United states securities and exchange commission



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TV Guide Network . The Company’s investment interest in TV Guide Network consists of an equity investment in its common stock units and mandatorily redeemable preferred stock units. On February 28, 2009, the Company purchased all of the issued and outstanding equity interests of TV Guide Network. The Company paid approximately $241.6 million for all of the equity interest of TV Guide Network, On May 28, 2009, the Company sold 49% of the Company’s interest in TV Guide Network for approximately $122.4 million in cash.

The February 28, 2009 acquisition was accounted for as a purchase, with the results of operations of TV Guide Network included in the Company’s consolidated results from February 28, 2009 through May 27, 2009. Subsequent to the sale of the 49% interest in TV Guide Network, the Company determined it is not the primary beneficiary of TV Guide Network because pursuant to the operating agreement of the entity, the power to direct the activities that most significantly impact the economic performance of TV Guide Network is shared with the 49% owner of TV Guide Network. Accordingly, the Company’s interest in TV Guide Network is being accounted for under the equity method of accounting.



Investment in Mandatorily Redeemable Preferred Stock Units . The mandatorily redeemable preferred stock carries a dividend rate of 10% compounded annually and is mandatorily redeemable in May 2019 at the stated value plus the dividend return and any additional capital contributions less previous distributions. 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.
Transactions with TV Guide Network:
The Company licenses certain films and/or television programs to TV Guide Network. A portion of the profits of these
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LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

licenses reflecting the Company’s ownership share in the venture are eliminated through an adjustment to the equity interest loss of the venture. These profits are recognized as they are realized by TV Guide Network through the amortization of the related asset, recorded on TV Guide Network's balance sheet, over the license period. The table below sets forth the revenues and gross profits recognized by Lionsgate and the calculation of the amounts eliminated in the equity interest line item on the statement of operations:
































 

Year Ended

 

Year Ended

 

March 31,
2012


 

March 31,
2011


 

(Amounts in thousands)

Revenue recognized on sales to TV Guide Network

$

2,925




 

$

14,175




 

 

 

 

Gross profit on sales to TV Guide Network

$

969




 

$

5,381




Ownership interest in TV Guide Network

51

%

 

51

%

Elimination of the Company's share of profit on sales to TV Guide Network

$

494




 

$

2,744





TV Guide Network Financial Information:

The following table presents summarized balance sheet data as of March 31, 2012 and March 31, 2011 for TV Guide Network:



 





























 

March 31,
2012


 

March 31,
2011


 

(Amounts in thousands)

Current assets

$

41,548




 

$

43,497




Non-current assets

$

236,855




 

$

261,245




Current liabilities

$

30,979




 

$

32,126




Non-current liabilities

$

33,407




 

$

40,354




Redeemable preferred stock

$

230,412




 

$

200,724



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Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

The following table presents the summarized statement of operations for the years ended March 31, 2012 , 2011 and 2010 for TV Guide Network and a reconciliation of the net loss reported by TV Guide Network to equity interest loss recorded by the Company:



 









































 

Year Ended

 

Year Ended

 

Period from May 28, 2009 to

 

March 31,
2012


 

March 31,
2011


 

March 31,
2010


 

(Amounts in thousands)

Revenues

$

100,899




 

$

115,680




 

$

96,983




Expenses:

 

 

 

 

 

Cost of services

52,789




 

38,369




 

29,760




Selling, marketing, and general and administration

53,440




 

60,964




 

49,505




Depreciation and amortization

11,602




 

15,331




 

15,609




Operating income (loss)

(16,932

)

 

1,016




 

2,109




Interest expense, net

1,816




 

1,853




 

784




Accretion of redeemable preferred stock units (1)

29,687




 

27,703




 

20,587




Total interest expense, net

31,503




 

29,556




 

21,371




Net loss

(48,435

)

 

(28,540

)

 

(19,262

)

Reconciliation of net loss reported by TV Guide Network to equity interest loss:

 

 

 

 

 

Net loss reported by TV Guide Network

$

(48,435

)

 

$

(28,540

)

 

$

(19,262

)

Ownership interest in TV Guide Network

51

%

 

51

%

 

51

%

The Company's share of net loss

(24,702

)

 

(14,555

)

 

(9,824

)

Accretion of dividend and interest income on redeemable preferred stock units (1)

15,141




 

14,129




 

10,499




Eliminations of the Company’s share of profit on sales to TV Guide Network (2)

(494

)

 

(2,744

)

 

(727

)

Realization of the Company’s share of profits on sales to TV Guide Network (3)

1,522




 

182




 






Total equity interest loss recorded

$

(8,533

)

 

$

(2,988

)

 

$

(52

)

 ___________________







(1)

Accretion of mandatorily redeemable preferred stock units represents TV Guide Network’s 10% dividend and the amortization of discount on its mandatorily redeemable preferred stock units held by the Company and the 49% interest holder. The Company records 51% of this expense as income from the accretion of dividend and discount on mandatorily redeemable preferred stock units within equity interest loss.










(2)

Represents the elimination of the gross profit recognized by Lionsgate on the sale to TV Guide Network in proportion to Lionsgate's ownership interest in TV Guide Network. The amount of intra-entity profit is calculated as the total gross profit recognized on a title by title basis multiplied by Lionsgate's percentage ownership of TV Guide Network. The table above in the Transactions with TV Guide Network section shows the calculation of the profit eliminated.










(3)

Represents the realization of a portion of the profits previously eliminated. This profit remains eliminated until realized by TV Guide Network. TV Guide Network 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 TV Guide Network's books is amortized. The profit amount realized is calculated by multiplying the percentage of the TV Guide Network inventory amortized in the period reported by TV Guide Network by the amount of profit initially eliminated, on a title by title basis.

Tiger Gate Entertainment Limited. Tiger Gate Entertainment Limited (“Tigergate”) was an operator of pay television channels and a distributor of television programming and action and horror films across Asia. The Company recorded its share of the joint venture results on a one quarter lag and, accordingly, during the year ended March 31, 2012 , the Company recorded its share of the losses incurred by the joint venture for the year ended December 31, 2011 . The Company funded an additional $1.0 million during the year ended March 31, 2012 . In January 2012, Tigergate partnered with Celestial Pictures Limited to
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