First Quarter Revenue is $1.01
Billion, Net Income Attributable to Lionsgate Shareholders
is $174 Million or Basic EPS of
$0.84; Adjusted OIBDA is $182 Million
Motion Picture Segment Profit Climbs 173%
Television Production Segment Profit Up 31%
SANTA MONICA, Calif. and
VANCOUVER, British Columbia,
Aug. 8, 2017 /PRNewswire/
-- Global content leader Lionsgate (NYSE: LGF.A, LGF.B) today
reported revenue of $1.01 billion,
net income attributable to Lionsgate shareholders of $174 million, or basic EPS of $0.84 on 206.8 million weighted average common
shares outstanding, adjusted net income attributable to Lionsgate
shareholders of $108 million, or
adjusted basic EPS of $0.52,
operating income of $90 million and
adjusted OIBDA of $182 million for
the first quarter of fiscal 2018 (quarter ended June 30, 2017).
The results included the Company's gain on the sale of its
equity interest in EPIX during the quarter.
"We are pleased to report strong first quarter financial results
that have gotten fiscal 2018 off to a great start," said Lionsgate
Chief Executive Officer Jon
Feltheimer. "With our second straight billion-dollar
revenue quarter, combined with strong bottom line profits, the
scale of our global content platform is reflected in our financial
results as well as our operational achievements. We continued
to grow our content business in the quarter by launching
significant new premium properties, expanding the reach of current
brands and adding to the Lionsgate-owned or controlled platforms
across which we monetize our intellectual property."
First Quarter Results
With Lionsgate's acquisition of Starz, fiscal 2018 first quarter
results are not directly comparable to prior reporting periods, so
the following quarterly segment results will be discussed on a
combined pro forma basis.
The Media Networks segment revenues increased 9.2% to
$390.5 million from $357.6 million last year on a combined pro forma
basis. Segment profits decreased 7.9% in the quarter to
$109.5 million as higher marketing
costs to support the increased number of original series impacted
results. Starz debuted the new series American Gods and
The White Princess during the quarter, and the fourth season
of the hit series Power returned at the end of the
quarter. Segment profit margins moderated to 28.0% in the
quarter from 33.2% on a combined pro forma basis a year ago.
Motion Picture segment revenues increased 15.8% to $472.4 million from $408.0
million last year on a combined pro forma basis primarily
driven by the strong home entertainment performances of
John Wick: Chapter Two, La
La Land, Saban's Power Rangers and The Shack.
John Wick: Chapter Two became
the highest-grossing electronic sell-through title in the Company's
history. The Company also reported theatrical revenue in the
quarter from Codeblack's All Eyez On Me and Pantelion Films'
How to Be A Latin Lover. Segment profit in the quarter
increased 191.6% to $86.9 million
from $29.8 million last year,
benefiting from higher revenue and lower marketing spend.
Segment profit margins in the quarter increased to 18.4% from 7.3%
last year on a combined pro forma basis.
Television Production segment revenues declined 18.6% to
$156.6 million in the quarter from
$192.5 million last year on a
combined pro forma basis due to the timing of episodic
deliveries. Segment profits increased 22.3% to $12.6 million. Segment profit margins improved to
8.0%, up from 5.4% in the quarter last year on a combined pro forma
basis.
Lionsgate's backlog, or already contracted future revenue on the
licensing of film and television product not yet recorded, remained
at a near-record $1.4 billion at
June 30, 2017.
Lionsgate senior management will hold its analyst and investor
conference call to discuss its fiscal 2018 first quarter financial
results at 5:30 P.M. ET/2:30 P.M. PT this afternoon, August 8. Interested parties may listen to the
live webcast by visiting the events page on the Lionsgate corporate
website or via
http://services.choruscall.com/links/lgf170808ldOgQ2Fz.html. A full
replay will become available this afternoon, August 8, 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 16,000-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
required to produce and market films and television series,
increased costs for producing and marketing feature films and
television series; budget overruns; limitations imposed by our
credit facilities and notes; unpredictability of the commercial
success of our motion pictures and television programming; risks
related to 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; litigation relating to the
acquisition of Starz; other trends affecting the entertainment
industry; and the other risk factors as set forth in Lionsgate's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on May 25, 2017, as
amended in Lionsgate's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August
8, 2017, which risk factors are incorporated herein by
reference. 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 June 30, 2017, which will be
posted on the Company's website at
www.lionsgate.com/corporate/reports/sec-filings, when filed with
the Securities and Exchange Commission. Trending schedules
containing certain financial information will also be available at
www.lionsgate.com/corporate/reports.
LIONS GATE
ENTERTAINMENT CORP.
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
June 30,
2017
|
|
March 31,
2017
|
|
(Amounts in
millions)
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
156.5
|
|
|
$
|
321.9
|
|
Restricted
cash
|
—
|
|
|
2.8
|
|
Accounts receivable,
net
|
822.9
|
|
|
908.1
|
|
Program
rights
|
238.8
|
|
|
261.7
|
|
Other current
assets
|
209.6
|
|
|
195.9
|
|
Total current
assets
|
1,427.8
|
|
|
1,690.4
|
|
Investment in films
and television programs and program rights, net
|
1,660.4
|
|
|
1,729.5
|
|
Property and
equipment, net
|
162.6
|
|
|
165.5
|
|
Investments
|
179.2
|
|
|
371.5
|
|
Intangible
assets
|
2,019.5
|
|
|
2,046.7
|
|
Goodwill
|
2,704.5
|
|
|
2,700.5
|
|
Other
assets
|
446.2
|
|
|
472.8
|
|
Deferred tax
assets
|
33.5
|
|
|
20.0
|
|
Total
assets
|
$
|
8,633.7
|
|
|
$
|
9,196.9
|
|
LIABILITIES
|
|
|
|
Accounts payable and
accrued liabilities
|
328.2
|
|
|
573.0
|
|
Participations and
residuals
|
498.9
|
|
|
514.9
|
|
Film obligations and
production loans
|
168.8
|
|
|
367.2
|
|
Debt - short term
portion
|
78.0
|
|
|
77.9
|
|
Deferred
revenue
|
161.1
|
|
|
156.9
|
|
Total current
liabilities
|
1,235.0
|
|
|
1,689.9
|
|
Debt
|
2,623.2
|
|
|
3,047.0
|
|
Participations and
residuals
|
372.1
|
|
|
359.7
|
|
Film obligations and
production loans
|
156.8
|
|
|
116.0
|
|
Other
liabilities
|
44.2
|
|
|
50.3
|
|
Dissenting
shareholders' liability
|
826.2
|
|
|
812.9
|
|
Deferred
revenue
|
73.1
|
|
|
72.7
|
|
Deferred tax
liabilities
|
432.3
|
|
|
440.2
|
|
Redeemable
noncontrolling interest
|
95.0
|
|
|
93.8
|
|
Commitments and
contingencies
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
Class A voting common
shares, no par value, 500.0 shares authorized, 81.2 shares issued
(March 31, 2017 - 81.1 shares issued)
|
611.1
|
|
|
605.7
|
|
Class B non-voting
common shares, no par value, 500.0 shares authorized, 126.9 shares
issued (March 31, 2017 - 126.4 shares issued)
|
1,934.8
|
|
|
1,914.1
|
|
Retained
earnings
|
244.1
|
|
|
10.6
|
|
Accumulated other
comprehensive loss
|
(14.2)
|
|
|
(16.0)
|
|
Total shareholders'
equity
|
2,775.8
|
|
|
2,514.4
|
|
Total liabilities and
shareholders' equity
|
$
|
8,633.7
|
|
|
$
|
9,196.9
|
|
LIONS GATE
ENTERTAINMENT CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions, except per share amounts)
|
Revenues
|
$
|
1,005.3
|
|
|
$
|
553.6
|
|
Expenses:
|
|
|
|
Direct
operating
|
554.9
|
|
|
366.3
|
|
Distribution and
marketing
|
198.1
|
|
|
125.0
|
|
General and
administration
|
111.7
|
|
|
71.0
|
|
Depreciation and
amortization
|
40.0
|
|
|
5.6
|
|
Restructuring and
other
|
10.9
|
|
|
7.7
|
|
Total
expenses
|
915.6
|
|
|
575.6
|
|
Operating income
(loss)
|
89.7
|
|
|
(22.0)
|
|
Other expenses
(income):
|
|
|
|
Interest
expense
|
|
|
|
Cash
interest
|
34.6
|
|
|
12.9
|
|
Interest on
dissenters' liability
|
13.3
|
|
|
—
|
|
Discount and
financing costs amortization
|
4.4
|
|
|
2.3
|
|
Total interest
expense
|
52.3
|
|
|
15.2
|
|
Interest and other
income
|
(2.8)
|
|
|
(0.9)
|
|
Loss on
extinguishment of debt
|
11.6
|
|
|
—
|
|
Total other expenses,
net
|
61.1
|
|
|
14.3
|
|
Income (loss)
before equity interests and income taxes
|
28.6
|
|
|
(36.3)
|
|
Equity interests
income (loss)
|
(8.3)
|
|
|
10.8
|
|
Gain on sale of
equity interest in EPIX
|
201.0
|
|
|
—
|
|
Income (loss)
before income taxes
|
221.3
|
|
|
(25.5)
|
|
Income tax provision
(benefit)
|
46.8
|
|
|
(26.3)
|
|
Net
income
|
174.5
|
|
|
0.8
|
|
Less: Net (income)
loss attributable to noncontrolling interest
|
(0.7)
|
|
|
0.5
|
|
Net income
attributable to Lions Gate Entertainment Corp.
shareholders
|
$
|
173.8
|
|
|
$
|
1.3
|
|
|
|
|
|
Per share
information attributable to Lions Gate Entertainment Corp.
shareholders:
|
|
|
|
Basic net income
per common share
|
$
|
0.84
|
|
|
$
|
0.01
|
|
Diluted net income
per common share
|
$
|
0.80
|
|
|
$
|
0.01
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
Basic
|
206.8
|
|
|
147.2
|
|
Diluted
|
217.9
|
|
|
149.6
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
—
|
|
|
$
|
0.09
|
|
LIONS GATE
ENTERTAINMENT CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions)
|
Operating
Activities:
|
|
|
|
Net income
|
$
|
174.5
|
|
|
$
|
0.8
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
40.0
|
|
|
5.6
|
|
Amortization of films
and television programs and program rights
|
393.6
|
|
|
292.4
|
|
Interest on
dissenters' liability
|
13.3
|
|
|
—
|
|
Discount and
financing costs amortization
|
4.4
|
|
|
2.3
|
|
Non-cash share-based
compensation
|
22.7
|
|
|
21.7
|
|
Other non-cash
items
|
0.9
|
|
|
1.3
|
|
Loss on
extinguishment of debt
|
11.6
|
|
|
—
|
|
Equity interests loss
(income)
|
8.3
|
|
|
(10.8)
|
|
Gain on sale of
equity interest in EPIX
|
(201.0)
|
|
|
—
|
|
Deferred income taxes
(benefit)
|
45.1
|
|
|
(30.7)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Restricted
cash
|
2.8
|
|
|
(7.9)
|
|
Accounts receivable,
net and other assets
|
101.3
|
|
|
146.7
|
|
Investment in films
and television programs and program rights, net
|
(289.1)
|
|
|
(250.0)
|
|
Accounts payable and
accrued liabilities
|
(253.7)
|
|
|
(70.9)
|
|
Participations and
residuals
|
(13.5)
|
|
|
43.6
|
|
Film
obligations
|
3.9
|
|
|
5.5
|
|
Deferred
revenue
|
4.5
|
|
|
(6.5)
|
|
Net Cash Flows
Provided By Operating Activities
|
69.6
|
|
|
143.1
|
|
Investing
Activities:
|
|
|
|
Proceeds from the
sale of equity method investee, net of transaction costs
|
393.7
|
|
|
—
|
|
Investment in equity
method investees
|
(9.5)
|
|
|
(4.2)
|
|
Capital
expenditures
|
(9.4)
|
|
|
(2.9)
|
|
Net Cash Flows
Provided By (Used In) Investing Activities
|
374.8
|
|
|
(7.1)
|
|
Financing
Activities:
|
|
|
|
Debt -
borrowings
|
115.0
|
|
|
185.0
|
|
Debt -
repayments
|
(554.0)
|
|
|
(121.0)
|
|
Production loans -
borrowings
|
38.5
|
|
|
63.3
|
|
Production loans -
repayments
|
(209.1)
|
|
|
(222.7)
|
|
Dividends
paid
|
—
|
|
|
(13.2)
|
|
Distributions to
noncontrolling interest
|
(3.0)
|
|
|
(2.2)
|
|
Exercise of stock
options
|
9.2
|
|
|
0.4
|
|
Tax withholding
required on equity awards
|
(5.5)
|
|
|
(13.8)
|
|
Net Cash Flows
Used In Financing Activities
|
(608.9)
|
|
|
(124.2)
|
|
Net Change In Cash
And Cash Equivalents
|
(164.5)
|
|
|
11.8
|
|
Foreign Exchange
Effects on Cash
|
(0.9)
|
|
|
0.4
|
|
Cash and Cash
Equivalents - Beginning Of Period
|
321.9
|
|
|
57.7
|
|
Cash and Cash
Equivalents - End Of Period
|
$
|
156.5
|
|
|
$
|
69.9
|
|
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. Following the Starz merger, the Company has added a new
segment from the Starz business and realigned business operations
within Lionsgate and Starz under three reporting segments and made
some changes in what is included and excluded from segment
profit.
The Company previously had two reportable business segments,
consisting of the Motion Pictures and Television Production
segments. Beginning in the quarter ended December 31, 2016, the Company now manages and
reports its operating results in three reportable business
segments: (1) Motion Pictures, (2) Television Production and (3)
Media Networks.
As a result, the Company has presented prior period segment data
in a manner that conforms to the current period presentation (see
further discussion below).
Motion Pictures consists of the development and production of
feature films, acquisition of North American and worldwide
distribution rights, North American theatrical, home entertainment
and television distribution of feature films produced and acquired,
and worldwide licensing of distribution rights to feature films
produced and acquired. As a result of the Starz merger, beginning
December 8, 2016, the Motion Pictures
segment includes Starz's third-party distribution business, which
is substantially the same as the Motion Pictures existing
business.
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.
Media Networks (which was previously not a reportable segment)
consists of (i) Starz Networks, which includes the licensing of
premium subscription video programming to U.S. multichannel video
programming distributors ("MVPDs") including cable operators,
satellite television providers and telecommunication companies, and
online video providers, and on an over-the-top ("OTT") basis (ii)
Content and Other, which includes the licensing of the Media
Networks' original series programming to digital media platforms,
international television networks, home entertainment and other
ancillary markets and (iii) Streaming Services, which represents
the Lionsgate legacy start-up direct to consumer streaming services
on its subscription video-on-demand ("SVOD") platforms which were
moved under the Media Networks segment in connection with the Starz
Merger.
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 production produced or acquired programming
reported from the Motion Pictures and Television Production
segments to the Media Networks segment, and certain fees charged to
the Media Networks segment by the Television Production segment for
the distribution of Media Networks' original series programming in
ancillary markets. While intersegment transactions are treated like
third-party transactions to determine segment performance, the
revenues (and corresponding expenses or assets 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 by business unit is presented in the table
below. The Media Networks segment reflects the Starz network
business from the date of acquisition (December 8, 2016), and the Lionsgate direct to
consumer streaming services on SVOD platforms for the historical
periods presented.
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Segment
revenues
|
|
|
|
Motion
Pictures
|
$
|
472.4
|
|
|
$
|
362.2
|
|
Television
Production
|
156.6
|
|
|
191.1
|
|
Media
Networks
|
390.5
|
|
|
0.3
|
|
Intersegment
eliminations
|
(14.2)
|
|
|
—
|
|
|
$
|
1,005.3
|
|
|
$
|
553.6
|
|
Gross
contribution
|
|
|
|
Motion
Pictures
|
$
|
113.8
|
|
|
$
|
56.3
|
|
Television
Production
|
21.7
|
|
|
17.1
|
|
Media
Networks
|
135.1
|
|
|
(6.8)
|
|
Intersegment
eliminations
|
(2.0)
|
|
|
—
|
|
|
$
|
268.6
|
|
|
$
|
66.6
|
|
Segment general
and administration
|
|
|
|
Motion
Pictures
|
$
|
26.9
|
|
|
$
|
24.5
|
|
Television
Production
|
9.1
|
|
|
7.5
|
|
Media
Networks
|
25.6
|
|
|
2.7
|
|
|
$
|
61.6
|
|
|
$
|
34.7
|
|
Segment profit
(loss)
|
|
|
|
Motion
Pictures
|
$
|
86.9
|
|
|
$
|
31.8
|
|
Television
Production
|
12.6
|
|
|
9.6
|
|
Media
Networks
|
109.5
|
|
|
(9.5)
|
|
Intersegment
eliminations
|
(2.0)
|
|
|
—
|
|
Total segment
profit
|
$
|
207.0
|
|
|
$
|
31.9
|
|
Corporate general and
administrative expenses
|
(25.5)
|
|
|
(21.3)
|
|
Adjusted
OIBDA
|
$
|
181.5
|
|
|
$
|
10.6
|
|
LIONS GATE ENTERTAINMENT CORP.
SEGMENT INFORMATION (Continued)
The following table sets forth revenues and segment profit by
product line for the Media Networks segment for the three months
ended June 30, 2017 and 2016:
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Media Networks
Revenue:
|
|
|
|
Starz
Networks
|
$
|
343.2
|
|
|
$
|
—
|
|
Content and
Other
|
45.9
|
|
|
—
|
|
Streaming
Services(1)
|
1.4
|
|
|
0.3
|
|
|
$
|
390.5
|
|
|
$
|
0.3
|
|
Media Networks
Segment Profit:
|
|
|
|
Starz
Networks
|
$
|
94.8
|
|
|
$
|
—
|
|
Content and
Other
|
20.6
|
|
|
—
|
|
Streaming
Services(1)
|
(5.9)
|
|
|
(9.5)
|
|
|
$
|
109.5
|
|
|
$
|
(9.5)
|
|
___________________
|
(1)
|
Streaming Services
represents the Lionsgate legacy start-up direct to consumer
streaming service initiatives on SVOD platforms which are now
included in the Media Networks segment.
|
LIONS GATE ENTERTAINMENT CORP.
PRO FORMA COMBINED SEGMENT INFORMATION
The following table sets forth segment information on a pro
forma combined basis as if the Starz Merger and our segment
reorganization occurred on April 1, 2016:
|
PRO FORMA
COMBINED
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Segment
revenues
|
|
|
|
Motion
Pictures
|
$
|
472.4
|
|
|
$
|
408.0
|
|
Television
Production
|
156.6
|
|
|
192.5
|
|
Media
Networks
|
390.5
|
|
|
357.6
|
|
Intersegment
eliminations
|
(14.2)
|
|
|
(0.6)
|
|
|
$
|
1,005.3
|
|
|
$
|
957.5
|
|
Gross
contribution
|
|
|
|
Motion
Pictures
|
$
|
113.8
|
|
|
$
|
60.3
|
|
Television
Production
|
21.7
|
|
|
18.5
|
|
Media
Networks
|
135.1
|
|
|
149.4
|
|
Intersegment
eliminations
|
(2.0)
|
|
|
—
|
|
|
$
|
268.6
|
|
|
$
|
228.2
|
|
Segment general
and administration
|
|
|
|
Motion
Pictures
|
$
|
26.9
|
|
|
$
|
30.5
|
|
Television
Production
|
9.1
|
|
|
8.2
|
|
Media
Networks
|
25.6
|
|
|
30.5
|
|
|
$
|
61.6
|
|
|
$
|
69.2
|
|
Segment profit
(loss)
|
|
|
|
Motion
Pictures
|
$
|
86.9
|
|
|
$
|
29.8
|
|
Television
Production
|
12.6
|
|
|
10.3
|
|
Media
Networks
|
109.5
|
|
|
118.9
|
|
Intersegment
eliminations
|
(2.0)
|
|
|
—
|
|
Total segment
profit
|
$
|
207.0
|
|
|
$
|
159.0
|
|
Corporate general and
administrative expenses
|
(25.5)
|
|
|
(21.8)
|
|
Adjusted
OIBDA
|
$
|
181.5
|
|
|
$
|
137.2
|
|
NOTE: The amounts above were determined by combining
the historical financial information of Lionsgate and Starz for
each respective period, applying the new Lionsgate segment
structure, and applying the acquisition related accounting.
However, the effects of purchase accounting are not part of the
definition of segment profit, and have been excluded accordingly.
In addition, the combined information does not apply any operating
costs synergies. The amounts are presented for illustrative
purposes and are not necessarily indicative of the combined
financial results that might have been achieved for the periods had
the acquisition taken place on April 1,
2016, nor are they indicative of the future combined results
of Lionsgate and Starz.
LIONS GATE ENTERTAINMENT CORP.
PRO FORMA COMBINED SEGMENT INFORMATION
(Continued)
The following table sets forth revenues by product line on a pro
forma combined basis for the Media Networks segment for the three
months ended June 30, 2017 and 2016:
|
PRO FORMA
COMBINED
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Media Networks
Revenue:
|
|
|
|
Starz
Networks
|
$
|
343.2
|
|
|
$
|
343.1
|
|
Content and
Other
|
45.9
|
|
|
14.3
|
|
Streaming
Services(1)
|
1.4
|
|
|
0.2
|
|
|
$
|
390.5
|
|
|
$
|
357.6
|
|
Media Networks
Segment Profit:
|
|
|
|
Starz
Networks
|
$
|
94.8
|
|
|
$
|
127.6
|
|
Content and
Other
|
20.6
|
|
|
0.9
|
|
Streaming
Services(1)
|
(5.9)
|
|
|
(9.6)
|
|
|
$
|
109.5
|
|
|
$
|
118.9
|
|
___________________
|
(1)
|
Streaming Services
represents the Lionsgate legacy start-up direct to consumer
streaming service initiatives on SVOD platforms which are now
included in the Media Networks segment.
|
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, and
restructuring and other costs.
- 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 the acquisition of Starz and Pilgrim Media Group.
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 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 excluding 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 costs would generally include
restructuring costs, such as severance, contract termination, or
asset impairments, transaction related costs, cost associated with
certain unusual legal matters, and unusual gains and losses.
- Purchase accounting and related adjustments represent the
amortization of non-cash fair value adjustments to the assets and
liabilities acquired in the acquisition of Starz and Pilgrim Media
Group.
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.
Free Cash Flow: Free cash flow is defined as net cash
flows provided by (used in) operating activities, less capital
expenditures, plus or minus the net increase or decrease in
production loans. 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 free cash flow when the payments are actually made.
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, loss on extinguishment of debt, cost
associated with certain unusual legal matters, and unusual gains or
losses, net of the tax effect of the adjustments at the applicable
statutory rate and net of the impact of the adjustments on
non-controlling interest.
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. 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 EPS is considered an important
measure of the Company's business operations as, similar to
Adjusted OIBDA, this measure eliminates 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
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions)
|
Operating income
(loss)
|
$
|
89.7
|
|
|
$
|
(22.0)
|
|
Adjusted depreciation
and amortization(1)
|
10.1
|
|
|
4.8
|
|
Restructuring and
other(2)
|
10.9
|
|
|
7.7
|
|
Adjusted share-based
compensation expense(3)
|
23.8
|
|
|
13.7
|
|
Purchase accounting
and related adjustments(4)
|
47.0
|
|
|
6.4
|
|
Adjusted
OIBDA
|
$
|
181.5
|
|
|
$
|
10.6
|
|
___________________
|
(1)
|
Adjusted depreciation
and amortization represents depreciation and amortization as
presented on our consolidated statements of income less the
depreciation and amortization related to the non-cash fair value
adjustments to property and equipment and intangible assets
acquired in the acquisition of Starz and Pilgrim Media Group which
are included in the purchase accounting and related adjustments
line item above, as shown in the table below:
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions)
|
Depreciation and
amortization
|
$
|
40.0
|
|
|
$
|
5.6
|
|
Less: Amount included
in purchase accounting and related adjustments
|
(29.9)
|
|
|
(0.8)
|
|
Adjusted depreciation
and amortization
|
$
|
10.1
|
|
|
$
|
4.8
|
|
|
|
(2)
|
Restructuring and
other includes restructuring and severance costs, certain
transaction related costs, and certain unusual items, when
applicable.
|
|
|
(3)
|
Adjusted share-based
compensation represents share-based compensation excluding amounts
related to immediately vested stock awards granted as part of the
Company's annual bonus program (which are, when granted, included
in segment and corporate general and administrative expense) and
excludes share-based compensation included in restructuring and
other. The following table reconciles total share-based
compensation expense to adjusted share-based compensation
expense:
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions)
|
Share-based
compensation
|
$
|
23.8
|
|
|
$
|
22.2
|
|
Less:
|
|
|
|
Bonus related
share-based compensation included in segment and corporate general
and administrative expense(a)
|
—
|
|
|
(8.5)
|
|
Adjusted share-based
compensation
|
$
|
23.8
|
|
|
$
|
13.7
|
|
|
|
(a)
|
Adjusted OIBDA is
reduced by bonus expense whether such amounts are cash-based
bonuses or immediately vested stock awards granted as part of our
annual bonus program.
|
|
|
(4)
|
Purchase accounting
and related adjustments represent the amortization of non-cash fair
value adjustments to the assets and liabilities acquired in the
acquisition of Starz and Pilgrim Media Group. The following sets
forth the amounts included in each line item in the financial
statements:
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions)
|
Purchase accounting
and related adjustments:
|
|
|
|
Direct
operating
|
$
|
15.9
|
|
|
$
|
4.3
|
|
General and
administrative expense
|
1.2
|
|
|
1.3
|
|
Depreciation and
amortization
|
29.9
|
|
|
0.8
|
|
|
$
|
47.0
|
|
|
$
|
6.4
|
|
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF PRO FORMA COMBINED OPERATING
INCOME
TO PRO FORMA COMBINED ADJUSTED OIBDA
The reconciliation of pro forma combined operating income to pro
forma combined Adjusted OIBDA is as follows:
|
PRO FORMA
COMBINED
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Operating
income
|
$
|
89.7
|
|
|
$
|
83.4
|
|
Adjusted depreciation
and amortization(1)
|
10.1
|
|
|
10.0
|
|
Restructuring and
other(2)
|
10.9
|
|
|
17.2
|
|
Adjusted share-based
compensation expense(3)
|
23.8
|
|
|
20.2
|
|
Purchase accounting
and related adjustments(4)
|
47.0
|
|
|
6.4
|
|
Adjusted
OIBDA
|
$
|
181.5
|
|
|
$
|
137.2
|
|
___________________
|
(1)
|
Adjusted depreciation
and amortization represents depreciation and amortization as
presented on our condensed consolidated statements of income less
the depreciation and amortization related to the non-cash fair
value adjustments to property and equipment and intangible assets
acquired in the acquisition of Starz and Pilgrim Media Group which
are included in the purchase accounting and related adjustments
line item above.
|
|
PRO FORMA
COMBINED
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Depreciation and
amortization
|
$
|
40.0
|
|
|
$
|
10.8
|
|
Less: Amount included
in purchase accounting and related adjustments
|
(29.9)
|
|
|
(0.8)
|
|
Adjusted depreciation
and amortization
|
$
|
10.1
|
|
|
$
|
10.0
|
|
|
|
(2)
|
Restructuring and
other includes restructuring and severance costs, certain
transaction related costs, and certain unusual items, when
applicable.
|
|
|
(3)
|
Adjusted share-based
compensation represents share-based compensation excluding amounts
related to immediately vested stock awards granted as part of the
Company's annual bonus program (which are, when granted, included
in segment and corporate general and administrative expense) and
excludes share-based compensation included in restructuring and
other. The following table reconciles share-based compensation
expense to adjusted share-based compensation expense:
|
|
PRO FORMA
COMBINED
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Share-based
compensation
|
$
|
23.8
|
|
|
$
|
28.7
|
|
Less:
|
|
|
|
Bonus related
share-based compensation included in segment and corporate general
and administrative expense(a)
|
—
|
|
|
(8.5)
|
|
Adjusted share-based
compensation
|
$
|
23.8
|
|
|
$
|
20.2
|
|
|
|
(a)
|
Adjusted OIBDA is
reduced by bonus expense whether such amounts are cash-based
bonuses or immediately vested stock awards granted as part of our
annual bonus program.
|
|
|
(4)
|
Purchase accounting
and related adjustments represent the amortization of non-cash fair
value adjustments to the assets and liabilities acquired in the
acquisition of Starz and Pilgrim Media Group. The following sets
forth the amounts included in each line item in the financial
statements:
|
|
PRO FORMA
COMBINED
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Unaudited,
amounts in millions)
|
Purchase accounting
and related adjustments:
|
|
|
|
Direct
operating
|
$
|
15.9
|
|
|
$
|
4.3
|
|
General and
administrative expense
|
1.2
|
|
|
1.3
|
|
Depreciation and
amortization
|
29.9
|
|
|
0.8
|
|
|
$
|
47.0
|
|
|
$
|
6.4
|
|
LIONS GATE
ENTERTAINMENT CORP.
|
|
RECONCILIATION OF
NET INCOME ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP.
SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO LIONS GATE
ENTERTAINMENT CORP. SHAREHOLDERS, AND ADJUSTED BASIC AND DILUTED
EPS
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions)
|
Reported Net
Income Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
173.8
|
|
|
$
|
1.3
|
|
Adjusted share-based
compensation expense(1)
|
23.8
|
|
|
13.7
|
|
Restructuring and
other
|
10.9
|
|
|
7.7
|
|
Purchase accounting
and related adjustments(2)
|
46.5
|
|
|
6.4
|
|
Loss on
extinguishment of debt
|
11.6
|
|
|
—
|
|
Gain on sale of
equity interest in EPIX
|
(201.0)
|
|
|
—
|
|
Tax impact of above
items(3)
|
44.1
|
|
|
(9.4)
|
|
Noncontrolling
interest impact of above items
|
(2.2)
|
|
|
(2.4)
|
|
Adjusted Net
Income Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
107.5
|
|
|
$
|
17.3
|
|
|
|
|
|
|
|
|
|
Reported Basic
EPS
|
$
|
0.84
|
|
|
$
|
0.01
|
|
Impact of adjustments
on basic earnings per share
|
(0.32)
|
|
|
0.11
|
|
Adjusted Basic
EPS
|
$
|
0.52
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
Reported Diluted
EPS
|
$
|
0.80
|
|
|
$
|
0.01
|
|
Impact of adjustments
on diluted earnings per share
|
(0.31)
|
|
|
0.11
|
|
Adjusted Diluted
EPS(4)
|
$
|
0.49
|
|
|
$
|
0.12
|
|
|
|
|
|
Adjusted weighted
average number of common shares outstanding:
|
|
|
|
Basic
|
206.8
|
|
|
147.2
|
|
Diluted
|
217.9
|
|
|
151.7
|
|
_________________________
|
(1)
|
Represents
share-based compensation expense excluding amounts attributable to
bonus awards (which are, when granted, included in segment and
corporate general and administrative expense) and excluding amounts
related to severance awards included in restructuring and other.
See the table under footnote (3) to the reconciliation of operating
income to Adjusted OIBDA for a reconciliation of share-based
compensation expense to adjusted share-based compensation
expense.
|
(2)
|
Represents the
amounts included in Adjusted OIBDA net of interest income on the
amortization of non-cash fair value adjustments to capital lease
obligations acquired in the acquisition of Starz.
|
(3)
|
Represents the tax
impact of the adjustments to net income (loss) attributable to
Lions Gate Entertainment Corp. shareholders, calculated using the
statutory tax rate applicable to each adjustment.
|
(4)
|
Adjusted diluted net
income attributable to Lions Gate Entertainment Corp. shareholders
for diluted EPS includes the add-back of interest expense on the
convertible notes, net of tax assuming conversion of the notes at
the beginning of each period presented when dilutive.
|
LIONS GATE
ENTERTAINMENT CORP.
RECONCILIATION OF
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH
FLOW
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2017
|
|
2016
|
|
(Amounts in
millions)
|
Net Cash Flows
Provided By Operating Activities
|
$
|
69.6
|
|
|
$
|
143.1
|
|
Capital
expenditures
|
(9.4)
|
|
|
(2.9)
|
|
Net borrowings under
and (repayment) of production loans
|
(170.6)
|
|
|
(159.4)
|
|
Free Cash Flow, as
defined
|
$
|
(110.4)
|
|
|
$
|
(19.2)
|
|
|
|
|
|
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SOURCE Lionsgate