LIONS GATE ENTERTAINMENT CORP /CN/ - FORM 10-Q

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

Form 10-Q

___________________________________________________________

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015



¨	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)

___________________________________________________________



British Columbia, Canada		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

250 Howe Street, 20th Floor

Vancouver, British Columbia V6C 3R8

and

2700 Colorado Avenue, Suite 200

Santa Monica, California 90404

(Address of principal executive offices)

___________________________________________________________

(877) 848-3866

(Registrant’s telephone number, including area code)

___________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 ý No ¨

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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.



Title of Each Class		Outstanding at August 3, 2015
Common Shares, no par value per share		148,303,421 shares

Table of Contents




Item	Page
PART I — FINANCIAL INFORMATION

1. Financial Statements	4
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
3. Quantitative and Qualitative Disclosures About Market Risk	56
4. Controls and Procedures	59

PART II — OTHER INFORMATION

1. Legal Proceedings	60
1A. Risk Factors	60
2. Unregistered Sales of Equity Securities and Use of Proceeds	62
3. Defaults Upon Senior Securities	62
4. Mine Safety Disclosures	62
5. Other Information	62
6. Exhibits	63

Table of Contents

FORWARD-LOOKING STATEMENTS

This report includes statements that are, or may be 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 “believes,” “estimates,” “potential,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “may,” “will,” “could,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on May 21, 2015, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. "Risk Factors" herein. These risk factors should not be construed as exhaustive and should be read with the other cautionary statements and information in our Annual Report on Form 10-K, and this report.

We caution you that forward-looking statements made in this report or anywhere else are not guarantees of future performance and that 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 those made in or suggested by the forward-looking statements contained in this report 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 and television series, budget overruns, limitations imposed by our credit facilities and notes, unpredictability of the commercial success of our motion pictures and television programming, risks related to acquisition and integration of acquired businesses, the effects of dispositions of businesses or assets, including individual films or libraries, the cost of defending our intellectual property, difficulties in integrating acquired businesses, technological changes and other trends affecting the entertainment industry, and the other risks and uncertainties discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 21, 2015, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. "Risk Factors" herein. 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.

Any forward-looking statements, which we make in this report, speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

This Quarterly Report on Form 10-Q may contain references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.

Unless otherwise indicated or the context requires, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” refer to Lions Gate Entertainment Corp., a corporation organized under the laws of the province of British Columbia, Canada, and its direct and indirect subsidiaries.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



	June 30, 2015		March 31, 2015
	(Amounts in thousands, except share amounts)
ASSETS
Cash and cash equivalents	$	196,550	$	102,697
Restricted cash	2,508		2,508
Accounts receivable, net of reserves for returns and allowances of $49,508 (March 31, 2015 - $64,362) and provision for doubtful accounts of $4,175 (March 31, 2015 - $4,120)	761,216		891,880
Investment in films and television programs, net	1,539,828		1,381,829
Property and equipment, net	28,354		26,651
Investments	499,009		438,298
Goodwill	323,328		323,328
Other assets	75,278		74,784
Deferred tax assets	43,716		50,114
Total assets	$	3,469,787	$	3,292,089
LIABILITIES
Senior revolving credit facility	$	—	$	—
5.25% Senior Notes	225,000		225,000
Term Loan	400,000		375,000
Accounts payable and accrued liabilities	220,314		332,473
Participations and residuals	501,760		471,661
Film obligations and production loans	776,411		656,755
Convertible senior subordinated notes	98,463		114,126
Deferred revenue	291,812		274,787
Total liabilities	2,513,760		2,449,802
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Common shares, no par value, 500,000,000 shares authorized, 148,261,908 shares issued (March 31, 2015 - 145,532,978 shares)	868,487		830,786
Retained earnings	44,028		13,720
Accumulated other comprehensive income (loss)	43,512		(2,219		)
Total shareholders’ equity	956,027		842,287
Total liabilities and shareholders’ equity	$	3,469,787	$	3,292,089

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands, except per share amounts)
Revenues	$	408,941		$	449,383
Expenses:
Direct operating	230,310			238,873
Distribution and marketing	71,924			97,321
General and administration	60,712			64,079
Depreciation and amortization	1,830			1,346
Total expenses	364,776			401,619
Operating income	44,165			47,764
Other expenses (income):
Interest expense
Cash interest	10,371			9,442
Amortization of debt discount and deferred financing costs	2,254			3,530
Total interest expense	12,625			12,972
Interest and other income	(600		)	(1,018		)
Total other expenses, net	12,025			11,954
Income before equity interests and income taxes	32,140			35,810
Equity interests income	11,388			18,210
Income before income taxes	43,528			54,020
Income tax provision	2,844			10,759
Net income	$	40,684		$	43,261

Basic net income per common share	$	0.28		$	0.31
Diluted net income per common share	$	0.26		$	0.30

Weighted average number of common shares outstanding:
Basic	147,619			138,509
Diluted	157,498			152,210

Dividends declared per common share	$	0.07		$	0.05

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands)
Net income	$	40,684	$	43,261
Foreign currency translation adjustments, net of tax	3,490		1,482
Net unrealized gain on available-for-sale securities, net of $6,311 tax	42,234		—
Net unrealized gain (loss) on foreign exchange contracts, net of tax	7		(811		)
Comprehensive income	$	86,415	$	43,932

See accompanying notes.

LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY



	Common Shares			Retained Earnings			Accumulated Other Comprehensive Income (Loss)
	Number	Amount		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	(Amounts in thousands, except share amounts)
Balance at March 31, 2015	145,532,978	$	830,786	$	13,720		$	(2,219	)	$	842,287
Exercise of stock options	188,825	3,197		—			—			3,197
Share-based compensation, net of withholding tax obligations of $15,489	551,164	18,109		—			—			18,109
Conversion of April 2009 3.625% Notes	1,983,058	16,162		—			—			16,162
Issuance of common shares to directors for services	5,883	188		—			—			188
Dividends declared	—	—		(10,376		)	—			(10,376		)
Excess tax benefits on equity-based compensation awards	—	45		—			—			45
Net income	—	—		40,684			—			40,684
Foreign currency translation adjustments, net of tax	—	—		—			3,490			3,490
Net unrealized gain on available-for-sale securities, net of tax	—	—		—			42,234			42,234
Net unrealized gain on foreign exchange contracts, net of tax	—	—		—			7			7
Balance at June 30, 2015	148,261,908	$	868,487	$	44,028		$	43,512		$	956,027

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands)
Operating Activities:
Net income	$	40,684		$	43,261
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	1,830			1,346
Amortization of films and television programs	160,419			158,808
Amortization of debt discount and deferred financing costs	2,254			3,530
Non-cash share-based compensation	16,591			16,537
Distribution from equity method investee	—			6,230
Equity interests income	(11,388		)	(18,210		)
Deferred income taxes	791			5,105
Changes in operating assets and liabilities:
Restricted cash	—			1,391
Accounts receivable, net	134,173			169,514
Investment in films and television programs	(315,861		)	(263,851		)
Other assets	(2,514		)	382
Accounts payable and accrued liabilities	(95,336		)	(95,666		)
Participations and residuals	29,916			(1,539		)
Film obligations	(9,218		)	(34,589		)
Deferred revenue	16,776			(4,883		)
Net Cash Flows Used In Operating Activities	(30,883		)	(12,634		)
Investing Activities:
Proceeds from the sale of equity method investees	—			14,575
Investment in equity method investees	(800		)	(9,650		)
Purchases of property and equipment	(3,248		)	(1,427		)
Net Cash Flows Provided By (Used In) Investing Activities	(4,048		)	3,498
Financing Activities:
Senior revolving credit facility - borrowings	—			170,000
Senior revolving credit facility - repayments	—			(183,619		)
Term Loan - borrowings, net of deferred financing costs of $616	24,384			—
Convertible senior subordinated notes - repurchases	(5		)	(16		)
Production loans - borrowings	203,087			207,953
Production loans - repayments	(74,276		)	(36,859		)
Repurchase of common shares	—			(109,529		)
Dividends paid	(10,187		)	(7,066		)
Excess tax benefits on equity-based compensation awards	45			2,771
Exercise of stock options	3,118			406
Tax withholding required on equity awards	(16,082		)	(10,247		)
Net Cash Flows Provided By Financing Activities	130,084			33,794
Net Change In Cash And Cash Equivalents	95,153			24,658
Foreign Exchange Effects on Cash	(1,300		)	22
Cash and Cash Equivalents - Beginning Of Period	102,697			25,692
Cash and Cash Equivalents - End Of Period	$	196,550		$	50,372

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Nature of Operations

Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, channel platforms and international distribution and sales.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Lionsgate and all of its majority-owned and controlled subsidiaries.

The unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to quarterly report on Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the three months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2016. The balance sheet at March 31, 2015 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2015.

Certain amounts presented in prior years have been reclassified to conform to the current year’s presentation.

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 and provisions for doubtful accounts; fair value of equity-based compensation; 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, equity investments, goodwill and intangible assets. Actual results could differ from such estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standard update relating to the recognition of revenue from contracts with customers, which will supersede most current U.S. GAAP revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. In July 2015, the FASB voted to defer the effective date to annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods), with early adoption permitted to the original effective date of December 15, 2016. As a result, the guidance will be effective for the Company's fiscal year beginning April 1, 2018, and can be applied either retrospectively or under a cumulative-effect transition method. The Company is currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial statements.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for the Company's fiscal year beginning April 1, 2016, with early adoption permitted. The Company plans to adopt the new guidance effective April 1, 2016. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

2. Investment in Films and Television Programs



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Motion Pictures Segment - Theatrical and Non-Theatrical Films
Released, net of accumulated amortization	$	492,178	$	507,628
Acquired libraries, net of accumulated amortization	7,609		9,357
Completed and not released	37,523		76,968
In progress	677,964		478,879
In development	25,597		21,054
Product inventory	24,127		23,023
	1,264,998		1,116,909
Television Production Segment - Direct-to-Television Programs
Released, net of accumulated amortization	201,403		231,470
In progress	68,256		28,585
In development	5,171		4,865
	274,830		264,920
	$	1,539,828	$	1,381,829

The following table sets forth acquired libraries that represent titles released three years prior to the date of acquisition. These libraries are being amortized over their expected revenue stream from the acquisition date over a period up to 20 years:



		Total Amortization Period	Remaining Amortization Period	Unamortized Costs
Acquired Library	Acquisition Date	Total Amortization Period	Remaining Amortization Period	June 30, 2015		March 31, 2015
		(In years)		(Amounts in thousands)
Artisan Entertainment	December 2003	20.00	8.50	$	3,738	$	5,122
Summit Entertainment	January 2012	20.00	16.50	3,871		4,235
Total acquired libraries				$	7,609	$	9,357

The Company expects approximately 46% of completed films and television programs, net of accumulated amortization, will be amortized during the one-year period ending June 30, 2016. Additionally, the Company expects approximately 81% 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 June 30, 2018.

3. Investments

The carrying amounts of investments, by category, at June 30, 2015 and March 31, 2015 were as follows:



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Equity method investments	$	246,391	$	234,202
Available-for-sale securities	210,570		162,024
Cost method investments	42,048		42,072
	$	499,009	$	438,298

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equity Method Investments:

The carrying amounts of equity method investments at June 30, 2015 and March 31, 2015 were as follows:



	June 30, 2015
Equity Method Investee	Ownership Percentage	June 30, 2015		March 31, 2015
		(Amounts in thousands)
EPIX	31.2%	$	132,760	$	119,688
Pop	50.0%	92,116		91,683
Other Equity Method Investments⁽¹⁾	Various	21,515		22,831
		$	246,391	$	234,202

Equity interests in equity method investments for the three months ended June 30, 2015 and 2014 were as follows (income (loss)):



	Three Months Ended
	June 30,
Equity Method Investee	2015			2014
	(Amounts in thousands)
EPIX	$	13,072		$	8,508
Pop	(367		)	(2,225		)
Other Equity Method Investments⁽¹⁾	(1,317		)	11,927
	$	11,388		$	18,210

_________________________

(1)The Company records its share of the net income or loss of Other Equity Method Investments on a one quarter lag. Equity interest income from Other Equity Method Investments of $11.9 million for the three months ended June 30, 2014 includes a gain on sale of the Company's investment in FEARnet of $11.4 million.

EPIX. In April 2008, the Company formed a joint venture with Viacom, its Paramount Pictures unit and Metro-Goldwyn-Mayer Studios to create a premium television channel and subscription video-on-demand service named “EPIX”. The Company invested $80.4 million through September 30, 2010, and no additional amounts have been funded since. During the three months ended June 30, 2014, the Company received distributions from EPIX of $6.2 million. No distributions were made during the three months ended June 30, 2015. Since the Company's original investment in April 2008, the Company has received distributions from EPIX of $28.0 million.

EPIX Financial Information:

The following table presents summarized balance sheet data as of June 30, 2015 and March 31, 2015 for EPIX:



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Current assets	$	293,314	$	285,819
Non-current assets	$	305,594	$	277,888
Current liabilities	$	95,394	$	121,451
Non-current liabilities	$	25,940	$	6,753

The following table presents the summarized statement of operations for the three months ended June 30, 2015 and 2014 for EPIX and a reconciliation of the net income reported by EPIX to equity interest income recorded by the Company:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands)
Revenues	$	111,351		$	91,449
Expenses:
Operating expenses	62,937			57,506
Selling, general and administrative expenses	5,789			5,755
Operating income	42,625			28,188
Interest and other expense	(509		)	(394		)
Net income	$	42,116		$	27,794
Reconciliation of net income reported by EPIX to equity interest income:
Net income reported by EPIX	$	42,116		$	27,794
Ownership interest in EPIX	31.15		%	31.15		%
The Company's share of net income	13,119			8,658
Eliminations of the Company’s share of profits on licensing sales to EPIX⁽¹⁾	(2,795		)	(1,867		)
Realization of the Company’s share of profits on licensing sales to EPIX⁽²⁾	2,748			1,717
Total equity interest income recorded	$	13,072		$	8,508

__________________


(1)	Represents the elimination of the gross profit recognized by the Company on licensing sales to EPIX in proportion to the Company's ownership interest in EPIX.


(2)	Represents the realization of a portion of the profits previously eliminated. This profit remains eliminated until realized by EPIX. EPIX initially records the license fee for the title as inventory on its balance sheet and amortizes the inventory over the license period. Accordingly, the profit is realized as the inventory on EPIX's books is amortized.

Pop. The Company’s investment interest in Pop consists of an equity investment in its common stock units and mandatorily redeemable preferred stock units. The Company's partner in Pop, CBS TVG Inc. ("CBS"), has a call option to purchase a portion of the Company's ownership interest in Pop at fair market value, which would result in CBS owning 80% of Pop, exercisable beginning March 26, 2018 for a period of 30 days. During the three months ended June 30, 2015, the Company made contributions to Pop of $0.8 million (2014 - $7.5 million).

The mandatorily redeemable preferred stock units carry a dividend rate of 10% compounded annually and are mandatorily redeemable in May 2019 at the stated value plus the dividend return and any additional capital contributions less previous distributions. The mandatorily redeemable preferred stock units were initially recorded based on their estimated fair value, as determined using an option pricing model. The mandatorily redeemable preferred stock units and the 10% dividend are being accreted up to their redemption amount over the ten-year period to the redemption date, which is recorded as income within equity interest.

Pop Financial Information:

The following table presents summarized balance sheet data as of June 30, 2015 and March 31, 2015 for Pop:



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Current assets	$	32,104	$	32,815
Non-current assets	$	186,027	$	187,985
Current liabilities	$	24,654	$	26,048
Non-current liabilities	$	5,078	$	7,196
Redeemable preferred stock	$	414,485	$	399,247

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the summarized statement of operations for the three months ended June 30, 2015 and 2014 for Pop and a reconciliation of the net loss reported by Pop to equity interest loss recorded by the Company:



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands)
Revenues	$	20,554		$	18,828
Expenses:
Cost of services	9,365			8,490
Selling, marketing, and general and administration	9,892			12,471
Depreciation and amortization	1,944			1,997
Operating loss	(647		)	(4,130		)
Other expense	—			110
Interest expense, net	111			210
Accretion of redeemable preferred stock units⁽¹⁾	13,638			10,932
Total interest expense, net	13,749			11,252
Net loss	$	(14,396	)	$	(15,382	)
Reconciliation of net loss reported by Pop to equity interest loss:
Net loss reported by Pop	$	(14,396	)	$	(15,382	)
Ownership interest in Pop	50		%	50		%
The Company's share of net loss	(7,198		)	(7,691		)
Accretion of dividend and interest income on redeemable preferred stock units⁽¹⁾	6,819			5,466
Elimination of the Company's share of profits on licensing sales to Pop	(133		)	—
Realization of the Company’s share of profits on licensing sales to Pop	145			—
Total equity interest loss recorded	$	(367	)	$	(2,225	)

___________________

(1)

Accretion of mandatorily redeemable preferred stock units represents Pop's 10% dividend and the amortization of discount on its mandatorily redeemable preferred stock units held by the Company and the other interest holder. The Company recorded its share of this expense as income from the accretion of dividend and discount on mandatorily redeemable preferred stock units within equity interest loss.

Other Equity Method Investments

Defy Media. In June 2007, the Company acquired an interest in Break Media, a multi-platform digital media company and a leader in male-targeted content creation and distribution. In October 2013, Break Media merged with Alloy Digital, a multi-platform digital media company with a strong presence in the youth market, to create Defy Media. The Company's effective economic interest in Defy Media through its investment in Break Media and its direct investment in Defy Media is approximately 16.0%. The Company is accounting for its investment in Defy Media, a limited liability company, under the equity method of accounting due to the Company's board representation that provides significant influence over the investee.

Roadside Attractions. Roadside Attractions is an independent theatrical distribution company. The Company owns a 43.0% interest in Roadside Attractions.

Pantelion Films. Pantelion Films is a joint venture with Videocine, an affiliate of Televisa, which produces, acquires and distributes a slate of English and Spanish language feature films that target Hispanic moviegoers in the U.S. The Company owns a 49.0% interest in Pantelion Films.

Atom Tickets (formerly MovieFriends). Atom Tickets is a theatrical movie discovery service. The Company made initial investments totaling $4.3 million in Atom Tickets during the year ended March 31, 2015. The Company owns an interest of approximately 18.1% in Atom Tickets. The Company is accounting for its investment in Atom Tickets, a limited liability company, under the equity method of accounting due to the Company's board representation that provides significant influence over the investee.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Tribeca Short List. Tribeca Short List is a subscription video-on-demand (SVOD) service. The Company made an initial investment of $2.1 million during the year ended March 31, 2015. The Company holds a 75.0% economic interest, however, the power to direct the activities that most significantly impact the economic performance of Tribeca Short List is shared equally with Tribeca Enterprises. Accordingly, the Company's interest in Tribeca Short List is being accounted for under the equity method of accounting.

Available-for-Sale Securities:

The cost basis, unrealized gains and fair market value of available-for-sale securities are set forth below:



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Cost basis	$	158,916	$	158,916
Gross unrealized gain	51,654		3,108
Fair value	$	210,570	$	162,024

Starz. At June 30, 2015 and March 31, 2015, available-for-sale securities consisted of the Company's minority interest in Starz. On March 27, 2015, pursuant to the terms of a stock exchange agreement entered into on February 10, 2015 (the "Exchange Agreement"), the Company exchanged 4,967,695 of its newly issued common shares for 2,118,038 shares of Series A common stock of Starz and 2,590,597 shares of Series B common stock of Starz held by certain affiliates of John C. Malone ("Dr. Malone") (the exchange transaction, the "Exchange" ). The Exchange Agreement placed certain restrictions on the ability to transfer the shares issued by the Company. The Starz shares acquired by the Company represent approximately 14.7% of the total voting power of the issued and outstanding Starz common stock as of June 30, 2015. However, under the Exchange Agreement, the Company granted an irrevocable proxy to Dr. Malone and the affiliates of Dr. Malone to vote the shares the Company acquired except with respect to proposals related to extraordinary transactions, including any proposals related to any sale or issuance of securities, or any business combination, merger, consolidation, liquidation, reorganization, recapitalization, sale or disposition of all or substantially all of Starz's assets or similar extraordinary transaction, whether or not involving the Company.

The Company classifies the Series A common stock of Starz within Level 1 of the fair value hierarchy as the valuation inputs are based on quoted prices in active markets (see Note 8). The Series B common stock of Starz are considered a Level 2 security because the quoted market prices are based on infrequent transactions. Therefore, the fair value of the Series B common stock, which is convertible, at the holder’s option, into Series A common stock of Starz is based on the quoted market price of the Series A common stock, which is an equivalent security other than for the voting rights.

Cost Method Investments:

Telltale. Telltale Games ("Telltale") is a creator, developer and publisher of interactive software episodic games based upon popular stories and characters across all major gaming and entertainment platforms. In February 2015, the Company invested $40.0 million in Telltale, which consisted of a cash investment in Telltale of $28.0 million in exchange for 2,628,072 of Series D Convertible Preferred Stock, and 361,229 newly issued common shares of the Company with a fair value of approximately $12.0 million in exchange for approximately 1,126,316 existing common shares of Telltale, representing in the aggregate an approximately 14% economic interest in Telltale.

Next Games. Next Games is a mobile games development company headquartered in Helsinki, Finland, with a focus on crafting visually impressive, highly engaging games. In July 2014, the Company invested $2.0 million in Next Games for a small minority ownership interest.

4. Other Assets

The composition of the Company’s other assets is as follows as of June 30, 2015 and March 31, 2015:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Deferred financing costs, net of accumulated amortization	$	26,936	$	28,060
Prepaid expenses and other	47,228		45,537
Finite-lived intangible assets	1,114		1,187
	$	75,278	$	74,784

Deferred Financing Costs. Deferred financing costs primarily include costs incurred in connection with the Company's various debt issuances (see Note 5).

Prepaid Expenses and Other. Prepaid expenses and other primarily include prepaid expenses, security deposits, and other assets.

Finite-lived Intangible Assets. Finite-lived intangibles consist primarily of sales agency relationships and trademarks.

5. Corporate Debt

The total carrying values of corporate debt of the Company, excluding film obligations and production loans, were as follows as of June 30, 2015 and March 31, 2015:



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Senior revolving credit facility	$	—	$	—
5.25% Senior Notes	225,000		225,000
Term Loan Due 2022	400,000		375,000
Convertible senior subordinated notes, net of unamortized discount of $3,387 (March 31, 2015 - $3,891)	98,463		114,126
	$	723,463	$	714,126

The following table sets forth future annual contractual principal payment commitments of corporate debt as of June 30, 2015:



	Conversion Price Per Share at June 30, 2015	Maturity Date	Year Ended March 31,
Debt Type	Conversion Price Per Share at June 30, 2015	Maturity Date	2016		2017		2018		2019		2020		Thereafter		Total
			(Amounts in thousands)
Senior revolving credit facility	N/A	September 2017	$	—	$	—	$	—	$	—	$	—	$	—	$	—
5.25% Senior Notes	N/A	August 2018	—		—		—		225,000		—		—		225,000
Term Loan Due 2022	N/A	March 2022	—		—		—		—		—		400,000		400,000
Principal amounts of convertible senior subordinated notes:
January 2012 4.00% Notes	$10.36	January 2017	—		41,850		—		—		—		—		41,850
April 2013 1.25% Notes	$29.59	April 2018	—		—		—		60,000		—		—		60,000
			$	—	$	41,850	$	—	$	285,000	$	—	$	400,000	726,850
Less aggregate unamortized discount															(3,387		)
															$	723,463

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Senior Revolving Credit Facility

Availability of Funds. The senior revolving credit facility provides for borrowings and letters of credit up to an aggregate of $800 million, and at June 30, 2015 there was $800.0 million available (March 31, 2015 — $800.0 million). The availability of funds is limited by a borrowing base and also reduced by outstanding letters of credit which amounted to nil at June 30, 2015 (March 31, 2015 — nil).

Maturity Date. September 27, 2017.

Interest. Interest is payable at an alternative base rate, as defined, plus 1.5%, or LIBOR plus 2.5% as designated by the Company.

Commitment Fee. The Company is required to pay a quarterly commitment fee of 0.375% to 0.5% per annum, depending on the average balance of borrowings outstanding during the period, on the total senior revolving credit facility of $800 million less the amount drawn.

Security. Obligations 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 Company’s subsidiaries.

Covenants. The senior revolving credit facility contains a number of 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, make certain investments and acquisitions, repurchase its stock, 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. As of June 30, 2015, the Company was in compliance with all applicable covenants.

Change in Control. The Company may also be subject to an event of default upon a change in control (as defined in the credit agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50% of the Company’s common shares.

5.25% Senior Notes

Issuance Date. On July 19, 2013, Lions Gate Entertainment Corp. issued $225.0 million aggregate principal amount of 5.25% Senior Secured Second-Priority Notes (the "5.25% Senior Notes").

Interest. Interest is payable semi-annually on February 1 and August 1 of each year at a rate of 5.25% per year, and commenced on February 1, 2014.

Maturity Date. August 1, 2018.

Covenants. The 5.25% Senior Notes contain certain restrictions and covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations. As of June 30, 2015, the Company was in compliance with all applicable covenants.

Term Loan Due 2022

Issuance Date. On March 17, 2015, Lions Gate Entertainment Corp. entered into a second lien credit and guarantee agreement (the "Credit Agreement"), and pursuant to the Credit Agreement, borrowed a term loan in an aggregate amount of $375 million (the "Term Loan Due 2022"). In May 2015, Lions Gate Entertainment Corp. amended the Credit Agreement governing its Term Loan Due 2022, and pursuant to the amended Credit Agreement, borrowed an additional term loan in an aggregate amount of $25.0 million. Contemporaneously with the issuance of the Term Loan Due 2022 (which carries a fixed interest rate of 5.00%), the Company used a portion of the proceeds to redeem its $225.0 million principal amount term loan (the "Term Loan Due 2020") (which carried a variable interest rate of LIBOR, subject to a 1.00% floor, plus 4.00%).

Interest. Interest on the Term Loan Due 2022 is payable on the last business day of each April, July, October and January at a rate of 5.00% per year.

Maturity Date. The Term Loan Due 2022 matures on March 17, 2022.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Covenants. Substantially similar to the 5.25% Senior Notes discussed above. As of June 30, 2015, the Company was in compliance with all applicable covenants.

Convertible Senior Subordinated Notes

Outstanding Amount and Terms. The following table sets forth the convertible senior subordinated notes outstanding and certain key terms of these notes at June 30, 2015 and March 31, 2015:



	Maturity Date	Conversion Price Per Share at June 30, 2015	June 30, 2015							March 31, 2015
Convertible Senior Subordinated Notes	Maturity Date	Conversion Price Per Share at June 30, 2015	Principal		Unamortized Discount			Net Carrying Amount		Principal		Unamortized Discount			Net Carrying Amount
			(Amounts in thousands)
April 2009 3.625% Notes	N/A	N/A	$	—	$	—		$	—	$	16,167	$	—		$	16,167
January 2012 4.00% Notes	January 11, 2017	$10.36	41,850		(3,387		)	38,463		41,850		(3,891		)	37,959
April 2013 1.25% Notes	April 15, 2018	$29.59	60,000		—			60,000		60,000		—			60,000
			$	101,850	$	(3,387	)	$	98,463	$	118,017	$	(3,891	)	$	114,126

April 2009 3.625% Notes: On March 17, 2015, the April 2009 3.625% Notes were called for redemption and in April 2015, the holders of the notes converted substantially all of the outstanding principal amounts into common shares.

January 2012 4.00% Notes: In January 2012, LGEI issued approximately $45.0 million of January 2012 4.00% Notes, of which $10.1 million was allocated to the equity component. Interest is payable semi-annually on January 15 and July 15 of each year.

April 2013 1.25% Notes: In April 2013, LGEI issued approximately $60.0 million in aggregate principal amount of April 2013 1.25% Notes. Interest is payable semi-annually on April 15 and October 15 of each year, and commenced on October 15, 2013.

Conversion Features: The convertible senior subordinated notes are convertible, at any time, into the number of common shares of the Company determined by the principal amount being converted divided by the conversion price, subject to adjustment in certain circumstances.

The January 2012 4.00% Notes provide that upon conversion, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company. Accounting guidance require that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are recorded by separately accounting for the liability and equity component (i.e., conversion feature), thereby reducing the principal amount with a debt discount that is amortized as interest expense over the expected life of the note using the effective interest method. The effective interest rate on the liability component of the January 2012 4.00% Notes is 9.56%.

The April 2013 1.25% Notes are convertible only into the Company's common shares and do not carry an option to be settled in cash upon conversion, and accordingly, have been recorded at their principal amount (not reduced by a debt discount for the equity component).

Conversions. The following conversions were completed with respect to the Company's convertible senior subordinated notes in the three months ended June 30, 2015 and 2014:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands, except share amounts)
April 2009 3.625% Notes
Principal amount converted	$	16,162	$	10
Common shares issued upon conversion	1,983,058		1,212
Weighted average conversion price per share	$	8.15	$	8.25
October 2004 2.9375% Notes
Principal amount converted	$	—	$	99
Common shares issued upon conversion	—		8,634
Weighted average conversion price per share	$	—	$	11.46
Total
Principal amount converted	$	16,162	$	109
Common shares issued upon conversion	1,983,058		9,846
Weighted average conversion price per share	$	8.15	$	11.07

Interest Expense. Interest expense recognized for the convertible senior subordinated notes for the three months ended June 30, 2015 and 2014 is presented below:



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands)
Interest Expense
Contractual interest coupon	$	549	$	973
Amortization of discount on liability component and debt issuance costs	517		1,619
	$	1,066	$	2,592

6. Participations and Residuals

The Company expects approximately 67% of accrued participations and residuals will be paid during the one-year period ending June 30, 2016.

Theatrical Slate Participation

On March 10, 2015, the Company entered into a theatrical slate participation arrangement with TIK Films (U.S.), Inc. and TIK Films (Hong Kong) Limited (collectively, "TIK Films"), both wholly owned subsidiaries of Hunan TV & Broadcast Intermediary Co. Ltd. Under the arrangement, TIK Films, in general and subject to certain limitations including per picture and annual caps, will contribute a minority share of 25%, of the Company’s production or acquisition costs of “qualifying” theatrical feature films, released during the three-year period ending January 23, 2018, and participate 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 arrangement excludes among others, any theatrical feature film incorporating any elements from the Twilight, Hunger Games or Divergent franchises. The percentage of the contribution could vary on certain pictures.

Amounts provided from TIK Films are reflected as a participation liability in the Company's consolidated balance sheet and amounted to $24.9 million at June 30, 2015 (March 31, 2015 - $13.6 million). The difference between the ultimate participation expected to be paid to TIK Films and the amount provided by TIK Films is amortized as a charge to or a reduction of participation expense under the individual-film-forecast method.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Film Obligations and Production Loans



	June 30, 2015		March 31, 2015
	(Amounts in thousands)
Film obligations	$	46,656	$	55,811
Production loans	729,755		600,944
Total film obligations and production loans	$	776,411	$	656,755

The following table sets forth future annual repayment of film obligations and production loans as of June 30, 2015:



	Nine Months Ended
	March 31,		Year Ended March 31,
	2016		2017		2018		2019		2020		Thereafter		Total
	(Amounts in thousands)
Film obligations	$	40,911	$	2,964	$	2,000	$	1,000	$	—	$	—	$	46,875
Production loans	250,646		479,109		—		—		—		—		729,755
	$	291,557	$	482,073	$	2,000	$	1,000	$	—	$	—	776,630
Less imputed interest on film obligations													(219		)
													$	776,411

Film Obligations

Film obligations include minimum guarantees, which represent amounts payable for film rights that the Company has acquired and certain theatrical marketing obligations for amounts received from third parties that are contractually committed for theatrical marketing expenditures associated with specific titles.

Production Loans

Production loans represent individual loans for the production of film and television programs that the Company produces. The majority of 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, and incur interest at rates ranging from 3.29% to 3.54%.

8. 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

Fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s 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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

•

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 not required to be measured at fair value on a recurring basis include the Company’s convertible senior subordinated notes, production loans, 5.25% Senior Notes, and Term Loan, which are priced using discounted cash flow techniques that use observable market inputs, such as LIBOR-based yield curves, 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 Company measures the fair value of its investment in Pop's Mandatorily Redeemable Preferred Stock Units using primarily a discounted cash flow analysis based on the expected cash flows of the investment. The analysis reflects the contractual terms of the investment, including the period to maturity, and uses a discount rate commensurate with the risk associated with the investment.

The following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of June 30, 2015 and March 31, 2015:



	June 30, 2015								March 31, 2015
	Level 1		Level 2			Total			Level 1		Level 2			Total
Assets:	(Amounts in thousands)
Available-for-sale securities (see Note 3):
Starz Series A common stock⁽¹⁾	$	94,719	$	—		$	94,719		$	72,882	$	—		$	72,882
Starz Series B common stock⁽¹⁾	—		115,851			115,851			—		89,142			89,142

Forward exchange contracts (see Note 16)	—		8,128			8,128			—		8,335			8,335

Liabilities:
Forward exchange contracts (see Note 16)	—		(1,598		)	(1,598		)	—		(2,024		)	(2,024		)
	$	94,719	$	122,381		$	217,100		$	72,882	$	95,453		$	168,335


(1)	As of August 6, 2015, the fair value of the Company's minority interest in Starz was $168.9 million, compared to the Company's original cost basis of $158.9 million.

The following table sets forth the carrying values and fair values of the Company’s investment in Pop's mandatorily redeemable preferred stock units and outstanding debt at June 30, 2015 and March 31, 2015:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	June 30, 2015				March 31, 2015
	(Amounts in thousands)
	Carrying Value		Fair Value		Carrying Value		Fair Value
			(Level 3)				(Level 3)
Assets:
Investment in Pop's Mandatorily Redeemable Preferred Stock Units	$	92,116	$	110,000	$	91,683	$	110,000

	Carrying Value		Fair Value		Carrying Value		Fair Value
			(Level 2)				(Level 2)
Liabilities:
April 2009 3.625% Notes	$	—	$	—	$	16,167	$	16,167
January 2012 4.00% Notes	38,463		42,140		37,959		41,473
April 2013 1.25% Notes	60,000		53,710		60,000		53,241
Production loans	729,755		729,755		600,944		600,944
5.25% Senior Notes	225,000		231,750		225,000		233,438
Term Loan	400,000		400,500		375,000		375,938
	$	1,453,218	$	1,457,855	$	1,315,070	$	1,321,201

9. Net Income Per Share

Basic net income per share is calculated based on the weighted average common shares outstanding for the period. Basic net income per share for the three months ended June 30, 2015 and 2014 is presented below:



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands, except per share amounts)
Basic Net Income Per Common Share:
Numerator:
Net income	$	40,684	$	43,261
Denominator:
Weighted average common shares outstanding	147,619		138,509
Basic net income per common share	$	0.28	$	0.31

Diluted net income per common share reflects the potential dilutive effect, if any, of the conversion of convertible senior subordinated notes under the "if converted" method. Diluted net income per common share also reflects share purchase options, including equity-settled share appreciation rights and restricted share units ("RSUs") using the treasury stock method when dilutive, and any contingently issuable shares when dilutive. Diluted net income per common share for the three months ended June 30, 2015 and 2014 is presented below:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands, except per share amounts)
Diluted Net Income Per Common Share:
Numerator:
Net income	$	40,684	$	43,261
Add:
Interest on convertible notes, net of tax	676		1,643
Numerator for diluted net income per common share	$	41,360	$	44,904

Denominator:
Weighted average common shares outstanding	147,619		138,509
Effect of dilutive securities:
Conversion of notes	6,325		10,909
Share purchase options	3,130		2,366
Restricted share units	424		426
Adjusted weighted average common shares outstanding	157,498		152,210
Diluted net income per common share	$	0.26	$	0.30

For the three months ended June 30, 2015 and 2014, the outstanding common shares issuable presented below were excluded from diluted net income per common share because their inclusion would have had an anti-dilutive effect.



	Three Months Ended
	June 30,
	2015	2014
	(Amounts in thousands)
Anti-dilutive shares issuable
Share purchase options	3,945	5,107
Restricted share units	67	288
Contingently issuable shares	397	275
Total weighted average anti-dilutive shares issuable excluded from diluted net income per common share	4,409	5,670

10. Capital Stock

(a) Common Shares

The Company had 500 million authorized common shares at June 30, 2015 and March 31, 2015. The table below outlines common shares reserved for future issuance:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	June 30, 2015	March 31, 2015
	(Amounts in thousands)
Stock options outstanding, average exercise price $23.61 (March 31, 2015 - $22.22)	14,246	12,215
Restricted share units — unvested	1,503	1,662
Share purchase options and restricted share units available for future issuance	4,767	7,163
Shares issuable upon conversion of April 2009 3.625% Notes at conversion price of $8.15 per share at March 31, 2015	—	1,984
Shares issuable upon conversion of January 2012 4.00% Notes at conversion price of $10.36 per share (March 31, 2015 - $10.38)	4,040	4,032
Shares issuable upon conversion of April 2013 1.25% Notes at conversion price of $29.59 per share (March 31, 2015 - $29.65)	2,028	2,024
Shares reserved for future issuance	26,584	29,080

In September 2012, the Company adopted the 2012 Performance Incentive Plan, as amended on September 9, 2014 (the "2012 Plan"). The 2012 Plan provides for the issuance of up to 27.6 million common shares of the Company, stock options, share appreciation rights, restricted shares, stock bonuses and other forms of awards granted or denominated in common shares or units of common shares of the Company, as well as certain cash bonus awards to eligible directors of the Company, officers or employees of the Company or any of its subsidiaries, and certain consultants and advisors to the Company or any of its subsidiaries.

(b) Share-based Compensation

The Company recognized the following share-based compensation expense during the three months ended June 30, 2015, and 2014:



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands)
Compensation Expense:
Stock Options	$	9,234		$	8,643
Restricted Share Units and Other Share-based Compensation	7,357			6,049
Share Appreciation Rights	288			1,729
	16,879			16,421
Impact of accelerated vesting on stock options and restricted share units⁽¹⁾	—			1,194
Total share-based compensation expense	$	16,879		$	17,615

Tax impact⁽²⁾	(6,190		)	(6,458		)
Reduction in net income	$	10,689		$	11,157

____________________________


(1)	Represents the impact of the acceleration of certain vesting schedules for stock options and restricted share units pursuant to the severance arrangements related to the integration of the marketing operations of the Company's Lionsgate and Summit film labels.


(2)	Represents the income tax benefit recognized in the statements of income for share-based compensation arrangements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the stock option and restricted share unit activity during the three months ended June 30, 2015:



	Stock Options		Weighted-Average Exercise Price	Restricted Share Units		Weighted-Average Grant-Date Fair Value
Outstanding at March 31, 2015	13,214,696		$21.26	1,662,028		$28.10
Granted	2,222,298		$30.62	808,470		$30.97
Options exercised or RSUs vested	(301,825	)	$14.05	(946,326	)	$28.90
Forfeited or expired	(1,929	)	$23.75	(21,243	)	$30.60
Outstanding at June 30, 2015	15,133,240		$22.78	1,502,929		$29.10

During the three months ended June 30, 2014, 75,000 cash-settled share appreciation rights were exercised resulting in a cash payment of $1.7 million.

The excess tax benefits realized from tax deductions associated with option exercises and RSU activity were insignificant and $2.8 million for the three months ended June 30, 2015 and 2014, respectively.

Total unrecognized compensation cost related to unvested stock options and restricted share unit awards at June 30, 2015 are $66.2 million and $31.1 million, respectively, and are expected to be recognized over a weighted average period of 1.9 and 1.7 years, respectively.

On June 15, 2015, the Company's Board of Directors declared a quarterly cash dividend of $0.07 per common share payable on August 7, 2015, to shareholders of record as of June 30, 2015. As of June 30, 2015, the Company had $10.4 million of cash dividends payable included in accounts payable and accrued liabilities on the unaudited condensed consolidated balance sheet.

11. Income Taxes

The income tax provision for the three months ended June 30, 2015 and 2014 is calculated by estimating the Company's annual effective tax rate (estimated annual tax provision divided by estimated annual income before income taxes), and then applying the effective tax rate to income before income taxes for the quarter, plus or minus the tax effects of items that relate discretely to the quarter, if any.

The Company's effective tax rate differs from the federal statutory rate and has changed from the prior period and could fluctuate significantly in the future, as the Company's effective tax rates are affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company and other discrete items.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Government Assistance

Tax credits earned for film and television production activity for the three months ended June 30, 2015 and 2014 totaled $17.8 million and $77.5 million, respectively and are recorded as a reduction of the cost of the related film and television program. Accounts receivable at June 30, 2015 includes $213.6 million with respect to tax credits receivable (March 31, 2015 - $219.2 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 have generally not been material historically.

13. Segment Information

The Company’s 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 has two reportable business segments as of June 30, 2015: Motion Pictures and Television Production.

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.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Segment information by business unit is as follows:



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands)
Segment revenues
Motion Pictures	$	275,387	$	331,916
Television Production	133,554		117,467
	$	408,941	$	449,383
Direct operating expenses
Motion Pictures	$	129,355	$	147,194
Television Production	100,955		91,679
	$	230,310	$	238,873
Distribution and marketing
Motion Pictures	$	62,466	$	88,605
Television Production	9,458		8,716
	$	71,924	$	97,321
Gross segment contribution
Motion Pictures	$	83,566	$	96,117
Television Production	23,141		17,072
	$	106,707	$	113,189
Segment general and administration
Motion Pictures	$	18,202	$	17,353
Television Production	4,383		3,410
	$	22,585	$	20,763
Segment profit
Motion Pictures	$	65,364	$	78,764
Television Production	18,758		13,662
	$	84,122	$	92,426

Gross segment contribution is defined as segment revenue less segment direct operating and distribution and marketing expenses.

Segment profit is defined as segment revenue less segment direct operating, distribution and marketing, and general and administration expenses. The reconciliation of total segment profit to the Company’s income before income taxes is as follows:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands)
Company’s total segment profit	$	84,122		$	92,426
Shared services and corporate expenses:
Share-based compensation expense	(16,879		)	(16,421		)
Restructuring and other items⁽¹⁾	—			(4,888		)
Other shared services and corporate expenses	(21,248		)	(22,007		)
Total shared services and corporate expenses	(38,127		)	(43,316		)
Depreciation and amortization	(1,830		)	(1,346		)
Operating income	44,165			47,764
Interest expense	(12,625		)	(12,972		)
Interest and other income	600			1,018
Equity interests income	11,388			18,210
Income before income taxes	$	43,528		$	54,020

________________________

(1)

Restructuring and other items includes certain unusual items, such as severance and restructuring charges, and certain transaction related costs, when applicable. Amounts in the three months ended June 30, 2014 primarily represent severance costs associated with the integration of the marketing operations of the Company's Lionsgate and Summit film labels and costs related to the move of our international sales and distribution organization to the United Kingdom. Approximately $1.2 million of the costs are non-cash charges resulting from the acceleration of vesting of stock awards (see Note 10).

The following table sets forth significant assets as broken down by segment and other unallocated assets as of June 30, 2015 and March 31, 2015:



	June 30, 2015						March 31, 2015
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in thousands)
Significant assets by segment
Accounts receivable	$	399,041	$	362,175	$	761,216	$	538,515	$	353,365	$	891,880
Investment in films and television programs, net	1,264,998		274,830		1,539,828		1,116,909		264,920		1,381,829
Goodwill	294,367		28,961		323,328		294,367		28,961		323,328
	$	1,958,406	$	665,966	$	2,624,372	$	1,949,791	$	647,246	$	2,597,037
Other unallocated assets (primarily cash, other assets, and investments)					845,415						695,052
Total assets					$	3,469,787					$	3,292,089

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth acquisition of investment in films and television programs as broken down by segment for the three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands)
Acquisition of investment in films and television programs
Motion Pictures	$	235,237	$	152,421
Television Production	80,624		111,430
	$	315,861	$	263,851

Purchases of property and equipment amounted to $3.2 million and $1.4 million for the three months ended June 30, 2015 and 2014, respectively, primarily pertaining to purchases for the Company’s corporate headquarters.

14. Contingencies

Two purported Lions Gate stockholders have initiated legal proceedings in the United States District Court for the Southern District of New York relating to the March 13, 2014 announcement that the Company had entered into an administrative order with the United States Securities and Exchange Commission (the "SEC") that resolved the SEC’s investigation into transactions that the Company announced on July 20, 2010. These actions are captioned Laborers Pension Trust Fund-Detroit & Vicinity v. Lions Gate Entertainment Corp., et al., Case No. 14 CV 5197 (filed July 11, 2014) and Barger v. Lions Gate Entertainment Corp., Case No. 14 CV 5477 (filed July 21, 2014). The actions allege, among other things, that the Company and certain of its current and former officers and directors violated the federal securities laws by failing to disclose the SEC’s investigation prior to March 13, 2014. On October 28, 2014, the court consolidated the actions under the caption In re Lions Gate Entertainment Corp. Securities Litigation, Case No. 1:14-cv-05197-JGK, and appointed lead plaintiff and lead counsel. Lead plaintiff filed a consolidated amended complaint on December 29, 2014 and a second consolidated amended complaint on March 30, 2015. On April 30, 2015, defendants moved to dismiss the action. The Company does not believe the action has any merit and intends to vigorously defend against it.

In addition, on May 16, 2014, the Company received a letter from another purported stockholder, Arkansas Teacher Retirement System, demanding that the Company seek to recover the costs of the SEC investigation, including the fine paid, from the directors who were on the board (and certain officers) at the time the July 20, 2010 transactions occurred. On August 6, 2014, the board created a Special Committee of independent directors (composed of Mr. Frank Giustra and Mr. Gordon Crawford) to consider the demand. On October 1, 2014, the Arkansas Teacher Retirement System filed a petition in the Supreme Court of British Columbia seeking an order granting it leave to prosecute the claims in the name and on behalf of Lions Gate. The Special Committee concluded that commencing an action in British Columbia against the proposed defendants (or any of them) as demanded by the Arkansas Teacher Retirement System would not be in the best interests of the Company, and the Company has taken steps to oppose the petition, including through filing materials in opposition in December 2014 and January 2015. The Arkansas Teacher Retirement System has filed materials in reply. The parties are now arranging a hearing date, which is expected to be in the week of November 23, 2015.

From time to time, the Company is involved in other 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 legal proceedings in which the Company is currently involved will have a material adverse effect on the Company's consolidated financial position, results of operations or cash flow.

15. Consolidating Financial Information — Convertible Senior Subordinated Notes

The January 2012 4.00% Notes and the April 2013 1.25% Notes by their terms, are fully and unconditionally guaranteed by the Company. LGEI, the issuer of the January 2012 4.00% Notes, and the April 2013 1.25% Notes that are guaranteed by the Company, is 100% owned by the parent company guarantor, Lions Gate Entertainment Corp.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables present condensed consolidating financial information as of June 30, 2015 and March 31, 2015, and for the three months ended June 30, 2015 and 2014 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.



	As of
	June 30, 2015
	Lions Gate Entertainment Corp.		Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries		Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	15,111	$	106,833		$	74,606	$	—		$	196,550
Restricted cash	—		2,508			—		—			2,508
Accounts receivable, net	613		9,839			750,764		—			761,216
Investment in films and television programs, net	—		6,406			1,533,422		—			1,539,828
Property and equipment, net	—		26,602			1,752		—			28,354
Investments	40,048		8,770			450,191		—			499,009
Goodwill	10,172		—			313,156		—			323,328
Other assets	8,574		62,684			9,809		(5,789		)	75,278
Deferred tax assets	9,377		33,135			1,204		—			43,716
Subsidiary investments and advances	1,519,199		1,511,389			2,739,071		(5,769,659		)	—
	$	1,603,094	$	1,768,166		$	5,873,975	$	(5,775,448	)	$	3,469,787
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	—		$	—	$	—		$	—
5.25% Senior Notes	225,000		—			—		—			225,000
Term Loan	400,000		—			—		—			400,000
Accounts payable and accrued liabilities	22,067		57,225			141,022		—			220,314
Participations and residuals	—		3,663			498,097		—			501,760
Film obligations and production loans	—		—			776,411		—			776,411
Convertible senior subordinated notes	—		98,463			—		—			98,463
Deferred revenue	—		7,448			284,364		—			291,812
Intercompany payable	—		1,726,280			2,640,601		(4,366,881		)	—
Shareholders’ equity (deficiency)	956,027		(124,913		)	1,533,480		(1,408,567		)	956,027
	$	1,603,094	$	1,768,166		$	5,873,975	$	(5,775,448	)	$	3,469,787

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30, 2015
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
				(Amounts in thousands)
STATEMENT OF INCOME
Revenues	$	—		$	2,105		$	406,999		$	(163	)	$	408,941
EXPENSES:
Direct operating	—			(1,504		)	231,814			—			230,310
Distribution and marketing	—			522			71,402			—			71,924
General and administration	858			36,916			23,332			(394		)	60,712
Depreciation and amortization	—			1,551			279			—			1,830
Total expenses	858			37,485			326,827			(394		)	364,776
OPERATING INCOME (LOSS)	(858		)	(35,380		)	80,172			231			44,165
Other expenses (income):
Interest expense	8,985			53,542			42,160			(92,062		)	12,625
Interest and other income	(50,534		)	(162		)	(41,841		)	91,937			(600		)
Total other expenses (income)	(41,549		)	53,380			319			(125		)	12,025
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	40,691			(88,760		)	79,853			356			32,140
Equity interests income (loss)	677			89,484			11,848			(90,621		)	11,388
INCOME (LOSS) BEFORE INCOME TAXES	41,368			724			91,701			(90,265		)	43,528
Income tax provision (benefit)	684			47			6,092			(3,979		)	2,844
NET INCOME (LOSS)	40,684			677			85,609			(86,286		)	40,684
Foreign currency translation adjustments, net of tax	45,731			45,915			(1,543		)	(86,613		)	3,490
Net unrealized gain on available-for-sale securities, net of tax	—			—			42,234			—			42,234
Net unrealized gain on foreign exchange contracts, net of tax	—			—			7			—			7
COMPREHENSIVE INCOME (LOSS)	$	86,415		$	46,592		$	126,307		$	(172,899	)	$	86,415

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30, 2015
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments		Lions Gate Consolidated
	(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	10,380		$	62,627		$	(103,890	)	$	—	$	(30,883	)
INVESTING ACTIVITIES:
Investment in equity method investees	—			—			(800		)	—		(800		)
Purchases of property and equipment	—			(3,124		)	(124		)	—		(3,248		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	—			(3,124		)	(924		)	—		(4,048		)
FINANCING ACTIVITIES:
Term Loan - borrowings, net of deferred financing costs of $616	24,384			—			—			—		24,384
Convertible senior subordinated notes - repurchases	—			(5		)	—			—		(5		)
Production loans - borrowings	—			—			203,087			—		203,087
Production loans - repayments	—			—			(74,276		)	—		(74,276		)
Dividends paid	(10,187		)	—			—			—		(10,187		)
Excess tax benefits on equity-based compensation awards	—			45			—			—		45
Exercise of stock options	3,118			—			—			—		3,118
Tax withholding required on equity awards	(16,082		)	—			—			—		(16,082		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	1,233			40			128,811			—		130,084
NET CHANGE IN CASH AND CASH EQUIVALENTS	11,613			59,543			23,997			—		95,153
FOREIGN EXCHANGE EFFECTS ON CASH	(1		)	—			(1,299		)	—		(1,300		)
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	3,499			47,290			51,908			—		102,697
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	15,111		$	106,833		$	74,606		$	—	$	196,550

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	As of
	March 31, 2015
	Lions Gate Entertainment Corp.		Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries		Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	3,499	$	47,290		$	51,908	$	—		$	102,697
Restricted cash	—		2,508			—		—			2,508
Accounts receivable, net	617		7,933			883,330		—			891,880
Investment in films and television programs, net	—		6,402			1,375,427		—			1,381,829
Property and equipment, net	—		24,938			1,713		—			26,651
Investments	40,072		9,229			388,997		—			438,298
Goodwill	10,172		—			313,156		—			323,328
Other assets	8,109		61,409			11,180		(5,914		)	74,784
Deferred tax assets	10,524		32,252			7,338		—			50,114
Subsidiary investments and advances	1,385,522		1,378,571			2,571,801		(5,335,894		)	—
	$	1,458,515	$	1,570,532		$	5,604,850	$	(5,341,808	)	$	3,292,089
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	—		$	—	$	—		$	—
5.25% Senior Notes	225,000		—			—		—			225,000
Term Loan	375,000		—			—		—			375,000
Accounts payable and accrued liabilities	16,228		86,472			229,773		—			332,473
Participations and residuals	—		3,417			468,244		—			471,661
Film obligations and production loans	—		—			656,755		—			656,755
Convertible senior subordinated notes	—		114,126			—		—			114,126
Deferred revenue	—		7,722			267,065		—			274,787
Intercompany payable	—		1,530,299			2,547,928		(4,078,227		)	—
Shareholders’ equity (deficiency)	842,287		(171,504		)	1,435,085		(1,263,581		)	842,287
	$	1,458,515	$	1,570,532		$	5,604,850	$	(5,341,808	)	$	3,292,089

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30, 2014
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
STATEMENT OF INCOME
Revenues	$	—		$	2,896		$	446,586		$	(99	)	$	449,383
EXPENSES:
Direct operating	2			(829		)	239,586			114			238,873
Distribution and marketing	—			568			96,753			—			97,321
General and administration	564			39,942			23,692			(119		)	64,079
Depreciation and amortization	—			752			594			—			1,346
Total expenses	566			40,433			360,625			(5		)	401,619
OPERATING INCOME (LOSS)	(566		)	(37,537		)	85,961			(94		)	47,764
Other expenses (income):
Interest expense	7,373			46,575			33,125			(74,101		)	12,972
Interest and other income	(43,039		)	(31		)	(31,933		)	73,985			(1,018		)
Total other expenses (income)	(35,666		)	46,544			1,192			(116		)	11,954
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	35,100			(84,081		)	84,769			22			35,810
Equity interests income (loss)	8,550			94,758			18,050			(103,148		)	18,210
INCOME (LOSS) BEFORE INCOME TAXES	43,650			10,677			102,819			(103,126		)	54,020
Income tax provision (benefit)	389			2,127			20,477			(12,234		)	10,759
NET INCOME (LOSS)	43,261			8,550			82,342			(90,892		)	43,261
Foreign currency translation adjustments, net of tax	671			2,217			(391		)	(1,015		)	1,482
Net unrealized loss on foreign exchange contracts, net of tax	—			—			(811		)	—			(811		)
COMPREHENSIVE INCOME (LOSS)	$	43,932		$	10,767		$	81,140		$	(91,907	)	$	43,932

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended
	June 30, 2014
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments		Lions Gate Consolidated
	(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	142,265		$	(26	)	$	(154,873	)	$	—	$	(12,634	)
INVESTING ACTIVITIES:
Proceeds from the sale of equity method investees	—			—			14,575			—		14,575
Investment in equity method investees	—			(2,150		)	(7,500		)	—		(9,650		)
Purchases of property and equipment	—			(1,305		)	(122		)	—		(1,427		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	—			(3,455		)	6,953			—		3,498
FINANCING ACTIVITIES:
Senior revolving credit facility - borrowings	170,000			—			—			—		170,000
Senior revolving credit facility - repayments	(183,619		)	—			—			—		(183,619		)
Convertible senior subordinated notes - repurchases	—			(16		)	—			—		(16		)
Production loans - borrowings	—			—			207,953			—		207,953
Production loans - repayments	—			—			(36,859		)	—		(36,859		)
Repurchase of common shares	(109,529		)	—			—			—		(109,529		)
Dividends paid	(7,066		)	—			—			—		(7,066		)
Excess tax benefits on equity-based compensation awards	—			2,771			—			—		2,771
Exercise of stock options	406			—			—			—		406
Tax withholding required on equity awards	(10,247		)	—			—			—		(10,247		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(140,055		)	2,755			171,094			—		33,794
NET CHANGE IN CASH AND CASH EQUIVALENTS	2,210			(726		)	23,174			—		24,658
FOREIGN EXCHANGE EFFECTS ON CASH	—			—			22			—		22
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	8,128			5,999			11,565			—		25,692
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	10,338		$	5,273		$	34,761		$	—	$	50,372

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16. Derivative Instruments and Hedging Activities

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 June 30, 2015, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 17 months from June 30, 2015):



June 30, 2015
Foreign Currency	Foreign Currency Amount			US Dollar Amount		Weighted Average Exchange Rate Per $1 USD
	(Amounts in millions)			(Amounts in millions)
British Pound Sterling		£9.7	in exchange for		$14.8	£0.65
Australian Dollar		A$56.8	in exchange for		$50.6	A$1.12
Euro		€1.5	in exchange for		$1.7	€0.93
Canadian Dollar		C$3.9	in exchange for		$3.2	C$1.20

Changes in the fair value representing a net unrealized fair value gain (loss) on foreign exchange contracts that qualified as effective hedge contracts outstanding during the three months ended June 30, 2015 were gains of less than $0.1 million (2014 - losses of $0.8 million), and are included in accumulated other comprehensive loss, a separate component of shareholders’ equity. Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that did not qualify as effective hedge contracts outstanding during the three months ended June 30, 2015 were $0.1 million (2014 - nil) and are included in direct operating expenses in the consolidated statement of income. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions.

As of June 30, 2015, $8.1 million was included in other assets and $1.6 million in accounts payable and accrued liabilities (March 31, 2015 - $8.3 million in other assets and $2.0 million in accounts payable and accrued liabilities) in the accompanying consolidated balance sheets related to the Company's use of foreign currency derivatives. The Company classifies its forward foreign exchange contracts within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

During the three months ended June 30, 2015, the Company did not have any significant amounts reclassified out of accumulated other comprehensive income.

17. Supplementary Cash Flow Statement Information

The supplemental schedule of non-cash investing and financing activities for the three months ended June 30, 2015 and 2014 is presented below.



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands)
Non-cash financing activities:
Accrued dividends (see Note 10)	$	10,376	$	6,881
Conversions of convertible senior subordinated notes (see Note 5)	$	16,162	$	109

There were no non-cash investing activities for the three months ended June 30, 2015 and 2014.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, channel platforms and international distribution and sales. We operate primarily through two reporting segments: Motion Pictures and Television Production.

Revenues

Our revenues are derived from the Motion Pictures and Television Production segments, as described below. Our revenues are derived from the U.S., Canada, the U.K., and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the three months ended June 30, 2015 and 2014.

Motion Pictures. Our Motion Pictures segment includes revenues derived from the following:

•

Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (directly distributed by us in the U.S. and through a sub-distributor in Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we receive a percentage of the box office results and are negotiated on a picture-by-picture basis.

•

Home Entertainment. Home Entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films (including theatrical and direct-to-video releases) and certain television programs, to retail stores and through digital media platforms. In addition, we have revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, we share in the rental or sales revenues generated by the platform on a title-by-title basis. We categorize our Home Entertainment revenue as follows:


•	Packaged media revenue: Packaged media revenue consists of the sale or rental of DVDs and Blu-ray discs.


•	Digital media revenue: Digital media revenue consists of revenues generated from pay-per-view and video-on-demand platforms, electronic sell-through (“EST”), and digital rental.


•	Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the domestic cable, satellite, and free and pay television markets.

•

International. International revenues are derived from the licensing of our productions, acquired films, our catalog product and libraries of acquired titles from our international subsidiaries, and revenues from our distribution to international sub-distributors, on a territory-by-territory basis. International revenues also includes revenues from the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.


•	Motion Pictures - Other. Other revenues are derived from, among others, our interactive ventures and games division, our global franchise management and strategic partnerships division, the sales and licensing of music from the theatrical exhibition of our films and the television broadcast of our productions, and from the licensing of our films and television programs to ancillary markets.

Television Production. Our Television Production segment includes revenues derived from the following:


•	Domestic Television. Domestic television revenues are derived from the licensing and syndication to domestic markets of one-hour and half-hour series, television movies, mini-series and non-fiction programming.


•	International. International television revenues are derived from the licensing and syndication to international markets of one-hour and half-hour series, television movies, mini-series and non-fiction programming.


•	Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series to retail stores and through digital media platforms. Home entertainment revenue consists of packaged media revenue and digital media revenue.

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•	Television Production - Other. Other revenues are derived from, among others, product integration in our television episodes and programs, the sales and licensing of music from the television broadcasts of our productions, and from the licensing of our television programs to ancillary markets. For additional information, see Motion Pictures - Other above.

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 SAG - AFTRA, Directors Guild of America, and Writers Guild of America, based on the performance of the film in certain ancillary markets or based on the individual’s (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.

CRITICAL ACCOUNTING POLICIES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. 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. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. 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. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 2 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on May 21, 2015.

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 year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the current year expected to be recognized from exploitation, exhibition or sale of such film or television program. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. For previously released film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed twenty years from the date of acquisition.

Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful than anticipated and some are less successful than anticipated. Our 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. Our management estimates the

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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.

An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results in a write-down of the film cost to the title’s fair value. These write-downs are included in amortization expense within direct operating expenses in our consolidated statements of income. 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. In determining the fair value of our films and television programs, we employ a discounted cash flows ("DCF") methodology with assumptions for cash flows. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. The fair value of any film costs associated with a film or television program that we plan to abandon is zero. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement (as defined in Note 8 to our unaudited condensed consolidated financial statements). 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 our future revenue estimates.

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 and 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, including digital and EST arrangements, such as download-to-own, download-to-rent, video-on-demand, and subscription video-on-demand, revenue is recognized when we are entitled to receipts and such receipts are determinable. Revenues from television or digital licensing for fixed fees 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. The primary estimate requiring the most subjectivity and judgment involving revenue recognition is the estimate of sales returns associated with our revenue from the sale of DVDs/Blu-ray discs in the retail market which is discussed separately below under the caption “Sales Returns Allowance.”

Sales Returns Allowance. Revenues are recorded net of estimated returns and other allowances. We estimate reserves for DVD/Blu-ray returns based on previous returns experience, point-of-sale data available from certain retailers, current economic trends, and projected future sales of the title to the consumer based on the actual performance of similar titles 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. Our estimate of future returns affects reported revenue and operating income. If we underestimate the impact of future returns in a particular period, then we may record less revenue in later periods when returns exceed the estimated amounts. If we overestimate the impact of future returns in a particular period, then we may record additional revenue in later periods when returns are less than estimated. An incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related product) for home entertainment products would have had an impact of approximately $0.9 million on our total revenue in the three months ended June 30, 2015 (2014 - $1.1 million).

Provisions for Accounts Receivable. 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

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its ability to pay may change over time or could be better or worse than anticipated 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 “Management’s 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 related to net operating loss carryforwards and certain temporary differences, net of applicable reserves. We recognize a future tax benefit to the extent that realization of such benefit is more likely than not, otherwise a valuation allowance is applied. In order to realize the benefit of our deferred tax assets, we will need to generate sufficient taxable income in the future. In previous years, we had historically provided a full valuation allowance against our net deferred tax assets because of our historical operating losses. Due to the profitability achieved in our fiscal year ended March 31, 2013, which resulted in a cumulative positive three year pre-tax income, and our current projections of profitability in the next few years, we determined that it was more likely than not that we will realize the benefit of certain of our deferred tax assets, including our net operating loss carryforwards and, accordingly, the valuation allowance related to those assets was reversed as of March 31, 2013. In addition, due to certain financing transactions in the year ended March 31, 2014, we determined that it was more likely than not that we will realize the benefit of certain of our deferred tax assets in our Canadian tax jurisdiction, and accordingly, the valuation allowance related to those assets was reversed during the year ended March 31, 2014. However, the assessment as to whether there will be sufficient taxable income to realize our net deferred tax assets is an estimate which could change in the future depending primarily upon the actual performance of our Company. We will be required to continually evaluate the more likely than not assessment that our net deferred tax assets will be realized, and if operating results deteriorate, we may need to reestablish all or a portion of the valuation allowance through a charge to our income tax provision.

In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on our expected annual income and statutory tax rates in the various jurisdictions in which we operate. The income tax provision in the period is calculated by estimating the Company's annual effective tax rate (estimated annual tax provision divided by estimated annual income before income taxes), and then applying the effective tax rate to income before income taxes for the period plus or minus the tax effects of items that relate discretely to the period, if any. Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which we operate, changes in tax laws and regulations in those jurisdictions, changes in valuation allowances on our deferred tax assets, tax planning strategies available to us and other discrete items.

Goodwill. Goodwill is reviewed for impairment 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, 2015 by first assessing qualitative factors to determine whether it was necessary to perform the two-step annual goodwill impairment test. Based on our qualitative assessments, including but not limited to, the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, industry and market conditions, cash flows, and changes in our share price, we concluded that it was more likely than not that the fair value of our reporting units was greater than their carrying value.

Recent Accounting Pronouncements

In April 2015, the FASB issued an accounting standards update relating to the presentation of debt issuance costs. The accounting update requires companies to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than as an asset. The guidance is effective for our fiscal year beginning April 1, 2016, with early adoption permitted. We are planning to adopt the new guidance effective April 1, 2016. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

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RESULTS OF OPERATIONS

Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014

The following table sets forth segment information by business unit, and as a percentage of segment revenues, for the three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,
	2015				2014				Increase (Decrease)
	Amount		% of Segment Revenues		Amount		% of Segment Revenues		Amount			Percent
	(Amounts in millions)
Segment revenues⁽¹⁾
Motion Pictures	$	275.4			$	331.9			$	(56.5	)	(17.0	)%
Television Production	133.6				117.5				16.1			13.7	%
	$	409.0			$	449.4			$	(40.4	)	(9.0	)%
Direct operating expenses
Motion Pictures	$	129.4	47.0	%	$	147.2	44.4	%	$	(17.8	)	(12.1	)%
Television Production	100.9		75.5		91.7		78.0		9.2			10.0	%
	$	230.3	56.3	%	$	238.9	53.2	%	$	(8.6	)	(3.6	)%
Distribution and marketing
Motion Pictures	$	62.4	22.7	%	$	88.6	26.7	%	$	(26.2	)	(29.6	)%
Television Production	9.5		7.1		8.7		7.4		0.8			9.2	%
	$	71.9	17.6	%	$	97.3	21.7	%	$	(25.4	)	(26.1	)%
Gross segment contribution
Motion Pictures	$	83.6	30.4	%	$	96.1	29.0	%	$	(12.5	)	(13.0	)%
Television Production	23.1		17.3		17.1		14.6		6.0			35.1	%
	$	106.7	26.1	%	$	113.2	25.2	%	$	(6.5	)	(5.7	)%

_________________________________________


(1)	A significant 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 three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,				Increase (Decrease)
	2015		2014		Amount			Percent
	(Amounts in millions)
Home Entertainment Revenue
Motion Pictures	$	115.4	$	133.2	$	(17.8	)	(13.4	)%
Television Production	14.1		7.7		6.4			83.1	%
	$	129.5	$	140.9	$	(11.4	)	(8.1	)%

Motion Pictures Revenue

The table below sets forth the components of revenue and the changes in these components for the Motion Pictures reporting segment for the three months ended June 30, 2015 and 2014.

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	Three Months Ended
	June 30,				Increase (Decrease)
	2015		2014		Amount			Percent
	(Amounts in millions)
Motion Pictures
Theatrical	$	23.1	$	42.7	$	(19.6	)	(45.9	)%
Home Entertainment	115.4		133.2		(17.8		)	(13.4	)%
Television	48.4		58.8		(10.4		)	(17.7	)%
International⁽¹⁾	84.8		90.7		(5.9		)	(6.5	)%
Other	3.7		6.5		(2.8		)	(43.1	)%
	$	275.4	$	331.9	$	(56.5	)	(17.0	)%

_________________________________


(1)	The three months ended June 30, 2014 includes a reclassification of Lionsgate UK (previously presented separately) amounting to $30.0 million to the International line item, in order to be consistent with the current fiscal year classification.

Motion Pictures — Theatrical Revenue

The following table sets forth the titles released from our Fiscal 2016 and Fiscal 2015 Theatrical Slates and titles released in other product categories that represented a significant portion of revenue for the three months ended June 30, 2015 and 2014, respectively:



Three Months Ended June 30,
2015		2014
	Theatrical Release Date		Theatrical Release Date
Fiscal 2016 Theatrical Slate:		Fiscal 2015 Theatrical Slate:
The Age of Adaline	April 2015	Draft Day	April 2014
Child 44*	April 2015*	The Quiet Ones	April 2014
Fiscal 2015 Theatrical Slate:		Fiscal 2014 Theatrical Slate:
The Divergent Series: Insurgent	March 2015	Divergent	March 2014
Managed Brands⁽¹⁾:
Love & Mercy	June 2015

_________________________________

* Limited release


(1)	Managed Brands represents Direct-to-DVD motion pictures, acquired and licensed brands, third-party library product and ancillary-driven platform theatrical releases.

Theatrical revenue of $23.1 million decreased $19.6 million, or 45.9%, in the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. The decrease is due to the limited release of Child 44 resulting in lower box office performance, lower box office generated from The Divergent Series: Insurgent as compared to Divergent in the prior year's quarter, and while The Age of Adaline had a strong performance at the box office, under the terms of our distribution arrangement, we record only our distribution fee as theatrical revenue. These decreases were slightly offset by the performance of Love & Mercy from our Managed Brands product category.

Motion Pictures — Home Entertainment Revenue

The following table sets forth the titles released on home entertainment from our theatrical slates in the three months ended June 30, 2015 and 2014, in addition to titles from our theatrical slates and other product categories which contributed a significant amount of revenue in the current and prior year's quarter, respectively:

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Three Months Ended June 30,
2015		2014
	Packaged Media Release Date		Packaged Media Release Date
Fiscal 2015 Theatrical Slate:		Fiscal 2014 Theatrical Slate:
The Duff	June 2015	I, Frankenstein	May 2014
Mortdecai	May 2015	The Legend of Hercules	April 2014
The Hunger Games: Mockingjay - Part 1	March 2015	The Hunger Games: Catching Fire	March 2014
John Wick	February 2015	Escape Plan	February 2014
		Ender's Game	February 2014
Managed Brands:		Managed Brands:
The Last Knights	June 2015	Joe	June 2014
A Most Violent Year	April 2015	Tyler Perry's Madea's Neighbors From Hell (the Play)	April 2014
Wild Card	March 2015

The following table sets forth the components of home entertainment revenue by product category for the three months ended June 30, 2015 and 2014:



	Three Months Ended June 30,
	2015						2014						Total Increase (Decrease)
	Packaged Media		Digital Media⁽¹⁾		Total		Packaged Media		Digital Media⁽¹⁾		Total		Total Increase (Decrease)
					(Amounts in millions)
Home entertainment revenues⁽²⁾
Fiscal 2015 Theatrical Slate	$	15.0	$	28.4	$	43.4	$	—	$	—	$	—	$	43.4
Fiscal 2014 Theatrical Slate	1.8		2.4		4.2		20.0		40.5		60.5		(56.3		)
Prior Theatrical Slates	5.8		6.1		11.9		10.5		5.5		16.0		(4.1		)
Total Theatrical Slates	22.6		36.9		59.5		30.5		46.0		76.5		(17.0		)
Managed Brands	32.4		20.1		52.5		37.1		16.7		53.8		(1.3		)
Other Feature Film⁽³⁾	2.4		1.0		3.4		1.3		1.6		2.9		0.5
	$	57.4	$	58.0	$	115.4	$	68.9	$	64.3	$	133.2	$	(17.8	)

___________________


(1)	Digital media revenue consists of revenues generated from pay-per-view and video-on-demand platforms, EST, and digital rental.


(2)	Certain amounts in the prior year's quarter have been reclassified between product types in order to be consistent with the current period classification.


(3)	Other Feature Film includes certain specialty theatrical releases and other titles.

Home entertainment revenue of $115.4 million decreased $17.8 million, or 13.4%, in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014. Of the decrease, approximately $17.0 million was from our theatrical slates, primarily due to lower revenue generated by the titles released on packaged media from our Fiscal 2015 Theatrical Slate in the three months ended June 30, 2015 (as listed in the table above), compared to the revenue from the titles released on packaged media from our Fiscal 2014 Theatrical Slate in the three months ended June 30, 2014 (as listed in the table above). Additionally, Managed Brands decreased by $1.3 million, which was mostly offset by higher revenue from Other Feature Film of $0.5 million in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014.

Motion Pictures — Television Revenue

The following table sets forth the titles contributing significant motion pictures television revenue for the three months ended June 30, 2015 and 2014:

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Three Months Ended June 30,
2015		2014
Fiscal 2015 Theatrical Slate:		Fiscal 2014 Theatrical Slate:
Addicted		Ender's Game
John Wick		Red 2
The Expendables 3		You're Next

The following table sets forth the components of television revenue by product category for the three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,				Increase (Decrease)
	2015		2014		Amount			Percent
	(Amounts in millions)
Television revenues⁽¹⁾
Fiscal 2015 Theatrical Slate	$	23.7	$	—	$	23.7		n/m
Fiscal 2014 Theatrical Slate	—		32.9		(32.9		)	(100.0	)%
Prior Theatrical Slates	17.0		17.0		—			—	%
Total Theatrical Slates	40.7		49.9		(9.2		)	(18.4	)%
Managed Brands	6.1		8.3		(2.2		)	(26.5	)%
Other Feature Film	1.6		0.6		1.0			n/m
	$	48.4	$	58.8	$	(10.4	)	(17.7	)%

___________________

n/m - Percentage not meaningful.


(1)	Certain amounts in the prior year's quarter have been reclassified between product types in order to be consistent with the current period classification.

Television revenue decreased in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014, due primarily to the fewer number of titles with television windows opening in the period from our smaller Fiscal 2015 Theatrical Slate as compared to our Fiscal 2014 Theatrical Slate, and the lower revenue generated from those titles.

Motion Pictures — International Revenue

The following table sets forth the titles contributing significant motion pictures international revenue for the three months ended June 30, 2015 and 2014:



Three Months Ended June 30,
2015		2014
Fiscal 2016 Theatrical Slate:		Fiscal 2014 Theatrical Slate:
Child 44		Divergent
		The Hunger Games: Catching Fire
Fiscal 2015 Theatrical Slate:		Prior Theatrical Slates:
Mortdecai		The Hunger Games
The Divergent Series: Insurgent		The Twilight Saga: Breaking Dawn - Part 2
The Hunger Games: Mockingjay - Part 1		The Twilight Saga: Breaking Dawn - Part 1
UK Third Party Product:
A Little Chaos

The following table sets forth the components of international revenue by product category for the three months ended June 30, 2015 and 2014:

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	Three Months Ended
	June 30,				Increase (Decrease)
	2015		2014		Amount			Percent
	(Amounts in millions)
International revenues⁽¹⁾
Fiscal 2016 Theatrical Slate	$	12.9	$	—	$	12.9		n/m
Fiscal 2015 Theatrical Slate	35.6		0.9		34.7			n/m
Fiscal 2014 Theatrical Slate	3.2		35.5		(32.3		)	(91.0	)%
Prior Theatrical Slates	10.2		28.2		(18.0		)	(63.8	)%
Total Theatrical Slates	61.9		64.6		(2.7		)	(4.2	)%
UK Third Party Product⁽²⁾	14.5		11.4		3.1			27.2	%
Managed Brands	4.0		6.6		(2.6		)	(39.4	)%
Other Feature Film	4.4		8.1		(3.7		)	(45.7	)%
	$	84.8	$	90.7	$	(5.9	)	(6.5	)%

___________________

n/m - Percentage not meaningful.


(1)	Certain amounts in the prior year's quarter have been reclassified between product types in order to be consistent with the current period classification. Specifically, Lionsgate UK revenues in the three months ended June 30, 2014 of $30.0 million, which were previously separately presented, have been combined within our international revenue product categories.


(2)	UK Third Party Product represents titles acquired separately for self-distribution in the U.K. territory.

International motion pictures revenue decreased in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014, due to the revenue generated by the titles and product categories listed above. In particular, revenue from our Prior Theatrical Slates category was lower in the three months ended June 30, 2015 as compared to the three months ended June 30, 2014, primarily due to significant contributions from The Hunger Games, The Twilight Saga: Breaking Dawn - Part 1 and The Twilight Saga: Breaking Dawn - Part 2 in the prior year's quarter. This decrease was offset partially by a higher contribution from our Fiscal 2016 Theatrical Slate driven by Child 44 in the three months ended June 30, 2015, as compared to the revenue generated by our Fiscal 2015 Theatrical Slate in the three months ended June 30, 2014.

Television Production Revenue

The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,				Increase (Decrease)
	2015		2014		Amount			Percent
	(Amounts in millions)
Television Production
Domestic Television	$	59.0	$	72.8	$	(13.8	)	(19.0	)%
International	59.4		34.4		25.0			72.7	%
Home Entertainment
Digital	10.3		4.5		5.8			128.9	%
Packaged Media	3.8		3.2		0.6			18.8	%
Total Home Entertainment	14.1		7.7		6.4			83.1	%
Other	1.1		2.6		(1.5		)	(57.7	)%
	$	133.6	$	117.5	$	16.1		13.7	%

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Television Production - Domestic Television

Domestic television revenue decreased in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014, primarily due to a decrease in television episodes delivered during the three months ended June 30, 2015, as compared to the three months ended June 30, 2014. Television episodes delivered for original exhibition during the three months ended June 30, 2015 and 2014 included the episode deliveries as shown in the table below:



		Three Months Ended				Three Months Ended
		June 30, 2015				June 30, 2014
		Episodes	Hours			Episodes	Hours
Nashville - Season 3	1hr	5	5.0	Anger Management	1/2hr	11	5.5
Orange Is The New Black - Season 3	1hr	1	1.0	Mad Men - Season 7	1hr	4	4.0
Other⁽¹⁾	1/2hr & 1hr	12	9.0	Manhattan - Season 1	1hr	1	1.0
				Nashville - Season 2	1hr	3	3.0
				Rosemary's Baby	1hr	4	4.0
				Other⁽¹⁾	1/2hr & 1hr	8	4.0
		18	15.0			31	21.5

______________________


(1)	Other in the three months ended June 30, 2015 includes episodes delivered for Casual, Cuckoo, Deadbeat (Season 2), Deion's Family Playbook, and DeSean Jackson: Home Team (Season 1). Other in the three months ended June 30, 2014 includes episodes delivered for Deal With It (Season 2).

In addition to the titles mentioned in the table above, significant domestic television revenue was contributed in the three months ended June 30, 2015 from Family Feud (Season 8), The Wendy Williams Show (Season 6), Celebrity Name Game, Anger Management, and Are We There Yet, and in the three months ended June 30, 2014, from Family Feud (Season 7), The Wendy Williams Show (Season 5), House of Payne, Are We There Yet, Nurse Jackie (Season 6), and Meet The Browns.

Television Production - International Revenue

International revenue in the three months ended June 30, 2015 increased as compared to the three months ended June 30, 2014, primarily driven by a significant contribution of revenue from Orange Is The New Black (Seasons 1, 2 & 3) in the three months ended June 30, 2015, partially offset by decreases in revenues from Mad Men and Anger Management.

Television Production - Home Entertainment Revenue

The increase in home entertainment revenue is primarily due to an increase in digital media revenue, largely driven by revenues from Blue Mountain State (Seasons 1,2 & 3) and Ascension, as well as a slight increase in packaged media revenue in the three months ended June 30, 2015 as compared to the three months ended June 30, 2014.

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Direct Operating Expenses

The following table sets forth direct operating expenses by segment for the three months ended June 30, 2015 and 2014:



	Three Months Ended									Three Months Ended
	June 30, 2015									June 30, 2014
	Motion Pictures			Television Production			Total			Motion Pictures			Television Production			Total
	(Amounts in millions)
Direct operating expenses
Amortization of films and television programs	$	91.7		$	68.7		$	160.4		$	93.3		$	65.5		$	158.8
Participation and residual expense	40.9			31.4			72.3			56.2			26.7			82.9
Other expenses	(3.2		)	0.8			(2.4		)	(2.3		)	(0.5		)	(2.8		)
	$	129.4		$	100.9		$	230.3		$	147.2		$	91.7		$	238.9
Direct operating expenses as a percentage of segment revenues	47.0		%	75.5		%	56.3		%	44.4		%	78.0		%	53.2		%

Direct operating expenses of the Motion Pictures segment of $129.4 million for the three months ended June 30, 2015 were 47% of motion pictures revenue, compared to $147.2 million, or 44.4% of motion pictures revenue for the three months ended June 30, 2014. The decrease in direct operating expenses of $17.8 million is primarily due to a decrease in motion pictures revenue in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014. The increase in direct operating expenses as a percentage of motion pictures revenue was primarily due to the change in the mix of titles generating revenue in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014, and was primarily driven by our theatrical slates. Included in amortization expense are investment in film write-downs of approximately $0.6 million in the three months ended June 30, 2015, compared to approximately $2.8 million in the three months ended June 30, 2014. Other direct operating expenses in the three months ended June 30, 2015 consisted primarily of foreign exchange gains offset partially by the provision for doubtful accounts, as compared to lower foreign exchange gains in the three months ended June 30, 2014.

Direct operating expenses of the Television Production segment of $100.9 million for the three months ended June 30, 2015 were 75.5% of television revenue, compared to $91.7 million, or 78.0%, of television revenue for the three months ended June 30, 2014. The increase in direct operating expenses of $9.2 million is primarily due to an increase in television production revenue in the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. The decrease in direct operating expenses as a percentage of television production revenue is primarily due to the change of the mix of titles generating revenue, compared to the three months ended June 30, 2014, including higher revenue from the Orange Is The New Black series relative to total revenue, and lower direct operating expenses from the Nashville series.

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Distribution and Marketing Expenses

The following table sets forth distribution and marketing expenses by segment for the three months ended June 30, 2015 and 2014:



	Three Months Ended						Three Months Ended
	June 30, 2015						June 30, 2014
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in millions)
Distribution and marketing expenses
Theatrical	$	22.8	$	—	$	22.8	$	37.8	$	—	$	37.8
Home Entertainment	24.7		1.8		26.5		30.7		1.5		32.2
International⁽¹⁾	12.0		4.9		16.9		18.3		2.9		21.2
Television and Other	2.9		2.8		5.7		1.8		4.3		6.1
	$	62.4	$	9.5	$	71.9	$	88.6	$	8.7	$	97.3

___________________


(1)	The three months ended June 30, 2014 includes certain reclassifications to be consistent with the current fiscal year classification, primarily related to Lionsgate UK.

The majority of distribution and marketing expenses relate to the Motion Pictures segment. Theatrical prints and advertising (“P&A”) in the Motion Pictures segment in the three months ended June 30, 2015 of $22.8 million decreased $15.0 million, compared to $37.8 million in the three months ended June 30, 2014. The decrease was primarily driven by lower P&A spending in the three months ended June 30, 2015 on our theatrical slates as a result of fewer wide releases requiring P&A in the current quarter compared to the prior year's quarter, offset partially by higher P&A spending on platform theatrical releases from our Managed Brands category. In the three months ended June 30, 2015, approximately $10.1 million of P&A was incurred in advance for films to be released in subsequent quarters, such as The Hunger Games: Mockingjay - Part 2, American Ultra and The Last Witch Hunter. In the three months ended June 30, 2014, approximately $8.6 million of P&A was incurred in advance for films to be released in subsequent quarters, such as The Expendables 3, The Hunger Games: Mockingjay - Part 1 and Step Up: All In.

Home entertainment distribution and marketing costs on motion pictures and television product in the three months ended June 30, 2015 of $26.5 million decreased $5.7 million, or 17.7%, compared to $32.2 million in the three months ended June 30, 2014. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues were 20.5% in the three months ended June 30, 2015, compared to home entertainment distribution and marketing costs as a percentage of home entertainment revenues of 22.9% in the three months ended June 30, 2014. The decrease in home entertainment distribution and marketing costs as a percentage of home entertainment revenues was primarily due to lower packaged media marketing and distribution costs relative to home entertainment revenue in the three months ended June 30, 2015 as compared to the three months ended June 30, 2014.

International distribution and marketing expenses in the Motion Pictures segment in the three months ended June 30, 2015 of $12.0 million decreased from $18.3 million in the three months ended June 30, 2014.

Gross Segment Contribution

Gross segment contribution is defined as segment revenue less segment direct operating and distribution and marketing expenses. The following table sets forth gross segment contribution for the three months ended June 30, 2015 and 2014:

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	Three Months Ended
	June 30,
	2015				2014				Increase (Decrease)
	Amount		% of Segment Revenues		Amount		% of Segment Revenues		Amount			Percent
	(Amounts in millions)
Gross segment contribution
Motion Pictures	$	83.6	30.4	%	$	96.1	29.0	%	$	(12.5	)	(13.0	)%
Television Production	23.1		17.3		17.1		14.6		6.0			35.1	%
	$	106.7	26.1	%	$	113.2	25.2	%	$	(6.5	)	(5.7	)%

Gross segment contribution of the motion pictures segment for the three months ended June 30, 2015 of $83.6 million decreased $12.5 million, or 13.0%, as compared to the three months ended June 30, 2014. The decrease in gross segment contribution of the motion pictures segment is primarily due to lower motion pictures segment revenue and slightly higher direct operating expenses as a percentage of motion pictures revenue, partially offset by lower distribution and marketing costs for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014.

Gross segment contribution of the television segment for the three months ended June 30, 2015 of $23.1 million increased $6.0 million, as compared to $17.1 million for the three months ended June 30, 2014. The increase in gross segment contribution of the television production segment is due to an increase in television production segment revenues. The gross segment contribution of the television production segment is primarily impacted by the performance and mix of television series and the increase in television episodes delivered in the three months ended June 30, 2015, as compared to the three months ended June 30, 2014.

General and Administrative Expenses

The following table sets forth general and administrative expenses by segment for the three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,						Increase (Decrease)
	2015			2014			Amount			Percent
	(Amounts in millions)
General and administrative expenses
Motion Pictures	$	18.2		$	17.4		$	0.8		4.6	%
Television Production	4.4			3.4			1.0			29.4	%
Shared services and corporate expenses, excluding items below	21.2			22.1			(0.9		)	(4.1	)%
General and administrative expenses before items below:	43.8			42.9			0.9			2.1	%
Share-based compensation expense	16.9			16.3			0.6			3.7	%
Restructuring and other items	—			4.9			(4.9		)	(100.0	)%
Total general and administrative expenses	$	60.7		$	64.1		$	(3.4	)	(5.3	)%
Total general and administrative expenses as a percentage of revenue	14.8		%	14.3		%
General and administrative expenses excluding share-based compensation expense, restructuring and other items, as a percentage of revenue	10.7		%	9.5		%

Total General and Administrative Expenses

General and administrative expenses decreased by $3.4 million, or 5.3%, as reflected in the table above and further discussed below.

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General and administrative expenses of the Motion Pictures segment increased $0.8 million, or 4.6% primarily due to increases in salaries and related expenses and rent and facilities costs.

General and administrative expenses of the Television Production segment increased $1.0 million, or 29.4% primarily due to increases in salaries and related expenses associated with the reorganization of our international sales operations.

Shared services and corporate expenses excluding share-based compensation expense, restructuring and other items decreased $0.9 million, or 4.1%, primarily due to a decrease in incentive compensation, which was partially offset by increases in professional fees and other shared services and corporate expenses.

Share-Based Compensation Expense. The following table sets forth share-based compensation expense included in shared services and corporate expenses for the three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,				Increase (Decrease)
	2015		2014		Amount			Percent
	(Amounts in millions)
Share-based compensation expense:
Stock options	$	9.2	$	8.6	$	0.6		7.0	%
Restricted share units and other share-based compensation	7.4		6.0		1.4			23.3	%
Share appreciation rights	0.3		1.7		(1.4		)	(82.4	)%
	$	16.9	$	16.3	$	0.6		3.7	%

Restructuring and Other Items. Restructuring and other items includes certain unusual items, such as severance and restructuring charges, and certain transaction related costs, when applicable. Amounts in the three months ended June 30, 2014 primarily consist of severance costs associated with the integration of the marketing operations of our Lionsgate and Summit film labels and costs related to the move of our international sales and distribution organization to the United Kingdom. Approximately $1.2 million of the costs were non-cash charges resulting from the acceleration of vesting of stock awards.

Depreciation, Amortization and Other Expenses (Income)

Depreciation and amortization was $1.8 million in the three months ended June 30, 2015, compared to $1.3 million in the three months ended June 30, 2014.

Interest expense of $12.6 million for the three months ended June 30, 2015 decreased $0.4 million, or 3.1%, from $13.0 million in the three months ended June 30, 2014. The following table sets forth the components of interest expense for the three months ended June 30, 2015 and 2014:



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in millions)
Interest Expense
Cash Based:
Senior revolving credit facility	$	0.9	$	1.4
Convertible senior subordinated notes	0.5		1.0
5.25% Senior Notes	3.0		3.0
Term Loans	4.9		2.8
Other	1.0		1.3
	10.3		9.5
Non-Cash Based:
Amortization of discount and deferred financing costs	2.3		3.5
	$	12.6	$	13.0

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Interest and other income was $0.6 million in the three months ended June 30, 2015, compared to $1.0 million in the three months ended June 30, 2014.

The following table represents our portion of the income or (loss) of our equity method investees based on our percentage ownership for the three months ended June 30, 2015 and 2014:



	June 30, 2015	Three Months Ended
	June 30, 2015	June 30,
	Ownership Percentage	2015			2014
		(Amounts in millions)
EPIX⁽¹⁾	31.2%	$	13.1		$	8.5
Pop⁽¹⁾	50.0%	(0.4		)	(2.2		)
Other Equity Method Investments⁽²⁾	Various	(1.3		)	11.9
		$	11.4		$	18.2

______________________

(1)

We license certain of our theatrical releases and other films and television programs to EPIX and Pop. A portion of the profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity interest income (loss) of the venture. These profits are recognized as they are realized by the venture (see Note 3 to our unaudited condensed consolidated financial statements).


(2)	On April 14, 2014, we sold all of our 34.5% interest in FEARnet, which resulted on a gain on sale of $11.4 million in the three months ended June 30, 2014 included in our Other Equity Method Investments income shown above. See Note 3 to our unaudited condensed consolidated financial statements.

Income Tax Provision

We had an income tax expense of $2.8 million, or 6.5%, of income before income taxes (i.e., effective rate) in the three months ended June 30, 2015, compared to an expense of $10.8 million, or 19.9%, of income before income taxes in the three months ended June 30, 2014. Our effective tax rate excluding certain unusual and discrete items for the three months ended June 30, 2015 was 6.0%, compared to 20.0% for the three months ended June 30, 2014. The decrease in our effective tax rate in the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 reflects the implementation of certain business and financing strategies in and among our operations in the various tax jurisdictions in which we operate.

Our effective tax rate differs from the federal statutory rate and has changed from the prior period and could fluctuate significantly in the future, as our effective tax rates are affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which we operate, changes in tax laws and regulations in those jurisdictions, changes in valuation allowances on our deferred tax assets, tax planning strategies available to us and other discrete items.

We expect that with the utilization of our net operating loss carryforwards and other tax attributes, our cash tax requirements will not increase significantly in fiscal 2016 as compared to fiscal 2015.

Net Income

Net income for the three months ended June 30, 2015 was $40.7 million, or basic net income per common share of $0.28 on 147.6 million weighted average common shares outstanding and diluted net income per common share of $0.26 on 157.5 million weighted average common shares outstanding. This compares to net income for the three months ended June 30, 2014 of $43.3 million, or basic net income per common share of $0.31 on 138.5 million weighted average common shares outstanding and diluted net income per common share of $0.30 on 152.2 million weighted average common shares outstanding.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Our liquidity and capital resources have been provided principally through cash generated from operations, corporate debt, and our production loans. Our corporate debt at June 30, 2015 primarily consisted of our senior revolving credit facility, 5.25% Senior Notes, Term Loan Due 2022, and our convertible senior subordinated notes.

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Our principal uses of cash in operations include the funding of film and television productions, film rights acquisitions, and the distribution and marketing of films and television programs. We also use cash for debt service (i.e. principal and interest payments) requirements, equity or cost method investments, quarterly cash dividends, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of businesses.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

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, quarterly cash dividends and debt service (i.e. principal and interest payments) requirements for the foreseeable future, including the funding of future film and television production, film rights acquisitions and theatrical and video release schedules, and future equity or cost method investment funding requirements, and the purchase of common shares under our share repurchase program. 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, 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. If additional financing beyond our existing cash flows from operations and credit facilities cannot fund such transactions, there is no assurance that such financing will be available on terms acceptable to us. We may also dispose of businesses or assets, including individual films or libraries, and use the net proceeds from such dispositions to fund operations or such acquisitions, or to repay debt.

Share Repurchase Plan. On December 17, 2013, our Board of Directors authorized to increase our previously announced share repurchase plan from a total authorization of $150 million to $300 million. Since the December 17, 2013 increase in share repurchase authorization, through June 30, 2015, we have repurchased a total of 5.3 million common shares for an aggregate price of $144.8 million (weighted average repurchase price of $27.11 per share). As a result of these repurchases, the Company has $89.9 million of remaining capacity in its $300 million share repurchase plan as of June 30, 2015.

Dividends. On June 15, 2015, our Board of Directors declared a quarterly cash dividend of $0.07 per common share payable on August 7, 2015, to shareholders of record as of June 30, 2015. The amount of dividends, if any, that we pay to our shareholders is determined by our Board of Directors, at its discretion, and is dependent on a number of factors, including our financial position, results of operations, cash flows, capital requirements and restrictions under our credit agreements, and shall be in compliance with applicable law. We cannot guarantee the amount of dividends paid in the future, if any.

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Discussion of Operating, Investing, Financing Cash Flows

Cash and cash equivalents increased by $95.2 million for the three months ended June 30, 2015 and increased by $24.7 million for the three months ended June 30, 2014, before foreign exchange effects on cash. Components of these changes are discussed below in more detail.

Operating Activities. Cash flows used in operating activities for the three months ended June 30, 2015 and 2014 were as follows:



	Three Months Ended
	June 30,
	2015			2014			Net Change
	(Amounts in thousands)
Operating income	$	44,165		$	47,764		$	(3,599	)
Amortization of films and television programs	160,419			158,808			1,611
Non-cash share-based compensation	16,591			16,537			54
Cash interest	(10,371		)	(9,442		)	(929		)
Current income tax provision	(2,053		)	(5,654		)	3,601
Other non-cash charges included in operating activities	2,430			8,594			(6,164		)
Cash flows from operations before changes in operating assets and liabilities	211,181			216,607			(5,426		)

Changes in operating assets and liabilities:
Accounts receivable, net	134,173			169,514			(35,341		)
Investment in films and television programs	(315,861		)	(263,851		)	(52,010		)
Other changes in operating assets and liabilities	(60,376		)	(134,904		)	74,528
Changes in operating assets and liabilities	(242,064		)	(229,241		)	(12,823		)
Net Cash Flows Used In Operating Activities	$	(30,883	)	$	(12,634	)	$	(18,249	)

Cash flows used in operating activities for the three months ended June 30, 2015 were $30.9 million compared to cash flows used in operating activities for the three months ended June 30, 2014 of $12.6 million. The increase in cash used in operating activities for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 is primarily due to increases in investment in films and television programs production activity, including the production of The Divergent Series: Allegiant - Part 1, Deepwater Horizon and Nerve, lower increases in accounts receivable, partially offset by lower decreases from changes in other operating assets and liabilities primarily driven by increases in participations and residuals, lower decreases in film obligations and increases in deferred revenue as compared to the three months ended June 30, 2014.

Investing Activities. Cash flows provided by (used in) investing activities for the three months ended June 30, 2015 and 2014 were as follows:



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands)
Proceeds from the sale of equity method investees	$	—		$	14,575
Investment in equity method investees	(800		)	(9,650		)
Purchases of property and equipment	(3,248		)	(1,427		)
Net Cash Flows Provided By (Used In) Investing Activities	$	(4,048	)	$	3,498

Cash used in investing activities of $4.0 million for the three months ended June 30, 2015 compared to cash provided by investing activities of $3.5 million for the three months ended June 30, 2014, as reflected above. The change was primarily due to lower proceeds from the sale of equity method investees in the three months ended June 30, 2015, due to the sale of our interest in FEARnet in the three months ended June 30, 2014. In addition, investments in equity method investees decreased in the current quarter as compared to the prior year's quarter, primarily related to investments in Pop ($0.8 million in the current

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quarter compared to $7.5 million in the prior year's quarter) (see Note 3 to our unaudited condensed consolidated financial statements).

Financing Activities. Cash flows provided by financing activities for the three months ended June 30, 2015 and 2014 were as follows:



	Three Months Ended
	June 30,
	2015			2014
	(Amounts in thousands)
Senior revolving credit facility - borrowings	$	—		$	170,000
Senior revolving credit facility - repayments	—			(183,619		)
Net repayments of senior revolving credit facility	—			(13,619		)

Term Loan - borrowings, net of deferred financing costs of $616	24,384			—
Convertible senior subordinated notes - repurchases	(5		)	(16		)
Net proceeds from (repayments of) corporate debt	24,379			(13,635		)

Production loans - borrowings	203,087			207,953
Production loans - repayments	(74,276		)	(36,859		)
Net proceeds from production loans	128,811			171,094

Repurchase of common shares	—			(109,529		)
Other financing activities	(23,106		)	(14,136		)
Net Cash Flows Provided By Financing Activities	$	130,084		$	33,794

Cash flows provided by financing activities of $130.1 million for the three months ended June 30, 2015 increased from cash provided by financing activities of $33.8 million for the three months ended June 30, 2014. Cash flows provided by financing activities for the three months ended June 30, 2015 primarily reflects production loan borrowings in order to fund productions and production loan repayments, and net proceeds of $24.4 million from additional borrowings under the Term Loan Due 2022, offset by cash used for other financing activities which includes dividend payments of $10.2 million and tax withholding of $16.1 million required on equity awards offset by the proceeds from the exercise of stock options.

Cash flows provided by financing activities for the three months ended June 30, 2014 primarily reflects net borrowings under production loans of $171.1 million, offset by net repayments of our senior revolving credit facility of $13.6 million, and cash used for share repurchases and other financing activities which includes dividend payments and tax withholding required on equity awards.

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Corporate Debt

See Note 5 to our unaudited condensed consolidated financial statements for a discussion of our corporate debt. The principal amounts outstanding under our corporate debt as of June 30, 2015 and March 31, 2015 were as follows:



	Maturity Date	Conversion Price Per Share as of June 30, 2015	Principal Amounts Outstanding
			June 30,		March 31,
			2015		2015
			(Amounts in thousands)
Senior revolving credit facility⁽¹⁾	September 2017	N/A	$	—	$	—
5.25% Senior Notes⁽²⁾	August 2018	N/A	225,000		225,000
Term Loan Due 2022⁽²⁾	March 2022	N/A	400,000		375,000
Principal amounts of convertible senior subordinated notes
April 2009 3.625% Notes	N/A	N/A	—		16,167
January 2012 4.00% Notes	January 2017	$10.36	41,850		41,850
April 2013 1.25% Notes	April 2018	$29.59	60,000		60,000
			$	726,850	$	718,017

______________________

(1)

Senior Revolving Credit Facility: The senior revolving credit facility provides for borrowings up to $800.0 million, limited by a borrowing base and also reduced by outstanding letters of credit. At June 30, 2015, there was $800.0 million available (March 31, 2015 — $800.0 million). Interest is payable at an alternative base rate, as defined, plus 1.5% or LIBOR plus 2.5% as designated by us. We are required to pay a quarterly commitment fee of 0.375% to 0.5% per annum on our unused capacity for the period. Obligations 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 covenants, and as of June 30, 2015, we were in compliance with all applicable covenants.


(2)	5.25% Senior Notes: The 5.25% Senior Notes contain a number of certain restrictions and covenants, and as of June 30, 2015, we were in compliance with all applicable covenants. Interest is payable semi-annually on February 1 and August 1 of each year at a rate of 5.25% per year.


(3)	Term Loan Due 2022: The Term Loan Due 2022 contains a number of certain restrictions and covenants, and as of June 30, 2015, we were in compliance with all applicable covenants. Interest is payable on the last business day of each April, July, October and January at a rate of 5.00% per year.

Convertible Senior Subordinated Notes Conversions. During the three months ended June 30, 2015 and 2014, there were various conversions of our convertible senior subordinated notes. The table below summarizes the total principal amount converted, common shares issued upon conversion and weighted average conversion price per share (see Note 5 to our unaudited condensed consolidated financial statements for detailed information by debt instrument):



	Three Months Ended
	June 30,
	2015		2014
	(Amounts in thousands, except share amounts)
Principal amount converted	$	16,162	$	109
Common shares issued upon conversion	1,983,058		9,846
Weighted average conversion price per share	$	8.15	$	11.07

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Production Loans

The amounts outstanding under our production loans as of June 30, 2015, and March 31, 2015 were as follows:



	June 30,		March 31,
	2015		2015
	(Amounts in thousands)

Production loans⁽¹⁾	$	729,755	$	600,944

______________________


(1)	Represents individual loans for the production of film and television programs that we produce. Production loans have contractual repayment dates either at or near the expected film or television program completion date, with the exception of certain loans containing repayment dates on a longer term basis, and incur interest at rates ranging from 3.29% to 3.54%.

Table of Debt and Contractual Commitments

The following table sets forth our future annual repayment of debt, and our contractual commitments as of June 30, 2015:



	Nine Months Ended March 31,		Year Ended March 31,
	2016		2017		2018		2019		2020		Thereafter		Total
					(Amounts in thousands)
Future annual repayment of debt recorded as of June 30, 2015 (on-balance sheet arrangements)
Senior revolving credit facility	$	—	$	—	$	—	$	—	$	—	$	—	$	—
5.25% Senior Notes	—		—		—		225,000		—		—		225,000
Term Loan Due 2022	—		—		—		—		—		400,000		400,000
Film obligations and production loans⁽¹⁾	291,557		482,073		2,000		1,000		—		—		776,630
Principal amounts of convertible senior subordinated notes	—		41,850		—		60,000		—		—		101,850
	291,557		523,923		2,000		286,000		—		400,000		1,503,480
Contractual commitments by expected repayment date (off-balance sheet arrangements)
Film obligation and production loan commitments⁽²⁾	244,490		187,522		53,736		—		—		—		485,748
Interest payments⁽³⁾	31,418		34,237		32,563		26,281		20,000		42,444		186,943
Operating lease commitments	9,831		12,759		12,530		12,873		13,212		48,644		109,849
Other contractual obligations	57,059		34,883		14,380		3,374		2		—		109,698
	342,798		269,401		113,209		42,528		33,214		91,088		892,238
Total future commitments under contractual obligations	$	634,355	$	793,324	$	115,209	$	328,528	$	33,214	$	491,088	$	2,395,718

___________________


(1)	Film obligations include minimum guarantees and theatrical marketing obligations. Production loans represent loans for the production of film and television programs that we produce. Repayment dates are based on anticipated delivery or release date of the related film or contractual due dates of the obligation.

(2)

Film obligation commitments include distribution and marketing commitments and minimum guarantee commitments. 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. Minimum guarantee commitments represent contractual commitments related to the purchase of film rights for pictures to be delivered in the future. 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 when incurred. Future payments under these commitments are based on anticipated delivery or

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release dates of the related film or contractual due dates of the commitment. The amounts include future interest payments associated with the commitment.


(3)	Includes cash interest payments on our corporate debt, excluding the interest payments on the senior revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

Theatrical Slate Participation

On March 10, 2015, we entered into a theatrical slate participation arrangement with TIK Films (U.S.), Inc. and TIK Films (Hong Kong) Limited (collectively, "TIK Films"), both wholly owned subsidiaries of Hunan TV & Broadcast Intermediary Co. Ltd. Under the arrangement, TIK Films, in general and subject to certain limitations including per picture and annual caps, will contribute a minority share of 25% of our production or acquisition costs of “qualifying” theatrical feature films, released during the three-year period ending January 23, 2018, and participate 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 arrangement excludes among others, any theatrical feature film incorporating any elements from the Twilight, Hunger Games, or Divergent franchises. The percentage of the contribution could vary on certain pictures.

Amounts provided from TIK Films are reflected as a participation liability in our consolidated balance sheet and amounted to $24.9 million at June 30, 2015 (March 31, 2015 - $13.6 million). The difference between the ultimate participation expected to be paid to TIK Films and the amount provided by TIK Films is amortized as a charge to or a reduction of participation expense under the individual-film-forecast method.

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 June 30, 2015 and March 31, 2015 was $1.3 billion and $1.1 billion, respectively.

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 table above.

Item 3. 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 June 30, 2015, we had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 17 months from June 30, 2015):

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June 30, 2015
Foreign Currency	Foreign Currency Amount			US Dollar Amount		Weighted Average Exchange Rate Per $1 USD
	(Amounts in millions)			(Amounts in millions)
British Pound Sterling		£9.7	in exchange for		$14.8	£0.65
Australian Dollar		A$56.8	in exchange for		$50.6	A$1.12
Euro		€1.5	in exchange for		$1.7	€0.93
Canadian Dollar		C$3.9	in exchange for		$3.2	C$1.20

Changes in the fair value representing a net unrealized fair value gain (loss) on foreign exchange contracts that qualified as effective hedge contracts outstanding during the three months ended June 30, 2015 were gains of less than $0.1 million (2014 - losses of $0.8 million), and are included in accumulated other comprehensive loss, a separate component of shareholders’ equity. Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that did not qualify as effective hedge contracts outstanding during the three months ended June 30, 2015 were $0.1 million (2014 - nil) and are included in direct operating expenses in the consolidated statement of income. These contracts are entered into with major financial institutions as counterparties. 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. Certain of our borrowings, primarily borrowings under our amended and restated senior revolving credit facility and certain production loans, 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 amended and restated senior revolving credit facility is a percentage per annum equal to 2.50% plus an adjusted rate based on LIBOR. Assuming the amended and restated senior revolving credit facility is drawn up to its maximum borrowing capacity of $800 million, based on the applicable LIBOR in effect as of June 30, 2015, each quarter point change in interest rates would result in a $2.0 million change in annual interest expense on the amended and restated senior revolving credit facility.

The variable interest production loans incur interest at rates ranging from approximately 3.29% to 3.54% and applicable margins ranging from 2.5% over the one, two, three, or six-month LIBOR to 3.0% over the one, three or six-month LIBOR. A quarter point increase of the interest rates on the outstanding principal amount of our variable rate production loans would result in $1.8 million in additional costs capitalized to the respective film or television asset.

At June 30, 2015, our 5.25% Senior Notes, Term Loan Due 2022 and convertible senior subordinated notes had an aggregate outstanding carrying value of $723.5 million, and an estimated fair value of $728.1 million. A 1% increase or decrease in the level of interest rates would increase or decrease the fair value of the 5.25% Senior Notes, Term Loan Due 2022 and convertible senior subordinated notes by approximately $30.3 million and $32.2 million, respectively.

The following table presents our financial instruments that are sensitive to changes in interest rates. The table also presents the cash flows of the principal amounts of the financial instruments with the related weighted-average interest rates by expected maturity dates and the fair value of the instrument as of June 30, 2015:

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	Nine Months Ended March 31,			Year Ended March 31,															Fair Value
	2016			2017			2018		2019			2020		Thereafter			Total		June 30, 2015
							(Amounts in thousands)
Variable Rates:
Senior Revolving Credit Facility⁽¹⁾	$	—		$	—		$	—	$	—		$	—	$	—		$	—	$	—
Average Interest Rate	—			—			—		—			—		—
Production loans⁽²⁾	250,646			479,109			—		—			—		—			729,755		729,755
Average Interest Rate	3.33		%	3.29		%	—		—			—		—
Fixed Rates:
5.25% Senior Notes⁽³⁾	—			—			—		225,000			—		—			225,000		231,750
Average Interest Rate	—			—			—		5.25		%	—		—
Term Loan Due 2022⁽⁴⁾	—			—			—		—			—		400,000			400,000		400,500
Average Interest Rate	—			—			—		—			—		5.00		%
Principal Amounts of Convertible Senior Subordinated Notes:
January 2012 4.00% Notes	—			41,850			—		—			—		—			41,850		42,140
Average Interest Rate	—			4.00		%	—		—			—		—
April 2013 1.25% Notes	—			—			—		60,000			—		—			60,000		53,710
Average Interest Rate	—			—			—		1.25		%	—		—
	$	250,646		$	520,959		$	—	$	285,000		$	—	$	400,000		$	1,456,605	$	1,457,855

____________________


(1)	Amended and restated senior revolving credit facility, which expires September 27, 2017 and bears interest of 2.50% over the Adjusted LIBOR rate.


(2)	Represents amounts owed to film production entities on anticipated delivery date or release date of the titles or the contractual due dates of the obligation, that incur interest at rates ranging from approximately 3.29% to 3.54%.


(3)	Senior secured second-priority notes with a fixed interest rate equal to 5.25%.


(4)	Term Loan maturing on March 17, 2022 with a fixed interest rate equal to 5.00%.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods specified in the SEC’s 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.

As of June 30, 2015, the end of the period covered by this report, the Company 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 Rule 13a-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective as of June 30, 2015.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, the Company, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, also evaluated whether any changes occurred to the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, such control. Based on that evaluation, there has been no such change during the period covered by this report.

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PART II

Item 1. Legal Proceedings.

From time to time, the Company is 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 legal proceedings in which the Company is currently involved will have a material adverse effect on the Company's consolidated financial position, results of operations or cash flow.

For a discussion of certain claims and legal proceedings, see Note 14 - Contingencies to our unaudited condensed consolidated financial statements, which discussion is incorporated by reference into this Part II, Item 1, Legal Proceedings.

Item 1A. Risk Factors.

Other than as set forth below, there were no other material changes to the risk factors previously reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015.

If our level of corporate debt increases, it could adversely affect our ability to raise additional capital to fund our operations, require us to dedicate substantial capital to servicing our debt obligations, expose us to interest rate risk, limit our ability to pursue strategic business opportunities, affect our ability to react to changes in the economy or our industry and prevent us from meeting our debt obligations.

As of June 30, 2015, our corporate debt was $726.9 million (carrying value - $723.5 million). In addition, our production loan obligations were $729.8 million.

On July 19, 2013, we redeemed $432.0 million of our 10.25% Senior Secured Second-Priority Notes (the “10.25% Senior Notes”), issued $225.0 million of our 5.25% Senior Secured Second-Priority Notes (the “5.25% Senior Notes”) and borrowed $225.0 million under our Second Lien Credit and Guarantee Agreement dated July 19, 2013 (the “Term Loan Due 2020”). On March 17, 2015, we redeemed the Term Loan Due 2020 and borrowed $375 million under our Second Lien Credit and Guarantee Agreement dated March 17, 2015 (the "Term Loan Due 2022"). On March 17, 2015, the April 2009 3.625% Notes were called for redemption and in April 2015, the holders of the notes converted substantially all of the outstanding principal amounts into common shares. On May 4, 2015, we amended the Term Loan Due 2022 to increase the aggregate principal amount to $400 million.

A 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, production and distribution, debt service requirements, acquisitions or general corporate or other purposes, or limit our ability to obtain such financing on terms acceptable to us;


•	a 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 funding motion picture and television production, development and distribution and other operating expenses, 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 secured credit facilities 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;


•	it may limit our ability to pursue strategic acquisitions and other business opportunities that may be in our best interests;


•	we may be vulnerable to a downturn in general economic conditions or in our business; and/or


•	we may be unable to carry out capital spending that is important to our growth.

Despite our current indebtedness levels, we and our subsidiaries may be able to incur additional debt in the future.

Although each of our credit facilities and the indentures governing our senior secured notes contains covenants that, among other things, limit our ability to incur additional indebtedness, including guarantees, make restricted payments and investments, and

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grant liens on our assets, the covenants contained in such debt documents provide a number of important exceptions and thus, do not prohibit us or our subsidiaries from doing so. Such exceptions will provide us substantial flexibility to incur indebtedness, grant liens and expend funds to operate our business. For example, under the terms of the indenture governing our senior secured notes (i) with few restrictions, we may incur indebtedness in connection with certain film and television financing arrangements, including without limitation, purchasing or acquiring rights in film or television productions or financing print and advertising expenses, and such indebtedness may be secured by liens senior to the liens in respect of our senior secured notes, and (ii) in limited circumstances, we may make investments in assets that are not included in the borrowing base supporting our senior secured notes, in each case, without having to meet the leverage ratio tests for debt incurrence or to fit such investments within the restricted payments “build up basket” or within other categories of funds applicable to making investments and other restricted payments under the indenture governing our senior secured notes.

In addition, we may incur additional indebtedness through our senior secured credit facility. We may borrow up to $800 million under the senior secured credit facility. At June 30, 2015, we have no borrowings under our senior secured credit facility, and no letters of credit outstanding. We could borrow some or all of the remaining permitted amount in the future. The amount we have available to borrow under this facility 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 new debt is added to our and our subsidiaries' existing debt levels, this has the potential to magnify the risks discussed above relating to our ability to service our indebtedness and the potential adverse impact our high level of indebtedness could have on us.

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 July 20, 2015, three of our shareholders, Mark H. Rachesky, M.D., Capital World Investors, and Capital Research Global Investors, and their respective affiliates, beneficially owned approximately 27.2 %, 5.8% and 5.4%, 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 holders of our senior secured notes and our convertible senior subordinated notes may require us to repurchase all or a portion of such notes upon a change in control and the holders of our 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 secured credit facilities from repurchasing all of the notes tendered by holders upon a change in control. Our failure to repurchase our senior secured notes upon a change in control would cause a default under the indentures governing the senior secured notes and the convertible senior subordinated notes and a cross-default under our secured credit facilities.

Our secured credit facilities also provide that a change in control, which includes a person or group acquiring ownership or control in excess of 50% 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 senior secured notes and convertible senior subordinated notes. Any of our future debt agreements may contain similar provisions

Certain shareholders own a substantial amount of our outstanding common shares.

As of July 20, 2015, three of our shareholders beneficially owned an aggregate of 56,832,076 of our common shares, or approximately 38.4% of the outstanding shares. In addition, one of these shareholders, Mark H. Rachesky, M.D., the beneficial owner of approximately 27.2% of our outstanding common shares, currently serves as the Chairman of our Board of Directors. Accordingly, these three 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.

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As of July 20, 2015, approximately 27.2% of our common shares were held beneficially by certain individuals and institutional investors who each had ownership of equal to or greater than 5% of our common shares. We also filed a resale registration statement to enable certain shareholders who received our common shares in connection with our acquisition of Summit Entertainment in January 2012 and certain holders of debt convertible into our common shares, to resell 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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Securities

On May 31, 2007, our Board of Directors authorized the repurchase of up to $50 million of our common shares. On each of May 29, 2008 and November 6, 2008, our Board of Directors authorized additional repurchases up to an additional $50 million of our common shares. Thereafter, on December 17, 2013, our Board of Directors authorized the Company to further increase its stock repurchase plan to $300 million. To date, approximately $210.1 million of the Company’s common shares have been purchased, leaving approximately $89.9 million of authorized potential purchases. The remaining $89.9 million of the Company’s common shares may be purchased from time to time at the Company’s discretion, including quantity, timing and price thereof, and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal requirements.

During the period from the authorization date through June 30, 2015, 5,342,218 common shares have been repurchased at a cost of approximately $144.8 million, including commission costs. The share repurchase program has no expiration date.

The following table sets forth information with respect to shares of our common stock purchased by us during the three months ended June 30, 2015:



ISSUER PURCHASES OF EQUITY SECURITIES
Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2015 - April 30, 2015	—	$	—	—	$	89,931,883
May 1, 2015 - May 31, 2015	—	$	—	—	$	89,931,883
June 1, 2015 - June 30, 2015	—	$	—	—	$	89,931,883
Total	—	$	—	—	$	89,931,883

Additionally, during the three months ended June 30, 2015, 444,349 common shares were withheld upon the vesting of restricted share units and share issuances to satisfy minimum statutory federal, state and local tax withholding obligations.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None

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Item 6. Exhibits.



Exhibit
Number		Description of Documents
3.1(1)		Articles
3.2(2)		Notice of Articles
3.3(3)		Vertical Short Form Amalgamation Application
3.4(3)		Certificate of Amalgamation
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
101		The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholders' Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements

__________________________


(1)	Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2005 as filed on June 29, 2005.


(2)	Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2010 as filed on February 9, 2011.


(3)	Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 as filed on May 30, 2007.

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SIGNATURES

Pursuant to the requirements 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.




	LIONS GATE ENTERTAINMENT CORP.
	By:	/s/ JAMES W. BARGE
		Name:	James W. Barge
DATE: August 6, 2015		Title:	Duly Authorized Officer and Chief Financial Officer

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