Lions Gate Entertainment Annual Report 2020

FY2020 Annual Report · Lions Gate Entertainment

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Annual Report

2020

LIONS GATE ENTERTAINMENT CORP.

To Our Shareholders:

We had a strong and successful year moving our Company forward in fiscal 2020 despite the extraordinary challenges of the
global pandemic, creating lasting and incremental value across our film, television and Starz businesses. It was a year in which
we added exciting new franchises to our content portfolio, extended a number of our major brands while cultivating new
ones, renewed our key television series and continued the transformation of Starz into a valuable premium global streaming
platform distinguished by the quality of its content, the focus of its offering and its unique ability to complement other
services.

Strong OTT Growth, Record Library Revenues

Financially, we reported fiscal 2020 revenue of $3.89 billion, net loss attributable to Lionsgate shareholders of
$188.4 million or diluted loss per share of $0.86, and adjusted net income attributable to Lionsgate shareholders of
$124.3 million or adjusted diluted earnings per share of $0.56. Operating income was $2.8 million and adjusted OIBDA was
$462.2 million in the fiscal year with cash flows provided by operating activities of $614.6 million and adjusted free cash flow
of $348.7 million.

We achieved stellar growth across several key metrics as the Company’s global paid streaming subscribers, including our
STARZPLAY Arabia venture, grew to 10.6 million at the end of the fiscal year, a total that continues to grow. Starz reported a
record 6.8 million paid domestic OTT subscribers at the end of the fiscal year, driven by strong sequential gains in the fourth
quarter. Library revenues for the fiscal year reached a record $600 million in response to surging demand for content that
continues to grow in value over time.

When the pandemic hit in March, we quickly transitioned our non-essential employees to work safely from home,
redeployed resources according to the areas of greatest need, ensured that our businesses were positioned to continue
delivering premium quality entertainment to the large at home audience and took immediate steps to conserve cash in order
to protect a healthy balance sheet. As a result, we were able to mitigate many of the adverse impacts of the pandemic and
resulting economic downturn. We enter fiscal 2021 with protocols in place to operate successfully in the “new normal,” full
pipelines of film and television content ready to resume production, and a complete re-imagining of all of our businesses that
positions them to emerge from the current environment stronger than ever.

Accelerating the Transformation of Starz Into A Global Streaming Leader

When we bought Starz in December 2016, our goal was to combine our global content company with a premier distribution
platform to amplify the reach of our respective businesses and capitalize on the opportunities afforded by a dynamic and
disruptive environment. Less than four years later, we’ve created a thriving direct-to-consumer offering that reaches
10 million global subscribers, expanded what was once a domestic network into 50 countries around the world and
transitioned our legacy business into an a la carte environment for which it is exceptionally well suited.

During the year, we fulfilled our commitment to open the creative aperture at Starz, producing one of our best original
programming slates ever. Domestically, the hit series Outlander achieved record ratings in its 5th season, reporting a 13%
uptick from the prior year, and new series Hightown, from producer Jerry Bruckheimer, and P-Valley, from playwright Katori
Hall, debuted to critical acclaim and strong ratings, driving record engagement on the Starz app. Both series have been
renewed for their second seasons and look to become mainstays of our slate.

When production resumes, we will finish shooting the next two series in the Power franchise, Power Book II: Ghost and Power
Book III: Raising Kanan. They join a line-up of new series that includes the family drama Heels, set in the world of small town
wrestling, the stylish and provocative Dangerous Liaisons, and the sexy and spirited comedy series Run The World, from Dear
White People’s Yvette Lee Bowser, complemented by the eagerly-anticipated return of Stephen Soderbergh’s buzzworthy The
Girlfriend Experience. At a time when many platforms continue to search for their identities in a crowded marketplace, Starz
knows its brand, its audience and how to reach them with original, compelling, provocative series reflecting grown-up
premium content at its best.

Internationally, our strategy of assembling Starz originals, iconic Lionsgate library content and best-in-class 3rd-party
acquisitions continues to gain traction with consumers. We recently launched The Great, starring Elle Fanning and Nicholas
Hoult, and Normal People, based on the runaway best-seller, to strong ratings, and we’re pleased to see that series like
P-Valley are resonating in key international territories. We’re also beginning to complement our offering with local language
productions as we put together a portfolio distinguished by its premium programming, exceptional curation and ability to
connect with audiences in every territory.

Building on our early mover advantage, we’ve launched with global streaming partners Amazon Prime and Apple and leading
local distributors Vodafone, Orange, Virgin Media, Bell Media, Izzi & Rakuten. With over 5 million international subscribers,
including STARZPLAY Arabia and Canada, we continue to track toward our target of 15 to 25 million international
subscribers by 2025.

STARZPLAY brings to an enormous market opportunity great content, a clear and focused strategy, a scalable platform and
the ability to complement every kind of offering. And in a fast-changing world, our own path forward is evident. We’ve
charted a course, funded it out of our own free cash flow, our growth is on schedule and outsized value creation is within our
sights.

Top Five Domestic Box Office Performance by Our Motion Picture Group, Driven By Strong Brands & Talent
Relationships

Turning to our film business, we ranked among the top five studios in domestic box office market share last year as we
created exciting new franchises like Knives Out, which earned multiple Academy Award® nominations on its way to grossing
more than $300 million at the global box office, and extended blockbuster brands like The Hunger Games, John Wick, and Now
You See Me with highly-anticipated new installments.

The next two chapters of the John Wick action franchise are already in the works with John Wick: Chapter 4 slated to hit
theatres on Memorial Day weekend 2022. Now You See Me 3, bringing back the Four Horsemen, is currently being written by
American Hustle’s Eric Warren Singer. And we’ve reassembled the Hunger Games creative team led by director Francis
Lawrence to adapt author Suzanne Collins’ best-selling Hunger Games prequel, The Ballad of Songbirds & Snakes, into the
franchise’s newest chapter. The book sold over half a million copies in its first week of release and has already fueled strong
revenue growth for the Hunger Games titles in our library.

Though our feature film production has been paused, the process of refilling our pipeline with signature properties has not as
we move forward with the film adaptation of Judith Blume’s iconic bestseller Are You There, God? It’s Me, Margaret, the first
time one of her books has been brought to the screen, and the adaptation of the blockbuster video game franchise
Borderlands, starring Academy Award® winner Cate Blanchett and directed by Eli Roth. Our relationships with renowned and
prolific content creators like Seth Rogen, Roland Emmerich, Jonathan Levine, Chad Stahelski and the Erwin Brothers
continue to replenish our slate with additional titles distinguished by great talent, compelling stories and strong commercial
appeal.

There are a number of uncertainties surrounding when theatres will re-open, how quickly moviegoers will return and when
production can safely resume. But our confidence in the future of our theatrical business is undiminished, bolstered by the
continued demand for movies across every kind of platform, the quality and excitement of the content we bring to our
audiences and distribution partners, the flexibility built into our diverse portfolio of movies, and our longstanding ability to
pivot quickly and change with a changing world.

Television Group Secures Renewal of Key Series, Setting Foundation for Long-Term Value Creation

Our Television Group had a successful year in launching new series and keeping them on the air as Love Life, Zoey’s
Extraordinary Playlist, Mythic Quest: Raven’s Banquet, Hightown and P-Valley all secured second season renewals from our
network partners. Love Life, a romantic comedy starring Anna Kendrick, was the centerpiece of HBO Max’s first Emmy®
campaign, Zoey’s resonated with NBC’s millennial online digital audience, Mythic Quest: Raven’s Banquet delivered one of the
season’s most memorable episodes from quarantine, and Hightown and P-Valley illustrate the kind of premium, buzzworthy
content we’re creating for Starz.

In last year’s letter we talked about our shift to a decentralized Television Group structure that relies on the prolific output
of our production partnerships with world-class creators like 3 Arts Entertainment, Point Grey, BBC Studios, Courtney
Kemp, the Tannenbaum Company and Paul Feig. That strategy continues to pay dividends, positioning us as a leading
supplier of premium scripted programming to every part of the television ecosystem. Our collaboration with 3 Arts has
already yielded three network series pickups and a pilot order with another dozen projects in development. Not only has our
partnership reaffirmed our strategy of getting closer to talent, but 3 Arts has emerged as one of the pillars of our television
production business.

With Lionsgate and Starz fully integrated, our Television Group continues to place increasing emphasis on supplying
premium programming to Starz, with more than 20 series on the air, in production or fast track development. From Hightown
to Heels, Step Up to The Continental, this collaboration creates a virtuous cycle – a high-profile buyer for Lionsgate Television,
a prolific source of premium content for Starz, and increased ability to control our own destiny in a highly competitive
environment.

Underscoring the enduring value of our content, we recently concluded a lucrative, multifaceted licensing deal for Mad Men,
one of the most acclaimed series in television history, with a diverse array of buyers — Amazon Prime Video internationally,
Amazon’s IMDb TV domestically, AMC in the U.S. and, beginning this fall, our STARZPLAY platform across its European and
Latin American footprint.

Strong Growth at PANTAYA, Building Out Our Global Network of Location-Based Entertainment and Live
Stage Attractions

Fiscal 2020 was also a strong growth year for two of our newer businesses. The PANTAYA platform continued to deliver on
its promise as the premium streaming destination for Spanish-language movies and original programming, more than
doubling its paid subscribers to over 700,000 and launching its first slate of original series.

Our location-based entertainment and live stage business continued to roll out around the world. Lionsgate Entertainment
World in Hengqin, China, hailed as a pioneer in leading a new generation of vertically-designed indoor theme parks,
reopened to strong attendance in June with many of the Company’s other branded attractions expected to resume
operations soon.

Company Launches New Diversity & Inclusion Initiatives, Acquires Landmark Content

The national conversation about racial justice and equality served as a reminder that our businesses have to look more like
the audiences we serve. During the year, we redoubled our commitment to diversity and inclusion in our recruitment, hiring
and promotion as we took steps to ensure that all of our employees have an equal path to success regardless of race, religion,
gender or sexual orientation.

We named a Chief Diversity Officer from within our ranks at Starz and formed an Executive Diversity Council, which I chair,
with a mandate to develop and implement new Company-wide initiatives to increase gender parity and bring more
employees of color into all levels of our workforce, including our executive ranks and Board of Directors.

Some of our initiatives have already been recognized. For the third year in a row, we were named to the Bloomberg Gender
Equality Index of publicly-traded companies for leadership in programs and policies fostering gender parity, and the Human
Rights Campaign named us one of the Best Places to Work for LGBTQ+ Inclusion for the second straight year with a perfect
score of 100.

We are also committed to using our platform to amplify the voices of diverse creative talent who speak to who we are as a
Company and who we aspire to be. Last month, in a ground-breaking “Lionsgate 360” initiative across all of our businesses,
we partnered with global media leader Oprah Winfrey, The New York Times and Pulitzer Prize®-winning investigative
journalist Nikole Hannah-Jones to adapt her acclaimed 1619 Project, a reframing of the history of slavery in America and the
contributions of Black Americans, into a portfolio of feature films, television series, documentaries, unscripted programming
and location-based entertainment. The projects will feature the storytelling of many of our industry’s leading Black creative
voices.

Strong Financial Flexibility & Liquidity

In closing, the extraordinary circumstances of recent months have tested our resolve, ability to pivot quickly and willingness
to embrace change and re-imagine every facet of how we do business. But our employees have risen to the challenge with
resilience, resourcefulness and a “can do” collaborative team spirit, and we enter the new fiscal year in good shape
operationally, strategically and financially.

We have plenty of financial flexibility and liquidity with over $300 million in available cash at fiscal yearend, an undrawn
revolver of $1.5 billion and continued strong free cash flow generation.

And though the industry playbook continues to be rewritten on an almost daily basis, our own path forward is clear, guided
by our “North Star” principles of focusing on those audiences with whom we have always connected successfully, creating
content that is bold, original and stands out from the clutter, positioning ourselves where the puck is going, not where it has
already been, and continuing to create a valuable, scalable, premium global streaming platform that is unlike anything else in
the marketplace.

By continuing to adhere to those core principles, we will continue to build incremental long-term value for our employees,
our partners and 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

Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2020
OR

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

For the transition period from

EXCHANGE ACT OF 1934
to

Commission File No.: 1-14880

LIONS GATE ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter)

British Columbia, Canada
(State or Other Jurisdiction of
Incorporation or Organization)

250 Howe Street, 20th Floor
Vancouver, British Columbia V6C 3R8
(877) 848-3866

N/A
(I.R.S. Employer
Identification No.)
2700 Colorado Avenue
Santa Monica, California 90404
(310) 449-9200

(Address of Principal Executive Offices, Zip Code)
Registrant’s telephone number, including area code:
(877) 848-3866
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Class A Voting Common Shares, no par
value per share
Class B Non-Voting Common Shares, no
par value per share

LGF.A

LGF.B

Name of Each Exchange on Which
Registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í 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 Í

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 Í 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 Í 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 Í
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 has filed a report on and attestation to its management’s assessment of the effectiveness of

its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. Í

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No Í
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of September 30, 2019 (the last
business day of the registrant’s most recently completed second fiscal quarter) was approximately $1,626,643,913, based on the closing sale
price of such shares as reported on the New York Stock Exchange.

As of May 18, 2020, 82,899,512 shares of the registrant’s no par value Class A voting common shares were outstanding, and

136,513,166 shares of the registrant’s no par value Class B non-voting common shares were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement relating to its 2020 annual meeting of shareholders (the “ 2020 Proxy

Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2020 Proxy
Statement will be filed with the U.S. Securities and Exchange Commission (the “SEC”) within 120 days after the end of the fiscal year
to which this report relates. Portions of the Registrant’s Annual Report on Form 10-K for Fiscal 2019, filed with the SEC on May 23,
2019, are incorporated by reference into Part II of this Annual Report on Form 10-K.

[THIS PAGE INTENTIONALLY LEFT BLANK]

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

Item 8.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . .

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Page

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104

PART IV

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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.
These factors may also be increased or intensified as a result of the coronavirus (COVID-19 global pandemic),
including if there is a resurgence of the COVID-19 global pandemic after the initial outbreak subsides. The
extent to which the COVID-19 global pandemic ultimately impacts our business, results of operations and
financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

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 potential effects of the COVID-19 global pandemic on the Company, economic
and business conditions; 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. Lionsgate’s film and
television properties support location-based entertainment venues and other branded attractions, as well as a
video game business. 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. International revenues are derived from (i) licensing of our productions, acquired 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 and
related content (e.g., games, music, location-based entertainment royalties, etc.) to other ancillary
markets.

Television Production

Our Television Production segment includes revenues derived from the following:

•

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. International revenues are derived from the licensing and syndication to 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:

•

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.

• Other Streaming Services. Other Streaming Services revenues are derived primarily from our majority

owned premium Spanish language streaming services business, Pantaya.

Segment Revenue

For the year ended March 31, 2020, contributions to the Company’s consolidated revenues from its
reporting segments included Motion Picture 43.0%, Television Production 25.7% and Media Networks 38.2%,
and intersegment revenue eliminations represented (6.9)% of consolidated revenues.

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

• Theatrical, 21.3%;

• Home Entertainment, 42.2%;

• Television, 14.8%;

•

International, 20.4%; and

• Motion Picture-Other, 1.3%.

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

• Television, 71.5%;

•

International, 15.3%;

• Home Entertainment, 6.1%; and

• Television Production-Other, 7.1%.
Within the Media Networks segment, revenues were generated from the following:

•

Starz Networks, 96.2%;

STARZPLAY International, 1.5%

• Other Streaming Services, 2.3%.

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 support the growth of STARZ’s direct-to-consumer
offering and expansion of STARZPLAY, our international premium branded SVOD service. 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 2020 (i.e., the twelve-month period ended March 31, 2020), we released 28 films in the U.S. across all
our labels, which included the following:

• Twelve 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);

• Three films released through our Good Universe label;

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

• Ten films released through our partnership with Roadside Attractions.

Title

I Still Believe*
Hope Gap
Las Pildoras De Mi Novio (My

Boyfriend’s Meds)
The Last Full Measure
The Grudge
Bombshell
En Brazos De Un Asesino
Knives Out
The Warrior Queen Of Jhansi
Midway
My Love (Edmond) Cyrano
Jexi
Judy
Rambo: Last Blood
Tod@s Caen
Angel Has Fallen
Fiddler: A Miracle Of Miracles
Good Boys
Scary Stories To Tell In The Dark
The Peanut Butter Falcon
Marianne & Leonard: Words Of Love
Anna (2019)
American Woman (2019)
John Wick: Chapter 3 — Parabellum
Trial By Fire
Long Shot
Fast Color
Hellboy

Fiscal 2020
Theatrical Releases

Release Date

March 13, 2020
March 6, 2020

February 21, 2020
January 24, 2020
January 3, 2020
December 13, 2019
December 6, 2019
November 27, 2019
November 15, 2019
November 8, 2019
October 18, 2019
October 11, 2019
September 27, 2019
September 20, 2019
August 30, 2019
August 23, 2019
August 23, 2019
August 16, 2019
August 9, 2019
August 9, 2019
July 5, 2019
June 21, 2019
June 14, 2019
May 17, 2019
May 17, 2019
May 3, 2019
April 19, 2019
April 12, 2019

* Theatrical run terminated early due to the COVID-19 global pandemic.

Label/Partnership

Lionsgate
Roadside Attractions

Pantelion Films
Roadside Attractions
Good Universe/Sony
Summit
Pantelion Films
Lionsgate
Roadside Attractions
Summit
Roadside Attractions
Lionsgate
Roadside Attractions
Lionsgate
Pantelion Films
Lionsgate
Roadside Attractions
Good Universe/Universal
Lionsgate
Roadside Attractions
Roadside Attractions
Summit
Roadside Attractions
Summit
Roadside Attractions
Good Universe/Summit
Lionsgate
Summit

In fiscal 2020, 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):

Title

Intrigo: Death Of An Author
Inherit The Viper
Hell On The Border
Trauma Center
The Courier
The Turkey Bowl
Primal
The Gallows Act Ii
Lucky Day
The Cotton Club Encore
Semper Fi
10 Minutes Gone
3 From Hell
The Weekend
Strange But True
Angel Of Mine
Apocalypse Now: Final Cut
The Tracker
Killers Anonymous
Vault
The Poison Rose
Crypto

Fiscal 2020
Day-and-Date Releases

Release Date

January 17, 2020
January 10, 2020
December 13, 2019
December 6, 2019
November 22, 2019
November 15, 2019
November 8, 2019
October 25, 2019
October 11, 2019
October 11, 2019
October 4, 2019
September 27, 2019
September 16, 2019
September 13, 2019
September 6, 2019
August 30, 2019
August 15, 2019
August 9, 2019
June 28, 2019
June 14, 2019
May 24, 2019
April 12, 2019

Label/Partnership

Grindstone
Lionsgate
Grindstone
Grindstone
Grindstone
Lionsgate
Lionsgate
Lionsgate
Grindstone
Lionsgate
Lionsgate
Grindstone
Lionsgate/ Saban with Fathom
Grindstone
Lionsgate
Grindstone
Lionsgate
Grindstone
Grindstone
Grindstone
Grindstone
Grindstone

Lionsgate and affiliated companies have distributed films that have earned 129 Academy Award®

nominations and 32 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, 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 50% of net home entertainment packaged media revenue in fiscal 2020. 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 2020, Grindstone Entertainment Group released 35 titles.

Additionally, we distribute television product including series such as American Gods, Ancient Aliens, Ash

vs. Evil Dead, Blue Mountain State, Duck Dynasty, Fear the Walking Dead, Grace and Frankie, Narcos, Into the
Badlands, Knightfall, MacGyver, Mad Men, Nurse Jackie, Orange Is The New Black, Power, Project Blue Book,
The Royals, The Walking Dead, Vida, Weeds, Zoey’s Extraordinary Playlist, 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 and Aardman’s Shaun the Sheep library.

Our year included the following:

•

In fiscal 2020, four of our theatrical releases, Cold Pursuit, Tyler Perry’s Madea Family Funeral,
Rambo: Last Blood, and Midway debuted at number one on DVD/Blu-ray;

In fiscal 2020, we shipped approximately 45 million DVD/Blu-ray finished units;

In calendar 2019, we had an approximate 9% market share for home entertainment, making us the
number six studio in market share overall;

In calendar 2019, we maintained a box office-to-home entertainment conversion rate of 25% 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”)), subscription video-on-demand (“SVOD”), ad-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.

We directly distribute our content to digital transactional distribution platforms and networks including,

among others, AMC Theaters On Demand, Amazon, Apple, Vudu, Google Play, Fandango NOW, Microsoft’s
Movies & TV, 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, Pluto and Peacock. We also directly distribute our
content to other transactional distribution platforms, including, among others, MVPDs like Altice USA, Comcast,
DIRECTV, DISH Network, and Verizon Fios.

Linear networks to which we distribute our content include, among others, pay television networks such as
Starz, EPIX, HBO and Showtime, and basic cable network groups such as NBCUniversal Cable Entertainment,
FX, ViacomCBS Domestic Media Networks, Turner Entertainment Networks, A+E Networks and AMC
Networks, as well as Freeform, Reelz, Bounce, Telemundo and UniMás.

In fiscal 2020, we achieved the following:

• Eight titles we distributed, Cold Pursuit, Tyler Perry’s Family Funeral, Long Shot, John Wick Chapter
3, Rambo: Last Blood, Midway, Knives Out, and Bombshell debuted at the number one ranking on the
Rentrak On-Demand charts.

•

Five of our titles reached the number one ranking on the iTunes’ movie charts, including John Wick
Double Feature, Long Shot, Knives Out, John Wick 3, and Angel Has Fallen.

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 2020 included such in-house productions as Knives Out, Bombshell, I Still Believe, John
Wick: Chapter 3 — Parabellum, Anna, and Long Shot. Third party films for which we were engaged as exclusive
sales agent and/or released by us internationally in fiscal 2020 included Burden, Dark Waters, Playmobil, and
Paradise Hills.

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 12 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;

• 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 2020, Lionsgate
UK released the following 16 films theatrically:

Fiscal 2020
Theatrical Releases — Lionsgate UK

Title

Missing Link
Hellboy
Red Joan*
Long Shot
John Wick: Chapter 3 — Parabellum
Anna
The Queen’s Corgi
Angel Has Fallen
Rambo: Last Blood
Skin
Farming*
Midway
Knives Out
Bombshell
The Personal History of David Copperfield*
Military Wives**

Release Date

April 5, 2019
April 11, 2019
April 19, 2019
May 3, 2019
May 17, 2019
July 5, 2019
July 5, 2019
August 21, 2019
September 19, 2019
September 27, 2019
October 11, 2019
November 8, 2019
November 27, 2019
January 17, 2020
January 24, 2020
March 6, 2020

British film productions.

*
** Theatrical run terminated early due to the COVID-19 global pandemic.

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, 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 television
series and feature films for distribution across other media platforms;

• Continue to expand our Starz’s offering in the region (branded as Lionsgate Play), through its launch in

collaboration with Vodafone Idea and Airtel; and

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

Motion Picture — Other

Global Live, Interactive and Location Based Entertainment

Our Global Live, Interactive and Location Based Entertainment division drives incremental revenue and

builds consumer engagement across our entire portfolio of properties via licensing and launching of live shows
and experiences, location-based entertainment destinations, games, and related merchandise around the world,
and through select strategic partnerships and investments.

Our Global Live Entertainment business focuses on licensing, developing, and producing live stage shows,

concerts, and live experiences and events based on our theatrical and television content.

Our Interactive Entertainment business focuses on growing our robust games slate that includes games
across PC/console, mobile, casino, tabletop, virtual reality and more, as well as integration of our properties into
franchise crossover events with marquee games. We also maintain strategic investments in Finnish mobile game
developer/publisher Next Games, live-streaming native mobile gaming platform Mobcrush, and leading esports
franchise Immortals.

Our Location Based Entertainment business licenses our Lionsgate, theatrical, and television brands for
theme parks, destinations, attractions, and experiences. Our projects currently include, among others, Lionsgate
Entertainment World in Hengqin, China, an indoor theme park which opened on July 31, 2019, and a Lionsgate
branded theme park zone at the Motiongate Theme Park in Dubai, which opened in October of 2017.

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 60 television shows on more than 25 networks

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

In fiscal 2020, 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 2020
Scripted — Lionsgate

Title

Dear White People
Florida Girls
Greenleaf
High Town
Leavenworth
MacGyver
Manhunt: Deadly Games
Mythic Quest
Orange Is The New Black
Power
Power Confidential
P-Valley
The Rook
Vida
Zoey’s Extraordinary Playlist

Fiscal 2020
Unscripted — Lionsgate

Title

Chasing the Cure
De Viaje con los Derbez
Gooseberry
Grant
Kevin Hart: Don’t F**k This Up
Kevin Hart: What The Fit
Kevin Hart’s Laugh Out Loud
Raise The Bar
Revenge Body With Khloé Kardashian
Selling Sunset
Skindecision

Network

Netflix
Pop
OWN
Starz
Starz
CBS
Charter
Apple+
Netflix
Starz
Starz
Starz
Starz
Starz
NBC

Network

TNT
Pantaya
Comedy Central
History
Netflix
YouTube
Bounce
YouTube
E!
Netflix
Netflix

Fiscal 2020
Unscripted — Pilgrim Media Group

Title

American Wreckers
Driven
Fast & Loud
Ghost Hunters
My Big Fat Fabulous Life
Street Outlaws
Street Outlaws: Fastest in America
Street Outlaws Memphis
Street Outlaws: No Prep King
Switching Gears
Wicked Tuna
Wicked Tuna Outer Banks
Zombie House Flipping

Network

History
Discovery
Discovery
A&E
TLC
Discovery
Discovery
Discovery
Discovery
Discovery
Nat Geo
Nat Geo
FYI

Fiscal 2020
Syndication — Debmar-Mercury

Title

Ambitions
Bojack Horseman
Caught In Providence
Family Feud
House of Payne
Meet The Browns
Wendy Williams

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
its various joint ventures and investments. Lionsgate UK holds interests in, and has strategic partnerships with,
television and film production company Kindle Entertainment, television production company Further South
Productions and television drama company Potboiler Television.

In fiscal 2020, Lionsgate UK television programming (developed in-house and through Lionsgate UK’s

interest and partnerships) included the following:

Title

Kiss Me First
The A-List
Jerk
Motherland Series 2
The Goes Wrong Show
Cold Courage

Fiscal 2020
Television — Lionsgate UK

Network

Channel 4/Netflix
BBC3
BBC3
BBC
BBC
Viaplay

Partner(s)

Kindle Entertainment, Balloon
Entertainment
Kindle Entertainment
Primal Media, Roughcut TV
BBC, Merman, Delightful
Mischief Screen, Big Talk, BBC
Luminoir

Television Production — Home Entertainment

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 where they receive an
executive producer fee and back-end participations.

MEDIA NETWORKS

Media Networks — Starz Networks — United States

Starz is a leading provider of premium subscription video programming to MVPDs in the U.S., including

cable operators (such as Comcast and Charter), satellite television providers (such as DIRECTV and DISH
Network), OTT providers (such as Amazon, Apple, Google and Hulu), telecommunications companies (such as
AT&T and Verizon), and on a direct-to-consumer basis.

Our flagship premium service STARZ had 18.9 million subscribers as of March 31, 2020 (not including
subscribers who receive programming free as part of a promotional offer). STARZ offers premium 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 classic 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 our 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.

Flagship network with 6 premium channels
All 6 channels offered in HD
Powerful original series and big hit movies
First-run output and library films
STARZ ON DEMAND: offers more than 2,700 monthly selections,
with over 500 movies and approximately 2,100 series episodes

8 premium channel offerings
Favorite films and series across genre-themed channels
First-run and classic favorites
STARZ ENCORE ON DEMAND: offers more than 3,900 monthly
selections, with 500 movies and select series

3 premium channel offerings
All 3 channels offered in HD
Variety of art house, independent films and classic movie
library content
MOVIEPLEX ON DEMAND: offers more than 200 movies every month

On-demand streaming and downloadable access to STARZ, STARZ
ENCORE and MOVIEPLEX networks’ content in a single destination
app
The Starz app offers more than 7,500 monthly movies and series
episodes including:

Over 1,300 movies
Approximately 500 Starz Original series episodes
Over 5,600 other series episodes

Demographics and Strategy

Designed to complement any basic television offering across traditional MVPD, wholesale and retail OTT
and telecom distribution platforms, STARZ is a best-in-class subscription service delivering premium original
series and hit movies with appeal to women and diverse audiences worldwide.

We are focused on developing and distributing authentic and engaging programming that resonates with

women, African American, Latinx and LGBTQIA audiences, which have been traditionally underserved in the
premium television space. Driven primarily by growing multiplatform viewership amongst these target
audiences, Starz is positioned to continue to capture the digital television transition.

Across our digital platforms, the STARZ app provides an alternative for subscribers looking for a
competitively priced option. Subscribers have access to a vast library of quality content and a top-rated user
experience, along with the ability to download and watch STARZ original series, blockbuster theatricals and
favorite classic TV series and movies without an internet connection.

This strategy, combined with a proven management team, will ensure Starz Networks’ services remain a “must
have” for subscribers and a meaningful profit center for our Distributors, thereby driving value for our stockholders.

Affiliation agreements

Our services are distributed pursuant to affiliation agreements with our 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 2026.

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

may help fund the Distributors’ efforts to market our 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 maximize 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
certain of the agreements 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.

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 including Amazon Prime Video channels, Apple
Channels, Hulu, Roku and You Tube, among others;

Includes on-demand streaming and downloadable access for internet-free viewing;

• Offers instant access to approximately 7,500 selections each month (including STARZ 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 2021 STARZ Originals line-up is as follows:

Title

Vida Season 3
High Town Season 1
P-Valley Season 1
TBD 1
TBD 2
Power II: Ghost Season 1
Spanish Princess Part 2
TBD 3
American Gods Season 3
Run the World Season 1
TBD 4
Step Up Season 3

Number of
Episodes

6
8
8
TBD
TBD
10
8
TBD
10
8
TBD
10

TBD

Starz’s fiscal 2020 STARZ Originals line-up was as follows:

Title

Spanish Princess Part 1
Vida Season 2
The Rook Season 1
Sweetbitter Season 2
Power Season 6
Leavenworth (documentary series)
Dublin Murders
Wrong Man Season 2 (documentary series)
Outlander Season 5

Number of
Episodes

8
10
8
8
15
5
8
6
12

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 (3) to seven (7) 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

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

. . . . . . .

12/2021 Paramount . . . . . . . . . . . . . . . . . . . . . . . . . .
Warner Bros. . . . . . . . . . . . . . . . . . . . . . . . .
Miramax . . . . . . . . . . . . . . . . . . . . . .
. . . . .
. . . .
Twentieth Century Fox. . . . . . . . . . . .
MGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sony Pictures. . . . . . . . . . . . . . . . . . . . . . . .
Lionsgate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Universal . . . . . . . . . . . . . . . . . . . . . . . . . . .

Term

08/2022
12/2022
02/2023
02/2025
04/2025
12/2025
01/2026
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 — Starz — International

STARZ is available in 50 countries outside the U.S. through our four (4) international branded services:

STARZPLAY in Western Europe and Latin America; STARZ in Canada; LIONSGATE Play in India; and
through our STARZPLAY Arabia joint venture in the Middle East and North Africa (see Joint Ventures,
Partnerships and Ownership Interests below). These branded services are made available through OTT providers
(such as Amazon and Apple), internet protocol television (“IPTV”) providers (such as Orange and Vodafone),
telecommunications companies (such as Orange and Vodafone), on a direct-to-consumer basis, and cable and
satellite providers in Canada only. Across these services, Starz had 5.0 million subscribers as of March 31, 2020.

International Strategy

STARPLAY is positioned as a pure-play premium content service offered at a competitive subscription

price, made available through a complementary retail and wholesale distribution strategy.

Premium content that targets all adults is the foundation of our international content strategy. We believe

this allows us to operate as a complementary service, not a direct competitor, with other higher priced, broad
based video services. STARZPLAY provides subscribers with access to STARZ original series, often airing
day-and-date with the U.S., a rich and diverse Lionsgate library of television series, feature films and
documentaries, and, to amplify content from the Starz domestic original programming slate, first-run, exclusive
third-party programming, including locally produced television shows that align with the STARZ brand. Most
content available on STARZPLAY is English-language, available with sub-titles and/or local language dubbing
for each country. Starz also expects to co-produce local language content for some countries in the coming years.

We have priced STARZPLAY competitively on a territory by territory basis and made it available through a
complementary wholesale and retail distribution strategy that has allowed us to quickly build out our distribution
platform with 50 implementations across our 31 country footprint. Our distribution strategy is led with a
wholesale model, where STARZPLAY is sold or bundled as an a la carte channel or bundled within our partners’
platforms, including Amazon and Apple, as well as local IPTV and Telco partners. Our wholesale distribution
partners manage the technology and infrastructure associated with the exhibition of the STARZPLAY service in
exchange for a share of the subscription revenue. To enhance our subscriber reach, we modified our domestic
(U.S.) app for deployment internationally to include, among other new features, full European Union General
Data Protection Regulation compliance, support for seven (7) languages, multiple audio/closed captioning
options and a variety of potential carrier/billing integrations. We expect to launch with additional wholesale
partners and deploy the STARZPLAY app in additional countries in the coming years.

STARZPLAY App

The STARZPLAY app is the single destination for direct OTT subscribers to stream on-demand or

download our original series and movie content. The STARZPLAY app:

•

Is currently available in eight (8) countries across Europe and Latin America, including France,
Germany, Spain, UK, Netherlands, Mexico and Brazil with additional countries to come;

• The STARZPLAY app includes a language toggle allowing users to select their preferred language for

viewing;

• Offers instant access to approximately 1,000 selections each month (including original series and

commercial free movies);
Is available for purchase as a standalone OTT service for £/€4.99 in Europe and ~$4.50 in Latin
America.

•

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) in the case of India, the total number of our distributors’ monthly active video users who view
our content multiplied by rates specified in the affiliation agreements. 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 with discounted or no 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 structured on a country by country basis, to be multi-year agreements with staggered
expiration dates by Distributor.

STARZPLAY Programming

STARZPLAY contracts with our Television Production segment and other major content licensors to

acquire first-run original scripted series that appears on our STARZPLAY services.

STARZPLAY’s currently expected fiscal 2021 first-run STARZ Originals programming, which will be
available to STARZPLAY across its footprint in Western Europe, Latin America and Canada, is as follows:

Title

Vida Season 3
High Town Season 1
P-Valley S1
TBD 1
TBD 2
Power II: Ghost Season 1
Spanish Princess Part 2 (not available in Spain)
TBD 3
Run the World Season 1
TBD 4
Step Up Season 3

Number of
Episodes

6
8
8
TBD
TBD
10
8
TBD
8
TBD
10

TBD

STARZPLAY’s fiscal 2020 first-run STARZ Originals programming and country availability was as

follows:

Title

Dublin Murders
The Rook
Spanish Princess
Vida
Sweetbitter
Power

Countries Available

Number of
Episodes

DE, FR, IT, ES, Benelux, LatAm, Brazil
DE, FR, IT, ES, Benelux, LatAm, Brazil
UK, DE, FR, IT, Benelux, LatAm, Brazil
UK, DE, FR, IT, ES, Benelux, LatAm, Brazil
UK, DE, FR, IT, ES, Benelux, LatAm, Brazil
ES

8
8
8
10
8
13
55

STARZPLAY’s fiscal 2020 first-run third-party programming and country availability was as follows:

Title

Pennyworth

Castle Rock

The Act
Catch 22
Killing Eve
Mr. Mercedes

Countries Available

Number of
Episodes

UK, DE, IT, ES, Benelux, LatAm, Brazil

UK, DE, IT, Benelux, LatAm, Brazil
UK, DE, FR, IT, Benelux, LatAm, Brazil
DE, ES, Benelux
DE
UK, DE, FR, IT, LatAm, Brazil

10
8
6
8
10

Distributor

Warner
Bros
Warner
Bros
NBCU
Paramount
Endeavor
Sony

Media Networks — Other Streaming Services

Other Streaming Services represent revenues derived primarily from our majority owned premium Spanish

language streaming services business, Pantaya. 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.

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

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

Atom Tickets

Pantelion Films

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

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.

Pilgrim Media Group

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

Roadside Attractions

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

STARZPLAY Arabia

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.

Intellectual Property

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 media 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.

Impact of COVID-19 Global Pandemic

The impact of disruptions associated with the ongoing COVID-19 global pandemic and measures to prevent

its spread and mitigate its effects both domestically and internationally, and the resulting unprecedented
economic uncertainty, are affecting our business in a number of ways. To date, we have experienced early
termination of the theatrical run of one of our films domestically and one of our films in the UK, delayed
theatrical distribution of several films domestically and internationally, and delayed production of film and
television content (resulting in changes in future release dates for some titles and series). Our partners have also
closed several location-based entertainment attractions based on our film and television properties. Conversely,
television and streaming consumption around the globe has increased as well as home entertainment demand.

STARZ has experienced an increase in viewership of its content across all platforms as well as an increase in
subscribers to its OTT services, both domestically and internationally. In a number of instances, we have also
been able to adapt to these new circumstances by releasing one of our theatrical films earlier on streaming
platforms, completing post-production of one of our television series remotely and continuing the development
of a number of our television series utilizing virtual writers’ rooms. These changes in the way we operate may be
helpful to partially offset some of the negative impacts from the pandemic; however, the ultimate impact of these
changes and the COVID-19 global pandemic cannot be predicted with certainty. For additional information
regarding the impact on our operating results, cash flows and financial position, and the other risks and
uncertainties see Part I, Item 1A. Risk Factors and Part II, Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations in this Annual Report.

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 18, 2020, we had 1,443 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 of these risks and uncertainties occur, they could adversely affect
our business, financial condition, operating results, liquidity and prospects.

Risks Related to Our Business

The impact of the COVID-19 global pandemic could materially and adversely affect our business, financial
condition and results of operations.

The impact of disruptions associated with the ongoing COVID-19 global pandemic and measures to prevent its
spread and mitigate its effects both domestically and internationally, and the resulting unprecedented economic
uncertainty, are affecting our business in a number of ways. To date, we have experienced early termination of
the theatrical run of one of our films domestically and one of our films in the UK, delayed theatrical distribution
of several films domestically and internationally, the delayed production of film and television content (resulting
in future changes in release dates for some titles and series). Our partners have also closed several location-based
entertainment attractions based on our film and television properties. We may not be able to accurately predict
when theaters re-open, production resumes or if and when certain of our content will be released. We also may
not be able to predict if current insurance will provide sufficient coverage for continued production delays, or if
we will be able to obtain and/or recover insurance coverage for productions in the future if there are additional
disruptions associated with COVID-19 or similar pandemics. Our businesses could also be impacted should the
disruptions lead to changes in consumer behavior. The COVID-19 global pandemic could also impact our results
of operations by decreasing our revenue and increasing our expenses. As a direct result of the COVID-19 global
pandemic and the related economic disruption, including the worldwide closure of most theaters, international
travel restrictions and the pausing of motion picture and television productions, during the fourth quarter of fiscal
2020 we have incurred $50.5 million in incremental costs which were expensed in the period. We expect to incur
additional incremental costs in future periods. In addition to the potential direct impacts on our business, the
global economy may be weakened as a result of actions taken in response to the COVID-19 global pandemic. To
the extent that the weakened global economy impacts consumers’ ability or willingness to pay for our services,
we could see our business and results of operations negatively affected.

Conversely, television and streaming consumption around the globe has increased as well as home entertainment
demand. STARZ has experienced an increase in viewership of its content across all platforms as well as an
increase in subscribers to its OTT services, both domestically and internationally. This increase, however, may
not be indicative of future results and growth may slow as governmental and other restrictions are relaxed and as
a result of the current and possible long-term negative economic impact of the pandemic. In a number of
instances, we have also been able to adapt to these new circumstances by releasing one of our theatrical films
earlier on streaming platforms, completing post-production of one of our television series remotely and
continuing the development of a number of our television series utilizing virtual writers’ rooms. These changes
in the way we operate may be helpful to partially offset some of the negative impacts from the pandemic;
however, the ultimate impact of these changes and the COVID-19 global pandemic cannot be predicted with
certainty.

We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our
business, results of operations and financial condition, will depend on, among other things, the duration and
spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed
in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global
economic conditions as a result of the COVID-19 global pandemic. In addition, if a resurgence of the COVID-19
global pandemic occurs after the initial outbreak subsides, the impact could be exacerbated. All of these impacts

could place limitations on our ability to execute on our business plan and materially and adversely affect our
business, financial condition and results of operations. We continue to monitor the situation, have actively
implemented policies and procedures to address the situation and mitigate any adverse impacts, and may adjust
our current policies and procedures as more information and guidance become available to address the evolving
situation. The impact of the ongoing COVID-19 global pandemic and its effects may also exacerbate other risks
discussed in Item 1A. Risk Factors in this Annual Report, any of which could have a material effect on us.
Accordingly, due to the evolving and uncertain nature of this situation, we are not able to estimate the full extent
of the impact on our operating results, cash flows and financial position.

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, including because of delayed

theatrical distribution of films as a result of the ongoing COVID-19 global pandemic and its effects, 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.

An impairment in the carrying value of goodwill and intangible assets could have a material adverse effect on
our financial condition and results of operations.

At March 31, 2020, the carrying value of our goodwill and indefinite-lived intangible assets was $2.8 billion and
$250.0 million, respectively. Our indefinite-lived intangible assets consist of trade names primarily representing
the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as of
December 8, 2016. Our reporting units for purposes of goodwill impairment testing, along with their respective
balances at March 31, 2020 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.

For the second quarter of fiscal 2020, due primarily to the sustained decline in the market price of our common
shares, we updated our quantitative impairment assessment for three (Television, Media Networks and Motion
Picture) of our reporting units. Based on our quantitative impairment assessment for the second quarter of fiscal
2020, we determined that there were no goodwill impairments; however, two of our reporting units (Television
and Media Networks) were at risk for impairment due to relatively small changes in certain key assumptions that
could cause an impairment of goodwill.

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 units may include the duration of the COVID-19 global pandemic and its impact on the global
economy and the creation and consumption of our content; 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,
including our affiliate agreements of our Media Networks business; our subscriber growth rates domestically and
internationally across our traditional and OTT platforms 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 used in our assessments are not realized, it is possible that an impairment charge may
need to be recorded in the future, which could have a material adverse effect on our financial condition and
results of operations.

At March 31, 2020, the carrying value of our finite-lived intangible assets was approximately $1.47 billion. Our
finite-lived intangible assets primarily relate to customer relationships associated with U.S. MVPDs, including
cable operators, satellite television providers and telecommunications companies (“Traditional Affiliate”), and
the carrying value reflects the estimated fair value of these customer relationships determined in connection with
the acquisition of Starz on December 8, 2016, net of amortization recorded since the date of the Starz acquisition.

Identifiable intangible assets with finite lives are amortized to depreciation and amortization expense over their
estimated useful lives, ranging from 5 to 17 years. Through the first quarter of fiscal 2020, we amortized our
Traditional Affiliate customer relationships discussed above on a straight-line basis over 17 years. Our finite-
lived intangible assets are tested for impairment whenever events or changes in circumstances (triggering events)
indicate that the carrying amount of the asset may not be recoverable. If a triggering event has occurred, an
impairment analysis is required. The impairment test first requires a comparison of undiscounted future cash
flows expected to be generated over the useful life of an asset to the carrying value of the asset. The impairment
test is performed at the lowest level of cash flows associated with the asset. If the carrying value of the asset
exceeds the undiscounted future cash flows, the asset would not be deemed to be recoverable. Impairment would
then be measured as the excess of the asset’s carrying value over its fair value.

Due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption,
during the second quarter of the fiscal year ended March 31, 2020, we determined it was appropriate to change
the pattern of amortization of our Traditional Affiliate customer relationship intangible asset (i.e., a finite-lived
intangible asset). Accordingly, beginning in the second quarter of the fiscal year ended March 31, 2020, the
Company has adopted an amortization method that reflects amortization in the proportion that current period
revenues bear to management’s estimate of future revenue over the remaining estimated useful life of the asset.
This method results in greater amortization in the earlier years of the estimated useful life of the asset than the
latter years.

During the fiscal year ended March 31, 2020, due to industry factors discussed in the preceding paragraph and
the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our
amortizable intangible assets, as described above. The impairment analysis requires a comparison of
undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of
the asset. Based on our impairment analysis, the estimated undiscounted cash flows exceeded the carrying
amount of the assets and therefore no impairment charge was required.

Should the revenues from our Traditional Affiliate relationships decline more than the assumed attrition rates
used in our current estimates, either as a result of decreases in subscriber rates or changes of the terms of our
renewals of our Traditional Affiliate contracts, we may have indicators of impairment which could result in an
impairment of our customer relationships intangible assets, or we may need to further shorten the useful life or
adopt a more accelerated method of amortization. Both of these occurrences would increase the amount of
amortization expense we record, which could have a material adverse effect on our financial condition and
results of operations.

For further discussion, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, Critical Accounting Policies.

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 condition, including the volatility and uncertainty in financial markets as a
result of the ongoing COVID-19 global pandemic and its effects, 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 Global
Live, Interactive and Location Based Entertainment and 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.
Additionally and as stated previously, we have experienced early termination of the theatrical run of one of our
films domestically and one of our films in the UK, delayed theatrical distribution of several films domestically
and internationally and delayed production of film and television content due to the ongoing COVID-19 global
pandemic and its effects. 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, including as a result of the ongoing COVID-19 global pandemic and
its effects. 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 2026. The largest distributors have significant leverage in their relationship with certain programmers,
including Starz. Furthermore, Starz depends on a limited number of major global partners to distribute its content
internationally.

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. Moreover,
given the limited number of global partners, the loss of one more of Starz global partners could materially
adversely affect our international business, operating results, and growth 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 the
STARZ service available on an authenticated basis via our app as an additional benefit to paying traditional
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 (including because of early
termination or even delayed theatrical distribution as a result of the ongoing COVID-19 global pandemic and its
effects), 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. Further, concerns over the COVID-19 global pandemic has caused extreme volatility in financial and
other capital markets and impacted the ability to access capital on favorable terms. As a result of the impacts of
the COVID-19 global pandemic, we may be required to raise additional capital and such additional debt
financing may not be available on commercially reasonable terms, if at all.

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 you 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 you 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. We must invest substantial
amounts in the production and marketing of our original programming before we learn whether such content will
reach anticipated audience acceptance levels. 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 at a
reasonable cost, 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. Increased competition may drive up talent and production
costs and may force some programming services to commit to straight-to-series orders for programming instead
of a pilot order. If we commit to straight-to-series orders and those series do not meet anticipated production or
quality standards or are otherwise not accepted by audiences, revisions to the programming may be necessary,
which could increase production costs. The increased financial commitment for a straight-to-series order also
could increase the risks associated with such an order. 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, such as that being created by the ongoing COVID-19 global pandemic and its effects,
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. It is likely that the current outbreak or continued spread of COVID-19 will
cause a global recession, which will further adversely affect our business, and such adverse effects may be

material. In addition, the magnitude, duration and speed of the global pandemic is uncertain. We cannot
guarantee that we will recover as rapidly as other industries, or that we will recover as rapidly as others within
the industry. As a consequence, we cannot estimate the impact on our business, financial condition or near or
longer-term financial or operational results with certainty.

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, pandemics such as COVID-19 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. We have also experienced a disruption to our business as a result
of the COVID-19 global pandemic which has suspended production of our programming. 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.

We face economic, political, regulatory, and other 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:

•

difficulties in understanding and complying with local laws, regulations and customs in foreign
jurisdictions;

the loss of one or more of the major global partners that we rely upon to distribute our programming
internationally;

laws and policies adversely affecting trade, investment and taxes, including laws and policies relating
to the repatriation of funds and withholding taxes, and changes in these laws;

the impact of trade disputes;

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 regulations designed to stimulate local productions,
promote and preserve local culture and economic activity (including local content quotas, investment
obligations, local ownership requirements, and levies to support local film funds); or censorship
requirements that may cause us to remove or edit popular content, leading to consumer disappointment,
brand tarnishment or consumer dissatisfaction;

regulatory requirements or government action against our service, whether in response to enforcement
of actual or purported legal and regulatory requirements or otherwise, that results in disruption or
non-availability of our service or particular content in the applicable jurisdiction;

inability to adapt our offerings successfully to differing languages, cultural tastes, and preferences in
international markets;

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;

currency exchange restrictions, export controls and currency devaluation risks in some foreign
countries;

the spread of communicable diseases (such as the current COVID-19 global pandemic), 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 and costs 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.

We are managing and adjusting our international business to address varied content offerings, consumer customs
and practices, in particular those dealing with e-commerce and streaming video, as well as differing and changing
legal and regulatory environments. As online streaming grows in international markets, governments may look to
introduce new or extend legacy regulations to these services, in particular those related to broadcast media,
consumer privacy and tax. While we believe our legal and regulatory positions are consistent with the laws and
regulations in the jurisdictions in which we conduct our business, it is possible that we will be required to comply
with new regulations or legislation or new interpretations of existing regulations or legislation. In such an event,
increased jurisdictional legal or regulatory oversight and/or action could cause us to incur additional expenses or
alter our business model.

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, pandemics (such as the ongoing COVID-19 global pandemic), 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). We maintain this information and data either on our own systems or on
those of third party vendors. While we take measures to protect against unauthorized intrusion into this
information, we, or the vendors we use, could experience an unauthorized intrusion. 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. Current and potential customers may become unwilling to provide the
information to us necessary for them to remain or become customers. We also may be required to notify
regulators about any actual or perceived data breach (including the EU Lead Data Protection Authority) as well
as the individuals who are affected by the incident within strict time periods. 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 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.

The costs relating to any data breach could be material. 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.

We are subject to payment processing risk.

Our subscribers pay for our services using a variety of different payment methods, including credit and debit
cards. We rely on internal systems as well as those of third parties to process payment. Acceptance and
processing of these payment methods are subject to certain rules and regulations, including additional
authentication requirements for certain payment methods, and require payment of interchange and other fees. To
the extent there are increases in payment processing fees, material changes in the payment ecosystem, such as
large re-issuances of payment cards, delays in receiving payments from payment processors, changes to rules or
regulations concerning payments, loss of payment partners and/or disruptions or failures in our payment
processing systems, partner systems or payment products, including products we use to update payment
information, our revenue, operating expenses and results of operation could be adversely impacted. In certain
instances, we leverage third parties such as our cable and other partners to bill subscribers on our behalf. If these
third parties become unwilling or unable to continue processing payments on our behalf, we would have to
transition subscribers or otherwise find alternative methods of collecting payments, which could adversely
impact subscriber acquisition and retention. In addition, from time to time, we encounter fraudulent use of
payment methods, which could impact our results of operations and if not adequately controlled and managed
could create negative consumer perceptions of our service. If we are unable to maintain our fraud and chargeback

rate at acceptable levels, card networks may impose fines, our card approval rate may be impacted and we may
be subject to additional card authentication requirements. The termination of our ability to process payments on
any major payment method would significantly impair our ability to operate our business.

Our activities are subject to a variety of laws and regulations which may adversely impact our operations or, if
violated, could subject us to an increased risk of litigation and regulatory actions.

Privacy and Child Protection Regulations. 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. Privacy concerns could limit our
ability to collect and leverage subscriber personal information and other data and disclosure of subscriber
personal information and other data could adversely impact our business and reputation. In the ordinary course of
business we collect and utilize information supplied by our subscribers, which may include personal information
and other data. The manner in which we acquire, store, disclose, use, and protect such subscriber information is
regulated, including but not limited to Regulation (EU) 2016/679 (also known as the General Data Protection
Regulation or “GDPR”) and the California Consumer Privacy Act (“CCPA”), and various other domestic and
international privacy and data security laws and regulations, which are continually evolving. There are also a
variety of laws, rules and regulations are 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. Any actual or perceived failure to comply with these or any future
regulations, or related contractual or other obligations, or any perceived privacy rights violation, could lead to
investigations, claims, and proceedings by governmental entities and private parties, damages for contract
breach, and other significant costs, fines, penalties, or other liabilities, as well as harm to our reputation and
market position.

Increased regulation of data utilization practices, including self-regulation or findings under existing laws that
limit our ability to collect, transfer and use information and other data, could have an adverse effect on our
business. In addition, if we were to disclose information and other data about our subscribers in a manner that
was objectionable to them, our business reputation could be adversely affected, and we could face potential legal
claims that could impact our operating results. Internationally, we may become subject to additional and/or more
stringent legal obligations concerning our treatment of customer and other personal information, such as laws
regarding data localization and/or restrictions on data export. Failure to comply with these obligations could
subject us to liability, and to the extent that we need to alter our business model or practices to adapt to these
obligations, we could incur additional expenses.

Additionally, as we grow our STARZ direct-to-consumer business, we may be subject to additional consumer
legal claims and state and local consumer protection regulation.

Network Regulations. 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.

Internet and Other Media Operator Regulations. The adoption or modification of laws or regulations relating to
the internet or other areas of our business could limit or otherwise adversely affect the manner in which we
currently conduct our business. For example, recent changes to European law may cause some individual
member states to attempt to impose levies and other financial obligations on media operators located outside their
jurisdiction. We anticipate that several jurisdictions may, over time, attempt to impose additional financial and
regulatory obligations on us. In addition, the continued growth and development of the market for online
commerce may lead to more stringent consumer protection laws, which may impose additional burdens on us. If
we are required to comply with new regulations or legislation or new interpretations of existing regulations or
legislation, this compliance could cause us to incur additional expenses or alter our business model.

Changes in laws or regulations that adversely affect the growth, popularity or use of the internet, including laws
impacting net neutrality, could decrease the demand for our service and increase our cost of doing business.
Certain laws intended to prevent network operators from discriminating against the legal traffic that traverse their
networks have been implemented in many countries, including across the European Union. In others, the laws
may be nascent or non-existent. These laws may change, including for example, in the United States where net
neutrality regulations were repealed. Given uncertainty around these rules, including changing interpretations,
amendments or repeal, coupled with potentially significant political and economic power of local network
operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause
us to incur additional expense or otherwise negatively affect our business.

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.

Risks Related To 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, 2020, we and our subsidiaries have
corporate debt of approximately $2,741.9 million, finance lease obligations of approximately $42.4 million and
production loan obligations of approximately $151.4 million, and the Senior Credit Facilities provide for unused
commitments of $1.5 billion. On the same basis, approximately $1,720.0 million of such indebtedness is secured
(including all of our finance 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 the ongoing COVID-19 global pandemic and its effects, 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 will depend 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, including the ongoing
COVID-19 global pandemic and its effects. If our cash flow from operations declines significantly, including any
decline related to the impact of the ongoing COVID-19 global pandemic, it could result in the inability 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. In addition, during times of economic instability, including recent disruptions to, and volatility in,
the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 global
pandemic, it has been difficult for many companies to obtain financing in the public markets or to obtain debt
financing. 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. Additionally, there can also be no assurance that we will
not face credit rating downgrades as a result of weaker than anticipated performance of our businesses,
fluctuations in our leverage or cost of capital or other factors. Future downgrades could further adversely affect
our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a
significant downgrade could have an adverse commercial impact on our business.

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. The recent
COVID-19 global pandemic may add to our indebtedness. 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 our 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 limit 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, including the effects on our business from the ongoing COVID-19 global pandemic and related
government actions and consumer behavior; as such, we may be unable to meet such financial ratios and tests.

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,
including in connection with the ongoing COVID-19 global pandemic and its effects which could increase the
cost of capital. 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 23% 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 Internal Revenue Code (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.

On January 31, 2020, the UK formally withdrew 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.

Changes in the method of determining the London Interbank Offered Rate (LIBOR), or the replacement of
LIBOR with an alternative reference rate, may adversely affect interest rates, our business, and financial
markets as a whole.

On July 27, 2017, the Financial Conduct Authority in the U.K. announced that it would phase out LIBOR as a
benchmark by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such
that it continues to exist after 2021, or whether different benchmark rates used to price indebtedness will develop.
Under the terms of the credit and guarantee agreement dated December 8, 2016, as amended (the “Amended
Credit Agreement”), in the event of the discontinuance of the LIBOR Rate, a mutually agreed-upon alternate
benchmark rate will be established to replace the LIBOR Rate. The Company and Lenders (as defined in the
Amended Credit Agreement) shall, in good faith, endeavor to establish an alternate benchmark rate that gives due
consideration to prevailing market convention for determining a rate of interest for syndicated loans in the United
States at such time, and which places the Lenders and the Company in the same economic position that existed
immediately prior to the discontinuation of the LIBOR Rate. The Company does not anticipate that the
discontinuance or modification of the LIBOR Rate will materially impact its liquidity or financial position. There
is presently substantial uncertainty relating to the process and timeline for developing LIBOR alternatives, how
widely any given alternative will be adopted by parties in the financial markets, and the extent to which
alternative benchmarks may be subject to volatility or present risks and challenges that LIBOR does not. It is
possible that we will disagree with our contractual counterparties over which alternative benchmark to adopt,
which could make renewing or replacing our debt facilities and other agreements more complex. Consequently, it
is difficult to predict what effect, if any, the phase-out of LIBOR and the use of alternative benchmarks may have
on our business or on the overall financial markets. If LIBOR alternatives re-allocate risk among parties in a way
that is disadvantageous to market participants, if there is disagreement among market participants, over which
alternative benchmark to adopt, or if uncertainty relating to the LIBOR phase-out disrupts financial markets, it
could have a material adverse effect on our financial position, results of operations, and liquidity.

Global legislative and governmental responses to COVID-19 could affect our business.

On March 18, 2020 and March 27, 2020, new United States Congressional legislations, the “Families First
Coronavirus Response Act” (FFCRA) and the “Coronavirus Aid, Relief, and Economic Security Act” (CARES
Act), respectively (collectively, the COVID-19 Acts) were signed into law. The COVID-19 Acts include several
significant business tax provisions that, among other things, eliminate the taxable income limit for certain net
operating losses (“NOL”s) and allow businesses to carry back NOLs arising in tax years beginning in 2018,
2019, and 2020 to the five prior tax years, permit businesses to carry back NOLs generated in fiscal tax year
2018 to the two prior tax years pursuant to a technical amendment of Section 172 of the Code, relax the business
interest expense limitation under Section 163(j) of the Code from 30 percent to 50 percent of adjusted taxable
income, accelerate refunds of previously generated corporate alternative minimum tax credits, and provide
payroll tax relief to employers by allowing the deferral of payment of a certain portion of the employer’s share of
Social Security tax over the next two years and granting a refundable payroll tax credit to eligible employers
whose business operations have been disrupted by COVID-19. In addition, other countries around the world,
where we operate, have enacted legislation to provide tax relief to businesses dealing with the COVID-19 crisis.
The U.S. Treasury and foreign tax authorities continue to issue guidance on the application of these recently
enacted legislations, and accordingly, our analysis of the impact of these provisions on us is not final. We are
continuing to assess the effects of these provisions to our fiscal 2020 and 2021 effective income tax rates and our
profile.

Any potential government crisis relief assistance in response to COVID-19 could impose limitations on our
corporate activities, may dilute our stockholders and may not be on terms favorable to us.

Numerous government-sponsored crisis relief programs have been implemented and others are being considered
in response to the COVID-19 outbreak. If any government agrees to provide crisis relief assistance that we
accept, it may impose certain requirements on the recipients of the aid including restrictions on executive officer
compensation, share buybacks, dividends, prepayment of debt, limitations on debt, and other similar restrictions
that will apply for a period of time after the aid is repaid or redeemed in full. We cannot assure you that any such
government crisis relief assistance will not limit our corporate activities or be on terms that are favorable to us.
Such restrictions and terms could adversely impact our business and operations.

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);

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

7,500 square feet at Unit 502, Crest Audeus, Fun Republic Lane, Andheri West, Mumbai, India (per a
lease that expires in August 2024);

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 December 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 2020).

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 18 - 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 18, 2020, there were approximately 525 and 713 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 2020
Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year
ended March 31, 2020.

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) with respect to 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 such holder 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 such
as those 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 of the dividends 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 such U.S. Holder 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, including repurchases subsequent to March 31, 2020 of approximately $1.0 million, approximately
$288.1 million (or 16,608,796) of our common shares have been purchased, leaving approximately
$179.9 million of authorized potential purchases. The remaining $179.9 million of our common shares may be
purchased from time to time at the Company’s discretion, including quantity, timing and price thereof, and will
be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal
requirements. The share repurchase program has no expiration date.

The following table sets forth information with respect to our common shares purchased by us during the

three months ended March 31, 2020:

ISSUER PURCHASES OF EQUITY SECURITIES

Period

January 1, 2020 - January 31, 2020 . . . . . . . . . . . . .
February 1, 2020 - February 29, 2020 . . . . . . . . . . .
March 1, 2020 - March 31, 2020 . . . . . . . . . . . . . . .

(a) Total
Number of
Shares
Purchased

—
—
704,795

Total

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

704,795

(d) Approximate
Dollar Value of
Shares that May Yet
Be Purchased Under
the Plans or
Programs

—
—
704,795

704,795

$184,713,820
184,713,820
180,886,791

$180,886,791

(b) Average
Price Paid
per Share

$ —
—
5.43

$5.43

Additionally, during the three months ended March 31, 2020, no Class A voting shares and 42,391 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 Media Holdings

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 issued the Company’s Class A voting shares and the Company’s Class B
non-voting shares to AT&T in 2017, 2018 and 2019. The Company’s Class A voting shares and Class B
non-voting shares were 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 on the New York Stock Exchange, respectively,
as of the business day immediately prior to the applicable payment date. On December 19, 2019, in connection
with the Securities Issuance Agreement, the Company issued 929,023 of the Company’s Class A voting shares
and 980,392 of the Company’s Class B non-voting shares to AT&T. The Company’s Class A voting shares and
Class B non-voting shares issued pursuant to the Securities Issuance Agreement were 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% was 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 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. On June 17, 2019, in connection with the Purchase Agreement, the
Company issued 1,334,332 of the Company’s Class B non-voting shares to the sellers therewith as the balance of
the purchase price. The Company’s Class B non-voting shares issued pursuant to the Purchase Agreement were
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, 2015 and ending
March 31, 2020. All values assume that $100 was invested on March 31, 2015 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

$140

$120

$100

$80

$60

$40

$20

3/15

3/16

12/9/16

3/17

3/18

3/19

3/20

Lions Gate Entertainment Corporation-Class A

Lions Gate Entertainment Corporation-Class B

NYSE Composite

Dow Jones US Media Sector

*$100 invested on 3/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending March 31.

3/15

3/16

12/9/16

3/17

3/18

3/19

3/20

Lions Gate Entertainment

Corporation-Class A(1) . . . . . . . . . . .

$100.00

$65.14

$ 79.54

$ 77.62

$ 47.36

$ 18.41

Lions Gate Entertainment

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

$100.00
$100.00

$96.09
$97.80

$100.00

$ 92.45
$111.01
$118.11

$ 91.66
$123.23
$110.93

$ 57.94
$128.93
$124.13

$ 21.41
$107.36
$106.84

(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, 2020, 2019, 2018, 2017, and 2016 and financial positions as at March 31, 2020, 2019, 2018, 2017, and
2016 are not directly comparable to prior reporting periods.

Statement of Operations Data:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Lions Gate

Year Ended March 31,

2020(1)(5)

2019(2)(5)

2018(3)

2017(4)

2016(4)

(Amounts in millions, except per share amounts)

$3,890.0
2.8
(206.4)

$3,680.5
130.0
(299.6)

$4,129.1
248.7
468.1

$3,201.5
(16.3)
14.5

$2,347.4
(25.0)
42.7

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

(188.4)

(284.2)

473.6

14.8

50.2

Per share information attributable to Lions Gate

Entertainment Corp. shareholders:

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

$ (0.86) $ (1.33) $

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

$ (0.86) $ (1.33) $

2.27

2.15

0.09

0.34

0.33

Weighted average number of common shares

outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . .

217.9
217.9
$ — $

213.7
213.7
0.18

208.4
220.4
0.09

165.0
172.2
0.09

Balance Sheet Data (at end of period):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in films and television programs and program
rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt, net(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dissenting shareholders’ liability(7) . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interests . . . . . . . . . . . . . . . .
Total Lions Gate Entertainment Corp. shareholders’

$ 318.2

$ 184.3

$ 378.1

$ 321.9

1,827.8
7,951.2
2,733.0
151.3
—
167.8

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

148.5
154.1
0.34

57.7

1,457.6
3,834.2
865.2
690.0
—
90.5

equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,658.0
2,660.0

2,918.7
2,921.9

3,155.9
3,156.9

2,514.4
2,514.4

850.3
850.3

(1) Results for fiscal 2020 included restructuring and other charges of $24.3 million, incremental direct
operating and distribution and marketing expense incurred as a direct result of the COVID-19 global
pandemic of $50.2 million, certain programming and content charges of $76.5 million in connection with
the implementation of changes to the Company’s programming and broadcasting strategy, and a charge of
$21.4 million from the net increase in the valuation allowance for certain of the Company’s deferred tax
assets.

(2) Results for fiscal 2019 included restructuring and other charges of $78.0 million, certain programming and
content charges of $35.1 million in connection with the implementation of changes to the Company’s
programming and broadcasting strategy, shareholder litigation settlements of $114.1 million, and a charge
of $53.7 million from the net increase in the valuation allowance for certain of the Company’s deferred tax
assets.

(3) Results for fiscal 2018 included restructuring and other charges of $59.8 million, gain on investments of

$171.8 million, and a net tax benefit of $259.1 million from the impact of the corporate tax rate change on
net deferred tax liabilities and other discrete items.

(4) Results for fiscal 2017 and fiscal 2016 included restructuring and other charges of $88.7 million and
$19.8 million, respectively, and fiscal 2017 also included a gain on investments of $20.4 million.
(5) Effective April 1, 2018, the Company adopted new guidance on revenue recognition on a modified-

retrospective basis. Accordingly, the selected financial data for periods prior to April 1, 2018 is not directly
comparable. See Note 13 to the Company’s consolidated financial statements for further information.
(6) Total debt includes corporate debt, convertible senior subordinated notes and finance lease obligations, net

of unamortized discount and debt issuance costs, if applicable.

(7) 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.

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

RESULTS OF OPERATIONS.

This section of our Annual Report Form 10-K includes a discussion and analysis of our financial condition

and results of operation for the fiscal years ended March 31, 2020 and 2019, and year-to-year comparisons
between fiscal 2020 and fiscal 2019. A discussion and analysis of our financial condition and results of operation
for the fiscal year ended March 31, 2018 and year-to-year comparisons between fiscal 2019 and fiscal 2018 can
be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part
II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019, and is herein
incorporated by reference.

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. Lionsgate’s film and television properties support location-based
entertainment venues and other branded attractions, as well as a video game business. 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).

Impact of COVID-19

The impact of the ongoing COVID-19 global pandemic and measures to prevent its spread, and the resulting

unprecedented economic uncertainty, are affecting our business in a number of ways. To date, we have
experienced early termination of the theatrical run of one of our films domestically and one of our films in the
UK, delayed theatrical distribution of several films domestically and internationally, the delayed production of
film and television content (resulting in changes in future release dates for some titles and series). Our partners
have also closed several location-based entertainment attractions based on our film and television properties. We
may not be able to accurately predict when theaters re-open, production resumes or if and when certain of our
content will be released. The full extent of the impact of the COVID-19 global pandemic on our business,
operations and financial results will depend on numerous evolving factors that we may not be able to accurately
predict. See Item 1A. Risk Factors for further details.

Conversely, television and streaming consumption around the globe has increased as well as home

entertainment demand. STARZ has experienced an increase in viewership of its content across all platforms as well
as an increase in subscribers to its OTT services, both domestically and internationally. This increase, however, may
not be indicative of future results and growth may slow as governmental and other restrictions are relaxed, and as a
result of the current and possible longer term negative economic impact of the pandemic. In a number of instances,
we have also been able to adapt to these new circumstances by releasing one of our theatrical films earlier on
streaming platforms, completing post-production of one of our television series remotely and continuing the
development of a number of our television series utilizing virtual writers’ rooms. These changes in the way we
operate may be helpful to partially offset some of the negative impacts from the pandemic, however the ultimate
impact of these changes and the COVID-19 global pandemic cannot be predicted with certainty.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent

its spread and mitigate its effects both domestically and internationally, and the related economic disruption,
including the worldwide closure of most theaters, international travel restrictions and the pausing of motion
picture and television productions, during the fourth quarter of fiscal 2020 we have incurred $50.5 million in
incremental costs which were expensed in the period. These costs include $46.0 million reflected in direct
operating expense, which include certain motion picture and television impairments and development charges
associated with changes in performance expectations or the feasibility of completing the project, costs associated
with the pausing of productions, including certain cast and crew costs and incremental costs associated with bad

debt reserves. In addition, these costs include $4.2 million reflected in distribution and marketing expense, which
primarily consists of early marketing spends for film releases and events that have been canceled or delayed and
will provide no economic benefit, and $0.3 million in restructuring and other costs primarily due to transitioning
the Company to a remote-work environment and other incremental costs associated with the COVID-19 global
pandemic during this period. We expect to incur additional incremental costs in future periods. We are in the
process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and
therefore have not been recorded in our consolidated financial statements. See further discussion in the Results of
Operations section below.

We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our

business, results of operations and financial condition, will depend on, among other things, the duration and
spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed
in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global
economic conditions as a result of the COVID-19 global pandemic. All of these impacts could place limitations
on our ability to execute on our business plan and materially and adversely affect our business, financial
condition and results of operations. We continue to monitor the situation, have actively implemented policies and
procedures to address the situation, and may adjust our current policies and procedures as more information and
guidance become available to address the evolving situation. Accordingly, due to the evolving and uncertain
nature of this situation, we are not able to estimate the full extent of the impact on our operating results, cash
flows and financial position, particularly over the near to medium term.

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, 2020, 2019 and 2018.

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 (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. International revenues are derived from (1) licensing of our productions, acquired 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 and 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 we earn 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.

• 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.

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.

• Other Streaming Services. Other Streaming Services revenues are derived primarily from our majority

owned premium Spanish language streaming services business, Pantaya.

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 generally employ a discounted cash flows (“DCF”) methodology with
assumptions for cash flows (a Level 3 fair value measurement, see Note 11 to our consolidated financial
statements). 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. 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 include content licensed from third parties and content produced by and licensed from the

Television Production segment. 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.

Licensed content is stated at the lower of amortized cost or net realizable value, and produced original

content is stated at the lower of amortized cost or estimated fair value, as discussed above. 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.

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 from our
majority owned premium Spanish language streaming services business, Pantaya.

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 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
discrete benefit are recorded as distribution and marketing costs, and payments to distributors for which Starz
receives no discrete benefit are recorded as a reduction of revenue.

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 $3.6 million, $4.2 million and $6.0 million on our total revenue in the fiscal years ended
March 31, 2020, 2019, and 2018, respectively.

Goodwill and Indefinite-Lived Intangibles. At March 31, 2020, the carrying value of goodwill and
indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively. Our indefinite-lived
intangible assets consist of trade names primarily representing the estimated fair value of the Starz brand name
determined in connection with the acquisition of Starz as of December 8, 2016. 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
that information 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, 2020, were Motion Picture
(goodwill of $394 million), Media Networks (goodwill of $2.04 billion), and 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 and indefinite-lived intangible assets are not amortized but are 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 or indefinite-lived intangible asset is less than its carrying value.
We perform our annual impairment test as of January 1 in each fiscal year. A goodwill or indefinite-lived
intangible asset impairment loss would be recognized for the amount that the carrying amount of a reporting unit,
including goodwill or an indefinite-lived intangible asset, exceeds its fair value. An entity may perform a
qualitative assessment of the likelihood of the existence of a goodwill or indefinite-lived intangible asset
impairment. The qualitative assessment is an evaluation, based on all identified events and circumstances which
impact the fair value of the reporting unit or indefinite-lived intangible asset, of whether or not it is more-likely-
than-not that the fair value is less than the carrying value of the reporting unit or indefinite-lived intangible asset.
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 or 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. A quantitative assessment requires
determining the fair value of our reporting units or indefinite-lived intangible assets. 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 a quantitative assessment of goodwill, we determine the fair value of our reporting units by
using a combination of discounted cash flow (“DCF”) analyses and market-based valuation methodologies. The
models rely on significant judgments and assumptions surrounding general market and economic conditions,
short-term and long-term growth rates, discount rates, income tax rates, and detailed management forecasts of
future cash flow and operating margin projections, and other assumptions, all of which are based on our internal
forecasts of future performance as well as historical trends. The market-based valuation method utilizes EBITDA

multiples from guideline public companies operating in similar industries and a control premium. The results of
these valuation methodologies are weighted as to their relative importance and a single fair value is determined.
The fair value of our reporting units is reconciled to the market value of our equity, determined based on the
average prices of our common shares just prior to the period end. 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 or interim goodwill impairment
tests will prove to be an accurate prediction of the future.

Goodwill Impairment Assessment:

For fiscal 2019, due primarily to the decline in the market price of our common shares, we performed a
quantitative goodwill impairment assessment for all of our reporting units. Our quantitative goodwill impairment
analysis of our reporting units indicated that the fair value of the reporting units exceeded their respective
carrying values. However, our Television business reporting unit was considered at risk for impairment due to
relatively small changes in certain key assumptions that could cause an impairment of goodwill. As a result,
during fiscal 2020 we monitored all of our reporting units for changes in the business environment that could
impact recoverability.

For the second quarter of fiscal 2020, due primarily to the sustained decline in the market price of our
common shares, we updated our quantitative impairment assessment for three (Television, Media Networks and
Motion Picture) of our reporting units. 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 4.0%, at a
weighted average cost of capital (discount rate) ranging from 10% to 14%, which considered the risk of
achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a
whole. Based on our quantitative impairment assessment for the second quarter of fiscal 2020, we determined
that there were no goodwill impairments; however, two of our reporting units (Television and Media Networks)
were at risk for impairment due to relatively small changes in certain key assumptions that could cause an
impairment of goodwill.

For our annual goodwill impairment test for fiscal 2020, due to the decline in the market price of our
common shares in the fourth quarter ended March 31, 2020, which was significantly impacted by the economic
uncertainty and market volatility resulting from the COVID-19 global pandemic, we updated our quantitative
impairment assessment for all of our reporting units as of March 31, 2020. 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 4.0%, at a weighted average cost of capital (discount rate) ranging from 11.5% to 15%,
which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting
unit, industry and market as a whole. Based on our annual quantitative impairment assessment for fiscal 2020, we
determined that two of our reporting units (Television and Media Networks) were at risk for impairment.

We evaluated the sensitivity of our most critical assumptions used in the fair value analysis of our

Television and Media Networks reporting units, including the discount rate, perpetual nominal growth rate and
annual revenue growth rates. For our Television business reporting unit, we determined that an increase in the
discount rate of up to 3.3% would not have impacted the test results, assuming no changes to other factors. For
our Media Networks reporting unit, we determined that an increase in the discount rate of up to 0.7% or a
reduction of the perpetual nominal growth rate of up to 1.33% would not have impacted the test results, assuming
no changes to other factors. We also performed a sensitivity analysis on annual revenue growth. We determined
that a decrease in annual revenue growth by 0.5% for our Television business reporting unit and 0.3% for our
Media Networks reporting unit, and holding film cost spend and amortization the same and maintaining other
expenses at the same percentage of revenue, the results would have triggered an impairment.

Management will continue to monitor all of its reporting units for changes in the business environment that
could impact the 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 units may include the duration of the COVID-19
global pandemic, its impact on the global economy and the creation and consumption of our content, and the
timing of when production can resume and theaters can re-open; 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; including our affiliate agreements of our Media Networks business; our subscriber growth rates
domestically and internationally across our traditional and OTT platforms 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.

Indefinite-Lived Intangibles Other Than Goodwill Impairment Assessment:

For fiscal 2020, we performed a qualitative impairment assessment of our indefinite-lived trade names.
Based on the qualitative impairment assessment of our trade names, we concluded that it is more-likely-than-not
that the fair value of our trade names was more than its carrying amount, and therefore our trade names were not
considered at risk of impairment. This qualitative analysis considered the relative impact of market-specific and
macroeconomic factors. The market-specific factors considered included recent projections of revenues and
growth in OTT subscribers, both domestic and internationally, associated with the STARZ brand name. The
Company also considered the macroeconomic impact including the uncertainty around the COVID-19 global
pandemic, and the resulting uncertain long-term economic impact on discount rates and growth rates, as well as
the impact from tax law changes inclusive of the reduction of the federal tax rate since the acquisition of Starz.

Finite-Lived Intangible Assets. At March 31, 2020, the carrying value of our finite-lived intangible assets

was approximately $1.47 billion. Our finite-lived intangible assets primarily relate to customer relationships
associated with U.S. MVPDs, including cable operators, satellite television providers and telecommunications
companies (“Traditional Affiliate”), which amounted to $1.45 billion. The amount of our customer relationship
asset related to these Traditional Affiliate relationships reflects the estimated fair value of these customer
relationships determined in connection with the acquisition of Starz on December 8, 2016, net of amortization
recorded since the date of the Starz acquisition. Identifiable intangible assets with finite lives are amortized to
depreciation and amortization expense over their estimated useful lives, ranging from 5 to 17 years. Through the
first quarter of fiscal 2020, we amortized the Starz Traditional Affiliate customer relationships discussed above
on a straight-line basis over 17 years.

Amortizable intangible assets are tested for impairment whenever events or changes in circumstances
(triggering events) indicate that the carrying amount of the asset may not be recoverable. If a triggering event has
occurred, an impairment analysis is required. The impairment test first requires a comparison of undiscounted
future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. The
impairment test is performed at the lowest level of cash flows associated with the asset. If the carrying value of
the asset exceeds the undiscounted future cash flows, the asset would not be deemed to be recoverable.
Impairment would then be measured as the excess of the asset’s carrying value over its fair value.

The Company monitors its finite-lived intangible assets and changes in the underlying circumstances each

asset. This method results in greater amortization in the earlier years of the estimated useful life of the asset than
the latter years. See Note 1 to our consolidated financial statements under the Finite-Lived Intangible Assets
section for further details.

During the fiscal year ended March 31, 2020, due to industry factors discussed in the preceding paragraph

and the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our
amortizable intangible assets. The impairment analysis requires a comparison of undiscounted future cash flows
expected to be generated over the useful life of an asset to the carrying value of the asset. Based on our
impairment analysis, the estimated undiscounted cash flows exceeded the carrying amount of the assets and
therefore no impairment charge was required.

Determining whether an intangible asset is recoverable or impaired requires various estimates and

assumptions, including whether events or circumstances indicate that the carrying amount of the asset may not be
recoverable, determining estimates of future cash flows for the assets involved and, when applicable, the
assumptions applied in determining fair value, including discount rates, growth rates, market risk premiums and
other assumptions about the economic environment. Should the revenues from our Traditional Affiliate
relationships decline more than the assumed attrition rates used in our current estimates, either as a result of
decreases in subscriber rates or changes of the terms of our renewals of our Traditional Affiliate contracts, we
may have indicators of impairment which could result in an impairment of our customer relationships intangible
assets, or we may need to further shorten the useful life or adopt a more accelerated method of amortization both
of which would increase the amount of amortization expense we record.

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

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, 2020, we have a valuation allowance of $435.8 million against certain
U.S. and foreign deferred tax assets that may not be realized on a more likely than not basis.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed

into law, and has resulted in significant changes to the U.S. federal corporate tax law. Additionally, several state
jurisdictions have enacted legislations to comply with federal changes and some foreign jurisdictions have
enacted similar tax incentive legislations. As the enactment dates of these laws are before the end of the reporting
period, we have considered the applicable tax law changes to our current and deferred income tax expense as of
March 31, 2020 and concluded that the impact was immaterial. We are continuing to analyze the impact of these
tax law changes to future periods.

Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the

overall level of pre-tax income (loss), the mix of our pre-tax income (loss) generated across the various
jurisdictions in which we operate, any changes in tax laws and regulations in those jurisdictions, changes in
uncertain tax positions, further interpretation and legislative guidance regarding the new CARES Act, changes in
valuation allowances against our deferred tax assets, tax planning strategies available to us and other discrete
items.

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. As of March 31, 2020, our investments included investments in equity method
investees of $34.3 million, and other investments of $6.0 million.

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 2020 Compared to Fiscal 2019

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the fiscal years ended March 31,

2020 and 2019:

Revenues

Year Ended
March 31,

Increase (Decrease)

2020

2019

Amount

Percent

(Amounts in millions)

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

$1,670.9
1,001.3
1,486.8
(269.0)

$1,464.4
920.9
1,461.0
(165.8)

$ 206.5
80.4
25.8
(103.2)

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

3,890.0

3,680.5

209.5

14.1%
8.7%
1.8%
62.2%

5.7%

Expenses:

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

2,226.1
1,008.7
430.4
197.7
24.3

2,028.2
835.5
445.4
163.4
78.0

197.9
173.2
(15.0)
34.3
(53.7)

9.8%
20.7%
(3.4)%
21.0%
(68.8)%

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

3,887.2

3,550.5

336.7

9.5%

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

2.8

130.0

(127.2)

(97.8)%

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

Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (provision) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Net loss attributable to Lions Gate Entertainment Corp.

(191.3)
—
8.8
(11.1)
5.4
(0.5)
(17.2)

(203.1)
(3.3)

(206.4)
18.0

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

(308.1)
8.5

(299.6)
15.4

7.6
114.1
(3.2)
(6.4)
7.3
87.1
25.7

(3.8)%
n/a
(26.7)%
136.2%
(384.2)%
(99.4)%
(59.9)%

105.0
(11.8)

(34.1)%
(138.8)%

93.2
2.6

(31.1)%
16.9%

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

$ (188.4) $ (284.2) $ 95.8

(33.7)%

Revenues. Consolidated revenues increased in fiscal 2020, due to increases in Motion Picture, Television
Production and to a lesser extent, Media Networks revenues. These increases were partially offset by increases in
intersegment eliminations due to higher Television Production revenues (a substantial portion of intersegment
eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and
STARZPLAY International, both in the Media Networks segment. Motion Picture revenue increased due to

higher theatrical and home entertainment revenue primarily driven by the performance of the films released from
our Fiscal 2020 Theatrical Slate, offset partially by lower television and other revenue. Media Networks revenue
increased due to increased revenue across STARZPLAY International and Other Streaming Services, offset by a
slight decrease from Starz Networks. 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, 2020 and 2019:

Year Ended March 31,

2020

2019

Increase (Decrease)

% of
Segment
Revenues

Amount

% of
Segment
Revenues Amount

Percent

Amount

(Amounts in millions)

Direct operating expenses

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . .
COVID-19 related costs . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment eliminations . . . . . . . . . . . . . . .

$ 810.2
879.9
680.2
46.0
85.6
(275.8)

48.5% $ 758.1
774.5
87.9
600.9
45.7
—
nm
54.2
nm
(159.5)
nm

51.8% $ 52.1
105.4
84.1
79.3
41.1
46.0
nm
31.4
nm
(116.3)
nm

6.9%
13.6%
13.2%
n/a
57.9%
72.9%

$2,226.1

57.2% $2,028.2

55.1% $ 197.9

9.8%

nm — Percentage not meaningful.

Direct operating expenses increased in fiscal 2020, due to increases from Media Networks and Motion
Picture, as well as COVID-19 related costs, and certain programming and content charges included in “other” (as
further described below). The increase in Television Production direct operating expense were more than offset
by the increase in intersegment eliminations which primarily relate to Television Production direct operating
costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the
Media Networks segment. Media Networks direct operating expense increased due to higher programming
amortization at STARZPLAY International, which was partially offset by lower direct operating expense at Starz
Networks, which included a benefit of $39.7 million associated with the modification of a content licensing
arrangement net of amortization for related changes in content availability and air dates. Motion Picture direct
operating expense increased due to increased Motion Picture revenue and higher investment-in-film write-downs.
See further discussion in the Segment Results of Operations section below.

COVID-19 Related Costs. As a direct result of the COVID-19 global pandemic, during the fourth quarter of
fiscal 2020 we have incurred $46.0 million in incremental costs which were expensed in the period, reflected in
consolidated direct operating expense, and are excluded from segment direct operating expense. These costs
include certain motion picture and television impairments and development charges associated with changes in
performance expectations or the feasibility of completing the project, and costs associated with the pausing of
productions, including certain cast and crew costs and incremental costs associated with bad debt reserves. We
expect to incur additional incremental costs in future periods. A majority of these costs relate to our Motion
Picture segment. We are in the process of seeking insurance recovery for some of these costs, which cannot be
estimated at this time, and therefore have not been recorded in our consolidated financial statements.

Other. During fiscal 2020 and 2019, in connection with recent management changes, we implemented
changes to our programming and broadcasting strategy including programming acquired or produced under prior
management. As a result, we recorded certain programming and content charges of $76.5 million and
$35.1 million in fiscal 2020 and 2019, respectively, which are excluded from segment operating results but
included in direct operating expense in the consolidated statement of operations and reflected in the “other” line

item above. In addition, “other” direct operating expenses in the table above includes 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, 2020 and 2019:

Year Ended March 31,

Increase (Decrease)

2020

2019

Amount

Percent

(Amounts in millions)

Distribution and marketing expenses

Motion Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Television Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Media Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COVID-19 related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 547.2
30.7
426.1
4.2
0.5

$472.2
36.8
326.1
—
0.4

$ 75.0
(6.1)
100.0
4.2
0.1

15.9%
(16.6)%
30.7%
n/a
25.0%

$1,008.7

$835.5

$173.2

20.7%

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

$ 351.8

$289.5

$ 62.3

21.5%

nm — Percentage not meaningful.

Distribution and marketing expenses increased in fiscal 2020 primarily due to increased Media Networks

distribution and marketing expense across Starz Networks, STARZPLAY International and Other Streaming
Services, and to a lesser extent, increased Motion Picture theatrical P&A associated with an increased number of
theatrical releases, partially offset by a slight decrease in Television Production distribution and marketing
expense. See further discussion in the Segment Results of Operations section below.

As a direct result of the COVID-19 global pandemic, during the fourth quarter of fiscal 2020 we have
incurred $4.2 million in costs primarily related to early marketing spends for film releases and events that have
been canceled or delayed and thus will provide no economic benefit. These charges are excluded from segment
operating results. We expect to incur additional incremental costs in future periods.

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

for the fiscal years ended March 31, 2020 and 2019:

General and administrative expenses

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

Share-based compensation expense . . . . . . . . .
Purchase accounting and related

Year Ended March 31,

Increase (Decrease)

2020

% of
Revenues

% of

2019

Revenues Amount

Percent

(Amounts in millions)

$104.8
37.3
87.5
99.7

329.3
48.5

$105.6
43.5
97.7
104.2

$ (0.8)
(6.2)
(10.2)
(4.5)

8.5% 351.0
50.6

9.5% (21.7)
(2.1)

(0.8)%
(14.3)%
(10.4)%
(4.3)%

(6.2)%
(4.2)%

adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .

52.6

43.8

8.8

20.1%

Total general and administrative expenses . . . . . . . .

$430.4

11.1% $445.4

12.1% $(15.0)

(3.4)%

nm — Percentage not meaningful.

General and administrative expenses decreased in fiscal 2020, resulting from decreases in Media Networks,
Corporate, Television Production, and Motion Picture general and administrative expenses and a slight decrease
in share-based compensation expense, partially offset by increased purchase accounting and related adjustments.
See further discussion in the Segment Results of Operations section below.

Corporate general and administrative expenses decreased $4.5 million, or 4.3%, primarily due to decreases

in professional fees.

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

year ended March 31, 2020, as compared to the year ended March 31, 2019 is primarily due to lower
compensation expense associated with the replacement of Starz share-based payment awards. Additionally, the
decrease in share-based compensation expense is due to lower fair values associated with performance-based
stock option and other equity awards that are revalued at each reporting period until the stock option or equity
award vests and the applicable performance goals are achieved. The following table presents share-based
compensation expense by financial statement line item:

Share-based compensation expense included in:

General and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and marketing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Year Ended March 31,

2020

2019

(Amounts in millions)

$48.5
0.6
1.0
0.5

$50.6

$50.6
16.0
1.1
0.4

$68.1

(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, 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. The increase reflects amounts related to 3 Arts Entertainment, as fiscal 2019 included purchase
accounting and related adjustments from the acquisition date of May 29, 2018, as compared to a full year in
fiscal 2020.

Depreciation and Amortization Expense. Depreciation and amortization of $197.7 million for fiscal 2020
increased $34.3 million from $163.4 million in fiscal 2019, due to a change in the amortization method for the
Starz Traditional Affiliate customer relationships in the second quarter of fiscal 2020, which resulted in an
increase to amortization expense of $38.7 million in fiscal 2020. See Note 1 to our consolidated financial
statements under the Finite-Lived Intangible Assets section for further details.

Restructuring and Other. Restructuring and other decreased $53.7 million in fiscal 2020 as compared to

fiscal 2019, 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 year ended
March 31, 2020 and 2019 (see Note 16 to our consolidated financial statements):

Restructuring and other:
Severance(1)

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
Accelerated vesting on equity awards (see Note 14)

Total severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COVID-19 related costs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction and related costs(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

Increase (Decrease)

2020

2019

Amount

Percent

(Amounts in millions)

$12.3
0.6

12.9
0.3
11.1

$31.5
16.0

47.5
—
30.5

$(19.2)
(15.4)

(34.6)
0.3
(19.4)

(61.0)%
(96.3)%

(72.8)%
n/a
(63.6)%

$24.3

$78.0

$(53.7)

(68.8)%

(1) Severance costs in the fiscal years ended March 31, 2020 and 2019 were primarily related to restructuring

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

(2) During the year ended March 31, 2020, the Company has incurred certain costs including costs primarily

related to transitioning the Company to a remote-work environment and other incremental costs associated
with the COVID-19 global pandemic.

(3) Transaction and related costs in the fiscal years ended March 31, 2020 and 2019 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.

Interest Expense. Interest expense of $191.3 million in fiscal 2020 decreased $7.6 million from fiscal 2019.
The following table sets forth the components of interest expense for the fiscal years ended March 31, 2020 and
2019:

Interest Expense
Cash Based:

Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375% Senior Notes(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Interest on dissenting shareholders’ liability(3)

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

Year Ended March 31,

2020

2019

(Amounts in millions)

6.4
76.0
30.6
35.1
28.3

176.4
14.9

191.3
—

$ 10.9
86.4
30.6
5.5
18.6

152.0
11.6

163.6
35.3

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

$191.3

$198.9

(1) The 6.375% Senior Notes were issued in February 2019, therefore fiscal 2020 includes a full year of interest

expense, as compared to fiscal 2019, which includes approximately two months of interest expense.

(2) Amounts include interest expense related to the Company’s interest rate swap agreements (see Note 19 to

our consolidated financial statements), finance lease obligations and other interest.

(3) Represents interest accrued in connection with the previously outstanding dissenting shareholders’ liability

associated with the Starz Merger.

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

related to previous shareholder litigation in connection with the Starz merger and 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 2020.

Other Expense. Other expense of $11.1 million for fiscal 2020 compared to other expense of $4.7 million
for fiscal 2019, and represented the loss related to our monetization of accounts receivable programs (see Note 20
to our consolidated financial statements).

Gain (Loss) on Extinguishment of Debt. Gain on extinguishment of debt of $5.4 million in fiscal 2020
related primarily to the repurchase of a portion of the 5.875% Senior Notes, 6.375% Senior Notes and Term Loan
B. This compared to a loss of $1.9 million in fiscal 2019 related to early repayments on the Term Loan B. See
Note 7 to our consolidated financial statements.

Loss on Investments. Loss on investments of $0.5 million for fiscal 2020 compared to loss on investments

of $87.6 million for fiscal 2019. The loss on investments in fiscal 2020 represents unrealized losses on equity
securities. The loss on investments in fiscal 2019 included a loss of $44.6 million in connection with the
March 15, 2019 sale of our 50.0% equity interest in Pop, and other-than-temporary impairments on our
investments of $36.8 million.

Equity Interests Loss. Equity interests loss of $17.2 million in fiscal 2020 compared to equity interests loss

of $42.9 million in fiscal 2019. In fiscal 2019, the equity interest loss included equity losses from Pop (50.0%
equity interest sold in March 2019), and higher equity losses from other equity investees.

Income Tax (Provision) Benefit. We had an income tax provision of $3.3 million in fiscal 2020, compared

to a benefit of $8.5 million in fiscal 2019. Our income tax provision 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, changes in the valuation allowance against our deferred tax assets, and certain
minimum taxes and foreign withholding taxes. Our income tax provision for fiscal 2020 was also impacted by
the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

In fiscal 2019, our income tax benefit was also impacted by the tax deductions generated by our capital

structure, which included certain foreign affiliate dividends in our Canadian jurisdiction that could 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.

At March 31, 2020, we had U.S. net operating loss carryforwards of approximately $1,660.6

million available to reduce future federal income taxes which expire beginning in 2029 through 2039, state net
operating loss carryforwards of approximately $881.2 million available to reduce future state income taxes which
expire in varying amounts beginning 2021, Canadian loss carryforwards of $57.2 million which will expire
beginning in 2034, and Luxembourg loss carryforwards of $768.8 million which will expire beginning in 2036.
In addition, at March 31, 2020, we had U.S. credit carryforwards related to foreign taxes paid of
approximately $76.2 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, 2020 was $188.4 million, or basic and diluted net loss per
common share of $0.86 on 217.9 million weighted average common shares outstanding. This compares to net
loss attributable to our shareholders for the fiscal year ended March 31, 2019 of $284.2 million, or basic and
diluted net loss per common share of $1.33 on 213.7 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, and exclude items separately identified
in the restructuring and other line item in the consolidated statements of operations.

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, certain programming and content charges as a result of
changes in management and associated programming and content strategy, and, when applicable, certain costs
related to the COVID-19 global pandemic, and purchase accounting and related adjustments. 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 17 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, 2020 and 2019:

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

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

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

Year Ended March 31,

Increase (Decrease)

2020

2019

Amount

Percent

(Amounts in millions)

$1,670.9

$1,464.4

$206.5

14.1%

810.2
547.2

313.5
104.8

758.1
472.2

234.1
105.6

52.1
75.0

79.4
(0.8)

6.9%
15.9%

33.9%
(0.8)%

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

$ 208.7

$ 128.5

$ 80.2

62.4%

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

$ 351.8

$ 289.5

$ 62.3

21.5%

48.5%
18.8%

51.8%
16.0%

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

years ended March 31, 2020 and 2019:

Feature
Film(1)

2020
Other
Film(2)

Year Ended March 31,

Total

Feature
Film(1)

(Amounts in millions)

2019
Other
Film(2)

Total
Increase
(Decrease)

Total

$ 326.1

$ 29.5

$ 355.6

$164.5

$ 51.3

$ 215.8

$139.8

Motion Picture Revenue

Theatrical . . . . . . . . . . . . . . . . . . . .
Home Entertainment

Digital Media . . . . . . . . . . . . .
Packaged Media . . . . . . . . . . .

276.0
154.8

171.9
102.1

447.9
256.9

157.2
108.4

177.5
149.1

Total Home

Entertainment . . . . . . .
Television . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Other

430.8
189.8
255.2
19.8

274.0
57.3
85.8
2.6

704.8
247.1
341.0
22.4

265.6
209.6
260.8
36.2

326.6
64.8
80.3
4.7

334.7
257.5

592.2
274.4
341.1
40.9

113.2
(0.6)

112.6
(27.3)
(0.1)
(18.5)

$1,221.7

$449.2

$1,670.9

$936.7

$527.7

$1,464.4

$206.5

(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 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 increased $139.8 million, or 64.8%, in fiscal 2020 as compared to fiscal 2019, primarily

driven by the performance of the Feature Films released in fiscal 2020, and included significant revenue from
Knives Out, John Wick: Chapter 3 — Parabellum, Angel Has Fallen, Midway and Rambo: Last Blood. In
addition, fiscal 2020 included the release of 12 Feature Films, as compared to 11 Feature Films released in fiscal
2019. This increase was partially offset by a decrease from Other Film driven by theatrical revenue in the prior
year period from Overboard and Extinction. As a result of the COVID-19 global pandemic, in March 2020 we
had to prematurely terminate the theatrical run of our Feature Film, I Still Believe, which was released on
March 13, 2020 and had its theatrical run suspended on March 17, 2020. Accordingly, theatrical revenues for
fiscal 2020 were impacted by this early termination. See further discussion below on the impact of COVID-19.

Home entertainment revenue increased $112.6 million, or 19.0%, in fiscal 2020, as compared to fiscal 2019,

driven by an increase of $165.2 million from our Feature Films, which was partially offset by a decrease of
$52.6 million from Other Film. The increase in Feature Film home entertainment revenue was due to the
performance of our Fiscal 2020 Theatrical Slate, and in particular, significant digital and packaged media
revenues from John Wick: Chapter 3 — Parabellum. The increase was also, to a lesser extent, due to a greater
number of Feature Films released on home entertainment. The decrease in revenue from Other Film was
primarily due to home entertainment revenue in fiscal 2019 from I Can Only Imagine, Overboard, and Hostiles.

Television revenue decreased $27.3 million, or 9.9%, in fiscal 2020, as compared to fiscal 2019, due
primarily to fewer Feature Films from our 2019 Theatrical Slates with television windows opening in fiscal 2020
as compared to the number of Feature Films from our Fiscal 2018 Theatrical Slate with television windows
opening in fiscal 2019.

Other revenue decreased $18.5 million, or 45.2%, in fiscal 2020, as compared to fiscal 2019, due to Feature

Film revenues from an other ancillary market licensing arrangement in fiscal 2019.

We expect that Motion Picture segment revenues will decrease in fiscal 2021 due to delays in domestic and

international theatrical distribution and production as a result of the closure of theaters and paused productions
throughout the U.S., Canada, and worldwide due to COVID-19. The extent of the impact on Motion Picture
segment revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of
governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the
effectiveness of actions taken to contain or mitigate the outbreak, global economic conditions, the ability for
theaters to re-open at a scale to attract motion pictures and the rate of consumers’ return to the theater.

Direct Operating Expense. The increase in direct operating expenses is due to an increase in Motion Picture

revenues, and higher investment-in-film write-downs, which were partially offset by decreased direct operating
expenses as a percentage of motion pictures revenue. Investment in film write-downs included in Motion Picture
segment direct operating expense for the period increased to $42.1 million in fiscal 2020, as compared to
approximately $22.9 million in fiscal 2019. The decrease in direct operating expenses as a percentage of motion
picture revenue was driven by the change in the mix of titles and product categories generating revenue in fiscal
2020 as compared to fiscal 2019, and in particular, the Fiscal 2020 Theatrical Slate releases in fiscal 2020 (John
Wick: Chapter 3 — Parabellum, Knives Out, Angel Has Fallen, Midway) as compared to the Fiscal 2019
Theatrical Slate releases in fiscal 2019 (The Spy Who Dumped Me, Robin Hood).

Distribution and Marketing Expense. The increase in distribution and marketing expense in fiscal 2020 is

primarily due to higher theatrical P&A spending on a greater number of Feature Film theatrical releases. In fiscal
2020, approximately $10.8 million of P&A was incurred in advance for films to be released in fiscal 2021, such
as Antebellum, Spiral, Barb and Star Go to Visa Del Mar, and Run. 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.

Gross Contribution. Gross contribution of the Motion Picture segment for fiscal 2020 increased as

compared to fiscal 2019, primarily due to increased Motion Picture revenue and lower direct operating expenses
as a percentage of Motion Picture revenue.

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

segment decreased $0.8 million, or 0.8%, primarily due to decreases in professional fees.

Television Production

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

ended March 31, 2020 and 2019:

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

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

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

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

Year Ended March 31,

Increase (Decrease)

2020

2019

Amount

Percent

(Amounts in millions)

$1,001.3

$920.9

$ 80.4

8.7%

879.9
30.7

90.7
37.3

53.4

774.5
36.8

109.6
43.5

105.4
(6.1)

(18.9)
(6.2)

13.6%
(16.6)%

(17.2)%
(14.3)%

$ 66.1

$ (12.7)

(19.2)%

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

87.9% 84.1%
9.1% 11.9%

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

the fiscal years ended March 31, 2020 and 2019:

Television Production

Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home Entertainment Revenue

Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Packaged Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Year Ended
March 31,

Increase
(Decrease)

2020

2019

Amount

Percent

(Amounts in millions)

$ 715.7
152.7

$655.8
136.0

$ 59.9
16.7

9.1%
12.3%

57.4
3.4

60.8
72.1

66.9
7.6

74.5
54.6

(9.5)
(4.2)

(13.7)
17.5

(14.2)%
(55.3)%

(18.4)%
32.1%

$1,001.3

$920.9

$ 80.4

8.7%

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

television revenue increased in fiscal 2020 as compared to fiscal 2019, due to an increase in syndicated licensing
revenue, and increased intersegment revenues from the licensing of Starz original series. These increases were
offset partially by decreased revenue from fewer television episodes delivered, and decreased license fees from
unscripted television programs in fiscal 2020 as compared to fiscal 2019.

International revenue in fiscal 2020 increased $16.7 million, or 12.3%, as compared to fiscal 2019, primarily

due to revenue from Mythic Quest: Raven’s Banquet Season 1, Orange Is the New Black Season 7, Dear White
People Season 3, and Greenleaf Season 4, and intersegment revenue from STARZPLAY International from the
Starz original series The Rook Season 1, Power Season 6, Vida Season 2, and The Spanish Princess Season 1 in
fiscal 2020. This compared to revenue in fiscal 2019 from Orange Is the New Black Seasons 6 & 7, Step Up:
High Water Season 2, Greenleaf Season 3, Ash vs. Evil Dead Season 3, and Power Season 5.

Home entertainment revenue in fiscal 2020 decreased $13.7 million, or 18.4%, as compared to fiscal 2019,

primarily driven by decreases from digital media revenue in fiscal 2019 for The Royals, and the Starz original
series, The Missing Season 2 and Black Sails Season 4, which were partially offset by increased digital media
revenue in fiscal 2020 for Are We There Yet.

Other revenue increased in fiscal 2020 as compared to fiscal 2019 due to a full year of revenue in fiscal
2020 from 3 Arts Entertainment, which compared to revenue in fiscal 2019 from the acquisition date of May 29,
2018 to March 31, 2019. Revenue of 3 Arts Entertainment was negatively impacted by a small amount in our
fiscal year ended March 31, 2020 as a result of the COVID-19 global pandemic, and will be more significantly
impacted in the fiscal year ended March 31, 2021, the extent of which will depend on when film and television
productions and releases return to pre COVID-19 levels.

The extent of the impact of the COVID-19 global pandemic on Television Production revenues, will depend

on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that
have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to
contain or mitigate the outbreak, and global economic conditions.

Direct Operating Expense. Direct operating expense of the Television Production segment in fiscal 2020

increased $105.4 million, or 13.6%, due to the increase in Television Production revenues. Direct operating
expenses as a percentage of television production revenue increased primarily due to the mix of titles generating
revenue in fiscal 2020 as compared to fiscal 2019. In particular, fiscal 2019 included significant revenue from
higher margin television series, such as Orange Is The New Black and Step Up: High Water as compared to fiscal

2020 which included new television programs (Manhunt, Zoey’s Extraordinary Playlist, Mythic Quest: Raven’s
Banquet, Kevin Hart: Don’t F**k This Up, The Rook, Ambitions), which typically result in higher amortization
expenses in relation to revenues initially.

Gross Contribution. Gross contribution of the Television Production segment for fiscal 2020 decreased as

compared to fiscal 2019 even though revenues increased, due to higher direct operating expenses as a percentage
of television production revenue, partially offset by lower distribution and marketing expense.

General and Administrative Expense. General and administrative expenses of the Television Production

segment decreased $6.2 million, or 14.3%, primarily due to decreases in salaries and related expenses, incentive
compensation and professional fees. 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, 2020 and 2019:

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

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

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

Year Ended
March 31,

Increase (Decrease)

2020

2019

Amount

Percent

(Amounts in millions)

$1,486.8

$1,461.0

$ 25.8

1.8%

680.2
426.1

380.5
87.5

600.9
326.1

534.0
97.7

79.3
100.0

13.2%
30.7%

(153.5)
(10.2)

(28.7)%
(10.4)%

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

$ 293.0

$ 436.3

$(143.3)

(32.8)%

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

45.7%
25.6%

41.1%
36.6%

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

Year Ended
March 31, 2020

Year Ended
March 31, 2019

Starz
Networks

STARZPLAY
International

Other
Streaming
Services

Total
Media
Networks

Starz
Networks

STARZPLAY
International

Other
Streaming
Services

Total
Media
Networks

(Amounts in millions)

Media Networks Segment:
Revenue . . . . . . . . . . . . . . . . . $1,430.1
Expenses:

$ 22.9

$ 33.8 $1,486.8 $1,440.9

$ 2.1

$ 18.0 $1,461.0

Direct operating

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

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

554.3

120.1

5.8

680.2

563.7

30.1

7.1

600.9

346.9

528.9

42.4

(139.6)

36.8

(8.8)

426.1

380.5

303.1

574.1

5.2

(33.2)

17.8

(6.9)

326.1

534.0

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

66.1

15.0

6.4

87.5

86.1

7.2

4.4

97.7

Segment profit . . . . . . . . . . . . $ 462.8

$(154.6)

$(15.2) $ 293.0 $ 488.0

$(40.4)

$(11.3) $ 436.3

Subscriber Data. The number of period-end service subscribers is a key metric to evaluate a non-ad

supported subscription video service as a growing or decreasing subscriber base is a key indicator of the health of
the overall business. Service subscribers may impact revenue differently depending on specific distribution
agreements we have with our distributors which may include fixed fees, rates per basic video household or a rate
per STARZ subscriber. The table below sets forth, for the periods presented, subscriptions to our Media
Networks and STARZPLAY Arabia services.

The pro forma subscriber data as of March 31, 2019 reflects the number of subscribers as of March 31,
2019, adjusted to remove the estimated number of subscribers to MVPD video packages or MVPD bundles that
include the Starz service for distributors who dropped or removed Starz from these highly distributed MVPD
video packages or MVPD bundles. This is a key metric to show prior period subscribers on a comparable basis to
March 31, 2020 quarter-end subscribers. An MVPD video package is an offering by our distributors to its
customers of multiple distinct video networks or services for a single recurring price where there is no distinction
of price on any one specific network. An MVPD bundle is an offering by our distributors to its customers of two
or more distinct MVPD services, such as video, internet and phone, sold on a subscription basis to a consumer or
subscriber for a single price, and may include additional premium channels, like STARZ, to promote the bundle
offering.

March 31,
2020

March 31,
2019

Pro Forma

March 31,
2019

(Amounts in millions)

Domestic Subscribers

STARZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Other Streaming Services(1)

International Subscribers

STARZPLAY International . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
STARZPLAY Arabia(2)

18.9
0.7

19.6

3.2
1.8

5.0

Total Domestic and International Subscribers . . . .

24.6

Subscribers by Platform:

Linear Subscribers . . . . . . . . . . . . . . . . . . . . . . . . .
OTT Subscribers(3) . . . . . . . . . . . . . . . . . . . . . . . . .

Total Global Subscribers . . . . . . . . . . . . . . . .

14.0
10.6

24.6

24.7
0.3

25.0

2.0
1.1

3.1

28.1

22.6
5.5

28.1

16.8
0.3

17.1

2.0
1.1

3.1

20.2

14.7
5.5

20.2

(1) Represents subscribers of our premium Spanish-language streaming service, Pantaya, which was launched

in the quarter ended September 30, 2017.

(2) Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee.
(3) OTT subscribers includes subscribers of STARZPLAY Arabia, as presented above.

Revenue. The increase in Media Networks’ revenue was driven by higher STARZPLAY International
revenue of $20.8 million, increased Other Streaming Services revenue of $15.8 million, partially offset by
decreased Starz Networks’ revenue of $10.8 million. STARZPLAY International revenue increased as a result of
subscriber and revenue growth in the international territories launched in fiscal 2019, and additional territories
launched since March 31, 2019. Other Streaming Services revenue increased due to subscriber growth. Starz
Networks’ revenue decreased as a result of declines in revenue from traditional linear services, which was mostly
offset by higher OTT revenue resulting from increased subscriptions.

As a result of the COVID-19 global pandemic, television and streaming consumption around the globe has

increased and home entertainment demand continues. For instance, STARZ has experienced an increase in
viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both
domestically and internationally. This increase in subscribers is dependent upon future economic conditions, our
ability to deliver original content and may vary due to changes in consumer viewing and subscription patterns,
such as declining linear subscribers and increasing subscribers to OTT services. This increase may not be
indicative of future results and growth may slow as governmental and other restrictions are relaxed, and as a
result of the current and possible longer term negative economic impact of the pandemic.

During fiscal 2020 and fiscal 2019, the following original series premiered on STARZ:

Year Ended March 31, 2020

Year Ended March 31, 2019

First Quarter:

The Spanish Princess
Vida Season 2
The Rook Season 1

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

Second Quarter:

Sweetbitter Season 2
Power Season 6A
Power Confidential Season 1

Third Quarter:

Dublin Murders
Leavenworth

Fourth Quarter:

Power Season 6B
Wrong Man Season 2
Outlander Season 5

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

Direct Operating and Distribution and Marketing Expenses. 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 original series and first-run output theatrical movies premiering on the network during the period.
Programming cost amortization and advertising and marketing costs generally increase in periods where new
original series premiere. In addition, the launch of the STARZPLAY international service has and will continue
to result in an increase in expenses as the service continues to expand.

The increase in Media Networks direct operating expenses is due to higher direct operating expenses at
STARZPLAY International, which were partially offset by lower Starz Networks’ direct operating expenses in
fiscal 2020. Direct operating expenses at STARZPLAY International increased as a result of higher programming
cost amortization related to the launch and operation of STARZPLAY in additional international territories since
March 31, 2019. The decrease in direct operating expense at Starz Networks was due to a benefit of
$39.7 million associated with the modification of a content licensing arrangement, net of amortization for related
changes in content availability and air dates, and lower programming amortization related to our Starz Originals.
This benefit was partially offset by higher programming amortization related to theatrical releases under our
programming output agreement, and higher development expense related to our Starz Originals.

The increase in Media Networks distribution and marketing expense is due to increases at Starz Networks,
STARZPLAY International, and to a lesser extent, Other Streaming Services. Starz Networks’ distribution and
marketing expense increased due to increased operating costs associated with increased OTT revenue and
increased marketing spend. Distribution and marketing expense for STARZPLAY International increased due to
an increase in advertising and marketing costs in order to drive subscriber growth in the international territories

launched in fiscal 2019, and additional territories launched since March 31, 2019. The increase in distribution
and marketing expense for Other Streaming Services was primarily attributable to increased advertising and
marketing costs in order to drive subscriber growth.

Gross Contribution. Gross contribution of the Media Networks segment for fiscal 2020 was primarily from
Starz Networks, offset partially by negative contributions from STARZPLAY International which has continued
to expand in additional territories, and to a lesser extent, negative contribution from Other Streaming Services.
The decrease in gross contribution compared to fiscal 2019 was primarily due to higher negative contributions
from STARZPLAY International, and lower gross contribution from Starz Networks driven by increased
distribution and marketing expense.

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

in fiscal 2020 decreased from fiscal 2019, driven by a decrease in Starz Networks, partially offset by increased
general and administrative expenses for STARZPLAY International. The decrease in Starz Networks resulted
from a decrease in payroll and related costs.

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. As of March 31, 2020, we had cash and cash equivalents of $318.2 million. Our
debt at March 31, 2020 primarily consisted of a $1.5 billion five-year revolving credit facility (with no amounts
outstanding at March 31, 2020) due March 2023 (the “Revolving Credit Facility”), a five-year term loan A
facility due March 2023 (the “Term Loan A”), a seven-year term loan B facility due March 2025 (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 method or other equity
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 $167.8 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 12 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. In
addition, the launch of the Company’s STARZPLAY international service has and will require capital investment
as the service expands to other international territories.

In the short-term, while a portion of our revenue has been reduced as a result of the COVID-19 global
pandemic, our cash requirements for productions and marketing spends have also been reduced. As previously

discussed, in some areas we have experienced increases in revenue and viewership of our content. We expect that
the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of
operations and financial condition, will depend on, among other things, the duration and spread of the pandemic,
the impact of governmental regulations that have been, and may continue to be, imposed in response to the
pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global economic conditions.
As a result, we cannot predict the outcome of the full extent of the COVID-19 global pandemic on our operating
results, cash flows and financial position.

However, we currently 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 home entertainment release schedules, and future equity
method or other investment funding requirements, and international expansion. However, we may seek
alternative sources of capital in connection with the STARZPLAY international expansion. 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 continue to expand our STARZPLAY international service and 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. Our ability to
obtain any additional financing will depend on, among other things, our business plans, operating performance
and the condition of the capital markets at the time we seek financing. Additionally, the COVID-19 global
pandemic has caused disruption in the capital markets, which could make financing more difficult and/or
expensive, and we may not be able to obtain such financing. 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,
2020, 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, 2020, 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, including repurchases subsequent
to March 31, 2020 of approximately $1.0 million, approximately $288.1 million of our common shares have been
purchased under the plan, leaving approximately $179.9 million of authorized potential purchases. The remaining
$179.9 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. During the fiscal year ended
March 31, 2020, we repurchased 0.7 million of our Class A voting shares for an aggregate cost of $3.8 million,
with a weighted average repurchase price per share of $5.43.

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, 2020, 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 accumulated deficit or net loss, and therefore the Company’s net loss of $206.4 million and
accumulated deficit of $16.9 million were deemed free of restrictions at March 31, 2020.

Discussion of Operating, Investing, Financing Cash Flows

Cash and cash equivalents increased by $136.8 million for the fiscal year ended March 31, 2020 and
decreased by $193.5 million for the fiscal year ended March 31, 2019, before foreign exchange effects on cash.
Components of these changes are discussed below in more detail.

Operating Activities. Cash flows provided by operating activities for the fiscal years ended March 31, 2020

and 2019 were as follows:

Operating Activities:
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of films and television programs and program rights . . . . . . . .
Non-cash share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder litigation settlement charges and interest . . . . . . . . . . . . . . . . . . .
Other non-cash charges included in operating activities . . . . . . . . . . . . . . . . .

Year Ended March 31,

2020

2019

Net Change

(Amounts in millions)

2.8
1,706.7
50.5
(176.4)
(4.2)
—
263.9

130.0
1,516.5
68.1
(152.0)
(15.1)
(221.3)
201.5

$(127.2)
190.2
(17.6)
(24.4)
10.9
221.3
62.4

Cash flows from operations before changes in operating assets and
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,843.3

1,527.7

315.6

Changes in operating assets and liabilities:

Accounts receivable, net and other assets . . . . . . . . . . . . . . . . . . . . . . . .
Investment in films and television programs and program rights . . . . . .
Other changes in operating assets and liabilities . . . . . . . . . . . . . . . . . . .

397.5
(1,545.3)
(80.9)

470.8
(1,469.9)
(101.1)

(73.3)
(75.4)
20.2

Changes in operating assets and liabilities . . . . . . . . . . . . . . . . . . . .

(1,228.7)

(1,100.2)

(128.5)

Net Cash Flows Provided By Operating Activities . . . . . . . . . . . . . . . . . . .

614.6

427.5

$ 187.1

Cash flows provided by operating activities for the fiscal year ended March 31, 2020 were $614.6 million
compared to cash flows provided by operating activities of $427.5 million for the fiscal year ended March 31,
2019. The increase in cash provided by operating activities for fiscal 2020 as compared to fiscal 2019 is due to
higher cash flows from operations before changes in operating assets and liabilities, which in fiscal 2019
included the portion of the shareholder litigation settlement associated with the Starz merger. The increase was

partially offset by an increase in cash used from changes in operating assets and liabilities which were driven by
lower decreases in accounts receivable and other assets, and increases in investment in films and television
programs and program rights. In addition, cash flows provided by operating activities for the year ended
March 31, 2020 benefited by approximately $253.0 million from the monetization of accounts receivables
programs, as compared to a benefit of $347.0 million for the year ended March 31, 2019 (see Note 20 to our
consolidated financial statements).

Investing Activities. Cash flows used in investing activities for the fiscal years ended March 31, 2020 and

2019 were as follows:

Investing Activities:
Proceeds from the sale of equity method investees, net of transaction costs . . . . . . . . . . . . . .
Investment in equity method investees and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business acquisitions, net of cash acquired of $5.5 in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2020

2019

(Amounts in millions)

$ —
(20.6)
—
(31.1)

$ 48.0
(48.6)
(77.3)
(43.8)

Net Cash Flows Used In Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(51.7)

$(121.7)

Cash used in investing activities of $51.7 million for the fiscal year ended March 31, 2020 compared to cash

used in investing activities of $121.7 million for the fiscal year ended March 31, 2019, as reflected above. The
change was primarily due to cash used in fiscal 2019 for the purchase of 3 Arts Entertainment, net of cash
acquired, and less cash used in fiscal 2020 for investment in equity method investees and capital expenditures,
offset partially by the net proceeds from the sale of our equity interest in Pop in fiscal 2019.

Financing Activities. Cash flows used in financing activities for the fiscal years ended March 31, 2020 and

2019 were as follows:

Debt — borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt — repurchases and repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net (repayments of) proceeds from debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans — borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans — repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net (repayments of) proceeds from production loans . . . . . . . . . . . . . . . . . . . . . . .

Repurchase of common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dissenter liability accrued at acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended March 31,

2020

2019

(Amounts in millions)
852.1
(1,033.4)

$ 3,541.2
(3,212.7)

(181.3)
59.0
(293.8)

(234.8)

(2.6)
—
(7.4)

328.5
338.1
(305.4)

32.7

—
(797.3)
(63.2)

Net Cash Flows Used In Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (426.1)

$ (499.3)

Cash flows used in financing activities of $426.1 million for the fiscal year ended March 31, 2020 compared

to cash flows used in financing activities of $499.3 million for the fiscal year ended March 31, 2019.

Cash flows used in financing activities for fiscal 2020 primarily reflects net production loan repayments of

$234.8 million and net debt repurchases and repayments of $181.3 million. In addition, cash flows used in
financing activities for fiscal 2020 reflects cash used for the repurchase of common shares of $2.6 million. Net
debt repurchases and repayments of $181.3 million in fiscal 2020 included the below transactions:

•

In March 2020, we paid $1.0 million to repurchase $1.3 million principal amount of the 5.875% Senior
Notes, and we paid $3.5 million to repurchase $4.4 million principal amount of the 6.375% Senior
Notes.

In March 2020, we paid $22.0 million to repurchase $28.0 million principal amount of the Term Loan
B.

• Voluntary prepayments totaling $101.9 million in principal outstanding under the Term Loan B,

together with accrued and unpaid interest.

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, 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.

Debt

See Note 7 to our consolidated financial statements for a discussion of our debt.

Production Loans

See Note 10 to our consolidated financial statements for a discussion of our production loans.

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, 2020:

2021

2022

2023

2024

2025

Thereafter

Total

Year Ended March 31,

(Amounts in millions)

Future annual repayment of debt and other
obligations recorded as of March 31, 2020
(on-balance sheet arrangements)

Revolving credit facility . . . . . . . . . . . . . . . . $ — $ — $ — $ — $ — $ — $ —
712.5
52.5
Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . .
965.1
12.5
Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . .
518.7
—
5.875% Senior Notes . . . . . . . . . . . . . . . . . . .
545.6
—
6.375% Senior Notes . . . . . . . . . . . . . . . . . . .
450.6
353.8
Film obligations and production loans(1) . . . .
187.0
41.2
. . . . . . . . . . . .
Operating lease obligations(2)
42.4
3.0
. . . . . . . . . . . . . .
Finance lease obligations(2)

75.0 585.0 —
12.5
12.5
12.5
—
—
—
— 545.6
—
7.5
38.3
47.0
20.3
32.4
33.1
1.0
0.9
0.9

—
915.1
518.7
—
2.4
13.0
1.0

—
—
—
—
1.6
47.0
35.6

463.0 168.5 669.1 586.9 1,450.2

84.2

3,421.9

Contractual commitments by expected
repayment date (off-balance sheet
arrangements)

Film obligation and production loan

commitments(3)
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Interest payments(4)
Other contractual obligations . . . . . . . . . . . .

391.8 384.1 111.5
74.1
161.8 161.8 157.0 133.4
10.8
143.3

75.6

45.4

7.8
90.8
7.3

17.4
34.0
49.0

986.7
738.8
331.4

Total future repayment of debt and other

commitments under contractual
obligations(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,159.9 $790.0 $983.0 $805.2 $1,556.1 $184.6 $5,478.8

696.9 621.5 313.9 218.3

105.9

100.4

2,056.9

(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) See Note 8 to our consolidated financial statements for further information on leases.
(3) 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 (including interest on finance lease obligations), 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 $167.8 million of redeemable noncontrolling interest, as future

amounts and timing are subject to a number of uncertainties such that we are unable to make sufficiently
reliable estimations of future payments (see Note 12 to our consolidated financial statements).

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 18 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 13 to our consolidated financial statements, remaining performance obligations
were $1.6 billion at March 31, 2020 (March 31, 2019—$1.8 billion). The backlog portion of remaining
performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production
segments was $1.0 billion at March 31, 2020 (March 31, 2019—$1.2 billion), respectively.

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements and other relationships with unconsolidated entities that will

affect our liquidity or capital resources. We have no special purpose entities that provided off-balance sheet
financing, liquidity or market or credit risk support, nor do we engage in leasing, hedging or research and
development services that could expose us to liability that is not reflected on the face of our consolidated
financial statements. Our commitments to fund operating leases, minimum guarantees, production loans, equity
method investment funding requirements and all other contractual commitments not reflected on the face of our
consolidated financial statements are presented in the table above.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Currency and Interest Rate Risk Management

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign

currency exchange rates. Our exposure to interest rate risk results from the financial debt instruments that arise
from transactions entered into during the normal course of business. As part of our overall risk management
program, we evaluate and manage our exposure to changes in interest rates and currency exchange risks on an
ongoing basis. Hedges and derivative financial instruments will 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 denominated in various foreign currencies. 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 19 to our consolidated
financial statements for additional information on our financial instruments.

Interest Rate Risk. At March 31, 2020, we had interest rate swap agreements to fix the interest rate on $1.7
billion of variable rate LIBOR-based debt. See Note 19 and Note 23 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, 2020, each quarter point change
in interest rates would result in a $3.7 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 3.24% to 3.74%
and applicable margins ranging from 1.75% over the one, two, or three-month LIBOR to 2.25% 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 $0.4 million in additional costs capitalized to the respective
film or television asset.

At March 31, 2020, our 5.875% Senior Notes and 6.375% Senior Notes had an outstanding principal value

of $1,043.2 million, and an estimated fair value of $883.4 million. 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
$17.7 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 $45.5 million.

The following table presents information about 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, or the
cash flows associated with the notional amounts of interest rate derivative instruments, and related weighted-
average interest rates by expected maturity or required principal payment dates and the fair value of the
instrument as of March 31, 2020:

2021

2022

2023

2024

2025

Thereafter

Total

Year Ended March 31,

Fair Value
March 31,
2020

(Amounts in millions)

Debt and Production Loans
Variable Rates:

Revolving Credit Facility(1) . . . . . . $ — $ — $ — $ — $ — $— $ — $ —

Average Interest Rate . . . . . . . . — —
75.0

Term Loan A(1) . . . . . . . . . . . . . . . .
Average Interest Rate . . . . . . . .
Term Loan B(1) . . . . . . . . . . . . . . . .
Average Interest Rate . . . . . . . .
Production loans(1) . . . . . . . . . . . . .
Average Interest Rate . . . . . . . .

—

—
—
—

—
—
—
52.5
585.0 —
—
2.74% 2.74% 2.74% —
12.5
915.1 —
12.5
3.24% 3.24% 3.24% 3.24% 3.24% —
—
132.8 —
—
3.68% —

18.6 —
3.24% —

—
—

12.5

Fixed Rates:

5.875% Senior Notes . . . . . . . . . . . — —
Average Interest Rate . . . . . . . . — —
6.375% Senior Notes . . . . . . . . . . . — —
Average Interest Rate . . . . . . . . — —

—
—
—
—
— 545.6
—
— 6.375% —

518.7 —
5.875% —
—
—

Interest Rate Swaps(2)

. . . . . . . . . .

Variable to fixed notional

712.5

637.7

965.1

845.7

151.4

518.7

430.5

545.6

452.9

amount . . . . . . . . . . . . . . . . . — —

—

— 1,700.0

1,700.0

(187.9)

(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. See Note 19 to our consolidated
financial statements. On May 15, 2020, the Company entered into certain transactions which effectively
extended the maturity date on an aggregate of $1.05 billion of interest rate swaps by an additional 2 to 5
years, subject to Mandatory Early Termination Dates of March 23, 2025. This resulted in a decrease of the
weighted average fixed pay rate from 2.87028% to 2.39293% per annum representing an annual cash
interest savings of approximately $8.1 million compared to the prior swaps. See Note 23 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, 2020, 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, 2020.

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, 2020. 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, 2020, the Company

maintained effective internal control over financial reporting. The effectiveness of the Company’s internal
control over financial reporting has been audited by Ernst & Young LLP, an independent 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, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting. We have not experienced any material impact to our internal controls over financial
reporting despite the fact that most of our employees are working remotely due to the COVID-19 global
pandemic, but we are continually monitoring and assessing the COVID-19 situation on our internal controls.

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, 2020, 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, 2020, 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 2020 consolidated financial statements and the related notes and schedule listed in
the Index at Item 15(a) and our report dated May 27, 2020 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 27, 2020

/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 2020 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended
March 31, 2020.

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-73.

(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, 2020:

Reserves:

Schedule II. Valuation and Qualifying Accounts

Lions Gate Entertainment Corp.

March 31, 2020

(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 . .

$ 35.0
5.4
$
$401.1

$ 81.2
5.7
$
4.5
$

$ —
$ —
$30.2(4)

$ (82.5)(2)
(1.8)(3)
$
$ —

$ 33.7
9.3
$
$435.8

Year Ended March 31, 2019:

Reserves:

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
$

$126.0
$ (2.0)
$313.9

$168.3
$ (1.0)
$ 67.3

$ —
$ —
$14.0(4)

$(147.2)(2)
$
(0.1)(3)
$ —

$ 35.0
$
5.4
$401.1

$ —
$ —
$ —

$(180.7)(2)
$
(0.5)(3)
$ —

$ 56.2
$
7.5
$ 73.2

(1) Charges for returns and allowances are charges against revenue.
(2) Actual returns and fluctuations in foreign currency exchange rates.
(3) Uncollectible accounts written off and fluctuations in foreign currency exchange rates.
(4) Valuation allowance addition recorded in other comprehensive income and primarily associated with

hedging losses.

100

Item 15(b).

INDEX TO EXHIBITS

Exhibit
Number

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

2.1

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

Incorporated by Reference

Form Exhibit

Filing Date/
Period End Date

8-K

2.1

7/1/2016

8-K

8-K/A

8-K

3.1

4.1

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

Description of Class A voting shares, no par value per share

S-4 —

Description of Class B non-voting shares, no par value per share

S-4 —

8/1/2016

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

10-Q 10.62

12/31/2008

8-K 10.65

7/10/2009

8-K 10.68

10/23/2009

8-K

2.1

1/17/2012

8-K

10.1

6/3/2013

8-K

10.1

2/11/2015

101

Exhibit
Number

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

Exhibit Description

Underwriting Agreement dated April 8, 2015, by and among Lions
Gate Entertainment Corp., MHR 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, Discovery Communications, Inc.,
and the affiliated funds of Mammoth party thereto

Incorporated by Reference

Form Exhibit

Filing Date/
Period End Date

8-K

1.1

4/9/2015

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

102

Exhibit
Number

10.18

10.19*

10.20*

10.21

Exhibit Description

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.

Incorporated by Reference

Form Exhibit

Filing Date/
Period End Date

8-K

10.9

7/1/2016

Amendment to Employment Agreement, dated October 11, 2016,
between the Company and Jon Feltheimer

8-K

10.1

10/13/2016

Amendment to Employment Agreement, dated November 3, 2016,
between Lions Gate Entertainment Corp. and Michael Burns

8-K

10.1

11/4/2016

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

8-K

10.1

12/8/2016

10.22*

Executive Annual Bonus Program

10-Q 10.36

6/30/2017

10.23*

Form of Restricted Share Unit Award Agreement

10-Q 10.38

9/30/2017

10.24

10.25

10.26*

10.27

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).

8-K

10.1

12/11/2017

8-K

10.1

3/22/2018

Employment Agreement between Lions Gate Entertainment Corp.
and Brian Goldsmith dated as of October 1, 2018

10-Q 10.39

12/31/2018

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.

10-K 10.34

5/23/2019

10.28*

Lions Gate Entertainment Inc. Deferred Compensation Plan

10-Q 10.35

8/8/2019

10.29*

Lions Gate Entertainment Corp. 2019 Performance Incentive Plan.

8-K

10.1

9/13/2019

10.30*

Employment Agreement between Lions Gate Entertainment Corp.
and James W. Barge dated November 1, 2019

10-Q 10.38

11/7/2019

103

Exhibit
Number

Exhibit Description

Incorporated by Reference

Form Exhibit

Filing Date/
Period End Date

10.31*

Form of Restricted Share Unit Award Agreement

10-Q 10.39

11/7/2019

10.32*

Form of Nonqualified Stock Option Agreement

10-Q 10.40

11/7/2019

10.33*

Form of Share Appreciation Rights Award Agreement

10-Q 10.41

11/7/2019

10.34*x

Employment Agreement between Lions Gate Entertainment Corp.
and Corii D. Berg dated as of May 15, 2020

21.1x

23.1x

24.1x

31.1x

31.2x

32.1x

101x

Subsidiaries of the Company

Consent of Ernst & Young LLP

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

The following financial statements from the Company’s Annual
Report on Form 10-K for the year ended March 31, 2020, formatted
in Inline XBRL: (i) Consolidated Balance Sheets (ii) Consolidated
Statements of Operations, (iii) Consolidated Statements of
Comprehensive Income, (iv) Consolidated Statements of Equity,
(v) Consolidated Statements of Cash Flows and (vi) Notes to
Consolidated Financial Statements, tagged as blocks of text and
including detailed tags.

104x

The cover page from the Company’s Annual Report on Form 10-K
for the year ended March 31, 2020 (formatted as Inline XBRL and
contained in Exhibit 101).

* Management contract or compensatory plan or arrangement.
x Filed herewith

ITEM 16. FORM 10-K SUMMARY.

None.

104

SIGNATURES

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 27,
2020.

LIONS GATE ENTERTAINMENT CORP.

By: /s/ James W. Barge

James W. Barge
Chief Financial Officer

DATE: May 27, 2020

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, 2020; 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

Title

Date

/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

Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)

May 27, 2020

Director

May 27, 2020

Director

May 27, 2020

Director

May 27, 2020

Chief Executive Officer (Principal
Executive Officer) and Director

May 27, 2020

Director

May 27, 2020

Director

May 27, 2020

105

Signature

/s/ SIR LUCIAN GRAINGE

Sir Lucian Grainge

/s/ SUSAN MCCAW

Susan McCaw

/s/ YVETTE OSTOLAZA

Yvette Ostolaza

Title

Director

Date

May 27, 2020

Director

May 27, 2020

Director

May 27, 2020

/s/ MARK H. RACHESKY, M.D.

Chairman of the Board of Directors

May 27, 2020

Mark H. Rachesky, M.D.

/s/ DANIEL SANCHEZ

Daniel Sanchez

/s/ DARYL SIMM

Daryl Simm

/s/ HARDWICK SIMMONS

Hardwick Simmons

/s/ DAVID M. ZASLAV

David M. Zaslav

Director

May 27, 2020

Director

May 27, 2020

Director

May 27, 2020

Director

May 27, 2020

106

INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets — March 31, 2020 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations — Years Ended March 31, 2020, 2019 and 2018 . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income (Loss) — Years Ended March 31, 2020, 2019 and

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity — Years Ended March 31, 2020, 2019 and 2018 . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows — Years Ended March 31, 2020, 2019 and 2018 . . . . . . . . . . . .
Notes to Audited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page
Number

F-2
F-4
F-5

F-6
F-7
F-8
F-9

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, 2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its
operations and its cash flows for each of the three years in the period ended March 31, 2020, 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, 2020, 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 27, 2020 expressed an
unqualified opinion thereon.

Adoption of ASU No. 2016-02

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting
for leases in fiscal 2020 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases
(Topic 842), and the related amendments.

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to
which they relate.

F-2

Description of the
Matter

Valuation of Goodwill
At March 31, 2020, the Company’s goodwill was $2.8 billion. As disclosed in Note 1 to the
consolidated financial statements “Description of Business, Basis of Presentation and Significant
Accounting Policies,” goodwill is tested for impairment at least annually at the reporting unit
level, and between 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.

Auditing management’s evaluation of goodwill for impairment is complex and requires
significant judgment due to the estimation required in determining the fair value of the reporting
units. These fair value estimates are affected by significant assumptions such as the discount rate,
projected annual revenue growth rate and EBITDA margin, terminal growth rate, and market
multiples, which are affected by expectations about future market or economic conditions.

How We Addressed
the Matter in Our
Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s goodwill impairment review process, including controls over
management’s assessment of the significant assumptions used in the fair value measurements
described above.

Description of the
Matter

To test the estimated fair values of the Company’s reporting units, we performed audit
procedures that included, among others, assessing the methodologies used and testing the
significant assumptions discussed above and the underlying data used by the Company in its
analyses. We compared the significant assumptions used by management to current industry
and economic trends, changes to the Company’s business model, historical financial
performance, and other relevant factors. We assessed the historical accuracy of management’s
forecasts and performed sensitivity analyses of significant assumptions to evaluate the changes
in the fair value of the reporting units that would result from changes in the assumptions. In
addition, we tested management’s reconciliation of the fair value of the reporting units to the
market capitalization of the Company. We also involved our specialists to help evaluate the
reasonableness of certain significant assumptions and the valuation methodologies used.

Pre-release Film Impairments
As disclosed in Note 1 to the consolidated financial statements “Description of Business, Basis
of Presentation and Significant Accounting Policies,” “Investment in Films and Television
Programs” is stated at the lower of amortized cost or estimated fair value. As disclosed in Note
3 to the consolidated financial statements “Investment in Films and Television Programs and
Program Rights,” total impairment charges on investment in films and television programs
related to theatrical films were $55.2 million for the year ended March 31, 2020 and the
unamortized balance related to completed and not released and in progress theatrical films was
$150.8 million at March 31, 2020.

Auditing the Company’s impairment evaluation for theatrical films prior to release is
challenging and subjective as the key inputs into the analysis include estimates of future
anticipated revenues and box office performance, which may differ from future actual results.
These estimates are based in part on the historical performance of similar films, test audience
results when available, information regarding competing film releases, and critic reviews.

How We Addressed
the Matter in Our
Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s theatrical impairment review process. For example, we tested
controls over management’s review of unreleased theatrical films for indicators of impairment
and management’s determination of the significant assumptions mentioned above.

To test the assessment of unreleased theatrical films for impairment, our audit procedures
included, among others, testing the completeness and accuracy of the underlying data as well
as the significant assumptions mentioned above. For example, we assessed management’s
assumptions by comparing them to historical performance of comparable films and to current
operating information, and we considered the historical accuracy of management’s estimates.
We also performed sensitivity analyses to evaluate the potential changes in the expected
profitability of unreleased films resulting from reasonable changes in the assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2001.

Los Angeles, California
May 27, 2020

F-3

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS

ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Program rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2020

March 31,
2019

(Amounts in millions)

$ 318.2
522.0
310.5
157.4

$ 184.3
647.2
295.7
267.2

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

1,308.1
1,517.3
140.9
40.3
1,719.6
2,833.5
391.5
—

1,394.4
1,672.0
155.3
26.2
1,871.6
2,833.5
436.1
19.8

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,951.2

$8,408.9

LIABILITIES
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participations and residuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Film obligations and production loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt — short term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 18)

EQUITY
Class A voting common shares, no par value, 500.0 shares authorized, 83.0 shares issued

$ 526.9
441.9
353.7
68.6
116.6

1,507.7
2,664.4
421.6
96.9
334.9
61.3
36.6
167.8

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

(March 31, 2019 — 82.5 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

659.2

649.7

Class B non-voting common shares, no par value, 500.0 shares authorized, 136.4 shares

issued (March 31, 2019 — 133.5 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings (accumulated deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Lions Gate Entertainment Corp. shareholders’ equity . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,221.7
(16.9)
(206.0)

2,658.0
2.0

2,140.6
208.7
(80.3)

2,918.7
3.2

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,660.0

2,921.9

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,951.2

$8,408.9

See accompanying notes.

F-4

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:

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

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

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

Interest expense

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

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

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

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net loss attributable to noncontrolling interests . . . . .

Net income (loss) attributable to Lions Gate Entertainment

Year Ended March 31,

2020

2019

2018

(Amounts in millions, except per share amounts)
$4,129.1
$3,680.5
$3,890.0

2,226.1
1,008.7
430.4
197.7
24.3

3,887.2

2.8

(191.3)
—

(191.3)
—
8.8
(11.1)
5.4
(0.5)
(17.2)

(203.1)
(3.3)

(206.4)
18.0

2,028.2
835.5
445.4
163.4
78.0

3,550.5

130.0

(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

2,309.6
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

Corp. shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (188.4)

$ (284.2)

$ 473.6

Per share information attributable to Lions Gate

Entertainment Corp. shareholders:

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

$ (0.86)

$ (1.33)

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

$ (0.86)

$ (1.33)

Weighted average number of common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . . . . .

217.9
217.9
$ —

213.7
213.7
0.18

2.27

2.15

208.4
220.4
0.09

See accompanying notes.

F-5

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended March 31,

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized loss on available-for-sale securities, net of tax . . . . . . . . . . . . . . . . . .
Net unrealized loss on cash flow hedges, net of tax benefit of nil, $0.3 million, and

2020

2018

2019
(Amounts in millions)
$(206.4) $(299.6) $468.1
7.0
(0.5)

(0.6)
—

(5.8)
—

$0.1 million in 2020, 2019 and 2018, respectively . . . . . . . . . . . . . . . . . . . . . . . . .

(125.1)

(62.2)

(0.2)

Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Comprehensive loss attributable to noncontrolling interest . . . . . . . . . . . . . . . .

(332.1)
18.0

(367.6)
15.4

474.4
5.5

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

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

$(314.1) $(352.2) $479.9

See accompanying notes.

F-6

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(

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:

Year Ended March 31,

2020

2019

2018

(Amounts in millions)

$ (206.4) $ (299.6) $

468.1

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of films and television programs and program rights . . . . . . . . . . . . . .
Interest on dissenting shareholders’ liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions from equity method investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity interests loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197.7
1,706.7
—
14.9
50.5
68.5
—
(5.4)
17.2
0.5
(0.9)

163.4
1,516.5
(72.0)
11.6
68.1
29.0
1.8
1.9
42.9
87.6
(23.6)

159.0
1,641.7
56.5
14.3
88.4
20.1
—
35.7
52.8
(171.8)
(299.5)

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

397.5
(1,545.3)
(31.8)
(24.5)
6.8
(31.4)

470.8
(1,469.9)
41.0
(85.8)
(11.8)
(44.4)

(8.6)
(1,526.4)
(181.7)
62.6
5.1
(29.9)

Net Cash Flows Provided By Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

614.6

427.5

386.4

Investing Activities:
Proceeds from the sale of equity method investee, net of transaction costs . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in equity method investees and other
Business acquisitions, net of cash acquired of $5.5 and $18.7 in 2019 and 2018,

respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net Cash Flows Provided By (Used In) Investing Activities . . . . . . . . . . . . . . . . . . . . .

Financing Activities:
Debt — borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt — repurchases and repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans — borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production loans — repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dissenter liability accrued at acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax withholding required on equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(20.6)

—
(31.1)

(51.7)

48.0
(48.6)

(77.3)
(43.8)

393.7
(53.4)

(1.8)
(45.9)

(121.7)

292.6

852.1
(1,033.4)
59.0
(293.8)
—
(2.6)
—
(5.7)
1.7
(3.4)

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

3,712.6
(4,335.7)
319.7
(332.8)
—
—
—
(8.2)
44.9
(22.9)

(622.4)

56.6
(3.2)
324.7

Net Cash Flows Used In Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(426.1)

Net Change In Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Exchange Effects on Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . .
Cash and Cash Equivalents — Beginning Of Period . . . . . . . . . . . . . . . . . . . . . . . . . . .

136.8
(2.9)
184.3

Cash and Cash Equivalents — End Of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

318.2

184.3

378.1

See accompanying notes.

F-8

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business, Basis of Presentation and Significant Accounting Policies

Description of Business

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

F-9

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 from
the Company’s majority owned premium Spanish language streaming services business, Pantaya.

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.

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.

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.

F-10

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

• 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, are recognized as revenue starting at the
exhibition date and are 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.

O 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 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.

O 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. International revenues are derived from (1) licensing of the Company’s 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

F-11

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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. Media Networks’ revenues
also include revenues from the Company’s majority owned premium Spanish language streaming
services business, Pantaya.

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.

F-12

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 13 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.

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, 2020, 2019, and
2018, total capitalized interest was $3.8 million, $10.8 million, and $7.9 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. In determining the fair value of its films and television programs, the
Company generally 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 (a Level 3 fair value measurement, see Note 11).

F-13

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. 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 20). Costs of Packaged Media sales, including shipping and handling costs, are included in
distribution and marketing expenses.

Program Rights: Program rights include content licensed from third parties and content produced by and

licensed from the Television Production segment. 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 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.

Licensed content is stated at the lower of amortized cost or net realizable value, and produced original

content is stated at the lower of amortized cost or estimated fair value, as discussed above. Changes in

F-14

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 . . . . . . . . . . . . . . . . . . . . . . Lease term or the useful life, whichever is shorter
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not depreciated

1 — 7 years
2 — 5 years
2 — 10 years

26 years

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.

Leases

The Company adopted the new guidance for accounting for leases on April 1, 2019, utilizing the modified
retrospective approach, and therefore, results for reporting periods beginning after April 1, 2019 are presented
under the new guidance, while prior periods have not been adjusted (see further description in the Recent
Accounting Pronouncements section below).

The Company determines if an arrangement is a lease at its inception. The expected term of the lease used

for computing the lease liability and right-of-use (“ROU”) asset and determining the classification of the lease as
operating or financing may include options to extend or terminate the lease when it is reasonably certain that the
Company will exercise that option. The Company also elected to not separate lease components from non-lease
components across all lease categories. Instead, each separate lease component and non-lease component are
accounted for as a single lease component.

Operating Leases. Operating lease ROU assets, representing the Company’s right to use the underlying
asset for the lease term, are included in the “Other assets — non-current” line item in the Company’s March 31,
2020 consolidated balance sheet. Operating lease liabilities, representing the present value of the Company’s
obligation to make payments over the lease term, are included in the “Accounts payable and accrued liabilities”
and “Other liabilities — non-current” line items in the Company’s March 31, 2020 consolidated balance sheet.
The Company has entered into various short-term operating leases which have an initial term of 12 months or
less. These short-term leases are not recorded on the Company’s consolidated balance sheet. Lease expense for
operating leases is recognized on a straight-line basis over the lease term.

Finance Leases. Finance lease ROU assets are included in “Property and equipment, net” and finance lease

liabilities are included in the “Debt — short-term portion” and “Debt — non-current” line items in the
Company’s March 31, 2020 consolidated balance sheet. For finance leases, the Company recognizes interest
expense on lease liabilities using the effective interest method and amortization of ROU assets on a straight-line
basis over the lease term.

F-15

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The present value of the lease payments is calculated using a rate implicit in the lease, when readily
determinable. However, as most of the Company’s leases do not provide an implicit rate, the Company uses its
incremental borrowing rate to determine the present value of the lease payments for the majority of its leases.

Variable lease payments that are based on an index or rate are included in the measurement of ROU assets

and lease liabilities at lease inception. All other variable lease payments are expensed as incurred and are not
included in the measurement of ROU assets and lease liabilities.

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.

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 most equity method
investments on a one quarter lag and, accordingly, during the years ended March 31, 2020, 2019, and 2018, the
Company recorded its share of the income or loss generated by these entities for the years ended December 31,
2019, 2018 and 2017, 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).

F-16

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

Finite-Lived Intangible Assets

At March 31, 2020, the carrying value of the Company’s finite-lived intangible assets was approximately

$1.47 billion. The Company’s finite-lived intangible assets primarily relate to customer relationships associated
with U.S. MVPDs, including cable operators, satellite television providers and telecommunications companies
(“Traditional Affiliate”), which amounted to $1.45 billion. The amount of the Company’s customer relationship
asset related to these Traditional Affiliate relationships reflects the estimated fair value of these customer
relationships determined in connection with the acquisition of Starz on December 8, 2016, net of amortization
recorded since the date of the Starz acquisition. Identifiable intangible assets with finite lives are amortized to
depreciation and amortization expense over their estimated useful lives, ranging from 5 to 17 years. Through the
first quarter of the fiscal year ended March 31, 2020, the Company amortized the Starz Traditional Affiliate
customer relationships discussed above on a straight-line basis over 17 years.

The Company monitors its finite-lived intangible assets and changes in the underlying circumstances each

reporting period for indicators of possible impairments or a change in the useful life or method of amortization of
our finite-lived intangible assets. Due to changes in the industry related to the migration from linear to OTT and
direct-to-consumer consumption, in the second quarter of its fiscal year ended March 31, 2020, the Company
changed its pattern of amortization of its Traditional Affiliate customer relationship intangible assets from the
straight line method over 17 years to an accelerated amortization method which reflects amortization in the
proportion that current period revenues bear to management’s estimate of future revenue over the remaining
estimated useful life of the asset. This method results in greater amortization in the earlier years of the estimated
useful life of the asset than the latter years. This change in amortization method resulted in an increase to
amortization expense of $38.7 million during the year ended March 31, 2020, with a corresponding increase in
loss before income taxes, net loss, and net loss attributable to Lions Gate Entertainment Corp. shareholders. This
change in amortization method increased basic and diluted net loss per share for the year ended March 31, 2020
by $0.17 per share and $0.17 per share, respectively. There was no tax benefit from the change due to changes in
the Company’s valuation allowance on deferred taxes.

F-17

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the fiscal year ended March 31, 2020, due to the industry factors discussed above and the economic

uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our amortizable
intangible assets. The impairment analysis requires a comparison of undiscounted future cash flows expected to
be generated over the useful life of an asset to the carrying value of the asset. Based on our impairment analysis,
the estimated undiscounted cash flows exceeded the carrying amount of the assets and therefore no impairment
charge was required.

Goodwill and Indefinite-Lived Intangible Assets

At March 31, 2020, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and

$250.0 million, respectively. The Company’s indefinite-lived intangible assets consist of trade names primarily
representing the estimated fair value of the Starz brand name determined in connection with the acquisition of
Starz as of December 8, 2016. 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 that information 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, 2020 were Motion Picture, Media Networks, and our
Television and Talent Management businesses, both of which are part of our Television Production segment.

Goodwill and indefinite-lived intangible assets are not amortized, but are 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 or indefinite-lived intangible asset is less than its carrying value.
The Company performs its annual impairment test as of January 1 in each fiscal year. A goodwill or indefinite-
lived intangible asset impairment loss would be recognized for the amount that the carrying amount of a
reporting unit, including goodwill or an indefinite-lived intangible asset, exceeds its fair value. An entity may
perform a qualitative assessment of the likelihood of the existence of a goodwill or indefinite-lived intangible
asset impairment. The qualitative assessment is an evaluation, based on all identified events and circumstances
which impact the fair value of the reporting unit or indefinite-lived intangible asset, of whether or not it is more-
likely-than-not that the fair value is less than the carrying value of the reporting unit or indefinite-lived 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 a reporting unit or 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.

A quantitative assessment requires determining the fair value of our reporting units or indefinite-lived
intangible assets. The determination of the fair value of each reporting or indefinite-lived intangible asset 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 and requires
assumptions and estimates of many factors, including 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 the second quarter of fiscal 2020, due primarily to the sustained decline in the market price of our
common shares, the Company updated its quantitative impairment assessment for three (Television, Media
Networks and Motion Picture) of its reporting units. 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
4.0%, at a weighted average cost of capital (discount rate) ranging from 10% to 14%, which considered the risk

F-18

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a
whole. Based on the Company’s quantitative impairment assessment for the second quarter of fiscal 2020, the
Company determined that there were no goodwill impairments; however, two of its reporting units (Television
and Media Networks) were at risk for impairment.

For fiscal 2020, due to the decline in the market price of our common shares in the quarter ended March 31,

2020, which was significantly impacted by the economic uncertainty and market volatility resulting from the
COVID-19 global pandemic, the Company updated its quantitative impairment assessment for all of its reporting
units as of March 31, 2020. 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 4.0%, at a weighted
average cost of capital (discount rate) ranging from 11.5% to 15%, which considered the risk of achieving the
projected cash flows, including the risk applicable to the reporting unit, industry and market as a whole. Based on
the Company’s annual quantitative impairment assessment for fiscal 2020, the Company determined that two of
its reporting units (Television and Media Networks) were at risk for impairment due to relatively small changes
in certain key assumptions that could cause an impairment of goodwill.

Management will continue to monitor the reporting units for changes in the business environment that could

impact the recoverability in future periods. The recoverability of goodwill is dependent upon the continued
growth of revenue and cash flows from the Company’s 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 the Company’s reporting units may include the duration of
the COVID-19 global pandemic, its impact on the global economy and the creation and consumption of the
Company’s content, and the timing of when production can resume and theaters can re-open; adverse
macroeconomic conditions; volatility in the equity and debt markets which could result in higher weighted-
average cost of capital; the commercial success of the Company’s television programming and motion pictures;
the Company’s continual contractual relationships with its customers; including its affiliate agreements of its
Media Networks business; the Company’s subscriber growth rates domestically and internationally across its
traditional and OTT platforms 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.

For fiscal 2020, the Company performed a qualitative impairment assessment of its indefinite-lived trade

names. Based on the qualitative impairment assessment of its trade names, the Company concluded that it is
more-likely-than-not that the fair value of its trade names was more than its carrying amount, and therefore its
trade names were not considered at risk of impairment. This qualitative analysis considered the relative impact of
market-specific and macroeconomic factors.

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 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.

F-19

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Advertising expenses for the year ended March 31, 2020 were $782.4 million (2019 — $640.1 million,

2018 — $654.9 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 20).

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.

F-20

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company uses derivative financial instruments to hedge its exposures to foreign currency exchange rate

and interest rate risks. All derivative financial instruments are recorded at fair value in the consolidated balance
sheets (see Note 11). The effective changes in fair values of derivatives designated as cash flow hedges are
recorded in accumulated other comprehensive loss and included in unrealized (losses) gains on cash flow hedges
until the underlying 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. If the derivative is not designated as a hedge, changes in
the fair value of the derivative are 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 14 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, 2020, 2019 and 2018 is presented
below:

Year Ended March 31,

2020

2019

2018

(Amounts in millions, except per share amounts)

Basic Net Income (Loss) Per Common Share:
Numerator:

Net income (loss) attributable to Lions Gate

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

$(188.4)

$(284.2)

$473.6

Denominator:

Weighted average common shares outstanding . . . .

217.9

213.7

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

$ (0.86)

$ (1.33)

208.4

$ 2.27

F-21

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 2020,
2019 and 2018 is presented below:

Year Ended March 31,

2020

2019

2018

(Amounts in millions, except per
share amounts)

Diluted Net Income (Loss) Per Common Share:
Numerator:

Net income (loss) attributable to Lions Gate Entertainment

Corp. shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(188.4)

$(284.2)

$473.6

Add:

Interest on convertible notes, net of tax . . . . . . . . . . . . . . .

—

0.5

Numerator for diluted net income (loss) per common share . . .

$(188.4)

$(284.2)

$474.1

Denominator:

Weighted average common shares outstanding . . . . . . . . . . . . .
Effect of dilutive securities:

217.9

213.7

208.4

Conversion of notes . . . . . . . . . . . . . . . . . . . . . . . . . .
Share purchase options . . . . . . . . . . . . . . . . . . . . . . . .
Restricted share units and restricted stock . . . . . . . . .
Contingently issuable shares . . . . . . . . . . . . . . . . . . . .

—
—
—
—

2.1
7.5
0.7
1.7

Adjusted weighted average common shares outstanding . . . . . .

217.9

213.7

220.4

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

$ (0.86)

$ (1.33)

$ 2.15

As a result of the net loss in the fiscal years ended March 31, 2020 and 2019, the dilutive effect of the 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 years ended March 31, 2020 and 2019 totaled
2.2 million and 7.1 million, respectively.

Additionally, for the years ended March 31, 2020, 2019 and 2018, 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,

2020

2019

2018

(Amounts in millions)

Anti-dilutive shares issuable
Share purchase options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted share units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other issuable shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31.4
2.4
4.0

Total weighted average anti-dilutive shares issuable excluded

from diluted net income (loss) per common share . . . . . . . . . .

37.8

21.3
1.0
1.4

23.7

11.5
0.2
1.2

12.9

F-22

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recent Accounting Pronouncements

Accounting Guidance Adopted in Fiscal 2020

Accounting for Leases: In February 2016, the Financial Accounting Standards Board (“FASB”) issued
guidance on accounting for leases which requires lessees to recognize most leases on their balance sheets for the
rights and obligations created by those leases. The new guidance also requires additional qualitative and
quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The
Company adopted the new standard on April 1, 2019 utilizing the modified retrospective approach, and therefore,
results for reporting periods beginning after April 1, 2019 are presented under the new guidance, while prior
periods have not been adjusted. Additionally, the Company elected to apply practical expedients allowing it to
not reassess (1) whether any expired or existing contracts previously assessed as not containing leases are, or
contain, leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any
existing leases. The Company also elected to not separate lease components from non-lease components across
all lease categories. Instead, each separate lease component and non-lease component are accounted for as a
single lease component.

Upon adoption of the new guidance, the Company recognized lease liabilities on the Company’s
consolidated balance sheet for its operating leases of approximately $187.2 million, with a corresponding
right-of-use assets balance of $157.4 million, net of existing lease incentives of $29.8 million previously
classified in accounts payable and accrued liabilities and other liabilities. The adoption had no material impact on
the Company’s consolidated statement of operations. See Note 8 for further information regarding the impact of
the adoption of the new guidance on accounting for leases on the Company’s financial statements.

Accounting Guidance Not Yet Adopted

Fair Value Measurement - Changes to Disclosure Requirements: In August 2018, the FASB issued guidance

that eliminates, adds and modifies certain disclosure requirements for fair value measurements. This guidance
eliminates the requirement that entities disclose the amount of and reasons for transfers between Level 1 and
Level 2 of the fair value hierarchy, but requires public companies to disclose the range and weighted average
used to develop significant unobservable inputs for Level 3 fair value measurements, among other changes. This
guidance is effective for the Company’s fiscal year beginning April 1, 2020. The Company does not expect that
the adoption of this guidance will have a material effect on its consolidated financial statements.

Improvements to Accounting for Costs of Films and License Agreements for Program Materials: In March
2019, the FASB issued guidance that aligns the accounting for production costs of an episodic television series
with the accounting for production costs of films by removing the content distinction for capitalization.
Accordingly, the capitalization of production costs for episodic television series is no longer constrained until
persuasive evidence of secondary market revenues exists. The updated guidance also updates certain presentation
and disclosure requirements for capitalized film and television costs and requires impairment testing to be
performed at a group level for capitalized film and television costs when the content is predominantly monetized
with other owned or licensed content. A film group is defined as the lowest level at which identifiable cash flows
are largely independent of the cash flows of other films and/or license agreements. In addition, under previous
guidance, film and television programs accounted for under the broadcasting accounting standard were carried on
the balance sheet at the lower of cost or net realizable value. The new guidance requires that an entity test a film
or television program for impairment, when impairment indicators are present, at a film group level when the
film or license agreement is predominantly monetized with other films and/or license agreements. The
impairment would be measured as the difference between the carrying value of the film group and its fair value
rather than its net realizable value. This guidance requires that an entity provide new disclosures about content

F-23

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, and is required to be adopted on a prospective basis. The Company does not expect that the
adoption of this guidance will have a material impact on its consolidated results of operations or financial
position. Furthermore, following adoption, we will present all films and television costs, including capitalized
costs of acquired programming rights, as non-current assets in the consolidated balance sheet.

Financial Instruments - Credit Losses: In June 2016, the FASB issued guidance, as amended, that changes

the impairment model for most financial assets and certain other instruments, including trade and other
receivables, held-to-maturity debt securities and loans, from the incurred loss methodology under current U.S.
GAAP to a new, forward-looking current expected credit loss model that would generally result in the earlier
recognition of credit losses. This guidance is effective for the Company’s fiscal year beginning April 1, 2020.
Adoption of the standard will be applied using a modified retrospective approach through a cumulative-effect
adjustment to retained earnings as of the effective date to align its credit loss methodology with the new standard.
The Company does not expect the adoption of this guidance will have a material impact on its consolidated
financial statements.

Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued guidance that simplifies

the accounting for income taxes. The guidance amends the rules for recognizing deferred taxes for investments,
performing intraperiod tax allocations and calculating income taxes in interim periods. It also reduces complexity
in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and
allocating taxes to members of a consolidated group. The guidance is effective for the Company’s fiscal year
beginning April 1, 2021, 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. Acquisitions

3 Arts Entertainment

On May 29, 2018, the Company purchased a 51% membership interest in 3 Arts Entertainment LLC, a

talent management and television/film production company. The purchase price was approximately
$166.6 million, of which 50% was paid in cash at closing, 32.5% was paid in the Company’s Class B non-voting
common shares at closing, and 17.5% was paid in the Company’s Class B non-voting common shares on the
one-year anniversary of closing. The number of shares issued was determined by dividing the dollar value of the
portion of the purchase price to be paid by the daily weighted average closing price of the Company’s Class B
non-voting common shares on the New York Stock Exchange for the twenty (20) consecutive trading days
immediately preceding the closing date. A portion of the purchase price, up to $38.3 million, may be recoupable
for a five-year period commencing on the acquisition date of May 29, 2018, contingent upon the continued
employment of certain employees, or the achievement of certain EBITDA targets, as defined in the 3 Arts
Entertainment acquisition and related agreements. Accordingly, $38.3 million was initially recorded as a deferred
compensation arrangement within other current and non-current assets and is being amortized in general and
administrative expenses over a five-year period.

The acquisition was accounted for as a purchase, with the results of operations of 3 Arts Entertainment
included in the Company’s consolidated results from May 29, 2018. Based on the purchase price allocation,
$92.7 million was allocated to goodwill, $47.0 million was allocated to the fair value of finite-lived intangible
assets and $38.3 million was allocated to deferred compensation arrangements, as discussed above. The
remainder of the purchase price was primarily allocated to cash and cash equivalents, accounts receivable, other
assets, and accounts payable and accrued liabilities, and $15.8 million was recorded as a redeemable

F-24

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

noncontrolling interest, representing the noncontrolling interest holders’ 49% equity interest in 3 Arts
Entertainment (see Note 12). 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.

3. Investment in Films and Television Programs and Program Rights

Motion Picture Segment - Theatrical and Non-Theatrical Films
Released, net of accumulated amortization . . . . . . . . . . . . . . . . . . . . .
Acquired libraries, net of accumulated amortization . . . . . . . . . . . . .
Completed and not released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In development

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

March 31,
2020

March 31,
2019

(Amounts in millions)

$ 329.5
0.5
53.9
96.9
44.4

$ 376.7
1.8
80.6
250.4
45.0

525.2

754.5

220.7
271.6
20.3

512.6

678.7
93.7
31.0

803.4

186.1
295.6
17.6

499.3

591.0
106.8
56.2

754.0

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

(13.4)

(40.1)

Investment in films and television programs and program rights,

net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion of program rights . . . . . . . . . . . . . . . . . . . . . . . .

1,827.8
(310.5)

1,967.7
(295.7)

Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,517.3

$1,672.0

Investment in films and television programs and program rights includes write-downs to fair value or net
realizable value of $135.5 million, $66.0 million and $36.3 million in the years ended March 31, 2020, 2019, and
2018, respectively, which are included in direct operating expense on the consolidated statements of operations,

F-25

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and of which $55.2 million, $27.2 million and $33.6 million, respectively, related to motion pictures. These
charges include certain programming and content charges in fiscal 2020 and fiscal 2019, and COVID-19 related
costs in fiscal 2020, which are excluded from segment operating results (see Note 16 and Note 17).

The Company expects approximately 46.7% of completed films and television programs, excluding licensed
program rights, will be amortized during the one-year period ending March 31, 2021. Additionally, the Company
expects approximately 85.9% 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, 2023.

4. Property and Equipment

Distribution equipment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
Computer equipment and software . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less accumulated depreciation and amortization . . . . . . . . . . . . . . . .

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2020

March 31,
2019

(Amounts in millions)
$ 29.1
$ 29.7
50.4
50.4
43.2
43.4
25.5
25.9
132.9
162.4

311.8
(172.1)

139.7
1.2

281.1
(127.0)

154.1
1.2

$ 140.9

$ 155.3

(1) This category includes the cost of satellite transponders accounted for as finance leases, which was

$9.5 million as of March 31, 2020, and accumulated depreciation for these transponders was $7.7 million
(2019 - cost of $9.5 million, accumulated depreciation of $6.2 million).

(2) Represents the cost of Starz’s building in Englewood, Colorado which is accounted for as a finance lease.

Accumulated depreciation for the building totaled $4.9 million at March 31, 2020 (2019 - $3.5 million).

During the year ended March 31, 2020, depreciation expense amounted to $45.6 million and includes the
amortization of assets recorded under finance leases (2019 - $50.8 million; 2018 - $48.8 million).

5. Investments

The Company’s investments consisted of the following:

Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . .
Other investments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2020

March 31,
2019

(Amounts in millions)
$23.1
$34.3
3.1
6.0

$40.3

$26.2

(1)

Includes investments in equity securities without readily determinable fair values of $5.4 million and
$1.9 million at March 31, 2020 and 2019, respectively.

F-26

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equity Method Investments:

The Company has investments in various equity method investees with ownership percentages ranging from

approximately 11% to 49%. These investments include:

STARZPLAY Arabia. STARZPLAY Arabia (Playco Holdings Limited) offers a STARZ-branded online

subscription video-on-demand service in the Middle East and North Africa.

Roadside Attractions. Roadside Attractions is an independent theatrical distribution company.

Pantelion Films. Pantelion Films is a joint venture with Videocine, an affiliate of Televisa, which produces,
acquires and distributes a slate of English and Spanish language feature films that target Hispanic moviegoers in
the U.S.

Atom Tickets. Atom Tickets is the first-of-its-kind theatrical mobile ticketing platform and app.

Great Point Opportunity Fund. Great Point Opportunity Fund is a partnership to make investments in an

operating company that will operate a studio facility in Yonkers, New York.

Other. In addition to the equity method investments discussed above, the Company holds ownership

interests in other immaterial equity method investees.

Summarized Financial Information. Summarized financial information for the Company’s equity method
investees on an aggregate basis is set forth below (excluding the Company’s former equity method investees, Pop
and EPIX, which are separately presented further below):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2020

March 31,
2019

(Amounts in millions)
$189.8
$138.3
$ 55.7
$162.0
$167.8
$167.3
$ 46.7
$102.2

Year Ended March 31,

2020

2019

2018

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Amounts in millions)
$ 107.5
$ 36.9
$(102.6)

$131.9
$ 51.1
$ (64.4)

$ 178.8
$ 42.6
$(117.7)

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

F-27

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pop Financial Information:

The following table presents the summarized statements of operations for Pop for the period from April 1,
2018 through the date of sale of March 15, 2019, and for the year ended March 31, 2018, and a reconciliation of
the net loss reported by Pop to the 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)

Year Ended
March 31, 2018

$ 96.9

$110.9

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

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(107.0)

$ (97.6)

Reconciliation of net loss reported by Pop to equity interest loss:

Net loss reported by Pop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ownership interest in Pop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Company’s share of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of dividend and interest income on redeemable preferred stock

units(1)

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

$(107.0)

50%

(53.5)

$ (97.6)

50%

(48.8)

44.7
(0.2)
0.6

39.5
(0.8)
1.1

Total equity interest loss recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8.4)

$ (9.0)

(1) Accretion of mandatorily redeemable preferred stock units represents Pop’s 10% dividend and the

amortization of discount on its mandatorily redeemable preferred stock units previously held by the
Company and the other interest holder. The Company recorded its share of this expense as income from the
accretion of dividend and discount on mandatorily redeemable preferred stock units within equity interest
loss.

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.

F-28

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Period from
April 1, 2017 to
May 11, 2017
(date of sale)

(Amounts in
millions)
$ 44.8

32.3
2.4

10.1

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10.1

Reconciliation of net income reported by EPIX to equity interest income:

Net income reported by EPIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ownership interest in EPIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10.1
31.15%

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)

3.1
(0.1)
1.0

Total equity interest income recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.0

(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.

Gain (Loss) on Investments:

The following table summarizes the components of the gain (loss) on investments:

Year Ended March 31,

2020

2019

2018

Impairments of investments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses on equity securities held as of March 31,

(Amounts in millions)
$(36.8)

$ (29.2)

$—

2020 and 2019, respectively(2) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .

Gain (loss) on sale of equity method investees(3)

(0.5)
—

(6.2)
(44.6)

—
201.0

$(0.5)

$(87.6)

$171.8

(1)

Included in impairments of investments in fiscal 2019 and fiscal 2018 were $34.2 million and $10.0 million,
respectively, of impairments on investments in equity securities without readily determinable fair values,
with the remainder representing charges for other-than-temporary impairments on equity method investees.

F-29

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2) As a result of the adoption of new accounting guidance for Recognition and Measurement of Financial
Instruments, 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.
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)

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

Balance as of March 31, 2018 . . . . . . . . . . . . . . . . . . . .
Business acquisitions(1) . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Measurement period adjustments(1)

$393.7
—
—

(Amounts in millions)
$2,037.9
—
—

$309.2
92.0
0.7

$2,740.8
92.0
0.7

Balance as of March 31, 2019 . . . . . . . . . . . . . . . . . . . .

$393.7

$401.9

$2,037.9

$2,833.5

Balance as of March 31, 2020 . . . . . . . . . . . . . . . . . . . .

$393.7

$401.9

$2,037.9

$2,833.5

(1)

In fiscal 2019, represents the goodwill resulting from the acquisition of 3 Arts Entertainment (see Note 2),
and related measurement period adjustments, consisting of a decrease to the fair value of finite-lived
intangible assets and a corresponding increase to goodwill.

Intangible Assets

Finite-lived intangible assets consisted of the following as of March 31, 2020 and March 31, 2019:

Finite-lived intangible assets subject to

amortization:

Customer relationships(1) . . . . . . . .
Trademarks and trade names . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .

March 31, 2020

March 31, 2019

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

$399.2
1.4
9.3

$409.9

$1,452.8
2.2
14.6

$1,852.0
3.6
23.9

$1,469.6

$1,879.5

$250.8
1.0
6.1

$257.9

$1,601.2
2.6
17.8

$1,621.6

(1) Customer relationships primarily represent affiliation agreements with distributors acquired in the Starz

Merger.

F-30

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Indefinite-lived intangible assets not subject to amortization consisted of the following:

March 31,
2020

March 31,
2019

(Amounts in millions)

Indefinite-lived intangible assets not subject to amortization:

Tradenames(1)

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

$250.0

(1) Tradenames are 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, 2020,

2019 and 2018 was approximately $152.1 million, $112.6 million, and $109.0 million, respectively.
Amortization expense remaining relating to intangible assets for each of the years ending March 31,
2021 through 2025 is estimated to be approximately
$140.9 million, $132.3 million, $124.3 million, $123.3 million, and $123.1 million, respectively.

7. Debt

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

2020 and March 31, 2019:

March 31,
2020

March 31,
2019

(Amounts in millions)

Corporate debt:

Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ —
750.0
1,107.5
520.0
550.0

712.5
965.1
518.7
545.6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total corporate debt

2,741.9
42.4

2,927.5
45.4

Total debt
Unamortized debt issuance costs, net of fair value adjustment on finance lease

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

2,784.3

2,972.9

obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(51.3)

(68.5)

Total debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,733.0
(68.6)

2,904.4
(53.6)

Non-current portion of debt

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

$2,664.4

$2,850.8

F-31

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth future annual contractual principal payment commitments of debt as of

March 31, 2020:

Debt Type

Maturity Date

2021

2022

2023

2024

2025

Thereafter

Total

Year Ending March 31,

(Amounts in millions)
$ — $ — $ — $ — $ —
Revolving Credit Facility . . . . March 2023
—
585.0
52.5
Term Loan A . . . . . . . . . . . . . March 2023
—
915.1
12.5
Term Loan B . . . . . . . . . . . . . March 2025
12.5
12.5
518.7
—
—
5.875% Senior Notes . . . . . . . November 2024 —
—
— 545.6
—
6.375% Senior Notes . . . . . . . February 2024
1.0
1.0
0.9
3.0
Finance lease obligations . . . . Various

75.0
12.5
—
—
0.9

$68.0 $88.4 $598.4 $559.1 $1,434.8

Less aggregate unamortized debt issuance

costs, net of fair value adjustment on finance
lease obligations . . . . . . . . . . . . . . . . . . . . . . .

$ —
—
—
—
—
35.6

$35.6

$ —
712.5
965.1
518.7
545.6
42.4

2,784.3

(51.3)

$2,733.0

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, 2020 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, 2020. The Company is required to pay a quarterly
commitment fee on the revolving credit facility of 0.250% to 0.375% per annum, depending on the achievement
of certain leverage ratios, as defined in the credit and guarantee agreement dated December 8, 2016, as amended
(the “Amended Credit Agreement”), on the total revolving credit facility of $1.5 billion less the amount drawn.

Maturity Date:

• Revolving Credit Facility & Term Loan A: March 22, 2023.

•

Term Loan B: March 24, 2025.

Interest:

• Revolving Credit Facility & Term Loan A: The Revolving Credit Facility and Term Loan A bear
interest at a rate per annum equal to LIBOR plus 1.75% (or an alternative base rate plus 0.75%)
margin, with a LIBOR floor of zero. The margin is subject to potential increases of up to 50 basis
points (two (2) increases of 25 basis points each) upon certain increases to net first lien leverage ratios,
as defined in the Amended Credit Agreement (effective interest rate of 2.74% as of March 31, 2020,
before the impact of interest rate swaps, see Note 19 for interest rate swaps).

•

Term Loan B: 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
3.24% as of March 31, 2020, before the impact of interest rate swaps, see Note 19 for interest rate
swaps).

F-32

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Potential Impact of LIBOR Transition

The Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the
London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or
compel banks to submit rates for the calculation of LIBOR after 2021. That announcement indicates
that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021.
Moreover, it is possible that LIBOR will be discontinued or modified prior to 2021.

Under the terms of the Company’s Amended Credit Agreement, in the event of the discontinuance of
the LIBOR Rate, a mutually agreed-upon alternate benchmark rate will be established to replace the
LIBOR Rate. The Company and Lenders (as defined in the Amended Credit Agreement) shall, in good
faith, endeavor to establish an alternate benchmark rate that gives due consideration to prevailing
market convention for determining a rate of interest for syndicated loans in the United States at such
time, and which places the Lenders and the Company in the same economic position that existed
immediately prior to the discontinuation of the LIBOR Rate. The Company does not anticipate that the
discontinuance or modification of the LIBOR Rate will materially impact its liquidity or financial
position.

Required Principal Payments:

•

Term Loan A: Quarterly principal payments, at quarterly rates of 1.25% beginning June 30, 2019,
1.75% beginning June 30, 2020, and 2.50% beginning June 30, 2021 through December 31, 2022, with
the balance payable at maturity.

Term Loan B: Quarterly principal payments, at a quarterly rate of 0.25%, with the balance payable at
maturity.

The Term Loan A and Term Loan B also require mandatory prepayments in connection with certain
asset sales, subject to certain significant exceptions, and the Term Loan B is subject to additional
mandatory repayment from specified percentages of excess cash flow, as defined in the Amended
Credit Agreement.

Optional Prepayment:

• Revolving Credit Facility & Term Loan A: The Company may voluntarily prepay the Revolving Credit

Facility and Term Loan A at any time without premium or penalty.

•

Term Loan B: The Company may voluntarily prepay the Term Loan B at any time.

Security. The Senior Credit Facilities are guaranteed by the Guarantors (as defined in the Amended Credit

Agreement) and are secured by a security interest in substantially all of the assets of Lionsgate and the
Guarantors (as defined in the Amended Credit Agreement), subject to certain exceptions.

F-33

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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) 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. 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 redemption prices below) of the notes redeemed plus interest through February 1, 2021
(discounted at the treasury rate on the redemption date plus 50 basis points) over the principal
amount of the notes redeemed on the redemption date.

(ii) On and after February 1, 2021, redeemable by the Company, in whole or in part, at the redemption
prices set forth as follows (as a percentage of the principal amount redeemed), plus accrued and
unpaid interest to the redemption date: (i) on or after February 1, 2021 - 103.188%; (ii) on or after
February 1, 2022 - 101.594%; (iii) on or after February 1, 2023 - 100%.

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

the Company.

Covenants. The 5.875% Senior Notes and 6.375% Senior Notes contain certain restrictions and covenants

that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or
repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of
certain assets subject to certain conditions, among other limitations. As of March 31, 2020, the Company was in
compliance with all applicable covenants.

F-34

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 2020, 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 accumulated deficit or
net loss, and therefore the Company’s net loss of $206.4 million and accumulated deficit of $16.9 million were
deemed free of restrictions at March 31, 2020.

Debt Transactions

Fiscal 2020:

Senior Notes Repurchases. During the year ended March 31, 2020, the Company paid $1.0 million to
repurchase $1.3 million principal amount of the 5.875% Senior Notes, and the Company paid $3.5 million to
repurchase $4.4 million principal amount of the 6.375% Senior Notes.

Term Loan B Repurchases. During the year ended March 31, 2020, the Company paid $22.0 million to

repurchase $28.0 million principal amount of the Term Loan B.

Term Loan Prepayments. During the year ended March 31, 2020, the Company made voluntary

prepayments totaling $101.9 million in principal outstanding under the Term Loan B, together with accrued and
unpaid interest.

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 and guarantee agreement dated December 8, 2016 to refinance its revolving credit
facility, Term Loan A and 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

F-35

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

previous Term Loan B, and terminated all commitments under the previous revolving credit facility, and 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 (together with the Term Loan A and Term Loan B, the “Senior Credit Facilities”).

December 2017 Term Loan B Refinancing. On December 11, 2017, the Company entered into an

amendment to the credit and guarantee agreement dated December 8, 2016 to reduce the interest rate on the 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.

Gain (Loss) on Extinguishment of Debt

During the years ended March 31, 2020 and 2019, the Company recorded a gain (loss) on extinguishment of

debt related to the transactions discussed above, as presented below:

Gain (loss) on extinguishment of debt:

Senior Notes repurchases . . . . . . . . . . . . . . . . .
Term Loan B repurchases . . . . . . . . . . . . . . . . .
Term Loan B prepayments . . . . . . . . . . . . . . . .

Year Ended March 31,

2020

2019

$ 1.1
5.7
(1.4)

$ 5.4

$—
—
(1.9)

$(1.9)

During the year ended March 31, 2018, the Company recorded a loss on extinguishment of debt associated

with the debt refinancing transactions in fiscal 2018, as discussed above. The following table summarizes the
accounting for the debt issuance costs incurred and the related loss on extinguishment of debt recorded:

Year Ended March 31, 2018

Loss on
Extinguishment
of Debt

Capitalized &
Amortized Over
Life of New
Issuances

(Amounts in millions)

Total

New debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Previously incurred debt issuance costs or unamortized discount . . . . . .

Total

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

$11.0

24.7

$35.7

$11.6

$22.6

Finance Lease Obligations

Finance lease obligations represent lease agreements acquired in the Starz Merger. As of March 31, 2020,

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 6.39%, and a finance lease obligation
for Starz’s transponder capacity that expires in February 2021 and has an imputed annual interest rate of 7.0%.
See Note 8 for further information.

F-36

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Leases

The Company has operating leases primarily for office space, studio facilities, and other equipment. The

Company also has finance leases for a satellite transponder and the Starz commercial building. The Company’s
leases have remaining lease terms of up to approximately 10 years, and the Starz commercial building lease
includes four successive five-year renewal periods at the Company’s option. Most leases are not cancelable prior
to their expiration.

The components of lease cost were as follows:

Operating lease cost(1)
Finance lease cost

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

Amortization of right-of-use assets . . . . . . . . . . . . . . .
Interest on lease liabilities . . . . . . . . . . . . . . . . . . . . . .

Short-term lease cost(1)(2)

Total finance lease cost

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

Year Ended
March 31,
2020

(Amounts in
millions)
$ 35.3

3.0
3.4

6.4
93.3

Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . .

$135.0

(1) Amounts include costs capitalized during the period for leased assets used in the production of film and

television programs. Operating lease cost amounts primarily represent the amortization of right-of-use assets
and are included in the “other amortization” line of the consolidated statement of cash flows.

(2) Short-term lease cost primarily consists of leases of facilities and equipment associated with film and

television productions.

Supplemental cash flow information related to leases was as follows:

Year Ended
March 31,
2020

(Amounts in
millions)

Cash paid for amounts included in the measurement of

lease liabilities:

Operating cash flows for operating leases . . . . . . . . . .
Operating cash flows for finance leases . . . . . . . . . . . .
Financing cash flows for finance leases . . . . . . . . . . . .

$37.1
3.4
3.0

Right-of-use assets obtained in exchange for new lease

obligations:

Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.3

F-37

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental balance sheet information related to leases was as follows: