SANTA MONICA, Calif.
and VANCOUVER, British
Columbia, Feb. 7, 2019
/PRNewswire/ -- Global content leader Lionsgate (NYSE: LGF.A,
LGF.B) today reported revenue of $933.2 million and net income
attributable to Lionsgate shareholders of $22.9 million, or
fully diluted earnings per share of $0.10, on 220.8 million
diluted weighted average common shares outstanding for the quarter
ended December 31, 2018.
Adjusted net income attributable to Lionsgate shareholders was
$78.2 million, or adjusted diluted
earnings per share of $0.35,
operating income was $86.8 million, and adjusted OIBDA was
$171.4 million.
The Company generated $273.7
million in free cash flow during the quarter driven by
working capital improvements.
Starz had a strong revenue and subscriber quarter, ending the
quarter with 25.1 million overall domestic subscribers, which was
consistent sequentially and up 1.1 million subscribers from the
prior year quarter. Starz achieved strong over-the-top (OTT)
subscriber growth for the sequential quarter as well as
year-over-year.
"We're pleased to report a strong quarter with significant free
cash flow and continued revenue and subscriber growth at Starz,"
said Lionsgate Chief Executive Officer Jon
Feltheimer. "As we refill our feature film and
television pipelines at a robust pace and take our integration of
Lionsgate and Starz to the next level, all signs are pointing to
strong growth in the year ahead."
Segment Results
Media Networks segment revenues increased to $366.8 million due to strong OTT subscriber
growth. Segment profits increased 9.6% to $134.1 million from the prior year quarter.
Overall domestic subscribers were sequentially consistent in the
quarter at 25.1 million and up 1.1 million year over year.
Motion Picture segment revenues were $362.6 million. Segment profits decreased by
19.9% to $43.5 million, reflecting
underperformance of certain titles in Fiscal 2019 compared to the
outperformance of Wonder in the prior year quarter.
Television Production segment revenues were $216.5 million in the quarter. Segment profits
were $21.2 million compared to
$27.8 million in the prior year
quarter, driven in part by timing of certain episodic deliveries
which moved out of Fiscal 2019.
Lionsgate senior management will hold its analyst and investor
conference call to discuss its fiscal 2019 third quarter results at
5:00 PM ET/2:00 PM PT this
afternoon, February 7th. 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/lgf190207dlPd8PVQ.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
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; 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
7, 2019. 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 recent Quarterly Report on Form 10-Q, 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/financial-reports/quarterly-results/2019.
LIONS GATE
ENTERTAINMENT CORP.
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
December 31,
2018
|
|
March 31,
2018
|
|
(Unaudited,
amounts in millions)
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
106.2
|
|
|
$
|
378.1
|
|
Accounts receivable,
net
|
833.1
|
|
|
946.0
|
|
Program
rights
|
247.0
|
|
|
253.2
|
|
Other current
assets
|
227.7
|
|
|
195.8
|
|
Total current
assets
|
1,414.0
|
|
|
1,773.1
|
|
Investment in films
and television programs and program rights, net
|
1,670.0
|
|
|
1,692.0
|
|
Property and
equipment, net
|
153.4
|
|
|
161.7
|
|
Investments
|
122.6
|
|
|
164.9
|
|
Intangible
assets
|
1,900.0
|
|
|
1,937.7
|
|
Goodwill
|
2,833.5
|
|
|
2,740.8
|
|
Other
assets
|
453.6
|
|
|
458.6
|
|
Deferred tax
assets
|
33.2
|
|
|
38.8
|
|
Total
assets
|
$
|
8,580.3
|
|
|
$
|
8,967.6
|
|
LIABILITIES
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
432.5
|
|
|
$
|
447.7
|
|
Participations and
residuals
|
499.6
|
|
|
504.5
|
|
Film obligations and
production loans
|
441.2
|
|
|
327.9
|
|
Debt - short term
portion
|
44.4
|
|
|
79.1
|
|
Dissenting
shareholders' liability
|
—
|
|
|
869.3
|
|
Deferred
revenue
|
173.0
|
|
|
183.9
|
|
Total current
liabilities
|
1,590.7
|
|
|
2,412.4
|
|
Debt
|
2,967.9
|
|
|
2,478.3
|
|
Participations and
residuals
|
458.1
|
|
|
438.3
|
|
Film obligations and
production loans
|
148.5
|
|
|
171.3
|
|
Other
liabilities
|
83.7
|
|
|
46.4
|
|
Deferred
revenue
|
70.0
|
|
|
70.3
|
|
Deferred tax
liabilities
|
46.8
|
|
|
91.9
|
|
Redeemable
noncontrolling interest
|
144.3
|
|
|
101.8
|
|
Commitments and
contingencies
|
|
|
|
EQUITY
|
|
|
|
Class A voting common
shares, no par value, 500.0 shares authorized, 82.5 shares issued
(March 31, 2018 - 81.8 shares issued)
|
647.9
|
|
|
628.7
|
|
Class B non-voting
common shares, no par value, 500.0 shares authorized, 132.9 shares
issued (March 31, 2018 - 129.3 shares issued)
|
2,117.5
|
|
|
2,020.3
|
|
Retained
earnings
|
346.0
|
|
|
516.6
|
|
Accumulated other
comprehensive loss
|
(44.4)
|
|
|
(9.7)
|
|
Total Lions Gate
Entertainment Corp. shareholders' equity
|
3,067.0
|
|
|
3,155.9
|
|
Noncontrolling
interests
|
3.3
|
|
|
1.0
|
|
Total
equity
|
3,070.3
|
|
|
3,156.9
|
|
Total liabilities and
equity
|
$
|
8,580.3
|
|
|
$
|
8,967.6
|
|
LIONS GATE
ENTERTAINMENT CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions, except per share amounts)
|
Revenues
|
$
|
933.2
|
|
|
$
|
1,142.7
|
|
|
$
|
2,766.9
|
|
|
$
|
3,088.8
|
|
Expenses
|
|
|
|
|
|
|
|
Direct
operating
|
502.0
|
|
|
650.1
|
|
|
1,495.2
|
|
|
1,726.6
|
|
Distribution and
marketing
|
176.9
|
|
|
237.1
|
|
|
608.3
|
|
|
669.7
|
|
General and
administration
|
110.0
|
|
|
114.2
|
|
|
335.2
|
|
|
337.4
|
|
Depreciation and
amortization
|
41.0
|
|
|
39.7
|
|
|
122.1
|
|
|
119.0
|
|
Restructuring and
other
|
16.5
|
|
|
21.4
|
|
|
42.1
|
|
|
35.8
|
|
Total
expenses
|
846.4
|
|
|
1,062.5
|
|
|
2,602.9
|
|
|
2,888.5
|
|
Operating
income
|
86.8
|
|
|
80.2
|
|
|
164.0
|
|
|
200.3
|
|
Interest
expense
|
|
|
|
|
|
|
|
Interest
expense
|
(42.7)
|
|
|
(31.9)
|
|
|
(116.9)
|
|
|
(105.7)
|
|
Interest on
dissenting shareholders' liability
|
(2.6)
|
|
|
(14.4)
|
|
|
(35.3)
|
|
|
(41.6)
|
|
Total interest
expense
|
(45.3)
|
|
|
(46.3)
|
|
|
(152.2)
|
|
|
(147.3)
|
|
Shareholder
litigation settlements
|
—
|
|
|
—
|
|
|
(114.1)
|
|
|
—
|
|
Interest and other
income
|
2.9
|
|
|
2.2
|
|
|
9.0
|
|
|
7.7
|
|
Other
expense
|
(1.8)
|
|
|
—
|
|
|
(1.8)
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
(6.2)
|
|
|
—
|
|
|
(24.2)
|
|
Gain (loss) on
investments
|
(6.2)
|
|
|
(29.2)
|
|
|
(43.2)
|
|
|
171.8
|
|
Equity interests
loss
|
(11.0)
|
|
|
(13.8)
|
|
|
(28.8)
|
|
|
(34.8)
|
|
Income (loss)
before income taxes
|
25.4
|
|
|
(13.1)
|
|
|
(167.1)
|
|
|
173.5
|
|
Income tax benefit
(provision)
|
(5.3)
|
|
|
204.2
|
|
|
26.6
|
|
|
205.0
|
|
Net income
(loss)
|
20.1
|
|
|
191.1
|
|
|
(140.5)
|
|
|
378.5
|
|
Less: Net loss
attributable to noncontrolling interests
|
2.8
|
|
|
1.9
|
|
|
11.5
|
|
|
3.8
|
|
Net income (loss)
attributable to Lions Gate Entertainment Corp.
shareholders
|
$
|
22.9
|
|
|
$
|
193.0
|
|
|
$
|
(129.0)
|
|
|
$
|
382.3
|
|
|
|
|
|
|
|
|
|
Per share
information attributable to Lions Gate Entertainment Corp.
shareholders:
|
|
|
|
|
|
|
|
Basic net income
(loss) per common share
|
$
|
0.11
|
|
|
$
|
0.92
|
|
|
$
|
(0.61)
|
|
|
$
|
1.84
|
|
Diluted net income
(loss) per common share
|
$
|
0.10
|
|
|
$
|
0.87
|
|
|
$
|
(0.61)
|
|
|
$
|
1.74
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
214.2
|
|
|
208.8
|
|
|
213.2
|
|
|
207.8
|
|
Diluted
|
220.8
|
|
|
221.6
|
|
|
213.2
|
|
|
219.7
|
|
|
|
|
|
|
|
|
|
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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Operating
Activities:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
20.1
|
|
|
$
|
191.1
|
|
|
$
|
(140.5)
|
|
|
$
|
378.5
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
41.0
|
|
|
39.7
|
|
|
122.1
|
|
|
119.0
|
|
Amortization of films
and television programs and program rights
|
382.1
|
|
|
468.2
|
|
|
1,105.3
|
|
|
1,232.8
|
|
Interest on
dissenting shareholders' liability
|
(104.6)
|
|
|
14.4
|
|
|
(72.0)
|
|
|
41.6
|
|
Amortization of debt
discount and financing costs
|
3.1
|
|
|
3.6
|
|
|
9.0
|
|
|
11.0
|
|
Non-cash share-based
compensation
|
13.6
|
|
|
27.1
|
|
|
43.7
|
|
|
74.5
|
|
Other non-cash
items
|
8.4
|
|
|
1.8
|
|
|
20.5
|
|
|
5.7
|
|
Shareholder
litigation settlements
|
(114.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Distributions from
equity method investee
|
1.8
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
6.2
|
|
|
—
|
|
|
24.2
|
|
Equity interests
loss
|
11.0
|
|
|
13.8
|
|
|
28.8
|
|
|
34.8
|
|
Loss (gain) on
investments
|
6.2
|
|
|
29.2
|
|
|
43.2
|
|
|
(171.8)
|
|
Deferred income taxes
(benefit)
|
4.6
|
|
|
(205.5)
|
|
|
(36.3)
|
|
|
(189.3)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable,
net and other assets
|
135.6
|
|
|
(83.1)
|
|
|
308.5
|
|
|
48.6
|
|
Investment in films
and television programs and program rights, net
|
(376.4)
|
|
|
(407.3)
|
|
|
(1,073.5)
|
|
|
(1,088.0)
|
|
Accounts payable and
accrued liabilities
|
(1.5)
|
|
|
(22.6)
|
|
|
(66.8)
|
|
|
(220.4)
|
|
Participations and
residuals
|
7.0
|
|
|
17.4
|
|
|
(17.1)
|
|
|
38.3
|
|
Film
obligations
|
2.1
|
|
|
(20.3)
|
|
|
(10.3)
|
|
|
5.3
|
|
Deferred
revenue
|
(54.2)
|
|
|
(41.0)
|
|
|
(10.7)
|
|
|
24.5
|
|
Net Cash Flows
Provided By (Used In) Operating Activities
|
(14.2)
|
|
|
32.7
|
|
|
255.7
|
|
|
369.3
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
Proceeds from the
sale of equity method investee, net of transaction costs
|
—
|
|
|
—
|
|
|
—
|
|
|
393.7
|
|
Investment in equity
method investees
|
(17.6)
|
|
|
(18.3)
|
|
|
(39.6)
|
|
|
(47.6)
|
|
Business
acquisitions, net of cash acquired
|
—
|
|
|
(1.8)
|
|
|
(77.3)
|
|
|
(1.8)
|
|
Capital
expenditures
|
(7.3)
|
|
|
(7.1)
|
|
|
(28.9)
|
|
|
(28.4)
|
|
Net Cash Flows
Provided By (Used In) Investing Activities
|
(24.9)
|
|
|
(27.2)
|
|
|
(145.8)
|
|
|
315.9
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
Debt -
borrowings
|
840.0
|
|
|
46.6
|
|
|
2,909.5
|
|
|
161.6
|
|
Debt -
repayments
|
(324.0)
|
|
|
(174.2)
|
|
|
(2,468.8)
|
|
|
(992.1)
|
|
Production loans -
borrowings
|
92.4
|
|
|
129.9
|
|
|
246.9
|
|
|
299.5
|
|
Production loans -
repayments
|
(18.5)
|
|
|
(15.6)
|
|
|
(208.2)
|
|
|
(267.2)
|
|
Payment of dissenter
liability accrued at acquisition
|
(797.3)
|
|
|
—
|
|
|
(797.3)
|
|
|
—
|
|
Dividends
paid
|
(19.2)
|
|
|
—
|
|
|
(57.4)
|
|
|
—
|
|
Distributions to
noncontrolling interest
|
(0.8)
|
|
|
(1.4)
|
|
|
(2.3)
|
|
|
(6.0)
|
|
Exercise of stock
options
|
2.4
|
|
|
9.2
|
|
|
4.2
|
|
|
31.6
|
|
Tax withholding
required on equity awards
|
(2.9)
|
|
|
(8.5)
|
|
|
(6.9)
|
|
|
(17.0)
|
|
Net Cash Flows
Used In Financing Activities
|
(227.9)
|
|
|
(14.0)
|
|
|
(380.3)
|
|
|
(789.6)
|
|
Net Change In
Cash, Cash Equivalents and Restricted Cash
|
(267.0)
|
|
|
(8.5)
|
|
|
(270.4)
|
|
|
(104.4)
|
|
Foreign Exchange
Effects on Cash, Cash Equivalents and Restricted
Cash
|
0.9
|
|
|
(0.7)
|
|
|
(1.5)
|
|
|
(3.6)
|
|
Cash, Cash
Equivalents and Restricted Cash - Beginning Of
Period
|
372.3
|
|
|
225.9
|
|
|
378.1
|
|
|
324.7
|
|
Cash and Cash
Equivalents - End Of Period
|
$
|
106.2
|
|
|
$
|
216.7
|
|
|
$
|
106.2
|
|
|
$
|
216.7
|
|
LIONS GATE ENTERTAINMENT CORP.
SEGMENT INFORMATION
The Company has three reportable business segments: (1) Motion
Picture, (2) Television Production and (3) Media Networks.
Segment Reorganization. During the quarter ended
June 30, 2018, the Company
reorganized its operational reporting of the Television Production
segment to include the production and licensing to Starz Networks
of Starz original series (previously produced by and included in
the Media Networks segment) and the ancillary market distribution
of Starz original productions and licensed product (also previously
included in the Media Networks segment). This reorganization aligns
the segment presentation of the Starz original product to be
consistent with the Company's other television productions included
in the Television Production segment. This alignment of operational
reporting and business operations will allow our chief operating
decision maker to review all of the Company's television production
related activity in a consistent manner, and as part of one segment
(i.e., the Television Production segment). The changes resulting
from the segment reorganization are as follows: (i) the Television
Production segment includes licensing revenues from the licensing
of Starz original series productions to Starz Networks which are
eliminated in consolidation as intersegment transactions; and (ii)
the Television Production segment now includes the associated
ancillary market distribution of Starz original productions and
licensed product that were previously included in Content and Other
within the Media Networks segment. As a result of the segment
reorganization, the Company has presented prior period segment data
in a manner that conforms to the current period presentation.
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. As described
under the Segment Reorganization section above, as of
April 1, 2018, Television Production
now includes the licensing of Starz original series productions to
Starz Networks 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 (i) Starz
Networks, which includes the licensing of premium subscription
video programming to Distributors, and on a direct-to-consumer
basis and (ii) 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
by business unit is presented in the table below:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Segment
revenues
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
362.6
|
|
|
$
|
539.1
|
|
|
$
|
1,106.9
|
|
|
$
|
1,397.0
|
|
Television
Production
|
216.5
|
|
|
266.2
|
|
|
648.1
|
|
|
738.7
|
|
Media
Networks
|
366.8
|
|
|
353.5
|
|
|
1,099.0
|
|
|
1,057.8
|
|
Intersegment
eliminations
|
(12.7)
|
|
|
(16.1)
|
|
|
(87.1)
|
|
|
(104.7)
|
|
|
$
|
933.2
|
|
|
$
|
1,142.7
|
|
|
$
|
2,766.9
|
|
|
$
|
3,088.8
|
|
Gross
contribution
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
69.2
|
|
|
$
|
82.1
|
|
|
$
|
186.3
|
|
|
$
|
230.9
|
|
Television
Production
|
32.6
|
|
|
36.4
|
|
|
79.4
|
|
|
117.8
|
|
Media
Networks
|
157.2
|
|
|
147.8
|
|
|
418.7
|
|
|
390.0
|
|
Intersegment
eliminations
|
(1.2)
|
|
|
0.5
|
|
|
(3.4)
|
|
|
(8.0)
|
|
|
$
|
257.8
|
|
|
$
|
266.8
|
|
|
$
|
681.0
|
|
|
$
|
730.7
|
|
Segment general
and administration
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
25.7
|
|
|
$
|
27.8
|
|
|
$
|
78.6
|
|
|
$
|
81.1
|
|
Television
Production
|
11.4
|
|
|
8.6
|
|
|
32.9
|
|
|
28.3
|
|
Media
Networks
|
23.1
|
|
|
25.4
|
|
|
73.3
|
|
|
75.5
|
|
|
$
|
60.2
|
|
|
$
|
61.8
|
|
|
$
|
184.8
|
|
|
$
|
184.9
|
|
Segment
profit
|
|
|
|
|
|
|
|
Motion
Picture
|
$
|
43.5
|
|
|
$
|
54.3
|
|
|
$
|
107.7
|
|
|
$
|
149.8
|
|
Television
Production
|
21.2
|
|
|
27.8
|
|
|
46.5
|
|
|
89.5
|
|
Media
Networks
|
134.1
|
|
|
122.4
|
|
|
345.4
|
|
|
314.5
|
|
Intersegment
eliminations
|
(1.2)
|
|
|
0.5
|
|
|
(3.4)
|
|
|
(8.0)
|
|
Total segment
profit
|
$
|
197.6
|
|
|
$
|
205.0
|
|
|
$
|
496.2
|
|
|
$
|
545.8
|
|
Corporate general and
administrative expenses
|
(26.2)
|
|
|
(27.4)
|
|
|
(79.2)
|
|
|
(78.1)
|
|
Adjusted
OIBDA(1)
|
$
|
171.4
|
|
|
$
|
177.6
|
|
|
$
|
417.0
|
|
|
$
|
467.7
|
|
|
|
_______________
|
(1)
|
See "Use of Non-GAAP
Financial Measures" for the definition of Adjusted OIBDA and
reconciliation to the most directly comparable GAAP financial
measure.
|
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 and nine months ended
December 31, 2018 and 2017:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Media Networks
Revenue:
|
|
|
|
|
|
|
|
Starz
Networks
|
$
|
362.1
|
|
|
$
|
351.8
|
|
|
$
|
1,087.0
|
|
|
$
|
1,053.7
|
|
Streaming
Services
|
4.7
|
|
|
1.7
|
|
|
12.0
|
|
|
4.1
|
|
|
$
|
366.8
|
|
|
$
|
353.5
|
|
|
$
|
1,099.0
|
|
|
$
|
1,057.8
|
|
Media Networks
Segment Profit:
|
|
|
|
|
|
|
|
Starz
Networks
|
$
|
135.5
|
|
|
$
|
134.3
|
|
|
$
|
354.9
|
|
|
$
|
345.6
|
|
Streaming
Services
|
(1.4)
|
|
|
(11.9)
|
|
|
(9.5)
|
|
|
(31.1)
|
|
|
$
|
134.1
|
|
|
$
|
122.4
|
|
|
$
|
345.4
|
|
|
$
|
314.5
|
|
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.
- 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.
- 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.
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, 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 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, loss on extinguishment of debt, and
unusual gains or losses, 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.
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 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
TO ADJUSTED
OIBDA
|
|
The following table
reconciles the GAAP measure, operating income to the non-GAAP
measure, Adjusted OIBDA:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Operating
income
|
$
|
86.8
|
|
|
$
|
80.2
|
|
|
$
|
164.0
|
|
|
$
|
200.3
|
|
Adjusted depreciation
and amortization(1)
|
10.1
|
|
|
9.8
|
|
|
30.4
|
|
|
29.2
|
|
Restructuring and
other(2)
|
16.5
|
|
|
21.4
|
|
|
42.1
|
|
|
35.8
|
|
Adjusted share-based
compensation expense(3)
|
11.1
|
|
|
24.2
|
|
|
41.3
|
|
|
71.6
|
|
Purchase accounting
and related adjustments(4)
|
46.9
|
|
|
42.0
|
|
|
139.2
|
|
|
130.8
|
|
Adjusted
OIBDA
|
$
|
171.4
|
|
|
$
|
177.6
|
|
|
$
|
417.0
|
|
|
$
|
467.7
|
|
___________________
|
(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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Depreciation and
amortization
|
$
|
41.0
|
|
|
$
|
39.7
|
|
|
$
|
122.1
|
|
|
$
|
119.0
|
|
Less: Amount included
in purchase accounting and related adjustments
|
(30.9)
|
|
|
(29.9)
|
|
|
(91.7)
|
|
|
(89.8)
|
|
Adjusted depreciation
and amortization
|
$
|
10.1
|
|
|
$
|
9.8
|
|
|
$
|
30.4
|
|
|
$
|
29.2
|
|
|
|
(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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Restructuring and
other:
|
|
|
|
|
|
|
|
Severance(a)
|
|
|
|
|
|
|
|
Cash
|
$
|
13.3
|
|
|
$
|
9.1
|
|
|
$
|
17.0
|
|
|
$
|
10.1
|
|
Accelerated vesting
on equity awards
|
2.4
|
|
|
2.9
|
|
|
2.4
|
|
|
2.9
|
|
Total severance
costs
|
15.7
|
|
|
12.0
|
|
|
$
|
19.4
|
|
|
$
|
13.0
|
|
Transaction and
related costs(b)
|
0.8
|
|
|
1.0
|
|
|
22.7
|
|
|
14.4
|
|
Development
expense(c)
|
—
|
|
|
8.4
|
|
|
—
|
|
|
8.4
|
|
|
$
|
16.5
|
|
|
$
|
21.4
|
|
|
$
|
42.1
|
|
|
$
|
35.8
|
|
|
_______________________
|
|
(a)
|
Severance costs in
the three and nine months ended December 31, 2018 and 2017
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,
2018 and 2017 reflect transaction, integration and legal costs
associated with certain strategic transactions 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. In the three and nine months
ended December 31, 2017, these costs were primarily related to
the sale of EPIX, the legal fees associated with the Starz class
action lawsuits and other matters, and the integration of
Starz.
|
|
(c)
|
Development expense
in the three and nine months ended December 31, 2017 represents
write-downs resulting from the restructuring of the Motion Picture
business in connection with the acquisition of Good Universe and
new management's decisions around the creative direction on certain
development projects which were abandoned in the three months ended
December 31, 2017.
|
(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
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Total share-based
compensation expense
|
$
|
13.5
|
|
|
$
|
27.1
|
|
|
$
|
43.7
|
|
|
$
|
74.5
|
|
Less: Amount included
in restructuring and other(a)
|
(2.4)
|
|
|
(2.9)
|
|
|
(2.4)
|
|
|
(2.9)
|
|
Adjusted share-based
compensation
|
$
|
11.1
|
|
|
$
|
24.2
|
|
|
$
|
41.3
|
|
|
$
|
71.6
|
|
|
|
|
|
(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.
|
(4)
|
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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Purchase accounting
and related adjustments:
|
|
|
|
|
|
|
|
Direct
operating
|
$
|
2.9
|
|
|
$
|
10.4
|
|
|
$
|
16.5
|
|
|
$
|
36.5
|
|
General and
administrative expense
|
13.1
|
|
|
1.7
|
|
|
31.0
|
|
|
4.5
|
|
Depreciation and
amortization
|
30.9
|
|
|
29.9
|
|
|
91.7
|
|
|
89.8
|
|
|
$
|
46.9
|
|
|
$
|
42.0
|
|
|
$
|
139.2
|
|
|
$
|
130.8
|
|
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 ADJUSTED BASIC AND DILUTED
EPS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions, except per share amounts)
|
Reported Net
Income (Loss) Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
22.9
|
|
|
$
|
193.0
|
|
|
$
|
(129.0)
|
|
|
$
|
382.3
|
|
Adjusted share-based
compensation expense(1)
|
11.1
|
|
|
24.2
|
|
|
41.3
|
|
|
71.6
|
|
Restructuring and
other
|
16.5
|
|
|
21.4
|
|
|
42.1
|
|
|
35.8
|
|
Purchase accounting
and related adjustments(2)
|
46.5
|
|
|
41.5
|
|
|
138.2
|
|
|
129.3
|
|
Shareholder
litigation settlements(3)
|
—
|
|
|
—
|
|
|
114.1
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
6.2
|
|
|
—
|
|
|
24.2
|
|
Loss (gain) on
investments(4)
|
6.2
|
|
|
29.2
|
|
|
43.2
|
|
|
(171.8)
|
|
Tax impact of above
items(5)
|
(17.4)
|
|
|
(41.6)
|
|
|
(63.2)
|
|
|
(23.1)
|
|
Impact of corporate
tax rate change on net deferred tax
liabilities(6)
|
—
|
|
|
(165.0)
|
|
|
—
|
|
|
(165.0)
|
|
Noncontrolling
interest impact of above items
|
(7.6)
|
|
|
(2.0)
|
|
|
(19.7)
|
|
|
(6.4)
|
|
Adjusted Net
Income Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
78.2
|
|
|
$
|
106.9
|
|
|
$
|
167.0
|
|
|
$
|
276.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Basic
EPS
|
$
|
0.11
|
|
|
$
|
0.92
|
|
|
$
|
(0.61)
|
|
|
$
|
1.84
|
|
Impact of adjustments
on basic earnings per share
|
0.26
|
|
|
(0.41)
|
|
|
1.39
|
|
|
(0.51)
|
|
Adjusted Basic
EPS
|
$
|
0.37
|
|
|
$
|
0.51
|
|
|
$
|
0.78
|
|
|
$
|
1.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Diluted
EPS
|
$
|
0.10
|
|
|
$
|
0.87
|
|
|
$
|
(0.61)
|
|
|
$
|
1.74
|
|
Impact of adjustments
on diluted earnings per share
|
0.25
|
|
|
(0.39)
|
|
|
1.37
|
|
|
(0.48)
|
|
Adjusted Diluted
EPS(7)
|
$
|
0.35
|
|
|
$
|
0.48
|
|
|
$
|
0.76
|
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
|
Adjusted weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
214.2
|
|
|
208.8
|
|
|
213.2
|
|
|
207.8
|
|
Diluted
|
220.8
|
|
|
221.6
|
|
|
221.1
|
|
|
219.7
|
|
|
_________________________
|
(1)
|
Represents
share-based compensation expense excluding, when applicable,
amounts attributable to immediately vested 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)
|
Shareholder
litigation settlements of $114.1 million in the nine months ended
December 31, 2018 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
exceeds the previously accrued dissenting shareholders' liability
including interest through the date agreed in the
settlement.
|
|
The Fiduciary
Litigation means the seven putative class action complaints that
were filed between July 19, 2016 and August 30, 2016 by purported
Starz stockholders in the Court of Chancery of the State of
Delaware consolidated into In re Starz Stockholder Litigation,
Consolidated C.A. No. 12584-VCG. As disclosed in the Company's
Current Report on Form 8-K filed on August 24, 2018, on August 22,
2018, the parties to the Fiduciary Litigation reached an agreement
in principle providing for the settlement of the Fiduciary
Litigation on the terms and conditions set forth in an executed
term sheet.
|
|
The Appraisal
Litigation means the five verified petitions for appraisal
(representing approximately 22.5 million shares of Starz Series A
common stock) filed between December 8, 2016 and March 16, 2017 by
purported Starz stockholders in the Court of Chancery of the State
of Delaware, which were consolidated into In re Starz Appraisal,
Consolidated C.A. No. 12968-VCG.
|
(4)
|
In the three and nine
months ended December 31, 2018, amounts represent
other-than-temporary impairments on our investments, and the
unrealized losses recorded for the change in fair value of our
available-for-sale equity securities measured at fair value. In the
three and nine months ended December 31, 2017, amounts
represent other-than-temporary impairments on our investments, and
the nine months ended December 31, 2017 also includes the gain
recorded in connection with the May 11, 2017 sale of our 31.15%
equity interest in EPIX.
|
(5)
|
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.
|
(6)
|
Represents a deferred
tax benefit resulting from the impact of the change in the U.S.
federal corporate income tax rate
from 35% to 21% under the Tax Cuts and Jobs Act
on our net deferred tax liabilities.
|
(7)
|
For the three and
nine months ended December 31, 2017, 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 the period presented.
|
LIONS GATE
ENTERTAINMENT CORP.
RECONCILIATION OF
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES
TO FREE CASH
FLOW
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited,
amounts in millions)
|
Net Cash Flows
Provided By (Used In) Operating
Activities(1)
|
$
|
(14.2)
|
|
|
$
|
32.7
|
|
|
$
|
255.7
|
|
|
$
|
369.3
|
|
Capital
expenditures
|
(7.3)
|
|
|
(7.1)
|
|
|
(28.9)
|
|
|
(28.4)
|
|
Net borrowings under
and (repayment) of production loans
|
73.9
|
|
|
114.3
|
|
|
38.7
|
|
|
32.3
|
|
Shareholder
litigation settlement charges and interest
|
221.3
|
|
|
—
|
|
|
221.3
|
|
|
—
|
|
Free Cash Flow, as
defined(2)
|
$
|
273.7
|
|
|
$
|
139.9
|
|
|
$
|
486.8
|
|
|
$
|
373.2
|
|
|
|
|
|
|
|
|
|
|
________________
|
(1)
|
Cash flows used in
operating activities for the three and nine months ended December
31, 2018 includes the net proceeds of approximately $131.1 million
from the monetization of trade accounts receivable (see Note 18 to
the unaudited condensed consolidated financial statements in the
Form 10-Q for the three months ended December 31, 2018).
|
(2)
|
Free cash flow
amounts for the nine months ended December 31, 2017 have been
adjusted to reflect the adoption of a new accounting standard in
the first quarter of fiscal 2019, which requires restricted cash to
be reported as part of cash and cash equivalents in the statement
of cash flows, and therefore the change in restricted cash is no
longer reported as an activity in the statement of cash flows. As a
result of adopting this standard, cash provided by operating
activities and therefore free cash flow was reduced by $2.8 million
for the nine months ended December 31, 2017.
|
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SOURCE Lionsgate