UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2010
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
For the transition period from to
Commission File No. 1-14880
LIONS GATE ENTERTAINMENT CORP.
(Exact Name of Registrant as Specified in Its Charter)
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British Columbia, Canada
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N/A |
(State or Other Jurisdiction of
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(I.R.S. Employer |
Incorporation or Organization)
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Identification No.) |
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1055 West Hastings Street, Suite 2200
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2700 Colorado Avenue, Suite 200 |
Vancouver, British Columbia V6E 2E9
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Santa Monica, California 90404 |
(877) 848-3866
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(310) 449-9200 |
(Address of Principal Executive Offices, Zip Code)
Registrants telephone number, including area code:
(877) 848-3866
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered |
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Common Shares, without par value
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Securities Exchange Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant as of
September 30, 2009 (the last business day of the registrants most recently completed second fiscal
quarter) was approximately $565,496,723, based on the closing sale price as reported on the New
York Stock Exchange.
As of May 21, 2010, 118,108,487 shares of the registrants no par value common shares were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A and relating to the registrants 2010 annual meeting
of shareholders are incorporated by reference into Part III.
FORWARD-LOOKING STATEMENTS
This report contains statements that are, or may deemed to be, forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act),
and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These
forward-looking statements can be identified by the use of forward-looking terminology, including
the terms may, intend, will, could, would, expect, anticipate, potential, believe,
estimate, plan, project, forecast, or the negative of these terms, as applicable, and
similar expressions intended to identify forward-looking statements.
These forward-looking statements are not guarantees of future performance they reflect Lions
Gate Entertainment Corp.s current views with respect to future events and are based on assumptions
and are subject to risks and uncertainties. Also, these forward-looking statements present our
estimates and assumptions only as of the date of this report. Except for our ongoing obligation to
disclose material information as required by federal securities laws, we do not intend to update
you concerning any new information, future revisions, events or otherwise to any forward-looking
statements to reflect events or circumstances occurring after the date of this report.
Our actual results of operations, financial condition and liquidity and the development of the
industry in which we operate may differ materially and adversely from what is expressed or
forecasted in the forward-looking statements as a result of various important factors, including,
but not limited to, the substantial investment of capital required to produce and market films and
television series, increased costs for producing and marketing feature films, budget overruns,
limitations imposed by our credit facilities and notes, unpredictability of the commercial success
of our motion pictures and television programming, the cost of defending our intellectual property,
difficulties in integrating acquired businesses, technological changes and other trends affecting
the entertainment industry, and the risk factors found under the heading Risk Factors found
elsewhere in this report. In addition, even if our results of operations, financial condition and
liquidity, and the development of the industry in which we operate are consistent with the
forward-looking statements contained in this report, those results or developments may not be
indicative of results or developments in subsequent periods.
Unless otherwise indicated, all references to the Company, Lionsgate, we, us, and
our include reference to our subsidiaries as well.
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PART I
ITEM 1. BUSINESS.
Overview
Lions Gate Entertainment Corp. (Lionsgate, the Company, we, us or our) is the
leading next generation studio with a diversified presence in the production and distribution of
motion pictures, television programming, home entertainment, family entertainment, video-on-demand
and digitally delivered content.
We have released approximately 15 motion pictures theatrically per year for the last three
years, which include films we develop and produce in-house, as well as films that we acquire from
third parties. In fiscal 2010, we released 10 motion pictures theatrically due, in part, to a
crowded marketplace and our desire to invest in our television and channel businesses to achieve an
even more balanced mix. In fiscal 2011, we intend to increase our diversified theatrical slate to
approximately 13 motion pictures to capitalize on a resurgent theatrical box office and
thinning competitive ranks, and we anticipate a more normalized slate of 12 to 15 motion pictures
annually going forward. Additionally, we have delivered approximately 75 hours of television
programming on average for the last three years, primarily prime time television series for the
cable and broadcast networks. In fiscal 2011, we intend to deliver approximately 78 hours of
television programming.
We currently distribute our library of approximately 8,000 motion picture titles and
approximately 4,000 television episodes and programs directly to retailers, video rental stores,
DVD rental kiosks, and pay and free television channels in the United States, Canada, the United
Kingdom and Ireland, through various digital media platforms, and indirectly to other international
markets through our subsidiaries and various third parties. We also distribute our library through
our various platforms including:
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TV Guide Network, TV Guide Network On Demand and TV Guide Online
(www.tvguide.com) (collectively, TV Guide Network), our joint ventures with One
Equity Partners (OEP), the global private equity investment arm of JPMorgan Chase, N.A.; |
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Studio 3 Partners LLC (EPIX), our joint venture with Viacom Inc. (Viacom), Paramount
Pictures Corporation (Paramount) and Metro-Goldwyn-Mayer Studios Inc. (MGM); |
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Tiger Gate Entertainment Limited (Tiger Gate), our joint venture with Saban Capital
Group, Inc. (SCG) and |
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Horror Entertainment, LLC (FEARnet), our joint venture with Sony Pictures Entertainment
Inc. (Sony) and Comcast Corporation (Comcast). |
In order to maximize our profit, we attempt to maintain a disciplined approach to acquisition,
production and distribution of projects by balancing our financial risks against the probability of
commercial success for each project. A key element of this strategy is to invest in or acquire
individual properties, including films and television programs, libraries, and entertainment
studios and companies which enhance our competitive position in the industry, generate significant
long-term returns and build a diversified foundation for future growth. As part of this strategy,
we have acquired, integrated and/or consolidated into our business the following:
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TV Guide Network, one of the 30 most widely distributed general entertainment cable
networks in the United States, including TV Guide Network On Demand and TV Guide Online
(www.tvguide.com), a leading online navigational tool and provider of television
listings and video and other entertainment content (we acquired TV Guide Network in February
2009 and sold a 49% interest to OEP in May 2009); |
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Mandate Pictures, LLC (Mandate Pictures), a worldwide independent film producer,
financier and distributor (acquired in September 2007); |
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Maple Pictures Corp. (Maple Pictures), a Canadian film, television and home video
distributor (consolidated effective July 2007); |
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Debmar-Mercury, LLC (Debmar-Mercury), a leading independent syndicator of film and
television packages (acquired in July 2006); |
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Redbus Film Distribution Ltd. and Redbus Pictures (collectively, Redbus and currently,
Lions Gate UK Ltd. (Lionsgate UK)), an independent film distributor, which provides us the
ability to self-distribute our motion pictures in the United |
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Kingdom and Ireland and included the acquisition of the Redbus library of approximately 130
films (acquired in October 2005); |
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Certain of the film assets and accounts receivable of Modern Entertainment, Ltd., a
licensor of film rights to DVD distributors, broadcasters and cable networks (acquired in
August 2005); |
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Artisan Entertainment, Inc. (Artisan Entertainment), a diversified motion picture,
family and home entertainment company (acquired in December 2003); and |
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Trimark Holdings, Inc., a worldwide distributor of entertainment content (acquired in
October 2000). |
As part of this strategy, we also have ownership interests in the following:
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Tiger Gate, an operator of pay television channels and a distributor of television
programming and action and horror films across Asia (joint venture entered into in April
2010); |
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EPIX, a joint venture entered into to create a premium television channel and
subscription video-on-demand service (entered into in April 2008); |
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Elevation Sales Limited (Elevation), a United Kingdom based home entertainment
distributor (interest acquired in July 2007); |
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Roadside Attractions, LLC (Roadside), an independent theatrical distribution company
(interest acquired in July 2007); |
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NextPoint, Inc. (Break.com), an online video entertainment service provider (interest
acquired in June 2007); and |
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FEARnet, a multiplatform programming and content service provider (interest acquired in
October 2006). |
Our investments and acquisitions support our strategy of diversifying our company in an
attempt to create a multiplatform global industry leader in entertainment.
Our Industry
Motion Pictures
General. According to the Motion Picture Association of Americas U.S. Theatrical Market:
2009 Statistics, domestic box office (which includes the United States and Canada) grew to another
historic high of approximately $10.6 billion in 2009, compared to approximately $9.8 billion in
2008, a 10.1% increase, and up 20.3% over the past five years. The 3-D market was a key growth
driver 11% of 2009 box office, or $1.1 billion, came from 3-D showings. Worldwide box office also
reached an all time high of approximately $29.9 billion in 2009, compared to approximately $27.8
billion in 2008, a 7.6% increase. International box office ($19.3 billion) made up 64% of the 2009
worldwide total, while domestic box office ($10.6 billion) made up 36%, a proportion consistent
with the last several years. Domestic theatrical admissions, or tickets sold, reached a five year
high at $1.4 billion in 2009, a 5.5% increase from 2008, the first increase in two years.
Competition. Major studios have historically dominated the motion picture industry. The term
major studios is generally regarded in the entertainment industry to mean Paramount, Sony,
Twentieth Century Fox Film Corp., Universal Pictures, Walt Disney Studios Motion Pictures and
Warner Bros. Entertainment, Inc. All of these companies are owned by media conglomerates with a
variety of operations, including studios, television networks, cable channels and distribution
divisions, including the major studios and independent production companies. These studios have
historically produced and distributed the majority of theatrical motion pictures released annually
in the United States.
Competitors less diversified than the major studios include DreamWorks Animation SKG, Inc.,
Summit Entertainment, The Weinstein Company and MGM. These independent motion picture production
companies, including many smaller production companies, have also played an important role in the
worldwide feature film market. Independent films have gained wider market approval and increased
share of overall box office receipts in recent years. Lionsgate is a diversified next generation
studio that competes directly with both major studios and independents in its various businesses,
although it operates with a different business model and cost structure than the major studios.
Product Life Cycle. In general, the economic life of a motion picture consists of its
exploitation in theaters and in ancillary markets such as home entertainment, pay-per-view, digital
rentals, pay television, broadcast television, foreign and other markets.
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Successful motion pictures may continue to play in theaters for more than three months
following their initial release. Concurrent with their release in the United States, motion
pictures are generally released in Canada and may also be released in one or more other foreign
markets. After the initial theatrical release, distributors seek to maximize revenues by releasing
movies in sequential release date windows, which are generally exclusive against other
non-theatrical distribution channels:
Typical Film Release Windows*
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Months After |
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Release Period |
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Initial Release |
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Release Period |
Theatrical |
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0-3 months |
Home entertainment/DVD/Blu-ray/digital (1st cycle) |
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3-6 months |
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1-3 months |
Video-on-demand, pay-per-view and digital rental |
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3-4 months |
Pay television |
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18 months |
Network (free and basic) |
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Licensing and merchandising |
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Ongoing |
All international releasing |
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Ongoing |
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These patterns may not be applicable to every film, and may change
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First pay television window. |
International theatrical distribution (outside of the United States and Canada) generally
follows the same cycle as domestic theatrical distribution. Historically, the international
distribution cycle begins a few months after the start of the domestic distribution cycle. However,
the increasing sophistication of film piracy operations in international markets, as well as the
ease with which the dominant DVD format can be copied, has resulted in a much higher percentage of
films being released simultaneously to the United States and international markets.
Home Entertainment
Home entertainment distribution involves the marketing, promotion and sale and/or lease of
DVDs and Blu-ray discs to wholesalers and retailers who then sell or rent the DVDs and Blu-ray
discs to consumers for private viewing and through various digital media platforms (i.e.,
electronic sell-through or EST). The calendar year 2009 marked a year of declined consumer spend
for home entertainment. According to the Digital Entertainment Group (the DEG), home
entertainment spend, including on-demand, declined by about 5% in 2009 to about $20 billion.
Generally, weakness in the overall economy has been cited as a primary reason for this decline in
spend.
Past growth in the home entertainment sector has been driven in part, by increased Blu-ray
penetration. This is anticipated to resume in upcoming years from Blu-ray and other technological
enhancements including EST, enhanced video and audio quality, and special features such as
inclusion of previously-deleted scenes, film commentaries and behind the scenes footage. Indeed,
according to a June 2009 FutureSource Consulting report, in 2010, Blu-ray (which has been growing
steadily and significantly over the last three years), is projected to, in part, achieve
replacement value for falling DVD revenue. Additionally, according to the DEG, the number of
Blu-ray playback devices in homes increased to 17 million in 2009, up 76% compared to year-end
2008. The continued increase in digital delivery of content is also expected to foster long-term
growth of the overall home entertainment business.
Television Programming
The market for television programming is composed primarily of the broadcast television
networks (such as ABC, CBS, CW, Fox and NBC), pay and basic cable networks (such as AMC, HBO, MTV,
Showtime, Starz, TV Guide Network, VH1 and USA Network) and syndicators of first-run programming
(such as Sony Pictures Television, CBS Paramount Distribution and ABC Studios) which license
programs on a station-by-station basis. Continued growth in the cable and satellite television
markets has driven increased demand for nearly all genres of television programming. We expect key
drivers to include the success of the cable industrys bundled services, increased average revenue
per user, reduced number of participants discontinuing services and accelerated ad spend growth.
Increased capacity for channels on upgraded digital cable systems and satellite television has led
to the launch of new networks seeking programming to compete with traditional broadcast networks as
well as other existing networks.
Cable and Satellite Television Distribution
The cable and satellite television industry is comprised primarily of cable and satellite
multiple system operators (MSOs) that
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provide cable and satellite television service to their subscribers, and cable and satellite
channels that provide programming content to the system operators for distribution to their
subscribers. The operators generally pay a per subscriber carriage fee for the right to distribute
a channel to their systems with the highest fees going to those channels with the most viewers.
Operators seek to create a mix of channels that will be attractive to their subscriber base to gain
new subscribers and to reduce subscriber turnover. Cable and satellite channels are generally more
clearly branded than broadcast networks and provide content that reflects those brands. Branding
helps the channels target a more specific demographic so that they can better attract advertisers
seeking to reach that audience.
Digital Media
Growth in the digital market and EST has been driven, in part, by broadband penetration.
According to the 2009 Deloitte Touche State of Media Democracy report, 82% of United States
households have either broadband digital subscriber lines (DSL) or broadband cable internet
access. The increase in broadband penetration will further aid in the growth of digital revenue for
the home entertainment business. Indeed, in 2009, Adams Media Research reported that industry-wide
revenue from digital EST (not including downloads of television episodes) grew 38%, while digital
delivery (Internet based) video-on-demand grew by 33%.
The Company
Production
Motion Pictures. The motion picture industry is generally composed of two major business
segments: production and distribution. Production consists of the greenlighting and financing of
motion pictures, as well as the development of the screenplay and the actual filming activities and
post-filming editing/post-production process. We have historically produced motion pictures with
production budgets of $35 million or less. Films intended for theatrical release are generally
budgeted between $5 million and $35 million (although, from time to time, we have and are willing
to consider larger budgets), and films intended for release directly to video or cable television
are generally budgeted between $1 million and $5 million. We take a disciplined approach to film
production, with the goal of producing content that we can distribute to theatrical and ancillary
markets, which include home video, pay and free television, on-demand services and digital media
platforms, both domestically and internationally.
In fiscal 2010, we produced, participated in the production of, or completed or substantially
completed principal photography (the phase of film production during which most of the filming
takes place) of the following motion pictures:
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Tyler Perrys I Can Do Bad All By Myself When Madea, a pistol-packing grandma, catches
sixteen-year-old Jennifer and her two younger brothers looting her home, she decides to take
matters into her own hands and delivers the young delinquents to the only relative they
have: their aunt April. A heavy-drinking nightclub singer who lives off of Raymond, her
married boyfriend, April wants nothing to do with the kids. But her attitude begins to
change when Sandino, a handsome Mexican immigrant looking for work, moves into Aprils
basement room and challenges April to open her heart (released in September 2009). |
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Saw VI Special Agent Strahm is dead, and Detective Hoffman has emerged as the
unchallenged successor to Jigsaws legacy. However, when the FBI draws closer to Hoffman,
he is forced to set a game into motion, and Jigsaws grand scheme is finally understood
(released in October 2009). |
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Daybreakers The year is 2019. A mysterious plague has swept over the earth,
transforming the majority of the worlds population into vampires. Humans are now an
endangered, second-class species forced into hiding as they are hunted and farmed for
vampire consumption to the brink of extinction. Its all up to Edward Dalton, a vampire
researcher who refuses to feed on human blood, to perfect a blood substitute that might
sustain vampires and spare the few remaining humans (released in January 2010). |
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Tyler Perrys Why Did I Get Married Too Gathered together in the Bahamas for their
annual one-week reunion, four close couples eagerly reconnect, sharing news about their
lives and relationships. But their intimate week in paradise is disrupted by the unexpected
arrival of Sheilas ex-husband, Mike, who hopes to break up her new marriage with Troy and
win her back. The others soon realize they too are not immune to the challenges of
commitment and fidelity (released in April 2010). |
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Killers A womans seemingly perfect life is thrown upside down when she discovers that
her husband was a former spy. Now, someone from his past puts a hit out on him, but the hit
has a catch: it was put out three years ago to become active on his 35th
birthday. Everyone in their seemingly perfect suburban life is now a suspect who may want to
kill them. |
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Warrior Combining the enormous success of MMA with the historical success of
inspirational sports movies, Warrior is the first Rocky-like story for the millennium,
combining the enormous success of mixed martial arts with the historical success of
inspirational sports movies. Two estranged brothers compete in a mixed-martial arts
tournamentfighting for the love of their father, the survival of their families and the
redemption of their past. |
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Saw VII 3-D The latest installment of the most successful horror franchise in movie
history in vivid, chilling 3-D. As a deadly battle rages over Jigsaws brutal legacy, a
group of Jigsaw survivors gather to seek the support of self-help guru and fellow survivor
Bobby Dagen, a man whose own dark secrets unleash a new wave of terror. |
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The Next Three Days Based on the incredibly tense French film Pour Elle, Lara and John
are leading a perfectly happy family life with their young son Luke. But one morning their
world falls apart when the police come to their home and arrest Lara for murder, sentencing
her to life behind bars. Convinced of her innocence, John is finally left with no options
except to free Lara from prison. With impossible odds and his own inexperience stacked
against him, John devises an elaborate escape plot and plunges into a dangerous and
unfamiliar world, ultimately risking everything to save the woman he loves. |
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Alpha and Omega 3-D In this 3-D animated adventure from the creator of Open Season,
Kate, a skilled Alpha wolf, and Humphrey, a fun loving Omega, are taken by humans to a
national park far from their home. Despite pack law forbidding Alphas and Omegas to mix,
mingle or mate the two must work together to make it back. |
The following motion pictures are currently in or slated for production in fiscal 2011:
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For Colored Girls Who Have Considered Suicide When the Rainbow Is Enuf The film
adaptation of the classic play. Eight women find their lives all impacted by a tragic
event that befalls one of them: the death of her children at the hands of their mentally
unstable father. Though each woman has her own struggle she is dealing with from abortion
to date rape they all find strength in the local community center to allow them to get
through their trying times and come through it together triumphantly. |
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Tyler Perrys Madeas Big Happy Family Based on Tyler Perrys smash hit play, Madea is
back and this time, she brings her wisdom and comedy to a family who must come together to
overcome tragedy and learn the true meaning of life. |
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Abduction High school senior Nathan Harper discovers during a sociology project that he
looks eerily close to a picture of a missing child from 1994. Partnered with Karen, his
school crush, Nathan investigates his true identity to find out hes been in a deep cover
protection program, and his questioning has unleashed unknown forces who want him dead. On a
race for their lives, Nathan and Karen must outrun the local cops, the CIA, and Serbian
hitmen bent on revenge, while Nathan realizes that everyone is after him because of who he
really is: the son of the United States most important secret agent. |
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Conan Based on the novels of Robert E. Howard, this is the epic tale of a Cimmerian
child who grows into a man who seeks revenge against the warlord who massacred his tribe. |
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North of the North A 3-D animated film about a Polar Bear who comes to New York
and becomes a wildly successful mascot for a multinational corporation. He makes appearances
on talk shows, does publicity stunts at iconic New York locations, stars in commercials and
of course has all the amenities one would expect for someone of his stature. However, he
soon discovers that without the natural beauty of his arctic ice being an entertainment icon
isnt all that its cracked up to be. |
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Lincoln Lawyer When Mickey Haller, an attorney with questionable ethics who works out
of the back of his Lincoln Towncar, is hired by Louis Roulet, a Hollywood playboy accused of
murder, he foresees a big payday for the highest profile case he has ever had. However, as
Mickey investigates further, he begins to suspect that his client is guilty of a murder for
which he successfully prosecuted another man. |
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One for the Money A down-on-her-luck New Jersey woman convinces her bail bondsman
cousin to give her a shot as a bounty hunter. Her first assignment is to track down a former
cop on the run for murderthe same man who broke her heart years before. |
Our production team attempts to produce films with disciplined budgets that have commercial
potential. First, our production division reviews hundreds of scripts, looking for material that
will attract top talent (primarily actors and directors). We then actively
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develop such scripts, working with the major talent agencies and producers to recruit talent
that appeals to the films target audience. We believe the commercial and/or critical success of
our films should enhance our reputation and continue to give us access to top talent, scripts and
projects. We often develop films in targeted niche markets in which we can achieve a sustainable
competitive advantage, as evidenced by the successes of our horror films, including the Saw
franchise, and our urban films, including the Tyler Perry franchise.
The decision whether to greenlight (or proceed with production of) a film is a diligent
process that involves many of our key executives. Generally, the production division presents
projects to a committee comprised of the heads of our production, theatrical distribution, home
entertainment, international distribution, legal and finance departments. In this process, scripts
are evaluated for both artistic merit and commercial viability. The committee considers the entire
package, including the script, the talent that may be attached or pursued and the production
divisions initial budget. They also discuss talent and story elements that could make the project
more successful. Next, the heads of domestic and international distribution prepare estimates of
projected revenues and the costs of marketing and distributing the film. Our finance and legal
professionals then review the projections and financing options, and the committee decides whether
the picture is worth pursuing by balancing the risk of a production against its potential for
financial success or failure. The final greenlight decision is made by our corporate senior
management team, headed by our President of the Motion Picture Group and our Chief Executive
Officer.
We typically seek to mitigate the financial risk associated with film production by
negotiating co-production agreements (which provide for joint efforts and cost-sharing between us
and one or more third-party production companies) and pre-selling international distribution rights
on a selective basis (which refers to licensing the rights to distribute a film in one or more
media, in one or more specific territories prior to completion of the film). We often attempt to
minimize our production exposure by structuring agreements with talent that provide for them to
participate in the financial success of the motion picture in exchange for reducing guaranteed
amounts to be paid, regardless of the films success (which we refer to as up-front payments).
In addition, many states and foreign countries have implemented incentive programs designed to
attract film production to their jurisdiction as a means of economic development. Government
incentives typically take the form of sales tax refunds, transferable tax credits, refundable tax
credits, direct subsidies or cash rebates, which are calculated based on the amount of money spent
in the particular jurisdiction in connection with the production. Each jurisdiction determines the
regulations that must be complied with, as well as the conditions that must be satisfied, in order
for a production to qualify for the rebate. We use certain Canadian tax credits, German tax
structures, United Kingdom subsidy programs, domestic state tax incentives and/or programs (in such
states as New Mexico, Massachusetts and Pennsylvania) and other structures that may help reduce our
financial risk.
Television. Our television business consists of the development, production and worldwide
distribution of television productions including television series, television movies and
mini-series and non-fiction programming. Television revenues are primarily derived from the
licensing of our productions and acquired films to the domestic cable, free and pay television
markets. As with film production, we use similar tax credits, structures, subsidies, incentives and
programs for television production in order to employ fiscally responsible deal structures.
During fiscal 2010, we delivered approximately 111 episodes of domestic television
programming. Domestic television programming may include one-hour and half-hour dramas,
mini-series, animated series and reality and non-fiction programming. In fiscal 2011, we intend to
have at least six series on the air, comprising approximately 113 episodes, and may also have
mini-series and limited series slated for production.
Series. In fiscal 2010, we delivered the following:
13 episodes of the third season of the Emmy, Golden Globe and Peabody Award-winning series
Mad Men, a one-hour drama starring Jon Hamm for the AMC Network;
13 episodes of the fifth season of the series Weeds, a half-hour comedy starring Mary-Louise
Parker, Elizabeth Perkins and Kevin Nealon for Showtime;
13 episodes of the second season of Crash, a one-hour drama series based on the Academy
Award® winning Best Picture, for Starz Entertainment;
13 episodes of the first season of Blue Mountain State, a half-hour comedy for Spike TV;
8
24 episodes of the first and second seasons of Nurse Jackie, a half-hour comedy starring
Edie Falco for Showtime;
10 episodes of Paris Hilton: My New BFF Season 2, a reality show for MTV (in collaboration
with Ish Entertainment, LLC (Ish));
8 episodes of Paris Hilton: My New BFF UK, a reality show for TV Guide Network (in
collaboration with ITV);
10 episodes of My Antonio, a reality show for MTV (in collaboration with Ish); and
7 episodes of Gone Too Far, a reality show starring the late DJ A.M. for MTV (in
collaboration with Ish).
In fiscal 2011, we intend to deliver the following:
13 episodes of the fourth season of Mad Men;
13 episodes of the sixth season of Weeds;
12 episodes of the third season of Nurse Jackie;
12 episodes of the second season of Blue Mountain State;
13 episodes of the first season of Tough Trade, a one-hour drama starring Sam Shepard, and
the first original series for EPIX;
13 episodes of the first season of Running Wilde, a half-hour comedy starring Will Arnett
and Keri Russell for Fox;
13 episodes of the first season of Playing With Guns, a half-hour comedy starring Danny
Masterson and Joey Kern for Spike TV;
9 episodes of Paris Hiltons BFF Dubai, a reality show for TV Guide Network (in
collaboration with Ish);
8 episodes of Scream Queens Season 2, a reality competition show for MTV; and
6 episodes of Stanley Park, a half-hour comedy for the BBC in the United Kingdom.
Animation. We are involved in the development, acquisition, production and distribution of a
number of animation projects for full theatrical release, television and DVD release.
DVD Production We have released seven direct-to-video animated movies with Marvel
Entertainment Inc. (Marvel) which include Ultimate Avengers, Ultimate Avengers 2, The
Invincible Iron Man, Doctor Strange, Next Avengers: Heroes of Tomorrow and Hulk vs.
Thor/Wolverine and, in the fourth quarter of fiscal 2010, Planet Hulk. We expect to release
Thor, Tales of Asgard in fiscal 2011.
Television Production In 2009, we delivered 26 half-hours and five films of a comedic action
adventure series (based on the well-known franchise Speed Racer) to Nickelodeon Networks,
which was produced by Animation Collective of New York City. All 26 episodes aired in fiscal
2009. Additionally, the first DVD of Speed Racer, The Next Generation was released in the
first quarter of fiscal 2009, the second DVD was released in the third quarter of 2009 and the
third DVD was released in the second quarter of fiscal 2010. We are handling international
sales, overseeing merchandising and licensing as well as distributing the DVD of this
adventure series. Nickelodeon Networks has ordered a second 26 half-hour season of the
adventure series, expected to be delivered in fiscal 2011.
Theatrical Films We are currently in final delivery on Alpha and Omega, a 3-D animated film
starring Justin Long, Hayden Panettiere, Christina Ricci, Danny Glover and Dennis Hopper with
our partner, Crest Animation. The film is the first picture developed under a co-finance deal
with Crest Animation and is from the creator of Open Season, a Sony Pictures Animation CGI
film. The film is slated for release in the fourth quarter of fiscal 2011. Building on our
relationship with Crest Animation, in February 2010, we announced our second production in a
multi-picture deal, Norm of the North. We anticipate delivery of this 3-D animated movie in
the fourth quarter of fiscal 2012, which we will be distributing domestically.
9
Television Movies, Mini-Series and Specials. From time to time, we also are involved in the
development, acquisition, production and distribution of television content in the
movie-of-the-week, mini-series and reality special formats. During fiscal 2010, we delivered Street
Dogs of LA, a two-hour documentary for Animal Planet.
Music. Our music department creatively oversees music for our theatrical and television
slate, as well as the music needs of other areas within our company. Our music strategy is to
service the creative divisions music needs, while building a business that focuses on healthy
growth areas of the music business, specifically, music publishing assets, live projects and
improving soundtrack distribution. Unlike music publishers, whose revenue has historically been
dependent upon royalties generated by record sales, our publishing revenue derives primarily
from performance royalties generated by the theatrical exhibition of our films
and the television broadcast of our productions.
In fiscal 2010, we distributed more than 10,000 units of Repo: The Genetic Opera soundtracks
exclusively through a relationship with Hot Topic, Inc. We also released soundtrack albums to our
top television shows (Weeds, Mad Men and Nurse Jackie), while continuing to evolve our record label
by acquiring soundtracks from our film partners (Daybreakers and The Imaginarium of Dr.
Parnassus).
Distribution
Domestic Theatrical Distribution. Distribution refers to the marketing and commercial or
retail exploitation of motion pictures. We distribute motion pictures directly to United States
movie theaters. Generally, distributors and exhibitors (theater owners) will enter into agreements
whereby the exhibitor retains a portion of the gross box office receipts, which are the
admissions paid at the box office. The balance (i.e., gross film rentals) is remitted to the
distributor.
Over the past 11 years, our releases have included the following in-house productions or
co-productions:
|
|
|
Title |
|
Principal Actors |
Akeelah and the Bee
|
|
Keke Palmer, Laurence Fishburne, Angela Bassett |
Crank
|
|
Jason Statham, Amy Smart |
Crank: High Voltage
|
|
Jason Statham, Amy Smart, Bai Ling |
Employee of the Month
|
|
Dane Cook, Jessica Simpson, Dax Shepherd |
Facing Ali
|
|
Documentary |
Godsend
|
|
Robert DeNiro, Greg Kinnear, Rebecca Romijn Stamos |
Good Luck Chuck
|
|
Jessica Alba, Dane Cook |
Grizzly Man
|
|
Documentary |
Monsters Ball
|
|
Halle Berry, Billy Bob Thornton |
My Best Friends Girl
|
|
Kate Hudson, Dane Cook |
My Bloody Valentine 3-D
|
|
Jensen Ackles, Jamie King |
Pride
|
|
Bernie Mac, Terrence Howard |
Punisher: War Zone
|
|
Ray Stevenson, Julie Benz, Dominic West |
The Eye
|
|
Jessica Alba |
The Punisher
|
|
John Travolta, Thomas Jane |
The Spirit
|
|
Gabriel Macht, Samuel Jackson, Scarlett Johansson, Eva
Mendes |
The U.S. vs. John Lennon
|
|
Documentary |
Saw II
|
|
Donnie Wahlberg, Tobin Bell, Shawnee Smith |
Saw III
|
|
Tobin Bell, Shawnee Smith, Bahar Soomekh, Angus MacFayden |
Saw IV
|
|
Tobin Bell |
Saw V
|
|
Tobin Bell, Scott Patterson |
Tyler Perrys Diary of a Mad Black Woman
|
|
Tyler Perry, Steve Harris, Shemar Moore |
Tyler Perrys I Can Do Bad All By Myself
|
|
Taraji P. Henson, Janet Jackson, Louis Gossett Jr. |
Tyler Perrys Madeas Family Reunion
|
|
Tyler Perry |
Tyler Perrys Madea Goes To Jail
|
|
Tyler Perry, Keke Palmer, Keisha Knight Pulliam, Derek Luke |
Tyler Perrys Meet The Browns
|
|
Tyler Perry, Angela Bassett |
Tyler Perrys Why Did I Get Married?
|
|
Tyler Perry, Janet Jackson |
Tyler Perrys The Family That Preys
|
|
Tyler Perry, Alfre Woodard, Kathie Bates |
War
|
|
Jet Li, Jason Statham |
10
Motion pictures that we have acquired and distributed in this same time period include the
following:
|
|
|
Title |
|
Principal Actors |
3:10 to Yuma
|
|
Russell Crowe, Christian Bale |
Bangkok Dangerous
|
|
Nicolas Cage |
Brothers
|
|
Jake Gyllenhaal, Natalie Portman, Tobey Maguire |
Crash
|
|
Don Cheadle, Sandra Bullock, Matt Dillon, Brendan Fraser |
Daybreakers
|
|
Ethan Hawke, Willem Dafoe, Sam Neill |
Dogma
|
|
Ben Affleck, Matt Damon, Chris Rock |
Fahrenheit 9/11
|
|
Documentary |
From Paris With Love
|
|
John Travolta, Jonathan Rhys Meyers |
Gamer
|
|
Gerard Butler, John Leguizamo, Milo Ventimiglia, Kyra Sedgwick |
Girl With A Pearl Earring
|
|
Scarlett Johannson, Colin Firth |
Hard Candy
|
|
Patrick Wilson, Ellen Page |
Kick-Ass
|
|
Nicolas Cage, Christopher Mintz-Plasse, Aaron Johnson, Chloe
Moretz |
Lord of War
|
|
Nicolas Cage, Ethan Hawke, Jared Leto, Bridget Moynahan |
More Than A Game
|
|
LeBron James |
New In Town
|
|
Renee Zellwegger, Harry Connick Jr. |
The Bank Job
|
|
Jason Statham |
The Cooler
|
|
Alec Baldwin, William H. Macy, Maria Bello |
The Descent
|
|
Shauna Macdonald, Natalie Jackson Mendoza, Alex Reid, Saskia
Mulder |
The Forbidden Kingdom
|
|
Jet Li, Jackie Chan |
The Haunting In Connecticut
|
|
Virginia Madsen |
O
|
|
Julia Stiles, Mekhi Phifer |
Open Water
|
|
Blanchard Ryan, Daniel Travis |
Precious: Based on the Novel PUSH by Sapphire
|
|
Gabourey Sidibe, MoNique, Paula Patton, Maria Carey |
Rambo
|
|
Sylvester Stallone |
Religulous
|
|
Bill Maher |
Saw
|
|
Danny Glover, Monica Potter, Cary Elwes |
Sicko
|
|
Documentary |
The Spy Next Door
|
|
Jackie Chan, George Lopez, Billy Ray Cyrus |
Transporter 3
|
|
Jason Statham |
In the last 11 years, films we have distributed have earned 37 Academy Award nominations and
won nine Academy Awards, and have been nominated for and won numerous Golden Globe, Screen Actors
Guild, BAFTA and Independent Spirit Awards.
We have released approximately 15 motion pictures theatrically per year for the last three
years, which include films we develop and produce in-house, as well as films that we acquire from
third parties. In fiscal 2011, we intend to release approximately 13 motion pictures theatrically,
which includes our in-house productions, co-productions and acquisitions. Our approach to acquiring
films for theatrical release is similar to our approach to film production. We generally seek to
limit our financial exposure while adding films of quality and commercial viability to our release
schedule and our video library. The decision to acquire a motion picture for theatrical release
entails a process involving our key executives from the releasing, home entertainment and
acquisitions departments, as well as corporate senior management. The team meets to discuss a
films expected critical reaction, marketability, and potential for commercial success, as well as
the cost to acquire the picture, the estimated distribution and marketing expenses (typically
called P&A or prints and advertising) required to bring the film to its widest possible target
audience and ancillary market potential after its theatrical release. Generally, we release films
on a wide basis, typically to more than 2,000 screens nationwide.
We construct release schedules taking into account moviegoer attendance patterns and
competition from other studios scheduled theatrical releases. We use either wide or limited
initial releases, depending on the film. We generally spend significantly less on P&A for a given
film than a major studio and we design our marketing plans to cost-effectively reach a large
audience.
Our remaining fiscal 2011 theatrical release schedule may include (in anticipated order of
release):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Produced* |
|
Approximate |
Title |
|
Summary |
|
Principal Actors |
|
or Acquired |
|
Release Date |
Killers
|
|
A womans seemingly
perfect life is
thrown upside down
when she discovers
that her husband
was as a former
spy. Now someone
from his past puts
a hit out on him,
but the hit has a
catch: it was put
out three years ago
to become active on
his 35th
birthday. Everyone
in their seemingly
perfect suburban
life is now a
suspect who may
want to kill them.
|
|
Katherine Heigl, Ashton
Kutcher
|
|
Produced
|
|
June 2010 |
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Produced* |
|
Approximate |
Title |
|
Summary |
|
Principal Actors |
|
or Acquired |
|
Release Date |
|
|
|
|
|
|
|
|
|
The Expendables
|
|
The only life
theyve known is
war. The only
loyalty they have
is to each other.
They are the
Expendables. Living
life in the fringes
of the law, these
hardened
mercenaries take on
what appears to be
a routine
assignment: a
covert, CIA-funded
operation to
infiltrate the
South American
country of
Vilena and
overthrow its
ruthless dictator,
General Garza. But
when their job is
revealed to be a
suicide mission,
the men are faced
with a deadly
choice, one that
might redeem their
souls, or destroy
their brotherhood
forever.
|
|
Sylvester Stallone, Jason
Statham, Jet Li, Dolph
Lungren, Eric Roberts,
Randy Couture, Steve
Austin
|
|
Acquired
|
|
August 2010 |
|
|
|
|
|
|
|
|
|
The Last Exorcism
|
|
After a career
spent helping the
devout through
prayer and
trickery, Reverend
Cotton Marcus
invites a film crew
to document his
final fraudulent
days as an
exorcist. Soon his
faith is truly
tested when a
desperate plea from
the father of a
possessed girl
brings him face to
face with the devil
himself.
|
|
Patrick Fabian, Ashley Bell
|
|
Acquired
|
|
August 2010 |
|
|
|
|
|
|
|
|
|
Warrior
|
|
Combining the
enormous success of
MMA with the
historical success
of inspirational
sports movies,
Warrior is the
first Rocky-like
story for the
millennium,
combining the
enormous success of
mixed martial arts
with the historical
success of
inspirational
sports movies. Two
estranged brothers
compete in a
mixed-martial arts
tournamentfighting
for the love of
their father, the
survival of their
families and the
redemption of their
past.
|
|
Tom Hardy, Nick Nolte,
Joel Edgerton
|
|
Produced
|
|
September 2010 |
|
|
|
|
|
|
|
|
|
Buried
|
|
Paul Conroy is not
ready to die. But
when he wakes up
six feet
underground with no
idea of who put him
there or why, life
for the truck
driver and family
man instantly
becomes a hellish
struggle for
survival. Buried
with only a cell
phone and a
lighter, his
contact with the
outside world and
ability to piece
together clues that
could help him
discover his
location are
maddeningly
limited. Poor
reception, a
rapidly draining
battery, and a
dwindling oxygen
supply become his
worst enemies in a
tightly confined
race against time,
fighting panic,
despair and
delirium, Paul has
only ninety minutes
to be rescued
before his worst
nightmare comes
true.
|
|
Ryan Reynolds
|
|
Acquired
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
Alpha and Omega 3-D
|
|
In this 3-D
animated adventure
from the creator of
Open Season, Kate,
a skilled Alpha
wolf, and Humphrey,
a fun loving Omega,
are taken by humans
to a national park
far from their
home. Despite pack
law forbidding
Alphas and Omegas
to mix, mingle or
mate the two must
work together to
make it back.
|
|
Christina Ricci, Justin
Long, Hayden Panettiere
|
|
Produced
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
Saw VII 3-D
|
|
The latest
installment of the
most successful
horror franchise in
movie history in
vivid, chilling
3-D. As a deadly
battle rages over
Jigsaws brutal
legacy, a group of
Jigsaw survivors
gathers to seek the
support of
self-help guru and
fellow survivor
Bobby Dagen, a man
whose own dark
secrets unleash a
new wave of terror.
|
|
Tobin Bell, Carey Elwes,
Costas Mandylor
|
|
Produced
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
The Next Three Days
|
|
Based on the
incredibly tense
French film Pour
Elle, Lara and John
are leading a
perfectly happy
family life with
their young son
Luke. But one
morning their world
falls apart when
the police come to
their home and
arrest Lara for
murder, sentencing
her to life behind
bars. Convinced of
her innocence, John
is finally left
with no options
except to free Lara
from prison. With
impossible odds and
his own
inexperience
stacked against
him, John devises
an elaborate escape
plot and plunges
into a dangerous
and unfamiliar
world, ultimately
risking everything
to save the woman
he loves.
|
|
Russell Crowe, Elizabeth
Banks, Liam Neeson
|
|
Acquired
|
|
November 2010 |
|
|
|
|
|
|
|
|
|
For Colored Girls
Who Have Considered
Suicide When the
Rainbow is Enuf
|
|
The film
adaptation of the
classic
play. Eight women
find their lives
all impacted by a
tragic event that
befalls one of
them: the death of
her children at the
hands of their
mentally unstable
father. Though each
woman has her own
struggle she is
dealing with from
abortion to date
rape -they all find
strength in the
local community
center to allow
them to get through
their trying times
and come through it
together
triumphantly.
|
|
Macy Gray, Mariah Carey,
Whoopie Goldberg, Janet
Jackson
|
|
Acquired
|
|
January 2011 |
|
|
|
* |
|
Includes significant participation in production. |
We may revise the release date of a motion picture as the production schedule changes or in
such a manner as we believe is likely to maximize revenues or for other business reasons.
Additionally, there can be no assurance that any of the motion pictures scheduled for release will
be completed, that completion will occur in accordance with the anticipated schedule or budget,
that the film will ever be released, or that the motion pictures will necessarily involve any of
the creative talent listed above.
Mandate Pictures. Our wholly-owned subsidiary, Mandate Pictures, is a full-service production
and financing company. In fiscal 2010, Mandate Pictures released Drew Barrymores directorial debut
Whip It, distributed by Fox Searchlight. Mandate Pictures upcoming film slate includes The Switch,
starring Jennifer Aniston and Jason Bateman, to be released by Miramax Films in August 2010, and an
untitled comedy starring Joseph Gordon-Levitt, Seth Rogen, Academy-Award® nominated actress Anna
Kendrick and
12
Academy-Award winning actress Anjelica Huston, written. Mandate Pictures past theatrical
releases include the Academy Award-winning (Best Original Screenplay by Diablo Cody and three other
nominations), $231 million world-wide box-office sensation Juno, Nick and Norahs Infinite
Playlist, The Strangers, Mr. Magoriums Wonder Emporium, Stranger Than Fiction, Harold & Kumar Go
to White Castle and its sequel, Harold & Kumar Escape From Guantanamo Bay. Mandate Pictures
current development and production slate includes, among others, the remake of the French hit LOL
(Laughing Out Loud) starring Miley Cyrus and Demi Moore, and a remake of the highly-acclaimed
South Korean action-adventure/epic, Old Boy. The third installment of the Harold & Kumar series
will go into production in summer 2010.
Mandate Pictures also maintains a partnership with Ghost House Pictures (Ghost House),
formed with filmmakers Sam Raimi (Spider-Man and Evil Dead Franchises) and Rob Tapert as a
production label dedicated to the financing, development and production of films in the
horror/thriller genre. Under this partnership, Mandate Pictures has most recently produced Drag Me
To Hell, along with such titles as 30 Days of Night, The Grudge I and II, The Messengers and
Boogeyman, all of which opened at number one at the domestic box office. Next up is 30 Days of
Night: Dark Days to be released by Sony Pictures in Fall 2010. Ghost Houses current development
and production slate includes, among others, Panic Attack an original idea with Uruguayan filmmaker
and YouTube Federico Alvarez, This Man, written and directed by Bryan Bertino (The Strangers),
Burst 3D to be directed by Neil Marshall, and Dibbuk Box, written by Juliet Snowden & Stiles White
(Boogeyman). In October 2009, Ghost House established Spooky Pictures, a production label under
the Ghost House banner dedicated to the financing, development, production and distribution of
scary movies made for the family audience. The first project under the new label, in collaboration
with friends and partners Sony Pictures and Stars Road Entertainments Joshua Donen, will be The
Substitute, written by Scott Derrickson and Paul Harris Boardman.
Mandate continues to foster talent relationships by inking exclusive production deals with
Hollywoods top writers and directors. Recently, Mandate signed a two-year first-look deal with
David Gordon Green, Jody Hill and Danny McBride to produce high concept comedies under the label
Rough House Pictures. Combining their creative filmmaking with Mandates financing and producing
expertise, Rough House is establishing itself as a hub for exciting and bold comedic voices.
Projects in development through Rough Houses deal with Mandate Pictures include, among others,
L.A.P.I., an action-comedy from writers Michael Diliberti and Matthew Sullivan with Jody Hill
attached to direct and Danny McBride attached to star, and an untitled comedy based on an idea by
Aziz Ansari and Emmy Award-winning 30 Rock writer Matt Hubbard, written by Harris Wittels (Parks &
Recreation), to star Ansari (Funny People, I Love You Man) and Danny McBride (Up In The Air,
Pineapple Express).
Ancillary Markets. In addition to the distribution described above, we also license the right
to non-theatrical uses of our films to distributors who in turn make a motion picture available to
airlines, hotels, schools, oil rigs, public libraries, prisons, community groups, the armed forces,
ships at sea and others.
International Sales and Distribution. The primary components of our international business
are: (i) the licensing and sale of rights in all media of our in-house theatrical titles; (ii) the
licensing and sale of third party product on an agency basis; (iii) the licensing and sale of
in-house catalog product or libraries of acquired titles (such as those of Artisan Entertainment
and Modern Times Group); and, (iv) direct distribution; all of which are on a territory by
territory basis through third parties or directly through our international divisions.
Lionsgate International We sell or license rights in all media on a territory by territory
basis (other than the territories in which Lionsgate UK and Maple Pictures sell and
distribute) of (i) our in-house Lionsgate theatrical titles, as well as titles from Mandate
Pictures and Ghost House, (ii) our catalog product or libraries of acquired titles, and (iii)
theatrical product produced by third parties such as Relativity Media, Gold Circle Films, LLC
and other independent producers. We often pre-sell international territories to cover a
significant portion of the production budget or acquisition cost on new releases. We also
leverage our infrastructure to generate revenue through a sales agency business for third
party product. Recent high profile films sold by us include: Dear John, starring Channing
Tatum and Amanda Seyfried, The Dark Fields, starring Bradley Cooper and Robert DeNiro,
Immortals 3-D, starring Henry Cavill, Freida Pinto and Mickey Rourke, Kick-Ass, Killers,
Knockout, starring Ewan McGregor, Channing Tatum, Michael Douglas, and Antonio Banderas, LOL,
The Next Three Days, Riddick, starring Vin Diesel, Saw VI, Saw VII 3-D, and The Switch.
Lionsgate UK We self-distribute our motion pictures in the United Kingdom and Ireland
through our subsidiary, Lionsgate UK. Elevation, our joint venture with Optimum
Releasing/StudioCanal, handles the joint sales and distribution of DVD product for Lionsgate
UK. In the last three years, Lionsgate UK has successfully built up a strong third party
acquisitions business. In fiscal 2010, half of its theatrical slate was from third party
sources, including releasing the Academy Award and British Academy of Film and Television Arts
Best Picture winning The Hurt Locker. Lionsgate UK also releases over 50 direct-to-video
titles, the majority of which are acquired in the open market. In August 2009, Lionsgate
Pictures UK Limited, a wholly owned subsidiary of Lionsgate UK, financed and produced its
first feature film production entitled Blitz, a British police thriller starring Jason
Statham. International sales were handled by Lionsgate International. Lionsgate UK is expected
to release approximately 12 films theatrically in fiscal 2011.
13
Television We continue to expand our television business internationally through sales and
distribution of original Lionsgate television series, third party television programming and
format acquisitions.
Canada We distribute our motion picture, television and home video product in Canada through
Maple Pictures, one of the largest independent distributors in Canada. Maple Pictures
also acquires and distributes third party films, including, in fiscal 2010, Academy Award
winners The Hurt Locker, which won six awards including Best Picture, and The Cove, which won
Best Documentary. Maple Pictures also has an output arrangement with Gold Circle Films, whose
films in fiscal 2011 include A Haunting In Georgia. In fiscal 2011, Maple Pictures will also
distribute acquired films including Lebanon, which won the Golden Lion at the Venice Film
Festival, Nowhere Boy, starring Aaron Johnson, and The Fields, starring Sam Worthington. Maple
Pictures is supportive in distribution of Canadian productions as well, which, in fiscal 2011,
include Man On a Train, starring Donald Sutherland, and Servitude, being produced through the
Canadian Film Centre Comedy Lab.
Home Video Distribution. Home video distribution includes distribution of films to the home
entertainment market, including home video, DVD, Blu-ray, video-on-demand, and digital/electronic
distribution. Our United States video distribution operation aims to exploit our filmed and
television content library of approximately 12,000 motion picture titles and television episodes
and programs. We have established a track record for building on the awareness generated from our
theatrical releases and have developed strong positions in childrens, fitness, horror, urban and
teen comedy products.
As noted above, in fiscal 2010, consumer spend declined for home entertainment. Indeed, our
home entertainment revenue decreased approximately 10% in fiscal 2010, as compare to fiscal 2009.
This decrease is due, mostly in part to fewer theatrical releases in fiscal 2010 as compared to
fiscal 2009, and a weakness in the overall economy.
For the year ended March 31, 2010, however, Blu-ray represented over 10% of new theatrical DVD
release revenue from our new theatrical releases, with some titles representing more than 20%.
According to data from industry sources, in the year ended March 31, 2010, we held an approximately
5% market share of the Blu-ray theatrical feature film market based on revenue, and for the
calendar year ended December 31, 2009, we attained a box-office to Blu-ray conversion rate that was
nearly 16% higher than the average rate of the major studios. We expect this percentage to continue
to grow as overall consumer revenue from Blu-ray is projected to grow in the next year with
improved market conditions and, specifically, our increased fiscal 2011 theatrical slate.
We maintained our overall market share of combined sell-through and rental consumer spend to
approximately 7% for calendar year 2009 with our market share at over 7% for calendar year 2010 to
date. In fiscal 2010, we had six theatrical releases on DVD debut at number one or two with Tyler
Perrys Madea Goes to Jail, Haunting in Connecticut, Crank: High Voltage, Tyler Perrys I Can Do
Bad All by Myself, Gamer and Precious, and the top eight fitness releases of the year, Jillian
Michaels 30 Day Shred, Jillian Michaels No More Trouble Zone, Jillian Michaels Banish Fat Boost
Metabolism, The Biggest Loser Cardio Max, Dancing with the Stars Latin Cardio Dance, The Biggest
Loser Boot Camp, The Biggest Loser Last Chance Workout, The Biggest Loser 30 Day Jump Start,
The Biggest Loser Power Sculpt, and The Biggest Loser Weight Loss Yoga. Our childrens
non-theatrical DVD share in fiscal 2010 was approximately 20%, compared to approximately 13% for
fiscal 2009. Additionally, over the past year, our Saw franchise continued as the number one horror
franchise in DVD history. According to Adams Media Research, in the year ended December 31, 2009,
we continue to achieve one of the highest box-office to DVD conversion rate rates in the industry,
maintaining more than a 20% premium over the average rate of our competition. Box-office to DVD
conversion rate is calculated as the ratio of the total box-office revenues from a theatrical
release compared to the total first cycle DVD release revenues for such theatrical release.
We directly distribute to the rental market through Blockbuster, Inc. (Blockbuster),
Netflix, Inc. (Netflix) and Rentrak Corporation. In August 2009, we also entered in a multi-year
distribution agreement with Redbox Automated Retail, LLC, pursuant to which we made certain of our
titles available at the more than 22,000 Redbox DVD rental locations nationwide. We also distribute
or sell directly to mass merchandisers, such as Wal-Mart Stores Inc. (Wal-Mart), K-Mart, Best Buy
Co. Inc. (Best Buy), Target Corporation and Costco Wholesale Corporation, and others who buy
large volumes of our DVDs and Blu-ray discs to sell directly to consumers. Sales to Wal-Mart
accounted for approximately 35% of net home entertainment revenue in fiscal 2010. No other customer
accounted for more than 10% of our revenues in fiscal 2010.
In addition to our theatrical releases each year, we also acquire approximately 65 titles
annually that have commercial potential in video and ancillary markets, adding a total of
approximately 75 to 80 films to our library each year. We also distribute television product on
video, including certain Saturday Night Live product currently in our library (which distribution
rights were extended through 2014), the first, second and third seasons of the Emmy award winning
AMC series Mad Men, the first, second, third, fourth
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and fifth seasons of the Emmy award winning Showtime series Weeds, the first season of the
Showtime series Secret Diary of A Call Girl, the entire catalog of the comedy series Moonlighting,
the entire catalog of the comedy series Will and Grace, the entire catalog of Little House on the
Prairie, and certain Disney-ABC Domestic Television series and Comcast series. We also released
direct-to-video titles including No Greater Love, Cabin Fever 2, Five Fingers, Wrong Side of Town
and Horsemen, and limited theatrical films on DVD including Battle for Terra, More Than a Game,
Good Hai, and September Issue.
Our relationship with Tyler Perry has continued to grow. In addition to the theatrical
releases on DVD of Tyler Perrys Madea Goes to Jail and Tyler Perrys I Can Do Bad All by Myself,
we also released the first, second, third, fourth and fifth volumes of the TBS television series
Tyler Perrys House of Payne. The Tyler Perry franchise has sold over 44 million DVDs in the past
four years through our home video distribution.
Our domestic family entertainment division has established itself as a major home
entertainment distributor of childrens product. According to Nielsen Media Research, over the
past fiscal year, one in every five childrens non-theatrical DVDs sold in the United States was
distributed by Lionsgate, making us the second largest distributor of childrens non-theatrical
product. Growth in fiscal 2010 for the division was driven by distribution of HIT Entertainment,
Inc. (HIT Entertainment) properties, Aardman Animations Ltd.s (Aardman Animations) properties
including Wallace & Gromit and Shaun the Sheep, new portfolio additions from LeapFrog Enterprises,
Inc. (LeapFrog), the Jim Henson Companys (Jim Henson) Fraggle Rock, Marvels Wolverine & the
X-Men and other animated features, and our catalog of premiere childrens brands including Barbie,
Bratz, Care Bears, Clifford the Big Red Dog, Speed Racer and Teenage Mutant Ninja Turtles.
HIT Entertainments extensive portfolio of award-winning childrens programming distributed by
us includes the childrens DVD preschool franchises Thomas & Friends and Barney, and the newly
CGI-Animated Bob the Builder and Fireman Sam series. In fiscal 2010, Lionsgate launched a new
CGI-animated television series broadcasting on PBS entitled Angelina Ballerina with HIT
Entertainment, as well as a new Shaun the Sheep spin-off preschool television series to be
broadcast on Playhouse Disney entitled Timmy Time with Aardman Animations. Additionally, in 2011,
we will continue to produce and distribute direct-to-video family-oriented feature films for
educational toy maker LeapFrog and will distribute new DVD premiere animated movies for Care Bears
and Bratz. We are also adding and relaunching Jim Hensons Wubbulous World of Dr. Seuss television
series on DVD in fiscal 2011, as well as releasing various classic Jim Henson catalog jewels onto
DVD for the first time.
We remain a leader in the fitness industry as the number one distributor of fitness product in
calendar year 2009 and number two distributor in year-to-date 2010. With over 32% market share in
fitness DVD revenue, we have a lineup that includes popular series such as Denise Austin, Jillian
Michaels, The Biggest Loser and Dancing With The Stars, as well as upcoming titles that feature
Billy Blanks Jr., and Jane Fonda. Additionally, Denise Austin remains the largest fitness franchise
in the DVD era.
We continue our direct-to-video horror genre with our arrangement with Ghost House
Underground, the film acquisitions company that extends the Ghost House brand to home
entertainment. We released four titles in fiscal 2010, including The Children, Seventh Moon,
Offspring and Thaw. We expect to release approximately four to six films through this venture in
fiscal 2011.
We also continue our distribution agreement with Disney-ABC Domestic Television under which we
obtained the home entertainment distribution rights to select prime time series and library titles
from ABC Studios, including According to Jim, starring Jim Belushi and Courtney Thorne-Smith,
Reaper, Hope & Faith, starring Kelly Ripa and Faith Ford, 8 Simple Rules...for Dating My Teenage
Daughter, starring John Ritter and Katey Sagal, Boy Meets World, starring Ben Savage and Rider
Strong, My Wife & Kids, starring Damon Wayans and Tisha Campbell, and Dirt Season 2 starring
Courtney Cox.
Our first-look partnership continues with Comcast, which operates Comcasts West Coast
entertainment properties, under which we obtained the home entertainment distribution rights to
series airing on E! Entertainment Television, The Style Network and G4 including Keeping Up with
the Kardashians, Kourtney and Khloe Take Miami, Sunset Tan, Snoop Doggs Father Hood, and Kimora:
Life In The Fab Lane.
In addition, in fiscal 2010, we obtained the distribution rights for SyFys (formerly known as
the Sci-Fi Channel) Alice mini-series, produced by Robert
Halmi Jr., and RHI Entertainment, Inc.,
and Showtimes Secret Diary of a Call Girl, produced by Tiger Aspect. More recently, in May 2010,
we also became the exclusive home entertainment distributor (including DVD, Blu-ray, digital
delivery, television and video-on-demand) for all Exclusive Media Groups (Exclusive) Newmarket
Films theatrical titles in the United States, as well as its library of 250 titles.
Television Syndication. We distribute television programming through our subsidiary,
Debmar-Mercury. Currently, Debmar-
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Mercury produces and distributes The Wendy Williams Show, distributes Tyler Perrys House of
Payne and spinoff Meet the Browns, and strips Family Feud, South Park and E! True Hollywood Story,
as well as the weekly program, Deadliest Catch. Additionally, two new series will debut in fiscal
2011 Are We There Yet, distributed by Debmar-Mercury, will premiere on TBS in June 2010, while
Big Lake, produced and distributed by Debmar-Mercury, is expected to premiere on Comedy Central
during the last half of 2010. Debmar-Mercury also distributes a movie library featuring our titles
as well as those from Revolution Studios.
Pay and Free Television Distribution. We have over 600 titles in active distribution in the
domestic cable, free and pay television markets. Pay television rights include rights granted to
cable, direct broadcast satellite and other services paid for by subscribers. We sell our library
titles and new product to major cable channels such as Showtime, USA Network, FX, Turner Networks,
Starz Entertainment, Family Channel, Disney Channel, Cartoon Network and IFC, through which we have
an agreement for a package of 70 of our feature films. We also directly distribute to pay-per-view
and video-on-demand to cable, satellite and internet providers such as Comcast, Time Warner Inc.,
Cox Communications, Inc. thru iN Demand L.L.C., Charter Communications, Inc., AT&T Uverse and
Verizon FIOS thru Avail-TVN, Cablevision Systems Corp., DirecTV, Inc. and DISH Network L.L.C.
Additionally, in April 2008, we formed a joint venture with Viacom, Paramount, and MGM and
created a premium television channel and video-on-demand service named EPIX, for our theatrical
releases after January 1, 2009. EPIX, which launched in October 2009, provides us with an
additional platform to distribute our library of motion picture titles and television episodes and
programs. To date, EPIX has concluded carriage agreements with six distributors, including with
Verizon FiOS, Cox Communications, Charter Communications, Inc., Mediacom Communications, the
National Cable and Telecommunications Cooperative, and most recently, DISH Network L.L.C., and is
now available to consumers in over 30 million homes.
Electronic Distribution. We also deliver our content through a broad spectrum of digital
media platforms. We have digital delivery arrangements for first run theatrical films, television
series, our movie library, third party product and product not available on DVD. Distribution
outlets include, among others, Apple iTunes, Amazon.com, Inc., Microsoft Inc.s Zune/X-BOX, Sonys
Playstation Network, Netflix, Roxio, Best Buy/CinemaNow, Hulu LLC (Hulu), YouTube, mSpot, Inc.
and Wal-Mart/Vudu. To date, we have distributed over 800 films and television episodes through
these digital channels. We also operate FEARnet, a branded multiplatform programming and content
service provider of horror genre films, in connection with partners Comcast and Sony. We entered
into a five-year license agreement with FEARnet for United States territories and possessions,
whereby we license content to FEARnet for video-on-demand and broadband exhibition. Further, we own
an interest in Break.com, a leading viral marketing company that creates new opportunities for
showcasing our feature films and television programming. We have also partnered with YouTube to
create new branded Lionsgate channels which enable us to post full length films and television
episodes and to post promotional scenes from our film and television libraries. In addition to
sharing advertising revenue from the channel, a banner on the page leads to our online shop, where
our films and shows highlighted in the promotional scenes are available for purchase as DVDs or
Blu-ray discs in digital form. Finally, through our partnership with EPIX, we offer product via the
internet and to multiple devices for consumption anytime/anywhere by EPIX subscribers.
TV Guide Network. TV Guide Network offers entertainment and television guidance-related
programming as well as localized program listings and descriptions primarily in the United States.
TV Guide Network is typically included in a basic or expanded basic viewing package offered by MSOs
to their subscribers, and is usually available in both analog and digital channel lineups. In the
majority of cable television homes, the screen for TV Guide Network is divided into two components.
The lower portion of the screen contains a scrolling program guide, which is color-coded by genre
and displays updated local program listings information. This customized text portion of the screen
contains viewing times, channel numbers, network identification, program titles, weather, movie
descriptions, program ratings and ordering instructions for pay-per-view and, where available,
video-on-demand services, for channel lineups in the United States, Puerto Rico, and the U.S.
Virgin Islands. The upper portion of the screen contains programming dedicated to the world of
television and entertainment. In satellite homes, TV Guide Networks programming is shown
full-screen, without a scrolling program guide.
TV Guide Network broadcasts content acquired or licensed by third party producers and produces
original content from its studio in Hollywood, California. During fiscal 2010, TV Guide Network
entered into agreements to acquire the exclusive cable off-network rights to television series Ugly
Betty, Curb Your Enthusiasm and Weeds. As of April 1, 2010, TV Guide Network was distributed to
80.2 million households, as measured by Nielsen Media Research. TV Guide Network generates revenue
primarily from advertising and carriage fees paid by MSOs. We plan to continue to evolve TV Guide
Network into an entertainment destination that features high-quality programming relating to the
world of television, entertainment news and celebrities.
TV Guide Online. TV Guide Online (www.tvguide.com), a leading online provider of
television listings information and entertainment and video content, features a combination of
entertainment news, video programming, celebrity information, localized
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channel listings, editorial guidance, community features and search features. The tvguide.com
search engine provides consumers with a comprehensive experience by integrating online video with
the breadth and depth of TV Guide Networks database of listings, show and episode descriptions,
news, reviews, ratings, user blogs, groups, message boards, photos, and other contextual
information, as well as video clips from TV Guide Network and certain third party networks.
According to Nielsen/Net Ratings, TV Guide Online averaged 6.9 million unduplicated unique users
per month for the fiscal year ended March 31, 2010. TV Guide Online generates revenue primarily
from advertising.
Intellectual Property
We are currently using a number of trademarks including LIONS GATE HOME ENTERTAINMENT,
ARTISAN HOME ENTERTAINMENT, FAMILY HOME ENTERTAINMENT, DIRTY DANCING, THE BLAIR WITCH
PROJECT, RESERVOIR DOGS and MAD MEN in connection with our domestic home video distribution,
LIONS GATE FILMS, LGF FILMS, ARTISAN ENTERTAINMENT, TRIMARK PICTURES, GHOST HOUSE
PICTURES, GRINDSTONE ENTERTAINMENT GROUP, MANDATE PICTURES and MANDATE INTERNATIONAL in
connection with films distributed domestically and licensed internationally and LIONS GATE
TELEVISION, TRIMARK TELEVISION and DEBMAR/MERCURY in connection with licenses to free, pay and
cable television.
The trademarks LIONSGATE, LIONS GATE HOME ENTERTAINMENT, TV GUIDE, TV GUIDE NETWORK,
LIONS GATE SIGNATURE SERIES, ARTISAN ENTERTAINMENT, FAMILY HOME ENTERTAINMENT, TRIMARK
PICTURES, DIRTY DANCING, THE BLAIR WITCH PROJECT, RESERVOIR DOGS and SAW among others, are
registered with the United States Patent and Trademark Office. We regard our trademarks as valuable
assets and believe that our trademarks are an important factor in marketing our products.
Copyright protection is a serious problem in the DVD and Blu-ray distribution industry because
of the ease with which DVDs and Blu-ray discs may be duplicated. In the past, certain countries
permitted video pirating to such an extent that we did not consider these markets viable for
distribution. Video piracy continues to be prevalent across the entertainment industry. We and
other video distributors have taken legal actions to enforce copyright protection when necessary.
We also hold various domain names relating to our trademarks and service marks including
lionsgate.com and tvguide.com.
Competition
Television and Motion Picture Distribution
Television and motion picture production and distribution are highly competitive businesses.
We face competition from companies within the entertainment business and from alternative forms of
leisure entertainment, such as travel, sporting events, outdoor recreation, video games, the
internet and other cultural and computer-related activities. We compete with the major studios,
numerous independent motion picture and television production companies, television networks and
pay television systems for the acquisition of literary and film properties, the services of
performing artists, directors, producers and other creative and technical personnel and production
financing, all of which are essential to the success of our entertainment businesses. In addition,
our motion pictures compete for audience acceptance and exhibition outlets with motion pictures
produced and distributed by other companies. Likewise, our television product faces significant
competition from independent distributors as well as major studios. As a result, the success of any
of our motion pictures and television product is dependent not only on the quality and acceptance
of a particular film or program, but also on the quality and acceptance of other competing motion
pictures or television programs released into the marketplace at or near the same time.
TV Guide Network. A majority of TV Guide Networks viewership comes from analog cable homes,
where scroll data is still utilized for guidance. In satellite and digital cable households, which
have many more channels and generally use an interactive program guide for listings information,
viewership has historically been small. TV Guide Network invests in premium syndicated content,
movies and producers original content that celebrates entertainment. TV Guide Network believes
that, by focusing on programming that celebrates entertainment, it can draw an audience beyond
those who currently tune in solely for television program listings. This means that it will compete
with general entertainment channels for television viewership and marketers advertising spend.
TV Guide Network also competes with other networks for limited analog cable television system
channel slots. The competition for channel space has increased, and TV Guide Network believes it
will continue to increase as programming distributors increase deployment of advanced digital
services such as high definition television, voice over internet protocol and video-on-demand.
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As a source of listing information, TV Guide Network has the following primary sources of
competition: television listings included in local and national newspapers, as well as free
supplements in Sunday newspapers; niche cable-guide publications; and electronic, interactive and
online programming guides, including our own interactive and internet program listings guide
services. TV Guide Network also faces competition from MSOs who may wish to launch their own
programming guide channels.
TV Guide Online. TV Guide Online competes with general entertainment websites for visitors. TV
Guide Online also competes with general entertainment websites and other forms of media for
marketers advertising spend. Certain initiatives, including its television focused search engine,
compete with established online search providers who may have an inherent advantage in terms of
their online brand recognition and current traffic.
As a source of listing information, TV Guide Online has the following primary sources of
competition: other programming listing services available on the internet; electronic, interactive
and online programming guides provided by cable and satellite MSOs; television listings included in
local and national newspapers, as well as free supplements in Sunday newspapers; and niche
cable-guide publications.
TV Guide Network On Demand and TV Guide Broadband. TV Guide Network On Demand and TV Guide
Broadband are advertiser supported, video-on-demand services featuring short-form,
originally-produced entertainment programs that guide consumers to the most compelling fare on
television each week. TV Guide Broadband is available on www.tvguide.com and is also distributed on
major video portals such as Hulu, YouTube, Fancast and Daily Motion. TV Guide Network On Demand is
currently available to over 37 million subscribers.
Legislative and Regulatory Actions
The satellite transmission, cable and telecommunications industries are subject to pervasive
federal regulation, including Federal Communications Commission (FCC) licensing and other
requirements. The industries are also often subject to extensive regulation by local and state
authorities. Although most cable and telecommunication industry regulations do not apply directly
to TV Guide Network, they affect programming distributors, a primary customer for its products and
services. TV Guide Network monitors pending legislation and administrative proceedings to ascertain
their relevance, analyze their impact and develop strategic direction relating to regulatory trends
and developments within the industry.
Recent Developments
Tiger Gate Entertainment Limited. On April 5, 2010, Pearl River Holdings Corp., our
wholly-owned subsidiary, entered into a joint venture with SCG, a leading private investment firm
specializing in the media, entertainment and communications industries, to operate and manage Tiger
Gate, an operator of pay television channels and a distributor of television programming and action
and horror films across Asia. Established by the Company in 2008, Tiger Gate currently operates the
thriller/horror channel THRILL and the action channel KIX. The channels launched in Indonesia in
August 2009, and in Hong Kong and Singapore in April 2010.
December 2009 Subordinated Debt Repurchase. In December 2009, our wholly-owned subsidiary,
Lions Gate Entertainment Inc. (LGEI), paid $37.7 million to extinguish $39.9 million of aggregate
principal amount (carrying value $35.0 million) of 3.625% convertible senior subordinated secured
notes due 2025 (the February 2005 3.625% Notes) and $38.0 million to extinguish $40.0 million of
aggregate principal amount (carrying value $35.5 million) of 2.9375% convertible senior
subordinated secured notes due 2024 (the October 2004 2.9375% Notes).
10.25% Senior Secured Second-Priority Notes. On October 21, 2009, LGEI issued $236.0 million
aggregate principal amount of 10.25% senior secured second-priority notes due 2016 (the Senior
Notes) in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities
Act of 1933, as amended. The Senior Notes were issued by LGEI at an initial price of 95.222%
(original issue discount 4.778%) of the principal amount. The net proceeds, after deducting
discounts, fees paid to the initial purchaser, and all transaction costs (including legal,
accounting and other professional fees) from the sale of the Senior Notes was approximately $214.7
million, which was used by LGEI to repay a portion of its outstanding debt under our senior
revolving credit facility.
Film Credit Facility. On October 6, 2009, we entered into a revolving film credit facility
agreement, as amended effective December 31, 2009 (the Film Credit Facility), which provides for
borrowings for the acquisition or production of motion pictures. Currently, the Film Credit
Facility provides for total borrowings up to $120 million and can be increased to $200 million if
additional lenders or financial institutions become a party to and provide a commitment under the
facility. The Film Credit Facility has a
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maturity date of April 6, 2013 and as of March 31, 2010, bore interest of 3.25% over the
LIBO rate (as defined in the credit agreement effective interest rate of 3.50% as of March 31,
2010). We are required to pay a quarterly commitment fee of 0.75% per annum on the unused
commitment under the Film Credit Facility. Borrowings under the Film Credit Facility are due the
earlier of (a) nine months after delivery of each motion picture or (b) April 6, 2013. Borrowings
under the Film Credit Facility are subject to a borrowing base calculation and are secured by
interests in the related motion pictures, together with certain other receivables from other motion
picture and television productions pledged by us, including a minimum pledge of such receivables of
$25 million. Receivables pledged to the Film Credit Facility must be excluded from the borrowing
base calculation under our senior revolving credit facility.
Theatrical Slate Participation. On May 29, 2009, we terminated our theatrical slate
participation arrangement with Pride Pictures, LLC (Pride), an unrelated entity. The arrangement
was evidenced by, among other documents, that certain Master Covered Picture Purchase Agreement
(the Master Picture Purchase Agreement) between us and LG Film Finance I, LLC (FilmCo) and that
certain Limited Liability Company Agreement (the FilmCo Operating Agreement) for FilmCo by and
between us and Pride, each dated as of May 25, 2007 and amended on January 30, 2008. Under the
arrangement, Pride contributed, in general, 50% of our production, acquisition, marketing and
distribution costs of theatrical feature films and participated in a pro rata portion of the
pictures net profits or losses similar to a co-production arrangement based on the portion of
costs funded. Amounts provided from Pride were reflected as a participation liability. In late
2008, the administrative agent for the senior lenders under Prides senior credit facility took the
position, among others, that the senior lenders did not have an obligation to continue to fund
under the senior credit facility because the conditions precedent to funding set forth in the
senior credit facility could not be satisfied. We were not a party to the credit facility.
Consequently, Pride did not purchase the pictures The Spirit, My Bloody Valentine 3-D and Madea
Goes To Jail. Thereafter, on April 20, 2009, after failed attempts by us to facilitate a
resolution, we gave FilmCo and Pride notice that FilmCo, through Prides failure to make capital
contributions, was in default of the Master Picture Purchase Agreement. On May 5, 2009, the
representative for the Pride equity and the Pride mezzanine investor responded that the required
amount was fully funded and that it had no further obligations to make any additional capital
contributions. Consequently, on May 29, 2009, we gave notice of termination of the Master Picture
Purchase Agreement. Since May 29, 2009, there have been no developments with respect to the
arrangement. Although we will no longer receive financing as provided from the participation of
Pride in our films, we do not believe this will have a material adverse effect to our business
Refinancing Exchange. On April 20, 2009, LGEI entered into Refinancing Exchange Agreements
(the Refinancing Exchange Agreements) with certain existing holders of the February 2005 3.625%
Notes. Pursuant to the terms of the Refinancing Exchange Agreements, holders of the February 2005
3.625% Notes exchanged approximately $66.6 million aggregate principal amount of the February 2005
3.625% Notes for new 3.625% convertible senior subordinated secured notes due 2025 (the April 2009
3.625% Notes) in the same aggregate principal amount under a new indenture entered into by LGEI,
Lionsgate, as guarantor, and an indenture trustee thereunder.
April 2009 3.625% Notes. As discussed above, in April 2009, LGEI issued approximately
$66.6 million of the April 2009 3.625% Notes. LGEI will pay interest on the April 2009 3.625% Notes
on March 15 and September 15 of each year. The April 2009 3.625% Notes will mature on March 15,
2025. On or after March 15, 2015, LGEI may redeem the April 2009 3.625% Notes, in whole or in part,
at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be redeemed,
plus accrued and unpaid interest through the date of redemption. The holder may require LGEI to
repurchase the April 2009 3.625% Notes on March 15, 2015, 2018 and 2023 or upon a designated
event, at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be
repurchased plus accrued and unpaid interest. Under certain circumstances, if the holder requires
LGEI to repurchase all or a portion of their notes upon a change in control, they will be entitled
to receive a make whole premium. The amount of the make whole premium, if any, will be based on the
price of our common shares on the effective date of the change in control. No make whole premium
will be paid if the price of our common shares at such time is less than $5.36 per share or exceeds
$50.00 per share. The April 2009 3.625% Notes may be converted into our common shares at any time
before maturity, redemption or repurchase. The initial conversion rate of the April 2009
3.625% Notes is 121.2121 common shares per $1,000 principal amount of the April 2009 3.625% Notes,
subject to adjustment in certain circumstances, which represents a conversion price of
approximately $8.25 per share. Upon conversion of the April 2009 3.625% Notes, we have the option
to deliver, in lieu of common shares, cash or a combination of cash and our common shares.
TV Guide Network Acquisition. In January 2009, we entered into an Equity Purchase Agreement
(the Equity Purchase Agreement) with Gemstar-TV Guide International, Inc. (Gemstar), TV Guide
Entertainment Group, Inc. (TVGE), its parent company, UV Corporation and Macrovision Solutions
Corporation (Macrovision), the ultimate parent company of Gemstar, TVGE and UV Corporation, for
the purchase by us of TV Guide Network, and related assets, including TV Guide Network On Demand
and TV Guide Online (www.tvguide.com). The acquisition closed February 28, 2009. We paid
approximately $241.6 million for all of the
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equity interest of TV Guide Network, which included a capital lease obligation of $12.1
million and incurred approximately $1.5 million direct transaction costs (legal fees, accountants
fees and other professional fees).
Sale of Noncontrolling Interest in TV Guide Network. On May 28, 2009, we entered into, and
closed, a Purchase Agreement (the Purchase Agreement) with OEP, pursuant to which OEP purchased
49% of our interest in TV Guide Network for approximately $122.4 million in cash. In addition, OEP
reserved the option of buying another 1% of TV Guide Network under certain circumstances. The
arrangement contains joint control rights, as evidenced in an operating agreement, as well as
customary transfer restrictions and exit rights.
Senior Revolving Credit Facility. In July 2008 (as amended in September 2009 and December
2009), we entered into an amended senior revolving credit facility which provides for a $340
million secured revolving credit facility, of which $30 million may be utilized by two of our
wholly owned foreign subsidiaries. The senior revolving credit facility expires July 25, 2013 and
bears interest at 2.5% over the Adjusted LIBOR rate. The availability of funds under the senior
revolving credit facility is limited by a borrowing base and also reduced by outstanding letters of
credit. We are required to pay a quarterly commitment fee based upon 0.375% per annum on the total
senior revolving credit facility of $340 million less the amount drawn. This senior revolving
credit facility amends and restates our original $215 million credit facility. Obligations under
the senior revolving credit facility are secured by collateral (as defined in the credit agreement)
granted by us and certain of our subsidiaries, as well as a pledge of equity interests in certain
of our subsidiaries. The senior revolving credit facility contains affirmative and negative
covenants that, among other things, require us to satisfy certain financial covenants and restrict
our ability to incur additional debt, pay dividends and make distributions, make certain
investments and acquisitions, repurchase our stock and prepay certain indebtedness, create liens,
enter into agreements with affiliates, modify the nature of our business, enter into sale-leaseback
transactions, transfer and sell material assets and merge or consolidate. Under the senior
revolving credit facility, we may also be subject to an event of default upon a change in control
(as defined in the senior revolving credit facility) which, among other things, includes a person
or group acquiring ownership or control in excess of 20% of our common stock. On September 30,
2009, we amended the senior revolving credit facility which allowed us to issue certain senior
secured second-priority notes and expand acceptable obligors included in the senior revolving
credit facilitys borrowing base calculation. The amendment resulted in an increase of the interest
rate of 0.25% to 2.5%, and an additional financial covenant was added, among other changes.
Employees
As
of May 21, 2010, we had 497 full-time employees in our worldwide
operations, which does not include employees at TV Guide Network and
TV Guide Online. We also
utilize many consultants in the ordinary course of our business and hire additional employees on a
project-by-project basis in connection with the production of our motion pictures and television
programming. We believe that our employee and labor relations are good.
Corporate History
We are a corporation organized under the laws of the Province of British Columbia, resulting
from the merger of Lions Gate Entertainment Corp. and Beringer Gold Corp. on November 13, 1997.
Beringer Gold Corp. was incorporated under the Business Corporation Act (British Columbia) on May
26, 1986 as IMI Computer Corp. Lions Gate Entertainment Corp. was incorporated under the Canada
Business Corporations Act using the name 3369382 Canada Limited on April 28, 1997, amended its
articles on July 3, 1997 to change its name to Lions Gate Entertainment Corp., and on September 24,
1997, continued under the Business Corporation Act (British Columbia).
Financial Information About Segments and Foreign and Domestic Operations
Financial and other information by reporting segment and geographic area as of March 31, 2010
and 2009 and for each of the three years in the period ended March 31, 2010 is set forth in Note 20
to our consolidated financial statements.
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
proxy statements and amendments to those reports filed or furnished pursuant to Sections 13(a) and
15(d) of Exchange Act, are available, free of charge, on our website at www.lionsgate.com
as soon as reasonably practicable after we electronically file such material with, or furnish it
to, the Securities and Exchange Commission (the SEC). The Companys Disclosure Policy, Corporate
Governance Guidelines, Standards for Director Independence, Code of Business Conduct and Ethics for
Directors, Officers and Employees, Code of Ethics for Senior Financial Officers, Policy on
Shareholder Communications, Charter of the Audit Committee, Charter of the Compensation Committee
20
and Charter of the Nominating and Corporate Governance Committee and any amendments thereto
are also available on the Companys website, as well as in print to any stockholder who requests
them. The information posted on our website is not incorporated into this Annual Report on Form
10-K.
We are filing as exhibits to this Annual Report on Form 10-K certifications required pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. We have also filed with the New York Stock
Exchange (the NYSE) the annual certification of our Chief Executive Officer for fiscal 2010,
confirming that we were in compliance with NYSE corporate governance listing standards.
The SEC maintains an internet site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC at www.sec.gov.
The public may read and copy any materials we file with the SEC at the SECs Public Reference Room
at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below as well as other information included
in, or incorporated by reference into in this Form 10-K before making an investment decision. The
following risks and uncertainties could materially adversely affect our business, results of
operations and financial condition. The risks described below are not the only ones facing the
Company. Additional risks that we are not presently aware of or that we currently believe are
immaterial may also impair our business operations.
We have had losses, and we cannot assure future profitability.
We have reported operating income for fiscal years 2005, 2006, 2007 and 2010, and operating
losses for fiscal years 2008 and 2009. We have reported net income for fiscal years 2005 and 2007,
and net losses for the fiscal years 2006, 2008, 2009 and 2010. Our
accumulated deficit was $460.6
million at March 31, 2010. We cannot assure you that we will operate profitably and, if we do not,
we may not be able to meet our debt service requirements, working capital requirements, capital
expenditure plans, production slate, acquisition and releasing plans or other cash needs. Our
inability to meet those needs could have a material adverse effect on our business, results of
operations and financial condition.
We face substantial capital requirements and financial risks.
Our business requires a substantial investment of capital. The production, acquisition and
distribution of motion pictures and television programs require a significant amount of capital. A
significant amount of time may elapse between our expenditure of funds and the receipt of
commercial revenues from or government contributions to our motion pictures or television programs.
This time lapse requires us to fund a significant portion of our capital requirements from our
senior revolving credit facility, the Film Credit Facility and from other financing sources.
Although we intend to continue to reduce the risks of our production exposure through financial
contributions from broadcasters and distributors, tax credit programs, government and industry
programs, other studios and other sources, we cannot assure you that we will continue to implement
successfully these arrangements or that we will not be subject to substantial financial risks
relating to the production, acquisition, completion and release of future motion pictures and
television programs. For example, in May 2009, we terminated our theatrical slate participation
arrangement with Pride, an unrelated entity. Under that arrangement, Pride contributed, in general,
50% of our production, acquisition, marketing and distribution costs of certain theatrical feature
films and participated in a pro rata portion of the pictures net profits or losses. In addition,
if we increase (through internal growth or acquisition) our production slate or our production
budgets, we may be required to increase overhead and/or make larger up-front payments to talent
and, consequently, bear greater financial risks. Any of the foregoing could have a material adverse
effect on our business, results of operations and financial condition.
The costs of producing and marketing feature films have steadily increased and may further
increase in the future, which may make it more difficult for a film to generate a profit or compete
against other films. The costs of producing and marketing feature films have generally increased in
recent years. These costs may continue to increase in the future, which may make it more difficult
for our films to generate a profit or compete against other films. Historically, production costs
and marketing costs have risen at a higher rate than increases in either the number of domestic
admissions to movie theaters or admission ticket prices. A continuation of this trend would leave
us more dependent on other media, such as home video, television, international markets and new
media for revenue, and the revenues from such sources may not be sufficient to offset an increase
in the cost of motion picture production. If we cannot successfully exploit these other media, it
could have a material adverse effect on our business, results of operations and financial
condition.
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Budget overruns may adversely affect our business. Our business model requires that we be
efficient in the production of our motion pictures and television programs. Actual motion picture
and television production costs often exceed their budgets, sometimes significantly. The
production, completion and distribution of motion pictures and television productions are subject
to a number of uncertainties, including delays and increased expenditures due to creative
differences among key cast members and other key creative personnel or other disruptions or events
beyond our control. Risks such as death or disability of star performers, technical complications
with special effects or other aspects of production, shortages of necessary equipment, damage to
film negatives, master tapes and recordings or adverse weather conditions may cause cost overruns
and delay or frustrate completion of a production. If a motion picture or television production
incurs substantial budget overruns, we may have to seek additional financing from outside sources
to complete production. We cannot make assurances regarding the availability of such financing on
terms acceptable to us, and the lack of such financing could have a material adverse effect on our
business, results of operations and financial condition.
In addition, if a motion picture or television production incurs substantial budget overruns,
we cannot assure you that we will recoup these costs, which could have a material adverse effect on
our business, results of operations and financial condition. Increased costs incurred with respect
to a particular film may result in any such film not being ready for release at the intended time
and the postponement to a potentially less favorable time, all of which could cause a decline in
box office performance, and, thus, the overall financial success of such film. Budget overruns
could also prevent a picture from being completed or released. Any of the foregoing could have a
material adverse effect on our business, results of operations and financial condition.
We may not be able to generate sufficient cash to service all of our indebtedness, and be forced
to take other actions to satisfy our obligations under our indebtedness, which may not be
successful.
Our ability to make scheduled payments or to refinance our debt obligations depends on our
financial and operating performance, which is subject to prevailing economic and competitive
conditions and to certain financial, business and other factors beyond our control. We cannot
assure you that we will maintain a level of cash flows from operating activities sufficient to
permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations,
we may be forced to reduce or delay capital expenditures, sell assets or operations, seek
additional capital or restructure or refinance our indebtedness. We cannot assure you that we would
be able to take any of these actions, that these actions would be successful and permit us to meet
our scheduled debt service obligations or that these actions would be permitted under the terms of
our existing or future debt agreements. In the absence of such operating results and resources, we
could face substantial liquidity problems and might be required to dispose of material assets or
operations to meet our debt service and other obligations. Our $340 million senior revolving credit
facility, the Film Credit Facility and the indenture that governs the Senior Notes restrict our
ability to dispose of assets and use the proceeds from the disposition. We may not be able to
consummate those dispositions or to obtain the proceeds which we could realize from them and these
proceeds may not be adequate to meet any debt service obligations then due.
If we cannot make scheduled payments on our debt, we will be in default and, as a result:
our debt holders could declare all outstanding principal and interest to be due and payable;
the lenders under our senior revolving credit facility and the Film Credit Facility could
terminate their commitments to lend us money and foreclose against the assets securing their
borrowings; and
we could be forced into bankruptcy or liquidation.
Despite current indebtedness levels, we and our subsidiaries may be able to incur substantial
additional indebtedness in the future. The terms of the indenture governing the Senior Notes do not
fully prohibit us or our subsidiaries from doing so. Additionally, our senior revolving credit
facility provides commitments of up to $340 million in the aggregate, and the Film Credit Facility
currently provides commitments of up to $120 million in the aggregate (with a possible increase to
$200 million under certain circumstances). All of those borrowings are secured on a first lien
basis, except to the extent such liens are subordinated to liens securing certain indebtedness of
guarantors with respect to certain film and television financing arrangements. If new debt is added
to our current debt levels, the related risks that we and our subsidiaries now face could
intensify. The Company and the subsidiaries that guarantee the Senior Notes are also guarantors
under our senior revolving credit facility and certain subsidiaries are guarantors under the Film
Credit Facility.
Our level of indebtedness could adversely affect our ability to raise additional capital to
fund our operations, limit our ability to react to changes in the economy or our industry and
prevent us from meeting our obligations under our indebtedness.
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As of March 31, 2010, the principal value of our consolidated total indebtedness was
approximately $815.5 million. Our substantial degree of leverage could have important consequences,
including the following:
it may limit our ability to obtain additional debt or equity financing for working
capital, capital expenditures, motion picture and television development and production, debt
service requirements, acquisitions or general corporate or other purposes;
a substantial portion of our cash flows from operations will be dedicated to the payment of
principal and interest on our indebtedness and will not be available for other purposes,
including our operations, capital expenditures and future business opportunities;
the debt service requirements of our indebtedness could make it more difficult for us to
satisfy our financial obligations;
certain of our borrowings, including borrowings under our senior revolving credit facility
and the Film Credit Facility, are at variable rates of interest, exposing us to the risk of
increased interest rates;
it may limit our ability to adjust to changing market conditions and place us at a
competitive disadvantage compared to our competitors that have less debt; and
we may be vulnerable to a downturn in general economic conditions or in our business, or we
may be unable to carry out capital spending that is important to our growth.
Substantial leverage could adversely affect our financial condition.
Historically, we have been highly leveraged and may be highly leveraged in the future. We have
access to capital through our $340 million senior revolving credit facility and our $120 million
Film Credit Facility. In addition, as of March 31, 2010, we have $236.0 million principal amount of
the Senior Notes that mature in 2016 and have unsecured convertible senior subordinated notes
outstanding with an aggregate principal amount of $236.1 million. The holders of our unsecured
convertible senior subordinated notes may require us to repurchase such notes on certain dates
($110 million principal amount of the October 2004 2.9375% Notes may be required to be repurchased
as early as October 2011, $59.5 million principal amount of the February 2005 3.625% Notes may be
required to be repurchased as early as March 2012, and $66.6 million principal amount of the April
2009 3.625% Notes may be required to be repurchased as early as March 2015). In addition, the
holders of our unsecured convertible senior subordinated notes may require us to repurchase such
notes upon a change in control at a price equal to 100% of the principal amount, together with
accrued and unpaid interest through the date of repurchase.
Although each of our senior revolving credit facility, the Film Credit Facility and the
indenture governing the Senior Notes contains covenants that, among other things, limit our ability
to incur additional indebtedness, including guarantees, make restricted payments and investments,
and grant liens on our assets, the covenants contained in the indenture governing the Senior Notes
provide a number of important exceptions. Such exceptions will provide us substantial flexibility
to incur indebtedness, grant liens and expend funds to operate our business. Under the terms of the
indenture governing the Senior Notes, so long as we meet certain specified conditions, we will be
able to incur indebtedness to purchase or acquire rights in motion picture or television
productions secured by liens on such rights, which liens will be prior to the liens in respect of
the Senior Notes. For example, in October 2009, we entered into the Film Credit Facility, a new
revolving credit agreement that allows us to diversify our capital sources for theatrical motion
picture production and distribution. The initial commitments for this facility are $120 million,
but we may seek to increase the amount of commitments to as much as $200 million, and obligations
thereunder are secured on a first priority basis by interests in the related motion pictures.
Similarly, with few restrictions, we may incur indebtedness in connection with certain film and
television financing arrangements, or make investments in assets that are not included in the
borrowing base supporting the Senior Notes, in each case, without having to meet the leverage ratio
tests for debt incurrence or to fit such investments within certain restricted payment baskets or
within other categories of funds applicable to making investments and other restricted payments
under the indenture governing the Senior Notes.
In addition, our ability to incur additional indebtedness under the leverage ratio tests
depends in part on the size of our borrowing base, as defined in the indenture governing the Senior
Notes. Many of the details of this definition depend, in turn, on corresponding provisions in the
definition of borrowing base in our senior revolving credit agreement. As a result, whether certain
particular assets are included in the borrowing base for the Senior Notes effectively depends on
whether the administrative agent and the lenders under our senior revolving credit agreement permit
their inclusion in the borrowing base for such credit agreement.
At March 31, 2010, we had approximately $91.4 million in cash and cash equivalents. As of
March 31, 2010, we have borrowed $17 million of our senior revolving credit facility, $35.7 million
of the Film Credit Facility, and had $25.6 million letters of credit outstanding, and could borrow
some or all of the permitted amount in the future. The amount we have available to borrow under
these
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facilities depends upon our borrowing base, which in turn depends on the value of our existing
library of films and television programs, as well as accounts receivable and cash held in
collateral accounts. If several of our larger motion picture releases are commercial failures or
our library declines in value, our borrowing base could decrease. Such a decrease could have a
material adverse effect on our business, results of operations, liquidity and financial condition.
For example, it could:
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require us to dedicate a substantial portion of our cash flow to the repayment of our
indebtedness, reducing the amount of cash flow available to fund motion picture and
television production, distribution and other operating expenses; |
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limit our flexibility in planning for or reacting to downturns in our business, our
industry or the economy in general; |
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limit our ability to obtain additional financing, if necessary, for operating expenses,
or limit our ability to obtain such financing on terms acceptable to us; and |
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limit our ability to pursue strategic acquisitions and other business opportunities that
may be in our best interests. |
An increase in the ownership of our common shares by certain shareholders could trigger a
change in control under the agreements governing our long-term indebtedness.
The agreements governing certain of our long-term indebtedness contain change in control
provisions that are triggered when any of our shareholders, directly or indirectly, acquires
ownership or control in excess of a certain percentage of our common shares. As of March 31, 2010,
four of our shareholders, Mark H. Rachesky, M.D., Carl C. Icahn, Capital Research Global Investors
and Kornitzer Capital Management, Inc. and their respective affiliates, beneficially owned 19.6%,
18.7%, 10.4% and 7.9%, respectively, of our outstanding common shares. Under certain circumstances,
including the acquisition of ownership or control by a person or group in excess of 50% of our
common shares, the noteholders of our unsecured convertible senior subordinated notes and the
Senior Notes may require us to repurchase all or a portion of such notes upon a change in control
and the noteholders of our unsecured convertible senior subordinated notes may be entitled to
receive a make whole premium based on the price of our common shares on the change in control date.
We may not be able to repurchase these notes upon a change in control because we may not have
sufficient funds. Further, we may be contractually restricted under the terms of our senior
revolving credit facility and the Film Credit Facility from repurchasing all of the notes tendered
by holders upon a change in control. Our failure to repurchase the notes upon a change in control
would cause a default under the indentures governing the Senior Notes and our unsecured convertible
senior subordinated notes and a cross-default under the senior revolving credit facility and the
Film Credit Facility.
Our senior revolving credit facility and the Film Credit Facility also provide that a change
in control, which includes a person or group acquiring ownership or control in excess of 20% of our
outstanding common shares, will be an event of default that permits lenders to accelerate the
maturity of borrowings thereunder and to enforce security interests in the collateral securing such
debt, thereby limiting our ability to raise cash to purchase our outstanding notes.
Restrictive covenants may adversely affect our operations.
Our senior revolving credit facility, the Film Credit Facility and the indenture governing the
Senior Notes contain various covenants that, subject to certain exceptions, limit our ability to,
among other things:
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incur or assume additional debt or provide guarantees in respect of obligations of other
persons; |
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issue redeemable stock and preferred stock; |
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pay dividends or distributions or redeem or repurchase capital stock; |
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prepay, redeem or repurchase debt that is junior in right of payment to the Senior Notes; |
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make loans, investments and capital expenditures; |
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incur liens; |
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engage in sale/leaseback transactions; |
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restrict dividends, loans or asset transfers from our subsidiaries; |
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sell or otherwise dispose of assets, including capital stock of subsidiaries; |
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consolidate or merge with or into, or sell substantially all of our assets to, another
person; |
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enter into transactions with affiliates; and |
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enter into new lines of business. |
These covenants may prevent us from raising additional financing, competing effectively or
taking advantage of new business opportunities.
In addition, the restrictive covenants in our senior revolving credit facility require us to
maintain specified financial ratios and
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satisfy other financial condition tests. Our ability to comply with these covenants or meet
those financial ratios and tests can be affected by events beyond our control (such as a change in
control event), and we cannot assure you that we will meet them.
Upon the occurrence of an event of default under our senior revolving credit facility and the
Film Credit Facility, lenders could elect to declare all amounts outstanding under our senior
revolving credit facility and the Film Credit Facility to be immediately due and payable and
terminate all commitments to extend further credit. Further, the lenders under our senior revolving
credit facility and the Film Credit Facility could proceed against the collateral granted to them
to secure that indebtedness, which represents a significant portion of our assets. If the lenders
under our senior revolving credit facility and the Film Credit Facility accelerate the repayment of
borrowings, we cannot assure you that we will have sufficient cash flows or assets to repay our
senior revolving credit facility, the Film Credit Facility and our indebtedness or borrow
sufficient funds to refinance such indebtedness. Even if we are able to obtain new financing, it
may not be on commercially reasonable terms, or terms that are acceptable to us.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt
service obligations to increase significantly.
Certain of our borrowings, primarily borrowings under our senior revolving credit facility and
the Film Credit Facility, are, and are expected to continue to be, at variable rates of interest
and expose us to interest rate risk. If interest rates increase, our debt service obligations on
the variable rate indebtedness would increase even though the amount borrowed remained the same,
and our net income would decrease. The applicable margin with respect to loans under the senior
revolving credit facility is a percentage per annum equal to 2.50% plus an adjusted rate based on
LIBOR. The applicable margin with respect to loans under the Film Credit Facility is a percentage
per annum equal to 3.25% over the LIBO rate (as defined in the credit agreement). Assuming all
revolving loans are fully drawn, based on the applicable LIBOR in effect as of March 31, 2010, each
quarter point change in interest rates would result in a $0.9 million change in annual interest
expense on our senior revolving credit facility and $0.3 million change in annual interest expense
on the Film Credit Facility. In the future, we may enter into interest rate swaps, involving the
exchange of floating for fixed rate interest payments, to reduce interest rate volatility.
Our revenues and results of operations may fluctuate significantly.
Revenues and results of operations are difficult to predict and depend on a variety of
factors. Our revenues and results of operations depend significantly upon the commercial success of
the motion pictures and television programming that we distribute, which cannot be predicted with
certainty. Accordingly, our revenues and results of operations may fluctuate significantly from
period to period, and the results of any one period may not be indicative of the results for any
future periods. Furthermore, largely as a result of these predictive difficulties, we may not be
able to achieve our projected earnings. We have, in the past, revised our projected earnings
downward. Future revisions to projected earnings could cause investors to lose confidence in us,
which in turn could materially and adversely affect our business, our financial condition and the
market value of our securities.
In addition, our revenues and results of operations may be impacted by the success of
critically acclaimed and award winning films, including Academy Award winners and nominees. We
cannot assure you that we will manage the production, acquisition and distribution of future motion
pictures (including any films in the Saw or Tyler Perry franchises) as successfully as we have done
with these recent critically acclaimed, award winning and/or commercially popular films or that we
will produce or acquire motion pictures that will receive similar critical acclaim or perform as
well commercially. Any inability to achieve such commercial success could have a material adverse
effect on our business, results of operations and financial condition.
We have few output agreements with cable and broadcast channels. In February 2009, we acquired
certain assets related to the business of TV Guide. Also, certain broadcast channels exhibit our
films, but they license such rights on a film-by-film, rather than an output basis. Moreover, in
April 2008, we formed a joint venture with Viacom, Paramount, and MGM to create a premium
television channel and video-on-demand service named EPIX, for our theatrical releases after
January 1, 2009. EPIX, which launched in October 2009, provides us with an additional platform to
distribute our library of motion picture titles and television episodes and programs. To date, EPIX
has concluded carriage agreements with six distributors, including with Verizon FiOS, Cox
Communications, Charter Communications, Inc., Mediacom Communications, the National Cable and
Telecommunications Cooperative, and most recently, DISH Network L.L.C. We cannot assure you,
however, that we will be able to secure other output agreements on acceptable terms, if at all.
Additionally, we cannot assure you that the joint venture will enter into additional carriage
agreements or that it will be successful. We had an agreement with Showtime Networks to exhibit our
films, but that agreement expired in December 2008 and does not cover films released theatrically
after 2008. Without multiple output agreements that typically contain guaranteed minimum payments,
our revenues may be subject to greater volatility, which could have a material adverse effect on
our business, results of operations and financial condition.
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We do not have long-term arrangements with many of our production partners. We typically do
not enter into long-term distribution contracts with the creative producers of the films we
produce, acquire or distribute. For example, we have a first-look arrangement with Tyler Perry
that gives us a right to negotiate for the purchase of distribution rights to films if certain
criteria are met. However, even if we negotiate for such purchase, this does not guarantee that we
will obtain such distribution rights. Further, we have an agreement with the creators of the Saw
franchise that gives us the right to compel production through Saw IX under certain contractual
conditions and, thereafter, the right to opt in under certain economic terms for future Saw films
if our partner elects to produce such pictures. Moreover, we generally have certain derivative
rights that provide us with distribution rights to, for example, prequels, sequels and remakes of
certain films we produce, acquire or distribute. However, there is no guarantee that we will
produce, acquire or distribute future films by any creative producer, and a failure to do so could
adversely affect our business, results of operations and financial condition.
We rely on a few major retailers and distributors for a material portion of our business and
the loss of any of those retailers or distributors could reduce our revenues and operating results.
Wal-Mart represented approximately 12% of our revenues in fiscal 2010. In addition, a small number
of other retailers and distributors account for a significant percentage of our revenues. We do not
have long-term agreements with retailers. We cannot assure you that we will continue to maintain
favorable relationships with our retailers and distributors or that they will not be adversely
affected by economic conditions. If any of these retailers or distributors reduces or cancels a
significant order, it could have a material adverse effect on our business, results of operations
and financial condition.
Our revenues and results of operations are vulnerable to currency fluctuations. We report our
revenues and results of operations in United States dollars, but a significant portion of our
revenues is earned outside of the United States. Our principal currency exposure is between
Canadian dollars, pounds sterling and United States dollars. We cannot accurately predict the
impact of future exchange rate fluctuations on revenues and operating margins, and fluctuations
could have a material adverse effect on our business, results of operations and financial
condition. From time to time, we may experience currency exposure on distribution and production
revenues and expenses from foreign countries, which could have a material adverse effect on our
business, results of operations and financial condition.
Accounting practices used in our industry may accentuate fluctuations in operating results. In
addition to the cyclical nature of the entertainment industry, our accounting practices (which are
standard for the industry) may accentuate fluctuations in our operating results. In accordance with
United States generally accepted accounting principles and industry practice, we amortize film and
television programming costs using the individual-film-forecast method. Under this accounting
method, we amortize film and television programming costs for each film or television program based
on the following ratio:
Revenue earned by title in the current period
Estimated total future revenues by title as of the beginning of the year
We regularly review, and revise when necessary, our total revenue estimates on a
title-by-title basis. This review may result in a change in the rate of amortization and/or a
write-down of the film or television asset to its estimated fair value. Results of operations in
future years depend upon our amortization of our film and television costs. Periodic adjustments in
amortization rates may significantly affect these results. In addition, we are required to expense
film advertising costs as incurred, but are also required to recognize the revenue from any motion
picture or television program over the entire revenue stream expected to be generated by the
individual picture or television program. Accordingly, our revenues and results of operations may
fluctuate significantly from period to period, and the results of any one period may not be
indicative of the results for any future period.
Failure to manage future growth may adversely affect our business.
We are subject to risks associated with possible acquisitions, business combinations, or joint
ventures. From time to time, we engage in discussions and activities with respect to possible
acquisitions, business combinations, or joint ventures intended to complement or expand our
business. For instance, in February 2009, we acquired TV Guide Network and related assets,
including TV Guide On Demand and TV Guide Online. Additionally, in April 2008, we formed a joint
venture with Viacom, Paramount and MGM to create a premium television channel and video-on-demand
service named EPIX. We may not realize the anticipated benefit from any of the transactions we
pursue. Regardless of whether we consummate any such transaction, the negotiation of a potential
transaction (including associated litigation and proxy contests), as well as the integration of the
acquired business, could require us to incur significant costs and cause diversion of managements
time and resources. Any such transaction could also result in impairment of goodwill and other
intangibles, development write-offs and other related expenses. Any of the foregoing could have a
material
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adverse effect on our business, results of operations and financial condition.
We may be unable to integrate any business that we acquire or have acquired or with which we
combine or have combined. Integrating any business that we acquire or have acquired or with which
we combine or have combined is distracting to our management and disruptive to our business and may
result in significant costs to us. We could face challenges in consolidating functions and
integrating procedures, information technology and accounting systems, personnel and operations in
a timely and efficient manner. If any such integration is unsuccessful, or if the integration takes
longer than anticipated, there could be a material adverse effect on our business, results of
operations and financial condition. We may have difficulty managing the combined entity in the
short term if we experience a significant loss of management personnel during the transition period
after the significant acquisition.
Claims against us relating to any acquisition or business combination may necessitate our
seeking claims against the seller for which the seller may not indemnify us or that may exceed the
sellers indemnification obligations. There may be liabilities assumed in any acquisition or
business combination that we did not discover or that we underestimated in the course of performing
our due diligence investigation. Although a seller generally will have indemnification obligations
to us under an acquisition or merger agreement, these obligations usually will be subject to
financial limitations, such as general deductibles and maximum recovery amounts, as well as time
limitations. We cannot assure you that our right to indemnification from any seller will be
enforceable, collectible or sufficient in amount, scope or duration to fully offset the amount of
any undiscovered or underestimated liabilities that we may incur. Any such liabilities,
individually or in the aggregate, could have a material adverse effect on our business, results of
operations and financial condition.
We may not be able to obtain additional funding to meet our requirements. Our ability to grow
through acquisitions, business combinations and joint ventures, to maintain and expand our
development, production and distribution of motion pictures and television programs and to fund our
operating expenses depends upon our ability to obtain funds through equity financing, debt
financing (including credit facilities) or the sale or syndication of some or all of our interests
in certain projects or other assets. If we do not have access to such financing arrangements, and
if other funding does not become available on terms acceptable to us, there could be a material
adverse effect on our business, results of operations and financial condition.
A significant portion of our filmed and television content library revenues comes from a small
number of titles.
We depend on a limited number of titles in any given fiscal quarter for the majority of the
revenues generated by our filmed and television content library. In addition, many of the titles in
our library are not presently distributed and generate substantially no revenue. If we cannot
acquire new product and the rights to popular titles through production, distribution agreements,
acquisitions, mergers, joint ventures or other strategic alliances, it could have a material
adverse effect on our business, results of operations and financial condition.
We are limited in our ability to exploit a portion of our filmed and television content library.
Our rights to the titles in our filmed and television content library vary; in some cases, we
have only the right to distribute titles in certain media and territories for a limited term. We
cannot assure you that we will be able to renew expiring rights on acceptable terms and that any
failure to renew titles generating a significant portion of our revenue would not have a material
adverse effect on our business, results of operations or financial condition.
Our success depends on external factors in the motion picture and television industry.
Our success depends on the commercial success of motion pictures and television programs,
which is unpredictable. Operating in the motion picture and television industry involves a
substantial degree of risk. Each motion picture and television program is an individual artistic
work, and inherently unpredictable audience reactions primarily determine commercial success.
Generally, the popularity of our motion pictures or programs depends on many factors, including the
critical acclaim they receive, the format of their initial release, for example, theatrical or
direct-to-video, the actors and other key talent, their genre and their specific subject matter.
The commercial success of our motion pictures or television programs also depends upon the quality
and acceptance of motion pictures or programs that our competitors release into the marketplace at
or near the same time, critical reviews, the availability of alternative forms of entertainment and
leisure activities, general economic conditions and other tangible and intangible factors, many of
which we do not control and all of which may change. We cannot predict the future effects of these
factors with certainty, any of which factors could have a material adverse effect on our business,
results of operations and financial condition.
In addition, because a motion pictures or television programs performance in ancillary
markets, such as home video and pay and free television, is often directly related to its box
office performance or television ratings, poor box office results or poor television
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ratings may negatively affect future revenue streams. Our success will depend on the
experience and judgment of our management to select and develop new investment and production
opportunities. We cannot make assurances that our motion pictures and television programs will
obtain favorable reviews or ratings, that our motion pictures will perform well at the box office
or in ancillary markets or that broadcasters will license the rights to broadcast any of our
television programs in development or renew licenses to broadcast programs in our library. The
failure to achieve any of the foregoing could have a material adverse effect on our business,
results of operations and financial condition.
Changes and the effects of the continued global economic crisis or regional economic
conditions in the United States could adversely affect the profitability of our business. The
recent global economic crisis has caused a general tightening in the credit markets, lower levels
of liquidity, increases in the rates of default and bankruptcy, an unprecedented level of
intervention from the United States federal government and other foreign governments, decreased
consumer confidence, overall slower economic activity and extreme volatility in credit, equity and
fixed income markets. While the ultimate outcome of these events cannot be predicted, a decrease in
economic activity in the United States or in other regions of the world in which we do business
could adversely affect demand for our films, thus reducing our revenue and earnings. A decline in
economic conditions could reduce performance of our theatrical, television and home entertainment
releases. In addition, an increase in price levels generally, could result in a shift in consumer
demand away from the entertainment we offer, which could also adversely affect our revenues and, at
the same time, increase our costs. Moreover, financial institution failures may cause us to incur
increased expenses or make it more difficult either to utilize our existing debt capacity or
otherwise obtain financing for our operations, investing activities (including the financing of any
future acquisitions), or financing activities. We cannot predict the timing or the duration of this
or any other downturn in the economy and we are not immune to the effects of general worldwide
economic conditions.
Licensed distributors failure to promote our programs may adversely affect our business.
Licensed distributors decisions regarding the timing of release and promotional support of our
motion pictures, television programs and related products are important in determining the success
of these pictures, programs and products. We do not control the timing and manner in which our
licensed distributors distribute our motion pictures or television programs. Any decision by those
distributors not to distribute or promote one of our motion pictures, television programs or
related products or to promote our competitors motion pictures, television programs or related
products to a greater extent than they promote ours could have a material adverse effect on our
business, results of operations and financial condition.
We could be adversely affected by strikes or other union job actions. We are directly or
indirectly dependent upon highly specialized union members who are essential to the production of
motion pictures and television programs. A strike by, or a lockout of, one or more of the unions
that provide personnel essential to the production of motion pictures or television programs could
delay or halt our ongoing production activities. Such a halt or delay, depending on the length of
time, could cause a delay or interruption in our release of new motion pictures and television
programs, which could have a material adverse effect on our business, results of operations and
financial condition.
We face substantial competition in all aspects of our business.
We are smaller and less diversified than many of our competitors. As an independent
distributor and producer, we constantly compete with major United States and international studios.
Most of the major United States studios are part of large diversified corporate groups with a
variety of other operations, including television networks and cable channels that can provide both
the means of distributing their products and stable sources of earnings that may allow them better
to offset fluctuations in the financial performance of their motion picture and television
operations. In addition, the major studios have more resources with which to compete for ideas,
storylines and scripts created by third parties as well as for actors, directors and other
personnel required for production. The resources of the major studios may also give them an
advantage in acquiring other businesses or assets, including film libraries, that we might also be
interested in acquiring. Additionally, TV Guide Network competes with general entertainment
channels for television viewership and carriage on cable and satellite systems. TV Guide Online
competes for visitors with general entertainment websites and online search providers, including
sites that provide television listings, television-specific information and/or that enable users to
locate and view video on the internet. Moreover, each of TV Guide Network and TV Guide Online
competes for marketers advertising spend with other media outlets. Our inability to compete
successfully could have a material adverse effect on our business, results of operations and
financial condition.
The motion picture industry is highly competitive and at times may create an oversupply of
motion pictures in the market. The number of motion pictures released by our competitors,
particularly the major studios, may create an oversupply of product in the market, reduce our share
of box office receipts and make it more difficult for our films to succeed commercially. Oversupply
may become most pronounced during peak release times, such as school holidays and national
holidays, when theater attendance is expected to be highest. For this reason, and because of our
more limited production and advertising budgets, we typically do not
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release our films during peak release times, which may also reduce our potential revenues for
a particular release. Moreover, we cannot guarantee that we can release all of our films when they
are otherwise scheduled. In addition to production or other delays that might cause us to alter our
release schedule, a change in the schedule of a major studio may force us to alter the release date
of a film because we cannot always compete with a major studios larger promotion campaign. Any
such change could adversely impact a films financial performance. In addition, if we cannot change
our schedule after such a change by a major studio because we are too close to the release date,
the major studios release and its typically larger promotion budget may adversely impact the
financial performance of our film. The foregoing could have a material adverse effect on our
business, results of operations and financial condition.
The limited supply of motion picture screens compounds this product oversupply problem.
Currently, a substantial majority of the motion picture screens in the United States typically are
committed at any one time to only 10 to 15 films distributed nationally by major studio
distributors. In addition, as a result of changes in the theatrical exhibition industry, including
reorganizations and consolidations and the fact that major studio releases occupy more screens, the
number of screens available to us when we want to release a picture may decrease. If the number of
motion picture screens decreases, box office receipts, and the correlating future revenue streams,
such as from home video and pay and free television, of our motion pictures may also decrease,
which could have a material adverse effect on our business, results of operations and financial
condition.
We must successfully respond to rapid technological changes and alternative forms of delivery or
storage to remain competitive.
The entertainment industry in general and the motion picture and television industries in
particular continue to undergo significant technological developments. Advances in technologies or
alternative methods of product delivery or storage or certain changes in consumer behavior driven
by these or other technologies and methods of delivery and storage could have a negative effect on
our business. Examples of such advances in technologies include video-on-demand, new video formats,
including release of titles in high-definition Blu-ray format, and downloading and streaming from
the internet. An increase in video-on-demand could decrease home video rentals. In addition,
technologies that enable users to fast-forward or skip advertisements, such as digital video
recorders, may cause changes in consumer behavior that could affect the attractiveness of our
products to advertisers, and could therefore adversely affect our revenues. Similarly, further
increases in the use of portable digital devices that allow users to view content of their own
choosing while avoiding traditional commercial advertisements could adversely affect our revenues.
Other larger entertainment distribution companies will have larger budgets to exploit these growing
trends. We cannot predict how we will financially participate in the exploitation of our motion
pictures and television programs through these emerging technologies or whether we have the right
to do so for certain of our library titles. If we cannot successfully exploit these and other
emerging technologies, it could have a material adverse effect on our business, results of
operations and financial condition.
If we are unable to increase our advertising revenue for our TV Guide Network business, we may
be unable to achieve improved results.
Revenues at TV Guide Network consist of affiliate fees and advertising revenues; however,
since the majority of its affiliates are contracted under long-term agreements with only
cost-of-living increases available under certain contracts, we do not expect significant growth in
affiliate revenues in the future. Accordingly, the results at TV Guide Network are highly dependent
upon advertising revenue. Advertising revenue at TV Guide Network primarily comes from commercials
sold during programming hours (11:00 AM to 2:00 AM) and infomercials broadcast between 2:00 AM and
11:00 AM. Advertising sales are primarily dependent on the extent of distribution of the network,
viewership ratings, such as those published by Nielsen Media Research, and the strength of the
market for advertising. Digital cable and satellite subscribers generally use an interactive
program guide rather than TV Guide Network for listing information. As such, the viewership of TV
Guide Network in digital cable and satellite homes has been minimal to date. Also, certain
long-term distribution agreements with MSOs for TV Guide Network allow for migration to digital
carriage. If the MSOs elect to migrate TV Guide Network to digital carriage, it will experience a
reduction in subscribers, resulting in a decrease in affiliate fee revenue and potentially in
advertising revenue, due both to the smaller pool of potential viewers and the fact that TV Guide
Networks viewers primarily come from analog cable homes where scroll data is still used for
guidance. TV Guide Network has been investing in new programming and marketing initiatives with an
expectation that these additional investments will result in increased viewership in both cable and
satellite homes in the future. However, if viewership ratings do not improve sufficiently or TV
Guide Network is unable to maintain broad distribution, advertising revenue will not increase and
TV Guide Networks increased programming and marketing costs could have a material adverse effect
on the results of its operations. Additionally, while the recent programming and marketing
initiatives are designed in part to position TV Guide Network as an entertainment destination
independent of listings data, that such initiatives ultimately will result in increased viewership
ratings and corresponding advertising revenues, or that any initial increase in ratings will be
sustainable over time cannot be assured.
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Non-renewals of our affiliation agreements, or renewals with less advantageous terms could
cause our revenue to decline.
Because TV Guide Network is licensed to distributors such as cable and satellite operators
which in turn distribute it to consumers, it is dependent upon the continuation of affiliation
agreements with these operators. These agreements generally provide for the level of carriage that
TV Guide Network will receive, such as channel placement and programming package inclusion (widely
distributed, broader programming packages compared to lesser distributed, specialized programming
packages), and for payment of a license fee to TV Guide Network based on the numbers of subscribers
that receive the network. The term of each TV Guide Network affiliation agreement varies from
distributor to distributor, and renewal of these affiliation agreements or renewal on terms that
are as favorable as those in effect today cannot be assured. A reduction in the per subscriber
license fees that TV Guide Network receives or the number of subscribers for which fees are paid,
including as a result of a loss or reduction in carriage of the network, could adversely affect its
distribution revenue. Such loss or reduction in carriage also could decrease the potential audience
for TV Guide Network thereby adversely affecting its advertising revenue.
If third-party suppliers of TV Guide Network fail to provide it with network infrastructure
services on a timely basis, its costs could increase and its growth could be hindered.
TV Guide Network currently relies on third parties to supply key network infrastructure
services including uplink, playback, transmission and satellite services, which are available only
from limited sources. TV Guide Network has occasionally experienced delays and other problems in
receiving communications equipment, services and facilities and, in the future, may be unable to
obtain such services, equipment or facilities on the scale and within the required time frames on
acceptable terms. If it is unable to obtain such acceptable terms or if it experiences a delay in
delivery of such services, it may be forced to incur significant unanticipated expenses to secure
alternative third party suppliers or adjust its operations, which could hinder its growth and
reduce its revenue.
Digital recapture may adversely affect TV Guide Network business and operating results.
Cable television is transmitted on a limited frequency spectrum that must be allocated between
multiple analog and digital channels. As digital penetration increases, cable MSOs are reclaiming
analog bandwidth to launch more high-definition channels and other services, and are likely to
continue this recapture until they rebuild their plants to increase bandwidth or there is stability
in the mix of analog and digital carriage. Digital recapture will result in a significant decline
in the distribution of the analog TV Guide Network, which could negatively impact its operating
results.
Certain terms of TV Guide Networks distribution agreements could be interpreted in a manner
that could adversely affect affiliate revenue payable under those agreements.
Some of TV Guide Networks license agreements contain most favored nations clauses. These
clauses provide that if TV Guide Network enters into an agreement with another licensee on more
favorable terms, it must offer some or all of those terms to the existing licensees. TV Guide
Network has entered into a number of license agreements with terms that differ in some respects
from those contained in other agreements. While we believe that TV Guide Network has appropriately
complied with the most favored nations terms included in its license agreements, these contracts
are complex and other parties could reach a different conclusion that, if deemed correct, could
have an adverse effect on TV Guide Networks financial condition or results of operations.
Government regulations may adversely affect TV Guide Network business.
Programming services like TV Guide Network, and their distributors, including cable operators,
satellite operators and internet companies (such as TV Guide Online), are highly regulated by
United States federal laws and regulations issued and administered by various federal agencies,
including the FCC, as well as by state and local governments. The United States Congress, the FCC
and the courts currently have under consideration, and may in the future adopt, new laws,
regulations and policies regarding a wide variety of matters that could, directly or indirectly,
affect operations of TV Guide Network and TVGuide.com or modify the terms under which we offer our
services and operate. For example, any changes to the laws and regulations that govern the services
or signals that are carried by cable operators or our other distributors may result in less
bandwidth for programming services, such as our network, which could adversely affect its revenue.
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Interruption or failure of communications and transmission systems and mechanisms could impair
TV Guide Networks ability to effectively provide its services, which could affect its revenues.
The provision of certain TV Guide Network services depends on the continuing operation of
communications and transmission systems and mechanisms, including satellite, cable, wire and over
the air broadcast. These communication and transmission systems and mechanisms are subject to
significant risks, such as telecommunications and satellite failures, natural disasters,
terrorists attacks, power loss, computer viruses and similar events, and any damage to or failure
of these systems and mechanisms could result in an interruption of the provision of the services of
TV Guide Network. Interruptions in distribution of the network could adversely affect its revenues,
and its brand could be damaged if people believe the services are unreliable. While TV Guide
Network maintains and updates its disaster recovery plan, such plan cannot account for all
eventualities since the communications and transmission systems and mechanisms upon which it
depends are not fully redundant.
Continued consolidation of the cable and satellite broadcasting industry could adversely
affect existing agreements; the impact of these changes is not clear.
TV Guide Network has entered into agreements with a large number of cable MSOs and satellite
providers for the licensing or distribution of its services. If consolidation of the cable and
satellite broadcasting industry continues, some of these agreements may be affected by mergers,
acquisitions or system swaps and measures that we have taken to protect TV Guide Network against
any negative consequences resulting from those transactions will be effected. Also, a service
provider that files a bankruptcy petition or otherwise restructures or liquidates could avoid its
future obligations and/or discharge its past payment obligations under its TV Guide Network
agreement in certain circumstances. Therefore, any such bankruptcy, restructuring or liquidation
events could have a material adverse effect on the amount of revenue TV Guide Network receives
under such agreement.
Limitations on control of joint ventures may adversely impact our operations.
We hold our interests in certain businesses as a joint venture or in partnership with
non-affiliated third parties. As a result of such arrangements, we may be unable to control the
operations, strategies and financial decisions of such joint venture or partnership entities which
could in turn result in limitations on our ability to implement strategies that we may favor. In
addition, our ability to transfer our interests in businesses owned with third parties is limited
under certain joint venture, partnership or similar agreements.
We face risks from doing business internationally.
We distribute motion picture and television productions outside the United States, in the
United Kingdom and Ireland through Lionsgate UK, and through third party licensees elsewhere, and
derive revenues from these sources. As a result, our business is subject to certain risks inherent
in international business, many of which are beyond our control. These risks include:
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laws and policies affecting trade, investment and taxes, including laws and policies
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changes in local regulatory requirements, including restrictions on content; |
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differing cultural tastes and attitudes; |
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differing degrees of protection for intellectual property; |
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financial instability and increased market concentration of buyers in foreign television
markets, including in European pay television markets; |
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the instability of foreign economies and governments; |
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fluctuating foreign exchange rates; |
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the spread of communicable diseases in such jurisdictions, which may impact business in
such jurisdictions; and |
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war and acts of terrorism. |
Events or developments related to these and other risks associated with international trade
could adversely affect our revenues from non-United States sources, which could have a material
adverse effect on our business, financial condition and results of operations.
Protecting and defending against intellectual property claims may have a material adverse effect
on our business.
Our ability to compete depends, in part, upon successful protection of our intellectual
property. We do not have the financial resources to protect our rights to the same extent as major
studios. We attempt to protect proprietary and intellectual property rights to our productions
through available copyright and trademark laws and licensing and distribution arrangements with
reputable international companies in specific territories and media for limited durations. Despite
these precautions, existing copyright and trademark laws afford only limited practical protection
in certain countries. We also distribute our products in other countries in which there is no
copyright or trademark protection. As a result, it may be possible for unauthorized third parties
to copy and distribute our productions or certain portions or applications of our intended
productions, which could have a material adverse effect on our
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business, results of operations and financial condition.
Litigation may also be necessary in the future to enforce our intellectual property rights, to
protect our trade secrets, or to determine the validity and scope of the proprietary rights of
others or to defend against claims of infringement or invalidity. Any such litigation could result
in substantial costs and the diversion of resources and could have a material adverse effect on our
business, results of operations and financial condition. We cannot assure you that infringement or
invalidity claims will not materially adversely affect our business, results of operations and
financial condition. Regardless of the validity or the success of the assertion of these claims, we
could incur significant costs and diversion of resources in enforcing our intellectual property
rights or in defending against such claims, which could have a material adverse effect on our
business, results of operations and financial condition.
Others may assert intellectual property infringement claims against us.
One of the risks of the film production business is the possibility that others may claim that
our productions and production techniques misappropriate or infringe the intellectual property
rights of third parties with respect to their previously developed films, stories, characters,
other entertainment or intellectual property. We are likely to receive in the future claims of
infringement or misappropriation of other parties proprietary rights. Any such assertions or
claims may materially adversely affect our business, financial condition or results of operations.
Irrespective of the validity or the successful assertion of such claims, we could incur significant
costs and diversion of resources in defending against them, which could have a material adverse
effect on our business, financial condition or results of operations. If any claims or actions are
asserted against us, we may seek to settle such claim by obtaining a license from the plaintiff
covering the disputed intellectual property rights. We cannot provide any assurances, however, that
under such circumstances a license, or any other form of settlement, would be available on
reasonable terms or at all.
Our business involves risks of liability claims for media content, which could adversely affect
our business, results of operations and financial condition.
As a distributor of media content, we may face potential liability for:
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invasion of privacy; |
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negligence; |
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copyright or trademark infringement (as discussed above); and |
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other claims based on the nature and content of the materials distributed. |
These types of claims have been brought, sometimes successfully, against producers and
distributors of media content. Any imposition of liability that is not covered by insurance or is
in excess of insurance coverage could have a material adverse effect on our business, results of
operations and financial condition.
Piracy of motion pictures, including digital and internet piracy, may reduce the gross receipts
from the exploitation of our films.
Motion picture piracy is extensive in many parts of the world, including South America, Asia,
and former Eastern bloc countries, and is made easier by technological advances and the conversion
of motion pictures into digital formats. This trend facilitates the creation, transmission and
sharing of high quality unauthorized copies of motion pictures in theatrical release on DVDs,
Blu-ray discs, from pay-per-view through set top boxes and other devices and through unlicensed
broadcasts on free television and the internet. The proliferation of unauthorized copies of these
products has had and will likely continue to have an adverse effect on our business, because these
products reduce the revenue we receive from our products. Additionally, in order to contain this
problem, we may have to implement elaborate and costly security and anti-piracy measures, which
could result in significant expenses and losses of revenue. We cannot assure you that even the
highest levels of security and anti-piracy measures will prevent piracy.
In particular, unauthorized copying and piracy are prevalent in countries outside of the
United States, Canada and Western Europe, whose legal systems may make it difficult for us to
enforce our intellectual property rights. While the United States government has publicly
considered implementing trade sanctions against specific countries that, in its opinion, do not
make appropriate efforts to prevent copyright infringements of United States produced motion
pictures, there can be no assurance that any such sanctions will be enacted or, if enacted, will be
effective. In addition, if enacted, such sanctions could impact the amount of revenue that we
realize from the international exploitation of motion pictures. If no embargoes or sanctions are
enacted, or if other measures are not taken, we may lose revenue as a result of motion picture
piracy.
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An investment by non-Canadians in our business is potentially reviewable under the ICA, which
could adversely affect our results.
The Investment Canada Act (Canada) or ICA is administered by the Minister of Industry of
Canada and, in the case of investments in a Canadian business that is a cultural business, by the
Minister of Canadian Heritage (both referred to herein as the Minister). A cultural business is
a business activity relating to Canadas cultural heritage or national identity, and includes a
business engaged in the production, distribution, sale or exhibition of film or video products.
The ICA contains rules, the application of which determines whether an entity (as the term is
defined in the ICA) is Canadian-controlled and whether it carries on a Canadian business, including
a Canadian business that is a cultural business. We may or may not be operating a Canadian business
that is a cultural business for the purposes of the ICA. Under the ICA, the Minister has discretion
to determine, after considering any information or evidence submitted by the entity or otherwise
made available to the Minister or to the Director of Investments appointed under the ICA (the
Director of Investments), that an investment by a non-Canadian in a Canadian business that is a
cultural business may constitute an acquisition of control by that non-Canadian, notwithstanding
the provisions in the ICA that state that certain investments do not or may not constitute an
acquisition of control that would require notification or review under the ICA.
If the Minister exercises such discretion and deems an investment by a non-Canadian in a
cultural business to be an acquisition of control, the investment is potentially subject to
notification and/or review. If the investment is subject to review, the Minister must be satisfied
that the investment is likely to be of net benefit to Canada. Such a determination is often
accompanied by requests that the non-Canadian provide undertakings supportive of Canadian cultural
policy. These undertakings may, in some circumstances, include a request for financial support of
certain initiatives. The determination by the Minister of whether a proposed investment is of net
benefit to Canada also includes consideration of sector specific policies of the Canadian federal
government, some of which restrict or prohibit investments by non-Canadians in certain types of
Canadian cultural businesses, including certain types of businesses in the Canadian film industry.
An acquisition of control may also arise under the ICA if a non-Canadian acquires all or
substantially all of the assets used in carrying on a Canadian business, although there is an
exemption from the ICA if the acquisition of control is in connection with the realization of
security granted for a loan or other financial assistance. However, a subsequent disposition
following such realization of security may be subject to the ICA.
Although we believe we are currently a Canadian-controlled entity under the ICA, there can be
no assurance that the Minister will not determine that we are not a Canadian-controlled entity
under the ICA, or that events beyond our control will not result in our ceasing to be
Canadian-controlled pursuant to the ICA. There are currently no transfer restrictions on our common
shares as a class, and we accordingly may not be able to prevent an acquisition of control by
non-Canadians. In addition, the ICA provides the Minister with discretion to make a determination
that an entity engaged in a cultural business is not a Canadian-controlled entity, if the Minister
is satisfied, after considering any information or evidence submitted by the entity or otherwise
made available to the Minister or the Director of Investments, that the entity is controlled in
fact by one or more non-Canadians. The assessment of control in fact may take into account many
considerations, including the extent of non-Canadians financing and rights or conditions
associated with such financing. If we cease to be Canadian-controlled under the ICA, we and the
entities that we consolidate, may no longer qualify for or be entitled to access refundable tax
credits and other Canadian government and private motion picture industry incentives that are
restricted to Canadian-controlled corporations. Such a change in status could also cause us or the
entities that we consolidate to be required to repay certain tax credits and other government
incentives previously received and default on certain distribution obligations, thereby affecting
our financial results since we are required to consolidate the results of operations in our
financial statements.
We believe that we may be a controlled foreign corporation or CFC for U.S. federal income
tax purposes. U.S. persons owning or deemed to own 10 percent or more of the shares of a CFC (by
vote) (U.S. Shareholders) are subject to certain U.S. income tax risks associated with the CFC
rules under the U.S. Internal Revenue Code of 1986, as amended.
In general, a non-U.S. corporation, such as ours, is a CFC for U.S. federal income tax
purposes if U.S. Shareholders together own or are deemed to own more than 50 percent of its shares
(by vote or value). Under the CFC rules, U.S. persons that are U.S. Shareholders on the last day
of a taxable year on which a non-U.S. corporation is a CFC may be required to include in gross
income for U.S. federal income tax purposes their pro rata share of the corporations subpart F
income (and, in some cases, the subpart F income of CFC subsidiaries of the corporation), as
well as their pro rata share of the corporations (and, in some cases, the corporations CFC
subsidiaries) earnings invested in U.S. property. Subpart F income includes, generally, passive
income and certain income from related-party sales and service transactions. In addition, gain on
the sale of shares of a CFC or a former CFC recognized by U.S. Shareholders is generally included
in their gross income as a dividend to the extent of their proportionate share of
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the CFCs (and certain of its subsidiaries) earnings and profits accumulated during such U.S.
Shareholders holding period of the non-U.S. corporations shares while it was a CFC. U.S.
Shareholders may also be subject to additional U.S. federal income tax reporting requirements. We urge our shareholders, however, to consult with their own tax
advisers as to the consequences to them (or to their direct or indirect U.S. owners) of our status
as a CFC in any taxable year.
Our success depends on certain key employees.
Our success depends to a significant extent on the performance of a number of senior
management personnel and other key employees, including production and creative personnel. We do
not currently have significant key person life insurance policies for any of our employees. We
have entered into employment agreements with our top executive officers and production executives.
However, although it is standard in the motion picture industry to rely on employment agreements as
a method of retaining the services of key employees, these agreements cannot assure us of the
continued services of such employees. In addition, competition for the limited number of business,
production and creative personnel necessary to create and distribute our entertainment content is
intense and may grow in the future. Our inability to retain or successfully replace where necessary
members of our senior management and other key employees could have a material adverse effect on
our business, results of operations and financial condition.
To be successful, we need to attract and retain qualified personnel.
Our success continues to depend to a significant extent on our ability to identify, attract,
hire, train and retain qualified professional, creative, technical and managerial personnel.
Competition for the caliber of talent required to produce our motion pictures and television
programs continues to increase. We cannot assure you that we will be successful in identifying,
attracting, hiring, training and retaining such personnel in the future. If we were unable to hire,
assimilate and retain qualified personnel in the future, such inability would have a material
adverse effect on our business, results of operations and financial condition.
If our stock price fluctuates, you could lose a significant part of your investment.
The market price of our common shares may be influenced by many factors, some of which are
beyond our control, including changes in financial estimates by analysts, announcements by us or
our competitors of significant contracts, productions, acquisitions or capital commitments,
variations in quarterly operating results, general economic conditions, terrorist acts, future
sales of our common shares and investor perception of us and the filmmaking industry. These broad
market and industry factors may materially reduce the market price of our common stock, regardless
of our operating performance.
While we believe we currently have adequate internal control over financial reporting, we are
required to assess our internal control over financial reporting on an annual basis and any future
adverse results from such assessment could result in a loss of investor confidence in our financial
reports and have an adverse effect on our securities.
Section 404 of the Sarbanes-Oxley Act of 2002 and the accompanying rules and regulations
promulgated by the SEC to implement it require us to include in our Form 10-K an annual report by
our management regarding the effectiveness of our internal control over financial reporting. The
report includes, among other things, an assessment of the effectiveness of our internal control
over financial reporting as of the end of our fiscal year. This assessment must include disclosure
of any material weaknesses in our internal control over financial reporting identified by
management. During this process, if our management identifies one or more material weaknesses in
our internal control over financial reporting that cannot be remediated in a timely manner, we will
be unable to assert such internal control is effective. While we currently believe our internal
control over financial reporting is effective, the effectiveness of our internal controls in future
periods is subject to the risk that our controls may become inadequate because of changes in
conditions, and, as a result, the degree of compliance of our internal control over financial
reporting with the applicable policies or procedures may deteriorate. If we are unable to conclude
that our internal control over financial reporting is effective (or if our independent auditors
disagree with our conclusion), we could lose investor confidence in the accuracy and completeness
of our financial reports, which would have an adverse effect on our securities.
Changes in, or interpretations of, tax rules and regulations, and changes in geographic
operating results, may adversely affect our effective tax rates.
We are subject to income taxes in the United States and foreign tax jurisdictions. Our future
effective tax rates could be affected by changes in tax laws or the interpretation of tax laws, by
changes in the amount of revenue or earnings that we derive from international sources in countries
with high or low statutory tax rates, or by changes in the valuation of our deferred tax assets and
liabilities. Unanticipated changes in our tax rates could affect our future results of operations.
34
In addition, we may be subject to examination of our income tax returns by federal, state, and
foreign tax jurisdictions. We regularly assess the likelihood of outcomes resulting from possible
examinations to determine the adequacy of our provision for income taxes. In making such
assessments, we exercise judgment in estimating our provision for income taxes. While we believe
our estimates are reasonable, we cannot assure you that final determinations from any examinations
will not be materially different from that reflected in our historical income tax provisions and
accruals. Any adverse outcome from any examinations may have an adverse effect on our business and
operating results, which could cause the market price of our securities to decline.
We will incur costs and demands upon management as a result of complying with the laws and
regulations affecting public companies, which could affect our operating results.
We have incurred, and will continue to incur, significant legal, accounting and other expenses
associated with corporate governance and public company reporting requirements, including
requirements under the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and the
NYSE. As long as the SEC requires the current level of compliance for public companies of our size,
we expect these rules and regulations to require significant legal and financial compliance costs
and to make some activities time-consuming and costly. These rules and regulations may make it more
expensive for us to obtain director and officer liability insurance, and we may be required to
accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or
similar coverage than was previously available. As a result, it may be more difficult for us to
attract and retain qualified individuals to serve on our Board of Directors or as our executive
officers.
Certain shareholders own a majority of our outstanding common shares.
As of March 31, 2010, four of our shareholders beneficially owned an aggregate of 65,467,799
of our common shares, or approximately 55.4% of the outstanding shares. In addition, one of these
shareholders, Mark H. Rachesky, M.D., the beneficial owner of approximately 19.6% of our
outstanding common shares currently serves on our Board of Directors. Accordingly, these four
shareholders, collectively, have the power to exercise substantial influence over us and on matters
requiring approval by our shareholders, including the election of directors, the approval of
mergers and other significant corporate transactions. This concentration of ownership may make it
more difficult for other shareholders to effect substantial changes in our company and may also
have the effect of delaying, preventing or expediting, as the case may be, a change in control of
our company.
Sales of a substantial number of shares of our common shares, or the perception that such
sales might occur, could have an adverse effect on the price of our common shares, and therefore
our ability to raise additional capital to fund our operations.
As of March 31, 2010, approximately 68.7% of our common shares were held beneficially by
certain individuals and institutional investors who each had ownership of greater than 5% of our
common shares. Sales by such individuals and institutional investors of a substantial number of
shares of our common shares into the public market, or the perception that such sales might occur,
could have an adverse effect on the price of our common shares, which could materially impair our
ability to raise capital through the sale of common shares or debt that is convertible into our
common shares.
An unsolicited offer for our shares could create volatility in our stock price.
In March 2010, Carl Icahn and affiliates (the Icahn Group) launched an unsolicited tender
offer, pursuant to which the Icahn Group currently is offering to acquire all of our outstanding
shares of common stock, subject to certain conditions. An unsolicited offer for shares of our
common shares is, among other things, a distraction for our management and employees, requires the
expenditure of significant time and resources by us, could cause our stock price to fluctuate
significantly and, if it results in a change in control, could result in a significant change in
our business. In addition, if the offer triggers a change in control under the agreements governing
our long-term indebtedness, we may be required to repurchase our outstanding unsecured convertible
senior subordinated convertible notes and the Senior Notes, and the maturity of our other
outstanding indebtedness may be accelerated. See An increase in the ownership of our common shares
by certain shareholders could trigger a change in control under the agreements governing our
long-term indebtedness. Any unsolicited offer, whether from the Icahn Group or another party,
could subject us to any of the aforementioned concerns, which could harm our business and have a
material and adverse effect on our business, our results of operations and the price of our
shares. Any unsolicited offer also could cause our stock price to fluctuate
significantly.
35
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
Our corporate head office is located at 1055 West Hastings Street, Suite 2200, Vancouver,
British Columbia V6E 2E9. Our principal executive offices are located at 1055 West Hastings Street,
Suite 2200 and 2700 Colorado Avenue, Suite 200, Santa Monica, California, 90404. At the Santa
Monica address, we occupy approximately 125,000 square feet, including an approximately 4,000
square foot screening room. Our lease expires in August 2015.
We also lease the following properties for our various subsidiaries: a 6,697 square foot space
and a 36,785 square foot space in New York, New York (which leases expire in July 2014 and December
2015, respectively); an additional 4,389 square foot space in Santa Monica, California (which lease
expires in March 2011); a 22,722 square foot space in Tulsa, Oklahoma (which lease expires in April
2011); a 4,833 square foot space in Chicago, Illinois (which lease expires in October 2012); a
15,371 square foot space and a 24,924 square foot space in Hollywood, California (which leases
expire in December 2013 and March 2014, respectively).
We believe that our current facilities are adequate to conduct our business operations for the
foreseeable future. We believe that we will be able to renew these leases on similar terms upon
expiration. If we cannot renew, we believe that we could find other suitable premises without any
material adverse impact on our operations.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we are involved in certain claims and legal proceedings arising in the
normal course of business. While the resolution of these matters cannot be predicted with
certainty, we do not believe, based on current knowledge, that the outcome of any currently pending
claims or legal proceedings in which the Company is currently involved will have a material adverse
effect on the Companys consolidated financial position, results of operations or cash flow.
ITEM 4. REMOVED AND RESERVED.
PART II
|
|
|
ITEM 5. |
|
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES. |
Market Information
Our common shares are listed on the NYSE under the symbol LGF.
On May 21, 2010, the closing sales price of our common shares on the NYSE was $6.81.
The following table sets forth the range of high and low closing sale prices for our common
shares, as reported by the NYSE in United States dollars, for our two most recent fiscal years:
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
Year ended March 31, 2011 |
|
|
|
|
|
|
|
|
First Quarter (through May 21, 2010) |
|
$ |
7.18 |
|
|
$ |
6.14 |
|
Year ended March 31, 2010 |
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
6.30 |
|
|
$ |
4.85 |
|
Third Quarter |
|
|
6.07 |
|
|
|
4.89 |
|
Second Quarter |
|
|
6.66 |
|
|
|
5.40 |
|
First Quarter |
|
|
6.26 |
|
|
|
4.55 |
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
Year ended March 31, 2009 |
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
5.91 |
|
|
$ |
3.90 |
|
Third Quarter |
|
|
9.14 |
|
|
|
5.27 |
|
Second Quarter |
|
|
10.52 |
|
|
|
8.82 |
|
First Quarter |
|
|
10.68 |
|
|
|
9.67 |
|
36
Holders
As of May 21, 2010, there were 843 registered holders of our common shares.
Dividend Policy
We have not paid any dividends on our outstanding common shares since our inception and do not
anticipate doing so in the foreseeable future. The declaration of dividends on our common shares is
restricted by our senior revolving credit facility and is within the discretion of our Board of
Directors and will depend upon the assessment of, among other things, our earnings, financial
requirements and operating and financial condition. At the present time, given our anticipated
capital requirements, we intend to follow a policy of retaining earnings in order to finance
further development of our business. We may be limited in our ability to pay dividends on our
common shares by restrictions under the Business Corporations Act (British Columbia) relating to
the satisfaction of solvency tests.
Securities Authorized for Issuance Under Equity Compensation Plans
We currently maintain two equity compensation plans: the Lions Gate Entertainment Corp. 2004
Performance Incentive Plan (the 2004 Plan) and the Lionsgate Employees and Directors Equity
Incentive Plan (the Equity Incentive Plan), each of which has been approved by our shareholders.
In addition, as described below, we granted certain equity-based awards that were not under
shareholder-approved plans in connection with our acquisition of Mandate Pictures in 2007.
The following table sets forth, for each of our equity compensation plans, the number of
common shares subject to outstanding options and rights, the weighted-average exercise price of
outstanding options, and the number of shares remaining available for future award grants as of
March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Common Shares |
|
|
|
|
|
|
|
|
|
|
Remaining Available for |
|
|
|
|
|
|
|
|
|
|
Future Issuance Under |
|
|
Number of Common |
|
|
|
|
|
Equity |
|
|
Shares to be Issued |
|
Weighted-Average |
|
Compensation Plans |
|
|
Upon Exercise of |
|
Exercise Price of |
|
(Excluding Shares |
|
|
Outstanding Options, |
|
Outstanding Options, |
|
Reflected in |
Plan Category |
|
Warrants and Rights |
|
Warrants and Rights |
|
the First Column) |
Equity compensation plans approved by shareholders |
|
|
7,120,686 |
(1) |
|
$ |
9.87 |
(2) |
|
|
3,717,360 |
(3) |
Equity compensation plans not approved by shareholders |
|
|
1,028,333 |
(4) |
|
$ |
9.22 |
(4) |
|
|
|
|
Total |
|
|
8,149,019 |
|
|
$ |
9.75 |
|
|
|
3,717,360 |
|
|
|
|
(1) |
|
Of these shares, 2,760,000 were subject to options then outstanding under the 2004 Plan. In
addition, this number includes 4,360,686 shares that were subject to outstanding stock unit
awards granted under the 2004 Plan. Of these stock unit awards, 1,268,051 represent units
subject to satisfaction of certain performance targets. |
|
(2) |
|
This number does not reflect the 4,360,686 shares that were subject to outstanding stock unit
awards granted under the 2004 Plan. |
|
(3) |
|
All of these shares were available for award grant purposes under the 2004 Plan. The shares
available under the 2004 Plan are, subject to certain other limits under that plan, generally
available for any type of award authorized under the 2004 Plan including options, stock
appreciation rights, restricted stock, restricted share units, stock bonuses and performance
shares. No new awards may be granted under the Equity Incentive Plan. |
|
(4) |
|
On September 10, 2007, pursuant to the acquisition of Mandate Pictures, Joseph Drake entered
into an employment agreement with Lions Gate Films, Inc. (LGF), our wholly-owned subsidiary,
to serve as its Co-Chief Operating Officer and President of the Motion Picture Group, and
Nathan Kahane entered into an employment agreement with LGF to serve as the President of
Mandate Pictures. Pursuant to the terms of his employment agreement, Mr. Drake was granted
525,000 restricted share units (payable upon vesting in an equal number of shares of our
common stock) which are scheduled to vest over five years based on his continued employment
with LGF and half of which are also subject to the satisfaction of certain performance
targets, and options to purchase |
37
|
|
|
|
|
500,000 shares of our common stock, 200,000 options of which are vested and 300,000 options which
are scheduled to vest over three years based on his continued employment with LGF. Pursuant to
the terms of his employment agreement, Mr. Kahane was granted 25,000 restricted share units
(payable upon vesting in an equal number of shares of our common stock) and options to purchase
100,000 shares of our common stock, all of which are scheduled to vest over three years based on
his continued employment with LGF. The per share exercise price of each option is the closing
price of our common stock on September 10, 2007, the date of grant of the options. |
Taxation
The following is a general summary of certain Canadian income tax consequences to U.S. Holders
(who, at all relevant times, deal at arms length with the Company) of the purchase, ownership and
disposition of common shares. For the purposes of this Canadian income tax discussion, a U.S.
Holder means a holder of common shares who (1) for the purposes of the Income Tax Act (Canada) is
not, has not, and will not be, or deemed to be, resident in Canada at any time while he, she or it
holds common shares, (2) at all relevant times is a resident of the United States under the
Canada-United States Income Tax Convention (1980) (the Convention) and is eligible for benefits
under the Convention, and (3) does not and will not use or be deemed to use the common shares in
carrying on a business in Canada. This summary does not apply to U.S. Holders who are insurers.
Such U.S. Holders should seek tax advice from their advisors.
This summary is not intended to be, and should not be construed to be, legal or tax advice to
any prospective investor and no representation with respect to the tax consequences to any
particular investor is made. The summary does not address any aspect of any provincial, state or
local tax laws or the tax laws of any jurisdiction other than Canada or the tax considerations
applicable to non-U.S. Holders. Accordingly, prospective investors should consult with their own
tax advisors for advice with respect to the income tax consequences to them having regard to their
own particular circumstances, including any consequences of an investment in common shares arising
under any provincial, state or local tax laws or the tax laws of any jurisdiction other than
Canada.
This summary is based upon the current provisions of the Income Tax Act (Canada), the
regulations thereunder and the proposed amendments thereto publicly announced by the Department of
Finance, Canada before the date hereof (the Tax Proposals) and our understanding of the current
published administrative and assessing practices of the Canada Revenue Agency. No assurance may be
given that any proposed amendment will be enacted in the form proposed, if at all. This summary
does not otherwise take into account or anticipate any changes in law, whether by legislative,
governmental or judicial action.
The following summary applies only to U.S. Holders who hold their common shares as capital
property. In general, common shares will be considered capital property of a holder where the
holder is neither a trader nor dealer in securities, does not hold the common shares in the course
of carrying on a business and is not engaged in an adventure in the nature of trade in respect
thereof. This summary does not apply to holders who are financial institutions within the meaning
of the mark-to-market rules contained in the Income Tax Act (Canada).
Amounts in respect of common shares paid or credited or deemed to be paid or credited as, on
account or in lieu of payment of, or in satisfaction of, dividends to a shareholder who is not a
resident of Canada within the meaning of the Income Tax Act (Canada) will generally be subject to
Canadian non-resident withholding tax. Canadian withholding tax applies to dividends that are
formally declared and paid by the Company and also to deemed dividends that may be triggered by a
cancellation of common shares if the cancellation occurs otherwise than as a result of a simple
open market transaction. For either deemed or actual dividends, withholding tax is levied at a
basic rate of 25%, which may be reduced pursuant to the terms of an applicable tax treaty between
Canada and the country of residence of the non-resident shareholder. Under the Convention, the rate
of Canadian non-resident withholding tax on the gross amount of dividends received by a U.S.
Holder, which is the beneficial owner of such dividends, is generally 15%. However, where such
beneficial owner is a company that owns at least 10% of the voting shares of the company paying the
dividends, the rate of such withholding is 5%.
In addition to the Canadian withholding tax on actual or deemed dividends, a U.S. Holder also
needs to consider the potential application of Canadian capital gains tax. A U.S. Holder will
generally not be subject to tax under the Income Tax Act (Canada) in respect of any capital gain
arising on a disposition of common shares (including, generally, on a purchase by the Company on
the open market) unless at the time of disposition such shares constitute taxable Canadian property
of the holder for purposes of the Income Tax Act (Canada) and such U.S. Holder is not entitled to
relief under the Convention. If the common shares are listed on a designated stock exchange (which
includes the NYSE) at the time they are disposed of, they will generally not constitute taxable
Canadian property of a U.S. Holder unless, at any time during the 60-month period immediately
preceding the disposition of the common shares, the U.S. Holder, persons with whom he, she or it
does not deal at arms length, or the U.S. Holder together with such non-arms length persons,
38
owned 25% or more of the issued shares of any class or series of the capital stock of the
Company. Furthermore, pursuant to the Tax Proposals, shares of corporations that did not, at any
time during the immediately preceding 60-month period, derive their value principally from one or
any combination of (i) real or immovable property situated in Canada, (ii) Canadian resource
properties, (iii) timber resource properties, and (iv) options in respect of, or interests in, such
properties, no longer constitute taxable Canadian property. In any event, under the Convention,
gains derived by a U.S. Holder from the disposition of common shares will generally not be subject
to tax in Canada unless the value of the companys shares is derived principally from real property
or certain other immovable property situated in Canada.
Issuer Purchases of Equity Securities
On May 31, 2007,
our Board of Directors authorized the repurchase of up to $50 million of our
common shares. Thereafter, on each of May 29, 2008 and November 6, 2008, as part of its regularly
scheduled meetings, our Board of Directors authorized the repurchase up to an additional $50
million of our common shares, subject to market conditions. The additional resolutions increased
the total authorization to $150 million. The common shares may be purchased, from time to time, at
the Companys discretion, including the quantity, timing and price thereof. Such purchases will be
structured as permitted by securities laws and other legal requirements. During the period from the
authorization date through March 31, 2010, 6,787,310 shares have been repurchased at a cost of
approximately $65.2 million (including commission costs). The share repurchase program has no
expiration date.
There were no purchases of shares of our common stock by us during the three months ended
March 31, 2010.
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Approximate |
|
|
|
|
|
|
|
|
|
|
(c) Total Number of |
|
Dollar Value of |
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
Shares that May Yet |
|
|
|
|
|
|
|
|
|
|
Part of Publicly |
|
Be Purchased Under |
|
|
(a) Total Number of |
|
(b) Average Price |
|
Announced Plans or |
|
the Plans or |
Period |
|
Shares Purchased |
|
Paid per Share |
|
Programs |
|
Programs |
January 1, 2010 January 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 1, 2010 February 29, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 1, 2010 March 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85,080,000 |
|
Stock Performance Graph
The following graph compares our cumulative total shareholder return with those of the NYSE
Composite Index and the S&P Movies & Entertainment Index for the period commencing March 31, 2005
and ending March 31, 2010. All values assume that $100 was invested on March 31, 2005 in our common
shares and each applicable index and all dividends were reinvested.
The comparisons shown in the graph below are based on historical data and we caution that the
stock price performance shown in the graph below is not indicative of, and is not intended to
forecast, the potential future performance of our common shares.
39
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Lions Gate Entertainment Corporation, The NYSE Composite Index
And The S&P Movies & Entertainment Index
|
|
|
* |
|
$100 invested on March 31, 2005 in stock or index, including reinvestment of
dividends. Fiscal year ending March 31. |
|
|
|
CopyrightÓ 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company/Index |
|
3/31/05 |
|
3/31/06 |
|
3/31/07 |
|
3/31/08 |
|
3/31/09 |
|
3/31/10 |
Lions Gate Entertainment Corp. |
|
|
100.00 |
|
|
|
91.86 |
|
|
|
103.35 |
|
|
|
88.24 |
|
|
|
45.70 |
|
|
|
56.47 |
|
NYSE Composite Index |
|
|
100.00 |
|
|
|
117.44 |
|
|
|
135.00 |
|
|
|
131.15 |
|
|
|
76.42 |
|
|
|
117.20 |
|
S&P Movies & Entertainment Index |
|
|
100.00 |
|
|
|
96.02 |
|
|
|
117.90 |
|
|
|
98.86 |
|
|
|
51.65 |
|
|
|
100.99 |
|
|
|
|
* |
|
The graph and related information are being furnished solely to accompany this Form 10-K
pursuant to Item 201(e) of Regulation S-K. They shall not be deemed soliciting materials or to be
filed with the SEC (other than as provided in Item 201), nor shall such information be
incorporated by reference into any future filing under the Securities Act or the Exchange Act,
except to the extent that we specifically incorporate it by reference into such filing. |
ITEM 6. SELECTED FINANCIAL DATA.
The consolidated financial statements for all periods presented in this Form 10-K are prepared
in conformity with U.S. generally accepted accounting principles.
The Selected Consolidated Financial Data below includes the results of Lionsgate UK,
Debmar-Mercury, Mandate Pictures and TV Guide Network from their acquisition dates of October 17,
2005, July 3, 2006, September 10, 2007, and February 28, 2009, respectively, onwards. The Selected
Consolidated Financial Data below also includes the results of Maple Pictures from the date of
consolidation of July 18, 2007, onwards. Due to the acquisitions and the consolidation of Maple
Pictures, the Companys results of operations for the years ended March 31, 2010, 2009, 2008, 2007,
and 2006 and financial positions as at March 31, 2010, 2009, 2008, 2007, and 2006 are not directly
comparable to prior reporting periods.
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
(Amounts in thousands, except per share amounts) |
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
1,583,718 |
|
|
$ |
1,466,374 |
|
|
$ |
1,361,039 |
|
|
$ |
976,740 |
|
|
$ |
945,385 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
807,311 |
|
|
|
793,816 |
|
|
|
660,924 |
|
|
|
435,934 |
|
|
|
456,986 |
|
Distribution and marketing |
|
|
515,755 |
|
|
|
669,557 |
|
|
|
635,666 |
|
|
|
404,410 |
|
|
|
399,299 |
|
General and administration |
|
|
180,543 |
|
|
|
136,563 |
|
|
|
119,080 |
|
|
|
90,782 |
|
|
|
69,936 |
|
Depreciation and amortization |
|
|
28,064 |
|
|
|
7,657 |
|
|
|
5,500 |
|
|
|
3,670 |
|
|
|
3,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,531,673 |
|
|
|
1,607,593 |
|
|
|
1,421,170 |
|
|
|
934,796 |
|
|
|
930,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
52,045 |
|
|
|
(141,219 |
) |
|
|
(60,131 |
) |
|
|
41,944 |
|
|
|
15,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual cash based interest |
|
|
28,271 |
|
|
|
15,131 |
|
|
|
12,851 |
|
|
|
14,056 |
|
|
|
15,057 |
|
Amortization of debt discount, deferred financing costs
and accretion of redeemable preferred stock units |
|
|
29,789 |
|
|
|
19,144 |
|
|
|
17,048 |
|
|
|
15,783 |
|
|
|
14,578 |
|
Interest rate swaps mark-to-market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
58,060 |
|
|
|
34,275 |
|
|
|
29,899 |
|
|
|
29,839 |
|
|
|
29,758 |
|
Interest and other income |
|
|
(1,573 |
) |
|
|
(5,785 |
) |
|
|
(11,276 |
) |
|
|
(11,930 |
) |
|
|
(4,304 |
) |
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
(2,909 |
) |
|
|
(1,722 |
) |
|
|
|
|
Gain on extinguishment of debt |
|
|
(5,675 |
) |
|
|
(3,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses, net |
|
|
50,812 |
|
|
|
25,467 |
|
|
|
15,714 |
|
|
|
16,187 |
|
|
|
25,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity interests and income taxes |
|
|
1,233 |
|
|
|
(166,686 |
) |
|
|
(75,845 |
) |
|
|
25,757 |
|
|
|
(10,111 |
) |
Equity interests loss |
|
|
(28,149 |
) |
|
|
(9,044 |
) |
|
|
(7,559 |
) |
|
|
(2,605 |
) |
|
|
(74 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(26,916 |
) |
|
|
(175,730 |
) |
|
|
(83,404 |
) |
|
|
23,152 |
|
|
|
(10,185 |
) |
Income tax provision (benefit) |
|
|
1,230 |
|
|
|
2,724 |
|
|
|
4,031 |
|
|
|
7,680 |
|
|
|
(1,030 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before discontinued operations |
|
|
(28,146 |
) |
|
|
(178,454 |
) |
|
|
(87,435 |
) |
|
|
15,472 |
|
|
|
(9,155 |
) |
Income from discontinued operations
(including gain on sale in 2006 of $4,872, net of tax of $2,464) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(28,146 |
) |
|
$ |
(178,454 |
) |
|
$ |
(87,435 |
) |
|
$ |
15,472 |
|
|
$ |
(4,679 |
) |
Add: Net loss attributable to noncontrolling interest |
|
|
8,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lions Gate Entertainment Corp. Shareholders |
|
$ |
(19,478 |
) |
|
$ |
(178,454 |
) |
|
$ |
(87,435 |
) |
|
$ |
15,472 |
|
|
$ |
(4,679 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Income (Loss) Per Common Share From Continuing Operations |
|
$ |
(0.17 |
) |
|
$ |
(1.53 |
) |
|
$ |
(0.74 |
) |
|
$ |
0.14 |
|
|
$ |
(0.09 |
) |
Basic Income Per Common Share From Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net Income (Loss) Per Common Share |
|
$ |
(0.17 |
) |
|
$ |
(1.53 |
) |
|
$ |
(0.74 |
) |
|
$ |
0.14 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Income (Loss) Per Common Share From Continuing Operations |
|
$ |
(0.17 |
) |
|
$ |
(1.53 |
) |
|
$ |
(0.74 |
) |
|
$ |
0.14 |
|
|
$ |
(0.09 |
) |
Diluted Income Per Common Share From Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net Income (Loss) Per Common Share |
|
$ |
(0.17 |
) |
|
$ |
(1.53 |
) |
|
$ |
(0.74 |
) |
|
$ |
0.14 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
117,510 |
|
|
|
116,795 |
|
|
|
118,427 |
|
|
|
108,398 |
|
|
|
103,066 |
|
Diluted |
|
|
117,510 |
|
|
|
116,795 |
|
|
|
118,427 |
|
|
|
111,164 |
|
|
|
103,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
91,421 |
|
|
|
138,475 |
|
|
|
371,589 |
|
|
|
51,497 |
|
|
|
46,978 |
|
Investments auction rate securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237,379 |
|
|
|
167,081 |
|
Investment in films and television programs |
|
|
680,647 |
|
|
|
702,767 |
|
|
|
608,942 |
|
|
|
493,140 |
|
|
|
417,750 |
|
Total assets |
|
|
1,704,457 |
|
|
|
1,667,250 |
|
|
|
1,536,927 |
|
|
|
1,135,598 |
|
|
|
1,050,953 |
|
Senior revolving credit facility |
|
|
17,000 |
|
|
|
255,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured second-priority notes |
|
|
225,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated notes and other financing obligations |
|
|
203,208 |
|
|
|
281,521 |
|
|
|
261,519 |
|
|
|
243,675 |
|
|
|
290,869 |
|
Total liabilities |
|
|
1,620,557 |
|
|
|
1,625,557 |
|
|
|
1,282,328 |
|
|
|
807,880 |
|
|
|
809,848 |
|
Lions Gate Entertainment Corp. shareholders equity |
|
|
53,922 |
|
|
|
41,693 |
|
|
|
254,599 |
|
|
|
327,718 |
|
|
|
241,105 |
|
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
Lions Gate Entertainment Corp. (Lionsgate, the Company, we, us or our) is the
leading next generation studio with a diversified presence in the production and distribution of
motion pictures, television programming, home entertainment, family entertainment, video-on-demand
and digitally delivered content.
We have released approximately 15 motion pictures theatrically per year for the last three
years, which include films we develop and produce in-house, as well as films that we acquire from
third parties. In fiscal 2010, we released 10 motion pictures theatrically due, in part, to a
crowded marketplace and our desire to invest in our television and channel businesses to achieve an
even more
41
balanced mix. In fiscal 2011, we intend to increase our diversified theatrical slate to
approximately 13 motion pictures to capitalize on a resurgent theatrical box office and
thinning competitive ranks, and we anticipate a more normalized slate of 12 to 15 motion pictures
annually going forward. Additionally, we have produced approximately 75 hours of television
programming on average for the last three years, primarily prime time television series for the
cable and broadcast networks. In fiscal 2011, we intend to deliver approximately 78 hours of
television programming.
We currently distribute our library of approximately 8,000 motion picture titles and
approximately 4,000 television episodes and programs directly to retailers, video rental stores,
DVD rental kiosks, and pay and free television channels in the United States (the U.S.), Canada,
the United Kingdom (the UK) and Ireland, through various digital media platforms, and indirectly
to other international markets through our subsidiaries and various third parties. We also
distribute our library through our various platforms including:
TV Guide Network, TV Guide Network On Demand and TV Guide Online (www.tvguide.com)
(collectively, TV Guide Network), our joint ventures with One Equity Partners (OEP), the global
private equity investment arm of JPMorgan Chase, N.A.;
Studio 3 Partners LLC (EPIX), our joint venture with Viacom Inc. (Viacom), Paramount
Pictures Corporation (Paramount) and Metro-Goldwyn-Mayer Studios Inc. (MGM);
Tiger Gate Entertainment Limited (Tiger Gate), our joint venture with Saban Capital Group,
Inc. (SCG); and
Horror Entertainment, LLC (FEARnet), our joint venture with Sony Pictures Entertainment
Inc. (Sony) and Comcast Corporation (Comcast).
In order to maximize our profit, we attempt to maintain a disciplined approach to acquisition,
production and distribution of projects by balancing our financial risks against the probability of
commercial success for each project. A key element of this strategy is to invest in or acquire
individual properties, including films and television programs, libraries, and entertainment
studios and companies, which enhance our competitive position in the industry, generate significant
long-term returns and build a diversified foundation for future growth. As part of this strategy,
we have acquired, integrated and/or consolidated into our business the following:
|
|
|
TV Guide Network, including TV Guide Network On Demand and TV Guide Online
(www.tvguide.com) (we acquired TV Guide Network in February 2009 and
sold a 49% interest to OEP in May 2009); |
|
|
|
|
Mandate Pictures, LLC (Mandate Pictures), a worldwide independent film producer,
financier and distributor (acquired in September 2007); |
|
|
|
|
Maple Pictures Corp. (Maple Pictures), a Canadian film, television and home video
distributor (consolidated effective July 2007); |
|
|
|
|
Debmar-Mercury, LLC (Debmar-Mercury), a leading independent syndicator of film and
television packages (acquired in July 2006); |
|
|
|
|
Redbus Film Distribution Ltd. and Redbus Pictures (collectively, Redbus and currently,
Lions Gate UK Ltd. (Lionsgate UK)), an independent film distributor, which provides us the
ability to self-distribute our motion pictures in the UK and Ireland and included the
acquisition of the Redbus library of approximately 130 films (acquired in October 2005); |
|
|
|
|
Certain of the film assets and accounts receivable of Modern Entertainment, Ltd., a
licensor of film rights to DVD distributors, broadcasters and cable networks (acquired in
August 2005); |
|
|
|
|
Artisan Entertainment, Inc. (Artisan Entertainment), a diversified motion picture,
family and home entertainment company (acquired in December 2003); and |
|
|
|
|
Trimark Holdings, Inc., a worldwide distributor of entertainment content (acquired in
October 2000). |
42
As part of this strategy, we also have ownership interests in the following:
|
|
|
Tiger Gate, an operator of pay television channels and a distributor of television
programming and action and horror films across Asia (joint venture entered into in April
2010); |
|
|
|
|
EPIX, a joint venture entered into to create a premium television channel and
subscription video-on-demand service (entered into in April 2008); |
|
|
|
|
Roadside Attractions, LLC (Roadside), an independent theatrical distribution company
(interest acquired in July 2007); |
|
|
|
|
NextPoint, Inc. (Break.com), an online video entertainment service provider (interest
acquired in June 2007); and |
|
|
|
|
FEARnet, a multiplatform programming and content service provider (interest acquired in
October 2006). |
Revenues
Our revenues are derived from the Motion Pictures, Television Production and Media Networks
segments, as described below:
Motion Pictures. Motion Pictures includes Theatrical, Home Entertainment, Television,
International, Lionsgate UK, and Mandate Pictures revenue.
Theatrical revenues are derived from the theatrical release of motion pictures in the U.S. and
Canada which are distributed to theatrical exhibitors on a picture by picture basis. The financial
terms that we negotiate with our theatrical exhibitors generally provide that we receive a
percentage of the box office results and are negotiated on a picture by picture basis.
Home Entertainment revenues consist of the sale or rental of packaged media (i.e., DVD and
Blu-ray) and electronic media (i.e., electronic-sell through or EST and digital rental) of our
own productions and acquired films, including theatrical releases and direct-to-video releases, to
retail stores and through digital media platforms. In addition, we have revenue sharing
arrangements with certain rental stores which generally provide that in exchange for a nominal or
no upfront sales price we share in the rental revenues generated by each such store on a title by
title basis.
Television revenues are primarily derived from the licensing of our productions and acquired
films to the domestic cable, free and pay television markets, which includes pay-per-view and
video-on-demand.
International revenues include revenues from our international subsidiaries from the licensing
and sale of our productions, acquired films, our catalog product or libraries of acquired titles
and revenues from our distribution to international sub-distributors, on a territory-by-territory
basis. Our revenues are derived from the U.S., Canada, the UK, Australia and other foreign
countries; none of the foreign countries individually comprised greater than 10% of total revenues.
Lionsgate UK revenues include revenues from the licensing and sale of our productions,
acquired films, our catalog product or libraries of acquired titles from our subsidiary located in
the United Kingdom.
Mandate Pictures revenues include revenues from the sales and licensing of domestic and
worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors
and to international sub-distributors.
Television Production. Television Production includes the licensing and syndication to
domestic and international markets of one-hour and half-hour drama series, television movies and
mini-series and non-fiction programming, and home entertainment revenues consisting of television
production movies or series.
Media Networks. Media Networks consists of TV Guide Network, including TV Guide Network On
Demand, and TV Guide Online (www.tvguide.com), (which we acquired in February 2009 and of which we
sold a 49% interest in May 2009). Media Networks revenue includes distribution revenue from
multi-system cable operators and digital broadcast satellite providers
43
(distributors generally pay a per subscriber fee for the right to distribute programming) and
advertising revenue from the sale of advertising on its television channel and related online media
platforms.
Expenses
Our primary operating expenses include Direct Operating Expenses, Distribution and Marketing
Expenses and General and Administration Expenses.
Direct Operating Expenses include amortization of film and television production or
acquisition costs, participation and residual expenses, provision for doubtful accounts, and
foreign exchange gains and losses. Participation costs represent contingent consideration payable
based on the performance of the film to parties associated with the film, including producers,
writers, directors or actors, etc. Residuals represent amounts payable to various unions or
guilds such as the Screen Actors Guild, Directors Guild of America, and Writers Guild of America,
based on the performance of the film in certain ancillary markets or based on the individuals
(i.e., actor, director, writer) salary level in the television market.
Distribution and Marketing Expenses primarily include the costs of theatrical prints and
advertising (P&A) and of DVD/Blu-ray duplication and marketing. Theatrical P&A includes the
costs of the theatrical prints delivered to theatrical exhibitors and the advertising and marketing
cost associated with the theatrical release of the picture. DVD/Blu-ray duplication represents the
cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical
products. DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the
time of its release or special promotional advertising.
General and Administration Expenses include salaries and other overhead.
Recent Developments
Tiger Gate Entertainment Limited. On April 5, 2010, Pearl River Holdings Corp., our
wholly-owned subsidiary, entered into a joint venture with SCG, a leading private investment firm
specializing in the media, entertainment and communications industries, to operate and manage Tiger
Gate, an operator of pay television channels and a distributor of television programming and action
and horror films across Asia. Established by the Company in 2008, Tiger Gate currently operates the
thriller/horror channel THRILL and the action channel KIX. The channels launched in Indonesia in
August 2009, and in Hong Kong and Singapore in April 2010.
December 2009 Subordinated Debt Repurchase. In December 2009, our wholly-owned subsidiary,
Lions Gate Entertainment Inc. (LGEI), paid $37.7 million to extinguish $39.9 million of aggregate
principal amount (carrying value $35.0 million) of 3.625% convertible senior subordinated secured
notes due 2025 (the February 2005 3.625% Notes) and recorded a loss on extinguishment of $0.9
million, which includes $0.4 million of deferred financing costs written off. The loss represented
the excess of the fair value of the liability component of the February 2005 3.625% Notes
repurchased over their carrying value, plus the deferred financing costs written off. The excess of
the amount paid over the fair value of the February 2005 3.625% Notes repurchased was recorded as a
reduction of shareholders equity reflecting the repurchase of the equity component of the February
2005 3.625% Notes repurchased.
The February 2005 3.625% Notes repurchased in December 2009 may be resold at the prevailing
market value. In addition, $32.9 million of aggregate principal amount of the February 2005 3.625%
Notes repurchased are being held as collateral under the Companys senior revolving credit
facility.
In December 2009, LGEI paid $38.0 million to extinguish $40.0 million of aggregate principal
amount (carrying value $35.5 million) of 2.9375% convertible senior subordinated secured notes
due 2024 (the October 2004 2.9375% Notes) and recorded a loss on extinguishment of $0.8 million,
which includes $0.3 million of deferred financing costs written off. The loss represented the
excess of the fair value of the liability component of the October 2004 2.9375% Notes repurchased
over their carrying value, plus the deferred financing costs written off. The excess of the amount
paid over the fair value of the October 2004 2.9375% Notes repurchased was recorded as a reduction
of shareholders equity reflecting the repurchase of the equity component of the October 2004
2.9375% Notes repurchased.
10.25% Senior Secured Second-Priority Notes. On October 21, 2009, LGEI issued $236.0 million
aggregate principal amount of 10.25% senior secured second-priority notes due 2016 (the Senior
Notes) in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities
Act of 1933, as amended (the Securities Act). The Notes will pay interest semi-annually on May 1
and November 1 of each year at a rate of 10.25% per year and will mature on November 1, 2016. The
Senior Notes were issued by LGEI at an initial price of 95.222% (original issue discount 4.778%)
of the principal amount. The net proceeds, after deducting
44
discounts, the fees paid to the initial purchaser, and all transaction costs (including legal,
accounting and other professional fees) from the sale of the Senior Notes was approximately $214.7
million, which was used by LGEI to repay a portion of its outstanding debt under our senior
revolving credit facility.
Film Credit Facility. On October 6, 2009, we entered into a revolving film credit facility
agreement, as amended effective December 31, 2009 (Film Credit Facility), which provides for
borrowings for the acquisition or production of motion pictures. Currently, the Film Credit
Facility provides for total borrowings up to $120 million and can be increased to $200 million if
additional lenders or financial institutions become a party to and provide a commitment under the
facility. The Film Credit Facility has a maturity date of April 6, 2013 and as of March 31, 2010,
bore interest of 3.25% over the LIBO rate (as defined in the credit agreement effective
interest rate of 3.50% as of March 31, 2010). We are required to pay a quarterly commitment fee of
0.75% per annum on the unused commitment under the Film Credit Facility. Borrowings under the Film
Credit Facility are due the earlier of (a) nine months after delivery of each motion picture or (b)
April 6, 2013. Borrowings under the Film Credit Facility are subject to a borrowing base
calculation and are secured by interests in the related motion pictures, together with certain
other receivables from other motion picture and television productions pledged by us, including a
minimum pledge of such receivables of $25 million. Receivables pledged to the Film Credit Facility
must be excluded from the borrowing base calculation under our senior revolving credit facility.
Refinancing Exchange. On April 20, 2009, LGEI entered into Refinancing Exchange Agreements
(the Refinancing Exchange Agreements) with certain existing holders of the February 2005 3.625%
Notes. Pursuant to the terms of the Refinancing Exchange Agreements, holders of the February 2005
3.625% Notes exchanged approximately $66.6 million aggregate principal amount of the February 2005
3.625% Notes for new 3.625% convertible senior subordinated secured notes due 2025 (the April 2009
3.625% Notes) in the same aggregate principal amount under a new indenture entered into by LGEI,
Lionsgate, as guarantor, and an indenture trustee thereunder.
April 2009 3.625% Notes. As discussed above, in April 2009, LGEI issued approximately
$66.6 million of the April 2009 3.625% Notes. LGEI will pay interest on the April 2009 3.625% Notes
on March 15 and September 15 of each year. The April 2009 3.625% Notes will mature on March 15,
2025. On or after March 15, 2015, LGEI may redeem the April 2009 3.625% Notes, in whole or in part,
at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be redeemed,
plus accrued and unpaid interest through the date of redemption. The holder may require LGEI to
repurchase the April 2009 3.625% Notes on March 15, 2015, 2018 and 2023 or upon a designated
event, at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be
repurchased plus accrued and unpaid interest. Under certain circumstances, if the holder requires
LGEI to repurchase all or a portion of their notes upon a change in control, they will be entitled
to receive a make whole premium. The amount of the make whole premium, if any, will be based on the
price of our common shares on the effective date of the change in control. No make whole premium
will be paid if the price of our common shares at such time is less than $5.36 per share or exceeds
$50.00 per share. The April 2009 3.625% Notes may be converted into our common shares at any time
before maturity, redemption or repurchase. The initial conversion rate of the April 2009
3.625% Notes is 121.2121 common shares per $1,000 principal amount of the April 2009 3.625% Notes,
subject to adjustment in certain circumstances, which represents a conversion price of
approximately $8.25 per share. Upon conversion of the April 2009 3.625% Notes, we have the option
to deliver, in lieu of common shares, cash or a combination of cash and our common shares.
TV Guide Network Acquisition. In January 2009, we entered into an Equity Purchase Agreement
(the Equity Purchase Agreement) with Gemstar-TV Guide International, Inc. (Gemstar), TV Guide
Entertainment Group, Inc. (TVGE), its parent company, UV Corporation and Macrovision Solutions
Corporation (Macrovision), the ultimate parent company of Gemstar, TVGE and UV Corporation, for
the purchase by us of TV Guide Network and related assets, including TV Guide Network On Demand,
and TV Guide Online (www.tvguide.com). The acquisition closed February 28, 2009. We paid
approximately $241.6 million for all of the equity interest of TV Guide Network, which included a
capital lease obligation of $12.1 million, and incurred approximately $1.5 million in direct
transaction costs (legal fees, accountants fees and other professional fees).
The acquisition was accounted for as a purchase, with the results of operations of TV Guide
Network consolidated from February 28, 2009. Goodwill of $152.6 million represents the excess of
purchase price over the fair value of the tangible and intangible assets acquired and liabilities
assumed.
Sale of Noncontrolling Interest in TV Guide Network. On May 28, 2009, we entered into a
Purchase Agreement (the Purchase Agreement) with OEP, pursuant to which OEP purchased 49% of our
interest in TV Guide Network for approximately $122.4 million in cash. In addition, OEP reserved
the option of buying another 1% of TV Guide Network under certain circumstances. The
45
arrangement contains joint control rights, as evidenced in an operating agreement as well as
customary transfer restrictions and exit rights.
CRITICAL ACCOUNTING POLICIES
The application of the following accounting policies, which are important to our financial
position and results of operations, requires significant judgments and estimates on the part of
management. As described more fully below, these estimates bear the risk of change due to the
inherent uncertainty attached to the estimate. For example, accounting for films and television
programs requires us to estimate future revenue and expense amounts which, due to the inherent
uncertainties involved in making such estimates, are likely to differ to some extent from actual
results. For a summary of all of our accounting policies, including the accounting policies
discussed below, see Note 2 to our audited consolidated financial statements.
Generally Accepted Accounting Principles (GAAP). Our consolidated financial statements have
been prepared in accordance with U.S. GAAP.
Accounting for Films and Television Programs. We capitalize costs of production and
acquisition, including financing costs and production overhead, to investment in films and
television programs. These costs for an individual film or television program are amortized and
participation and residual costs are accrued to direct operating expenses in the proportion that
current years revenues bear to managements estimates of the ultimate revenue at the beginning of
the year expected to be recognized from exploitation, exhibition or sale of such film or television
program over a period not to exceed ten years from the date of initial release. For previously
released film or television programs acquired as part of a library, ultimate revenue includes
estimates over a period not to exceed 20 years from the date of acquisition.
The Companys management regularly reviews and revises when necessary its ultimate revenue and
cost estimates, which may result in a change in the rate of amortization of film costs and
participations and residuals and/or write-down of all or a portion of the unamortized costs of the
film or television program to its estimated fair value. The Companys management estimates the
ultimate revenue based on experience with similar titles or title genre, the general public appeal
of the cast, actual performance (when available) at the box office or in markets currently being
exploited, and other factors such as the quality and acceptance of motion pictures or programs that
our competitors release into the marketplace at or near the same time, critical reviews, general
economic conditions and other tangible and intangible factors, many of which we do not control and
which may change. In the normal course of our business, some films and titles are more successful
than anticipated and some are less successful. Accordingly, we update our estimates of ultimate
revenue and participation costs based upon the actual results achieved or new information as to
anticipated revenue performance such as (for home entertainment revenues) initial orders and demand
from retail stores when it becomes available. An increase in the ultimate revenue will generally
result in a lower amortization rate while a decrease in the ultimate revenue will generally result
in a higher amortization rate and periodically results in an impairment requiring a write-down of
the film cost to the titles fair value. These write-downs are included in amortization expense
within direct operating expenses in our consolidated statements of operations.
Revenue Recognition. Revenue from the theatrical release of feature films is recognized at the
time of exhibition based on our participation in box office receipts. Revenue from the sale of
DVDs/Blu-ray discs in the retail market, net of an allowance for estimated returns and other
allowances, is recognized on the later of receipt by the customer or street date (when it is
available for sale by the customer). Under revenue sharing arrangements, rental revenue is
recognized when we are entitled to receipts and such receipts are determinable. Revenues from
television licensing are recognized when the feature film or television program is available to the
licensee for telecast. For television licenses that include separate availability windows during
the license period, revenue is allocated over the windows. Revenue from sales to international
territories are recognized when access to the feature film or television program has been granted
or delivery has occurred, as required under the sales contract, and the right to exploit the
feature film or television program has commenced. For multiple media rights contracts with a fee
for a single film or television program where the contract provides for media holdbacks (defined as
contractual media release restrictions), the fee is allocated to the various media based on our
assessment of the relative fair value of the rights to exploit each media and is recognized as each
holdback is released. For multiple-title contracts with a fee, the fee is allocated on a
title-by-title basis, based on our assessment of the relative fair value of each title.
Distribution revenue from the distribution of TV Guide Network programming (distributors
generally pay a per subscriber fee for the right to distribute programming) is recognized in the
month the services are provided.
46
Advertising revenue is recognized when the advertising spot is broadcast or displayed online.
Advertising revenue is recorded net of agency commissions and discounts.
Cash payments received are recorded as deferred revenue until all the conditions of revenue
recognition have been met. Long-term, non-interest bearing receivables are discounted to present
value.
Reserves. Revenues are recorded net of estimated returns and other allowances. We estimate
reserves for DVD/Blu-ray returns based on previous returns and our estimated expected future
returns related to current period sales on a title-by-title basis in each of the DVD/Blu-ray
businesses. Factors affecting actual returns include, among other factors, limited retail shelf
space at various times of the year, success of advertising or other sales promotions, and the near
term release of competing titles. We believe that our estimates have been materially accurate in
the past; however, due to the judgment involved in establishing reserves, we may have adjustments
to our historical estimates in the future.
We estimate provisions for accounts receivable based on historical experience and relevant
facts and information regarding the collectability of the accounts receivable. In performing this
evaluation, significant judgments and estimates are involved, including an analysis of specific
risks on a customer-by-customer basis for our larger customers and an analysis of the length of
time receivables have been past due. The financial condition of a given customer and its ability to
pay may change over time and could result in an increase or decrease to our allowance for doubtful
accounts, which, when the impact of such change is material, is disclosed in our discussion on
direct operating expenses elsewhere in Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Income Taxes. We are subject to federal and state income taxes in the U.S., and in several
foreign jurisdictions. We record deferred tax assets, net of applicable reserves, related to net
operating loss carryforwards and certain temporary differences. We recognize a future tax benefit
to the extent that realization of such benefit is more likely than not or a valuation allowance is
applied. Because of our historical operating losses, we have provided a full valuation allowance
against our net deferred tax assets. When we have a history of profitable operations sufficient to
demonstrate that it is more likely than not that our deferred tax assets will be realized, the
valuation allowance will be reversed. However, this assessment of our planned use of our deferred
tax assets is an estimate which could change in the future depending upon the generation of taxable
income in amounts sufficient to realize our deferred tax assets.
Goodwill. Goodwill is reviewed annually for impairment within each fiscal year or between the
annual tests if an event occurs or circumstances change that indicate it is more likely than not
that the fair value of a reporting unit is less than its carrying value. We perform our annual
impairment test as of January 1 in each fiscal year. We performed our last annual impairment test
on our goodwill as of January 1, 2010. No goodwill impairment was identified in any of our
reporting units. Determining the fair value of reporting units requires various assumptions and
estimates. The estimates of fair value include consideration of the future projected operating
results and cash flows of the reporting unit. Such projections could be different than actual
results. Should actual results be significantly less than estimates, the value of our goodwill
could be impaired in the future.
Subordinated notes. We account for our subordinated notes by separating for the liability and
equity components in a manner that will reflect the our nonconvertible debt borrowing rate on the
subordinated notes issuance date when interest cost is recognized. Accordingly, a portion of the
proceeds received is recorded as a liability and a portion is recorded as an addition to
shareholders equity reflecting the equity component (i.e., conversion feature). The difference
between the principal amount and the amount recorded as the liability component represents the debt
discount. The carrying amount of the liability is accreted up to the principal amount through the
amortization of the discount, using the effective interest method, to interest expense over the
expected life of the note.
Business Acquisitions. The Company accounts for its business acquisitions as a purchase,
whereby the purchase price is allocated to the assets acquired and liabilities assumed based on
their estimated fair value. The excess of the purchase price over estimated fair value of the net
identifiable assets is allocated to goodwill. Determining the fair value of assets and liabilities
requires various assumptions and estimates. These estimates and assumptions are refined with
adjustments recorded to goodwill as information is gathered and final appraisals are completed over
a one-year allocation period. The changes in these estimates could impact the amount of assets,
including goodwill and liabilities, ultimately recorded in our balance sheet and could impact our
operating results subsequent to such acquisition. We believe that our estimates have been
materially accurate in the past.
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS)
47
No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, a replacement of FASB Statement No. 162 (SFAS No. 168). This statement
modifies the GAAP hierarchy by establishing only two levels of GAAP, authoritative and
nonauthoritative accounting literature. Effective July 2009, the FASB Accounting Standards
Codification (ASC), also known collectively as the Codification, is considered the single
source of authoritative U.S. accounting and reporting standards, except for additional
authoritative rules and interpretive releases issued by the SEC. Nonauthoritative guidance and
literature would include, among other things, FASB Concepts Statements, American Institute of
Certified Public Accountants Issue Papers and Technical Practice Aids and accounting textbooks. The
Codification was developed to organize GAAP pronouncements by topic so that users can more easily
access authoritative accounting guidance. It is organized by topic, subtopic, section, and
paragraph, each of which is identified by a numerical designation. We adopted the Codification
prospectively beginning in the second quarter of fiscal 2010, resulting in no impact on the
Companys consolidated financial statements.
Accounting for noncontrolling interest in consolidated subsidiaries. We adopted new accounting
guidance that changes the accounting and reporting for minority interests, which are
recharacterized as noncontrolling interests and classified as a component of equity. This new
consolidation method changes the accounting for transactions with noncontrolling interest holders.
We adopted this standard beginning in the first quarter of fiscal 2010 (see Note 16 in the
Companys audited consolidated financial statements for the year ended March 31, 2010).
Subsequent events. We adopted new accounting guidance related to the accounting for and
disclosure of subsequent events that occur after the balance sheet date. We adopted this standard
beginning in the first quarter of fiscal 2010 and have evaluated subsequent events through the date
of issuance, resulting in no impact on the Companys consolidated financial statements.
Consolidation accounting for variable interest entities. This new accounting guidance modifies
the previous guidance in relation to the identification of controlling financial interests in a
VIE. This analysis identifies the primary beneficiary of a VIE as the enterprise that has both of
the following characteristics, among others: (a) the power to direct the activities of a VIE that
most significantly impact the entitys economic performance; and (b) the obligation to absorb
losses of the entity, or the right to receive benefits from the entity, that could potentially be
significant to the VIE. If an enterprise determines that power is shared among multiple unrelated
parties such that no one party has the power to direct the activities of a VIE that most
significantly impact the VIEs economic performance, then no party is the primary beneficiary.
Power is shared if each of the parties sharing power are required to consent to the decisions
relating to the activities that most significantly impact the VIEs performance. The provisions of
this standard will become effective for us beginning in fiscal 2011. Based upon our review and the
current business and ownership structure of TV Guide Network, we will no longer be required to
consolidate TV Guide Network, effective April 1, 2010.
The deconsolidation of TV Guide network will result in the reclassification of the asset and
liability amounts in each balance sheet caption related to the TV Guide Network to the investment
in equity method investees account within other assets on the consolidated balance sheet. In
addition, under the equity method of accounting our share of the revenues and expenses of TV Guide
Network will be recorded net in the equity interest line item in the consolidated statements of
operations and we will report interest income for the earnings on our share of the mandatorily
redeemable preferred stock. The adoption of the new accounting standard is not expected to impact
the net loss attributable to our shareholders. We may apply the statement on a retrospective basis
with the prior year statements adjusted to reflect the application of the statement as of the
beginning of the earliest period presented.
Had this new accounting guidance been effective as of March 31, 2010 our consolidated balance
sheet would have included a decrease of approximately $22.2 million of cash and cash equivalents,
approximately $19.7 million of net accounts receivable, approximately $152.6 million of goodwill,
approximately $112.9 million of other assets, approximately $36.1 million of accounts payable and
accrued liabilities, approximately $18.5 million of other liabilities, approximately $94.6 million
of mandatorily redeemable preferred stock units held by noncontrolling interest and $38.6 million
of noncontrolling interests, with a corresponding net increase to investment in equity method
investments, which is classified as other assets on our consolidated balance sheets.
48
RESULTS OF OPERATIONS
Fiscal 2010 Compared to Fiscal 2009
The following table sets forth the components of consolidated revenue for the fiscal year
ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
|
|
|
|
|
|
(Amounts in millions) |
|
|
|
|
|
Consolidated Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
1,119.2 |
|
|
$ |
1,233.9 |
|
|
$ |
(114.7 |
) |
|
|
(9.3 |
%) |
Television Production |
|
|
350.9 |
|
|
|
222.2 |
|
|
|
128.7 |
|
|
|
57.9 |
% |
Media Networks |
|
|
113.6 |
|
|
|
10.3 |
|
|
|
103.3 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,583.7 |
|
|
$ |
1,466.4 |
|
|
$ |
117.3 |
|
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM Percentage not meaningful |
Our largest component of revenue comes from home entertainment. The following table sets forth
total home entertainment revenue for both the Motion Pictures and Television Production reporting
segments for the fiscal year ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
|
|
|
|
|
|
(Amounts in millions) |
|
|
|
|
|
Home Entertainment Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
540.4 |
|
|
$ |
640.7 |
|
|
$ |
(100.3 |
) |
|
|
(15.7 |
%) |
Television Production |
|
|
67.8 |
|
|
|
34.9 |
|
|
|
32.9 |
|
|
|
94.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
608.2 |
|
|
$ |
675.6 |
|
|
$ |
(67.4 |
) |
|
|
(10.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures Revenue
The decrease in motion pictures revenue this period was mainly attributable to decreases in
theatrical and home entertainment revenue and, to a lesser extent, a decrease in international
revenue. These decreases were offset by an increase in Mandate Pictures revenue, and, to a lesser
extent, increases in television and Lionsgate UK revenue. We expect an increase in the number of
our theatrical releases for fiscal 2011, as compared to fiscal 2010. As a result, we currently
expect our motion picture segment revenue for fiscal 2011 will exceed our fiscal 2010 motion
picture segment revenue. However, actual motion pictures revenue will depend on the performance of
our film and video titles across all media and territories and can vary materially from
expectations. The following table sets forth the components of revenue for the motion pictures
reporting segment for the fiscal year ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
|
|
|
|
|
|
(Amounts in millions) |
|
|
|
|
|
Motion Pictures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical |
|
$ |
139.4 |
|
|
$ |
223.3 |
|
|
$ |
(83.9 |
) |
|
|
(37.6 |
%) |
Home Entertainment |
|
|
540.4 |
|
|
|
640.7 |
|
|
|
(100.3 |
) |
|
|
(15.7 |
%) |
Television |
|
|
186.7 |
|
|
|
170.3 |
|
|
|
16.4 |
|
|
|
9.6 |
% |
International |
|
|
73.4 |
|
|
|
81.6 |
|
|
|
(8.2 |
) |
|
|
(10.0 |
%) |
Lionsgate UK |
|
|
74.3 |
|
|
|
60.7 |
|
|
|
13.6 |
|
|
|
22.4 |
% |
Mandate Pictures |
|
|
99.1 |
|
|
|
45.5 |
|
|
|
53.6 |
|
|
|
117.8 |
% |
Other |
|
|
5.9 |
|
|
|
11.8 |
|
|
|
(5.9 |
) |
|
|
(50.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,119.2 |
|
|
$ |
1,233.9 |
|
|
$ |
(114.7 |
) |
|
|
(9.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
49
Motion Pictures Theatrical Revenue
The following table sets forth the titles contributing significant motion pictures theatrical
revenue for the fiscal year ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
Year Ended March 31, |
2010 |
|
2009 |
|
|
Theatrical Release Date |
|
|
|
Theatrical Release Date |
From Paris With Love
|
|
February 2010
|
|
The Haunting in Connecticut
|
|
March 2009 |
Daybreakers
|
|
January 2010
|
|
Madea Goes to Jail
|
|
February 2009 |
Spy Next Door
|
|
January 2010
|
|
My Bloody Valentine 3-D
|
|
January 2009 |
Brothers
|
|
December 2009
|
|
Transporter 3
|
|
November 2008 |
Precious
|
|
November 2009
|
|
Saw V
|
|
October 2008 |
Saw VI
|
|
October 2009
|
|
W.
|
|
October 2008 |
Gamer
|
|
September 2009
|
|
The Family That Preys
|
|
September 2008 |
I Can Do Bad All By Myself
|
|
September 2009
|
|
The Forbidden Kingdom
|
|
April 2008 |
The Haunting in Connecticut
|
|
March 2009 |
|
|
|
|
The following table sets forth the amount and percentage of theatrical revenue generated
by the titles listed above and the titles not listed above for the fiscal year ended March 31, 2010
and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
|
|
|
|
Theatrical |
|
|
|
|
|
|
Theatrical |
|
|
Theatrical |
|
|
|
|
|
|
Theatrical |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
Theatrical Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical revenue from significant titles listed above |
|
$ |
126.4 |
|
|
|
|
|
|
|
91 |
% |
|
$ |
170.8 |
|
|
|
|
|
|
|
76 |
% |
|
$ |
(44.4 |
) |
|
|
(26.0 |
%) |
Theatrical revenue from titles not listed above |
|
|
13.0 |
|
|
|
|
|
|
|
9 |
% |
|
|
52.5 |
|
|
|
|
|
|
|
24 |
% |
|
|
(39.5 |
) |
|
|
(75.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
139.4 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
223.3 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
(83.9 |
) |
|
|
(37.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of theatrical revenue of significant titles individually,
as a percent of theatrical revenue |
|
|
6 |
% |
|
to |
|
|
17 |
% |
|
|
5 |
% |
|
to |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical revenue of $139.4 million decreased $83.9 million, or 37.6%, in fiscal 2010 as
compared to fiscal 2009. The decrease in theatrical revenue in fiscal 2010 as compared to fiscal
2009 is due to only 10 theatrical releases in the current fiscal year compared to 16 in the prior
fiscal year. The contribution of theatrical revenue from titles listed above decreased $44.4
million in the current fiscal year compared to the prior fiscal year, and the contribution of
theatrical revenue from the titles not listed in the table above decreased $39.5 million in the
current fiscal year compared to the prior fiscal year.
50
Motion Pictures Home Entertainment Revenue
The following table sets forth the titles contributing significant motion pictures home
entertainment revenue for the fiscal year ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
Year Ended March 31, |
2010 |
|
2009 |
|
|
DVD Release Date |
|
|
|
DVD Release Date |
Brothers
|
|
March 2010
|
|
Punisher: War Zone
|
|
March 2009 |
Precious
|
|
March 2010
|
|
Transporter 3
|
|
March 2009 |
Gamer
|
|
January 2010
|
|
Bangkok Dangerous
|
|
January 2009 |
I Can Do Bad All By Myself
|
|
January 2010
|
|
My Best Friends Girl
|
|
January 2009 |
Saw VI
|
|
January 2010
|
|
Saw V
|
|
January 2009 |
Crank: High Voltage
|
|
September 2009
|
|
The Family That Preys
|
|
January 2009 |
The Haunting in Connecticut
|
|
July 2009
|
|
The Forbidden Kingdom
|
|
September 2008 |
Madea Goes to Jail
|
|
June 2009
|
|
Meet the Browns
|
|
July 2008 |
My Bloody Valentine 3-D
|
|
May 2009
|
|
The Bank Job
|
|
July 2008 |
New In Town
|
|
May 2009
|
|
The Eye
|
|
June 2008 |
The Spirit
|
|
April 2009
|
|
Witless Protection
|
|
June 2008 |
|
|
|
|
Rambo
|
|
May 2008 |
The following table sets forth the amount and percentage of home entertainment revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
|
|
|
|
Home |
|
|
|
|
|
|
Home |
|
|
Home |
|
|
|
|
|
|
Home |
|
|
|
|
|
|
Entertainment |
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
|
|
|
|
Entertainment |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
Home Entertainment Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home entertainment revenue from significant titles listed above |
|
$ |
223.0 |
|
|
|
|
|
|
|
41 |
% |
|
$ |
290.4 |
|
|
|
|
|
|
|
45 |
% |
|
$ |
(67.4 |
) |
|
|
(23.2 |
%) |
Home entertainment revenue from titles not listed above |
|
|
317.4 |
|
|
|
|
|
|
|
59 |
% |
|
|
350.3 |
|
|
|
|
|
|
|
55 |
% |
|
|
(32.9 |
) |
|
|
(9.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
540.4 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
640.7 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
(100.3 |
) |
|
|
(15.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of home entertainment revenue of significant titles
individually, as a percent of home entertainment revenue |
|
|
2 |
% |
|
to |
|
|
6 |
% |
|
|
2 |
% |
|
to |
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home entertainment revenue of $540.4 million decreased $100.3 million, or 15.7%, in
fiscal 2010 as compared to fiscal 2009. The decrease in home entertainment revenue in the fiscal
2010 compared to fiscal 2009 is primarily due to fewer theatrical releases in fiscal 2010 as compared
to fiscal 2009 and the impact of the overall reduction of consumer
spending on home entertainment products. The contribution of home entertainment
revenue from titles listed above decreased $67.4 million in the current fiscal year compared to
the prior fiscal year, and the contribution of home entertainment revenue from the titles not
listed above decreased $32.9 million in the current fiscal year compared to the prior fiscal year.
51
Motion Pictures Television Revenue
The following table sets forth the titles contributing significant motion pictures television
revenue for the fiscal year ended March 31, 2010 and 2009:
|
|
|
Year Ended March 31, |
2010 |
|
2009 |
Madea Goes to Jail
|
|
3:10 to Yuma |
My Best Friends Girl
|
|
Forbidden Kingdom |
My Bloody Valentine 3-D
|
|
Good Luck Chuck |
New In Town
|
|
Meet the Browns |
Saw V
|
|
Rambo |
The Family That Preys
|
|
Saw IV |
The Haunting in Connecticut
|
|
The Bank Job |
Transporter 3
|
|
The Eye |
W.
|
|
Why Did I Get Married? Feature |
The following table sets forth the amount and percentage of television revenue generated
by the titles listed above and the titles not listed above for the fiscal year ended March 31, 2010
and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
|
|
|
|
Television |
|
|
|
|
|
|
Television |
|
|
Television |
|
|
|
|
|
|
Television |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
Television Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television revenue from significant titles listed above |
|
$ |
100.8 |
|
|
|
|
|
|
|
54 |
% |
|
$ |
107.6 |
|
|
|
|
|
|
|
63 |
% |
|
$ |
(6.8 |
) |
|
|
(6.3 |
%) |
Television revenue from titles not listed above |
|
|
85.9 |
|
|
|
|
|
|
|
46 |
% |
|
|
62.7 |
|
|
|
|
|
|
|
37 |
% |
|
|
23.2 |
|
|
|
37.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
186.7 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
170.3 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
16.4 |
|
|
|
9.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of television revenue of significant titles individually,
as a percent of television revenue |
|
|
4 |
% |
|
to |
|
|
9 |
% |
|
|
6 |
% |
|
to |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television revenue included in motion pictures revenue of $186.7 million increased $16.4
million, or 9.6% in fiscal 2010 as compared to fiscal 2009. The contribution of television revenue
from the titles listed above decreased $6.8 million in the current fiscal year compared to the
prior fiscal year, and the contribution of television revenue from the titles not listed above
increased $23.2 million in the current fiscal year compared to the prior fiscal year.
Motion Pictures International Revenue
The following table sets forth the titles contributing significant motion pictures
international revenue for the fiscal year ended March 31, 2010 and 2009:
|
|
|
Year Ended March 31, |
2010 |
|
2009 |
Brothers
|
|
My Best Friends Girl |
My Bloody Valentine 3-D
|
|
Punisher: War Zone |
Saw V
|
|
Saw IV |
Saw VI
|
|
Saw V |
|
|
The Eye |
52
The following table sets forth the amount and percentage of international revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
|
|
|
|
International |
|
|
|
|
|
|
International |
|
|
International |
|
|
|
|
|
|
International |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
International Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International revenue from significant titles listed above |
|
$ |
28.9 |
|
|
|
|
|
|
|
39 |
% |
|
$ |
37.4 |
|
|
|
|
|
|
|
46 |
% |
|
$ |
(8.5 |
) |
|
|
(22.7 |
%) |
International revenue from titles not listed above |
|
|
44.5 |
|
|
|
|
|
|
|
61 |
% |
|
|
44.2 |
|
|
|
|
|
|
|
54 |
% |
|
|
0.3 |
|
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
73.4 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
81.6 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
(8.2 |
) |
|
|
(10.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of international revenue of significant titles individually,
as a percent of international revenue |
|
|
7 |
% |
|
to |
|
|
13 |
% |
|
|
8 |
% |
|
to |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International revenue included in motion pictures revenue of $73.4 million decreased $8.2
million, or 10.0%, in fiscal 2010 as compared to fiscal 2009. The decrease in international
revenue in fiscal 2010 compared to fiscal 2009 is mainly due to a decrease in the contribution
of international revenue from titles listed above in fiscal 2010 as compared to fiscal 2009.
Motion Pictures Lionsgate UK Revenue
The following table sets forth the titles contributing significant Lionsgate UK revenue for
the fiscal year ended March 31, 2010 and 2009:
|
|
|
Year Ended March 31, |
2010 |
|
2009 |
Drag Me to Hell
|
|
My Bloody Valentine 3-D |
Harry Brown
|
|
Righteous Kill |
Hurt Locker
|
|
Saw IV |
My Bloody Valentine 3-D
|
|
Saw V |
Saw VI
|
|
The Bank Job |
The following table sets forth the amount and percentage of Lionsgate UK revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
|
|
|
|
Lionsgate UK |
|
|
|
|
|
|
Lionsgate UK |
|
|
Lionsgate UK |
|
|
|
|
|
|
Lionsgate UK |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
Lionsgate UK Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lionsgate UK revenue from significant titles listed above |
|
$ |
28.6 |
|
|
|
|
|
|
|
38 |
% |
|
$ |
23.2 |
|
|
|
|
|
|
|
38 |
% |
|
$ |
5.4 |
|
|
|
23.3 |
% |
Lionsgate UK revenue from titles not listed above |
|
|
45.7 |
|
|
|
|
|
|
|
62 |
% |
|
|
37.5 |
|
|
|
|
|
|
|
62 |
% |
|
|
8.2 |
|
|
|
21.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
74.3 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
60.7 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
13.6 |
|
|
|
22.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of Lionsgate UK revenue of significant titles individually,
as a percent of Lionsgate UK revenue |
|
|
5 |
% |
|
to |
|
|
13 |
% |
|
|
5 |
% |
|
to |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lionsgate UK revenue of $74.3 million increased $13.6 million, or 22.4%, in fiscal 2010
as compared to fiscal 2009. The increase in Lionsgate UK revenue in fiscal 2010 compared to
fiscal 2009 is mainly due to stronger performance of theatrical releases in the United Kingdom for
titles such as Hurt Locker and Drag Me To Hell in fiscal 2010 as compared to fiscal 2009. The
contribution of Lionsgate UK revenue from titles listed above increased $5.4 million in the current
fiscal year compared to the prior fiscal year, and
53
the contribution of Lionsgate UK revenue from the titles not listed in the table above increased
$8.2 million in the current fiscal year compared to the prior fiscal year.
Motion Pictures Mandate Pictures Revenue
The following table sets forth the titles contributing significant Mandate Pictures revenue
for the fiscal year ended March 31, 2010 and 2009:
|
|
|
Year Ended March 31, |
2010 |
|
2009 |
Drag Me To Hell
|
|
30 Days of Night |
Horsemen
|
|
Harold and Kumar Escape from Guantanamo Bay |
Juno
|
|
Juno |
Passengers
|
|
Nick and Norahs Infinite Playlist |
Whip It
|
|
Passengers |
The following table sets forth the amount and percentage of Mandate Pictures revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
Amount of |
|
|
|
|
|
|
of |
|
|
|
|
|
|
Mandate |
|
|
|
|
|
|
Mandate |
|
|
Mandate |
|
|
|
|
|
|
Mandate |
|
|
|
|
|
|
Pictures |
|
|
|
|
|
|
Pictures |
|
|
Pictures |
|
|
|
|
|
|
Pictures |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
|
|
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
Mandate Pictures Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandate Pictures revenue from significant titles listed above |
|
$ |
92.3 |
|
|
|
|
|
|
|
93 |
% |
|
$ |
35.3 |
|
|
|
|
|
|
|
78 |
% |
|
$ |
57.0 |
|
|
|
161.5 |
% |
Mandate Pictures revenue from titles not listed above |
|
|
6.8 |
|
|
|
|
|
|
|
7 |
% |
|
|
10.2 |
|
|
|
|
|
|
|
22 |
% |
|
|
(3.4 |
) |
|
|
(33.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
99.1 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
45.5 |
|
|
|
|
|
|
|
100 |
% |
|
$ |
53.6 |
|
|
|
117.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of Mandate Pictures revenue of significant titles
individually, as a percent of Mandate Pictures revenue |
|
|
7 |
% |
|
to |
|
|
51 |
% |
|
|
5 |
% |
|
to |
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandate Pictures revenue includes revenue from the sales and licensing of domestic and
worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors or
international sub-distributors. The increase in Mandate Pictures revenue in fiscal 2010
compared to fiscal 2009 is mainly due to the higher contribution of Mandate Pictures revenue from
titles listed above, in particular from Drag Me To Hell in fiscal 2010 as compared to fiscal 2009.
54
Television Production Revenue
Television production revenue of $350.9 million, increased $128.7 million, or 57.9%, in fiscal
2010 as compared to fiscal 2009. Based on the television shows currently expected to be delivered
in fiscal 2011, we anticipate that our television production segment revenue in fiscal 2011 will
exceed our fiscal 2010 television production segment revenue. However, actual revenues will depend
on actual deliveries and can vary materially from expectations. The following table sets forth the
components and the changes in the components of revenue that make up television production revenue
for the fiscal year ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
|
|
|
|
|
|
(Amounts in millions) |
|
|
|
|
|
Television Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic series licensing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lionsgate Television |
|
$ |
128.8 |
|
|
$ |
79.2 |
|
|
$ |
49.6 |
|
|
|
62.6 |
% |
Debmar-Mercury |
|
|
92.2 |
|
|
|
59.1 |
|
|
|
33.1 |
|
|
|
56.0 |
% |
Ish Entertainment |
|
|
19.0 |
|
|
|
23.4 |
|
|
|
(4.4 |
) |
|
|
(18.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total domestic series licensing |
|
|
240.0 |
|
|
|
161.7 |
|
|
|
78.3 |
|
|
|
48.4 |
% |
International |
|
|
42.3 |
|
|
|
24.9 |
|
|
|
17.4 |
|
|
|
69.9 |
% |
Home entertainment releases of television production |
|
|
67.8 |
|
|
|
34.9 |
|
|
|
32.9 |
|
|
|
94.3 |
% |
Other |
|
|
0.8 |
|
|
|
0.7 |
|
|
|
0.1 |
|
|
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
350.9 |
|
|
$ |
222.2 |
|
|
$ |
128.7 |
|
|
|
57.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues included in domestic series licensing from Lionsgate Television increased in
fiscal 2010 due to an increase in episodes of programming delivered, and higher revenue generated
per episode delivered in fiscal 2010 compared to fiscal 2009.
The following table sets forth the number of television episodes and hours delivered included
in Lionsgate Television domestic series licensing revenue in the fiscal year ended March 31, 2010
and 2009, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
|
|
March 31, 2010 |
|
|
|
|
|
|
Episodes |
|
Hours |
Crash Season 2 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Mad Men Season 3 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Nurse Jackie Season 2 |
|
1/2hr |
|
|
12 |
|
|
|
6.0 |
|
Nurse Jackie Season 1 |
|
1/2hr |
|
|
12 |
|
|
|
6.0 |
|
Blue Mountain State |
|
1/2hr |
|
|
13 |
|
|
|
6.5 |
|
Weeds Season 5 |
|
1/2hr |
|
|
13 |
|
|
|
6.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
51.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
|
|
March 31, 2009 |
|
|
|
|
|
|
Episodes |
|
Hours |
Fear Itself |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Crash Season 1 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Mad Men Season 2 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Scream Queens |
|
1hr |
|
|
8 |
|
|
|
8.0 |
|
Weeds Season 4 |
|
1/2hr |
|
|
13 |
|
|
|
6.5 |
|
Pilots |
|
1/2hr |
|
|
2 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
54.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues included in domestic series licensing from Debmar-Mercury increased in fiscal
2010 due to increased revenue from the television series House of Payne, Meet the Browns, The Wendy
Williams Show, and Family Feud.
Revenues included in domestic series licensing from our reality television collaboration with
Ish Entertainment Inc. (Ish), resulted primarily from the production of the domestic series Paris
Hiltons My New BFF, and My Antonio.
International revenue increased in fiscal 2010 due to revenue from Mad Men Season 3, Crash
Season 1, Dead Zone Season 1, and Fear Itself, and international revenue in fiscal 2009 includes
revenue from Mad Men Season 1 and Season 2, Paris Hiltons British Best Friend, Weeds Season 3 and
Season 4, Wildfire Season 4, and The Kill Point.
The increase in revenue from home entertainment releases of television production is primarily
driven by DVD/Blu-ray revenue from Weeds Season 4 and Season 5, and Mad Men Season 2 and Season 3.
Media Networks Revenue
Media Networks revenue was $113.6 million in fiscal 2010 compared to $10.3 million for the
period from the acquisition date of February 28, 2009 to March 31, 2009. Beginning in fiscal 2011,
we will no longer consolidate TV Guide Network, and, as a result, we will not include revenue from
Media Networks in consolidated revenue in fiscal 2011 and beyond.
55
Direct Operating Expenses
The following table sets forth direct operating expenses by segment for the fiscal year ended
March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of films
and television programs |
|
$ |
302.0 |
|
|
$ |
202.4 |
|
|
$ |
36.6 |
|
|
$ |
541.0 |
|
|
$ |
329.2 |
|
|
$ |
125.7 |
|
|
$ |
3.8 |
|
|
$ |
458.7 |
|
Participation and residual expense |
|
|
188.8 |
|
|
|
75.9 |
|
|
|
|
|
|
|
264.7 |
|
|
|
279.0 |
|
|
|
49.3 |
|
|
|
|
|
|
|
328.3 |
|
Other expenses |
|
|
0.8 |
|
|
|
0.6 |
|
|
|
0.2 |
|
|
|
1.6 |
|
|
|
5.1 |
|
|
|
1.8 |
|
|
|
(0.1 |
) |
|
|
6.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
491.6 |
|
|
$ |
278.9 |
|
|
$ |
36.8 |
|
|
$ |
807.3 |
|
|
$ |
613.3 |
|
|
$ |
176.8 |
|
|
$ |
3.7 |
|
|
$ |
793.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses as a
percentage of segment revenues |
|
|
43.9 |
% |
|
|
79.5 |
% |
|
|
32.4 |
% |
|
|
51.0 |
% |
|
|
49.7 |
% |
|
|
79.6 |
% |
|
|
35.9 |
% |
|
|
54.1 |
% |
Direct operating expenses of the motion pictures segment of $491.6 million for fiscal
2010 were 43.9% of motion pictures revenue, compared to $613.3 million, or 49.7%, of motion
pictures revenue for fiscal 2009. The decrease in direct operating expense of the motion pictures
segment in fiscal 2010 as a percent of revenue is due primarily to a fiscal 2009 charge for a home
entertainment library distribution contract of family entertainment titles, and a decrease in
investment in film write-downs for fiscal 2010, partially offset by an increase in direct operating
expenses as a percentage of revenue attributed to Mandate Pictures. Investment in film write-downs
of the motion picture segment totaled approximately $12.5 million for fiscal 2010, compared to
$37.3 million for 2009. Also, in fiscal 2009, we recorded a charge of $36.1 million for a
participation reserve in connection with a home entertainment library distribution contract of
family entertainment titles entered into in fiscal 2009 due to the actual and expected future
underperformance of the titles in this library. The fiscal 2010 write-downs included write-downs on
two titles over $1.0 million which aggregated $7.4 million. The fiscal 2009 write-downs included
write-downs on six titles over $1.0 million which aggregated $26.9 million of the total charges due
to the lower than anticipated performance of six titles and $5.1 million of write-downs of film
libraries acquired due to the underperformance of those libraries. Other expenses consists of the
provision for doubtful accounts and foreign exchange gains and losses. The provision for doubtful
accounts decreased from $3.7 million in fiscal 2009 to $1.6 million in fiscal 2010. Foreign
exchange gains and losses included a loss of $3.1 million in fiscal 2009 to a gain of less than
$0.1 million in fiscal 2010 due to changes in exchange rates.
Direct operating expenses of the television production segment of $278.9 million for fiscal
2010 were 79.5% of television revenue, compared to $176.8 million, or 79.6%, of television revenue
for fiscal 2009. The increase in direct operating expense of the television production segment in
fiscal 2010 is due to the increase in television production revenue in fiscal 2010 as compared to
fiscal 2009. In fiscal 2010, $12.6 million of charges for costs incurred in excess of contracted
revenues for episodic television series or write-downs of television film costs were included in
the amortization of television programs, compared to $9.1 million in fiscal 2009. The fiscal 2010
write-downs included write-downs on five titles over $1.0 million which aggregated $10.5 million,
of which $4.9 million related to one television series. The fiscal 2009 write-downs included
write-downs on four titles over $1.0 million which aggregated $7.7 million.
Direct operating expenses of the media networks segment, acquired in February 2009, of $36.8
million for fiscal 2010 consists primarily of programming expenses associated with the production
of such programs as Idol Tonight and Hollywood 411. Beginning in fiscal 2011, we will no longer
consolidate TV Guide Network, and, as a result, we will not include direct operating expenses from
Media Networks in consolidated direct operating expenses in fiscal 2011 and beyond.
56
Distribution and Marketing Expenses
The following table sets forth distribution and marketing expenses by segment for the fiscal
year ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
|
(Amounts in millions) |
|
Distribution and marketing expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical |
|
$ |
235.9 |
|
|
$ |
0.2 |
|
|
$ |
|
|
|
$ |
236.1 |
|
|
$ |
330.5 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
330.5 |
|
Home Entertainment |
|
|
192.0 |
|
|
|
18.7 |
|
|
|
|
|
|
|
210.7 |
|
|
|
255.4 |
|
|
|
10.5 |
|
|
|
|
|
|
|
265.9 |
|
Television |
|
|
3.9 |
|
|
|
8.5 |
|
|
|
|
|
|
|
12.4 |
|
|
|
5.0 |
|
|
|
10.4 |
|
|
|
|
|
|
|
15.4 |
|
International |
|
|
4.7 |
|
|
|
3.7 |
|
|
|
|
|
|
|
8.4 |
|
|
|
6.3 |
|
|
|
3.8 |
|
|
|
|
|
|
|
10.1 |
|
Lionsgate UK |
|
|
31.1 |
|
|
|
1.1 |
|
|
|
|
|
|
|
32.2 |
|
|
|
42.4 |
|
|
|
0.5 |
|
|
|
|
|
|
|
42.9 |
|
Media Networks |
|
|
|
|
|
|
|
|
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
|
|
1.9 |
|
|
|
1.9 |
|
Other |
|
|
1.7 |
|
|
|
0.3 |
|
|
|
|
|
|
|
2.0 |
|
|
|
2.1 |
|
|
|
0.8 |
|
|
|
|
|
|
|
2.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
469.3 |
|
|
$ |
32.5 |
|
|
$ |
14.0 |
|
|
$ |
515.8 |
|
|
$ |
641.7 |
|
|
$ |
26.0 |
|
|
$ |
1.9 |
|
|
$ |
669.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of distribution and marketing expenses relate to the motion pictures
segment. Theatrical P&A in the motion pictures segment in fiscal 2010 of $235.9 million decreased
$94.6 million, or 28.6%, compared to $330.5 million in fiscal 2009. The decrease is driven by the
lower number of theatrical releases in fiscal 2010 as compared to fiscal 2009. Domestic theatrical
P&A from the motion pictures segment this period included P&A incurred on the release of Brothers,
Daybreakers, Gamer, From Paris With Love, I Can Do Bad All By Myself, Kick-Ass, Precious, Saw VI,
Spy Next Door and Why Did I Get Married Too?, which individually represented between 5% and 13% of
total theatrical P&A and, in the aggregate, accounted for 91% of the total theatrical P&A. Kick-Ass
and Why Did I Get Married Too? were released subsequent to the year ended March 31, 2010, and,
therefore, did not have any theatrical revenue contribution for fiscal 2010 but accounted for an
aggregate of 12% of theatrical P&A for the fiscal year. Domestic theatrical P&A from the motion
pictures segment in fiscal 2009 included P&A incurred on the release of titles such as Bangkok
Dangerous, Disaster Movie, Madea Goes to Jail, My Best Friends Girl, My Bloody Valentine 3-D, New
In Town, Punisher: War Zone, Saw V, The Family That Preys, The Haunting in Connecticut, The Spirit
and Transporter 3, which individually represented between 5% and 9% of total theatrical P&A and, in
the aggregate, accounted for 89% of the total theatrical P&A. In fiscal 2009, Bangkok Dangerous,
Disaster Movie, My Best Friends Girl, New In Town, Punisher: War Zone and The Spirit individually
represented between 6% and 9% of total theatrical P&A, and in the aggregate, accounted for 43% of
total theatrical P&A, and each contributed less than 5% of total theatrical revenue, and, in the
aggregate, contributed less than 18% of total theatrical revenue. Due to the anticipated increase
in the number of theatrical releases in fiscal 2011, we expect theatrical distribution and
marketing expenses to increase in fiscal 2011 as compared to fiscal 2010.
Home entertainment distribution and marketing costs on motion pictures and television
production in fiscal 2010 of $210.7 million decreased $55.2 million, or 20.8%, compared to $265.9
million in fiscal 2009. The decrease in home entertainment distribution and marketing costs is
mainly due to the decrease in revenue in fiscal 2010 as compared to fiscal 2009. Home entertainment
distribution and marketing costs as a percentage of home entertainment revenues was 34.6% and 39.4%
in fiscal 2010 and fiscal 2009, respectively. The decrease in distribution and marketing costs as a
percentage of home entertainment revenues is mainly due to lower marketing expenses as a percentage
of revenue incurred in the current fiscal year as compared to the prior fiscal year.
Lionsgate UK distribution and marketing expenses
in the motion pictures segment
in fiscal 2010 of $31.1 million decreased
from $42.4 million in fiscal 2009, due to fewer theatrical releases in the current fiscal year as
compared to the prior fiscal year.
Distribution and marketing expenses of Media Networks, acquired in February 2009, of $14.0
million and $1.9 million in fiscal 2010 and fiscal 2009, respectively, include transmission and
marketing and promotion expenses. Beginning fiscal 2011, we will no longer consolidate TV Guide
Network, and, as a result, we will not include distribution and marketing expenses from Media
Networks in consolidated distribution and marketing expenses in fiscal 2011 and beyond.
57
General and Administrative Expenses
The following table sets forth general and administrative expenses by segment for the fiscal
year ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
General and Administrative Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
47.3 |
|
|
$ |
49.6 |
|
|
$ |
(2.3 |
) |
|
|
(4.6 |
%) |
Television Production |
|
|
9.7 |
|
|
|
13.1 |
|
|
|
(3.4 |
) |
|
|
(26.0 |
%) |
Media Networks |
|
|
43.7 |
|
|
|
3.8 |
|
|
|
39.9 |
|
|
NM |
|
Corporate, including stock based compensation |
|
|
79.8 |
|
|
|
70.1 |
|
|
|
9.7 |
|
|
|
13.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total General and Administrative Expenses |
|
$ |
180.5 |
|
|
$ |
136.6 |
|
|
$ |
43.9 |
|
|
|
32.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Media Networks General and Administrative Expenses |
|
|
(43.7 |
) |
|
|
(3.8 |
) |
|
|
(39.9 |
) |
|
NM |
|
Less Stock-Based Compensation Expense |
|
|
(19.2 |
) |
|
|
(9.8 |
) |
|
|
(9.4 |
) |
|
|
95.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expenses excluding Media
Networks and Stock-Based Compensation Expense |
|
$ |
117.6 |
|
|
$ |
123.0 |
|
|
$ |
(5.4 |
) |
|
|
(4.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative expenses as a percentage of revenue |
|
|
11.4 |
% |
|
|
9.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses excluding Media Networks and
stock-based compensation expense, as a percentage of
Motion Pictures and Television Production revenue |
|
|
8.0 |
% |
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
NM Percentage not meaningful |
The following table sets forth stock-based compensation expense (benefit) included in our
corporate segment for the years ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
Stock-Based Compensation Expense (Benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
$ |
3.2 |
|
|
$ |
3.2 |
|
|
$ |
|
|
|
|
0.0 |
% |
Restricted share units and other share-based compensation |
|
|
14.8 |
|
|
|
10.1 |
|
|
|
4.7 |
|
|
|
46.5 |
% |
Stock appreciation rights |
|
|
1.2 |
|
|
|
(3.5 |
) |
|
|
4.7 |
|
|
|
(134.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19.2 |
|
|
$ |
9.8 |
|
|
$ |
9.4 |
|
|
|
95.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses increased by $43.9 million, or 32.1%, mainly due to
the general and administrative expenses of $43.7 million associated with the Media Networks
segment, which was acquired in February 2009, and due to increases in stock-based compensation
and legal and professional fees associated with a shareholder
activist matter included in the corporate segment in the current period, offset by decreases in our other reporting
segments. General and administrative expenses of the Media Networks segment are primarily related
to salaries and related expenses.
General and administrative expenses excluding the Media Networks segment and excluding
stock-based compensation was $117.6 million in the current fiscal year compared to $123.0 million
in the prior fiscal year, which represents a decrease of $5.4 million, or 4.4%.
General and administrative expenses of the motion pictures segment decreased $2.3 million, or
4.6%, mainly due to a decrease in other general overhead such as travel and entertainment expenses
and facility expenses. In fiscal 2010, $7.9 million of motion pictures overhead was capitalized
compared to $7.7 million in fiscal 2009.
General and administrative expenses of the television production segment decreased $3.4
million, or 26.0%, mainly due to decreases in professional and consulting fees associated with
Tiger Gate, our Asian television channel joint venture, and to other
58
general overhead decreases. In fiscal 2010, $5.0 million of television production overhead was
capitalized compared to $5.8 million in fiscal 2009.
General and administrative expenses of the Media Networks segment, acquired in February 2009,
increased $39.9 million in fiscal 2010 compared to fiscal 2009. Beginning fiscal 2011, we will no
longer consolidate TV Guide Network, and, as a result, we will not include general and
administrative expenses from Media Networks in consolidated general and administrative expenses in
fiscal 2011 and beyond.
General and administrative expenses of the corporate segment increased $9.7 million, or 13.8%,
mainly due to $5.7 million of legal and professional fees associated with a shareholder activist
matter and increases in stock-based compensation, partially offset by
decreases in other professional fees, rent and facility expenses, and
compensation expenses.
At March 31, 2010, as disclosed in Note 15 to the audited consolidated financial statements,
there were unrecognized compensation costs of approximately $16.8 million related to stock options
and restricted share units previously granted, including annual installments of share grants that
were subject to performance targets, which will be expensed over the remaining vesting periods. At
March 31, 2010, 894,554 shares of restricted share units have been awarded to four key executive
officers, the vesting of which will be subject to performance targets to be set annually by the
Compensation Committee of the Board of Directors of the Company. These restricted share units will
vest in three, four, and five annual installments assuming annual performance targets have been
met. The fair value of the 894,554 shares, whose future annual performance targets have not been
set, was $5.6 million, based on the market price of the Companys common shares as of March 31,
2010. The market value will be remeasured when the annual performance criteria are set and the
value will be expensed over the remaining vesting periods once it becomes probable that the
performance targets will be satisfied.
Depreciation, Amortization and Other Expenses (Income)
Depreciation and amortization of $28.1 million in fiscal 2010 increased $20.4 million, or
264.9%, from $7.7 million in fiscal 2009. The increase is primarily due to tangible and intangible
assets acquired in connection with the purchase of TV Guide Network. Beginning fiscal 2011, we will
no longer consolidate TV Guide Network, and, as a result, we will not include depreciation and
amortization expenses from TV Guide Network in consolidated depreciation and amortization expenses
in fiscal 2011 and beyond.
Estimated amortization expense, excluding amortization expense related to TV Guide Network,
for each of the years ending March 31, 2011 through 2015 is approximately $1.0 million, $0.3
million, $0.1 million, nil, and nil, respectively.
Interest expense of $58.1 million in fiscal 2010 increased $23.8 million, or 69.4%, from $34.3
million in fiscal 2009. The following table sets forth the components of interest expense for the
years ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in millions) |
|
Interest Expense |
|
|
|
|
|
|
|
|
Cash Based: |
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
5.8 |
|
|
$ |
2.9 |
|
Senior subordinated debentures |
|
|
9.1 |
|
|
|
10.6 |
|
Senior secured second priority notes |
|
|
10.8 |
|
|
|
|
|
Other |
|
|
2.6 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
28.3 |
|
|
|
15.1 |
|
|
|
|
|
|
|
|
Non-Cash Based: |
|
|
|
|
|
|
|
|
Amortization of discount on liability component of
senior subordinated debentures |
|
|
16.1 |
|
|
|
15.5 |
|
Amortization of discount on senior secured second priority notes |
|
|
0.4 |
|
|
|
|
|
Amortization of deferred financing costs |
|
|
3.2 |
|
|
|
3.7 |
|
Accretion of mandatorily redeemable preferred stock units
and 10% non-cash dividend |
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.8 |
|
|
|
19.2 |
|
|
|
|
|
|
|
|
|
|
$ |
58.1 |
|
|
$ |
34.3 |
|
|
|
|
|
|
|
|
59
Interest expense increased in fiscal 2010 due to additional interest expense related to
the Senior Notes issued in fiscal 2010, higher average outstanding balances under our senior revolving credit
facility and the non-cash interest including the 10% dividend
associated with the accretion of the mandatorily redeemable preferred
stock units, as compared to the average outstanding balance of the prior year.
Interest and other income was $1.6 million in fiscal 2010, compared to $5.8 million in fiscal
2009. Interest and other income in fiscal 2010 was earned on the cash balance and restricted
investments held during the fiscal year ended March 31, 2010.
Gain on extinguishment of debt was $5.7 million for fiscal 2010, resulting primarily from the
April 2009 gain on the exchange of $66.6 million of the Companys 3.625% convertible senior
subordinated notes offset slightly by losses resulting from the December 2009 repurchase of $40.0
million of the October 2004 2.9375% Notes and $39.9 million of the February 2005 3.625% Notes. This
compares to a gain on extinguishment of debt of $3.0 million in fiscal 2009, resulting from the
December 2008 repurchase of $9.0 million of the Companys 3.625% convertible senior subordinated
notes.
The following table represents our portion of the income or (loss) of our equity method
investees based on our percentage ownership for the years ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
Percentage |
|
|
March 31, |
|
|
March 31, |
|
|
|
Ownership |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(Amounts in millions) |
|
Horror Entertainment, LLC (FEARnet) |
|
|
33.33 |
% |
|
$ |
(0.6 |
) |
|
$ |
(5.3 |
) |
NextPoint, Inc. (Break.com) |
|
|
42.00 |
% |
|
|
(0.8 |
) |
|
|
(2.6 |
) |
Roadside Attractions, LLC |
|
|
43.00 |
% |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Studio 3 Partners, LLC (EPIX) (1) |
|
|
31.15 |
% |
|
|
(26.6 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(28.1 |
) |
|
$ |
(9.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain of our theatrical releases have been made available to EPIX for exhibition in
the domestic pay television window, for which $38.6 million of revenue and $26.3 million of gross
profit was recognized during the year ended March 31, 2010. Intercompany profits reflecting our pro
rata share of the venture of $7.9 million for the year ended March 31, 2010 were eliminated and are
reflected in equity interest losses of EPIX shown above. Also reflected in our share of losses
incurred by EPIX shown above are losses of $18.7 million and $1.0 million for the years ended March
31, 2010 and 2009, respectively. EPIX launched operations during the current year and began
amortization of its program costs and increased its marketing efforts, and as a result, EPIX expects
to report losses of approximately $42.0 million for its quarter ended March 31, 2010, of which the
Companys pro rata share will be recorded in the quarter ended June 30, 2010. |
Income Tax Expense
We
had an income tax expense of $1.2 million, or (4.6%), of loss before income taxes in fiscal
2010, compared to an expense of $2.7 million, or (1.6%), of loss before income taxes in fiscal
2009. The tax expense reflected in the current period is primarily attributable to U.S. and
Canadian income taxes and foreign withholding taxes. Our actual annual effective tax rate will
differ from the statutory federal rate as a result of several factors, including changes in the
valuation allowance against net deferred tax assets, non-temporary differences, foreign income
taxed at different rates, and state and local income taxes. Income tax loss carryforwards, subject
to certain limitations that may prevent us from fully utilizing them, amount to approximately
$156.2 million for U.S. federal income tax purposes available to reduce income taxes over twenty
years, $131.1 million for U.S. state income tax purposes available to reduce income taxes over
future years with varying expirations, $27.3 million for Canadian income tax purposes available to
reduce income taxes over 20 years with varying expirations, and $15.9 million for UK income tax
purposes available indefinitely to reduce future income taxes.
60
Net Loss
Net loss for the fiscal year ended March 31, 2010 was $28.1 million, compared to net loss for
the fiscal year ended March 31, 2009 of $178.5 million.
Net loss attributable to noncontrolling interest for the fiscal year ended March 31, 2010 was
$8.7 million, compared to nil for the fiscal year ended March 31, 2009.
Net loss attributable to our shareholders for the fiscal year ended March 31, 2010 was $19.5
million, or basic and diluted net loss per common share of $0.17 on 117.5 million weighted average
common shares outstanding. This compares to net loss attributable to our shareholders for the
fiscal year ended March 31, 2009 of $178.5 million, or basic and diluted net loss per common share
of $1.53 on 116.8 million weighted average common shares outstanding.
Fiscal 2009 Compared to Fiscal 2008
The following table sets forth the components of consolidated revenue for the fiscal year
ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
Consolidated Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
1,233.9 |
|
|
$ |
1,150.5 |
|
|
$ |
83.4 |
|
|
|
7.2 |
% |
Television Production |
|
|
222.2 |
|
|
|
210.5 |
|
|
|
11.7 |
|
|
|
5.6 |
% |
Media Networks |
|
|
10.3 |
|
|
|
|
|
|
|
10.3 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,466.4 |
|
|
$ |
1,361.0 |
|
|
$ |
105.4 |
|
|
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM Percentage not meaningful |
Our largest component of revenue came from home entertainment. The following table sets forth
total home entertainment revenue for both the Motion Pictures and Television Production reporting
segments for the fiscal year ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
Home Entertainment Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
640.7 |
|
|
$ |
623.5 |
|
|
$ |
17.2 |
|
|
|
2.8 |
% |
Television Production |
|
|
34.9 |
|
|
|
21.6 |
|
|
|
13.3 |
|
|
|
61.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
675.6 |
|
|
$ |
645.1 |
|
|
$ |
30.5 |
|
|
|
4.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
61
Motion Pictures Revenue
The increase in motion pictures revenue in fiscal 2009 was mainly attributable to increases in
television, theatrical, and home entertainment revenue, offset by decreases in international and,
to a lesser extent, Mandate Pictures and Lionsgate UK revenue. The following table sets forth the
components of revenue for the motion pictures reporting segment for the fiscal year ended March 31,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
Motion Pictures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical |
|
$ |
223.3 |
|
|
$ |
191.7 |
|
|
$ |
31.6 |
|
|
|
16.5 |
% |
Home Entertainment |
|
|
640.7 |
|
|
|
623.5 |
|
|
|
17.2 |
|
|
|
2.8 |
% |
Television |
|
|
170.3 |
|
|
|
115.5 |
|
|
|
54.8 |
|
|
|
47.4 |
% |
International |
|
|
81.6 |
|
|
|
94.1 |
|
|
|
(12.5 |
) |
|
|
(13.3 |
%) |
Lionsgate UK |
|
|
60.7 |
|
|
|
64.6 |
|
|
|
(3.9 |
) |
|
|
(6.0 |
%) |
Mandate Pictures |
|
|
45.5 |
|
|
|
52.3 |
|
|
|
(6.8 |
) |
|
|
(13.0 |
%) |
Other |
|
|
11.8 |
|
|
|
8.8 |
|
|
|
3.0 |
|
|
|
34.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,233.9 |
|
|
$ |
1,150.5 |
|
|
$ |
83.4 |
|
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures Theatrical Revenue
The following table sets forth the titles contributing significant motion pictures theatrical
revenue for the fiscal year ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
Year Ended March 31, |
2009 |
|
2008 |
|
|
Theatrical Release Date |
|
|
|
Theatrical Release Date |
The Haunting in Connecticut
|
|
March 2009
|
|
The Bank Job
|
|
March 2008 |
Madea Goes to Jail
|
|
February 2009
|
|
Meet the Browns
|
|
March 2008 |
My Bloody Valentine 3-D
|
|
January 2009
|
|
The Eye
|
|
February 2008 |
Transporter 3
|
|
November 2008
|
|
Rambo
|
|
January 2008 |
Saw V
|
|
October 2008
|
|
Why Did I Get Married? Feature
|
|
October 2007 |
W.
|
|
October 2008
|
|
Saw IV
|
|
October 2007 |
The Family That Preys
|
|
September 2008
|
|
Good Luck Chuck
|
|
September 2007 |
The Forbidden Kingdom
|
|
April 2008
|
|
3:10 to Yuma
|
|
September 2007 |
|
|
|
|
War
|
|
August 2007 |
The following table sets forth the amount and percentage of theatrical revenue generated
by the titles listed above and the titles not listed above for the fiscal year ended March 31, 2009
and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
of |
|
|
Amount of |
|
|
of |
|
|
|
|
|
|
Theatrical |
|
|
Theatrical |
|
|
Theatrical |
|
|
Theatrical |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
Theatrical Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical revenue from significant titles listed above |
|
$ |
170.8 |
|
|
|
76 |
% |
|
$ |
164.7 |
|
|
|
86 |
% |
|
$ |
6.1 |
|
|
|
3.7 |
% |
Theatrical revenue from titles not listed above |
|
|
52.5 |
|
|
|
24 |
% |
|
|
27.0 |
|
|
|
14 |
% |
|
|
25.5 |
|
|
|
94.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
223.3 |
|
|
|
100 |
% |
|
$ |
191.7 |
|
|
|
100 |
% |
|
$ |
31.6 |
|
|
|
16.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of theatrical revenue of significant titles individually,
as a percent of theatrical revenue |
|
5 |
% |
to |
|
19 |
% |
|
|
5 |
% |
to |
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical revenue of $223.3 million increased $31.6 million, or 16.5%, in fiscal 2009 as
compared to fiscal 2008 primarily due to the performance of the theatrical releases listed in the
above table during fiscal 2009 as compared to the performance during fiscal 2008. The contribution
of theatrical revenue from titles listed above increased $6.1 million in fiscal 2009 compared to
fiscal 2008, and the contribution of theatrical revenue from the titles not listed in the table
above increased $25.5 million in fiscal 2009 compared to fiscal 2008.
62
Motion Pictures Home Entertainment Revenue
The following table sets forth the titles contributing significant motion pictures home
entertainment revenue for the fiscal year ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
Year Ended March 31, |
2009 |
|
2008 |
|
|
DVD Release Date |
|
|
|
DVD Release Date |
Punisher: War Zone
|
|
March 2009
|
|
Why Did I Get Married? Feature
|
|
February 2008 |
Transporter 3
|
|
March 2009
|
|
3:10 to Yuma
|
|
January 2008 |
Bangkok Dangerous
|
|
January 2009
|
|
Good Luck Chuck
|
|
January 2008 |
My Best Friends Girl
|
|
January 2009
|
|
Saw IV
|
|
January 2008 |
Saw V
|
|
January 2009
|
|
War
|
|
January 2008 |
The Family That Preys
|
|
January 2009
|
|
Bratz: The Movie
|
|
November 2007 |
The Forbidden Kingdom
|
|
September 2008
|
|
Delta Farce
|
|
September 2007 |
Meet the Browns
|
|
July 2008
|
|
The Condemned
|
|
September 2007 |
The Bank Job
|
|
July 2008
|
|
Daddys Little Girls
|
|
June 2007 |
The Eye
|
|
June 2008
|
|
Pride
|
|
June 2007 |
Witless Protection
|
|
June 2008
|
|
Happily NEver After
|
|
May 2007 |
Rambo
|
|
May 2008 |
|
|
|
|
The following table sets forth the amount and percentage of home entertainment revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
of |
|
|
Amount of |
|
|
of |
|
|
|
|
|
|
Home |
|
|
Home |
|
|
Home |
|
|
Home |
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Entertainment |
|
|
Entertainment |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
Home Entertainment Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home entertainment revenue from significant titles listed above |
|
$ |
290.4 |
|
|
|
45 |
% |
|
$ |
300.8 |
|
|
|
48 |
% |
|
$ |
(10.4 |
) |
|
|
(3.5 |
%) |
Home entertainment revenue from titles not listed above |
|
|
350.3 |
|
|
|
55 |
% |
|
|
322.7 |
|
|
|
52 |
% |
|
|
27.6 |
|
|
|
8.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
640.7 |
|
|
|
100 |
% |
|
$ |
623.5 |
|
|
|
100 |
% |
|
$ |
17.2 |
|
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of home entertainment revenue of significant titles
individually, as a percent of home entertainment revenue |
|
2 |
% |
to |
|
7 |
% |
|
|
2 |
% |
to |
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home entertainment revenue of $640.7 million increased $17.2 million, or 2.8%, in fiscal
2009 as compared to fiscal 2008. The increase in home entertainment revenue in fiscal 2009 compared
to fiscal 2008 is due to more theatrical releases in fiscal 2009 as compared to fiscal 2008. The
contribution of home entertainment revenue from titles listed above decreased $10.4 million in
fiscal 2009 compared to fiscal 2008, and the contribution of home entertainment revenue from the
titles not listed above increased $27.6 million in fiscal 2009 compared to fiscal 2008.
63
Motion Pictures Television Revenue
The following table sets forth the titles contributing significant motion pictures television
revenue for the fiscal year ended March 31, 2009 and 2008:
|
|
|
Year Ended March 31, |
2009 |
|
2008 |
3:10 to Yuma
|
|
Crank |
Forbidden Kingdom
|
|
Daddys Little Girls |
Good Luck Chuck
|
|
Employee of the Month |
Meet the Browns
|
|
Saw III |
Rambo
|
|
The Descent |
Saw IV |
|
|
The Bank Job |
|
|
The Eye |
|
|
Why Did I Get Married? Feature |
|
|
The following table sets forth the amount and percentage of television revenue generated
by the titles listed above and the titles not listed above for the fiscal year ended March 31, 2009
and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
of |
|
|
Amount of |
|
|
of |
|
|
|
|
|
|
Television |
|
|
Television |
|
|
Television |
|
|
Television |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
Television Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television revenue from significant titles listed above |
|
$ |
107.6 |
|
|
|
63 |
% |
|
$ |
50.7 |
|
|
|
44 |
% |
|
$ |
56.9 |
|
|
|
112.2 |
% |
Television revenue from titles not listed above |
|
|
62.7 |
|
|
|
37 |
% |
|
|
64.8 |
|
|
|
56 |
% |
|
|
(2.1 |
) |
|
|
(3.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
170.3 |
|
|
|
100 |
% |
|
$ |
115.5 |
|
|
|
100 |
% |
|
$ |
54.8 |
|
|
|
47.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of television revenue of significant titles individually,
as a percent of television revenue |
|
6 |
% |
to |
|
8 |
% |
|
|
6 |
% |
to |
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television revenue included in motion pictures revenue of $170.3 million in fiscal 2009
increased $54.8 million, or 47.4%, compared to fiscal 2008. The contribution of television revenue
from the titles listed above increased $56.9 million in fiscal 2009 compared to fiscal 2008, and
the contribution of television revenue from the titles not listed above decreased $2.1 million in
fiscal 2009 compared to fiscal 2008.
Motion Pictures International Revenue
The following table sets forth the titles contributing significant motion pictures
international revenue for the fiscal year ended March 31, 2009 and 2008:
|
|
|
Year Ended March 31, |
2009 |
|
2008 |
My Best Friends Girl
|
|
Good Luck Chuck |
Punisher: War Zone
|
|
Saw III |
Saw IV
|
|
Saw IV |
Saw V
|
|
The Condemned |
The Eye
|
|
War |
64
The following table sets forth the amount and percentage of international revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
| |
| |
| |
| |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
of |
|
|
Amount of |
|
|
of |
|
|
|
|
|
|
International |
|
|
International |
|
|
International |
|
|
International |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
International Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International revenue from significant titles listed above |
|
$ |
37.4 |
|
|
|
46 |
% |
|
$ |
44.5 |
|
|
|
47 |
% |
|
$ |
(7.1 |
) |
|
|
(16.0 |
%) |
International revenue from titles not listed above |
|
|
44.2 |
|
|
|
54 |
% |
|
|
49.6 |
|
|
|
53 |
% |
|
|
(5.4 |
) |
|
|
(10.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
81.6 |
|
|
|
100 |
% |
|
$ |
94.1 |
|
|
|
100 |
% |
|
$ |
(12.5 |
) |
|
|
(13.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of international revenue of significant titles individually,
as a percent of international revenue |
|
8 |
% |
to |
|
11 |
% |
|
|
4 |
% |
to |
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International revenue included in motion pictures revenue of $81.6 million decreased
$12.5 million, or 13.3%, in fiscal 2009 as compared to fiscal 2008. The decrease in international
revenue in fiscal 2009 compared to fiscal 2008 is due to the decrease in the contribution of
international revenue from titles listed above and titles not listed above in fiscal 2009 as
compared to fiscal 2008.
Motion Pictures Lionsgate UK Revenue
The following table sets forth the titles contributing significant Lionsgate UK revenue for
the fiscal year ended March 31, 2009 and 2008:
|
|
|
Year Ended March 31, |
2009 |
|
2008 |
My Bloody Valentine 3-D
|
|
3:10 to Yuma |
Righteous Kill
|
|
Dirty Dancing |
Saw IV
|
|
Good Luck Chuck |
Saw V
|
|
Saw III |
The Bank Job
|
|
Saw IV |
The following table sets forth the amount and percentage of Lionsgate UK revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
of |
|
|
Amount of |
|
|
of |
|
|
|
|
|
|
Lionsgate UK |
|
|
Lionsgate UK |
|
|
Lionsgate UK |
|
|
Lionsgate UK |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
Lionsgate UK Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lionsgate UK revenue from significant titles listed above |
|
$ |
23.2 |
|
|
|
38 |
% |
|
$ |
29.7 |
|
|
|
46 |
% |
|
$ |
(6.5 |
) |
|
|
(21.9 |
%) |
Lionsgate UK revenue from titles not listed above |
|
|
37.5 |
|
|
|
62 |
% |
|
|
34.9 |
|
|
|
54 |
% |
|
|
2.6 |
|
|
|
7.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
60.7 |
|
|
|
100 |
% |
|
$ |
64.6 |
|
|
|
100 |
% |
|
$ |
(3.9 |
) |
|
|
(6.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of Lionsgate UK revenue of significant titles individually,
as a percent of Lionsgate UK revenue |
|
5 |
% |
to |
|
10 |
% |
|
|
6 |
% |
to |
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lionsgate UK revenue of $60.7 million decreased $3.9 million, or 6.0%, in fiscal 2009 as
compared to fiscal 2008. The contribution of Lionsgate UK revenue from titles listed above
decreased $6.5 million in the fiscal 2009 compared to fiscal 2008, and the contribution of
Lionsgate UK revenue from the titles not listed in the table above increased $2.6 million in fiscal
2009 compared to fiscal 2008.
65
Motion Pictures Mandate Pictures Revenue
The following table sets forth the titles contributing significant Mandate Pictures revenue
for the fiscal year ended March 31, 2009 and 2008:
|
|
|
Year Ended March 31, |
2009 |
|
2008 |
30 Days of Night
|
|
30 Days of Night |
Harold and Kumar Escape from Guantanamo Bay
|
|
Harold and Kumar Escape from Guantanamo Bay |
Juno
|
|
Juno |
Nick and Norahs Infinite Playlist
|
|
Passengers |
Passengers
|
|
The Boogeyman 2 |
The following table sets forth the amount and percentage of Mandate Pictures revenue
generated by the titles listed above and the titles not listed above for the fiscal year ended
March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Amount of |
|
|
of |
|
|
Amount of |
|
|
of |
|
|
|
|
|
|
Mandate |
|
|
Mandate |
|
|
Mandate |
|
|
Mandate |
|
|
|
|
|
|
Pictures |
|
|
Pictures |
|
|
Pictures |
|
|
Pictures |
|
|
Increase (Decrease) |
|
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
|
millions) |
|
|
|
|
|
Mandate Pictures Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandate Pictures revenue from significant titles listed above |
|
$ |
35.3 |
|
|
|
78 |
% |
|
$ |
46.7 |
|
|
|
89 |
% |
|
$ |
(11.4 |
) |
|
|
(24.4 |
%) |
Mandate Pictures revenue from titles not listed above |
|
|
10.2 |
|
|
|
22 |
% |
|
|
5.6 |
|
|
|
11 |
% |
|
|
4.6 |
|
|
|
82.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
45.5 |
|
|
|
100 |
% |
|
$ |
52.3 |
|
|
|
100 |
% |
|
$ |
(6.8 |
) |
|
|
(13.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of contribution of Mandate Pictures revenue of significant titles
individually, as a percent of Mandate Pictures revenue |
|
|
5 |
% |
to |
30 |
% |
|
|
7 |
% |
to |
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandate Pictures revenue included revenue from the sales and licensing of domestic and
worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors or
international sub-distributors. In fiscal 2009, Mandate Pictures revenue amounted to $45.5 million,
as compared to $52.3 million in fiscal 2008. The decrease in Mandate Pictures revenue in fiscal
2009 compared to fiscal 2008 was mainly due to lower contribution of Mandate Pictures revenue from
titles listed above in fiscal 2009 as compared to fiscal 2008, partially offset by higher
contribution of Mandate Pictures revenue from titles not listed above in fiscal 2009 as compared to
fiscal 2008.
66
Television Production Revenue
The following table sets forth the components and the changes in the components of revenue
that made up television production revenue for the fiscal year ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
Television Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic series licensing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lionsgate Television |
|
$ |
79.2 |
|
|
$ |
84.3 |
|
|
$ |
(5.1 |
) |
|
|
(6.0 |
%) |
Debmar-Mercury |
|
|
59.1 |
|
|
|
50.5 |
|
|
|
8.6 |
|
|
|
17.0 |
% |
Ish Entertainment |
|
|
23.4 |
|
|
|
|
|
|
|
23.4 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total domestic series licensing |
|
|
161.7 |
|
|
|
134.8 |
|
|
|
26.9 |
|
|
|
20.0 |
% |
Domestic television movies and miniseries |
|
|
|
|
|
|
16.1 |
|
|
|
(16.1 |
) |
|
|
(100.0 |
%) |
International |
|
|
24.9 |
|
|
|
37.6 |
|
|
|
(12.7 |
) |
|
|
(33.8 |
%) |
Home entertainment releases of television production |
|
|
34.9 |
|
|
|
21.6 |
|
|
|
13.3 |
|
|
|
61.6 |
% |
Other |
|
|
0.7 |
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
75.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
222.2 |
|
|
$ |
210.5 |
|
|
$ |
11.7 |
|
|
|
5.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues included in domestic series licensing from Lionsgate Television of $79.2 million
decreased by $5.1 million in fiscal 2009, compared to domestic series licensing revenue of $84.3
million in fiscal 2008, due to lower revenue generated per episode delivered in fiscal 2009
compared to fiscal 2008, partially offset by revenue generated by five more episodes of programming
delivered in fiscal 2009 compared to fiscal 2008.
The following table sets forth the number of television episodes and hours delivered included
in Lionsgate Television domestic series licensing revenue in the fiscal year ended March 31, 2009
and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
March 31, 2009 |
|
|
|
|
|
Episodes |
|
Hours |
Fear Itself |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Mad Men Season 2 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Crash Season 1 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Scream Queens |
|
1hr |
|
|
8 |
|
|
|
8.0 |
|
Weeds Season 4 |
|
1/2hr |
|
|
13 |
|
|
|
6.5 |
|
Pilots |
|
1/2hr |
|
|
2 |
|
|
|
1.0 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
62 |
|
|
|
54.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
March 31, 2008 |
|
|
|
|
Episodes |
|
Hours |
The Dead Zone Season 5 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
The Dresden Files |
|
1hr |
|
|
2 |
|
|
|
2.0 |
|
Mad Men Season 1 |
|
1hr |
|
|
12 |
|
|
|
12.0 |
|
Wildfire Season 4 |
|
1hr |
|
|
13 |
|
|
|
13.0 |
|
Weeds Season 3 |
|
1/2hr |
|
|
15 |
|
|
|
7.5 |
|
Pilots |
|
1/2hr |
|
|
2 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57 |
|
|
|
48.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Although the number of episodes and hours delivered increased in fiscal 2009 compared to
fiscal 2008 the revenue per episode was less in fiscal 2009 primarily due to lower per episode
revenue on Fear Itself.
Revenues included in domestic series licensing from Debmar-Mercury increased $8.6 million to
$59.1 million from $50.5 million in fiscal 2008, primarily due to increased revenue from the
television series Family Feud, Meet the Browns and Trivial Pursuit.
Revenues included in domestic series licensing from the Companys reality television
collaboration with Ish, of $23.4 million resulted from the production of the domestic series Paris
Hiltons My New BFF, 50 Cent: The Money and the Power, and T.I.s Road to Redemption.
Domestic television movies and miniseries revenue decreased by $16.1 million in fiscal 2009,
primarily because there were no deliveries in fiscal 2009, as compared to the delivery of eight
episodes of the miniseries The Kill Point in fiscal 2008.
International revenue of $24.9 million decreased by $12.7 million in fiscal 2009, compared to
international revenue of $37.6 million in fiscal 2008. International revenue in fiscal 2009
included revenue from Mad Men Season 1 and Season 2, Paris Hiltons British Best Friend, Weeds
Season 3, Wildfire Season 4, and The Kill Point, and international revenue in fiscal 2008 included
revenue from Hidden Palms, Mad Men Season 1, The Dresden Files, The Dead Zone Season 1 and Season
5, The Kill Point, and Weeds Season 2 and Season 3.
67
The increase in revenue from home entertainment releases of television production was
primarily driven by DVD/Blu-ray revenue from Weeds Season 3 and Mad Men Season 1.
Media Networks Revenue
Media Networks revenue for the year ended March 31, 2008 are nil, as the acquisition of TV
Guide Network occurred on February 28, 2009. Media Networks revenue for the period beginning
February 28, 2009 and ending March 31, 2009 was $10.3 million.
Direct Operating Expenses
The following table sets forth direct operating expenses by segment for the fiscal year ended
March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Motion |
|
|
Television |
|
|
|
|
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
Pictures |
|
|
Production |
|
|
Total |
|
|
|
(Amounts in millions) |
|
Direct operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of films
and television programs |
|
$ |
329.2 |
|
|
$ |
125.7 |
|
|
$ |
3.8 |
|
|
$ |
458.7 |
|
|
$ |
255.6 |
|
|
$ |
147.8 |
|
|
$ |
403.4 |
|
Participation and residual expense |
|
|
279.0 |
|
|
|
49.3 |
|
|
|
|
|
|
|
328.3 |
|
|
|
212.7 |
|
|
|
44.3 |
|
|
|
257.0 |
|
Other expenses |
|
|
5.1 |
|
|
|
1.8 |
|
|
|
(0.1 |
) |
|
|
6.8 |
|
|
|
0.5 |
|
|
|
0.1 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
613.3 |
|
|
$ |
176.8 |
|
|
$ |
3.7 |
|
|
$ |
793.8 |
|
|
$ |
468.8 |
|
|
$ |
192.2 |
|
|
$ |
661.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses as a
percentage of segment revenues |
|
|
49.7 |
% |
|
|
79.6 |
% |
|
|
35.9 |
% |
|
|
54.1 |
% |
|
|
40.7 |
% |
|
|
91.3 |
% |
|
|
48.6 |
% |
Direct operating expenses of the motion pictures segment of $613.3 million for fiscal 2009
were 49.7% of motion pictures revenue, compared to $468.8 million, or 40.7%, of motion pictures
revenue for fiscal 2008. The increase in direct operating expense of the motion pictures segment in
fiscal 2009 as a percent of revenue was due to the lower performance of the titles from the fiscal
2008 and 2009 theatrical releases in fiscal 2009, as compared to fiscal 2008, and a charge for a
home entertainment library distribution contract of family entertainment titles. Investment in film
write-downs of the motion picture segment totaled approximately $37.3 million for fiscal 2009,
compared to $23.7 million for 2008. In addition, in fiscal 2009 we recorded a charge of $36.1
million for a participation reserve in connection with a home entertainment library distribution
contract of family entertainment titles entered into in fiscal 2009 due to the actual and expected
future underperformance of the titles in this library. The fiscal 2009 write-downs included
write-downs on six titles over $1.0 million which aggregated $26.9 million of the total charges due
to the lower than anticipated performance of six titles that have not yet been released and $5.1
million of write-downs of film libraries acquired due to the underperformance of those libraries.
The fiscal 2008 write-downs included write-downs on seven titles over $1.0 million which aggregated
$18.5 million. Approximately $4.8 million of the fiscal 2008 write-downs related to
underperformance on released titles and approximately $13.7 million of the write-downs related to
titles that had not yet been released due to a change in expected performance and release plans
based on the review of the film and the test market results. Other expenses consists of the
provision for doubtful accounts and foreign exchange gains and losses. The provision for doubtful
accounts increased from $0.9 million in fiscal 2008 to $3.9 million in fiscal 2009 primarily due to
collection issues associated with certain domestic and foreign television networks and distributors
and, to a lesser extent, certain home entertainment retailers. Foreign exchange gains and losses
included a gain of $0.3 million in fiscal 2008 and a loss of $3.0 million in fiscal 2009 due to
changes in exchange rates.
Direct operating expenses of the television production segment of $176.8 million for fiscal
2009 were 79.6% of television revenue, compared to $192.2 million, or 91.3% of television revenue
for fiscal 2008. The decrease in direct operating expense and the decrease in the percent of
revenue of direct operating expense of the television production segment in fiscal 2009 are due to
a greater portion of revenue attributed to more successful shows, such as Weeds, House of Payne and
Mad Men. In fiscal 2009, $9.1 million of charges for costs incurred in excess of contracted
revenues for episodic television series or write-downs of television film costs were included in
the amortization of television programs, compared to $6.8 million in fiscal 2008. The fiscal 2009
write-downs included write-downs on four titles over $1.0 million which aggregated $7.7 million.
The fiscal 2008 write-downs included write-downs on three titles over $1.0 million which aggregated
$5.3 million.
68
Direct operating expenses of the media networks segment of $3.7 million for fiscal 2009
consists primarily of programming expenses associated with the production of such programs as Idol
Tonight and Hollywood 411.
Distribution and Marketing Expenses
The following table sets forth distribution and marketing expenses by segment for the fiscal
year ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Motion |
|
|
Television |
|
|
|
|
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
Pictures |
|
|
Production |
|
|
Total |
|
|
|
(Amounts in millions) |
|
Distribution and marketing expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical |
|
$ |
330.5 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
330.5 |
|
|
$ |
326.3 |
|
|
$ |
|
|
|
$ |
326.3 |
|
Home Entertainment |
|
|
255.4 |
|
|
|
10.5 |
|
|
|
|
|
|
|
265.9 |
|
|
|
238.7 |
|
|
|
7.4 |
|
|
|
246.1 |
|
Television |
|
|
5.0 |
|
|
|
10.4 |
|
|
|
|
|
|
|
15.4 |
|
|
|
3.2 |
|
|
|
4.5 |
|
|
|
7.7 |
|
International |
|
|
6.3 |
|
|
|
3.8 |
|
|
|
|
|
|
|
10.1 |
|
|
|
8.3 |
|
|
|
3.5 |
|
|
|
11.8 |
|
Lionsgate UK |
|
|
42.4 |
|
|
|
0.5 |
|
|
|
|
|
|
|
42.9 |
|
|
|
41.2 |
|
|
|
1.2 |
|
|
|
42.4 |
|
Media Networks |
|
|
|
|
|
|
|
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
2.1 |
|
|
|
0.8 |
|
|
|
|
|
|
|
2.9 |
|
|
|
1.3 |
|
|
|
0.1 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
641.7 |
|
|
$ |
26.0 |
|
|
$ |
1.9 |
|
|
$ |
669.6 |
|
|
$ |
619.0 |
|
|
$ |
16.7 |
|
|
$ |
635.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of distribution and marketing expenses related to the motion pictures
segment. Theatrical P&A in the motion pictures segment in fiscal 2009 of $330.5 million increased
$4.2 million, or 1.3%, compared to $326.3 million in fiscal 2008. Domestic theatrical P&A from the
motion pictures segment in fiscal 2009 included P&A incurred on the release of Bangkok Dangerous,
Disaster Movie, Madea Goes To Jail, My Best Friends Girl, My Bloody Valentine 3-D, New In Town,
Punisher: War Zone, Saw V, The Family That Preys, The Haunting in Connecticut, The Spirit, and
Transporter 3, which individually represented between 5% and 9% of total theatrical P&A and, in the
aggregate, accounted for 89% of the total theatrical P&A. Bangkok Dangerous, Disaster Movie, My
Best Friends Girl, New In Town, Punisher: War Zone and The Spirit individually represented between
6% and 9% of total theatrical P&A, and in the aggregate, accounted for 43% of total theatrical P&A,
and each contributed less than 5% of total theatrical revenue, and in the aggregate, contributed
less than 18% of total theatrical revenue. Domestic theatrical P&A from the motion pictures segment
in fiscal 2008 included P&A incurred on the release of titles such as 3:10 to Yuma, Bratz: The
Movie, Bug, Hostel 2, Good Luck Chuck, Meet the Browns, Rambo, The Eye, Saw IV, War and Why Did I
Get Married?, which individually represented between 5% and 13% of total theatrical P&A and, in the
aggregate, accounted for 80% of the total theatrical P&A. In fiscal 2008, Bug, Hostel 2, and Bratz:
The Movie, individually represented between 5% and 7% of total theatrical P&A and, in the
aggregate, accounted for 18% of total theatrical P&A, and individually contributed less than 5% of
total theatrical revenue, and, in the aggregate, contributed less than 10% of total theatrical
revenue.
Home entertainment distribution and marketing costs on motion pictures and television product
in fiscal 2009 of $265.9 million increased $19.8 million, or 8.0%, compared to $246.1 million in
fiscal 2008. The increase in home entertainment distribution and marketing costs is mainly due to
the increase in revenue in fiscal 2009 as compared to fiscal 2008. Home entertainment distribution
and marketing costs as a percentage of home entertainment revenues was 39.4% and 38.1% in fiscal
2009 and fiscal 2008, respectively.
Media Networks includes transmission and marketing and promotion expenses.
69
General and Administrative Expenses
The following table sets forth general and administrative expenses by segment for the fiscal
year ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
General and Administrative Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
49.6 |
|
|
$ |
43.0 |
|
|
$ |
6.6 |
|
|
|
15.3 |
% |
Television Production |
|
|
13.1 |
|
|
|
6.7 |
|
|
|
6.4 |
|
|
|
95.5 |
% |
Media Networks |
|
|
3.8 |
|
|
|
|
|
|
|
3.8 |
|
|
|
100.0 |
% |
Corporate, including stock based compensation |
|
|
70.1 |
|
|
|
69.4 |
|
|
|
0.7 |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total General and Administrative Expenses |
|
$ |
136.6 |
|
|
$ |
119.1 |
|
|
$ |
17.5 |
|
|
|
14.7 |
% |
|
Less Media Networks General and Administrative Expenses |
|
|
(3.8 |
) |
|
|
|
|
|
|
(3.8 |
) |
|
|
100.0 |
% |
Less Stock-Based Compensation Expense |
|
|
(9.8 |
) |
|
|
(12.1 |
) |
|
|
2.3 |
|
|
|
(19.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expenses excluding Media
Networks and Stock-Based Compensation Expense |
|
$ |
123.0 |
|
|
$ |
107.0 |
|
|
$ |
16.0 |
|
|
|
15.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative expenses as a percentage of revenue |
|
|
9.3 |
% |
|
|
8.8 |
% |
|
|
|
|
|
|
|
|
|
General and administrative expenses excluding Media Networks and
stock-based compensation expense, as a percentage of
Motion Pictures and Television Production revenue |
|
|
8.4 |
% |
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
The following table sets forth stock-based compensation expense (benefit) for the fiscal
year ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
Amount |
|
|
Percent |
|
|
|
(Amounts in millions) |
|
Stock-Based Compensation Expense (Benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
$ |
3.2 |
|
|
$ |
3.4 |
|
|
$ |
(0.2 |
) |
|
|
(5.9 |
%) |
Restricted share units and other share-based compensation |
|
|
10.1 |
|
|
|
10.4 |
|
|
|
(0.3 |
) |
|
|
(2.9 |
%) |
Stock appreciation rights |
|
|
(3.5 |
) |
|
|
(1.7 |
) |
|
|
(1.8 |
) |
|
|
105.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9.8 |
|
|
$ |
12.1 |
|
|
$ |
(2.3 |
) |
|
|
(19.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses increased by $17.5 million or 14.7% mainly due to the
general and administrative expenses associated with the Motion Pictures and Television Production
segments. General and administrative expenses of the Media Networks segment are primarily related
to salaries and related expenses.
General and administrative expenses excluding the Media Networks segment and excluding
stock-based compensation was $123.0 million in fiscal 2009 compared to $107.0 million in the prior
year period, which represents an increase of $16.0 million or 15.0%.
General and administrative expenses of the motion pictures segment increased $6.6 million, or
15.3%, mainly due to increases in general and administrative expenses associated with our recent
acquisitions, increases in salaries and related expenses, including an increase of approximately
$0.3 million in severance pay associated with certain workforce reductions, and increases in other
overhead costs primarily related to rents and facility expenses, offset by capitalized film
production costs that are directly attributable to motion picture productions. In fiscal 2009, $7.7
million of motion pictures overhead was capitalized compared to $3.4 million in fiscal 2008.
General and administrative expenses of the television production segment increased $6.4
million, or 95.5%, mainly due to general and administrative expense increases associated with
Debmar-Mercury of $1.6 million primarily related to increases in salaries and related expenses,
additional costs associated with Tiger Gate of $3.5 million, including approximately $1.1 million
in severance pay as a result of reduced investment in this area, and an increase in other general
overhead costs of approximately $1.3 million primarily related to salaries and related expenses and
rents and facility expenses. In fiscal 2009, $5.8 million of television production overhead was
capitalized compared to $3.9 million in fiscal 2008.
70
General and administrative expenses of the corporate segment increased $0.7 million or 1.0%
mainly due to increases in rents and facility costs and other general overhead expenses of $3.2
million, an increase of $0.2 million of professional fees offset by a decrease in stock-based
compensation of approximately $2.3 million and a net decrease in salaries and related expenses of
approximately $0.4 million. The decrease in salaries and related expenses was approximately $1.8
million offset by an increase of approximately $1.4 million in severance pay associated with
certain workforce reductions. The increase in professional fees is due to an increase in
transactional related professional fees partially offset by a decrease in IT related consulting
fees resulting in a net increase of approximately $0.2 million.
At March 31, 2009,
there were unrecognized compensation costs of approximately $19.6 million related to stock options
and restricted share units previously granted, including the first annual installment of share
grants that were subject to performance targets, which will be expensed over the remaining vesting
periods. At March 31, 2009, 1,056,548 shares of restricted share units have been awarded to four
key executive officers, the vesting of which will be subject to performance targets to be set
annually by the Compensation Committee of the Board of Directors of the Company. These restricted
share units will vest in three, four, and five annual installments assuming annual performance
targets have been met. The fair value of the 1,056,548 shares whose future annual performance
targets have not been set was $5.3 million, based on the market price of our common shares as of
March 31, 2009. The market value will be remeasured when the annual performance criteria are set
and the value will be expensed over the remaining vesting periods once it becomes probable that the
performance targets will be satisfied.
During the quarter ended March 31, 2009, it was determined that the four key executive
officers share grants subject to fiscal 2009 performance targets would not meet their performance
criteria. Accordingly, compensation costs of $1.7 million previously recognized in connection with
these performance awards were reversed in the year ended March 31, 2009.
71
Depreciation, Amortization and Other Expenses (Income)
Depreciation and amortization of $7.7 million in fiscal 2009 increased $2.2 million, or 40.0%,
from $5.5 million in fiscal 2008. The increase is primarily due to intangible assets acquired in
connection with the purchase of TV Guide Network.
Interest expense of $34.3 million in fiscal 2009 increased $4.4 million, or 14.7%, from $29.9
million in fiscal 2008. The following table sets forth the components of interest expense for the
years ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in millions) |
|
Interest Expense |
|
|
|
|
|
|
|
|
Cash Based: |
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
2.9 |
|
|
$ |
1.5 |
|
Senior subordinated debentures |
|
|
10.6 |
|
|
|
10.8 |
|
Other |
|
|
1.6 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
15.1 |
|
|
|
12.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Based: |
|
|
|
|
|
|
|
|
Amortization of discount on liability component of
senior subordinated debentures |
|
|
15.5 |
|
|
|
14.1 |
|
Amortization of deferred financing costs |
|
|
3.7 |
|
|
|
2.9 |
|
|
|
|
|
|
|
|
|
|
|
19.2 |
|
|
|
17.0 |
|
|
|
|
|
|
|
|
|
|
$ |
34.3 |
|
|
$ |
29.9 |
|
|
|
|
|
|
|
|
Interest and other income was $5.8 million for the fiscal year ended March 31, 2009,
compared to $11.3 million for the fiscal year ended March 31, 2008. Interest and other income in
fiscal 2009 was earned on the cash balance and restricted investments held during the fiscal year
ended March 31, 2009.
Gain on sale of equity securities was nil for fiscal 2009, compared to $2.9 million in fiscal
2008, primarily from the sale of shares in Magna Pacific (Holdings) Limited, an Australian film
distributor.
Gain on the extinguishment of debt was $3.0 million for fiscal 2009, resulting from the
December 2008 repurchase of $9.0 million of the February 2005 3.625% Notes, compared to nil in
fiscal 2008.
The following table represents our portion of the loss of our equity method investees based on
our percentage ownership for the years ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
|
|
|
|
|
Ended |
|
|
Ended |
|
|
|
Percentage |
|
|
March 31, |
|
|
March 31, |
|
|
|
Ownership |
|
|
2009 |
|
|
2008 |
|
|
| | | | |
(Amounts in millions) |
|
Maple Pictures Corp. |
|
|
10.00 |
% |
|
$ |
|
|
|
$ |
(0.1 |
) |
Horror Entertainment, LLC (FEARnet) |
|
|
33.33 |
% |
|
|
(5.3 |
) |
|
|
(5.4 |
) |
NextPoint, Inc. (Break.com) |
|
|
42.00 |
% |
|
|
(2.6 |
) |
|
|
(1.0 |
) |
Roadside Attractions, LLC |
|
|
43.00 |
% |
|
|
(0.1 |
) |
|
|
(0.9 |
) |
Studio 3 Partners, LLC (EPIX) |
|
|
28.57 |
% |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(9.0 |
) |
|
$ |
(7.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
72
Income Tax Expense
We had an income tax expense of $2.7 million, or (1.6%) of loss before income taxes in fiscal
2009, compared to an expense of $4.0 million, or (4.8%), of loss before income taxes in fiscal
2008. The tax expense reflected in fiscal 2009 was primarily attributable to U.S. and Canadian
income taxes and foreign withholding taxes. Our actual annual effective tax rate will differ from
the statutory federal rate as a result of several factors, including changes in the valuation
allowance against net deferred tax assets, non-temporary differences, foreign income taxed at
different rates, and state and local income taxes. Income tax loss carryforwards, subject to
certain limitations that may prevent us from fully utilizing them, amount to approximately $133.2
million for U.S. federal income tax purposes available to reduce income taxes over twenty years,
$147.3 million for U.S. state income tax purposes available to reduce income taxes over future
years with varying expirations, $18.9 million for Canadian income tax purposes available to reduce
income taxes over 20 years with varying expirations, and $20.9 million for UK income tax purposes
available indefinitely to reduce future income taxes.
Net Loss
Net loss and net loss attributable to our shareholders for the fiscal year ended March 31,
2009 was $178.5 million, or basic and diluted net loss per share of $1.53, on 116.8 million
weighted average common shares outstanding. This compared to net loss and net loss attributable to
our shareholders for the fiscal year ended March 31, 2008 of $87.4 million, or basic and diluted
net loss per share of $0.74, on 118.4 million weighted average common shares outstanding.
Liquidity and Capital Resources
Our liquidity and capital resources are provided principally through cash generated from
operations, issuance of subordinated notes, and our senior revolving credit facility.
10.25% Senior Secured Second-Priority Notes. On October 21, 2009, LGEI issued $236.0 million
aggregate principal amount of the Senior Notes in a private offering conducted pursuant to Rule
144A and Regulation S under the Securities Act. The Senior Notes were issued by LGEI at an initial
price of 95.222% (original issue discount 4.778%) of the principal amount. The net proceeds,
after deducting discounts, the fees paid to the initial purchaser, and all transaction costs
(including legal, accounting and other professional fees) from the sale of the Senior Notes was
approximately $214.7 million, which was used by LGEI to repay a portion of its outstanding debt
under our senior revolving credit facility.
Interest: The interest on the Senior Notes is payable semi-annually on May 1 and November 1 of
each year at a rate of 10.25% per year.
Maturity Date: The Senior Notes mature on November 1, 2016.
Certain Terms: The Senior Notes are guaranteed on a senior secured basis by us and certain of
our and LGEIs wholly-owned subsidiaries. The Senior Notes are ranked junior in right of payment to
the Companys senior revolving credit facility, ranked equally in right of payment to the Companys
subordinated notes, and ranked senior to any of the Companys unsecured debt, to the extent of the
value of the respective collateral. The Senior Notes contain certain restrictions and covenants
that, subject to certain exceptions, limit our ability to incur additional indebtedness, pay
dividends or repurchase our common shares, make certain loans or investments, and sell or otherwise
dispose of certain assets subject to certain conditions, among other limitations.
Film Credit Facility. On October 6, 2009, we entered into the Film Credit Facility, as
amended effective December 31, 2009, which provides for borrowings for the acquisition or
production of motion pictures. Currently, the Film Credit Facility provides for total borrowings up
to $120 million and can be increased to $200 million if additional lenders or financial
institutions become a party to and provide a commitment under the facility. The Film Credit
Facility has a maturity date of April 6, 2013 and as of March 31, 2010, bore interest of 3.25% over
the LIBO rate (as defined in the credit agreement effective interest rate of 3.50% as of March
31, 2010). We are required to pay a quarterly commitment fee of 0.75% per annum on the unused
commitment under the Film Credit Facility. Borrowings under the Film Credit Facility are due the
earlier of (a) nine months after delivery of each motion picture or (b) April 6, 2013. Borrowings
under the Film Credit Facility are subject to a borrowing base calculation and are secured by
interests in the related motion pictures, together with certain other receivables from other motion
picture and television productions pledged by us
including a minimum pledge of such receivables of $25 million. Receivables pledged to the Film
Credit Facility must be excluded from the borrowing base calculation under our senior revolving
credit facility. At March 31, 2010, the Company had borrowings of $35.7 million and $84.3 million
available under the Film Credit Facility.
Senior Revolving Credit Facility. At March 31, 2010, we had borrowings of $17.0 million (March
31, 2009 $255 million) under our senior revolving credit facility. The availability of funds
under our senior revolving credit facility is limited by a borrowing base
73
and also reduced by outstanding letters of credit which amounted to $25.6 million at March 31,
2010 (March 31, 2009 $46.7 million). At March 31, 2010, there was $297.4 million available under
the senior revolving credit facility (March 31, 2009 $38.3 million). We are required to pay a
quarterly commitment fee based upon 0.375% per annum on the total senior revolving credit facility
of $340 million less the amount drawn. The senior revolving credit facility expires July 25, 2013,
and as of March 31, 2010, bore interest of 2.5% over the Adjusted LIBOR rate (effective interest
rate of 2.75% as of March 31, 2010 and March 31, 2009). Obligations under the senior revolving
credit facility are secured by collateral (as defined in the credit agreement) granted by us and
certain of our subsidiaries, as well as a pledge of equity interests in certain of our
subsidiaries. The senior revolving credit facility contains a number of affirmative and negative
covenants that, among other things, require us to satisfy certain financial covenants and restrict
our ability to incur additional debt, pay dividends and make distributions, make certain
investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens,
enter into agreements with affiliates, modify the nature of our business, enter into sale-leaseback
transactions, transfer and sell material assets and merge or consolidate. Under the senior
revolving credit facility, we may also be subject to an event of default upon a change in control
(as defined in the senior revolving credit facility) which, among other things, includes a person
or group acquiring ownership or control in excess of 20% of our common stock.
October 2004 2.9375% Notes. In October 2004, LGEI sold $150.0 million of the October 2004
2.9375% Notes.
Outstanding Amount: As of March 31, 2010, $110.0 million of aggregate principal amount
(carrying value $99.5 million) of the October 2004 2.9375% Notes remain outstanding.
Interest: Interest on the October 2004 2.9375% Notes is payable semi-annually on April 15 and
October 15.
Maturity Date: The October 2004 2.9375% Notes mature on October 15, 2024.
Redeemable by Company: From October 15, 2009 to October 14, 2010, LGEI may redeem the October
2004 2.9375% Notes at 100.839%; from October 15, 2010 to October 14, 2011, LGEI may redeem the
October 2004 2.9375% Notes at 100.420%; and thereafter, LGEI may redeem the October 2004 2.9375%
Notes at 100%.
Redeemable by Holder: The holder may require LGEI to repurchase the October 2004 2.9375% Notes
on October 15, 2011, 2014 and 2019 or upon a change in control at a price equal to 100% of the
principal amount, together with accrued and unpaid interest through the date of repurchase.
Conversion Features: The holder may convert the October 2004 2.9375% Notes into our common
shares prior to maturity only if the price of our common shares issuable upon conversion of a note
reaches or falls below a certain specific threshold over a specified period, the notes have been
called for redemption, a change in control occurs or certain other corporate transactions occur.
Before the close of business on or prior to the trading day immediately before the maturity date,
the holder may convert the notes into our common shares at a conversion rate equal to 86.9565
shares per $1,000 principal amount of the October 2004 2.9375% Notes, subject to adjustment in
certain circumstances, which represents a conversion price of approximately $11.50 per share. Upon
conversion of the October 2004 2.9375% Notes, we have the option to deliver, in lieu of common
shares, cash or a combination of cash and our common shares.
Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all
or a portion of our notes or the holder converts the notes upon a change in control, they will be
entitled to receive a make whole premium. The amount of the make whole premium, if any, will be
based on the price of our common shares on the effective date of the change in control. No make
whole premium will be paid if the price of our common shares at such time is less than $8.79 per
share or exceeds $50.00 per share.
February 2005 3.625% Notes. In February 2005, LGEI sold $175.0 million of the February 2005
3.625% Notes.
Outstanding Amount: As of March 31, 2010, $59.5 million of aggregate principal amount
(carrying value $52.7 million) of the February 2005 3.625% Notes remain outstanding.
Interest: Interest on the February 2005 3.625% Notes is payable at 3.625% per annum
semi-annually on March 15 and September 15 until March 15, 2012 and at 3.125% per annum thereafter
until maturity.
Maturity Date: The February 2005 3.625% Notes mature on March 15, 2025.
74
Redeemable by Company: LGEI may redeem all or a portion of the February 2005 3.625% Notes at
our option on or after March 15, 2012 at 100% of their principal amount, together with accrued and
unpaid interest through the date of redemption.
Redeemable by Holder: The holder may require LGEI to repurchase the February 2005 3.625% Notes
on March 15, 2012, 2015 and 2020 or upon a change in control at a price equal to 100% of the
principal amount, together with accrued and unpaid interest through the date of repurchase.
Conversion Features: The February 2005 3.625% Notes are convertible, at the option of the
holder, at any time before the maturity date, if the notes have not been previously redeemed or
repurchased, at a conversion rate equal to 70.0133 shares per $1,000 principal amount of the
February 2005 3.625% Notes, subject to adjustment in certain circumstances, which represents a
conversion price of approximately $14.28 per share. Upon conversion of the February 2005 3.625%
Notes, we have the option to deliver, in lieu of common shares, cash or a combination of cash and
our common shares.
Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all
or a portion of our notes upon a change in control, they will be entitled to receive a make whole
premium. The amount of the make whole premium, if any, will be based on the price of our common
shares on the effective date of the change in control. No make whole premium will be paid if the
price of our common shares at such time is less than $10.35 per share or exceeds $75.00 per share.
April 2009 3.625% Notes. In April 2009, LGEI issued approximately $66.6 million of the April
2009 3.625% Notes.
Outstanding Amount: As of March 31, 2010, $66.6 million of aggregate principal amount
(carrying value $36.2 million) of the April 2009 3.625% Notes remain outstanding.
Interest: Interest on the April 2009 3.625% Notes is payable at 3.625% per annum semi-annually
on March 15 and September 15 of each year.
Maturity Date: The April 2009 3.625% Notes will mature on March 15, 2025.
Redeemable by Company: On or after March 15, 2015, LGEI may redeem the April 2009 3.625%
Notes, in whole or in part, at a price equal to 100% of the principal amount of the April 2009
3.625% Notes to be redeemed, plus accrued and unpaid interest through the date of redemption.
Redeemable by Holder: The holder may require LGEI to repurchase the April 2009 3.625% Notes on
March 15, 2015, 2018 and 2023 or upon a designated event, at a price equal to 100% of the
principal amount of the April 2009 3.625% Notes to be repurchased plus accrued and unpaid interest.
Conversion Features: The April 2009 3.625% Notes may be converted into our common shares at
any time before maturity, redemption or repurchase. The initial conversion rate of the April 2009
3.625% Notes is 121.2121 common shares per $1,000 principal amount of the April 2009 3.625% Notes,
subject to adjustment in certain circumstances, which represents a conversion price of
approximately $8.25 per share. Upon conversion of the April 2009 3.625% Notes, we have the option
to deliver, in lieu of common shares, cash or a combination of cash and common shares of the
Company.
Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all
or a portion of their notes upon a change in control, they will be entitled to receive a make whole
premium. The amount of the make whole premium, if any, will be based on the price of our common
shares on the effective date of the change in control. No make whole premium will be paid if the
price of our common shares at such time is less than $5.36 per share or exceeds $50.00 per share.
Theatrical Slate Participation. On May 29, 2009, we terminated our theatrical slate
participation arrangement with Pride Pictures, LLC (Pride), an unrelated entity. The arrangement
was evidenced by, among other documents, that certain Master Covered Picture Purchase Agreement
(the Master Picture Purchase Agreement) between us and LG Film Finance I, LLC (FilmCo) and that
certain Limited Liability Company Agreement (the FilmCo Operating Agreement) for FilmCo by and
between LGEI and Pride, each dated as of May 25, 2007 and amended on January 30, 2008. Under the
arrangement, Pride contributed, in general, 50% of our production,
acquisition, marketing and distribution costs of theatrical feature films and participated in
a pro rata portion of the pictures net profits or losses similar to a co-production arrangement
based on the portion of costs funded. Amounts provided from Pride were reflected as a participation
liability. In late 2008, the administrative agent for the senior lenders under Prides senior
credit facility took the position, among others, that the senior lenders did not have an obligation
to continue to fund under the senior credit facility because
75
the conditions precedent to funding set forth in the senior credit facility could not be
satisfied. We were not a party to the credit facility. Consequently, Pride did not purchase the
pictures The Spirit, My Bloody Valentine 3-D and Madea Goes To Jail. Thereafter, on April 20, 2009,
after failed attempts by us to facilitate a resolution, we gave FilmCo and Pride notice that
FilmCo, through Prides failure to make certain capital contributions, was in default of the Master
Picture Purchase Agreement. On May 5, 2009, the representative for the Pride equity and the Pride
mezzanine investor responded that the required amount was fully funded and that it had no further
obligations to make any additional capital contributions. Consequently, on May 29, 2009, we gave
notice of termination of the Master Picture Purchase Agreement. Since May 29, 2009, there have been
no developments with respect to the arrangement. Although we will no longer receive financing as
provided from the participation of Pride in our films, we do not believe this will have a material
adverse effect to our business.
Société Générale de Financement du Québec. On July 30, 2007, the Company entered into a
four-year filmed entertainment slate participation agreement with Société Générale de Financement
du Québec (SGF), the Québec provincial governments investment arm. SGF will provide up to 35% of
production costs of television and feature film productions produced in Québec for a four-year
period for an aggregate participation of up to $140.0 million, and we will advance all amounts
necessary to fund the remaining budgeted costs. The maximum aggregate of budgeted costs over the
four-year period will be $400.0 million, including our portion, but no more than $100.0 million per
year. In connection with this agreement, we and SGF will proportionally share in the proceeds
derived from the productions after we deduct a distribution fee, recoup all distribution expenses
and releasing costs, and pay all applicable third party participations and residuals. Under the
terms of the arrangement, $35.0 million is available through July 30, 2010 and $35.0 million is
available during the twelve-month period ended July 30, 2011 to be provided by SGF. As of March 31,
2010, $5.5 million was received under the agreement reducing the July 30, 2010 availability to
$29.5 million.
Filmed Entertainment Backlog. Backlog represents the amount of future revenue not yet recorded
from contracts for the licensing of films and television product for television exhibition and in
international markets. Backlog at March 31, 2010 and 2009 is $448.9 million and $499.5 million,
respectively.
Cash Flows Provided by/Used in Operating Activities. Cash flows used in operating activities
for the year ended March 31, 2010 were $121.8 million, compared to cash flows used in operating
activities for the year ended March 31, 2009 of $101.9 million, and cash flows provided by
operating activities for the year ended March 31, 2008 of $89.2 million. The increase in cash used
in operating activities in fiscal 2010 as compared to fiscal 2009 was primarily due to increases in
accounts receivable, decreases in cash provided by changes in accounts payable and accrued
liabilities, participations and residuals, film obligations, and deferred revenue, offset by
decreases in investment in films and television programs, a lower net loss generated in the year
ended March 31, 2010, and a higher amortization of films and television programs. The increase in
cash used in operating activities in fiscal 2009 as compared to fiscal 2008 was primarily due to
increases in investment in films and television programs, decreases in cash provided by changes in
accounts payable and accrued liabilities, participations and residuals, and a higher net loss
generated in the year ended March 31, 2009, offset by decreases in accounts receivable, increases
in film obligations, and a higher amortization of films and television programs.
Cash Flows Provided by/Used in Investing Activities. Cash flows used in investing activities
of $46.8 million for the year ended March 31, 2010 consisted of $6.6 million for purchases of
property and equipment, $47.1 million for the investment in equity method investees, offset by $8.3
million of repayments on loans made to a third party producer. Cash flows used in investing
activities of $298.6 million for the year ended March 31, 2009 consisted of $243.2 million for the
acquisition of TV Guide Network, $8.7 million for purchases of property and equipment, $18.0
million for the investment in equity method investees and $25.0 million for increases in loans made
to a third party producer and $3.8 million for an increase in loans made to Break.com. Cash flows
provided by investing activities of $201.3 million for the year ended March 31, 2008 consisted of
net proceeds from the sale of $237.4 million of auction rate securities and $19.3 million in net
proceeds from the sale of equity securities, offset by $3.6 million for purchases of property and
equipment, $6.5 million for the investment in equity method investees, $3.0 million for a note
receivable from Break.com and $41.2 million for the acquisition of Mandate Pictures, net of
unrestricted cash.
Cash Flows Provided by Financing Activities. Cash flows provided by financing activities of
$120.4 million for the year ended March 31, 2010 resulted from receipt of net proceeds of $214.7
million from the sale of senior secured second-priority notes, borrowings of $302.0 million under
the senior revolving credit facility, increased production loans of $238.3 million and proceeds of
$122.4 million from the issuance of mandatorily redeemable preferred stock units and common stock
units related to the sale of our 49% interest in TV Guide Network, offset by $540.0 million
repayment on the senior revolving credit facility, $139.0 million repayment of production loans,
$75.2 million repayment on the repurchase of subordinated notes, $2.0 million paid for tax
withholding requirements associated with our equity awards, and $0.8 million repayment of other
financing obligations. Cash flows
provided by financing activities of $171.6 million for the year ended March 31, 2009 resulted
from borrowings of $255.0 million under the senior revolving credit facility, increased production
loans of $189.9 million and the exercise of stock options of $2.9 million, offset by $222.0 million
repayment of production loans, $45.0 million paid for the repurchase of our common shares, $3.7
76
million paid for tax withholding requirements associated with our equity awards, and $5.4
million repayment on the repurchase of subordinated notes. Cash flows provided by financing
activities of $28.4 million in the year ended March 31, 2008 resulted from increased production
loans and financing arrangements of $166.1 million and the exercise of stock options of $1.3
million, offset by $97.1 million repayment of production loans, repayment of $14.3 million of debt
assumed from the Mandate Pictures acquisition, $22.3 million paid for the repurchase of our common
shares and $5.3 million paid for tax withholding requirements associated with our equity awards.
Anticipated Cash Requirements. The nature of our business is such that significant initial
expenditures are required to produce, acquire, distribute and market films and television programs,
while revenues from these films and television programs are earned over an extended period of time
after their completion or acquisition. We believe that cash flow from operations, cash on hand,
senior revolving credit facility availability, tax-efficient financing and available production
financing will be adequate to meet known operational cash requirements for the foreseeable future,
including the funding of future film and television production, film rights acquisitions,
theatrical and video release schedules, and future equity method investment funding requirements.
We monitor our cash flow liquidity, availability, fixed charge coverage, capital base, film
spending and leverage ratios with the long-term goal of maintaining our credit worthiness.
Our current financing strategy is to fund operations and to leverage investment in films and
television programs through our cash flow from operations, our senior revolving credit facility,
single-purpose production financing, film credit facility, government incentive programs, film
funds, and distribution commitments. In addition, we may acquire businesses or assets, including
individual films or libraries that are complementary to our business. Any such transaction could be
financed through our cash flow from operations, credit facilities, equity or debt financing.
Future commitments under contractual obligations as of March 31, 2010 are as follows:
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
|
Total |
|
|
|
(Amounts in thousands) |
|
Future annual repayment of debt and other
financing obligations recorded as of March 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,000 |
|
Production loans(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual production loans |
|
|
156,069 |
|
|
|
38,952 |
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
210,021 |
|
Pennsylvania Regional Center production loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
Film Credit Facility |
|
|
30,764 |
|
|
|
4,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,735 |
|
Subordinated notes and other financing obligations (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2004 2.9375% Notes |
|
|
|
|
|
|
110,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,035 |
|
February 2005 3.625% Notes |
|
|
|
|
|
|
59,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,479 |
|
April 2009 3.625% Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,581 |
|
|
|
|
|
|
|
66,581 |
|
Other financing obligations |
|
|
883 |
|
|
|
944 |
|
|
|
4,726 |
|
|
|
1,078 |
|
|
|
1,151 |
|
|
|
6,108 |
|
|
|
14,890 |
|
Senior secured second priority notes (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,000 |
|
|
|
236,000 |
|
Mandatorily redeemable preferred stock units (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324,088 |
|
|
|
324,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
187,716 |
|
|
$ |
214,381 |
|
|
$ |
4,726 |
|
|
$ |
98,824 |
|
|
$ |
67,732 |
|
|
$ |
566,196 |
|
|
$ |
1,139,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual commitments by expected
repayment date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film obligations(1) |
|
$ |
58,043 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
58,043 |
|
Distribution and marketing commitments (5) |
|
|
85,702 |
|
|
|
|
|
|
|
22,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,702 |
|
Minimum guarantee commitments (6) |
|
|
159,514 |
|
|
|
18,654 |
|
|
|
7,544 |
|
|
|
5,554 |
|
|
|
5,871 |
|
|
|
3,019 |
|
|
|
200,156 |
|
Production loan commitments (6) |
|
|
14,604 |
|
|
|
2,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,834 |
|
Cash interest payments on subordinated notes and other financing obligations |
|
|
8,815 |
|
|
|
8,754 |
|
|
|
3,032 |
|
|
|
2,936 |
|
|
|
2,863 |
|
|
|
959 |
|
|
|
27,359 |
|
Cash interest payments on senior secured second priority notes |
|
|
24,862 |
|
|
|
24,190 |
|
|
|
24,190 |
|
|
|
24,190 |
|
|
|
24,190 |
|
|
|
48,380 |
|
|
|
170,002 |
|
Operating lease commitments |
|
|
11,989 |
|
|
|
11,269 |
|
|
|
11,830 |
|
|
|
11,835 |
|
|
|
10,113 |
|
|
|
4,786 |
|
|
|
61,822 |
|
Other contractual obligations |
|
|
24,041 |
|
|
|
3,840 |
|
|
|
2,589 |
|
|
|
2,509 |
|
|
|
2,548 |
|
|
|
2,976 |
|
|
|
38,503 |
|
Employment and consulting contracts |
|
|
34,551 |
|
|
|
18,284 |
|
|
|
9,271 |
|
|
|
4,918 |
|
|
|
2,637 |
|
|
|
1,890 |
|
|
|
71,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
422,121 |
|
|
$ |
87,221 |
|
|
$ |
80,456 |
|
|
$ |
51,942 |
|
|
$ |
48,222 |
|
|
$ |
62,010 |
|
|
$ |
751,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total future commitments under contractual obligations |
|
$ |
609,837 |
|
|
$ |
301,602 |
|
|
$ |
85,182 |
|
|
$ |
150,766 |
|
|
$ |
115,954 |
|
|
$ |
628,206 |
|
|
$ |
1,891,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Production loans represent loans for the production of film and television programs that we
produce. Film obligations include minimum guarantees and theatrical marketing obligations as
disclosed in Note 11 of our audited consolidated financial statements. Repayment dates are
based on anticipated delivery or release date of the related film or contractual due dates of
the obligation. |
|
(2) |
|
Subordinated notes and other financing obligations reflect the principal amounts of the
October 2004 2.9375% Notes, the February 2005 3.625% Notes and the April 2009 3.625% Notes and
other financing obligations. The future repayment dates of the Senior
Notes represent the first
redemption date by holder for each note respectively. As of March 31, 2010, the carrying value
of our subordinated notes was as follows: October 2004 2.9375% Notes $99.5 million;
February 2005 3.625% Notes $52.7 million; |
77
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|
|
|
and April 2009 3.625% Notes $36.2 million. The difference between the carrying value and the
principal amounts is being amortized as a non-cash charge to interest expense over the
expected life of the notes. |
|
(3) |
|
The Senior Notes reflect the principal amount payable in November 2016 with a carrying amount
of $225.2 million as of March 31, 2010. The difference between the carrying value and the
principal amount is being amortized as a non-cash charge to interest expense over the expected
life of the notes. |
|
(4) |
|
Amount represents the anticipated redemption amount (i.e., principal amount of $125.0 million
plus the accretion of a 10% annual dividend) payable in May 2019 of the mandatorily redeemable
preferred stock units held by the noncontrolling interest in TV Guide Network. The carrying
amount of the mandatorily redeemable preferred stock held by the non controlling interest was
$94.6 million as of March 31, 2010. The carrying amount and the 10% dividend is being
accreted, through a non cash charge to interest expense, up to its redemption amount over the
ten-year period to the redemption date. |
|
(5) |
|
Distribution and marketing commitments represent contractual commitments for future
expenditures associated with distribution and marketing of films which we will distribute. The
payment dates of these amounts are primarily based on the anticipated release date of the
film. |
|
(6) |
|
Minimum guarantee commitments represent contractual commitments related to the purchase of
film rights for future delivery. Production loan commitments represent amounts committed for
future film production and development to be funded through production financing and recorded
as a production loan liability. Future payments under these commitments are based on
anticipated delivery or release dates of the related film or contractual due dates of the
commitment. The amounts include future interest payments associated with the commitment. |
Off-Balance Sheet Arrangements
We do not have any transactions, arrangements and other relationships with unconsolidated
entities that will affect our liquidity or capital resources. We have no special purpose entities
that provided off-balance sheet financing, liquidity or market or credit risk support, nor do we
engage in leasing, hedging or research and development services, that could expose us to liability
that is not reflected on the face of our consolidated financial statements. Our commitments to fund
operating leases, minimum guarantees, production loans, equity method investment funding
requirements and all other contractual commitments not reflected on the face of our consolidated
financial statements are presented in the above table.
78
|
|
|
ITEM 7A. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Currency and Interest Rate Risk Management
Market risks relating to our operations result primarily from changes in interest rates and
changes in foreign currency exchange rates. Our exposure to interest rate risk results from the
financial debt instruments that arise from transactions entered into during the normal course of
business. As part of our overall risk management program, we evaluate and manage our exposure to
changes in interest rates and currency exchange risks on an ongoing basis. Hedges and derivative
financial instruments will be used in the future in order to manage our interest rate and currency
exposure. We have no intention of entering into financial derivative contracts, other than to hedge
a specific financial risk.
Currency Rate Risk. We enter into forward foreign exchange contracts to hedge our foreign
currency exposures on future production expenses denominated in various foreign currencies. As of
March 31, 2010, we had outstanding forward foreign exchange contracts to buy Canadian $1.7 million
in exchange for US$1.6 million over a period of one month at a weighted average exchange rate of
one US$ equals Canadian $1.07 and we had outstanding forward exchange contracts to buy US$6.2
million in exchange for British Pound Sterling £3.8 million over a period of six months at a
weighted average exchange rate of one British Pound Sterling equals US$1.64. Changes in the fair
value representing a net unrealized fair value gain on foreign exchange contracts that qualified as
effective hedge contracts outstanding during the year ended March 31, 2010 amounted to $0.4 million
and are included in accumulated other comprehensive income (loss), a separate component of
shareholders equity. These contracts are entered into with a major financial institution as
counterparty. We are exposed to credit loss in the event of nonperformance by the counterparty,
which is limited to the cost of replacing the contracts, at current market rates. We do not require
collateral or other security to support these contracts.
Interest Rate Risk. Our principal risk with respect to our debt is interest rate risk. We
currently have exposure to cash flow risk due to changes in market interest rates related to our
interest-bearing debt, production loans and subordinated notes and other financing obligations at
March 31, 2010 as set forth in the following table:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
|
Total |
|
Senior Revolving Credit Facility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,000 |
|
|
$ |
|
|
|
$ |
|
|
|
|
17,000 |
|
Production Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable (2) |
|
|
164,808 |
|
|
|
13,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,743 |
|
Fixed (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
Subordinated Notes and Other Financing Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed (4) |
|
|
|
|
|
|
169,514 |
|
|
|
|
|
|
|
|
|
|
|
66,581 |
|
|
|
|
|
|
|
236,095 |
|
Fixed (5) |
|
|
|
|
|
|
|
|
|
|
3,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,718 |
|
Fixed (6) |
|
|
883 |
|
|
|
944 |
|
|
|
1,008 |
|
|
|
1,078 |
|
|
|
1,151 |
|
|
|
6,108 |
|
|
|
11,172 |
|
Senior Secured Second Priority Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,000 |
|
|
|
236,000 |
|
Mandatorily Redeemable Preferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Units: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,009 |
|
|
|
125,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
165,691 |
|
|
$ |
184,393 |
|
|
$ |
4,726 |
|
|
$ |
83,824 |
|
|
$ |
67,732 |
|
|
$ |
367,117 |
|
|
$ |
873,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Senior revolving credit facility, which expires July 25, 2013 bears interest of 2.50% over
the Adjusted LIBOR rate. At March 31, 2010, we had borrowings of $17.0 million under this
facility. |
|
(2) |
|
Amounts owed to film production entities on anticipated delivery date or release date of the
titles or the contractual due dates of the obligation. Production loans of $178.7 million
incur interest at rates ranging from approximately 1.98% to 4.00%. Not included in the table
above are approximately $67.0 million of production loans which are non-interest bearing. |
|
(3) |
|
Long term production loans of $65.7 million with a fixed interest rate equal to 1.5%. |
79
|
|
|
(4) |
|
Subordinated notes reflect the principal amounts of the October 2004 2.9375% Notes, the
February 2005 3.625% Notes and the April 2009 3.625% Notes as of March 31, 2010, and the
repayment dates fall on the first redemption date by holder for each note respectively. |
|
(5) |
|
Other financing obligation with fixed interest rate equal to 8.02%. |
|
(6) |
|
Capital lease obligation for a satellite transponder with an imputed interest rate equal to
6.65%. |
|
(7) |
|
Senior Notes reflect the principal amount of $236.0 million with a fixed interest rate equal
to 10.25%. |
|
(8) |
|
Mandatorily redeemable preferred stock units reflect the principal amount of $125.0 million
with a 10% dividend accretion through a non-cash charge to interest expense, up to its
redemption amount over the ten year period to the redemption date of May 2019. |
|
|
|
ITEM 8. |
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
The Auditors Report and our Consolidated Financial Statements and Notes thereto appear in a
separate section of this report (beginning on page F-1 following Part IV). The index to our
Consolidated Financial Statements is included in Item 15.
|
|
|
ITEM 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
Not applicable.
|
|
|
ITEM 9A. |
|
CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the
Exchange Act), is recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms, and that such information is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. We periodically review the design and
effectiveness of our disclosure controls and internal control over financial reporting. We make
modifications to improve the design and effectiveness of our disclosure controls and internal
control structure, and may take other corrective action, if our reviews identify a need for such
modifications or actions.
As of March 31, 2010, the end of the period covered by this report, the Companys management
had carried out an evaluation under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and
procedures, as defined in Exchange Act Rules 13a-15(e). Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that such controls and procedures were
effective.
Internal Control Over Financial Reporting
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting for the Company. Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Internal control over financial reporting includes policies and procedures
that:
|
|
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; |
|
|
|
|
provide reasonable assurance that (a) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and (b) that our receipts and expenditures are being recorded and made only in
accordance with managements authorizations; and |
80
|
|
|
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets. |
A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Because of the inherent
limitations, internal controls over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of the effectiveness of internal control over financial reporting to
future periods are subject to the risks that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
81
Our management has made an assessment of the effectiveness of our internal control over
financial reporting as of March 31, 2010. Management based its assessment on criteria established
in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
Based on this assessment, our management has concluded that, as of March 31, 2010, the Company
maintained effective internal control over financial reporting. Our independent registered public
accounting firm, Ernst & Young LLP, has issued an attestation report on managements assessment of
the Companys internal control over financial reporting. Their report is included below.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting during the fiscal fourth
quarter ended March 31, 2010, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
82
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Lions Gate Entertainment Corp.
We have audited Lions Gate Entertainment Corp.s internal control over financial reporting as of
March 31, 2010, based on criteria established in Internal Control Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Lions
Gate Entertainment Corp.s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Managements Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. In our opinion, Lions
Gate Entertainment Corp. maintained, in all material respects, effective internal control over
financial reporting as of March 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Lions Gate Entertainment Corp. as of
March 31, 2010 and 2009, and the related consolidated statements of operations, equity, and cash
flows for each of the three years in the period ended March 31, 2010 of Lions Gate Entertainment
Corp. and our report dated June 1, 2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Los Angeles, California
June 1, 2010
83
|
|
|
ITEM 9B. |
|
OTHER INFORMATION |
None.
PART III
|
|
|
ITEM 10. |
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
The information required by this item is incorporated by reference to our Proxy Statement for
our 2010 Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the
end of the fiscal year ended March 31, 2010.
|
|
|
ITEM 11. |
|
EXECUTIVE COMPENSATION. |
The information required by this item is incorporated by reference to our Proxy Statement for
our 2010 Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the
end of the fiscal year ended March 31, 2010.
|
|
|
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS. |
The information required by this item is incorporated by reference to our Proxy Statement for
our 2010 Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the
end of the fiscal year ended March 31, 2010.
|
|
|
ITEM 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
The information required by this item is incorporated by reference to our Proxy Statement for
our 2010 Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the
end of the fiscal year ended March 31, 2010.
|
|
|
ITEM 14. |
|
PRINCIPAL ACCOUNTING FEES AND SERVICES. |
The information required by this item is incorporated by reference to our Proxy Statement for
our 2010 Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the
end of the fiscal year ended March 31, 2010.
PART IV
|
|
|
ITEM 15. |
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
(a) |
|
The following documents are filed as part of this report: |
The financial statements listed on the accompanying Index to Financial Statements are
filed as part of this report at pages F-1 to F-51.
|
(2) |
|
Financial Statement Schedules |
|
|
|
|
Schedule II. Valuation and Qualifying Accounts |
All other Schedules are omitted since the required information is not present or is not
present in amounts sufficient to require submission of the schedule.
The exhibits listed on the accompanying Index to Exhibits are filed as part of this
report.
84
Item 15(a).
Schedule II. Valuation and Qualifying Accounts
Lions Gate Entertainment Corp.
March 31, 2010
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COL. A. |
|
COL. B. |
|
COL. C. |
|
COL. D. |
|
COL. E. |
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
Balance at |
|
Charged to Costs and |
|
Charged to Other |
|
Deductions - |
|
Balance at End |
Description |
|
Beginning of Period |
|
Expenses (1) |
|
Accounts - Describe |
|
Describe |
|
of Period |
Year Ended March 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video returns and allowances |
|
$ |
98,947 |
|
|
$ |
178,865 |
|
|
$ |
1,103 |
(2) |
|
$ |
(190,937 |
) (3) |
|
$ |
87,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
9,847 |
|
|
|
1,564 |
|
|
|
635 |
(2) |
|
|
(3,334 |
) (4) |
|
|
8,712 |
|
|
|
|
Total |
|
$ |
108,794 |
|
|
$ |
180,429 |
|
|
$ |
1,738 |
|
|
$ |
(194,271 |
) |
|
$ |
96,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video returns and allowances |
|
$ |
95,515 |
|
|
$ |
224,855 |
|
|
$ |
7,000 |
(2) |
|
$ |
(228,423 |
) (3) |
|
$ |
98,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
5,978 |
|
|
|
3,377 |
|
|
|
872 |
(2) |
|
|
(380 |
) (4) |
|
|
9,847 |
|
|
|
|
Total |
|
$ |
101,493 |
|
|
$ |
228,232 |
|
|
$ |
7,872 |
|
|
$ |
(228,803 |
) |
|
$ |
108,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video returns and allowances |
|
$ |
77,691 |
|
|
$ |
194,690 |
|
|
$ |
2,120 |
(2) |
|
$ |
(178,986 |
) (3) |
|
$ |
95,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
6,345 |
|
|
|
551 |
|
|
|
204 |
(2) |
|
|
(1,122 |
) (4) |
|
|
5,978 |
|
|
|
|
Total |
|
$ |
84,036 |
|
|
$ |
195,241 |
|
|
$ |
2,324 |
|
|
$ |
(180,108 |
) |
|
$ |
101,493 |
|
|
|
|
|
|
|
(1) |
|
Charges for video returns and allowances are charges against revenue. |
|
(2) |
|
Opening balances due to acquisitions and fluctuations in foreign exchange rates. Video
returns and allowances for the year ended March 31, 2009 includes an initial returns reserve
for the HIT Entertainment distribution deal. |
|
(3) |
|
Actual video returns and fluctuations in foreign currency exchange rates. |
|
(4) |
|
Uncollectible accounts written off and fluctuations in foreign currency exchange rates. |
85
Item 15(b).
INDEX TO EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Description of Documents |
3.1(10) |
|
Articles |
|
|
|
3.2(34) |
|
Notice of Articles |
|
|
|
3.3(17) |
|
Vertical Short Form Amalgamation Application |
|
|
|
3.4(17) |
|
Certificate of Amalgamation |
|
4.1(1) |
|
Indenture dated as of December 3, 2003 among Lions Gate Entertainment Inc., Lions Gate Entertainment Corp.
and J.P. Morgan Trust Company, National Association |
|
|
|
4.2(1) |
|
Form of 4.875% Convertible Senior Subordinated Notes Due 2010 |
|
|
|
4.3(1) |
|
Form of Guaranty of 4.875% Convertible Subordinated Notes Due 2010 |
|
|
|
4.4(2) |
|
Indenture dated as of October 4, 2004 among Lions Gate Entertainment Inc., Lions Gate Entertainment Corp.
and J.P. Morgan Trust Company, National Association |
|
|
|
4.5(2) |
|
Form of 2.9375% Convertible Senior Subordinated Notes due 2024 |
|
|
|
4.6(2) |
|
Form of Guaranty of 2.9375% Convertible Senior Subordinated Notes due 2024 |
|
|
|
4.7(3) |
|
Indenture dated as of February 24, 2005 among Lions Gate Entertainment Inc., Lions Gate Entertainment
Corp. and J.P. Morgan Trust Company, National Association |
|
4.8(3) |
|
Form of 3.625% Convertible Senior Subordinated Notes due 2025 |
|
|
|
4.9(3) |
|
Form of Guaranty of 3.625% Convertible Senior Subordinated Notes due 2025 |
|
|
|
4.10 (24) |
|
Form of Refinancing Exchange Agreement dated April 27, 2009 |
|
|
|
4.11 (24) |
|
Form of Indenture dated as of April 27, 2009 among Lions Gate Entertainment Inc., Lions Gate Entertainment
Corp. and The Bank of New York Mellon Trust Company, N.A. |
|
4.12 (24) |
|
Form of 3.625% Convertible Senior Subordinated Notes Due 2025 dated as of April 27, 2009 |
|
|
|
4.13 (24) |
|
Form of Guaranty of 3.625% Convertible Senior Subordinated Notes due 2025 dated as of April 27, 2009 |
|
|
|
4.14 (35) |
|
Rights Plan, dated as of March 12, 2010, between Lions Gate Entertainment Corp. and CIBC Mellon Trust
Company, as amended and restated as of April 22, 2010 between Lions Gate Entertainment Corp. and CIBC
Mellon Trust Company. |
|
|
|
10.1(4)* |
|
Amended Employees and Directors Equity Incentive Plan |
|
|
|
10.2(5)* |
|
Form of Incentive Plan Stock Option Agreement |
|
|
|
10.3(10)* |
|
2004 Performance Plan Restricted Share Unit Agreement |
|
|
|
10.4(14)* |
|
2004 Performance Incentive Plan |
|
|
|
10.5(10)* |
|
Form of 2004 Performance Incentive Plan Nonqualified Stock Option Agreement |
|
|
|
10.6(6) |
|
Registration Rights Agreement by and among the Company, Mark Amin and Reza Amin, dated as of June 6, 2000 |
|
|
|
10.7* |
|
Director Compensation Summary |
|
|
|
10.8(16)* |
|
Employment Agreement between the Company and Jon Feltheimer, dated September 20, 2006 |
|
|
|
10.9(16)* |
|
Employment Agreement between the Company and Michael Burns, dated September 1, 2006 |
|
|
|
10.10(13)* |
|
Employment Agreement between the Company and James Keegan, dated February 21, 2006 and entered into as of
April 4, 2006 |
|
|
|
10.11(13)* |
|
Employment Agreement between the Company and Wayne Levin, dated April 1, 2006 and entered into as of May
9, 2006 |
86
|
|
|
Exhibit |
|
|
Number |
|
Description of Documents |
10.12(13)*
|
|
Employment Agreement between the Company and Marni Wieshofer, dated January 5, 2006 and entered into as of
March 7, 2006 |
|
|
|
10.13(17)*
|
|
Employment Agreement between the Company and Steve Beeks, dated March 28, 2007 and entered into as of
March 29, 2007 |
|
|
|
10.14(7)
|
|
Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of December 15, 2003 among
Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the
Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase Bank (Toronto Branch), Fleet National
Bank and BNP Paribas, dated as of December 15, 2003 |
|
|
|
10.15(1)
|
|
Amendment No. 1 to the Companys Amended and Restated Credit, Security, Guaranty and Pledge Agreement,
dated as of June 15, 2004, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the
Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase
Bank (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003 |
|
|
|
10.16(2)
|
|
Amendment No. 2 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
September 22, 2004, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the
Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase
Bank (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003 |
|
|
|
10.17(8)
|
|
Amendment No. 3 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
December 31, 2004, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the
Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase
Bank (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003 |
|
|
|
10.18(8)
|
|
Amendment No. 4 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
February 15, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the
Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National
Association, JP Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP
Paribas, dated as of December 15, 2003 |
|
|
|
10.19(9)
|
|
Amendment No. 5 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
March 31, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors
referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP
Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of
December 15, 2003 |
|
|
|
10.20(11)
|
|
Amendment No. 6 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
June 21, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors
referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP
Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of
December 15, 2003 |
|
|
|
10.21(11)
|
|
Amendment No. 7 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
October 17, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the
Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National
Association, JP Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP
Paribas, dated as of December 15, 2003 |
|
|
|
10.22(17)
|
|
Amendment No. 9 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
April 2, 2007, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors
referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP
Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of
December 15, 2003 |
|
|
|
10.23(10)*
|
|
Amendment to January 5, 2000 Incentive Plan Stock Option Agreement between the Company and Michael Burns,
dated December 11, 2001 |
|
|
|
10.24(10)*
|
|
Amendment to January 5, 2000 Incentive Plan Stock Option Agreement between the Company and Jon Feltheimer,
dated December 11, 2001 |
|
|
|
10.25(10)*
|
|
Share Appreciation Rights Award Agreement between the Company and Steve Beeks, dated February 2, 2004 |
|
|
|
10.26(10)*
|
|
Clarification of Stock Appreciation Rights Award Letter for Steve Beeks, dated November 18, 2004 |
87
|
|
|
Exhibit |
|
|
Number |
|
Description of Documents |
10.27(12) |
|
Partnership Interest Purchase Agreement, dated December 22, 2005, by and among Lions Gate Entertainment
Corp., Lions Gate Films Corp., Bosa Development Corp., and 0742102 B.C. LTD. |
|
|
|
10.28(12) |
|
Amendment to Partnership Interest Purchase Agreement Amendment and Removal of Conditions Precedent,
January 23, 2006, by and among Lions Gate Entertainment Corp., Lions Gate Films Corp., Bosa Development
Corp., and 0742102 B.C. LTD. |
|
|
|
10.29(13) |
|
Agreement dated as of December 6, 2005 between Lions Gate Film, Inc. and Sobini Films, with respect to the
distribution rights to the motion picture entitled The Prince and Me II. |
|
|
|
10.30(13) |
|
Agreement dated as of March 24, 2005 between Lions Gate Films Inc. and Sobini Films, with respect to the
distribution rights to the motion picture entitled Streets of Legend. |
|
10.31(13) |
|
Agreement dated as of December 6, 2005 between Lions Gate Films Inc. and Sobini Films, with respect to the
distribution rights to the motion picture entitled Peaceful Warrior. |
|
|
|
10.32(13) |
|
Purchase Agreement dated March 17, 2006 between Lions Gate Entertainment Corp. and Icon International, Inc. |
|
|
|
10.33(13) |
|
Vendor Subscription Agreement dated March 17, 2006 between Lions Gate Entertainment Corp. and Icon
International, Inc. |
|
|
|
10.34(13) |
|
Agreement, by and between Ignite, LLC and Lions Gate Films Inc., entered into June 13, 2006 and dated and
effective as of March 13, 2006 |
|
|
|
10.35(15) |
|
Right of First Refusal Agreement dated as of August 29, 2006 between Lions Gate Entertainment Corp.,
Sobini Films and Mark Amin. |
|
|
|
10.36(17)+ |
|
Master Covered Picture Purchase Agreement, by and between LG Film Finance I, LLC and Lions Gate Films
Inc., dated as of May 25, 2007 |
|
|
|
10.37(17)+ |
|
Master Distribution Agreement, by and between Lions Gate Films Inc. and LG Film Finance I, LLC, dated as
of May 25, 2007 |
|
|
|
10.38(17)+ |
|
Limited Liability Company Agreement for LG Film Finance I, LLC, dated as of May 25, 2007 |
|
|
|
10.39(18) |
|
Amendment No. 10 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
August 8, 2007, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors
referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP
Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of
December 15, 2003. |
|
|
|
10.40(19)+ |
|
Revenue Participation Purchase Agreement dated as of July 25, 2007 among Lions Gate Entertainment Inc.,
Lions Gate Films Inc., Lions Gate Television Inc., MQP, LLC and SGF Entertainment, Inc. |
|
|
|
10.41(19)+ |
|
Master Distribution Agreement (Film Productions) dated as of July 25, 2007 between MQP LLC and Lions Gate
Films Inc. |
|
|
|
10.42(19)+ |
|
Master Distribution Agreement (Television Productions) dated as of July 25, 2007 between MQP LLC and Lions
Gate Television Inc. |
|
|
|
10.43(20) |
|
Purchase Agreement by and among the Sellers, Lions Gate Entertainment Corp., Lions Gate Entertainment
Inc., Mandate Pictures, LLC and Joseph Drake dated September 10, 2007. |
|
|
|
10.44(20) |
|
Registration Rights Agreement by and among the Sellers and Lions Gate Entertainment Corp. dated September
10, 2007. |
|
|
|
10.45(20) |
|
Letter Agreement by and among the Sellers, Lions Gate Entertainment Corp., Lions Gate Entertainment Inc.,
Mandate Pictures, LLC and Joseph Drake dated September 10, 2007. |
|
|
|
10.46(20)* |
|
Employment Agreement by and between Lions Gate Films, Inc. and Joe Drake dated September 10, 2007 |
|
|
|
10.47(21) |
|
Amendment No. 1 to Right of First Refusal Agreement dated as of August 29, 2006 by and among Lions Gate
Entertainment Corp., Sobini Films and Mark Amin dated December 20, 2007 |
|
|
|
10.48(22) |
|
Amendment No. 8 to the Amended and Restated Credit Facility, Security, Guaranty and Pledge Agreement,
dated as of December 5, 2006, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc.,
the Guarantors |
88
|
|
|
Exhibit |
|
|
Number |
|
Description of Documents |
|
|
referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National
Association, JP Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP
Paribas, dated as of December 15, 2003 |
|
|
|
10.49(22)+ |
|
First Amendment dated January 30, 2008 to Master Covered Picture Purchase Agreement by and between LG Film
Finance I, LLC and Lions Gate Films, Inc. dated as of May 25, 2007 |
|
|
|
10.50(23) |
|
Amendment No. 11 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of
April 10, 2008, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors
referred to therein, the Lenders referred to therein, JPMorgan Chase Bank, National Association (formerly
known as JPMorgan Chase Bank), JP Morgan Chase Bank, National Association (Toronto Branch), Bank of
America, N.A. (as successor by merger to Fleet National Bank) and BNP Paribas, dated as of December 15,
2003 |
|
10.51 (25)+ |
|
Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement by and among Lions Gate
Entertainment Inc., Lions Gate UK Limited, Lions Gate Australia Pty Limited, the Guarantors referred to
therein, the Lenders referred to therein, JPMorgan Chase Bank, N.A. and Wachovia Bank, N.A., dated of July
25, 2008 |
|
|
|
10.52 (26)* |
|
Amendment of Employment Agreement between the Company and Jon Feltheimer dated September 18, 2008 |
|
|
|
10.53 (26)* |
|
Amendment of Employment Agreement between the Company and Michael Burns dated September 22, 2008 |
|
|
|
10.54 (27)* |
|
Amendment of Employment Agreement between the Company and Jon Feltheimer dated October 8, 2008 |
|
|
|
10.55 (28) |
|
Equity Purchase Agreement dated January 5, 2009, by and among Lions Gate Entertainment, Inc., Gemstar-TV
Guide International, Inc., TV Guide Entertainment Group, Inc., UV Corporation and Macrovision Solutions
Corporation |
|
|
|
10.56 (29)* |
|
Employment Agreement between the Company and James Keegan dated January 14, 2009 |
|
|
|
10.57 (30)* |
|
Amended and Restated Employment Agreement between the Company and Jon Feltheimer dated December 15, 2008 |
|
|
|
10.58 (30)* |
|
Amended and Restated Employment Agreement between the Company and Michael Burns dated December 15, 2008 |
|
|
|
10.59 (30)* |
|
Amended and Restated Employment Agreement between the Company and Steven Beeks dated December 15, 2008 |
|
|
|
10.60 (30)* |
|
Amended and Restated Employment Agreement between the Company and James Keegan dated December 15, 2008 |
|
|
|
10.61 (30)* |
|
Amended and Restated Employment Agreement between the Company and Wayne Levin dated December 15, 2008 |
|
|
|
10.62 (30) |
|
Form of Director Indemnity Agreement |
|
|
|
10.63 (31)* |
|
Amendment of Employment Agreement between the Company and Steven Beeks dated February 6, 2009 |
|
|
|
10.64 (32)* |
|
Employment Agreement between Lions Gate Films, Inc. and Wayne Levin dated April 6, 2009 |
|
|
|
10.65 (36)+ |
|
Equity Purchase Agreement between TVGN Holdings, LLC, Lionsgate Channels, Inc. and Lions Gate
Entertainment Inc. dated May 28, 2009 |
|
|
|
10.66 (36)+ |
|
Amended and Restated Operating Agreement of TV Guide Entertainment Group, LLC dated as of May 28, 2009 |
|
|
|
10.67 (37) |
|
Letter Agreement between Mark H. Rachesky and Lions Gate Entertainment Corp. dated July 9, 2009 |
|
|
|
10.68 (38) |
|
Registration Rights Agreement, dated as of October 22, 2009, by and among Lions Gate Entertainment Corp.
and the persons listed on the signature pages thereto. |
|
|
|
10.69 (39)* |
|
Amendment of Employment Agreement, dated as of November 2, 2009, by and between the Company and Michael
Burns. |
|
|
|
10.70 (34)+ |
|
Amendment No. 1 to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated
as of July 25, 2008, with the guarantors and lenders referred to therein, JP Morgan ChaseBank, N.A., as
administrative agent and issuing bank, and Wachovia Bank, N.A., as syndication agent. |
89
|
|
|
Exhibit |
|
|
Number |
|
Description of Documents |
10.71 (40)
|
|
Amendment No. 2 dated as of November 24, 2009 to the Second Amended and Restated Credit, Security,
Guaranty and Pledge Agreement dated as of July 25, 2008 among Lions Gate Entertainment Inc., Lions Gate UK
Limited and Lions Gate Australia Pty Limited, as Borrowers, the guarantors and lenders referred to
therein, JPMorgan Chase Bank, N.A., as Administrative Agent and as Issuing Bank and Wachovia Bank, N.A.,
as Syndication Agent. |
|
|
|
10.72 (41)+
|
|
Credit, Security, Guaranty and Pledge Agreement dated as of October 6, 2009, among Lions Gate Mandate
Financing Vehicle Inc., the guarantors and lenders referred to therein, JPMorgan Chase Bank, N.A., as
administrative agent and issuing bank, Union Bank, N.A., as co-administrative agent, syndication agent and
joint lead arranger, and Wells Fargo Bank, National Association as documentation agent. |
|
|
|
10.73 (41)
|
|
Indenture dated as of October 21, 2009 among Lions Gate Entertainment Inc., Lions Gate Entertainment
Corp., the guarantors referred to therein and U.S. Bank National Association. |
|
|
|
10.74 (41)
|
|
Pledge and Security Agreement dated as of October 21, 2009 among Lions Gate Entertainment, Inc., the
grantors listed therein and U.S. Bank National Association. |
|
|
|
10.75 (41)
|
|
Intercreditor Agreement dated as of October 21, 2009 among JPMorgan Chase Bank, N.A., as administrative
agent, U.S. Bank National Association, as collateral agent, Lions Gate Entertainment, Inc. and the loan
parties referred to therein. |
|
|
|
10.76 (41)+
|
|
Amendment No. 1, executed on January 22, 2010 and dated as of December 31, 2009, to Credit, Security,
Guaranty and Pledge Agreement dated as of October 6, 2009, among Lions Gate Mandate Financing Vehicle
Inc., the guarantors and lenders referred to therein, JPMorgan Chase Bank, N.A., as administrative agent
and issuing bank, Union Bank, N.A., as co-administrative agent, syndication agent and joint lead arranger,
and Wells Fargo Bank, National Association as documentation agent. |
|
|
|
18.1 (33)
|
|
Preferability Letter dated May 30, 2008 |
|
|
|
21.1
|
|
Subsidiaries of the Company |
|
|
|
23.1
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm |
|
|
|
23.2
|
|
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm |
|
|
|
24.1
|
|
Power of Attorney (Contained on Signature Page) |
|
|
|
31.1
|
|
Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
|
|
|
31.2
|
|
Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
|
|
|
32.1
|
|
Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002 |
|
|
|
99.1
|
|
Studio 3 Partners L.L.C. Audited Financial Statements for the fiscal years ended December 31, 2009 and 2008 |
|
|
|
(1) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period
ended June 30, 2004. |
|
(2) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on October 4,
2004. |
|
(3) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on February
25, 2005. |
|
(4) |
|
Incorporated by reference to the Companys Definitive Proxy Statement dated August 13, 2001. |
|
(5) |
|
Incorporated by reference to the Companys Registration Statement on Form S-2 under the
Securities Act of 1933 dated April 30, 2003. |
|
(6) |
|
Incorporated by reference to the Companys Registration Statement on Form F-4 under the
Securities Act of 1933 dated August 18, 2000. |
|
(7) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period ended
December 31, 2003. |
|
(8) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on February
22, 2005. |
|
(9) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on April 14,
2005. |
|
(10) |
|
Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended March 31, 2005 as filed on June 29, 2005. |
|
(11) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on October 18,
2005. |
|
(12) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period ended
December 31, 2005. |
|
(13) |
|
Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended March 31, 2006 as filed on June 14, 2006. |
|
(14) |
|
Incorporated by reference to the Companys Definitive Proxy Statement dated July 28, 2006. |
|
(15) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on September
5, 2006. |
|
(16) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period ended
September 30, 2006. |
|
(17) |
|
Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended March 31, 2007 as filed on May 30, 2007. |
90
|
|
|
(18) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on August 9,
2007. |
|
(19) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period ended
June 30, 2007. |
|
(20) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on September
10, 2007. |
|
(21) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on December
21, 2007. |
|
(22) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period ended
December 31, 2006. |
|
(23) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on April 11,
2008. |
|
(24) |
|
Incorporated by reference to the Companys Form T-3 filed on April 20, 2009, as amended on
April 22, 2009. |
|
(25) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period ended
June 30, 2008. |
|
(26) |
|
Incorporated by reference to the Companys Current Report on Form 8-K filed on September 23,
2008. |
|
(27) |
|
Incorporated by reference to the Companys Current Report on Form 8-K filed on October 14,
2008. |
|
(28) |
|
Incorporated by reference to the Companys Current Report on Form 8-K filed on January 9,
2009 (filed as Exhibit 10.54). |
|
(29) |
|
Incorporated by reference to the Companys Current Report on Form 8-K filed on January 16,
2009 (filed as Exhibit 10.55). |
|
(30) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the period ended
December 31, 2008. |
|
(31) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on February
11, 2009. |
|
(32) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on April 10,
2009. |
|
(33) |
|
Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended March 31, 2008 as filed on May 30, 2008. |
|
(34) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2009 as filed on November 9, 2009. |
|
(35) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on April 23,
2010. |
|
(36) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2009 as filed on August 10, 2009. |
|
(37) |
|
Incorporated by reference as Exhibit 10.65 to the Companys Current Report on Form 8-K as
filed on July 10, 2009. |
|
(38) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on October 23,
2009. |
|
(39) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on November 6,
2009. |
|
(40) |
|
Incorporated by reference to the Companys Current Report on Form 8-K as filed on December 1,
2009. |
|
(41) |
|
Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2009 as filed on February 9, 2010. |
|
* |
|
Management contract or compensatory plan or arrangement. |
|
+ |
|
Confidential treatment has been granted for portions of this exhibit. Portions of this
document have been omitted and submitted separately to the Securities and Exchange Commission. |
91
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on June 1, 2010.
|
|
|
|
|
|
LIONS GATE ENTERTAINMENT CORP.
|
|
|
By: |
/s/ James Keegan
|
|
|
|
James Keegan |
|
|
|
Chief Financial Officer |
|
|
DATE: June 1, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons in the capacities and on the dates so indicated.
Each person whose signature appears below authorizes each of Jon Feltheimer, Michael Burns,
Wayne Levin and James Keegan, severally and not jointly, to be his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and
in such persons name, place and stead, in any and all capacities, to sign any amendments to the
Companys Annual Report on Form 10-K for the fiscal year ended
March 31, 2010; granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or
his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
|
|
|
|
|
Signature |
|
Title |
|
Date |
/s/ Norman Bacal
Norman Bacal
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Michael Burns
Michael Burns
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Arthur Evrensel
Arthur Evrensel
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Jon Feltheimer
Jon Feltheimer
|
|
Chief Executive Officer (Principal
Executive Officer) and
Co-Chairman of the Board of Directors
|
|
June 1, 2010 |
|
|
|
|
|
/s/ James Keegan
James Keegan
|
|
Chief Financial Officer (Principal
Financial Officer and
Principal Accounting Officer)
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Morley Koffman
Morley Koffman
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Harald Ludwig
Harald Ludwig
|
|
Co-Chairman of the Board of Directors
|
|
June 1, 2010 |
|
|
|
|
|
/s/ G. Scott Paterson
G. Scott Paterson
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/
Mark H. Rachesky, M.D.
Mark H. Rachesky, M.D.
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Daryl Simm
Daryl Simm
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Hardwick Simmons
Hardwick Simmons
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Brian V. Tobin
Brian V. Tobin
|
|
Director
|
|
June 1, 2010 |
|
|
|
|
|
/s/ Phyllis Yaffe
Phyllis Yaffe
|
|
Director
|
|
June 1, 2010 |
92
INDEX TO FINANCIAL STATEMENTS
|
|
|
|
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Page |
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Number |
|
Audited Financial Statements |
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F-2 |
|
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|
|
F-3 |
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|
|
F-4 |
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F-5 |
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F-6 |
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F-7 |
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F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Lions Gate Entertainment Corp.
We have audited the accompanying consolidated balance sheets of Lions Gate Entertainment Corp. as
of March 31, 2010 and 2009, and the related consolidated statements of operations, equity, and cash
flows for each of the three years in the period ended March 31, 2010. Our audits also included the
financial statement schedule listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Lions Gate Entertainment Corp. at March 31, 2010
and 2009, and the consolidated results of its operations and its cash flows for each of the three
years in the period ended March 31, 2010, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Lions Gate Entertainment Corp.s internal control over financial reporting
as of March 31, 2010, based on criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June
1, 2010 expressed an unqualified opinion thereon.
/s/
Ernst & Young LLP
Los Angeles, California
June 1, 2010
F-2
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands, |
|
|
|
except share amounts) |
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
91,421 |
|
|
$ |
138,475 |
|
Restricted cash |
|
|
4,123 |
|
|
|
10,056 |
|
Restricted investments |
|
|
6,995 |
|
|
|
6,987 |
|
Accounts receivable, net of reserve for returns and allowances of $87,978 (March 31, 2009
$98,947) and provision for doubtful accounts of $8,712 (March 31, 2009 $9,847) |
|
|
312,123 |
|
|
|
227,010 |
|
Investment in films and television programs, net |
|
|
680,647 |
|
|
|
702,767 |
|
Property and equipment, net |
|
|
33,577 |
|
|
|
42,415 |
|
Finite-lived intangible assets, net |
|
|
71,530 |
|
|
|
78,904 |
|
Goodwill |
|
|
391,853 |
|
|
|
379,402 |
|
Other assets |
|
|
112,188 |
|
|
|
81,234 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,704,457 |
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
17,000 |
|
|
$ |
255,000 |
|
Senior secured second-priority notes |
|
|
225,155 |
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
270,120 |
|
|
|
270,561 |
|
Participations and residuals |
|
|
302,677 |
|
|
|
371,857 |
|
Film obligations and production loans |
|
|
369,545 |
|
|
|
304,525 |
|
Subordinated notes and other financing obligations |
|
|
203,208 |
|
|
|
281,521 |
|
Mandatorily redeemable preferred stock units held by noncontrolling interest |
|
|
94,580 |
|
|
|
|
|
Deferred revenue |
|
|
138,272 |
|
|
|
142,093 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,620,557 |
|
|
|
1,625,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
Lions Gate Entertainment Corp. shareholders equity: |
|
|
|
|
|
|
|
|
Common shares, no par value, 500,000,000 shares authorized, 117,951,754 and
116,950,512 shares issued at March 31, 2010 and 2009, respectively |
|
|
521,164 |
|
|
|
494,724 |
|
Accumulated deficit |
|
|
(460,631 |
) |
|
|
(441,153 |
) |
Accumulated other comprehensive loss |
|
|
(6,611 |
) |
|
|
(11,878 |
) |
|
|
|
|
|
|
|
Total Lions Gate Entertainment Corp. shareholders equity |
|
|
53,922 |
|
|
|
41,693 |
|
Noncontrolling interest |
|
|
29,978 |
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
83,900 |
|
|
|
41,693 |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
1,704,457 |
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands, except per share amounts) |
|
Revenues |
|
$ |
1,583,718 |
|
|
$ |
1,466,374 |
|
|
$ |
1,361,039 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
807,311 |
|
|
|
793,816 |
|
|
|
660,924 |
|
Distribution and marketing |
|
|
515,755 |
|
|
|
669,557 |
|
|
|
635,666 |
|
General and administration |
|
|
180,543 |
|
|
|
136,563 |
|
|
|
119,080 |
|
Depreciation and amortization |
|
|
28,064 |
|
|
|
7,657 |
|
|
|
5,500 |
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,531,673 |
|
|
|
1,607,593 |
|
|
|
1,421,170 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
52,045 |
|
|
|
(141,219 |
) |
|
|
(60,131 |
) |
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
Contractual cash based interest |
|
|
28,271 |
|
|
|
15,131 |
|
|
|
12,851 |
|
Amortization of debt discount, deferred financing costs
and accretion of redeemable preferred stock units |
|
|
29,789 |
|
|
|
19,144 |
|
|
|
17,048 |
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
58,060 |
|
|
|
34,275 |
|
|
|
29,899 |
|
Interest and other income |
|
|
(1,573 |
) |
|
|
(5,785 |
) |
|
|
(11,276 |
) |
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
(2,909 |
) |
Gain on extinguishment of debt |
|
|
(5,675 |
) |
|
|
(3,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses, net |
|
|
50,812 |
|
|
|
25,467 |
|
|
|
15,714 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity interests and income taxes |
|
|
1,233 |
|
|
|
(166,686 |
) |
|
|
(75,845 |
) |
Equity interests loss |
|
|
(28,149 |
) |
|
|
(9,044 |
) |
|
|
(7,559 |
) |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(26,916 |
) |
|
|
(175,730 |
) |
|
|
(83,404 |
) |
Income tax provision |
|
|
1,230 |
|
|
|
2,724 |
|
|
|
4,031 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(28,146 |
) |
|
|
(178,454 |
) |
|
|
(87,435 |
) |
Add: Net loss attributable to noncontrolling interest |
|
|
8,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to Lions Gate Entertainment Corp. Shareholders |
|
$ |
(19,478 |
) |
|
$ |
(178,454 |
) |
|
$ |
(87,435 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net Loss Per Common Share |
|
$ |
(0.17 |
) |
|
$ |
(1.53 |
) |
|
$ |
(0.74 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted Net Loss Per Common Share |
|
$ |
(0.17 |
) |
|
$ |
(1.53 |
) |
|
$ |
(0.74 |
) |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
117,510 |
|
|
|
116,795 |
|
|
|
118,427 |
|
Diluted |
|
|
117,510 |
|
|
|
116,795 |
|
|
|
118,427 |
|
See accompanying notes.
F-4
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lions Gate Entertainment Corp. Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
Preferred Shares |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Treasury Shares |
|
|
Noncontrolling |
|
|
Comprehensive |
|
|
|
|
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Number |
|
|
Amount |
|
|
Interest |
|
|
Income |
|
|
Total |
|
|
|
(Amounts in thousands, except share amounts) |
|
|
|
|
|
|
|
|
|
Balance at March 31, 2007 |
|
|
116,970,280 |
|
|
$ |
504,277 |
|
|
|
10 |
|
|
$ |
|
|
|
$ |
(175,264 |
) |
|
$ |
(1,295 |
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
327,718 |
|
Exercise of stock options |
|
|
993,772 |
|
|
|
(2,492 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,492 |
) |
Stock based compensation, net of
withholding tax obligations of $1,576 |
|
|
666,306 |
|
|
|
12,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,212 |
|
Issuance of common shares
to directors for services |
|
|
25,970 |
|
|
|
277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277 |
|
Issuance of common shares
for investment in NextPoint, Inc |
|
|
1,890,189 |
|
|
|
20,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,851 |
|
Issuance of common shares
related to the Redbus acquisition |
|
|
94,937 |
|
|
|
900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900 |
|
Issuance of common shares
related to the Debmar acquisition |
|
|
269,978 |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
Issuance of common shares
related to the Mandate acquisition |
|
|
169,879 |
|
|
|
1,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,566 |
|
Repurchase of common shares,
no par value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,410,499 |
|
|
|
(22,260 |
) |
|
|
|
|
|
|
|
|
|
|
(22,260 |
) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,435 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(87,435 |
) |
|
|
(87,435 |
) |
Foreign currency translation
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,168 |
|
|
|
1,168 |
|
Net unrealized loss on foreign
exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(333 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(333 |
) |
|
|
(333 |
) |
Unrealized loss on investments
available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73 |
) |
|
|
(73 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(86,673 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2008 |
|
|
121,081,311 |
|
|
|
540,091 |
|
|
|
10 |
|
|
|
|
|
|
|
(262,699 |
) |
|
|
(533 |
) |
|
|
2,410,499 |
|
|
|
(22,260 |
) |
|
|
|
|
|
|
|
|
|
|
254,599 |
|
Exercise of stock options, net of
withholding tax obligations of $1,192 |
|
|
878,809 |
|
|
|
1,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,702 |
|
Stock based compensation, net of
withholding tax obligations of $2,542 |
|
|
833,386 |
|
|
|
10,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500 |
|
Issuance of common shares
to directors for services |
|
|
43,060 |
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
408 |
|
Issuance of common shares
related to the Mandate acquisition |
|
|
1,113,120 |
|
|
|
10,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,263 |
|
December 2008 Repurchase reduction of
equity component of February 2005 3.625%
Notes extinguished |
|
|
|
|
|
|
(1,012 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,012 |
) |
Repurchase and cancellation of
common shares, no par value |
|
|
(6,999,174 |
) |
|
|
(67,228 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,410,499 |
) |
|
|
22,260 |
|
|
|
|
|
|
|
|
|
|
|
(44,968 |
) |
Redemption of Series B Preferred Shares |
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(178,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(178,454 |
) |
|
|
(178,454 |
) |
Foreign currency translation
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,562 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,562 |
) |
|
|
(11,562 |
) |
Net unrealized gain on foreign
exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144 |
|
|
|
144 |
|
Unrealized gain on investments
available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73 |
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(189,799 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2009 |
|
|
116,950,512 |
|
|
|
494,724 |
|
|
|
|
|
|
|
|
|
|
|
(441,153 |
) |
|
|
(11,878 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,693 |
|
Stock based compensation, net of
withholding tax obligations of $2,030 |
|
|
900,577 |
|
|
|
15,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
424 |
|
|
|
|
|
|
|
15,868 |
|
Issuance of common shares
to directors for services |
|
|
100,665 |
|
|
|
573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
573 |
|
Sale of TV
Guide Network common stock units to noncontrolling interest |
|
|
|
|
|
|
(167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,222 |
|
|
|
|
|
|
|
38,055 |
|
April 2009 Exchange Transaction equity
component of April 2009 3.625% Notes
issued, net of $1,324 reduction for February
2005 3.625% Notes extinguished |
|
|
|
|
|
|
14,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,761 |
|
December 2009 Repurchase reduction of
equity component of October 2004 2.9375%
Notes and February 2005 3.625% Notes
extinguished |
|
|
|
|
|
|
(4,171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,171 |
) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,668 |
) |
|
$ |
(28,146 |
) |
|
|
(28,146 |
) |
Foreign currency translation
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,849 |
|
|
|
4,849 |
|
Net unrealized gain on foreign
exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
418 |
|
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(22,879 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010 |
|
|
117,951,754 |
|
|
$ |
521,164 |
|
|
|
|
|
|
$ |
|
|
|
$ |
(460,631 |
) |
|
$ |
(6,611 |
) |
|
|
|
|
|
$ |
|
|
|
$ |
29,978 |
|
|
|
|
|
|
$ |
83,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
LIONS GATE ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Lions Gate Entertainment Corp. shareholders |
|
$ |
(19,478 |
) |
|
$ |
(178,454 |
) |
|
$ |
(87,435 |
) |
Net loss attributable to noncontrolling interest |
|
|
(8,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(28,146 |
) |
|
|
(178,454 |
) |
|
|
(87,435 |
) |
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment |
|
|
15,295 |
|
|
|
5,925 |
|
|
|
3,974 |
|
Amortization of intangible assets |
|
|
12,769 |
|
|
|
1,732 |
|
|
|
1,526 |
|
Amortization of films and television programs |
|
|
540,963 |
|
|
|
458,757 |
|
|
|
403,319 |
|
Amortization of debt discount, deferred financing costs
and accretion of redeemable preferred stock units |
|
|
29,789 |
|
|
|
19,144 |
|
|
|
17,048 |
|
Non-cash stock-based compensation |
|
|
18,299 |
|
|
|
13,438 |
|
|
|
13,934 |
|
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
(2,909 |
) |
Gain on extinguishment of debt |
|
|
(5,675 |
) |
|
|
(3,023 |
) |
|
|
|
|
Equity interests loss |
|
|
28,149 |
|
|
|
9,044 |
|
|
|
7,559 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
(187 |
) |
|
|
244 |
|
|
|
(228 |
) |
Accounts receivable, net |
|
|
(80,565 |
) |
|
|
37,304 |
|
|
|
(128,876 |
) |
Investment in films and television programs |
|
|
(519,625 |
) |
|
|
(558,277 |
) |
|
|
(445,714 |
) |
Other assets |
|
|
(9,691 |
) |
|
|
(7,363 |
) |
|
|
(2,985 |
) |
Accounts payable and accrued liabilities |
|
|
(18,620 |
) |
|
|
30,323 |
|
|
|
66,704 |
|
Participations and residuals |
|
|
(69,574 |
) |
|
|
(12,781 |
) |
|
|
209,806 |
|
Film obligations |
|
|
(31,010 |
) |
|
|
59,376 |
|
|
|
1,387 |
|
Deferred revenue |
|
|
(3,946 |
) |
|
|
22,705 |
|
|
|
32,040 |
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows Provided By (Used In) Operating Activities |
|
|
(121,775 |
) |
|
|
(101,906 |
) |
|
|
89,150 |
|
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of restricted investments |
|
|
(13,994 |
) |
|
|
(13,989 |
) |
|
|
(229,262 |
) |
Proceeds from the sale of restricted investments |
|
|
13,985 |
|
|
|
14,000 |
|
|
|
466,641 |
|
Purchases of investments equity securities |
|
|
|
|
|
|
|
|
|
|
(4,836 |
) |
Proceeds from the sale of investments equity securities |
|
|
|
|
|
|
|
|
|
|
24,155 |
|
Acquisition of TV Guide, net of unrestricted cash acquired |
|
|
|
|
|
|
(243,158 |
) |
|
|
|
|
Acquisition of Mandate Pictures, net of unrestricted cash acquired |
|
|
|
|
|
|
|
|
|
|
(41,205 |
) |
Acquisition of Maple Pictures, net of unrestricted cash acquired |
|
|
|
|
|
|
|
|
|
|
1,753 |
|
Investment in equity method investees |
|
|
(47,129 |
) |
|
|
(18,031 |
) |
|
|
(6,460 |
) |
Increase in loans receivable |
|
|
(1,418 |
) |
|
|
(28,767 |
) |
|
|
(5,895 |
) |
Repayment of loans receivable |
|
|
8,333 |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(6,577 |
) |
|
|
(8,674 |
) |
|
|
(3,608 |
) |
|
|
|
|
|
|
|
|
|
|
Net Cash Flows Provided By (Used In) Investing Activities |
|
|
(46,800 |
) |
|
|
(298,619 |
) |
|
|
201,283 |
|
|
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
|
|
|
|
2,894 |
|
|
|
1,251 |
|
Tax withholding requirements on equity awards |
|
|
(2,030 |
) |
|
|
(3,734 |
) |
|
|
(5,319 |
) |
Repurchase and cancellation of common shares |
|
|
|
|
|
|
(44,968 |
) |
|
|
(22,260 |
) |
Proceeds from the issuance of mandatorily redeemable preferred stock units
and common stock units related to the sale of 49% interest in TV Guide Network |
|
|
122,355 |
|
|
|
|
|
|
|
|
|
Borrowings under senior revolving credit facility |
|
|
302,000 |
|
|
|
255,000 |
|
|
|
|
|
Repayments of borrowings under senior revolving credit facility |
|
|
(540,000 |
) |
|
|
|
|
|
|
|
|
Borrowings under individual production loans |
|
|
144,741 |
|
|
|
189,858 |
|
|
|
162,400 |
|
Repayment of individual production loans |
|
|
(136,261 |
) |
|
|
(222,034 |
) |
|
|
(111,357 |
) |
Production loan borrowings under Pennsylvania Regional Center credit facility |
|
|
63,133 |
|
|
|
|
|
|
|
|
|
Production loan borrowings under film credit facility, net of deferred financing costs |
|
|
30,469 |
|
|
|
|
|
|
|
|
|
Production loan repayments under film credit facility |
|
|
(2,718 |
) |
|
|
|
|
|
|
|
|
Proceeds from sale of senior secured second-priority notes, net of deferred financing costs |
|
|
214,727 |
|
|
|
|
|
|
|
|
|
Repurchase of subordinated notes |
|
|
(75,185 |
) |
|
|
|
|
|
|
|
|
Borrowings under other financing obligations |
|
|
|
|
|
|
|
|
|
|
3,718 |
|
Repayment of other financing obligations |
|
|
(826 |
) |
|
|
(5,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows Provided By Financing Activities |
|
|
120,405 |
|
|
|
171,639 |
|
|
|
28,433 |
|
|
|
|
|
|
|
|
|
|
|
Net Change In Cash And Cash Equivalents |
|
|
(48,170 |
) |
|
|
(228,886 |
) |
|
|
318,866 |
|
Foreign Exchange Effects on Cash |
|
|
1,116 |
|
|
|
(4,228 |
) |
|
|
1,226 |
|
Cash and Cash Equivalents Beginning Of Period |
|
|
138,475 |
|
|
|
371,589 |
|
|
|
51,497 |
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents End Of Period |
|
$ |
91,421 |
|
|
$ |
138,475 |
|
|
$ |
371,589 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
LIONS GATE ENTERTAINMENT CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations
Lions Gate Entertainment Corp. (the Company, Lionsgate, we, us or our) is the
leading next generation studio with a diversified presence in the production and distribution of
motion pictures, television programming, home entertainment, family entertainment, video-on-demand
and digitally delivered content.
2. Significant Accounting Policies
(a) Generally Accepted Accounting Principles
These consolidated financial statements have been prepared in accordance with United States
(the U.S.) generally accepted accounting principles (GAAP). The Canadian dollar and the U.S.
dollar are the functional currencies of the Companys Canadian and U.S. based businesses,
respectively.
(b) Principles of Consolidation
The accompanying consolidated financial statements of the Company include the accounts of
Lionsgate and all of its majority-owned and controlled subsidiaries. The Company reviews its
relationships with other entities to identify whether it is the primary beneficiary of a variable
interest entity (VIE). If the determination is made that the Company is the primary beneficiary,
then the entity is consolidated in accordance with accounting guidance.
Investments in which the Company exercises significant influence, but does not control, are
accounted for using the equity method of accounting. Investments in which there is no significant
influence are accounted for using the cost method of accounting.
All significant intercompany balances and transactions have been eliminated in consolidation.
(c) Revenue Recognition
Revenue from the theatrical release of feature films is recognized at the time of exhibition
based on our participation in box office receipts. Revenue from the sale of DVDs/Blu-ray discs in
the retail market, net of an allowance for estimated returns and other allowances, is recognized on
the later of receipt by the customer or street date (when it is available for sale by the
customer). Under revenue sharing arrangements, rental revenue is recognized when we are entitled to
receipts and such receipts are determinable. Revenues from television licensing are recognized when
the feature film or television program is available to the licensee for telecast. For television
licenses that include separate availability windows during the license period, revenue is
allocated over the windows. Revenue from sales to international territories are recognized when
access to the feature film or television program has been granted or delivery has occurred, as
required under the sales contract, and the right to exploit the feature film or television program
has commenced. For multiple media rights contracts with a fee for a single film or television
program where the contract provides for media holdbacks (defined as contractual media release
restrictions), the fee is allocated to the various media based on our assessment of the relative
fair value of the rights to exploit each media and is recognized as each holdback is released. For
multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on our
assessment of the relative fair value of each title.
Distribution revenue from the distribution of TV Guide Network (as defined in Note 16)
programming (distributors generally pay a per subscriber fee for the right to distribute
programming) is recognized in the month the services are provided.
Advertising revenue is recognized when the advertising spot is broadcast or displayed online.
Advertising revenue is recorded net of agency commissions and discounts.
Cash payments received are recorded as deferred revenue until all the conditions of revenue
recognition have been met. Long-term, non-interest bearing receivables are discounted to present
value. At March 31, 2010, $75 million of accounts receivable are due beyond one year. The accounts
receivable are due as follows: $31.9 million in fiscal 2012, $21.9 million in fiscal 2013, $14.4
million in fiscal 2014, $4.9 million in fiscal 2015, and $1.9 million thereafter.
F-7
(d) Cash and Cash Equivalents
Cash and cash equivalents consist of cash deposits at financial institutions and investments
in money market mutual funds.
(e) Restricted Cash
Restricted cash represents amounts held as collateral required under our revolving film credit
facility and amounts on deposit with financial institutions that are contractually designated for
certain theatrical marketing obligations.
(f) Restricted Investments
Restricted investments represent amounts held in investments that are contractually designated
as collateral for certain production loans.
(g) Investment in Films and Television Programs
Investment in films and television programs includes the unamortized costs of completed films
and television programs which have been produced by the Company or for which the Company has
acquired distribution rights, libraries acquired as part of acquisitions of companies, films and
television programs in progress and in development and home entertainment product inventory.
For films and television programs produced by the Company, capitalized costs include all
direct production and financing costs, capitalized interest and production overhead. For acquired
films and television programs, these capitalized costs consist of minimum guarantee payments to
acquire the distribution rights.
Costs of acquiring and producing films and television programs and of acquired libraries are
amortized using the individual-film-forecast method, whereby these costs are amortized and
participations and residuals costs are accrued in the proportion that current years revenue bears
to managements estimate of ultimate revenue at the beginning of the current year expected to be
recognized from the exploitation, exhibition or sale of the films or television programs.
Ultimate revenue includes estimates over a period not to exceed ten years following the date
of initial release or from the date of delivery of the first episode for episodic television
series. For titles included in acquired libraries, ultimate revenue includes estimates over a
period not to exceed twenty years following the date of acquisition.
Investment in films and television programs is stated at the lower of amortized cost or
estimated fair value. The valuation of investment in films and television programs is reviewed on a
title-by-title basis, when an event or change in circumstances indicates that the fair value of a
film or television program is less than its unamortized cost. The fair value of the film or
television program is determined using managements future revenue and cost estimates and a
discounted cash flow approach. Additional amortization is recorded in the amount by which the
unamortized costs exceed the estimated fair value of the film or television program. Estimates of
future revenue involve measurement uncertainty and it is therefore possible that reductions in the
carrying value of investment in films and television programs may be required as a consequence of
changes in managements future revenue estimates.
Films and television programs in progress include the accumulated costs of productions which
have not yet been completed.
Films and television programs in development include costs of acquiring film rights to books,
stage plays or original screenplays and costs to adapt such projects. Such costs are capitalized
and, upon commencement of production, are transferred to production costs. Projects in development
are written off at the earlier of the date they are determined not to be recoverable or when
abandoned, or three years from the date of the initial investment.
Home entertainment product inventory consists of DVDs/Blu-ray discs and is stated at the lower
of cost or market value (first-in, first-out method).
Costs for programs acquired by the Media Networks segment are amortized on a program-by-program
basis over the license term based on the actual airings of the program as a percentage of the total
expected airings of the program through the term of the license agreement. Costs for programs
produced by the Media Networks segment are expensed upon first airing due to the content of the
programs produced by Media Networks generally dealing with current events.
F-8
(h) Property and Equipment, net
Property and equipment is carried at cost less accumulated depreciation. Depreciation is
provided for using the following rates and methods:
|
|
|
Computer equipment and software
|
|
2 5 years straight-line |
Furniture and equipment
|
|
2 10 years straight-line |
Leasehold improvements
|
|
Over the lease term or the useful life, whichever is shorter |
Transponder under capital lease
|
|
15 years straight-line |
Land
|
|
Not depreciated |
The Company periodically reviews and evaluates the recoverability of property and equipment.
Where applicable, estimates of net future cash flows, on an undiscounted basis, are calculated
based on future revenue estimates, if appropriate and where deemed necessary, a reduction in the
carrying amount is recorded.
(i) Goodwill
Goodwill represents the excess of acquisition costs over the tangible and intangible assets
acquired and liabilities assumed in various business acquisitions by the Company. The Company has
three reporting units with goodwill within its businesses: Motion Pictures, Television and Media
Networks. Goodwill is not amortized but is reviewed for impairment annually within each fiscal year
or between the annual tests if an event occurs or circumstances change that indicate it is
more-likely-than-not that the fair value of a reporting unit is less than its carrying value. The
impairment test follows a two-step approach. The first step determines if the goodwill is
potentially impaired, and the second step measures the amount of the impairment loss, if necessary.
Under the first step, goodwill is considered potentially impaired if the fair value of the
reporting unit is less than the reporting units carrying amount, including goodwill. Under the
second step, the impairment loss is then measured as the excess of recorded goodwill over the fair
value of the goodwill, as calculated. The fair value of goodwill is calculated by allocating the
fair value of the reporting unit to all the assets and liabilities of the reporting unit as if the
reporting unit was purchased in a business combination and the purchase price was the fair value of
the reporting unit. The Company performs its annual impairment test as of January 1 in each fiscal
year. The Company performed its annual impairment test on its goodwill as of January 1, 2010. No
goodwill impairment was identified in any of the Companys reporting units. Determining the fair
value of reporting units requires various assumptions and estimates. The estimates of fair value
include consideration of the future projected operating results and cash flows of the reporting
unit. Such projections could be different than actual results. Should actual results be
significantly less than estimates, the value of our goodwill could be impaired in the future.
(j) Other Assets
Other
assets include deferred financing costs, prepaid expenses and other, loans receivable
and equity method investments.
Deferred Financing Costs. Amounts incurred in connection with obtaining debt financing are
deferred and amortized, as a component of interest expense, over the earlier of the date of the
earliest put option or term to maturity of the related debt obligation.
Prepaid Expenses and Other. Prepaid expenses and other primarily include prepaid expenses and
security deposits.
Loans
Receivable. The Company records loans receivable at carrying value.
Equity Method Investments. The Company uses the equity method of accounting for investments
in companies in which it has minority equity interest and the ability to exert significant
influence over operating decisions of the companies. Other assets include companies which are
accounted for using the equity method. The Companys equity method investees are periodically
reviewed to determine whether there has been a loss in value that is other than a temporary
decline.
(k) Subordinated Notes
The Company accounts for its subordinated notes by separating for the liability and equity
components in a manner that will reflect the Companys nonconvertible debt borrowing rate on the
subordinated notes issuance date when interest cost is recognized. Accordingly, a portion of the
proceeds received is recorded as a liability and a portion is recorded as an addition to
shareholders equity reflecting the equity component (i.e., conversion feature). The difference
between the principal amount and the amount
F-9
recorded as the liability component represents the debt
discount. The carrying amount of the liability is accreted up to the principal amount through the
amortization of the discount, using the effective interest method, to interest expense over the
expected life of the note.
(l) Noncontrolling Interest
As discussed in Note 16, the net loss attributable to noncontrolling interest in the
consolidated statements of operations and equity represents the noncontrolling interests 49% share
of the net loss incurred by TV Guide Network for the period from May 28, 2009 through March 31,
2010.
(m) Prints, Advertising and Marketing Expenses.
The costs of advertising and marketing expenses are expensed as incurred. Advertising expenses
for the year ended March 31, 2010 were $303.2 million (2009 $423.7 million, 2008 $398.7
million) which were recorded as distribution and marketing expenses. The costs of film prints are
capitalized as prepaid expenses and expensed upon theatrical release and are included in
distribution and marketing expenses.
(n) Income Taxes
Income taxes are accounted for using an asset and liability approach for financial accounting
and reporting for income taxes and recognition and measurement of deferred assets are based upon
the likelihood of realization of tax benefits in future years. Under this method, deferred taxes
are provided for the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Valuation allowances are established when management determines that it is more likely
than not that some portion or all of the net deferred tax asset will not be realized. The financial
effect of changes in tax laws or rates is accounted for in the period of enactment.
(o) Government Assistance
The Company has access to government programs that are designed to promote film and television
production and distribution in Canada. The Company also has access to similar programs in certain
states within the U.S. that are designed to promote film and television production in those states.
Tax credits earned with respect to expenditures on qualifying film and television productions
are included as an offset to investment in films and television programs when the qualifying
expenditures have been incurred provided that there is reasonable assurance that the credits will
be realized (refer to Note 19).
(p) Foreign Currency Translation
Monetary assets and liabilities denominated in currencies other than the functional currency
are translated at exchange rates in effect at the balance sheet date. Resulting unrealized
translation gains and losses are included in the consolidated statements of operations.
Foreign company assets and liabilities in foreign currencies are translated into U.S. dollars
at the exchange rate in effect at the balance sheet date. Foreign company revenue and expense items
are translated at the average rate of exchange for the fiscal year. Gains or losses arising on the
translation of the accounts of foreign companies are included in accumulated other comprehensive
income (loss), a separate component of shareholders equity.
(q) Derivative Instruments and Hedging Activities
Derivative financial instruments are used by the Company in the management of its foreign
currency exposures. The Companys policy is not to use derivative financial instruments for trading
or speculative purposes.
The Company enters into forward foreign exchange contracts to hedge its foreign currency
exposures on future production expenses denominated in Canadian dollars. The Company evaluates
whether the foreign exchange contracts qualify for hedge accounting at the inception of the
contract. The fair value of the forward exchange contracts is recorded on the consolidated balance
sheets. Changes in the fair value of the foreign exchange contracts that are effective hedges are
reflected in accumulated other
F-10
comprehensive income (loss), a separate component of shareholders
equity, and changes in the fair value of foreign exchange contracts that are ineffective hedges are
reflected in the consolidated statements of operations. Gains and losses realized upon settlement
of the foreign exchange contracts are amortized to the consolidated statements of operations on the
same basis as the production expenses being hedged.
(r) Stock-Based Compensation
Stock-based compensation cost recognized in the years ended March 31, 2010, 2009 and 2008
includes: (a) compensation cost for all stock options granted prior to, but not yet vested as of,
April 1, 2006, based on the grant date fair value; and (b) compensation cost for all share-based
payments granted on or after April 1, 2006, based on the grant-date fair value. See Note 15 for
further discussion of the Companys stock-based compensation.
F-11
(s) Net Loss Per Share
Basic and diluted net loss per share is calculated based on the weighted average common shares
outstanding for the period. Basic and diluted net loss per share for the years ended March 31,
2010, 2009 and 2008 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Basic and Diluted Net Loss Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Lions Gate Entertainment Corp. shareholders |
|
$ |
(19,478 |
) |
|
$ |
(178,454 |
) |
|
$ |
(87,435 |
) |
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
117,510 |
|
|
|
116,795 |
|
|
|
118,427 |
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Net Loss Per Common Share |
|
$ |
(0.17 |
) |
|
$ |
(1.53 |
) |
|
$ |
(0.74 |
) |
|
|
|
|
|
|
|
|
|
|
For the years ended March 31, 2010, 2009, and 2008, the weighted average incremental
common shares calculated under the if converted and treasury stock method presented below were
excluded from diluted net loss per common share for the periods because their inclusion would have
had an anti-dilutive effect as a result of the reported net losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Year |
|
Year |
|
|
Ended |
|
Ended |
|
Ended |
|
|
March 31, |
|
March 31, |
|
March 31, |
|
|
2010 |
|
2009 |
|
2008 |
|
|
(Amounts in thousands) |
Incremental shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Notes |
|
|
25,907 |
|
|
|
24,666 |
|
|
|
25,295 |
|
Share purchase options |
|
|
|
|
|
|
340 |
|
|
|
1,494 |
|
Restricted share units |
|
|
338 |
|
|
|
365 |
|
|
|
486 |
|
Contingently issuable shares |
|
|
|
|
|
|
968 |
|
|
|
705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total incremental shares excluded from Diluted Net Loss
Per Common Share |
|
|
26,245 |
|
|
|
26,339 |
|
|
|
27,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additionally, for the years ended March 31, 2010, 2009, and 2008, the weighted average
common shares issuable presented below were excluded from diluted net loss per common share because
their inclusion would have had an anti-dilutive effect due to either award terms or the market
price of common shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Year |
|
Year |
|
|
Ended |
|
Ended |
|
Ended |
|
|
March 31, |
|
March 31, |
|
March 31, |
|
|
2010 |
|
2009 |
|
2008 |
|
|
(Amounts in thousands) |
Anti-dilutive shares issuable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share purchase options |
|
|
3,670 |
|
|
|
3,724 |
|
|
|
3,121 |
|
Restricted share units |
|
|
1,172 |
|
|
|
1,007 |
|
|
|
415 |
|
Contingently issuable shares |
|
|
631 |
|
|
|
376 |
|
|
|
136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average anti-dilutive shares issuable excluded from Diluted
Net Loss Per Common Share |
|
|
5,473 |
|
|
|
5,107 |
|
|
|
3,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-12
(t) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting period. The most significant
estimates made by management in the preparation of the financial statements relate to ultimate
revenue and costs for investment in films and television programs; estimates of sales returns and
other allowances, provision for doubtful accounts; fair value of assets and liabilities for
allocation of the purchase price of companies acquired; income taxes and accruals for contingent
liabilities; and impairment assessments for investment in films and television programs, property
and equipment, goodwill and intangible assets. Actual results could differ from such estimates.
(u) Reclassifications
Certain amounts presented in prior years have been reclassified to conform to the current
years presentation.
(v) Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (SFAS No.
168). This statement modifies the GAAP hierarchy by establishing only two levels of GAAP,
authoritative and nonauthoritative accounting literature. Effective July 2009, the FASB Accounting
Standards Codification (ASC), also known collectively as the Codification, is considered the
single source of authoritative U.S. accounting and reporting standards, except for additional
authoritative rules and interpretive releases issued by the SEC. Nonauthoritative guidance and
literature would include, among other things, FASB Concepts Statements, American Institute of
Certified Public Accountants Issue Papers and Technical Practice Aids and accounting textbooks. The
Codification was developed to organize GAAP pronouncements by topic so that users can more easily
access authoritative accounting guidance. It is organized by topic, subtopic, section, and
paragraph, each of which is identified by a numerical designation. The Company has adopted the
Codification prospectively beginning in the second quarter of fiscal 2010, resulting in no impact
on the Companys consolidated financial statements.
Accounting for noncontrolling interest in consolidated subsidiaries. The Company adopted new
accounting guidance that changes the accounting and reporting for minority interests, which are
recharacterized as noncontrolling interests and classified as a component of equity. This new
consolidation method changes the accounting for transactions with noncontrolling interest holders.
The Company adopted this standard beginning in the first quarter of fiscal 2010 (see Note 16).
Subsequent events. The Company adopted new accounting guidance related to the accounting for
and disclosure of subsequent events that occur after the balance sheet date. The Company adopted
this standard beginning in the first quarter of fiscal 2010 and has evaluated subsequent events
through the date of issuance, resulting in no impact on the Companys consolidated financial
statements.
Consolidation accounting for variable interest entities. This new accounting guidance modifies
the previous guidance in relation to the identification of controlling financial interests in a
variable interest entity (VIE). This analysis identifies the primary beneficiary of a VIE as the
enterprise that has both of the following characteristics, among others: (a) the power to direct
the activities of a VIE that most significantly impact the entitys economic performance; and (b)
the obligation to absorb losses of the entity, or the right to receive benefits from the entity,
that could potentially be significant to the VIE. If an enterprise determines that power is shared
among multiple unrelated parties such that no one party has the power to direct the activities of a
VIE that most significantly impact the VIEs economic performance, then no party is the primary
beneficiary. Power is shared if each of the parties sharing power are required to consent to the
decisions relating to the activities that most significantly impact the VIEs performance. The
provisions of this standard will become effective for the Company beginning in fiscal 2011. Based
upon the Companys review and its current business and ownership structure of TV Guide Network, the
Company will no longer be required to consolidate TV Guide Network, effective April 1, 2010.
The deconsolidation of TV Guide network will result in the reclassification of the asset and
liability amounts in each balance sheet caption related to the TV Guide Network to the investment
in equity method investees account within other assets on the consolidated balance sheet. In
addition, under the equity method of accounting the Companys share of the revenues and expenses of
TV Guide Network will be recorded net in the equity interest line item in the consolidated
statements of operations and the Company will report interest income for the earnings on its share
of the mandatorily redeemable preferred stock. The adoption of the new accounting
F-13
standard is not
expected to impact the net loss attributable to Lionsgate Entertainment Corp. Shareholders. The
Company may apply the statement on a retrospective basis with the
prior year financial statements adjusted to
reflect the application of the statement as of the beginning of the earliest period presented.
The
net carrying value of TV Guide Network as of March 31, 2010 was
$120.4 million.
Had this new accounting guidance been effective as of March 31, 2010 the Companys
consolidated balance sheet would have included a decrease of approximately $22.2 million of cash
and cash equivalents, approximately $19.7 million of net accounts receivable, approximately $152.6
million of goodwill, approximately $19.0 million of investment
in films and television programs, approximately $21.2 million of
property and equipment, approximately $70.1 million of finite-lived
intangible assets, approximately $1.6 million of other assets, approximately $36.1 million of
accounts payable and accrued liabilities, approximately $18.5 million of other liabilities,
approximately $94.6 million of mandatorily redeemable preferred stock units held by noncontrolling
interest and $38.6 million of noncontrolling interests, with a corresponding net increase to
investment in equity method investments, which is classified as other assets on the Companys
consolidated balance sheets.
3. Restricted Cash and Restricted Investments
Restricted Cash. Restricted cash represents amounts held as collateral required under our
revolving film credit facility and amounts on deposit with financial institutions that are
contractually designated for certain theatrical marketing obligations. As of March 31, 2009,
restricted cash included collateral required under our senior revolving credit facility as a result
of a borrowing under our funding agreement with the State of Pennsylvania (see Note 11).
Restricted Investments. Restricted investments, which are measured at fair value, represent
amounts held in investments that are contractually designated as collateral for certain production
loans. The carrying amounts of these restricted investments are equal to their respective fair
values as of March 31, 2010 and March 31, 2009. At March 31, 2010 and March 31, 2009, the Company
held $7.0 million of restricted investments in United States Treasury Bills bearing an interest
rate of 0.165% (March 31, 2009 0.39%), maturing May 13, 2010 (March 31, 2009 matured September
3, 2009). These investments are held as collateral for a production loans pursuant to an escrow
agreement.
At March 31, 2008, the Company held $7.0 million of a triple A rated taxable Student Auction
Rate Security (ARS), at par value, issued by the Panhandle-Plains Higher Education Authority.
These ARS were sold back to the issuer at par value resulting in no gain or loss.
The following table illustrates the impact in other comprehensive income (loss) of realized
and unrealized gains of investments available-for-sale during the years ended March 31, 2010, 2009
and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Gain on sale of restricted and available-for-sale investments included in net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain arising during the year |
|
$ |
|
|
|
$ |
73 |
|
|
$ |
2,836 |
|
Reclassification adjustment |
|
|
|
|
|
|
|
|
|
|
(2,909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) recognized in other comprehensive income |
|
$ |
|
|
|
$ |
73 |
|
|
$ |
(73 |
) |
|
|
|
|
|
|
|
|
|
|
F-14
4. Investment in Films and Television Programs
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
Motion Picture Segment Theatrical and Non-Theatrical Films |
|
|
|
|
|
|
|
|
Released, net of accumulated amortization |
|
$ |
212,582 |
|
|
$ |
262,067 |
|
Acquired libraries, net of accumulated amortization |
|
|
43,374 |
|
|
|
56,898 |
|
Completed and not released |
|
|
49,338 |
|
|
|
55,494 |
|
In progress |
|
|
198,743 |
|
|
|
149,402 |
|
In development |
|
|
10,730 |
|
|
|
6,732 |
|
Product inventory |
|
|
38,291 |
|
|
|
40,392 |
|
|
|
|
|
|
|
|
|
|
|
553,058 |
|
|
|
570,985 |
|
|
|
|
|
|
|
|
Television Segment Direct-to-Television Programs |
|
|
|
|
|
|
|
|
Released, net of accumulated amortization |
|
|
81,057 |
|
|
|
77,973 |
|
In progress |
|
|
24,198 |
|
|
|
51,619 |
|
In development |
|
|
3,292 |
|
|
|
1,445 |
|
|
|
|
|
|
|
|
|
|
|
108,547 |
|
|
|
131,037 |
|
|
|
|
|
|
|
|
Media Networks |
|
|
|
|
|
|
|
|
Released, net of accumulated amortization |
|
|
18,752 |
|
|
|
|
|
In progress |
|
|
290 |
|
|
|
745 |
|
|
|
|
|
|
|
|
|
|
|
19,042 |
|
|
|
745 |
|
|
|
|
|
|
|
|
|
|
$ |
680,647 |
|
|
$ |
702,767 |
|
|
|
|
|
|
|
|
The following table sets forth acquired libraries that represent titles released three
years prior to the date of acquisition, and amortized over their expected revenue stream from
acquisition date up to 20 years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Remaining |
|
Unamortized Costs |
|
|
Unamortized Costs |
|
Acquired |
|
Acquisition |
|
Amortization |
|
Amortization |
|
March 31, |
|
|
March 31, |
|
Library |
|
Date |
|
Period |
|
Period |
|
2010 |
|
|
2009 |
|
|
|
|
|
(In years) |
|
(Amounts in thousands) |
|
Trimark |
|
October 2000 |
|
20.00 |
|
10.50 |
|
$ |
4,589 |
|
|
$ |
6,280 |
|
Artisan |
|
December 2003 |
|
20.00 |
|
13.75 |
|
|
36,836 |
|
|
|
47,255 |
|
Modern |
|
August 2005 |
|
20.00 |
|
15.25 |
|
|
1,142 |
|
|
|
2,462 |
|
Lionsgate UK |
|
October 2005 |
|
20.00 |
|
15.50 |
|
|
807 |
|
|
|
901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Acquired Libraries |
|
|
|
|
|
$ |
43,374 |
|
|
$ |
56,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects approximately 44% of completed films and television programs, net of
accumulated amortization will be amortized during the one-year period ending March 31, 2011.
Additionally, the Company expects approximately 80% of completed and released films and television
programs, net of accumulated amortization and excluding acquired libraries, will be amortized
during the three-year period ending March 31, 2013.
5. Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
Leasehold improvements |
|
$ |
11,166 |
|
|
$ |
11,071 |
|
Property and equipment |
|
|
14,744 |
|
|
|
12,943 |
|
Computer equipment and software |
|
|
29,475 |
|
|
|
24,699 |
|
Transponder under capital lease |
|
|
12,065 |
|
|
|
12,065 |
|
|
|
|
|
|
|
|
|
|
|
67,450 |
|
|
|
60,778 |
|
Less accumulated depreciation and amortization |
|
|
(35,079 |
) |
|
|
(19,569 |
) |
|
|
|
|
|
|
|
|
|
|
32,371 |
|
|
|
41,209 |
|
Land |
|
|
1,206 |
|
|
|
1,206 |
|
|
|
|
|
|
|
|
|
|
$ |
33,577 |
|
|
$ |
42,415 |
|
|
|
|
|
|
|
|
F-15
6. Goodwill
The changes in the carrying amount of goodwill by reporting segment in the years ended March
31, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion |
|
|
|
|
|
|
Media |
|
|
|
|
|
|
Pictures |
|
|
Television |
|
|
Networks |
|
|
Total |
|
|
|
(Amounts in thousands) |
|
Balance as of March 31, 2008 |
|
$ |
210,570 |
|
|
$ |
13,961 |
|
|
$ |
|
|
|
$ |
224,531 |
|
Mandate Pictures, LLC |
|
|
(277 |
) |
|
|
|
|
|
|
|
|
|
|
(277 |
) |
TV Guide Network |
|
|
|
|
|
|
|
|
|
|
155,148 |
|
|
|
155,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2009 |
|
|
210,293 |
|
|
|
13,961 |
|
|
|
155,148 |
|
|
|
379,402 |
|
TV Guide Network |
|
|
|
|
|
|
|
|
|
|
(2,549 |
) |
|
|
(2,549 |
) |
Debmar-Mercury, LLC |
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2010 |
|
$ |
210,293 |
|
|
$ |
28,961 |
|
|
$ |
152,599 |
|
|
$ |
391,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended March 31, 2010, goodwill increased by $15.0 million for the buy-out
of the earn-out associated with the acquisition of Debmar-Mercury, LLC (see Note 16), offset by a
decrease of $2.5 million due to the completion of the preliminary purchase price allocation of the
identified tangible and intangible assets and liabilities assumed from the acquisition of TV Guide
Network.
F-16
7. Finite-Lived Intangible Assets and Other Assets
Finite-lived Intangible Assets
Finite-lived intangible assets consist primarily of customer relationships and trademarks. The
composition of the Companys finite-lived intangible assets and the associated accumulated
amortization is as follows as of March 31, 2010 and March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
Range |
|
|
|
|
|
|
|
|
average |
|
of |
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
|
remaining |
|
remaining |
|
Gross |
|
|
|
|
|
|
Net |
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
life in |
|
life in |
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
years |
|
years |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
|
(Amounts in thousands) |
|
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
9 |
|
4 - 10 |
|
$ |
66,340 |
|
|
$ |
6,994 |
|
|
$ |
59,346 |
|
|
$ |
64,330 |
|
|
$ |
530 |
|
|
$ |
63,800 |
|
Trademarks |
|
16 |
|
1 - 19 |
|
|
11,850 |
|
|
|
2,114 |
|
|
|
9,736 |
|
|
|
11,330 |
|
|
|
627 |
|
|
|
10,703 |
|
Developed technology
and patents |
|
2 |
|
1 - 5 |
|
|
3,710 |
|
|
|
1,906 |
|
|
|
1,804 |
|
|
|
3,740 |
|
|
|
147 |
|
|
|
3,593 |
|
Distribution agreements |
|
2 |
|
1 - 3 |
|
|
3,922 |
|
|
|
3,278 |
|
|
|
644 |
|
|
|
1,598 |
|
|
|
790 |
|
|
|
808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finite-lived intangible assets |
|
|
|
|
|
$ |
85,822 |
|
|
$ |
14,292 |
|
|
$ |
71,530 |
|
|
$ |
80,998 |
|
|
$ |
2,094 |
|
|
$ |
78,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate amount of amortization expense associated with the Companys intangible
assets for the years ending March 31, 2010, 2009 and 2008 was approximately $12.8 million, $1.7
million and $1.5 million, respectively. Beginning fiscal 2011, we will no longer consolidate TV
Guide Network, and, as a result, we will not include the finite-lived intangible assets (gross
carrying amount of $80.3 million as of March 31, 2010) and associated accumulated amortization from
TV Guide Network in consolidated finite-lived intangible assets in fiscal 2011 and beyond. The
estimated aggregate amortization expense, excluding amortization expense related to TV Guide
Network, for each of the years ending March 31, 2011 through 2015 is approximately $1.0 million,
$0.3 million, $0.1 million, nil, and nil, respectively.
Other Assets
The composition of the Companys other assets is as follows as of March 31, 2010 and March 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
Deferred financing costs, net of accumulated amortization |
|
$ |
19,460 |
|
|
$ |
10,184 |
|
Prepaid expenses and other |
|
|
15,691 |
|
|
|
6,181 |
|
Loans receivable |
|
|
26,096 |
|
|
|
32,909 |
|
Equity method investments |
|
|
50,941 |
|
|
|
31,960 |
|
|
|
|
|
|
|
|
|
|
$ |
112,188 |
|
|
$ |
81,234 |
|
|
|
|
|
|
|
|
Deferred Financing Costs. Deferred financing costs primarily include costs incurred in
connection with (1) an amended senior revolving credit facility (see Note 8), (2) the issuance of
the Senior Secured Second-Priority Notes (see Note 9) and (3) the issuance of the October 2004
2.9375% Notes, the February 2005 3.625% Notes and the April 2009 3.625% Notes (see Note 12) that
are deferred and amortized to interest expense using the effective interest method.
Prepaid Expenses and Other. Prepaid expenses and other primarily include prepaid expenses and
security deposits.
Loans
Receivable. The following table sets forth the Companys loans receivable at March 31, 2010
and March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
March 31, |
|
|
March 31, |
|
|
|
Rate |
|
2010 |
|
|
2009 |
|
|
|
|
|
(Amounts in thousands) |
|
Third-party producer |
|
3.04% |
|
$ |
17,147 |
|
|
$ |
25,813 |
|
NextPoint, Inc. (Break.com) |
|
5.29% - 20.0% |
|
|
7,891 |
|
|
|
7,096 |
|
Other |
|
3.49% |
|
|
1,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
26,096 |
|
|
$ |
32,909 |
|
|
|
|
|
|
|
|
|
|
F-17
Equity Method Investments. The carrying amount of significant equity method investments at
March 31, 2010 and March 31, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
Horror Entertainment, LLC (FEARnet) |
|
$ |
630 |
|
|
$ |
845 |
|
NextPoint, Inc. (Break.com) |
|
|
16,698 |
|
|
|
17,542 |
|
Roadside Attractions, LLC |
|
|
1,913 |
|
|
|
2,062 |
|
Studio 3 Partners, LLC (EPIX) |
|
|
31,700 |
|
|
|
11,511 |
|
|
|
|
|
|
|
|
|
|
$ |
50,941 |
|
|
$ |
31,960 |
|
|
|
|
|
|
|
|
Equity interests in equity method investments in our consolidated statements of
operations represent our portion of the income or loss of our equity method investees based on our
percentage ownership. Equity interest losses in equity method investments for the years ended March
31, 2010, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Maple Pictures Corp. |
|
$ |
|
|
|
$ |
|
|
|
$ |
(71 |
) |
Horror Entertainment, LLC (FEARnet) |
|
|
(568 |
) |
|
|
(5,323 |
) |
|
|
(5,418 |
) |
NextPoint, Inc. (Break.com) |
|
|
(845 |
) |
|
|
(2,543 |
) |
|
|
(1,013 |
) |
Roadside Attractions, LLC |
|
|
(149 |
) |
|
|
(138 |
) |
|
|
(898 |
) |
Studio 3 Partners, LLC (EPIX) |
|
|
(26,587 |
) |
|
|
(1,040 |
) |
|
|
|
|
Elevation Sales Limited |
|
|
|
|
|
|
|
|
|
|
(159 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(28,149 |
) |
|
$ |
(9,044 |
) |
|
$ |
(7,559 |
) |
|
|
|
|
|
|
|
|
|
|
Horror Entertainment, LLC. Represents the Companys 33.33% interest in Horror
Entertainment, LLC (FEARnet), a multiplatform programming and content service provider of horror
genre films operating under the branding of FEARnet. The Company entered into a five-year license
agreement with FEARnet for U.S. territories and possessions whereby the Company will license
content to FEARnet for video-on-demand and broadband exhibition. The Company made capital
contributions to FEARnet of $5.0 million in October 2006, $2.6 million in July 2007, $2.5 million
in April 2008, $2.9 million in October 2008, and $0.3 million in April 2009. The Company is
recording its share of the FEARnet results on a one quarter lag and, accordingly, during the year
ended March 31, 2010, the Company recorded 33.33% of the loss incurred by FEARnet through December
31, 2009.
NextPoint, Inc. Represents the Companys 42% equity interest or 21,000,000 share ownership of
the Series B Preferred Stock of NextPoint, Inc. (Break.com), an online home entertainment service
provider operating under the branding of Break.com. The interest was acquired on June 29, 2007
for an aggregate purchase price of $21.4 million which included $0.5 million of transaction costs,
by issuing 1,890,189 of the Companys common shares. The value assigned to the shares for purposes
of recording the investment of $20.9 million was based on the average price of the Companys common
shares a few days prior and subsequent to the date of the closing of the acquisition. The Company
is recording its share of the Break.com results on a one quarter lag and, accordingly, during the
year ended March 31, 2010, the Company recorded 42% of the loss incurred by Break.com through
December 31, 2009.
Roadside Attractions, LLC. Represents the Companys 43% equity interest acquired on July 26,
2007 in Roadside Attractions, LLC (Roadside), an independent theatrical releasing company. The
Company has a call option which is exercisable for a period of 90 days commencing on the receipt of
certain audited financial statements for the three years ended July 26, 2010, to purchase all of
the remaining 57% equity interests of Roadside, at a price representative of the then fair value of
the remaining interest. The estimated initial cost of the call option is de minimus since the
option price is designed to be representative of the then fair value and is included within the
investment balance. The Company is recording its share of the Roadside results on a one quarter lag
and, accordingly, during the year ended March 31, 2010, the Company recorded 43% of the loss
incurred by Roadside through December 31, 2009.
Studio 3 Partners, LLC (EPIX). In April 2008, the Company formed a joint venture with Viacom
Inc. (Viacom), its Paramount Pictures unit (Paramount Pictures) and Metro-Goldwyn-Mayer Studios
Inc. (MGM) to create a premium television channel and subscription video-on-demand service named
EPIX. The new venture has access to the Companys titles released
F-18
theatrically on or after
January 1, 2009. Viacom provides operational support to the venture, including marketing and
affiliate services through its MTV Networks division. The joint venture provides the Company with
an additional platform to distribute its library of motion picture titles and television episodes
and programs. The Company increased its initial 28.57% interest in EPIX to 31.15% during the year
ended March 31, 2010. The Company has invested $59.2 million through March 31, 2010. The Company is
recording its share of the joint venture results on a one quarter lag and, accordingly, during the
nine months ended December 31, 2009, the Company recorded 28.57% of the loss incurred by the joint
venture through September 30, 2009 and for the quarter ended March 31, 2010, the Company recorded
31.15% of the loss incurred by the joint venture for their quarter ended December 31, 2009.
Certain of the Companys theatrical releases have been made available to EPIX for exhibition
in the domestic pay television window, for which $38.6 million of revenue and $26.3 million of
gross profit was recognized by the Company during the year ended March 31, 2010. Intercompany
profits reflecting our pro rata share of the venture of $7.9 million for the year ended March 31,
2010 were eliminated and reflected in the Equity interests loss line in our consolidated statements
of operations. Also for the year ended March 31, 2010, Equity interests loss includes $18.7 million
for our share of EPIX losses incurred during their year ended December 31, 2009.
EPIX launched operations during the current year and began amortization of its program cost
and increased its marketing efforts, and as a result, EPIX expects to report losses of
approximately $42.0 million for its quarter ended March 31, 2010, of which the Companys pro rata
share will be recorded in the quarter ended June 30, 2010.
8. Senior Revolving Credit Facility
On September 30, 2009, the Company amended its senior revolving credit facility which allowed
for the Company to issue certain senior secured second-priority notes and expand acceptable
obligors included in the senior revolving credit facilitys borrowing base calculation. The
amendment resulted in an increase of the interest rate of 0.25%, and an additional financial
covenant was added, among other changes.
At March 31, 2010, the Company had borrowings of $17.0 million (March 31, 2009 $255 million)
under its senior revolving credit facility. The availability of funds under its senior revolving
credit facility is limited by a borrowing base and also reduced by outstanding letters of credit
which amounted to $25.6 million at March 31, 2010 (March 31, 2009 $46.7 million). At March 31,
2010, there was $297.4 million available under the senior revolving credit facility (March 31, 2009
- $38.3 million). The Company is required to pay a quarterly commitment fee based upon 0.375% per
annum on the total senior revolving credit facility of $340 million less the amount drawn. The
senior revolving credit facility expires July 25, 2013 and as of March 31, 2010, bore interest of
2.5% over the Adjusted LIBOR rate (effective interest rate of 2.75% as of March 31, 2010 and
March 31, 2009). Obligations under the senior revolving credit facility are secured by collateral
(as defined in the credit agreement) granted by the Company and certain subsidiaries of the
Company, as well as a pledge of equity interests in certain of the Companys subsidiaries. The
senior revolving credit facility contains a number of affirmative and negative covenants that,
among other things, require the Company to satisfy certain financial covenants and restrict the
ability of the Company to incur additional debt, pay dividends and make distributions, make certain
investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens,
enter into agreements with affiliates, modify the nature of its business, enter into sale-leaseback
transactions, transfer and sell material assets and merge or consolidate. Under the senior
revolving credit facility, the Company may also be subject to an event of default upon a change in
control (as defined in the senior revolving credit facility) which, among other things, includes a
person or group acquiring ownership or control in excess of 20% of the Companys common stock.
9. Senior Secured Second-Priority Notes
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
|
(Amounts in |
|
|
|
thousands) |
|
Principal amount of Senior Secured Second-Priority Notes |
|
$ |
236,000 |
|
Unamortized discount (remaining period as of March 31, 2010 of 6.6 years ) |
|
|
(10,845 |
) |
|
|
|
|
Net carrying amount of Senior Secured Second-Priority Notes |
|
$ |
225,155 |
|
|
|
|
|
F-19
On October 21, 2009, Lions Gate Entertainment Inc. (LGEI), one of the Companys
wholly-owned subsidiaries, issued $236.0 million aggregate principal amount of senior secured
second-priority notes due 2016 (the Senior Notes) in a private offering conducted pursuant to
Rule 144A and Regulation S under the Securities Act of 1933, as amended (the Securities Act).
The Senior Notes were issued by LGEI at an initial price of 95.222% (original issue discount
4.778%) of the principal amount. The net proceeds, after deducting discounts, the fees paid to the
initial purchaser, and all transaction costs (including legal, accounting and other professional
fees) from the sale of the Senior Notes was approximately $214.7 million, which was used by LGEI to
repay a portion of its outstanding debt under its senior revolving credit facility. The original
issue discount, interest and deferred financing costs are being amortized through November 1, 2016
using the effective interest method.
The Senior Notes pay interest semi-annually on May 1 and November 1 of each year at a rate of
10.25% per year and mature on November 1, 2016.
The Senior Notes are guaranteed on a senior secured basis by the Company, and certain
wholly-owned subsidiaries of both the Company and LGEI. The Senior Notes are ranked junior in right
of payment to the Companys senior revolving credit facility, ranked equally in right of payment to
the Companys subordinated notes, and ranked senior to any of the Companys unsecured debt, to the
extent of the value of the respective collateral.
The Senior Notes contain certain restrictions and covenants that, subject to certain
exceptions, limit our ability to incur additional indebtedness, pay dividends or repurchase the
Companys common shares, make certain loans or investments, and sell or otherwise dispose of
certain assets subject to certain conditions, among other limitations.
10. Participations and Residuals
The Company expects approximately 81% of accrued participations and residuals will be paid
during the one-year period ending March 31, 2011.
Theatrical Slate Participation
On May 25, 2007, the Company closed a theatrical slate participation arrangement, as amended
on January 30, 2008. Under this arrangement, Pride Pictures, LLC (Pride), an unrelated entity,
was to contribute, in general, 50% of the Companys production, acquisition, marketing and
distribution costs of theatrical feature films up to an aggregate of approximately $196 million,
net of transaction costs. The funds available from Pride were generated from the issuance of
subordinated debt instruments, equity and a senior revolving credit facility, which was subject to
a borrowing base. The borrowing base calculation was generally based on 90% of the estimated
ultimate amounts due to Pride on previously released films, as defined in the applicable
agreements. The Company was not a party to the Pride debt obligations or their senior credit
facility, and provided no guarantee of repayment of these obligations. The percentage of the
contribution could vary on certain pictures. Pride participated in a pro rata portion of the
pictures net profits or losses similar to a co-production arrangement based on the portion of
costs funded. The Company distributed the pictures covered by the arrangement with a portion of net
profits after all costs and the Companys distribution fee being distributed to Pride based on
their pro rata contribution to the applicable costs similar to a back-end participation on a film.
In late 2008, the administrative agent for the senior lenders under Prides senior credit
facility took the position, among others, that the senior lenders did not have an obligation to
continue to fund under the senior credit facility because the conditions precedent to funding set
forth in the senior credit facility could not be satisfied. The Company was not a party to the
credit facility. Consequently, Pride did not purchase the pictures The Spirit, My Bloody Valentine
3-D and Madea Goes To Jail. Thereafter, on April 20, 2009, after failed attempts by the Company to
facilitate a resolution, the Company gave LG Film Finance I, LLC (FilmCo) and Pride notice that
FilmCo, through Prides failure to make certain capital contributions, was in default of the Master
Picture Purchase Agreement. On May 5, 2009, the representative for the Pride equity and the Pride
mezzanine investor responded that the required amount was fully funded and that it had no further
obligations to make any additional capital contributions. Consequently, on May 29, 2009, the
Company terminated its theatrical slate participation arrangement with Pride. Since May 29, 2009,
there have been no developments with respect to the arrangement.
Amounts provided from Pride are reflected as a participation liability. The difference between
the ultimate participation expected to be paid to Pride and the amount provided by Pride is
amortized as a charge to or a reduction of participation expense under the individual-film-forecast
method.
F-20
At March 31, 2010, $24.1 million (March 31, 2009, $83.8 million) was payable to Pride and is
included in participations and residuals in the consolidated balance sheets.
Société Générale de Financement du Québec Filmed Entertainment Participation
On July 30, 2007, the Company entered into a four-year filmed entertainment slate
participation agreement with Société Générale de Financement du Québec (SGF), the Québec
provincial governments investment arm. SGF will provide up to 35% of production costs of
television and feature film productions produced in Québec for a four-year period for an aggregate
participation of up to $140 million, and the Company will advance all amounts necessary to fund the
remaining budgeted costs. The maximum aggregate of budgeted costs over the four-year period will be
$400 million, including the Companys portion, but no more than $100 million per year. In
connection with this agreement, the Company and SGF will proportionally share in the proceeds
derived from the productions after the Company deducts a distribution fee, recoups all distribution
expenses and releasing costs, and pays all applicable third party participations and residuals.
Amounts provided from SGF are reflected as a participation liability. The difference between
the ultimate participation expected to be paid to SGF and the amount provided by SGF is amortized
as a charge to or a reduction of participation expense under the individual film forecast method.
At March 31, 2010, $7.2 million (March 31, 2009, $3.2 million) was payable to SGF and is included
in participations and residuals in the consolidated balance sheets. Under the terms of the
arrangement, $35 million is available through July 30, 2010 and $35 million is available during the
twelve-month period ending July 30, 2011, to be provided by SGF. As of March 31, 2010, $5.5 million
was received under the agreement reducing the July 30, 2010 availability to $29.5 million.
F-21
11. Film Obligations and Production Loans
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
Film obligations |
|
$ |
58,043 |
|
|
$ |
88,814 |
|
Production loans |
|
|
|
|
|
|
|
|
Individual production loans |
|
|
210,021 |
|
|
|
206,978 |
|
Pennsylvania Regional Center production loans |
|
|
65,746 |
|
|
|
8,733 |
|
Film Credit Facility |
|
|
35,735 |
|
|
|
|
|
|
|
|
|
|
|
|
Total film obligations and production loans |
|
|
369,545 |
|
|
|
304,525 |
|
Less film obligations and production loans expected to be paid within one year |
|
|
(244,876 |
) |
|
|
(185,647 |
) |
|
|
|
|
|
|
|
Film obligations and production loans expected to be paid after one year |
|
$ |
124,669 |
|
|
$ |
118,878 |
|
|
|
|
|
|
|
|
The following table sets forth future annual repayment of film obligations and production
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
|
Total |
|
|
|
(Amounts in thousands) |
|
Future annual repayment of Film Obligations and Production Loans
recorded as of March 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film obligations |
|
$ |
58,043 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
58,043 |
|
Production loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual production loans |
|
|
156,069 |
|
|
|
38,952 |
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
210,021 |
|
Pennsylvania Regional Center production loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
Film Credit Facility |
|
|
30,764 |
|
|
|
4,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
244,876 |
|
|
$ |
43,923 |
|
|
$ |
|
|
|
$ |
80,746 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
369,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film Obligations
Film obligations include minimum guarantees, which represent amounts payable for film rights
that the Company has acquired and certain theatrical marketing obligations, which represent amounts
received from third parties that are contractually committed for theatrical marketing expenditures
associated with specific titles.
Individual Production Loans
Production loans represent individual loans for the production of film and television programs
that the Company produces. Individual production loans have contractual repayment dates either at
or near the expected completion date, with the exception of certain loans containing repayment
dates on a longer term basis. Individual production loans of $143.0 million incur interest at rates
ranging from 1.98% to 4.00%; approximately $67.0 million of production loans are non-interest
bearing.
Pennsylvania Regional Center
On April 9, 2008, the Company entered into a loan agreement with the Pennsylvania Regional
Center, which provides for the availability of production loans up to $66,500,000 on a five year
term for use in film and television productions in the State of Pennsylvania. The amount that can
be borrowed is generally limited to approximately one half of the qualified production costs
incurred in the State of Pennsylvania through the two-year period ended April 2010, and is subject
to certain other limitations. Under the terms of the loan, for every dollar borrowed, the Companys
production companies are required (within a two-year period) to either create a specified number of
jobs, or spend a specified amount in certain geographic regions in the State of Pennsylvania.
Amounts borrowed under the agreement carry an interest rate of 1.5%, which is payable
semi-annually, and the principal amount is due on the five-year anniversary date of the first
borrowing under the agreement (i.e., April 2013). The loan is secured by a first priority security
interest in the Companys film library pursuant to an intercreditor agreement with the Companys
senior lender under the Companys senior revolving credit facility. Pursuant to the terms of the
Companys senior revolving credit facility, the Company is required to maintain certain collateral
equal to the loans outstanding plus 5% under this facility. Such collateral can consist of cash,
cash equivalents or debt securities, including the Companys subordinated debt repurchased. As of
March 31, 2010, $72.8 million principal value (fair value $69.5 million) of the Companys
subordinated debt repurchased in December 2009 (see Note 12) was held as collateral under the
Companys senior revolving credit facility.
F-22
All amounts borrowed under this loan agreement with the Pennsylvania Regional Center are due
April 11, 2013, five years from the date that the Company began to borrow under this agreement.
Film Credit Facility
On October 6, 2009, the Company, entered into a revolving film credit facility agreement, as
amended effective December 31, 2009 (the Film Credit Facility), which provides for borrowings for
the acquisition or production of motion pictures. Currently, the Film Credit Facility provides for
total borrowings up to $120 million and can be increased to $200 million if additional lenders or
financial institutions become a party to and provide a commitment under the facility. The Film
Credit Facility has a maturity date of April 6, 2013 and as of March 31, 2010, bore interest of
3.25% over the LIBO rate (as defined in the credit agreement effective interest rate of 3.50%
as of March 31, 2010). The Company is required to pay a quarterly commitment fee of 0.75% per annum
on the unused commitment under the Film Credit Facility. Borrowings under the Film Credit Facility
are due the earlier of (a) nine months after delivery of each motion picture or (b) April 6, 2013.
Borrowings under the Film Credit Facility are subject to a borrowing base calculation and are
secured by interests in the related motion pictures, together with certain other receivables from
other motion picture and television productions pledged by the Company, including a minimum pledge
of such receivables of $25 million. Receivables pledged to the Film Credit Facility must be
excluded from the borrowing base calculation under the Companys senior revolving credit facility
as described in Note 8. At March 31, 2010, the Company had borrowings of $35.7 million and $84.3
million remains available under the Film Credit Facility.
12. Subordinated Notes and Other Financing Obligations
The following table sets forth the subordinated notes and other financing obligations
outstanding at March 31, 2010 and March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
October 2004 2.9375% Convertible Senior Subordinated Notes |
|
$ |
99,471 |
|
|
$ |
127,253 |
|
February 2005 3.625% Convertible Senior Subordinated Notes |
|
|
52,675 |
|
|
|
138,552 |
|
April 2009 3.625% Convertible Senior Subordinated Notes |
|
|
36,172 |
|
|
|
|
|
Other financing obligations |
|
|
14,890 |
|
|
|
15,716 |
|
|
|
|
|
|
|
|
|
|
$ |
203,208 |
|
|
$ |
281,521 |
|
|
|
|
|
|
|
|
F-23
Subordinated Notes
Carrying Value. The following table sets forth the equity and liability components of the
Companys subordinated notes outstanding as of March 31, 2010 and March 31, 2009 as fully described
below:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
October 2004 2.9375% Convertible Senior Subordinated Notes: |
|
|
|
|
|
|
|
|
Carrying amount of equity component |
|
$ |
48,080 |
|
|
$ |
50,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of liability component |
|
|
|
|
|
|
|
|
Principal amount of October 2004 2.9375% Notes |
|
$ |
110,035 |
|
|
$ |
150,000 |
|
Unamortized discount (remaining period of 1.8 and 2.8 years, respectively) |
|
|
(10,564 |
) |
|
|
(22,747 |
) |
|
|
|
|
|
|
|
Net carrying amount of October 2004 2.9375% Notes |
|
$ |
99,471 |
|
|
$ |
127,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2005 3.625% Convertible Senior Subordinated Notes: |
|
|
|
|
|
|
|
|
Carrying amount of equity component |
|
$ |
50,855 |
|
|
$ |
54,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of liability component |
|
|
|
|
|
|
|
|
Principal amount of February 3.625% Notes |
|
$ |
59,479 |
|
|
$ |
166,000 |
|
Unamortized discount (remaining period of 2.0 and 3.0 years, respectively) |
|
|
(6,804 |
) |
|
|
(27,448 |
) |
|
|
|
|
|
|
|
Net carrying amount of February 2005 3.625% Notes |
|
$ |
52,675 |
|
|
$ |
138,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2009 3.625% Convertible Senior Subordinated Notes: |
|
|
|
|
|
|
|
|
Carrying amount of equity component |
|
$ |
16,085 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of liability component |
|
|
|
|
|
|
|
|
Principal amount of April 2009 3.625% Notes |
|
$ |
66,581 |
|
|
|
N/A |
|
Unamortized discount (remaining period of 5.0 years) |
|
|
(30,409 |
) |
|
|
N/A |
|
|
|
|
|
|
|
|
Net carrying amount of April 2009 3.625% Notes |
|
$ |
36,172 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
Interest Expense. The effective interest rate on the liability component and the amount
of interest expense, which includes both the contractual interest coupon and amortization of the
discount on the liability component, for the years ended March 31, 2010, 2009 and 2008 are
presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
October 2004 2.9375% Convertible Senior Subordinated Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
Effective interest rate of liability component (9.65%) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest coupon |
|
$ |
3,879 |
|
|
$ |
4,406 |
|
|
$ |
4,406 |
|
Amortization of discount on liability component |
|
|
7,731 |
|
|
|
7,570 |
|
|
|
6,876 |
|
Amortization of debt issuance costs |
|
|
497 |
|
|
|
457 |
|
|
|
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,107 |
|
|
$ |
12,433 |
|
|
$ |
11,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2005 3.625% Convertible Senior Subordinated Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
Effective interest rate of liability component (10.03%) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest coupon |
|
$ |
2,965 |
|
|
$ |
6,235 |
|
|
$ |
6,344 |
|
Amortization of discount on liability component |
|
|
5,098 |
|
|
|
7,894 |
|
|
|
7,251 |
|
Amortization of debt issuance costs |
|
|
301 |
|
|
|
493 |
|
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,364 |
|
|
$ |
14,622 |
|
|
$ |
14,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2009 3.625% Convertible Senior Subordinated Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
Effective interest rate of liability component (17.26%) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest coupon |
|
$ |
2,286 |
|
|
|
N/A |
|
|
|
N/A |
|
Amortization of discount on liability component |
|
|
3,276 |
|
|
|
N/A |
|
|
|
N/A |
|
Amortization of debt issuance costs |
|
|
7 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,569 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
F-24
October 2004 2.9375% Notes. In October 2004, LGEI sold $150.0 million of 2.9375%
Convertible Senior Subordinated Notes (the October 2004 2.9375% Notes).
Outstanding Amount: As of March 31, 2010, $110.0 million of aggregate principal amount
(carrying value $99.5 million) of the October 2004 2.9375% Notes remain outstanding.
Interest: Interest on the October 2004 2.9375% Notes is payable semi-annually on April 15
and October 15.
Maturity Date: The October 2004 2.9375% Notes mature on October 15, 2024.
Redeemable by Company: From October 15, 2009 to October 14, 2010, LGEI may redeem the
October 2004 2.9375% Notes at 100.839%; from October 15, 2010 to October 14, 2011, LGEI may
redeem the October 2004 2.9375% Notes at 100.420%; and thereafter, LGEI may redeem the October
2004 2.9375% Notes at 100%.
Redeemable by Holder: The holder may require LGEI to repurchase the October 2004 2.9375%
Notes on October 15, 2011, 2014 and 2019 or upon a change in control at a price equal to 100% of
the principal amount, together with accrued and unpaid interest through the date of repurchase.
Conversion Features: The holder may convert the October 2004 2.9375% Notes into the
Companys common shares prior to maturity only if the price of the Companys common shares
issuable upon conversion of a note reaches or falls below a certain specific threshold over a
specified period, the notes have been called for redemption, a change in control occurs or
certain other corporate transactions occur. Before the close of business on or prior to the
trading day immediately before the maturity date, the holder may convert the notes into the
Companys common shares at a conversion rate equal to 86.9565 shares per $1,000 principal amount
of the October 2004 2.9375% Notes, subject to adjustment in certain circumstances, which
represents a conversion price of approximately $11.50 per share. Upon conversion of the October
2004 2.9375% Notes, the Company has the option to deliver, in lieu of common shares, cash or a
combination of cash and common shares of the Company.
Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase
all or a portion of their notes or the holder converts the notes upon a change in control, they
will be entitled to receive a make whole premium. The amount of the make whole premium, if any,
will be based on the price of the Companys common shares on the effective date of the change in
control. No make whole premium will be paid if the price of the Companys common shares at such
time is less than $8.79 per share or exceeds $50.00 per share.
Transaction: In December 2009, LGEI paid $38.0 million to repurchase $40.0 million of
aggregate principal amount (carrying value $35.5 million) of the October 2004 2.9375% Notes and
recorded a loss on extinguishment of $0.8 million, which includes $0.3 million of deferred
financing costs written off. The loss represented the excess of the fair value of the liability
component of the October 2004 2.9375% Notes repurchased over their carrying value, plus the
deferred financing costs written off. The excess of the amount paid over the fair value of the
October 2004 2.9375% Notes repurchased was recorded as a reduction of shareholders equity
reflecting the repurchase of the equity component of the October 2004 2.9375% Notes repurchased.
The October 2004 2.9375% Notes repurchased in December 2009 are being held as collateral
under the Companys senior revolving credit facility and may be resold at the prevailing market
value.
February 2005 3.625% Notes. In February 2005, LGEI sold $175.0 million of 3.625% Convertible
Senior Subordinated Notes (the February 2005 3.625% Notes).
Outstanding Amount: As of March 31, 2010, $59.5 million of aggregate principal amount
(carrying value $52.7 million) of the February 2005 3.625% Notes remain outstanding.
Interest: Interest on the February 2005 3.625% Notes is payable at 3.625% per annum
semi-annually on March 15 and September 15 until March 15, 2012 and at 3.125% per annum
thereafter until maturity.
Maturity Date: The February 2005 3.625% Notes will mature on March 15, 2025.
F-25
Redeemable by Company: LGEI may redeem all or a portion of the February 2005 3.625% Notes at
its option on or after March 15, 2012 at 100% of their principal amount, together with accrued
and unpaid interest through the date of redemption.
Redeemable by Holder: The holder may require LGEI to repurchase the February 2005 3.625%
Notes on March 15, 2012, 2015 and 2020 or upon a change in control at a price equal to 100% of
the principal amount, together with accrued and unpaid interest through the date of repurchase.
Conversion Features: The February 2005 3.625% Notes are convertible, at the option of the
holder, at any time before the maturity date, if the notes have not been previously redeemed or
repurchased, at a conversion rate equal to 70.0133 shares per $1,000 principal amount of the
February 2005 3.625% Notes, subject to adjustment in certain circumstances, which represents a
conversion price of approximately $14.28 per share. Upon conversion of the February 2005 3.625%
Notes, the Company has the option to deliver, in lieu of common shares, cash or a combination of
cash and common shares of the Company.
Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase
all or a portion of their notes upon a change in control, they will be entitled to receive a make
whole premium. The amount of the make whole premium, if any, will be based on the price of the
Companys common shares on the effective date of the change in control. No make whole premium
will be paid if the price of the Companys common shares at such time is less than $10.35 per
share or exceeds $75.00 per share.
Transactions: The Company had the following transactions associated with its February 2005
3.625% Notes:
December 2008 Repurchase: In December 2008, LGEI paid $5.5 million to extinguish $9.0
million of aggregate principal amount (carrying value $7.4 million) of the February 2005 3.625%
Notes and recorded a gain on extinguishment of $3.0 million, which includes $0.1 million of
deferred financing costs written off. The gain represented the excess of the carrying value of
the liability component of the February 2005 3.625% Notes repurchased over their fair value, net
of the deferred financing costs written off. The excess of the amount paid over the fair value of
the February 2005 3.625% Notes repurchased was recorded as a reduction of shareholders equity
reflecting the repurchase of the equity component of the February 2005 3.625% Notes repurchased.
April 20, 2009 Refinancing Exchange Agreement: On April 20, 2009, LGEI entered into
Refinancing Exchange Agreements (the Refinancing Exchange Agreements) with certain existing
holders of the February 2005 3.625% Notes. Pursuant to the terms of the Refinancing Exchange
Agreements, holders of the February 2005 3.625% Notes exchanged approximately $66.6 million
aggregate principal amount of the February 2005 3.625% Notes for new 3.625% convertible senior
subordinated notes (the April 2009 3.625% Notes) in the same aggregate principal amount under a
new indenture entered into by LGEI, the Company, as guarantor, and an indenture trustee
thereunder. As a result of the exchange transaction, the Company recorded a gain on
extinguishment of debt of $7.5 million. The gain represented the difference between the fair
value of the liability component of the February 2005 3.625% Notes and their carrying value. The
excess of the fair value of both the equity and liability component of the April 2009 3.625%
Notes over the fair value of the February 2005 3.625% Notes of $3.9 million was recorded as a
reduction of shareholders equity reflecting the repurchase of the equity component of the
February 2005 3.625% Notes.
December 2009 Repurchase: In December 2009, LGEI paid $37.7 million to extinguish $39.9
million of aggregate principal amount (carrying value $35.0 million) of the February 2005
3.625% Notes and recorded a loss on extinguishment of $0.9 million, which includes $0.4 million
of deferred financing costs written off. The loss represented the excess of the fair value of the
liability component of the February 2005 3.625% Notes repurchased over their carrying value, plus
the deferred financing costs written off. The excess of the amount paid over the fair value of
the February 2005 3.625% Notes repurchased was recorded as a reduction of shareholders equity
reflecting the repurchase of the equity component of the February 2005 3.625% Notes repurchased.
The February 2005 3.625% Notes repurchased in December 2009 may be resold at the prevailing
market value. In addition, $32.9 million of aggregate principal amount of the February 2005
3.625% Notes repurchased are being held as collateral under the Companys senior revolving credit
facility.
April 2009 3.625% Notes. As discussed above, in April 2009, LGEI issued approximately $66.6
million of 3.625% Convertible Senior Subordinated Notes (the April 2009 3.625% Notes).
F-26
Outstanding Amount: As of March 31, 2010, $66.6 million of aggregate principal amount
(carrying value $36.2 million) of the April 2009 3.625% Notes remain outstanding.
Interest: Interest on the April 2009 3.625% Notes is payable at 3.625% per annum
semi-annually on March 15 and September 15 of each year.
Maturity Date: The April 2009 3.625% Notes will mature on March 15, 2025.
Redeemable by Company: On or after March 15, 2015, the Company may redeem the April 2009
3.625% Notes, in whole or in part, at a price equal to 100% of the principal amount of the April
2009 3.625% Notes to be redeemed, plus accrued and unpaid interest through the date of
redemption.
Redeemable by Holder: The holder may require LGEI to repurchase the April 2009 3.625% Notes
on March 15, 2015, 2018 and 2023 or upon a designated event, at a price equal to 100% of the
principal amount of the April 2009 3.625% Notes to be repurchased plus accrued and unpaid
interest.
Conversion Features: The April 2009 3.625% Notes may be converted into common shares of the
Company at any time before maturity, redemption or repurchase. The initial conversion rate of the
April 2009 3.625% Notes is 121.2121 common shares per $1,000 principal amount of the April 2009
3.625% Notes, subject to adjustment in certain circumstances, which represents a conversion price
of approximately $8.25 per share. Upon conversion of the April 2009 3.625% Notes, the Company has
the option to deliver, in lieu of common shares, cash or a combination of cash and common shares
of the Company.
Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase
all or a portion of their notes upon a change in control, they will be entitled to receive a make
whole premium. The amount of the make whole premium, if any, will be based on the price of the
Companys common shares on the effective date of the change in control. No make whole premium
will be paid if the price of the Companys common shares at such time is less than $5.36 per
share or exceeds $50.00 per share.
The following table sets forth future contractual principal payment commitments under
convertible senior subordinated notes as of March 31, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
|
Total |
|
|
|
(Amounts in thousands) |
|
Future annual repayment of Convertible Senior
Subordinated Notes
recorded as of March 31, 2010 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2004 2.9375%
Notes |
|
$ |
|
|
|
$ |
110,035 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
110,035 |
|
February 2005 3.625%
Notes |
|
|
|
|
|
|
59,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,479 |
|
April 2009 3.625% Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,581 |
|
|
|
|
|
|
|
66,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
169,514 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
66,581 |
|
|
$ |
|
|
|
$ |
236,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The future repayment dates of the convertible senior
subordinated notes represent the first
redemption date by holder for each note respectively, as described above. |
Other Financing Obligations
The following table sets forth other financing obligations outstanding at March 31, 2010 and
March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
March 31, |
|
|
March 31, |
|
|
|
Rate |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(Amounts in thousands) |
|
TV Guide Network
satellite transponder
lease |
|
|
6.65 |
% |
|
$ |
11,172 |
|
|
$ |
11,998 |
|
Capital asset acquisition |
|
|
8.02 |
% |
|
|
3,718 |
|
|
|
3,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,890 |
|
|
$ |
15,716 |
|
|
|
|
|
|
|
|
|
|
|
|
F-27
Future annual repayments of other financing obligations as of March 31, 2010 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
|
Total |
|
|
|
(Amounts in thousands) |
|
Future annual repayment of Other Financing Obligations
recorded as of March 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TV Guide Network satellite transponder lease |
|
$ |
883 |
|
|
$ |
944 |
|
|
$ |
1,008 |
|
|
$ |
1,078 |
|
|
$ |
1,151 |
|
|
$ |
6,108 |
|
|
$ |
11,172 |
|
Capital asset acquisition |
|
|
|
|
|
|
|
|
|
|
3,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
883 |
|
|
$ |
944 |
|
|
$ |
4,726 |
|
|
$ |
1,078 |
|
|
$ |
1,151 |
|
|
$ |
6,108 |
|
|
$ |
14,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Fair Value Measurements
Fair Value
Accounting guidance and standards about fair value define fair value as the price that would
be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
Fair Value Hierarchy
Accounting guidance and standards about fair value establish a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. A financial instruments categorization within the fair value
hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. The accounting guidance and standards establish three levels of inputs that may be
used to measure fair value:
|
|
|
Level 1 Quoted prices in active markets for identical assets or liabilities. |
|
|
|
|
Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant
inputs are observable or can be derived principally from or corroborated by observable
market data for substantially the full term of the assets or liabilities. Level 2
liabilities that are measured at fair value on a recurring basis include the Companys
senior revolving credit facility and convertible senior subordinated notes, both priced
using discounted cash flow techniques that use observable market inputs, such as LIBOR-based
yield curves, three- and seven-year swap rates, and credit ratings. |
|
|
|
|
Level 3 Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities. |
The following table sets forth the carrying values and fair values (all determined using Level
2 inputs defined above) of the Companys outstanding debt at March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
Value |
|
|
Fair Value |
|
|
|
|
|
|
|
(Level 2) |
|
|
|
(Amounts in thousands) |
|
Senior revolving credit facility |
|
$ |
17,000 |
|
|
$ |
17,000 |
|
October 2004 2.9375% Convertible Senior Subordinated Notes |
|
|
99,471 |
|
|
|
105,865 |
|
February 2005 3.625% Convertible Senior Subordinated Notes |
|
|
52,675 |
|
|
|
54,715 |
|
April 2009 3.625% Convertible Senior Subordinated Notes |
|
|
36,172 |
|
|
|
49,542 |
|
Senior Secured Second-Priority Notes |
|
|
225,155 |
|
|
|
258,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
430,473 |
|
|
$ |
485,251 |
|
|
|
|
|
|
|
|
F-28
14. Comprehensive Income (Loss)
Components of accumulated other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
Gain (Loss) |
|
|
|
|
|
|
Accumulated |
|
|
|
Currency |
|
|
on Foreign |
|
|
Unrealized |
|
|
Other |
|
|
|
Translation |
|
|
Exchange |
|
|
Gain (Loss) on |
|
|
Comprehensive |
|
|
|
Adjustments |
|
|
Contracts |
|
|
Securities |
|
|
Income (Loss) |
|
|
|
(Amounts in thousands) |
|
Balance at March 31, 2008 |
|
$ |
(334 |
) |
|
$ |
(126 |
) |
|
$ |
(73 |
) |
|
$ |
(533 |
) |
Current year change |
|
|
(11,562 |
) |
|
|
144 |
|
|
|
73 |
|
|
|
(11,345 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2009 |
|
|
(11,896 |
) |
|
|
18 |
|
|
|
|
|
|
|
(11,878 |
) |
Current year change |
|
|
4,849 |
|
|
|
418 |
|
|
|
|
|
|
|
5,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010 |
|
$ |
(7,047 |
) |
|
$ |
436 |
|
|
$ |
|
|
|
$ |
(6,611 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Capital Stock
(a) Common Shares
The Company had 500,000,000 authorized shares of common stock at March 31, 2010 and 2009. The
table below outlines common shares reserved for future issuance:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
March 31, |
|
|
2010 |
|
2009 |
|
|
(Amounts in thousands) |
Stock
options outstanding, average exercise price $9.75 (March 31, 2009 $9.75 ) |
|
|
3,360 |
|
|
|
3,899 |
|
Restricted share units unvested |
|
|
3,416 |
|
|
|
2,566 |
|
Share purchase options and restricted share units available for future issuance |
|
|
3,717 |
|
|
|
5,120 |
|
Shares issuable upon conversion of October 2004 2.9375% Notes at conversion price of $11.50 per
share |
|
|
9,568 |
|
|
|
13,043 |
|
Shares issuable upon conversion of February 2005 3.625% Notes at conversion price of $14.28 per
share |
|
|
4,164 |
|
|
|
11,622 |
|
Shares issuable upon conversion of April 2009 3.625% Notes at conversion price of $8.25 per share |
|
|
8,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares reserved for future issuance |
|
|
32,295 |
|
|
|
36,250 |
|
|
|
|
|
|
|
|
|
|
The Companys Board of Directors has authorized the repurchase of up to $150 million of
the Companys common shares, with the timing, price, quantity, and manner of the purchases to be
made at the discretion of management, depending upon market conditions. During the period from the
authorization date through March 31, 2010, 6,787,310 shares have been repurchased pursuant to the
plan at a cost of approximately $65.2 million, including commission costs. During the years ended
March 31, 2009 and 2008, 4,588,675 and 2,198,635 shares have been repurchased pursuant to the plan
at a cost of approximately $45.0 million and $20.3 million, respectively. No shares were
repurchased during the year ended March 31, 2010. The share repurchase program has no expiration
date.
(b) Series B Preferred Shares
As a condition of the purchase of a subsidiary, on October 13, 2000, the Company issued ten
shares at $10 per share to the principal shareholder of Trimark Holdings, Inc. The shares were
non-transferable and were not entitled to dividends. The shares were non-voting except that the
holder, who was a principal of the subsidiary acquired, had the right to elect himself as a
director to the Companys Board of Directors. The shares were redeemable by the Company if certain
events occur. The shares had a liquidation preference equal to the stated value of $10 per share.
In February 2009, the Company redeemed the ten shares at $10 per share.
(c) Share-Based Compensation
The Company has two stock option and long-term incentive plans that permit the grant of stock
options and other equity awards to certain employees, officers, non-employee directors and
consultants for up to 23.0 million shares of the Companys common stock.
Employees and Directors Equity Incentive Plan (the Plan): The plan provides for the
issuance of up to 9.0 million shares of common stock of the Company to eligible employees,
directors, and service providers. Of the 9.0 million common shares allocated for issuance, up to a
maximum of 250,000 common shares may be issued as discretionary bonuses in accordance with the
terms of a share
F-29
bonus plan. No new awards were granted under the Plan subsequent to the 2004
Annual General Meeting of Shareholders. Any remaining shares available for additional grant
purposes under the Plan may be issued under the 2004 Plan. At March 31, 2010, 101,351 common shares
were available for grant under the 2004 Plan.
2004 Performance Incentive Plan (the 2004 Plan): The 2004 Plan provides for the issuance of
up to an additional 14.0 million common shares, stock options, share appreciation rights,
restricted shares, share bonuses or other forms of awards granted or denominated in common shares
of the Company to eligible employees, directors, officers and other eligible persons through the
grant of awards and incentives for high levels of individual performance and improved financial
performance of the Company. The per share exercise price of an option granted under the 2004 Plan
generally may not be less than the fair market value of a common share of the Company on the date
of grant. The maximum term of an option granted under the 2004 Plan is ten years from the date of
grant. At March 31, 2010, 3,616,009 common shares were available for grant under the 2004 Plan.
The Company accounts for stock-based compensation in accordance with accounting standards that
require the measurement of all stock-based awards using a fair value method and the recognition of
the related stock-based compensation expense in the consolidated financial statements over the
requisite service period. Further, the Company estimates forfeitures for share-based awards that
are not expected to vest. As stock-based compensation expense recognized in the Companys consolidated financial statements is based on awards ultimately expected to vest, it has
been reduced for estimated forfeitures.
The
Company recognized the following stock-based compensation expense (benefit) during the
years ended March 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Compensation Expense (Benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
$ |
3,213 |
|
|
$ |
3,184 |
|
|
$ |
3,375 |
|
Restricted Share Units
and Other Share-based
Compensation |
|
|
14,809 |
|
|
|
10,063 |
|
|
|
10,414 |
|
Stock Appreciation Rights |
|
|
1,225 |
|
|
|
(3,527 |
) |
|
|
(1,708 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
19,247 |
|
|
$ |
9,720 |
|
|
$ |
12,081 |
|
|
|
|
|
|
|
|
|
|
|
There was no income tax benefit recognized in
the statements of operations for
stock-based compensation arrangements during the years ended March 31, 2010, 2009 and 2008.
F-30
Stock Options
A summary of option activity under the various plans as of March 31, 2010, 2009 and 2008 and
changes during the years then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Aggregate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
Intrinsic |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Average |
|
|
Remaining |
|
|
Value as of |
|
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
March 31, |
|
|
|
Shares (1) |
|
|
Shares (2) |
|
|
Shares |
|
|
Price |
|
|
Term In Years |
|
|
2010 |
|
Options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Outstanding at April 1, 2007 |
|
|
5,933,289 |
|
|
|
|
|
|
|
5,933,289 |
|
|
$ |
6.30 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
495,000 |
|
|
|
600,000 |
|
|
|
1,095,000 |
|
|
|
10.33 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,871,058 |
) |
|
|
|
|
|
|
(1,871,058 |
) |
|
|
3.09 |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(19,868 |
) |
|
|
|
|
|
|
(19,868 |
) |
|
|
7.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008 |
|
|
4,537,363 |
|
|
|
600,000 |
|
|
|
5,137,363 |
|
|
$ |
8.32 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
|
9.53 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,158,177 |
) |
|
|
|
|
|
|
(1,158,177 |
) |
|
|
3.67 |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(85,020 |
) |
|
|
|
|
|
|
(85,020 |
) |
|
|
6.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009 |
|
|
3,299,166 |
|
|
|
600,000 |
|
|
|
3,899,166 |
|
|
$ |
9.75 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
110,000 |
|
|
|
|
|
|
|
110,000 |
|
|
|
5.41 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(649,166 |
) |
|
|
|
|
|
|
(649,166 |
) |
|
|
8.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2010 |
|
|
2,760,000 |
|
|
|
600,000 |
|
|
|
3,360,000 |
|
|
$ |
9.75 |
|
|
|
6.73 |
|
|
$ |
91,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2010, vested
or expected to vest
in the future |
|
|
2,753,667 |
|
|
|
600,000 |
|
|
|
3,353,667 |
|
|
$ |
9.76 |
|
|
|
6.73 |
|
|
$ |
87,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2010 |
|
|
1,887,500 |
|
|
|
200,000 |
|
|
|
2,087,500 |
|
|
$ |
9.89 |
|
|
|
6.48 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Issued under our long-term incentive plans. |
|
(2) |
|
On September 10, 2007, in connection with the acquisition of Mandate Pictures (see Note 16),
two executives entered into employment agreements with LGF. Pursuant to the employment
agreements, the executives were granted an aggregate of 600,000 stock options, 200,000 options
of which vested, and 400,000 options of which are vesting over a one- to three year period.
The options were granted outside of our long-term incentive plans. |
The fair value of each option award is estimated on the date of grant using a closed-form
option valuation model (Black-Scholes) based on the assumptions noted in the following table.
Expected volatilities are based on implied volatilities from traded options on the Companys stock,
historical volatility of the Companys stock and other factors. The expected term of options
granted represents the period of time that options granted are expected to be outstanding. The
weighted-average grant-date fair values for options granted during the year ended March 31, 2010
was $3.21 (2009 $3.06, 2008 $4.17). The following table represents the assumptions used in the
Black-Scholes option-pricing model for stock options granted during the years ended March 31, 2010,
2009 and 2008:
|
|
|
|
|
|
|
|
|
Year |
|
Year |
|
Year |
|
|
Ended |
|
Ended |
|
Ended |
|
|
March 31, |
|
March 31, |
|
March 31, |
|
|
2010 |
|
2009 |
|
2008 |
Risk-free interest rate |
|
2.6% - 3.6% |
|
2.7% |
|
2.7% - 4.8% |
Expected option lives (in years) |
|
10 years |
|
5.0 years |
|
5.0 to 6.5 years |
Expected volatility for options |
|
45% |
|
31% |
|
31% |
Expected dividend yield |
|
0% |
|
0% |
|
0% |
The total intrinsic value of options exercised as of each exercise date during the year
ended March 31, 2010 was nil (2009 $7.1 million, 2008 $12.1 million).
During the year ended March 31, 2009, 279,368 shares were cancelled to fund withholding tax
obligations upon exercise.
Restricted Share Units
Effective June 27, 2005, the Company, pursuant to the 2004 Plan, began granting restricted
share units to certain employees, directors and consultants.
F-31
A summary of the status of the Companys restricted share units as of March 31, 2010, 2009 and
2008, and changes during the years then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Weighted Average |
|
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
|
Grant Date Fair |
|
|
|
Shares (1) |
|
|
Shares (2) |
|
|
Shares |
|
|
Value |
|
Restricted Share Units: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Outstanding at April 1, 2007 |
|
|
1,872,243 |
|
|
|
|
|
|
|
1,872,243 |
|
|
$ |
9.78 |
|
Granted |
|
|
1,051,267 |
|
|
|
287,500 |
|
|
|
1,338,767 |
|
|
|
10.39 |
|
Vested |
|
|
(825,846 |
) |
|
|
|
|
|
|
(825,846 |
) |
|
|
9.89 |
|
Forfeited |
|
|
(60,539 |
) |
|
|
|
|
|
|
(60,539 |
) |
|
|
9.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008 |
|
|
2,037,125 |
|
|
|
287,500 |
|
|
|
2,324,625 |
|
|
$ |
10.09 |
|
Granted |
|
|
1,301,400 |
|
|
|
105,000 |
|
|
|
1,406,400 |
|
|
|
8.57 |
|
Vested |
|
|
(1,097,403 |
) |
|
|
(8,333 |
) |
|
|
(1,105,736 |
) |
|
|
10.06 |
|
Forfeited |
|
|
(59,621 |
) |
|
|
|
|
|
|
(59,621 |
) |
|
|
10.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009 |
|
|
2,181,501 |
|
|
|
384,167 |
|
|
|
2,565,668 |
|
|
$ |
9.27 |
|
Granted |
|
|
1,910,792 |
|
|
|
52,500 |
|
|
|
1,963,292 |
|
|
|
5.58 |
|
Vested |
|
|
(918,618 |
) |
|
|
(113,334 |
) |
|
|
(1,031,952 |
) |
|
|
9.16 |
|
Forfeited |
|
|
(81,040 |
) |
|
|
|
|
|
|
(81,040 |
) |
|
|
7.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2010 |
|
|
3,092,635 |
|
|
|
323,333 |
|
|
|
3,415,968 |
|
|
$ |
7.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Issued under our long-term incentive plans. |
|
(2) |
|
On September 10, 2007, in connection with the acquisition of Mandate Pictures (see Note 16),
two executives entered into employment agreements with Lions Gate Films, Inc. Pursuant to the
employment agreements, the executives were granted an aggregate of 287,500 restricted share
units, which vest over a three- to five-year period, based on continued employment, and
262,500 restricted share units, which vest over a five-year period, subject to the
satisfaction of certain annual performance targets. The restricted share units were granted
outside of our long-term incentive plans. |
The fair values of restricted share units are determined based on the market value of the
shares on the date of grant.
The following table summarizes the total remaining unrecognized compensation cost as of March
31, 2010 related to non-vested stock options and restricted share units and the weighted average
remaining years over which the cost will be recognized:
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Weighted |
|
|
|
Unrecognized |
|
|
Average |
|
|
|
Compensation |
|
|
Remaining |
|
|
|
Cost |
|
|
Years |
|
|
|
(Amounts in thousands) |
|
|
|
|
|
Stock Options |
|
$ |
2,787 |
|
|
|
0.9 |
|
Restricted Share Units |
|
|
13,989 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
16,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2010, 894,554 shares of restricted share units have been awarded to four key
executive officers, the vesting of which will be subject to performance targets to be set annually
by the Compensation Committee of the Board of Directors of the Company. These restricted share
units will vest in three, four, and five annual installments assuming annual performance targets
have been met. The fair value of the 894,554 shares whose future annual performance targets have
not been set was $5.6 million, based on the market price of the Companys common shares as of March
31, 2010. The market value will be remeasured when the annual performance criteria are set and the
value will be expensed over the remaining vesting periods once it becomes probable that the
performance targets will be satisfied.
Under the Companys two stock option and long term incentive plans, the Company withholds
shares to satisfy minimum statutory federal, state and local tax withholding obligations arising
from the vesting of restricted share units. During the year ended March 31, 2010, 263,313 shares
were withheld upon the vesting of restricted share units.
The Company becomes entitled to an income tax deduction in an amount equal to the taxable
income reported by the holders of the
F-32
stock options and restricted share units when vesting or
exercise occurs, the restrictions are released and the shares are issued. Restricted share units
are forfeited if the employees terminate prior to vesting.
Stock Appreciation Rights
The Company has the following stock appreciation rights (SARs) outstanding as of March 31,
2010 as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
July 14, 2008 |
|
August 14, 2008 |
|
February 5, 2009 |
|
April 6, 2009 |
|
March 17, 2010 |
SARs outstanding |
|
|
750,000 |
|
|
|
250,000 |
|
|
|
850,000 |
|
|
|
700,000 |
|
|
|
500,000 |
|
Vested and exercisable |
|
|
500,000 |
|
|
|
187,500 |
|
|
|
283,333 |
|
|
|
|
|
|
|
|
|
Exercise price |
|
$ |
9.56 |
|
|
$ |
11.16 |
|
|
$ |
5.45 |
|
|
$ |
5.17 |
|
|
$ |
5.95 |
|
Vesting period |
|
3 years |
|
|
4 years |
|
|
3 years |
|
|
4 years |
|
|
4 years |
|
Expiration date |
|
July 14, 2013 |
|
|
June 20, 2012 |
|
|
February 5, 2014 |
|
|
April 6, 2014 |
|
|
March 17, 2015 |
|
Fair value as of March 31, 2010 |
|
$ |
1.24 |
|
|
$ |
0.61 |
|
|
$ |
2.58 |
|
|
$ |
2.73 |
|
|
$ |
2.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability as of March 31, 2010 (in thousands) |
|
$ |
862 |
|
|
$ |
152 |
|
|
$ |
838 |
|
|
$ |
471 |
|
|
$ |
13 |
|
SARs require that upon their exercise, the Company pay the holder the excess of the
market value of the Companys common stock at that time over the exercise price of the SAR
multiplied by the number of SARs exercised. SARs can be exercised at any time subsequent to vesting
and prior to expiration. The fair value of all unexercised SARs are determined at each reporting
period under a Black-Scholes option pricing methodology based on the inputs in the table below and
are recorded as a liability over the vesting period. With the exception of the SARs granted on July
14, 2008, the fair value of the SARs is expensed on a pro rata basis over the vesting period or
service period, if shorter. The SARs granted on July 14, 2008 were granted to a third party
producer and vest in 250,000 SAR increments over a three-year period based on the commencement of
principal photography of certain films. Accordingly, the pro rata portion of the fair value of the
SARs are recorded as part of the cost of the related films until commencement of principal
photography of the motion picture (i.e., vesting) with subsequent changes in the fair value of the
SARs recorded to expense.
For the year ended March 31, 2010, the following assumptions were used in the Black-Scholes
option-pricing model:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
July 14, 2008 |
|
August 14, 2008 |
|
February 5, 2009 |
|
April 6, 2009 |
|
March 17, 2010 |
Risk-free interest rate |
|
|
1.6 |
% |
|
|
1.0 |
% |
|
|
2.1 |
% |
|
|
2.1 |
% |
|
|
2.6 |
% |
Expected option lives (in years) |
|
3.3 years |
|
2.2 years |
|
3.9 years |
|
4.0 years |
|
5.0 years |
Expected volatility for options |
|
|
45 |
% |
|
|
45 |
% |
|
|
45 |
% |
|
|
45 |
% |
|
|
45 |
% |
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Other Share-Based Compensation
During the years ended March 31, 2010 and 2009, as per the terms of certain employment
agreements, the Company granted the equivalent of $1.2 million and $0.3 million, respectively, in
common shares to certain officers on a quarterly basis through the term of their employment
contracts. For the years ended March 31, 2010 and 2009, the Company issued 131,234 and 24,095
shares, respectively, net of shares withheld to satisfy minimum tax withholding obligations. The
Company recorded stock-based compensation expense related to this
arrangement in the amount of $1.3
million and $0.5 million for the years ended March 31, 2010 and 2009, respectively.
16. Acquisitions and Divestitures
TV Guide Network
Acquisition of TV Guide Network. On February 28, 2009, the Company purchased all of the issued
and outstanding equity interests of TV Guide Network and TV Guide.com (collectively TV Guide
Network), a network and online provider of entertainment and television guidance-related
programming, as well as localized program listings and descriptions primarily in the U.S. The
Company paid approximately $241.6 million for all of the equity interest of TV Guide Network, which
included a capital lease obligation of $12.1 million, and incurred approximately $1.5 million in
direct transaction costs (legal fees, accountants fees and other professional fees).
F-33
The acquisition was accounted for as a purchase, with the results of operations of TV Guide
Network included in the Companys consolidated results from February 28, 2009. The acquisition
goodwill represents the significant opportunity for the Company to expand the existing television
channel and online media platforms. Goodwill of $152.6 million represents the excess of purchase
price over the fair value of the tangible and intangible assets acquired and liabilities assumed.
Although the goodwill will not be amortized for financial reporting purposes, it is anticipated
that substantially all of the goodwill will be deductible for federal tax purposes over the
statutory period of 15 years. The final allocation of the purchase price to the assets acquired and
liabilities assumed were as follows:
|
|
|
|
|
|
|
Allocation |
|
|
|
(Amounts in |
|
|
|
thousands) |
|
Accounts receivable, net |
|
$ |
14,505 |
|
Property and equipment |
|
|
26,649 |
|
Other assets acquired |
|
|
1,831 |
|
Finite-lived intangible assets: |
|
|
|
|
Customer relationships |
|
|
66,340 |
|
Trademarks/trade names |
|
|
10,250 |
|
Internal Use Software |
|
|
2,200 |
|
Prepaid Patent License Agreements |
|
|
1,510 |
|
Goodwill |
|
|
152,599 |
|
Other liabilities assumed |
|
|
(32,775 |
) |
|
|
|
|
Total purchase
price including
transaction costs |
|
$ |
243,109 |
|
|
|
|
|
F-34
Sale of Noncontrolling Interest in TV Guide Network. On May 28, 2009, the Company entered
into a Purchase Agreement (the Purchase Agreement) with One Equity Partners (OEP), the global
private equity investment arm of JPMorgan Chase Bank, N.A., pursuant to which OEP purchased 49% of
the Companys interest in TV Guide Network for approximately $122.4 million in cash. In addition,
OEP reserved the option of buying another 1% of TV Guide Network under certain circumstances. The
arrangement contains joint control rights, as evidenced in an operating agreement as well as
certain transfer restrictions and exit rights.
In exchange for the cash consideration, OEP received mandatorily redeemable preferred stock
units and common stock units representing its 49% noncontrolling interest in TV Guide Network. The
Company also received mandatorily redeemable preferred stock units and common stock units
representing its 51% ownership share. The mandatorily redeemable preferred stock carries a dividend
rate of 10% compounded annually and is mandatorily redeemable in May 2019 at the stated value plus
the dividend return and any additional capital contributions less previous distributions.
TV Guide Network is a variable interest entity that is currently required to be consolidated
since the Company is the primary beneficiary pursuant to its business and ownership structure. The
net loss attributable to noncontrolling interest in the consolidated statement of operations
represents the noncontrolling interests 49% share of the net loss incurred by TV Guide Network for
the period from May 28, 2009 through March 31, 2010. Due to a new consolidation accounting standard
for variable interest entities that the Company will adopt beginning fiscal 2011, the Company will
no longer consolidate TV Guide Network in fiscal 2011 and beyond (see Note 2).
As a result of the sale transaction, the difference between the cash received and 49% of the
carrying value of TV Guide Network acquired by OEP was recorded as an adjustment to shareholders
equity attributable to the Companys shareholders. The mandatorily redeemable preferred stock units
attributable to the noncontrolling interest were recorded based on their estimated fair value, as
determined using an option pricing model methodology, as a liability in our consolidated balance
sheet. The carrying value of the 49% interest in TV Guide Network, less the amount recorded for the
mandatorily redeemable preferred stock units, representing the common stock units held by the
minority holders, was recorded as equity attributable to noncontrolling interest in our
consolidated statement of equity.
The portion of the mandatorily redeemable preferred and common stock units held by the Company
and associated non-cash interest representing the Companys 51% ownership interest is eliminated in
consolidation. The mandatorily redeemable preferred stock held by the noncontrolling interest and
the 10% dividend is being accreted, through a non-cash charge to interest expense, up to its
redemption amount over the ten-year period to the redemption date. The redemption amount of the
noncontrolling interests share of the mandatorily redeemable preferred stock as of March 31, 2010
which includes capital contributions and dividend accretion through March 31, 2010 was $135.3
million (carrying value $94.6 million).
The following unaudited pro forma condensed consolidated statement of operations presented
below illustrate the results of operations of the Company as if the acquisition of TV Guide Network
on February 28, 2009 had occurred at April 1, 2007 and also presents the pro forma adjustments and
results of operations as if the sale of the Companys interest in TV Guide Network as described
above occurred at April 1, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Year |
|
Year |
|
|
Ended |
|
Ended |
|
Ended |
|
|
March 31, |
|
March 31, |
|
March 31, |
|
|
2010 |
|
2009 |
|
2008 |
|
|
(Amounts in thousands, except per share amounts) |
Revenues |
|
$ |
1,583,718 |
|
|
$ |
1,591,312 |
|
|
$ |
1,503,709 |
|
Operating income (loss) |
|
$ |
52,045 |
|
|
$ |
(129,834 |
) |
|
$ |
(48,134 |
) |
Net loss |
|
$ |
(21,165 |
) |
|
$ |
(177,530 |
) |
|
$ |
(90,656 |
) |
Basic Net Loss Per Common Share |
|
$ |
(0.18 |
) |
|
$ |
(1.52 |
) |
|
$ |
(0.77 |
) |
Diluted Net Loss Per Common Share |
|
$ |
(0.18 |
) |
|
$ |
(1.52 |
) |
|
$ |
(0.77 |
) |
Weighted average number of
common shares outstanding Basic |
|
|
117,510 |
|
|
|
116,795 |
|
|
|
118,427 |
|
Weighted average number of
common shares outstanding Diluted |
|
|
117,510 |
|
|
|
116,795 |
|
|
|
118,427 |
|
F-35
Acquisition of Mandate Pictures, LLC
On September 10, 2007, the Company purchased all of the membership interests in Mandate
Pictures, LLC (Mandate), a worldwide independent film producer and distributor. The Company paid
approximately $58.6 million, comprised of $46.8 million in cash and 1,282,999 of the Companys
common shares. The value assigned to the shares for purposes of recording the acquisition was $11.8
million and was based on the average price of the Companys common shares a few days prior and
subsequent to the date of the closing of the acquisition, which is when it was publicly announced.
In addition, the Company may be obligated to pay additional amounts pursuant to the purchase
agreement should certain films or derivative works meet certain target performance thresholds. Such
amounts, to the extent they relate to films or derivative works of films identified at the
acquisition date will be charged to goodwill if the target thresholds are achieved, and such
amounts, to the extent they relate to other qualifying films produced in the future, will be
accounted for similar to other film participation arrangements. The amount to be paid is the excess
of the sum of the following amounts over the performance threshold (i.e., the Hurdle Amount):
|
|
|
80% of the earnings of certain films for the longer of 5 years from the closing or 5
years from the release of the pictures, plus |
|
|
|
|
20% of the earnings of certain pictures which commence principal photography within 5
years from the closing date for a period up to 10 years, plus |
|
|
|
|
certain fees designated for derivative works which commence principal photography within
7 years of the initial release of the original picture. |
The Hurdle Amount is the purchase price of approximately $56 million plus an interest cost
accruing until such hurdle is reached, and certain other costs the Company agreed to pay in
connection with the acquisition. Accordingly, the additional consideration is the total of the
above in excess of the Hurdle Amount. As of March 31, 2010, the total earnings and fees from
identified projects in process are not projected to reach the Hurdle Amount. However, as additional
projects are identified in the future and current projects are released in the market place, the
total projected earnings and fees from these projects could increase causing additional payments to
the sellers to become payable.
F-36
Acquisition of Debmar-Mercury, LLC
On July 3, 2006, the Company acquired all of the capital stock of Debmar-Mercury, LLC
(Debmar-Mercury), a leading syndicator of film and television packages. Consideration for the
Debmar-Mercury acquisition was $27.0 million, comprised of a combination of $24.5 million in cash
paid on July 3, 2006 and $2.5 million in common shares of the Company issued in January 2008, and
assumed liabilities of $10.5 million. Goodwill of $8.7 million represents the excess of the
purchase price over the fair value of the net identifiable tangible and intangible assets acquired.
The purchase agreement provided for additional purchase consideration if the aggregate
earnings before interest, taxes, depreciation and amortization adjusted to add back 20% of the
overhead expense (Adjusted EBITDA) of Debmar-Mercury exceeded certain thresholds. In March 2010,
the Company negotiated the buy-out of this potential additional purchase consideration for $15
million. This amount was recorded as an addition to goodwill in March 2010. In connection with
this buy-out the Company extended certain employment contracts which provides for certain
contractual bonuses, as defined.
17. Direct Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Amortization of films and television programs |
|
$ |
540,963 |
|
|
$ |
458,757 |
|
|
$ |
403,319 |
|
Participations and residual expense |
|
|
264,760 |
|
|
|
328,267 |
|
|
|
257,046 |
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
1,620 |
|
|
|
3,718 |
|
|
|
872 |
|
Foreign exchange losses (gains) |
|
|
(32 |
) |
|
|
3,074 |
|
|
|
(313 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
807,311 |
|
|
$ |
793,816 |
|
|
$ |
660,924 |
|
|
|
|
|
|
|
|
|
|
|
18. Income Taxes
The Companys Canadian, UK, U.S.,
Australian and Hong Kong pretax income (loss), net of intercompany eliminations, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Canada |
|
$ |
15,167 |
|
|
$ |
(6,011 |
) |
|
$ |
(2,221 |
) |
United Kingdom |
|
|
23,663 |
|
|
|
(9,747 |
) |
|
|
(8,720 |
) |
United States |
|
|
(65,827 |
) |
|
|
(155,734 |
) |
|
|
(73,557 |
) |
Australia |
|
|
81 |
|
|
|
(744 |
) |
|
|
1,094 |
|
Hong Kong |
|
|
|
|
|
|
(3,494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(26,916 |
) |
|
$ |
(175,730 |
) |
|
$ |
(83,404 |
) |
|
|
|
|
|
|
|
|
|
|
F-37
The Companys current and deferred income tax provision (benefits) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Current |
|
$ |
883 |
|
|
$ |
876 |
|
|
$ |
4,820 |
|
Deferred |
|
|
347 |
|
|
|
1,848 |
|
|
|
(789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,230 |
|
|
$ |
2,724 |
|
|
$ |
4,031 |
|
|
|
|
|
|
|
|
|
|
|
CANADA |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
779 |
|
|
$ |
(590 |
) |
|
$ |
458 |
|
Deferred |
|
|
|
|
|
|
513 |
|
|
|
(1,367 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
779 |
|
|
|
(77 |
) |
|
|
(909 |
) |
|
|
|
|
|
|
|
|
|
|
UNITED KINGDOM |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
|
|
|
$ |
|
|
|
$ |
(56 |
) |
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
UNITED STATES |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
41 |
|
|
$ |
1,569 |
|
|
$ |
4,217 |
|
Deferred |
|
|
347 |
|
|
|
1,318 |
|
|
|
597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
388 |
|
|
|
2,887 |
|
|
|
4,814 |
|
|
|
|
|
|
|
|
|
|
|
AUSTRALIA |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
63 |
|
|
$ |
(103 |
) |
|
$ |
201 |
|
Deferred |
|
|
|
|
|
|
17 |
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
(86 |
) |
|
|
182 |
|
|
|
|
|
|
|
|
|
|
|
The differences between
income taxes expected at U.S. statutory income tax rates and the
income tax provision are as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
(Amounts in thousands) |
|
Income taxes (tax benefits) computed at Federal statutory rate of 35% |
|
$ |
(9,421 |
) |
|
$ |
(61,506 |
) |
|
$ |
(29,372 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal alternative minimum tax |
|
|
(1,567 |
) |
|
|
(88 |
) |
|
|
|
|
Foreign and provincial operations subject
to different income tax rates |
|
|
(307 |
) |
|
|
1,455 |
|
|
|
(390 |
) |
State income tax |
|
|
494 |
|
|
|
1,327 |
|
|
|
2,642 |
|
Change to the accrual for tax liability |
|
|
(482 |
) |
|
|
(255 |
) |
|
|
51 |
|
Foreign income tax withholding |
|
|
1,698 |
|
|
|
1,148 |
|
|
|
753 |
|
Permanent
differences |
|
|
6,019 |
|
|
|
(2,102 |
) |
|
|
1,830 |
|
Deferred tax on goodwill amortization |
|
|
1,001 |
|
|
|
1,318 |
|
|
|
534 |
|
Noncontrolling
interests |
|
|
3,034 |
|
|
|
|
|
|
|
|
|
Other |
|
|
(498 |
) |
|
|
(1,602 |
) |
|
|
3,214 |
|
Increase in valuation allowance |
|
|
1,259 |
|
|
|
63,029 |
|
|
|
24,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,230 |
|
|
$ |
2,724 |
|
|
$ |
4,031 |
|
|
|
|
|
|
|
|
|
|
|
Although the Company is incorporated under Canadian law, the majority of its global
operations are currently subject to tax in the U.S. As a result, the Company believes it is more
appropriate to use the U.S. Federal statutory rate in its reconciliation of the statutory rate to
its reported income tax rate.
F-38
The income tax effects of temporary differences between the book value and tax basis of assets
and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
CANADA |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Net operating losses |
|
$ |
9,961 |
|
|
$ |
8,079 |
|
Property and equipment |
|
|
1,792 |
|
|
|
774 |
|
Reserves |
|
|
1,670 |
|
|
|
1,676 |
|
Other |
|
|
5,975 |
|
|
|
5,340 |
|
Valuation allowance |
|
|
(18,938 |
) |
|
|
(15,346 |
) |
|
|
|
|
|
|
|
|
|
|
460 |
|
|
|
523 |
|
Liabilities |
|
|
|
|
|
|
|
|
Investment in film and
television obligations |
|
|
(104 |
) |
|
|
(202 |
) |
Other |
|
|
(356 |
) |
|
|
(321 |
) |
|
|
|
|
|
|
|
Net Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED KINGDOM |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Net operating losses |
|
$ |
4,439 |
|
|
$ |
5,875 |
|
Property and equipment |
|
|
45 |
|
|
|
61 |
|
Interest Payable |
|
|
674 |
|
|
|
469 |
|
Other |
|
|
52 |
|
|
|
36 |
|
Valuation Allowance |
|
|
(4,030 |
) |
|
|
(5,235 |
) |
|
|
|
|
|
|
|
|
|
|
1,180 |
|
|
|
1,206 |
|
Liabilities |
|
|
|
|
|
|
|
|
Investment in film and
television obligations |
|
|
(1,180 |
) |
|
|
(1,206 |
) |
|
|
|
|
|
|
|
Net United Kingdom |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Net operating losses |
|
$ |
48,894 |
|
|
$ |
51,153 |
|
Accounts payable |
|
|
18,315 |
|
|
|
22,290 |
|
Other assets |
|
|
54,836 |
|
|
|
64,541 |
|
Reserves |
|
|
59,197 |
|
|
|
59,668 |
|
Valuation allowance |
|
|
(114,157 |
) |
|
|
(130,246 |
) |
|
|
|
|
|
|
|
|
|
|
67,085 |
|
|
|
67,406 |
|
Liabilities |
|
|
|
|
|
|
|
|
Investment in film and
television obligations |
|
|
(12,224 |
) |
|
|
(11,323 |
) |
Accounts receivable |
|
|
(457 |
) |
|
|
(1,193 |
) |
Subordinated notes |
|
|
(20,930 |
) |
|
|
(20,947 |
) |
Other |
|
|
(35,183 |
) |
|
|
(35,796 |
) |
|
|
|
|
|
|
|
Net United States |
|
|
(1,709 |
) |
|
|
(1,853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUSTRALIA |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Net operating losses |
|
$ |
|
|
|
$ |
223 |
|
Property and equipment |
|
|
1 |
|
|
|
1 |
|
Other |
|
|
1 |
|
|
|
8 |
|
Valuation allowance |
|
|
(2 |
) |
|
|
(232 |
) |
|
|
|
|
|
|
|
Liabilities Net Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HONG KONG |
|
|
|
|
|
|
|
|
Assets |
|
|
NA |
|
|
|
|
|
Net operating losses |
|
|
|
|
|
$ |
422 |
|
Other |
|
|
|
|
|
|
182 |
|
Valuation allowance |
|
|
|
|
|
|
(604 |
) |
|
|
|
|
|
|
|
Liabilities Net Hong Kong |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
(1,709 |
) |
|
$ |
(1,853 |
) |
|
|
|
|
|
|
|
Due to the uncertainty surrounding the timing of realizing the benefits of its deferred
tax assets in future tax returns, the Company has recorded a valuation allowance against its
deferred tax assets with the exception of deferred tax liabilities related to tax goodwill and
certain foreign deferred tax assets. The total change in the valuation allowance was $14.5 million
and $70.9 million for fiscal 2010 and fiscal 2009, respectively.
The deferred tax liabilities associated with tax goodwill cannot be considered a source of
taxable income to support the realization of deferred tax assets, because these deferred tax
liabilities will not reverse until some indefinite future period. As such, the Company has recorded
a deferred tax liability as of March 31, 2010 and 2009 of $1.7 million and $1.8 million,
respectively, arising from the Mandate Pictures and TV Guide Network acquisitions.
F-39
At March 31, 2010, the Company had U.S. net operating loss carryforwards of approximately
$156.2 million available to reduce future federal income taxes which expire beginning in 2018
through 2028. At March 31, 2010, the Company had state net operating loss carryforwards of
approximately $131.1 million available to reduce future state income taxes which expire in varying
amounts beginning 2011. At March 31, 2010, the Company had Canadian loss carryforwards of $27.3
million which will expire beginning in 2014 through 2030, and $15.9 million of UK loss
carryforwards available indefinitely to reduce future income taxes. The Company expects the future utilization
of the Companys U.S. NOLs to offset future taxable
income will be subject to a substantial annual limitation as a result of ownership changes that
have occurred previously or that could occur in the future.
The Company recognizes tax benefits associated with the exercise of stock options and vesting
of restricted share units directly to stockholders equity only when realized. Accordingly,
deferred tax assets are not recognized for net operating loss carryforwards resulting from tax
benefits occurring from April 1, 2006 onward. A tax benefit occurs when the actual tax benefit
realized upon an employees disposition of a share-based award exceeds the deferred tax asset, if
any, associated with the award. At March 31, 2010, deferred tax assets do not include $27.4 million
of loss carryovers from stock-based compensation.
U.S. income taxes were not provided on undistributed earnings from Australian and UK
subsidiaries. Those earnings are considered to be permanently reinvested in accordance with
accounting guidance.
Accounting guidance clarifies the accounting for uncertainty in income taxes recognized in an
entitys financial statements and prescribes a recognition threshold and measurement attributes for
financial statement disclosure of tax positions taken or expected to be taken on a tax return.
Under this accounting guidance, the impact of an uncertain income tax position on the income tax
return must be recognized at the largest amount that is more-likely-than-not to be sustained upon
audit by the relevant taxing authority. An uncertain income tax position will not be recognized if
it has less than a 50% likelihood of being sustained. Additionally, this accounting guidance
provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.
The Company adopted the provisions of this accounting standard on April 1, 2007. Upon
adoption, the Company recognized no adjustment in its balance of unrecognized tax benefits. As of
April 1, 2007, the date of adoption, the Companys unrecognized tax benefits totaled $0.5 million
exclusive of associated interest and penalties.
|
|
The following table summarizes the changes to the gross unrecognized tax
benefits for the years ended March 31, 2010, 2009, and 2008: |
|
|
|
|
|
|
|
(Amounts |
|
|
|
in millions) |
|
Gross unrecognized tax benefits at April 1, 2007 |
|
$ |
0.5 |
|
Increases in tax positions for prior years |
|
|
|
|
Decreases in tax positions for prior years |
|
|
|
|
Increases in tax positions for current year |
|
|
|
|
Settlements |
|
|
(0.5 |
) |
Lapse in statute of limitations |
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits at March 31, 2008 |
|
|
|
|
Increases in tax positions for prior years |
|
|
|
|
Decreases in tax positions for prior years |
|
|
|
|
Increases in tax positions for current year |
|
|
|
|
Settlements |
|
|
|
|
Lapse in statute of limitations |
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits at March 31, 2009 |
|
|
|
|
Increases in tax positions for prior years |
|
|
|
|
Decreases in tax positions for prior years |
|
|
|
|
Increases in tax positions for current year |
|
|
|
|
Settlements |
|
|
|
|
Lapse in statute of limitations |
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits at March 31, 2010 |
|
$ |
|
|
|
|
|
|
The Companys practice is to recognize interest and/or penalties related to income tax matters
in income tax expense. For the years ended March 31, 2010 and 2009, interest and penalties were not
significant. The Company is subject to taxation in the U.S. and various state and foreign
jurisdictions. With a few exceptions, the Company is subject to income tax examination by U.S. and
state tax authorities for the fiscal years ended March 31, 2005 and forward. However, to the extent
allowed by law, the taxing authorities may have the right to examine prior periods where net
operating losses (NOLs) were generated and carried forward, and make adjustments up to the amount
of the NOLs. The Companys fiscal years ended March 31, 2007 and forward are subject to examination
by the UK tax authorities. The Companys fiscal years ended March 31, 2006 and forward are subject
to examination by the Canadian tax authorities. The Companys fiscal years ended March 31, 2007 and
forward are subject to examination by the Australian tax authorities. Currently, audits are
occurring in various state and local tax jurisdictions.
19. Government Assistance
Tax credits earned for film and television production activity for the year ended March 31,
2010 totaled $51.7 million (2009 $39.4 million; 2008 $15.0 million) and are recorded as a
reduction of the cost of the related film and television program. Accounts receivable at March 31,
2010 includes $45.8 million with respect to tax credits receivable (2009 $37.2 million).
The Company is subject to routine inquiries and review by regulatory authorities of its
various incentive claims which have been received or are receivable. Adjustments of claims, if any,
as a result of such inquiries or reviews, will be recorded at the time of such determination.
20. Segment Information
Accounting guidance requires the Company to make certain disclosures about each reportable
segment. The Companys reportable segments are determined based on the distinct nature of their
operations and each segment is a strategic business unit that offers different products and
services and is managed separately. The Company evaluates performance of each segment using segment
profit
F-40
(loss) as defined below. The Company has three reportable business segments: Motion
Pictures, Television Production, and Media Networks.
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.
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 consists of TV Guide Network, including TV Guide Network On Demand and TV Guide
Online (www.tvguide.com), acquired in February 2009. The Media
Networks Segment includes distribution
revenue from multi-system cable operators and digital broadcast satellite providers (distributors
generally pay a per subscriber fee for the right to distribute programming) and advertising revenue
from the sale of advertising on its television channel and related online media platforms.
Segmented information by business is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Segment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
1,119,245 |
|
|
$ |
1,233,879 |
|
|
$ |
1,150,518 |
|
Television Production |
|
|
350,876 |
|
|
|
222,173 |
|
|
|
210,521 |
|
Media Networks |
|
|
113,597 |
|
|
|
10,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,583,718 |
|
|
$ |
1,466,374 |
|
|
$ |
1,361,039 |
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
491,603 |
|
|
$ |
613,339 |
|
|
$ |
468,765 |
|
Television Production |
|
|
278,943 |
|
|
|
176,763 |
|
|
|
192,159 |
|
Media Networks |
|
|
36,765 |
|
|
|
3,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
807,311 |
|
|
$ |
793,816 |
|
|
$ |
660,924 |
|
|
|
|
|
|
|
|
|
|
|
Distribution and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
469,285 |
|
|
$ |
641,571 |
|
|
$ |
619,003 |
|
Television Production |
|
|
32,472 |
|
|
|
26,149 |
|
|
|
16,663 |
|
Media Networks |
|
|
13,998 |
|
|
|
1,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
515,755 |
|
|
$ |
669,557 |
|
|
$ |
635,666 |
|
|
|
|
|
|
|
|
|
|
|
Segment contribution before general and
administration expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
158,357 |
|
|
$ |
(21,031 |
) |
|
$ |
62,750 |
|
Television Production |
|
|
39,461 |
|
|
|
19,261 |
|
|
|
1,699 |
|
Media Networks |
|
|
62,834 |
|
|
|
4,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
260,652 |
|
|
$ |
3,001 |
|
|
$ |
64,449 |
|
|
|
|
|
|
|
|
|
|
|
General and administration |
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
47,251 |
|
|
$ |
49,643 |
|
|
$ |
42,951 |
|
Television Production |
|
|
9,699 |
|
|
|
13,129 |
|
|
|
6,680 |
|
Media Networks |
|
|
43,677 |
|
|
|
3,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
100,627 |
|
|
$ |
66,542 |
|
|
$ |
49,631 |
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
111,106 |
|
|
$ |
(70,674 |
) |
|
$ |
19,799 |
|
Television Production |
|
|
29,762 |
|
|
|
6,132 |
|
|
|
(4,981 |
) |
Media Networks |
|
|
19,157 |
|
|
|
1,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
160,025 |
|
|
$ |
(63,541 |
) |
|
$ |
14,818 |
|
|
|
|
|
|
|
|
|
|
|
Acquisition of investment in films and
television programs |
|
|
|
|
|
|
|
|
|
|
|
|
Motion Pictures |
|
$ |
287,991 |
|
|
$ |
366,095 |
|
|
$ |
323,504 |
|
Television Production |
|
|
176,725 |
|
|
|
187,913 |
|
|
|
122,210 |
|
Media Networks |
|
|
54,909 |
|
|
|
4,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
519,625 |
|
|
$ |
558,277 |
|
|
$ |
445,714 |
|
|
|
|
|
|
|
|
|
|
|
Segment contribution before general and administration expenses is defined as segment
revenue less segment direct operating and distribution and marketing expenses.
F-41
Segment profit (loss) is defined as segment revenue less segment direct operating,
distribution and marketing and general and administration expenses. The reconciliation of total
segment profit (loss) to the Companys loss before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Companys total segment profit (loss) |
|
$ |
160,025 |
|
|
$ |
(63,541 |
) |
|
$ |
14,818 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate general and
administration |
|
|
(79,916 |
) |
|
|
(70,021 |
) |
|
|
(69,449 |
) |
Depreciation and amortization |
|
|
(28,064 |
) |
|
|
(7,657 |
) |
|
|
(5,500 |
) |
Interest expense |
|
|
(58,060 |
) |
|
|
(34,275 |
) |
|
|
(29,899 |
) |
Interest and other income |
|
|
1,573 |
|
|
|
5,785 |
|
|
|
11,276 |
|
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
2,909 |
|
Gain on extinguishment of debt |
|
|
5,675 |
|
|
|
3,023 |
|
|
|
|
|
Equity interests loss |
|
|
(28,149 |
) |
|
|
(9,044 |
) |
|
|
(7,559 |
) |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
$ |
(26,916 |
) |
|
$ |
(175,730 |
) |
|
$ |
(83,404 |
) |
|
|
|
|
|
|
|
|
|
|
The following table sets forth significant assets as broken down by segment and other
unallocated assets as of March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Motion |
|
|
Television |
|
|
Media |
|
|
|
|
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
Pictures |
|
|
Production |
|
|
Networks |
|
|
Total |
|
|
|
(Amounts in thousands) |
|
Significant assets by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
171,522 |
|
|
$ |
120,902 |
|
|
$ |
19,699 |
|
|
$ |
312,123 |
|
|
$ |
148,625 |
|
|
$ |
61,652 |
|
|
$ |
16,733 |
|
|
$ |
227,010 |
|
Investment in films
and television programs, net |
|
|
553,058 |
|
|
|
108,547 |
|
|
|
19,042 |
|
|
|
680,647 |
|
|
|
570,985 |
|
|
|
131,037 |
|
|
|
745 |
|
|
|
702,767 |
|
Goodwill |
|
|
210,293 |
|
|
|
28,961 |
|
|
|
152,599 |
|
|
|
391,853 |
|
|
|
210,293 |
|
|
|
13,961 |
|
|
|
155,148 |
|
|
|
379,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
934,873 |
|
|
$ |
258,410 |
|
|
$ |
191,340 |
|
|
$ |
1,384,623 |
|
|
$ |
929,903 |
|
|
$ |
206,650 |
|
|
$ |
172,626 |
|
|
$ |
1,309,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other unallocated assets (primarily cash, other
assets and finite-lived intangible assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
319,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
358,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,704,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment amounted to $6.6 million, $8.7 million and $3.6
million for the fiscal year ended March 31, 2010, 2009, and 2008, respectively, all primarily
pertaining to the corporate headquarters.
Revenue by geographic location, based on the location of the customers, with no other foreign
country individually comprising greater than 10% of total revenue, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in thousands) |
|
Canada |
|
$ |
71,423 |
|
|
$ |
71,925 |
|
|
$ |
61,247 |
|
United States |
|
|
1,265,394 |
|
|
|
1,195,138 |
|
|
|
1,069,887 |
|
Other foreign |
|
|
246,901 |
|
|
|
199,311 |
|
|
|
229,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,583,718 |
|
|
$ |
1,466,374 |
|
|
$ |
1,361,039 |
|
|
|
|
|
|
|
|
|
|
|
Assets by geographic location are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Amounts in thousands) |
|
Canada |
|
$ |
49,927 |
|
|
$ |
54,909 |
|
United States |
|
|
1,557,474 |
|
|
|
1,547,365 |
|
United Kingdom |
|
|
95,740 |
|
|
|
60,737 |
|
Australia |
|
|
1,316 |
|
|
|
3,372 |
|
Hong Kong |
|
|
|
|
|
|
867 |
|
|
|
|
|
|
|
|
|
|
$ |
1,704,457 |
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
F-42
Total amount of revenue from one retail customer representing greater than 10% of consolidated
revenues for the year ended March 31, 2010 was $191.9 million (2009 $255.1 million; 2008
$251.4 million). Accounts receivable due from this retail customer was approximately 15% of
consolidated gross accounts receivable at March 31, 2010 and accounts receivable due from a
broadcasting customer was approximately 18% of consolidated gross accounts receivable at March 31,
2010. The total amount of gross accounts receivable due from this retail customer was approximately
$60.1 million at March 31, 2010 and the total amount of gross accounts receivable due from this
broadcasting customer was approximately $74.3 million at March 31, 2010. Accounts receivable due
from one retail customer was approximately 16% of consolidated gross accounts receivable at March
31, 2009 and accounts receivable due from one broadcasting customer was approximately 12% of
consolidated gross accounts receivable at March 31, 2009. The total amount of gross accounts
receivable due from this retail customer was approximately $52.4 million at March 31, 2009 and the
total amount of gross accounts receivable due from this broadcasting customer was approximately
$39.8 million at March 31, 2009.
21. Commitments and Contingencies
Future commitments under contractual obligations as of March 31, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
Future annual repayment of debt and other
financing obligations recorded as of March 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,000 |
|
Production loans(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual production loans |
|
|
156,069 |
|
|
|
38,952 |
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
210,021 |
|
Pennsylvania Regional Center production loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
|
|
|
|
|
|
|
|
|
|
65,746 |
|
Film Credit Facility |
|
|
30,764 |
|
|
|
4,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,735 |
|
Subordinated notes and other financing obligations (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2004 2.9375% Notes |
|
|
|
|
|
|
110,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,035 |
|
February 2005 3.625% Notes |
|
|
|
|
|
|
59,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,479 |
|
April 2009 3.625% Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,581 |
|
|
|
|
|
|
|
66,581 |
|
Other financing obligations |
|
|
883 |
|
|
|
944 |
|
|
|
4,726 |
|
|
|
1,078 |
|
|
|
1,151 |
|
|
|
6,108 |
|
|
|
14,890 |
|
Senior secured second priority notes (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,000 |
|
|
|
236,000 |
|
Mandatorily redeemable preferred stock units (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324,088 |
|
|
|
324,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
187,716 |
|
|
$ |
214,381 |
|
|
$ |
4,726 |
|
|
$ |
98,824 |
|
|
$ |
67,732 |
|
|
$ |
566,196 |
|
|
$ |
1,139,575 |
|
Contractual commitments by expected
repayment date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film obligations(1) |
|
$ |
58,043 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
58,043 |
|
Distribution and marketing commitments (5) |
|
|
85,702 |
|
|
|
|
|
|
|
22,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,702 |
|
Minimum guarantee commitments (6) |
|
|
159,514 |
|
|
|
18,654 |
|
|
|
7,544 |
|
|
|
5,554 |
|
|
|
5,871 |
|
|
|
3,019 |
|
|
|
200,156 |
|
Production loan commitments (6) |
|
|
14,604 |
|
|
|
2,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,834 |
|
Cash interest payments on subordinated notes and other financing obligations |
|
|
8,815 |
|
|
|
8,754 |
|
|
|
3,032 |
|
|
|
2,936 |
|
|
|
2,863 |
|
|
|
959 |
|
|
|
27,359 |
|
Cash interest payments on senior secured second priority notes |
|
|
24,862 |
|
|
|
24,190 |
|
|
|
24,190 |
|
|
|
24,190 |
|
|
|
24,190 |
|
|
|
48,380 |
|
|
|
170,002 |
|
Operating lease commitments |
|
|
11,989 |
|
|
|
11,269 |
|
|
|
11,830 |
|
|
|
11,835 |
|
|
|
10,113 |
|
|
|
4,786 |
|
|
|
61,822 |
|
Other contractual obligations |
|
|
24,041 |
|
|
|
3,840 |
|
|
|
2,589 |
|
|
|
2,509 |
|
|
|
2,548 |
|
|
|
2,976 |
|
|
|
38,503 |
|
Employment and consulting contracts |
|
|
34,551 |
|
|
|
18,284 |
|
|
|
9,271 |
|
|
|
4,918 |
|
|
|
2,637 |
|
|
|
1,890 |
|
|
|
71,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
422,121 |
|
|
$ |
87,221 |
|
|
$ |
80,456 |
|
|
$ |
51,942 |
|
|
$ |
48,222 |
|
|
$ |
62,010 |
|
|
$ |
751,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total future commitments under
contractual obligations |
|
$ |
609,837 |
|
|
$ |
301,602 |
|
|
$ |
85,182 |
|
|
$ |
150,766 |
|
|
$ |
115,954 |
|
|
$ |
628,206 |
|
|
$ |
1,891,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Production loans represent loans for the production of film and television programs that the
Company produces. Film obligations include minimum guarantees and theatrical marketing
obligations as disclosed in Note 11 of our consolidated financial statements. Repayment dates
are based on anticipated delivery or release date of the related film or contractual due dates
of the obligation. |
|
(2) |
|
Subordinated notes and other financing obligations reflect the principal amounts of the
October 2004 2.9375% Notes, the February 2005 3.625% Notes, and the April 2009 3.625% Notes and
other financing obligations. The future repayment dates of the Senior
Notes represent the first
redemption date by holder for each note respectively. As of March 31, 2010, the carrying value
of our subordinated notes was as follows: October 2004 2.9375% Notes $99.5 million;
February 2005 3.625% Notes $52.7 million;
and April 2009 3.625% Notes $36.2 million. The difference between the carrying value and the
principal amounts is being amortized as a non-cash charge to interest expense over the expected
life of the Notes. |
|
(3) |
|
Senior secured second-priority notes reflect the principal amount payable in November 2016
with a carrying amount of $225.2 million as of March 31, 2010. The difference between the
carrying value and the principal amount is being amortized as a non-cash charge to interest
expense over the expected life of the notes. |
|
(4) |
|
Amount represents the anticipated redemption amount (i.e., principal amount of $125.0 million
plus the accretion of a 10% annual dividend) payable in May 2019 of the mandatorily redeemable
preferred stock units held by the noncontrolling interest in TV Guide
Network, assuming no earlier distributions. The carrying
amount of the mandatorily redeemable preferred stock held by the non controlling interest was |
F-43
|
|
|
|
|
$94.6 million as of March 31, 2010. The carrying amount and the 10% dividend is being
accreted, through a non cash charge to interest expense, up to its redemption amount over the
ten-year period to the redemption date. |
|
(5) |
|
Distribution and marketing commitments represent contractual commitments for future
expenditures associated with distribution and marketing of films which we will distribute. The
payment dates of these amounts are primarily based on the anticipated release date of the
film. |
|
(6) |
|
Minimum guarantee commitments represent contractual commitments related to the purchase of
film rights for future delivery. Production loan commitments represent amounts committed for
future film production and development to be funded through production financing and recorded
as a production loan liability. Future payments under these commitments are based on
anticipated delivery or release dates of the related film or contractual due dates of the
commitment. The amounts include future interest payments associated with the commitments. |
Operating Leases. The Company has operating leases for offices and equipment. The Company
incurred rental expense of $12.4 million during the year ended March 31, 2010 (2009 $9.6 million;
2008 $6.2 million). The Company earned sublease income of $0.7 million during the year ended
March 31, 2010 (2009 $0.5 million; 2008 $0.5 million).
Contingencies. The Company is from time to time involved in various claims, legal proceedings
and complaints arising in the ordinary course of business. The Company does not believe that
adverse decisions in any such pending or threatened proceedings, or any amount which the Company
might be required to pay by reason thereof, would have a material adverse effect on the financial
condition or future results of the Company.
The Company has provided an accrual for estimated losses under the above matters as of March
31, 2010.
22. Financial Instruments
(a) Credit Risk
Concentration of credit risk with the Companys customers is limited due to the Companys
customer base and the diversity of its sales throughout the world. The Company performs ongoing
credit evaluations and maintains a provision for potential credit losses. The Company generally
does not require collateral for its trade accounts receivable. Accounts receivable include amounts
receivable from Canadian governmental agencies in connection with government assistance for
productions as well as amounts due from customers. Amounts receivable from governmental agencies
amounted to 14.7% of accounts receivable, net at March 31, 2010
(2009 16.4%).
(b) Forward Contracts
The Company enters into forward foreign exchange contracts to hedge its foreign currency
exposures on future production expenses denominated in various foreign currencies. As of March 31,
2010, we had outstanding forward foreign exchange contracts to buy Canadian $1.7 million in
exchange for US$1.6 million over a period of one month at a weighted average exchange rate of one
US$ equals Canadian $1.07 and we had outstanding forward exchange contracts to buy US$6.2 million
in exchange for British Pound Sterling £3.8 million over a period of six months at a weighted
average exchange rate of one British Pound Sterling equals US$1.64.
Changes in the fair value representing a net unrealized fair value gain on foreign exchange
contracts that qualified as effective hedge contracts outstanding during the year ended March 31,
2010 amounted to $0.4 million and are included in accumulated other comprehensive income (loss), a
separate component of shareholders equity. These contracts are entered into with a major financial
institution as counterparty. The Company is exposed to credit loss in the event of nonperformance
by the counterparty, which is limited to the cost of replacing the contracts, at current market
rates. The Company does not require collateral or other security to support these contracts.
F-44
23. Supplementary Cash Flow Statement Information
(a) Interest paid during the fiscal year ended March 31, 2010 amounted to $18.7 million (2009
$14.5 million; 2008 $12.1 million).
(b) Income taxes paid during the fiscal year ended March 31, 2010 amounted to $1.2 million
(2009 $5.3 million; 2008 $4.8 million).
24. Quarterly Financial Data (Unaudited)
Certain quarterly information is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
|
(Amounts in thousands, except per share amounts) |
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
387,707 |
|
|
$ |
393,677 |
|
|
$ |
371,783 |
|
|
$ |
430,551 |
|
Direct operating expenses |
|
$ |
213,059 |
|
|
$ |
198,047 |
|
|
$ |
208,907 |
|
|
$ |
187,298 |
|
Net income (loss) |
|
$ |
36,349 |
|
|
$ |
31,716 |
|
|
$ |
(65,259 |
) |
|
$ |
(22,284 |
) |
Basic income (loss) per share |
|
$ |
0.31 |
|
|
$ |
0.27 |
|
|
$ |
(0.55 |
) |
|
$ |
(0.19 |
) |
Diluted income (loss) per
share |
|
$ |
0.30 |
|
|
$ |
0.26 |
|
|
$ |
(0.55 |
) |
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
|
(Amounts in thousands, except per share amounts) |
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
298,459 |
|
|
$ |
380,718 |
|
|
$ |
324,027 |
|
|
$ |
463,170 |
|
Direct operating expenses |
|
$ |
147,684 |
|
|
$ |
199,626 |
|
|
$ |
218,451 |
|
|
$ |
228,055 |
|
Net income (loss) |
|
$ |
3,519 |
|
|
$ |
(51,814 |
) |
|
$ |
(97,731 |
) |
|
$ |
(32,428 |
) |
Basic income (loss) per share |
|
$ |
0.03 |
|
|
$ |
(0.44 |
) |
|
$ |
(0.84 |
) |
|
$ |
(0.28 |
) |
Diluted income (loss) per
share |
|
$ |
0.03 |
|
|
$ |
(0.44 |
) |
|
$ |
(0.84 |
) |
|
$ |
(0.28 |
) |
25. Consolidating Financial Information Subordinated Notes
The October 2004 2.9375% Notes, the February 2005 3.625% Notes, and the April 2009 3.625%
Notes, by their terms, are fully and unconditionally guaranteed by the Company.
The following tables present condensed consolidating financial information as of March 31,
2010 and 2009 and for the years ended March 31, 2010, 2009, and 2008 for (1) the Company, on a
stand-alone basis, (2) LGEI, on a stand-alone basis, (3) the non-guarantor subsidiaries of the
Company (including the subsidiaries of LGEI), on a combined basis (collectively, the Non-guarantor
Subsidiaries) and (4) the Company, on a consolidated basis.
F-45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
814 |
|
|
$ |
3,059 |
|
|
$ |
87,548 |
|
|
$ |
|
|
|
$ |
91,421 |
|
Restricted cash |
|
|
|
|
|
|
4,123 |
|
|
|
|
|
|
|
|
|
|
|
4,123 |
|
Restricted investments |
|
|
|
|
|
|
6,995 |
|
|
|
|
|
|
|
|
|
|
|
6,995 |
|
Accounts receivable, net |
|
|
99 |
|
|
|
1,116 |
|
|
|
310,908 |
|
|
|
|
|
|
|
312,123 |
|
Investment in films and television programs, net |
|
|
2 |
|
|
|
6,391 |
|
|
|
675,536 |
|
|
|
(1,282 |
) |
|
|
680,647 |
|
Property and equipment, net |
|
|
|
|
|
|
11,328 |
|
|
|
22,249 |
|
|
|
|
|
|
|
33,577 |
|
Finite-lived intangible assets, net |
|
|
|
|
|
|
|
|
|
|
71,530 |
|
|
|
|
|
|
|
71,530 |
|
Goodwill |
|
|
10,173 |
|
|
|
15,000 |
|
|
|
366,680 |
|
|
|
|
|
|
|
391,853 |
|
Other assets |
|
|
431 |
|
|
|
44,057 |
|
|
|
67,700 |
|
|
|
|
|
|
|
112,188 |
|
Subsidiary investments and advances |
|
|
73,664 |
|
|
|
(20,885 |
) |
|
|
(106,396 |
) |
|
|
53,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85,183 |
|
|
$ |
71,184 |
|
|
$ |
1,495,755 |
|
|
$ |
52,335 |
|
|
$ |
1,704,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders
Equity (Deficiency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
|
|
|
$ |
17,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,000 |
|
Senior secured second-priority notes |
|
|
|
|
|
|
225,155 |
|
|
|
|
|
|
|
|
|
|
|
225,155 |
|
Accounts payable and accrued liabilities |
|
|
1,018 |
|
|
|
53,706 |
|
|
|
215,892 |
|
|
|
(496 |
) |
|
|
270,120 |
|
Participations and residuals |
|
|
186 |
|
|
|
3,760 |
|
|
|
298,741 |
|
|
|
(10 |
) |
|
|
302,677 |
|
Film obligations and production loans |
|
|
79 |
|
|
|
|
|
|
|
369,466 |
|
|
|
|
|
|
|
369,545 |
|
Subordinated notes and other financing obligations |
|
|
|
|
|
|
188,318 |
|
|
|
14,890 |
|
|
|
|
|
|
|
203,208 |
|
Mandatorily redeemable preferred stock units held
by noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
193,021 |
|
|
|
(98,441 |
) |
|
|
94,580 |
|
Deferred revenue |
|
|
|
|
|
|
247 |
|
|
|
138,146 |
|
|
|
(121 |
) |
|
|
138,272 |
|
Shareholders equity (deficiency) |
|
|
83,900 |
|
|
|
(417,002 |
) |
|
|
265,599 |
|
|
|
151,403 |
|
|
|
83,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85,183 |
|
|
$ |
71,184 |
|
|
$ |
1,495,755 |
|
|
$ |
52,335 |
|
|
$ |
1,704,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2010 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
|
|
|
$ |
32,219 |
|
|
$ |
1,587,650 |
|
|
$ |
(36,151 |
) |
|
$ |
1,583,718 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
|
|
|
|
458 |
|
|
|
836,061 |
|
|
|
(29,208 |
) |
|
|
807,311 |
|
Distribution and marketing |
|
|
|
|
|
|
7,475 |
|
|
|
510,718 |
|
|
|
(2,438 |
) |
|
|
515,755 |
|
General and administration |
|
|
7,070 |
|
|
|
72,705 |
|
|
|
101,026 |
|
|
|
(258 |
) |
|
|
180,543 |
|
Depreciation and amortization |
|
|
|
|
|
|
4,832 |
|
|
|
23,232 |
|
|
|
|
|
|
|
28,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
7,070 |
|
|
|
85,470 |
|
|
|
1,471,037 |
|
|
|
(31,904 |
) |
|
|
1,531,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS) |
|
|
(7,070 |
) |
|
|
(53,251 |
) |
|
|
116,613 |
|
|
|
(4,247 |
) |
|
|
52,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
45,165 |
|
|
|
24,205 |
|
|
|
(11,310 |
) |
|
|
58,060 |
|
Interest and other income |
|
|
(130 |
) |
|
|
(12,050 |
) |
|
|
(703 |
) |
|
|
11,310 |
|
|
|
(1,573 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
(5,675 |
) |
|
|
|
|
|
|
|
|
|
|
(5,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses (income) |
|
|
(130 |
) |
|
|
27,440 |
|
|
|
23,502 |
|
|
|
|
|
|
|
50,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE EQUITY
INTERESTS AND INCOME
TAXES |
|
|
(6,940 |
) |
|
|
(80,691 |
) |
|
|
93,111 |
|
|
|
(4,247 |
) |
|
|
1,233 |
|
Equity interests income (loss) |
|
|
(21,181 |
) |
|
|
49,090 |
|
|
|
(27,155 |
) |
|
|
(28,903 |
) |
|
|
(28,149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(28,121 |
) |
|
|
(31,601 |
) |
|
|
65,956 |
|
|
|
(33,150 |
) |
|
|
(26,916 |
) |
Income tax provision (benefit) |
|
|
25 |
|
|
|
225 |
|
|
|
980 |
|
|
|
|
|
|
|
1,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
|
(28,146 |
) |
|
|
(31,826 |
) |
|
|
64,976 |
|
|
|
(33,150 |
) |
|
|
(28,146 |
) |
Add: Net loss attributable to noncontrolling interest |
|
|
8,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO
LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS |
|
$ |
(19,478 |
) |
|
$ |
(31,826 |
) |
|
$ |
64,976 |
|
|
$ |
(33,150 |
) |
|
$ |
(19,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2010 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING
ACTIVITIES |
|
$ |
(12,543 |
) |
|
$ |
14,072 |
|
|
$ |
(123,304 |
) |
|
$ |
|
|
|
$ |
(121,775 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of restricted investments |
|
|
|
|
|
|
(13,994 |
) |
|
|
|
|
|
|
|
|
|
|
(13,994 |
) |
Proceeds from the sale of restricted investments |
|
|
|
|
|
|
13,985 |
|
|
|
|
|
|
|
|
|
|
|
13,985 |
|
Investment in equity method investees |
|
|
|
|
|
|
|
|
|
|
(47,129 |
) |
|
|
|
|
|
|
(47,129 |
) |
Increase in loan receivables |
|
|
|
|
|
|
(362 |
) |
|
|
(1,056 |
) |
|
|
|
|
|
|
(1,418 |
) |
Repayment of loans receivable |
|
|
|
|
|
|
|
|
|
|
8,333 |
|
|
|
|
|
|
|
8,333 |
|
Purchases of property and equipment |
|
|
|
|
|
|
(1,146 |
) |
|
|
(5,431 |
) |
|
|
|
|
|
|
(6,577 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) INVESTING
ACTIVITIES |
|
|
|
|
|
|
(1,517 |
) |
|
|
(45,283 |
) |
|
|
|
|
|
|
(46,800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax withholding requirements on equity awards |
|
|
(2,030 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,030 |
) |
Proceeds from the issuance of mandatorily redeemable
preferred stock units and common stock units
related to the sale of 49% interest in TV
Guide Network |
|
|
|
|
|
|
|
|
|
|
122,355 |
|
|
|
|
|
|
|
122,355 |
|
Borrowings under senior revolving credit facility |
|
|
|
|
|
|
302,000 |
|
|
|
|
|
|
|
|
|
|
|
302,000 |
|
Repayments of borrowings under senior revolving credit facility |
|
|
|
|
|
|
(540,000 |
) |
|
|
|
|
|
|
|
|
|
|
(540,000 |
) |
Borrowings under individual production loans |
|
|
|
|
|
|
|
|
|
|
144,741 |
|
|
|
|
|
|
|
144,741 |
|
Repayment of individual production loans |
|
|
|
|
|
|
|
|
|
|
(136,261 |
) |
|
|
|
|
|
|
(136,261 |
) |
Production loan borrowings under Pennsylvania Regional
Center credit facility |
|
|
|
|
|
|
|
|
|
|
63,133 |
|
|
|
|
|
|
|
63,133 |
|
Production loan borrowings under film credit facility, net of
deferred financing costs |
|
|
|
|
|
|
|
|
|
|
30,469 |
|
|
|
|
|
|
|
30,469 |
|
Production loan repayments under film credit facility |
|
|
|
|
|
|
|
|
|
|
(2,718 |
) |
|
|
|
|
|
|
(2,718 |
) |
Proceeds from sale of senior secured second-priority notes,
net of deferred financing costs |
|
|
|
|
|
|
214,727 |
|
|
|
|
|
|
|
|
|
|
|
214,727 |
|
Repurchase of subordinated notes |
|
|
|
|
|
|
(75,185 |
) |
|
|
|
|
|
|
|
|
|
|
(75,185 |
) |
Repayment of other financing obligations |
|
|
|
|
|
|
|
|
|
|
(826 |
) |
|
|
|
|
|
|
(826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES |
|
|
(2,030 |
) |
|
|
(98,458 |
) |
|
|
220,893 |
|
|
|
|
|
|
|
120,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS |
|
|
(14,573 |
) |
|
|
(85,903 |
) |
|
|
52,306 |
|
|
|
|
|
|
|
(48,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN EXCHANGE EFFECTS ON
CASH |
|
|
2,134 |
|
|
|
|
|
|
|
(1,018 |
) |
|
|
|
|
|
|
1,116 |
|
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD |
|
|
13,253 |
|
|
|
88,962 |
|
|
|
36,260 |
|
|
|
|
|
|
|
138,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS END OF PERIOD |
|
$ |
814 |
|
|
$ |
3,059 |
|
|
$ |
87,548 |
|
|
$ |
|
|
|
$ |
91,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2009 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
13,253 |
|
|
$ |
88,962 |
|
|
$ |
36,260 |
|
|
$ |
|
|
|
$ |
138,475 |
|
Restricted cash |
|
|
|
|
|
|
10,056 |
|
|
|
|
|
|
|
|
|
|
|
10,056 |
|
Restricted investments |
|
|
|
|
|
|
6,987 |
|
|
|
|
|
|
|
|
|
|
|
6,987 |
|
Accounts receivable, net |
|
|
113 |
|
|
|
3,737 |
|
|
|
223,289 |
|
|
|
(129 |
) |
|
|
227,010 |
|
Investment in films and television programs, net |
|
|
2 |
|
|
|
6,761 |
|
|
|
695,781 |
|
|
|
223 |
|
|
|
702,767 |
|
Property and equipment, net |
|
|
|
|
|
|
15,014 |
|
|
|
27,401 |
|
|
|
|
|
|
|
42,415 |
|
Finite-lived intangible assets, net |
|
|
|
|
|
|
|
|
|
|
78,904 |
|
|
|
|
|
|
|
78,904 |
|
Goodwill |
|
|
10,173 |
|
|
|
|
|
|
|
369,229 |
|
|
|
|
|
|
|
379,402 |
|
Other assets |
|
|
|
|
|
|
37,636 |
|
|
|
43,598 |
|
|
|
|
|
|
|
81,234 |
|
Subsidiary investments and advances |
|
|
19,188 |
|
|
|
(1,103 |
) |
|
|
(52,438 |
) |
|
|
34,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,729 |
|
|
$ |
168,050 |
|
|
$ |
1,422,024 |
|
|
$ |
34,447 |
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders
Equity (Deficiency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
|
|
|
$ |
255,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
255,000 |
|
Accounts payable and accrued liabilities |
|
|
821 |
|
|
|
12,289 |
|
|
|
257,866 |
|
|
|
(415 |
) |
|
|
270,561 |
|
Participations and residuals |
|
|
152 |
|
|
|
472 |
|
|
|
371,234 |
|
|
|
(1 |
) |
|
|
371,857 |
|
Film obligations and production loans |
|
|
63 |
|
|
|
|
|
|
|
304,590 |
|
|
|
(128 |
) |
|
|
304,525 |
|
Subordinated notes and other financing obligations |
|
|
|
|
|
|
265,805 |
|
|
|
15,716 |
|
|
|
|
|
|
|
281,521 |
|
Deferred revenue |
|
|
|
|
|
|
385 |
|
|
|
141,708 |
|
|
|
|
|
|
|
142,093 |
|
Shareholders equity (deficiency) |
|
|
41,693 |
|
|
|
(365,901 |
) |
|
|
330,910 |
|
|
|
34,991 |
|
|
|
41,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,729 |
|
|
$ |
168,050 |
|
|
$ |
1,422,024 |
|
|
$ |
34,447 |
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2009 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
560 |
|
|
$ |
24,810 |
|
|
$ |
1,475,631 |
|
|
$ |
(34,627 |
) |
|
$ |
1,466,374 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
712 |
|
|
|
|
|
|
|
796,770 |
|
|
|
(3,666 |
) |
|
|
793,816 |
|
Distribution and marketing |
|
|
8 |
|
|
|
2,374 |
|
|
|
667,229 |
|
|
|
(54 |
) |
|
|
669,557 |
|
General and administration |
|
|
1,584 |
|
|
|
67,734 |
|
|
|
67,243 |
|
|
|
2 |
|
|
|
136,563 |
|
Depreciation and amortization |
|
|
|
|
|
|
3,889 |
|
|
|
3,768 |
|
|
|
|
|
|
|
7,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
2,304 |
|
|
|
73,997 |
|
|
|
1,535,010 |
|
|
|
(3,718 |
) |
|
|
1,607,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS) |
|
|
(1,744 |
) |
|
|
(49,187 |
) |
|
|
(59,379 |
) |
|
|
(30,909 |
) |
|
|
(141,219 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
14 |
|
|
|
32,707 |
|
|
|
1,554 |
|
|
|
|
|
|
|
34,275 |
|
Interest and other income |
|
|
(229 |
) |
|
|
(4,022 |
) |
|
|
(1,534 |
) |
|
|
|
|
|
|
(5,785 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
(3,023 |
) |
|
|
|
|
|
|
|
|
|
|
(3,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other
expenses (income) |
|
|
(215 |
) |
|
|
25,662 |
|
|
|
20 |
|
|
|
|
|
|
|
25,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE EQUITY
INTERESTS AND INCOME
TAXES |
|
|
(1,529 |
) |
|
|
(74,849 |
) |
|
|
(59,399 |
) |
|
|
(30,909 |
) |
|
|
(166,686 |
) |
Equity interests income (loss) |
|
|
(176,919 |
) |
|
|
(87,022 |
) |
|
|
(6,150 |
) |
|
|
261,047 |
|
|
|
(9,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(178,448 |
) |
|
|
(161,871 |
) |
|
|
(65,549 |
) |
|
|
230,138 |
|
|
|
(175,730 |
) |
Income tax provision (benefit) |
|
|
6 |
|
|
|
1,374 |
|
|
|
1,344 |
|
|
|
|
|
|
|
2,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(178,454 |
) |
|
$ |
(163,245 |
) |
|
$ |
(66,893 |
) |
|
$ |
230,138 |
|
|
$ |
(178,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2009 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING
ACTIVITIES |
|
$ |
56,435 |
|
|
$ |
(256,846 |
) |
|
$ |
98,505 |
|
|
$ |
|
|
|
$ |
(101,906 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments auction
rate securities |
|
|
|
|
|
|
(13,989 |
) |
|
|
|
|
|
|
|
|
|
|
(13,989 |
) |
Proceeds from the sale of investments -
auction rate securities |
|
|
|
|
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
14,000 |
|
Acquisition of TV Guide, net of unrestricted cash acquired |
|
|
|
|
|
|
(243,158 |
) |
|
|
|
|
|
|
|
|
|
|
(243,158 |
) |
Investment in equity method investees |
|
|
|
|
|
|
|
|
|
|
(18,031 |
) |
|
|
|
|
|
|
(18,031 |
) |
Increase in loan receivables |
|
|
|
|
|
|
(3,767 |
) |
|
|
(25,000 |
) |
|
|
|
|
|
|
(28,767 |
) |
Purchases of property and equipment |
|
|
|
|
|
|
(7,549 |
) |
|
|
(1,125 |
) |
|
|
|
|
|
|
(8,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) INVESTING
ACTIVITIES |
|
|
|
|
|
|
(254,463 |
) |
|
|
(44,156 |
) |
|
|
|
|
|
|
(298,619 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
2,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,894 |
|
Tax withholding requirements on equity awards |
|
|
(3,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,734 |
) |
Repurchases of common shares |
|
|
(44,968 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,968 |
) |
Production loan borrowings under Pennsylvania
Regional Center credit facility |
|
|
|
|
|
|
255,000 |
|
|
|
|
|
|
|
|
|
|
|
255,000 |
|
Production loan borrowings under film credit facility,
net of deferred financing costs |
|
|
|
|
|
|
|
|
|
|
189,858 |
|
|
|
|
|
|
|
189,858 |
|
Proceeds from sale of senior secured second-priority
notes, net of deferred financing costs |
|
|
|
|
|
|
|
|
|
|
(222,034 |
) |
|
|
|
|
|
|
(222,034 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of subordinated notes |
|
|
|
|
|
|
(5,310 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
(5,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES |
|
|
(45,808 |
) |
|
|
249,690 |
|
|
|
(32,243 |
) |
|
|
|
|
|
|
171,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS |
|
|
10,627 |
|
|
|
(261,619 |
) |
|
|
22,106 |
|
|
|
|
|
|
|
(228,886 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN EXCHANGE EFFECTS ON
CASH |
|
|
(1,848 |
) |
|
|
|
|
|
|
(2,380 |
) |
|
|
|
|
|
|
(4,228 |
) |
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD |
|
|
4,474 |
|
|
|
350,581 |
|
|
|
16,534 |
|
|
|
|
|
|
|
371,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
END OF PERIOD |
|
$ |
13,253 |
|
|
$ |
88,962 |
|
|
$ |
36,260 |
|
|
$ |
|
|
|
$ |
138,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2008 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
397 |
|
|
$ |
14,312 |
|
|
$ |
1,363,872 |
|
|
$ |
(17,542 |
) |
|
$ |
1,361,039 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
254 |
|
|
|
|
|
|
|
662,507 |
|
|
|
(1,837 |
) |
|
|
660,924 |
|
Distribution and marketing |
|
|
|
|
|
|
1,969 |
|
|
|
634,011 |
|
|
|
(314 |
) |
|
|
635,666 |
|
General and administration |
|
|
1,182 |
|
|
|
68,407 |
|
|
|
49,491 |
|
|
|
|
|
|
|
119,080 |
|
Depreciation and amortization |
|
|
|
|
|
|
2 |
|
|
|
5,498 |
|
|
|
|
|
|
|
5,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,436 |
|
|
|
70,378 |
|
|
|
1,351,507 |
|
|
|
(2,151 |
) |
|
|
1,421,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS) |
|
|
(1,039 |
) |
|
|
(56,066 |
) |
|
|
12,365 |
|
|
|
(15,391 |
) |
|
|
(60,131 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
29,235 |
|
|
|
664 |
|
|
|
|
|
|
|
29,899 |
|
Interest and other income |
|
|
(275 |
) |
|
|
(10,684 |
) |
|
|
(317 |
) |
|
|
|
|
|
|
(11,276 |
) |
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
(2,909 |
) |
|
|
|
|
|
|
(2,909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other
expenses (income) |
|
|
(275 |
) |
|
|
18,551 |
|
|
|
(2,562 |
) |
|
|
|
|
|
|
15,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE EQUITY
INTERESTS AND INCOME
TAXES |
|
|
(764 |
) |
|
|
(74,617 |
) |
|
|
14,927 |
|
|
|
(15,391 |
) |
|
|
(75,845 |
) |
Equity interests income (loss) |
|
|
(87,320 |
) |
|
|
(10,385 |
) |
|
|
(5,896 |
) |
|
|
96,042 |
|
|
|
(7,559 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(88,084 |
) |
|
|
(85,002 |
) |
|
|
9,031 |
|
|
|
80,651 |
|
|
|
(83,404 |
) |
Income tax provision (benefit) |
|
|
(649 |
) |
|
|
422 |
|
|
|
4,258 |
|
|
|
|
|
|
|
4,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(87,435 |
) |
|
$ |
(85,424 |
) |
|
$ |
4,773 |
|
|
$ |
80,651 |
|
|
$ |
(87,435 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2008 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Non-guarantor |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING
ACTIVITIES |
|
$ |
29,821 |
|
|
$ |
124,361 |
|
|
$ |
(66,878 |
) |
|
$ |
1,846 |
|
|
$ |
89,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments auction
rate securities |
|
|
|
|
|
|
(229,262 |
) |
|
|
|
|
|
|
|
|
|
|
(229,262 |
) |
Proceeds from the sale of investments auction rate
securities |
|
|
|
|
|
|
466,641 |
|
|
|
|
|
|
|
|
|
|
|
466,641 |
|
Purchases of investments equity securities |
|
|
|
|
|
|
|
|
|
|
(4,836 |
) |
|
|
|
|
|
|
(4,836 |
) |
Proceeds from the sale of investments equity securities |
|
|
|
|
|
|
16,343 |
|
|
|
7,812 |
|
|
|
|
|
|
|
24,155 |
|
Acquisition of Mandate, net of unrestricted cash acquired |
|
|
|
|
|
|
(45,157 |
) |
|
|
3,952 |
|
|
|
|
|
|
|
(41,205 |
) |
Acquisition of Maple, net of unrestricted cash acquired |
|
|
|
|
|
|
|
|
|
|
1,753 |
|
|
|
|
|
|
|
1,753 |
|
Investment in equity method investees |
|
|
|
|
|
|
(3,099 |
) |
|
|
(3,361 |
) |
|
|
|
|
|
|
(6,460 |
) |
Increase in loan receivables |
|
|
|
|
|
|
(5,895 |
) |
|
|
|
|
|
|
|
|
|
|
(5,895 |
) |
Purchases of property and equipment |
|
|
|
|
|
|
(1,200 |
) |
|
|
(2,408 |
) |
|
|
|
|
|
|
(3,608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) INVESTING
ACTIVITIES |
|
|
|
|
|
|
198,371 |
|
|
|
2,912 |
|
|
|
|
|
|
|
201,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
1,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,251 |
|
Tax withholding requirements on equity awards |
|
|
(5,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,319 |
) |
Repurchases of common shares |
|
|
(22,260 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,260 |
) |
Borrowings under financing arrangements |
|
|
|
|
|
|
|
|
|
|
3,718 |
|
|
|
|
|
|
|
3,718 |
|
Increase in production loans |
|
|
|
|
|
|
|
|
|
|
162,400 |
|
|
|
|
|
|
|
162,400 |
|
Repayment of production loans |
|
|
|
|
|
|
|
|
|
|
(111,357 |
) |
|
|
|
|
|
|
(111,357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES |
|
|
(26,328 |
) |
|
|
|
|
|
|
54,761 |
|
|
|
|
|
|
|
28,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS |
|
|
3,493 |
|
|
|
322,732 |
|
|
|
(9,205 |
) |
|
|
1,846 |
|
|
|
318,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN EXCHANGE EFFECTS ON
CASH |
|
|
(927 |
) |
|
|
(498 |
) |
|
|
4,497 |
|
|
|
(1,846 |
) |
|
|
1,226 |
|
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD |
|
|
1,908 |
|
|
|
28,347 |
|
|
|
21,242 |
|
|
|
|
|
|
|
51,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
END OF PERIOD |
|
$ |
4,474 |
|
|
$ |
350,581 |
|
|
$ |
16,534 |
|
|
$ |
|
|
|
$ |
371,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26. Consolidating Financial Information Senior Secured Second-Priority Notes
In October 2009, the Company issued $236.0 million aggregate principal amount of the Senior
Notes due 2016 in a private offering conducted pursuant to Rule 144A and Regulation S under the
Securities Act of 1933, as amended, through LGEI.
The Company has agreed to make available to the trustee and the holders of the Senior Notes
the following tables which present condensed consolidating financial information as of March 31,
2010 and March 31, 2009, and for years ended March 31, 2010, 2009 and 2008 for (1) the Company, on
a stand-alone basis, (2) LGEI, on a stand-alone basis, (3) the guarantor subsidiaries of the
Company (including the subsidiaries of LGEI), on a combined basis (4) the non-guarantor
subsidiaries of the Company (including the subsidiaries of LGEI), on a combined basis and (5) the
Company, on a consolidated basis.
F-50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
814 |
|
|
$ |
3,059 |
|
|
$ |
8,152 |
|
|
$ |
79,396 |
|
|
$ |
|
|
|
$ |
91,421 |
|
Restricted cash |
|
|
|
|
|
|
4,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,123 |
|
Restricted investments |
|
|
|
|
|
|
6,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,995 |
|
Accounts receivable, net |
|
|
99 |
|
|
|
1,116 |
|
|
|
238,138 |
|
|
|
72,770 |
|
|
|
|
|
|
|
312,123 |
|
Investment in films and television programs, net |
|
|
2 |
|
|
|
6,391 |
|
|
|
567,718 |
|
|
|
107,818 |
|
|
|
(1,282 |
) |
|
|
680,647 |
|
Property and equipment, net |
|
|
|
|
|
|
11,328 |
|
|
|
382 |
|
|
|
21,867 |
|
|
|
|
|
|
|
33,577 |
|
Finite-lived intangible assets, net |
|
|
|
|
|
|
|
|
|
|
1,027 |
|
|
|
70,503 |
|
|
|
|
|
|
|
71,530 |
|
Goodwill |
|
|
10,173 |
|
|
|
15,000 |
|
|
|
183,883 |
|
|
|
182,797 |
|
|
|
|
|
|
|
391,853 |
|
Other assets |
|
|
431 |
|
|
|
44,057 |
|
|
|
64,140 |
|
|
|
3,560 |
|
|
|
|
|
|
|
112,188 |
|
Subsidiary investments and advances |
|
|
73,664 |
|
|
|
(20,885 |
) |
|
|
(76,278 |
) |
|
|
(60,581 |
) |
|
|
84,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85,183 |
|
|
$ |
71,184 |
|
|
$ |
987,162 |
|
|
$ |
478,130 |
|
|
$ |
82,798 |
|
|
$ |
1,704,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders
Equity (Deficiency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
|
|
|
$ |
17,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,000 |
|
Senior secured second-priority notes |
|
|
|
|
|
|
225,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,155 |
|
Accounts payable and accrued liabilities |
|
|
1,018 |
|
|
|
53,706 |
|
|
|
169,893 |
|
|
|
47,275 |
|
|
|
(1,772 |
) |
|
|
270,120 |
|
Participations and residuals |
|
|
186 |
|
|
|
3,760 |
|
|
|
255,794 |
|
|
|
42,947 |
|
|
|
(10 |
) |
|
|
302,677 |
|
Film obligations and production loans |
|
|
79 |
|
|
|
|
|
|
|
334,791 |
|
|
|
34,675 |
|
|
|
|
|
|
|
369,545 |
|
Subordinated notes and other financing obligations |
|
|
|
|
|
|
188,318 |
|
|
|
3,718 |
|
|
|
11,172 |
|
|
|
|
|
|
|
203,208 |
|
Mandatorily redeemable preferred stock units held
by noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,021 |
|
|
|
(98,441 |
) |
|
|
94,580 |
|
Deferred revenue |
|
|
|
|
|
|
247 |
|
|
|
125,323 |
|
|
|
12,823 |
|
|
|
(121 |
) |
|
|
138,272 |
|
Shareholders equity (deficiency) |
|
|
83,900 |
|
|
|
(417,002 |
) |
|
|
97,643 |
|
|
|
136,217 |
|
|
|
183,142 |
|
|
|
83,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85,183 |
|
|
$ |
71,184 |
|
|
$ |
987,162 |
|
|
$ |
478,130 |
|
|
$ |
82,798 |
|
|
$ |
1,704,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2010 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
|
|
|
$ |
32,219 |
|
|
$ |
1,238,659 |
|
|
$ |
356,637 |
|
|
$ |
(43,797 |
) |
|
$ |
1,583,718 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
|
|
|
|
458 |
|
|
|
664,323 |
|
|
|
186,057 |
|
|
|
(43,527 |
) |
|
|
807,311 |
|
Distribution and marketing |
|
|
|
|
|
|
7,475 |
|
|
|
433,878 |
|
|
|
76,840 |
|
|
|
(2,438 |
) |
|
|
515,755 |
|
General and administration |
|
|
7,070 |
|
|
|
72,705 |
|
|
|
42,347 |
|
|
|
58,695 |
|
|
|
(274 |
) |
|
|
180,543 |
|
Depreciation and amortization |
|
|
|
|
|
|
4,832 |
|
|
|
3,645 |
|
|
|
19,587 |
|
|
|
|
|
|
|
28,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
7,070 |
|
|
|
85,470 |
|
|
|
1,144,193 |
|
|
|
341,179 |
|
|
|
(46,239 |
) |
|
|
1,531,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS) |
|
|
(7,070 |
) |
|
|
(53,251 |
) |
|
|
94,466 |
|
|
|
15,458 |
|
|
|
2,442 |
|
|
|
52,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
45,165 |
|
|
|
1,662 |
|
|
|
22,543 |
|
|
|
(11,310 |
) |
|
|
58,060 |
|
Interest and other income |
|
|
(130 |
) |
|
|
(12,050 |
) |
|
|
(605 |
) |
|
|
(98 |
) |
|
|
11,310 |
|
|
|
(1,573 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
(5,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses (income) |
|
|
(130 |
) |
|
|
27,440 |
|
|
|
1,057 |
|
|
|
22,445 |
|
|
|
|
|
|
|
50,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE EQUITY
INTERESTS AND INCOME
TAXES |
|
|
(6,940 |
) |
|
|
(80,691 |
) |
|
|
93,409 |
|
|
|
(6,987 |
) |
|
|
2,442 |
|
|
|
1,233 |
|
Equity interests income (loss) |
|
|
(21,181 |
) |
|
|
49,090 |
|
|
|
(27,155 |
) |
|
|
|
|
|
|
(28,903 |
) |
|
|
(28,149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(28,121 |
) |
|
|
(31,601 |
) |
|
|
66,254 |
|
|
|
(6,987 |
) |
|
|
(26,461 |
) |
|
|
(26,916 |
) |
Income tax provision (benefit) |
|
|
25 |
|
|
|
225 |
|
|
|
(751 |
) |
|
|
1,731 |
|
|
|
|
|
|
|
1,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
|
(28,146 |
) |
|
|
(31,826 |
) |
|
|
67,005 |
|
|
|
(8,718 |
) |
|
|
(26,461 |
) |
|
|
(28,146 |
) |
Add: Net loss attributable to noncontrolling interest |
|
|
8,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO
LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS |
|
$ |
(19,478 |
) |
|
$ |
(31,826 |
) |
|
$ |
67,005 |
|
|
$ |
(8,718 |
) |
|
$ |
(26,461 |
) |
|
$ |
(19,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2010 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING
ACTIVITIES |
|
$ |
(12,543 |
) |
|
$ |
14,072 |
|
|
$ |
(94,998 |
) |
|
$ |
(28,306 |
) |
|
$ |
|
|
|
$ |
(121,775 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of restricted investments |
|
|
|
|
|
|
(13,994 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,994 |
) |
Proceeds from the sale of restricted investments |
|
|
|
|
|
|
13,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,985 |
|
Investment in equity method investees |
|
|
|
|
|
|
|
|
|
|
(47,129 |
) |
|
|
|
|
|
|
|
|
|
|
(47,129 |
) |
Increase in loan receivables |
|
|
|
|
|
|
(362 |
) |
|
|
|
|
|
|
(1,056 |
) |
|
|
|
|
|
|
(1,418 |
) |
Repayment of loans receivable |
|
|
|
|
|
|
|
|
|
|
8,333 |
|
|
|
|
|
|
|
|
|
|
|
8,333 |
|
Purchases of property and equipment |
|
|
|
|
|
|
(1,146 |
) |
|
|
(605 |
) |
|
|
(4,826 |
) |
|
|
|
|
|
|
(6,577 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) INVESTING
ACTIVITIES |
|
|
|
|
|
|
(1,517 |
) |
|
|
(39,401 |
) |
|
|
(5,882 |
) |
|
|
|
|
|
|
(46,800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax withholding requirements on equity awards |
|
|
(2,030 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,030 |
) |
Proceeds from the issuance of mandatorily redeemable
preferred stock units and common stock units
related to the sale of 49% interest in TV
Guide Network |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,355 |
|
|
|
|
|
|
|
122,355 |
|
Borrowings under senior revolving credit facility |
|
|
|
|
|
|
302,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302,000 |
|
Repayments of borrowings under senior revolving credit facility |
|
|
|
|
|
|
(540,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(540,000 |
) |
Borrowings under individual production loans |
|
|
|
|
|
|
|
|
|
|
128,590 |
|
|
|
16,151 |
|
|
|
|
|
|
|
144,741 |
|
Repayment of individual production loans |
|
|
|
|
|
|
|
|
|
|
(87,347 |
) |
|
|
(48,914 |
) |
|
|
|
|
|
|
(136,261 |
) |
Production loan borrowings under Pennsylvania Regional
Center credit facility |
|
|
|
|
|
|
|
|
|
|
63,133 |
|
|
|
|
|
|
|
|
|
|
|
63,133 |
|
Production loan borrowings under film credit facility, net of
deferred financing costs |
|
|
|
|
|
|
|
|
|
|
30,469 |
|
|
|
|
|
|
|
|
|
|
|
30,469 |
|
Production loan repayments under film credit facility |
|
|
|
|
|
|
|
|
|
|
(2,718 |
) |
|
|
|
|
|
|
|
|
|
|
(2,718 |
) |
Proceeds from sale of senior secured second-priority notes,
net of deferred financing costs |
|
|
|
|
|
|
214,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,727 |
|
Repurchase of subordinated notes |
|
|
|
|
|
|
(75,185 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,185 |
) |
Repayment of other financing obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(826 |
) |
|
|
|
|
|
|
(826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES |
|
|
(2,030 |
) |
|
|
(98,458 |
) |
|
|
132,127 |
|
|
|
88,766 |
|
|
|
|
|
|
|
120,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS |
|
|
(14,573 |
) |
|
|
(85,903 |
) |
|
|
(2,272 |
) |
|
|
54,578 |
|
|
|
|
|
|
|
(48,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN EXCHANGE EFFECTS ON
CASH |
|
|
2,134 |
|
|
|
|
|
|
|
|
|
|
|
(1,018 |
) |
|
|
|
|
|
|
1,116 |
|
CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
|
. |
|
|
|
|
|
|
|
|
|
|
|
|
|
BEGINNING OF PERIOD |
|
|
13,253 |
|
|
|
88,962 |
|
|
|
10,424 |
|
|
|
25,836 |
|
|
|
|
|
|
|
138,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
END OF PERIOD |
|
$ |
814 |
|
|
$ |
3,059 |
|
|
$ |
8,152 |
|
|
$ |
79,396 |
|
|
$ |
|
|
|
$ |
91,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2009 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
|
|
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
13,253 |
|
|
$ |
88,962 |
|
|
$ |
10,424 |
|
|
$ |
25,836 |
|
|
$ |
|
|
|
$ |
138,475 |
|
Restricted cash |
|
|
|
|
|
|
10,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,056 |
|
Restricted investments |
|
|
|
|
|
|
6,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,987 |
|
Accounts receivable, net |
|
|
113 |
|
|
|
3,737 |
|
|
|
168,479 |
|
|
|
54,810 |
|
|
|
(129 |
) |
|
|
227,010 |
|
Investment in films and television programs, net |
|
|
2 |
|
|
|
6,761 |
|
|
|
515,278 |
|
|
|
180,909 |
|
|
|
(183 |
) |
|
|
702,767 |
|
Property and equipment, net |
|
|
|
|
|
|
15,014 |
|
|
|
558 |
|
|
|
26,843 |
|
|
|
|
|
|
|
42,415 |
|
Finite-lived intangible assets, net |
|
|
|
|
|
|
|
|
|
|
1,070 |
|
|
|
77,834 |
|
|
|
|
|
|
|
78,904 |
|
Goodwill |
|
|
10,173 |
|
|
|
|
|
|
|
183,883 |
|
|
|
185,346 |
|
|
|
|
|
|
|
379,402 |
|
Other assets |
|
|
|
|
|
|
37,636 |
|
|
|
40,427 |
|
|
|
3,171 |
|
|
|
|
|
|
|
81,234 |
|
Subsidiary investments and advances |
|
|
19,188 |
|
|
|
(1,103 |
) |
|
|
13,718 |
|
|
|
(33,545 |
) |
|
|
1,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,729 |
|
|
$ |
168,050 |
|
|
$ |
933,837 |
|
|
$ |
521,204 |
|
|
$ |
1,430 |
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders
Equity (Deficiency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior revolving credit facility |
|
$ |
|
|
|
$ |
255,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
255,000 |
|
Accounts payable and accrued liabilities |
|
|
821 |
|
|
|
12,289 |
|
|
|
216,725 |
|
|
|
40,301 |
|
|
|
425 |
|
|
|
270,561 |
|
Participations and residuals |
|
|
152 |
|
|
|
472 |
|
|
|
280,070 |
|
|
|
91,118 |
|
|
|
45 |
|
|
|
371,857 |
|
Film obligations and production loans |
|
|
63 |
|
|
|
|
|
|
|
258,597 |
|
|
|
45,993 |
|
|
|
(128 |
) |
|
|
304,525 |
|
Subordinated notes and other financing obligations |
|
|
|
|
|
|
265,805 |
|
|
|
3,718 |
|
|
|
11,998 |
|
|
|
|
|
|
|
281,521 |
|
Deferred revenue |
|
|
|
|
|
|
385 |
|
|
|
110,652 |
|
|
|
31,056 |
|
|
|
|
|
|
|
142,093 |
|
Shareholders equity (deficiency) |
|
|
41,693 |
|
|
|
(365,901 |
) |
|
|
64,075 |
|
|
|
300,738 |
|
|
|
1,088 |
|
|
|
41,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,729 |
|
|
$ |
168,050 |
|
|
$ |
933,837 |
|
|
$ |
521,204 |
|
|
$ |
1,430 |
|
|
$ |
1,667,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2009 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
560 |
|
|
$ |
24,810 |
|
|
$ |
1,291,404 |
|
|
$ |
187,455 |
|
|
$ |
(37,855 |
) |
|
$ |
1,466,374 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
712 |
|
|
|
|
|
|
|
733,948 |
|
|
|
95,863 |
|
|
|
(36,707 |
) |
|
|
793,816 |
|
Distribution and marketing |
|
|
8 |
|
|
|
2,374 |
|
|
|
580,625 |
|
|
|
86,630 |
|
|
|
(80 |
) |
|
|
669,557 |
|
General and administration |
|
|
1,584 |
|
|
|
67,734 |
|
|
|
45,648 |
|
|
|
21,597 |
|
|
|
|
|
|
|
136,563 |
|
Depreciation and amortization |
|
|
|
|
|
|
3,889 |
|
|
|
1,052 |
|
|
|
2,716 |
|
|
|
|
|
|
|
7,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
2,304 |
|
|
|
73,997 |
|
|
|
1,361,273 |
|
|
|
206,806 |
|
|
|
(36,787 |
) |
|
|
1,607,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS |
|
|
(1,744 |
) |
|
|
(49,187 |
) |
|
|
(69,869 |
) |
|
|
(19,351 |
) |
|
|
(1,068 |
) |
|
|
(141,219 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
14 |
|
|
|
32,707 |
|
|
|
1,187 |
|
|
|
961 |
|
|
|
(594 |
) |
|
|
34,275 |
|
Interest and other income |
|
|
(229 |
) |
|
|
(4,022 |
) |
|
|
(1,489 |
) |
|
|
(639 |
) |
|
|
594 |
|
|
|
(5,785 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
(3,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses (income) |
|
|
(215 |
) |
|
|
25,662 |
|
|
|
(302 |
) |
|
|
322 |
|
|
|
|
|
|
|
25,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE EQUITY
INTERESTS AND INCOME
TAXES |
|
|
(1,529 |
) |
|
|
(74,849 |
) |
|
|
(69,567 |
) |
|
|
(19,673 |
) |
|
|
(1,068 |
) |
|
|
(166,686 |
) |
Equity interests income (loss) |
|
|
(176,919 |
) |
|
|
(98,120 |
) |
|
|
(6,151 |
) |
|
|
|
|
|
|
272,146 |
|
|
|
(9,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(178,448 |
) |
|
|
(172,969 |
) |
|
|
(75,718 |
) |
|
|
(19,673 |
) |
|
|
271,078 |
|
|
|
(175,730 |
) |
Income tax provision (benefit) |
|
|
6 |
|
|
|
1,374 |
|
|
|
1,134 |
|
|
|
210 |
|
|
|
|
|
|
|
2,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO
LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS |
|
$ |
(178,454 |
) |
|
$ |
(174,343 |
) |
|
$ |
(76,852 |
) |
|
$ |
(19,883 |
) |
|
$ |
271,078 |
|
|
$ |
(178,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2009 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING
ACTIVITIES |
|
$ |
56,435 |
|
|
$ |
(256,846 |
) |
|
$ |
92,006 |
|
|
$ |
6,499 |
|
|
$ |
|
|
|
$ |
(101,906 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of restricted investments |
|
|
|
|
|
|
(13,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,989 |
) |
Proceeds from the sale of restricted investments |
|
|
|
|
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000 |
|
Acquisition of TV Guide, net of unrestricted cash acquired |
|
|
|
|
|
|
(243,158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(243,158 |
) |
Investment in equity method investees |
|
|
|
|
|
|
|
|
|
|
(18,031 |
) |
|
|
|
|
|
|
|
|
|
|
(18,031 |
) |
Increase in loan receivables |
|
|
|
|
|
|
(3,767 |
) |
|
|
(25,000 |
) |
|
|
|
|
|
|
|
|
|
|
(28,767 |
) |
Purchases of property and equipment |
|
|
|
|
|
|
(7,549 |
) |
|
|
(191 |
) |
|
|
(934 |
) |
|
|
|
|
|
|
(8,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) INVESTING
ACTIVITIES |
|
|
|
|
|
|
(254,463 |
) |
|
|
(43,222 |
) |
|
|
(934 |
) |
|
|
|
|
|
|
(298,619 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
2,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,894 |
|
Tax withholding requirements on equity awards |
|
|
(3,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,734 |
) |
Repurchases of common shares |
|
|
(44,968 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,968 |
) |
Borrowings under senior revolving credit facility |
|
|
|
|
|
|
255,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255,000 |
|
Borrowings under individual production loans |
|
|
|
|
|
|
|
|
|
|
148,583 |
|
|
|
41,275 |
|
|
|
|
|
|
|
189,858 |
|
Repayment of individual production loans |
|
|
|
|
|
|
|
|
|
|
(192,842 |
) |
|
|
(29,192 |
) |
|
|
|
|
|
|
(222,034 |
) |
Repayment of other financing obligations |
|
|
|
|
|
|
(5,310 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
(5,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES |
|
|
(45,808 |
) |
|
|
249,690 |
|
|
|
(44,259 |
) |
|
|
12,016 |
|
|
|
|
|
|
|
171,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS |
|
|
10,627 |
|
|
|
(261,619 |
) |
|
|
4,525 |
|
|
|
17,581 |
|
|
|
|
|
|
|
(228,886 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN EXCHANGE EFFECTS ON
CASH |
|
|
(1,848 |
) |
|
|
|
|
|
|
|
|
|
|
(2,380 |
) |
|
|
|
|
|
|
(4,228 |
) |
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD |
|
|
4,474 |
|
|
|
350,581 |
|
|
|
5,899 |
|
|
|
10,635 |
|
|
|
|
|
|
|
371,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
END OF PERIOD |
|
$ |
13,253 |
|
|
$ |
88,962 |
|
|
$ |
10,424 |
|
|
$ |
25,836 |
|
|
$ |
|
|
|
$ |
138,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2008 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
397 |
|
|
$ |
14,312 |
|
|
$ |
1,202,129 |
|
|
$ |
162,109 |
|
|
$ |
(17,908 |
) |
|
$ |
1,361,039 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating |
|
|
254 |
|
|
|
|
|
|
|
606,345 |
|
|
|
85,961 |
|
|
|
(31,636 |
) |
|
|
660,924 |
|
Distribution and marketing |
|
|
|
|
|
|
1,969 |
|
|
|
563,736 |
|
|
|
70,874 |
|
|
|
(913 |
) |
|
|
635,666 |
|
General and administration |
|
|
1,182 |
|
|
|
68,407 |
|
|
|
38,814 |
|
|
|
10,675 |
|
|
|
2 |
|
|
|
119,080 |
|
Depreciation and amortization |
|
|
|
|
|
|
2 |
|
|
|
5,310 |
|
|
|
318 |
|
|
|
(130 |
) |
|
|
5,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,436 |
|
|
|
70,378 |
|
|
|
1,214,205 |
|
|
|
167,828 |
|
|
|
(32,677 |
) |
|
|
1,421,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS) |
|
|
(1,039 |
) |
|
|
(56,066 |
) |
|
|
(12,076 |
) |
|
|
(5,719 |
) |
|
|
14,769 |
|
|
|
(60,131 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
29,235 |
|
|
|
273 |
|
|
|
1,880 |
|
|
|
(1,489 |
) |
|
|
29,899 |
|
Interest and other income |
|
|
(275 |
) |
|
|
(10,684 |
) |
|
|
(748 |
) |
|
|
(1,022 |
) |
|
|
1,453 |
|
|
|
(11,276 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
(67 |
) |
|
|
(2,842 |
) |
|
|
|
|
|
|
(2,909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses (income) |
|
|
(275 |
) |
|
|
18,551 |
|
|
|
(542 |
) |
|
|
(1,984 |
) |
|
|
(36 |
) |
|
|
15,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE EQUITY
INTERESTS AND INCOME
TAXES |
|
|
(764 |
) |
|
|
(74,617 |
) |
|
|
(11,534 |
) |
|
|
(3,735 |
) |
|
|
14,805 |
|
|
|
(75,845 |
) |
Equity interests income (loss) |
|
|
(87,320 |
) |
|
|
(25,004 |
) |
|
|
(5,418 |
) |
|
|
(159 |
) |
|
|
110,342 |
|
|
|
(7,559 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(88,084 |
) |
|
|
(99,621 |
) |
|
|
(16,952 |
) |
|
|
(3,894 |
) |
|
|
125,147 |
|
|
|
(83,404 |
) |
Income tax provision (benefit) |
|
|
(649 |
) |
|
|
422 |
|
|
|
4,378 |
|
|
|
(120 |
) |
|
|
|
|
|
|
4,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO
LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS |
|
$ |
(87,435 |
) |
|
$ |
(100,043 |
) |
|
$ |
(21,330 |
) |
|
$ |
(3,774 |
) |
|
$ |
125,147 |
|
|
$ |
(87,435 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2008 |
|
|
|
Lions Gate |
|
|
Lions Gate |
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment |
|
|
Entertainment |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Lions Gate |
|
|
|
Corp. |
|
|
Inc. |
|
|
Guarantors |
|
|
Non-guarantors |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
(Amounts in thousands) |
|
STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING
ACTIVITIES |
|
$ |
29,821 |
|
|
$ |
124,361 |
|
|
$ |
(48,555 |
) |
|
$ |
(18,323 |
) |
|
$ |
1,846 |
|
|
$ |
89,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of restricted investments |
|
|
|
|
|
|
(229,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(229,262 |
) |
Proceeds from the sale of restricted investments |
|
|
|
|
|
|
466,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
466,641 |
|
Purchases of investments equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,836 |
) |
|
|
|
|
|
|
(4,836 |
) |
Proceeds from the sale of investments
equity securities |
|
|
|
|
|
|
16,343 |
|
|
|
|
|
|
|
7,812 |
|
|
|
|
|
|
|
24,155 |
|
Acquisition of Mandate, net of
unrestricted cash acquired |
|
|
|
|
|
|
(45,157 |
) |
|
|
1,057 |
|
|
|
2,895 |
|
|
|
|
|
|
|
(41,205 |
) |
Acquisition of Maple Pictures, net of
unrestricted cash acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,753 |
|
|
|
|
|
|
|
1,753 |
|
Investment in equity method investees |
|
|
|
|
|
|
(3,099 |
) |
|
|
(2,604 |
) |
|
|
(757 |
) |
|
|
|
|
|
|
(6,460 |
) |
Increase in loans receivable |
|
|
|
|
|
|
(5,895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,895 |
) |
Purchases of property and equipment |
|
|
|
|
|
|
(1,200 |
) |
|
|
(2,178 |
) |
|
|
(230 |
) |
|
|
|
|
|
|
(3,608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) INVESTING
ACTIVITIES |
|
|
|
|
|
|
198,371 |
|
|
|
(3,725 |
) |
|
|
6,637 |
|
|
|
|
|
|
|
201,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
1,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,251 |
|
Tax withholding requirements on equity awards |
|
|
(5,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,319 |
) |
Repurchases of common shares |
|
|
(22,260 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,260 |
) |
Borrowings under individual production loans |
|
|
|
|
|
|
|
|
|
|
132,861 |
|
|
|
29,539 |
|
|
|
|
|
|
|
162,400 |
|
Repayment of individual production loans |
|
|
|
|
|
|
|
|
|
|
(78,775 |
) |
|
|
(32,582 |
) |
|
|
|
|
|
|
(111,357 |
) |
Borrowings under other financing obligations |
|
|
|
|
|
|
|
|
|
|
3,718 |
|
|
|
|
|
|
|
|
|
|
|
3,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES |
|
|
(26,328 |
) |
|
|
|
|
|
|
57,804 |
|
|
|
(3,043 |
) |
|
|
|
|
|
|
28,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS |
|
|
3,493 |
|
|
|
322,732 |
|
|
|
5,524 |
|
|
|
(14,729 |
) |
|
|
1,846 |
|
|
|
318,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN EXCHANGE EFFECTS ON
CASH |
|
|
(927 |
) |
|
|
(498 |
) |
|
|
|
|
|
|
4,497 |
|
|
|
(1,846 |
) |
|
|
1,226 |
|
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD |
|
|
1,908 |
|
|
|
28,347 |
|
|
|
375 |
|
|
|
20,867 |
|
|
|
|
|
|
|
51,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
END OF PERIOD |
|
$ |
4,474 |
|
|
$ |
350,581 |
|
|
$ |
5,899 |
|
|
$ |
10,635 |
|
|
$ |
|
|
|
$ |
371,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27. Related Party Transactions
Cerulean, LLC Transactions
In December 2003 and April 2005 (as amended in May 2010), the Company entered into
distribution agreements with Cerulean, LLC (Cerulean), a company in which Jon Feltheimer, the
Companys
F-54
Chief Executive Officer and Co-Chairman of the Companys Board of Directors, and Michael
Burns, the Companys Vice Chairman and a director, each hold a 28% interest. Under the agreements,
the Company obtained rights to distribute certain titles in home video and television media and
Cerulean is entitled to receive royalties. During the year ended March 31, 2010, the Company paid
$0.1 million to Cerulean under these agreements (2009 nominal, 2008 nominal).
Icon International Transactions
In January 2007, the Company and Icon entered into a vendor subscription agreement (the
Vendor Agreement) with a term of five years. Under the Vendor Agreement, the Company agreed to
purchase media advertising through Icon and Icon agreed to reimburse the Company for certain
operating expenses as follows: (1) $763,958 during the first year of the term; (2) $786,013 during
the second year of the term; (3) $808,813 during the third year of the term; (4) $832,383 during
the fourth year of the term; and (5) $856,750 during the fifth year of the term (collectively, the
Minimum Annual Payment Amounts) or at the Companys option, the Company could elect that Icon
reimburse the Company for certain operating expenses in the following amounts: (a) $1,145,936
during the first year of the term; (b) $1,179,019 during the second year of the term; (c)
$1,213,219 during the third year of the term; (d) $1,248,575 during the fourth year of the term;
and (e) $1,285,126 during the fifth year of the term (collectively, the Supplemental Annual
Payment Amounts). The Company elected to be reimbursed for the Supplemental Annual Payment Amount
for the first year of the term. In exchange, the Company agreed to purchase media advertising
through Icon of approximately $5.6 million per year (if the Company elects to be reimbursed for the
Minimum Annual Payment Amount) or approximately $8.4 million per year (if the Company elects to be
reimbursed for the Supplemental Annual Payment Amount) for the five-year term. The actual amount of
media advertising to be purchased is determined using a formula based upon values assigned to
various types of advertising, as set forth in the Vendor Agreement. For accounting purposes, the
operating expenses incurred by the Company will continue to be expensed in full and the
reimbursements from Icon of such expenses will be treated as a discount on media advertising and
will be reflected as a reduction of advertising expense as the media advertising costs are incurred
by the Company. The Vendor Agreement may be terminated by the Company effective as of any Vendor
Agreement year end with six months notice. During the year ended March 31, 2010, Icon paid $1.2
million to the Company under the Vendor Agreement (2009 $1.2 million, 2008 $1.4 million).
During the year ended March 31, 2010, the Company incurred $7.2 million in media advertising
expenses with Icon under the Vendor Agreement (2009 $10.9 million, 2008 $8.8 million).
Other Transactions
The Company recognized $2.7 million in revenue pursuant to the library and output agreement
with Maple Pictures during the period from April 1, 2007 to July 17, 2007, the period in which
Maple Pictures was an equity method investment (see Note 7).
During the year ended March 31, 2010, the Company recognized $2.2 million in revenue pursuant
to the five-year license agreement with Horror Entertainment, LLC (2009 $2.9 million, 2008 $1.8
million).
During the year ended March 31, 2010, the Company recognized less than $0.1 million in
distribution and marketing expenses paid to Roadside Attractions, LLC in connection with the
release of certain theatrical titles (2009 $4.7 million, 2008 $3.9 million). During the year
ended March 31, 2010, the Company made $3.1 million in participation payments to Roadside
Attractions, LLC in connection with the distribution of certain theatrical titles (2009 $0.3
million, 2008 nil).
During the year ended March 31, 2010, the Company recognized $0.6 million in interest income
associated with a $7.9 million note receivable from Break.com, see Note 7 (2009 $0.6 million,
2008 $0.2 million).
During the year ended March 31, 2010, the Company recognized $38.6 million of revenue from
EPIX in connection with certain theatrical releases (2009 nil, 2008 nil). As of March 31, 2010,
the Company held $11.8 million of accounts receivables from EPIX (2009 nil, 2008 nil).
F-55