new shows in years reflects our
ability to create bespoke business models for every platform.

Among our current series, Manhunt: Lone Wolf is being readied for its debut season on Charter’s
Spectrum, Greenleaf is entering its fourth season on OWN, and Step Up: High Water continues to dance
into the hearts of audiences in its second season on YouTube Premium. Dear White People and Orange is
the New Black continue to win rave reviews as they enter their third and seventh seasons, respectively, on
Netflix, underscoring our ability to create evergreen content for today’s diverse audiences.

New Content Partnerships Reaffirm the Value of Our Films and Television Series

Demand for our content is greater than ever. During the year we entered into a record-breaking pay
television agreement with Hulu and FX for Lionsgate theatrical films to be released in 2020 and 2021, the
first time a streaming platform and a cable network have partnered to jointly secure the pay television
window of a theatrical output deal.

Fiscal 2019 was also one of our most successful years for extending our hit film and television

properties into location-based entertainment and interactive games. On July 31, 2019, we’ll open Lionsgate
Entertainment World in Hengqin, China, a vertically-designed indoor theme park built around multiple
Lionsgate properties. It adds to a portfolio of Lionsgate-branded attractions and events that includes the
Lionsgate Zone of the Motiongate theme park in Dubai, the Official Saw Escape Room in Las Vegas, The
Hunger Games: The Exhibition, the Now You See Me Live stage show and La La Land, Hunger Games
and Twilight live-to-film concert tours. We’re also adapting two of our most acclaimed intellectual
properties, the long-running television series Nashville and the film sensation Wonder, to the Broadway
stage in collaboration with award-winning producers, with more iconic properties in the pipeline.

Our games division is coming off a productive year that featured, in addition to the Fortnite X John

Wick crossover, the launch of top-selling virtual reality title Five Nights at Freddy’s VR: Help Wanted, and
two major PC/console game announcements — Blair Witch in partnership with Microsoft and the award
winning strategy game John Wick Hex. We also integrated the character Ash from the Starz original series
Ash vs. Evil Dead into the popular horror game Dead by Daylight.

Commitment to A Diverse and Inclusive Culture

One of our greatest strengths is a culture that places a premium on innovation, resourcefulness,
empowerment, inclusiveness, integrity and collaboration across our businesses — what we call “Lionsgate
360.” During the year, we continued to reaffirm these values across our workforce, reinforced by Employee
Resource Groups that celebrate multicultural diversity, women’s empowerment, LGBTQ Pride and military
veterans.

We partnered with the UCLA Anderson School of Management and Howard University on an

internship program designed to increase the diversity of our industry, and we’re pleased to be recognized for
the second year in a row by the Bloomberg Gender Equality Index and to receive a perfect score of 100
from the Human Rights Campaign, ranking as one of the Best Places to Work for LGBTQ+ Inclusion.
Diversity and inclusiveness make our Company stronger.

We enter fiscal 2020 with re-energized film and television pipelines, strong talent relationships and a

Starz platform that is fulfilling its promise as a premier global streaming service backed by the full content
resources of our Company. Though mindful of the competitive challenges and disruption in our operating
environment, we continue to play our own game and define success on our own terms. We remain confident
in our strategy and committed to its diligent and disciplined execution.

It is a strategy that we believe will maintain our position as a relevant and essential part of our media

ecosystem and will create significant long-term value for our shareholders.

Sincerely,

Jon Feltheimer
Chief Executive Officer

Michael Burns
Vice Chairman

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2019
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
Class A Voting Common Shares, no par value per share
Class B Non-Voting Common Shares, no par value per share

Trading Symbol(s)
LGF.A
LGF.B

Name of Each Exchange on Which Registered
New York Stock Exchange
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 every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑
Non-accelerated filer ☐

☐
Accelerated filer
Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of September 30, 2018
(the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $4,255,846,171, based on
the closing sale price of such shares as reported on the New York Stock Exchange.

As of May 20, 2019, 82,605,121 shares of the registrant’s no par value Class A voting common shares were outstanding, and

133,601,545 shares of the registrant’s no par value Class B non-voting common shares were outstanding.

Portions of the Registrant’s definitive proxy statement relating to its 2019 annual meeting of shareholders (the “2019 Proxy

Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2019 Proxy Statement
will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

DOCUMENTS INCORPORATED BY REFERENCE

PART I

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 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 . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes In and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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

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Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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104

PART IV

FORWARD-LOOKING STATEMENTS

This report includes statements that are, or may be deemed to be, “forward-looking statements” within

the meaning of the 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; budget overruns; limitations imposed by our credit facilities and
notes; unpredictability of the commercial success of our motion pictures and television programming; risks
related to acquisition and integration of acquired businesses; the effects of dispositions of businesses or
assets, including individual films or libraries; the cost of defending our intellectual property; technological
changes and other trends affecting the entertainment industry; potential adverse reactions or changes to
business or employee relationships; and the other risks and uncertainties discussed under Part I, Item 1A.
“Risk Factors” herein. In addition, even if our results of operations, financial condition and liquidity, and
the development of the industry in which we operate are consistent with the forward-looking statements
contained in this report, those results or developments may not be indicative of results or developments in
subsequent periods.

Any forward-looking statements, which we make in this report, speak only as of the date of such
statement, and we undertake no obligation to update such statements. Comparisons of results for current
and any prior periods are not intended to express any future trends or indications of future performance,
unless expressed as such, and should only be viewed as historical data.

This 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.

Unless otherwise indicated or the context requires, all references to the “Company,” “Lionsgate,” “we,”

“us,” and “our” refer to Lions Gate Entertainment Corp., a corporation organized under the laws of the
province of British Columbia, Canada, and its direct and indirect subsidiaries.

PART I

ITEM 1. BUSINESS.

Overview

Lionsgate (NYSE: LGF.A, LGF.B) is a global content leader whose films, television series, digital
products and linear and over-the-top platforms reach next generation audiences around the world. In
addition to our filmed entertainment leadership, Lionsgate content drives a growing presence in interactive
and location-based entertainment, video games, esports and other new entertainment technologies.
Lionsgate’s content initiatives are backed by a nearly 17,000-title film and television library and delivered
through a global sales and licensing infrastructure.

We manage and report our operating results through three reportable business segments: Motion
Picture, Television Production and Media Networks. Financial information for our segments is set forth in
Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this
Annual Report.

Motion Picture

Our Motion Picture segment includes revenues derived from the following:

•

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
(including pay-per-view and video-on-demand platforms, electronic sell through, and digital
rental). 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.

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 revenues are derived from (i) licensing of our productions, acquired

International.
films, our catalog product and libraries of acquired titles to international distributors, on a
territory-by-territory basis, and (ii) the direct distribution of our productions, acquired films, and
our catalog product and libraries of acquired titles in the United Kingdom.

Other. Other revenues are derived from, among others, the licensing of our film and television
content to other ancillary markets, our interactive ventures and games division, our global live and
location-based entertainment franchise division, and the sales and licensing of music from the
theatrical exhibition of our films and the television broadcast of our productions.

Television Production

Our Television Production segment includes revenues derived from the following:

•

Television. Television revenues are derived from the licensing to domestic markets (e.g., linear
pay, basic cable, free television and syndication) of scripted and unscripted series, television
movies, mini-series and non-fiction programming. Television revenues also include revenue from
licenses to subscription-video-on-demand (“SVOD”) platforms in which the initial license of a
television series is to an SVOD platform.

•

International revenues are derived from the licensing and syndication to

International.
international markets of 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.

Other. Other revenues are derived from, among others, the licensing of our television programs
to other ancillary markets, the sales and licensing of music from the television broadcasts of our
productions, and from commissions due to our interest in 3 Arts Entertainment related to talent
management.

Media Networks

Our Media Networks segment includes revenues derived from the following:

•

Starz Networks. Starz Networks’ revenues are derived from the domestic distribution of our
STARZ branded premium subscription video services pursuant to affiliation agreements with
U.S. multichannel video programming distributors (“MVPDs”), including cable operators,
satellite television providers and telecommunications companies, and over-the top (“OTT”)
(collectively, “Distributors”), and on a direct-to-consumer basis. Starz Networks’ revenues also
include international revenues from the OTT distribution of the Company’s STARZ branded
premium subscription video services.

STARZPLAY International. STARZPLAY International revenues are primarily derived from
OTT distribution of the Company’s STARZ branded premium subscription video services
internationally.

Streaming Services. Streaming Services revenues are derived from the Lionsgate legacy start-up
direct to consumer streaming services on SVOD platforms.

Segment Revenue

For the year ended March 31, 2019, contributions to the Company’s consolidated revenues from its

reporting segments included Motion Picture 39.8%, Television Production 25.0% and Media Networks
39.7%, and intersegment revenue eliminations represented (4.5)% of consolidated revenues.

Within the Motion Picture segment, revenues were generated from the following:

•

Theatrical, 14.7%;

Home Entertainment, 40.4%;

Television, 18.7%;

International, 23.3%; and

• Motion Picture-Other, 2.8%.

Within the Television Production segment, revenues were generated from the following:

•

Television, 71.2%;

International, 14.8%;

Home Entertainment, 8.1%; and

Television Production-Other, 5.8%.

Within the Media Networks segment, revenues were generated from the following:

•

Starz Networks, 98.6%;

STARZPLAY International, 0.1%

Streaming Services, 1.2%.

Corporate Strategy

We continue to grow and diversify our portfolio of content to capitalize on demand from streaming

and traditional platforms throughout the world. We maintain a disciplined approach to acquisition,
production and distribution of content, by balancing our financial risks against the probability of
commercial success for each project. We also continue to invest in new programming and marshal our
resources Company-wide to support the continued robust growth of Starz’s direct-to-consumer offering and
expansion of the Starz brand around the world. We believe that our strategic focus on content, alignment of
our content creation and distribution platforms, and creation of other 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 create significant incremental long-term value for our
shareholders.

MOTION PICTURE

Motion Picture — Theatrical

Production and Acquisition

We take a disciplined approach to theatrical production, with the goal of producing content that can be

distributed through various domestic and international platforms. In doing so, we attempt to mitigate the
financial risk associated with production by, among other things:

•

Negotiating co-financing development and co-production agreements which may provide for joint
efforts and cost-sharing with one or more third-party companies;

Pre-licensing international distribution rights on a selective basis, including through international
output agreements (which license rights to distribute a film in one or more media generally for a
limited term, and in one or more specific territories prior to completion of the film);

Structuring agreements that provide for talent participation in the financial success of the film in
exchange for reduced guaranteed “up-front payments” that would be paid regardless of the film’s
success; and

Utilizing governmental incentives, programs and other structures from state and foreign countries
(which typically take the form of sales tax refunds, transferable tax credits, refundable tax credits,
low interest loans, direct subsidies or cash rebates, calculated based on the amount of money spent
in the particular jurisdiction in connection with the 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.

Distribution

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.

We distribute motion pictures directly to movie theaters in the U.S. whereby the exhibitor retains a
portion of the gross box office receipts and the balance is remitted to the distributor. Concurrent with their
release in the U.S., films are generally released in Canada and may also be released in one or more other
foreign 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. After the initial theatrical release,
distributors seek to maximize revenues by releasing films in sequential release date windows, which may be
exclusive against other non-theatrical distribution platforms.

Producing, marketing and distributing films can involve significant risks and costs, and can cause our

financial results to vary depending on the timing of a film’s release. For instance, 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. Further, we may revise the release date of a film 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 films 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.

Theatrical Releases

In fiscal 2019 (i.e., the twelve-month period ended March 31, 2019), we released 33 films in the

U.S. across all our labels, which included the following:

•

Fourteen films released through our Lionsgate and Summit Entertainment labels (including films
developed and produced in-house, films co-developed and co-produced and films acquired from
third parties);

Six films released through our Lionsgate Premiere label;

One film released through our Good Universe label;

Four films released through Pantelion Films, our joint venture with Grupo Televisa; and

Eight films released through our partnership with Roadside Attractions.

Title
Dragged Across Concrete
Five Feet Apart
No Manches Frida 2
The Kid
Tyler Perry’s A Madea
Family Funeral
Run The Race
Cold Pursuit
Perfectos Desconocidos
(Perfect Strangers)
Backtrace
Ben Is Back
Robin Hood
Hunter Killer
Viper Club
The Oath
Hell Fest
A Simple Favor
Lizzie
Kin
Ya Veremos
Reprisal
Down A Dark Hall
Juliet Naked

The Spy Who Dumped Me
Blindspotting
Bleeding Steel
Whitney

Fiscal 2019 Theatrical Releases
Release Date
March 22, 2019
March 15, 2019
March 15, 2019
March 8, 2019
March 1, 2019

February 22, 2019
February 8, 2019
January 11, 2019

December 14, 2018
December 7, 2018
November 21, 2018
October 26, 2018
October 26, 2018
October 12, 2018
September 28, 2018
September 14, 2018
September 14, 2018
August 31, 2018
August 31, 2018
August 31, 2018
August 17, 2018
August 17, 2018

August 3, 2018
July 20, 2018
July 6, 2018
July 6, 2018

Label/Partnership
Lionsgate Premiere
Lionsgate
Pantelion Films
Lionsgate
Lionsgate

Roadside Attractions
Summit
Pantelion Films

Lionsgate Premiere
Roadside Attractions
Summit
Summit
Roadside Attractions
Roadside Attractions
Lionsgate
Lionsgate
Roadside Attractions
Summit
Pantelion Films
Lionsgate Premiere
Summit
Roadside Attractions/
Lionsgate
Lionsgate
Summit
Lionsgate Premiere
Roadside Attractions

Title
Uncle Drew
Future World
Beast
Overboard
Traffik
Blockers
Spinning Man

Fiscal 2019 Theatrical Releases
Release Date
June 29, 2018
May 25, 2018
May 11, 2018
May 4, 2018
April 20, 2018
April 6, 2018
April 6, 2018

Label/Partnership
Summit
Lionsgate Premiere
Roadside Attractions
Pantelion Films
Summit
Good Universe/Universal
Lionsgate Premiere

In fiscal 2019, we also released the following films ‘day-and-date’ (where select titles are released on
video-on-demand (“VOD”) and other digital formats on the same day as they are released theatrically):

Fiscal 2019 Day-and-Date Releases

Title

We Die Young

The Last Man

Norm of The North 2

Bernie The Dolphin

Blood Brother

Time Freak

Air Strike

I Still See You

Little Italy

The Row

Affairs of State

Con Is On

Release Date

March 1, 2019

January 18, 2019

January 11, 2019

December 7, 2018
November 30, 2018
November 9, 2018
October 26, 2018
October 12, 2018
September 21, 2018
July 27, 2018
June 15, 2018
May 4, 2018

Lionsgate and affiliated companies have distributed films that have earned 124 Academy Award®
nominations and 30 wins, as well as numerous Golden Globe Awards®, Producers Guild Awards®, Screen
Actors Guild Awards®, Directors Guild Awards®, BAFTA Awards and Independent Spirit Awards
nominations and wins.

Motion Picture — Home Entertainment

Our U.S. home entertainment distribution operation exploits our film and television content library of

nearly 17,000 motion picture titles and television episodes and programs, consisting of titles from, among
others, Lionsgate, our subsidiaries, affiliates and joint ventures (such as Starz, Summit Entertainment,
Anchor Bay Entertainment, Artisan Entertainment, Grindstone Entertainment Group, Modern
Entertainment, Trimark, Pantelion Films and Roadside Attractions), as well as titles from third parties such
as A24, A&E, Amazon Studios, AMC, CBS Films, Entertainment Studios, Marvel, Miramax, Saban
Entertainment, StudioCanal, and Tyler Perry Studios. 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/Blu-ray

discs to wholesalers and retailers who then sell or rent the DVDs/Blu-ray discs to consumers for private
viewing. Fulfillment of physical distribution services are substantially licensed to Twentieth Century Fox
Home Entertainment.

We distribute or sell content directly to retailers such as Wal-Mart, Best Buy, Target, Amazon, Costco

and others who buy large volumes of our DVDs/Blu-ray discs to sell directly to consumers. Sales to
Wal-Mart accounted for approximately 53% of net home entertainment packaged media revenue in fiscal
2019. We also directly distribute content to the rental market through Redbox, Netflix and others.

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 are then distributed direct-to-video,
VOD and through other media. In fiscal 2019, Grindstone Entertainment Group released 37 titles.

Additionally, we distribute television product including series such as American Gods, Ancient Aliens,
Ash vs. Evil Dead, Blue Mountain State, Casual, Duck Dynasty, Fear the Walking Dead, Grace and Frankie,
Graves, Narcos, Knightfall, MacGyver, Into the Badlands, Mad Men, Nurse Jackie, Orange Is The New Black,
Power, The Royals, The Walking Dead, Weeds, library titles such as Alf and Little House on the Prairie,
certain Disney-ABC Domestic Television series, as well as premier children’s brands including Saban
Brand’s Power Rangers, Aardman’s Shaun the Sheep library, and Rock Dog.

Our year included the following:

•

In fiscal 2019, one of our theatrical releases, I Can Only Imagine, debuted at number one on
DVD/Blu-ray;

In fiscal 2019, we shipped approximately 65 million DVD/Blu-ray finished units;

In calendar 2018, we had an approximate 9% market share for home entertainment, making us the
number six studio in market share overall;

In calendar 2018, we maintained a box office-to-home entertainment conversion rate of 22%
above the industry average. 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 distributed

theatrically or on physical media) by electronic means directly to consumers in-home and on mobile devices.
The key distribution methods today include transactional distribution (such as electronic-sell-through
(“EST”) and transactional video-on-demand (“TVOD”)), SVOD, advertiser-supported video-on-demand
(“AVOD”) and free video-on-demand (“FVOD”)), as well as distribution through various linear pay, basic
cable and free, over-the-air television platforms.

Digital transactional platforms and networks to which we distribute our content include, among

others, iTunes, Amazon, Wal-Mart’s Vudu, Google Play, Microsoft’s Xbox, and Sony’s PlayStation
Network. Digital SVOD services to which we license our content include, among others, Netflix, Hulu, and
Amazon Prime. AVOD services to which we license our content include, among others, The Roku Channel,
Tubi TV, YouTube, IMDb, and Pluto. We also directly distribute digital transactional content to MVPDs
including cable operators (such as Comcast and Charter), satellite television providers (such as DIRECTV
and DISH Network) and telecommunications companies (such as Verizon).

Linear networks to which we distribute our content include, among others, pay television networks
such as Starz, EPIX, HBO and Showtime, and basic cable networks such as USA Network, FX, Turner
Entertainment Networks, BET, Pop, A&E, SyFy, Lifetime, MTV, Bravo, Comedy Central, Paramount
Network, Audience Network, Spike, AMC Networks, Freeform, Reelz, Nickelodeon, El Rey, HD Net,
Bounce, Telemundo and UniMás.

In fiscal 2019, we achieved the following:

•

Four titles we distributed, Tyler Perry’s Acrimony, Overboard, The Spy Who Dumped Me and
Hunter Killer, debuted at the number one ranking on the Rentrak On-Demand charts.

Two titles we distributed, Hostiles and Chappaquiddick, debuted at the number two and number
three rankings, respectively, on the Rentrak On-Demand charts.

Four of our titles reached the number one ranking on the iTunes’ movie charts, including Sicario,
A Simple Favor, Hunter Killer and Robin Hood.

Motion Picture — Television

We license our theatrical productions and acquired films to the domestic linear pay, basic cable and
free television markets. For additional information regarding such distribution, see Motion Picture — Home
Entertainment — Digital Media above.

Motion Picture — 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:

•

The licensing of rights in all media of our in-house feature film product and third party
acquisitions on an output basis;

The licensing of rights in all media of our in-house product and third party acquisitions on a sales
basis for non-output territories;

The licensing of third party feature films on an agency basis; and

Direct distribution of theatrical and/or ancillary rights licensing.

We license rights in all media on a territory by territory basis (other than the territories where we
self-distribute) of (i) our in-house Lionsgate and Summit Entertainment feature film product, and (ii) films
produced by third parties such as Black Label Media, CBS Films, Gold Circle Films, Participant Media,
River Road Entertainment, Thunder Road Pictures and other independent producers. Films licensed and/or
released by us internationally in fiscal 2019 included such in-house productions as Sicario: Day of the
Soldado, Robin Hood, Kin, A Simple Favor, Down A Dark Hall and Spy Who Dumped Me. Third party films
for which we were engaged as exclusive sales agent and/or released by us internationally in fiscal 2019
included Green Book, On the Basis of Sex, Hellfest, Captive State and Five Feet Apart.

Through our territory by territory sales and output arrangements, we generally cover a substantial

portion of the production budget or acquisition cost of new theatrical releases which we license and
distribute internationally. Our output agreements for Lionsgate and Summit feature films currently cover 13
major territories including the following:

•

Australia/New Zealand;

Benelux (Belgium/Netherlands/Luxembourg);

Canada;

CIS (Commonwealth of Independent States);

Ex-Yugoslavia (e.g., Croatia, Slovenia, Bosnia and Herzegovina, Serbia, Kosovo, Macedonia,
Montenegro and Albania);

Eastern Europe (Bulgaria, Czech Republic, Hungary, Romania and Slovak Republic);

France;

Italy;

• Middle East;

•

Poland;

Scandinavia;

Singapore; 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
International Distribution Company and certain theatrical titles in China through our relationship with
Hunan TV & Broadcast Intermediary Co.

We also self-distribute motion pictures in the United Kingdom and Ireland through Lions Gate

International UK (“Lionsgate UK”). Lionsgate UK has established a reputation in the United Kingdom as
a leading producer, distributor and acquirer of commercially successful and critically acclaimed product. In
fiscal 2019, Lionsgate UK released the following 15 films theatrically:

Fiscal 2019
Theatrical Releases — Lionsgate UK

Title
Fighting With My Family
Destroyer
Colette
Robin Hood
Kin
Hunter Killer
Blindspotting
A Simple Favor
The Spy Who Dumped Me
Uncle Drew
Sicario 2: Soldado
The Happy Prince
McQueen
On Chesil Beach
Ghost Stories

Release Date
February 27, 2019
January 25, 2019
January 9, 2019
November 21, 2018
November 9, 2018
October 19, 2018
October 5, 2018
September 20, 2018
August 22 2018
July 6, 2018
June 29, 2018
June 15, 2018
June 8, 2018
May 18, 2018
April 6, 2018

Additionally, we have established an office in India to manage operations and growth opportunities in

the South Asian/Indian sub-continent. Through our local office in Mumbai, we manage the following
activities:

•

License our feature films, television series and library content to local linear and digital platforms;

Appoint and work closely with theatrical distribution partners to maximize box office for our
films;

Partner with local production companies, as well as develop in-house, Indian local language
original television series and feature films for distribution across other media platforms;

Continue to expand our Starz’s direct-to-consumer offering in the region (branded as Lionsgate
Play), including its launch on the SonyLIV streaming platform in November 2018; and

Explore investment opportunities throughout the South Asian/Indian media market.

Motion Picture — Other

Interactive Ventures and Games

Our Interactive Ventures and Games division oversees our interactive business which includes
multiplatform games based off our and third party intellectual property, esports, augmented and virtual
reality, and strategic investments in digital businesses including emerging content platforms, esports
franchises and world-class game developers/publishers.

Over the past few years, we have invested in Finnish mobile game developer/publisher Next Games,

live-streaming native mobile gaming platform Mobcrush, and leading esports franchise Immortals, which
includes the Los Angeles Valiant of The Overwatch League. In gaming, we currently have a slate of over 30

projects in varying stages of development, production and release. Our game releases to date have included
Saban’s Power Rangers: Legacy Wars, a top ranked free to play mobile game developed and published by
nWay, Saban’s Power Rangers: Battle for the Grid, a cross platform PC/console fighting game developed and
published by nWay, John Wick Chronicles, an arcade style shooter game in virtual reality developed and
published by Starbreeze, and an Orange Is The New Black slot machine game with International Game
Technology. We also integrate our intellectual property into some of the world’s most popular games
including Hellboy into Ubisoft’s PC/console fighting game Brawlhalla and top mobile game Legendary:
Game of Heroes, Saw and Ash vs. Evil Dead into popular PC/console multiplayer horror game Dead by
Daylight, John Wick and Reservoir Dogs into top ranked FPS Payday 2, and Power Rangers into mobile
game Family Guy: The Quest for Stuff.

Global Live and Location-Based Entertainment

Our Global Live and Location Based Entertainment division broadly covers all theatrical and
television live and location-based entertainment initiatives. Our goal is to drive incremental revenue and
build consumer engagement across our entire portfolio of properties via licensing and launching live shows
and location-based entertainment destinations around the world.

Our business currently includes, among others, the following projects:

Developing musical adaptations of Nashville, Wonder and other theatrical and television
properties into Broadway productions;

Now You See Me Live, a global magic touring show that opened in China in November 2018;

Global live film-to-concert tours based on Lionsgate theatrical properties, including La La Land in
Concert, which has held more than 130 performances in 25 major international countries since its
debut at the Hollywood Bowl in May 2017;

A Lionsgate branded theme park zone in Motiongate Dubai, which opened in October 2017;

Permanent horror attractions in Las Vegas (The Official Saw Escape Experience) and the United
Kingdom (SAW-The Ride at Thorpe Park) and multiple seasonal horror activations at various
parks around the world; and

Lionsgate Entertainment World, our first Lionsgate branded indoor theme park in Hengqin,
China, expected to open in 2019.

•

Music

Our music department creatively manages music for our theatrical and television slates, including

overseeing songs, scores and soundtracks for all of our theatrical productions, co-productions and
acquisitions, as well as 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, television, and other productions,
and the theatrical exhibition of our films and the broadcast and webcast of our productions.

Ancillary Revenues

Ancillary revenues are derived from the licensing of non-theatrical uses of our films and television
content to distributors who, in turn, make such content available to airlines, hotels, schools, oil rigs, public
libraries, prisons, community groups, the armed forces, ships at sea and others.

TELEVISION PRODUCTION

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 entertainment (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.

Television Production — Television

Lionsgate Television

We currently produce, syndicate and distribute nearly 70 television shows on more than 25 networks

(including programming produced by Pilgrim Media Group, of which we own a majority interest).

In fiscal 2019, scripted and unscripted programming produced, co-produced or distributed by us and

our affiliated entities (see Starz Original Programming below for original programming that appears on our
Starz services), as well as programming syndicated by our wholly-owned subsidiary, Debmar-Mercury,
included the following:

Fiscal 2018
Scripted — Lionsgate

Title
Casual
Dear White People
Greenleaf
MacGyver
Nashville
Orange Is The New Black
Step Up
Florida Girls
Get Christie Love
LA Confidential
The Rook

Network
Hulu
Netflix
OWN
CBS
CMT/Hulu
Netflix
YouTube
Pop
ABC
CBS
Starz

Title
Young Guns
The Joel McHale Show
Lyft Legends
Mad Dog Knives
Music City
The Norm Show
Model Squad
In Fashion
Revenge Body
Selling Sunset
What The Fit?
You Kidding Me

Fiscal 2019
Unscripted — Lionsgate

Network
Go90
Netflix
LOL
Discover
CMT
Netflix
E!
Starz
E!
Netflix
YouTube
Facebook

Fiscal 2019
Unscripted — Pilgrim Media Group

Title
Battlefish
Bring It
Chopper
Fast & Loud
Garage Rehab
Heavy Hitters
Love at First Flight
Mega Race Clip Show
Misfits Garage
My Big Fat Fab Life
Street Outlaws
Street Outlaws Memphis
Street Outlaws New Orleans
Sweetie Pies
Switching Gears
Ultimate Fighter
Wicked Tuna
Wicked Tuna OB
Zombie Flippers

Network
Netflix
Lifetime
Discovery
Discovery
Discovery
FS1
FYI
Discovery Go
Discovery
TLC
Discovery
Discovery
Discovery
OWN
Discovery
FS1
Nat Geo
Nat Geo
FYI

Fiscal 2019
Syndication — Debmar-Mercury
Title
Family Feud
Wendy Williams
Caught In Providence
Anger Management
Are We There Yet?
Bojack Horseman
House of Payne
Meet The Browns
Ambitions

Starz Original Programming

For information regarding production of Starz original programming, see Media Networks — Starz

Networks — Starz Original Programming.

Television Production — International

We continue to expand our television business through international sales and distribution of original

Lionsgate television series, Starz original programming, third party television programming and format
acquisitions via packaged media and various digital platforms.

Lionsgate UK also continues to build a robust television business alongside its premier film brand

through in-house production/development, as well as through its various joint ventures and investments.
Lionsgate UK holds interests in, and has strategic partnerships with, television and film production
company Kindle Entertainment, non-scripted television production company Primal Media, television
drama company Potboiler Television, and film and television production company Bonafide Films.
Additionally, Lionsgate UK has enhanced its television production efforts with nearly twenty (20) projects
currently being developed in-house.

In fiscal 2019, Lionsgate UK television programming (developed in-house and through Lionsgate UK’s

interest and partnerships) included the following:

Title
Kiss Me First
Carnage
The A-List
Jerk

Fiscal 2019
Television — Lionsgate UK

Network
Channel 4/Netflix
Sky One
BBC3
BBC3

Partner(s)
Kindle Entertainment, Balloon Entertainment
Primal Media, Motion Content Group
Kindle Entertainment
Primal Media, Roughcut TV

Additionally, Lionsgate UK television programming currently in production includes the following:

Fiscal 2019
Television — In Production — Lionsgate UK

Title
Motherland Series 2
The Goes Wrong Show
Cold Courage

Network
BBC
BBC
Viaplay

Television Production — Home Entertainment

Partner(s)
BBC, Merman, Delightful
Mischief Screen, Big Talk, BBC
Luminoir

For information regarding television production home entertainment revenue, see Motion Picture —

Home Entertainment above.

Television Production — Other

Other revenues are derived from, among others, the licensing of our television programs to other
ancillary markets, the sales and licensing of music from the television broadcasts of our productions, and
from our interest in 3 Arts Entertainment, a talent management company. 3 Arts Entertainment receives
commission revenue from talent representation and are producers on a number of television shows and
films (including It’s Always Sunny in Philadelphia, The Office, Silicon Valley, The Good Place, and
Unbreakable Kimmy Schmidt), where they receive an executive producer fee and back-end participations.

MEDIA NETWORKS

Media Networks — Starz Networks

Starz is a leading provider of premium subscription video programming to U.S. MVPDs, including
cable operators (such as Comcast and Charter), satellite television providers (such as DIRECTV and DISH
Network), telecommunications companies (such as AT&T and Verizon), OTT providers (such as Amazon)
and on a direct-to-consumer basis.

Our flagship premium service STARZ had 24.7 million subscribers as of March 31, 2019 (not

including subscribers who receive programming free as part of a promotional offer). STARZ offers original
series and recently released and library movies without advertisements. Our other services, STARZ
ENCORE and MOVIEPLEX, offer theatrical and independent library movies as well as original and older
television series also without advertisements. Our services include 17 linear networks, on-demand and
online viewing platforms, and a stand-alone direct-to-consumer service. The linear networks air over 1,000
movies per month from studio partners, including first-run content from Sony Pictures Entertainment, and
have a growing line-up of successful original programming. Our services are offered by Distributors to their
subscribers either at a fixed monthly price as part of a programming tier or package or on an a la carte
basis, or directly to consumers via the STARZ app at www.starz.com or through our retail partners (such as
Apple and Google) for a monthly fee.

The table below depicts our 17 existing linear services, the respective on-demand service, the STARZ

app service and highlights some of their key attributes.

Demographics and Strategy

Our services deliver Obsessable™ original series and hit movies that appeal to a wide range of

audiences, attracting both die hard and casual viewers and serving a variety of fandoms. We are focused on
developing and delivering content to meet the needs of engaged viewers, including underserved audiences
such as African Americans, LatinX, LGBTQIA and female audiences.

Built to serve both our traditional MVPDs as well as the OTT community, the STARZ app is a

best-in-class subscription video app designed with fans in mind. In addition to targeting MVPD
subscribers, the STARZ app targets audiences who are looking for an alternative to a traditional
subscription package. The primary audience for the app consists of a balanced mix of individuals, who are
cost-conscious, heavy consumers of video content and likely have at least one OTT subscription service.
Other important segments consist of households with children and frequent travelers looking for the ability
to download and watch blockbuster theatricals, STARZ original series and favorite TV and movies without
an internet connection.

We also intend to ensure that our Starz Networks’ services are available in formats and platforms that
meet the needs of our Distributors as well as subscribers. We seek to monetize the digital rights we control
for our Starz Networks’ exclusive original series and those under our programming licensing agreements
with Hollywood studios by licensing the digital rights to Starz Networks’ services to our traditional
distributors and online video providers as well as using these rights for the STARZ app.

We believe that this strategy, combined with a proven management team, positions Starz Networks for

continued success. We look forward to making our Starz Networks services “must haves” for subscribers
and a meaningful margin driver for our Distributors, thereby driving value for our stockholders.

Affiliation agreements

Our services are distributed pursuant to affiliation agreements with Distributors. These agreements
require delivery of programming that meets certain standards. We earn revenue under these agreements
either (i) based on the total number of subscribers who receive our services multiplied by rates specified in
the affiliation agreements or (ii) based on amounts or rates which are not tied solely to the total number of
subscribers who receive our services. Our affiliation agreements expire at various dates through 2023.

We work with Distributors to increase the number of subscribers to our services. To accomplish this,

we may help fund the Distributors’ efforts to market these services or may permit Distributors to offer
limited promotional periods without payment of subscriber fees. We believe these efforts enhance our
relationship with Distributors, improve the awareness of our services and ultimately increase subscribers
and revenue over the term of these affiliation agreements.

Distributors report the number of subscribers to our services and pay for services, generally, on a

monthly basis. The agreements are generally structured to be multi-year agreements with staggered
expiration dates and generally provide for annual contractual rate increases of a fixed percentage or a fixed
amount, or rate increases tied to annual increases in the Consumer Price Index.

For the fiscal year ended March 31, 2019, revenue earned under Starz Networks’ affiliation agreements

with AT&T (including DIRECTV) accounted for at least 10% of Lionsgate’s revenue.

OTT service

The STARZ app is the single destination for both Distributor authenticated and direct OTT

subscribers to stream or download our original series and movie content. The STARZ app:

•

Is available on a wide array of platforms and devices;

Includes on-demand streaming and downloadable access to our content in a single destination
app;

Offers instant access to approximately 7,500 selections each month (including original series and
commercial free movies);

Is available for purchase as a standalone OTT service for $8.99/month; and

Is available as an additional benefit to paying MVPD subscribers of the Starz Networks’ linear
premium services.

Starz Original Programming

Starz Networks contracts with our Television Production segment and other independent production

companies to produce original programming that appears on our Starz services.

Starz’s currently announced fiscal 2020 STARZ Originals line-up is as follows:

Title
Spanish Princess
Vida Season 2
The Rook Season 1
Sweetbitter Season 2
Power Season 6
TBD Documentary Series
Dublin Murders
P-Valley Season 1
TBD Documentary Series
Wrong Man Season 2 (documentary series)

Starz’s fiscal 2019 STARZ Originals line-up was as follows:

Title
Howard’s End (limited series)
Sweetbitter Season 1
Vida Season 1
Wrong Man Season 1 (documentary series)
Power Season 5
America to Me (documentary series)
Warriors of Liberty City (documentary series)
Outlander Season 4
Counterpart Season 2
American Gods Season 2
Now Apocalypse Season 1

Number of
Episodes
8
10
8
8
15
5
8
TBD
4
TBD
TBD

Number of
Episodes
4
6
6
6
10
10
6
13
10
8
10
89

Lionsgate and Starz television programming have earned 235 Emmy® Award nominations including 37
wins, as well as numerous Golden Globe® Awards, NAACP Awards, GLAAD Awards, Screen Actors Guild
Awards nomination and wins.

Output and Content License Agreements

The majority of content on our services consists of movies that have been released theatrically. Starz

has an exclusive long-term output licensing agreement with Sony for all qualifying movies released
theatrically in the U.S. by studios owned by Sony through December 31, 2021. The Sony agreement, which
began in 2001, includes all titles released under the Columbia, Screen Gems, Sony Pictures Classics and
TriStar labels. Starz does not license movies produced by Sony Pictures Animation. Under this agreement,
Starz has valuable exclusive rights to air new movies on linear television services, on-demand or online
during two separate windows over a period of approximately three to seven years from their initial theatrical
release. Generally, except on a VOD or pay-per-view basis, no other linear service, online streaming or other
video service may air or stream these recent releases during Starz’s windows, and no other premium
subscription service may air or stream these releases between the two windows.

Starz also licenses library content comprised of older, previously released theatrical movies from many

of Hollywood’s major studios. In addition to theatrical movies, Starz licenses made for television movies,
television series and other content from studios, production companies or other rights holders. The rights
agreements for library content are of varying duration and generally permit Starz’s services to exhibit these
movies, series and other programming during certain window periods.

A summary of significant output and library programming agreements (including a library agreement

with Lionsgate) are as follows:

Significant output programming agreements

Significant library programming agreements

Studio

Term(1)

Studio

Term

Sony . . . . . . . . . . . . . . . . . . . . . . . . . .

12/2021 Paramount . . . . . . . . . . . . . . . . . . . . . . . . .

08/2022

Warner Bros . . . . . . . . . . . . . . . . . . . . . . . .

12/2022

Miramax. . . . . . . . . . . . . . . . . . . . . . . . . . .

02/2023

Twentieth Century Fox . . . . . . . . . . . . . .

02/2025

MGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

04/2025

Sony Pictures . . . . . . . . . . . . . . . . . . . . . . .

12/2025

Lionsgate . . . . . . . . . . . . . . . . . . . . . . . . . .

01/2026

Universal . . . . . . . . . . . . . . . . . . . . . . . . . .

03/2027

(1) Dates based on initial theatrical release.

The Sony output agreement requires Starz to pay for movies at rates calculated on a pricing grid that is
based on each film’s domestic box office performance (subject to maximum amounts payable per movie and
a cap on the number of movies that can be put to Starz each year). The amounts Starz pays for library
content vary based on each specific agreement, but generally reflect an amount per movie, series or other
programming commensurate with the quality (e.g., utility and perceived popularity) of the content being
licensed.

Transmission

We uplink our programming to four non-pre-emptible, protected transponders on two satellites

positioned in geo-synchronous orbit. These satellites feed our signals to various swaths of the Americas. We
lease these transponders under long-term lease agreements. These transponder leases have termination dates
in 2023. We transmit to these satellites from our uplink center in Englewood, Colorado. We have made
arrangements at a third party facility to uplink our linear channels to these satellites in the event we are
unable to do so from our uplink center.

Regulatory Matters

In the U.S., the Federal Communications Commission (the “FCC”) regulates several aspects of our,

and our distribution ecosystem’s operations and programming. This includes FCC oversight in connection
with communications satellites and related uplink/downlink equipment and transmissions, content-specific
requirements such as closed captioning, messaging during children’s programming, loudness of
commercials, and program access requirements in connection with certain Distributors and programmer
services with shared attributable interests. Additionally, as part of the FCC’s 2008 order approving the
acquisition by Liberty Media Corporation (now known as Qurate Retail, Inc.) (“Liberty Media”) of a
controlling interest in DIRECTV, the FCC imposed program access conditions on Liberty Media and its
affiliated entities, which may remain applicable to Starz.

Online Services

To the extent that our programming services are distributed through online based platforms, we must

comply with various federal and state laws and regulations applicable to online communications and
commerce. Congress and individual states may consider additional legislation addressing online privacy and
other issues.

Proposed Changes in Regulation

The regulation of programming services, cable television systems, direct broadcast satellite providers,
broadcast television licensees and online distributed services is subject to the political process and has been
in constant flux historically. Further material changes in the law and regulatory requirements must be
anticipated and there can be no assurance that our business will not be materially adversely affected by
future legislation, new regulation or deregulation.

Media Networks — STARZPLAY International

STARZ, through its international premium branded SVOD service, STARZPLAY, is currently
available in five countries and expected to launch in additional countries over the next several years.

The service is anchored by Starz and Lionsgate programming, as well as content from third party

providers. Most content available on STARZPLAY is English-language, may include certain seasons of
STARZ original series exclusively and may often air day-and-date with the U.S. STARZPLAY also includes
access to a rich and diverse Lionsgate library of television series, feature films and documentaries, and, to
amplify content from the Starz domestic slate, may include first-run, exclusive access to unique third party
programming, including locally produced television shows that align with the STARZ brand.

STARZPLAY is distributed through global wholesale partners, local IPTV or Telco partners, and is

expected to be offered through retail partners over the next year. We believe that this multi-faceted
approach to distribution will allow STARZPLAY to scale across multiple countries through new and
existing distribution partners and supported platforms.

STARZ also expands its international footprint through the following: STARZPLAY Arabia, a service

that provides access to 19 different countries in the Middle East and North Africa (see Joint Ventures,
Partnerships and Ownership Interests below); Celestial Tiger Entertainment, a service that provides access
to China and Southeast Asia; and Bell Media, which has the exclusive rights to distribute the STARZ
service in Canada across linear, on-demand and streaming platforms.

Media Networks — Streaming Services

Streaming services represent revenues derived from the Lionsgate legacy start-up direct to consumer

streaming service initiatives on SVOD platforms including PANTAYA, our joint venture with Hemisphere
Media Group. PANTAYA is the first-ever premium streaming destination for world-class movies in
Spanish offering the largest selection of current and classic, commercial-free blockbusters and critically
acclaimed titles from Latin America and the U.S. In February 2019, PANTAYA announced its first-ever
original scripted series “El Juego de las Llaves” (The Game of Keys) which is expected to debut in the
U.S. exclusively on PANTAYA in fall 2019, and will stream internationally in more than 200 countries and
territories on Amazon Prime Video.

JOINT VENTURES, PARTNERSHIPS AND OWNERSHIP INTERESTS

Our joint ventures, partnerships and ownership interests support our strategy of being 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 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. Certain of the Company’s joint ventures,
partnerships and ownership interests include the following:

3 Arts Entertainment

Atom Tickets

Celestial Tiger Entertainment

In May 2018, we acquired a majority stake in 3 Arts Entertainment, a
leading talent management and television/film production company.

In August 2014, we acquired an interest in Atom Tickets, a first-of-its-kind
social movie ticketing app.

In January 2012, we formed Celestial Tiger Entertainment, a joint venture
with Saban Capital Group and Celestial Pictures, a company wholly-owned
by Astro Overseas Limited. Celestial Tiger Entertainment is a leading
independent media company dedicated to entertaining audiences in Asia
and beyond that creates and distributes branded pay television channels
and services targeted at Asian consumers.

Immortals

Pantelion Films

Pilgrim Media Group

Roadside Attractions

STARZPLAY Arabia

Intellectual Property

In January 2017, we acquired an interest in Immortals, an esports
franchise.

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.

In November 2015, we acquired an interest in Pilgrim Media Group, a
leader in unscripted programming.

In July 2007, we acquired an interest in Roadside Attractions, an
independent theatrical distribution company.

Launched in 2015, STARZPLAY Arabia is a personalized OTT
entertainment service that operates in 19 Middle East/North African
countries. STARZPLAY Arabia offers a deep selection of Hollywood
movies and television series with English, Arabic and French language
options, along with local Arabic and Bollywood content.

We currently use and own or license a number of trademarks, service marks, copyrights, domain names

and similar intellectual property in connection with our businesses and own registrations and applications
to register them both domestically and internationally. We believe that ownership of, and/or the right to use,
such trademarks, service marks, copyrights, domain names and similar intellectual property is an important
factor in our businesses and that our success 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 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 may 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.

Competition

Our businesses operate in highly competitive markets. We compete with companies within the
entertainment and media business and from alternative forms of leisure entertainment, such as travel,
sporting events, outdoor recreation and other cultural related activities. We compete with the major studios,
numerous independent motion picture and television production companies, television networks, pay
television services 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 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. Moreover, our networks compete with other programming networks
for viewing and subscribership by each distributor’s customer base, as well as for carriage by such
distributors. As a result, the success of any of our motion picture, television or networks business 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 content released into the marketplace at or near the same time as well as
on the ability to license and produce content for the networks that is adequate in quantity and quality and
will generate satisfactory subscriber levels.

Given such competition, we attempt to operate with a different business model than 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 and Employee Engagement

Lionshares

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.

Employee Resource Groups

We provide our employees with an opportunity to enhance cross-cultural awareness, develop leadership

skills and network across the Company’s various business units and levels through resource groups
including Lionsgate Multicultural Group, Lionsgate Pride, Lionsgate Vets and Lionsgate Women’s
Empowerment Group.

•

Lionsgate Multicultural Group engages in partnerships that promote diversity, equity and
inclusion within the Company and the industry, allowing for an exchange of ideas and resources
that contribute to overall innovation.

Lionsgate Pride supports, develops and inspires future LGBTQ leaders within the Company and
the industry.

Lionsgate Vets creates a community of veterans and their supporters working together to enhance
veteran presence and engage the industry from the unique perspective of a military background.

Lionsgate Women’s Empowerment Group creates a community that improves the prominence of
female leaders and empowers women at all levels within the Company and the industry.

Employees

As of May 20, 2019, we had 1,415 full-time employees in our worldwide operations. 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

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 Corporations 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 investors.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, 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. We will disclose on our website waivers of, or amendments to, our
Code of Business Conduct and Ethics that applies to our Chief Executive Officer, Chief Financial Officer,
Chief Accounting Officer or persons performing similar functions.

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.

ITEM 1A. RISK FACTORS.

You should carefully consider the risks described below as well as other information included in, or
incorporated by reference into this Form 10-K. The risk and uncertainties described below are not the only
ones facing the Company. Additional risks and uncertainties not presently known to us or that we currently
deem immaterial may also impair our business operations. If any these risks and uncertainties occur, they
could adversely affect our business, financial condition, operating results, liquidity and prospects.

Risks Related to Our Business

We face substantial capital requirements and financial risks.

Our business requires a substantial investment of capital. The production, acquisition and distribution

of motion picture and television content requires substantial capital. A significant amount of time may
elapse between our expenditure of funds and the receipt of revenues after release or distribution of such
content. This may require us to fund a significant portion of our capital requirements under the Senior
Credit Facilities (as defined below) or other financing sources. Although we reduce the risks of our
production exposure through tax credit programs, government and industry programs, 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 and
distribution of future motion picture and television content. 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. The costs of

producing and marketing feature films generally increase each year, which may make it more difficult for
our films to generate a profit. 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 motion picture and television content, actual production costs may exceed
their budgets. The production, completion and distribution of such content 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 production incurs substantial budget overruns, we may have to seek additional financing or
fund the overrun ourselves. We cannot make assurances regarding the availability of such additional
financing on terms acceptable to us, or that we will recoup these costs. For instance, increased costs
incurred with respect to a particular film may result in a delayed release 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 incur significant write-offs if our feature films and other projects do not perform well enough to
recoup costs.

We are required to amortize capitalized production costs over the expected revenue streams as we
recognize revenue from 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, those
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 film or other project, we may be required to accelerate amortization or
record impairment charges with respect to the unamortized costs, even if we previously recorded
impairment charges for such film or other project. Such impairment charges could adversely impact our
business, operating results and financial condition.

Changes in our business strategy, plans for growth or restructuring of our businesses may increase our costs or
otherwise affect the profitability of our businesses.

As changes in our business environment occur, we may adjust our business strategies to meet these
changes, which may include growing a particular area of business or restructuring a particular business or
asset. In addition, external events including changing technology, changing consumer patterns, acceptance
of our theatrical and television offerings and changes in macroeconomic conditions may impair the value of
our assets. When these changes or events occur, we may incur costs to change our business strategy and may
need to write down the value of assets. We may also make investments in existing or new businesses,
including investments in the international expansion of our business and in new business lines. Such
investments have and continue to be made in our interactive ventures and games business, and in our global
live and location-based entertainment business. More recently, we have also increased investments related to
our direct-to-consumer and licensed offerings (specifically, the international rollout of our STARZPLAY
service). Some of these investments may have short-term returns that are negative or low and the ultimate
prospects of the businesses may be uncertain, or, in international markets, may not develop at a rate that
supports our level of investment. In any of these events, our costs may increase, we may have significant
charges associated with the write-down of assets, or returns on new investments may be lower than prior to
the change in strategy, plans for growth or restructuring.

We have entered into output licensing agreements that require Starz to make substantial payments.

Starz has an output licensing agreement with Sony to acquire theatrical releases that will expire on
December 31, 2021. Starz is required to pay Sony for films released at rates calculated on a pricing grid that
is based on each film’s domestic box office performance (subject to maximum amounts payable per film and
a cap on the number of films that can be put to Starz each year), and the amounts payable pursuant to such
agreement will be substantial. We believe that the theatrical performance of the films Starz will receive
under the agreements will perform at levels consistent with the performance of films Starz has received
from Sony in the past. We also assume a certain number of annual releases of first run films by Sony’s
studios consistent with the number Starz received in prior years. Should the films perform at higher levels
across the slate of films Starz receives or the quantity of films increase, then our payment obligations would
increase and would have a materially adverse effect on our business, financial condition, operating results,
liquidity and prospects.

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 picture, television and other
content that we sell, license or 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 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 fiscal year.

Low ratings for television programming produced by us may lead to the cancellation of a program and

can negatively affect future license fees for the cancelled program. If we decide to no longer air
programming due to low ratings or other factors, we could incur significant programming impairments,
which could have a material adverse effect on our results of operations in a given period.

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 year-to-date 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 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 motion picture
and television content that 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
content we produce, acquire or distribute. However, there is no guarantee that we will produce, acquire or
distribute future content 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. 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.

We depend on distributors that carry our Starz programming, and no assurance can be given that we will

be able to maintain and renew these affiliation agreements on favorable terms or at all. Starz currently
distributes programming through affiliation agreements with many distributors, including Altice, Amazon,
AT&T, Charter, Comcast, Cox, DISH Network, Hulu and Verizon. These agreements are scheduled to
expire at various dates through 2023. The largest distributors have significant leverage in their relationship
with certain programmers, including Starz. For the fiscal year ended March 31, 2019, revenue earned under
Starz’s affiliation agreements with AT&T (including DIRECTV) accounted for at least 10% of Lionsgate’s
revenue.

The renewal negotiation process for affiliation agreements is typically lengthy. In certain cases, renewals

are not agreed upon prior to the expiration of a given agreement, while the programming typically
continues to be carried by the relevant distributor pursuant to the other terms and conditions in the
affiliation agreement. We may be unable to obtain renewals with our current distributors on acceptable
terms, if at all. We may also be unable to successfully negotiate affiliation agreements with new distributors
to carry our programming. The failure to renew affiliation agreements on acceptable terms, or the failure to
negotiate new affiliation agreements at all, in each case covering a material portion of multichannel
television households, could result in a discontinuation of carriage, or could otherwise materially adversely
affect our subscriber growth, revenue and earnings which could materially adversely affect our business,
financial condition, operating results, liquidity and prospects.

In some cases, if a distributor is acquired, the affiliation agreement of the acquiring distributor will
govern following the acquisition. In those circumstances, the acquisition of a distributor that is party to
affiliation agreements with us that are more favorable to us may adversely impact our business, financial
condition, operating results, liquidity and prospects.

Increasing rates paid by distributors to other programmers may result in increased rates charged to their

subscribers for their services, making it more costly for subscribers to purchase our STARZ services. The
amounts paid by distributors to certain programming networks for the rights to carry broadcast networks
and sports networks have increased substantially in recent years. As a result, distributors have passed on
some of these increases to their subscribers. The rates that subscribers pay for programming from
distributors continue to increase each year and these increases may impact our ability, as a premium
subscription video provider, to increase or even maintain our subscriber levels and may adversely impact
our revenue and earnings which could have a materially adverse effect on our business, financial condition,
operating results, liquidity and prospects.

We depend on distributors to market Starz’s networks and other services, the lack of which may result in

reduced customer demand. At times, certain of our distributors do not allow us to participate in
cooperative marketing campaigns to market Starz’s networks and services. Our inability to participate in the
marketing of our networks and other services may put us at a competitive disadvantage. Also, our
distributors are often focused more on marketing their bundled service offerings (video, Internet and
telephone) than premium video services. If our distributors do not sign up new subscribers to our networks,
we may lose subscribers which would have a materially adverse effect on our business, financial condition,
operating results, liquidity and prospects.

We must respond successfully to ongoing changes in the U.S. television industry and consumer viewing

patterns to remain competitive. We derive revenues and profits from our Starz networks and the
production and licensing of television programming to broadcast and cable networks and other premium
pay television services. The U.S. television industry is continuing to evolve rapidly, with developments in
technology leading to new methods for the distribution of video content and changes in when, where and
how audiences consume video content. These changes pose risks to the traditional U.S. television industry
including the disruption of the traditional television content distribution model by OTT services, which are
increasing in number and some of which have significant and growing subscriber/user bases. Over the past
few years, the number of subscribers to traditional services in the U.S. has declined each year.
Developments in technology and new content delivery products and services have also led to an increasing
amount of video content that is available through OTT services and consumers spending an increased
amount of time viewing such content, as well as changes in consumers’ expectations regarding the
availability and packaging of video content, their willingness to pay for access to such content, their

perception of what quality entertainment is and how much it should cost, and the ease for a consumer to
unsubscribe or switch. We are engaged in efforts to respond to and mitigate the risks from these changes,
including launching the Starz service on these OTT services and on a direct-to-consumer basis and making
our STARZ OTT service available on an authenticated basis as an additional benefit to paying subscribers
of our premium services. Growth in OTT service subscribers may be slower than the decline of service
subscribers on traditional services in the U.S., and we may incur significant costs to implement our strategy
and initiatives, and if we are not successful, our competitive position, businesses and results of operations
could be adversely affected.

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 portion of our revenue is earned outside of the U.S. Our
currency exposure is primarily between Canadian dollars, British pound sterling, Euros and U.S. dollars.
We cannot accurately predict the impact of future exchange rate fluctuations on revenues and operating
margins. Moreover, we may experience currency exposure on distribution and production revenues and
expenses from foreign countries. This could have a material adverse effect on our business, financial
condition, operating results, liquidity and prospects.

The directional guidance we provide from time to time is subject to several factors that we may not be

successful in achieving. From time to time, we provide directional guidance for certain financial periods
which 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 content that we distribute, which cannot be accurately
predicted. 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 significantly. 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 future periods. Management prepares directional guidance on the basis of available information at such
time, and 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.

A significant portion of our library revenues comes from a small number of titles, a portion of which we may
be limited in our ability to exploit.

We depend on a limited number of titles in any given fiscal quarter for the majority of the revenues
generated by our library. In addition, many of the titles in our library are not presently distributed and
generate substantially no revenue. Additionally, our rights to the titles in our library vary; in some cases, we
have only the right to distribute titles in certain media and territories for a limited term. If we cannot
acquire new product and the rights to popular titles through production, distribution agreements,
acquisitions, mergers, joint ventures or other strategic alliances, or renew expiring rights to titles generating
a significant portion of our revenue on acceptable terms, any such failure 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. 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

and 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. Such transaction may pose challenges
in the consolidation and integration of information technology, accounting systems, personnel and
operations. We may also 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. No

assurance can be given that expansion or acquisition opportunities will be successful, completed on time, or
that we will realize expected operating efficiencies, cost savings, revenue enhancements, synergies or other
benefits. Any of the foregoing could have a material adverse effect on our business, financial condition,
operating results, liquidity and prospects.

We may seek claims against a seller for claims against us relating to any acquisition or business
combination that the seller may not indemnify us for 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 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 could have a material
adverse effect on our business, financial condition, operating results, liquidity and prospects.

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 content, 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 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.

Our success depends on attracting and retaining key personnel.

Our success depends upon the continued efforts, abilities and expertise of our executive teams and
other key employees, including production, creative and technical personnel. Our success also depends on
our ability to identify, attract, hire, train and retain such personnel. We have entered into employment
agreements with top executive officers and production executives but do not currently have significant “key
person” life insurance policies for any employee. Although it is standard in the 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, and our inability to do so could 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 programming, which is
unpredictable. Generally, the popularity of our programs depends on many factors, including the critical
acclaim they receive, the format of their initial release, their talent, their genre and their specific subject
matter, audience reaction, the quality and acceptance of motion pictures or television content 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 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 assure that our motion pictures and television
programing 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. Additionally, we cannot
assure that any original programming content will appeal to our distributors and subscribers. The failure to
achieve any of the foregoing could have a material adverse effect on our business, financial condition,
operating results, liquidity and prospects.

Our business depends on the appeal of our content to distributors and subscribers, which is difficult to
predict. Our business depends in part upon viewer preferences and audience acceptance of Starz’s network
programming. These factors are difficult to predict and are subject to influences beyond our control, such
as the quality and appeal of competing programming, general economic conditions and the availability of
other entertainment activities. We may not be able to anticipate and react effectively to shifts in tastes and
interests in markets. A change in viewer preferences could cause Starz’s programming to decline in
popularity, which could jeopardize renewal of affiliation agreements with distributors. In addition, our
competitors may have more flexible programming arrangements, as well as greater amounts of available
content, distribution and capital resources and may be able to react more quickly than we can to shifts in
tastes and interests.

To an increasing extent, the success of our business depends on exclusive original programming and

our ability to accurately predict how audiences will respond to our original programming. Because original
programming often involves a greater degree of financial commitment, as compared to acquired
programming that we license from third parties, and because our branding strategies depend significantly
on a relatively small number of original series, a failure to anticipate viewer preferences for such series could
be especially detrimental to our business.

In addition, theatrical feature films constitute a significant portion of the programming on our Starz
networks. In general, the popularity of feature-film content on linear television is declining, due in part to
the broad availability of such content through an increasing number of distribution platforms prior to our
linear window. Should the popularity of feature-film programming suffer significant further declines, Starz
may lose subscribership or be forced to rely more heavily on original programming, which could increase
our costs.

If Starz’s programming does not gain the level of audience acceptance we expect, or if we are unable to

maintain the popularity of Starz’s programming, we may have a diminished negotiating position when
dealing with distributors, which could reduce our revenue and earnings. We cannot ensure that we will be
able to maintain the success of any of Starz’s current programming, or generate sufficient demand and
market acceptance for Starz’s new original programming. This could materially adversely impact our
business, financial condition, operating results, liquidity and prospects.

Starz’s success depends upon the availability of programming that is adequate in quantity and quality, and

we may be unable to secure or maintain such programming. Starz’s success depends upon the availability of
quality programming, particularly original programming and films that is suitable for its target markets.
While we produce some of Starz’s original programming, we obtain most of Starz’s programming

(including some of Starz’s original series, films and other acquired programming) through agreements with
third parties that have produced or control the rights to such programming. These agreements expire at
varying times and may be terminated by the other party if we are not in compliance with their terms.

We compete with other programming services, including cable programming, national broadcast

television, local broadcast television stations and SVOD to secure desired programming, the competition for
which has increased as the number of programming services has increased. Other programming services
that are affiliated with programming sources such as movie or television studios or film libraries may have a
competitive advantage over us in this area. Some of these competitors have exclusive contracts with motion
picture studios or independent motion picture distributors or own film libraries.

We cannot assure you that we will ultimately be successful in negotiating renewals of Starz’s

programming rights agreements or in negotiating adequate substitute agreements. In the event that these
agreements expire or are terminated and are not replaced by programming content, including additional
original programming, acceptable to Starz’s distributors and subscribers, it would have a materially adverse
impact 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 U.S. or in other regions of the world in which we do business could adversely affect demand for our
content, 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. For instance, lower
household income and decreases in U.S. consumer discretionary spending, which is sensitive to general
economic conditions, may affect cable television and other video service subscriptions, in particular with
respect to digital programming packages on which our networks are typically carried and premium video
programming packages and premium a la carte services on which our networks are typically carried. A
reduction in spending may cause a decrease in subscribers to our networks, which could have a materially
adverse impact on our business, financial condition, operating results, liquidity and prospects. 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.

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 content. 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 content could delay or halt our ongoing
production activities, or could cause a delay or interruption in our release of new motion pictures and
television content. A strike may result in increased costs and decreased revenue, 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. Our headquarters are located in Southern California, which 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
uninterrupted power source equipment designed to protect our equipment. A long-term power outage,
however, could disrupt our operations. 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,
financial condition, operating results, liquidity and prospects.

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 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. The major studios also 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. These resources 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. The number of motion pictures released by our
competitors 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, which may be most pronounced during peak release times
such as 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.

The home entertainment industry is highly competitive. We compete with all of the major U.S. studios

which distribute their theatrical, television and titles acquired from third parties on DVDs/Blu-ray discs and
other media and have marketing budgets greater than ours. We not only compete for ultimate consumer
sales, but also with these parties and independent home entertainment distributors for location and shelf
space placement at retailers and other distributors. The quality and quantity of titles as well as the quality
of our marketing programs determines how much shelf space we are able to garner at any given time as
retailers and other distributors look to maximize sales.

We also compete with U.S. studios and other distributors that may have certain competitive advantages

over us to acquire the rights to sell or rent DVDs/Blu-ray discs and other media. Our ability to license and
produce quality content in sufficient quantities has a direct impact on our ability to acquire shelf space at
retail locations and on websites. In addition, certain of our content is obtained through agreements with
other parties that have produced or own the rights to such content, while other U.S studios may produce
most of the content they distribute.

Our DVDs/Blu-ray discs sales and other media sales are also impacted by myriad choices consumers
have to view entertainment content, including over-the-air broadcast television, cable television networks,
online services, mobile services, radio, print media, motion picture theaters and other sources of
information and entertainment. The increasing availability of content from these varying media outlets may
reduce our ability to sell DVDs/Blu-ray discs and other media in the future, particularly during difficult
economic conditions.

We are subject to intense competition for marketing and carriage of our Starz networks. The

subscription video programming industry is highly competitive. Our Starz networks compete with other
programming networks and other video programming services for marketing and distribution by
distributors. We face intense competition from other providers of programming networks for the right to be
carried by a particular distributor and for the right to be carried by such distributor on a particular “tier”
or in a particular “package” of service. Certain programming networks affiliated with broadcast networks
like ABC, CBS, Fox or NBC or other programming networks affiliated with sports and certain general
entertainment networks with strong viewer ratings have a competitive advantage over our networks in
obtaining distribution through the “bundling” of carriage agreements for such programming networks with
a distributor’s right to carry the affiliated broadcasting network. The inability of our programming

networks to be carried by one or more distributors, or the inability of our programming networks to be
placed on a particular tier or programming package could have a materially adverse effect on our business,
financial condition, operating results, liquidity and prospects.

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 (including the emergence of alternative distribution
platforms), 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. New technologies also may affect our ability to maintain or grow
our business and may increase our capital expenditures. 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.

For instance, such changes may impact the revenue we are able to generate from traditional

distribution methods by decreasing the viewership of our networks on systems of cable operators, satellite
television providers and telecommunication companies, or by decreasing the number of households
subscribing to services offered by those distributors. If we cannot successfully exploit these and other
emerging technologies, our appeal to targeted audiences might decline which could have a material adverse
effect on our business, financial condition, operating results, liquidity and prospects.

Any extended inability to transmit Starz’s programming via satellite would result in lost revenue and could
result in lost subscribers.

Our success is in the U.S. dependent upon our continued ability to transmit Starz’s programming to
distributors through Starz’s satellite uplink facility. Starz has entered into long-term satellite transponder
leases that expire in 2023 for carriage of the Starz networks’ programming. These leases provide for
replacement transponders and/or replacement satellites, as applicable, throughout the term of the leases to
ensure continued carriage of Starz programming in the event of transponder or satellite failures. Although
we believe that we take reasonable and customary measures to ensure continued satellite transmission
capability, termination or interruption of satellite transmissions may occur and could have a materially
adverse effect on our business, financial condition, operating results, liquidity and prospects.

Despite Starz’s efforts to secure transponder capacity with long-term satellite transponder leases, there
is a risk that when these leases expire, we may not be able to secure capacity on a transponder on the same
or similar terms, if at all. This may result in an inability to transmit content and could result in significant
lost revenue and lost subscribers and would have a materially adverse effect on our business, financial
condition, operating results, liquidity and prospects.

If Starz’s technology facilities fail or their operations are disrupted, our business also could be damaged.

Starz’s programming is transmitted from Starz’s uplink center in Englewood, Colorado. Starz uses this

center for a variety of purposes, including signal processing, satellite uplinking, program editing, on-air
promotions, creation of programming segments (i.e., interstitials) to fill short gaps between featured
programs, quality control and live and recorded playback. Starz’s uplink center is equipped with backup
generator power and other redundancies. However, like other facilities, this facility is subject to interruption
from fire, lightning, adverse weather conditions and other natural causes. Equipment failure, employee
misconduct or outside interference could also disrupt the facility’s services. Starz has made arrangements at
a third-party facility to uplink Starz’s linear channels and services to Starz’s satellites in the event Starz is
unable to do so from this facility. Additionally, Starz has direct fiber connectivity to certain of Starz’s
distributors, which would allow continuous operation with respect to a significant segment of Starz’s
subscriber base in the event of a satellite transmission interruption. Notwithstanding these precautions, any
significant or prolonged interruption of operations at Starz’s facility, and any failure by Starz’s third-party
facility to perform as intended, would have a materially adverse effect on our business, financial condition,
operating results, liquidity and prospects. Further, if the FCC adopted rules in an ongoing rulemaking for

the flexible use of the 3.7-4.2 GHz Band proceeding to reassign a portion of the 3700-4200 MHz band
(“C-band”) to mobile terrestrial operations, it is possible that there will be an increase in interference of the
downlink of our satellite transmission, which could have a materially adverse effect on our business,
financial conditions, operating results, liquidity and prospects.

We face risks from doing business internationally.

We distribute content 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 strict 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;

laws and policies relating to data privacy and security such as the European Union General Data
Protection Regulation;

establishing and protecting a new brand identity in competitive markets;

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.

Additionally, with respect to our direct-to-consumer offerings, these risks may include:

•

differing technical architectural and payment processing systems as well as consumer use and
acceptance of electronic payment methods, such as credit cards;

availability of reliable broadband connectivity and wide area networks in targeted areas for
expansion;

low usage and/or penetration of internet-connected consumer electronic devices;

new and different sources of competition; and

laws and policies relating to consumer protection.

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.

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. Additionally, 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.
Regardless of the validity or the success of the assertion of any such claims, we could incur significant costs
and diversion of resources in 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.

Our business involves risks of liability claims for content of material, 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 films and television programs could adversely affect our business over time.

Piracy is extensive in many parts of the world and is made easier by the availability of digital copies of
content and technological advances allowing conversion of films and television content into digital formats.
This trend facilitates the creation, transmission and sharing of high quality unauthorized copies of motion
pictures and television content. 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. 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 and television content, 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 our content.

Service disruptions or failures of the Company’s or our vendors’ information systems and networks as a result
of computer viruses, misappropriation of data or other bad acts, natural disasters, extreme weather, accidental
releases of information or other similar events, may disrupt our businesses, damage our reputation or have a
negative impact on our results of operations.

Shutdowns or service disruptions of our information systems or networks or to vendors that provide

information systems, networks or other services to us pose increasing risks. Such disruptions may be caused
by third-party hacking of computers and systems; dissemination of computer viruses, worms and other
destructive or disruptive software; denial of service attacks and other bad acts, as well as power outages,
natural disasters, extreme weather, terrorist attacks, or other similar events. Shutdowns or disruption from
such events could have an adverse impact on us and our customers, including degradation or disruption of
service, loss of data, release or threatened release of data publicly, misuse or threatened misuse of data, and
damage to equipment and data. System redundancy may be ineffective or inadequate, and our disaster
recovery planning may not be sufficient to cover everything that could happen. Significant events could
result in a disruption of our operations, reduced revenues, the loss of or damage to the integrity of data
used by management to make decisions and operate our business, damage to our reputation or brands or a
loss of customers. We may not have adequate insurance coverage to compensate it for any losses associated
with such events.

We are also subject to risks caused by the misappropriation, misuse, falsification or intentional or
accidental release or loss of data maintained in our information systems and networks or of our vendors,
including sensitive or confidential personnel, customer or vendor data, business information or other
sensitive or confidential information (including our content). The number and sophistication of attempted
and successful information security breaches have increased in recent years and, as a result, the risks
associated with such an event continue to increase. We expect that outside parties will attempt to penetrate
our systems and those of our vendors or fraudulently induce our employees or customers or employees of
our vendors to disclose sensitive or confidential information to obtain or gain access to our data, business
information or other sensitive or confidential information. If a material breach of our information systems
or those of our vendors occurs, the market perception of the effectiveness of our information security
measures could be harmed, we could lose customers, our revenues could be adversely affected and our
reputation, brands and credibility could be damaged. In addition, if a material breach of our information
systems occurs, we could be required to expend significant amounts of money and other resources to review
data and systems to determine the extent of any breach, repair or replace information systems or networks
or to comply with notification requirements. We also could be subject to actions by regulatory authorities
and claims asserted in private litigation in the event of a breach of our information systems or our vendors.

Although we develop and maintain information security practices and systems designed to prevent
these events from occurring, the development and maintenance of these systems are costly and require
ongoing monitoring and updating as technologies change and tactics to overcome information security
measures become more sophisticated. Despite our efforts, the possibility of these events occurring cannot
be eliminated entirely. Moreover, the techniques used by parties seeking to evade the information security
practices and systems to infiltrate, disrupt, or for some other hostile purpose change rapidly and often are
not recognized until launched against some targets. Information security risks will continue to increase, and
we will need to expend additional resources to protect our information systems, networks, data, business
information and other sensitive or confidential information as we distribute more of our content digitally,
engage in more electronic transactions directly with consumers, acquire more consumer data, including
information about consumers’ viewing behavior, their credit card information and other personal data,
increase the number of information technology systems used in our business operations, rely on
cloud-based services and information systems and increases our use of third-party service providers to
perform information technology services.

Protection of electronically stored data is costly and if our data is compromised in spite of this protection, we
may incur additional costs, lost opportunities and damage to our reputation.

We maintain information in digital form as necessary to conduct our business, including confidential

and proprietary information, copies of films, television programs and other content and personal
information regarding our employees. Data maintained in digital form is subject to the risk of intrusion,

tampering and theft. We develop and maintain systems to prevent this from occurring, but it is costly and
requires ongoing monitoring and updating as technologies change and efforts to overcome security
measures become more sophisticated. Moreover, despite our efforts, the possibility of intrusion, tampering
and theft cannot be eliminated entirely, and risks associated with each of these remain. In addition, we
provide confidential information, digital content and personal information to third parties when it is
necessary to pursue business objectives. While we obtain assurances that these third parties will protect this
information and, where appropriate, monitor the protections employed by these third parties, there is a risk
that data systems of these third parties may be compromised. If our data systems or data systems of these
third parties are compromised, our ability to conduct our business may be impaired, we may lose profitable
opportunities or the value of those opportunities may be diminished and we may lose revenue as a result of
unlicensed use of our intellectual property. A breach of our network security or other theft or misuse of
confidential and proprietary information, digital content or personal employee information could subject us
to business, regulatory, litigation and reputation risk, which could have a materially adverse effect on our
business, financial condition and results of operations.

Our 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, rules and regulations have been
adopted in recent years aimed at protecting all individuals, including children who use 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 with respect to the acquisition, storage, disclosure, use and protection of personal data,
including under the European Union General Data Protection Regulation and various other domestic and
international privacy and data security laws and regulations, which are continually evolving. If our 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. Additionally, as we grow our STARZ
direct-to-consumer business, we may be subject to consumer legal claims and state and local consumer
protection regulation.

Our Starz networks business is limited by regulatory constraints which may adversely impact our operations.

Although our Starz networks business generally is not directly regulated by the FCC, under the
Communications Act of 1934 and the 1992 Cable Act, there are certain FCC regulations that govern our
network business. Furthermore, to the extent that regulations and laws, either presently in force or
proposed, hinder or stimulate the growth of the cable television and satellite industries, our network
business will be affected. As we continue to expand internationally, we also may be subject to varying
degrees of local government regulations.

Regulations governing our network businesses are subject to the political process and have been in

constant flux historically. Further material changes in the law and regulatory requirements must be
anticipated. We cannot assure you that we will be able to anticipate material changes in laws or regulatory
requirements or that future legislation, new regulation or deregulation will not have a materially 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

material weaknesses in our internal control over financial reporting identified by management. If our
management identifies any such material weakness that cannot be remediated in a timely manner, we will be
unable to assert such internal control is effective. While we 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 may lose investor confidence in the accuracy
and completeness of our financial reports, which could have an adverse effect on our securities.

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 Board of Directors assesses relevant factors when considering the declaration of a dividend on or

repurchases of our common stock. 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. In November 2018, our Board of Directors suspended our quarterly cash dividend to focus
on driving long-term shareholder value by investing in global growth opportunities for Starz, while also
strengthening the Company’s balance sheet.

Risks Related Our Indebtedness

We have incurred significant indebtedness that could adversely affect our operations and financial condition.

We currently have a substantial amount of indebtedness. As of March 31, 2019, we and our

subsidiaries have corporate debt of approximately $2,927.5 million, capitalized lease obligations of
approximately $45.4 million and production loan obligations of approximately $386.4 million, and the
Senior Credit Facilities provide for unused commitments of $1.5 billion. On the same basis, approximately
$1,902.9 million of such indebtedness is secured (including all of our capital lease obligations but excluding
all of our production loan obligations).

Our high level of debt could have adverse consequences on our business, such as:

•

making it more difficult for us to satisfy our obligations with respect to our notes and our other
debt;

limiting our ability to refinance such indebtedness or to obtain additional financing to fund future
working capital, capital expenditures, acquisitions or other general corporate requirements;

requiring a substantial portion of our cash flows to be dedicated to debt service payments instead
of other purposes, thereby reducing the amount of cash flows available for working capital, capital
expenditures, acquisitions and other general corporate purposes;

increasing our vulnerability to economic downturns and adverse developments in our business;

exposing us to the risk of increased interest rates as certain of our borrowings, including
borrowings under the Senior Credit Facilities, are at variable rates of interest;

limiting our flexibility in planning for, and reducing our flexibility in reacting to, changes in the
conditions of the financial markets and our industry;

placing us at a competitive disadvantage compared to other, less leveraged competitors;

increasing our cost of borrowing; and

•

restricting the way in which we conduct our business because of financial and operating covenants
in the agreements governing our existing and future indebtedness and exposing us to potential
events of default (if not cured or waived) under covenants contained in our debt instruments.

In addition, the Senior Credit Facilities and the indentures that govern our 6.375% Senior Notes due

2024 issued in February 2019 (the “6.375% Senior Notes”), our 5.875% Senior Notes due 2024 issued in
October 2016 (the “2016 5.875% Senior Notes”) and our new 5.875% Senior Notes due 2024 issued in
March 2018 (the “2018 5.875% Senior Notes” and, together with the 2016 5.875% Senior Notes, the
“5.875% Senior Notes”) each contain restrictive covenants limiting our ability to engage in activities that
may be in our long-term best interest. Our failure to comply with those covenants could result in an event
of default which, if not cured or waived, could result in acceleration of all our debt.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take
other actions to satisfy our obligations under our indebtedness, which may not be successful.

A significant portion of our cash flows from operations is expected to be dedicated to the payments of

principal and interest obligations under the Senior Credit Facilities, the 6.375% Senior Notes and the
5.875% Senior Notes. Our ability to make scheduled payments on or refinance our debt obligations depends
on our financial condition and operating performance, which are subject to prevailing economic and
competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond
our control. We may not be able to 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 could face
substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or
to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance
our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially
reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our
scheduled debt service obligations. The Senior Credit Facilities and the indentures that govern the 6.375%
Senior Notes and the 5.875% Senior Notes restrict our ability to dispose of assets and use the proceeds from
those dispositions, and also restrict our ability to raise debt or certain types of equity to be used to repay other
indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain
proceeds in an amount sufficient to meet any debt service obligations then due.

In addition, we conduct a substantial portion of our operations through our subsidiaries, certain of

which are not guarantors of the 6.375% Senior Notes, the 5.875% Senior Notes or our other indebtedness.
Accordingly, repayment of our indebtedness, including the 6.375% Senior Notes and the 5.875% Senior
Notes, is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash
available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of the 6.375% Senior
Notes, the 5.875% Senior Notes or our other indebtedness, our subsidiaries do not have any obligation to
pay amounts due on the 6.375% Senior Notes, the 5.875% Senior Notes or our other indebtedness or to
make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to,
make distributions to enable us to make payments in respect of our indebtedness, including the 6.375%
Senior Notes and the 5.875% Senior Notes. Each subsidiary is a distinct legal entity, and, under certain
circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries.
While the senior credit facilities and the indentures that govern the 6.375% Senior Notes and the 5.875%
Senior Notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay
dividends or make other intercompany payments to us, these limitations are subject to qualifications and
exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to
make required principal and interest payments on our indebtedness.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our
indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial
position and results of operations and our ability to satisfy our obligations under our notes.

If we cannot make scheduled payments on our debt, we will be in default and holders of the 6.375%
Senior Notes and/or the 5.875% Senior Notes could declare all outstanding principal and interest under
such notes to be due and payable, the lenders under the Senior Credit Facilities could terminate their
commitments to loan money, the lenders under our secured debt could foreclose against the assets securing
their borrowings and we could be forced into bankruptcy or liquidation.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more
debt. This could further exacerbate the risks to our financial condition described above.

We and our subsidiaries may be able to incur significant additional indebtedness in the future.
Although the Senior Credit Facilities and the indentures that govern the 6.375% Senior Notes and the
5.875% Senior Notes contain restrictions on the incurrence of additional indebtedness, these restrictions are
subject to a number of qualifications and exceptions, and the additional indebtedness incurred in
compliance with these restrictions could be substantial. These restrictions also will not prevent us from
incurring obligations that do not constitute indebtedness under the indentures governing the notes, such as
certain qualified receivables financings. If new debt is added to our current debt levels, the related risks that
we and the guarantors now face could intensify.

The terms of the Senior Credit Facilities and the indentures that govern the 6.375% Senior Notes and the
5.875% Senior Notes restrict our current and future operations, particularly our ability to respond to changes
or to take certain actions.

The Senior Credit Facilities and the indentures that govern the 6.375% Senior Notes and the 5.875%

Senior Notes, contain a number of restrictive covenants that impose significant operating and financial
restrictions on us and limits our ability to engage in acts that may be in our long-term best interest,
including restrictions on our ability to:

•

incur, assume or guarantee additional indebtedness;

issue certain disqualified stock;

pay dividends or distributions or redeem or repurchase capital stock;

prepay, redeem or repurchase debt that is junior in right of payment to the notes;

make loans or investments;

incur liens;

restrict dividends, loans or asset transfers from our restricted subsidiaries;

sell or otherwise dispose of assets, including capital stock of subsidiaries and sale/leaseback
transactions;

enter into transactions with affiliates; and

enter into new lines of business.

The indentures that govern the 6.375% Senior Notes and the 5.875% Senior Notes also limit the ability
of Lions Gate and our guarantors to consolidate or merge with or into, or sell substantially all of our assets
to, another person.

In addition, the restrictive covenants in the Senior Credit Facilities require us to maintain specified
financial ratios, tested quarterly. Our ability to meet those financial ratios and tests can be affected by events
beyond our control, and we may be unable to meet them.

A breach of the covenants or restrictions under the Senior Credit Facilities or the indentures that
govern the 6.375% Senior Notes and the 5.875% Senior Notes could result in an event of default under the
applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result
in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In
addition, an event of default under the Senior Credit Facilities would permit the lenders to terminate all
commitments to extend further credit pursuant to the revolving facility thereunder. Furthermore, if we were
unable to repay the amounts due and payable under the Senior Credit Facilities, the lenders thereof could
proceed against the collateral granted to them to secure the Senior Credit Facilities. In the event our lenders
or noteholders accelerate borrowings, we and our subsidiaries may not have sufficient assets to repay that
indebtedness.

As a result of these restrictions, we may be:

•

limited in how we conduct our business;

•

unable to raise additional debt or equity financing to operate during general economic or business
downturns; or

unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy. In addition, our
financial results, our substantial indebtedness and our credit ratings could adversely affect the availability
and terms of our financing.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to
increase significantly.

Borrowings under the Senior Credit Facilities are at variable rates of interest and expose us to interest

rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness
would increase even though the amount borrowed remained the same, and our net income and cash flows,
including cash available for servicing our indebtedness, will correspondingly decrease.

An increase in the ownership of our Class A voting common shares by certain shareholders could trigger a
change in control under the agreements governing our 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 of in
excess of a certain percentage of the total voting power of our Class A voting common shares, no par value
per share (the “Class A voting shares”).

Upon the occurrence of certain change of control events, the holders of the 6.375% Senior Notes
and the 5.875% Senior Notes may require us to repurchase all or a portion of such notes. Dr. Mark H.
Rachesky, M.D. and his affiliates, who collectively currently hold over 19% of our voting stock and 11% of
our non-voting common stock, are “Permitted Holders” for purposes of the indentures that govern the
6.375% Senior Notes and the 5.875% Senior Notes. Accordingly, certain increases of ownership or other
transactions involving Dr. Rachesky and his affiliates would not constitute a change of control under the
indentures that govern the 6.375% Notes and the 5.875% Senior Notes (in which case holders of the 6.375%
Notes and the 5.875% Senior Notes would not have a right to have their respective notes, as applicable,
repurchased), but could constitute a change of control under the other existing or future indebtedness of us
and our subsidiaries.

We may not be able to repurchase outstanding debt upon a qualifying change of control for such debt

because we may not have sufficient funds. Further, we may be contractually restricted under the terms of
the Senior Credit Facilities from repurchasing all of the 6.375% Senior Notes and the 5.875% Senior Notes
tendered by holders upon a change in control. Our failure to repurchase the 6.375% Senior Notes and the
5.875% Senior Notes upon a change in control would cause a default under the indentures that governs
such notes and a cross-default under the Senior Credit Facilities.

The Senior Credit Facilities will also provide that certain change of control events will result in an
event of default that permits lenders to accelerate the maturity of borrowings thereunder and, in the case of
the Senior Credit Facilities, to enforce security interests in the collateral securing such debt, thereby limiting
our ability to raise cash to purchase outstanding 6.375% Senior Notes and 5.875% Senior Notes, and
reducing the practical benefit of the offer-to-purchase provisions to the holders of the 6.375% Senior Notes
and the 5.875% Senior Notes. Any of our future debt agreements may contain similar provisions.

Risk Related to Tax Rules and Regulations

The Internal Revenue Service may not agree that we should be treated as a non-U.S. corporation for
U.S. federal tax purposes and may not agree that our U.S. affiliates should not be subject to certain adverse
U.S. federal income tax rules.

Under current U.S. federal tax law, a corporation is generally considered for U.S. federal tax purposes
to be a tax resident in the jurisdiction of its organization or incorporation. Because we are incorporated in
Canada, we would generally be classified as a non-U.S. corporation (and, therefore, a non-U.S. tax resident)
under these rules. However, Section 7874 of the Code (“Section 7874”) provides an exception to this
general rule under which a non-U.S. incorporated entity may, in certain circumstances, be treated as a
U.S. corporation for U.S. federal tax purposes.

Under Section 7874, if (a) the Starz stockholders held (within the meaning of Section 7874) 80% or
more (by vote or value) of our post-reclassification shares after the Starz merger by reason of holding Starz
common stock (the “80% ownership test,” and such ownership percentage the “Section 7874 ownership
percentage”), and (b) our “expanded affiliated group” did not have “substantial business activities” in
Canada when compared to the total business activities of such expanded affiliated group (the “substantial
business activities test”), we will be treated as a U.S. corporation for U.S. federal tax purposes. If the
Section 7874 ownership percentage of the Starz stockholders in Lions Gate after the merger was less than
80% but at least 60% (the “60% ownership test”), and the substantial business activities test was not met,
Starz and its U.S. affiliates (including the U.S. affiliates historically owned by us) may, in some
circumstances, be subject to certain adverse U.S. federal income tax rules (which, among other things, could
limit our ability to utilize certain U.S. tax attributes to offset U.S. taxable income or gain resulting from
certain transactions).

Based on the terms of the merger, the rules for determining share ownership under Section 7874 and

certain factual assumptions, Starz stockholders are believed to have held (within the meaning of Section
7874) less than 60% (by both vote and value) of our post-reclassification shares after the merger by reason
of holding shares of Starz common stock. Therefore, under current law, it is expected that we should not be
treated as a U.S. corporation for U.S. federal tax purposes and that Section 7874 should otherwise not apply
to us or our affiliates as a result of the merger.

However, due to the issuance by the Internal Revenue Service (the “IRS”) of a series of notices and
proposed, temporary, and final regulations, many of the rules under Section 7874 are relatively new and
complex. In particular, stock ownership for purposes of computing the Section 7874 ownership percentage
is subject to various adjustments under the Code and the Treasury regulations promulgated thereunder.
Some of the relevant determinations must be made based on facts as they existed at the time of closing of
the merger and the specific set of rules that were in effect on that date, making the determination of the
Section 7874 ownership percentage complex and subject to factual and legal uncertainties. Thus, there
can be no assurance that the IRS will agree with the position that we should not be treated as a
U.S. corporation for U.S. federal tax purposes or that Section 7874 does not otherwise apply as a result
of the merger.

In particular, on April 4, 2016, the IRS issued temporary and proposed Treasury regulations under

Section 7874 (the “2016 Section 7874 Regulations”), which, among other things, require certain
adjustments that generally increase, for purposes of the Section 7874 ownership tests, the percentage of the
stock of a foreign acquiring corporation deemed owned (within the meaning of Section 7874) by the former
shareholders of an acquired U.S. corporation by reason of holding stock in such U.S. corporation. On
January 13, 2017, the IRS published regulations which finalized with some modifications certain portions
of the 2016 Section 7874 Regulations and which included new temporary and proposed regulations.
Further, on July 11, 2018, the IRS published final regulations (along with the final regulations published on
January 13, 2017, the “Final Regulations”) adopting with some modifications the remaining 2016
Section 7874 Regulations.

For example, the Final Regulations disregard, for purposes of determining the Section 7874 ownership
percentage, (a) any “non-ordinary course distributions” (within the meaning of the temporary regulations)
made by the acquired U.S. corporation (such as Starz) during the 36 months preceding the acquisition,

including certain dividends and share repurchases, (b) potentially any cash consideration received by the
shareholders of such U.S. corporation in the acquisition to the extent such cash is, directly or indirectly,
provided by the U.S. corporation, (c) certain stock of the foreign acquiring corporation that was issued as
consideration in a prior acquisition of another U.S. corporation (or U.S. partnership) during the 36 months
preceding the signing date of a binding contract for the acquisition being tested, as well as (d) adopted rules
addressing certain post-inversion tax avoidance transactions. Taking into account the effect of the Final
Regulations, it is currently believed that the Section 7874 ownership percentage of the Starz stockholders in
Lions Gate after the merger is less than 60%. However, the Final Regulations are new and complex, there is
limited guidance regarding their application and some of the relevant determinations must be made based
on facts as they existed at the time of the closing of the acquisition. Accordingly, there can be no assurance
that the Section 7874 ownership percentage of the Starz stockholders after the merger will be less than 60%
as determined under the 2016 Section 7874 Regulations or the Final Regulations, as applicable,, or that the
IRS will not otherwise successfully assert that either the 80% ownership test or the 60% ownership test were
met after the merger.

If the 80% ownership test has been met after the merger and we were accordingly treated as a
U.S. corporation for U.S. federal tax purposes under Section 7874, we would be subject to substantial
additional U.S. tax liability. In addition, non-U.S. shareholders of Lions Gate would be subject to
U.S. withholding tax on the gross amount of any dividends paid by us to such shareholders (subject to an
exemption or reduced rate available under an applicable tax treaty). Regardless of any application of
Section 7874, we are expected to be treated as a Canadian tax resident for Canadian tax purposes.
Consequently, if we were to be treated as a U.S. corporation for U.S. federal tax purposes under Section
7874, we could be liable for both U.S. and Canadian taxes, which could have a material adverse effect on
our financial condition and results of operations.

If the 60% ownership test has been met, several adverse U.S. federal income tax rules could apply to

our U.S. affiliates (including Starz and its U.S. affiliates). In particular, in such case, Section 7874 could
limit the ability of such U.S. affiliates to utilize certain U.S. tax attributes (including net operating losses
and certain tax credits) to offset any taxable income or gain resulting from certain transactions, including
any transfers or licenses of property to a foreign related person during the 10-year period following the
merger. The 2016 Section 7874 Regulations and the Final Regulations generally expand the scope of these
rules. In addition, the 2016 Section 7874 Regulations and Final Regulations include rules that would apply
if the 60% ownership test has been met, which, in such situation, may limit our ability to restructure or
access cash earned by certain of its non-U.S. subsidiaries, in each case, without incurring substantial
U.S. tax liabilities. Moreover, in such case, Section 4985 of the Code and rules related thereto would impose
an excise tax on the value of certain stock compensation held directly or indirectly by certain “disqualified
individuals” at a rate currently equal to 15%.

Recent and proposed changes to the tax laws could result in Lions Gate being treated as a U.S. corporation for
U.S. federal tax purposes or in Starz and its U.S. affiliates (including the U.S. affiliates historically owned by
us) being subject to certain adverse U.S. federal income tax rules on financing and other activities.

As discussed above, under current law, we are expected to be treated as a non-U.S. corporation for
U.S. federal tax purposes and Section 7874 is not otherwise expected to apply as a result of the merger.
However, changes to Section 7874, or the U.S. Treasury regulations promulgated thereunder, could affect
our status as a non-U.S. corporation for U.S. federal tax purposes or could result in the application of
certain adverse U.S. federal income tax rules to Starz and its U.S. affiliates (including the U.S. affiliates
historically owned by us). Any such changes could have prospective or retroactive application. If we were to
be treated as a U.S. corporation for federal tax purposes or if Starz and its U.S. affiliates (including the
U.S. affiliates historically owned by us) were to become subject to such adverse U.S. federal income tax
rules, we and our U.S. affiliates could be subject to substantially greater U.S. tax liability than currently
contemplated.

Recent legislative proposals have aimed to expand the scope of U.S. corporate tax residence, including
in such a way as would cause us to be treated as a U.S. corporation if the management and control of Lions
Gate were determined to be located primarily in the U.S. In addition, recent legislative rules have aimed to
expand the scope of Section 7874, or otherwise address certain perceived issues arising in connection with

so-called inversion transactions. Such rules, if applicable on or prior to the date of the closing of the
merger, could cause us to be treated as a U.S. corporation for U.S. federal tax purposes or cause our
affiliates to be subject to adverse U.S. tax rules, in which case, we would be subject to substantially greater
U.S. tax liability than currently contemplated.

Recent legislative changes enacted as part of the Tax Cuts and Jobs Act (discussed in more detail
below), including the limitations on deduction of interest expense and the adoption of the base erosion and
anti-abuse tax, contain provisions intended to broaden the tax base and could affect our financing
arrangements. Further, additional legislative and other proposals (including the final Treasury regulations
under Section 385 of the Code issued by the IRS on October 13, 2016 (the “Final Section 385
Regulations”), if permitted to go into full effect, could cause us and our affiliates to be subject to certain
intercompany financing limitations, including with respect to their ability to deduct certain interest expense.
These recent and proposed legislative changes could cause us and our affiliates to recognize additional
taxable income and could have a significant adverse effect on us and our affiliates.

It is presently uncertain whether any such proposals or other legislative action relating to the scope of
U.S. tax residence, Section 7874 or so-called inversion transactions and inverted groups will be enacted into
law and/or how new laws will be interpreted or applied.

Future changes to U.S. and non-U.S. tax laws could adversely affect us.

The U.S. Congress, the Organisation for Economic Co-operation and Development (“OECD”) and
other government agencies in jurisdictions where we and our affiliates will conduct business have had an
extended focus on issues related to the taxation of multinational corporations. For the past several years, the
primary focus has been in the area of “base erosion and profit shifting,” including situations where
payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax
rates. As part of its so-called Base Erosion and Profit Shifting project, OECD and the G-20 developed
changes to numerous long-standing international tax principles. More recently, countries are increasingly
seeking ways to tax what is sometimes referred to as the digitalized economy.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law

are issued or applied. As discussed in more detail below, the U.S. recently enacted significant tax reform,
and certain provisions of the new law may adversely affect us. In addition, governmental tax authorities are
increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as
a number of other countries and organizations such as OECD, are actively considering changes to existing
tax laws that, if enacted, could increase our tax obligations in countries where we do business. If U.S. or
other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business,
financial condition or results of operations may be adversely impacted

Changes in foreign, state and local tax incentives may increase the cost of original programming content to
such an extent that they are no longer feasible.

Original programming requires substantial financial commitment, which can occasionally be offset by
foreign, state or local tax incentives. However, there is a risk that the tax incentives will not remain available
for the duration of a series. If tax incentives are no longer available or reduced substantially, it may result in
increased costs for us to complete the production, or make the production of additional seasons more
expensive. If we are unable to produce original programming content on a cost effective basis our business,
financial condition and results of operations would be materially adversely affected.

Changes to Tax Treaties could adversely affect us.

Over ninety jurisdictions have signed, or committed to sign, the Multilateral Convention to Implement

Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. The Multilateral Convention
modifies tax treaties signed by Canada and many jurisdictions where we or our affiliates may operate.
Although the United States is not a signatory to the Multilateral Convention, the U.S. Treasury has revised
the U.S. model income tax convention (the “model”), which is the baseline text used by the U.S. Treasury
to negotiate tax treaties. The revisions made to the model address certain aspects of the model by modifying
existing provisions and introducing entirely new provisions. Specifically, the new provisions target

(a) permanent establishments subject to little or no foreign tax, (b) special tax regimes, (c) expatriated
entities subject to Section 7874, (d) the anti-treaty shopping measures of the limitation on benefits article
and (e) subsequent changes in treaty partners’ tax laws.

With respect to new model provisions pertaining to expatriated entities, because it is expected that the
Starz merger will not result in the creation of an expatriated entity as defined in Section 7874, payments of
interest, dividends, royalties and certain other items of income by or to Starz and/or its U.S. affiliates to or
from non-U.S. persons would not be expected to be subject to such provisions (which, if applicable, could
cause such payments to become subject to full withholding tax), even if applicable treaties were
subsequently amended to adopt the new model provisions. However, as discussed above, the rules under
Section 7874 are relatively new, complex and are the subject of current and future legislative and regulatory
changes. In addition, because each tax treaty is a result of negotiation, the language used in a particular
treaty often departs from the model. Accordingly, even if we are not impacted by the language of the
current model, there can be no assurance that we will not be affected by the language agreed to in a
particular treaty.

Our tax rate is uncertain and may vary from expectations.

There is no assurance that we will be able to maintain any particular worldwide effective corporate tax

rate because of uncertainty regarding the tax policies jurisdictions in which we and our affiliates operate.
Our actual effective tax rate may vary from our expectations, and such variance may be material.
Additionally, tax laws or their implementation and applicable tax authority practices in any particular
jurisdiction could change in the future, possibly on a retroactive basis, and any such change could have an
adverse impact on us and our affiliates.

Legislative or other governmental action in the U.S. could adversely affect our business.

Legislative action may be taken by the U.S. Congress that, if ultimately enacted, could limit the
availability of tax benefits or deductions that we currently claim, override tax treaties upon which we rely,
or otherwise increase the taxes that the U.S. imposes on our worldwide operations. Such changes could
materially adversely affect our effective tax rate and/or require us to take further action, at potentially
significant expense, to seek to preserve our effective tax rate. In addition, if proposals were enacted that had
the effect of limiting our ability as a Canadian company to take advantage of tax treaties with the U.S., we
could incur additional tax expense and/or otherwise incur business detriment.

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. In addition, due to economic and political
conditions, tax rates in various jurisdictions may be subject to significant change. Our future effective tax
rates could be affected by changes in tax laws or regulations or the interpretation thereof (including those
affecting the allocation of profits and expenses to differing jurisdictions), by changes in the amount of
revenue or earnings that we derive from international sources in countries with high or low statutory tax
rates, by changes in the valuation of our deferred tax assets and liabilities, by changes in the expected timing
and amount of the release of any tax valuation allowance, or by the tax effects of stock-based
compensation. Unanticipated changes in our effective tax rates could affect our future results of operations.

Further, 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.

Based on our current assessment, we 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.

Guidance, regulations, or technical corrections issued in connection with the Tax Cuts and Jobs Act could
adversely impact our effective tax rate and profile.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law, making
significant changes to the taxation of U.S. business entities. The changes included in the Tax Act are broad
and complex. Among other things, the Tax Act contains significant changes to U.S. federal corporate
taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of
21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain
small businesses), a new base erosion anti-abuse tax, limitation of the deduction for net operating losses to
80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of
offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on
foreign earnings (subject to certain important exceptions), immediate deductions for certain new
investments instead of deductions for depreciation expense over time, and modifying or repealing many
business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall
impact of the Tax Act on us is uncertain and our business and financial condition could be adversely
affected. The impact of the Tax Act on holders of our stock could also be adverse. Further, the Tax Act
may reduce the appeal of a foreign corporation acquiring a U.S. corporation if the 60% or greater
ownership test (discussed above) is met post-merger, as it can now result in a recapture by the U.S.
corporation of its one time taxation of offshore earnings at a full 35% rate without foreign tax credits (as
opposed to a 15.5% or lower rate with such credits), an increased base erosion anti-abuse tax liability, and
the taxation of shareholders on distributions at ordinary income (as opposed to qualified dividend) rates.

The impacts of the Tax Act may differ from the estimates provided elsewhere in this report, possibly
materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to
address questions that arise because of the Tax Act, any changes in accounting standards for income taxes
or related interpretations in response to the Tax Act, or any updates or changes to estimates we have
utilized to calculate the impacts, including impacts from changes to current year earnings estimates. Given
the unpredictability of possible changes and their potential interdependency, it is very difficult to assess
whether the overall effect of such potential tax changes would be cumulatively positive or negative for our
earnings and cash flow, but such changes could adversely impact our financial results. In addition, it is
uncertain if and to what extent various states will conform to the newly enacted federal tax law. We urge our
shareholders to consult with their legal and tax advisors with respect to this legislation and the potential tax
consequences of investing in or holding our stock.

Economic conditions and regulatory changes leading up to and following the United Kingdom’s likely exit from
the European Union could have a material adverse effect on our business and results of operations.

In June 2016, voters in the United Kingdom, or U.K., approved the country’s exit from the European

Union, and the U.K. government has commenced the legal process of leaving the European Union,
typically referred to as Brexit. While the full effects of Brexit will not be known for some time, Brexit could
cause disruptions to, and create uncertainty surrounding, our business and results of operations. The most
immediate effect has been significant volatility in global equity and debt markets and currency exchange
rate fluctuations. Ongoing global market volatility and a deterioration in economic conditions due to
uncertainty surrounding Brexit could disrupt the markets in which we operate and lead our customers to
closely monitor their costs and delay financial spending decisions.

The effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets,
either during a transitional period or more permanently. The measures could potentially disrupt the markets
we serve and may cause us to lose customers and employees. In addition, Brexit could lead to legal
uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws
to replace or replicate. Any of these effects of Brexit could materially adversely affect our business, results
of operations and financial condition.

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, where we occupy
192,584 square feet (per a lease that expires in August 2023).

In addition, we lease the following properties used by our Motion Picture, Television Production and

Media Networks segments:

•

280,000 square feet at 8900 Liberty Circle, Englewood, Colorado (per a lease that expires in
December 2023);

93,670 square feet at 12020 Chandler Blvd., Valley Village, California (per a lease that expires in
December 2027);

60,116 square feet at 1647 Stewart Street, Santa Monica, California (per a lease that expires in
December 2028);

34,332 square feet at 530 Fifth Avenue, New York, New York (per a lease that expires in August
2028);

22,992 square feet at 2600 Colorado Avenue, Santa Monica, California (per a lease that expires in
January 2020);

11,907 square feet at 2401 W. Big Beaver Road, Troy, Michigan (per a lease that expires in
September 2019);

11,243 square feet at 45 Mortimer Street, London, United Kingdom (per a lease that expires in
July 2029);

8,794 square feet at 9777 Wilshire Blvd., Beverly Hills, California (per a lease that expires in
March 2020);

1,968 square feet at 1235 Bay Street, Toronto, Ontario (per a lease that expires in December 2020);

1,645 square feet at A6 Gonti Road, Beijing, China (per a lease that expires in June 2020);

1,200 square feet at 205, Landmark Building, New Link Road, Mumbai, India (per a lease that
expires in October 2020);

975 square feet at 3 Boulevard Royal, Luxembourg City, Luxembourg (per a lease that expires in
May 2021); and

620 square feet at Millennium City 5, 418 Kwun Tong Road, Kwun Tong, Hong Kong (per a lease
that expires in October 2019).

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.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common shares were previously listed on the NYSE under the symbols “LGF.” Effective
December 9, 2016, each then existing Lionsgate common share was converted into 0.5 shares of a newly
issued class of Class A voting shares and 0.5 shares of a newly issued class of Lionsgate Class B non-voting
shares, no par value per share (the “Class B non-voting shares”). Our Class A voting shares are listed on the
NYSE under the symbol “LGF.A”. Our Class B non-voting shares are listed on the NYSE under the
symbol “LGF.B”.

Holders

As of May 20, 2019, there were approximately 529 and 708 shareholders of record of our Class A

voting shares and Class B non-voting shares, respectively.

Dividends

The amount of any future 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.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this item is incorporated by reference to our Proxy Statement for our 2019
Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal
year ended March 31, 2019.

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 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.

No common shares were purchased by us during the year ended March 31, 2019.

Additionally, during the three months ended March 31, 2019, 16,173 Class A voting shares and
204,963 Class B non-voting shares were withheld upon the vesting of restricted share units and share
issuances to satisfy minimum statutory federal, state and local tax withholding obligations.

Unregistered Sales of Equity Securities

AT&T

On October 21, 2016, the Company, its indirect subsidiary Lions Gate Entertainment Inc. (“LGEI”)

and AT&T Media Holdings entered into a Securities Issuance and Payment Agreement (the “Securities
Issuance Agreement”), pursuant to which the Company and LGEI agreed to issue to AT&T Media
Holdings, Inc. (“AT&T”) $50 million in, at LGEI’s election, (a) an equal number of the Company’s Class A
voting shares and Class B non-voting shares, (b) cash or (c) a combination thereof, and paid in three
$16.67 million annual installments, beginning on the first anniversary of December 8, 2016, the
consummation of the Company’s acquisition of Starz. The Company’s Class A voting shares and Class B
non-voting shares will be deemed to have a value equal to the 30-day volume weighted average price of the
Company’s Class A voting shares and Class B non-voting shares, respectively, as of the business day
immediately prior to the applicable payment date.

The Company entered into the Securities Issuance Agreement in connection with Starz’s multi-year

extensions of its affiliation agreements with both AT&T Services, Inc. and DIRECTV, LLC (the
“Affiliation Agreements”). The Securities Issuance Agreement became effective upon the closing of the
merger and will terminate upon certain terminations of the Affiliation Agreements. The Company’s Class A
voting shares and Class B non-voting shares, if any, to be issued pursuant to the Securities Issuance
Agreement are expected to be issued as a private placement to AT&T in reliance on Section 4(a)(2) of the
Securities Act of 1933, as amended.

3 Arts Entertainment

On May 29, 2018, the Company and LGEI entered into a Membership Interest Purchase Agreement

with 3 Arts Entertainment (“3 Arts”) and certain other sellers therewith (the “Purchase Agreement”)
pursuant to which the Company purchased a 51% membership interest in 3 Arts. The purchase price was
approximately $166.6 million, of which 50% was paid in cash at closing, 32.5% was paid in the Company’s
Class B non-voting shares at closing, and 17.5% will be paid in the Company’s Class B non-voting shares on
the one-year anniversary of closing, subject to certain conditions. The number of shares issued and to be
issued was determined by dividing the dollar value of the portion of the purchase price to be paid by the
daily weighted average closing price of the Company’s Class B non-voting shares on the New York Stock
Exchange for the twenty (20) consecutive trading days immediately preceding the closing date. The
Company’s Class B non-voting shares to be issued pursuant to the Purchase Agreement are expected to be
issued as a private placement to 3 Arts in reliance on Section 4(a)(2) of the Securities Act of 1933, as
amended.

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, 2014
and ending March 31, 2019. All values assume that $100 was invested on March 31, 2014 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.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Lions Gate Entertainment Corporation, the NYSE Composite Index
and the Dow Jones US Media Sector Index

$160

$140

$120

$100

$80

$60

$40

$20

3/14

3/15

3/16

12/9/16

3/17

3/18

3/19

Lions Gate Entertainment Corporation-Class A

Lions Gate Entertainment Corporation-Class B

NYSE Composite

Dow Jones US Media Sector

*$100 invested on 3/31/14 in stock or index, including reinvestment of dividends.
Fiscal year ending March 31.

Lions Gate Entertainment

Corporation – Class A(1) . . . . .

$100.00

$127.95

$ 83.35

$101.77

$ 99.32

$ 60.60

3/14

3/15

3/16

12/9/16

3/17

3/18

3/19

Lions Gate Entertainment

Corporation – Class B(1) . . . . .
NYSE Composite . . . . . . . . . . .
. . .
Dow Jones US Media Sector

$100.00
$100.00

$106.02
$115.47

$101.87
$112.93

$100.00

$ 92.45
$117.69
$136.38

$ 91.66
$130.65
$128.10

$ 57.94
$136.69
$143.34

(1)

Immediately prior to the December 8, 2016 consummation of the Starz merger, we effected the
reclassification of our capital stock, pursuant to which each existing Lionsgate common share was
converted into 0.5 shares of a newly issued Class A voting shares and 0.5 shares of a newly issued
Class B non-voting shares, subject to the terms and conditions of the merger agreement.

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 3 Arts Entertainment from its

acquisition date of May 29, 2018 onwards, Starz from its acquisition date of December 8, 2016 onwards,
and Pilgrim Media Group from its acquisition date of November 12, 2015 onwards. Due to the acquisitions
of 3 Arts Entertainment, Starz, and Pilgrim Media Group, the Company’s results of operations for the
years ended March 31, 2019, 2018, 2017 and 2016 and financial positions as at March 31, 2019, 2018, 2017
and 2016 are not directly comparable to prior reporting periods.

Year Ended March 31,

2019

2018

2017

2016

2015

(Amounts in millions, except per share amounts)

Statement of Operations Data:

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,680.5

$4,129.1

$3,201.5

$2,347.4

$2,399.6

Expenses:

Direct operating . . . . . . . . . . . . . . . . . . . . . . .
Distribution and marketing . . . . . . . . . . . . . . .
General and administration . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Restructuring and other

Total expenses . . . . . . . . . . . . . . . . . . . . . . .

Operating income (loss) . . . . . . . . . . . . . . . . . . . .

2,028.2
835.5
445.4
163.4
78.0

3,550.5

130.0

2,309.6
897.6
454.4
159.0
59.8

3,880.4

248.7

1,903.8
806.8
355.4
63.1
88.7

3,217.8

1,415.3
661.8
262.4
13.1
19.8

2,372.4

1,315.8
591.5
252.8
6.6
10.7

2,177.4

(16.3)

(25.0)

222.2

Interest expense

Interest expense . . . . . . . . . . . . . . . . . . . . . . .
Interest on dissenting shareholders’ liability . . . .

Total interest expense . . . . . . . . . . . . . . . . . .
Shareholder litigation settlements
. . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Gain (loss) on investments
. . . . . . . . . . . . . . .
Equity interests income (loss)

Income (loss) before income taxes . . . . . . . . . . . . .

Income tax benefit (provision) . . . . . . . . . . . . . . .

(163.6)
(35.3)

(198.9)
(114.1)
12.0
(4.7)
(1.9)
(87.6)
(42.9)

(308.1)

8.5

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

(299.6)

Less: Net loss attributable to noncontrolling

(137.2)
(56.5)

(193.7)
—
10.4
—
(35.7)
171.8
(52.8)

148.7

319.4

468.1

(99.7)
(15.5)

(115.2)
—
6.4
—
(40.4)
20.4
10.7

(134.4)

148.9

14.5

(54.9)
—

(54.9)
—
1.9
—
—
—
44.2

(33.8)

76.5

42.7

(52.5)
—

(52.5)
—
2.9
—
(11.7)
—
52.5

213.4

(31.6)

181.8

interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.4

5.5

0.3

7.5

—

Net income (loss) attributable to Lions Gate

Entertainment Corp. shareholders . . . . . . . . . . .

$ (284.2) $ 473.6

14.8

50.2

$ 181.8

Per share information attributable to Lions Gate

Entertainment Corp. shareholders:

Basic net income (loss) per common share . . . . . . . .

$ (1.33) $

Diluted net income (loss) per common share . . . . . .

$ (1.33) $

2.27

2.15

0.09

0.34

0.33

1.31

1.23

Year Ended March 31,

2019

2018

2017

2016

2015

(Amounts in millions, except per share amounts)

Weighted average number of common shares

outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

213.7

208.4

220.4

165.0

172.2

Dividends declared per common share . . . . . . . . . .

0.18

0.09

Balance Sheet Data (at end of period):

Cash and cash equivalents . . . . . . . . . . . . . . . . . .

$ 184.3

$ 378.1

$ 321.9

Investment in films and television programs and

program rights(1)

. . . . . . . . . . . . . . . . . . . . . .

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt, net(2)
. . . . . . . . . . . . . . . . . . . . . . . .
Production loans, net . . . . . . . . . . . . . . . . . . . . .
Dissenting shareholders’ liability(3) . . . . . . . . . . . .
Redeemable noncontrolling interests
. . . . . . . . . .
Total Lions Gate Entertainment Corp.

1,967.7

8,408.9
2,904.4

385.4
—
127.6

1,945.2

8,967.6
2,557.4

352.5
869.3
101.8

1,991.2

9,196.9
3,124.9

353.3
812.9
93.8

shareholders’ equity . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,918.7
2,921.9

3,155.9
3,156.9

2,514.4
2,514.4

148.5

154.1

139.0

151.8

0.34

0.26

57.7

$ 102.7

1,457.6

3,834.2
865.2

1,381.8

3,264.0
686.6

690.0
—
90.5

850.3
850.3

600.5
—
—

842.3
842.3

(1) Total of investment in films and television programs and current and long-term portion of program

rights.

(2) Total debt includes corporate debt, convertible senior subordinated notes and capital lease obligations,

net of unamortized discount and debt issuance costs, if applicable.

(3) Dissenting shareholders’ liability was classified as a current liability as of March 31, 2018, and as a

non-current liability as of March 31, 2017 (see Note 17 to our consolidated financial statements).

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS.

Overview

Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” “Lions Gate,” “we,” “us” or “our”) is a

global content leader whose films, television series, digital products and linear and over-the-top platforms
reach next generation audiences around the world. In addition to our filmed entertainment leadership,
Lionsgate content drives a growing presence in interactive and location-based entertainment, video games,
esports and other new entertainment technologies. Lionsgate’s content initiatives are backed by a nearly
17,000-title film and television library and delivered through a global sales and licensing infrastructure. We
classify our operations through three reporting segments: Motion Picture, Television Production, and Media
Networks (see further discussion below).

Starz Merger

On December 8, 2016, upon shareholder approval, pursuant to an Agreement and Plan of Merger
dated June 30, 2016 (“Merger Agreement”), Lionsgate and Starz consummated a merger, under which
Lionsgate acquired Starz for a combination of cash and common stock (the “Starz Merger”).

Revenues

Our revenues are derived from the Motion Picture, Television Production and Media Networks
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, 2019, 2018 and 2017.

Motion Picture

Our Motion Picture 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.

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
(pay-per-view and video-on-demand platforms, electronic sell through, and digital rental). 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.

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 revenues are derived from (1) licensing of our productions, acquired

International.
films, our catalog product and libraries of acquired titles to international distributors, on a
territory-by-territory basis; and (2) the direct distribution of our productions, acquired films, and
our catalog product and libraries of acquired titles in the United Kingdom.

Other. Other revenues are derived from, among others, the licensing of our film and television
and related content (games, music, location-based entertainment royalties, etc.) to other ancillary
markets.

Television Production

Our Television Production segment includes revenues derived from the following:

•

Television. Television revenues are derived from the licensing to domestic markets (linear pay,
basic cable, free television markets, syndication) of scripted and unscripted series, television
movies, mini-series and non-fiction programming. Television revenues include fixed fee
arrangements as well as arrangements in which the Company earns advertising revenue from the
exploitation of certain content on television networks. Television revenues also include revenue
from licenses to subscription-video-on-demand (“SVOD”) platforms in which the initial license of
a television series is to an SVOD platform.

International revenues are derived from the licensing and syndication to

International.
international markets of 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.

Other. Other revenues are derived from, among others, the licensing of our television programs
to other ancillary markets, the sales and licensing of music from the television broadcasts of our
productions, and from commissions earned and executive producer fees related to talent
management.

Media Networks

Our Media Networks segment includes revenues derived from the following product lines:

•

Starz Networks. Starz Networks’ revenues are derived from the domestic distribution of our
STARZ branded premium subscription video services pursuant to affiliation agreements with U.S.
multichannel video programming distributors (“MVPDs”), including cable operators, satellite
television providers and telecommunications companies, and over-the-top (“OTT”) (collectively,
“Distributors”), and on a direct-to-consumer basis.

STARZPLAY International. STARZPLAY International revenues are primarily derived from
OTT distribution of the Company’s STARZ branded premium subscription video services
internationally.

Streaming Services. Streaming services revenues are derived from the Lionsgate legacy start-up
direct to consumer streaming services on SVOD platforms.

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,

amortization of programming production or acquisition costs and programming related salaries,
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 or

television program to parties associated with the film or television program, including producers, writers,
directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen
Actors Guild — American Federation of Television and Radio Artists, Directors Guild of America, and
Writers Guild of America, based on the performance of the film or television program 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. Marketing costs for Media Networks includes advertising, consumer marketing, distributor
marketing support and other marketing costs. In addition, distribution and marketing costs includes our
Media Networks segment operating costs for the direct-to-consumer service, transponder expenses and
maintenance and repairs.

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 1 to our consolidated
financial statements.

Accounting for Films and Television Programs and Program Rights. 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 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 or 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 a 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, audience test results when
available, 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, whether released or unreleased, 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 as discussed above, 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.

Program rights for films and television programs (including original series) exhibited by the Media

Networks segment are generally amortized on a title-by-title or episode-by-episode basis over the
anticipated number of exhibitions or license period. We estimate the number of exhibitions based on the
number of exhibitions allowed in the agreement and the expected usage of the content. Certain other
program rights are amortized to expense on a straight-line basis over the respective lives of the agreements.
Programming rights may include rights to more than one exploitation window under its output and library
agreements. For films with multiple windows, the license fee is allocated between the windows based upon
the proportionate estimated fair value of each window which generally results in the majority of the cost
allocated to the first window on newer releases. Programming costs vary due to the number of airings and
cost of our original series, the number of films licensed and the cost per film paid under our output and
library programming agreements.

The cost of the Media Networks’ segments produced original content generally represents the license
fees charged from the Television Production segment which are eliminated in consolidation. The amount
associated with the pay television market is reclassified to program rights when the program is aired and the
portion attributable to the ancillary markets remains in investment in films and television programs. The
cost of the Media Networks’ third-party licensed content is allocated between the pay television market
distributed by the Media Networks’ segment and the ancillary revenue markets (e.g., home video, digital
platforms, international television, etc.) distributed by the Television Production segment based on the
estimated relative fair values of these markets. Estimates of fair value for the pay television and ancillary
markets involve uncertainty as well as estimates of ultimate revenue. All the costs of programming
produced by the Television Production segment are included in investment in films and television programs
and program rights, net and are classified as long term. Amounts included in program rights, other than
internally produced programming, that are expected to be amortized within a year from the balance sheet
date are classified as short-term.

Changes in management’s estimate of the anticipated exhibitions of films and original series on our
networks could result in the earlier recognition of our programming costs than anticipated. Conversely,
scheduled exhibitions may not capture the appropriate usage of the program rights in current periods which
would lead to the write-off of additional program rights in future periods and may have a significant impact
on the Company’s future results of operations and financial position.

Revenue Recognition. Our Motion Picture and Television Production segments generate revenue
principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital
media and packaged media), television, and international market places. Our Media Networks segment
generates revenue primarily from the distribution of our STARZ branded premium subscription video
services and, to a lesser extent, direct-to-consumer content streaming services.

Our content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales

or usage based royalties. Our fixed fee or minimum guarantee licensing arrangements in the television,
digital media and international markets may, in some cases, include multiple titles, multiple license periods
(windows) with a substantive period in between the windows, rights to exploitation in different media, or
rights to exploitation in multiple territories, which may be considered distinct performance obligations.

When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the
arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of
relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window,
media or territory) are recognized when the content has been delivered, and the window for the exploitation
right in that territory has begun, which is the point in time at which the customer is able to begin to use and
benefit from the content.

Sales or usage based royalties represent amounts due to us based on the “sale” or “usage” of our

content by the customer, and revenues are recognized at the later of when the subsequent sale or usage
occurs, or the performance obligation to which some or all the sales or usage-based royalty has been
allocated has been satisfied (or partially satisfied). Generally, when we license completed content (with
standalone functionality, such as a movie, or television show), our performance obligation will be satisfied
prior to the sale or usage. When we license intellectual property that does not have stand-alone functionality
(e.g., brands, themes, logos, etc.), our performance obligation is generally satisfied in the same period as the
sale or usage. The actual amounts due to us under these arrangements are generally not reported to us until
after the close of the reporting period. We record revenue under these arrangements for the amounts due
and not yet reported to us based on estimates of the sales or usage of these customers and pursuant to the
terms of the contracts. Such estimates are based on information from our customers, historical experience
with similar titles in that market or territory, the performance of the title in other markets and/or data
available data in the industry. While we believe these estimates are reasonable estimates of the amounts due
under these arrangements, such estimated amounts could differ from the actual amounts to be subsequently
reported by the customer, which could be higher or lower than our estimates, and could result in an
adjustment to revenues in future periods.

Revenue from the theatrical release of feature films are treated as sales or usage-based royalties and

recognized starting at the exhibition date and based on our participation in box office receipts of the
theatrical exhibitor.

Digital media revenue sharing arrangements are recognized as sales or usage based royalties.

Revenue from the sale of physical discs (DVDs, Blu-ray or 4K Ultra HD), referred to as “Packaged

Media”, 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).

Revenue from commissions are recognized as such services are provided.

Media Networks revenues may be based on a fixed fee, subject to nominal annual escalations, or a
variable fee (i.e., a fee based on number of subscribers who receive our networks or other factors). Media
Networks programming revenue is recognized over the contract term based on the continuous delivery of
the content to the distributor. The variable distribution fee arrangements represent sales or usage based
royalties and are recognized over the period of such sales or usage by the Company’s distributor, which is
the same period that the content is provided to the distributor. Payments to distributors for marketing
support costs for which Starz receives a direct benefit are recorded as distribution and marketing costs.

Sales Returns Allowance. Revenues are recorded net of estimated returns and other allowances. We

estimate reserves for Packaged Media 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 Packaged
Media 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 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
$4.2 million, $6.0 million and $5.8 million on our total revenue in the fiscal years ended March 31, 2019,
2018, and 2017, 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 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 in these jurisdictions. We recognize a future tax benefit to
the extent that realization of such benefit is more likely than not on a jurisdiction by jurisdiction basis;
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 each of the jurisdictions which have these
deferred tax assets. However, the assessment as to whether there will be sufficient taxable income in a
jurisdiction to realize our net deferred tax assets in that jurisdiction 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 in a particular jurisdiction, we may need to record a valuation allowance for
all or a portion of our deferred tax assets through a charge to our income tax provision. As of March 31,
2019, we recorded a valuation allowance of $401.1 million against certain U.S. and foreign deferred tax
assets that may not be realized on a more likely than not basis.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law, making

significant changes to the taxation of U.S. business entities. The Tax Act reduced the U.S. corporate income
tax rate from 35% to 21%, imposed a one-time transition tax in connection with the move from a worldwide
tax system to a territorial tax system, provided for accelerated deductions for certain U.S. film production
costs, imposed limitations on certain tax deductions such as executive compensation in future periods, and
included numerous other provisions. We previously reported provisional amounts reflecting our reasonable
estimates of the impact of the Tax Act. The estimated impact of the Tax Act was based on a preliminary
review of the new law, subject to revision based upon further analysis and interpretation of the Tax Act.
During the quarter ended December 31, 2018, we completed our analysis and our accounting for the Tax
Act, and there were no material adjustments to our provisional estimates.

Our effective tax rates differ from the federal statutory rate and are 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, further interpretation and
legislative guidance regarding the new Tax Act, changes in valuation allowances on our deferred tax assets,
tax planning strategies available to us and other discrete items.

Goodwill. Goodwill is allocated to our reporting units, which are our operating segments or one level

below our operating segments (component level). Reporting units are determined by the discrete financial
information available for the component and whether it is regularly reviewed by segment management.
Components are aggregated into a single reporting unit if they share similar economic characteristics. Our
reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances
at March 31, 2019, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of
$2.04 billion), and each of our Television (goodwill of $309 million) and talent management (goodwill of
$93 million) businesses, both of which are part of our Television Production segment.

Goodwill is reviewed for impairment each fiscal year or between the annual tests if an event occurs or
circumstances change that indicates 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. A
goodwill impairment loss would be recognized for the amount that the carrying amount of a reporting unit,
including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting
unit. An entity may perform a qualitative assessment of the likelihood of the existence of a goodwill
impairment. The qualitative assessment is an evaluation, based on all identified events and circumstances
which impact the fair value of the reporting unit. If we believe that as a result of our qualitative assessment
it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a
quantitative impairment test is not required but may be performed at the option of the Company.

For fiscal 2018, we performed a qualitative impairment assessment for all reporting units. This
assessment included, but was 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.

For fiscal 2019, due primarily to the decline in the market price of our common shares, we performed a

quantitative impairment assessment for all of our reporting units. The quantitative assessment requires
determining the fair value of our reporting units. The determination of fair value requires considerable
judgment and requires assumptions and estimates of many factors, including revenue and market growth,
operating margins and cash flows, market multiples and discount rates.

In performing the quantitative assessment, the Company determined the fair value of its reporting

units by using a combination of discounted cash flow (“DCF”) analyses and market-based valuation
methodologies. The results of these valuation methodologies were weighted equally (each 50%). The models
relied on significant judgments and assumptions surrounding general market and economic conditions,
short-term and long-term growth rates, discount rates, tax rates, and detailed management forecasts of
future cash flow and operating margin projections, and other assumptions, all of which were based on our
internal forecasts of future performance as well as historical trends. The DCF analysis of fair values were
determined primarily by discounting estimated future cash flows, which included perpetual nominal growth
rates ranging from 1.5% to 3.5%, at a weighted average cost of capital (discount rate) ranging from 10.5% to
11%, based on the risk of achieving the projected cash flows, including the risk applicable to the reporting
unit, industry and market as a whole. The market-based valuation method utilized EBITDA multiples
from guideline public companies operating in similar industries and a control premium. Fair value
determinations require considerable judgment and are sensitive to changes in underlying assumptions and
factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the
annual goodwill impairment test will prove to be an accurate prediction of the future.

Based on our quantitative impairment assessment, we determined that the fair value of three of our

reporting units exceeded their respective carrying values by more than 20%, and the goodwill for those
reporting units was not considered at risk of impairment. The fair value of our Television business
reporting unit exceeded its carrying value by just under 20%. We evaluated the sensitivity of our most
critical assumptions used in the fair value analysis of our Television reporting unit, including the discount
rate and perpetual nominal growth rate. Based on the sensitivity analysis on the fair value of our Television
business reporting unit, we determined that an increase in the discount rate of up to 0.65% or a reduction of
the perpetual nominal growth rate of up to 1.34% would not have impacted the test results, assuming no
changes to other factors. Management will continue to monitor all of its reporting units for changes in the
business environment that could impact recoverability in future periods. The recoverability of goodwill is
dependent upon the continued growth of revenue and cash flows from our business activities. Examples of
events or circumstances that could result in changes to the underlying key assumptions and judgments used
in our goodwill impairment tests, and ultimately impact the estimated fair value of our reporting may
include adverse macroeconomic conditions; volatility in the equity and debt markets which could result in
higher weighted-average cost of capital; the commercial success of our television programming and our
motion pictures; our continual contractual relationships with our customers; and changes in consumer
behavior. While historical performance and current expectations have resulted in fair values of our
reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an
impairment charge may need to be recorded in the future.

Consolidation and Other Investments. We consolidate entities in which we own more than 50% of the

voting common 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
common 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 common stock, or do
not exercise significant influence over operating and financial policies, are recorded at fair value using
quoted market prices if the investment has a readily determinable fair value. If an equity investment’s fair

value is not readily determinable, we will recognize it at cost less any impairment, adjusted for observable
price changes in orderly transactions in the investees’ securities that are identical or similar to our
investments in the investee. The unrealized gains and losses and the adjustments related to the observable
price changes are recognized in net income (loss).

We regularly review our investments for impairment, including when the carrying value of an
investment exceeds its market value and whether the decline in value is other-than-temporary. For
investments accounted for using the equity method of accounting or equity investments without a readily
determinable fair value, we evaluate information available (e.g., budgets, business plans, financial
statements, etc.) in addition to quoted market prices, if any, in determining whether an
other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include
recurring operating losses, credit defaults and subsequent rounds of financing at an amount below the cost
basis of our investment. The estimation of fair value and whether an other-than-temporary impairment has
occurred requires the application of significant judgment and future results may vary from current
assumptions.

If we determine 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. Factors that are considered by us in
determining whether an other-than-temporary decline in value has occurred include (i) the market value of
the security in relation to its cost basis, (ii) the financial condition of the investee, and (iii) our intent and
ability to retain the investment for a sufficient period of time to allow for recovery in the market value of
the investment.

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.

Recent Accounting Pronouncements

See Note 1 to the accompanying consolidated financial statements for a discussion of recent

accounting guidance.

RESULTS OF OPERATIONS

Fiscal 2019 Compared to Fiscal 2018

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the fiscal years ended

March 31, 2019 and 2018:

Year Ended March 31,

Increase (Decrease)

2019

2018

Amount

Percent

(Amounts in millions)

Revenues

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,464.4

$1,822.1

$(357.7)

(19.6)%

Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

920.9

Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,461.0

1,033.2

1,411.2

(112.3)

(10.9)%

49.8

3.5%

Intersegment eliminations . . . . . . . . . . . . . . . . . . . . . . . . . .

(165.8)

(137.4)

(28.4)

20.7%

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,680.5

4,129.1

(448.6)

(10.9)%

Expenses:

Direct operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and marketing . . . . . . . . . . . . . . . . . . . . . . . . .
General and administration . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder litigation settlements . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity interests income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Net loss attributable to noncontrolling interest . . . . . . . .

Net income (loss) attributable to Lions Gate Entertainment Corp.

2,028.2
835.5
445.4
163.4
78.0

3,550.5

130.0

(198.9)
(114.1)
12.0
(4.7)
(1.9)
(87.6)
(42.9)

(308.1)
8.5

(299.6)

15.4

2,309.6
897.6
454.4
159.0
59.8

3,880.4

(281.4)
(62.1)
(9.0)
4.4
18.2

(329.9)

(12.2)%
(6.9)%
(2.0)%
2.8%
30.4%

(8.5)%

248.7

(118.7)

(47.7)%

2.7%
n/a
15.4%
n/a
(94.7)%
(151.0)%
(18.8)%

(307.2)%
(97.3)%

(193.7)

(5.2)
— (114.1)
1.6
(4.7)
33.8
(259.4)
9.9

10.4
—
(35.7)
171.8
(52.8)

(456.8)
(310.9)

148.7
319.4

468.1

5.5

(767.7)

(164.0)%

9.9

180.0%

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (284.2) $ 473.6

$(757.8)

(160.0)%

nm — Percentage not meaningful

Revenues. Consolidated revenues decreased in fiscal 2019, due to a decrease in Motion Picture
revenues, and to a lesser extent, Television Production revenues and higher intersegment eliminations
principally related to higher intersegment revenues in the Television Production segment, partially offset by
increased Media Networks revenues.

The decrease in Motion Picture revenue was primarily due to lower home entertainment and
international revenue generated from the Fiscal 2019 and Fiscal 2018 Theatrical Slates in fiscal 2019, as
compared to the revenue generated from the Fiscal 2018 and Fiscal 2017 Theatrical Slates in fiscal 2018. In

addition, theatrical revenue decreased due to a significant contribution of revenue in fiscal 2018 from
Wonder, and fewer Feature Films released in fiscal 2019 as compared to fiscal 2018. The decrease in
Television Production revenue was due to lower domestic television, international and home entertainment
revenue, offset partially by increased other revenue. The increase in Media Networks revenue was primarily
driven by OTT revenue growth. See further discussion in the Segment Results of Operations section below.

Direct Operating Expenses. Direct operating expenses by segment were as follows for the fiscal years

ended March 31, 2019 and 2018:

Year Ended March 31,

2019

2018

Increase (Decrease)

% of
Segment
Revenues

Amount

Percent

(Amounts in millions)

Direct operating expenses

Motion Picture . . . . . . . . . . . . . . . . . . . .

$ 758.1

51.8% $ 977.8

53.7% $(219.7)

(22.5)%

Television Production . . . . . . . . . . . . . . .

Media Networks . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Intersegment eliminations

774.5

600.9
54.2
(159.5)

84.1

41.1
nm
nm

842.2

575.9
45.6
(131.9)

81.5

40.8
nm
nm

(67.7)

25.0
8.6
(27.6)

(8.0)%

4.3%
18.9%
20.9%

$2,028.2

55.1% $2,309.6

55.9% $(281.4)

(12.2)%

nm — Percentage not meaningful.

Direct operating expenses decreased in fiscal 2019, primarily due to decreased Motion Picture and
Television Production revenue. See further discussion in the Segment Results of Operations section below.

Other in fiscal 2019 and fiscal 2018 represents the amortization of the non-cash fair value adjustments

on film and television assets associated with the application of purchase accounting related to recent
acquisitions. In addition, during the fourth quarter of fiscal 2019, in connection with recent management
changes, we implemented changes to our programming strategy including programming that will no longer
be broadcast on Starz networks. As a result, we recorded certain programming and content charges of
$35.1 million in fiscal 2019, which are included in direct operating expense in the consolidated statement of
operations and reflected in the “other” line item in the table above (see Note 15 to our consolidated
financial statements).

Distribution and Marketing Expenses. Distribution and marketing expenses by segment were as

follows for the fiscal years ended March 31, 2019 and 2018:

Distribution and marketing expenses

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

Increase (Decrease)

2019

2018

Amount

Percent

(Amounts in millions)

$472.2
36.8
326.1
0.4

$835.5

$551.7
39.7
305.3
0.9

$(79.5)
(2.9)
20.8
(0.5)

(14.4)%
(7.3)%
6.8%
(55.6)%

$897.6

$(62.1)

(6.9)%

U.S. theatrical P&A expense included in Motion Picture distribution
and marketing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$289.5

$319.1

$(29.6)

(9.3)%

nm — Percentage not meaningful.

Distribution and Marketing expenses decreased in fiscal 2019, due to decreased Motion Picture
theatrical P&A on fewer Feature Film releases and lower home entertainment distribution and marketing
expenses, and to a lesser extent, international distribution and marketing expenses, which were partially
offset by increased Motion Picture theatrical P&A incurred in advance in fiscal 2019 for films to be released
in future periods, and increased Media Networks distribution and marketing expense. See further discussion
in the Segment Results of Operations section below.

General and Administrative Expenses. General and administrative expenses by segment were as

follows for the fiscal years ended March 31, 2019 and 2018:

Year Ended March 31,
% of
Revenues

2019

% of
Revenues
(Amounts in millions)

2018

Increase (Decrease)

Amount

Percent

General and administrative expenses

Motion Picture . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation expense . . . . . . . . .
Purchase accounting and related adjustments . .
Total general and administrative expenses . . . . . .

$105.6
43.5
97.7
104.2
351.0
50.6
43.8
$445.4

$113.2
40.3
100.9
110.3
9.5% 364.7
83.6
6.1
12.1% $454.4

$ (7.6)
3.2
(3.2)
(6.1)
8.8% (13.7)
(33.0)
37.7
11.0% $ (9.0)

(6.7)%
7.9%
(3.2)%
(5.5)%
(3.8)%
(39.5)%
nm
(2.0)%

nm — Percentage not meaningful.

General and administrative expenses decreased in fiscal 2019, resulting from lower share-based

compensation expense and decreases in Motion Picture, Corporate and Media Networks general and
administrative expenses due in part to the Company’s cost-saving initiatives, partially offset by increased
purchase accounting and related adjustments and increased Television Production general and
administrative expenses. In fiscal 2019, Television Production includes general and administrative expenses
of 3 Arts Entertainment from the acquisition date of May 29, 2018. See further discussion in the Segment
Results of Operations section below.

Corporate general and administrative expenses decreased $6.1 million, or 5.5%, primarily due to
decreases in incentive compensation and professional fees, partially offset by increases in rent and facilities
costs.

The decrease in share-based compensation expense included in general and administrative expense is

primarily due to lower fair values associated with stock option and other equity awards in fiscal 2019 as
compared to fiscal 2018. Additionally, the decrease in share-based compensation expense is due to lower
compensation expense associated with the replacement of Starz share-based payment awards. The following
table reconciles this amount to total share-based compensation expense:

Year Ended March 31,
2019
2018
(Amounts in millions)

Share-based compensation expense by expense category

Other general and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and marketing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . .

$50.6
16.0
1.1
0.4
$68.1

$83.6
2.9
1.1
0.9
$88.5

(1) Represents share-based compensation expense included in restructuring and other expenses reflecting
the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain
severance arrangements.

Purchase accounting and related adjustments represent the charge for the accretion of the
noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, and the
amortization of the recoupable portion of the purchase price and the expense associated with earned
distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are
included in general and administrative expense (see Note 11 to our consolidated financial statements for
further information).

Depreciation and Amortization Expense. Depreciation and amortization of $163.4 million for fiscal

2019 increased $4.4 million from $159.0 million in fiscal 2018.

Restructuring and Other. Restructuring and other increased $18.2 million in fiscal 2019 as compared

to fiscal 2018, and includes restructuring and severance costs, certain transaction and related costs, and
certain unusual items, when applicable. Restructuring and other costs were as follows for the fiscal years
ended March 31, 2019 and 2018 (see Note 15 to our consolidated financial statements):

Restructuring and other:

Severance(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Accelerated vesting on equity awards (see Note 13)

Total severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction and related costs(2) . . . . . . . . . . . . . . . . . . . . . . . . .
Development expense(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

Increase (Decrease)

2019

2018

Amount

Percent

(Amounts in millions)

$31.5
16.0

47.5
30.5
—

$21.5
2.9

24.4
22.2
13.2

$ 10.0
13.1

46.5%
451.7%

23.1
8.3
(13.2)

94.7%
37.4%
(100.0)%

$78.0

$59.8

$ 18.2

30.4%

(1) Severance costs in the fiscal years ended March 31, 2019 and 2018 were primarily related to

restructuring activities in connection with recent acquisitions, and other cost-saving initiatives.

(2) Transaction and related costs in the fiscal years ended March 31, 2019 and 2018 reflect transaction,

integration and legal costs incurred associated with certain strategic transactions and legal matters. In
fiscal 2019, these costs were primarily related to the legal fees associated with the Starz class action
lawsuits and other matters and, to a lesser extent, costs related to the acquisition of 3 Arts
Entertainment and other strategic transactions. In fiscal 2018, these costs were primarily related to the
sale of EPIX (see Note 5 to our consolidated financial statements), the legal fees associated with the
Starz class action lawsuits and other matters, and the integration of Starz.

(3) Development expense in the fiscal year ended March 31, 2018 represents write-downs resulting from

the restructuring of the Motion Picture business in connection with the acquisition of Good Universe
and new management’s decisions around the creative direction on certain development projects which
were abandoned in the fiscal year ended March 31, 2018.

Interest Expense.

Interest expense of $198.9 million in fiscal 2019 increased $5.2 million from fiscal

2018. The following table sets forth the components of interest expense for the fiscal years ended March 31,
2019 and 2018:

Interest Expense
Cash Based:

Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of debt discount and financing costs . . . . . . . . . . . . . . . . .

Interest on dissenting shareholders’ liability(2)

. . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2019

2018

(Amounts in millions)

$ 10.9
86.4
30.6
5.5
18.6
152.0
11.6
163.6
35.3
$198.9

3.9
78.4
30.7
—
9.9
122.9
14.3
137.2
56.5
$193.7

(1)

In fiscal 2019, amounts include interest expense related to the Company’s interest rate swap agreements
(see Note 18 to our consolidated financial statements), capital leases and other interest.

(2) Represents interest accrued in connection with the previously outstanding dissenting shareholders’
liability associated with the Starz Merger. See Note 17 to our consolidated financial statements.

Shareholder Litigation Settlements. Shareholder litigation settlements of $114.1 million in fiscal 2019

includes the following: (i) $54.8 million for the net expense recorded for the settlement of the Fiduciary
Litigation (representing the settlement amount of $92.5 million, net of aggregate insurance reimbursement
of $37.8 million, and (ii) $59.3 million related to the Appraisal Litigation, representing the amount by
which the settlement amount of approximately $964 million exceeded the previously accrued (at date of
acquisition) dissenting shareholders’ liability plus interest through the date agreed in the settlement. There
were no comparable charges in fiscal 2018. See Note 17 to our consolidated financial statements.

Other Expense. Other expense of $4.7 million for fiscal 2019 represented the loss recorded related to

our monetization of accounts receivable to third-party purchasers (see Note 19 to our consolidated
financial statements). There was no comparable charge in fiscal 2018.

Loss on Extinguishment of Debt. Loss on extinguishment of debt was $1.9 million in fiscal 2019
related to early repayments on the Term Loan B. Loss on extinguishment of debt was $35.7 million in fiscal
2018 related to the March 2018 refinancing of the Company’s Senior Credit Facilities, the December 2017
Term Loan B refinancing, and other voluntary prepayments on the Previous Term Loan B. See Note 7 to
our consolidated financial statements.

Gain (Loss) on Investments. The following table sets forth the components of the gain (loss) on

investments for fiscal 2019 and 2018 (see Note 5 to our consolidated financial statements):

Impairments of investments(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses on equity securities held as of March 31, 2019(2)
. . . . . . . .
Gain (loss) on sale of equity method investees(3) . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2019
$(36.8)
(6.2)
(44.6)
$(87.6)

2018
$ (29.2)
—
201.0
$171.8

(1) Represents other-than-temporary impairments on our investments.

(2) Represents the unrealized losses recorded for the change in fair value of our investment in

available-for-sale equity securities measured at fair value.

(3)

In fiscal 2019, represents the loss recorded in connection with the March 15, 2019 sale of our 50.0%
equity interest in Pop. In fiscal 2018, represents the gain recorded in connection with the May 11, 2017
sale of our 31.15% equity interest in EPIX.

Equity Interests Loss. Equity interests loss of $42.9 million in fiscal 2019 compared to equity interests

loss of $52.8 million in fiscal 2018, driven by lower losses from other equity method investees which was
partially offset by lower income from EPIX in fiscal 2019 due to the May 2017 sale of our equity interest in
EPIX.

Income Tax Benefit. We had an income tax benefit of $8.5 million in fiscal 2019, compared to a

benefit of $319.4 million in fiscal 2018. Our income tax benefit differs from the federal statutory rate
multiplied by pre-tax income (loss) due to the mix of our pre-tax income (loss) generated across the various
jurisdictions in which we operate and the tax deductions generated by our capital structure, which includes
certain foreign affiliate dividends in our Canadian jurisdiction that can be received without being subject to
tax under Canadian tax law. However, our income tax benefit for the fiscal year ended March 31, 2019 was
offset by valuation allowances against certain U.S. and foreign deferred tax assets, certain minimum taxes
imposed by the Tax Act, and the nondeductible portion of our shareholder litigation settlements.

Our total income tax benefit of $319.4 million in fiscal 2018 included a net benefit of $259.1 million,

consisting of a $165.0 million benefit from the impact of the change in U.S. federal tax rates (see below) on
our beginning net deferred tax liability balances, a benefit of $162.3 million primarily for foreign affiliate
dividends resulting from an internal capital restructuring in connection with our third party debt
refinancing (see Note 7 to our consolidated financial statements), offset by charges of $58.8 million and
$9.4 million from increases in our valuation allowance associated with certain U.S. and foreign deferred tax
assets, respectively, that may not be realized on a more likely than not basis.

On December 22, 2017, the Tax Act was signed into law, making significant changes to the taxation of
U.S. business entities. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, imposed a
one-time transition tax in connection with the move from a worldwide tax system to a territorial tax system,
changed the ability to claim certain tax deductions, and included numerous other provisions. As we have a
March 31 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory
federal rate of approximately 31.5% for our fiscal year ended March 31, 2018, and 21% for subsequent fiscal
years. Our U.S. tax provision consists primarily of deferred tax benefits calculated at the 21% tax rate.

In the fiscal year ended March 31, 2018, we recorded provisional amounts reflecting reasonable
estimates of the impact of the Tax Act, which included a $165.0 million income tax benefit related to the
impact of the corporate income tax rate reduction on our net deferred tax liabilities. In addition, we made
provisional estimates of other effects of the Tax Act, such as the tax effects of executive compensation, the
one-time transition tax, net operating loss carryovers, foreign tax credits, and accelerated deductions for
U.S. film costs. The estimated impact of the Tax Act was based on a preliminary review of the new law,
subject to revision based upon further analysis and interpretation of the Tax Act. During the quarter ended
December 31, 2018, we completed our analysis and our accounting for the Tax Act, and there were no
material adjustments to our provisional estimates.

At March 31, 2019, we had U.S. net operating loss carryforwards of approximately $1,367.9 million

available to reduce future federal income taxes which expire beginning in 2029 through 2038, state net
operating loss carryforwards of approximately $791.3 million available to reduce future state income taxes
which expire in varying amounts beginning 2021, Canadian loss carryforwards of $106.9 million which will
expire beginning in 2034, and Luxembourg loss carryforwards of $947.0 million which will expire beginning
in 2036. In addition, at March 31, 2019, we had U.S. credit carryforwards related to foreign taxes paid of
approximately $74.2 million to offset future federal income taxes that will expire beginning in 2021.

Net Income (Loss) Attributable to Lions Gate Entertainment Corp. Shareholders. Net loss attributable

to our shareholders for the fiscal year ended March 31, 2019 was $284.2 million, or basic and diluted net
loss per common share of $1.33 on 213.7 million weighted average common shares outstanding. This
compares to net income attributable to our shareholders for the fiscal year ended March 31, 2018 of
$473.6 million, or basic net income per common share of $2.27 on 208.4 million weighted average common
shares outstanding and diluted net income per common share of $2.15 on 220.4 million weighted average
common shares outstanding.

Segment Results of Operations

The segment results of operations presented below do not include the elimination of intersegment

transactions which are eliminated when presenting consolidated results.

The Company’s primary measure of segment performance is segment profit. Segment profit is defined
as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment
general and administration expenses. Segment profit excludes corporate general and administrative expense,
restructuring and other costs, share-based compensation, other than annual bonuses granted in immediately
vested stock awards when applicable, certain programming and content charges as a result of management
changes and associated strategy, and purchase accounting and related adjustments, when applicable. The
Company believes the presentation of segment profit is relevant and useful for investors because it allows
investors to view segment performance in a manner similar to the primary method used by the Company’s
management and enables them to understand the fundamental performance of the Company’s businesses.
The reconciliation of segment profit to the Company’s consolidated income (loss) before income taxes is
presented in Note 16 to the consolidated financial statements.

Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the fiscal years

ended March 31, 2019 and 2018:

Motion Picture Segment:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:

Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution & marketing expense . . . . . . . . . . . . . . . . . . . . .

Gross contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

Increase (Decrease)

2019

2018

Amount

Percent

(Amounts in millions)

$1,464.4

$1,822.1

$(357.7)

(19.6)%

758.1
472.2

234.1
105.6

977.8
551.7

292.6
113.2

(219.7)
(79.5)

(58.5)
(7.6)

(22.5)%
(14.4)%

(20.0)%
(6.7)%

Segment profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 128.5

$ 179.4

$ (50.9)

(28.4)%

U.S. theatrical P&A expense included in distribution and

marketing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct operating expense as a percentage of revenue . . . . . . . . . .
Gross contribution as a percentage of revenue . . . . . . . . . . . . . .

$ 289.5

$ 319.1

$ (29.6)

(9.3)%

51.8%
16.0%

53.7%
16.1%

Revenue. The table below sets forth Motion Picture revenue by media and product category for the

fiscal years ended March 31, 2019 and 2018:

Year Ended March 31,

2019

Feature
Film(1)

Other Than
Feature
Film(2)

Total

Feature
Film(1)

2018

Other Than
Feature
Film(2)

Total
Increase
(Decrease)

Total

(Amounts in millions)

Motion Picture Revenue

Theatrical . . . . . . . . . . . . . . . . . . . . $164.5

$ 51.3

$ 215.8 $ 238.5

$ 42.9

$ 281.4 $ (65.6)

Home Entertainment

Digital Media . . . . . . . . . . . . . . . 157.2

Packaged Media . . . . . . . . . . . . . 108.4

Total Home Entertainment

. . . . 265.6

Television . . . . . . . . . . . . . . . . . . . . 209.6

International . . . . . . . . . . . . . . . . . . 260.8

Other . . . . . . . . . . . . . . . . . . . . . . .

36.2

177.5

149.1

326.6

64.8

80.3

4.7

334.7

257.5

592.2

274.4

341.1

40.9

206.1

213.4

419.5

220.2

356.2

24.1

167.6

186.9

354.5

58.3

100.5

7.4

373.7

400.3

774.0

278.5

456.7

31.5

(39.0)

(142.8)

(181.8)

(4.1)

(115.6)

9.4

$936.7

$527.7

$1,464.4 $1,258.5

$563.6

$1,822.1 $(357.7)

(1) Feature Film: Includes theatrical releases through our Lionsgate and Summit Entertainment film labels,
which includes films developed and produced in-house, films co-developed and co-produced and films
acquired from third parties.

(2) Other Than Feature Film: Includes direct-to-DVD motion pictures, acquired and licensed brands,

third-party library product and ancillary-driven platform theatrical releases through our specialty films
distribution labels including Lionsgate Premiere, through Good Universe, and with our equity method
investees, Roadside Attractions and Pantelion Films, and other titles.

Theatrical revenue decreased $65.6 million, or 23.3%, in fiscal 2019 as compared to fiscal 2018, due to
significant theatrical revenue from Wonder in fiscal 2018, and fewer Feature Films released in fiscal 2019 as
compared to fiscal 2018. The decrease in revenue from our Feature Films was partially offset by increased
revenue from Other Than Feature Film product categories, driven by the performance of Pantelion Films’
Overboard in fiscal 2019, as compared to How to Be a Latin Lover in fiscal 2018.

Home entertainment revenue decreased $181.8 million, or 23.5%, in fiscal 2019, as compared to fiscal

2018, primarily due to a decrease of $153.9 million of home entertainment revenue from our Feature Films,
driven by lower packaged media revenue (and to a lesser extent, digital media revenue) from the Feature
Films released on packaged media during fiscal 2019 as compared to fiscal 2018. In particular, the home
entertainment revenue generated in fiscal 2019 from our Fiscal 2019 and Fiscal 2018 Theatrical Slates
(which included home entertainment revenue from the release of A Simple Favor, Robin Hood, and The Spy
Who Dumped Me from our Fiscal 2019 Theatrical Slate and The Commuter from our Fiscal 2018 Theatrical
Slate) was less than the revenue generated in fiscal 2018 from our Fiscal 2018 and Fiscal 2017 Theatrical
Slates (which included home entertainment revenue from the release of The Hitman’s Bodyguard from our
Fiscal 2018 Theatrical Slate and La La Land, John Wick: Chapter 2, and Power Rangers from our Fiscal
2017 Theatrical Slate). In addition, home entertainment revenue from Other Than Feature Film product
categories decreased $27.9 million driven by lower revenue from a distribution arrangement acquired as
part of the Starz acquisition, partially offset by higher home entertainment revenue from ancillary-driven
platform theatrical releases.

International revenue decreased $115.6 million, or 25.3%, in fiscal 2019, as compared to fiscal 2018,
primarily due to lower revenue from our Feature Films, and in particular, the revenue generated in fiscal
2019 from our Fiscal 2018 Theatrical Slate as compared to the revenue generated in fiscal 2018 from our
Fiscal 2017 Theatrical Slate (which included significant international revenue from La La Land, Power

Rangers and John Wick: Chapter 2). In addition, the decrease in international revenue was, to a lesser
extent, driven by lower revenue from Other Than Feature Film product categories as a result of significant
revenues in fiscal 2018 from a library distribution agreement and UK third-party product.

Direct Operating Expense. Direct operating expenses as a percentage of motion picture revenue in
fiscal 2019 was comparable to fiscal 2018. Direct operating expense as a percentage of revenue can fluctuate
due to the change in the mix of titles and product categories generating revenue and investment in film
write-downs. Investment in film write-downs were approximately $22.9 million in fiscal 2019, as compared
to approximately $33.6 million in fiscal 2018.

Distribution and Marketing Expense. The decrease in distribution and marketing expense in fiscal

2019 is primarily due to lower theatrical P&A spending in fiscal 2019 on fewer Feature Film theatrical
releases and lower home entertainment distribution and marketing expenses associated with lower home
entertainment revenue, offset partially by increased theatrical P&A incurred in advance in fiscal 2019 for
films to be released in future periods. The decrease was also, to a lesser extent, due to lower international
distribution and marketing expenses associated with lower international revenue. In fiscal 2019,
approximately $31.6 million of P&A was incurred in advance for films to be released in fiscal 2020, such as
Hellboy, Long Shot and John Wick: Chapter 3. In fiscal 2018, approximately $10.3 million of P&A was
incurred in advance for films to be released in fiscal 2019, such as Uncle Drew, Traffik and The Spy Who
Dumped Me.

Gross Contribution. Gross contribution of the Motion Picture segment for fiscal 2019 decreased as

compared to fiscal 2018, primarily due to a decrease in Motion Picture revenue.

General and Administrative Expense. General and administrative expenses of the Motion Picture

segment decreased $7.6 million, or 6.7%, primarily due to decreases in incentive compensation and
professional fees, partially offset by increases in rent and facilities costs.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the fiscal

years ended March 31, 2019 and 2018:

Year Ended March 31,

Increase (Decrease)

2019

2018

Amount

Percent

(Amounts in millions)

Television Production Segment:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:

Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution & marketing expense . . . . . . . . . . . . . . . . . . . . . .

Gross contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General and administrative expenses . . . . . . . . . . . . . . . . . . . . . .

$920.9

$1,033.2

$(112.3)

(10.9)%

774.5
36.8

109.6

43.5

842.2
39.7

151.3

40.3

(67.7)
(2.9)

(8.0)%
(7.3)%

(41.7)

(27.6)%

3.2

7.9%

Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 66.1

$ 111.0

$ (44.9)

(40.5)%

Direct operating expense as a percentage of revenue . . . . . . . . . . .

Gross contribution as a percentage of revenue . . . . . . . . . . . . . . .

84.1%

11.9%

81.5%

14.6%

Revenue. The table below sets forth Television Production revenue and the changes in revenue by

media for the fiscal years ended March 31, 2019 and 2018:

Year Ended March 31,

Increase (Decrease)

2019

2018

Amount

Percent

(Amounts in millions)

Television Production

Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$655.8

$ 744.5

$ (88.7)

(11.9)%

International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136.0

179.6

(43.6)

(24.3)%

Home Entertainment Revenue

Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Packaged Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Home Entertainment Revenue . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66.9

7.6

74.5

54.6

96.3

11.2

107.5

1.6

(29.4)

(30.5)%

(3.6)

(32.1)%

(33.0)

(30.7)%

53.0

$920.9

$1,033.2

$(112.3)

(10.9)%

nm — Percentage not meaningful.

The primary component of Television Production revenue is domestic television revenue. Domestic

television revenue decreased in fiscal 2019 as compared to fiscal 2018, primarily due to fewer television
episodes delivered, and to a lesser extent, decreased license fees from unscripted television programs. These
decreases were offset partially by increased revenues from the licensing of Starz original series in fiscal 2019
as compared to fiscal 2018.

International revenue in fiscal 2019 decreased $43.6 million, or 24.3%, as compared to fiscal 2018, due

to lower revenue in fiscal 2019 for library television titles, such as Weeds, Mad Men and Dirty Dancing,
lower revenue generated from a partial season delivered for Nashville Season 6 in fiscal 2019 as compared to
episodes delivered for Nashville Season 5 and Season 6 in fiscal 2018, and a contribution of revenues from
Dear White People Season 2 in fiscal 2018. The decrease in international revenue was also, to a lesser extent,
due to lower revenues from the licensing of Starz original series in fiscal 2019 as compared to fiscal 2018.

Home entertainment revenue in fiscal 2019 decreased $33.0 million, or 30.7%, as compared to fiscal
2018, primarily driven by a significant contribution of revenues from a digital media licensing arrangement
in fiscal 2018 for the Starz original series, Power Seasons 1 – 4.

Other revenue increased in fiscal 2019 as compared to fiscal 2018 due to revenue in fiscal 2019 from the

May 29, 2018 acquisition of 3 Arts Entertainment.

Direct Operating Expense. Direct operating expense of the Television Production segment in fiscal

2019 decreased $67.7 million, or 8.0%, primarily driven by lower Television Production revenue. The
increase in direct operating expenses as a percentage of television production revenue is primarily due to the
mix of titles generating revenue in fiscal 2019 as compared to fiscal 2018.

Gross Contribution. Gross contribution and gross contribution margin of the Television Production
segment for fiscal 2019 decreased as compared to fiscal 2018, primarily due to lower television production
revenue and higher direct operating expenses as a percentage of television production revenue.

General and Administrative Expense. General and administrative expenses of the Television
Production segment increased $3.2 million, or 7.9%, primarily due to increases in salaries and related
expenses and to a lesser extent increases in professional fees and rent and facilities costs. Fiscal 2019
includes general and administrative expenses of 3 Arts Entertainment from the acquisition date of May 29,
2018.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the fiscal years

ended March 31, 2019 and 2018:

Year Ended March 31,

Increase (Decrease)

2019

2018

Amount

Percent

(Amounts in millions)

Media Networks Segment:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,461.0

$1,411.2

$49.8

3.5%

Expenses:

Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Distribution & marketing expense . . . . . . . . . . . . . . . . . . . . .

Gross contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General and administrative expenses . . . . . . . . . . . . . . . . . . . . .

600.9

326.1

534.0

97.7

575.9

305.3

530.0

100.9

25.0

20.8

4.0

4.3%

6.8%

0.8%

(3.2)

(3.2)%

Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 436.3

$ 429.1

$ 7.2

1.7%

Direct operating expense as a percentage of revenue . . . . . . . . . . .
Gross contribution as a percentage of revenue . . . . . . . . . . . . . . .

41.1%
36.6%

40.8%
37.6%

The following table sets forth the Media Networks segment profit by product line:

Year Ended March 31, 2019

Year Ended March 31, 2018

Starz
Networks

STARZPLAY
International

Streaming
Services

Total Media
Networks

Starz
Networks

Streaming
Services

Total Media
Networks

(Amounts in millions)

Media Networks Segment:
Revenue . . . . . . . . . . . . . . . . . $1,440.9
Expenses:

$ 2.1

$ 18.0

$1,461.0 $1,404.1

$ 7.1

$1,411.2

Direct operating expense . . . .
Distribution & marketing

expense . . . . . . . . . . . . . .

Gross contribution . . . . . . . . . .
General and administrative

563.7

30.1

7.1

600.9

554.5

21.4

575.9

303.1

574.1

5.2

(33.2)

17.8

(6.9)

326.1

534.0

288.3

561.3

17.0

(31.3)

305.3

530.0

expenses . . . . . . . . . . . . . . .

86.1

7.2

4.4

97.7

93.3

7.6

100.9

Segment profit . . . . . . . . . . . . . $ 488.0

$(40.4)

$(11.3) $ 436.3 $ 468.0

$(38.9) $ 429.1

Revenue. The table below sets forth, for the periods presented, domestic subscriptions to our STARZ

network:

Period End Subscriptions:

STARZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24.7

23.5

March 31,
2019

March 31,
2018

(Amounts in millions)

The increase in Media Networks revenue was driven by higher Starz Networks’ revenue of $36.8
million due to a $27.5 million increase in effective rates and a $9.3 million increase due to higher average
subscriptions primarily as a result of OTT revenue growth partially offset by declines in subscribers on
traditional services. Revenue from STARZPLAY International increased with the launch of the
STARZPLAY service in the United Kingdom, Germany, Canada and Spain. During fiscal 2019 and fiscal
2018, the following original series premiered on STARZ:

Year Ended March 31, 2019

Year Ended March 31, 2018

First Quarter:

Howard’s End
Sweetbitter Season 1
Vida Season 1
Wrong Man Season 1

Second Quarter:

Power Season 5
America to Me

Warriors of Liberty City

Third Quarter:

Outlander Season 4
Counterpart Season 2

Fourth Quarter:

American Gods Season 2
Now Apocalypse Season 1

First Quarter:

The White Princess
American Gods Season 1
Power Season 4

Second Quarter:

Survivor’s Remorse Season 4
Outlander Season 3

Third Quarter:

The Girlfriend Experience Season 2

Fourth Quarter:

Counterpart Season 1
Ash Vs. Evil Dead Season 3

Direct Operating and Distribution and Marketing Expenses. Starz Networks’ and STARZPLAY
International direct operating and distribution and marketing expenses primarily represent programming
cost amortization and advertising and marketing costs, respectively. The level of programing cost
amortization and advertising and marketing costs and thus the gross contribution margin for the Media
Networks segment can fluctuate from period to period depending on the number of new shows and
particularly new original series premiering on the network during the period. Programming cost
amortization and advertising and marketing costs generally increase in periods where new original series are
premiering on STARZ. In addition, the launch of the STARZPLAY service by STARZPLAY International
will result in an increase in expenses.

The increase in Media Networks direct operating expense is primarily due to Starz International direct
operating expense in fiscal 2019, as a result of higher programming cost amortization related to the launch
of STARZPLAY in the United Kingdom, Germany, Canada and Spain, with no comparable expense in
fiscal 2018, and higher programming amortization related to our Starz Originals, partially offset by a
decrease in programming cost amortization related to our programming output agreements. This increase
was partially offset by decreased Streaming Services direct operating expense.

The increase in Media Networks distribution and marketing expense is primarily due to an increase in
Starz Networks’ OTT related operating and advertising and marketing costs, and increased spend on Starz
Originals. In addition, fiscal 2019 included distribution and marketing expenses related to STARZPLAY
International, with no comparable expense in fiscal 2018.

Gross Contribution. Gross contribution of the Media Networks segment for fiscal 2019 was primarily

from Starz Networks. The increase in gross contribution compared to fiscal 2018 was due to higher gross
contribution from Starz Networks and lower negative contributions from Streaming Services, which were
mostly offset by the STARZPLAY International gross contribution loss in fiscal 2019.

General and Administrative Expense. General and administrative expenses of the Media Networks

segment in fiscal 2019 decreased slightly from fiscal 2018, driven by a decrease in Starz Networks and
Streaming Services, offset by general and administrative expenses in fiscal 2019 for STARZPLAY
International. The decrease in Starz Networks was driven by a decrease in professional services.

Fiscal 2018 Compared to Fiscal 2017

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the fiscal years ended

March 31, 2018 and 2017. Due to the Starz Merger, fiscal 2017 includes the results of operations from Starz
from the acquisition date of December 8, 2016. R evenue from Starz across all segments was $1.65 billion
for the fiscal year ended March 31, 2018, as compared to $483.2 million for the period from the acquisition
date of December 8, 2016 to March 31, 2017.

Year Ended March 31,

2018

2017

Increase (Decrease)
Percent
Amount

(Amounts in millions)

Revenues

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues

$1,822.1
1,033.2
1,411.2
(137.4)
4,129.1

$1,920.6
892.8
426.3
(38.2)
3,201.5

$ (98.5)
140.4
984.9
(99.2)
927.6

(5.1)%
15.7%
nm
nm
29.0%

Expenses:

Direct operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and marketing . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administration . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses
Operating income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity interests income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .

Less: Net loss attributable to noncontrolling interest
Net income attributable to Lions Gate Entertainment Corp.

2,309.6
897.6
454.4
159.0
59.8
3,880.4
248.7
(193.7)
10.4
(35.7)
171.8
(52.8)
148.7
319.4
468.1
5.5

1,903.8
806.8
355.4
63.1
88.7
3,217.8
(16.3)
(115.2)
6.4
(40.4)
20.4
10.7
(134.4)
148.9
14.5
0.3

405.8
90.8
99.0
95.9
(28.9)
662.6
265.0
(78.5)
4.0
4.7
151.4
(63.5)
283.1
170.5
453.6
5.2

21.3%
11.3%
27.9%
152.0%
(32.6)%
20.6%
nm
68.1%
62.5%
(11.6)%
nm
nm
(210.6)%
114.5%
nm
nm

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 473.6

14.8

$458.8

nm — Percentage not meaningful

Revenues. Consolidated revenues increased in fiscal 2018, due to the inclusion of Starz revenue for the

entire fiscal year, as compared to the period from the acquisition date of December 8, 2016 to March 31,
2017 in fiscal 2017, and increased Television Production revenues, offset partially by decreases in Motion
Picture revenues and increases in intercompany eliminations principally related to revenues in the Television
Production segment. The Media Networks, Television Production and Motion Picture revenues in fiscal
2018 include $1,404.1 million, $121.3 million and $126.4 million, respectively, of third party revenues from
Starz, as compared to $423.4 million, $30.3 million and $29.5 million, respectively, in fiscal 2017 from the
date of acquisition.

The decrease in Motion Picture revenue was primarily due to decreases in theatrical and international

revenue driven by our smaller theatrical slate (15 feature films released in fiscal 2018 compared to 18 in
fiscal 2017). In addition, fiscal 2017 included significant theatrical and international contributions from
La La Land, Now You See Me 2 and Deepwater Horizon. These decreases were partially offset by an
increase in Motion Picture home entertainment revenue, driven by a greater contribution in fiscal 2018 from
the Starz third party distribution business as a result of the Starz Merger.

Direct Operating Expenses. Direct operating expenses by segment were as follows for the fiscal years

ended March 31, 2018 and 2017:

Direct operating expenses

Motion Picture . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Intersegment eliminations

Year Ended March 31,

2018

2017

Increase (Decrease)

Amount

% of
Segment
Revenues

Amount

(Amounts in millions)

Amount

Percent

$ 977.8
842.2
575.9
45.6
(131.9)
$2,309.6

53.7% $ 976.4
749.8
81.5
186.6
40.8
18.8
nm
nm
(27.8)
55.9% $1,903.8

1.4
50.8% $
92.4
84.0
389.3
43.8
26.8
nm
nm
(104.1)
59.5% $ 405.8

0.1%
12.3%
208.6%
142.6%
nm
21.3%

nm — Percentage not meaningful.

Direct operating expenses increased in fiscal 2018, primarily due to the inclusion of Starz expenses for

the entire fiscal year. The increased Television Production direct operating expense was offset by the
increase in intersegment eliminations primarily related to the elimination of Television Production direct
operating expense. See further discussion in the Segment Results of Operations section below.

Other primarily consists of the amortization of the non-cash fair value adjustments on film and
television assets associated with the application of purchase accounting related to recent acquisitions.

Distribution and Marketing Expenses. Distribution and marketing expenses by segment were as

follows for the fiscal years ended March 31, 2018 and 2017:

Distribution and marketing expenses

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018

$551.7
39.7
305.3
0.9
$897.6

$706.4
35.6
64.4
0.4
$806.8

$(154.7)
4.1
240.9
0.5
$ 90.8

(21.9)%
11.5%
nm
nm
11.3%

Year Ended March 31,

Increase (Decrease)
Percent
Amount
(Amounts in millions)

2017

U.S. theatrical P&A expense included in Motion Picture distribution
and marketing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$319.1

$474.5

$(155.4)

(32.8)%

nm — Percentage not meaningful.

Distribution and Marketing expenses increased in fiscal 2018, due to the inclusion of distribution and

marketing expenses from Starz in the Media Networks segment for the entire fiscal year, and slightly
increased Television Production distribution and marketing expenses, offset partially by decreased Motion
Picture theatrical P&A expenses. See further discussion in the Segment Results of Operations section below.

General and Administrative Expenses. General and administrative expenses by segment were as

follows for the fiscal years ended March 31, 2018 and 2017:

Year Ended March 31,

Increase (Decrease)

2018

% of
Revenues

2017

% of
Revenues

Amount

Percent

(Amounts in millions)

General and administrative expenses

Motion Picture . . . . . . . . . . . . . . . . . . . . . . .

$113.2

Television Production . . . . . . . . . . . . . . . . . . .

Media Networks . . . . . . . . . . . . . . . . . . . . . .

Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation expense . . . . . . . . .

Purchase accounting and related adjustments . .

40.3

100.9

110.3

364.7

83.6

6.1

$105.3

32.1

45.0

92.5

8.8% 274.9

8.6%

75.5

5.0

$ 7.9

8.2

55.9

17.8

89.8

8.1

1.1

Total general and administrative expenses

. . . . . .

$454.4

11.0% $355.4

11.1% $99.0

7.5%

25.5%

19.2%

32.7%

10.7%

22.0%

27.9%

nm — Percentage not meaningful.

General and administrative expenses increased in fiscal 2018, resulting from the inclusion of general

and administrative expense from Starz in the Media Networks segment for a full fiscal year, increased
corporate general and administrative expenses, higher share-based compensation expense, and increased
Motion Picture and Television Production general and administrative expense. See further discussion in the
Segment Results of Operations section below.

Corporate general and administrative expenses increased primarily due to increases in professional fees

and salaries and related expenses.

The increase in share-based compensation expense included in general and administrative expense is

primarily due to compensation expense associated with the replacement of Starz share-based payment
awards (see Note 2 to our consolidated financial statements). The following table reconciles this amount to
total share-based compensation expense:

Year Ended March 31,

2018

2017

(Amounts in millions)

Share-based compensation expense by expense category

Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . .

$83.6
2.9
1.1
0.9

$88.5

$75.5
2.4
1.2
0.4

$79.5

Purchase accounting and related adjustments represent the charge for the accretion of the
noncontrolling interest discount related to Pilgrim Media Group that is included in general and
administrative expense (see Note 11 to our consolidated financial statements).

Depreciation and Amortization Expense. Depreciation and amortization of $159.0 million for fiscal

2018 increased $95.9 million from $63.1 million in fiscal 2017. The increase is primarily due to the
depreciation and amortization associated with the property and equipment and intangible assets related to
the Starz acquisition.

Restructuring and Other. Restructuring and other decreased $28.9 million, and includes restructuring

and severance costs, certain transaction and related costs, and certain unusual items, when applicable.
Restructuring and other costs were as follows for the fiscal years ended March 31, 2018 and 2017 (see
Note 15 to our consolidated financial statements):

Year Ended March 31,

Increase (Decrease)
Percent
Amount
(Amounts in millions)

2017

Restructuring and other:

Severance(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Accelerated vesting on equity awards (see Note 13)
Total severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction and related costs(2) . . . . . . . . . . . . . . . . . . . . . . . . .
Development expense(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018

$21.5
2.9
24.4
22.2
13.2
$59.8

$26.7
2.4
29.1
59.6
—
$88.7

$ (5.2)
0.5
(4.7)
(37.4)
13.2
$(28.9)

(19.5)%
20.8%
(16.2)%
(62.8)%
nm
(32.6)%

nm — Percentage not meaningful.

(1) Severance costs in the fiscal years ended March 31, 2018 and 2017 were primarily related to

restructuring activities in connection with recent acquisitions, and other cost-saving initiatives.

(2) Transaction and related costs in the fiscal years ended March 31, 2018 and 2017 reflect transaction,

integration and legal costs incurred associated with certain strategic transactions. In fiscal 2018, these
costs were primarily related to the sale of EPIX (see Note 5 to our consolidated financial statements),
the legal fees associated with the Starz class action lawsuits and other matters, and the integration of
Starz. In fiscal 2017, these costs were primarily related to the Starz Merger, the legal fees associated
with the Starz class action lawsuits, and an arbitration award of $5.8 million and related legal expenses.

(3) Development expense in the fiscal year ended March 31, 2018 represents write-downs resulting from

Interest Expense.

Interest expense of $193.7 million in fiscal 2018 increased $78.5 million from fiscal
2017, driven by the increase in debt in connection with the Starz Merger and interest accrued in connection
with the dissenting shareholders’ liability associated with the Starz Merger. The following table sets forth
the components of interest expense for the fiscal years ended March 31, 2018 and 2017:

Interest Expense
Cash Based:

Revolving credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.25% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of debt discount and financing costs . . . . . . . . . . . . . . . . . . . .

Interest on dissenting shareholders’ liability(1) . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,
2018
2017
(Amounts in millions)

3.9
78.4
30.7
—
9.9
122.9
14.3
137.2
56.5
$193.7

9.6
46.7
13.1
8.1
9.3
86.8
12.9
99.7
15.5
$115.2

(1) Represents interest accrued in connection with the previously outstanding dissenting shareholders’
liability associated with the Starz Merger (see Note 2 to our consolidated financial statements).

Loss on Extinguishment of Debt. Loss on extinguishment of debt was $35.7 million in fiscal 2018,
primarily related to the March 2018 Senior Credit Facilities refinancing, the December 2017 Term Loan B
refinancing, and other voluntary prepayments on the Previous Term Loan B. See Note 7 to our
consolidated financial statements.

Loss on extinguishment of debt was $40.4 million in fiscal 2017 related to the extinguishment of debt
in connection with the Starz Merger financing in the third quarter of fiscal 2017, and the early repayment
of $400.0 million in principal amount on the Previous Term Loan B in the fourth quarter of fiscal 2017.

Gain on Investments. The following table sets forth the components of the gain on investments for

fiscal 2018 and 2017 (see Note 5 to our consolidated financial statements):

Impairments of investments(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of EPIX(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Starz investment(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2018

$ (29.2)
201.0
—

$171.8

2017

$ —
—
20.4

$20.4

(1) Represents other-than-temporary impairments on our investments.

(2) Represents the gain recorded in connection with the May 11, 2017 sale of our 31.15% equity interest in

EPIX.

(3) Represents the difference between the fair value and the original cost of the available-for-sale

investment in equity securities of Starz held on the date of the Starz Merger (December 8, 2016).

Equity Interests Income (Loss). Equity interests loss of $52.8 million in fiscal 2018 compared to
equity interests income of $10.7 million in fiscal 2017, driven by increased losses from other equity method
investees and lower income from EPIX in fiscal 2018 due to the May 2017 sale of our equity interest in
EPIX.

Income Tax Benefit. We had an income tax benefit of $319.4 million in fiscal 2018, compared to a

benefit of $148.9 million in fiscal 2017. Our income tax benefit differs from the federal statutory rate
multiplied by pre-tax income (loss) due to the mix of our pre-tax income (loss) generated across the various
jurisdictions in which we operate and the tax deductions generated by our capital structure, which 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 addition,
our total income tax benefit of $319.4 million in fiscal 2018 included a net benefit of $259.1 million,
consisting of a $165.0 million benefit from the impact of the change in U.S. federal tax rates (see below) on
our beginning net deferred tax liability balances, a benefit of $162.3 million primarily for foreign affiliate
dividends resulting from an internal capital restructuring in connection with our third party debt
refinancing (see Note 7 to our consolidated financial statements), offset by charges of $58.8 million and
$9.4 million from increases in our valuation allowance associated with certain U.S. and foreign deferred tax
assets, respectively, that may not be realized on a more likely than not basis. 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).

March 31 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory
federal rate of approximately 31.5% for our fiscal year ended March 31, 2018, and 21% for subsequent fiscal
years. Our U.S. tax provision consists primarily of deferred tax benefits calculated at the 21% tax rate.

In fiscal 2018, we recorded provisional amounts reflecting reasonable estimates of the impact of the

Tax Act, which included a $165.0 million income tax benefit related to the impact of the corporate income
tax rate reduction on our net deferred tax liabilities. In addition, we made provisional estimates of other
effects of the Tax Act, such as the tax effects of executive compensation, the one-time transition tax, net
operating loss carryovers, foreign tax credits, and accelerated deductions for U.S. film costs. The estimated
impact of the Tax Act was based on a preliminary review of the new law, subject to revision based upon
further analysis and interpretation of the Tax Act. During the quarter ended December 31, 2018, we
completed our analysis and our accounting for the Tax Act, and there were no material adjustments to our
provisional estimates.

Net Income Attributable to Lions Gate Entertainment Corp. Shareholders. Net income attributable to

our shareholders for the fiscal year ended March 31, 2018 was $473.6 million, or basic net income per
common share of $2.27 on 208.4 million weighted average common shares outstanding and diluted net
income per common share of $2.15 on 220.4 million weighted average common shares outstanding. This
compares to net income attributable to our shareholders for the fiscal year ended March 31, 2017 of
$14.8 million, or basic net income per common share of $0.09 on 165.0 million weighted average common
shares outstanding and diluted net income per common share of $0.09 on 172.2 million common shares
outstanding.

Segment Results of Operations

The segment results of operations presented below do not include the elimination of intersegment

transactions which are eliminated when presenting consolidated results.

Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the fiscal years

ended March 31, 2018 and 2017:

Year Ended March 31,

Increase (Decrease)

2018

2017

Amount

Percent

(Amounts in millions)

Motion Picture Segment:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,822.1

$1,920.6

$ (98.5)

(5.1)%

Expenses:

Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . .

Distribution & marketing expense . . . . . . . . . . . . . . . . . . . . .

Gross contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General and administrative expenses . . . . . . . . . . . . . . . . . . . . .

977.8

551.7

292.6

113.2

976.4

706.4

237.8

105.3

1.4

0.1%

(154.7)

(21.9)%

54.8

7.9

23.0%

7.5%

Segment profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 179.4

$ 132.5

$ 46.9

35.4%

U.S. theatrical P&A expense included in distribution and

$ 319.1

$ 474.5

$(155.4)

(32.8)%

53.7%
16.1%

50.8%
12.4%

Revenue. The table below sets forth Motion Picture revenue by media and product category for the

fiscal years ended March 31, 2018 and 2017:

2018

Other Than
Feature
Film(2)

Feature
Film(1)

Year Ended March 31,

Total

Feature
Film(1)

(Amounts in millions)

2017

Other Than
Feature
Film(2)

Total
Increase
(Decrease)

Total

Motion Picture Revenue

Theatrical
Home Entertainment

. . . . . . . . . . . . . . . . . . $ 238.5

$ 42.9

$ 281.4 $ 353.7

$ 17.6

$ 371.3 $(89.9)

Digital Media . . . . . . . . . . . . . .
Packaged Media . . . . . . . . . . . .

Total Home Entertainment . . .
Television . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Other

206.1
213.4

419.5
220.2
356.2
24.1

167.6
186.9

354.5
58.3
100.5
7.4

373.7
400.3

774.0
278.5
456.7
31.5

192.7
247.0

439.7
238.7
439.7
18.2

111.2
156.8

268.0
40.4
94.1
10.5

303.9
403.8

707.7
279.1
533.8
28.7

69.8
(3.5)

66.3
(0.6)
(77.1)
2.8

$1,258.5

$563.6

$1,822.1 $1,490.0

$430.6

$1,920.6 $(98.5)

(1) Feature Film: Includes releases through our Lionsgate and Summit Entertainment film labels, which
includes films developed and produced in-house, films co-developed and co-produced and films
acquired from third parties.

(2) Other Than Feature Film: Includes direct-to-DVD motion pictures, acquired and licensed brands,

Theatrical revenue decreased $89.9 million, or 24.2%, in fiscal 2018 as compared to fiscal 2017, due to a

smaller theatrical slate and the performance of the Feature Films released, which included a significant
contribution in fiscal 2017 from La La Land.

Home entertainment revenue increased $66.3 million, or 9.4%, in fiscal 2018, as compared to fiscal

2017, primarily driven by increased home entertainment revenue from Other Than Feature Film of
$86.5 million, partially offset by a decrease of $20.2 million of home entertainment revenue from our
Feature Films. The increase in home entertainment revenue from Other Than Feature Film was driven by
increased revenue from the Starz third party distribution business in fiscal 2018 (increase of $91.4 million as
compared to fiscal 2017). The decrease in home entertainment revenue from our Feature Films was driven
by lower packaged media revenue in fiscal 2018 from the smaller Fiscal 2018 theatrical slate, as compared to
the packaged media revenue in fiscal 2017 from the Fiscal 2017 theatrical slate, partially offset by higher
digital media revenue in fiscal 2018 from our Fiscal 2017 theatrical slate.

International motion picture revenue decreased $77.1 million, or 14.4%, in fiscal 2018, as compared to

fiscal 2017, driven by our smaller Fiscal 2018 theatrical slate, and significant contributions in fiscal 2017
from Now You See Me 2 and Deepwater Horizon.

Direct Operating Expense. The increase in direct operating expenses as a percentage of motion
picture revenue was primarily driven by the change in the mix of titles and product categories generating
revenue in fiscal 2018 as compared to fiscal 2017, and an increase in investment in film write-downs.
Included in Motion Picture direct operating expenses are investment in film write-downs of approximately
$33.6 million in fiscal 2018, compared to approximately $17.0 million in fiscal 2017.

Distribution and Marketing Expense. The decrease in distribution and marketing expense in fiscal

2018 is primarily due to lower theatrical P&A, driven by lower P&A spending in fiscal 2018 on fewer
Feature Film theatrical releases. In fiscal 2018, approximately $10.3 million of P&A was incurred in advance
for films to be released in fiscal 2019, such as Uncle Drew, Traffik and The Spy Who Dumped Me. In fiscal
2017, approximately $1.9 million of P&A was incurred in advance for films to be released in fiscal 2018,
such as All Eyez on Me, How to Be a Latin Lover and American Assassin.

Gross Contribution. Gross contribution and gross contribution margin of the Motion Picture

segment for fiscal 2018 increased as compared to fiscal 2017, primarily due to lower U.S. theatrical P&A as
a percentage of Motion Picture revenue due to lower P&A spending on the fewer number of Feature Film
releases in fiscal 2018, offset partially by higher direct operating expenses as a percentage of Motion Picture
revenue.

General and Administrative Expense. General and administrative expenses of the Motion Picture
segment increased $7.9 million, or 7.5%, primarily due to increases in salaries and related expenses and
incentive compensation.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the fiscal

years ended March 31, 2018 and 2017:

Year Ended March 31,

Increase (Decrease)

2018

2017

Amount

Percent

(Amounts in millions)

Television Production Segment:

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,033.2

$892.8

$140.4

15.7%

Expenses:

Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution & marketing expense . . . . . . . . . . . . . . . . . . . . . . .

Gross contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . .

842.2
39.7

151.3
40.3

749.8
35.6

107.4
32.1

92.4
4.1

43.9
8.2

Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 111.0

$ 75.3

$ 35.7

12.3%
11.5%

40.9%
25.5%

47.4%

Direct operating expense as a percentage of revenue . . . . . . . . . . . .

81.5% 84.0%

Gross contribution as a percentage of revenue . . . . . . . . . . . . . . . .

14.6% 12.0%

Revenue. The table below sets forth Television Production revenue and the changes in revenue by

media for the fiscal years ended March 31, 2018 and 2017:

Year Ended March 31,

Increase (Decrease)

2018

2017

Amount

Percent

(Amounts in millions)

Television Production

Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 744.5

$667.3

$ 77.2

International

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

179.6

163.2

16.4

Home Entertainment Revenue

Digital

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Packaged Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Home Entertainment Revenue . . . . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96.3

11.2

107.5

1.6

50.1

6.3

56.4

5.9

46.2

4.9

51.1

(4.3)

(72.9)%

11.6%

10.0%

92.2%

77.8%

90.6%

$1,033.2

$892.8

$140.4

15.7%

The primary component of Television Production revenue is domestic television revenue. Domestic

television revenue increased in fiscal 2018, as compared to fiscal 2017, due to increased intersegment
domestic television revenues from the Media Networks segment for Starz original series, slightly offset by
lower domestic television license fees on new scripted television programs.

International revenue in fiscal 2018 increased $16.4 million, or 10.0% as compared to fiscal 2017,
primarily driven by higher revenue in fiscal 2018 from Starz original series due to the inclusion of Starz for
the entire fiscal year in fiscal 2018 compared to the period from the date of acquisition (December 8, 2016)
through March 31, 2017 in fiscal 2017. This increase was partially offset by lower international revenue in
fiscal 2018 from Orange Is the New Black Season 6, and Step Up: High Water Season 1, as compared to the
international revenue generated in fiscal 2017 from Orange Is the New Black Seasons 4 & 5 andMad Men
Seasons 1 to 7.

Home entertainment revenue in fiscal 2018 increased $51.1 million, or 90.6% as compared to fiscal
2017, primarily driven by higher digital revenue from Starz original series due to the inclusion of Starz for
the entire fiscal year in fiscal 2018 compared to the period from the date of acquisition (December 8, 2016)
through March 31, 2017 in fiscal 2017.

Direct Operating Expense. The decrease in direct operating expenses as a percentage of television
production revenue is primarily due to the mix of titles generating revenue in fiscal 2018 as compared to
fiscal 2017.

Gross Contribution. Gross contribution and gross contribution margin of the Television Production
segment for fiscal 2018 increased as compared to fiscal 2017, primarily due to higher Television Production
revenues, and lower direct operating expenses as a percentage of Television Production revenue.

General and Administrative Expense. General and administrative expenses of the Television
Production segment increased $8.2 million, or 25.5%, primarily due to increases in salaries and related
expenses, incentive compensation and general and administrative expenses associated with the distribution
of Starz Originals.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the fiscal years

ended March 31, 2018 and 2017. Media Networks was not previously a reportable segment prior to the
quarter ended December 31, 2016, and in fiscal 2017, the results of operations in the Media Networks
segment represent primarily activity related to Starz from the acquisition date of December 8, 2016 to
March 31, 2017.

Year Ended March 31,

2018

2017

(Amounts in millions)

Media Networks Segment:

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,411.2

$426.3

Expenses:

Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Distribution & marketing expense . . . . . . . . . . . . . . . . . . . . . . . . .

Gross contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . .

575.9

305.3

530.0

100.9

186.6

64.4

175.3

45.0

Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 429.1

$130.3

Direct operating expense as a percentage of revenue . . . . . . . . . . . . . .

Gross contribution as a percentage of revenue . . . . . . . . . . . . . . . . . .

40.8%

37.6%

43.8%

41.1%

The following table sets forth the Media Networks segment revenue and segment profit by product

line:

Segment Revenue:

Year Ended March 31,

Increase (Decrease)

2018

2017

Amount

Percent

(Amounts in millions)

Starz Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Streaming Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,404.1
7.1

$423.4
2.9

$980.7
4.2

nm
144.8%

$1,411.2

$426.3

$984.9

Segment Profit:

Starz Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Streaming Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 468.0
(38.9)

$165.9
(35.5)

$302.1
(3.4)

nm
9.6%

$ 429.1

$130.4

$298.7

229.1%

nm — Percentage not meaningful.

Revenue. The increase in Media Networks revenue in fiscal 2018 was due to the inclusion of Starz
revenue for the entire fiscal year, as compared to the period from the acquisition date of December 8, 2016
to March 31, 2017 in fiscal 2017. The table below sets forth, for the periods presented, domestic
subscriptions to our STARZ network:

Period End Subscriptions:

STARZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23.5

24.2

March 31,
2018

March 31,
2017

(Amounts in millions)

Direct Operating and Distribution and Marketing Expenses. Starz Networks’ direct operating and

distribution and marketing expenses primarily represent programming cost amortization and advertising
and marketing costs. The level of programing cost amortization and advertising and marketing costs and
thus the gross contribution margin for the Media Networks segment can fluctuate from period to period
depending on the number of new shows and particularly new original series premiering on the network
during the period. Programming cost amortization and advertising and marketing costs generally increase
in periods where new original series are premiering on STARZ. During fiscal 2018 and the period from the
acquisition date of December 8, 2016 through March 31, 2017, the following original series premiered on
STARZ:

Year Ended March 31, 2018

Period from December 8, 2016
(acquisition date) to March 31, 2017

First Quarter:

The White Princess
American Gods Season 1
Power Season 4

Second Quarter:

Survivor’s Remorse Season 4
Outlander Season 3

First Quarter:

n/a

Second Quarter:

n/a

Third Quarter:

The Girlfriend Experience Season 2

—

Fourth Quarter:

Counterpart Season 1
Ash Vs. Evil Dead Season 3

Fourth Quarter:

Black Sails Season 4
The Missing Season 2

Gross Contribution. Gross contribution of the Media Networks segment for fiscal 2018 was primarily

from Starz Networks.

General and Administrative Expense. General and administrative expenses of the Media Networks
segment in fiscal 2018 of $100.9 million represent general and administrative expenses associated with Starz
Networks and Streaming Services. In fiscal 2017, general and administrative expenses of $45.0 million
represent general and administrative expenses associated with Starz Networks from the acquisition date of
December 8, 2016 to March 31, 2017, and general and administrative expenses from Streaming Services.

Media Networks Supplemental Pro Forma Financial Information:

The following table sets forth the Media Networks segment profit on a pro forma basis as if the Starz

Merger occurred on April 1, 2016:

Media Networks Segment:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:

Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution & marketing expense . . . . . . . . . . . . . . . . . . . . .
Gross contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . .
Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct operating expense as a percentage of revenue . . . . . . . . . . .
Gross contribution as a percentage of revenue . . . . . . . . . . . . . . .

Year Ended March 31,

2018
2017
(Amounts in millions)

Increase (Decrease)
Percent
Amount

$1,411.2

$1,377.7

$ 33.5

2.4%

575.9
305.3
530.0
100.9
$ 429.1

632.4
184.6
560.7
122.5
$ 438.2

(56.5)
120.7
(30.7)
(21.6)
$ (9.1)

(8.9)%
65.4%
(5.5)%
(17.6)%
(2.1)%

40.8%
37.6%

45.9%
40.7%

NOTE: The pro forma amounts above were determined by combining the historical financial information of
Lionsgate and Starz for each respective period and applying the acquisition related accounting. However, the

effects of purchase accounting are not part of the definition of segment profit, and have been excluded
accordingly. In addition, the pro forma information does not apply any operating costs synergies. The amounts
are presented for illustrative purposes and are not necessarily indicative of the combined financial results that
might have been achieved for the periods had the acquisition taken place on April 1, 2016, nor are they
indicative of the future combined results of Lionsgate and Starz.

The following table sets forth the Media Networks segment revenue and segment profit by product line

on a pro forma basis:

Segment Revenue:

Year Ended March 31,

Increase (Decrease)

2018

2017

Amount

Percent

(Amounts in millions)

Starz Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,404.1

$1,374.8

$29.3

2.1%

Streaming Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.1

2.9

4.2

144.8%

$1,411.2

$1,377.7

$33.5

2.4%

Segment Profit:

Starz Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Streaming Services(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 468.0
(38.9)

$ 473.7
(35.5)

$ (5.7)
(3.4)

$ 429.1

$ 438.2

$ (9.1)

(1.2)%
9.6%

(2.1)%

Revenue. The increase in pro forma Starz Networks revenue was due to a $52.1 million increase due

to higher effective rates primarily driven by OTT revenue growth, partially offset by a $22.8 million decrease
due to lower average subscriptions related to subscriber losses at certain MVPDs. During fiscal 2018 and
fiscal 2017, the following original series premiered on STARZ.

Year Ended March 31, 2018

Year Ended March 31, 2017

First Quarter:

The White Princess
American Gods Season 1
Power Season 4

Outlander Season 2
The Girlfriend Experience Season 1

Second Quarter:

Survivor’s Remorse Season 4
Outlander Season 3

Third Quarter:

The Girlfriend Experience Season 2

Fourth Quarter:

Counterpart Season 1
Ash Vs. Evil Dead Season 3

Power Season 3
Survivor’s Remorse Season 4

Third Quarter:

Ash Vs. Evil Dead Season 2
Blunt Talk Season 2

Fourth Quarter:

Black Sails Season 4
The Missing Season 2

Direct Operating and Distribution and Marketing Expense. The decrease in pro forma direct operating

expense is primarily due to lower costs for Starz Networks, driven by decreased programming cost
amortization related to output licensing arrangements and Starz Originals, partially offset by an increase in
programming cost amortization related to library content and higher development costs. This decrease was
partially offset by an increase in direct operating expense for Streaming Services.

The increase in pro forma distribution and marketing expense is due to an increase in Starz Networks’

advertising and marketing costs associated with the STARZ app and increased spend on Starz Originals,
and to a lesser extent, due to an increase in distribution and marketing expense for Streaming Services.

Gross Contribution. On a pro forma basis, the decrease in gross contribution of the Media Networks

segment was primarily due to lower gross contribution from Starz Networks, and to a lesser extent, lower
gross contribution from Streaming Services.

General and Administrative Expense. Pro forma general and administrative expenses of the Media

Networks segment in fiscal 2018 decreased due to lower Starz Networks general and administrative
expenses primarily attributable to lower payroll and related expenses due to prior year headcount
reductions, and a slight decrease in costs associated with Streaming Services.

Liquidity and Capital Resources

Sources and Uses of Cash

Our liquidity and capital resources have been provided principally through cash generated from

operations, debt, and our production loans. Our debt at March 31, 2019 primarily consisted of a $1.5
billion five-year revolving credit facility entered into on March 22, 2018 (the “Revolving Credit Facility”), a
five-year term loan A facility issued March 22, 2018 (the “Term Loan A”), a seven-year term loan B facility
issued March 22, 2018 (the “Term Loan B”, and, together with the Revolving Credit Facility and the Term
Loan A, the “Senior Credit Facilities”), 5.875% senior notes due 2024 (the “5.875% Senior Notes”), and
6.375% Senior Notes due 2024 (the “6.375% Senior Notes”).

Our principal uses of cash in operations include the funding of film and television productions, film

and programming 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.

In addition, the Company has a redeemable noncontrolling interest balance of $127.6 million related to

its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may
require the use of cash in the event the holders of the noncontrolling interests require the Company to
repurchase their interests (see Note 11 to our consolidated financial statements).

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, revolving credit facility
availability, the monetization of trade accounts receivable, tax-efficient financing, and available production
financing will be adequate to meet known operational cash, and debt service (i.e. principal and interest
payments) requirements for the foreseeable future, including the funding of future film and television
production, film and programming rights acquisitions and theatrical and video release schedules, and 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 revolving credit facility, single-purpose production
financing, government incentive programs, film funds, distribution commitments, and the monetization of
trade accounts receivable. 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.

Covenants. The Senior Credit Facilities contain representations and warranties, events of default and

affirmative and negative covenants that are customary for similar financings and which include, among
other things and subject to certain significant exceptions, restrictions on the ability to declare or pay
dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or
consolidate with any other person. In addition, a net first lien leverage maintenance covenant and an
interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A
and are tested quarterly. As of March 31, 2019, the Company was in compliance with all applicable
covenants.

The 5.875% Senior Notes and 6.375% Senior Notes contain certain restrictions and covenants that,
subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or
repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose
of certain assets subject to certain conditions, among other limitations. As of March 31, 2019, the
Company was in compliance with all applicable covenants.

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 under the plan, leaving approximately
$184.7 million of authorized potential purchases. The remaining $184.7 million of our common shares
authorized under the plan may be purchased from time to time at our 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. We did not repurchase any shares during the fiscal year
ended March 31, 2019.

Dividends. 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. In November 2018, our Board of Directors
suspended our quarterly cash dividend to focus on driving long-term shareholder value by investing in
global growth opportunities for Starz, while also strengthening the Company’s balance sheet.

Capacity to Pay Dividends. At March 31, 2019, the capacity to pay dividends under the Senior Credit

Facilities and the 5.875% Senior Notes and 6.375% Senior Notes significantly exceeded the amount of the
Company’s retained earnings or net loss, and therefore the Company’s net loss of $299.6 million and
retained earnings of $208.7 million were deemed free of restrictions at March 31, 2019.

Discussion of Operating, Investing, Financing Cash Flows

Cash and cash equivalents decreased by $193.5 million for the fiscal year ended March 31, 2019,
increased by $56.6 million for the fiscal year ended March 31, 2018, and increased by $263.3 million for the
fiscal year ended March 31, 2017, 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 fiscal years ended

March 31, 2019, 2018 and 2017 were as follows:

Operating Activities:
Operating income (loss) . . . . . . . . . . . . . . .

Amortization of films and television

Year Ended March 31,

Net Change

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

(Amounts in millions)

130.0

248.7

(16.3)

$(118.7)

$ 265.0

programs and program rights . . . . . . . . .

1,516.5

1,641.7

1,414.0

(125.2)

Non-cash share-based compensation . . . . .

Cash interest . . . . . . . . . . . . . . . . . . . . . .

Current income tax provision . . . . . . . . . . .

68.1

(152.0)

(15.1)

88.4

(122.9)

19.9

76.9

(86.8)

(14.5)

(20.3)

(29.1)

(35.0)

227.7

11.5

(36.1)

34.4

Shareholder litigation settlement charges

and interest

. . . . . . . . . . . . . . . . . . . . .

(221.3)

—

(221.3)

—

Other non-cash charges included in

operating activities . . . . . . . . . . . . . . . .

201.5

189.5

87.8

12.0

101.7

Cash flows from operations before
changes in operating assets and
liabilities . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities:

Accounts receivable, net and other

1,527.7

2,065.3

1,461.1

(537.6)

604.2

assets . . . . . . . . . . . . . . . . . . . . . . . .

470.8

(8.6)

(87.8)

479.4

79.2

Investment in films and television

programs and program rights . . . . . . .

(1,469.9)

(1,526.4)

(1,092.0)

56.5

(434.4)

Other changes in operating assets and

liabilities . . . . . . . . . . . . . . . . . . . . . .

(101.1)

(143.9)

277.2

42.8

(421.1)

Changes in operating assets and

liabilities . . . . . . . . . . . . . . . . . . . .

(1,100.2)

(1,678.9)

(902.6)

578.7

(776.3)

Net Cash Flows Provided By Operating

Activities . . . . . . . . . . . . . . . . . . . . . . .

427.5

386.4

558.5

$ 41.1

$(172.1)

Fiscal 2019 as Compared to Fiscal 2018. Cash flows provided by operating activities for the fiscal year

ended March 31, 2019 were $427.5 million compared to cash flows provided by operating activities of
$386.4 million for the fiscal year ended March 31, 2018. The increase in cash provided by operating
activities for fiscal 2019 as compared to fiscal 2018 is due to lower cash used from changes in operating
assets and liabilities driven by higher decreases in accounts receivable and other assets, and lower
investment in films and television programs and program rights spend. The higher decreases in accounts
receivables were impacted by the $350.6 million monetization of accounts receivables (see Note 19 to our
consolidated financial statements) which contributed to the cash flows provided by operating activities.
These increases were partially offset by lower cash flows from operations before changes in operating assets
and liabilities, which includes the portion of the shareholder litigation settlement and dissenting
shareholders’ liability payments in excess of the amounts originally accrued at the acquisition date
associated with the Starz merger which are included in the financing activities section below. Cash flows
provided by operating activities and cash on hand were primarily used to pay down debt.

Fiscal 2018 as Compared to Fiscal 2017. Cash flows provided by operating activities for the fiscal year

ended March 31, 2018 were $386.4 million compared to cash flows provided by operating activities of
$558.5 million for the fiscal year ended March 31, 2017. The decrease in cash provided by operating
activities for fiscal 2018 as compared to fiscal 2017 is due to higher investment in films and television
program and program rights and decreases from changes in other operating assets and liabilities. These
decreases were partially offset by higher cash flows from operations before changes in operating assets and
liabilities and lower increases in accounts receivables.

Investing Activities. Cash flows provided by (used in) investing activities for the fiscal years ended

March 31, 2019, 2018 and 2017 were as follows:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Investing Activities:
Proceeds from the sale of equity method investees, net of transaction costs . . . $ 48.0 $393.7 $

—

Investment in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(48.6)

(53.4)

(20.6)

Distributions from equity method investees . . . . . . . . . . . . . . . . . . . . . . . . .

—

3.1

Business acquisitions, net of cash acquired of $5.5, $18.7, and $73.5 in 2019,

2018 and 2017, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(77.3)

(1.8)

(1,102.6)

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(43.8)

(45.9)

(25.2)

Net Cash Flows Provided By (Used In) Investing Activities . . . . . . . . . . . . . . . $(121.7) $292.6 $(1,145.3)

Fiscal 2019 as Compared to Fiscal 2018. Cash used in investing activities of $121.7 million for the
fiscal year ended March 31, 2019 compared to cash provided by investing activities of $292.6 million for the
fiscal year ended March 31, 2018, as reflected above. The change was primarily due to cash used for the
purchase of 3 Arts Entertainment, net of cash acquired, offset partially by the net proceeds from the sale of
our equity interest in Pop in fiscal 2019, which compared to the net proceeds from the sale of our equity
interest in EPIX in fiscal 2018.

Fiscal 2018 as Compared to Fiscal 2017. Cash provided by investing activities of $292.6 million for
the fiscal year ended March 31, 2018 compared to cash used in investing activities of $1.15 billion for the
fiscal year ended March 31, 2017, as reflected above. The change was primarily due to proceeds from the
sale of our equity interest in EPIX in fiscal 2018 offset partially by cash used for investment in equity
method investees, compared to cash used for the purchase of Starz of $1.1 billion, net of cash acquired, in
fiscal 2017.

Financing Activities. Cash flows provided by (used in) financing activities for the fiscal years ended

March 31, 2019, 2018 and 2017 were as follows:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Debt – borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt – repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,541.2
(3,212.7)

$ 3,712.6
(4,335.7)

$ 4,002.8
(2,766.9)

Net (repayments of) proceeds from debt

. . . . . . . . . . . . . . . . . . . .
Production loans – borrowings
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans – repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net (repayments of) proceeds from production loans . . . . . . . . . . . .

Payment of dissenter liability accrued at acquisition . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities

328.5
338.1
(305.4)

32.7

(797.3)
(63.2)

(623.1)
319.7
(332.8)

(13.1)

—
13.8

1,235.9
296.0
(632.6)

(336.6)

—
(49.2)

Net Cash Flows Provided By (Used In) Financing Activities

. . . . . . . . .

$ (499.3) $ (622.4) $

850.1

Fiscal 2019. Cash flows used in financing activities of $499.3 million for the fiscal year ended
March 31, 2019 compared to cash flows used in financing activities of $622.4 million for the fiscal year
ended March 31, 2018. Cash flows used in financing activities for fiscal 2019 primarily reflects the payment
of the dissenting shareholders’ liability accrued at acquisition associated with the Starz merger (see Note 17
to our consolidated financial statements), net debt borrowings of $328.5 million, net production loan
borrowings of $32.7 million, and cash paid for dividends of $57.4 million. Net debt borrowings of $328.5
million in fiscal 2019 included the below transactions:

•

On February 4, 2019 we issued $550.0 million aggregate principal amount of 6.375% Senior
Notes. We used the proceeds of the 6.375% Senior Notes to pay down outstanding amounts under
our Revolving Credit Facility and for working capital purposes.

On April 15, 2018, the 1.25% convertible senior subordinated notes due April 2018 (the “April
2013 1.25% Notes”) matured, and upon maturity, we repaid the outstanding principal amount of
$60.0 million, together with accrued and unpaid interest.

Voluntary prepayments totaling $130.0 million in principal outstanding under the Term Loan B,
together with accrued and unpaid interest.

Fiscal 2018. Cash flows used in financing activities of $622.4 million for the fiscal year ended

March 31, 2018 compared to cash flows provided by financing activities of $850.1 million for the fiscal year
ended March 31, 2017. Cash flows used in financing activities for the fiscal year ended March 31, 2018
primarily reflects net repayments of debt borrowings of $623.1 million, net production loan repayments of
$13.1 million, and cash provided by other financing activities, which includes proceeds from the exercise of
stock options partially offset by tax withholding payments. Net repayments of debt borrowings of $623.1
million in fiscal 2018 included the below transactions:

•

On March 22, 2018, the Company entered into an amendment to the Credit Agreement (as
amended, the “Amended Credit Agreement”) to refinance its Previous Revolving Credit Facility,
Previous Term Loan A and Previous Term Loan B. In connection with the amendment, the
Company repaid in full the then outstanding principal amounts of $950.0 million under the
Previous Term Loan A and $825.0 million under the Previous Term Loan B, and terminated all
commitments under the Previous Revolving Credit Facility. In addition, the Company incurred a
new five-year Term Loan A in aggregate principal amount of $750.0 million, incurred a new
seven-year Term Loan B in aggregate principal amount of $1,250.0 million, and obtained a new
$1.5 billion five-year Revolving Credit Facility. This resulted in net borrowings of $225.0 million.

On December 11, 2017, the Company entered into an amendment to the Credit Agreement to
reduce the interest rate on the Previous Term Loan B and prepaid $25.0 million of principal
outstanding under the Previous Term Loan B.

Voluntary prepayments totaling $740.0 million in principal outstanding under the Previous Term
Loan B, together with accrued and unpaid interest.

Fiscal 2017. Cash flows provided by financing activities of $850.1 million for the fiscal year ended
March 31, 2017 primarily reflects net debt borrowings of $1,235.9 million primarily in connection with the
Starz Merger, net production loan repayments of $336.6 million and cash used for other financing activities,
which includes dividend payments of $26.8 million and payments for tax withholding of $40.9 million
required on equity awards. Net debt borrowings of $1,235.9 million in fiscal 2017 included the below
transactions:

•

In connection with the Starz Merger, on December 8, 2016, Lions Gate Entertainment Corp.
entered into a credit and guarantee agreement (the “Credit Agreement”) which provided for a
$1.0 billion five-year revolving credit facility (the “Previous Revolving Credit Facility”) (ii) a
$1.0 billion five-year term loan A facility (the “Previous Term Loan A”) and (iii) a $2.0 billion
seven-year term loan B facility (the “Previous Term Loan B”). In addition, on October 27, 2016,
Lions Gate Entertainment Corp. issued $520.0 million aggregate principal amount of 5.875%
senior notes due 2024 (the “5.875% Senior Notes”).

The Company used the proceeds of the 5.875% Senior Notes, the Previous Term Loan A, the
Previous Term Loan B, and a portion of the Previous Revolving Credit Facility (amounting to
$50.0 million) to finance a portion of the consideration and transaction costs for the Starz Merger
and the associated transactions, including the discharge of Starz’s senior notes and repayment of
all amounts outstanding under Starz’s credit agreement.

•

Voluntary prepayments totaling $400.0 million in principal outstanding under the Previous Term
Loan B, together with accrued and unpaid interest.

Debt

See Note 7 to our consolidated financial statements for a discussion of our debt. The principal
amounts of our debt outstanding, excluding film obligations and production loans, as of March 31, 2019
and March 31, 2018 were as follows:

Maturity Date

Revolving Credit Facility(1)
. . . . . . . . . . . . . . . . . March 2023
Term Loan A(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . March 2023
Term Loan B(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . March 2025
5.875% Senior Notes(3)
6.375% Senior Notes(3)
Convertible senior subordinated notes
Capital lease obligations(4) . . . . . . . . . . . . . . . . . . Various

. . . . . . . . . . . . . . . . . . . . November 2024
. . . . . . . . . . . . . . . . . . . . February 2024
. . . . . . . . .

n/a

Principal Amounts Outstanding

March 31,
2019

March 31,
2018

(Amounts in millions)

—
750.0
1,107.5
520.0
550.0
—
45.4

—
750.0
1,250.0
520.0
—
60.0
50.5

$2,972.9

$2,630.5

(1) Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B):

(i) Revolving Credit Facility Availability of Funds & Commitment Fee: The Revolving Credit Facility
provides for borrowings and letters of credit up to an aggregate of $1.5 billion, and at March 31,
2019 there was $1.5 billion available. We are required to pay a quarterly commitment fee on the
Revolving Credit Facility of 0.250% to 0.375% per annum, depending on the achievement of
certain leverage ratios, as defined in the Amended Credit Agreement, on the total Revolving
Credit Facility of $1.5 billion less the amount drawn.

(ii)

Interest:

•

Revolving Credit Facility and Term Loan A: Initially bore interest at a rate per annum equal to
LIBOR plus 1.75% (or an alternative base rate plus 0.75%) margin, with a LIBOR floor of
zero. The margin is subject to potential increases of up to 50 basis points (two (2) increases of
25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the
Amended Credit Agreement. The margin as of March 31, 2019 is 2.00% (effective interest
rate of 4.49% as of March 31, 2019, before the impact of interest rate swaps, see item (2)
discussed below).

Term Loan B: As of March 22, 2018, pursuant to the Amended Credit Agreement described
below, the Term Loan B bears interest at a rate per annum equal to LIBOR plus 2.25%
margin, with a LIBOR floor of zero (or an alternative base rate plus 1.25% margin) (effective
interest rate of 4.74% as of March 31, 2019, before the impact of interest rate swaps, see item
(2) discussed below).

(iii) Required Principal Payments:

•

Term Loan A: Quarterly principal payments, at quarterly rates of 1.25% beginning June 30,
2019, 1.75% beginning June 30, 2020, and 2.50% beginning June 30, 2021 through
December 31, 2022, with the balance payable at maturity.

Term Loan B: Quarterly principal payments, at a quarterly rate of 0.25%, with the balance
payable at maturity.

The Term Loan A and Term Loan B also require mandatory prepayments in connection with
certain asset sales, subject to certain significant exceptions, and the Term Loan B is subject to
additional mandatory repayment from specified percentages of excess cash flow, as defined in
the Amended Credit Agreement.

(iv) Security and Covenants: The Senior Credit Facilities are guaranteed by the Guarantors (as defined
in the Amended Credit Agreement) and are secured by a security interest in substantially all of the
assets of Lionsgate and the Guarantors (as defined in the Amended Credit Agreement), subject to
certain exceptions. The Senior Credit Facilities contain a number of restrictions and covenants. In
addition, a net first lien leverage maintenance covenant and an interest coverage ratio
maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested
quarterly. As of March 31, 2019, we were in compliance with all applicable covenants.

(2) To manage interest rate risk on certain of its LIBOR-based floating-rate corporate debt, as of

March 31, 2019, the Company has entered into interest rate swaps to effectively convert the floating
interest rates to fixed interest rates on a $1.7 billion notional amount, which as of March 31, 2019,
converts the effective rate on $1.7 billion of our LIBOR-based corporate debt to 4.987% (see Note 18
for further information).

(3) 5.875% Senior Notes and 6.375% Senior Notes: The 5.875% Senior Notes and 6.375% Senior Notes

contain a number of restrictions and covenants, and as of March 31, 2019, we were in compliance with
all applicable covenants. Interest is payable each year at a rate of 5.875% per year on the 5.875% Senior
Notes and at a rate of 6.375% on the 6.375% Senior Notes.

(4) Capital Lease Obligations: Represents lease agreements acquired in the Starz merger, and as of

March 31, 2019 include a ten-year commercial lease for a building with an imputed annual interest rate
of 7.2%, with an additional four successive five-year renewal periods at our option and a capital lease
arrangement for Starz’s transponder capacity that expires in February 2021 and has an imputed annual
interest rate of 7.0%.

Production Loans

The amounts outstanding under our production loans as of March 31, 2019 and 2018 were as follows:

Production loans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$386.4

$352.9

March 31,
2019

March 31,
2018

(Amounts in millions)

(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 4.63% to 5.29%.

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, 2019:

2020

2021

2022

2023

2024

Thereafter

Total

Year Ended March 31,

(Amounts in millions)

Future annual repayment of debt and
other obligations recorded as of
March 31, 2019 (on-balance sheet
arrangements)

Revolving credit facility . . . . . . .

— $ — $ — $ — $ — $

— $

—

Term Loan A . . . . . . . . . . . . . .

Term Loan B . . . . . . . . . . . . . .

5.875% Senior Notes . . . . . . . . .

6.375% Senior Notes . . . . . . . . .

Film obligations and production

loans(1) . . . . . . . . . . . . . . . . .
Capital lease obligations . . . . . . .

37.5

12.5

—

513.6
3.0

566.6

52.5

12.5

—

118.1
3.0

186.1

75.0

12.5

—

13.9
0.9

585.0

12.5

—

12.5

—

— 550.0

7.0
0.9

3.0
1.0

—

750.0

1,045.0

1,107.5

520.0

—

1.1
36.6

520.0

550.0

656.7
45.4

102.3

605.4

566.5

1,602.7

3,629.6

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 . . .

Total future repayment of debt and

other commitments under
contractual obligations(4) . . . . . . .

648.6
154.3
37.2
128.8

968.9

225.4
151.6
36.5
44.5

458.0

108.7
148.1
35.8
26.2

318.8

32.0
144.1
35.5
10.7

222.3

8.8
112.8
20.1
0.9

142.6

5.6
104.6
52.3
—

162.5

1,029.1
815.5
217.4
211.1

2,273.1

$1,535.5

$644.1

$421.1

$827.7

$709.1

$1,765.2

$5,902.7

(1) Film obligations include minimum guarantees, theatrical marketing obligations, and accrued licensed
program rights 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, minimum guarantee
commitments, and program rights 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. Program rights commitments
represent contractual commitments under programming license agreements related to films that are not
available for exhibition until some future date (see below for further details). 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.

(3)

Includes cash interest payments on our debt, excluding the interest payments on the 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 $127.6 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 11 to our consolidated financial
statements).

We are obligated to pay programming fees for all qualifying films that are released theatrically in the
U.S. by Sony’s Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels through 2021. We
do not license films produced by Sony Pictures Animation. The programming fees to be paid by us to Sony
are based on the quantity and domestic theatrical exhibition receipts of qualifying films. Since the term of
the output programming agreement with Sony applies to all films released theatrically through
December 31, 2021, the Company is obligated to pay fees for films that have not yet been released in
theaters. We are unable to estimate the amounts to be paid under these agreements for films that have not
yet been released in theaters, however, such amounts are expected to be significant. We have also entered
into agreements with a number of other motion picture producers and are obligated to pay fees for the
rights to exhibit certain films that are released by these producers.

For additional details of commitments and contingencies, see Note 17 to our consolidated financial

statements.

Remaining Performance Obligations and Backlog

Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or

minimum guarantee contracts where the revenue will be recognized and the cash received in the future
(i.e., backlog). As disclosed in Note 12 to our consolidated financial statements, remaining performance
obligations were $1.8 billion at March 31, 2019. The backlog portion of remaining performance obligations
(excluding deferred revenue) related to our Motion Picture and Television Production segments was
$1.2 billion at March 31, 2019 and March 31, 2018, 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 continue to
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 and tax credit receivables denominated in various foreign
currencies (i.e., cash flow hedges). We also enter into forward foreign exchange contracts that economically

hedge certain of our foreign currency risks, even though hedge accounting does not apply or the Company
elects not to apply hedge accounting. As of March 31, 2019, we had the following outstanding forward
foreign exchange contracts (all outstanding contracts have maturities of less than 12 months from
March 31, 2019):

Foreign Currency

March 31, 2019

Foreign Currency
Amount

(Amounts in
millions)

British Pound Sterling . . . . . . .

£5.0

in exchange for

Canadian Dollar . . . . . . . . . . .

C$20.7

in exchange for

Australian Dollar . . . . . . . . . . .

A$3.5

in exchange for

Mexican Peso . . . . . . . . . . . . .

$108.3

in exchange for

US Dollar
Amount

(Amounts in
millions)

$ 7.2

$16.2

$ 2.7

$ 5.6

Weighted Average
Exchange Rate Per
$1 USD

£0.69

C$1.28

A$1.27

$19.30

Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts
that qualified as effective hedge contracts outstanding during the fiscal year ended March 31, 2019 were
$1.1 million, net of tax (2018 — losses of $0.2 million, net of tax; 2017 — losses of $3.5 million, net of
tax), 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 during the year ended March 31, 2019 were less
than $0.1 million (2018 — $0.1 million; 2017 — nil) and are included in direct operating expenses in the
accompanying consolidated statements of operations. 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. See Note 18 to our consolidated financial
statements for additional information on our financial instruments.

Interest Rate Risk. At March 31, 2019, we had interest rate swap agreements to fix the interest rate on

$1.7 billion of variable rate LIBOR-based debt. See Note 18 to our consolidated financial statements for
additional information. The difference between the fixed rate to be paid and the variable rate received under
the terms of the interest rate swap agreements will be recognized as interest expense for the related debt.
Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap
agreements will have a corresponding effect on future cash flows.

Certain of our borrowings, primarily borrowings under our Senior Credit Facilities 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 revolving credit facility and Term Loan A is a
percentage per annum equal to a LIBOR rate plus 1.75%. The applicable margin with respect to loans
under our Term Loan B is a percentage per annum equal to a LIBOR rate plus 2.25%. Assuming the
revolving credit facility is drawn up to its maximum borrowing capacity of $1.5 billion, based on the
applicable LIBOR in effect as of March 31, 2019, each quarter point change in interest rates would result in
a $4.1 million change in annual net interest expense on the revolving credit facility, Term Loan A, Term
Loan B and interest rate swap agreements.

The variable interest production loans incur interest at rates ranging from approximately 4.63% to
5.29% and applicable margins ranging from 1.5% over the one, two, or three-month LIBOR to 2.50% over
the one, two, or three-month LIBOR. A quarter point increase of the interest rates on the outstanding
principal amount of our variable rate production loans would result in $1.0 million in additional costs
capitalized to the respective film or television asset.

At March 31, 2019, our 5.875% Senior Notes and 6.375% Senior Notes had an outstanding principal

value of $1.07 billion, and an estimated fair value of $1.11 billion. A 1% increase in the level of interest
rates would decrease the fair value of the 5.875% Senior Notes and 6.375% Senior Notes by approximately
$37.3 million, and a 1% decrease in the level of interest rates would increase the fair value of the 5.875%
Senior Notes and 6.375% Senior Notes by approximately $26.5 million.

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 or required principal payment dates and the fair value
of the instrument as of March 31, 2019:

2020

2021

2022

2023

2024

Thereafter

Total

Year Ended March 31,

Fair Value
March 31,
2019

(Amounts in millions)

Debt and Production Loans

Variable Rates:

Revolving Credit Facility(1)

. . $ — $ — $ — $ — $ — $

— $

—

Average Interest Rate . . . .
Term Loan A(1) . . . . . . . . . .
Average Interest Rate . . . .
Term Loan B(1) . . . . . . . . . .
Average Interest Rate . . . .

—
37.5

—
52.5

—
75.0

—
585.0

—
—

4.49% 4.49% 4.49% 4.49% —
12.5
12.5
12.5

12.5

—
—

—
1,045.0

750.0

742.5

1,107.5

1,228.1

4.74% 4.74% 4.74% 4.74% 4.74%

4.74%

Production loans . . . . . . . . .
Average Interest Rate . . . .

336.6
49.8
—
4.93% 4.66% —

—
—

386.4

Fixed Rates:

5.875% Senior Notes . . . . . .
Average Interest Rate . . . .
6.375% Senior Notes . . . . . .
Average Interest Rate . . . .

Interest Rate Swaps(2)

Variable to fixed notional

—
—
—
—

—
—
—
—
— 550.0
— 6.375%

520.0
5.875%
—
—

520.0

534.3

550.0

576.1

amount . . . . . . . . . . . .

—

— 1,700.0

1,700.0

(63.6)

$386.6 $114.8

$87.5

$597.5

$562.5

$3,265.0

$5,013.9

$3,403.8

(1) The effective interest rate in the table above is before the impact of interest rate swaps.

(2) Represents interest rate swap agreements on certain of our LIBOR-based floating-rate corporate debt
with fixed rates paid ranging from 2.723% to 2.915% maturing in March 2025, which as of March 31,
2019, converts the effective rate on $1.7 billion of our LIBOR-based corporate debt to 4.987%. See
Note 18 to our consolidated financial statements.

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, 2019, 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, 2019.

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, 2019. Management based its assessment on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework).

Based on this assessment, our management has concluded that, as of March 31, 2019, 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

There were no changes in internal control over financial reporting during the fiscal fourth quarter

ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Lions Gate Entertainment Corp.

Opinion on Internal Control over Financial Reporting

We have audited Lions Gate Entertainment Corp.’s (the Company) internal control over financial

reporting as of March 31, 2019, 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). In our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of March 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States) (PCAOB), the 2019 consolidated financial statements and the related notes and
schedule listed in the Index at Item 15(a) and our report dated May 23, 2019 expressed an unqualified
opinion thereon.

Basis for Opinion

The Company’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
are a public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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.

Definition and Limitations of Internal Control Over Financial Reporting

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.

Los Angeles, California
May 23, 2019

/s/ Ernst & Young LLP

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
2019 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the
fiscal year ended March 31, 2019.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED SHAREHOLDER MATTERS.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

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-74.

(2) Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts

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.

Item 15(a).

Description

Year Ended March 31, 2019:

Reserves:

Schedule II. Valuation and Qualifying Accounts

Lions Gate Entertainment Corp.

March 31, 2019

(In Millions)

Additions

Balance at
Beginning of
Period

Charged to Costs
and Expenses(1)

Charged to
Other
Accounts

Deductions

Balance at
End of Period

Returns and allowances . . . . . . . . .
Provision for doubtful accounts . . .

Deferred tax valuation allowance . .

$56.2
$ 7.5

$73.2

Year Ended March 31, 2018:

Reserves:

Returns and allowances . . . . . . . . .
Provision for doubtful accounts . . .
Deferred tax valuation allowance . .

$68.6
$ 9.0
$ 5.9

Year Ended March 31, 2017:

Reserves:

Returns and allowances . . . . . . . . .
Provision for doubtful accounts . . .
Deferred tax valuation allowance . .

$51.8
$ 6.0
$10.1

$126.0
$ (2.0)

$313.9

$168.3
$ (1.0)
$ 67.3

$149.3
$ (0.2)
0.4
$

$ —
$ —
$14.0(6)

$(147.2)(3)
(0.1)(5)
$
$ —

$ 35.0

$ 5.4
$401.1

$ —
$ —
$ —

$(180.7)(3)
(0.5)(5)
$
$ —

$ 56.2
$ 7.5
$ 73.2

$24.3(2)
$ 3.2(2)
$ 1.4(2)

$(156.8)(3)
$ —
$

(6.0)(4)

$ 68.6
$ 9.0
$ 5.9

(1) Charges for returns and allowances are charges against revenue.

(2) Opening balances due to the acquisition of Starz on December 8, 2016.

(3) Actual returns and fluctuations in foreign currency exchange rates.

(4) Valuation allowance reversal, of which $1.4 million was recorded as a tax benefit in the consolidated

statement of operations, and $4.6 million was recorded in other comprehensive income. The
$4.6 million relates to the gain on Starz investment.

(5) Uncollectible accounts written off and fluctuations in foreign currency exchange rates.

(6) Valuation allowance addition recorded in other comprehensive income and primarily associated with

hedging losses.

Item 15(b).

Exhibit
Number

2.1

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

INDEX TO EXHIBITS

Exhibit Description

Agreement and Plan of Merger, dated as of June 30,
2016, by and among Lions Gate, Starz, and Orion
Arm Acquisition Inc.

Articles

Notice of Articles

Supplemental Indenture, dated as of December 8,
2016, among Lions Gate Entertainment Corp., the
guarantors party thereto, and Deutsche Bank Trust
Company Americas, as trustee

Indenture, dated as of October 27, 2016, by and
between LG FinanceCo Corp. and Deutsche Bank
Trust Company Americas, as trustee

Indenture, dated as of March 28, 2018, by and
between Lions Gate Capital Holdings LLC, as issuer,
the guarantors named therein, and Deutsche Bank
Trust Company Americas, as trustee

Indenture, dated as of February 4, 2019, by and
among Lions Gate Capital Holdings, LLC the
Guarantors named therein, and Deutsche Bank Trust
Company, as Trustee

Description of Class A voting shares, no par value per
share

Description of Class B non-voting shares, no par
value per share

10.1*x

Director Compensation Summary

10.2

10.3

10.4

10.5

10.6*

10.7

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

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

Employment Agreement, dated May 30, 2013,
between the Company and Jon Feltheimer

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

Incorporated by Reference

Form

8-K

Exhibit

2.1

8-K

8-K/A

8-K

3.1

4.1

Filing Date/
Period End
Date

7/1/2016

12/8/2016

12/9/2016

12/8/2016

8-K

4.1

10/27/2016

8-K

4.1

3/28/2018

8-K

4.1

2/4/2019

S-4

10-Q

8-K

—

8/1/2016

10.62

10.65

12/31/2008

7/10/2009

10.68

10/23/2009

8-K

2.1

1/17/2012

8-K

10.1

6/3/2013

2/11/2015

10.8

Underwriting Agreement dated April 8, 2015, by and
among Lions Gate Entertainment Corp., MHR

8-K

1.1

4/9/2015

100

Exhibit
Number

Exhibit Description

Incorporated by Reference

Form

Exhibit

Filing Date/
Period End
Date

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

Capital Partners Master Account LP, MHR Capital
Partners (100) LP, MHR Institutional Partners II LP,
MHR Institutional Partners IIA LP, MHR
Institutional Partners III LP and J.P. Morgan
Securities LLC

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.

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.

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
signatures pages thereto

Stock Exchange Agreement, dated as of June 30,
2016, by and among Lions Gate, Orion Arm
Acquisition Inc., and the stockholders listed on
Schedule 1 thereto

Amendment to Voting and Standstill Agreement,
dated as of June 30, 2016, by and among Lions Gate,
Liberty Global plc, Discovery, Dr. John C. Malone,
MHR Fund Management, LLC, Liberty, Discovery
Communications, Inc. and the Mammoth Funds (as
defined therein)

Amendment No. 1 to Investor Rights Agreement,
dated as of June 30, 2016, by and among Lions Gate,
Mammoth, Liberty, Discovery, Liberty Global plc,

101

8-K

10.1

11/10/2015

8-K

10.2

11/10/2015

8-K

10.3

11/10/2015

8-K

10.4

11/10/2015

8-K

1.1

11/13/2015

10-Q

10.116

2/4/2016

8-K

10.1

7/1/2016

8-K

10.7

7/1/2016

8-K

10.8

7/1/2016

Exhibit
Number

10.18

10.19*

10.20

10.21

10.22*

10.23

10.24*

10.25*
10.26*

10.27*

10.28

10.29

Exhibit Description

Discovery Communications, Inc., and the affiliated
funds of Mammoth party thereto

Commitment Letter, dated as of June 27, 2016,
among Lions Gate, and JPMorgan Chase Bank, N.A.,
Bank of America, N.A., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Deutsche Bank AG New York
Branch, Deutsche Bank AG Cayman Islands Branch,
and Deutsche Bank Securities Inc.

Amendment to Employment Agreement, dated
October 11, 2016, between the Company and
Jon Feltheimer

Securities Issuance and Payment Agreement, dated as
of October 21, 2016, by and among Lions Gate
Entertainment Corp., Lions Gate Entertainment Inc.
and AT&T Media Holdings, Inc.

Registration Rights Agreement, dated as of October
21, 2016, by and among Lions Gate Entertainment
Corp. and AT&T Media Holdings, Inc.

Amendment to Employment Agreement, dated
November 3, 2016, between Lions Gate
Entertainment Corp. and Michael Burns

Credit and Guarantee Agreement, dated as of
December 8, 2016, among Lions Gate, as borrower,
the guarantors party thereto, the lenders referred to
therein, and JPMorgan Chase Bank, N.A., as
Administrative Agent

Employment Agreement between Lions Gate
Entertainment Inc. and James W. Barge dated
December 28, 2016

Executive Annual Bonus Program

Lions Gate Entertainment Corp. 2017 Performance
Incentive Plan

Form of Restricted Share Unit Award Agreement

Amendment No. 1, dated as of December 11, 2017, to
the Credit and Guarantee Agreement dated as of
December 8, 2016, among Lions Gate Entertainment
Corp., as borrower, each guarantor party thereto, each
lender party thereto, JPMorgan Chase Bank, N.A., as
administrative agent, and the other parties thereto

Amendment No. 2, dated as of March 22, 2018, to the
Credit and Guarantee Agreement dated as of
December 8, 2016, among Lions Gate Entertainment
Corp., as borrower, each guarantor party thereto, each
lender party thereto, JPMorgan Chase Bank, N.A., as
administrative agent, and the other parties thereto (as
previously amended by that certain Amendment
No. 1 dated as of December 11, 2017).

Incorporated by Reference

Form

Exhibit

Filing Date/
Period End
Date

8-K

10.9

7/1/2016

8-K

10.1

10/13/2016

8-K

10.1

10/27/2016

8-K

10.2

10/27/2016

8-K

10.1

11/4/2016

8-K

10.1

12/8/2016

10-Q

10.137

12/31/2016

10-Q

8-K

10-Q

8-K

10.36

10.1

10.38

10.1

6/30/2017

9/15/2017

9/30/2017

12/11/2017

8-K

10.1

3/22/2018

10.30*

Form of Nonqualified Stock Option Agreement

10-K

10.36

5/24/18

102

Incorporated by Reference

Form

10-K

10-Q

Exhibit

10.37

10.38

10.39

Filing Date/
Period End
Date

5/24/18

12/31/2018

Exhibit
Number
10.31*
10.32*
10.33*

10.34x

21.1x

23.1x

23.2x

24.1x

31.1x

31.2x

32.1x

99.1x

101

Exhibit Description

Form of Incentive Stock Option Agreement

Form of Share Appreciation Rights Agreement

Employment Agreement between Lions Gate
Entertainment Corp. and Brian Goldsmith dated as of
October 1, 2018

Amendment No. 3 dated as of March 11, 2019, to the
Credit and Guarantee Agreement dated as of
December 8, 2016, as amended and restated as of
March 22, 2018 (as further amended, supplemented,
amended and restated or otherwise modified from
time to time) among Lions Gate Entertainment Corp.,
Lions Gate Capital Holdings LLC, as borrower, each
guarantor party thereto, each lender party thereto,
JPMorgan Chase Bank, N.A., as administrative agent,
and the other parties thereto.

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)

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

Pop Media Group, LLC Audited Consolidated
Financial Statements as of March 15, 2019 and
March 31, 2018, and for each of the three fiscal years
in the periods ended March 15, 2019, and March 31,
2018 and 2017

The following materials from the Company’s Annual
Report on Form 10-K for the year ended March 31,
2019 formatted in Extensible Business Reporting
Language (XBRL): (i) the Consolidated Balance
Sheets, (ii) the Consolidated Statements of
Operations, (iii) the Consolidated Statements of
Comprehensive Income (Loss), (iv) the Consolidated
Statements of Equity, (v) the Consolidated Statements
of Cash Flows and (vi) Notes to Consolidated
Financial Statements

* Management contract or compensatory plan or arrangement.

Filed herewith

103

ITEM 16. FORM 10-K SUMMARY.

None.

104

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 23, 2019.

SIGNATURES

LIONS GATE ENTERTAINMENT CORP.

By:

/s/ James W. Barge
James W. Barge
Chief Financial Officer

DATE: May 23, 2019

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,
Corii Berg 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, 2019; 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.

Signature

/s/ JAMES W. BARGE
James W. Barge

/s/ MICHAEL BURNS
Michael Burns

/s/ GORDON CRAWFORD
Gordon Crawford

/s/ ARTHUR EVRENSEL
Arthur Evrensel

/s/ JON FELTHEIMER
Jon Feltheimer

/s/ EMILY FINE
Emily Fine

/s/ MICHAEL T. FRIES
Michael T. Fries

/s/ SIR LUCIAN GRAINGE
Sir Lucian Grainge

/s/ SUSAN MCCAW
Susan McCaw

Title

Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)

Director

Date

May 23, 2019

Chief Executive Officer (Principal Executive
Officer) and Director

May 23, 2019

Director

May 23, 2019

/s/ MARK H. RACHESKY, M.D.
Mark H. Rachesky, M.D.

Chairman of the Board of Directors

May 23, 2019

105

Signature

/s/ DANIEL SANCHEZ
Daniel Sanchez

/s/ DARYL SIMM
Daryl Simm

/s/ HARDWICK SIMMONS
Hardwick Simmons

/s/ DAVID M. ZASLAV
David M. Zaslav

Title

Director

Date

May 23, 2019

106

INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets — March 31, 2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations — Years Ended March 31, 2019, 2018 and 2017 . . . . . . .

Consolidated Statements of Comprehensive Income (Loss) — Years Ended March 31, 2019,

2018 and 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Equity — Years Ended March 31, 2019, 2018 and 2017 . . . . . . . . . .

Consolidated Statements of Cash Flows — Years Ended March 31, 2019, 2018 and 2017 . . . . . .

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

To the Shareholders and the Board of Directors of Lions Gate Entertainment Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lions Gate Entertainment Corp.

(the Company) as of March 31, 2019 and 2018, the related consolidated statements of operations,
comprehensive income (loss), equity and cash flows for each of the three years in the period ended
March 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a)
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at
March 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in
the period ended March 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31,
2019, 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 23,
2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is

to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.

We have served as the Company’s auditor since 2001.

Los Angeles, California
May 23, 2019

/s/ Ernst & Young LLP

F-2

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS

ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Program rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in films and television programs and program rights, net . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets

LIABILITIES
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participations and residuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Film obligations and production loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt – short term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dissenting shareholders’ liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participations and residuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Film obligations and production loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 17)

EQUITY

March 31,
2019

March 31,
2018

(Amounts in millions)

$ 184.3
647.2
295.7
267.2
1,394.4
1,672.0
155.3
26.2
1,871.6
2,833.5
436.1
19.8
$8,408.9

$ 531.2
408.5
512.6
53.6
—
146.5
1,652.4
2,850.8
479.8
143.1
114.0
62.8
56.5
127.6

$ 378.1
946.0
253.2
195.8
1,773.1
1,692.0
161.7
164.9
1,937.7
2,740.8
458.6
38.8
$8,967.6

447.7
504.5
327.9
79.1
869.3
183.9
2,412.4
2,478.3
438.3
171.3
46.4
70.3
91.9
101.8

Class A voting common shares, no par value, 500.0 shares authorized, 82.5 shares

issued (March 31, 2018 – 81.8 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . .

649.7

628.7

Class B non-voting common shares, no par value, 500.0 shares authorized,

133.5 shares issued (March 31, 2018 – 129.3 shares issued)

. . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Lions Gate Entertainment Corp. shareholders’ equity . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,140.6
208.7
(80.3)
2,918.7
3.2
2,921.9
$8,408.9

2,020.3
516.6
(9.7)
3,155.9
1.0
3,156.9
$8,967.6

See accompanying notes.
F-3

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended March 31,

2019

2018

2017

(Amounts in millions, except per share amounts)

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,680.5

$4,129.1

$3,201.5

Expenses:

Direct operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,028.2

2,309.6

1,903.8

Distribution and marketing . . . . . . . . . . . . . . . . . . . . . . . . . .

General and administration . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . .

Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

835.5

445.4

163.4

78.0

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,550.5

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

130.0

Interest expense

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on dissenting shareholders’ liability . . . . . . . . . . . . . . .

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder litigation settlements . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Equity interests income (loss)

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net loss attributable to noncontrolling interests . . . . . . . .

Net income (loss) attributable to Lions Gate Entertainment Corp.

(163.6)
(35.3)

(198.9)
(114.1)
12.0
(4.7)
(1.9)
(87.6)
(42.9)

(308.1)
8.5

(299.6)
15.4

897.6

454.4

159.0

59.8

3,880.4

248.7

(137.2)
(56.5)

(193.7)
—
10.4
—
(35.7)
171.8
(52.8)

148.7
319.4

468.1
5.5

806.8

355.4

63.1

88.7

3,217.8

(16.3)

(99.7)
(15.5)

(115.2)
—
6.4
—
(40.4)
20.4
10.7

(134.4)
148.9

14.5
0.3

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (284.2)

$ 473.6

14.8

Per share information attributable to Lions Gate Entertainment

Corp. shareholders:

Basic net income (loss) per common share . . . . . . . . . . . . . . . . . . .

$ (1.33)

Diluted net income (loss) per common share . . . . . . . . . . . . . . . . .

$ (1.33)

Weighted average number of common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . . . . . . . .

213.7
213.7
0.18

2.27

2.15

208.4
220.4
0.09

0.09

165.0
172.2
0.09

See accompanying notes.
F-4

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(299.6) $468.1

$ 14.5

Foreign currency translation adjustments, net of tax . . . . . . . . . . . . . . . . . . .

(5.8)

Net unrealized gain (loss) on available-for-sale securities, net of tax . . . . . . . .

Reclassification adjustment for gain on available-for-sale securities realized in

net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

7.0

(0.5)

(8.1)

56.4

— (17.8)

Net unrealized loss on cash flow hedges, net of tax benefit of $0.3 million,

$0.1 million, and $2.5 million in 2019, 2018 and 2017, respectively . . . . . . . .

(62.2)

(0.2)

(3.5)

Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(367.6)

474.4

Less: Comprehensive loss attributable to noncontrolling interest

. . . . . . . . . .

15.4

5.5

41.5

0.3

Comprehensive income (loss) attributable to Lions Gate Entertainment Corp.

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(352.2) $479.9

$ 41.8

See accompanying notes.
F-5

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF EQUITY

Class B Non-Voting
Class A Voting
Common Shares
Common Shares
Number Amount Number Amount Number Amount

Common Shares Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total LGEC
Shareholders’
Equity

Non-
controlling
Interests(a)

Total
Equity

— $ —
—
—

— $
—

— 146.8
0.6
—

(Amounts in millions)
$ 885.8
$
0.7

7.6
—

$(43.1)
—

$ 850.3
0.7

$ —
—

$ 850.3
0.7

—
—

1.0
—

36.4
(7.0)

—
(6.3)

shares . . . . . . . . . . . . .

74.2

458.0

74.2

458.0

(148.4)

(916.3)

4.6

121.6

46.9

1,206.1

—
0.1
0.2

2.0
—
—

—
0.9
3.8

21.4
—
—

1.1
1.8
0.4

2.0
—
—

186.5
23.8
18.3

21.4
—
—

—

—
—
—

0.4

—
—
—

—

—
—
—

—
14.8
—

—
—

—

—
—
—

—
—
27.1

36.4
(13.3)

(0.3)

—
—

—

36.4
(13.3)

(0.3)

1,328.1

—

1,328.1

186.5
24.7
22.1

42.8
14.8
27.1

—
—
—

186.5
24.7
22.1

42.8
14.8
27.1

—
81.1

—
$605.7

—
126.4

—
$1,914.1

—
(5.5)
—
— $ — $ 10.6

—
$(16.0)

(5.5)
$2,514.4

—
$ —

(5.5)
$2,514.4

—
0.3

0.1
0.3
—
—
—
—

—
81.8

—
—

—
1.7

12.8
8.5
—
—
—
—

—
2.6

—
0.3
—
—
—
—

—
44.8

52.9
8.5
—
—
—
—

—
—

—
—
—
—
—
—

—
—

—
—
—
—
—
—

60.8
—

—
—
—
(19.1)
473.6
—

—
—

—
—
—
—
—
6.3

60.8
46.5

65.7
17.0
—
(19.1)
473.6
6.3

—
—

—
—
7.0
—
(6.0)
—

60.8
46.5

65.7
17.0
7.0
(19.1)
467.6
6.3

—
$628.7

—
129.3

—
$2,020.3

—

(9.3)
$ — $ — $ 516.6

—

—
$ (9.7)

(9.3)
$3,155.9

—
$ 1.0

(9.3)
$3,156.9

—
0.6

0.4

—
—
—

8.5
—
—
—
—

—
0.6

0.5

3.1

—
—
—

—
5.8

47.0

67.5
—
—
—
—

—

—
—
—

21.3
—

—

—
—
—
(38.5)
— (284.2)
—
—

(2.6)
—

—

—
—
—
—
(68.0)

18.7
6.4

58.9

76.0
—
(38.5)
(284.2)
(68.0)

—
—

—

—
1.4
—
0.8
—

18.7
6.4

58.9

76.0
1.4
(38.5)
(283.4)
(68.0)

—
82.5

—
$649.7

—
133.5

—
$2,140.6

—

(6.5)
$ — $ — $ 208.7

—

—
$(80.3)

(6.5)
$2,918.7

—
$ 3.2

(6.5)
$2,921.9

Balance at March 31, 2016 . . .
Exercise of stock options . . . .
Share-based compensation,

net . . . . . . . . . . . . . . .
Dividends declared . . . . . . .
Reclassification of common

Issuance of common shares

related to acquisitions and
other

. . . . . . . . . . . . .

Issuance of replacement equity
awards related to the Starz
Merger

. . . . . . . . . . . .
Exercise of stock options . . . .
Share-based compensation . . .
Conversion of convertible

senior subordinated notes . .
Net income
. . . . . . . . . . .
Other comprehensive income . .
Redeemable noncontrolling
interests adjustments to
redemption value . . . . . . .
Balance at March 31, 2017 . . .
Cumulative effect of accounting
changes . . . . . . . . . . . .
Exercise of stock options . . . .
Share-based compensation,

net . . . . . . . . . . . . . . .
. .
Issuance of common shares
Noncontrolling interests
. . . .
Dividends declared . . . . . . .
Net income
. . . . . . . . . . .
Other comprehensive income . .
Redeemable noncontrolling
interests adjustments to
redemption value . . . . . . .
Balance at March 31, 2018 . . .
Cumulative effect of accounting
changes . . . . . . . . . . . .
Exercise of stock options . . . .
Share-based compensation,

Issuance of common shares

related to acquisitions and
other

. . . . . . . . . . . . .
Noncontrolling interests
. . . .
Dividends declared . . . . . . .
Net income (loss)
. . . . . . . .
Other comprehensive loss . . . .
Redeemable noncontrolling
interests adjustments to
redemption value . . . . . . .
Balance at March 31, 2019 . . .

net . . . . . . . . . . . . . . .

0.3

11.9

(a) Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 11).

See accompanying notes.
F-6

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating Activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of films and television programs and program rights
. . . . . . . .
Interest on dissenting shareholders’ liability . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount and financing costs . . . . . . . . . . . . . . . . . . .
Non-cash share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions from equity method investee . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity interests loss (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities:

Accounts receivable, net and other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in films and television programs and program rights, net . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Participations and residuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Film obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Flows Provided By Operating Activities . . . . . . . . . . . . . . . . . . . . . .
Investing Activities:
Proceeds from the sale of equity method investee, net of transaction costs . . . . . .
Investment in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions from equity method investee
. . . . . . . . . . . . . . . . . . . . . . . . .
Business acquisitions, net of cash acquired of $5.5, $18.7, and $73.5 in 2019, 2018

and 2017, respectively (see Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Flows Provided By (Used In) Investing Activities . . . . . . . . . . . . . . . .
Financing Activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt – borrowings
Debt – repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans – borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans – repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dissenter liability accrued at acquisition . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax withholding required on equity awards . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Flows Provided By (Used In) Financing Activities . . . . . . . . . . . . . . . .
Net Change In Cash, Cash Equivalents and Restricted Cash . . . . . . . . . . . . . . .
Foreign Exchange Effects on Cash, Cash Equivalents and Restricted Cash . . . . . . .
Cash, Cash Equivalents and Restricted Cash – Beginning Of Period . . . . . . . . . .
Cash, Cash Equivalents and Restricted Cash – End Of Period . . . . . . . . . . . . . .

See accompanying notes.
F-7

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$ (299.6)

468.1

14.5

163.4
1,516.5
(72.0)
11.6
68.1
29.0
1.8
1.9
42.9
87.6
(23.6)

470.8
(1,469.9)
41.0
(85.8)
(11.8)
(44.4)
427.5

48.0
(48.6)
—

(77.3)
(43.8)
(121.7)

159.0
1,641.7
56.5
14.3
88.4
20.1
—
35.7
52.8
(171.8)
(299.5)

(8.6)
(1,526.4)
(181.7)
62.6
5.1
(29.9)
386.4

393.7
(53.4)
—

(1.8)
(45.9)
292.6

3,541.2
(3,212.7)
338.1
(305.4)
(797.3)
(57.4)
(3.7)
8.0
(10.1)
(499.3)
(193.5)
(0.3)
378.1
184.3

3,712.6
(4,335.7)
319.7
(332.8)
—
—
(8.2)
44.9
(22.9)
(622.4)
56.6
(3.2)
324.7
378.1

63.1
1,414.0
15.5
12.9
76.9
4.3
14.0
40.4
(10.7)
(20.4)
(163.4)

(87.8)
(1,092.0)
152.9
205.3
17.1
(98.1)
558.5

—
(20.6)
3.1

(1,102.6)
(25.2)
(1,145.3)

4,002.8
(2,766.9)
296.0
(632.6)
—
(26.8)
(6.9)
25.4
(40.9)
850.1
263.3
0.8
60.6
324.7

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business, Basis of Presentation and Significant Accounting Policies

Description of Business

Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a global content

leader whose films, television series, digital products and linear and over-the-top platforms reach next
generation audiences around the world. In addition to our filmed entertainment leadership, Lionsgate
content drives a growing presence in interactive and location-based entertainment, video games, esports and
other new entertainment technologies. Lionsgate’s content initiatives are backed by a nearly 17,000-title film
and television library and delivered through a global sales and licensing infrastructure.

Basis of Presentation

Generally Accepted Accounting Principles

These consolidated financial statements have been prepared in accordance with United States (“U.S.”)

generally accepted accounting principles (“GAAP”).

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.

All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make

estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue
and expenses during the reporting period. The most significant estimates made by management in the
preparation of the financial statements relate to ultimate revenue and costs used for the amortization of
investment in films and television programs; estimates of sales returns and other allowances and provisions
for doubtful accounts; estimates related to the revenue recognition of sales or usage-based royalties; fair
value of equity-based compensation; fair value of assets and liabilities for allocation of the purchase price
of companies acquired; income taxes including the assessment of valuation allowances for deferred tax
assets; accruals for contingent liabilities; and impairment assessments for investment in films and television
programs, property and equipment, equity investments, goodwill and intangible assets. Actual results could
differ from such estimates.

Reclassifications

Certain amounts presented in prior years have been reclassified to conform to the current year’s

presentation.

Significant Accounting Policies

Revenue Recognition

The Company’s Motion Picture and Television Production segments generate revenue principally from

the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and
packaged media), television, and international market places. The Company’s Media Networks segment
generates revenue primarily from the distribution of the Company’s STARZ branded premium subscription
video services and, to a lesser extent, direct-to-consumer content streaming services.

F-8

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue is recognized upon transfer of control of promised services or goods to customers in an

amount that reflects the consideration the Company expects to receive in exchange for those services or
goods. Revenues do not include taxes collected from customers on behalf of taxing authorities such as sales
tax and value-added tax.

Licensing Arrangements. The Company’s content licensing arrangements include fixed fee and

minimum guarantee arrangements, and sales or usage based royalties.

Fixed Fee or Minimum Guarantees: The Company’s fixed fee or minimum guarantee licensing

arrangements may, in some cases, include multiple titles, multiple license periods (windows) with a
substantive period in between the windows, rights to exploitation in different media, or rights to
exploitation in multiple territories, which may be considered distinct performance obligations. When these
performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is
allocated to the title, window, media right or territory as applicable, based on estimates of relative
standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or
territory) are recognized when the content has been delivered, and the window for the exploitation right in
that territory has begun, which is the point in time at which the customer is able to begin to use and benefit
from the content.

Sales or Usage Based Royalties: Sales or usage based royalties represent amounts due to the
Company based on the “sale” or “usage” of the Company’s content by the customer, and revenues are
recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which
some or all the sales or usage-based royalty has been allocated and has been satisfied (or partially satisfied).
Generally, when the Company licenses completed content (with standalone functionality, such as a movie,
or television show) its performance obligation will be satisfied prior to the sale or usage. When the
Company licenses intellectual property that does not have stand-alone functionality (e.g., brands, themes,
logos, etc.), its performance obligation is generally satisfied in the same period as the sale or usage. The
actual amounts due to the Company under these arrangements are generally not reported to the Company
until after the close of the reporting period. The Company records revenue under these arrangements for
the amounts due and not yet reported to the Company based on estimates of the sales or usage of these
customers and pursuant to the terms of the contracts. Such estimates are based on information from the
Company’s customers, historical experience with similar titles in that market or territory, the performance
of the title in other markets, and/or data available in the industry.

Revenues by Market or Product Line. The following describes the revenues generated by market or

product line. Theatrical revenues are included in the Motion Picture segment; home entertainment,
television, international and other revenues are applicable to both the Motion Picture and Television
Production segments; Media Networks programming revenues are included in the Media Networks
segment.

•

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 the Company
directly in the United States and through a sub-distributor in Canada). Revenue from the
theatrical release of feature films are treated as sales or usage-based royalties and recognized
starting at the exhibition date and based on the Company’s participation in box office receipts of
the theatrical exhibitor.

•

Home Entertainment. Home entertainment consists of Digital Media and Packaged Media.

◦ Digital Media. Digital media includes digital transaction revenue sharing arrangements

(pay-per-view and video-on-demand platforms, electronic sell through (“EST”), and digital
rental) and licenses of content to digital platforms for a fixed fee.

Digital Transaction Revenue Sharing Arrangements: Primarily represents revenue sharing
arrangements with certain digital media platforms which generally provide that, in exchange
for a nominal or no upfront sales price, the Company shares in the rental or sales revenues

F-9

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

generated by the platform on a title-by-title basis. These digital media platforms generate
revenue from rental and EST arrangements, such as download-to-own, download-to-rent,
and video-on-demand. These revenue sharing arrangements are recognized as sales or usage
based royalties based on the performance of these platforms and pursuant to the terms of the
contract, as discussed above.

Licenses of Content to Digital Platforms: Primarily represents the licensing of content to
subscription-video-on-demand (“SVOD”) or other digital platforms for a fixed fee. As
discussed above, revenues are recognized when the content has been delivered and the window
for the exploitation right in that territory has begun.

◦

Packaged Media. Packaged media revenues represent the sale of motion pictures and
television shows (produced or acquired) on physical discs (DVD’s, Blu-ray, 4K Ultra HD,
referred to as “Packaged Media”) in the retail market. Revenues are recognized, net of an
allowance for estimated returns and other allowances, on the later of receipt by the customer
or “street date” (when it is available for sale by the customer).

Television. Television revenues are derived from the licensing to domestic markets (linear pay,
basic cable, free television markets, syndication) of motion pictures (including theatrical
productions and acquired films) and scripted and unscripted television series, television movies,
mini-series, and non-fiction programming. Television revenues include fixed fee arrangements as
well as arrangements in which the Company earns advertising revenue from the exploitation of
certain content on television networks. Television also includes revenue from licenses to SVOD
platforms in which the initial license of a television series is to an SVOD platform. Revenues
associated with a title, right, or window from television licensing arrangements are recognized
when the feature film or television program is delivered (on an episodic basis for television
product) and the window for the exploitation right has begun.

International revenues are derived from (1) licensing of the Company’s

International.
productions, acquired films, catalog product and libraries of acquired titles to international
distributors, on a territory-by-territory basis; (2) the direct distribution of our productions,
acquired films, and our catalog product and libraries of acquired titles in the United Kingdom;
and (3) licensing to international markets of scripted and unscripted series, television movies,
mini-series and non-fiction programming. License fees and minimum guarantee amounts
associated with title, window, media or territory, 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 in that window, media or territory has
commenced. Revenues are also generated from sales or usage based royalties received from
international distributors based on their distribution performance pursuant to the terms of the
contracts after the recoupment of certain costs in some cases, and the initial minimum guarantee,
if any, and are recognized when the sale by our customer generating a royalty due to us has
occurred.

Other. Other revenues are derived from the licensing of the Company’s film and television and
related content (games, music, location-based entertainment royalties, etc.) to other ancillary
markets and from commissions earned and executive producer fees related to talent management.

Revenues from the licensing of film and television content and the sales and licensing of music are
recognized when the content has been delivered and the license period has begun, as discussed
above. Revenues from the licensing of symbolic intellectual property (i.e., licenses of motion
pictures or television characters, brands, storylines, themes or logos) is recognized over the
corresponding license term. Commissions are recognized as such services are provided.

•

• Media Networks — Programming Revenues. Media Networks’ revenues are primarily derived
from the distribution of the Company’s STARZ branded premium subscription video services

F-10

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

pursuant to affiliation agreements with U.S. multichannel video programming distributors
(“MVPDs”), including cable operators, satellite television providers and telecommunications
companies, and over-the-top (“OTT”) (collectively, “Distributors”) and on a direct-to-consumer
basis. Media Networks revenues also include international revenues primarily from the OTT
distribution of the Company’s STARZ branded premium subscription video services outside the
United States.

Pursuant to the Company’s distribution agreements, revenues may be based on a fixed fee, subject
to nominal annual escalations, or a variable fee (i.e., a fee based on number of subscribers who
receive the Company’s networks or other factors). Programming revenue is recognized over the
contract term based on the continuous delivery of the content to the distributor. The variable
distribution fee arrangements represent sales or usage based royalties and are recognized over the
period of such sales or usage by the Company’s distributor, which is the same period that the
content is provided to the distributor.

Deferred Revenue. Deferred revenue relates primarily to customer cash advances or deposits received

prior to when the Company satisfies the corresponding performance obligation.

Payment terms vary by location and type of customer and the nature of the licensing arrangement,
however, other than certain multi-year license arrangements; payments are generally due within 60 days
after revenue is recognized. For certain multi-year licensing arrangements, primarily in the television, digital
media, and international markets, payments may be due over a longer period. When we expect the period
between fulfillment of our performance obligation and the receipt of payment to be greater than a year, a
significant financing component is present. In these cases, such payments are discounted to present value
based on a discount rate reflective of a separate financing transaction between the customer and the
Company, at contract inception. The significant financing component is recorded as a reduction to revenue
and accounts receivable initially, with such accounts receivable discount amortized to interest income over
the period to receipt of payment. The Company does not assess contracts with deferred payments for
significant financing components if, at contract inception, we expect the period between fulfillment of the
performance obligation and subsequent payment to be one year or less.

In other cases, customer payments are made in advance of when the Company fulfills its performance

obligation and recognizes revenue. This primarily occurs under television production contracts, in which
payments may be received as the production progresses, international motion picture contracts, where a
portion of the payments are received prior to the completion of the movie and prior to license rights start
dates, and pay television contracts with multiple windows with a portion of the revenues deferred until the
subsequent exploitation windows commence. These arrangements do not contain significant financing
components because the reason for the payment structure is not for the provision of financing to the
Company, but rather to mitigate the Company’s risk of customer non-performance and incentivize the
customer to exploit the Company’s content.

See Note 12 for further information.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits at financial institutions and investments in money

market mutual funds.

Investment in Films and Television Programs and Program Rights

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.

F-11

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 2019, 2018, and 2017, total capitalized interest was $10.8 million, $7.9 million, and $8.7 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, whether released or unreleased, 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, 2019 and
2018, the Company recorded impairment charges of $35.2 million and $36.3 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 that includes cash flows 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 unless the fair value of the project exceeds its carrying cost.

Home entertainment product inventory consists of Packaged Media and is stated at the lower of cost

or market value (first-in, first-out method), and are included within other current assets on the consolidated
balance sheet (see Note 19). Costs of Packaged Media sales, including shipping and handling costs, are
included in distribution and marketing expenses.

Program Rights: The cost of program rights for films and television programs (including original

series) exhibited by the Media Networks segment are generally amortized on a title-by-title or
episode-by-episode basis over the anticipated number of exhibitions or license period. The number of
exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the

F-12

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expected usage of the content. Certain other program rights are amortized to expense on a straight-line
basis over the respective lives of the agreements. Programming rights may include rights to more than one
exploitation window under its output and library agreements. For films with multiple windows, the license
fee is allocated between the windows based upon the proportionate estimated fair value of each window
which generally results in the majority of the cost allocated to the first window on newer releases.

The cost of the Media Networks’ segments produced original content generally represents the license

fees charged from the Television Production segment which is eliminated in consolidation. The amount
associated with the pay television market is reclassified from investment in film and television programs to
program rights when the program is aired and the portion attributable to the ancillary markets remains in
investment in films and television programs. The cost of the Media Networks’ third-party licensed content
is allocated between the pay television market distributed by the Media Networks’ segment and the ancillary
revenue markets (e.g., home video, digital platforms, international television, etc.) distributed by the
Television Production segment based on the estimated relative fair values of these markets. Estimates of fair
value for the pay television and ancillary markets involve uncertainty as well as estimates of ultimate
revenue. All the costs of programming produced by the Television Production segment are included in
investment in films and television programs and program rights, net and are classified as long term.
Amounts included in program rights, other than internally produced programming, that are expected to be
amortized within a year from the balance sheet date are classified as short-term.

Changes in management’s estimate of the anticipated exhibitions of films and original series on our
networks could result in the earlier recognition of our programming costs than anticipated. Conversely,
scheduled exhibitions may not capture the appropriate usage of the program rights in current periods which
would lead to the write-off of additional program rights in future periods and may have a significant impact
on our future results of operations and our financial position.

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:

Distribution equipment
Computer equipment and software
Furniture and equipment
Leasehold improvements
Building
Land

1 – 4 years
2 – 5 years
2 – 10 years
Lease term or the useful life, whichever is shorter
26 years
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.

Investments

Investments include investments accounted for under the equity method of accounting, and equity

investments with and without readily determinable fair value.

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.

F-13

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 operations. 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,
2019, 2018, and 2017, the Company recorded its share of the income or loss generated by these entities for
the years ended December 31, 2018, 2017 and 2016, 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.

Other Equity Investments:

Investments in nonconsolidated affiliates in which the Company owns less

than 20% of the voting common stock, or does not exercise significant influence over operating and
financial policies, are recorded at fair value using quoted market prices if the investment has a readily
determinable fair value. If an equity investment’s fair value is not readily determinable, the Company will
recognize it at cost less any impairment, adjusted for observable price changes in orderly transactions in the
investees’ securities that are identical or similar to our investments in the investee. The unrealized gains and
losses and the adjustments related to the observable price changes are recognized in net income (loss).

Impairments of Investments: The Company regularly reviews its investments for impairment,
including when the carrying value of an investment exceeds its market value. 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. Factors that are considered by the Company in determining
whether an other-than-temporary decline in value has occurred include (i) the market value of the security
in relation to its cost basis, (ii) the financial condition of the investee, and (iii) the Company’s intent and
ability to retain the investment for a sufficient period of time to allow for recovery in the market value of
the investment.

For investments accounted for using the equity method of accounting or equity investments without a
readily determinable fair value, the Company evaluates information available (e.g., budgets, business plans,
financial statements, etc.) in addition to quoted market prices, if any, in determining whether an
other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include
recurring operating losses, credit defaults and subsequent rounds of financing at an amount below the cost
basis of the Company’s investment.

Intangible Assets
Intangible assets acquired in business combinations are recorded at the acquisition date fair value in
the Company’s consolidated balance sheet. Identifiable intangible assets with finite lives are amortized over
their estimated useful lives, and identifiable intangible assets with indefinite lives are not amortized, but
rather are tested annually for impairment, or sooner when circumstances indicate that the intangible asset
might be impaired.

Amortizable intangible assets are tested for impairment utilizing an income approach based on
undiscounted cash flows upon the occurrence of certain triggering events and, if impaired, are written
down to fair value. The impairment test is performed at the lowest level of cash flows associated with the
asset.

F-14

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For intangible assets with indefinite lives, an entity may first perform a qualitative assessment to
determine whether it is more-likely-than-not that an indefinite-lived intangible asset is impaired. The
qualitative assessment is an evaluation, based on all identified events and circumstances which impact the
fair value of the intangible asset. If the Company believes that as a result of its qualitative assessment it is
more likely than not that the fair value of an indefinite-lived intangible asset is greater than its carrying
amount, a quantitative impairment test is not required but may be performed at the option of the
Company. As of March 31, 2019, based on the Company’s qualitative assessment, the Company concluded
that the indefinite-lived intangible assets included in the accompanying consolidated balance sheet were not
impaired.

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. Goodwill is allocated to the Company’s
reporting units, which are its operating segments or one level below its operating segments (component
level). Reporting units are determined by the discrete financial information available for the component and
whether it is regularly reviewed by segment management. Components are aggregated into a single
reporting unit if they share similar economic characteristics. Our reporting units for purposes of goodwill
impairment testing at March 31, 2019 were Motion Picture, Media Networks, and each of our Television
and talent management businesses, both of which are part of our Television Production segment.

Goodwill is not amortized, but goodwill is reviewed for impairment each fiscal year or between the
annual tests if an event occurs or circumstances change that indicates it is more-likely-than-not that the fair
value of a reporting unit is less than its carrying value. The Company performs its annual impairment test
as of January 1 in each fiscal year. A goodwill impairment loss would be recognized for the amount that the
carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount
of goodwill allocated to that reporting unit. An entity may perform a qualitative assessment of the
likelihood of the existence of a goodwill impairment. The qualitative assessment is an evaluation, based on
all identified events and circumstances which impact the fair value of the reporting unit. If the Company
believes that as a result of its qualitative assessment it is more likely than not that the fair value of a
reporting unit is greater than its carrying amount, a quantitative impairment test is not required but may be
performed at the option of the Company.

A quantitative assessment requires determining the fair value of our reporting units. The

determination of the fair value of each reporting unit utilizes discounted cash flows (“DCF”) analyses and
market-based valuation methodologies, which represent Level 3 fair value measurements. Fair value
determinations require considerable judgment about revenue and market growth, operating margins and
cash flows, market multiples and discount rates, and are sensitive to changes in these underlying
assumptions and factors.

For fiscal 2019, due primarily to the decline in the market price of our common shares, we performed a

quantitative impairment assessment for all of our reporting units. Based on the Company’s quantitative
assessments, the Company concluded that it is more-likely-than-not that the fair value of its reporting units
is greater than their carrying values. Management will continue to monitor the reporting units for changes
in the business environment that could impact recoverability in future periods. The recoverability of
goodwill is dependent upon the continued growth of revenue and cash flows from our business activities.
While historical performance and current expectations have resulted in fair values of our reporting units in
excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may
need to be recorded in the future.

Prints, Advertising and Marketing Expenses

The costs of prints, advertising and marketing expenses are expensed as incurred.

Certain of Starz’s affiliation agreements require Starz to provide marketing support to the distributor

based upon certain criteria as stipulated in the agreements. Marketing support includes cooperative

F-15

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

advertising and marketing efforts between Starz and its distributors such as cross channel, direct mail and
point of sale incentives. Marketing support is recorded as an expense and not a reduction of revenue when
Starz has received a direct benefit and the fair value of such benefit is determinable.

Advertising expenses for the year ended March 31, 2019 were $640.1 million (2018 — $654.9 million,

2017 — $588.8 million) which were recorded as distribution and marketing expenses.

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, on a jurisdiction by jurisdiction basis, 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.

Government Assistance

The Company has access to government programs that are designed to promote film and television
production and distribution in certain foreign countries. 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 19).

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 operations.

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.

Derivative Instruments and Hedging Activities

Derivative financial instruments are used by the Company in the management of its foreign currency
and interest rate exposures. The Company’s policy is not to use derivative financial instruments for trading
or speculative purposes.

The Company uses derivative financial instruments to hedge its exposures to foreign currency exchange

rate and interest rate risks. All derivative financial instruments used as hedges are recorded at fair value in
the consolidated balance sheets (see Note 10). The effective changes in fair values of derivatives designated
as cash flow hedges are recorded in accumulated other comprehensive loss and included in unrealized

F-16

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(losses) gains on cash flow hedges until the underling hedged item is recognized in earnings. The effective
changes in the fair values of derivatives designated as cash flow hedges are reclassified from accumulated
other comprehensive loss to net income when the underlying hedged item is recognized in earnings.

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.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated based on the weighted average common shares

outstanding for the period. Basic net income (loss) per share for the years ended March 31, 2019, 2018 and
2017 is presented below:

Year Ended March 31,
2018
(Amounts in millions, except per share amounts)

2017

2019

Basic Net Income (Loss) Per Common Share:
Numerator:

Net income (loss) attributable to Lions Gate Entertainment

Corp. shareholders

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(284.2)

$473.6

$ 14.8

Denominator:

Weighted average common shares outstanding . . . . . . . . . . . .
Basic net income (loss) per common share . . . . . . . . . . . . . . . . .

213.7
$ (1.33)

208.4
$ 2.27

165.0
$ 0.09

Diluted net income (loss) 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
(loss) per common share also reflects share purchase options, including equity-settled share appreciation
rights (“SARs”), restricted share units (“RSUs”) and restricted stock using the treasury stock method when
dilutive, and any contingently issuable shares when dilutive. Diluted net income (loss) per common share for
the years ended March 31, 2019, 2018 and 2017 is presented below:

Year Ended March 31,
2018
(Amounts in millions, except per share amounts)

2017

2019

Diluted Net Income (Loss) Per Common Share:
Numerator:

Net income (loss) attributable to Lions Gate Entertainment

Corp. shareholders

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(284.2)

$473.6

$ 14.8

Add:

Interest on convertible notes, net of tax . . . . . . . . . . . . . . .
Numerator for diluted net income (loss) per common share . . .

—
$(284.2)

0.5
$474.1

—
$ 14.8

Denominator:

Weighted average common shares outstanding . . . . . . . . . . . .
Effect of dilutive securities:
Conversion of notes
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share purchase options . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted share units and restricted stock . . . . . . . . . . . . .
Contingently issuable shares . . . . . . . . . . . . . . . . . . . . . . .
Adjusted weighted average common shares outstanding . . . . .
Diluted net income (loss) per common share . . . . . . . . . . . . . . .

213.7

208.4

165.0

—
—
—
—
213.7
$ (1.33)

2.1
7.5
0.7
1.7
220.4
$ 2.15

—
3.5
0.3
3.4
172.2
$ 0.09

F-17

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As a result of the net loss in the fiscal year ended March 31, 2019, the dilutive effect of the convertible

notes, share purchase options, restricted share units and restricted stock, and contingently issuable shares
were considered anti-dilutive and, therefore, excluded from diluted loss per share. The weighted average
anti-dilutive shares excluded from the calculation due to the net loss for the fiscal year ended March 31,
2019 totaled 7.1 million.

Additionally, for the years ended March 31, 2019, 2018 and 2017, the outstanding common shares
issuable presented below were excluded from diluted net income (loss) per common share because their
inclusion would have had an anti-dilutive effect regardless of net income or loss in the period.

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Anti-dilutive shares issuable

Conversion of notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share purchase options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted share units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other issuable shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

21.3
1.0
1.4

Total weighted average anti-dilutive shares issuable excluded

from diluted net income (loss) per common share . . . . . . . .

23.7

—

11.5
0.2
1.2

12.9

5.2

12.1
0.6
1.2

19.1

Recent Accounting Pronouncements

Accounting Guidance Adopted in Fiscal 2019

Revenue Recognition: On April 1, 2018, the Company adopted, on a modified retrospective basis,
accounting guidance that establishes a new revenue recognition framework in U.S. GAAP for all companies
and industries. The core principle of the new revenue framework is that an entity should recognize revenue
from the transfer of promised goods or services to customers in an amount that reflects the consideration
the entity expects to receive for those goods or services. The revenue framework includes a five-step model
to determine the timing and amount of revenue to recognize related to contracts with customers.

The adoption of the new accounting guidance did not result in significant changes to the Company’s

reported operating results. The Company recorded a transition adjustment for all open contracts existing as
of April 1, 2018, of $18.7 million as an increase to the opening balance of retained earnings related
principally to the areas noted below:

Sales or Usage Based Royalties:

The Company receives royalties from certain domestic and

international distributors and other transactional digital distribution partners based on the sales made by
these distributors after recoupment of a minimum guarantee, if applicable. Under prior guidance, the
Company recorded these sales or usage based royalties after receiving statements from the licensee and/or
film distributor. Under the new guidance, revenues are recorded based on best estimates available of the
amounts due to the Company in the period of the customer’s sales or usage. Accordingly, the timing of the
revenue recognition is accelerated; however, the Company continues to have a consistent number of periods
of sales or usage based royalties in each reporting period, and therefore the impact of the new guidance
depends on the timing and performance of the titles released in those reporting periods. This change
primarily impacts the Motion Picture and Television Production segments.

Renewals of Licenses of Intellectual Property: Under the prior guidance, when the term of an

existing license agreement was extended, without any other changes to the provisions of the license, revenue
for the renewal period was recognized when the agreement was renewed or extended. Under the new
guidance, revenue associated with renewals or extensions of existing license agreements is recognized as
revenue when the licensed content becomes available for the customer to use and benefit from under the

F-18

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

renewal or extension. This change impacts the timing of revenue recognition (i.e., revenue is recorded at a
later time) as compared with prior revenue recognition guidance. While revenues from renewal do occur,
they are not a significant portion of our revenue and thus do not have a material impact on our revenue
recognition. This change primarily impacts the Motion Picture and Television Production segments.

Also, under the new guidance, the Company presents sales returns and certain sales incentive

allowances as refund liabilities instead of as contra asset allowances within accounts receivable. On April 1,
2018, the liabilities for such sales returns and incentives were $86.9 million and were recorded in accounts
payable and accrued liabilities on the consolidated balance sheet.

Changes to the opening balances of current assets, total assets, current liabilities and total liabilities

resulting from the adoption of the new guidance were as follows:

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,773.1
$8,967.6
$2,412.4
$5,708.9

$174.4
$143.6
$104.1
$124.9

March 31,
2018

Impact of Adoption

(Amounts in millions)

April 1,
2018

$1,947.5
$9,111.2
$2,516.5
$5,833.8

For further information, including the impact of adoption of the new guidance on the current fiscal

year, see Note 12.

Recognition and Measurement of Financial Instruments:

In January 2016, the Financial Accounting

Standards Board (“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 became effective for the Company as of April 1, 2018, and has been applied on a
prospective basis. Upon adoption of the new guidance, the Company recorded a transition adjustment of
$2.6 million to reclassify the unrealized gains recorded through March 31, 2018 for the Company’s
investments in equity securities with a readily determinable fair market value from accumulated other
comprehensive loss to retained earnings. After adoption of the new guidance, beginning in fiscal 2019,
changes in the fair value of the Company’s investments in equity securities with a readily determinable fair
market value are recognized in net income. The adoption of the new guidance also impacted the accounting
for the Company’s investments in equity securities without a readily determinable fair value, which are now
measured at cost less any impairment, adjusted for observable price changes in orderly transactions in the
investees’ securities that are identical or similar to the Company’s investments in the investee. The impact of
this change depends on the nature and extent of changes in observable prices, if any. See Note 5.

Restricted Cash:

In November 2016, the FASB issued guidance to clarify how entities should present
restricted cash and restricted cash equivalents in the statement of cash flows. The guidance requires entities
to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in
the statement of cash flows. As a result, entities will no longer present transfers between cash and cash
equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. This guidance
became effective for the Company as of April 1, 2018, and has been applied on a retrospective basis. Upon
adoption, in the consolidated statement of cash flows for the years ended March 31, 2018 and 2017, cash
provided by operating activities was reduced by $2.8 million and $0.1 million, respectively, and beginning
cash and cash equivalents was increased by $2.8 million and $2.9 million, respectively, to include restricted
cash. There was no restricted cash in the consolidated balance sheets as of March 31, 2019 or March 31,
2018.

F-19

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounting Guidance Not Yet Adopted

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 permitted, and is required to be
implemented using a modified retrospective approach. The Company will adopt the new standard on
April 1, 2019 utilizing the modified retrospective approach. The Company is continuing its evaluation of
the impact of the adoption and currently estimates the recognition of lease liabilities on the Company’s
consolidated balance sheet for its operating leases in the range from approximately $180 million to
$200 million with a corresponding right-of-use assets balance, net of existing lease incentives, and no
material impact on its consolidated statement of operations.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income:

February 2018, the FASB issued guidance that permits a company to reclassify the income tax effects of the
Tax Cuts and Jobs Act (the “Tax Act”) on items in accumulated other comprehensive income to retained
earnings, eliminating the stranded tax effects resulting from the Tax Act. The new guidance only applies to
the tax effects resulting from the Tax Act, and does not change the underlying guidance to recognize the
effect of a change in tax laws or rates in income from continuing operations. This guidance is effective for
the Company’s fiscal year beginning April 1, 2019, with early adoption permitted. The Company does not
expect that the adoption of this guidance will have a material effect on its consolidated financial statements.

Disclosure Update and Simplification:

In August 2018, the SEC adopted the final rule under SEC

Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that
were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded
the disclosure requirements on the analysis of shareholders’ equity for interim financial statements. Under
the amendments, an analysis of changes in each caption of shareholders’ equity presented in the balance
sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the
beginning balance to the ending balance of each period for which a statement of comprehensive income is
required to be filed. This final rule is effective for the first quarter of the Company’s fiscal year beginning
April 1, 2019.

Fair Value Measurement — Changes to Disclosure Requirements:

In August 2018, the FASB issued

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

Improvements to Accounting for Costs of Films and License Agreements for Program Materials:
March 2019, the FASB issued guidance that aligns the accounting for production costs of an episodic
television series with the accounting for production costs of films by removing the content distinction for
capitalization. Accordingly, the capitalization of production costs for episodic television series is no longer
constrained until persuasive evidence of secondary market revenues exists. In addition, under the new
guidance, a company will need to determine at the outset of production whether a film or television
program is primarily monetized on its own or within a film group. A film group is defined as the lowest
level at which identifiable cash flows are largely independent of the cash flows of other films and/or license
agreements. In addition, under previous guidance, film and television programs accounted for under the
broadcasting accounting standard were carried on the balance sheet at the lower of cost or net realizable
value. The new guidance requires that an entity test a film or television program for impairment, when
impairment indicators are present, at a film group level when the film or license agreement is predominantly

F-20

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

monetized with other films and/or license agreements. The impairment would be measured as the difference
between the carrying value of the film group and its fair value rather than its net realizable value. This
guidance requires that an entity provide new disclosures about content that is either produced or licensed,
and classify cash flows for licensed content as cash flows from operating activities in the statement of cash
flows. This guidance is effective for the Company’s fiscal year beginning April 1, 2020, with early adoption
permitted. The Company is currently evaluating the impact that the adoption of this new guidance will have
on its consolidated financial statements.

2. Merger & Acquisitions

3 Arts Entertainment

On May 29, 2018, the Company purchased a 51% membership interest in 3 Arts Entertainment LLC, a

talent management and television/film production company. The purchase price was approximately
$166.6 million, of which 50% was paid in cash at closing, 32.5% was paid in the Company’s Class B
non-voting common shares at closing, and 17.5% will be paid in the Company’s Class B non-voting
common shares on the one-year anniversary of closing, subject to certain conditions. The number of shares
issued and to be issued was determined by dividing the dollar value of the portion of the purchase price to
be paid by the daily weighted average closing price of the Company’s Class B non-voting common shares
on the New York Stock Exchange for the twenty (20) consecutive trading days immediately preceding the
closing date. The value of the shares issued or to be issued was based on the closing price of the Company’s
Class B non-voting common shares at closing. A portion of the purchase price, up to $38.3 million, may be
recoupable for a five-year period commencing on the acquisition date of May 29, 2018, contingent upon the
continued employment of certain employees, or the achievement of certain EBITDA targets, as defined in
the 3 Arts Entertainment acquisition and related agreements. Accordingly, $38.3 million was initially
recorded as a deferred compensation arrangement within other current and non-current assets and is being
amortized in general and administrative expenses over a five-year period.

The acquisition was accounted for as a purchase, with the results of operations of 3 Arts

Entertainment included in the Company’s consolidated results from May 29, 2018. Based on the purchase
price allocation, $92.7 million was allocated to goodwill, $47.0 million was allocated to the fair value of
finite-lived intangible assets (including measurement period adjustments recorded, see Note 6) and
$38.3 million was allocated to deferred compensation arrangements, as discussed above. The remainder of
the purchase price was primarily allocated to cash and cash equivalents, accounts receivable, other assets,
and accounts payable and accrued liabilities, and $15.8 million was recorded as a redeemable noncontrolling
interest, representing the noncontrolling interest holders’ 49% equity interest in 3 Arts Entertainment (see
Note 11). The acquired finite-lived intangible assets primarily represent customer relationships and are
being amortized over a weighted average estimated useful life of 12 years. The Company incurred
approximately $1.3 million of acquisition-related costs that were expensed in restructuring and other
expenses during the fiscal year ended March 31, 2019.

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

Good Universe

On October 11, 2017, the Company purchased all of the membership interests in True North Media,

LLC (“Good Universe”), a motion picture production and global sales company. The purchase price
consisted of $20.4 million in cash paid at closing, and an additional $1.4 million in cash and 119,751 of

F-21

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Class B non-voting common shares to be paid and issued after one-year of the closing date. In addition, the
Company assumed $23.6 million of corporate debt and production loans, of which $14.9 million was paid
off shortly following the acquisition during the fiscal year ended March 31, 2018. The acquisition was
accounted for as a purchase, with the results of operations of Good Universe included in the Company’s
consolidated results from October 12, 2017. Based on the purchase price allocation, $29.0 million was
allocated to goodwill, with the remainder primarily allocated to the fair values of investment in film and
television programs, cash and cash equivalents, and other liabilities. The goodwill recorded as part of this
acquisition arises from the executive management personnel and their extensive experience and key
relationships in the entertainment industry, and is included in the Motion Picture segment (see Note 6). The
goodwill is not amortized for financial reporting purposes, but is deductible for federal tax purposes.

Starz Merger

On December 8, 2016, upon shareholder approval, pursuant to the Agreement and Plan of Merger
dated June 30, 2016 (“Merger Agreement”), Lionsgate and Starz consummated the merger, under which
Lionsgate acquired Starz for a combination of cash and common stock (the “Starz Merger”).

Immediately prior to the consummation of the Starz Merger, Lionsgate effected the reclassification of
its capital stock, pursuant to which each existing Lionsgate common share was converted into 0.5 shares of
a newly issued class of Lionsgate Class A voting shares, no par value per share (the “Class A voting
shares”) and 0.5 shares of a newly issued class of Lionsgate Class B non-voting shares, no par value per
share (the “Class B non-voting shares”) subject to the terms and conditions of the Merger Agreement (see
Note 13).

The following table summarizes the components of the estimated purchase consideration, inclusive of
Lions Gate’s previously existing ownership of Starz common stock and Starz’s share-based equity awards
outstanding as of December 8, 2016:

Market value, as of December 8, 2016, of Starz Series A and Series B

common stock already owned by Lionsgate(1) . . . . . . . . . . . . . . . . . . . . .

Cash consideration paid to Starz stockholders

Starz Series A common stock at $18.00 . . . . . . . . . . . . . . . . . . . . . . . . .
Starz Series B common stock at $7.26 . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,123.3
52.8

Fair value of Lionsgate voting and non-voting shares issued to Starz’s

stockholders
Starz Series A common stock at exchange ratio of 0.6784 Lionsgate

non-voting shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Starz Series B common stock at exchange ratio of 0.6321 Lionsgate voting
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,088.0

121.6

Starz Series B common stock at exchange ratio of 0.6321 Lionsgate

non-voting shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118.1

Replacement of Starz share-based payment awards(2) . . . . . . . . . . . . . . . . .
Liability for dissenting shareholders(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Amounts in millions)

$ 179.3

1,176.1

1,327.7
186.5
797.3
$3,666.9

(1) The difference between the fair value ($179.3 million) and the original cost ($158.9 million) of the

available-for-sale investment in equity securities of Starz held by Lionsgate on the date of the Starz
Merger (December 8, 2016), amounting to $20.4 million, was reflected in the gain (loss) on investments
line item in the consolidated statement of operations for the fiscal year ended March 31, 2017.

F-22

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2) Upon the closing of the merger, each outstanding share-based equity award (i.e., stock options,

restricted stock, and restricted stock units) of Starz was replaced by a Lions Gate non-voting
share-based equity award (“Lions Gate replacement award”) with terms equivalent to the existing
awards based on the exchange ratio set forth in the Merger Agreement. Each Starz outstanding award
was measured at fair value on the date of acquisition and the portion attributable to pre-combination
service was recorded as part of the purchase consideration. The fair value of the Lions Gate
replacement award measured on the date of acquisition in excess of the fair value of the Starz award
attributed to and recorded as part of the purchase consideration was attributed to post-combination
services and is being recognized as share-based compensation expense over the remaining
post-combination service period. The estimated aggregate fair value of the Lions Gate replacement
awards recorded as part of the purchase consideration was $186.5 million, and the estimated remaining
aggregate fair value totaling $43.3 million is being recognized in accordance with each respective
award’s vesting terms. The fair value of the Lions Gate replacement restricted stock and restricted
stock unit awards was determined based on the value estimated for the Class A voting shares and
Class B non-voting shares as of the acquisition date as discussed above. The fair value of Lions Gate
replacement stock option awards was determined using the Black-Scholes option valuation model
using the estimated fair value of the Class B non-voting shares underlying the replacement stock
options. For purposes of valuing the Lions Gate replacement awards, the following weighted-average
applicable assumptions were used in the Black-Scholes option valuation model:

Weighted average assumptions:

Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected option lives (years) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.39% – 1.83%
0.01 – 5.50 years
35%
0%

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. The expected option lives
represents the period of time that options are expected to be outstanding. Expected volatilities are
based on implied volatilities from traded options on Lions Gate’s stock, historical volatility of Lions
Gate’s stock and other factors. The expected dividend yield was zero since the combined company had
suspended the quarterly dividend.

(3)

In connection with the Starz Merger, Starz received demands for appraisal from purported holders of
approximately 22.5 million shares of Starz Series A common stock, and the Company recorded a
dissenting shareholders’ liability at the time of acquisition for the value of the original merger
consideration attributable to the dissenting shareholders. As of March 31, 2018, the Company had not
paid the merger consideration for the shares that had demanded appraisal but had recorded a liability
of $869.3 million that was included in current dissenting shareholders’ liability on the consolidated
balance sheet for the estimated value of the merger consideration that would have been payable for
such shares, plus interest accrued at the Federal Reserve discount rate plus 5%, compounded quarterly.
In November 2018 a settlement agreement was reached and the dissenting shareholders’ liability was
paid. See Note 17 for further information.

F-23

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Allocation of Purchase Consideration. The Company has made an allocation of the purchase price of

Starz to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair
value as follows:

(Amounts in
millions)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73.5

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment in films and television programs and program rights . . . . . . . . . . . . . .

Property and equipment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt and capital lease obligations
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

254.9

851.9

121.4

12.1

2,071.0

139.9

(143.1)
(1,013.1)
(713.6)
(165.0)

1,489.9
2,177.0

Total purchase consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,666.9

Fair Value Estimates: The fair value of the assets acquired and liabilities assumed were determined
using income, cost and market approaches. The fair value measurements were primarily based on significant
inputs that are not observable in the market and thus represent a Level 3 measurement as defined in
Accounting Standards Codification (“ASC”) 820, other than the long-term debt assumed in the acquisition.
The income approach was primarily used to value the intangible assets, consisting primarily of acquired
customer relationships and tradenames.

The intangible assets acquired include customer relationships with a weighted average estimated useful

life of 17 years and tradenames with an indefinite useful life (see Note 6). The fair value of customer
relationships was estimated based on the estimated future cash flows to be generated from the customer
affiliation contracts considering assumptions related to contract renewal rates and revenue growth based on
the number of subscribers and contract rates. The earnings expected to be generated by the customer
relationships were forecasted over the estimated duration of the intangible asset. The earnings were then
adjusted by taxes and the required return for the use of the contributory assets and discounted to present
value at a rate commensurate with the risk of the asset. The fair value of tradenames was estimated based
on the present value of the theoretical cost savings that could be realized by the owner of the tradenames as
a result of not having to pay a stream of royalty payments to another party. These cost savings were
calculated based on the hypothetical royalty payment that a licensee would be required to pay in exchange
for use of the tradenames, reduced by the tax shield realized by the licensee on the royalty payments. The
cost savings were discounted to present value at a rate commensurate with the risk of the asset.

Investment in films and television programs include the cost of completed films and television
programs (including original series) which have been produced by Starz or for which Starz has acquired
distribution rights, as well as the costs of films and television programs in production, pre-production and
development. For film and television programs in production, pre-production and development, the fair
value has been estimated to be the recorded book value. For completed films and television programs, the
fair value was estimated based on forecasted cash flows discounted to present value at a rate commensurate
with the risk of the assets.

For tangible capital assets held under capital leases the income approach was utilized in valuing the

tangible capital assets, including the satellite transponders and the real property, under a right-to-use

F-24

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

scenario. The fair value of the capital asset was estimated by forecasting a market lease rate over the
remaining term of the contract and discounting the payments using a market participant lease rate
reflective of the riskiness of the asset. The fair value of the capital lease liability was estimated by
forecasting the contract lease rate over the remaining term of the contract and discounting payments using
a market participant debt rate reflective of the riskiness of the lessee. We estimated the fair value of the
asset retirement obligation by utilizing an estimate of cost to retire the asset, inflating it to the end of the
contract term and discounting it at a market participant debt rate reflective of the riskiness of the lessee.

The cost approach was utilized in valuing the tangible personal property using standard methodologies

to estimate a replacement cost new and depreciation effects for each asset. Replacement cost new was
estimated using historical costs and acquisition dates of the assets along with inflationary measures specific
to the types of assets included in the valuation. Depreciation effects encompass physical deterioration,
functional obsolescence, and economic obsolescence. Replacement cost new less depreciation results in an
estimate of fair value when using the cost approach.

The fair value of program rights has been assumed to be the recorded book value, based on an

assessment that such content is acquired or produced at fair value and aired over relatively short periods (a
few years) and thus the amortization of the cost reflects the decline in the fair value of the content over
time.

As part of the acquisition, we assumed and immediately extinguished Starz’s senior notes, which had a

principal amount outstanding of $675.0 million, and Starz’s credit facility, which had an outstanding
amount of $255.0 million (see Note 7). The former Starz senior notes were adjusted to fair value prior to
extinguishment using quoted market values, and the fair value of the outstanding amounts under Starz’s
credit facility were estimated to approximate their carrying value.

Deferred taxes were adjusted to record the deferred tax impact of acquisition accounting adjustments

primarily related to intangible assets. The incremental deferred tax liabilities were calculated based on the
tax effect of the step-up in book basis of the net assets of Starz, excluding the amount attributable to
goodwill, using the estimated statutory tax rates.

Goodwill of $2.2 billion represented the excess of the purchase price over the fair value of the
underlying tangible and identifiable intangible assets acquired and liabilities assumed. The acquisition
goodwill arises from the increase in the combined company’s content creation capability and enhanced scale
to its global distribution footprint across mobile, broadband, cable and satellite platforms. In addition, the
acquisition goodwill arises from the opportunity for a broad range of new content partnerships and
accelerates the growth of Lionsgate and Starz’s over-the-top (which primarily represent internet streaming
services and which the Company refers to as “OTT”) services, as well as other anticipated revenue and cost
synergies. The goodwill recorded as part of this acquisition is included in the Motion Pictures and Media
Networks segment (see Note 6). The goodwill is not being amortized for financial reporting purposes. An
insignificant portion of goodwill is deductible for federal tax purposes.

Pro Forma Statement of Operations Information. The following unaudited pro forma condensed
consolidated statements of operations information presented below illustrates the results of operations of
the Company as if the Starz Merger and related debt financing (see Note 7) occurred on April 1, 2016.

Year Ended March 31, 2017

(Amounts in millions,
except per share amounts)

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,323.7

$ 148.4

0.74

0.71

F-25

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The unaudited pro forma condensed consolidated statement of operations information does not

include adjustments for any operating efficiencies or cost savings, and exclude $70.9 million of
acquisition-related costs that were expensed in restructuring and other expenses during the year ended
March 31, 2017.

Investment in Films and Television Programs and Program Rights

March 31,
2019

March 31,
2018

(Amounts in millions)

Motion Picture Segment – Theatrical and Non-Theatrical Films

Released, net of accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . .

$ 376.7

$ 410.5

Acquired libraries, net of accumulated amortization . . . . . . . . . . . . . . . . . . .

Completed and not released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

In progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Television Production Segment – Direct-to-Television Programs
Released, net of accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . .
In progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Media Networks Segment
Released program rights, net of accumulated amortization . . . . . . . . . . . . . . .
In progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.8

80.6

250.4
45.0

754.5

186.1
295.6
17.6

499.3

591.0
106.8
56.2

754.0

2.1

55.0

347.2
24.6

839.4

238.9
186.6
4.8

430.3

616.9
45.6
30.0

692.5

Intersegment eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment in films and television programs and program rights, net . . . . . . . .
Less current portion of program rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(40.1)

1,967.7
(295.7)

(17.0)

1,945.2
(253.2)

Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,672.0

$1,692.0

The Company expects approximately 36.5% of completed films and television programs, excluding
licensed program rights, will be amortized during the one-year period ending March 31, 2020. Additionally,
the Company expects approximately 82.9% of completed and released films and television programs,
excluding licensed program rights and acquired libraries, will be amortized during the three-year period
ending March 31, 2022. Licensed program rights expected to be amortized within one-year from the
balance sheet date are classified as short-term in the consolidated balance sheet.

F-26

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Property and Equipment

March 31,
2019

March 31,
2018

(Amounts in millions)

Distribution equipment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computer equipment and software . . . . . . . . . . . . . . . . . . . . . . . .

$ 29.1
50.4

43.2

25.6

146.8

295.1

Less accumulated depreciation and amortization . . . . . . . . . . . . . . .

(141.0)

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

154.1

1.2

$ 30.4
50.4

29.7

21.1

117.2

248.8

(88.3)

160.5

1.2

$ 155.3

$161.7

(1) This category includes the cost of satellite transponders accounted for as capital leases, which was
$9.5 million as of March 31, 2019, and accumulated depreciation for these transponders was
$6.2 million (2018 — cost of $16.8 million, accumulated depreciation of $7.1 million).

(2) Represents the cost of Starz’s building in Englewood, Colorado which is accounted for as a capital

lease. Accumulated depreciation for the building totaled $3.5 million at March 31, 2019 (2018 —
$2.6 million).

During the year ended March 31, 2019, depreciation expense amounted to $50.8 million and includes

the amortization of assets recorded under capital leases (2018 — $48.8 million; 2017 — $24.4 million).

Investments

The Company’s investments consisted of the following:

Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2019

March 31,
2018

(Amounts in millions)

$24.5
1.7

$26.2

$127.0
37.9

$164.9

The Company’s equity interests income (loss) were as follows:

Equity Method Investee

EPIX(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pop(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$ —
(8.4)

(34.5)

$(42.9)

$ 4.0
(9.0)

(47.8)

$(52.8)

$ 31.0
(6.9)

(13.4)

$ 10.7

(1) The Company’s equity interest in EPIX was sold in May 2017 (see further discussion under “Gain

(Loss) on Investments” section below).

F-27

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2) The Company’s equity interest in Pop was sold in March 2019 (see further discussion under “Pop”

section below).

Equity Method Investments:

Pop. Pop was the Company’s joint venture with CBS. On March 15, 2019, the Company sold its
50.0% interest in Pop to CBS, resulting in net proceeds of $48.0 million (net of transaction costs). The
Company recorded a loss before income taxes on the sale of approximately $44.6 million, which is reflected
in the gain (loss) on investments line item in the consolidated statement of operations for the year ended
March 31, 2019.

Pop Financial Information:

The following table presents the summarized statements of operations for the period from April 1,
2018 through the date of sale of March 15, 2019, and for the years ended March 31, 2018 and 2017 for Pop
and a reconciliation of the net loss reported by Pop to equity interest loss recorded by the Company:

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services
Selling, marketing, and general and administration . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . .

Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net
Accretion of redeemable preferred stock units(1) . . . . . . . . . . . .
Total interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .

Period from
April 1, 2018 to
March 15, 2019
(date of sale)

$ 96.9

Year Ended March 31,

2018

$110.9

2017

$ 95.0

55.0
49.9
7.4

(15.4)
2.2
89.4

91.6

66.2
54.1
8.1

(17.5)
1.0
79.1

80.1

52.7
47.6
7.9

(13.2)
0.6
67.8

68.4

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(107.0)

$ (97.6)

$(81.6)

Reconciliation of net loss reported by Pop to equity interest loss:

Net loss reported by Pop . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ownership interest in Pop . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(107.0)
50%

$ (97.6)
50%

$(81.6)
50%

The Company’s share of net loss . . . . . . . . . . . . . . . . . . . . . . .

(53.5)

(48.8)

(40.8)

Accretion of dividend and interest income on redeemable

preferred stock units(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elimination of the Company’s share of profits on licensing sales

44.7

39.5

33.9

to Pop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.2)

(0.8)

(0.6)

Realization of the Company’s share of profits on licensing sales

to Pop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.6

1.1

0.6

Total equity interest loss recorded . . . . . . . . . . . . . . . . . . . . . .

(8.4)

$ (9.0)

$ (6.9)

(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).

F-28

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

EPIX.

In May 2017, the Company sold all of its 31.15% equity interest in EPIX. The Company

recorded a gain before income taxes of approximately $201.0 million which is reflected in the gain (loss) on
investments line item in the consolidated statement of operations in the year ended March 31, 2018. Prior
to the sale of its interest in EPIX, the Company had accounted for such interest as an equity method
investment.

EPIX Financial Information:

The following table presents the summarized statements of income for EPIX for the period from
April 1, 2017 through the date of sale of May 11, 2017, and for the year ended March 31, 2017 and a
reconciliation of the net income reported by EPIX to equity interest income recorded by the Company:

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Period from
April 1, 2017
to May 11,
2017
(date of sale)

Twelve Months
Ended
March 31,
2017

(Amounts in millions)

$ 44.8

$400.1

32.3
2.4

10.1
—

259.8
23.3

117.0
(0.3)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10.1

$116.7

Reconciliation of net income reported by EPIX to equity interest

income:
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 . . . . . . . . . . . . . . . . . . . . .

$ 10.1

$116.7

31.15%

3.1

36.4

(0.1)

(12.4)

1.0

4.0

7.0

$ 31.0

(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.

F-29

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Equity Method Investments

The Company has investments in various other equity method investees with ownership percentages

ranging from approximately 11% to 49%. These investments include:

Playco. Playco Holdings Limited (“Playco”) offers a STARZ-branded online subscription

video-on-demand service in the Middle East and North Africa.

Roadside Attractions. Roadside Attractions is an independent theatrical distribution company.

Pantelion Films. Pantelion Films is a joint venture with Videocine, an affiliate of Televisa, which

produces, acquires and distributes a slate of English and Spanish language feature films that target
Hispanic moviegoers in the U.S.

Atom Tickets. Atom Tickets is the first-of-its-kind theatrical mobile ticketing platform and app. 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.

Other.

In addition to the equity method investments discussed above, the Company holds ownership

interests in other immaterial equity method investees.

Summarized Financial Information. Summarized financial information for the Company’s “other

equity method investees”, on an aggregate basis, is set forth below:

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$189.8
$ 55.7
$167.8
$ 46.7

$232.7
$130.0
$201.5
$ 45.0

March 31,
2019

March 31,
2018

(Amounts in millions)

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 107.5
$ 36.9
$(102.6)

$ 178.8
$ 42.6
$(117.7)

$ 30.1
$ 9.1
$(50.8)

Other Investments:

Other investments include equity securities that are measured at fair value and equity securities without

readily determinable fair values, as described below:

Equity Securities Measured at Fair Value.

Investments in equity securities that are measured at fair
value are classified within Level 1 of the fair value hierarchy as the valuation inputs are based on quoted
prices in active markets (see Note 10).

As a result of the adoption of new accounting guidance for Recognition and Measurement of

Financial Instruments (see Note 1), effective April 1, 2018 changes in the fair value of the Company’s equity
securities with a readily determinable fair market value are recognized in net income. At March 31, 2019
and March 31, 2018, “other investments” include investments in equity securities measured at fair value of
$1.2 million and $7.3 million, respectively. Accordingly, during the fiscal year ended March 31, 2019, the
Company recognized $6.2 million in unrealized losses on equity securities held as of March 31, 2019 which
are reflected in the gain (loss) on investments line item on the consolidated statement of operations.

F-30

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equity Securities Without Readily Determinable Fair Values.

Investments in equity securities without
readily determinable fair values are valued at cost, less any impairment, and adjusted for changes resulting
from observable, orderly transactions for identical or similar securities. At March 31, 2019 and March 31,
2018, “other investments” include investments in equity securities without readily determinable fair values
of $0.5 million and $30.6 million, respectively.

Gain (Loss) on Investments:

The following table summarizes the components of the gain (loss) on investments:

Impairments of investments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses on equity securities held as of March 31, 2019 . . .
Gain (loss) on sale of equity method investees(2) . . . . . . . . . . . . . . .
Gain on Starz investment(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$(36.8)

$ (29.2)

$ —

(6.2)
(44.6)
—

—
201.0
—

—
—
20.4

$(87.6)

$171.8

$20.4

(1)

(2)

In the fiscal years ended March 31, 2019 and 2018, amounts include impairments of equity method
investments, and the fiscal year ended March 31, 2019 also includes other-than-temporary impairments
of $34.2 million on investments in equity securities without readily determinable fair values and notes
receivable (previously included in other assets) which were written down to their estimated fair value.

In the fiscal year ended March 31, 2019, represents the loss before income taxes recorded in connection
with the March 2019 sale of the Company’s 50.0% equity interest in Pop. In the fiscal year ended
March 31, 2018, represents the gain before income taxes recorded in connection with the May 2017 sale
of the Company’s 31.15% equity interest in EPIX.

(3) Represents the difference between the fair value and the original cost of the available-for-sale

investment in equity securities of Starz held on the date of the Starz Merger (December 8, 2016).

6. Goodwill and Intangible Assets

Goodwill

Changes in the carrying value of goodwill by reporting segment were as follows:

Motion
Picture

Television
Production

Media
Networks

Total

(Amounts in millions)

Balance as of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .

Business acquisitions(1)
Measurement period adjustments(2)

Balance as of March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .

Business acquisitions(1)
Measurement period adjustments(2)

$361.9
29.0
2.8

393.7
—
—

$309.2
—
—

309.2
92.0
0.7

$2,029.4
—
8.5

2,037.9
—
—

$2,700.5
29.0
11.3

2,740.8
92.0
0.7

Balance as of March 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . .

$393.7

$401.9

$2,037.9

$2,833.5

(1)

In fiscal 2019 and 2018, represents the goodwill resulting from the acquisitions of 3 Arts
Entertainment and Good Universe, respectively (see Note 2).

F-31

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2)

In fiscal 2019, represents measurement period adjustments resulting from the acquisition of 3 Arts
Entertainment (see Note 2), consisting of a decrease to the fair value of finite-lived intangible assets
and a corresponding increase to goodwill. In fiscal 2018, represents measurement period adjustments
related to the Starz Merger.

Intangible Assets

Finite-lived intangible assets consisted of the following as of March 31, 2019 and March 31, 2018:

Finite-lived intangible assets subject

to amortization:
Customer relationships(1) . . . . . .
Trademarks and trade names . . .
Other . . . . . . . . . . . . . . . . . . . .

March 31, 2019

March 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

(Amounts in millions)

Accumulated
Amortization

Net
Carrying
Amount

$1,852.0
3.6
23.9

$1,879.5

$250.8
1.0
6.1

$257.9

$1,601.2
2.6
17.8

$1,821.0
2.0
9.5

$1,621.6

$1,832.5

$141.4
0.6
2.8

$144.8

$1,679.6
1.4
6.7

$1,687.7

(1) Customer relationships primarily represent affiliation agreements with distributors acquired in the

Starz Merger.

Indefinite-lived intangible assets not subject to amortization consisted of the following:

March 31,
2019

March 31,
2018

(Amounts in millions)

Indefinite-lived intangible assets not subject to amortization:

Tradenames(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$250.0

(1) Tradenames are primarily related to the Starz brand name, which have an indefinite useful life and are

not amortized, but rather are assessed for impairment at least annually or more frequently whenever
events or circumstances indicate that the rights might be impaired.

Amortization expense associated with the Company’s intangible assets for the years ended March 31,

2019, 2018 and 2017 was approximately $112.6 million, $109.0 million, and $35.7 million, respectively.
Amortization expense remaining relating to intangible assets for each of the years ending March 31, 2020
through 2024 is estimated to be approximately $113.3 million, $113.3 million, $113.3 million,
$113.3 million, and $112.7 million, respectively.

F-32

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Debt

Total debt of the Company, excluding film obligations and production loans, was as follows as of

March 31, 2019 and March 31, 2018:

Corporate debt:

Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan A(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan B(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875% Senior Notes

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.375% Senior Notes

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total corporate debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized discount and debt issuance costs, net of fair value adjustment on

March 31,
2019

March 31,
2018

(Amounts in millions)

— $

750.0
1,107.5

520.0

550.0

2,927.5
—
45.4

2,972.9

—
750.0
1,250.0

520.0

—

2,520.0
60.0
50.5

2,630.5

capital lease obligations

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(68.5)

(73.1)

Total debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,904.4
(53.6)

2,557.4
(79.1)

Non-current portion of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,850.8

$2,478.3

(1) To manage interest rate risk on certain of its LIBOR-based floating-rate corporate debt, as of

March 31, 2019, the Company has entered into interest rate swaps to effectively convert the floating
interest rates to fixed interest rates on a $1.7 billion notional amount, which as of March 31, 2019
converts the effective rate on $1.7 billion of our LIBOR-based corporate debt to 4.987% (see Note 18
for further information).

The following table sets forth future annual contractual principal payment commitments of debt as of

March 31, 2019:

Debt Type

Maturity Date

2020

2021

2022

2023

2024

Thereafter

Total

Year Ended March 31,

(Amounts in millions)

Revolving Credit Facility . . . . . . . March 2023
Term Loan A . . . . . . . . . . . . . . March 2023
Term Loan B . . . . . . . . . . . . . . March 2025
5.875% Senior Notes
6.375% Senior Notes
Capital lease obligations . . . . . . . Various

. . . . . . . . . November 2024
. . . . . . . . . February 2024

Less aggregate unamortized

discount & debt issuance costs,
net of fair value adjustment on
capital lease obligations . . . . . .

$ — $ — $ — $ — $ — $

37.5
12.5
—
—
3.0
$53.0

52.5
12.5
—
—
3.0
$68.0

75.0
12.5
—
—
0.9
$88.4

—
585.0
12.5
12.5
—
—
— 550.0
1.0
0.9
$563.5
$598.4

— $
—
1,045.0
520.0
—
36.6
$1,601.6

—
750.0
1,107.5
520.0
550.0
45.4
2,972.9

(68.5)
$2,904.4

F-33

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B)

Revolving Credit Facility Availability of Funds & Commitment Fee. The revolving credit facility

provides for borrowings and letters of credit up to an aggregate of $1.5 billion, and at March 31, 2019 there
was $1.5 billion available. However, borrowing levels are subject to certain financial covenants as discussed
below. There were no letters of credit outstanding at March 31, 2019. The Company is required to pay a
quarterly commitment fee on the Revolving Credit Facility of 0.250% to 0.375% per annum, depending on
the achievement of certain leverage ratios, as defined in the Amended Credit Agreement, on the total
Revolving Credit Facility of $1.5 billion less the amount drawn.

Maturity Date:

•

Revolving Credit Facility & Term Loan A: March 22, 2023.

Term Loan B: March 24, 2025.

Interest:

•

Revolving Credit Facility & Term Loan A: Initially bore interest at a rate per annum equal to
LIBOR plus 1.75% (or an alternative base rate plus 0.75%) margin, with a LIBOR floor of zero.
The margin is subject to potential increases of up to 50 basis points (two (2) increases of 25 basis
points each) upon certain increases to net first lien leverage ratios, as defined in the Amended
Credit Agreement. The margin as of March 31, 2019 is 2.00% (effective interest rate of 4.49% as
of March 31, 2019, before the impact of interest rate swaps).

Term Loan B: As of March 22, 2018, pursuant to the Amended Credit Agreement described
below, the Term Loan B bears interest at a rate per annum equal to LIBOR plus 2.25% margin,
with a LIBOR floor of zero (or an alternative base rate plus 1.25% margin) (effective interest rate
of 4.74% as of March 31, 2019, before the impact of interest rate swaps).

Required Principal Payments:

•

Term Loan A: Quarterly principal payments, at quarterly rates of 1.25% beginning June 30, 2019,
1.75% beginning June 30, 2020, and 2.50% beginning June 30, 2021 through December 31, 2022,
with the balance payable at maturity.

Term Loan B: Quarterly principal payments, at a quarterly rate of 0.25%, with the balance payable
at maturity.

Optional Prepayment:

•

Revolving Credit Facility & Term Loan A: The Company may voluntarily prepay the Revolving
Credit Facility and Term Loan A at any time without premium or penalty.

Term Loan B: The Company may voluntarily prepay the Term Loan B at any time.

Security. The Senior Credit Facilities are guaranteed by the Guarantors (as defined in the Amended
Credit Agreement) and are secured by a security interest in substantially all of the assets of Lionsgate and
the Guarantors (as defined in the Amended Credit Agreement), subject to certain exceptions.

Covenants. The Senior Credit Facilities contain representations and warranties, events of default and

F-34

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or
consolidate with any other person. In addition, a net first lien leverage maintenance covenant and an
interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A
and are tested quarterly. As of March 31, 2019, the Company was in compliance with all applicable
covenants.

Change in Control. The Company may also be subject to an event of default upon a change in control

(as defined in the Credit Agreement) which, among other things, includes a person or group acquiring
ownership or control in excess of 50% of the Company’s common shares.

5.875% Senior Notes and 6.375% Senior Notes

Interest:

•

5.875% Senior Notes: Bears interest at 5.875% annually (payable semi-annually on May and
November 1 of each year).

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

Maturity Date:

•

5.875% Senior Notes: November 1, 2024.

6.375% Senior Notes: February 1, 2024.

Optional Redemption:

•

5.875% Senior Notes:

(i) Prior to November 1, 2019, the 5.875% Senior Notes are redeemable under certain

circumstances (as defined in the indenture governing the 5.875% Senior Notes), in whole at
any time or in part from time to time, at a price equal to 100% of the principal amount, plus
the Applicable Premium (as defined in the indenture governing the 5.875% Senior Notes).
The Applicable Premium is the greater of (i) 1.0% of the principal amount redeemed and
(ii) the excess of the present value of the redemption amount at November 1, 2019 (see below)
of the notes redeemed plus interest through the redemption date (discounted at the treasury
rate on the redemption date plus 50 basis points) over the principal amount of the notes
redeemed on the redemption date.

(ii) On and after November 1, 2019, redeemable by the Company, in whole or in part, at the

redemption prices set forth as follows (as a percentage of the principal amount redeemed),
plus accrued and unpaid interest to the redemption date: (i) on or after November 1, 2019 —
104.406%; (ii) on or after November 1, 2020 — 102.938%; (iii) on or after November 1,
2021 — 101.439%; and (iv) on or after November 1, 2022 — 100%.

•

6.375% Senior Notes:

(i) Prior to February 1, 2021, the 6.375% Senior Notes are redeemable under certain

circumstances (as defined in the indenture governing the 6.375% Senior Notes), in whole at
any time, or in part from time to time, at a price equal to 100% of the principal amount of the
Notes to be redeemed plus the Applicable Premium (as defined in the indenture governing the
6.375% Senior Notes). The Applicable Premium is the greater of (i) 1.0% of the principal
amount redeemed and (ii) the excess of the present value of the redemption amount at
February 1, 2021 (see below) of the notes redeemed plus interest through the redemption date
(discounted at the treasury rate on the redemption date plus 50 basis point) over the principal
amount of the notes redeemed on the redemption date.

F-35

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) On and after February 1, 2021, redeemable by the Company, in whole or in part, at the

redemption prices set forth as follows (as a percentage of the principal amount redeemed),
plus accrued and unpaid interest to the redemption date: (i) on or after February 1, 2021 —
103.188%; (ii) on or after February 1, 2022 — 101.594%; (iii) on or after February 1,
2023 —100%.

Security. The 5.875% Senior Notes and 6.375% Senior Notes are unsubordinated, unsecured

obligations of the Company.

Covenants. The 5.875% Senior Notes and 6.375% Senior Notes contain certain restrictions and
covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness,
pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or
otherwise dispose of certain assets subject to certain conditions, among other limitations. As of March 31,
2019, the Company was in compliance with all applicable covenants.

Change in Control. The occurrence of a change of control will be a triggering event requiring the
Company to offer to purchase from holders all of the 5.875% Senior Notes and 6.375% Senior Notes, at a
price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of
purchase. In addition, certain asset dispositions will be triggering events that may require the Company to
use the excess proceeds from such dispositions to make an offer to purchase the 5.875% Senior Notes and
6.375% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest, if any to the date
of purchase.

Capacity to Pay Dividends

At March 31, 2019, the capacity to pay dividends under the Senior Credit Facilities, the 5.875% Senior
Notes and the 6.375% Senior Notes significantly exceeded the amount of the Company’s retained earnings
or net loss, and therefore the Company’s net loss of $299.6 million and retained earnings of $208.7 million
were deemed free of restrictions at March 31, 2019.

Debt Transactions

Fiscal 2019:

6.375% Senior Notes Issuance. On February 4, 2019, the Company issued $550.0 million aggregate

principal amount of 6.375% Senior Notes. The Company used the proceeds of the 6.375% Senior Notes to
pay down outstanding amounts under its Revolving Credit Facility and for working capital purposes.

Convertible Senior Subordinated Notes Repayment. On April 15, 2018, the 1.25% convertible senior

subordinated notes due April 2018 (the “April 2013 1.25% Notes”) matured, and upon maturity, the
Company repaid the outstanding principal amount, together with accrued and unpaid interest.

Term Loan Prepayments. During the year ended March 31, 2019, the Company made voluntary
prepayments totaling $130.0 million in principal outstanding under the Term Loan B, together with accrued
and unpaid interest.

Fiscal 2018:

March 2018 Senior Credit Facilities Refinancing. On March 22, 2018, the Company entered into an

amendment to the Credit Agreement (as amended, the “Amended Credit Agreement”) to refinance its
Previous Revolving Credit Facility, Previous Term Loan A and Previous Term Loan B, all as defined below.
In connection with the amendment, the Company repaid in full the then outstanding principal amounts of
$950.0 million under the Previous Term Loan A and $825.0 million under the Previous Term Loan B, and
terminated all commitments under the Previous Revolving Credit Facility. In addition, the Company
incurred a new five-year Term Loan A in aggregate principal amount of $750.0 million (the “Term

F-36

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Loan A”), incurred a new seven-year Term Loan B in aggregate principal amount of $1,250.0 million (the
“Term Loan B”), and obtained a new $1.5 billion five-year revolving credit facility (the “Revolving Credit
Facility”, and together with the Term Loan A and Term Loan B, the “Senior Credit Facilities”).

December 2017 Previous Term Loan B Refinancing. On December 11, 2017, the Company entered into

an amendment to the Credit Agreement to reduce the interest rate on the Previous Term Loan B and
prepaid $25.0 million of principal outstanding under the Previous Term Loan B.

Term Loan Prepayments.

In addition to the prepayments in connection with the amendments

described above, during the year ended March 31, 2018, the Company made other voluntary prepayments
totaling $740.0 million in principal outstanding under the Previous Term Loan B, together with accrued
and unpaid interest.

Fiscal 2017:

Debt Issuances and Redemptions or Repayments Associated with the Starz Merger. On December 8,

2016, Lions Gate Entertainment Corp. entered into a credit and guarantee agreement (the “Credit
Agreement”) which provided for a $1.0 billion five-year revolving credit facility (the “Previous Revolving
Credit Facility”) (ii) a $1.0 billion five-year term loan A facility (the “Previous Term Loan A”) and (iii) a
$2.0 billion seven-year term loan B facility (the “Previous Term Loan B”). In addition, on October 27,
2016, Lions Gate Entertainment Corp. issued $520.0 million aggregate principal amount of 5.875% senior
notes due 2024 (the “5.875% Senior Notes”).

The Company used the proceeds of the 5.875% Senior Notes, the Previous Term Loan A, the Previous

Term Loan B, and a portion of the Previous Revolving Credit Facility (amounting to $50.0 million) to
finance a portion of the consideration and transaction costs for the Starz Merger and the associated
transactions.

Term Loan Prepayments. During the year ended March 31, 2017, the Company made other voluntary

prepayments totaling $400.0 million in principal outstanding under the Previous Term Loan B, together
with accrued and unpaid interest.

Loss on Extinguishment of Debt

Accounting for the Debt Redemption and Repayment Transactions Discussed Above:

Revolving Credit Facilities. Any fees paid to creditors or third parties related to the issuance of the
new revolving credit facility were capitalized and are being amortized over the term of the new revolving
credit facility. To the extent the borrowing capacity, measured as the amount available under the revolving
credit facility multiplied by the remaining term, on a creditor by creditor basis, was more than under the
previous revolving credit facility, any prior unamortized debt issuance costs were capitalized and are being
amortized over the term of the new revolving credit facility. To the extent the borrowing capacity on a
creditor by creditor basis was less than under the previous credit facility the prior unamortized debt
issuance costs were written off as a loss on extinguishment of debt in proportion to the decrease in
borrowing capacity under the former revolving credit facility.

Term Loans and Senior Notes.

In accounting for each contemporaneous issuance and repayment or

redemption transaction discussed above, a portion of the prepayment and issuance was considered a
modification of terms with creditors who participated in both the prepaid or redeemed debt and the new
issuance, and a portion was considered a debt extinguishment. The previously incurred unamortized
deferred financing costs, debt discount, call premiums (if any) and any fees or other amounts paid to
creditors, on the prepaid or redeemed debt will be amortized over the life of the new issuance, to the extent
the prepayment and issuance was considered a modification of terms, and expensed as a loss on
extinguishment of debt to the extent considered an extinguishment. The new debt issuances associated with
the existing creditors whose prior loans were prepaid were considered a modification of terms and therefore

F-37

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the new issuance costs associated with such issuances were expensed as a loss on extinguishment of debt.
All costs and expenses associated with new creditors are capitalized and amortized over the life of the new
issuance. Debt issuance costs and any debt discount are amortized using the effective interest method.

Loss on Extinguishment of Debt. The following tables summarize the accounting for the debt issuance

costs incurred and the related loss on extinguishment of debt recorded in the years ended March 31, 2018
and March 31, 2017 associated with the debt transactions discussed above. During the year ended
March 31, 2019, the Company recorded a loss on extinguishment of debt of $1.9 million related to early
repayments on the Term Loan B.

Year Ended March 31, 2018

Loss on
Extinguishment
of Debt

Capitalized &
Amortized Over
Life of New
Issuances

Total

New debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Previously incurred debt issuance costs or unamortized discount . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11.0

24.7

$35.7

(Amounts in millions)

$11.6

$22.6

Year Ended March 31, 2017

Loss on
Extinguishment
of Debt

Capitalized &
Amortized Over
Life of New
Issuances

(Amounts in millions)

Total

New debt issuance costs and call premium . . . . . . . . . . . . . . . . . .

Previously incurred debt issuance costs or unamortized discount . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$20.6

19.8

$40.4

$115.0

$135.6

Capital Lease Obligations

Capital lease obligations represent lease agreements acquired in the Starz Merger. As of March 31,
2019, these obligations include a ten-year commercial lease for a building, with four successive five-year
renewal periods at the Company’s option, with an imputed annual interest rate of 7.2%, and a capital lease
arrangement for Starz’s transponder capacity that expires in February 2021 and has an imputed annual
interest rate of 7.0%.

Interest Expense

The table below sets forth the composition of the Company’s interest expense for the years ended

March 31, 2019, 2018 and 2017:

Year Ended March 31,

2019

2018

2017

Interest expense

Cash interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount and financing costs . . . . . . . . .

Interest on dissenting shareholders’ liability (see Note 17) . . . .

$152.0
11.6

163.6

35.3

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$198.9

$122.9
14.3

137.2

56.5

$193.7

$ 86.8
12.9

99.7

15.5

$115.2

F-38

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Participations and Residuals

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, contributed a minority
share of 25% of the Company’s production or acquisition costs of “qualifying” theatrical feature films,
released during the three-year period ended January 23, 2018, and participated 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 excluded, 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 sheets and amounted to $157.0 million at March 31, 2019 (March 31, 2018 —
$151.8 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.

Film Obligations and Production Loans

March 31,
2019

March 31,
2018

(Amounts in millions)

Film obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 270.3
386.4

Total film obligations and production loans . . . . . . . . . . . . . . . . . .
Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . .
Total film obligations and production loans, net
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

656.7
(1.0)

655.7
(512.6)

$ 146.7
352.9

499.6
(0.4)

499.2
(327.9)

Total non-current film obligations and production loans

. . . . . . . . .

$ 143.1

$ 171.3

The following table sets forth future annual repayment of film obligations and production loans as of

March 31, 2019:

Year Ended March 31,

2020

2021

2022

2023

2024

Thereafter

Total

(Amounts in millions)

Film obligations . . . . . . . . . . . . . . . . . . . . .
Production loans . . . . . . . . . . . . . . . . . . . .

$177.3
336.6

$ 68.3
49.8

$13.9

$3.0
$7.0
— — —

$513.9

$118.1

$13.9

$7.0

$3.0

Less imputed interest on film obligations
and debt issuance costs on production
. . . . . . . . . . . . . . . . . . . . . . .
loans

$1.1
—

$1.1

$270.6
386.4

$657.0

(1.3)

$655.7

Film Obligations

Film obligations include minimum guarantees and accrued licensed program rights obligations, which

represent amounts payable for film or television rights that the Company has acquired or licensed and

F-39

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 4.63% to 5.29%.

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 3 — Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities.

The following table sets forth the assets and liabilities required to be carried at fair value on a recurring

basis as of March 31, 2019 and 2018:

March 31, 2019

March 31, 2018

Level 1

Level 2

Total

Level 1

Level 2

Total

(Amounts in millions)

Assets:

Available-for-sale equity securities (see Note 5) . . . . .
. . . . . . . .
Forward exchange contracts (see Note 18)

$1.2
—

$ — $ 1.2
1.5

1.5

$7.3
—

$ — $ 7.3
0.3

0.3

Liabilities:

Forward exchange contracts (see Note 18)

. . . . . . . .

Interest rate swaps (see Note 18) . . . . . . . . . . . . . . .

—

(0.6)

(0.6) —

(0.6)

(63.6)

(63.6) —

—

$1.2

$(62.7) $(61.5)

$7.3

$(0.3)

$ 7.0

F-40

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 outstanding debt at

March 31, 2019 and March 31, 2018:

March 31, 2019

March 31, 2018

(Amounts in millions)

Carrying
Value

Fair
Value

(Level 2)

Carrying
Value

Liabilities(1):

Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

733.3

742.5

729.7

Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,091.2

1,088.1

1,229.3

5.875% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . .

6.375% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . .

April 2013 1.25% Notes . . . . . . . . . . . . . . . . . . . . . .

Production loans . . . . . . . . . . . . . . . . . . . . . . . . . . .

502.8

541.4

—

385.4

534.3

576.1

—

386.4

500.4

—

60.0

352.6

Fair
Value

(Level 2)

750.9

1,251.6

539.5

—

60.3

352.9

$2,712.7

$2,891.3

$2,872.0

$2,955.2

(1) The Company measures the fair value of its outstanding debt using discounted cash flow techniques
that use observable market inputs, such as LIBOR-based yield curves, swap rates, and credit ratings
(Level 2 measurements).

The Company’s financial instruments also include cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, borrowings under the Revolving Credit Facility, if any, and capital
lease obligations. The carrying values of these financial instruments approximated the fair values at
March 31, 2019 and 2018.

11. Noncontrolling Interests

Redeemable Noncontrolling Interests

The table below presents the reconciliation of changes in redeemable noncontrolling interests:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial fair value of redeemable noncontrolling interests . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . . .
Noncontrolling interest discount accretion . . . . . . . . . . . . . . . .
Adjustments to redemption value . . . . . . . . . . . . . . . . . . . . . . .
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$101.8
15.8
(16.2)
22.1
6.5
(2.4)

$127.6

$ 93.8
—
0.5
6.1
9.3
(7.9)

$101.8

$90.5
—
(0.3)
5.0
5.5
(6.9)

$93.8

Redeemable noncontrolling interests (included in temporary equity on the consolidated balance sheets)

relate to the May 29, 2018 acquisition of a controlling interest in 3 Arts Entertainment and the
November 12, 2015 acquisition of a controlling interest in Pilgrim Media Group.

Redeemable noncontrolling interests are 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 if applicable, or (ii) the historical value resulting from the original

F-41

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acquisition date value plus or minus any earnings or loss attribution, plus the amount of amortized
noncontrolling interest discount, less the amount of cash distributions that are not accounted for as
compensation, if any. The amount of the redemption value in excess of the historical values of the
noncontrolling interest, if any, is recognized as an increase to redeemable noncontrolling interest and a
charge to retained earnings.

3 Arts Entertainment.

In connection with the acquisition of a controlling interest in 3 Arts

Entertainment on May 29, 2018, the Company recorded a non-compensatory (see below) redeemable
noncontrolling interest of $15.8 million, representing the noncontrolling interest holders 49% equity
interest in 3 Arts Entertainment (see Note 2). The noncontrolling interest holders have a right to put the
noncontrolling interest of 3 Arts Entertainment, at fair value, exercisable at five years after the acquisition
date of May 29, 2018, for a 60 day period. Beginning 30 days after the expiration of the exercise period for
the put rights held by the noncontrolling interest holders, the Company has a right to call the
noncontrolling interest of 3 Arts Entertainment, at fair value, for a 60 day period. 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, the noncontrolling interest holder’s interest is presented as redeemable
noncontrolling interest outside of shareholders’ equity on the Company’s consolidated balance sheets.

In addition, the noncontrolling interest holders have continued as employees of 3 Arts Entertainment.

Pursuant to the various 3 Arts Entertainment acquisition and related agreements, a portion of the
noncontrolling interest holders’ participation in the put and call proceeds is based on the noncontrolling
interest holders’ performance during the period. Further, if the employment of a noncontrolling interest
holder is terminated, under certain circumstances, their participations in distributions cease and the put and
call value is discounted from the fair value of their equity ownership percentage. Accordingly, earned
distributions are accounted for as compensation and are being expensed within general and administrative
expense as incurred. Additionally, the amount of the put and call proceeds subject to the discount is also
accounted for as compensation, and is being amortized over the vesting period within general and
administrative expense and reflected as an addition to redeemable noncontrolling interest.

Pilgrim Media Group.

In connection with the acquisition of a controlling interest in Pilgrim Media

Group on November 12, 2015, the Company recorded a redeemable noncontrolling interest of
$90.1 million, representing 37.5% of Pilgrim Media Group. 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 Media Group, at fair value, exercisable at 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 at 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 consolidated balance sheets.

In addition, the noncontrolling interest holder is the President and CEO of Pilgrim Media Group.
Pursuant to the operating agreement of Pilgrim Media Group, if the employment of the noncontrolling
interest holder is terminated, 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 Media Group and reflected as an addition to redeemable noncontrolling
interest.

Other Noncontrolling Interests

The Company has other noncontrolling interests that are not redeemable. These noncontrolling

interests primarily relate to Pantaya (a joint venture between the Company and Hemisphere Media Group),

F-42

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

a premium Spanish-language streaming service in which the Company owns a controlling interest. The
Pantaya service was launched in the three months ended September 30, 2017.

12. Revenue

Revenue by Segment, Market or Product Line

The table below presents revenues by segment, market or product line for the fiscal years ended

March 31, 2019, 2018 and 2017. The prior year information in the below table has not been adjusted under
the modified retrospective method of adoption of the new revenue recognition guidance.

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Revenue by Type:

Motion Picture

Theatrical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home Entertainment

Digital Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Packaged Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Home Entertainment

. . . . . . . . . . . . . . . . . . . .
Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 215.8

$ 281.4

$ 371.3

334.7
257.5

592.2
274.4
341.1
40.9

373.7
400.3

774.0
278.5
456.7
31.5

303.9
403.8

707.7
279.1
533.8
28.7

Total Motion Picture revenues . . . . . . . . . . . . . . . . . . . .

1,464.4

1,822.1

1,920.6

Television Production

Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home Entertainment

Digital Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Packaged Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Home Entertainment

. . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

655.8
136.0

66.9
7.6

74.5
54.6

744.5
179.6

96.3
11.2

107.5
1.6

667.3
163.2

50.1
6.3

56.4
5.9

Total Television Production revenues . . . . . . . . . . . . . . .

920.9

1,033.2

892.8

Media Networks – Programming Revenues

Domestic(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intersegment eliminations . . . . . . . . . . . . . . . . . . . . . . . . . .

1,458.9

1,411.2

2.1

1,461.0

(165.8)

—

1,411.2

(137.4)

426.3

—

426.3

(38.2)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,680.5

$4,129.1

$3,201.5

(1) Media Networks domestic revenues include revenue from the Company’s Streaming Services product
line of $18.0 million, $7.1 million and $2.9 million in the years ended March 31, 2019, 2018 and 2017,
respectively.

F-43

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Remaining Performance Obligations

Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or

minimum guarantee contracts where the revenue will be recognized and the cash received in the future
(i.e., backlog). Revenues expected to be recognized in the future related to performance obligations that are
unsatisfied at March 31, 2019 are as follows:

Year Ended March 31,

2020

2021

2022

Thereafter

Total

(Amounts in millions)

Remaining Performance Obligations . . . . . . . . . . . . .

$1,257.1

$275.4

$120.1

$163.4

$1,816.0

The above table does not include estimates of variable consideration for transactions involving sales or

usage-based royalties in exchange for licenses of intellectual property. The revenues included in the above
table include all fixed fee contracts regardless of duration.

Revenues of $231.7 million, including variable and fixed fee arrangements, were recognized during the

year ended March 31, 2019, respectively, from performance obligations satisfied prior to March 31, 2018.
These revenues were primarily associated with the distribution of television and theatrical product in
electronic sell-through and video-on-demand formats, and to a lesser extent, the distribution of theatrical
product in the domestic and international markets related to films initially released in prior periods.

Contract Assets and Deferred Revenue

The timing of revenue recognition, billings and cash collections affects the recognition of accounts
receivable, contract assets and deferred revenue (see Note 1). At March 31, 2019 and April 1, 2018, accounts
receivable, contract assets and deferred revenue are as follows:

March 31,
2019

April 1,
2018

Addition
(Reduction)

(Amounts in millions)

Accounts receivable, net – current . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net – non-current(1) . . . . . . . . . . . . . . . . . . . . . . .
Contract asset – current(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract asset – non-current(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue – non-current

$647.2
176.1
97.3
72.1
146.5
62.8

$1,042.2
257.7
78.3
71.5
183.8
70.5

$(395.0)
(81.6)
19.0
0.6
(37.3)
(7.7)

(1)

Included in accounts receivable within non-current other assets in the consolidated balance sheets.

(2)

Included in prepaid expenses and other within other current assets in the consolidated balance sheets.

(3)

Included in prepaid expenses and other within non-current other assets in the consolidated balance
sheets.

Contract assets relate to the Company’s conditional right to consideration for completed performance
under the contract (e.g., unbilled receivables). Amounts relate primarily to contractual payment holdbacks
in cases in which the Company is required to deliver additional episodes or seasons of television content in
order to receive payment, complete certain administrative activities, such as guild filings, or allow the
Company’s customers’ audit rights to expire. The change in balance of contract assets is primarily due to
the satisfaction of the condition related to payment holdbacks.

Deferred revenue relates primarily to customer cash advances or deposits received prior to when the

Company satisfies the corresponding performance obligation. Revenues of $143.0 million were recognized
during the year ended March 31, 2019, related to the balance of deferred revenue at April 1, 2018.

F-44

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Summarized Balance Sheet and Statement of Operations Comparison of New and Prior Revenue Recognition
Guidance

The following table presents the line items impacted by the adoption of the new revenue recognition

guidance (described in Note 1) on the consolidated balance sheet and statement of operations:

March 31, 2019

As
Reported

Impact of
Adoption

Without
Adoption of
New Revenue
Guidance

(Amounts in millions)

Balance Sheet Information:

Assets
Accounts receivable, net – current

. . . . . . . . . . . . . . . . . . . . . . . . .

$ 647.2

$ (6.2)

$ 641.0

Other assets – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets – non-current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in films and television programs and program rights, net . .

267.2
436.1
1,672.0

Liabilities
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . .
Participations and residuals – current . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue – non-current . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities

531.2
408.5
146.5
62.8
56.5

(97.3)
(0.5)
37.3

(58.7)
1.9
(0.6)
0.8
(1.9)

169.9
435.6
1,709.3

472.5
410.4
145.9
63.6
54.6

Equity
Retained earnings

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

208.7

(8.2)

200.5

Statement of Operations Information:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss

Year Ended March 31, 2019

As
Reported

Impact of
Adoption

Without
Adoption of
New Revenue
Guidance

(Amounts in millions)

$3,680.5
2,028.2
130.0
12.0
(308.1)
8.5
(299.6)

$44.9
31.0
13.9
—
13.9
(3.4)
10.5

$3,725.4
2,059.2
143.9
12.0
(294.2)
5.1
(289.1)

F-45

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

13. Capital Stock

(a) Common Shares

The Company had 500 million authorized Class A voting shares, and 500 million authorized Class B

non-voting shares, at March 31, 2019 and March 31, 2018.

As discussed in Note 2, immediately prior to the consummation of the December 8, 2016 Starz Merger,

the Company effected the reclassification of its capital stock, pursuant to which each previously existing
Lionsgate common share was converted into 0.5 shares of a newly issued Class A voting shares and 0.5
shares of a newly issued Class B non-voting shares, subject to the terms and conditions of the Merger
Agreement, resulting in 74.2 million of Class A voting shares and 74.2 million of Class B non-voting shares.

The table below outlines common shares reserved for future issuance:

March 31,
2019

March 31,
2018

(Amounts in millions)

Stock options and equity-settled SARs outstanding . . . . . . . . . . . . .
Restricted stock and restricted share units – unvested . . . . . . . . . . . .
Common shares available for future issuance under the 2017 Plan (as

defined below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issuable upon conversion of April 2013 1.25% Notes . . . . . . .

Shares reserved for future issuance . . . . . . . . . . . . . . . . . . . . . . .

34.6
2.0

6.7
—

43.3

32.1
2.2

10.3
2.1

46.7

(b) Share Repurchases

On February 2, 2016, the Company’s Board of Directors authorized the Company to increase its

previously announced share repurchase plan from a total authorization of $300 million to $468 million.
During the years ended March 31, 2019, 2018 and 2017 the Company did not repurchase any common
shares. To date, approximately $283.2 million common shares have been repurchased, leaving approximately
$184.7 million of authorized potential purchases.

The amount of dividends, if any, that the Company pays to its shareholders is determined by its 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 its credit agreements, and shall
be in compliance with applicable law. In November 2018, the Company’s Board of Directors suspended the
Company’s quarterly cash dividend to focus on driving long-term shareholder value by investing in global
growth opportunities for Starz, while also strengthening its balance sheet.

F-46

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the fiscal years ended March 31, 2019, 2018 and 2017, the Company’s Board of Directors

declared the following quarterly cash dividends:

Dividends Declared
Per Common Share

Total Amount

Payment Date

Fiscal Year 2019:

Second quarter ended September 30, 2018 . . . . . . .

First quarter ended June 30, 2018 . . . . . . . . . . . . .

Total cash dividends declared in fiscal year 2019. .

$0.09

$0.18

Fiscal Year 2018:

(in millions)

$19.3

19.2

$38.5

November 8, 2018

August 9, 2018

Fourth quarter ended March 31, 2018 . . . . . . . . . .

$0.09

$19.1

May 1, 2018

Fiscal Year 2017:

First quarter ended June 30, 2016 . . . . . . . . . . . . .

$0.09

$13.3

August 5, 2016

As of March 31, 2019, the Company was not limited in its capacity to pay dividends under the Senior
Credit Facilities Amended Credit Agreement and the indenture governing the 5.875% Senior Notes and the
6.375% Senior Notes (see Note 7).

(d) Share-based Compensation

On September 12, 2017, the Company’s shareholders approved the Lions Gate Entertainment Corp.

2017 Performance Incentive Plan (the “2017 Plan”) previously adopted by the Board of Directors (the
“Board”) of the Company. The types of awards that may be granted under the 2017 Plan include stock
options, share appreciation rights (“SARs”), restricted stock, restricted share units, stock bonuses and other
forms of awards granted or denominated in Class A voting shares and Class B non-voting shares
(“Common Shares”) or units of Common Shares, as well as certain cash bonus awards. Persons eligible to
receive awards under the 2017 Plan include directors of the Company, officers or employees of the
Company or any of its subsidiaries, and certain consultants and advisors to the Company or any of its
subsidiaries.

Stock options are generally granted at exercise prices equal to or exceeding the market price of the
Company’s Common Shares at the date of grant. Substantially all stock options vest ratably over one to
five years from the grant date based on continuous service and expire seven to ten years from the date of
grant. Restricted stock and restricted share units generally vest ratably over one to four years based on
continuous service. The Company satisfies stock option exercises and vesting of restricted stock and
restricted share units with newly issued shares.

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-47

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, 2019, 2018 and 2016:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Compensation Expense:

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23.0

$ 43.1

$ 42.5

Restricted share units and other share-based compensation . . .

Share appreciation rights . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impact of accelerated vesting on equity awards(1) . . . . . . . . . .
Total share-based compensation expense . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax impact(2)
Reduction in net income . . . . . . . . . . . . . . . . . . . . . . . . . . .

24.7

4.4

52.1
16.0

$68.1
(15.7)

$ 52.4

36.2

6.3

85.6
2.9

$ 88.5

(29.6)

$ 58.9

34.0

0.6

77.1
2.4

$ 79.5

(28.0)

$ 51.5

(1) Represents the impact of the acceleration of certain vesting schedules for equity awards pursuant to

certain severance arrangements.

(2) Represents the income tax benefit recognized in the statements of operations for share-based

compensation arrangements.

Share-based compensation expense, by expense category, consisted of the following:

Compensation Expense:

Direct operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and marketing . . . . . . . . . . . . . . . . . . . . . . . . .
General and administration . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$ 1.1
0.4
50.6
16.0

$68.1

$ 1.1
0.9
83.6
2.9

$88.5

$ 1.2
0.4
75.5
2.4

$79.5

F-48

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock Options

The following table sets forth the stock option and equity-settled share appreciation rights activity

during the year ended March 31, 2019:

Stock Options and Equity-Settled SARs

Class A Voting Shares

Class B Non-Voting Shares

Weighted-
Average
Exercise
Price

Number of
Shares

Weighted-
Average
Remaining
Contractual
Term
(years)

Aggregate
Intrinsic
Value

Number of
Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term
(years)

Aggregate
Intrinsic
Value

(Amounts in millions, except for weighted-average exercise price and years)

Outstanding at March 31, 2018 . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . .

Exercised . . . . . . . . . . . . . . . . . . . . . . .

8.6

0.2
—(1)

Forfeited or expired . . . . . . . . . . . . . . . . .

(0.4)

Outstanding at March 31, 2019 . . . . . . . . . .

Vested or expected to vest at March 31, 2019 . . .

Exercisable at March 31, 2019 . . . . . . . . . . .

8.4

6.1

$26.93

$28.07

$15.76

$33.42

$26.70

$26.71

$27.91

4.97

4.96

4.18

$0.1

23.5

4.2

(0.7)

(0.8)

26.2

25.8

19.1

$20.56

$21.52

$10.78

$29.00

$20.72

$20.70

$19.72

4.17

4.13

2.74

$25.4

$25.3

(1) Represents less than 0.1 million shares.

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, 2019, 2018 and 2017, and the weighted average applicable
assumptions used in the Black-Scholes option-pricing model for stock options and share-appreciation
rights granted during the years then ended:

Weighted average fair value of grants . . . . . . . . . . . . . .
Weighted average assumptions:

Year Ended March 31,

2019

$5.48

2018

$8.38

2017

$6.88

Risk-free interest rate(1) . . . . . . . . . . . . . . . . . . . . . .
Expected option lives (in years)(2) . . . . . . . . . . . . . . .
Expected volatility for options(3)
. . . . . . . . . . . . . . .
Expected dividend yield(4) . . . . . . . . . . . . . . . . . . . .

2.2% – 3.1%
1 – 7 years

34%
0.0% – 1.7%

1.7% – 2.7%
4 – 6 years

35%
0.0% – 1.5%

1.2% – 2.4%
4 – 10 years

35%
0.0% – 1.8%

(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 shares,

historical volatility of the Company’s shares and other factors.

(4) The expected dividend yield is estimated by dividing the expected annual dividend by the market price

of the Company’s shares at the date of grant.

F-49

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The total intrinsic value of options exercised during the year ended March 31, 2019 was $5.3 million

(2018 — $36.9 million, 2017 — $30.0 million).

During the year ended March 31, 2019, less than 0.1 million shares (2018 — 0.1 million shares,
2017 — 0.8 million shares) were cancelled to fund withholding tax obligations upon exercise of options.

Restricted Share Units

The following table sets forth the restricted share unit and restricted stock activity during the year

ended March 31, 2019:

Restricted Share Units

Restricted Stock

Weighted-
Average
Grant-
Date Fair
Value

Class B Non-
Voting Shares

Weighted-
Average
Grant-
Date Fair
Value

Class B Non-
Voting
Shares

Weighted-
Average
Grant-
Date Fair
Value

Class A
Voting Shares

(Amounts in millions, except for weighted-average grant date fair value)

Outstanding at March 31, 2018 . . . .

Granted . . . . . . . . . . . . . . . . . . .

Vested . . . . . . . . . . . . . . . . . . . .

Forfeited . . . . . . . . . . . . . . . . . .

Outstanding at March 31, 2019 . . . .

0.2
—(1)

(0.1)

—(1)

0.1

$28.49

$23.51

$29.05

$24.83

$25.68

1.5

1.3

(0.9)

(0.3)

1.6

$28.71

$19.88

$26.14

$23.24

$24.01

0.5

—

(0.2)

—(1)

0.3

$25.70

—

$25.70

(1) Represents less than 0.1 million shares.

The fair values of restricted stock and restricted share units are determined based on the market value

of the shares on the date of grant. The total fair value of restricted share units and restricted stock vested
during the year ended March 31, 2019 was $33.7 million (2018 — $41.6 million, 2017 — $60.7 million).

The following table summarizes the total remaining unrecognized compensation cost as of March 31,

2019 related to non-vested stock options and restricted stock and restricted share units and the weighted
average remaining years over which the cost will be recognized:

Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restricted Stock and Restricted Share Units . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total
Unrecognized
Compensation
Cost

(Amounts in
millions)

$43.4

31.9

$75.3

Weighted
Average
Remaining
Years

2.8

2.0

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 stock and restricted share units. During the year ended March 31, 2019, 0.5 million shares
(2018 — 0.7 million shares, 2017 — 1.0 million shares) were withheld upon the vesting of restricted stock
and 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.

F-50

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognized excess tax deficiencies of $14.9 million associated with its equity awards in

its tax benefit for the year ended March 31, 2019 (2018 — benefit of $5.2 million, 2017 — none).

Other Share-Based Compensation

Pursuant to the terms of certain employment agreements, during the year ended March 31, 2019, the

Company granted the equivalent of $2.3 million (2018 — $0.8 million, 2017 — $1.1 million) in 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, 2019, the
Company issued 0.1 million shares (2018 — less than 0.1 million shares, 2017 — less than 0.1 million
shares), net of shares withheld to satisfy minimum tax withholding obligations.

(e) Other

In connection with an amendment of an affiliation agreement with a customer and effective upon the

close of the Starz Merger, the Company agreed to issue to the customer three $16.67 million annual
installments of equity (or cash at the Company’s election). The total value of the contract of $50 million is
being amortized as a reduction of revenue over the period from December 8, 2016 to August 31, 2019.
During the year ended March 31, 2019, Lionsgate issued to the customer 0.4 million Class A voting shares
valued at $8.3 million and 0.5 million Class B voting shares valued at $8.3 million (2018 — 0.3 million
Class A voting shares valued at $8.3 million and 0.3 million Class B non-voting shares valued at
$8.3 million).

14. Income Taxes

On December 22, 2017, Tax Act was signed into law, making significant changes to the taxation of
U.S. business entities. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, imposed a
one-time transition tax in connection with the move from a worldwide tax system to a territorial tax system,
provided for accelerated deductions for certain U.S. film production costs, imposed limitations on certain
tax deductions such as executive compensation in future periods, and included numerous other provisions.
As the Company has a March 31 fiscal year-end, the lower corporate income tax rate was phased in,
resulting in a U.S. statutory federal rate of approximately 31.5% for the fiscal year ended March 31, 2018,
and 21% for subsequent fiscal years. The Company’s U.S. tax provision consists primarily of deferred tax
benefits calculated at the 21% tax rate.

In connection with the Tax Act, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to

provide guidance to companies that have not completed their accounting for the income tax effects of the
Tax Act. Under SAB 118, provisional amounts can be recorded to the extent a reasonable estimate can be
made. Additional tax effects and adjustments to previously recorded provisional amounts can be recorded
upon obtaining, preparing, or analyzing additional information (including computations) within one year
from the enactment date of the Tax Act. The Company previously made provisional estimates of the effects
of the Tax Act, such as the measurement of deferred tax assets and liabilities, the tax effects of executive
compensation, the one-time transition tax, net operating loss carryovers, foreign tax credits, and accelerated
deductions for U.S. film costs. The estimated impact of the Tax Act was based on a preliminary review of
the new law, subject to revision based upon further analysis and interpretation of the Tax Act. During the
quarter ended December 31, 2018, the Company completed its analysis and its accounting for the Tax Act,
and there were no material adjustments to its provisional estimates.

The Company’s income tax provision (benefit) differs from the federal statutory rate multiplied by

pre-tax income (loss) due to the mix of the Company’s pre-tax income (loss) generated across the various
jurisdictions in which the Company operates and the tax deductions generated by the Company’s capital
structure. However, the Company’s income tax benefit for the fiscal year ended March 31, 2019 was offset
by valuation allowances against certain U.S. and foreign deferred tax assets, certain minimum taxes imposed
by the Tax Act, and the nondeductible portion of shareholder litigation settlements.

F-51

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s income tax provision (benefit) can be 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 the
Company operates, changes in tax laws and regulations in those jurisdictions, further interpretation and
legislative guidance regarding the new Tax Act, changes in valuation allowances on its deferred tax assets,
tax planning strategies available to the Company, and other discrete items.

The components of pretax income, net of intercompany eliminations, are as follows:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(505.7)

$(824.1)

$(409.2)

International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197.6

972.8

274.8

$(308.1)

$ 148.7

$(134.4)

The Company’s U.S. pre-tax losses and international pre-tax income are primarily driven by

non-operating, intercompany items resulting from the Company’s internal capital structure. The Company’s
capital structure generally provides foreign affiliate dividends to its Canadian parent company (i.e.,
Lionsgate) and interest-related tax deductions to its U.S. companies. The Company’s international pre-tax
income may be significantly impacted by these foreign affiliate dividends related to its internal capital
structure.

The Company’s current and deferred income tax provision (benefits) are as follows:

Current provision (benefit):

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International

Total current provision (benefit)

. . . . . . . . . . . . . . . . . . . .

Deferred benefit:

Total deferred benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$ 9.1
(0.7)
6.7

$ 15.1

$(48.2)
5.8
18.8

(23.6)

$ (8.5)

$ (17.6)
(4.3)
2.0

$ (19.9)

$(269.0)
(18.5)
(12.0)

(299.5)

$(319.4)

7.8
2.2
4.5

$ 14.5

$(143.3)
(9.9)
(10.2)

(163.4)

$(148.9)

F-52

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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,

2019

2018

2017

(Amounts in millions)

Income taxes computed at Federal statutory rate . . . . . . . . . . . .

$ (64.7)

$ 46.8

$ (47.1)

Foreign affiliate dividends . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign operations subject to different income tax rates . . . . . .

State income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Remeasurement of opening U.S. deferred tax liabilities due to

the Tax Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional remeasurements of originating deferred tax assets

and liabilities

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible settlement costs
. . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in valuation allowance . . . . . . . . . . . . . . .

(37.5)

(235.7)

(8.5)

—

—
6.8
16.9
0.3
313.9

(329.1)

7.1

(21.2)

(165.0)

75.6

—
3.5
—
(5.3)
68.2

(84.2)

(14.6)

(6.0)

—

7.3
(0.5)
—
(2.3)
(1.5)

Total benefit for income taxes . . . . . . . . . . . . . . . . . . . . . .

(8.5)

$(319.4)

$(148.9)

For the years ended March 31, 2019, 2018, and 2017, the tax provision includes certain foreign affiliate

dividends in our Canadian jurisdiction that can be received without being subject to tax under Canadian
tax law. Additionally, as a result of an internal capital restructuring during the year ended March 31, 2019,
the Company generated a foreign net operating loss carryforward under local tax law which was offset by a
valuation allowance based on the Company’s assessment.

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-53

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:

March 31,
2019

March 31,
2018

(Amounts in millions)

Deferred tax assets:

Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 609.5

$ 336.7

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:

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74.2

79.0

78.9

71.7

13.9

927.2
(401.1)

526.1

(438.4)
(8.6)
(110.6)
(5.2)

Total deferred tax liabilities

. . . . . . . . . . . . . . . . . . . . . . . . . .

$(562.8)

Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (36.7)

68.3

101.5

96.4

59.0

21.4

683.3
(73.2)

610.1

(475.5)
(19.5)
(150.7)
(17.5)

$(663.2)

$ (53.1)

The Company has recorded valuation allowances for certain deferred tax assets, which are primarily
related to U.S. and foreign net operating loss carryforwards and U.S. foreign tax credit carryforwards as
sufficient uncertainty exists regarding the future realization of these assets.

At March 31, 2019, the Company had U.S. net operating loss carryforwards (“NOLs”) of

approximately $1,367.9 million available to reduce future federal income taxes which expire beginning in
2029 through 2038. At March 31, 2019, the Company had state NOLs of approximately $791.3 million
available to reduce future state income taxes which expire in varying amounts beginning 2021. At March 31,
2019, the Company had Canadian loss carryforwards of $106.9 million which will expire beginning in 2034.
At March 31, 2019, the Company had Luxembourg loss carryforwards of $947.0 million which will expire
beginning in 2036. In addition, at March 31, 2019, the Company had U.S. credit carryforwards related to
foreign taxes paid of approximately $74.2 million to offset future federal income taxes that will expire
beginning in 2021.

F-54

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, 2019, 2018, and 2017:

Amounts
in millions

Gross unrecognized tax benefits at March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . .

$ 4.5

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, 2017 . . . . . . . . . . . . . . . . . . . . . . .

Increases related to current year tax position . . . . . . . . . . . . . . . . . . . . . . . . . . .

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, 2018 . . . . . . . . . . . . . . . . . . . . . . .
Increases related to current year tax position . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases related to prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases related to prior year tax positions
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse in statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.2

(4.5)

—

14.2

0.1

11.5

(8.2)
—
—

17.6
0.3
2.5
(1.0)
(1.8)
(0.8)

Gross unrecognized tax benefits at March 31, 2019 . . . . . . . . . . . . . . . . . . . . . . .

$16.8

For the years ended March 31, 2019, 2018, and 2017, interest and penalties were not significant. The
Company records interest and penalties on unrecognized tax benefits as part of income tax provision. 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 NOLs were generated and carried forward,
and make adjustments up to the amount of the NOLs. Currently, audits are occurring in federal and
various state and local tax jurisdictions. In addition, the Company’s Canadian tax returns are under
examination for the years ended March 31, 2014 and March 31, 2015.

The total amount of unrecognized tax benefits as of March 31, 2019 that, if realized, would affect the

Company’s tax benefit (provision) are $17.6 million.

The Company estimates that approximately $3.8 million in unrecognized tax benefits may be realized

in the next 12 months.

F-55

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15. Restructuring and Other

Restructuring and other includes restructuring and severance costs, certain transaction and related
costs, and certain unusual items, when applicable, and were as follows for the years ended March 31, 2019,
2018 and 2017:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Restructuring and other:

Severance(1)

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 31.5

$21.5

$26.7

Accelerated vesting on equity awards (see Note 13) . . . . . . .

Total severance costs
. . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction and related costs(2)
. . . . . . . . . . . . . . . . . . . . . .
Development expense(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring and other . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .

Programming and content charges(4)
Total restructuring and other and programming and content

16.0

47.5
30.5
—

78.0
35.1

2.9

24.4
22.2
13.2

59.8
—

2.4

29.1
59.6
—

88.7
—

charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$113.1

$59.8

$88.7

(1) Severance costs in the fiscal years ended March 31, 2019, 2018 and 2017 were primarily related to

restructuring activities in connection with recent acquisitions, and other cost-saving initiatives. Of the
severance costs, $21.2 million is recorded as a liability and is expected to be paid by March 31, 2020.

(2) Transaction and related costs in the fiscal years ended March 31, 2019, 2018 and 2017 reflect

transaction, integration and legal costs incurred associated with certain strategic transactions and legal
matters. In fiscal 2019, these costs were primarily related to the legal fees associated with the Starz class
action lawsuits and other matters and, to a lesser extent, costs related to the acquisition of 3 Arts
Entertainment and other strategic transactions. In fiscal 2018, these costs were primarily related to the
sale of EPIX (see Note 5), the legal fees associated with the Starz class action lawsuits and other
matters, and the integration of Starz. In fiscal 2017, these costs were primarily related to the Starz
Merger, the legal fees associated with the Starz class action lawsuits, and an arbitration award of
$5.8 million and related legal expenses.

(3) Development expense in the fiscal year ended March 31, 2018 represents write-downs resulting from

(4) During the fourth quarter of the fiscal year ended March 31, 2019, in connection with recent

management changes, the Company implemented changes to its programming strategy including
programming that will no longer be broadcast on Starz networks. As a result, the Company recorded
certain programming and content charges of $35.1 million in fiscal 2019, which are included in direct
operating expense in the consolidated statement of operations.

F-56

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Changes in the restructuring and other severance liability were as follows for the years ended

March 31, 2019, 2018 and 2017:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Severance liability

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14.7

$ 22.2

$ 0.6

Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Severance payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31.5

(25.0)
—

21.5

(27.9)
(1.1)

26.7

(10.6)
5.5

$ 21.2

$ 14.7

$ 22.2

(1)

In the year ended March 31, 2018, other represents noncash reductions related to the settlement of
certain liabilities relating to employee compensation with equity instruments. In the year ended
March 31, 2017, other represents a severance liability acquired in connection with the Starz Merger.

16. Segment Information

The Company’s reportable segments have been determined based on the distinct nature of their
operations, the Company’s internal management structure, and the financial information that is evaluated
regularly by the Company’s chief operating decision maker.

The Company has three reportable business segments: (1) Motion Picture, (2) Television Production

and (3) Media Networks.

Motion Picture. Motion Picture 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. 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. Television Production includes the licensing of Starz original series productions
to Starz Networks and STARZPLAY International, and the ancillary market distribution of Starz original
productions and licensed product. Additionally, the results of operations of 3 Arts Entertainment is
included in the Television Production segment from the acquisition date of May 29, 2018 (see Note 2).

Media Networks. Media Networks consists of the following product lines (i) Starz Networks, which

includes the domestic licensing of premium subscription video programming to Distributors, and on a
direct-to-consumer basis (ii) STARZPLAY International, which represents revenues primarily from the
OTT distribution of the Company’s STARZ branded premium subscription video services internationally
and (iii) Streaming Services, which represents the Lionsgate legacy start-up direct to consumer streaming
services on its SVOD platforms.

In the ordinary course of business, the Company’s reportable segments enter into transactions with one

another. The most common types of intersegment transactions include licensing motion pictures or
television programming (including Starz original productions) from the Motion Picture and Television
Production segments to the Media Networks segment. While intersegment transactions are treated like
third-party transactions to determine segment performance, the revenues (and corresponding expenses,
assets, or liabilities recognized by the segment that is the counterparty to the transaction) are eliminated in
consolidation and, therefore, do not affect consolidated results.

F-57

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Segment information is presented in the table below. Due to the Starz Merger, fiscal 2017 includes the

results of operations from Starz from the acquisition date of December 8, 2016 (see Note 2).

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Segment revenues

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,464.4

$1,822.1

$1,920.6

Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

920.9

Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,461.0

1,033.2

1,411.2

Intersegment eliminations . . . . . . . . . . . . . . . . . . . . . . . . . .

(165.8)

(137.4)

892.8

426.3

(38.2)

$3,680.5

$4,129.1

$3,201.5

Intersegment revenues

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.9
154.8
0.1

10.7
126.4
0.3

$ 165.8

$ 137.4

Gross contribution

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment eliminations . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 234.1
109.6
534.0
(6.3)

$ 292.6
151.3
530.0
(5.5)

6.6
30.7
0.9

38.2

$ 237.8
107.4
175.3
(10.4)

$ 871.4

$ 968.4

$ 510.1

Segment general and administration

$ 105.6
43.5
97.7

$ 246.8

Segment profit

$ 128.5
66.1
436.3
(6.3)

$ 113.2
40.3
100.9

$ 254.4

$ 179.4
111.0
429.1
(5.5)

$ 105.3
32.1
45.0

$ 182.4

$ 132.5
75.3
130.3
(10.4)

$ 624.6

$ 714.0

$ 327.7

The Company’s primary measure of segment performance is segment profit. Segment profit is defined
as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment
general and administration expenses. Segment profit excludes corporate general and administrative expense,
restructuring and other costs, share-based compensation, other than annual bonuses granted in immediately
vested stock awards when applicable, certain programming and content charges as a result of management
changes and associated changes in strategy, and purchase accounting and related adjustments, when
applicable. The Company believes the presentation of segment profit is relevant and useful for investors
because it allows investors to view segment performance in a manner similar to the primary method used by
the Company’s management and enables them to understand the fundamental performance of the
Company’s businesses.

F-58

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reconciliation of total segment profit to the Company’s income (loss) before income taxes is as

follows:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Company’s total segment profit . . . . . . . . . . . . . . . . . . . . . . . .

$624.6

$ 714.0

$ 327.7

Corporate general and administrative expenses . . . . . . . . . . . .
Adjusted depreciation and amortization(1) . . . . . . . . . . . . . . .
Restructuring and other(2)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Programming and content charges(3) . . . . . . . . . . . . . . . . . . .
Adjusted share-based compensation expense(4) . . . . . . . . . . . .
Purchase accounting and related adjustments(5)
. . . . . . . . . . .

Operating income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder litigation settlements . . . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity interests income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

(104.2)
(41.1)
(78.0)
(35.1)
(52.1)

(184.1)

130.0
(198.9)
(114.1)
12.0
(4.7)
(1.9)
(87.6)
(42.9)

(110.3)
(39.3)
(59.8)
—
(85.6)

(170.3)

248.7
(193.7)
—
10.4
—
(35.7)
171.8
(52.8)

(92.6)
(22.8)
(88.7)
—
(77.1)

(62.8)

(16.3)
(115.2)
—
6.4
—
(40.4)
20.4
10.7

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . .

$(308.1)

$ 148.7

$(134.4)

(1) Adjusted depreciation and amortization represents depreciation and amortization as presented on our

consolidated statements of operations less the depreciation and amortization related to the non-cash
fair value adjustments to property and equipment and intangible assets acquired in recent acquisitions
which are included in the purchase accounting and related adjustments line item above, as shown in the
table below:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Depreciation and amortization . . . . . . . . . . . . . . . . . .

$ 163.4

$ 159.0

$ 63.1

Less: Amount included in purchase accounting and

related adjustments . . . . . . . . . . . . . . . . . . . . . . . .

(122.3)

(119.7)

Adjusted depreciation and amortization . . . . . . . . . . .

$ 41.1

$ 39.3

(40.3)

$ 22.8

(2) Restructuring and other includes restructuring and severance costs, certain transaction and related

costs, and certain unusual items, when applicable (see Note 15).

(3) During the fourth quarter of the fiscal year ended March 31, 2019, in connection with recent

F-59

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(4) The following table reconciles total share-based compensation expense to adjusted share-based

compensation expense:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Total share-based compensation expense . . . . . . . . . . .

$ 68.1

$88.5

$79.5

Less:

Amount included in restructuring and other(i) . . . . . .
Adjusted share-based compensation . . . . . . . . . . . . . .

(16.0)

$ 52.1

(2.9)

$85.6

(2.4)

$77.1

(i) Represents share-based compensation expense included in restructuring and other expenses

reflecting the impact of the acceleration of certain vesting schedules for equity awards pursuant to
certain severance arrangements.

(5) Purchase accounting and related adjustments represent the amortization of non-cash fair value

adjustments to certain assets acquired in recent acquisitions. These adjustments include the accretion
of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the
amortization of the recoupable portion of the purchase price and the expense associated with the
earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation
and are included in general and administrative expense. The following sets forth the amounts included
in each line item in the financial statements:

Purchase accounting and related adjustments:

Direct operating . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expense . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . .

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$ 18.0
43.8
122.3

$184.1

$ 44.5
6.1
119.7

$170.3

$17.5
5.0
40.3

$62.8

(6) Shareholder litigation settlements of $114.1 million in the year ended March 31, 2019 includes the

following: (i) $54.8 million for the net expense recorded for the settlement of the Fiduciary Litigation
(representing the settlement amount of $92.5 million, net of aggregate insurance reimbursement of
$37.8 million and (ii) $59.3 million related to the Appraisal Litigation, representing the amount by
which the settlement amount of approximately $964 million exceeded the previously accrued (at date of
acquisition) dissenting shareholders’ liability plus interest through the date agreed in the settlement.
See Note 17.

See Note 12 for revenues by media or product line as broken down by segment for the fiscal years

ended March 31, 2019, 2018, and 2017.

F-60

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table reconciles segment general and administration to the Company’s total consolidated

general and administration expense:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

General and administration

Segment general and administrative expenses . . . . . .

Corporate general and administrative expenses . . . . .

Share-based compensation expense included in

general and administrative expense . . . . . . . . . . . .

Purchase accounting and related adjustments . . . . . .

$246.8

104.2

50.6

43.8

$254.4

110.3

83.6

6.1

$182.4

92.6

75.4

5.0

$445.4

$454.4

$355.4

The reconciliation of total segment assets to the Company’s total consolidated assets is as follows:

March 31,
2019

March 31,
2018

(Amounts in millions)

Assets

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other unallocated assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,694.5
1,394.2
4,850.3
469.9

$1,757.4
1,400.5
5,166.5
643.2

$8,408.9

$8,967.6

(1) Other unallocated assets primarily consist of cash, other assets and investments.

The following table sets forth acquisition of investment in films and television programs and program

rights, as broken down by segment for the years ended March 31, 2019, 2018 and 2017:

Acquisition of investment in films and television

programs and program rights
Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production(1) . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Intersegment eliminations

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$ 388.4
681.6
594.3
(194.3)

$ 462.0
706.8
483.5
(125.9)

$ 412.7
506.6
218.6
(45.9)

$1,470.0

$1,526.4

$1,092.0

F-61

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth capital expenditures, as broken down by segment for the years ended

March 31, 2019, 2018 and 2017:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Capital expenditures

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

Television Production . . . . . . . . . . . . . . . . . . . . . .

Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2

30.0
10.6

$43.8

$ —

1.4

31.5
13.0

$45.9

$ —

1.8

10.6
12.8

$25.2

(1) Represents unallocated capital expenditures primarily related to 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:

Revenue

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long-lived assets by geographic location are as follows:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

47.9
3,124.6
508.0

$3,680.5

48.3
3,383.0
697.8

$4,129.1

56.0
2,431.9
713.6

$3,201.5

Long-lived assets(1)

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2019

March 31,
2018

(Amounts in millions)

— $

1,737.8
93.3

—
1,824.5
34.6

$1,831.1

$1,859.1

(1) Long-lived assets represents total assets less the following: current assets, investments, long-term

receivables, intangible assets, goodwill and deferred tax assets.

For the year ended March 31, 2019, the Company had revenue from one individual customer which
represented greater than 10% of consolidated revenues, amounting to $401.9 million, primarily related to
the Company’s Media Networks segment (2018 — revenue from one individual customer which represented
greater than 10% of consolidated revenues, amounting to $413.2 million, primarily related to the
Company’s Media Networks segment). For the year ended March 31, 2017, no individual customer
represented greater than 10% of consolidated revenue.

F-62

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2019, the Company had accounts receivable due from two customers which
individually represented greater than 10% of total consolidated accounts receivable. Accounts receivable
due from these two customers amounted to 31% of consolidated gross accounts receivable (current and
non-current) at March 31, 2019, or gross accounts receivable of approximately $269.9 million (2018 – one
individual customer represented 32% of consolidated gross accounts receivable, or gross accounts receivable
of approximately $419.2 million).

17. Commitments and Contingencies

The following table sets forth our future annual repayment of contractual commitments as of

March 31, 2019:

2020

2021

2022

2023

2024

Thereafter

Total

Year Ended March 31,

(Amounts in millions)

Contractual commitments by expected
repayment date (off-balance sheet
arrangements)

Film obligation and production loan

. . . . . . . . . . . . . . . .

$648.6

$225.4

$108.7

$ 32.0

8.8

5.6

$1,029.1

commitments(1)
Interest payments(2)

. . . . . . . . . . . . . . .

Operating lease commitments . . . . . . . . .

Other contractual obligations

. . . . . . . . .

Total future commitments under contractual

154.3

37.2

128.8

151.6

148.1

144.1

112.8

104.6

36.5

44.5

35.8

26.2

35.5

10.7

20.1

0.9

52.3

—

815.5

217.4

211.1

obligations(3)

. . . . . . . . . . . . . . . . . . . .

$968.9

$458.0

$318.8

$222.3

$142.6

$162.5

$2,273.1

(1) Film obligation commitments include distribution and marketing commitments, minimum guarantee
commitments and program rights 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. Program rights commitments
represent contractual commitments under programming license agreements related to films that are not
available for exhibition until some future date (see below for further details). 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 debt, excluding the interest payments on the
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 $127.6 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 11).

The Company is obligated to pay programming fees for all qualifying films that are released theatrically

in the U.S. by Sony’s Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels through
2021. The Company does not license films produced by Sony Pictures Animation. The programming fees to
be paid by the Company to Sony are based on the quantity and domestic theatrical exhibition receipts of
qualifying films. Since the term of the output programming agreement with Sony applies to all films

F-63

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

released theatrically through December 31, 2021, the Company is obligated to pay fees for films that have
not yet been released in theaters. The Company is unable to estimate the amounts to be paid under these
agreements for films that have not yet been released in theaters, however, such amounts are expected to be
significant. The Company has also entered into agreements with a number of other motion picture
producers and is obligated to pay fees for the rights to exhibit certain films that are released by these
producers.

Operating Leases. The Company has operating leases for offices, back-up transponder capacity 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 $27.0 million during the year ended March 31, 2019 (2018 — $20.7 million; 2017 —
$15.6 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 risks of participating
in these multiemployer pension plans are different from single-employer pension plans such that
(i) contributions made by the Company to the multiemployer pension plans may be used to provide benefits
to employees of other participating employers; (ii) if the Company chooses to stop participating in certain
of these multiemployer pension plans, it may be required to pay those plans an amount based on the
underfunded status of the plan, which is referred to as a withdrawal liability; and (iii) actions taken by a
participating employer that lead to a deterioration of the financial health of a multiemployer pension plan
may result in the unfunded obligations of the multiemployer pension plan to be borne by its remaining
participating employers.

The Company does not participate in any multiemployer benefit plans that are considered to be
individually significant to the Company, and as of March 31, 2019, all except two of the largest plans in
which the Company participates were funded at a level of 80% or greater. The other two plans, the Motion
Picture Industry Pension Plan and the Screen Actors Guild — Producers Pension Plan were funded at
66.80% and 76.97%, respectively for the 2018 plan year, but neither of these plans were considered to be in
endangered, critical, or critical and declining status in the 2018 plan year. Total contributions made by the
Company to multiemployer pension and other benefit plans for the years ended March 31, 2019, 2018 and
2017 were $56.9 million, $70.9 million, and $59.4 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

From time to time, the Company is involved in certain claims and legal proceedings arising in the
normal course of business. In addition, the matters discussed below under the captions Fiduciary Litigation
and Appraisal Litigation have arisen in connection with the Starz Merger.

The Company establishes an accrued liability for claims and legal proceedings when the Company

determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once
established, accruals are adjusted from time to time, as appropriate, in light of additional information. The
amount of any loss ultimately incurred in relation to matters for which an accrual has been established may
be higher or lower than the amounts accrued for such matters.

F-64

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Due to the inherent difficulty of predicting the outcome of claims and legal proceedings, the Company

often cannot predict what the eventual outcome of the pending matters will be, what the timing of the
ultimate resolution of these matters will be, or what the eventual loss, if any, related to each pending matter
may be. Accordingly, at this time, the Company has determined a loss related to these matters in excess of
accrued liabilities is reasonably possible, however a reasonable estimate of the possible loss or range of loss
cannot be made at this time.

Fiduciary Litigation

Between July 19, 2016 and August 30, 2016, seven putative class action complaints were filed by

purported Starz stockholders in the Court of Chancery of the State of Delaware (the “Fiduciary
Litigation”). On August 22, 2018, the parties to the Fiduciary Litigation reached an agreement in principle
providing for the settlement of the Fiduciary Litigation on the terms and conditions set forth in an executed
term sheet. On October 9, 2018, the parties to the Litigation executed a stipulation of settlement, which was
filed with the court (the “Stipulation”). The Stipulation provides for, among other things, the final dismissal
of the Fiduciary Litigation in exchange for a settlement payment made in the amount of $92.5 million, of
which $37.8 million was reimbursed by insurance. The Company is continuing to seek additional insurance
reimbursement, including pursuant to a lawsuit submitted by the Company on November 7, 2018 against
certain insurers. Accordingly, in the year ended March 31, 2019, the Company has recorded the net expense
of $54.8 million in the “shareholder litigation settlements” line item in the consolidated statement of
operations related to these items. The Fiduciary Litigation settlement was approved by the Court of
Chancery of the State of Delaware and the settlement amount and insurance reimbursement discussed
above were paid during the quarter ended December 31, 2018. On November 5, 2018, an insurer that
entered into an agreement and contributed $10.0 million to the Company’s aggregate insurance
reimbursement filed a lawsuit seeking declaratory judgment for reimbursement of its agreed upon payment.
The Company believes the lawsuit to be without merit and intends to vigorously defend it.

Appraisal Litigation

Between December 8, 2016 and March 16, 2017, five verified petitions for appraisal (representing

approximately 22.5 million shares of Starz Series A common stock) were filed by purported Starz
stockholders (dissenting shareholders) in the Court of Chancery of the State of Delaware (the “Appraisal
Litigation”). These actions were consolidated into In re Starz Appraisal, Consolidated C.A. No.
12968-VCG. On November 8, 2018, the parties to the Appraisal Litigation entered into a settlement
agreement that provides for, among other things, the final dismissal of the Appraisal Litigation in exchange
for a settlement payment made by the Company of approximately $964.0 million, which the Company paid
during the three months ended December 31, 2018. During the year ended March 31, 2019, the Company
recorded a shareholder litigation charge of $59.3 million in the “shareholder litigation settlements” line item
in the consolidated statement of operations related to the Appraisal Litigation, representing the amount by
which the settlement amount exceeded the previously accrued (at date of acquisition) dissenting
shareholders’ liability plus interest through the date agreed in the settlement. The portion of the settlement
payment representing the $797.3 million value of the original merger consideration attributable to the
dissenting shareholders that was accrued at the time of acquisition is reflected within cash flows from
financing activities in the statement of cash flows, with the remainder of the settlement payment reflected
within cash flows from operating activities in the statement of cash flows. The Appraisal Litigation
settlement was approved by the Court of Chancery of the State of Delaware and the claims in the Appraisal
Litigation were dismissed on November 19, 2018.

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.

F-65

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(b) Derivative Instruments and Hedging Activities

Forward Foreign Exchange Contracts

The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures

on future production expenses and tax credit receivables denominated in various foreign currencies (i.e.,
cash flow hedges). The Company also enters into forward foreign exchange contracts that economically
hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company
elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of,
the financial institutions that are party to its financial transactions. Changes in the fair value of the foreign
exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income
(loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do
not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon
settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating
expense on the same basis as the production expenses being hedged.

As of March 31, 2019, the Company had the following outstanding forward foreign exchange contracts

(all outstanding contracts have maturities of less than 12 months from March 31, 2019):

Foreign Currency

March 31, 2019

Foreign Currency
Amount

(Amounts in millions)

US Dollar
Amount

(Amounts in millions)

Weighted Average
Exchange Rate
Per $1 USD

British Pound Sterling . . . . . . . .
Canadian Dollar . . . . . . . . . . .
Australian Dollar . . . . . . . . . . .
Mexican Peso . . . . . . . . . . . . .

£5.0
C$20.7
A$3.5
$108.3

in exchange for
in exchange for
in exchange for
in exchange for

$ 7.2
$16.2
$ 2.7
$ 5.6

£0.69
C$1.28
A$1.27
$19.30

Interest Rate Swaps

The Company is exposed to the impact of interest rate changes primarily through its borrowing
activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash
flows. The Company primarily uses pay-fixed interest rate swaps to facilitate its interest rate risk
management activities, which the Company designates as cash flow hedges of interest payments on
floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate
borrowings. The unrealized gains or losses from these cash flow hedges are deferred in accumulated other
comprehensive income (loss) and recognized in interest expense as the interest payments occur.

As of March 31, 2019 and March 31, 2018, the total notional amount of the Company’s pay-fixed

interest rate swaps was $1.7 billion and nil, respectively.

The major terms of the Company’s interest rate swap agreements as of March 31, 2019 are as follows

(all related to the Company’s LIBOR-based debt, see Note 7):

Effective Date

Notional Amount
(in millions)

Fixed Rate Paid

Maturity Date

May 23, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 25, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 24, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,000.0

$ 200.0
$ 300.0

50.0

$ 100.0

50.0

2.915% March 24, 2025

2.723% March 23, 2025
2.885% March 23, 2025

2.744% March 23, 2025

2.808% March 23, 2025

2.728% March 23, 2025

F-66

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the effect, net of tax, of the Company’s derivatives on the accompanying

consolidated statements of operations and comprehensive income (loss) for the years ended March 31,
2019, 2018 and 2017:

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Derivatives designated as cash flow hedges:

Forward exchange contracts

Gain (loss) recognized in accumulated other comprehensive

income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1

(0.2)

(3.5)

Gain (loss) reclassified from accumulated other

comprehensive income (loss) into direct operating
expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(1.5)

5.0

Interest rate swap agreements

Loss recognized in accumulated other comprehensive income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(loss)

$ (71.3)

Loss reclassified from accumulated other comprehensive

income (loss) into interest expense . . . . . . . . . . . . . . . . .

(7.7)

—

Derivatives not designated as cash flow hedges:

Forward exchange contracts

Gain recognized in direct operating expense . . . . . . . . . . . .

—

0.1

—

Total direct operating expense on consolidated statements of

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense on consolidated statements of operations(1) . .

$2,028.2
$ 163.6

$2,309.6
$ 137.2

$1,903.8
99.7
$

(1) Represents interest expense before interest on dissenting shareholders’ liability.

The Company classifies its forward foreign exchange contracts and interest rate contracts within

Level 2 as the valuation inputs are based on quoted prices and market observable data of similar
instruments (see Note 10). As of March 31, 2019 and March 31, 2018, the Company had the following
amounts recorded in the accompanying consolidated balance sheets related to the Company’s use of
derivatives:

March 31, 2019

Accounts
Payable and
Accrued
Liabilities

Other
Non-Current
Liabilities

Other
Current Assets

(Amounts in millions)

Derivatives designated as cash flow hedges:

Forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1.5
—

$1.5

$0.6
—

$0.6

$ —
63.6

$63.6

F-67

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

March 31, 2018

Other
Current Assets

Accounts
Payable and
Accrued Liabilities

(Amounts in millions)

Derivatives designated as cash flow hedges:
Forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$0.3
$0.3(1)

$0.6
$0.6(1)

(1)

Includes an immaterial amount of forward foreign exchange contracts not designated as hedging
instruments as of March 31, 2018.

As of March 31, 2019, based on the current release schedule, the Company estimates less than
$0.1 million of losses associated with forward foreign exchange contract cash flow hedges in accumulated
other comprehensive loss to be reclassified into earnings during the one-year period ending March 31, 2020.

As of March 31, 2019, the Company estimates approximately $3.7 million of losses recorded in

accumulated other comprehensive loss associated with interest rate swap agreement cash flow hedges will be
reclassified into interest expense during the one-year period ending March 31, 2020.

19. Additional Financial Information

The following tables present supplemental information related to the consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consist of investments that are readily convertible into cash. Cash equivalents are
carried at cost, which approximates fair value. The Company classifies its cash equivalents within Level 1 of
the fair value hierarchy because the Company uses quoted market prices to measure the fair value of these
investments (see Note 10). The Company monitors concentrations of credit risk with respect to cash and
cash equivalents by placing such balances with higher quality financial institutions or investing such
amounts in liquid, short-term, highly-rated instruments or investment funds holding similar instruments.
As of March 31, 2019, the majority of the Company’s cash and cash equivalents were held in bank
depository accounts.

There was no restricted cash in the consolidated balance sheets as of March 31, 2019 or March 31,

2018.

Accounts Receivable, net

Accounts receivable are presented net of a provision for doubtful accounts of $5.4 million (March 31,
2018 — $7.5 million). Accounts receivable at March 31, 2018 are presented net of reserves for returns and
allowances of $56.2 million. Under the new revenue recognition guidance, as of March 31, 2019, the
Company presents sales returns and certain sales incentive allowances as refund liabilities instead of as
contra asset allowances within accounts receivable (see Note 1).

Accounts Receivable Monetization

The Company has entered into agreements to monetize certain of its trade accounts receivable directly
with third-party purchasers. The third-party purchasers have no recourse to other assets of the Company in
the event of non-payment by the customers. Upon transfer of the receivables, the Company receives cash
proceeds from the third-party purchaser, and the Company continues to service the receivables for the
purchasers. The Company accounts for the transfers of these receivables as a sale, and classifies the
proceeds as cash flows from operating activities in the statement of cash flows. During the year ended

F-68

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

March 31, 2019, the Company monetized trade accounts receivable with a carrying value of $473.9 million
with third-party purchasers, which were derecognized from the Company’s consolidated balance sheet, in
exchange for net cash proceeds of $469.2 million. The amount of proceeds received is based on the present
value of the timing of the payment of the underlying trade accounts receivable transferred discounted at an
average rate which is lower than the Company’s average borrowing rate under its Revolving Credit Facility.
The Company recorded a loss of $4.7 million, which is included in the “other expense” line item on the
consolidated statement of operations. The Company receives fees for servicing the accounts receivable for
the purchasers, which represent the fair value of the services and were immaterial for the year ended
March 31, 2019. At March 31, 2019, the outstanding amount of receivables derecognized from the
Company’s consolidated balance sheets, but which the Company continues to service, was $350.6 million.

Other Assets

The composition of the Company’s other assets is as follows as of March 31, 2019 and March 31,

2018:

Other current assets

Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other non-current assets

Prepaid expenses and other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2019

March 31,
2018

(Amounts in millions)

$150.6
19.9
96.7

$267.2

$109.2
176.1
150.8

$436.1

$ 34.1
20.3
141.4

$195.8

$ 23.8
325.2
109.6

$458.6

(1) Unamortized discounts on contract assets included in prepaid expenses and other were $3.9 million at
March 31, 2019, and unamortized discounts on long-term, non-interest bearing receivables were
$9.7 million and $18.0 million at March 31, 2019 and 2018, respectively.

F-69

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accumulated Other Comprehensive Loss

The following table summarizes the changes in the components of accumulated other comprehensive

loss, net of tax:

Foreign currency
translation
adjustments

Net unrealized gain
(loss) on available-
for-sale securities

Net unrealized gain
(loss) on cash
flow hedges

Total

(Amounts in millions)

March 31, 2016 . . . . . . . . . . . . . . . . . . . . . .

$(11.3)

$(35.5)

$ 3.7

$(43.1)

Reclassification adjustment for gain on

available-for-sale securities realized in net
income . . . . . . . . . . . . . . . . . . . . . . . . . .

Other comprehensive income (loss) . . . . . . . .

March 31, 2017 . . . . . . . . . . . . . . . . . . . . . .

Other comprehensive income (loss) . . . . . . . .

March 31, 2018 . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of accounting changes . . . .
Other comprehensive loss . . . . . . . . . . . . . . .

—

(8.1)

(19.4)

7.0

(12.4)
—
(5.8)

(17.8)

56.4

3.1

(0.5)

2.6
(2.6)
—

—

(3.4)

0.3

(0.2)

0.1
—
(62.2)

(17.8)

44.9

(16.0)

6.3

(9.7)
(2.6)
(68.0)

March 31, 2019 . . . . . . . . . . . . . . . . . . . . . .

$(18.2)

$ —

$(62.1)

$(80.3)

Supplemental Cash Flow Information

Interest paid during the fiscal year ended March 31, 2019 amounted to $146.7 million (2018 — $119.7

million; 2017 — $79.8 million).

Income taxes paid (refunded) during the fiscal year ended March 31, 2019 amounted to net tax paid of

$13.5 million (2018 — net tax refunds received of $20.3 million; 2017 — net tax paid of $14.3 million).

The supplemental schedule of non-cash investing and financing activities is presented below:

Non-cash investing activities:
Issuance of common shares related to business acquisitions
Accrued purchase consideration for dissenting shareholders (see

. . . .

Note 17)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issuance of Starz share-based payment replacement awards . . . .

Non-cash financing activities:
Accrued dividends (see Note 13)
. . . . . . . . . . . . . . . . . . . . . . .
Conversions of convertible senior subordinated notes . . . . . . . . .

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

$83.7

$ —

$1,327.7

$ —

$ —
$ —

$ —

$19.1
$ —

$ 797.3

$ 186.5

$
$

—
41.9

F-70

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

20. Quarterly Financial Data (Unaudited)

Certain quarterly information is presented below:

2019
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)(1)
. . . . . . . . . . . . . . . . . .
Net income (loss)(1)(2)
. . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Lions Gate

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

(Amounts in millions, except per share amounts)

$932.7
$ 38.2
$ (11.4)

$ 901.0
$ 39.1
$(149.3)

$933.2
$ 86.8
$ 20.1

$ 913.7
$ (34.0)
$(159.1)

Entertainment Corp. shareholders . . . . . . . . . . .

$ (7.9)

$(144.1)

$ 22.9

$(155.2)

Per share information attributable to Lions Gate

Entertainment Corp. shareholders:
Basic net income (loss) per common share . . . . .
Diluted net income (loss) per common share . . . .

2018
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)(3)
. . . . . . . . . . . . . . . . . .
Net income (loss)(3)(4) . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Lions Gate

$ (0.04)
$ (0.04)

First
Quarter

$ (0.67)
$ (0.67)

Second
Quarter

$ 0.11
$ 0.10

Third
Quarter

$ (0.72)
$ (0.72)

Fourth
Quarter

(Amounts in millions, except per share amounts)

$1,005.3
$
89.7
$ 174.5

$940.8
$ 30.4
$ 12.9

$1,142.7
$
80.2
$ 191.1

$1,040.2
48.4
$
89.6
$

Entertainment Corp. shareholders . . . . . . . . . . .

$ 173.8

$ 15.5

$ 193.0

91.3

Per share information attributable to Lions Gate

Entertainment Corp. shareholders:
Basic net income (loss) per common share . . . . .
Diluted net income (loss) per common share . . . .

$
$

0.84
0.80

$ 0.07
$ 0.07

$
$

0.92
0.87

$
$

0.43
0.41

(1) During fiscal 2019, operating income and net income included the following items:

•

Restructuring and Other. The first, second, third and fourth quarter of fiscal 2019 included
restructuring and other items of $10.5 million, $15.0 million, $16.6 million and $35.9 million,
respectively (after tax $7.8 million, $11.5 million, $12.6 million, and $27.3 million, respectively)
(see Note 15).

Programming and Content Charges. During the fourth quarter of fiscal 2019, in connection with
recent management changes, the Company implemented changes to its programming strategy
including programming that will no longer be broadcast on Starz networks. As a result, the
Company recorded certain programming and content charges of $35.1 million (after tax
$26.7 million) in connection with recent management changes, and changes to the Company’s
programming strategy, which are included in direct operating expense in the consolidated
statement of operations in the fourth quarter of fiscal 2019 (see Note 15).

(2) During fiscal 2019, net income also included the following items:

•

Shareholder Litigation Settlements. The second quarter of fiscal 2019 included shareholder
litigation settlements of $114.1 million (after tax $104.7 million) (see Note 17).

Loss on Investments. The first, second, third and fourth quarter of fiscal 2019 included a loss on
investments of $0.9 million, $36.1 million, $6.2 million and $44.4 million, respectively (after tax
$0.7 million, $32.4 million, $4.7 million and $33.7 million, respectively) (see Note 5).

F-71

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

•

Loss on Extinguishment of Debt. The fourth quarter of fiscal 2019 included a loss on
extinguishment of debt of $1.9 million (after tax $1.4 million) (see Note 7).

Deferred Tax Valuation Allowance. The fourth quarter of fiscal 2019 included a charge of
$53.7 million from an increase in the valuation allowance for certain of the Company’s deferred
tax assets (see Note 14).

(3) During fiscal 2018, operating income and net income included the following items:

•

Restructuring and Other. The first, second, third and fourth quarter of fiscal 2018 included
restructuring and other items of $10.9 million, $3.5 million, $21.4 million, and $24.0 million,
respectively (after tax $8.9 million, $2.5 million, $14.5 million, and $15.7 million, respectively) (see
Note 15).

(4) During fiscal 2018, net income also included the following items:

•

Loss on Extinguishment of Debt. The first, second, third and fourth quarter of fiscal 2018
included a loss on extinguishment of debt of $11.6 million, $6.4 million, $6.2 million and
$11.6 million, respectively (after tax $8.5 million, $4.7 million, $4.6 million and $7.8 million,
respectively) (see Note 7).

Gain (Loss) on Investments. The first and third quarter of fiscal 2018 included a gain on
investments of $201.0 million and a loss on investments of $29.2 million, respectively (after tax
gain of $127.0 million and loss of $20.1 million, respectively) (see Note 5).

Impact of Corporate Tax Rate Change on Deferred Tax Liabilities. The third quarter of fiscal
2018 included a deferred tax benefit of $165.0 million resulting from the impact of the change in
the U.S. federal corporate income tax rate from 35% to 21% under the Tax Cuts and Jobs Act on
the Company’s beginning net deferred tax liabilities (see Note 14).

Tax Benefit from Internal Capital Restructuring. The fourth quarter of fiscal 2018 included a net
tax benefit of $94.1 million primarily from the internal capital restructuring in connection with
our third party debt refinancing (see Note 7 to our consolidated financial statements), net of the
charge from an increase in its valuation allowance associated with certain deferred tax assets (see
Note 14).

21. Related Party Transactions

Voting Agreements regarding former Company Shares

On June 30, 2016, in connection with the Merger Agreement, the Company, Starz and MHR
Fund Management LLC and affiliates (collectively, “MHR Fund Management”) entered into a voting
agreement with respect to MHR Fund Management’s common shares of the Company (the “MHR Voting
Agreement”). Under the MHR Voting Agreement, the Company agreed to indemnify MHR
Fund Management for losses relating to or arising out of the MHR Voting Agreement, the merger
agreement or that certain stock exchange agreement of even date therewith and to pay up to $1.6 million in
reasonable out-of-pocket expenses of MHR Fund Management. The Company has incurred expenses on
behalf of MHR Fund Management for such costs amounting to approximately $0.5 million, which are
included in restructuring and other in the consolidated statement of operations for the year ended
March 31, 2017. Mark H. Rachesky, the Chairman of the Board of the Company, is the principal of MHR
Fund Management, which holds approximately 19% of the Company’s outstanding Class A voting shares
and 11% of the Company’s outstanding Class B non-voting common stock as of May 20, 2019.

Voting Agreement regarding former Starz Shares

On June 30, 2016, in connection with the Merger Agreement, the Company and Starz entered into a
Voting Agreement with LG Leopard Canada LP, an Ontario limited partnership and indirect wholly owned
subsidiary of the Company, and the stockholders of Starz listed on Schedule A thereto (including John C.

F-72

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Malone, a former director of the Company, and affiliated entities) (such stockholders the “Individual
Stockholders”), with respect to shares of previously issued Starz common stock (the “Starz Voting
Agreement”). Under the Starz Voting Agreement, the Company agreed to indemnify the Individual
Stockholders for losses relating to or arising out of the Starz Voting Agreement, the Merger Agreement and
that certain stock exchange agreement of even date therewith and to pay up to $1.6 million in reasonable
out-of-pocket expenses of the Individual Stockholders. The Company has incurred expenses on behalf of
the Individual Stockholders for such costs amounting to approximately $1.5 million, which are included in
restructuring and other in the consolidated statement of operations for the year ended March 31, 2017.

Other

In the year ended March 31, 2019, we have incurred expenses on behalf of Dr. Malone and Mark H.

Rachesky for reimbursement of certain litigation costs of approximately $3.3 million (2018 — $5.6 million;
2017 — $1.0 million), which are included in restructuring and other in the consolidated statement of
operations.

Atom Tickets

During the year ended March 31, 2018, the Company participated in an equity offering of its equity
method investee, Atom Tickets, and subscribed for an additional $10.0 million in equity interests (2017 —
none). Gordon Crawford, a director of the Company, is a director of and an investor in Atom Tickets.

Shrink, LLC

In April 2008, Lions Gate Films, Inc., a wholly-owned subsidiary of the Company (“LGF”), entered

into a sales agency agreement (as amended) with Shrink, LLC for distribution rights to the film Shrink.
Michael Burns, the Vice Chairman and a director of the Company, owns a 100% interest in Shrink, LLC.
During the year ended March 31, 2019, less than $0.1 million was paid to Shrink, LLC under this
agreement (2018 — $0.1 million, 2017 — none).

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 operations is as follows (see Note 1 and Note 5). In addition, during
the year ended March 31, 2019, the Company made loans of $20.7 million to certain of its equity method
investees, $7.3 million of which are included in other assets, noncurrent in the Company’s consolidated
balance sheet (net of equity interests losses applied against such loans), and included in the table below.

F-73

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

March 31,

2019

2018

(Amounts in millions)

Consolidated Balance Sheets

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.2

$ 6.0

Other assets, noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.3

0.2

Total due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9.5

$ 6.2

Participations and residuals, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Participations and residuals, noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred revenue, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.5

8.2

—

6.5

6.0

0.2

Total due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17.7

$12.7

Year Ended March 31,

2019

2018

2017

(Amounts in millions)

Consolidated Statements of Operations

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and marketing expense . . . . . . . . . . . . . . . . . . .
General and administrative expense(1) . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4.7
$32.2
$ 3.0
$ 0.7
$ 0.4

$ 8.9
$22.0
$ 3.5
$ (3.7)
$ —

$88.8
$10.5
$ 0.8
$ (0.7)
$ —

(1) Amounts primarily represent reimbursement for certain shared services for equity method investees.

F-74