SANTA MONICA, Calif.
and VANCOUVER, BC, Aug. 6, 2020
/PRNewswire/ -- Global content leader Lionsgate (NYSE: LGF.A,
LGF.B) today reported revenue of $813.7 million and net income
attributable to Lionsgate shareholders of $51.1 million, or
fully diluted earnings per share of $0.23, on 219.9 million
diluted weighted average common shares outstanding for the quarter
ended June 30, 2020. Adjusted net
income attributable to Lionsgate shareholders was $86.1 million, or adjusted diluted earnings per
share of $0.39, operating income was
$89.4 million, and adjusted OIBDA was
$173.7 million.
"We're pleased to report a quarter with strong financial results
in which all of our priorities were evident," said Lionsgate CEO
Jon Feltheimer. "During the
quarter we took steps to monetize our film and television library,
embraced innovative distribution strategies for our films, and
acquired new properties while renewing others. Most
important, it was a quarter in which we used all of our resources
to continue growing a unique, valuable and scalable global
streaming platform at Starz."
Library revenue in the quarter grew to a record $219.0 million driven by strong demand for
content and revenues from the recent syndication of Mad
Men.
Segment Results
Media Networks segment revenue was flat from the prior year
quarter at $367.3 million while
segment profit increased 18.5% to $71.8
million driven by lower losses at STARZPLAY
International. Starz Networks domestic OTT subscribers grew
to 7.4 million in the quarter and the Company's global OTT
subscribers (including STARZ, STARZPLAY Arabia and PANTAYA)
increased to 11.4 million in the quarter.
Motion Picture segment revenue decreased by 29.4% to
$280.7 million compared to the prior
year quarter and segment profit was $101.1
million. The performance in the Motion Picture segment
reflects the impact of theatre closings related to the COVID-19
global pandemic, reduced theatrical P&A expenses and increased
home entertainment and library revenues.
Television Production segment revenue decreased 30.1% to
$195.7 million, primarily due to the
timing of production schedules and episodic deliveries impacted by
production delays related to the COVID-19 global pandemic, while
segment profit increased 39.6% to $34.9
million reflecting the recent syndication of Mad
Men.
Lionsgate senior management will hold its analyst and investor
conference call to discuss its fiscal 2021 first quarter results at
5:00 PM ET/2:00 PM PT this
afternoon, August 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/lgf200806B6TNG20q.html. A
full replay will become available later this afternoon by clicking
the same link.
ABOUT LIONSGATE
Combining the STARZ premium global subscription platform with
world-class motion picture and television studio operations,
Lionsgate (NYSE: LGF.A, LGF.B) brings a unique and varied portfolio
of entertainment to consumers around the world. Its film,
television, subscription and location-based entertainment
businesses are backed by a 17,000-title library and the largest
collection of film and television franchises in the independent
media space. A digital age company driven by its
entrepreneurial culture and commitment to innovation, the Lionsgate
brand is synonymous with bold, original, relatable entertainment
for the audiences it serves worldwide.
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 potential effects of the COVID-19
global pandemic on the Company, economic and business conditions;
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; potential adverse reactions
or changes to business or employee relationships; 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
August 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 June 30, 2020, 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.
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
June 30,
2020
|
|
March 31,
2020
|
|
(Unaudited,
amounts in millions)
|
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
$
|
376.1
|
|
|
$
|
318.2
|
|
|
Accounts receivable,
net
|
430.6
|
|
|
522.0
|
|
|
Program
rights
|
—
|
|
|
310.5
|
|
|
Other current
assets
|
147.8
|
|
|
157.4
|
|
|
Total current
assets
|
954.5
|
|
|
1,308.1
|
|
|
Investment in films
and television programs and program rights, net
|
1,712.2
|
|
|
1,517.3
|
|
|
Property and
equipment, net
|
138.4
|
|
|
140.9
|
|
|
Investments
|
38.2
|
|
|
40.3
|
|
|
Intangible
assets
|
1,682.5
|
|
|
1,719.6
|
|
|
Goodwill
|
2,833.5
|
|
|
2,833.5
|
|
|
Other
assets
|
396.7
|
|
|
391.5
|
|
|
Total
assets
|
$
|
7,756.0
|
|
|
$
|
7,951.2
|
|
|
LIABILITIES
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
414.6
|
|
|
$
|
526.9
|
|
|
Participations and
residuals
|
444.3
|
|
|
441.9
|
|
|
Film obligations and
production loans
|
308.2
|
|
|
353.7
|
|
|
Debt - short term
portion
|
73.7
|
|
|
68.6
|
|
|
Deferred
revenue
|
89.4
|
|
|
116.6
|
|
|
Total current
liabilities
|
1,330.2
|
|
|
1,507.7
|
|
|
Debt
|
2,646.1
|
|
|
2,664.4
|
|
|
Participations and
residuals
|
373.8
|
|
|
421.6
|
|
|
Film obligations and
production loans
|
80.5
|
|
|
96.9
|
|
|
Other
liabilities
|
345.6
|
|
|
334.9
|
|
|
Deferred
revenue
|
59.8
|
|
|
61.3
|
|
|
Deferred tax
liabilities
|
36.6
|
|
|
36.6
|
|
|
Redeemable
noncontrolling interest
|
173.9
|
|
|
167.8
|
|
|
Commitments and
contingencies
|
|
|
|
|
EQUITY
|
|
|
|
|
Class A voting common
shares, no par value, 500.0 shares authorized, 82.9 shares issued
(March 31, 2020 - 83.0 shares issued)
|
659.3
|
|
|
659.2
|
|
|
Class B non-voting
common shares, no par value, 500.0 shares authorized, 136.9 shares
issued (March 31, 2020 - 136.4 shares issued)
|
2,232.4
|
|
|
2,221.7
|
|
|
Retained earnings
(accumulated deficit)
|
28.3
|
|
|
(16.9)
|
|
|
Accumulated other
comprehensive loss
|
(212.6)
|
|
|
(206.0)
|
|
|
Total Lions Gate
Entertainment Corp. shareholders' equity
|
2,707.4
|
|
|
2,658.0
|
|
|
Noncontrolling
interests
|
2.1
|
|
|
2.0
|
|
|
Total
equity
|
2,709.5
|
|
|
2,660.0
|
|
|
Total liabilities and
equity
|
$
|
7,756.0
|
|
|
$
|
7,951.2
|
|
|
LIONS GATE
ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions, except per share amounts)
|
|
Revenues
|
$
|
813.7
|
|
|
$
|
963.6
|
|
|
Expenses
|
|
|
|
|
Direct
operating
|
423.0
|
|
|
568.0
|
|
|
Distribution and
marketing
|
141.7
|
|
|
250.5
|
|
|
General and
administration
|
109.0
|
|
|
102.6
|
|
|
Depreciation and
amortization
|
47.6
|
|
|
40.1
|
|
|
Restructuring and
other
|
3.0
|
|
|
5.6
|
|
|
Total
expenses
|
724.3
|
|
|
966.8
|
|
|
Operating income
(loss)
|
89.4
|
|
|
(3.2)
|
|
|
Interest
expense
|
(44.4)
|
|
|
(49.0)
|
|
|
Interest and other
income
|
1.7
|
|
|
2.8
|
|
|
Other
expense
|
(1.7)
|
|
|
(2.3)
|
|
|
Gain on
investments
|
5.1
|
|
|
0.1
|
|
|
Equity interests
loss
|
(2.6)
|
|
|
(7.9)
|
|
|
Income (loss)
before income taxes
|
47.5
|
|
|
(59.5)
|
|
|
Income tax
(provision) benefit
|
(1.3)
|
|
|
1.1
|
|
|
Net income
(loss)
|
46.2
|
|
|
(58.4)
|
|
|
Less: Net loss
attributable to noncontrolling interests
|
4.9
|
|
|
4.4
|
|
|
Net income (loss)
attributable to Lions Gate Entertainment Corp.
shareholders
|
$
|
51.1
|
|
|
$
|
(54.0)
|
|
|
|
|
|
|
Per share
information attributable to Lions Gate Entertainment Corp.
shareholders:
|
|
|
|
|
Basic net income
(loss) per common share
|
$
|
0.23
|
|
|
$
|
(0.25)
|
|
|
Diluted net income
(loss) per common share
|
$
|
0.23
|
|
|
$
|
(0.25)
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
Basic
|
219.5
|
|
|
216.1
|
|
|
Diluted
|
219.9
|
|
|
216.1
|
|
|
LIONS GATE
ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Operating
Activities:
|
|
|
|
|
Net income
(loss)
|
$
|
46.2
|
|
|
$
|
(58.4)
|
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
47.6
|
|
|
40.1
|
|
|
Amortization of films
and television programs and program rights
|
281.2
|
|
|
436.6
|
|
|
Amortization of debt
financing costs and other non-cash interest
|
6.5
|
|
|
4.0
|
|
|
Non-cash share-based
compensation
|
14.4
|
|
|
9.6
|
|
|
Other
amortization
|
18.3
|
|
|
8.3
|
|
|
Equity interests
loss
|
2.6
|
|
|
7.9
|
|
|
Loss (gain) on
investments
|
(5.1)
|
|
|
(0.1)
|
|
|
Deferred income
taxes
|
—
|
|
|
0.2
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts receivable,
net and other assets
|
92.5
|
|
|
4.1
|
|
|
Investment in films
and television programs and program rights, net
|
(176.5)
|
|
|
(401.3)
|
|
|
Accounts payable and
accrued liabilities
|
(120.8)
|
|
|
3.0
|
|
|
Participations and
residuals
|
(45.4)
|
|
|
(21.9)
|
|
|
Film
obligations
|
(51.6)
|
|
|
2.0
|
|
|
Deferred
revenue
|
(28.5)
|
|
|
3.2
|
|
|
Net Cash Flows
Provided By Operating Activities
|
81.4
|
|
|
37.3
|
|
|
Investing
Activities:
|
|
|
|
|
Proceeds from the
sale of other investments
|
5.1
|
|
|
—
|
|
|
Investment in equity
method investees and other
|
(0.2)
|
|
|
(0.9)
|
|
|
Capital
expenditures
|
(6.4)
|
|
|
(8.6)
|
|
|
Net Cash Flows
Used In Investing Activities
|
(1.5)
|
|
|
(9.5)
|
|
|
Financing
Activities:
|
|
|
|
|
Debt -
borrowings
|
75.0
|
|
|
115.0
|
|
|
Debt -
repayments
|
(92.0)
|
|
|
(128.2)
|
|
|
Production loans -
borrowings
|
46.1
|
|
|
29.9
|
|
|
Production loans -
repayments
|
(44.1)
|
|
|
(34.6)
|
|
|
Interest rate swap
settlement payments
|
(2.1)
|
|
|
—
|
|
|
Repurchase of common
shares
|
(2.2)
|
|
|
—
|
|
|
Distributions to
noncontrolling interest
|
(0.8)
|
|
|
(0.3)
|
|
|
Exercise of stock
options
|
—
|
|
|
0.5
|
|
|
Tax withholding
required on equity awards
|
(2.0)
|
|
|
(0.3)
|
|
|
Net Cash Flows
Used In Financing Activities
|
(22.1)
|
|
|
(18.0)
|
|
|
Net Change In Cash
and Cash Equivalents
|
57.8
|
|
|
9.8
|
|
|
Foreign Exchange
Effects on Cash and Cash Equivalents
|
0.1
|
|
|
1.9
|
|
|
Cash and Cash
Equivalents - Beginning Of Period
|
318.2
|
|
|
184.3
|
|
|
Cash and Cash
Equivalents - End Of Period
|
$
|
376.1
|
|
|
$
|
196.0
|
|
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) Other Streaming Services,
which represents primarily our majority owned premium Spanish
language streaming services business, Pantaya.
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
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Segment
revenues
|
|
|
|
|
Motion
Picture
|
$
|
280.7
|
|
|
$
|
397.8
|
|
|
Television
Production
|
195.7
|
|
|
279.8
|
|
|
Media
Networks
|
367.3
|
|
|
372.4
|
|
|
Intersegment
eliminations
|
(30.0)
|
|
|
(86.4)
|
|
|
$
|
813.7
|
|
|
$
|
963.6
|
|
|
Gross
contribution
|
|
|
|
|
Motion
Picture
|
$
|
129.9
|
|
|
$
|
32.9
|
|
|
Television
Production
|
45.6
|
|
|
34.7
|
|
|
Media
Networks
|
92.3
|
|
|
80.9
|
|
|
Intersegment
eliminations
|
(7.7)
|
|
|
(1.7)
|
|
|
$
|
260.1
|
|
|
$
|
146.8
|
|
|
Segment general
and administration
|
|
|
|
|
Motion
Picture
|
$
|
28.8
|
|
|
$
|
25.3
|
|
|
Television
Production
|
10.7
|
|
|
9.7
|
|
|
Media
Networks
|
20.5
|
|
|
20.3
|
|
|
$
|
60.0
|
|
|
$
|
55.3
|
|
|
Segment
profit
|
|
|
|
|
Motion
Picture
|
$
|
101.1
|
|
|
$
|
7.6
|
|
|
Television
Production
|
34.9
|
|
|
25.0
|
|
|
Media
Networks
|
71.8
|
|
|
60.6
|
|
|
Intersegment
eliminations
|
(7.7)
|
|
|
(1.7)
|
|
|
Total segment
profit
|
$
|
200.1
|
|
|
$
|
91.5
|
|
|
Corporate general and
administrative expenses
|
(26.4)
|
|
|
(24.2)
|
|
|
Adjusted
OIBDA(1)
|
$
|
173.7
|
|
|
$
|
67.3
|
|
|
_______________
|
|
(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, certain
programming and content charges as a result of changes in
management and associated programming and content strategy, and,
when applicable, certain costs related to the COVID-19 global
pandemic and purchase accounting and related adjustments. The
Company believes the presentation of segment profit is relevant and
useful for investors because it allows investors to view segment
performance in a manner similar to the primary method used by the
Company's management and enables them to understand the fundamental
performance of the Company's businesses.
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 months ended
June 30, 2020 and 2019:
|
Three Months
Ended
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Media Networks
revenue:
|
|
|
|
|
Starz
Networks
|
$
|
345.8
|
|
|
$
|
362.9
|
|
|
STARZPLAY
International
|
10.0
|
|
|
3.1
|
|
|
Other Streaming
Services
|
11.5
|
|
|
6.4
|
|
|
$
|
367.3
|
|
|
$
|
372.4
|
|
|
Media Networks
gross contribution:
|
|
|
|
|
Starz
Networks
|
$
|
119.2
|
|
|
$
|
119.4
|
|
|
STARZPLAY
International
|
(25.6)
|
|
|
(39.1)
|
|
|
Other Streaming
Services
|
(1.3)
|
|
|
0.6
|
|
|
$
|
92.3
|
|
|
$
|
80.9
|
|
|
Media Networks
general and administration:
|
|
|
|
|
Starz
Networks
|
$
|
15.4
|
|
|
$
|
15.7
|
|
|
STARZPLAY
International
|
3.7
|
|
|
3.1
|
|
|
Other Streaming
Services
|
1.4
|
|
|
1.5
|
|
|
$
|
20.5
|
|
|
$
|
20.3
|
|
|
Media Networks
segment profit (loss):
|
|
|
|
|
Starz
Networks
|
$
|
103.8
|
|
|
$
|
103.7
|
|
|
STARZPLAY
International
|
(29.3)
|
|
|
(42.2)
|
|
|
Other Streaming
Services
|
(2.7)
|
|
|
(0.9)
|
|
|
$
|
71.8
|
|
|
$
|
60.6
|
|
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, certain costs related to the
COVID-19 global pandemic, and certain programming and content
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 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.
- COVID-19 related costs include certain motion picture and
television impairments and development charges associated with
changes in performance expectations or the feasibility of
completing the project, and costs associated with the pausing of
productions, including certain cast and crew costs and incremental
costs associated with bad debt reserves, which are included in
direct operating expense, when applicable. In addition, the costs
include early or contractual marketing spends for film releases and
events that have been canceled or delayed and will provide no
economic benefit, which are included in distribution and marketing
expense, when applicable.
- Programming and content charges include charges resulting from
the implementation of changes to the Company's programming strategy
and broadcasting 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. 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.
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,
gain or loss on extinguishment of debt, certain programming and
content charges, and COVID-19 related costs 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.
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
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Operating income
(loss)
|
$
|
89.4
|
|
|
$
|
(3.2)
|
|
|
Adjusted depreciation
and amortization(1)
|
10.1
|
|
|
10.7
|
|
|
Restructuring and
other(2)
|
3.0
|
|
|
5.6
|
|
|
COVID-19 related
costs(3)
|
10.4
|
|
|
—
|
|
|
Adjusted share-based
compensation expense(4)
|
14.4
|
|
|
9.2
|
|
|
Purchase accounting
and related adjustments(5)
|
46.4
|
|
|
45.0
|
|
|
Adjusted
OIBDA
|
$
|
173.7
|
|
|
$
|
67.3
|
|
|
___________________
|
|
(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
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Depreciation and
amortization
|
$
|
47.6
|
|
|
$
|
40.1
|
|
|
Less: Amount included
in purchase accounting and related adjustments
|
(37.5)
|
|
|
(29.4)
|
|
|
Adjusted depreciation
and amortization
|
$
|
10.1
|
|
|
$
|
10.7
|
|
|
(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
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Restructuring and
other:
|
|
|
|
|
Severance(a)
|
|
|
|
|
Cash
|
$
|
2.2
|
|
|
$
|
3.8
|
|
|
Accelerated vesting
on equity awards
|
—
|
|
|
0.3
|
|
|
Total severance
costs
|
2.2
|
|
|
4.1
|
|
|
COVID-19 related
costs included in restructuring and other(b)
|
0.5
|
|
|
—
|
|
|
Transaction and
related costs(c)
|
0.3
|
|
|
1.5
|
|
|
$
|
3.0
|
|
|
$
|
5.6
|
|
|
_______________________
|
|
(a)
|
Severance costs in
the three months ended June 30, 2020 and 2019 were primarily
related to restructuring activities in connection with cost-saving
initiatives and recent acquisitions.
|
|
(b)
|
During the three
months ended June 30, 2020, the Company has incurred certain
costs including costs primarily related to transitioning the
Company to a remote-work environment and other incremental costs
associated with the COVID-19 global pandemic.
|
|
(c)
|
Transaction and
related costs in the three months ended June 30, 2020 and 2019
reflect transaction, integration and legal costs associated with
certain strategic transactions, restructuring activities and legal
matters.
|
|
(3)
|
In connection with
the disruptions associated with the COVID-19 global pandemic and
measures to prevent its spread and mitigate its effects both
domestically and internationally, and the related economic
disruption, including the worldwide closure of most theaters,
international travel restrictions and the pausing of motion picture
and television productions,, during the three months ended
June 30, 2020, we have incurred $10.4 million in incremental
direct operating and distribution and marketing expense. These
charges are also excluded from segment operating results. The costs
included in direct operating expense, amounting to $5.7 million,
primarily represent costs associated with the pausing of
productions, including certain cast and crew costs. The costs
included in distribution and marketing expense, amounting to $4.7
million, primarily consist of contractual marketing spends for film
releases and events that have been canceled or delayed and will
provide no economic benefit. We expect to incur additional
incremental costs in future periods. We are in the process of
seeking insurance recovery for some of these costs, which cannot be
estimated at this time, and therefore have not been recorded in our
consolidated financial statements.
|
|
(4)
|
The following table
reconciles total share-based compensation expense to adjusted
share-based compensation expense:
|
|
Three Months
Ended
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Total share-based
compensation expense
|
$
|
14.4
|
|
|
$
|
9.5
|
|
|
Less: Amount included
in restructuring and other(a)
|
—
|
|
|
(0.3)
|
|
|
Adjusted share-based
compensation
|
$
|
14.4
|
|
|
$
|
9.2
|
|
|
(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
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Purchase accounting
and related adjustments:
|
|
|
|
|
Direct
operating
|
$
|
0.3
|
|
|
$
|
1.5
|
|
|
General and
administrative expense
|
8.7
|
|
|
14.1
|
|
|
Depreciation and
amortization
|
37.4
|
|
|
29.4
|
|
|
$
|
46.4
|
|
|
$
|
45.0
|
|
|
LIONS GATE
ENTERTAINMENT CORP.
|
|
|
RECONCILIATION OF
NET INCOME (LOSS) ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP.
SHAREHOLDERS TO ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO LIONS
GATE ENTERTAINMENT CORP. SHAREHOLDERS, AND BASIC AND DILUTED EPS TO
ADJUSTED BASIC AND DILUTED EPS
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions, except per share amounts)
|
|
Reported Net
Income (Loss) Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
51.1
|
|
|
$
|
(54.0)
|
|
|
Adjusted share-based
compensation expense
|
14.4
|
|
|
9.2
|
|
|
Restructuring and
other
|
3.0
|
|
|
5.6
|
|
|
COVID-19 related
costs
|
10.4
|
|
|
—
|
|
|
Purchase accounting
and related adjustments(1)
|
46.3
|
|
|
44.9
|
|
|
Gain on
investments
|
(5.1)
|
|
|
(0.1)
|
|
|
Tax impact of above
items(2)
|
(15.1)
|
|
|
(12.5)
|
|
|
Deferred tax
valuation allowance(3)
|
(14.2)
|
|
|
11.1
|
|
|
Noncontrolling
interest impact of above items
|
(4.7)
|
|
|
(7.5)
|
|
|
Adjusted Net
Income (Loss) Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
|
86.1
|
|
|
$
|
(3.3)
|
|
|
|
|
|
|
|
|
|
|
Reported Basic
EPS
|
$
|
0.23
|
|
|
$
|
(0.25)
|
|
|
Impact of adjustments
on basic earnings per share
|
0.16
|
|
|
0.23
|
|
|
Adjusted Basic
EPS
|
$
|
0.39
|
|
|
$
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
Reported Diluted
EPS
|
$
|
0.23
|
|
|
$
|
(0.25)
|
|
|
Impact of adjustments
on diluted earnings per share
|
0.16
|
|
|
0.23
|
|
|
Adjusted Diluted
EPS
|
$
|
0.39
|
|
|
$
|
(0.02)
|
|
|
|
|
|
|
Adjusted weighted
average number of common shares outstanding:
|
|
|
|
|
Basic
|
219.5
|
|
|
216.1
|
|
|
Diluted
|
219.9
|
|
|
216.1
|
|
|
|
_________________________
|
|
(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)
|
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.
|
|
(3)
|
In the three months
ended June 30, 2020 and 2019, represents an adjustment for the net
(benefit) charge from a net (decrease) 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 OPERATING ACTIVITIES
TO ADJUSTED FREE CASH
FLOW
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2020
|
|
2019
|
|
(Unaudited,
amounts in millions)
|
|
Net Cash Flows
Provided By Operating Activities(1)
|
$
|
81.4
|
|
|
$
|
37.3
|
|
|
Capital
expenditures
|
(6.4)
|
|
|
(8.6)
|
|
|
Net borrowings under
and (repayment) of production loans
|
2.0
|
|
|
(4.7)
|
|
|
Adjusted Free Cash
Flow
|
$
|
77.0
|
|
|
$
|
24.0
|
|
|
|
|
|
|
________________
|
|
(1)
|
Cash flows provided
by operating activities for the three months ended June 30, 2020
includes a net use of cash of approximately ($16.0) million from
the monetization of trade accounts receivable programs (three
months ended June 30, 2019 - net benefit of approximately $41.1
million).
|
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SOURCE Lionsgate