Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 1.27M
2: EX-31.1 EX-31.1 - Certification of CEO Pursuant to Section HTML 33K
302
3: EX-31.2 EX-31.2 - Certification of CFO Pursuant to Section HTML 33K
302
4: EX-32.1 EX-32.1 - Certification of CEO and CFO Pursuant to HTML 31K
Section 906
11: R1 Cover HTML 89K
12: R2 Unaudited Condensed Consolidated Balance Sheets HTML 148K
13: R3 Unaudited Condensed Consolidated Balance Sheets HTML 37K
(Parenthetical)
14: R4 Unaudited Condensed Consolidated Statements of HTML 125K
Operations
15: R5 Unaudited Condensed Consolidated Statements of HTML 57K
Comprehensive Income (Loss)
16: R6 Unaudited Condensed Consolidated Statements of HTML 90K
Equity
17: R7 Unaudited Condensed Consolidated Statements of HTML 128K
Cash Flows
18: R8 General HTML 35K
19: R9 Disposition HTML 31K
20: R10 Investment In Films and Television Programs and HTML 65K
Licensed Program Rights
21: R11 Investments HTML 61K
22: R12 Debt HTML 97K
23: R13 Film Obligations HTML 44K
24: R14 Fair Value Measurements HTML 76K
25: R15 Noncontrolling Interests HTML 46K
26: R16 Revenue HTML 98K
27: R17 Net Income (Loss) Per Share HTML 63K
28: R18 Capital Stock HTML 84K
29: R19 Income Taxes HTML 34K
30: R20 Restructuring and Other HTML 60K
31: R21 Segment Information HTML 135K
32: R22 Contingencies HTML 35K
33: R23 Derivative Instruments and Hedging Activities HTML 133K
34: R24 Additional Financial Information HTML 86K
35: R25 Subsequent Events HTML 33K
36: R26 General (Policies) HTML 42K
37: R27 Investment In Films and Television Programs and HTML 67K
Licensed Program Rights (Tables)
38: R28 Investments (Tables) HTML 63K
39: R29 Debt (Tables) HTML 58K
40: R30 Film Obligations (Tables) HTML 40K
41: R31 Fair Value Measurements (Tables) HTML 74K
42: R32 Noncontrolling Interests (Tables) HTML 41K
43: R33 Revenue (Tables) HTML 96K
44: R34 Net Income (Loss) Per Share (Tables) HTML 67K
45: R35 Capital Stock (Tables) HTML 89K
46: R36 Restructuring and Other (Tables) HTML 60K
47: R37 Segment Information (Tables) HTML 134K
48: R38 Derivative Instruments and Hedging Activities HTML 133K
(Tables)
49: R39 Additional Financial Information (Tables) HTML 86K
50: R40 General (Narrative) (Details) HTML 30K
51: R41 Disposition (Narrative) (Details) HTML 41K
52: R42 Investment In Films and Television Programs and HTML 32K
Licensed Program Rights (Narrative) (Details)
53: R43 Investment In Films and Television Programs and HTML 55K
Licensed Program Rights (Investment in Films and
Television Programs and Licensed Program Rights)
(Details)
54: R44 Investment In Films and Television Programs and HTML 37K
Licensed Program Rights (Amortization Expense)
(Details)
55: R45 Investment In Films and Television Programs and HTML 36K
Licensed Program Rights (Impairments) (Details)
56: R46 Investments (Investments by Category) (Details) HTML 35K
57: R47 Investments (Equity Method Investments Narrative) HTML 34K
(Details)
58: R48 Investments (Summarized Balance Sheet) (Details) HTML 65K
59: R49 Investments (Summarized Statements of Operations) HTML 58K
(Details)
60: R50 Investments (Gain (Loss) on Investments) (Details) HTML 36K
61: R51 Debt (Schedule of Debt) (Details) HTML 63K
62: R52 Debt (Narrative - Transactions) (Details) HTML 63K
63: R53 Debt (Narrative - Senior Credit Facilities) HTML 84K
(Details)
64: R54 Debt (Narrative - Senior Notes) (Details) HTML 63K
65: R55 Debt (Loss on Extinguishment of Debt) (Details) HTML 46K
66: R56 Film Obligations (Components) (Details) HTML 44K
67: R57 Film Obligations (Narrative) (Details) HTML 47K
68: R58 Fair Value Measurements (Assets and Liabilities HTML 58K
Required to be Carried at Fair Value on a
Recurring Basis) (Details)
69: R59 Fair Value Measurements (Carrying Values And Fair HTML 83K
Values Of Assets and Liabilities Not Required to
be Carried at Fair Value on a Recurring Basis)
(Details)
70: R60 Noncontrolling Interests (Narrative) (Details) HTML 50K
71: R61 Noncontrolling Interests (Changes In Redeemable HTML 40K
Noncontrolling Interest) (Details)
72: R62 Revenue (Disaggregation of Revenue) (Details) HTML 77K
73: R63 Revenue (Remaining Performance Obligations - HTML 46K
Timing) (Details)
74: R64 Revenue (Contract with Customer, Asset and HTML 56K
Liability) (Details)
75: R65 Revenue (Provision for Doubtful Accounts) HTML 36K
(Details)
76: R66 Revenue (Narrative) (Details) HTML 32K
77: R67 Net Income (Loss) Per Share (Basic) (Details) HTML 51K
78: R68 Net Income (Loss) Per Share (Diluted) (Details) HTML 60K
79: R69 Net Income (Loss) Per Share (Anti-Dilutive Shares HTML 41K
Issuable) (Details)
80: R70 Capital Stock (Narrative) (Details) HTML 48K
81: R71 Capital Stock (Common Shares Reserved for Future HTML 37K
Issuance) (Details)
82: R72 Capital Stock (Share-Based Compensation Expense) HTML 42K
(Details)
83: R73 Capital Stock (Share-based Compensation Expense by HTML 38K
Category) (Details)
84: R74 Capital Stock (Stock Option, SARs, Restricted HTML 96K
Stock and Restricted Share Unit Activity)
(Details)
85: R75 Restructuring and Other (Restructuring and Other) HTML 47K
(Details)
86: R76 Restructuring and Other (Severance Liability HTML 44K
Rollforward) (Details)
87: R77 Segment Information (Segment Information) HTML 59K
(Details)
88: R78 Segment Information (Reconciliation Of Total HTML 79K
Segment Profit To The Company's Income (Loss)
Before Income Taxes) (Details)
89: R79 Segment Information (Adjusted Depreciation and HTML 41K
Amortization, and COVID-19 Related Costs)
(Details)
90: R80 Segment Information (Purchase Accounting and HTML 40K
Related Adjustments) (Details)
91: R81 Segment Information (Reconciliation of Segment HTML 48K
General and Administration to Consolidated)
(Details)
92: R82 Segment Information (Reconciliation of Total HTML 47K
Assets By Segment to Consolidated Assets)
(Details)
93: R83 Contingencies (Narrative) (Details) HTML 37K
94: R84 Derivative Instruments and Hedging Activities HTML 50K
(Narrative) (Details)
95: R85 Derivative Instruments and Hedging Activities HTML 48K
(Forward Foreign Exchange Contracts) (Details)
96: R86 Derivative Instruments and Hedging Activities HTML 104K
(Interest Rate Swaps) (Details)
97: R87 Derivative Instruments and Hedging Activities HTML 50K
(Derivatives Effect on Statement of Operations and
Comprehensive Income) (Details)
98: R88 Derivative Instruments and Hedging Activities HTML 66K
(Derivatives by Balance Sheet Location) (Details)
99: R89 Additional Financial Information (Cash, Cash HTML 38K
Equivalents and Restricted Cash) (Details)
100: R90 Additional Financial Information (Other Assets) HTML 55K
(Details)
101: R91 Additional Financial Information (Accounts HTML 61K
Receivable Monetization) (Details)
102: R92 Additional Financial Information (Accumulated HTML 54K
Other Comprehensive Loss) (Details)
103: R93 Subsequent Events (Narrative) (Details) HTML 59K
105: XML IDEA XML File -- Filing Summary XML 209K
10: XML XBRL Instance -- lgfa-20210630_htm XML 3.09M
104: EXCEL IDEA Workbook of Financial Reports XLSX 133K
6: EX-101.CAL XBRL Calculations -- lgfa-20210630_cal XML 248K
7: EX-101.DEF XBRL Definitions -- lgfa-20210630_def XML 1.09M
8: EX-101.LAB XBRL Labels -- lgfa-20210630_lab XML 2.19M
9: EX-101.PRE XBRL Presentations -- lgfa-20210630_pre XML 1.46M
5: EX-101.SCH XBRL Schema -- lgfa-20210630 XSD 273K
106: JSON XBRL Instance as JSON Data -- MetaLinks 504± 755K
107: ZIP XBRL Zipped Folder -- 0000929351-21-000024-xbrl Zip 430K
iLIONS GATE ENTERTAINMENT CORP /CN/i0000929351i3/31i2022iQ1ifalsei9i1i1i00009293512021-04-012021-06-300000929351dei:OtherAddressMember2021-04-012021-06-300000929351us-gaap:CommonClassAMember2021-04-012021-06-300000929351us-gaap:CommonClassBMember2021-04-012021-06-30xbrli:shares0000929351us-gaap:CommonClassAMember2021-08-020000929351us-gaap:CommonClassBMember2021-08-02iso4217:USD00009293512021-06-3000009293512021-03-31iso4217:USDxbrli:shares0000929351us-gaap:CommonClassAMember2021-06-300000929351us-gaap:CommonClassAMember2021-03-310000929351us-gaap:CommonClassBMember2021-06-300000929351us-gaap:CommonClassBMember2021-03-3100009293512020-04-012020-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-03-310000929351us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-03-310000929351us-gaap:RetainedEarningsMember2021-03-310000929351us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310000929351us-gaap:ParentMember2021-03-310000929351us-gaap:NoncontrollingInterestMember2021-03-310000929351us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-04-012021-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-04-012021-06-300000929351us-gaap:ParentMember2021-04-012021-06-300000929351us-gaap:NoncontrollingInterestMember2021-04-012021-06-300000929351us-gaap:RetainedEarningsMember2021-04-012021-06-300000929351us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-06-300000929351us-gaap:RetainedEarningsMember2021-06-300000929351us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300000929351us-gaap:ParentMember2021-06-300000929351us-gaap:NoncontrollingInterestMember2021-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-03-310000929351us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-03-310000929351us-gaap:RetainedEarningsMember2020-03-310000929351us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310000929351us-gaap:ParentMember2020-03-310000929351us-gaap:NoncontrollingInterestMember2020-03-3100009293512020-03-310000929351us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-04-012020-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-04-012020-06-300000929351us-gaap:ParentMember2020-04-012020-06-300000929351us-gaap:NoncontrollingInterestMember2020-04-012020-06-300000929351us-gaap:RetainedEarningsMember2020-04-012020-06-300000929351us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-06-300000929351us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-06-300000929351us-gaap:RetainedEarningsMember2020-06-300000929351us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000929351us-gaap:ParentMember2020-06-300000929351us-gaap:NoncontrollingInterestMember2020-06-3000009293512020-06-30lgfa:titlexbrli:pure0000929351us-gaap:DisposalGroupNotDiscontinuedOperationsMemberlgfa:PantayaMember2021-03-310000929351us-gaap:DisposalGroupNotDiscontinuedOperationsMemberlgfa:PantayaMember2020-04-012021-03-310000929351lgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351us-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351us-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351srt:MinimumMember2021-06-300000929351srt:MaximumMember2021-06-300000929351us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2021-06-300000929351us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2021-03-310000929351us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2021-04-012021-06-300000929351us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2020-04-012020-06-300000929351us-gaap:RevolvingCreditFacilityMember2021-06-300000929351us-gaap:RevolvingCreditFacilityMember2021-03-310000929351us-gaap:LoansPayableMemberlgfa:A2023TermLoanAMember2021-06-300000929351us-gaap:LoansPayableMemberlgfa:A2023TermLoanAMember2021-03-310000929351us-gaap:LoansPayableMemberlgfa:A2026TermLoanAMember2021-06-300000929351us-gaap:LoansPayableMemberlgfa:A2026TermLoanAMember2021-03-310000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMember2021-06-300000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMember2021-03-310000929351lgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-06-300000929351lgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-03-310000929351us-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-06-300000929351us-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-03-310000929351lgfa:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2021-06-300000929351lgfa:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2021-03-310000929351us-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-04-012021-04-010000929351us-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-04-010000929351lgfa:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-012021-04-010000929351lgfa:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-010000929351lgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-010000929351us-gaap:RevolvingCreditFacilityMember2021-04-060000929351us-gaap:LoansPayableMemberlgfa:A2026TermLoanAMember2021-04-060000929351us-gaap:LoansPayableMemberlgfa:A2023TermLoanAMember2021-04-060000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMember2021-04-012021-05-310000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMember2021-05-310000929351us-gaap:LetterOfCreditMember2021-06-300000929351us-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2021-04-012021-06-300000929351us-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2021-04-012021-06-300000929351us-gaap:RevolvingCreditFacilityMemberlgfa:A2026RevolvingCreditFacilityMember2021-06-300000929351lgfa:A2023RevolvingCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2021-06-300000929351us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-04-012021-06-300000929351us-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMember2021-04-012021-06-300000929351us-gaap:RevolvingCreditFacilityMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-06-300000929351us-gaap:RevolvingCreditFacilityMember2021-04-012021-06-300000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-04-012021-06-300000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-06-300000929351us-gaap:BaseRateMemberus-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMember2021-04-012021-06-300000929351us-gaap:DebtInstrumentRedemptionPeriodOneMemberlgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-012021-06-300000929351lgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-012021-06-300000929351lgfa:A5500SeniorNotesMember2021-04-012021-06-300000929351lgfa:A5500SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:SeniorNotesMember2021-04-012021-06-300000929351us-gaap:DebtInstrumentRedemptionPeriodThreeMemberlgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-012021-06-300000929351us-gaap:DebtInstrumentRedemptionPeriodFourMemberlgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-012021-06-300000929351lgfa:ChangeinControlMemberlgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-012021-06-300000929351lgfa:CertainAssetDispositionMemberlgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-04-012021-06-300000929351lgfa:SeniorCreditFacilitiesAndSeniorNotesMember2021-04-012021-06-300000929351lgfa:SeniorCreditFacilitiesAndSeniorNotesMember2021-06-300000929351lgfa:TermLoanBFacilityMember2021-04-012021-06-300000929351lgfa:RevolvingCreditFacilityTermLoanAAndSeniorNotesMemberlgfa:NewDebtIssuanceCostsDiscountsAndCallPremiumsMember2021-04-012021-06-300000929351lgfa:RevolvingCreditFacilityTermLoanAAndSeniorNotesMemberlgfa:PreviouslyIncurredDebtIssuanceCostsOrUnamortizedDiscountMember2021-04-012021-06-300000929351lgfa:RevolvingCreditFacilityTermLoanAAndSeniorNotesMember2021-04-012021-06-300000929351lgfa:IndividualProductionLoansMembersrt:MinimumMember2021-06-300000929351lgfa:IndividualProductionLoansMembersrt:MaximumMember2021-06-300000929351lgfa:ProductionTaxCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2021-06-300000929351lgfa:ProductionTaxCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-04-012021-06-300000929351us-gaap:BaseRateMemberlgfa:ProductionTaxCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2021-04-012021-06-300000929351lgfa:ProductionTaxCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-06-300000929351us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-06-300000929351us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-06-300000929351us-gaap:FairValueMeasurementsRecurringMember2021-06-300000929351us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-03-310000929351us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-03-310000929351us-gaap:FairValueMeasurementsRecurringMember2021-03-310000929351us-gaap:OtherNoncurrentAssetsMemberlgfa:InterestRateSwapFinancingMember2021-06-300000929351us-gaap:OtherNoncurrentAssetsMemberlgfa:InterestRateSwapFinancingMember2021-03-310000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanAFacilityMember2021-06-300000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanAFacilityMemberus-gaap:FairValueInputsLevel2Member2021-06-300000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanAFacilityMember2021-03-310000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanAFacilityMemberus-gaap:FairValueInputsLevel2Member2021-03-310000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMember2021-06-300000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMemberus-gaap:FairValueInputsLevel2Member2021-06-300000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMember2021-03-310000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMemberus-gaap:FairValueInputsLevel2Member2021-03-310000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-06-300000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:A5500SeniorNotesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2021-06-300000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:A5500SeniorNotesMemberus-gaap:SeniorNotesMember2021-03-310000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:A5500SeniorNotesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2021-03-310000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-06-300000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-06-300000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-03-310000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMemberlgfa:A5.875SeniorNotesMember2021-03-310000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2021-06-300000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:A6.375SeniorNotesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2021-06-300000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2021-03-310000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:A6.375SeniorNotesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2021-03-310000929351lgfa:IndividualProductionLoansMemberus-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:IndividualProductionLoansMember2021-06-300000929351lgfa:IndividualProductionLoansMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:IndividualProductionLoansMemberus-gaap:FairValueInputsLevel2Member2021-06-300000929351lgfa:IndividualProductionLoansMemberus-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:IndividualProductionLoansMember2021-03-310000929351lgfa:IndividualProductionLoansMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:IndividualProductionLoansMemberus-gaap:FairValueInputsLevel2Member2021-03-310000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:ProductionTaxCreditFacilityMemberus-gaap:LineOfCreditMember2021-06-300000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:ProductionTaxCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:FairValueInputsLevel2Member2021-06-300000929351us-gaap:CarryingReportedAmountFairValueDisclosureMemberlgfa:ProductionTaxCreditFacilityMemberus-gaap:LineOfCreditMember2021-03-310000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberlgfa:ProductionTaxCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:FairValueInputsLevel2Member2021-03-310000929351us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-06-300000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-06-300000929351us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-03-310000929351us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-03-310000929351lgfa:A3ArtsEntertainmentMember2021-04-012021-06-300000929351lgfa:PilgrimMediaGroupMember2021-06-300000929351srt:ScenarioForecastMember2022-11-122022-11-120000929351srt:ScenarioForecastMember2024-11-122024-11-120000929351lgfa:PilgrimMediaGroupMember2021-04-012021-06-300000929351lgfa:MotionPictureMemberlgfa:TheatricalMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:MotionPictureMemberlgfa:TheatricalMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:DigitalMediaMemberlgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:DigitalMediaMemberlgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:MotionPictureMemberlgfa:PackagedMediaMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:MotionPictureMemberlgfa:PackagedMediaMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:MotionPictureMemberlgfa:HomeEntertainmentMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:MotionPictureMemberlgfa:HomeEntertainmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:TelevisionMemberlgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:TelevisionMemberlgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:MotionPictureMemberlgfa:InternationalMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:MotionPictureMemberlgfa:InternationalMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:OtherMediaMemberlgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:OtherMediaMemberlgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:DomesticTelevisionMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351lgfa:DomesticTelevisionMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351lgfa:InternationalMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351lgfa:InternationalMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351lgfa:DigitalMediaMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351lgfa:DigitalMediaMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351lgfa:PackagedMediaMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351lgfa:PackagedMediaMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351lgfa:HomeEntertainmentMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351lgfa:HomeEntertainmentMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351lgfa:OtherMediaMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351lgfa:OtherMediaMemberus-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351country:USlgfa:ProgrammingMemberlgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351country:USlgfa:ProgrammingMemberlgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:InternationalMemberlgfa:ProgrammingMemberlgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:InternationalMemberlgfa:ProgrammingMemberlgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:ProgrammingMemberlgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:ProgrammingMemberlgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351us-gaap:IntersegmentEliminationMember2021-04-012021-06-300000929351us-gaap:IntersegmentEliminationMember2020-04-012020-06-300000929351lgfa:OtherStreamingServicesMembercountry:USlgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-3000009293512021-07-012021-06-3000009293512022-04-012021-06-3000009293512023-04-012021-06-3000009293512024-04-012021-06-300000929351us-gaap:EquityUnitPurchaseAgreementsMember2021-04-012021-06-300000929351us-gaap:EquityUnitPurchaseAgreementsMember2020-04-012020-06-300000929351us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300000929351us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300000929351us-gaap:StockCompensationPlanMember2021-04-012021-06-300000929351us-gaap:StockCompensationPlanMember2020-04-012020-06-300000929351us-gaap:EmployeeStockOptionMember2021-06-300000929351us-gaap:EmployeeStockOptionMember2021-03-310000929351us-gaap:RestrictedStockUnitsRSUMember2021-06-300000929351us-gaap:RestrictedStockUnitsRSUMember2021-03-310000929351lgfa:PurchaseOptionsAndRestrictedSharesMember2021-06-300000929351lgfa:PurchaseOptionsAndRestrictedSharesMember2021-03-310000929351us-gaap:EmployeeStockOptionMember2021-04-012021-06-300000929351us-gaap:EmployeeStockOptionMember2020-04-012020-06-300000929351lgfa:RestrictedShareUnitsAndOtherShareBasedCompensationMember2021-04-012021-06-300000929351lgfa:RestrictedShareUnitsAndOtherShareBasedCompensationMember2020-04-012020-06-300000929351us-gaap:StockAppreciationRightsSARSMember2021-04-012021-06-300000929351us-gaap:StockAppreciationRightsSARSMember2020-04-012020-06-300000929351us-gaap:OperatingExpenseMember2021-04-012021-06-300000929351us-gaap:OperatingExpenseMember2020-04-012020-06-300000929351lgfa:DistributionAndMarketingMember2021-04-012021-06-300000929351lgfa:DistributionAndMarketingMember2020-04-012020-06-300000929351us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300000929351us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-06-300000929351us-gaap:CommonClassAMemberlgfa:SharebasedPaymentArrangementOptionsandStockAppreciationRightsSARSMember2021-03-310000929351us-gaap:CommonClassBMemberlgfa:SharebasedPaymentArrangementOptionsandStockAppreciationRightsSARSMember2021-03-310000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassAMember2021-03-310000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassBMember2021-03-310000929351us-gaap:CommonClassAMemberlgfa:SharebasedPaymentArrangementOptionsandStockAppreciationRightsSARSMember2021-04-012021-06-300000929351us-gaap:CommonClassBMemberlgfa:SharebasedPaymentArrangementOptionsandStockAppreciationRightsSARSMember2021-04-012021-06-300000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassAMember2021-04-012021-06-300000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassBMember2021-04-012021-06-300000929351us-gaap:CommonClassAMemberlgfa:SharebasedPaymentArrangementOptionsandStockAppreciationRightsSARSMember2021-06-300000929351us-gaap:CommonClassBMemberlgfa:SharebasedPaymentArrangementOptionsandStockAppreciationRightsSARSMember2021-06-300000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassAMember2021-06-300000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassBMember2021-06-300000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassAMembersrt:MaximumMember2021-03-310000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassAMembersrt:MaximumMember2021-06-300000929351us-gaap:CommonClassAMemberlgfa:SharebasedPaymentArrangementOptionsandStockAppreciationRightsSARSMembersrt:MaximumMember2021-04-012021-06-300000929351lgfa:RestrictedStockandRestrictedShareUnitsRSUsMemberus-gaap:CommonClassAMembersrt:MaximumMember2021-04-012021-06-300000929351us-gaap:CommonClassAMember2020-04-012020-06-300000929351us-gaap:SubsequentEventMember2007-05-312021-08-050000929351us-gaap:SubsequentEventMember2021-08-050000929351us-gaap:EmployeeSeveranceMember2021-04-012021-06-300000929351us-gaap:EmployeeSeveranceMember2020-04-012020-06-300000929351lgfa:COVID19RelatedCostsMember2021-04-012021-06-300000929351lgfa:COVID19RelatedCostsMember2020-04-012020-06-300000929351lgfa:TransactionAndRelatedCostMember2021-04-012021-06-300000929351lgfa:TransactionAndRelatedCostMember2020-04-012020-06-300000929351lgfa:DirectOperatingCostMember2021-04-012021-06-300000929351lgfa:DirectOperatingCostMember2020-04-012020-06-300000929351us-gaap:EmployeeSeveranceMember2021-03-310000929351us-gaap:EmployeeSeveranceMember2020-03-310000929351us-gaap:EmployeeSeveranceMember2021-06-300000929351us-gaap:EmployeeSeveranceMember2020-06-300000929351us-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:EmployeeSeveranceMember2021-06-30lgfa:segment0000929351lgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351lgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351lgfa:MotionPictureMemberus-gaap:IntersegmentEliminationMember2021-04-012021-06-300000929351lgfa:MotionPictureMemberus-gaap:IntersegmentEliminationMember2020-04-012020-06-300000929351us-gaap:IntersegmentEliminationMemberlgfa:TelevisionProductionMember2021-04-012021-06-300000929351us-gaap:IntersegmentEliminationMemberlgfa:TelevisionProductionMember2020-04-012020-06-300000929351us-gaap:IntersegmentEliminationMemberlgfa:MediaNetworksMember2021-04-012021-06-300000929351us-gaap:IntersegmentEliminationMemberlgfa:MediaNetworksMember2020-04-012020-06-300000929351us-gaap:OperatingSegmentsMember2021-04-012021-06-300000929351us-gaap:OperatingSegmentsMember2020-04-012020-06-300000929351us-gaap:CorporateNonSegmentMember2021-04-012021-06-300000929351us-gaap:CorporateNonSegmentMember2020-04-012020-06-300000929351lgfa:CorporateAndReconcilingItemsMember2021-04-012021-06-300000929351lgfa:CorporateAndReconcilingItemsMember2020-04-012020-06-300000929351lgfa:CorporateAndReconcilingItemsMemberlgfa:PurchaseAccountingandRelatedAdjustmentsMember2021-04-012021-06-300000929351lgfa:CorporateAndReconcilingItemsMemberlgfa:PurchaseAccountingandRelatedAdjustmentsMember2020-04-012020-06-300000929351lgfa:CorporateAndReconcilingItemsMemberus-gaap:OperatingExpenseMember2021-04-012021-06-300000929351lgfa:CorporateAndReconcilingItemsMemberus-gaap:OperatingExpenseMember2020-04-012020-06-300000929351us-gaap:GeneralAndAdministrativeExpenseMemberlgfa:CorporateAndReconcilingItemsMember2021-04-012021-06-300000929351us-gaap:GeneralAndAdministrativeExpenseMemberlgfa:CorporateAndReconcilingItemsMember2020-04-012020-06-300000929351lgfa:CorporateAndReconcilingItemsMemberlgfa:DepreciationandAmortizationExpenseMember2021-04-012021-06-300000929351lgfa:CorporateAndReconcilingItemsMemberlgfa:DepreciationandAmortizationExpenseMember2020-04-012020-06-300000929351lgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2021-06-300000929351lgfa:MotionPictureMemberus-gaap:OperatingSegmentsMember2021-03-310000929351us-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-06-300000929351us-gaap:OperatingSegmentsMemberlgfa:TelevisionProductionMember2021-03-310000929351lgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2021-06-300000929351lgfa:MediaNetworksMemberus-gaap:OperatingSegmentsMember2021-03-310000929351us-gaap:MaterialReconcilingItemsMember2021-06-300000929351us-gaap:MaterialReconcilingItemsMember2021-03-31lgfa:classActionComplaint0000929351lgfa:FiduciaryLitigationMember2016-07-192016-08-300000929351lgfa:FiduciaryLitigationMember2018-10-092018-10-090000929351lgfa:FiduciaryLitigationMember2018-11-05iso4217:GBP0000929351currency:GBPus-gaap:ForeignExchangeForwardMember2021-06-30iso4217:HUF0000929351currency:HUFus-gaap:ForeignExchangeForwardMember2021-06-30iso4217:EUR0000929351currency:EURus-gaap:ForeignExchangeForwardMember2021-06-30iso4217:CAD0000929351currency:CADus-gaap:ForeignExchangeForwardMember2021-06-30iso4217:CZK0000929351currency:CZKus-gaap:ForeignExchangeForwardMember2021-06-300000929351lgfa:InterestRateSwapFixedRatePaid2.915EffectiveDateMay232018Memberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberlgfa:InterestRateSwapFixedRatePaid1.923EffectiveDateMay192020Memberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRatePaid2.531EffectiveDateMay192020Memberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberlgfa:InterestRateSwapFixedRatePaid2.343EffectiveDateJune152020Memberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberlgfa:InterestRateSwapFixedRatePaid1840EffectiveDateAugust142020Memberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRatePaid2.915EffectiveDateMay232018Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRateReceived2.915EffectiveDateMay192020Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:NondesignatedMemberlgfa:InterestRateSwapFixedRatePaid2.723EffectiveDateJune252018Memberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:NondesignatedMemberlgfa:InterestRateSwapFixedRateReceived2723EffectiveDateAugust142020Memberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRatePaid2.885EffectiveDateJuly312018Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRateReceived2.885EffectiveDateMay192020Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRatePaid2.744EffectiveDateDecember242018Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRateReceived2.744EffectiveDateMay192020Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRatePaid2.808EffectiveDateDecember242018Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:NondesignatedMemberlgfa:InterestRateSwapFixedRateReceived2.808EffectiveDateJune152020Memberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:NondesignatedMemberlgfa:InterestRateSwapFixedRatePaid2.728EffectiveDateDecember242018Memberus-gaap:InterestRateSwapMember2021-06-300000929351lgfa:InterestRateSwapFixedRateReceived2.728EffectiveDateJune152020Memberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:InterestRateSwapMember2020-04-012021-03-310000929351us-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2020-04-012021-03-310000929351lgfa:AccumulatedGainLossNetCashFlowHedgeDiscontinuedIncludingNoncontrollingInterestMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:ForeignExchangeForwardMember2021-04-012021-06-300000929351us-gaap:ForeignExchangeForwardMember2020-04-012020-06-300000929351us-gaap:InterestRateSwapMember2021-04-012021-06-300000929351us-gaap:InterestRateSwapMember2020-04-012020-06-300000929351us-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:ForeignExchangeForwardMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:ForeignExchangeForwardMember2021-06-300000929351us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMember2021-06-300000929351us-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:OtherCurrentAssetsMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:OtherNoncurrentAssetsMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-06-300000929351us-gaap:OtherCurrentAssetsMember2021-06-300000929351us-gaap:OtherNoncurrentAssetsMember2021-06-300000929351us-gaap:AccountsPayableAndAccruedLiabilitiesMember2021-06-300000929351us-gaap:OtherNoncurrentLiabilitiesMember2021-06-300000929351us-gaap:OtherNoncurrentAssetsMemberlgfa:InterestRateSwapFinancingMemberus-gaap:NondesignatedMember2021-06-300000929351us-gaap:OtherNoncurrentLiabilitiesMemberlgfa:InterestRateSwapFinancingMemberus-gaap:NondesignatedMember2021-06-300000929351us-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMember2021-03-310000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:ForeignExchangeForwardMember2021-03-310000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:ForeignExchangeForwardMember2021-03-310000929351us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMember2021-03-310000929351us-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:OtherCurrentAssetsMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:OtherNoncurrentAssetsMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2021-03-310000929351us-gaap:OtherCurrentAssetsMember2021-03-310000929351us-gaap:OtherNoncurrentAssetsMember2021-03-310000929351us-gaap:AccountsPayableAndAccruedLiabilitiesMember2021-03-310000929351us-gaap:OtherNoncurrentLiabilitiesMember2021-03-310000929351us-gaap:OtherNoncurrentAssetsMemberlgfa:InterestRateSwapFinancingMemberus-gaap:NondesignatedMember2021-03-310000929351us-gaap:OtherNoncurrentLiabilitiesMemberlgfa:InterestRateSwapFinancingMemberus-gaap:NondesignatedMember2021-03-310000929351lgfa:ThirdPartyPurchasersIndividualAgreementsMemberus-gaap:TradeAccountsReceivableMember2021-04-012021-06-300000929351lgfa:ThirdPartyPurchasersIndividualAgreementsMemberus-gaap:TradeAccountsReceivableMember2020-04-012020-06-300000929351lgfa:ThirdPartyPurchasersIndividualAgreementsMemberus-gaap:TradeAccountsReceivableMember2021-06-300000929351lgfa:ThirdPartyPurchasersIndividualAgreementsMemberus-gaap:TradeAccountsReceivableMember2021-03-310000929351us-gaap:TradeAccountsReceivableMemberlgfa:ThirdPartyPurchasersRevolvingPooledAgreementsMember2019-12-012019-12-310000929351us-gaap:TradeAccountsReceivableMemberlgfa:ThirdPartyPurchasersRevolvingPooledAgreementsMember2021-06-300000929351us-gaap:TradeAccountsReceivableMemberlgfa:ThirdPartyPurchasersRevolvingPooledAgreementsMember2021-04-012021-06-300000929351us-gaap:TradeAccountsReceivableMemberlgfa:ThirdPartyPurchasersRevolvingPooledAgreementsMember2020-04-012020-06-300000929351us-gaap:TradeAccountsReceivableMemberlgfa:ThirdPartyPurchasersRevolvingPooledAgreementsMember2021-03-310000929351us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2021-03-310000929351us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember2021-03-310000929351us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2021-04-012021-06-300000929351us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember2021-04-012021-06-300000929351us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2021-06-300000929351us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember2021-06-300000929351us-gaap:SubsequentEventMember2021-07-150000929351lgfa:SpyglassMemberus-gaap:SubsequentEventMember2021-07-150000929351lgfa:IPCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2021-07-310000929351lgfa:IPCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-07-012021-07-310000929351us-gaap:BaseRateMemberlgfa:IPCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2021-07-012021-07-310000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMemberus-gaap:SubsequentEventMember2021-07-012021-07-310000929351us-gaap:LoansPayableMemberlgfa:TermLoanBFacilityMemberus-gaap:SubsequentEventMember2021-07-31
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
iClass
A Voting Common Shares, no par value per share
iLGF.A
iNew York Stock Exchange
iClass
B Non-Voting Common Shares, no par value per share
iLGF.B
iNew York Stock Exchange
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. iYes☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted 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 such files). iYes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
iLarge
accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging
growth company
i☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
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 28, 2021, which risk factors are incorporated herein by reference, as updated by any update to 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. These factors may also be increased or intensified as a result of events related to the ongoing coronavirus
(COVID-19 global pandemic), including as a result of the resurgence of COVID-19 and the spread of new variants. The extent to which the COVID-19 global pandemic ultimately impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
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 potential effects of the COVID-19 global pandemic on the Company,
economic and business conditions; the substantial investment of capital required to produce and market 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; technological changes and other trends affecting the entertainment industry; potential adverse reactions or changes to business or employee relationships; 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 28, 2021, which risk factors are incorporated herein by reference,
as updated by any 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.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. iGeneral
Nature
of Operations
Combining the STARZ premium global subscription platform with world-class motion picture and television studio operations, Lions Gate Entertainment Corp. (the “Company,”“Lionsgate,”"Lions Gate,"“we,”“us” or “our”) brings a unique and varied portfolio of entertainment to consumers around the world. Its film, television, subscription and location-based entertainment businesses are backed by a i17,000-title
library and one of the largest collections of film and television franchises in the independent media space.
i
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, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31,
2022. The balance sheet at March 31, 2021 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, 2021.
Certain amounts presented in prior periods have been reclassified to conform to the current period presentation.
i
Use
of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, including the potential impacts arising from the COVID-19 global pandemic, 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 used for the amortization of investment in films and television programs and licensed program rights; estimates of sales returns; estimates related to the revenue recognition of sales or usage-based royalties; fair value of equity-based compensation; fair value of assets and liabilities for allocation of the purchase price of companies acquired; income taxes
including the assessment of valuation allowances for deferred tax assets; accruals for contingent liabilities; and impairment assessments for investment in films and television programs and licensed program rights, property and equipment, equity investments, goodwill and intangible assets. Actual results could differ from such estimates.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2. iDisposition
Pantaya. On March 31, 2021,
the Company sold its i75% majority interest in Pantaya to Hemisphere Media Group for approximately $i123.6 million
in cash, subject to certain customary adjustments pursuant to the terms of the agreement. Under the terms of the purchase agreement, control of Pantaya transferred to Hemisphere Media Group on March 31, 2021, with the cash consideration transferred on April 1, 2021. The receivable for the cash purchase consideration was included in other current assets as of March 31, 2021. Pantaya was previously reflected in and represented substantially all of "Other Streaming Services" in the Company's Media Networks segment (see Note 14). The Company recorded a gain before income taxes of approximately $i44.1 million,
which was reflected in the gain on sale of Pantaya line item in the consolidated statement of operations in the year ended March 31, 2021. This gain amount was net of $i69.0 million of goodwill allocated from the Media Networks segment as required under the applicable accounting guidance.
3.
iInvestment in Films and Television Programs and Licensed Program Rights
i
Total
investment in films and television programs and licensed program rights by predominant monetization strategy is as follows:
Licensed
program rights, net of accumulated amortization
i453.1
i510.4
Investment
in films and television programs and licensed program rights, net
$
i2,429.2
$
i2,222.7
/
At
June 30, 2021, acquired film and television libraries have remaining unamortized costs of $i16.0 million, which are monetized individually and are being amortized using the individual-film-forecast method over a remaining period of approximately i19.25
years.
iAmortization of investment in film and television programs and licensed program rights by predominant monetization strategy is as follows for the three months ended June 30, 2021 and 2020, and was included in direct operating expense in
the unaudited condensed consolidated statements of operations:
Impairments.
iInvestment in films and television programs and licensed program rights includes write-downs to fair value, which are included in direct operating expense on the unaudited condensed consolidated statements of operations, and represented the following amounts by segment for the three months ended June 30, 2021 and 2020:
The Company has investments in various equity method investees with ownership percentages ranging from approximately i9% to i49%.
These investments include:
STARZPLAY Arabia. STARZPLAY Arabia (Playco Holdings Limited) offers a STARZ-branded online subscription video-on-demand service in the Middle East and North Africa.
Roadside Attractions. Roadside Attractions is an independent theatrical distribution company.
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.
Atom Tickets. Atom Tickets is the first-of-its-kind theatrical mobile ticketing platform and app.
Great Point Opportunity Fund. Great
Point Opportunity Fund is a partnership to make investments in an operating company that will operate a studio facility in Yonkers, New York.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other. In addition to the equity method investments discussed above, the Company holds ownership interests in other
immaterial equity method investees.
Summarized Financial Information.iSummarized financial information for the Company's equity method investees on an aggregate basis is set forth below:
Senior Notes Redemption and Issuance. On April 1, 2021, the Company redeemed in full all $i518.7 million outstanding principal amount of its i5.875%
Senior Notes due November 2024 ("i5.875% Senior Notes") and all $i545.6 million outstanding principal amount of its i6.375%
Senior Notes due February 2024 ("i6.375% Senior Notes"). In connection with the early redemption of the i5.875% Senior Notes and the i6.375%
Senior Notes, the Company paid a prepayment premium of $i15.2 million and $i17.4 million,
respectively, plus accrued and unpaid interest to the date of redemption, pursuant to the terms of the indentures governing the i5.875% Senior Notes and the i6.375%
Senior Notes, respectively.
In connection with the redemption of the i5.875% Senior Notes and the i6.375%
Senior Notes, on April 1, 2021, the Company issued $i1.0 billion aggregate principal amount of i5.500%
Senior Notes due April 15, 2029 ("i5.500% Senior Notes").
Credit Agreement Amendment.On April 6, 2021, the Company amended its credit and guarantee agreement dated December 8, 2016, as amended (the "Credit Agreement") to, among other things,
extend the maturity (the "Extension") of a portion of its revolving credit commitments, amounting to $i1.25 billion (the "2026 Revolving Credit Facility"), and a portion of its outstanding term A loans, amounting to $i444.9 million
(the "2026 Term Loan A"), to April 6, 2026, and make certain other changes to the covenants and other provisions therein. After giving effect to the Extension, $i250.0 million of revolving credit commitments (the "2023 Revolving Credit Facility) and $i215.1 million
of term A loans (the "2023 Term Loan A", and together with the 2026 Term Loan A, the "Term Loan A") remained outstanding with a maturity of March 22, 2023.
Term Loan B Repurchases. In April and May 2021, the Company completed a series of repurchases of the Term Loan B and, in aggregate, paid $i51.1 million to repurchase $i51.5 million
principal amount of the Term Loan B.
See the Loss on Extinguishment of Debt section further below for a description of the accounting for these transactions.
Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B)
Revolving Credit Facility Availability of Funds & Commitment Fee. The Revolving Credit Facility provides for borrowings and letters of credit up to an aggregate of $i1.5
billion, and at June 30, 2021 there was $i1.5 billion available. However, borrowing levels are subject to certain financial covenants as discussed below. There were ino
letters of credit outstanding at June 30, 2021. The Company is required to pay a quarterly commitment fee on the Revolving Credit Facility of i0.250% to
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
i0.375% per annum, depending on the achievement of certain leverage ratios, as defined in Credit Agreement, on the total Revolving Credit Facility of $i1.5
billion less the amount drawn.
Maturity Date:
•Revolving Credit Facility: A portion of the revolving credit commitments, amounting to $i1.25 billion, matures April 6, 2026, and a portion of the revolving credit commitments, amounting to $i250.0 million,
matures March 22, 2023.
•Revolving Credit Facility & Term Loan A: The Revolving Credit Facility and Term Loan A bear interest at a
rate per annum equal to LIBOR plus i1.75% (or an alternative base rate plus i0.75%) margin, with a LIBOR floor of izero.
The margin is subject to potential increases of up to i50 basis points (itwo
(i2) increases of i25
basis points each) upon certain increases to net first lien leverage ratios, as defined in the Credit Agreement (effective interest rate of i1.85% as of June 30, 2021, before the impact of interest rate swaps).
•Term Loan B: The Term Loan B bears interest at a rate per annum equal to LIBOR plus i2.25%
margin, with a LIBOR floor of izero (or an alternative base rate plus i1.25% margin) (effective interest rate of i2.35%
as of June 30, 2021, before the impact of interest rate swaps).
Required Principal Payments:
•Term Loan A:
◦2023 Term Loan A: Quarterly principal payments, at quarterly rates of i1.25% beginning June 30, 2019, i1.75%
beginning June 30, 2020, and ii2.50/%
beginning June 30, 2021 through December 31, 2022, with the balance payable at maturity.
◦2026 Term Loan A: Quarterly principal payments beginning September 30, 2022 at a quarterly rate of i1.25%, then at quarterly rates of i1.75%
beginning September 30, 2023, and ii2.50/%
beginning September 30, 2024 through March 31, 2026, with the balance payable at maturity.
•Term Loan B: Quarterly principal payments at a quarterly rate of i0.25%, with the balance payable at maturity.
The Term Loan A and Term Loan B also require mandatory prepayments in connection with certain asset sales, subject
to certain significant exceptions, and the Term Loan B is subject to additional mandatory repayment from specified percentages of excess cash flow, as defined in the Credit Agreement.
Optional Prepayment:
•Revolving Credit Facility & Term Loan A: The Company may voluntarily prepay the Revolving Credit Facility and Term Loan A at any time without premium or penalty.
•Term Loan B: The Company may voluntarily prepay the Term Loan B at any time.
Security. The Senior Credit Facilities are guaranteed by the
Guarantors (as defined in the Credit Agreement) and are secured by a security interest in substantially all of the assets of Lionsgate and the Guarantors (as defined in the Credit Agreement), subject to certain exceptions.
Covenants. The Senior Credit Facilities contain representations and warranties, events of default and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant exceptions, restrictions on the ability to declare or pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. In addition, a net first lien leverage maintenance covenant and an interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested quarterly. As of June 30,
2021, 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 i50% of the
Company’s common shares.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Potential Impact of LIBOR Transition. The Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after the end of 2021.
For U.S dollar LIBOR, publication of the one-week and two-month LIBOR settings will cease after December 31, 2021, and publication of the overnight and 12-month LIBOR settings will cease after June 30, 2023. Immediately after June 30, 2023, the one-month, three-month and six-month U.S. dollar LIBOR settings will no longer be representative. Given these changes, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. It is also possible that U.S. LIBOR will be discontinued or modified prior to June 30, 2023.
Under the
terms of the Company's Credit Agreement, in the event of the discontinuance of LIBOR, a mutually agreed-upon alternate benchmark rate will be established to replace LIBOR. The Company and Lenders (as defined in the Credit Agreement) shall, in good faith, endeavor to establish an alternate benchmark rate that gives due consideration to prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and which places the Lenders and the Company in the same economic position that existed immediately prior to the discontinuation of LIBOR. The Company does not anticipate that the discontinuance
or modification of LIBOR will materially impact its liquidity or financial position.
i5.500% Senior Notes
Interest: Bears interest at i5.500%
annually (payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2021).
(i)Prior to April 15, 2024, the Company may redeem the i5.500%
Senior Notes in whole at any time, or in part from time to time, at a price equal to i100% of the principal amount of the notes to be redeemed plus a "make-whole" premium, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The make-whole premium is the greater of (i) i1.0%
of the principal amount redeemed and (ii) the excess, if any, of the present value at such redemption date of the redemption price at April 15, 2024 (see redemption prices below) plus interest through April 15, 2024 (discounted to the redemption date at the treasury rate plus i50 basis points) over the principal amount of the notes redeemed on the redemption date.
(ii)On or after April
15, 2024, the Company may redeem the i5.500% Senior Notes in whole at any time, or in part from time to time, at certain specified redemption prices, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Such redemption prices are as follows (as a percentage of the principal amount redeemed): (i) on or after April 15, 2024 - i102.750%;
(ii) on or after April 15, 2025 - i101.375%; and (iii) on or after April 15, 2026 - i100%.
In addition, the Company may redeem up to i40% of the aggregate principal amount of the notes at any time and from time to time prior to April 15, 2024 with the net proceeds of certain equity offerings at a price of i105.500%
of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.
Security. The i5.500% Senior Notes are unsubordinated, unsecured obligations of the Company.
Covenants. The i5.500%
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, 2021, the Company was in compliance with all applicable covenants.
Change in Control. The occurrence of a change of control will be a triggering event requiring the
Company to offer to purchase from holders all of the i5.500% Senior Notes, at a price equal to i101% of the principal amount, plus accrued and unpaid interest, if any, to the
date of purchase. In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the i5.500% Senior Notes at i100% of
their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.
Capacity to Pay Dividends
At June 30, 2021, the capacity to pay dividends under the Senior Credit Facilities and the i5.500% Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the
Company's net loss of $i51.7 million and accumulated deficit of $i139.1 million were deemed free of
restrictions from paying dividends at June 30, 2021.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Loss on Extinguishment of Debt
Accounting for the Fiscal 2022 Debt Transactions Discussed Above:
Revolving Credit Facility.
•Unamortized
debt issuance costs: Where the borrowing capacity (measured as the amount available under the revolving credit facility multiplied by the remaining term) was less than it was prior to the amendment to the Revolving Credit Facility on a creditor-by-creditor basis, the unamortized debt issuance costs were written off as a loss on extinguishment of debt in proportion to the decrease in borrowing capacity. The remaining unamortized debt issuance costs were allocated between the 2023 and 2026 Revolving Credit Facility in proportion to the borrowing capacity of each facility and are being amortized over the respective terms of the 2023 and 2026 Revolving Credit Facility, as applicable.
•Fees paid to creditors and third-party costs:
All fees paid to creditors or third parties (i.e., new debt issuance costs) were recorded as a reduction of amounts outstanding under the 2026 Revolving Credit Facility and are being amortized over the term of the 2026 Revolving Credit Facility.
Term Loan A. With respect to substantially all creditors participating in the Term Loan A, the amendment was considered a modification of terms since the present value of the cash flows after the amendment differed by less than a 10% change from the present value of the cash flows on a creditor-by-creditor basis prior to the amendment. Accordingly, the associated costs were accounted for as follows:
•Unamortized debt issuance costs: Previously incurred unamortized debt issuance costs and fees were allocated between the 2023 Term Loan A and
the 2026 Term Loan A based on the relative balances outstanding after the amendment and are being amortized over the respective terms of the 2023 Term Loan A and 2026 Term Loan A. To the extent there was a reduction of the outstanding balance on a creditor-by-creditor basis (i.e., a partial prepayment of debt), previously incurred unamortized debt issuance costs and fees were expensed as a loss on extinguishment of debt on the unaudited condensed consolidated statement of operations.
•Fees paid to creditors: Certain fees were paid to creditors based on their 2026 Term Loan A participation. These fees paid to creditors were recorded as a reduction of amounts outstanding under the 2026 Term Loan A and are being amortized over the term of the 2026 Term Loan A.
•Third-party costs: Substantially
all third-party costs were expensed as a result of the modification and included in loss on extinguishment of debt in the unaudited condensed consolidated statement of operations.
Senior Notes. In accounting for the issuance and redemption of the i5.875% and i6.375%
Senior Notes as discussed above, a portion of the Senior Notes redemption and issuance was considered a modification of terms with creditors who participated in both the redeemed Senior Notes and new i5.500% Senior Notes, a portion was considered a debt extinguishment, and a portion represented new issuances to new creditors, and the debt issuance costs were accounted for as follows:
•Unamortized debt issuance costs:Previously incurred unamortized debt issuance
costs and fees on the redeemed Senior Notes are being amortized over the term of the new Senior Notes, to the extent considered a modification of terms, and expensed as a loss on extinguishment of debt to the extent considered an extinguishment. To the extent there was a reduction of the outstanding balance on a creditor-by-creditor basis (i.e., a partial prepayment of debt), previously incurred unamortized debt issuance costs and fees were expensed as a loss on extinguishment of debt on the unaudited condensed consolidated statement of operations.
•Fees paid to creditors: Fees paid to creditors or call premiums were recorded as a reduction of amounts outstanding under the new Senior Notes and are being amortized over the term of the new Senior Notes, to the extent considered a modification of terms or associated with new issuances to new creditors, and expensed as a loss on
extinguishment of debt to the extent considered an extinguishment or a partial prepayment of debt.
•Third-party costs:Costs incurred with third parties were recorded as a reduction of amounts outstanding under the new Senior Notes and will be amortized over the term of the new Senior Notes, to the extent considered an extinguishment or associated with new issuances to new creditors, and expensed as a loss on extinguishment of debt to the extent considered a modification of terms.
For all of the above transactions, debt issuance costs recorded as a reduction of outstanding debt are amortized using the effective interest method.
Term Loan B. In connection with the
repurchases of the Term Loan B discussed above, the Company recorded a loss on extinguishment of debt of $i0.2 million related to the write-off of debt issuance costs.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Loss on Extinguishment of Debt.iThe following table summarizes the loss on extinguishment of debt recorded related to the transactions described above in the three months ended June 30, 2021. There
was ino loss on extinguishment of debt in the three months ended June 30, 2020./
Program rights and other film obligations include minimum guarantees and accrued licensed program rights obligations, which represent amounts payable for film or television rights that the Company has acquired or licensed 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 LIBOR-based interest at rates ranging from i2.22% to i2.66%
(before the impact of interest rate swaps, see Note 16 for interest rate swaps).
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Production Tax Credit Facility
In January 2021, as amended on March 31, 2021, the Company entered into
a non-recourse senior secured revolving credit facility (the "Production Tax Credit Facility") based on collateral consisting of certain of the Company’s tax credit receivables. The maximum principal amount of the Production Tax Credit Facility is $i220.0 million, subject to the amount of collateral available, which is based on specified percentages of amounts payable to the
Company by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction. Advances under the Production Tax Credit Facility bear interest at a rate equal to, at the Company’s option, LIBOR plus i1.50% per annum or the base rate plus i0.50%
per annum (effective interest rate of i1.60% at June 30, 2021). The Production Tax Credit Facility matures on January 27, 2025.As of June 30, 2021, there were ino
additional amounts available under the Production Tax Credit Facility.
7. iFair 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.
•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 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
i
The
following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of June 30, 2021 and March 31, 2021:
(1)Amounts
at June 30, 2021 and March 31, 2021 exclude $i95.7 million and $i98.2 million,
respectively, of financing component of interest rate swaps presented in the table below.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
i
The
following table sets forth the carrying values and fair values of the Company’s outstanding debt, production loans, Production Tax Credit Facility and interest rate swaps at June 30, 2021 and March 31, 2021:
(1)The
Company measures the fair value of its outstanding debt and interest rate swaps using discounted cash flow techniques that use observable market inputs, such as LIBOR-based yield curves, swap rates, and credit ratings (Level 2 measurements).
(2)Amounts at June 30, 2021 and March 31, 2021 include $i95.7 million and $i98.2 million,
respectively, recorded as a reduction of assets under master netting arrangements.
/
The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, other liabilities, and borrowings under the Revolving Credit Facility, if any. The carrying values of these financial instruments approximated the fair values at June 30, 2021 and March 31, 2021.
8.
iNoncontrolling Interests
Redeemable Noncontrolling Interests
i
The table below presents
the reconciliation of changes in redeemable noncontrolling interests:
Net
loss attributable to redeemable noncontrolling interests
(i6.2)
(i4.9)
Noncontrolling
interests discount accretion
i7.7
i5.9
Adjustments
to redemption value
i10.8
i5.9
Cash
distributions
i—
(i0.8)
Ending
balance
$
i231.4
$
i173.9
/
Redeemable
noncontrolling interests (included in temporary equity on the unaudited condensed consolidated balance sheets) relate to the November 12, 2015 acquisition of a controlling interest in Pilgrim Media Group and the May 29, 2018 acquisition of a controlling interest in 3 Arts Entertainment.
3 Arts Entertainment. The noncontrolling interest holders have a right to put the noncontrolling interest of 3 Arts Entertainment, at fair value, exercisable at ifive
years after the acquisition date of May 29, 2018, for a i60 day period. Beginning i30 days after the expiration of the exercise period for the put rights held by the noncontrolling
interest holders, the Company has a right to call the noncontrolling interest of 3 Arts Entertainment, at fair value, for a i60 day period.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Pilgrim Media Group. Pursuant to an amendment dated April 2, 2021, the put and call rights associated with the Pilgrim Media Group noncontrolling interest were extended and modified, such that the noncontrolling interest holder has a right to put and the Company has a right to call a portion of the noncontrolling interest, equal to i25%
of Pilgrim Media Group, at fair value, exercisable for thirty (i30) days beginning November 12, 2022. In addition, the noncontrolling interest holder has a right to put and the Company has a right to call the remaining amount of noncontrolling interest at fair value, subject to a cap, exercisable for thirty (i30)
days beginning November 12, 2024, as amended.
In addition, the noncontrolling interest holder is the President and CEO of Pilgrim Media Group. Pursuant to the original operating agreement of Pilgrim Media Group, if the employment of the noncontrolling interest holder was terminated, under certain circumstances as defined in the operating agreement, the Company could call and the noncontrolling interest holder could put the noncontrolling interest at a discount to fair value, which was being expensed over the call periods in the original operating agreement. Pursuant to the amendment to the operating agreement on April 2, 2021, this discount was eliminated and therefore the remaining unamortized discount
of $i2.7 million has been expensed in the three months ended June 30, 2021. The amortization of the discount through June 30, 2021 was included in general and administrative expense of Pilgrim Media Group and reflected as an addition to redeemable noncontrolling interest.
Redeemable noncontrolling interests are measured at the greater of (i) the redemption amount that would be paid if
settlement occurred at the balance sheet date less the amount attributed to unamortized noncontrolling interest discount if applicable, or (ii) the historical value resulting from the original acquisition date value plus or minus any earnings or loss attribution, plus the amount of amortized noncontrolling interest discount, less the amount of cash distributions that are not accounted for as compensation, if any. The amount of the redemption value in excess of the historical values of the noncontrolling interest, if any, is recognized as an increase to redeemable noncontrolling interest and a charge to retained earnings or accumulated deficit.
Other Noncontrolling Interests
The Company has other immaterial noncontrolling interests that are not redeemable.
9. iRevenue
The Company's Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical
exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places. The Company's Media Networks segment generates revenue primarily from the distribution of the Company's STARZ branded premium subscription video services.
(1)Media
Networks domestic revenues for the three months ended June 30, 2020 included revenue from the Company's former Other Streaming Services product line of $i11.5 million, substantially all of which related to the Company's former interest in Pantaya, which was sold on March
31, 2021 (see Note 2).
Remaining Performance Obligations
Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog). iRevenues expected to be
recognized in the future related to performance obligations that are unsatisfied at June 30, 2021 are as follows:
The
above table does not include estimates of variable consideration for transactions involving sales or usage-based royalties in exchange for licenses of intellectual property. The revenues included in the above table include all fixed fee contracts regardless of duration.
Revenues of $i72.8 million, including variable and
fixed fee arrangements, were recognized during the three months ended June 30, 2021, from performance obligations satisfied prior to March 31, 2021. These revenues were primarily associated with the distribution of television and theatrical product in electronic sell-through and video-on-demand formats, and to a lesser extent, the distribution of theatrical product in the domestic and international markets related to films initially released in prior periods.
Accounts Receivable, Contract Assets and Deferred Revenue
The timing of revenue recognition, billings and cash collections affects the recognition of accounts receivable,
contract assets and deferred revenue. iAt June 30, 2021 and March 31, 2021, accounts receivable, contract assets and deferred revenue are as follows.
(1)Included
in prepaid expenses and other (see Note 17).
Accounts Receivable. Accounts receivable are presented net of a provision for doubtful accounts. The Company estimates provisions for accounts receivable based on historical experience for the respective risk categories and current and future expected economic conditions. To assess collectibility, the Company analyzes market trends, economic conditions, the aging of receivables and customer specific risks, and records a provision for estimated credit losses expected over the lifetime of the receivables in direct operating expense.
The
Company performs ongoing credit evaluations and monitors its credit exposure through active review of customers' financial condition, aging of receivable balances, historical collection trends, and expectations about relevant future events that may significantly affect collectibility. The Company generally does not require collateral for its trade accounts receivable.
i
Changes in the provision for doubtful accounts consisted
of the following:
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Contract
Assets. Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables). Amounts relate primarily to contractual payment holdbacks in cases in which the Company is required to deliver additional episodes or seasons of television content in order to receive payment, complete certain administrative activities, such as guild filings, or allow the Company's customers' audit rights to expire.
Deferred
Revenue. Deferred revenue relates primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation. Revenues of $i64.1 million were recognized during the three months ended June 30, 2021 related to the balance of deferred revenue at March 31, 2021.
10.
iNet Income (Loss) Per Share
iBasic net income (loss) per share is calculated based on the weighted average common shares outstanding for the period.iBasic
net income (loss) per share for the three months ended June 30, 2021 and 2020 is presented below:
Net
income (loss) attributable to Lions Gate Entertainment Corp. shareholders
$
(i45.4)
$
i51.1
Denominator:
Weighted
average common shares outstanding
i221.8
i219.5
Basic
net income (loss) per common share
$
(i0.20)
$
i0.23
Diluted
net income (loss) per common share reflects share purchase options, including share appreciation rights ("SARs"), restricted share units ("RSUs") and restricted stock using the treasury stock method when dilutive, and any contingently issuable shares when dilutive. iDiluted net income (loss) per common share for the three months ended June 30, 2021 and 2020 is presented below:
Net
income (loss) attributable to Lions Gate Entertainment Corp. shareholders
$
(i45.4)
$
i51.1
Denominator:
Weighted
average common shares outstanding
i221.8
i219.5
Effect
of dilutive securities:
Restricted share units and restricted stock
i—
i0.4
Adjusted
weighted average common shares outstanding
i221.8
i219.9
Diluted
net income (loss) per common share
$
(i0.20)
$
i0.23
As
a result of the net loss in the three months ended June 30, 2021, the dilutive effect of the share purchase options, restricted share units and restricted stock, and contingently issuable shares were considered anti-dilutive and, therefore, excluded from diluted net loss per share. The weighted average anti-dilutive shares excluded from the calculation due to the net loss for the three months ended June 30, 2021 totaled i7.4 million.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
i
Additionally, for the three months ended June 30, 2021 and 2020, the
outstanding common shares issuable presented below were excluded from diluted net income (loss) per common share because their inclusion would have had an anti-dilutive effect regardless of net income or loss in the period.
Total
weighted average anti-dilutive shares issuable excluded from diluted net income (loss) per common share
i15.3
i35.3
/
11.
iCapital Stock
(a) Common Shares
The Company had ii500/
million authorized Class A voting shares and ii500/
million authorized Class B non-voting shares at June 30, 2021 and March 31, 2021. iThe table below outlines common shares reserved for future issuance:
Restricted
share units and other share-based compensation
i22.9
i8.9
Share
appreciation rights
i2.3
i1.2
Total
share-based compensation expense
i34.6
i14.4
Tax
impact(1)
(i6.6)
(i3.0)
Reduction
in net income
$
i28.0
$
i11.4
___________________
(1)Represents
the income tax benefit recognized in the unaudited condensed consolidated statements of operations for share-based compensation arrangements prior to the effects of changes in the valuation allowance.
The
following table sets forth the stock option, SARs, restricted stock and restricted share unit activity during the three months ended June 30, 2021:
(1)Represents
less than iiiii0.1////
million shares.
/
(c) Share Repurchases
During the three months ended June 30, 2021, the Company did not repurchase any common shares. During the three months ended June 30, 2020, the Company repurchased i0.2
million of its Class A voting shares for an aggregate cost of $i1.0 million, with an average repurchase price per share of $i5.75.
To date, approximately $i288.1 million common shares have been repurchased, leaving approximately $i179.9
million of authorized potential repurchases.
12. iIncome Taxes
The income tax provision for the three months ended June 30, 2021 and 2020 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 (loss) before income taxes for the period, plus or minus the tax effects of items that relate discretely to the period, if any.
The Company's income tax provision differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of the Company's pre-tax income (loss) generated across the various jurisdictions in which the Company operates, changes in the valuation allowance against the Company's deferred
tax assets, and certain minimum taxes and foreign withholding taxes. The Company's income tax provision for the quarter ended June 30, 2021 was also impacted by the additional accrual of interest on uncertain tax benefits. The Company's income tax provision for the quarter ended June 30, 2020 was also impacted by the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company's income tax provision can be 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 uncertain tax positions, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and
other discrete items.
13. iRestructuring and Other
i
Restructuring
and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable. During the three months ended June 30, 2021 and 2020, the Company also incurred certain other unusual charges related to the COVID-19 global pandemic. The following table sets forth restructuring and other and COVID-19 related charges and the statement of operations line items they are included in for the three months ended June 30, 2021 and 2020:
COVID-19
related charges included in restructuring and other(2)
i0.3
i0.5
Transaction
and related costs(3)
i0.5
i0.3
Total
Restructuring and Other
i3.2
i3.0
COVID-19
related charges not included in restructuring and other, included in:
Direct operating expense(4)
i1.6
i5.7
Distribution
and marketing expense(4)
i—
i4.7
Total
restructuring and other and COVID-19 related charges
$
i4.8
$
i13.4
_______________________
(1)Severance
costs in the three months ended June 30, 2021 and 2020 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.
(2)During the three months ended June 30, 2021, the Company has incurred certain costs primarily related to incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic. In the three months ended June 30 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental costs associated
with the COVID-19 global pandemic.
(3)Transaction and related costs in the three months ended June 30, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
(4)In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of theaters, international travel restrictions and the pausing of motion picture and television productions, during the three months ended June 30, 2021 and 2020the Company incurred certain incremental costs which were expensed in the period. The costs included in direct operating expense primarily represent incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries. In addition, the costs included in distribution and marketing expense primarily consist of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit. The Company is in the process of seeking additional insurance recovery for some of these costs. The ultimate amount of insurance recovery cannot be estimated at this time.
Changes
in the restructuring and other severance liability were as follows for the three months ended June 30, 2021 and 2020:
(1)As
of June 30, 2021, the remaining severance liability of approximately $i4.3 million is expected to be paid in the next 12 months.
14. iSegment
Information
The Company’s reportable segments have been determined based on the distinct nature of their operations, the Company's internal management structure, and the financial information that is evaluated regularly by the Company's chief operating decision maker.
The Company has ithree
reportable business segments: (1) Motion Picture, (2) Television Production and (3) Media Networks.
Motion Picture. Motion Picture 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. 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. Television Production includes the licensing of Starz original series productions to Starz Networks and STARZPLAY International, and the ancillary market
distribution of Starz original productions and licensed product. Additionally, the Television Production segment includes the results of operations of 3 Arts Entertainment.
Media Networks. Media Networks consists of the following product lines (i) Starz Networks, which includes the domestic distribution of STARZ branded premium subscription video services through OTT platforms and Distributors and on a direct-to-consumer basis through the Starz App and (ii) STARZPLAY International, which represents revenues primarily from the OTT distribution of the Company's STARZ branded premium subscription video services outside of the U.S. Through March 31, 2021, Media Networks also included Other Streaming Services, which represented primarily our formerly majority owned premium
Spanish language streaming services business, Pantaya. The Company sold its interest in Pantaya on March 31, 2021 (see Note 2).
In the ordinary course of business, the Company's reportable segments enter into transactions with one another. The most common types of intersegment transactions include licensing motion pictures or television programming (including Starz original productions) from the Motion Picture and Television Production segments to the Media Networks segment. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses, assets, or liabilities recognized by the segment that is the counterparty to the transaction)
are eliminated in consolidation and, therefore, do not affect consolidated results.
The
Company's primary measure of segment performance is segment profit. Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses. Segment profit excludes, when applicable, corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, certain charges related to the COVID-19 global pandemic and purchase accounting and related adjustments. The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the
Company's management and enables them to understand the fundamental performance of the Company's businesses.
i
The reconciliation of total segment profit to the Company’s income (loss) before income taxes is as follows:
COVID-19
related charges included in direct operating expense and distribution and marketing expense(3)
(i1.6)
(i10.4)
Adjusted
share-based compensation expense(4)
(i34.6)
(i14.4)
Purchase
accounting and related adjustments(5)
(i50.0)
(i46.4)
Operating
income
i20.3
i89.4
Interest
expense
(i41.7)
(i44.4)
Interest
and other income
i3.9
i1.7
Other
expense
(i1.7)
(i1.7)
Loss
on extinguishment of debt
(i26.6)
i—
Gain
(loss) on investments
(i0.1)
i5.1
Equity
interests income (loss)
i0.7
(i2.6)
Income
(loss) before income taxes
$
(i45.2)
$
i47.5
___________________
(1)Adjusted
depreciation and amortization represents depreciation and amortization as presented on our unaudited condensed consolidated statements of operations less the depreciation and amortization related to the non-cash fair value adjustments to property and equipment and intangible assets acquired in recent acquisitions which are included in the purchase accounting and related adjustments line item above, as shown in the table below:
Less:
Amount included in purchase accounting and related adjustments
(i33.2)
(i37.5)
Adjusted
depreciation and amortization
$
i10.1
$
i10.1
(2)Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable (see Note 13).
(3)In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, during the three months ended June 30, 2021 and 2020the Company has incurred $i1.6
million and $i10.4 million, respectively, in incremental direct operating and distribution and marketing expense (see Note 13). These charges are excluded from segment operating results.
(4)Adjusted share-based compensation represents share-based compensation expense adjusted for amounts included in restructuring and other expenses, when applicable, reflecting the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain
severance arrangements.
(5)Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in recent acquisitions. These adjustments include the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the amortization of the recoupable portion of the purchase price and the expense associated with the earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense. The following sets forth the amounts included in each line item in the financial statements:
(1)Other
unallocated assets primarily consist of cash, other assets and investments.
/
15. iContingencies
From
time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business.
The Company establishes an accrued liability for claims and legal proceedings when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.
Due to the inherent difficulty of predicting the outcome of claims and legal proceedings, the Company often cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, if any, related to each
pending matter may be. Accordingly, at this time, the Company has determined a loss related to these matters in excess of accrued liabilities is reasonably possible, however a reasonable estimate of the possible loss or range of loss cannot be made at this time.
Insurance Litigation
Between July 19, 2016 and August 30, 2016, iseven
putative class action complaints were filed by purported Starz stockholders in the Court of Chancery of the State of Delaware (the "Fiduciary Litigation"). On August 22, 2018, the parties to the Fiduciary Litigation reached an agreement in principle providing for the settlement of the Fiduciary Litigation on the terms and conditions set forth in an executed term sheet. On October 9, 2018, the parties to the Litigation executed a stipulation of settlement, which was filed with the court (the "Stipulation"). The Stipulation provided for, among other things, the final dismissal of the Fiduciary Litigation in exchange for a settlement payment made in the amount of $i92.5
million, of which $i37.8 million was reimbursed by insurance. The Fiduciary Litigation settlement was approved by the Court of Chancery of the State of Delaware and the settlement amount and insurance reimbursement discussed above were paid during the quarter ended December 31, 2018. The Company is continuing to seek additional insurance reimbursement, including pursuant to a lawsuit filed by the
Company on November 7, 2018 against certain insurers.
On November 5, 2018, an insurer that entered into an agreement and contributed $i10.0 million to the Company's aggregate insurance reimbursement filed a lawsuit seeking declaratory judgment for reimbursement of its agreed upon payment.
The Company believes the lawsuit to be without merit and intends to vigorously defend it.
16. iDerivative Instruments and Hedging Activities
The
Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of, the financial institutions that
are party to its financial transactions. Changes in the fair value of the foreign exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income (loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest Rate Swaps
The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows. The Company primarily uses pay-fixed interest
rate swaps to facilitate its interest rate risk management activities, which the Company generally designates as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these designated cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur. Changes in the fair value of interest rate swaps that are not designated as hedges are recorded in interest expense (see further explanation below).
Cash settlements related to interest rate contracts are generally classified as operating activities on
the consolidated statements of cash flows. However, due to an other-than-insignificant financing element on a portion of our interest rate swaps (see designated cash flow hedges table below), the cash flows related to these contracts are classified as financing activities.
Designated Cash Flow Hedges. As of June 30, 2021, the Company had the following designated cash flow hedge pay-fixed interest rate swaps outstanding (all related to the Company's LIBOR-based debt, see Note 5 and Note 6):
(1)Subject to a mandatory early
termination date of March 23, 2025.
(2)These pay-fixed interest rate swaps are considered hybrid instruments with a financing component and an embedded at-market derivative that was designated as a cash flow hedge (see discussion of cash flow presentation above).
Not Designated. As of June 30, 2021, the Company had the following pay-fixed receive-variable and offsetting pay-variable receive-fixed interest rate swaps outstanding, which are not designated as cash flow hedges:
(1)During
the fiscal year ended March 31, 2021, the Company completed a series of transactions to amend and extend certain interest rate swap agreements, and as part of these transactions, the $i1.4 billion pay-fixed receive-variable interest rate swaps presented in the table above were de-designated, and the Company entered into $i1.4
billion of pay-variable receive-fixed interest rate swaps, as presented in the table above, which are designed to offset the terms of the $i1.4 billion of pay-fixed receive-variable swaps in the table above. At the time of the de-designation of the above $i1.4
billion in pay-fixed receive-variable interest rate swaps, there was approximately $i163.0 million of unrealized losses recorded in accumulated other comprehensive income (loss). This amount is being amortized to interest expense through the remaining term of the de-designated swaps unless it becomes
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the loss will be recorded to interest expense at that time. The $i1.4 billion of pay-fixed
receive-variable interest rate swaps de-designated as cash flow hedges and the $i1.4 billion of offsetting pay-variable receive-fixed swaps are marked to market with changes in fair value recognized, along with the fixed and variable payments on these swaps, in interest expense, which are expected to nearly offset each other.
Financial Statement Effect of Derivatives
Unaudited condensed consolidated statements
of operations and comprehensive income (loss):iThe following table presents the pre-tax effect of the Company's derivatives on the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three months ended June 30,
2021 and 2020:
Loss reclassified from accumulated other comprehensive loss into interest expense
$
(i8.4)
$
(i3.4)
Total
direct operating expense on consolidated statements of operations
$
i486.2
$
i423.0
Total
interest expense on consolidated statements of operations
$
i41.7
$
i44.4
Unaudited
condensed consolidated balance sheets:The Company classifies its forward foreign exchange contracts and interest rate swap agreements within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (see Note 7). The portion of the swaps reflecting the financing component of the hybrid instrument discussed above is recorded at amortized cost and reduced over time based on payments. Pursuant to the Company's accounting policy to offset the fair value amounts recognized for derivative instruments, the Company presents the asset or liability position of the
swaps that are with the same counterparty under a master netting arrangement net as either an asset or liability in its unaudited condensed consolidated balance sheets. As of June 30, 2021, the gross amount of swaps in an asset and liability position that were subject to a master netting arrangement was $i174.0 million and $i229.1
million, respectively, resulting in an asset recorded in other assets - non current of $i24.1 million and a liability recorded in other liabilities - non-current of $i79.2
million. As of March 31, 2021, the gross amount of swaps in an asset and liability position that were subject to a master netting arrangement was $i211.2 million and $i236.3
million, respectively, resulting in an asset recorded in other assets - non-current of $i50.8 million and a liability recorded in other liabilities - non-current of $i75.9
million.
iAs of June 30, 2021 and March 31, 2021, the Company had the following amounts recorded in the accompanying unaudited condensed consolidated balance sheets related to the
Company's use of derivatives:
(1)Includes
$i95.7 million and $i52.2 million included in other non-current assets and other non-current liabilities, respectively, representing the financing element of certain hybrid
instruments, which is offset by the pay-variable receive-fixed interest rate swaps outstanding at June 30, 2021.
(1)Includes
$i98.2 million and $i54.3 million included in other non-current assets and other non-current liabilities, respectively, representing the financing element of certain hybrid
instruments, which is offset by the pay-variable receive-fixed interest rate swaps outstanding at March 31, 2021.
As of June 30, 2021, based on the current release schedule, the Company estimates approximately $i0.3 million of gains associated with
forward foreign exchange contract cash flow hedges in accumulated other comprehensive loss will be reclassified into earnings during the one-year period ending June 30, 2022.
As of June 30, 2021, the Company estimates approximately $i47.4
million of losses recorded in accumulated other comprehensive loss associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending June 30, 2022.
17. iAdditional Financial Information
The
following tables present supplemental information related to the unaudited condensed consolidated financial statements.
Cash, Cash Equivalents and Restricted Cash
iThe following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the unaudited condensed consolidated balance sheet to the total amounts reported in the unaudited condensed
consolidated statement of cash flows at June 30, 2021. At June 30, 2021, restricted cash included in other current assets represents amounts related to required cash reserves for interest payments associated with the Production Tax Credit Facility. There were ino material amounts of restricted cash in the unaudited condensed consolidated balance sheet as of March 31, 2021. /
Cash
consideration receivable for sale of Pantaya (see Note 2)
i—
i123.6
Product
inventory
i13.8
i14.3
Tax credits receivable
i55.6
i68.4
$
i144.5
$
i274.3
Other
non-current assets
Prepaid expenses and other
$
i20.7
$
i25.8
Accounts
receivable
i57.3
i49.4
Tax
credits receivable
i271.4
i181.2
Operating
lease right-of-use assets
i130.4
i127.0
Interest
rate swap assets
i24.1
i50.8
$
i503.9
$
i434.2
/
Accounts
Receivable Monetization
Under the Company's accounts receivable monetization programs, the Company has entered into (1) individual agreements to monetize certain of its trade accounts receivable directly with third-party purchasers and (2) a revolving agreement to monetize designated pools of trade accounts receivable with various financial institutions, as further described below. Under these programs, the Company transfers receivables to purchasers in exchange for cash proceeds, and the Company continues to service the receivables for the purchasers. The
Company accounts for the transfers of these receivables as a sale, removes (derecognizes) the carrying amount of the receivables from its balance sheets and classifies the proceeds received as cash flows from operating activities in the statements of cash flows. The Company records a loss on the sale of these receivables reflecting the net proceeds received (net of any obligations incurred), less the carrying amount of the receivables transferred. The loss is reflected in the "other expense" line item on the unaudited condensed consolidated statements of operations. The Company receives fees for servicing the accounts receivable for the purchasers, which represent the fair value of the services and were immaterial for the three months ended June 30,
2021 and 2020.
Individual Monetization Agreements. The Company enters into individual agreements to monetize trade accounts receivable. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers. iThe
following table sets forth a summary of the receivables transferred under individual agreements or purchases during the three months ended June 30, 2021 and 2020:
Carrying value of receivables transferred and derecognized
$
i340.4
$
i313.2
Net
cash proceeds received
i338.5
i311.7
Loss
recorded related to transfers of receivables
i1.9
i1.5
At
June 30, 2021, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheets, but which the Company continues to service, related to the Company's individual agreements to monetize trade accounts receivable was $i509.2
million (March 31, 2021 - $i562.8 million).
Pooled Monetization Agreement. In December 2019, the Company
entered into a revolving agreement to transfer up to $i150.0 million of certain receivables to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. As customers pay their balances, the Company transfers additional receivables into the program. The transferred receivables are fully guaranteed
by a bankruptcy-remote wholly-owned subsidiary of the Company, which holds additional receivables in the amount of $i73.1 million as of June 30, 2021 that are pledged as collateral under this agreement. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment
by the customers.
The following table sets forth a summary of the receivables transferred under the pooled monetization agreement during the three months ended June 30, 2021 and 2020:
Gross cash proceeds received for receivables transferred and derecognized
$
i39.1
$
i52.3
Less
amounts from collections reinvested under revolving agreement
(i29.3)
(i41.3)
Proceeds
from new transfers
i9.8
i11.0
Collections
not reinvested and remitted or to be remitted
(i12.4)
(i10.4)
Net
cash proceeds received
$
(i2.6)
$
i0.6
Carrying
value of receivables transferred and derecognized (1)
$
i39.0
$
i52.0
Obligations
recorded
$
(i0.1)
$
i0.4
Loss
(gain) recorded related to transfers of receivables
$
(i0.2)
$
i0.1
___________________
(1)Receivables
net of unamortized discounts on long-term, non-interest bearing receivables.
At June 30, 2021, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheet, but which the Company continues to service, related to the pooled monetization agreement was approximately $i96.4
million (March 31, 2021 - $i99.0 million).
Accumulated Other Comprehensive Loss
i
The
following table summarizes the changes in the components of accumulated other comprehensive loss, net of tax:
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Supplemental Cash Flow Information
Significant non-cash transactions during the three months ended June 30, 2021 and 2020 include certain interest rate swap agreements, which are discussed in Note 16, "Derivative Instruments and Hedging Activities".
There were no significant non-cash financing activities
for the three months ended June 30, 2021 and 2020.
18. iSubsequent Events
Film Library Acquisition. On July 15, 2021, the
Company acquired the majority of the Spyglass Media Group, LLC ("Spyglass") feature film library of approximately i200 titles. In connection with the acquisition of the film library, the Company also formed a strategic content partnership (which provides for an investment of a i20%
minority ownership stake) and entered into a multiyear first-look television arrangement with Spyglass.
IP Credit Facility. In July 2021, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "IP Credit Facility") based on the collateral consisting solely of the Company’s rights in certain library titles, including the Spyglass and other recently acquired libraries and non-recourse to other assets of the Company. The maximum principal amount of the IP Credit Facility
is $i100.0 million, subject to the amount of collateral available, which is based on the valuation amount of cash flows from the libraries. The cash flows generated from the exploitation of the rights will be applied to repay the IP Credit Facility subject to a minimum guaranteed payment amount and are expected to be sufficient to fully repay the facility by the stated maturity date. Advances under the IP Credit Facility bear interest at a rate equal to, at the
Company’s option, LIBOR plus i2.25% per annum or the base rate plus i1.25% per annum. The IP Credit Facility matures on July
30, 2026.
Term Loan B Repurchases. In July and August 2021, the Company completed a series of repurchases of the Term Loan B, and in aggregate, paid $i38.7 million to repurchase $i38.9 million
principal amount of the Term Loan B.
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
Combining the STARZ
premium global subscription platform with world-class motion picture and television studio operations, Lions Gate Entertainment Corp. (the “Company,”“Lionsgate,”"Lions Gate,"“we,”“us” or “our”) brings a unique and varied portfolio of entertainment to consumers around the world. Our film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and one of the largest collections of film and television franchises in the independent media space. We classify our operations through three reporting segments: Motion Picture,Television Production, and Media Networks (see further discussion below).
COVID-19 Global Pandemic
The
impacts associated with the ongoing COVID-19 global pandemic and measures to prevent its spread, and the resulting economic uncertainty, continue to affect our business in a number of ways. We have experienced delays in theatrical distribution of our films, both domestically and internationally, as well as delays in the production of film and television content (resulting in continued changes in future release dates for some titles and series). While we have begun (and have, in certain instances, completed) production on a number of films and television series, and theaters have begun to reopen in certain locations with reduced capacity, we are not able to accurately predict when theaters will re-open at scale, at what level consumers will return to movie theaters, when film production will fully resume, whether productions that have resumed will be paused again, the impact of incremental costs required to adhere to health and safety protocols, or if and when certain
of our content will be released. The full extent of impacts related to the COVID-19 global pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. See Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 28, 2021, as updated by any risk factors found under Part II, Item 1A. "Risk Factors" herein.
In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of most theaters, international travel restrictions and the pausing of motion picture and television productions, during the three months ended June 30,
2021 we have incurred $1.9 million in incremental costs which were expensed in the period. These costs include $1.6 million reflected in direct operating expense, which include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, net of insurance recoveries. In addition, these costs include $0.3 million in restructuring and other costs primarily due to incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic during these periods. During the three months ended June 30, 2020, we incurred $10.9 million in incremental costs which were expensed in the period, including $5.7 million in direct operating expense, $4.7 million in distribution and marketing expense primarily consisting of contractual marketing spends for film releases and events that
have been canceled or delayed and will provide no economic benefit, and $0.5 million in restructuring and other costs primarily due to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic. We expect to incur additional incremental costs in future periods. However, if the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021. We are in the process of seeking additional insurance recovery for some of these costs. The ultimate amount of insurance recovery cannot be estimated at this time. See further discussion in the Results of Operations section below.
The
economic impact of the COVID-19 global pandemic and resulting societal changes will depend on numerous evolving factors that cannot be predicted with certainty. There are a number of ways in which these uncertainties resulting from the ongoing COVID-19 global pandemic have impacted our current results of operations and could continue to impact our future results of operations. These impacts include the incremental costs and losses discussed in the previous paragraph, lower revenues from the closure or limited reopenings of movie theaters and postponement of theatrical releases, partially offset by lower theatrical production and marketing costs; increased expenses associated with new health and safety protocols on motion picture and television productions; changes in the timing of revenues for motion pictures and television productions associated with delays in production and delivery or release; and while STARZ has experienced an increase in viewership of its content,
future growth could be impacted by the timing of when productions will fully resume, and whether productions that have resumed will be paused again.
We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact
of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak (including
the availability, effectiveness and/or public acceptance of any U.S. Food and Drug Administration ("FDA")-approved COVID-19 vaccines), and global economic conditions related to the COVID-19 global pandemic. All of these impacts could place limitations on our ability to execute on our business plan and materially and adversely affect our business, financial condition and results of operations. We have implemented policies, procedures and protocols to address the situation and expect to continue to adjust our current policies and procedures as more information and guidance become available. In addition, resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus, may result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19. These measures could result in further interruptions to our operations. Due to the evolving and uncertain
nature of this situation, we are not able to estimate the full extent of the impact on our operating results, cash flows and financial position, particularly over the near to medium term.
Revenues
Our revenues are derived from the Motion Picture, Television Production and Media Networks segments, as described below. Our revenues are derived from the U.S., Canada, the United Kingdom 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, 2021 and 2020.
Motion Picture
Our Motion Picturesegment 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 (distributed by us directly 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.
•Home Entertainment. Home entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) on packaged media and through digital media
platforms (including pay-per-view and video-on-demand platforms, electronic sell through, and digital rental). 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.
•Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the linear pay, basic cable and free television markets.
•International. International revenues are derived from (1) licensing of our productions, acquired films, our catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; and (2) the
direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.
•Other. Other revenues are derived from, among others, the licensing of our film and television and related content (games, music, location-based entertainment royalties, etc.) to other ancillary markets.
Television Production
Our Television Production segment includes revenues derived from the following.
•Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television and syndication) of scripted and unscripted series, television movies, mini-series and
non-fiction programming. Television revenues include fixed fee arrangements as well as arrangements in which we earn advertising revenue from the exploitation of certain content on television networks. Television revenues also include revenue from licenses to subscription-video-on-demand ("SVOD") platforms in which the initial license of a television series is to an SVOD platform.
•International. International revenues are derived from the licensing and syndication to international markets of scripted and unscripted 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 on packaged media and through digital media platforms.
•Other. Other revenues are derived from, among others, the licensing of our television programs to other ancillary markets, the sales and licensing of music from the television broadcasts of our productions, and from commissions earned and executive producer fees related to talent management.
Media Networks
Our Media Networks segment includes revenues derived from the following:
•Starz Networks. Starz Networks’ revenues are derived from the domestic distribution of our STARZ branded premium subscription video services through over-the-top ("OTT") platforms and U.S. multichannel video programming distributors (“MVPDs”)
including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”), and on a direct-to-consumer basis through the Starz App.
•STARZPLAY International.STARZPLAY International revenues are primarily derived from OTT distribution of the Company's STARZ branded premium subscription video services outside of the U.S.
Through March 31, 2021, our Media Networks segment also included revenues derived from Other Streaming Services, which represented revenues derived primarily from our formerly majority owned premium Spanish language streaming services business, Pantaya, which included subscriber based streaming revenue and
other distribution revenue. We sold our interest in Pantaya on March 31, 2021, for approximately $123.6 million in cash, subject to certain customary adjustments pursuant to the terms of the agreement. Under the terms of the purchase agreement, control of Pantaya transferred to Hemisphere Media Group on March 31, 2021, with the cash consideration transferred on April 1, 2021. See Note 2 to our unaudited condensed consolidated financial statements for further information.
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, amortization of programming production or acquisition costs and programming related salaries, 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 or television program to parties associated with the film or television program, including producers, writers, directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild - American Federation of Television and Radio Artists, Directors Guild of America, and Writers Guild of America, based on the performance of the film or television program 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. Marketing costs for Media Networks includes advertising, consumer marketing, distributor marketing support and other marketing costs. In addition, distribution and marketing costs includes our Media Networks segment operating costs for the direct-to-consumer service, transponder expenses and maintenance and repairs.
General
and administration expenses include salaries and other overhead.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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
of the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. In addition, the evolving and uncertain nature of the COVID-19 global pandemic could materially impact our estimates, particularly those that require consideration of forecasted financial information, in the near to medium term. Accordingly, actual results could differ materially from our estimates. 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. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 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 28, 2021.
Accounting for Films and Television Programs and Licensed Program Rights
Capitalized costs for films or television programs are amortized and tested for impairment based on whether the content
is predominantly monetized individually or as a group.
Film and Television Programs Monetized Individually. For films and television programs monetized individually, film cost amortization, participations and residuals expense are based on management's estimates. Costs of acquiring and producing films and television programs and of acquired libraries that are monetized individually are amortized and estimated liabilities for participations and residuals costs are accrued using the individual-film-forecast method, based on the ratio of the current period's revenues to management’s estimated remaining total gross revenues to be earned ("ultimate revenue"). Management's judgment is required in estimating ultimate revenue and the costs to be incurred throughout the life of each film or television program.
Management estimates ultimate revenues based on
historical experience with similar titles or the title genre, the general public appeal of the cast, audience test results when available, 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.
For motion pictures, ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. The most sensitive factor affecting our estimate of ultimate revenues for a film intended for theatrical release is the film's theatrical performance, as subsequent revenues from the licensing and sale in other markets have historically been
highly correlated to its theatrical performance. After a film's release, our estimates of revenue from succeeding markets are revised based on historical relationships and an analysis of current market trends.
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. The most sensitive factors affecting our estimate of ultimate revenues for a television series is whether the series will be ordered for a subsequent season and estimates of revenue in secondary markets other than the initial license fee. The initial estimate of ultimate revenue may include estimates of revenues outside of the initial license window (i.e., international, home entertainment and other distribution platforms) and are based on historical experience
for similar programs (genre, duration, etc.) based on the estimated number of seasons. We regularly monitor the performance of each season, and evaluate whether impairment indicators are present (i.e., low ratings, cancellations or the season is not reordered), and based upon our review, we revise our estimates as needed and perform an impairment assessment if impairment indicators are present (see below).
For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following 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
or less successful than anticipated. 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 a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value (see below).
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 an impairment requiring 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 operations. See further discussion below under Impairment Assessment.
Film and Television Programs Monetized as a Group. Licensed programming rights may include rights to more than one exploitation window under the Company's output and library agreements. For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated fair value of each window which generally results in the majority of the cost allocated to the first
window on newer releases. Certain license agreements and productions may include additional ancillary rights in addition to the pay television rights. The cost of the Media Networks’ third-party licensed content and produced content is allocated between the pay television market distributed by the Media Networks’ segment and the ancillary revenue markets (e.g., home video, digital platforms, international television, etc.) based on the estimated relative fair values of these markets. Our estimates of fair value for the pay television and ancillary markets and windows of exploitation involve uncertainty and management judgment. Programming costs vary due to the number of airings and cost of our original series, the number of films licensed and the cost per film paid under our output and library programming agreements.
The cost of program rights for films and television programs (including original series) exhibited by the
Media Networks segment are generally amortized on an accelerated or straight-line basis based on the anticipated number of exhibitions or expected and historical viewership patterns or the license period on a title-by-title or episode-by-episode basis. The number of exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the expected usage of the content. Participations and residuals are expensed in line with the amortization of production costs.
Changes in management’s estimate of the anticipated exhibitions and viewership patterns of films and original series on our networks could result in the earlier recognition of our programming costs than anticipated. Conversely, scheduled exhibitions and expected viewership patterns may not capture the appropriate usage of the program rights in current periods which would lead to the write-off of additional program rights in future periods
and may have a significant impact on our future results of operations and our financial position.
Impairment Assessment. A film group or individual film or television program is evaluated for impairment when events or changes in circumstances indicate that the fair value of an individual film or film group is less than its unamortized cost. If the result of the impairment test indicates that the carrying value exceeds the estimated fair value, an impairment charge will then be recorded for the amount of the difference.
Estimate of Fair Value. For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), the fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the
title. For motion pictures intended for theatrical release, the discounted cash flow analysis used in the impairment evaluation prior to theatrical release is subjective as key inputs include estimates of future anticipated revenues, estimates of box office performance, which may differ from future actual results. These estimates are based in part on the historical performance of similar films, test audience results when available, information regarding competing film releases, and critic reviews. See further discussion of Valuation Assumptions below.
For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), the fair value is determined based on the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows
are independent of other produced and licensed content. The Company's film groups are generally aligned along the Company's networks and digital content offerings domestically (i.e., Starz Networks and, through March 31, 2021, Other Streaming Services) and by territory or groups of territories internationally, wherein content assets are shared across the various territories and therefore, the territory or group of territories is the film group.
Valuation Assumptions. The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement, see Note 7 to our unaudited condensed consolidated financial statements).
The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program or film group. The fair value of any film costs associated with a film or television program that management plans to abandon is zero. 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 management’s future revenue estimates.
Revenue Recognition.Our Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home
entertainment (e.g., digital media and packaged media), television, and international market places. Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services and, through Mach 31, 2021, from our formerly majority owned premium Spanish language streaming services business, Pantaya, which includes subscriber based streaming revenue and other distribution revenue. We sold our interest in Pantaya on March 31, 2021, see Note 2 to our unaudited condensed consolidated financial statements for further information.
Our content licensing arrangements
include fixed fee and minimum guarantee arrangements, and sales or usage based royalties. Our fixed fee or minimum guarantee licensing arrangements in the television, digital media and international markets may, in some cases, include multiple titles, multiple license periods (windows) with a substantive period in between the windows, rights to exploitation in different media, or rights to exploitation in multiple territories, which may be considered distinct performance obligations. When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or territory) are recognized when the content has been delivered, and the window for the exploitation right in that territory has begun, which is the point in time
at which the customer is able to begin to use and benefit from the content.
Sales or usage based royalties represent amounts due to us based on the “sale” or “usage” of our content by the customer, and revenues are recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which some or all the sales or usage-based royalty has been allocated has been satisfied (or partially satisfied). Generally, when we license completed content (with standalone functionality, such as a movie, or television show), our performance obligation will be satisfied prior to the sale or usage. When we license intellectual property that does not have stand-alone functionality (e.g., brands, themes, logos, etc.), our performance obligation is generally satisfied in the same period as the sale or usage. The actual amounts due to us under these arrangements are generally not reported to us until
after the close of the reporting period. We record revenue under these arrangements for the amounts due and not yet reported to us based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. Such estimates are based on information from our customers, historical experience with similar titles in that market or territory, the performance of the title in other markets and/or available data in the industry. While we believe these estimates are reasonable estimates of the amounts due under these arrangements, such estimated amounts could differ from the actual amounts to be subsequently reported by the customer, which could be higher or lower than our estimates, and could result in an adjustment to revenues in future periods.
Revenue from the theatrical release of feature films are treated as sales
or usage-based royalties and recognized starting at the exhibition date and based on our participation in box office receipts of the theatrical exhibitor.
Digital media revenue sharing arrangements are recognized as sales or usage based royalties.
Revenue from the sale of physical discs (DVDs, Blu-ray or 4K Ultra HD), referred to as "Packaged Media", 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). We estimate reserves for Packaged Media 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 Packaged Media 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 $0.5 million on our total revenue in the three months ended June 30, 2021 (2020 - $0.5 million).
Revenue from commissions are recognized as such services are provided.
Media Networks revenues may be based on a fixed fee, subject to nominal annual escalations, or a variable fee (i.e., a fee based on number of subscribers who receive our networks or other factors). Media Networks programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor. The variable distribution fee arrangements represent sales or usage based royalties and are recognized over the period of such sales or usage
by the Company's distributor, which is the same period that the content is provided to the distributor. Payments to distributors for marketing support costs for which Starz receives a discrete benefit are recorded as distribution and marketing costs, and payments to distributors for which Starz receives no discrete benefit are recorded as a reduction of revenue.
Goodwill and Indefinite-Lived Intangibles.At June 30, 2021, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively. Our indefinite-lived intangible assets consist of trade names primarily representing the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as of December
8, 2016. Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (component level). Reporting units are determined by the discrete financial information available for the
component and whether that information is regularly reviewed by segment management. Components are aggregated into a single reporting unit if they share similar economic characteristics. Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at June 30, 2021, were Motion Picture (goodwill of $394 million), Media Networks
(goodwill of $1.97 billion), and our Television (goodwill of $309 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.
Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment each fiscal year or between the annual tests if an event occurs or circumstances change that indicates it is more-likely-than-not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value. We perform our annual impairment test as of January 1 in each fiscal year. A goodwill or indefinite-lived intangible asset impairment loss would be recognized for the amount that the carrying amount of a reporting unit, including goodwill or an indefinite-lived intangible asset, exceeds its fair value. An entity may perform a qualitative assessment of the likelihood of the existence of a goodwill or
indefinite-lived intangible asset impairment. The qualitative assessment is an evaluation, based on all identified events and circumstances which impact the fair value of the reporting unit or indefinite-lived intangible asset, of whether or not it is more-likely-than-not that the fair value is less than the carrying value of the reporting unit or indefinite-lived intangible asset. If we believe that as a result of our qualitative assessment it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is greater than its carrying amount, a quantitative impairment test is not required but may be performed at the option of the Company. A quantitative assessment requires determining the fair value of our reporting units or indefinite-lived intangible assets. The determination of fair value requires considerable judgment and requires assumptions
and estimates of many factors, including revenue and market growth, operating margins and cash flows, market multiples and discount rates.
In performing a quantitative assessment of goodwill, we determine the fair value of our reporting units by using a combination of discounted cash flow ("DCF") analyses and market-based valuation methodologies. The models rely on significant judgments and assumptions surrounding general market and economic conditions, short-term and long-term growth rates, discount rates, income tax rates, and detailed management forecasts of future cash flow and operating margin projections, and other assumptions, all of which are based on our internal forecasts of future performance as well as historical trends. The market-based valuation method utilizes EBITDA multiples from guideline public companies operating in similar industries and a control premium. The results of these valuation methodologies
are weighted as to their relative importance and a single fair value is determined. The fair value of our reporting units is reconciled to the market value of our equity, determined based on the average prices of our common shares just prior to the period end. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual or interim goodwill impairment tests will prove to be an accurate prediction of the future.
Goodwill Impairment Assessment:
For our annual goodwill impairment test for fiscal 2021, due to the increase in the market price of our common shares since our most recent quantitative impairment assessment at March 31, 2020, the performance of the Television
and Media Networks reporting units in fiscal 2021, and the improvement of overall economic conditions associated with the COVID-19 pandemic, we performed a qualitative assessment for all reporting units. This assessment included consideration of, but not limited to, the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, industry and market conditions, performance and current and projected cash flows of our reporting units, and changes in our share price. Based upon our qualitative assessment, we concluded that it was more-likely-than-not that the fair value of our reporting units was greater than their carrying value.
During the three months ended June 30, 2021, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our goodwill impairment
test, or that would indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.
Management will continue to monitor all of its reporting units for changes in the business environment that could impact the recoverability in future periods. The recoverability of goodwill is dependent upon the continued growth of revenue and cash flows from our business activities. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our reporting units may include the duration of the COVID-19 global pandemic, its impact on the global economy and the creation and consumption of our content, and the timing of when remaining production can resume and remaining theaters can re-open; adverse macroeconomic conditions; volatility in the equity and debt
markets which could result in higher weighted-average cost of capital; the commercial success of our television programming and our motion pictures; our continual contractual relationships with our customers; including our affiliate agreements of our Media Networks business; our subscriber growth rates domestically and internationally across our traditional and OTT platforms and changes in consumer behavior. While
historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.
Indefinite-Lived
Intangibles Other Than Goodwill Impairment Assessment:
For fiscal 2021, we performed a qualitative impairment assessment of our indefinite-lived trade names. Based on the qualitative impairment assessment of our trade names, we concluded that it is more-likely-than-not that the fair value of our trade names was more than its carrying amount, and therefore our trade names were not considered at risk of impairment. This qualitative analysis considered the relative impact of market-specific and macroeconomic factors. The market-specific factors considered included recent projections of revenues and growth in OTT subscribers, both domestic and internationally, associated with the STARZ brand name. The Company also considered the macroeconomic impact including the uncertainty around the COVID-19 global pandemic, and the resulting uncertain long-term
economic impact on discount rates and growth rates, as well as the impact from tax law changes inclusive of the reduction of the federal tax rate since the acquisition of Starz.
During the three months ended June 30, 2021, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our impairment assessment of our indefinite-lived trade names, or that would indicate that it is more-likely-than-not that the fair value of our indefinite-lived trade names is less than its carrying value.
Finite-Lived Intangible Assets.At June 30, 2021, the carrying value of our finite-lived intangible assets was approximately $1.29 billion. Our finite-lived intangible
assets primarily relate to customer relationships associated with U.S. MVPDs, including cable operators, satellite television providers and telecommunications companies ("Traditional Affiliate"), which amounted to $1.28 billion. The amount of our customer relationship asset related to these Traditional Affiliate relationships reflects the estimated fair value of these customer relationships determined in connection with the acquisition of Starz on December 8, 2016, net of amortization recorded since the date of the Starz acquisition. Identifiable intangible assets with finite lives are amortized to depreciation and amortization expense over their estimated useful lives, ranging from 5 to 17 years. The Starz Traditional Affiliate customer relationship intangible asset is amortized in the proportion that current period revenues bear to management’s estimate of future revenue over the remaining estimated useful life
of the asset, which results in greater amortization in the earlier years of the estimated useful life of the asset than the latter years.
Amortizable intangible assets are tested for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount of the asset may not be recoverable. If a triggering event has occurred, an impairment analysis is required. The impairment test first requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. The impairment test is performed at the lowest level of cash flows associated with the asset. If the carrying value of the asset exceeds the undiscounted future cash flows, the asset would not be deemed to be recoverable. Impairment would then be measured as the excess of the asset’s carrying value over its fair value.
The
Company monitors its finite-lived intangible assets and changes in the underlying circumstances each reporting period for indicators of possible impairments or a change in the useful life or method of amortization of our finite-lived intangible assets. During the fiscal year ended March 31, 2021, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption and the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our amortizable intangible assets. The impairment analysis requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. Based on our impairment analysis, the estimated undiscounted cash flows exceeded the carrying amount of the assets and therefore no impairment charge was required.
During
the three months ended June 30, 2021, there were no events or circumstances that have changed that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.
Determining whether an intangible asset is recoverable or impaired requires various estimates and assumptions, including whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining estimates of future cash flows for the assets involved and, when applicable, the assumptions applied in determining fair value, including discount rates, growth rates, market risk premiums and other assumptions about the economic environment. Should the revenues from our Traditional Affiliate relationships decline more than the assumed attrition rates used in our current estimates, either as a result of decreases in subscriber rates or changes of
the terms of our renewals of our Traditional Affiliate contracts, we may have indicators of impairment which could result in an impairment of our customer relationships intangible assets, or we may need to further shorten the useful life or adopt a more accelerated method of amortization both of which would increase the amount of amortization expense we record.
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 in
these jurisdictions. We recognize a future tax benefit to the extent that realization of such benefit is more likely than not on a jurisdiction-by-jurisdiction basis; 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 each of the jurisdictions which have these deferred tax assets. However, the assessment as to whether there will be sufficient taxable income in a jurisdiction to realize our net deferred tax assets in that jurisdiction 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
in a particular jurisdiction, we may need to record a valuation allowance for all or a portion of our deferred tax assets through a charge to our income tax provision. As of March 31, 2021, we had a valuation allowance of $350.9 million against certain U.S. and foreign deferred tax assets that may not be realized on a more likely than not basis.
Our quarterly income tax provision and our corresponding annual effective tax rate are based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. For interim financial reporting, we estimate the annual effective tax rate based on projected taxable income for the full year and record a quarterly tax provision in accordance with the expected annual effective tax rate. As the year progresses, we refine the estimates of the year’s taxable income as new information
becomes available, including year-to-date financial results. This continual estimation process often results in a change to our expected annual effective tax rate for the year. When this occurs, we adjust our income tax provision during the quarter in which the change in estimate occurs so that the year-to-date income tax provision reflects the expected annual effective tax rate. Significant judgment is required in determining our expected annual effective tax rate and in evaluating our tax positions.
Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the overall level of pre-tax income (loss), the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, any changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, changes in valuation allowances against our deferred tax assets, tax planning
strategies available to us and other discrete items.
The following table sets forth our consolidated results of operations for the three months ended June 30, 2021 and 2020. The Media Networks segment results of operations
for the three months ended June 30, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of Other Streaming Services). We sold our interest in Pantaya on March 31, 2021. See Note 2 to our unaudited condensed consolidated financial statements for further information.
Revenues. Consolidated revenues increased in the three months ended June 30, 2021, due to an increase in Television Production revenue, and to a lesser extent, increases in Media Networks and Motion Picture revenues, partially offset by increased intersegment eliminations associated with higher Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.
As
theaters have begun to reopen in certain locations with reduced capacity, Motion Picture revenue increased in the current quarter due to higher theatrical and international revenue associated with a greater number of theatrical and international releases, offset partially by lower home entertainment and television revenue.
Television Production revenue increased due to higher domestic television revenue with a greater number of television episodes delivered, and increased intersegment revenues from the licensing of Starz original series as compared to the prior year's quarter, which was negatively impacted by the pausing of productions associated with the COVID-19 global pandemic. The increase was also, to a lesser extent, due to higher international revenue and other revenue. These increases were partially offset by decreased home entertainment digital media revenue.
Media Networks
revenue increased due to increased revenue across STARZPLAY International and Starz Networks, partially offset by a decrease due to the prior year's quarter including revenue from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line). See further discussion in the Segment Results of Operations section below.
Direct Operating Expenses. Direct operating expenses by segment were as follows for the three months ended June 30, 2021 and 2020:
Direct operating expenses increased in the three months ended June 30, 2021 primarily due to higher Television Production revenue, partially offset by slightly lower Media Networks and Motion Picture direct operating expense and lower COVID-19 related charges (as further described below). The increase in Television Production direct operating expense was partially offset by the increase in intersegment eliminations, which primarily relate to Television Production direct operating costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment. Media Networks direct operating expense decreased due to a decrease at Starz Networks, partially offset by an increase at STARZPLAY International. See further discussion in the Segment Results of Operations section below.
COVID-19
Related Charges.In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended June 30, 2021 and 2020, we incurred $1.6 million and $5.7 million, respectively, in incremental costs which were expensed in the periods which are included in consolidated direct operating expense and are excluded from segment direct operating expense. These costs include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries. We expect to incur additional incremental costs
in future periods. If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to
improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021. We are in the process of seeking additional insurance recovery for some of these costs. The ultimate amount of insurance recovery cannot be estimated at this time.
Other. Other direct operating expenses in the table above includes the amortization of the non-cash fair value adjustments on film and television assets associated
with the application of purchase accounting related to recent acquisitions.
Distribution and Marketing Expenses. Distribution and marketing expenses by segment were as follows for the three months ended June 30, 2021 and 2020:
Three
Months Ended
June 30,
Increase (Decrease)
2021
2020
Amount
Percent
(Amounts in millions)
Distribution and marketing expenses
Motion
Picture
$
95.4
$
23.1
$
72.3
313.0
%
Television Production
7.9
6.9
1.0
14.5
%
Media
Networks
114.2
107.0
7.2
6.7
%
COVID-19 related charges
—
4.7
(4.7)
(100.0)
%
Other
0.1
—
0.1
n/a
$
217.6
$
141.7
$
75.9
53.6
%
U.S.
theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense
$
57.9
$
—
$
57.9
n/a
Distribution and marketing expenses increased in the three months ended June 30, 2021, due to an increase in Motion Picture theatrical P&A as theaters have begun to reopen in certain locations with reduced capacity, and increased Media
Networks distribution and marketing expense, partially offset by lower COVID-19 related charges (as further described below). The increase in Media Networks distribution and marketing expense was due to an increase at Starz Networks, partially offset by a decrease due to the prior year's quarter including distribution and marketing expense from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line). See further discussion in the Segment Results of Operations section below.
In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended June 30,
2021 and 2020, we incurred immaterial amounts and $4.7 million, respectively, in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit. These charges are excluded from segment operating results. We expect to incur additional incremental costs in future periods. If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021.
General and Administrative Expenses. General and administrative expenses by segment were as follows for the three months ended June 30, 2021 and 2020:
General and administrative expenses increased in the three months ended June 30, 2021,
resulting from increases in share-based compensation expense, purchase accounting and related adjustments, and a slight increase in Media Networks general and administrative expenses, partially offset by decreased Motion Picture, Corporate and Television Production general and administrative expenses. See further discussion in the Segment Results of Operations section below.
Corporate general and administrative expenses decreased $2.1 million, or 8.0%, primarily due to a decrease in incentive based compensation.
The increase in share-based compensation expense included in general and administrative expense in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020 is primarily due to higher fair values associated with performance-based stock option
and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved. Additionally, the increase in share-based compensation expense is due to an increase in the number of share-based payment awards incurring expense in the current quarter as compared to the prior year's quarter. The following table reconciles this amount to total share-based compensation expense:
Share-based compensation expense by expense category
General and administrative expense
$
34.4
$
13.9
Direct
operating expense
0.1
0.4
Distribution and marketing expense
0.1
0.1
Total share-based compensation expense
$
34.6
$
14.4
Purchase accounting and related adjustments
represent the charge for the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the amortization of the recoupable portion of the purchase price and the expense associated with earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense. Purchase accounting and related adjustments increased $7.7 million, or 88.5%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.
Depreciation and Amortization Expense. Depreciation and amortization of $43.3 million for the three months ended June 30, 2021 decreased $4.3 million, from $47.6 million in the three months ended June 30, 2020.
Restructuring
and Other. Restructuring and other increased $0.2 million in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable. Restructuring and other costs were as follows for the three months ended June 30, 2021 and 2020 (see Note 13 to our unaudited condensed consolidated financial statements):
(1)Severance
costs in the three months ended June 30, 2021 and 2020 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.
(2)During the three months ended June 30, 2021, the Company has incurred certain costs primarily related to incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic. In the three months ended June 30 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental costs associated
with the COVID-19 global pandemic.
(3)Transaction and related costs in the three months ended June 30, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
Interest Expense. Interest expense of $41.7 million in the three months ended June 30, 2021 decreased $2.7 million from the three months ended June 30, 2020, due to lower interest expense on the term loans, Senior Notes and other cash-based interest related to payments associated with the Company's
interest rate swaps. These decreases were partially offset by an increase in amortization of debt financing costs, and other non-cash interest due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements). The following table sets forth the components of interest expense for the three months ended June 30, 2021 and 2020:
Amortization
of debt financing costs, and other non-cash interest(2)
12.0
6.5
Total interest expense
$
41.7
$
44.4
______________________
(1)Amounts include payments associated with the Company's interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).
(2)Amounts
include the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).
Other Expense. Other expense of $1.7 million for the three months ended June 30, 2021 compared to other expense of $1.7 million for the three months ended June 30, 2020, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).
Loss on Extinguishment of Debt. Loss on extinguishment of debt for the three months ended June 30, 2021
related to the write-off of a portion of debt issuance costs (including a portion of call premiums) associated with the redemption of the 5.875% Senior Notes and 6.375% Senior Notes and associated issuance of the 5.500% Senior Notes, the amendment of our
credit agreement to extend the maturity of a portion of our revolving credit commitments and a portion of our outstanding term A loans, and repurchases of the Term Loan B. There was no comparable loss in the three months ended June 30, 2020. See Note 5 to our unaudited condensed consolidated financial statements.
Gain
(Loss) on Investments. Loss on investments of $0.1 millionfor the three months ended June 30, 2021 compared to a gain on investments of $5.1 millionfor the three months ended June 30, 2020, primarily due to a gain on sale of equity securities without readily determinable fair values in the prior year's quarter.
Equity Interests Income (Loss). Equity interests income of $0.7 million in the three months ended June 30, 2021 compared to equity interests loss of $2.6 million in the three months ended June 30, 2020 due to lower losses from our equity method investees in the current quarter.
Income Tax Provision. We had an income tax provision of $6.5 million in the three months ended June 30, 2021, compared to an income tax provision of $1.3 million in the three months ended June 30, 2020. Our income tax provision differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, changes in the valuation allowance against our deferred tax assets, and certain minimum taxes and foreign withholding taxes. Our income tax provision for the three months ended June 30, 2021 was also impacted by the additional accrual of interest and penalties on uncertain tax benefits. Our income tax provision for the
three months ended June 30, 2020 was also impacted by the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.
Net Income (Loss) Attributable to Lions Gate Entertainment Corp. Shareholders. Net loss attributable to our shareholders for the three months ended June 30, 2021 was $45.4 million, or basic and diluted net loss per common share of $0.20 on 221.8 million weighted average common shares outstanding. This compares to net income attributable to our shareholders for the three months ended June 30, 2020 of $51.1 million, or basic net income per common share of $0.23 on 219.5 million weighted average common shares outstanding and diluted net income per common share of $0.23 on
219.9 million weighted average common shares outstanding.
Segment Results of Operations
The segment results of operations presented below do not include the elimination of intersegment transactions which are eliminated when presenting consolidated results, and exclude items separately identified in the restructuring and other line item in the unaudited condensed consolidated statements of operations.
The Company's primary measure of segment performance is segment profit. Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses. Segment profit excludes, when applicable, corporate general and administrative
expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, certain charges related to the COVID-19 global pandemic, and purchase accounting and related adjustments. The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enables them to understand the fundamental performance of the Company's businesses. The reconciliation of segment profit to the
Company's consolidated income (loss) before income taxes is presented in Note 14 to the unaudited condensed consolidated financial statements.
(1)Feature
Film: Includes theatrical releases through our Lionsgate and Summit Entertainment film labels, which includes films developed and produced in-house, films co-developed and co-produced and films acquired from third parties.
(2)Other Film: Includes direct-to-DVD motion pictures, acquired and licensed brands, third-party library product and ancillary-driven platform theatrical releases through our specialty films distribution labels including Lionsgate Premiere, through Good Universe, and with our equity method investees, Roadside Attractions and Pantelion Films, and other titles.
Theatrical revenue increased $28.1 million in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020
due to revenue in the quarter from The Hitman's Wife's Bodyguard and Spiral, as theaters have begun to reopen in certain locations with reduced capacity. In the prior year's quarter, theaters were mostly closed due to circumstances associated with the COVID-19 global pandemic.
Home entertainment revenue decreased $21.0 million, or 12.6%, in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, due to lower digital media and packaged media revenues as a result of fewer home entertainment releases from our fiscal 2021 theatrical slate in our Feature Film category due to circumstances associated with the COVID-19 global pandemic. Digital media revenue in the
prior year's quarter included significant revenue from our fiscal 2020 theatrical slate (I Still Believe and Knives Out).
Television revenue decreased $7.7 million, or 13.2%, in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020 due to fewer television windows opening (and revenue recognized) than in the prior year's quarter.
International revenue increased $10.3 million, or 19.6%, in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020 due to higher revenue from our fiscal 2021 and 2022 theatrical slates in the current quarter as theaters
have begun to reopen in certain locations with reduced capacity, while the prior year's quarter had no new theatrical releases due to circumstances associated with the COVID-19 global pandemic.
If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we currently expect that Motion Picture segment revenues will increase in fiscal 2022 as compared to fiscal 2021. The extent of the increase, if any, to Motion Picture segment revenues, will depend on, among other things, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants
of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, general global economic conditions, the rate at which theaters are able to re-open at scale, the rate of consumers' return to the theaters, and the impact of a potentially crowded marketplace from movies which are awaiting theatrical release in the market. The evolving and uncertain nature of the situation could result in
further interruptions to our operations, including delays in domestic and international theatrical distribution and production and the pausing of productions, which could
impact Motion Picture segment revenues.
Direct Operating Expense. The decrease in direct operating expenses is due to lower direct operating expenses as a percentage of motion picture revenue, driven by the change in the mix of titles and product categories generating revenue in the current quarter as compared to the prior year's quarter. In particular, the decrease was impacted by the lower amortization rate of the fiscal 2022 and prior theatrical slate titles generating revenue in the current quarter as compared to the prior year's quarter. There were no investment in film write-downs included in Motion Picture segment direct operating expense in the three months ended June 30, 2021, as compared to $0.6 million in the three months ended June 30, 2020.
Distribution
and Marketing Expense. The increase in distribution and marketing expense in the three months ended June 30, 2021 is due to higher theatrical P&A and premium video-on-demand ("Premium VOD") expense compared to the prior year's quarter, which had no theatrical P&A expense in the Motion Picture segment due to the closure of theaters as a result of circumstances associated with the COVID-19 global pandemic. Theatrical P&A and Premium VOD expense in the three months ended June 30, 2021 includes expense associated with the release of The Hitman's Wife's Bodyguard, Spiral and Voyagers. In the three months ended June 30, 2021, approximately $2.7 million of P&A and Premium VOD expense was
incurred in advance for films to be released in subsequent quarters, with no comparable expense in the Motion Picture segment in the prior year's quarter.
Gross Contribution. Gross contribution of the Motion Picture segment for the three months ended June 30, 2021 decreased as compared to the three months ended June 30, 2020 due to higher Motion Picture distribution and marketing expense as a percentage of Motion Picture revenue.
General and Administrative Expense. General and administrative expenses of the Motion Picture segment in the three months ended June 30, 2021 decreased $4.4 million, or 15.3%, primarily due to decreases in incentive based compensation and salaries and related
compensation.
Television Production
The table below sets forth Television Production gross contribution and segment profit for the three months ended June 30, 2021 and 2020:
Three
Months Ended
June 30,
Increase (Decrease)
2021
2020
Amount
Percent
(Amounts in millions)
Television Production Segment:
Revenue
$
386.1
$
195.7
$
190.4
97.3
%
Expenses:
Direct
operating expense
365.2
143.2
222.0
155.0
%
Distribution & marketing expense
7.9
6.9
1.0
14.5
%
Gross
contribution
13.0
45.6
(32.6)
(71.5)
%
General and administrative expenses
10.0
10.7
(0.7)
(6.5)
%
Segment
profit
$
3.0
$
34.9
$
(31.9)
(91.4)
%
Direct operating expense as a percentage of revenue
Revenue. The table below sets forth Television Production revenue and changes in revenue by media for the three months ended June 30, 2021 and 2020:
Three
Months Ended
June 30,
Increase (Decrease)
2021
2020
Amount
Percent
Television Production
(Amounts in millions)
Television
$
272.2
$
95.9
$
176.3
183.8
%
International
67.5
46.4
21.1
45.5
%
Home
Entertainment
Digital
24.5
45.9
(21.4)
(46.6)
%
Packaged Media
2.3
0.7
1.6
228.6
%
Total
Home Entertainment
26.8
46.6
(19.8)
(42.5)
%
Other
19.6
6.8
12.8
188.2
%
$
386.1
$
195.7
$
190.4
97.3
%
The
primary component of Television Production revenue is domestic television revenue. Domestic television revenue increased in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, due to a greater number of television episodes delivered, increased intersegment revenues from the licensing of Starz original series (Power Book III: Raising Kanan, Blindspotting Season 1, Heels Season 1 among others), and increased revenue from reality television series, all of which were negatively impacted in the prior year's quarter by disruptions associated with the COVID-19 global pandemic and the associated pausing of productions.
International revenue in the three months ended June 30,
2021 increased $21.1 million, or 45.5% as compared to the three months ended June 30, 2020 due to revenue in the current quarter from Dear White People Season 4 and higher intersegment revenues from STARZPLAY International from the licensing of Starz original series.
Home entertainment revenue in the three months ended June 30, 2021 decreased $19.8 million due to significant digital media revenue in the prior year's quarter for Mad Men Seasons 1 - 7.
Other revenue increased in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase is primarily
due to revenue of 3 Arts Entertainment, which was negatively impacted in the three months ended June 30, 2020 as a result of the COVID-19 global pandemic related disruptions. While television production has mostly resumed, the extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases fully returning to and remaining at pre COVID-19 levels.
If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we currently expect that Television Production segment revenues will increase in fiscal 2022 as compared to fiscal 2021. The extent of the increase, if any, to Television Production segment revenues, will depend on, among other things, the impact of governmental regulations that have been, and may continue to be, imposed in response
to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, and general global economic conditions. The evolving and uncertain nature of the situation could result in further interruptions to our operations, including delays in domestic and international distribution and production throughout the U.S., Canada and worldwide, and the pausing of productions, which could impact Television Production segment revenues.
Direct Operating Expense.Direct operating expense
of the Television Production segment in the three months ended June 30, 2021 increased $222.0 million, or 155.0% due to the increase in Television Production revenues. Direct operating expenses as a percentage of television production revenue increased primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter, and in particular, due to the recent ramp up of production, the current quarter included a greater number of deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue. Due to the increase in cost associated with production and changes in season orders, the current quarter also included increased write-downs to fair value of investment in film and television programs amounting to $25.0 million in aggregate. This compared to lower direct operating expenses as a percentage of television revenue in the prior year's
quarter, which included fewer deliveries of newer shows primarily associated with the pausing of productions due to the COVID-19
Gross Contribution. Gross contribution of the Television Production segment for the three months ended June 30, 2021 decreased as compared to the three months ended June 30, 2020, due to higher direct operating expenses as a percentage of television production revenue, partially offset by higher television production revenue.
General and Administrative Expense. General and administrative expenses of the Television Production segment decreased $0.7 million, or 6.5%.
Media Networks
The table below sets forth Media Networks gross contribution and segment profit for the three months ended June 30, 2021 and 2020. The Media Networks segment results of operations for the three months ended June 30, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of our former Other Streaming Services product line). We sold our interest in Pantaya on March 31, 2021. See Note
2 to our unaudited condensed consolidated financial statements for further information.
Three Months Ended
June 30,
Increase
(Decrease)
2021
2020
Amount
Percent
(Amounts in millions)
Media Networks Segment:
Revenue
$
382.3
$
367.3
$
15.0
4.1
%
Expenses:
Direct
operating expense
158.8
168.0
(9.2)
(5.5)
%
Distribution & marketing expense
114.2
107.0
7.2
6.7
%
Gross
contribution
109.3
92.3
17.0
18.4
%
General and administrative expenses
21.1
20.5
0.6
2.9
%
Segment
profit
$
88.2
$
71.8
$
16.4
22.8
%
Direct operating expense as a percentage of revenue
41.5
%
45.7
%
Gross
contribution as a percentage of revenue
28.6
%
25.1
%
The following table sets forth the Media Networks segment profit by product line:
Subscriber Data. The number of period-end service subscribers is a key metric to evaluate a non-ad supported subscription video service as a growing or decreasing subscriber base is a key indicator of the health of the overall business. Service subscribers may impact revenue differently depending on specific distribution agreements we have with our distributors which may include fixed fees, rates per basic video household or a rate per STARZ subscriber. The table below sets forth, for the periods presented, subscriptions to our Media Networks and STARZPLAY Arabia services.
(1)Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee.
(2)Due
to the March 31, 2021 sale of Pantaya, total domestic and international subscribers, OTT subscribers and total global subscribers amounts have been adjusted from amounts previously reported for June 30, 2020 to exclude Pantaya in order to be consistent with the presentation at June 30, 2021. Subscribers of Pantaya (all OTT) at June 30, 2020 amounted to 0.8 million.
(3)OTT subscribers includes subscribers of STARZPLAY Arabia, as presented above.
Revenue. The increase in Media Networks' revenue was due to higher STARZPLAY International revenue of $14.1 million, and increased Starz Networks' revenue of $12.4
million, partially offset by a decrease due to the prior year's quarter including revenue from Pantaya (representing substantially all of Other Streaming Services), which was sold on March 31, 2021. STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since June 30, 2020. Starz Networks' revenue increased as a result of higher OTT revenue resulting from increased subscriptions, which was partially offset by declines in revenue from traditional linear services.
As a result of events related to the COVID-19 global pandemic, television and streaming consumption around the globe increased, as well as home entertainment demand. STARZ experienced an increase in viewership in the prior year of its content across
all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally. This increase in subscribers is dependent upon future economic conditions, our ability to deliver original content and may vary due to changes in consumer viewing and subscription patterns. However, it is too early to say whether this increase is indicative of future results and whether the slowing of growth will continue as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic.
During the three months ended June 30, 2021 and 2020, the following original series premiered on STARZ:
Direct
Operating and Distribution and Marketing Expenses. Direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively. The level of programming cost amortization and advertising and marketing costs and thus the gross contribution margin for the Media Networks' segment can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the network during the period. Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere. In addition, the launch of the STARZPLAY international service has and will continue to result in an increase in expenses as the service continues to expand.
The decrease in Media Networks direct operating expenses is due to lower direct operating expenses
at Starz Networks, partially offset by an increase at STARZPLAY International in the three months ended June 30, 2021. In addition, the prior year's quarter included direct operating expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021. The decrease in Starz Networks direct operating expense was due to lower programming amortization related to theatrical releases under our programming output agreement with Sony, lower programming cost amortization related to our Starz Originals due to a higher number of lower cost series premieres, and lower programming cost amortization related to our library content. Direct operating expenses at STARZPLAY International increased as a result of the continued expansion of STARZPLAY International.
The increase
in Media Networks distribution and marketing expense is due to an increase at Starz Networks due to an increase in operating expense related to continued growth in the OTT service and increased advertising and marketing due to increased spend on our Starz Originals, partially offset by a decrease due to the prior year's quarter including distribution and marketing expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021, and a slight decrease at STARZPLAY International.
Gross Contribution. The increase in gross contribution compared to the three months ended June 30, 2020 was due to an increase at Starz Networks driven by higher revenues and lower direct operating expense.
General
and Administrative Expense. General and administrative expenses of the Media Networks segment in the three months ended June 30, 2021 increased slightly from the prior year's quarter, driven by slightly increased general and administrative expenses at STARZPLAY International, which were partially offset by a decrease due to the prior year's quarter including general and administrative expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.
Our liquidity and capital resources have been provided principally through cash generated from operations, corporate debt, our production loans, the monetization of trade accounts receivable and our $220.0 million non-recourse senior secured revolving credit facility due January 2025 based on collateral consisting of certain of the Company’s tax credit receivables (the "Production Tax Credit Facility") (with $184.5 million outstanding, and no amounts available at June 30, 2021). As of June 30, 2021, we had cash and cash equivalents of $261.6 million. Our
debt at June 30, 2021 consisted of the following:
•Senior Credit Facilities:
◦Revolving Credit Facility. We have a $1.5 billion revolving credit facility (with no amounts outstanding at June 30, 2021). A portion of the revolving credit commitments, amounting to $1.25 billion, is due April 2026 (the "2026 Revolving Credit Facility"), and a portion of the revolving credit commitments, amounting to $250.0 million, is due March 2023 (the "2023 Revolving Credit Facility, and together with the 2026 Revolving Credit Facility, the "Revolving Credit Facility").
◦Term Loan A. We have a term loan A facility,
of which a portion of its outstanding loans, amounting to $444.9 million at June 30, 2021 is due April 2026 (the "2026 Term Loan A") and a portion of its outstanding loans, amounting to $209.7 million at June 30, 2021 is due March 2023 (the "2023 Term Loan A" and together with the 2026 Term Loan A, the "Term Loan A").
◦Term Loan B. We have a term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), with $898.0 million outstanding at June 30, 2021.
•Senior Notes:
◦5.500%
Senior Notes. We have $1.0 billion outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at June 30, 2021.
Subsequent to June 30, 2021, in July 2021, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "IP Credit Facility") based on the collateral consisting solely of the Company’s rights in certain library titles, including the Spyglass and other recently acquired libraries and non-recourse to other assets of the
Company. The maximum principal amount of the IP Credit Facility is $100.0 million, subject to the amount of collateral available, which is based on the valuation amount of cash flows from the libraries. The cash flows generated from the exploitation of the rights will be applied to repay the IP Credit Facility subject to a minimum guaranteed payment amount and are expected to be sufficient to fully repay the facility by the stated maturity date. Advances under the IP Credit Facility bear interest at a rate equal to, at the Company’s option, LIBOR plus 2.25% per annum or the base rate plus 1.25% per annum. The IP Credit Facility matures on July 30, 2026. See Note 18 - Subsequent Events in the unaudited condensed consolidated financial statements.
Our principal uses of cash in operations
include the funding of film and television productions, film and programming 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 method or other equity investments, quarterly cash dividends, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of businesses.
In addition, the Company has a redeemable noncontrolling interest balance of $231.4 million as of June 30, 2021 related to its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the
Company to repurchase their interests (see Note 8 to our unaudited condensed consolidated financial statements).
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. In addition, the
launch of the Company's STARZPLAY international service has and will require capital investment as the service expands to other international territories.
In the short-term, while a portion of our revenue has been reduced as a result of disruptions associated with the COVID-19 global pandemic, our cash requirements for productions and marketing spends have also been reduced. While we cannot predict the outcome of the disruptions associated with the COVID-19 global pandemic on our operating results, cash flows and financial position, we currently expect that as production
activity increases and theaters begin to reopen, our cash requirements for productions and marketing spends will increase in fiscal 2022 as compared to fiscal 2021.
However, we currently believe that cash flow from operations, cash on hand, revolving credit facility availability, the monetization of trade accounts receivable, tax-efficient financing, the availability of our Production Tax Credit Facility, and available production financing will be adequate to meet known operational cash and debt service (i.e. principal and interest payments) requirements for the foreseeable future, including the funding of future film and television production, film and programming rights acquisitions and theatrical and home entertainment release schedules, and future equity method or other investment funding requirements, and international expansion. 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 revolving credit facility, single-purpose production financing, government incentive programs, film funds, distribution commitments, the monetization of trade accounts receivable, and our Production Tax Credit Facility. In addition, we continue to expand our STARZPLAY international service and 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. Our ability to obtain any additional financing will depend on, among other things, our business plans, operating performance and the condition of the capital markets at the time we seek financing. Additionally, circumstances related to the COVID-19 global pandemic has caused disruption in the capital markets, which could make financing more difficult and/or expensive, and we may not be able to obtain such financing. 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.
Covenants. The Senior Credit Facilities contain representations and warranties, events of default and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant
exceptions, restrictions on the ability to declare or pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. In addition, a net first lien leverage maintenance covenant and an interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested quarterly. As of June 30, 2021, the Company was in compliance with all applicable covenants.
The 5.500% 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, 2021, the Company was in compliance with all applicable covenants.
Share Repurchase Plan. On February 2, 2016, our Board of Directors authorized to increase our previously announced share repurchase plan from $300 million to $468 million. To date, approximately $288.1 million of our common shares have been purchased under the plan, leaving approximately $179.9 million of authorized potential repurchases. The remaining $179.9 million of our common shares authorized under the plan may be purchased from time to time at our 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 three months ended June 30, 2021, the Company did not repurchase any common shares.
Dividends. 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. In November 2018, our Board of Directors suspended our quarterly cash dividend to focus on driving long-term shareholder value by investing in global
growth opportunities for Starz, while also strengthening the Company's balance sheet.
Capacity to Pay Dividends. At June 30, 2021, the capacity to pay dividends under the Senior Credit Facilities and the Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $51.7 million and accumulated deficit of $139.1 million were deemed free of restrictions from paying dividends at June 30, 2021.
Discussion of Operating, Investing, Financing Cash Flows
Cash, cash equivalents and restricted cash decreased by $261.3 million for the three months ended June 30, 2021 and increased by $57.8 million for the three months ended June 30, 2020, before foreign exchange effects on cash. Components of these changes are discussed below in more detail.
Operating Activities. Cash flows provided by (used in) operating activities for the three months ended June 30, 2021 and 2020 were as follows:
Amortization of films and television programs and program rights
371.1
281.2
89.9
Non-cash share-based compensation
34.6
14.4
20.2
Cash
interest
(29.7)
(37.9)
8.2
Current income tax provision
(5.6)
(1.3)
(4.3)
Other non-cash charges included in operating activities
27.7
18.3
9.4
Cash
flows from operations before changes in operating assets and liabilities
461.7
411.7
50.0
Changes in operating assets and liabilities:
Accounts
receivable, net and other assets
(149.6)
92.5
(242.1)
Investment in films and television programs and program rights
(577.4)
(176.5)
(400.9)
Accounts payable and accrued liabilities
(60.1)
(120.8)
60.7
Other
changes in operating assets and liabilities
(23.3)
(125.5)
102.2
Changes in operating assets and liabilities
(810.4)
(330.3)
(480.1)
Net Cash Flows Provided By (Used In) Operating Activities
$
(348.7)
$
81.4
$
(430.1)
Cash
flows used in operating activities for the three months ended June 30, 2021 were $348.7 million compared to cash flows provided by operating activities of $81.4 million for the three months ended June 30, 2020. The decrease in cash provided by operating activities for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 is due to greater cash used from changes in operating assets and liabilities as shown above, partially offset by increased cash flows from operations before changes in operating assets and liabilities. The greater use of cash from changes in operating assets and liabilities was driven by increased cash used for investment in films and television programs and program rights, and increases in accounts receivable, net and
other assets, partially offset by lower cash used from changes in other operating assets and liabilities and lower cash used for accounts payable and accrued liabilities as reflected above. In addition, cash flows provided by operating activities for the three months ended June 30, 2021 included a net use of cash of approximately $51.0 million from the monetization of accounts receivables programs, as compared to a net use of cash of approximately $16.5 million for the three months ended June 30, 2020 (see Note 17 to our unaudited condensed consolidated financial statements).
Investing Activities.Cash flows provided by (used in) investing activities for the three months ended June 30, 2021 and 2020
were as follows:
Proceeds
from the sale of equity method and other investments
—
5.1
Investment in equity method investees and other
(1.5)
(0.2)
Capital
expenditures
(6.4)
(6.4)
Net Cash Flows Provided By (Used In) Investing Activities
$
115.7
$
(1.5)
Cash
provided by investing activities of $115.7 million for the three months ended June 30, 2021 compared to cash used in investing activities of $1.5 million for the three months ended June 30, 2020, primarily due to proceeds from the sale of Pantaya, as reflected above (see Note 2 to our unaudited condensed consolidated financial statements).
Financing Activities.Cash flows used in financing activities for the three months ended June 30, 2021 and 2020 were as follows:
Debt - borrowings, net of debt issuance and redemption costs
$
1,199.9
$
75.0
Debt
- repurchases and repayments
(1,373.9)
(92.0)
Net repayments of debt
(174.0)
(17.0)
Production loans - borrowings
214.3
46.1
Production
loans - repayments
(113.2)
(44.1)
Net proceeds from production loans
101.1
2.0
Production tax credit facility
advances, net of debt issuance costs
94.9
—
Production tax credit facility repayments
(32.8)
—
Net proceeds from production tax credit facility
62.1
—
Repurchase
of common shares
—
(2.2)
Other financing activities
(17.5)
(4.9)
Net Cash Flows Used In Financing Activities
$
(28.3)
$
(22.1)
Cash
flows used in financing activities of $28.3 million for the three months ended June 30, 2021 compared to cash flows used in financing activities of $22.1 million for the three months ended June 30, 2020. Cash flows used in financing activities for the three months ended June 30, 2021 primarily reflects net debt repayments of $174.0 million, net production loan borrowings of $101.1 million as production activity increased in the quarter, and net Production Tax Credit Facility advances of $62.1 million. In addition, other financing activities in the three months ended June 30, 2021 includes $6.9 million for interest rate swap settlement payments due to an other-than-insignificant financing element on a portion of our interest rate swaps (see Note 16 to our unaudited condensed
consolidated financial statements) and tax withholding required on equity awards of $13.1 million. Net debt repayments of $174.0 million in the three months ended June 30, 2021 included the below transactions and associated debt issuance and redemption costs, along with required repayments on our term loans:
•On April 1, 2021, we redeemed in full all $518.7 million outstanding principal amount of our 5.875% Senior Notes and all $545.6 million outstanding principal amount of our 6.375% Senior Notes, and paid a prepayment premium of $15.2 million and $17.4 million on the 5.875% Senior Notes and 6.375% Senior Notes, respectively, plus accrued and unpaid interest to the date of redemption.
•On April 1, 2021, in connection with the redemption of the 5.875% Senior Notes and the 6.375% Senior Notes, we issued $1.0 billion aggregate principal amount of 5.500% Senior Notes.
•On April 6, 2021, we amended our Credit Agreement to, among other things, extend the maturity of a portion of our revolving credit commitments, amounting to $1.25 billion, and a portion of our outstanding term A loans, amounting to $444.9 million to April 6, 2026.
•In April and May 2021, the Company completed a series of repurchases
of the Term Loan B and, in aggregate, paid $51.1 million to repurchase $51.5 million principal amount of the Term Loan B.
Cash flows used in financing activities for the three months ended June 30, 2020 primarily reflects net debt repayments of $17.0 million, and net production loan borrowings of $2.0 million.
Debt
See Note 5 to our unaudited condensed consolidated financial statements for a discussion of our debt.
Production Loans and Production Tax Credit Facility
See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our production loans and Production Tax Credit Facility.
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, 2021:
Future annual repayment of debt recorded as of June 30, 2021 (on-balance sheet arrangements)
Revolving credit facility
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Term
Loan A
16.1
215.8
31.1
44.5
44.6
302.5
654.6
Term Loan B
9.4
12.5
12.5
863.6
—
—
898.0
5.500%
Senior Notes
—
—
—
—
—
1,000.0
1,000.0
Film obligations(1)
278.5
330.0
50.9
191.9
4.5
6.6
862.4
Operating
lease obligations
44.1
42.7
25.1
16.0
16.1
34.1
178.1
348.1
601.0
119.6
1,116.0
65.2
1,343.2
3,593.1
Contractual
commitments by expected repayment date (off-balance sheet arrangements)
Film obligations commitments(2)
258.7
616.9
180.0
41.5
47.7
1.0
1,145.8
Interest
payments(3)
93.9
120.0
107.2
99.9
61.1
178.8
660.9
Other contractual obligations
121.1
64.4
25.1
10.3
7.9
50.4
279.2
473.7
801.3
312.3
151.7
116.7
230.2
2,085.9
Total
future repayment of debt and other commitments under contractual obligations (4)
$
821.8
$
1,402.3
$
431.9
$
1,267.7
$
181.9
$
1,573.4
$
5,679.0
___________________
(1)Film
obligations include program rights and other film obligations, production loans and our Production Tax Credit Facility. Program rights and other film obligations include minimum guarantees, theatrical marketing obligations, and accrued licensed program rights 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. Production tax credit facility represent amounts due at June 30, 2021 under our
Production Tax Credit Facility,
and the repayment date represents the maturity date of the Production Tax Credit Facility (January 27, 2025), however net advances and payments under the Production Tax Credit Facility can fluctuate depending on the amount of collateral available. See Note 6 to our unaudited condensed consolidated financial statements.
(2)Film obligations commitments include distribution and marketing commitments, minimum guarantee commitments, program rights commitments, and production loan 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. Program rights commitments represent contractual commitments under programming license agreements related to films that are not available for exhibition until some future date (see below for further details). 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 release dates of the related film or contractual due dates of the commitment. The amounts include estimated future interest payments associated with the commitment.
(3)Includes cash interest payments on our debt, excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.
(4)Not
included in the amounts above are $231.4 million of redeemable noncontrolling interests, as future amounts and timing are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future payments (see Note 8 to our unaudited condensed consolidated financial statements).
We are obligated to pay programming fees for all qualifying films that are released theatrically in the U.S. by Sony’s Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels through 2021. We do not license films produced by Sony Pictures Animation. The programming fees to be paid by us to Sony are based on the quantity and domestic theatrical exhibition receipts of qualifying films. Since the term of the output programming agreement with Sony applies to all films released theatrically through December 31, 2021, the
Company is obligated to pay fees for films that have not yet been released in theaters. We are unable to estimate the amounts to be paid under these agreements for films that have not yet been released in theaters, however, such amounts are expected to be significant. We have also entered into agreements with a number of other motion picture producers and are obligated to pay fees for the rights to exhibit certain films that are released by these producers.
Remaining Performance Obligations and Backlog
Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog). As disclosed
in Note 9 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.5 billion at June 30, 2021 (March 31, 2021 - $1.6 billion). The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.1 billion at June 30, 2021 (March 31, 2021 - $1.2 billion).
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 unaudited condensed 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 unaudited condensed 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 continue to 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. 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. See Note 16 to our
unaudited condensed consolidated financial statements for additional information on our financial instruments.
Interest Rate Risk. At June 30, 2021, we had interest rate swap agreements to fix the interest rate on $1.7 billion of variable rate LIBOR-based debt. See Note 16 to our unaudited condensed consolidated financial statements for additional information. The difference between the fixed rate to be paid and the variable rate received under the terms of the interest rate swap agreements will be recognized as interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.
Certain of our borrowings, primarily borrowings under our
Senior Credit Facilities, certain production loans and our Production Tax Credit Facility, 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 revolving credit facility and Term Loan A is a percentage per annum equal to a LIBOR rate plus 1.75%. The applicable margin with respect to loans under our Term Loan B is a percentage per annum equal to a LIBOR rate plus 2.25%. Assuming the revolving credit facility is drawn up to its maximum borrowing capacity of $1.5 billion, based on the applicable LIBOR in effect as of June 30, 2021, each quarter point change in interest rates would result in a $3.4 million change in annual net
interest expense on the revolving credit facility, Term Loan A, Term Loan B and interest rate swap agreements.
The variable interest production loans incur interest at rates ranging from approximately 2.22% to 2.66%, including applicable margins ranging from 1.75% over the one, two, or three-month LIBOR to 2.25% over the one, two, or three-month LIBOR. A quarter point increase of the interest rates on the outstanding principal amount of our variable rate production loans would result in $1.2 million in additional costs capitalized to the respective film or television asset.
The applicable margin with respect to advances under the Production Tax Credit Facility is a percentage per annum equal to a LIBOR rate plus 1.50%. Assuming the Production Tax Credit Facility is utilized up to its maximum capacity of $220.0 million, based on the applicable LIBOR in effect as of June 30,
2021, each quarter point change in interest rates would result in a $0.6 million change in annual net interest expense on the Production Tax Credit Facility.
At June 30, 2021, our 5.500% Senior Notes had an outstanding carrying value of $963.1 million, and an estimated fair value of $1,052.5 million. A 1% increase in the level of interest rates would decrease the fair value of the 5.500% Senior Notes by approximately $43.2 million, and a 1% decrease in the level of interest rates would increase the fair value of the 5.500% Senior Notes by approximately $30.4 million.
The following table presents information about 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, or the
cash flows associated with the notional amounts of interest rate derivative instruments, and related weighted-average interest rates by expected maturity or required principal payment dates and the fair value of the instrument as of June 30, 2021:
Debt, Production Loans and Production Tax Credit Facility
Variable
Rates:
Revolving Credit Facility(1)
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Average
Interest Rate
—
—
—
—
—
—
Term Loan A(1)
16.1
215.8
31.1
44.5
44.6
302.5
654.6
644.8
Average
Interest Rate
1.85
%
1.85
%
1.85
%
1.85
%
1.85
%
1.85
%
Term
Loan B(1)
9.4
12.5
12.5
863.6
—
—
898.0
891.3
Average Interest Rate
2.35
%
2.35
%
2.35
%
2.35
%
—
—
Production
loans
141.4
300.2
33.0
—
—
—
474.6
474.6
Average Interest Rate
2.34
%
2.40
%
2.36
%
—
—
—
Production
tax credit facility(2)
—
—
—
184.5
—
—
184.5
184.5
Average Interest Rate
—
—
—
1.60
%
—
—
Fixed
Rates:
5.500% Senior Notes
—
—
—
—
—
1,000.0
1,000.0
1,052.5
Interest
Rate
—
—
—
—
—
5.500
%
Interest Rate Swaps(3)
Variable
to fixed notional amount
—
—
—
—
—
1,700.0
1,700.0
104.0
____________________
(1)The
effective interest rate in the table above is before the impact of interest rate swaps.
(2)The repayment amount for the Production Tax Credit Facility represents the amount outstanding at June 30, 2021, and the repayment date represents the maturity date of the Production Tax Credit Facility (January 27, 2025), however net advances and payments under the Production Tax Credit Facility can fluctuate depending on the amount of collateral available.
(3)Represents interest rate swap agreements on certain of our LIBOR-based floating-rate debt with fixed rates paid ranging from 1.840% to 2.915% with maturities beginning in March 2025 through March 2030. See Note 16 to our unaudited condensed consolidated financial statements.
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, 2021, 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, 2021.
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, has 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. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to disruptions related to the COVID-19 global pandemic, but we are continually monitoring and assessing the COVID-19 situation on our internal controls.
From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business. Due to the inherent difficulty of predicting the outcome of litigation and claims, the Company often cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, if any, related to each
pending matter may be.
For a discussion of certain claims and legal proceedings, see Note 15 - 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.
There were no material changes to the risk factors previously reported
in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
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. On December 17, 2013, our Board of Directors authorized the Company to increase its stock repurchase plan to $300 million and on February 2, 2016, our Board of Directors authorized the Company to further increase its stock repurchase plan to $468 million. To date, approximately $288.1 million (or 16,608,796) of our common shares have been purchased, leaving approximately $179.9 million of authorized potential repurchases. The remaining $179.9 million of our 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. The share repurchase program has no expiration date.
No common shares were purchased by us during the three months ended June 30, 2021.
Additionally, during the three months ended June 30, 2021, no Class A voting shares and 783,868 Class B non-voting shares were withheld upon the vesting of restricted share units and restricted awards, share issuances and stock option exercises to satisfy minimum statutory federal, state and local tax withholding obligations.
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104x
The
cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (formatted as Inline XBRL and contained in Exhibit 101).
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.
