United states securities and exchange commission



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Direct operating expenses of the motion pictures segment of $604.4 million for fiscal 2012 were 50.8% of motion pictures revenue, compared to $525.9 million , or 42.8% of motion pictures revenue for fiscal 2011 . The increase in direct operating expense of the motion pictures segment as a percent of revenue in fiscal 2012 is primarily due to the aggregate increase in the film cost of the Summit film assets as a result of recording the film rights of Summit at their estimated fair values due to the application of purchase accounting under generally accepted accounting principles, which results in higher amortization cost in relation to revenue. Additionally, the increase is, to a lesser extent, due to the change in the mix of product generating revenue compared to fiscal 2011, and is primarily driven by the titles in our theatrical slates. Investment in film write-downs of the motion pictures segment during fiscal 2012 totaled approximately $6.8 million, compared to $6.6 million for fiscal 2011 . In fiscal 2012 and in fiscal 2011 , there was one write-down that individually exceeded $1.0 million. Due to the January 2012 acquisition of Summit, we currently expect that direct operating expenses of the motion pictures segment for fiscal 2013 will increase as compared to fiscal 2012.

Direct operating expenses of the television production segment of $304.0 million for fiscal 2012 were 76.5% of television revenue, compared to $269.8 million , or 76.4% , of television revenue for fiscal 2011 . The direct operating expenses as a percent of television revenue were comparable to fiscal 2011 . In fiscal 2012 , $3.8 million of charges for write-downs of television film costs were included in the amortization of television programs, compared to charges of $11.6 million in fiscal 2011 . In fiscal 2012, there were no write-downs that individually exceeded $1.0 million, and the fiscal 2011 write-downs included write-downs on three titles over $1.0 million, which aggregated $7.9 million, of which $5.3 million related to one television series.




Distribution and Marketing Expenses

The following table sets forth distribution and marketing expenses by segment for the fiscal years ended March 31, 2012 and 2011 :



 













































































 

Year Ended

 

Year Ended

 

March 31, 2012

 

March 31, 2011

 

Television__Production'>Motion

Pictures

 

Television

Production

 

Total

 

Motion

Pictures

 

Television

Production

 

Total

 

(Amounts in millions)

Distribution and marketing expenses

 

 

 

 

 

 

 

 

 

 

 

Theatrical

$

234.4




 

$






 

$

234.4




 

$

267.1




 

$






 

$

267.1




Home Entertainment

164.2




 

8.6




 

172.8




 

191.2




 

12.6




 

203.8




Television

2.0




 

14.6




 

16.6




 

1.6




 

14.8




 

16.4




International

5.0




 

3.8




 

8.8




 

5.3




 

5.3




 

10.6




Lionsgate UK

45.8




 

1.5




 

47.3




 

45.1




 

2.5




 

47.6




Other

3.6




 

0.1




 

3.7




 

1.5




 

0.2




 

1.7




 

$

455.0




 

$

28.6




 

$

483.6




 

$

511.8




 

$

35.4




 

$

547.2



60


Table of Contents

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 fiscal 2012 of $234.4 million decreased $32.7 million , compared to $267.1 million in fiscal 2011 , largely due to only eight theatrical releases in fiscal 2012 as compared to twelve theatrical releases in fiscal 2011. Domestic theatrical P&A from the motion pictures segment in fiscal 2012 included P&A incurred on the release of Abduction, Conan the Barbarian, Good Deeds, Madea's Big Happy Family, The Hunger Games, and Warrior . Also, due to the January 2012 acquisition of Summit, domestic theatrical P&A from the motion pictures segment in fiscal 2012 includes P&A incurred on the release of a Summit title, Man on a Ledge , with no comparable expense in fiscal 2011. Approximately $125.1 million of P&A was incurred on titles that generated less than 5% of theatrical revenue in fiscal 2012 , of which approximately $15.5 million was P&A incurred in advance for films to be released in fiscal 2013, such as The Cabin in the Woods, Safe and What to Expect When You're Expecting . Domestic theatrical P&A from the motion pictures segment in fiscal 2011 included P&A incurred on the release of Alpha and Omega, Buried, For Colored Girls, Kick-Ass, Killers, Saw 3D, The Expendables, The Last Exorcism, The Next Three Days, and Why Did I Get Married Too? . Approximately $58.7 million of P&A was incurred on titles that generated less than 5% of theatrical revenue in fiscal 2011 , of which $7.6 million was P&A incurred in advance for films to be released in fiscal 2012. Due to the January 2012 acquisition of Summit, we currently expect that distribution and marketing expenses of the motion pictures segment for fiscal 2013 will increase as compared to fiscal 2012.

Home entertainment distribution and marketing costs on motion pictures and television product in fiscal 2012 of $172.8 million decreased $31 million , or 15.2% , compared to $203.8 million in fiscal 2011 , primarily due to lower distribution and marketing costs associated with lower motion pictures home entertainment revenues. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues was 25.3% and 29.5% in fiscal 2012 and fiscal 2011 , respectively. The decrease in home entertainment distribution and marketing costs as a percentage of home entertainment revenues was primarily due to an increase in home entertainment revenue from electronic media, which requires substantially lower distribution and marketing costs as compared to packaged media, as compared to fiscal 2011 .

Lionsgate UK distribution and marketing expenses in the motion pictures segment in fiscal 2012 of $45.8 million increased slightly from $45.1 million in fiscal 2011 .




General and Administrative Expenses

The following table sets forth general and administrative expenses by segment for the fiscal years ended March 31, 2012 and 2011 :



 


















































 

Year Ended

 

Year Ended

 

Increase (Decrease)

 

March 31, 2012




March 31, 2011




Amount

 

Percent

 

(Amounts in millions)

General and administrative expenses

 

 

 

 

 

 

 

Motion Pictures

$

55.5




 

$

48.4




 

$

7.1




 

14.7

 %

Television Production

10.9




 

11.5




 

(0.6

)

 

(5.2

)%

Shared services and corporate expenses, excluding items below

67.1




 

56.2




 

10.9




 

19.4

 %

Total general and administrative expenses before share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses

133.5




 

116.1




 

17.4




 

15.0

 %

Share-based compensation expense

25.0




 

32.4




 

(7.4

)

 

(22.8

)%

Shareholder activist matter

(1.7

)

 

22.9




 

(24.6

)

 

(107.4

)%

Severance and transaction costs related to the acquisition of Summit Entertainment, LLC

12.0




 






 

12.0




 

100.0

 %

 

35.3




 

55.3




 

(20.0

)

 

(36.2

)%

Total general and administrative expenses

$

168.8




 

$

171.4




 

$

(2.6

)

 

(1.5

)%

Total general and administrative expenses as a percentage of revenue

10.6

%

 

10.8

%

 

 

 

 

General and administrative expenses excluding share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses, as a percentage of revenue

8.4

%

 

7.3

%

 

 

 

 



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