SANTA MONICA, Calif.
and VANCOUVER, British
Columbia, Feb. 6, 2020
/PRNewswire/ -- Global content leader Lionsgate (NYSE: LGF.A,
LGF.B) today reported revenue of $998.5 million and a net loss
attributable to Lionsgate shareholders of $91.2 million, or
fully diluted loss per share of $0.42, on 218.0 million
diluted weighted average common shares outstanding for the quarter
ended December 31, 2019. Adjusted net
income attributable to Lionsgate shareholders was $31.7 million, or adjusted diluted earnings per
share of $0.14, operating loss was
$39.5 million, and adjusted OIBDA was
$124.0 million. The Company generated
cash flow from operations of $215.9
million and adjusted free cash flow of $88.4 million.
As the Company continues to expand its streaming business,
global subscribers from Starz, STARZPLAY Arabia and PANTAYA reached
28.5 million in the quarter and global OTT subscribers reached 8.6
million. The overall global total reflected an increase of
2.1 million subscribers, up 8% year-over-year. Total Media Networks
domestic subscribers were down 1.2 million year-over-year to 24.1
million.
"Our Motion Picture Group turned in a strong performance in the
quarter, led by the worldwide box office success of Knives
Out, while our Television Group secured a number of important
scripted series and pilot commitments and Starz continued to grow
its over-the-top platform worldwide," said Lionsgate CEO
Jon Feltheimer. "Our STARZPLAY
international rollout remains on track to achieve financial and
subscriber targets that we expect to translate into meaningful
incremental value creation."
The Company has projected STARZPLAY international subscriber
growth to between 15 and 25 million over the next five years.
Segment Results
Media Networks segment revenue was up 4.3% from the prior year
quarter at $382.4 million while
segment profit declined 23.9% to $102.1
million driven by our investment in STARZPLAY
International.
Motion Picture segment revenue increased by 30.7% to
$473.9 million compared to the prior
year quarter and segment profit was $49.0
million reflecting the strong theatrical performance of
Knives Out, which is expected to top $300 million at the worldwide box office,
as well as the continued outsized ancillary performance of
John Wick: Chapter 3 –
Parabellum.
Television Production segment revenue was $189.4 million and segment loss was $5.7 million, primarily due to the timing of
production schedules and episodic deliveries, including development
costs and deficits for new series.
Lionsgate senior management will hold its analyst and investor
conference call to discuss its fiscal 2020 third quarter results at
5:00 PM ET/2:00 PM PT this
afternoon, February 6. Interested parties may listen to the
live webcast by visiting the events page on the Lionsgate
corporate website or via
https://services.choruscall.com/links/lgf2002060GRtqcRs.html. A
full replay will become available later this afternoon by clicking
the same link.
ABOUT LIONSGATE
The first major new studio in decades, Lionsgate is a global
content platform whose films, television series, digital products
and linear and over-the-top platforms reach next generation
audiences around the world. In addition to its filmed
entertainment leadership, Lionsgate content drives a growing
presence in interactive and location-based entertainment, gaming,
virtual reality and other new entertainment technologies.
Lionsgate's content initiatives are backed by a nearly 17,000-title
film and television library and delivered through a global
licensing infrastructure. The Lionsgate brand is synonymous
with original, daring and ground-breaking content created with
special emphasis on the evolving patterns and diverse composition
of the Company's worldwide consumer base.
For further information, investors should contact:
James Marsh
310-255-3651
jmarsh@lionsgate.com
For media inquiries, please contact:
Peter Wilkes
310-255-3726
pwilkes@lionsgate.com
The matters discussed in this press release include
forward-looking statements, including those regarding the
performance of future fiscal years. Such statements are
subject to a number of risks and uncertainties. Actual results in
the future could differ materially and adversely from those
described in the forward-looking statements as a result of various
important factors, including the substantial investment of capital
and increased costs 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; other trends affecting the
entertainment industry; and the other risk factors as set forth in
Lionsgate's Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission on February
6, 2020. The Company undertakes no obligation to
publicly release the result of any revisions to these
forward-looking statements that may be made to reflect any future
events or circumstances.
Additional Information Available on Website
The information in this press release should be read in
conjunction with the financial statements and footnotes contained
in the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 2019, which will
be posted on the Company's website at
http://investors.lionsgate.com/financial-reports/sec-filings, when
filed with the Securities and Exchange Commission. Trending
schedules containing certain financial information will also be
available at
http://investors.lionsgate.com/governance/governance-documents.
LIONS GATE
ENTERTAINMENT CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
December 31,
2019
|
|
March 31,
2019
|
|
(Unaudited,
amounts in millions)
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
195.5
|
|
|
$
|
184.3
|
|
Accounts receivable,
net
|
597.7
|
|
|
647.2
|
|
Program
rights
|
243.4
|
|
|
295.7
|
|
Other current
assets
|
173.5
|
|
|
267.2
|
|
Total current
assets
|
1,210.1
|
|
|
1,394.4
|
|
Investment in films
and television programs and program rights, net
|
1,536.3
|
|
|
1,672.0
|
|
Property and
equipment, net
|
145.0
|
|
|
155.3
|
|
Investments
|
31.8
|
|
|
26.2
|
|
Intangible
assets
|
1,763.2
|
|
|
1,871.6
|
|
Goodwill
|
2,833.5
|
|
|
2,833.5
|
|
Other
assets
|
439.8
|
|
|
436.1
|
|
Deferred tax
assets
|
—
|
|
|
19.8
|
|
Total
assets
|
$
|
7,959.7
|
|
|
$
|
8,408.9
|
|
LIABILITIES
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
509.8
|
|
|
$
|
531.2
|
|
Participations and
residuals
|
418.0
|
|
|
408.5
|
|
Film obligations and
production loans
|
286.8
|
|
|
512.6
|
|
Debt - short term
portion
|
65.0
|
|
|
53.6
|
|
Deferred
revenue
|
141.4
|
|
|
146.5
|
|
Total current
liabilities
|
1,421.0
|
|
|
1,652.4
|
|
Debt
|
2,710.8
|
|
|
2,850.8
|
|
Participations and
residuals
|
406.6
|
|
|
479.8
|
|
Film obligations and
production loans
|
110.4
|
|
|
143.1
|
|
Other
liabilities
|
266.6
|
|
|
114.0
|
|
Deferred
revenue
|
60.4
|
|
|
62.8
|
|
Deferred tax
liabilities
|
37.5
|
|
|
56.5
|
|
Redeemable
noncontrolling interest
|
150.1
|
|
|
127.6
|
|
Commitments and
contingencies
|
|
|
|
EQUITY
|
|
|
|
Class A voting common
shares, no par value, 500.0 shares authorized, 83.7 shares issued
(March 31, 2019 - 82.5 shares issued)
|
661.9
|
|
|
649.7
|
|
Class B non-voting
common shares, no par value, 500.0 shares authorized, 136.3 shares
issued (March 31, 2019 - 133.5 shares issued)
|
2,211.2
|
|
|
2,140.6
|
|
Retained
earnings
|
44.5
|
|
|
208.7
|
|
Accumulated other
comprehensive loss
|
(123.5)
|
|
|
(80.3)
|
|
Total Lions Gate
Entertainment Corp. shareholders' equity
|
2,794.1
|
|
|
2,918.7
|
|
Noncontrolling
interests
|
2.2
|
|
|
3.2
|
|
Total
equity
|
2,796.3
|
|
|
2,921.9
|
|
Total liabilities and
equity
|
$
|
7,959.7
|
|
|
$
|
8,408.9
|
|
LIONS GATE
ENTERTAINMENT CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions, except per share amounts)
|
Revenues
|
$
|
998.5
|
|
|
$
|
933.2
|
|
|
$
|
2,945.7
|
|
|
$
|
2,766.9
|
|
Expenses
|
|
|
|
|
|
|
|
Direct
operating
|
594.6
|
|
|
502.0
|
|
|
1,662.0
|
|
|
1,495.2
|
|
Distribution and
marketing
|
279.1
|
|
|
176.9
|
|
|
791.7
|
|
|
608.3
|
|
General and
administration
|
108.7
|
|
|
110.0
|
|
|
317.3
|
|
|
335.2
|
|
Depreciation and
amortization
|
51.9
|
|
|
41.0
|
|
|
143.0
|
|
|
122.1
|
|
Restructuring and
other
|
3.7
|
|
|
16.5
|
|
|
16.8
|
|
|
42.1
|
|
Total
expenses
|
1,038.0
|
|
|
846.4
|
|
|
2,930.8
|
|
|
2,602.9
|
|
Operating income
(loss)
|
(39.5)
|
|
|
86.8
|
|
|
14.9
|
|
|
164.0
|
|
Interest
expense
|
|
|
|
|
|
|
|
Interest
expense
|
(48.7)
|
|
|
(42.7)
|
|
|
(145.7)
|
|
|
(116.9)
|
|
Interest on
dissenting shareholders' liability
|
—
|
|
|
(2.6)
|
|
|
—
|
|
|
(35.3)
|
|
Total interest
expense
|
(48.7)
|
|
|
(45.3)
|
|
|
(145.7)
|
|
|
(152.2)
|
|
Shareholder
litigation settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(114.1)
|
|
Interest and other
income
|
2.0
|
|
|
2.9
|
|
|
7.0
|
|
|
9.0
|
|
Other
expense
|
(3.6)
|
|
|
(1.8)
|
|
|
(9.7)
|
|
|
(1.8)
|
|
Loss on
extinguishment of debt
|
(1.4)
|
|
|
—
|
|
|
(1.4)
|
|
|
—
|
|
Loss on
investments
|
—
|
|
|
(6.2)
|
|
|
(0.3)
|
|
|
(43.2)
|
|
Equity interests
loss
|
(4.6)
|
|
|
(11.0)
|
|
|
(15.7)
|
|
|
(28.8)
|
|
Income (loss)
before income taxes
|
(95.8)
|
|
|
25.4
|
|
|
(150.9)
|
|
|
(167.1)
|
|
Income tax benefit
(provision)
|
(2.0)
|
|
|
(5.3)
|
|
|
(6.5)
|
|
|
26.6
|
|
Net income
(loss)
|
(97.8)
|
|
|
20.1
|
|
|
(157.4)
|
|
|
(140.5)
|
|
Less: Net loss
attributable to noncontrolling interests
|
6.6
|
|
|
2.8
|
|
|
14.0
|
|
|
11.5
|
|
Net income (loss)
attributable to Lions Gate Entertainment Corp.
shareholders
|
$
|
(91.2)
|
|
|
$
|
22.9
|
|
|
$
|
(143.4)
|
|
|
$
|
(129.0)
|
|
|
|
|
|
|
|
|
|
Per share
information attributable to Lions Gate Entertainment Corp.
shareholders:
|
|
|
|
|
|
|
|
Basic net income
(loss) per common share
|
$
|
(0.42)
|
|
|
$
|
0.11
|
|
|
$
|
(0.66)
|
|
|
$
|
(0.61)
|
|
Diluted net income
(loss) per common share
|
$
|
(0.42)
|
|
|
$
|
0.10
|
|
|
$
|
(0.66)
|
|
|
$
|
(0.61)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
218.0
|
|
|
214.2
|
|
|
217.2
|
|
|
213.2
|
|
Diluted
|
218.0
|
|
|
220.8
|
|
|
217.2
|
|
|
213.2
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.18
|
|
LIONS GATE
ENTERTAINMENT CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Operating
Activities:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(97.8)
|
|
|
$
|
20.1
|
|
|
$
|
(157.4)
|
|
|
$
|
(140.5)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
51.9
|
|
|
41.0
|
|
|
143.0
|
|
|
122.1
|
|
Amortization of films
and television programs and program rights
|
450.8
|
|
|
382.1
|
|
|
1,306.0
|
|
|
1,105.3
|
|
Interest on
dissenting shareholders' liability
|
—
|
|
|
(104.6)
|
|
|
—
|
|
|
(72.0)
|
|
Amortization of debt
financing costs
|
3.7
|
|
|
3.1
|
|
|
11.2
|
|
|
9.0
|
|
Non-cash share-based
compensation
|
17.3
|
|
|
13.6
|
|
|
41.4
|
|
|
43.7
|
|
Other non-cash
items
|
10.3
|
|
|
8.4
|
|
|
46.1
|
|
|
20.5
|
|
Shareholder
litigation settlements
|
—
|
|
|
(114.1)
|
|
|
—
|
|
|
—
|
|
Distributions from
equity method investee
|
—
|
|
|
1.8
|
|
|
—
|
|
|
1.8
|
|
Loss on
extinguishment of debt
|
1.4
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
Equity interests
loss
|
4.6
|
|
|
11.0
|
|
|
15.7
|
|
|
28.8
|
|
Loss on
investments
|
—
|
|
|
6.2
|
|
|
0.3
|
|
|
43.2
|
|
Deferred income taxes
(benefit)
|
0.2
|
|
|
4.6
|
|
|
0.8
|
|
|
(36.3)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable,
net and other assets
|
147.3
|
|
|
135.6
|
|
|
271.0
|
|
|
308.5
|
|
Investment in films
and television programs and program rights, net
|
(371.0)
|
|
|
(376.4)
|
|
|
(1,136.1)
|
|
|
(1,073.5)
|
|
Accounts payable and
accrued liabilities
|
2.5
|
|
|
(1.5)
|
|
|
(33.8)
|
|
|
(66.8)
|
|
Participations and
residuals
|
(18.0)
|
|
|
7.0
|
|
|
(63.8)
|
|
|
(17.1)
|
|
Film
obligations
|
(4.3)
|
|
|
2.1
|
|
|
(3.8)
|
|
|
(10.3)
|
|
Deferred
revenue
|
17.0
|
|
|
(54.2)
|
|
|
(7.6)
|
|
|
(10.7)
|
|
Net Cash Flows
Provided By (Used In) Operating Activities
|
215.9
|
|
|
(14.2)
|
|
|
434.4
|
|
|
255.7
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
Investment in equity
method investees
|
(9.9)
|
|
|
(17.6)
|
|
|
(14.8)
|
|
|
(39.6)
|
|
Business
acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(77.3)
|
|
Capital
expenditures
|
(7.1)
|
|
|
(7.3)
|
|
|
(24.0)
|
|
|
(28.9)
|
|
Net Cash Flows
Used In Investing Activities
|
(17.0)
|
|
|
(24.9)
|
|
|
(38.8)
|
|
|
(145.8)
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
Debt -
borrowings
|
295.1
|
|
|
840.0
|
|
|
597.1
|
|
|
2,909.5
|
|
Debt -
repayments
|
(410.2)
|
|
|
(324.0)
|
|
|
(738.6)
|
|
|
(2,468.8)
|
|
Production loans -
borrowings
|
2.3
|
|
|
92.4
|
|
|
54.0
|
|
|
246.9
|
|
Production loans -
repayments
|
(122.7)
|
|
|
(18.5)
|
|
|
(290.9)
|
|
|
(208.2)
|
|
Payment of dissenter
liability accrued at acquisition
|
—
|
|
|
(797.3)
|
|
|
—
|
|
|
(797.3)
|
|
Dividends
paid
|
—
|
|
|
(19.2)
|
|
|
—
|
|
|
(57.4)
|
|
Distributions to
noncontrolling interest
|
(0.9)
|
|
|
(0.8)
|
|
|
(4.5)
|
|
|
(2.3)
|
|
Exercise of stock
options
|
—
|
|
|
2.4
|
|
|
0.5
|
|
|
4.2
|
|
Tax withholding
required on equity awards
|
(1.3)
|
|
|
(2.9)
|
|
|
(3.1)
|
|
|
(6.9)
|
|
Net Cash Flows
Used In Financing Activities
|
(237.7)
|
|
|
(227.9)
|
|
|
(385.5)
|
|
|
(380.3)
|
|
Net Change In Cash
and Cash Equivalents
|
(38.8)
|
|
|
(267.0)
|
|
|
10.1
|
|
|
(270.4)
|
|
Foreign Exchange
Effects on Cash and Cash Equivalents
|
1.7
|
|
|
0.9
|
|
|
1.1
|
|
|
(1.5)
|
|
Cash and Cash
Equivalents - Beginning Of Period
|
232.6
|
|
|
372.3
|
|
|
184.3
|
|
|
378.1
|
|
Cash and Cash
Equivalents - End Of Period
|
$
|
195.5
|
|
|
$
|
106.2
|
|
|
$
|
195.5
|
|
|
$
|
106.2
|
|
LIONS GATE ENTERTAINMENT CORP.
SEGMENT INFORMATION
The Company's reportable segments have been determined based on
the distinct nature of their operations, the Company's internal
management structure, and the financial information that is
evaluated regularly by the Company's chief operating decision
maker.
The Company has three reportable business segments: (1) Motion
Picture, (2) Television Production and (3) Media Networks.
Motion Picture. Motion Picture consists of the
development and production of feature films, acquisition of North
American and worldwide distribution rights, North American
theatrical, home entertainment and television distribution of
feature films produced and acquired, and worldwide licensing of
distribution rights to feature films produced and acquired.
Television Production. Television Production consists of
the development, production and worldwide distribution of
television productions including television series, television
movies and mini-series, and non-fiction programming. Television
Production includes the licensing of Starz original series
productions to Starz Networks and STARZPLAY International, and the
ancillary market distribution of Starz original productions and
licensed product. Additionally, the results of operations of 3 Arts
Entertainment is included in the Television Production segment from
the acquisition date of May 29,
2018.
Media Networks. Media Networks consists of the following
product lines (i) Starz Networks, which includes the domestic
licensing of premium subscription video programming to
distributors, and on a direct-to-consumer basis (ii) STARZPLAY
International, which represents revenues primarily from the OTT
distribution of the Company's STARZ branded premium subscription
video services internationally and (iii) Streaming Services, which
represents the Lionsgate legacy start-up direct to consumer
streaming services on its SVOD platforms.
In the ordinary course of business, the Company's reportable
segments enter into transactions with one another. The most common
types of intersegment transactions include licensing motion
pictures or television programming (including Starz original
productions) from the Motion Picture and Television Production
segments to the Media Networks segment. While intersegment
transactions are treated like third-party transactions to determine
segment performance, the revenues (and corresponding expenses,
assets, or liabilities recognized by the segment that is the
counterparty to the transaction) are eliminated in consolidation
and, therefore, do not affect consolidated results.
LIONS GATE
ENTERTAINMENT CORP.
|
|
SEGMENT
INFORMATION (Continued)
|
|
Segment information
is presented in the table below:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Segment
revenues
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
473.9
|
|
|
$
|
362.6
|
|
|
$
|
1,277.6
|
|
|
$
|
1,106.9
|
|
Television
Production
|
189.4
|
|
|
216.5
|
|
|
743.2
|
|
|
648.1
|
|
Media
Networks
|
382.4
|
|
|
366.8
|
|
|
1,128.8
|
|
|
1,099.0
|
|
Intersegment
eliminations
|
(47.2)
|
|
|
(12.7)
|
|
|
(203.9)
|
|
|
(87.1)
|
|
|
$
|
998.5
|
|
|
$
|
933.2
|
|
|
$
|
2,945.7
|
|
|
$
|
2,766.9
|
|
Gross
contribution
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
74.0
|
|
|
$
|
69.2
|
|
|
$
|
183.7
|
|
|
$
|
186.3
|
|
Television
Production
|
4.4
|
|
|
32.6
|
|
|
58.8
|
|
|
79.4
|
|
Media
Networks
|
124.4
|
|
|
157.2
|
|
|
330.0
|
|
|
418.7
|
|
Intersegment
eliminations
|
2.0
|
|
|
(1.2)
|
|
|
2.6
|
|
|
(3.4)
|
|
|
$
|
204.8
|
|
|
$
|
257.8
|
|
|
$
|
575.1
|
|
|
$
|
681.0
|
|
Segment general
and administration
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
25.0
|
|
|
$
|
25.7
|
|
|
$
|
76.1
|
|
|
$
|
78.6
|
|
Television
Production
|
10.1
|
|
|
11.4
|
|
|
26.9
|
|
|
32.9
|
|
Media
Networks
|
22.3
|
|
|
23.1
|
|
|
62.7
|
|
|
73.3
|
|
|
$
|
57.4
|
|
|
$
|
60.2
|
|
|
$
|
165.7
|
|
|
$
|
184.8
|
|
Segment
profit
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
49.0
|
|
|
$
|
43.5
|
|
|
$
|
107.6
|
|
|
$
|
107.7
|
|
Television
Production
|
(5.7)
|
|
|
21.2
|
|
|
31.9
|
|
|
46.5
|
|
Media
Networks
|
102.1
|
|
|
134.1
|
|
|
267.3
|
|
|
345.4
|
|
Intersegment
eliminations
|
2.0
|
|
|
(1.2)
|
|
|
2.6
|
|
|
(3.4)
|
|
Total segment
profit
|
$
|
147.4
|
|
|
$
|
197.6
|
|
|
$
|
409.4
|
|
|
$
|
496.2
|
|
Corporate general and
administrative expenses
|
(23.4)
|
|
|
(26.2)
|
|
|
(73.0)
|
|
|
(79.2)
|
|
Adjusted
OIBDA(1)
|
$
|
124.0
|
|
|
$
|
171.4
|
|
|
$
|
336.4
|
|
|
$
|
417.0
|
|
|
|
|
|
|
|
(1)
|
See "Use of Non-GAAP
Financial Measures" for the definition of Adjusted OIBDA and
reconciliation to the most directly comparable GAAP financial
measure.
|
The Company's primary measure of segment performance is segment
profit. Segment profit is defined as gross contribution (revenues,
less direct operating and distribution and marketing expense) less
segment general and administration expenses. Segment profit
excludes corporate general and administrative expense,
restructuring and other costs, share-based compensation other than
annual bonuses granted in immediately vested stock awards when
applicable, certain programming and content charges as a result of
changes in management and associated programming and content
strategy, when applicable, and purchase accounting and related
adjustments, when applicable. The Company believes the presentation
of segment profit is relevant and useful for investors because it
allows investors to view segment performance in a manner similar to
the primary method used by the Company's management and enables
them to understand the fundamental performance of the Company's
businesses. Media Networks gross contribution and segment profit
for the three and nine months ended December
31, 2019 includes a benefit of $4.6
million and $41.3 million,
respectively, in direct operating expenses associated with the
modification of a content licensing arrangement net of amortization
for related changes in content availability and air dates.
LIONS GATE
ENTERTAINMENT CORP.
|
|
SEGMENT
INFORMATION (Continued)
|
|
The following table
sets forth segment information by product line for the Media
Networks segment for the three and nine months ended
December 31, 2019 and 2018:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Media Networks
revenue:
|
|
|
|
|
|
|
|
Starz
Networks
|
$
|
367.6
|
|
|
$
|
361.5
|
|
|
$
|
1,092.4
|
|
|
$
|
1,086.1
|
|
STARZPLAY
International
|
6.1
|
|
|
0.6
|
|
|
13.6
|
|
|
0.9
|
|
Streaming
Services
|
8.7
|
|
|
4.7
|
|
|
22.8
|
|
|
12.0
|
|
|
$
|
382.4
|
|
|
$
|
366.8
|
|
|
$
|
1,128.8
|
|
|
$
|
1,099.0
|
|
Media Networks
gross contribution:
|
|
|
|
|
|
|
|
Starz
Networks
|
$
|
168.7
|
|
|
$
|
159.9
|
|
|
$
|
443.1
|
|
|
$
|
444.8
|
|
STARZPLAY
International
|
(36.0)
|
|
|
(2.4)
|
|
|
(103.0)
|
|
|
(20.0)
|
|
Streaming
Services
|
(8.3)
|
|
|
(0.3)
|
|
|
(10.1)
|
|
|
(6.1)
|
|
|
$
|
124.4
|
|
|
$
|
157.2
|
|
|
$
|
330.0
|
|
|
$
|
418.7
|
|
Media Networks
general and administration:
|
|
|
|
|
|
|
|
Starz
Networks
|
$
|
17.1
|
|
|
$
|
20.0
|
|
|
$
|
47.5
|
|
|
$
|
65.2
|
|
STARZPLAY
International
|
3.7
|
|
|
2.0
|
|
|
10.6
|
|
|
4.7
|
|
Streaming
Services
|
1.5
|
|
|
1.1
|
|
|
4.6
|
|
|
3.4
|
|
|
$
|
22.3
|
|
|
$
|
23.1
|
|
|
$
|
62.7
|
|
|
$
|
73.3
|
|
Media Networks
segment profit:
|
|
|
|
|
|
|
|
Starz
Networks
|
$
|
151.6
|
|
|
$
|
139.9
|
|
|
$
|
395.6
|
|
|
$
|
379.6
|
|
STARZPLAY
International
|
(39.7)
|
|
|
(4.4)
|
|
|
(113.6)
|
|
|
(24.7)
|
|
Streaming
Services
|
(9.8)
|
|
|
(1.4)
|
|
|
(14.7)
|
|
|
(9.5)
|
|
|
$
|
102.1
|
|
|
$
|
134.1
|
|
|
$
|
267.3
|
|
|
$
|
345.4
|
|
LIONS GATE ENTERTAINMENT CORP.
USE OF NON-GAAP FINANCIAL MEASURES
This earnings release presents the following important
financial measures utilized by Lions Gate Entertainment Corp. (the
"Company," "we," "us" or "our") that are not all financial measures
defined by generally accepted accounting principles ("GAAP"). The
Company uses non-GAAP financial measures, among other measures, to
evaluate the operating performance of our business. These non-GAAP
financial measures are in addition to, not a substitute for, or
superior to, measures of financial performance prepared in
accordance with United States GAAP.
Adjusted OIBDA: Adjusted OIBDA is defined as operating
income (loss) before adjusted depreciation and amortization
("OIBDA"), adjusted for adjusted share-based compensation
("adjusted SBC"), purchase accounting and related adjustments,
restructuring and other costs, and certain programming charges as a
result of management changes and associated changes in
strategy.
- Adjusted depreciation and amortization represents depreciation
and amortization as presented on our consolidated statement of
operations, less the depreciation and amortization related to the
amortization of purchase accounting and related adjustments
associated with recent acquisitions. Accordingly, the full impact
of the purchase accounting is included in the adjustment for
"purchase accounting and related adjustments", described
below.
- Adjusted share-based compensation represents share-based
compensation excluding the following items, when applicable: (i)
immediately vested stock awards granted as part of the Company's
annual bonus program issued in lieu of cash bonuses (which are,
when granted, included in segment or corporate general and
administrative expense), and (ii) the impact of the acceleration of
certain vesting schedules for equity awards pursuant to certain
severance arrangements, which are included in restructuring and
other expenses, when applicable.
- Restructuring and other includes restructuring and severance
costs, certain transaction and related costs, and certain unusual
items, when applicable.
- Programming charges include charges resulting from the
implementation of changes to the Company's programming strategy in
connection with recent management changes, which are included in
direct operating expenses, when applicable.
- Purchase accounting and related adjustments primarily represent
the amortization of non-cash fair value adjustments to certain
assets acquired in recent acquisitions. These adjustments include
the accretion of the noncontrolling interest discount related to
Pilgrim Media Group and 3 Arts Entertainment, the amortization of
the recoupable portion of the purchase price and the expense
associated with the earned distributions related to 3 Arts
Entertainment, all of which are accounted for as compensation and
are included in general and administrative expense.
Adjusted OIBDA is calculated similar to how the Company defines
segment profit and manages and evaluates its segment operations.
Segment profit also excludes corporate general and administrative
expense.
Adjusted Free Cash Flow: Free cash flow is typically
defined as net cash flows provided by (used in) operating
activities, less capital expenditures. The Company defines Adjusted
Free Cash Flow as net cash flows provided by (used in) operating
activities, less capital expenditures, plus or minus the net
increase or decrease in production loans, plus shareholder
litigation settlement charges and interest paid. The adjustment for
the production loans is made because the GAAP based cash flows from
operations reflects a non-cash reduction of cash flows for the cost
of films and television programs associated with production loans
prior to the time the Company actually pays for the film or
television program. The Company believes that it is more meaningful
to reflect the impact of the payment for these films and television
programs in its Adjusted Free Cash Flow when the payments are
actually made. The adjustment for shareholder litigation settlement
and interest charges paid is to exclude the non-recurring, one-time
payment included in cash flows from operating activities that is
associated with litigation matters arising from the Starz
merger.
Adjusted Net Income (Loss) Attributable to Lions Gate
Entertainment Corp. Shareholders: Adjusted net income (loss)
attributable to Lions Gate Entertainment Corp. shareholders is
defined as net income (loss) attributable to Lions Gate
Entertainment Corp. shareholders, adjusted for share-based
compensation, purchase accounting and related adjustments,
restructuring and other items, net gains or losses on investments,
loss on extinguishment of debt, certain programming charges as
described in the Adjusted OIBDA definition, net of the tax effect
of the adjustments at the applicable blended statutory rate and net
of the impact of the adjustments on non-controlling interest and
certain changes in our deferred tax valuation allowance.
Adjusted Basic and Diluted EPS: Adjusted basic earnings
(loss) per share is defined as adjusted net income (loss)
attributable to Lions Gate Entertainment Corp. shareholders divided
by the weighted average shares outstanding. Diluted EPS is similar
to basic EPS but is adjusted for the effects of securities that are
diluted based on the level of adjusted net income (loss), similar
to GAAP.
LIONS GATE ENTERTAINMENT CORP.
USE OF NON-GAAP FINANCIAL MEASURES
(Continued)
These measures are non-GAAP financial measures as defined in
Regulation G promulgated by the SEC and are in addition to, not a
substitute for, or superior to, measures of financial performance
prepared in accordance with United States GAAP.
We use these non-GAAP measures, among other measures, to
evaluate the operating performance of our business. We believe
these measures provide useful information to investors regarding
our results of operations and cash flows before non-operating
items. Adjusted OIBDA is considered an important measure of the
Company's performance because this measure eliminates amounts that,
in management's opinion, do not necessarily reflect the fundamental
performance of the Company's businesses, are infrequent in
occurrence, and in some cases are non-cash expenses. Adjusted Free
Cash Flow is considered an important measure of the Company's
liquidity because it provides information about the ability of the
Company to reduce net corporate debt, make strategic investments,
dividends and share repurchases. Adjusted Net Income (Loss)
Attributable to Lions Gate Entertainment Corp. Shareholders and
Adjusted EPS are considered important measures of the Company's
business operations as, similar to Adjusted OIBDA, these measures
eliminate amounts that, in management's opinion, do not necessarily
reflect the fundamental performance of the Company's
businesses.
These non-GAAP measures are commonly used in the entertainment
industry and by financial analysts and others who follow the
industry to measure operating performance. However, not all
companies calculate these measures in the same manner and the
measures as presented may not be comparable to similarly titled
measures presented by other companies due to differences in the
methods of calculation and excluded items.
A general limitation of these non-GAAP financial measures is
that they are not prepared in accordance with U.S. generally
accepted accounting principles. These measures should be reviewed
in conjunction with the relevant GAAP financial measures and are
not presented as alternative measures of operating income, cash
flow, net income (loss), or earnings (loss) per share as determined
in accordance with GAAP. Reconciliations of the adjusted metrics
utilized to their corresponding GAAP metrics are provided
below.
LIONS GATE
ENTERTAINMENT CORP.
|
RECONCILIATION OF
OPERATING INCOME (LOSS)
|
TO ADJUSTED
OIBDA
|
|
The following table
reconciles the GAAP measure, operating income (loss) to the
non-GAAP measure, Adjusted OIBDA:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Operating income
(loss)
|
$
|
(39.5)
|
|
|
$
|
86.8
|
|
|
$
|
14.9
|
|
|
$
|
164.0
|
|
Adjusted depreciation
and amortization(1)
|
10.5
|
|
|
10.1
|
|
|
31.5
|
|
|
30.4
|
|
Restructuring and
other(2)
|
3.7
|
|
|
16.5
|
|
|
16.8
|
|
|
42.1
|
|
Programming and
content charges(3)
|
74.0
|
|
|
—
|
|
|
74.0
|
|
|
—
|
|
Adjusted share-based
compensation expense(4)
|
17.2
|
|
|
11.1
|
|
|
41.0
|
|
|
41.3
|
|
Purchase accounting
and related adjustments(5)
|
58.1
|
|
|
46.9
|
|
|
158.2
|
|
|
139.2
|
|
Adjusted
OIBDA
|
$
|
124.0
|
|
|
$
|
171.4
|
|
|
$
|
336.4
|
|
|
$
|
417.0
|
|
|
|
|
|
|
|
(1)
|
Adjusted depreciation
and amortization represents depreciation and amortization as
presented on our consolidated statements of operations less the
depreciation and amortization related to the non-cash fair value
adjustments to property and equipment and intangible assets
acquired in recent acquisitions which are included in the purchase
accounting and related adjustments line item above, as shown in the
table below:
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Depreciation and
amortization
|
$
|
51.9
|
|
|
$
|
41.0
|
|
|
$
|
143.0
|
|
|
$
|
122.1
|
|
Less: Amount included
in purchase accounting and related adjustments
|
(41.4)
|
|
|
(30.9)
|
|
|
(111.5)
|
|
|
(91.7)
|
|
Adjusted depreciation
and amortization
|
$
|
10.5
|
|
|
$
|
10.1
|
|
|
$
|
31.5
|
|
|
$
|
30.4
|
|
|
|
|
|
|
|
(2)
|
Restructuring and
other includes restructuring and severance costs, certain
transaction and related costs, and certain unusual items, when
applicable, as shown in the table below:
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Restructuring and
other:
|
|
|
|
|
|
|
|
Severance(a)
|
|
|
|
|
|
|
|
Cash
|
$
|
1.8
|
|
|
$
|
13.3
|
|
|
$
|
7.7
|
|
|
$
|
17.0
|
|
Accelerated vesting
on equity awards
|
—
|
|
|
2.4
|
|
|
0.3
|
|
|
2.4
|
|
Total severance
costs
|
1.8
|
|
|
15.7
|
|
|
8.0
|
|
|
19.4
|
|
Transaction and
related costs(b)
|
1.9
|
|
|
0.8
|
|
|
8.8
|
|
|
22.7
|
|
|
$
|
3.7
|
|
|
$
|
16.5
|
|
|
$
|
16.8
|
|
|
$
|
42.1
|
|
|
|
|
|
|
|
|
|
(a)
|
Severance costs in
the three and nine months ended December 31, 2019 and 2018
were primarily related to restructuring activities in connection
with recent acquisitions, and other cost-saving
initiatives.
|
|
(b)
|
Transaction and
related costs in the three and nine months ended December 31,
2019 and 2018 reflect transaction, integration and legal costs
associated with certain strategic transactions, restructuring
activities and legal matters. In the three and nine months ended
December 31, 2018, 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.
|
(3)
|
|
During the three
months ended December 31, 2019, in connection with recent
management changes, the Company implemented changes to its
programming and broadcasting strategy including programming
acquired or produced under prior management. As a result, the
Company recorded certain programming and content charges
of $74.0 million in the three and nine months ended
December 31, 2019 (representing $66.2 million related to the Media
Networks segment, and $7.8 million related to the Television
Production segment), which are included in direct operating expense
in the unaudited condensed consolidated statement of
operations.
|
(4)
|
|
The following table
reconciles total share-based compensation expense to adjusted
share-based compensation expense:
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Total share-based
compensation expense
|
$
|
17.2
|
|
|
$
|
13.5
|
|
|
$
|
41.3
|
|
|
$
|
43.7
|
|
Less: Amount included
in restructuring and other(a)
|
—
|
|
|
(2.4)
|
|
|
(0.3)
|
|
|
(2.4)
|
|
Adjusted share-based
compensation
|
$
|
17.2
|
|
|
$
|
11.1
|
|
|
$
|
41.0
|
|
|
$
|
41.3
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents
share-based compensation expense included in restructuring and
other expenses reflecting the impact of the acceleration of certain
vesting schedules for equity awards pursuant to certain severance
arrangements.
|
(5)
|
|
Purchase accounting
and related adjustments primarily represent the amortization of
non-cash fair value adjustments to certain assets acquired in
recent acquisitions. These adjustments include the accretion of the
noncontrolling interest discount related to Pilgrim Media Group and
3 Arts Entertainment, the amortization of the recoupable portion of
the purchase price and the expense associated with the earned
distributions related to 3 Arts Entertainment, all of which are
accounted for as compensation and are included in general and
administrative expense. The following sets forth the amounts
included in each line item in the financial statements:
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Purchase accounting
and related adjustments:
|
|
|
|
|
|
|
|
Direct
operating
|
$
|
5.1
|
|
|
$
|
2.9
|
|
|
$
|
7.6
|
|
|
$
|
16.5
|
|
General and
administrative expense
|
11.6
|
|
|
13.1
|
|
|
39.1
|
|
|
31.0
|
|
Depreciation and
amortization
|
41.4
|
|
|
30.9
|
|
|
111.5
|
|
|
91.7
|
|
|
$
|
58.1
|
|
|
$
|
46.9
|
|
|
$
|
158.2
|
|
|
$
|
139.2
|
|
LIONS GATE
ENTERTAINMENT CORP.
|
|
RECONCILIATION OF
NET INCOME (LOSS) ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP.
SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO LIONS GATE
ENTERTAINMENT CORP. SHAREHOLDERS, AND BASIC AND DILUTED EPS TO
ADJUSTED BASIC AND DILUTED EPS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions, except per share amounts)
|
Reported Net
Income (Loss) Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
(91.2)
|
|
|
$
|
22.9
|
|
|
$
|
(143.4)
|
|
|
$
|
(129.0)
|
|
Adjusted share-based
compensation expense
|
17.2
|
|
|
11.1
|
|
|
41.0
|
|
|
41.3
|
|
Restructuring and
other
|
3.7
|
|
|
16.5
|
|
|
16.8
|
|
|
42.1
|
|
Programming and
content charges
|
74.0
|
|
|
—
|
|
|
74.0
|
|
|
—
|
|
Purchase accounting
and related adjustments(1)
|
57.9
|
|
|
46.5
|
|
|
157.8
|
|
|
138.2
|
|
Shareholder
litigation settlements(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
114.1
|
|
Loss on
extinguishment of debt
|
1.4
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
Loss on
investments
|
—
|
|
|
6.2
|
|
|
0.3
|
|
|
43.2
|
|
Tax impact of above
items(3)
|
(34.8)
|
|
|
(17.4)
|
|
|
(63.6)
|
|
|
(63.2)
|
|
Deferred tax
valuation allowance(4)
|
11.5
|
|
|
—
|
|
|
15.9
|
|
|
—
|
|
Noncontrolling
interest impact of above items
|
(8.0)
|
|
|
(7.6)
|
|
|
(22.8)
|
|
|
(19.7)
|
|
Adjusted Net
Income Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
31.7
|
|
|
$
|
78.2
|
|
|
$
|
77.4
|
|
|
$
|
167.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Basic
EPS
|
$
|
(0.42)
|
|
|
$
|
0.11
|
|
|
$
|
(0.66)
|
|
|
$
|
(0.61)
|
|
Impact of adjustments
on basic earnings per share
|
0.57
|
|
|
0.26
|
|
|
1.02
|
|
|
1.39
|
|
Adjusted Basic
EPS
|
$
|
0.15
|
|
|
$
|
0.37
|
|
|
$
|
0.36
|
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Diluted
EPS
|
$
|
(0.42)
|
|
|
$
|
0.10
|
|
|
$
|
(0.66)
|
|
|
$
|
(0.61)
|
|
Impact of adjustments
on diluted earnings per share
|
0.56
|
|
|
0.25
|
|
|
1.01
|
|
|
1.37
|
|
Adjusted Diluted
EPS
|
$
|
0.14
|
|
|
$
|
0.35
|
|
|
$
|
0.35
|
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
Adjusted weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
218.0
|
|
|
214.2
|
|
|
217.2
|
|
|
213.2
|
|
Diluted
|
219.9
|
|
|
220.8
|
|
|
220.1
|
|
|
221.1
|
|
|
|
|
|
|
|
(1)
|
Represents the
amounts included in Adjusted OIBDA net of interest income on the
amortization of non-cash fair value adjustments to finance lease
obligations acquired in the acquisition of Starz.
|
(2)
|
Shareholder
litigation settlements of $114.1 million in the nine months ended
December 31, 2018 was related to previous shareholder
litigation in connection with the Starz merger.
|
(3)
|
Represents the tax
impact of the adjustments to net income attributable to Lions Gate
Entertainment Corp. shareholders, calculated using the blended
statutory tax rate applicable to each adjustment.
|
(4)
|
In the three and nine
months ended December 31, 2019, represents a charge from a net
increase in the valuation allowance for certain of the Company's
deferred tax assets.
|
LIONS GATE
ENTERTAINMENT CORP.
|
RECONCILIATION OF
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES
|
TO ADJUSTED FREE
CASH FLOW
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Unaudited,
amounts in millions)
|
Net Cash Flows
Provided By (Used In) Operating
Activities(1)
|
$
|
215.9
|
|
|
$
|
(14.2)
|
|
|
$
|
434.4
|
|
|
$
|
255.7
|
|
Capital
expenditures
|
(7.1)
|
|
|
(7.3)
|
|
|
(24.0)
|
|
|
(28.9)
|
|
Net borrowings under
and (repayment) of production loans
|
(120.4)
|
|
|
73.9
|
|
|
(236.9)
|
|
|
38.7
|
|
Shareholder
litigation settlement charges and interest
|
—
|
|
|
221.3
|
|
|
—
|
|
|
221.3
|
|
Adjusted Free Cash
Flow
|
$
|
88.4
|
|
|
$
|
273.7
|
|
|
$
|
173.5
|
|
|
$
|
486.8
|
|
|
|
|
|
|
|
(1)
|
Cash flows provided
by operating activities for the three and nine months ended
December 31, 2019 includes a net benefit of approximately $133.6
million and $280.9 million, respectively, from the monetization of
trade accounts receivable programs (three and nine months ended
December 31, 2018 - net benefit of approximately $131.1
million).
|
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SOURCE Lionsgate