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

In fiscal 2012 (i.e., the twelve-month period ending March 31, 2012), Lionsgate released 14 motion pictures theatrically, which included films developed and produced in-house, films co-developed and co-produced and films acquired from third parties. On January 13, 2012, we acquired Summit Entertainment, LLC (“Summit”), an independent worldwide theatrical motion picture development, production, and distribution studio. In calendar 2011, Summit released 8 motion pictures theatrically, which included films developed and produced in-house, films co-developed and co-produced and films acquired from third parties. In fiscal 2013, we intend to release approximately 20 motion pictures theatrically, with a smaller theatrical slate of approximately 12 to 14 titles per year to follow for fiscal years thereafter.
Our television business consists of the development, production, syndication and distribution of television productions. We currently produce and syndicate 19 television shows, which air on 14 networks and distribute over 200 series worldwide. In fiscal 2013, we expect to grow our television business through continued production and distribution of original content.
We distribute our library of approximately 13,000 motion picture titles and television episodes and programs directly to retailers, rental kiosks, through various digital media platforms, and pay and free television channels in the United States (the “U.S.”), the United Kingdom (the “U.K.”) and Ireland, and indirectly to other international markets through our subsidiaries and various third parties. We also distribute product through the following joint ventures:

Celestial Tiger Entertainment Limited (“Celestial Tiger Entertainment”), our joint venture with Saban Capital Group, Inc. (“SCG”) and Celestial Pictures, a company wholly-owned by Astro Malaysia Holdings Sdn Bhd (“Celestial Pictures”);

Horror Entertainment, LLC (“FEARnet”), our joint venture with Sony Pictures Television Inc. (“Sony”) and Comcast Corporation (“Comcast”);

Studio 3 Partners LLC (“EPIX”), our joint venture with Viacom Inc. (“Viacom”), its Paramount Pictures unit (“Paramount Pictures”) and Metro-Goldwyn-Mayer Studios Inc. (“MGM”); and

TV Guide Network, TV Guide Network On Demand and TV Guide Online (www.tvguide.com) (collectively, “TV Guide Network”), our joint ventures with One Equity Partners (“OEP”), the global private equity investment arm of JPMorgan Chase & Co.

In order to maximize our profit, we attempt to maintain a disciplined approach to acquisition, production and distribution of projects, including films and television programs, by balancing our financial risks against the probability of commercial success for each project. We also attempt to maintain the same disciplined approach to investments in, or acquisitions of, libraries or other assets complementary to our business, entertainment studios and companies that we believe will enhance our competitive position in the industry, generate significant long-term returns, represent an optimal use of our capital and build a diversified foundation for future growth.

Historically, we have made numerous acquisitions that are significant to our business and we may continue to make such acquisitions in the future. In this regard, we have acquired, integrated and/or consolidated into our business the following:

Summit, an independent worldwide theatrical motion picture development, production, and distribution studio (acquired in January 2012);

Mandate Pictures LLC (“Mandate Pictures”), a worldwide independent film producer, financier and distributor (acquired in September 2007);

Debmar-Mercury, LLC (“Debmar-Mercury”), a media company specializing in syndication, network, cable and


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ancillary markets (acquired in July 2006);

Redbus Film Distribution Ltd. and Redbus Pictures, (collectively, “Redbus” and currently, Lions Gate UK Limited (“Lionsgate UK”), a U.K. based independent film distributor (acquired in October 2005);

Certain of the film assets and accounts receivable of Modern Entertainment, Ltd. (“Modern Entertainment”), a licensor of film rights to distributors, broadcasters and cable networks (acquired in August 2005);

Artisan Entertainment, Inc. (“Artisan Entertainment”), a diversified motion picture, family and home entertainment company (acquired in December 2003); and

Trimark Holdings, Inc. (“Trimark”), a worldwide distributor of entertainment content (acquired in October 2000).

As part of this strategy, we also have acquired ownership interests in the following:

Celestial Tiger Entertainment (a 16% interest), a diversified media company focusing on the operation of branded pay television channels, content creation and content distribution targeted at Asian consumers (entered into in December 2011);

Pantelion Films (a 49% interest), a studio designed to produce and distribute a slate of English and Spanish language feature films to target Hispanic moviegoers in the U.S. (entered into in July 2010);

TV Guide Network (a 51% interest), an entertainment channel featuring original and acquired programming (acquired in February 2009 and a 49% interest sold to OEP in May 2009);

EPIX (a 31.2% interest), a premium entertainment service available on television, video-on-demand (“VOD”), online and consumer electronic devices (entered into in April 2008);

Elevation Sales Limited (“Elevation”) (a 50% interest), a U.K. based home entertainment distributor (interest acquired in July 2007);

Roadside Attractions, LLC (“Roadside Attractions”) (a 43.0% interest), an independent theatrical distribution company (interest acquired in July 2007);

NextPoint, Inc. (“Break Media”) (a 42.6% interest), a creator, publisher, and distributor of digital entertainment content (interest acquired in June 2007); and

FEARnet (a 34.5% interest), a multiplatform programming and content service provider (interest acquired in October 2006).


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., Australia and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the years ended March 31, 2012 and 2011.

Motion Pictures. Motion Pictures includes “Theatrical,” “Home Entertainment,” “Television,” “International,” “Lionsgate UK,” and “Mandate Pictures” revenue.

Theatrical revenues are derived from the theatrical release of motion pictures in the U.S. and Canada which are distributed to theatrical exhibitors on a picture-by-picture basis. The financial terms that we negotiate with our theatrical exhibitors generally provide that we receive a percentage of the box office results and are negotiated on a picture-by-picture basis.

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

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


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

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

International revenues include revenues from our international subsidiaries from the licensing and sale of our productions, acquired films, our catalog product or libraries of acquired titles and revenues from our distribution to international sub-distributors, on a territory-by-territory basis.

Lionsgate UK revenues include revenues from the licensing and sale of our productions, acquired films, our catalog product or libraries of acquired titles from our subsidiary located in the United Kingdom.

Mandate Pictures revenues include revenues from the sales and licensing of domestic and worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors and to international sub-distributors.

Television Production . Television Production includes the licensing and syndication to domestic and international markets of one-hour and half-hour drama series, television movies and mini-series and non-fiction programming, and home entertainment revenues consisting of television production movies or series.

Media Networks. Media Networks consists of TV Guide Network, including TV Guide Network On Demand, and TV Guide Online (www.tvguide.com), from the acquisition date of February 28, 2009 until its deconsolidation on May 28, 2009. We adopted the new accounting standard pertaining to consolidation accounting for variable interest entities on April 1, 2010 and applied the provisions of the new accounting standard retrospectively. Accordingly, we deconsolidated TV Guide Network on May 28, 2009, the date on which we sold a 49% interest in TV Guide Network to OEP, and retrospectively adjusted our financial statements to account for TV Guide Network under the equity method of accounting since that date. Media Networks revenue includes distribution revenue from multi-system cable operators and digital broadcast satellite providers (distributors generally pay a per subscriber fee for the right to distribute programming) and advertising revenue from the sale of advertising on its television channel and related online media platforms.


Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and administration expenses.

Direct operating expenses include amortization of film and television production or acquisition costs, participation and residual expenses, provision for doubtful accounts, and foreign exchange gains and losses. Participation costs represent contingent consideration payable based on the performance of the film to parties associated with the film, including producers, writers, directors or actors, etc. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild, Directors Guild of America, and Writers Guild of America, based on the performance of the film in certain ancillary markets or based on the 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.

Recent Developments
Acquisition of Summit Entertainment, LLC. On January 13, 2012, the Company purchased all of the membership interests in Summit , a worldwide independent film producer and distributor. The aggregate purchase price was approximately $412.1 million , which consisted of $361.9 million in cash, 5,837,781 in the Company's common shares (a part of which are included in escrow for indemnification purposes). Approximately $279.4 million of the purchase price and acquisition costs were funded with cash on the balance sheet of Summit. The value assigned to the shares for purposes of recording the acquisition was $50.2 million and was based on the closing price of the Company’s common shares on the date of closing of the acquisition. Additionally, the Company may be obligated to pay additional cash consideration of up to $7.5 million pursuant to the purchase agreement, should the domestic theatrical receipts from certain films meet certain target performance thresholds.

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In addition, on the date of the close, Summit's existing term loan of $507.8 million was paid off with cash from Lionsgate and the net proceeds of $476.2 million , after fees and expenses, from a new term loan with a principal amount of $500.0 million , maturing on September 7, 2016.

Convertible Senior Subordinated Notes Issuance. On January 11, 2012, Lions Gate Entertainment Inc., a wholly-owned subsidiary of the Company ("LGEI"), sold $45.0 million in aggregate principal amount of 4.00% Convertible Senior Subordinated Notes with a maturity date of January 11, 2017 (the "January 2012 4.00% Notes"). The proceeds were used to fund a portion of the acquisition of Summit discussed above. Interest on the January 2012 4.00% Notes is payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2012. The January 2012 4.00% Notes are convertible into common shares of the Company at any time prior to maturity or repurchase by the Company, at an initial conversion price of approximately $10.50  per share, subject to adjustment in certain circumstances, as specified in the Indenture.

Secondary Public Offering. On October 18, 2011, pursuant to the terms of an underwriting agreement, certain selling shareholders sold an aggregate of 19,201,000 common shares of the Company, at a price of $7.00 per share. The Company did not receive any proceeds from the sale of the shares in the offering. The Company paid an underwriting fee of approximately $3.4 million at the close of the transaction.

Redemption of October 2004 2.9375% Notes. On October 15, 2011, certain holders of 2.9375% Convertible Senior Subordinated Notes issued in October 2004 (the "October 2004 2.9375% Notes") required LGEI to repurchase $26.6 million in aggregate principal amount (carrying value - $26.6 million ) of the October 2004 2.9375% Notes, pursuant to the redemption terms of the October 2004 2.9375% Notes (see Note 9 of our consolidated financial statements). LGEI paid approximately $27.0 million for the repurchase, representing a price equal to 100% of the principal amount on October 17, 2011, together with accrued and unpaid interest through October 17, 2011.

Share Repurchases. On August 30, 2011, the Company entered into an agreement with certain shareholders, whereby the Company repurchased 11,040,493 of its common shares at a price of $7.00 per share, for aggregate cash consideration of $77.1 million . The shares repurchased under the agreement are included in treasury shares in the accompanying unaudited consolidated balance sheets and statements of shareholders' equity.

Sale of Maple Pictures. On August 10, 2011, the Company sold its interest in Maple Pictures Corp. (“Maple Pictures”) to Alliance Films Holdings Inc. (“Alliance”), a leading Canadian producer and distributor of motion pictures, television programming and home entertainment. The sales price was approximately $35.3 million , net of a working capital adjustment. Alliance is now responsible for all of Maple Pictures’ distribution, including Maple Pictures’ exclusive five -year output deal for Canadian distribution of the Company’s new motion picture and second window television product and Maple Pictures’ exclusive long-term arrangement for distribution of Canadian rights of the Company’s filmed entertainment library (i.e., distribution rights). The sales price was allocated between the fair value of the distribution rights and the fair value of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights of $17.8 million was recorded as deferred revenue and will be recognized as revenue by the Company as the revenues are earned pursuant to the distribution rights. The sales proceeds less the fair value of the distribution rights constitutes the proceeds allocated to the sale of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights was determined based on an estimate of the cash flows to be generated by Alliance pursuant to the distribution agreements, discounted at risk-adjusted discount rates of the film categories between 10% and 11% .

Additional Issuance of Senior Secured Second-Priority Notes . On May 13, 2011, LGEI issued approximately $200.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the “May 2011 Senior Notes” and collectively with $236.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the "October 2009 Senior Notes"), the "Senior Notes") in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The May 2011 Senior Notes have the same terms as the October 2009 Senior Notes, except for the issue date, issue price and first interest payment. The May 2011 Senior Notes were sold at 102.219% of the principal amount plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $204.4 million and net proceeds of approximately $192.4 million after estimated fees and expenses, including $5.6 million paid in connection with the consent solicitation of holders of the October 2009 Senior Notes. A portion of the proceeds were used to pay down amounts outstanding under our senior secured credit facility. The Senior Notes pay interest semi-annually on May 1 and November 1 of each year at a rate of 10.25% per year. The Senior Notes will mature on November 1, 2016.

Repurchase and Sale of a Portion of the Senior Secured Second-Priority Notes. In August 2011, a subsidiary of LGEI paid $9.9 million to repurchase $10.0 million of aggregate principal amount (carrying value — $9.9 million ) of the Senior Notes. We recorded a loss on extinguishment in the quarter ended September 30, 2011 of $0.4 million , which includes $0.5 million of deferred financing costs written off. In September 2011, in connection with the common shares repurchased as discussed in Note 14 to our consolidated financial statements, LGEI resold such Senior Notes at 99.0% of the $10.0 million face amount

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therof, plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $10.2 million , which were used to repurchase the common shares, as discussed in Note 14 to our consolidated financial statements.

May 2011 Repurchase of a Portion of the October 2004 2.9375% Notes . In May 2011, LGEI paid $19.5 million to repurchase $19.4 million of aggregate principal amount (carrying value — $18.9 million) of the October 2004 2.9375% Notes.

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