LIONS GATE ENTERTAINMENT CORP /CN/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - PRESS RELEASE - February 4, 2016

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Exhibit 99.1

LIONSGATE REPORTS RESULTS FOR THIRD QUARTER 2016

Revenue is $670.5 Million; Net Income Attributable to Lionsgate Shareholders is $40.7 Million or EPS of $0.27; Adjusted EBITDA is $53.6 Million

Free Cash Flow Increases to $73.9 Million

Company Pays Quarterly Cash Dividend of $0.09 per Common Share

SANTA MONICA, CA and VANCOUVER, BC, February 4, 2016 - Lionsgate (NYSE: LGF) today reported revenue of $670.5 million, adjusted EBITDA of $53.6 million, adjusted net income attributable to Lionsgate shareholders of $66.8 million or adjusted EPS of $0.45, and net income attributable to Lionsgate shareholders of $40.7 million or EPS of $0.27 for the fiscal 2016 third quarter ended December 31, 2015. Free cash flow in the quarter rose to $73.9 million.

“While the performance of our theatrical film slate resulted in softer than anticipated results, our other businesses performed strongly in the quarter,” said Lionsgate Chief Executive Officer Jon Feltheimer. “With our television business continuing its robust topline and margin growth, a deeper and more diversified film slate with lower costs and contributions anticipated from recently launched businesses, we have a clear path to resume our strong and sustainable financial trajectory in fiscal 2017.”

Adjusted net income attributable to Lionsgate shareholders of $66.8 million or $0.45 adjusted EPS for the quarter compared to adjusted net income attributable to Lionsgate shareholders of $110.0 million or adjusted EPS of $0.79 in the prior year quarter. Adjusted EBITDA of $53.6 million compared to adjusted EBITDA of $146.8 million in the prior year quarter.

Net income attributable to Lionsgate shareholders for the quarter was $40.7 million or EPS of $0.27 on 149.5 million weighted average number of common shares outstanding compared to net income attributable to Lionsgate shareholders of $98.2 million or EPS of $0.70 on 140.0 million weighted average number of common shares outstanding during the prior year quarter.

Free cash flow of $73.9 million in the quarter increased from negative free cash flow of $4.6 million in the prior year quarter.

Revenue of $670.5 million for the quarter compared to revenue of $751.3 million in the prior year quarter.

Revenue, adjusted EBITDA and EPS in the quarter declined from the prior year quarter due to the performance of the theatrical film slate. Although The Hunger Games: Mockingjay 2 grossed over $650 million at the global box office, ranking it among the highest-grossing films of the year, its box office performance declined from Mockingjay 1 with higher Mockingjay 2 production costs also impacting its profitability.

During the quarter, the Company declared a quarterly cash dividend of $0.09 per common share payable on February 5, 2016 to shareholders of record as of December 31, 2015.

Lionsgate’s filmed entertainment backlog, or already contracted future revenue not yet recorded, was approximately $1.3 billion at December 31, 2015, increasing from $1.2 billion at September 30, 2015.


1


Overall Motion Picture segment revenue for the quarter was $505.8 million compared to $590.1 million in the prior year quarter. Although theatrical revenue of $183.1 million was comparable to $186.4 million in the prior year quarter, margins were lower due in part to theatrical P&A expenses associated with four wide film releases in the quarter compared to two wide film releases in the prior year quarter.

Lionsgate’s home entertainment revenue from motion picture and television production for the quarter was $142.0 compared to $183.1 million in the prior year quarter, reflecting the composition and timing of the slate of wide release theatrical titles. This offset increased home entertainment revenue from television production in the quarter.

Television revenue included in the Motion Picture segment of $48.6 million in the quarter compared to $82.9 million in the prior year quarter due to timing of titles with television windows opening in the period. The Hunger Games opened in its network television window in the prior year quarter.

International Motion Picture segment revenue of $140.1 million for the quarter compared to $142.1 million in the prior year quarter. 

Television production segment revenue of $164.7 million increased from $161.2 million in the prior year quarter. Margins in the Company’s television business continued their growth trajectory in the quarter. Domestic television revenues were affected by timing of deliveries in the quarter. Deliveries of the critically-acclaimed hit series Orange is the New Black, Nashville, and The Royals are expected to drive strong growth in the fourth quarter along with the first full quarter of results from Pilgrim Studios, in which Lionsgate acquired a majority stake in November 2015.

Lionsgate senior management will hold its analyst and investor conference call to discuss its fiscal 2016 third quarter financial results at 9:00 A.M. ET/6:00 A.M. PT tomorrow, Friday, February 5. Interested parties may participate live in the conference call by calling 1-800-288-8974 (612-332-1213 outside the U.S. and Canada).  A full digital replay will be available from Friday morning, February 5, through Friday, February 12, by dialing 1-800-475-6701 (320-365-3844 outside the U.S. and Canada) and using access code 383600.

ABOUT LIONSGATE

Lionsgate 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, new channel platforms, video games and international distribution and sales. The Company currently has 80 television shows on 40 different networks spanning its primetime production, distribution and syndication businesses, including such critically-acclaimed hits as Orange is the New Black, the broadcast network series Nashville, the syndication success The Wendy Williams Show, the breakout comedy The Royals and the Golden Globe-nominated dramedy Casual.

Its feature film business has been fueled by such successes as the blockbuster Hunger Games franchise, the first two installments of the Divergent franchise, Sicario, John Wick, Now You See Me, CBS Films/Lionsgate’s The Duff, Roadside Attractions’ Love & Mercy and Mr. Holmes and Pantelion Films’ Instructions Not Included, the highest-grossing Spanish-language film ever released in the U.S.

Lionsgate's home entertainment business is an industry leader in box office-to-DVD and box office-to-VOD revenue conversion rate. The Company handles a prestigious and prolific library of approximately 16,000 motion picture and television titles that is an important source of recurring revenue and serves as the foundation for the growth of the Company's core businesses. The Lionsgate and Summit brands remain synonymous with original, daring, quality entertainment in markets around the world.

***
For further information, please contact:
Peter D. Wilkes

2


310-255-3726
pwilkes@lionsgate.com

The matters discussed in this press release include forward-looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films and television series, budget overruns, limitations imposed by our credit facility and notes, unpredictability of the commercial success of our motion pictures and television programming, the cost of defending our intellectual property, difficulties in integrating acquired businesses, risks related to our acquisition strategy and integration of acquired businesses, the effects of disposition of businesses or assets, technological changes and other trends affecting the entertainment industry, and the risk factors as set forth in Lionsgate’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the “SEC”) on February 4, 2016, which risk factors are incorporated herein by reference. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.


3


LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 
December 31,
2015
 
March 31,
2015
 
(Amounts in thousands,
except share amounts)
ASSETS
 
 
 
Cash and cash equivalents
$
88,292

 
$
102,697

Restricted cash
2,650

 
2,508

Accounts receivable, net of reserves for returns and allowances of $52,613 (March 31, 2015 - $64,362) and provision for doubtful accounts of $5,245 (March 31, 2015 - $4,120)
943,998

 
891,880

Investment in films and television programs, net
1,561,968

 
1,381,829

Property and equipment, net
41,914

 
26,651

Investments
475,109

 
438,298

Goodwill
534,143

 
323,328

Other assets
84,822

 
74,784

Deferred tax assets
105,503

 
50,114

Total assets
$
3,838,399

 
$
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
327,828

 
332,473

Participations and residuals
549,985

 
471,661

Film obligations and production loans
895,558

 
656,755

Convertible senior subordinated notes
99,508

 
114,126

Deferred revenue
295,971

 
274,787

Total liabilities
2,793,850

 
2,449,802

Commitments and contingencies

 

Redeemable noncontrolling interest
89,175

 
—

SHAREHOLDERS’ EQUITY
 
 
 
Common shares, no par value, 500,000,000 shares authorized, 150,252,445 shares issued (March 31, 2015 - 145,532,978 shares)
951,360

 
830,786

Retained earnings
7,673

 
13,720

Accumulated other comprehensive loss
(3,659
)
 
(2,219
)
Total shareholders’ equity
955,374

 
842,287

Total liabilities and shareholders’ equity
$
3,838,399

 
$
3,292,089







4


LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
 
Three Months Ended
 
Nine Months Ended
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
(Amounts in thousands, except per share amounts)
Revenues
$
670,522

 
$
751,299

 
$
1,556,222

 
$
1,753,558

Expenses:
 
 
 
 
 
 
 
Direct operating
404,068

 
400,576

 
927,188

 
945,840

Distribution and marketing
203,121

 
171,439

 
428,185

 
421,637

General and administration
70,083

 
61,407

 
198,372

 
186,975

Depreciation and amortization
2,970

 
1,708

 
7,320

 
4,685

Total expenses
680,242

 
635,130

 
1,561,065

 
1,559,137

Operating income (loss)
(9,720
)
 
116,169

 
(4,843
)
 
194,421

Other expenses (income):
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
Cash interest
11,833

 
10,567

 
32,561

 
29,546

Amortization of debt discount and deferred financing costs
2,336

 
2,984

 
6,863

 
10,048

Total interest expense
14,169

 
13,551

 
39,424

 
39,594

Interest and other income
(521
)
 
(623
)
 
(1,676
)
 
(2,188
)
Loss on extinguishment of debt
—

 
690

 
—

 
1,276

Total other expenses, net
13,648

 
13,618

 
37,748

 
38,682

Income (loss) before equity interests and income taxes
(23,368
)
 
102,551

 
(42,591
)
 
155,739

Equity interests income
10,826

 
10,898

 
29,363

 
37,353

Income (loss) before income taxes
(12,542
)
 
113,449

 
(13,228
)
 
193,092

Income tax provision (benefit)
(45,140
)
 
15,264

 
(44,441
)
 
30,865

Net income
32,598

 
98,185

 
31,213

 
162,227

Less: Net loss attributable to noncontrolling interest
8,119

 
—

 
8,119

 
—

Net income attributable to Lions Gate Entertainment Corp. shareholders
$
40,717

 
$
98,185

 
$
39,332

 
$
162,227

 
 
 
 
 
 
 
 
Per share information attributable to Lions Gate Entertainment Corp. shareholders:
 
 
 
 
 
 
 
Basic net income per common share
$
0.27

 
$
0.70

 
$
0.26

 
$
1.17

Diluted net income per common share
$
0.26

 
$
0.65

 
$
0.26

 
$
1.10

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
149,480

 
139,963

 
148,484

 
138,618

Diluted
159,412

 
151,713

 
154,412

 
151,716

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.09

 
$
0.07

 
$
0.25

 
$
0.19



5


LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended
 
Nine Months Ended
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
(Amounts in thousands)
Operating Activities:
 
 
 
 
 
 
 
Net income
$
32,598

 
$
98,185

 
$
31,213

 
$
162,227

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
2,970

 
1,708

 
7,320

 
4,685

Amortization of films and television programs
293,998

 
280,380

 
655,288

 
639,472

Amortization of debt discount and deferred financing costs
2,336

 
2,984

 
6,863

 
10,048

Non-cash share-based compensation
13,416

 
15,142

 
47,399

 
48,691

Other non-cash items
681

 
—

 
681

 
—

Distribution from equity method investee
—

 
—

 
—

 
7,788

Loss on extinguishment of debt
—

 
690

 
—

 
1,276

Equity interests income
(10,826
)
 
(10,898
)
 
(29,363
)
 
(37,353
)
Deferred income taxes
(52,121
)
 
1,927

 
(54,733
)
 
11,243

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Restricted cash
(142
)
 
27

 
(142
)
 
1,417

Accounts receivable, net
(48,670
)
 
(178,397
)
 
(36,663
)
 
(94,803
)
Investment in films and television programs
(235,785
)
 
(176,450
)
 
(771,255
)
 
(815,469
)
Other assets
(426
)
 
(520
)
 
(2,254
)
 
(1,416
)
Accounts payable and accrued liabilities
26,282

 
26,290

 
(8,018
)
 
(52,700
)
Participations and residuals
32,490

 
(28,640
)
 
77,428

 
(6,070
)
Film obligations
(19,028
)
 
4,960

 
(30,176
)
 
(33,953
)
Deferred revenue
20,284

 
7,508

 
(4,139
)
 
(8,124
)
Net Cash Flows Provided By (Used In) Operating Activities
58,057

 
44,896

 
(110,551
)
 
(163,041
)
Investing Activities:
 
 
 
 
 
 
 
Proceeds from the sale of equity method investees
—

 
—

 
—

 
14,575

Investment in equity method investees
(295
)
 
(2,100
)
 
(3,954
)
 
(14,750
)
Purchase of Pilgrim Studios, net of cash acquired of $15,816
(126,892
)
 
—

 
(126,892
)
 
—

Purchases of other investments
(750
)
 
—

 
(750
)
 
(2,000
)
Purchases of property and equipment
(6,800
)
 
(6,798
)
 
(13,680
)
 
(11,293
)
Net Cash Flows Used In Investing Activities
(134,737
)
 
(8,898
)
 
(145,276
)
 
(13,468
)
Financing Activities:
 
 
 
 
 
 
 
Senior revolving credit facility - borrowings
190,000

 
314,000

 
238,000

 
681,500

Senior revolving credit facility - repayments
(190,000
)
 
(293,000
)
 
(238,000
)
 
(618,619
)
Term Loan - borrowings, net of deferred financing costs of $964
—

 
—

 
24,036

 
—

Convertible senior subordinated notes - repurchases
—

 
—

 
(5
)
 
(16
)
Production loans - borrowings
138,624

 
148,075

 
509,569

 
533,781

Production loans - repayments
(128,091
)
 
(196,433
)
 
(240,565
)
 
(261,868
)
Repurchase of common shares
—

 
(3,455
)
 
—

 
(129,859
)
Dividends paid
(13,364
)
 
(9,590
)
 
(33,927
)
 
(23,536
)
Excess tax benefits on equity-based compensation awards
—

 
5,617

 
—

 
6,767

Exercise of stock options
1,554

 
2,741

 
6,007

 
4,404

Tax withholding required on equity awards
(3,888
)
 
(2,803
)
 
(22,871
)
 
(14,939
)
Net Cash Flows Provided By (Used In) Financing Activities
(5,165
)
 
(34,848
)
 
242,244

 
177,615

Net Change In Cash And Cash Equivalents
(81,845
)
 
1,150

 
(13,583
)
 
1,106

Foreign Exchange Effects on Cash
(280
)
 
1,467

 
(822
)
 
2,088

Cash and Cash Equivalents - Beginning Of Period
170,417

 
26,269

 
102,697

 
25,692

Cash and Cash Equivalents - End Of Period
$
88,292

 
$
28,886

 
$
88,292

 
$
28,886


6


LIONS GATE ENTERTAINMENT CORP.
USE OF NON-GAAP FINANCIAL MEASURES

This earnings release presents EBITDA, Adjusted EBITDA, free cash flow, adjusted net income (loss) attributable to Lions Gate Entertainment Corp. (the "Company," "we," "us" or "our") shareholders, and adjusted earnings (loss) per share, all of which are important financial measures for the Company but are not financial measures defined by GAAP.

These measures are non-GAAP financial measures as defined in Regulation G promulgated by the Securities and Exchange Commission (the "SEC") and are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”).

We believe these non-GAAP measures to be meaningful indicators of our performance that provide useful information to investors regarding our financial condition and results of operations and cash flows before non-operating items. These non-GAAP measures are commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. However, not all companies calculate these measures in the same manner and the measures as presented may not be comparable to similarly titled measures presented by other companies.

These measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of operating income, cash flow, net income, or earnings (loss) per share as determined in accordance with GAAP. Definitions and reconciliations of the adjusted metrics utilized to their corresponding GAAP metrics are provided below.

EBITDA and Adjusted EBITDA

EBITDA is defined as earnings before interest, income tax provision or benefit, and depreciation and amortization.

Adjusted EBITDA represents EBITDA as defined above adjusted for stock-based compensation, purchase accounting and related adjustments, restructuring and other items, start-up losses of new business initiatives, loss on extinguishment of debt, and backstopped prints and advertising expense.

Free Cash Flow

Free cash flow is defined as net cash flows provided by (used in) operating activities, less purchases of property and equipment, plus or minus the net increase or decrease in production loans, plus or minus excess tax benefits on equity-based compensation awards if applicable and excluding the cash used by our new business initiatives and the one-time transactional costs of Pilgrim Studios attributable to the noncontrolling shareholder. The adjustment for the production loans is made because the GAAP based cash flows from operations reflects a non-cash reduction of cash flows for the cost of films and television programs associated with production loans prior to the time the Company actually pays for the film or television program. The Company believes that it is more meaningful to reflect the impact of the payment for these films and television programs in its free cash flow when the payments are actually made. Cash used by our new business initiatives includes the cash used in operating activities plus the cash used in the purchase of property and equipment related to our consolidated subscription video-on-demand platforms.
 
Adjusted Net Income (Loss) Attributable to Lions Gate Entertainment Corp. Shareholders, and Adjusted Earnings (Loss) Per Share

Adjusted net income (loss) attributable to Lions Gate Entertainment Corp. shareholders is defined as net income (loss) attributable to Lions Gate Entertainment Corp. shareholders, adjusted for stock-based compensation, purchase accounting and related adjustments, restructuring and other items, start-up losses of new business initiatives, loss on extinguishment of debt, and backstopped prints and advertising expense, net of taxes at the applicable statutory rate and net of the amounts attributable to noncontrolling interest.

Adjusted earnings (loss) per share is defined as adjusted net income (loss) attributable to Lions Gate Entertainment Corp. shareholders per weighted average shares outstanding.


7


LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
 
Three Months Ended
 
Nine Months Ended
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014**
 
(Amounts in thousands)
Net income
$
32,598

 
$
98,185

 
$
31,213

 
$
162,227

Depreciation and amortization
2,970

 
1,708

 
7,320

 
4,685

Cash interest
11,833

 
10,567

 
32,561

 
29,546

Noncash interest expense
2,336

 
2,984

 
6,863

 
10,048

Interest and other income
(521
)
 
(623
)
 
(1,676
)
 
(2,188
)
Income tax provision (benefit)
(45,140
)
 
15,264

 
(44,441
)
 
30,865

EBITDA
$
4,076

 
$
128,085

 
$
31,840

 
$
235,183

 
 
 
 
 
 
 
 
Stock-based compensation(1)
13,235

 
15,132

 
47,506

 
48,875

Restructuring and other items(2)
13,398

 
766

 
17,605

 
7,008

Purchase accounting and related adjustments(3)
4,241

 
—

 
4,241

 
—

Start-up losses of new business initiatives(4)
6,909

 
—

 
10,387

 
—

Loss on extinguishment of debt
—

 
690

 
—

 
1,276

Backstopped prints and advertising expense(5)
11,755

 
2,100

 
4,942

 
2,100

Adjusted EBITDA
$
53,614

 
$
146,773

 
$
116,521

 
$
294,442

 
 
 
 
 
 
 
 
** In the quarter ended March 31, 2015, the definition of Adjusted EBITDA was revised to include the gains or losses from the sale of equity method investments. Accordingly, Adjusted EBITDA for the nine months ended December 31, 2014 has been revised to include the $11.4 million gain on the sale of the Company's interest in FEARnet which occurred April 2014. Prior to the sale of FEARnet, the Company recognized cumulative equity interest losses before income taxes of approximately $11.7 million from its interest in FEARnet.
(1)
Represents stock-based compensation expenses for the applicable periods.
(2)
Restructuring and other items includes restructuring and severance costs, certain transaction related costs, and certain unusual items, when applicable. Amounts in the three and nine months ended December 31, 2015 represent professional fees associated with certain strategic transactions including, among others, the acquisition of a majority interest in Pilgrim Media Group, LLC ("Pilgrim Studios") and certain shareholder transactions, the costs related to the move of our international sales and distribution organization to the United Kingdom, and certain transactional costs of $7.7 million of Pilgrim Studios attributable to the noncontrolling shareholder. Pursuant to the profit sharing provisions in the Pilgrim Studios operating agreement, the transactional costs of $7.7 million are included in net loss attributable to noncontrolling interest in the unaudited condensed consolidated statement of income and thus does not impact earnings per share attributable to Lions Gate Entertainment Corp. shareholders. In addition, amounts in the nine months ended December 31, 2015 include pension withdrawal costs of $2.7 million related to an underfunded multi-employer pension plan in which the Company is no longer participating.
Amounts in the three and nine months ended December 31, 2014 primarily represent costs related to the move of our international sales and distribution organization to the United Kingdom. In addition, amounts in the nine months ended December 31, 2014 include severance costs associated with the integration of the marketing operations of the Company's Lionsgate and Summit film labels, of which approximately $1.2 million are non-cash charges resulting from the acceleration of vesting of stock awards.
(3)
Purchase accounting and related adjustments represent the incremental amortization expense associated with the non-cash fair value adjustments on television assets of $3.6 million included in direct operating expense resulting from the application of purchase accounting and the charge of $0.7 million included in general and administrative expense related to the accretion of the noncontrolling interest discount.
(4)
Start-up losses of new business initiatives represent losses associated with the Company's direct to consumer initiatives including its subscription video-on-demand platforms and Atom Tickets, the first-of-its-kind theatrical mobile ticketing platform and app. For the three and nine months ended December 31, 2015, $1.3 million represents the gross contribution (i.e., revenue less direct operating and distribution and marketing expenses) of the consolidated business, $2.6 million and $3.0 million, respectively, is included in the Company's consolidated general and administrative expense and $3.0 million and $6.1 million, respectively, is included in equity interests income.
(5)
Backstopped prints and advertising expense ("P&A") represents the amount of theatrical marketing expense for third party titles that the Company funded and expensed for which a third party provides a first dollar loss guarantee (subject to a cap) that such expense will be recouped from the performance of the film (which results in minimal risk of loss to the Company). The amount represents the P&A expense incurred net of the impact of expensing the P&A cost over the revenue streams similar to a participation expense (i.e., the P&A under these arrangements are being expensed similar to a participation cost for purposes of the adjusted measure).

8


LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF FREE CASH FLOW TO
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
 
Three Months Ended
 
Nine Months Ended
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
(Amounts in thousands)
Net Cash Flows Provided By (Used In) Operating Activities
$
58,057

 
$
44,896

 
$
(110,551
)
 
$
(163,041
)
Purchases of property and equipment
(6,800
)
 
(6,798
)
 
(13,680
)
 
(11,293
)
Net borrowings under and (repayment) of production loans
10,533

 
(48,358
)
 
269,004

 
271,913

Cash used by new business initiatives
4,377

 
—

 
4,614

 
—

One-time transactional costs of Pilgrim Studios attributable to the noncontrolling shareholder
7,689

 
—

 
7,689

 
—

Excess tax benefits on equity-based compensation awards
—

 
5,617

 
—

 
6,767

Free Cash Flow, as defined
$
73,856

 
$
(4,643
)
 
$
157,076

 
$
104,346

 
 
 
 
 
 
 
 






9


LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF EBITDA TO FREE CASH FLOW
 
Three Months Ended
 
Nine Months Ended
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
(Amounts in thousands)
EBITDA
$
4,076

 
$
128,085

 
$
31,840

 
$
235,183

 
 
 
 
 
 
 
 
Plus: Amortization of film and television programs
293,998

 
280,380

 
655,288

 
639,472

Less: Cash paid for film and television programs(1)
(244,280
)
 
(219,848
)
 
(532,427
)
 
(577,509
)
Amortization of film and television programs in excess of cash paid
49,718

 
60,532

 
122,861

 
61,963

 
 
 
 
 
 
 
 
Plus: Non-cash stock-based compensation
13,416

 
15,142

 
47,399

 
48,691

Plus: Other non-cash items
681

 
—

 
681

 
—

Plus: Distribution from equity method investee
—

 
—

 
—

 
7,788

Less: Equity interests income
(10,826
)
 
(10,898
)
 
(29,363
)
 
(37,353
)
Plus: Loss on extinguishment of debt
—

 
690

 
—

 
1,276

Plus: Cash used by new business initiatives
4,377

 
—

 
4,614

 
—

Plus: One-time transactional costs of Pilgrim Studios attributable to the noncontrolling shareholder
7,689

 
—

 
7,689

 
—

 
 
 
 
 
 
 
 
EBITDA adjusted for items above
69,131

 
193,551

 
185,721

 
317,548

 
 
 
 
 
 
 
 
Changes in other operating assets and liabilities:
 
 
 
 
 
 
 
Restricted cash
(142
)
 
27

 
(142
)
 
1,417

Accounts receivable, net
(48,670
)
 
(178,397
)
 
(36,663
)
 
(94,803
)
Other assets
(426
)
 
(520
)
 
(2,254
)
 
(1,416
)
Accounts payable and accrued liabilities
26,282

 
26,290

 
(8,018
)
 
(52,700
)
Participations and residuals
32,490

 
(28,640
)
 
77,428

 
(6,070
)
Deferred revenue
20,284

 
7,508

 
(4,139
)
 
(8,124
)
 
29,818

 
(173,732
)
 
26,212

 
(161,696
)
 
 
 
 
 
 
 
 
Purchases of property and equipment
(6,800
)
 
(6,798
)
 
(13,680
)
 
(11,293
)
Interest, taxes and other(2)
(18,293
)
 
(17,664
)
 
(41,177
)
 
(40,213
)
 
 
 
 
 
 
 
 
Free Cash Flow, as defined
$
73,856

 
$
(4,643
)
 
$
157,076

 
$
104,346

_________________________
 
 
 
 
 
 
 
(1) Cash paid for film and television programs is calculated using the following amounts as presented in our consolidated statement of cash flows:
Change in investment in film and television programs
$
(235,785
)
 
$
(176,450
)
 
$
(771,255
)
 
$
(815,469
)
Change in film obligations
(19,028
)
 
4,960

 
(30,176
)
 
(33,953
)
Production loans - borrowings
138,624

 
148,075

 
509,569

 
533,781

Production loans - repayments
(128,091
)
 
(196,433
)
 
(240,565
)
 
(261,868
)
Total cash paid for film and television programs
$
(244,280
)
 
$
(219,848
)
 
$
(532,427
)
 
$
(577,509
)
_________________________
 
 
 
 
 
 
 
(2) Interest, taxes and other consists of the following:
 
 
 
 
 
 
 
Cash interest
$
(11,833
)
 
$
(10,567
)
 
$
(32,561
)
 
$
(29,546
)
Interest and other income
521

 
623

 
1,676

 
2,188

Current income tax provision
(6,981
)
 
(13,337
)
 
(10,292
)
 
(19,622
)
Excess tax benefits on equity-based compensation awards
—

 
5,617

 
—

 
6,767

Total interest, taxes and other
$
(18,293
)
 
$
(17,664
)
 
$
(41,177
)
 
$
(40,213
)
 
 
 
 
 
 
 
 

This reconciliation is provided to illustrate the difference between our EBITDA and free cash flow which are both separately reconciled to their corresponding GAAP metrics.


10


LIONS GATE ENTERTAINMENT CORP.

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS, AND BASIC AND DILUTED EPS TO ADJUSTED NET INCOME ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS, AND ADJUSTED BASIC AND DILUTED EPS
 
Three Months Ended December 31, 2015
 
(Amounts in thousands, except per share amounts)
 
Income (loss) before income taxes
 
Net income (1)
 
Net income attributable to Lions Gate Entertainment Corp. shareholders (2)
 
Basic EPS*
 
Diluted EPS*
As reported
$
(12,542
)
 
$
32,598

 
$
40,717

 
$
0.27

 
$
0.26

Stock-based compensation
13,235

 
8,382

 
8,382

 
0.06

 
0.05

Purchase accounting and related adjustments(3)
4,604

 
3,549

 
1,823

 
0.01

 
0.01

Restructuring and other items(4)
13,398

 
11,672

 
3,983

 
0.03

 
0.02

Start-up losses of new business initiatives(5)
7,049

 
4,464

 
4,464

 
0.03

 
0.03

Backstopped prints and advertising expense
11,755

 
7,444

 
7,444

 
0.05

 
0.05

As adjusted for items above
$
37,499

 
$
68,109

 
$
66,813

 
$
0.45

 
$
0.42

 
Three Months Ended December 31, 2014
 
(Amounts in thousands, except per share amounts)
 
Income before income taxes
 
Net income(1)
 
Net income attributable to Lions Gate Entertainment Corp. shareholders (2)
 
Basic EPS*
 
Diluted EPS*
As reported
$
113,449

 
$
98,185

 
$
98,185

 
$
0.70

 
$
0.65

Stock-based compensation
15,132

 
9,585

 
9,585

 
0.07

 
0.06

Restructuring and other items(4)
766

 
485

 
485

 
—

 
—

Loss on extinguishment of debt
690

 
437

 
437

 
—

 
—

Backstopped prints and advertising expense
2,100

 
1,330

 
1,330

 
0.01

 
0.01

As adjusted for items above
$
132,137

 
$
110,022

 
$
110,022

 
$
0.79

 
$
0.73

 
Nine Months Ended December 31, 2015
 
(Amounts in thousands, except per share amounts)
 
Income (loss) before income taxes
 
Net income (1)
 
Net income attributable to Lions Gate Entertainment Corp. shareholders (2)
 
Basic EPS*
 
Diluted EPS*
As reported
$
(13,228
)
 
$
31,213

 
$
39,332

 
$
0.26

 
$
0.26

Stock-based compensation
47,506

 
30,086

 
30,086

 
0.20

 
0.20

Purchase accounting and related adjustments(3)
4,604

 
3,549

 
1,823

 
0.01

 
0.01

Restructuring and other items(4)
17,605

 
14,422

 
6,733

 
0.05

 
0.04

Start-up losses of new business initiatives(5)
10,527

 
6,667

 
6,667

 
0.04

 
0.04

Backstopped prints and advertising expense
4,942

 
3,130

 
3,130

 
0.02

 
0.02

As adjusted for items above
$
71,956

 
$
89,067

 
$
87,771

 
$
0.59

 
$
0.57


11


 
Nine Months Ended December 31, 2014**
 
(Amounts in thousands, except per share amounts)
 
Income before income taxes
 
Net income (1)
 
Net income attributable to Lions Gate Entertainment Corp. shareholders (2)
 
Basic EPS*
 
Diluted EPS*
As reported
$
193,092

 
$
162,227

 
$
162,227

 
$
1.17

 
$
1.10

Stock-based compensation
48,875

 
30,957

 
30,957

 
0.22

 
0.20

Restructuring and other items(4)
7,008

 
4,439

 
4,439

 
0.03

 
0.03

Loss on extinguishment of debt
1,276

 
808

 
808

 
0.01

 
0.01

Backstopped prints and advertising expense
2,100

 
1,330

 
1,330

 
0.01

 
0.01

As adjusted for items above
$
252,351

 
$
199,761

 
$
199,761

 
$
1.44

 
$
1.35

______________________________________
* Basic and Diluted EPS amounts may not add precisely due to rounding
** In the quarter ended March 31, 2015, the definition of adjusted net income attributable to Lions Gate Entertainment Corp. shareholders and adjusted earnings per share was revised to include the gains or losses from the sale of equity method investments. Accordingly, adjusted net income attributable to Lions Gate Entertainment Corp. shareholders for the nine months ended December 31, 2014 has been revised to include the gain on the April 2014 sale of the Company's interest in FEARnet of $11.4 million ($7.2 million after income taxes) and representing adjusted basic and diluted earnings per share of $0.05 for the nine months ended December 31, 2014. Prior to the sale of FEARnet, the Company recognized cumulative equity interest losses before income taxes of approximately $11.7 million from the Company's interest in FEARnet.
(1)
Represents amounts net of the tax impact calculated using the statutory tax rate applicable to each adjustment.
(2)
Represents the net income amount adjusted for the portion attributable to noncontrolling interest, if any.
(3)
Purchase accounting and related adjustments include amounts presented in Adjusted EBITDA, plus $0.4 million of incremental depreciation and amortization expense associated with the non-cash fair value adjustments to property and equipment and intangible assets resulting from the application of purchase accounting related to the acquisition of Pilgrim Studios.
(4)
Restructuring and other items include amounts presented in Adjusted EBITDA. Pursuant to the profit sharing provisions in the Pilgrim Studios operating agreement, the transactional costs of $7.7 million of Pilgrim Studios, are included in net loss attributable to noncontrolling interest in the unaudited condensed consolidated statement of income and thus do not impact earnings per share attributable to Lions Gate Entertainment Corp. shareholders.
(5)
Start-up losses of new business initiatives include amounts presented in Adjusted EBITDA, plus $0.1 million for the depreciation expense associated with these entities.





12

LIONS GATE ENTERTAINMENT CORP /CN/ Reports