LIONSGATE REPORTS RESULTS FOR FIRST QUARTER 2015

Adjusted EBITDA Increases 27% to $77.3 Million

Adjusted Basic Net Income per Share Doubles to $0.36

$159.8 Million in Free Cash Flow Delivered in the Quarter

07 Aug, 2014, 16:06 ET from Lionsgate

SANTA MONICA, Calif. and VANCOUVER, British Columbia, Aug. 7, 2014 /PRNewswire/ -- Lionsgate (NYSE: LGF) today reported revenue of $449.4 million, adjusted EBITDA of $77.3 million, adjusted net income of $49.6 million or $0.36 adjusted basic net income per share, net income of $43.3 million or $0.31 basic net income per share and free cash flow of $159.8 million for the first quarter of fiscal 2015 (quarter ended June 30, 2014).

"We're pleased to report strong adjusted EBITDA, earnings and free cash flow generation in what is historically our lightest quarter of the fiscal year," said Lionsgate Chief Executive Officer Jon Feltheimer.  "During the quarter we deepened our portfolio of brands and franchises, extended our global reach and formed entrepreneurial partnerships with digital and traditional platforms alike as we used our strengths as an innovative pure play content company to position ourselves for continued growth and profitability in an increasingly dynamic industry environment."

Adjusted EBITDA of $77.3 million for the quarter increased 27% from adjusted EBITDA of $60.8 million in the prior year quarter.  Adjusted EBITDA excluded an $11.4 million gain on the Company's sale of its interest in FEARnet, stock-based compensation and a $4.9 million restructuring charge associated with costs of the Company's relocation of its international sales operations to London, England and integration of the marketing operations of its Lionsgate and Summit film labels.  

Adjusted net income of $49.6 million or $0.36 adjusted basic net income per share for the quarter compared to adjusted net income of $25.1 million or $0.18 adjusted basic net income per share in the prior year quarter. 

Net income for the quarter was $43.3 million or $0.31 basic net income per share on 138.5 million weighted average number of common shares outstanding compared to $13.6 million or $0.10 basic net income per share on 136.2 million weighted average number of common shares outstanding during the prior year quarter.

Adjusted net income for the quarter benefitted from decreased interest expense and a lower effective tax rate compared to the prior year quarter.  EBITDA gains were driven by lower theatrical marketing costs in the quarter. 

Revenue of $449.4 million for the quarter compared to $569.7 million in the prior year quarter with only two wide theatrical releases in the quarter compared to three wide releases, including the blockbuster Now You See Me, in the prior year quarter.  Lower television production revenue reflected fewer deliveries of Mad Men (whose seventh season has been split).

During the quarter, the Company declared another quarterly dividend of $0.05 per common share payable on August 8, 2014 to shareholders of record as of June 30, 2014.

The Company noted that, since the December 17, 2013 increase in its share repurchase authorization to $300 million, it repurchased a total of 4.7 million common shares through July 25, 2014 at an average price of $26.70, totaling an aggregate of $126.4 million.

Lionsgate's filmed entertainment backlog, or already contracted future revenue not yet recorded, rose to a record $1.3 billion at June 30, 2014 compared to $1.2 billion at March 31, 2014.

Overall Motion Picture segment revenue for the quarter was $331.9 million compared to $438.6 million in the prior year quarter.  Within the Motion Picture segment, theatrical revenue declined to $42.7 million due to the theatrical slate composition discussed above.

Lionsgate's home entertainment revenue for the quarter was $140.9 million compared to $169.4 million in the prior year quarter as two wide release theatrical titles were released on home entertainment platforms in the quarter compared to five wide release theatrical titles in the prior year quarter.  The hit film Divergent launched to very strong numbers on packaged media, VOD and electronic sell-through platforms after the quarter.

Bolstered by television windows opening for the feature films Ender's Game and Red 2, television revenue included in the Motion Picture segment increased 60% in the quarter to $58.8 million compared to $36.8 million in the prior year quarter.

International Motion Picture segment revenue (excluding Lionsgate U.K.) for the quarter was $60.7 million compared to $79.1 million in the prior year quarter with three wide release titles in worldwide release compared to five in the prior year quarter.

Lionsgate U.K. posted revenue of $30.0 million in the quarter compared to $32.4 million in the prior year quarter. 

Revenue for the Television Production segment was $117.5 million in the quarter, a decrease from $131.1 million in the prior year quarter as strong international revenue driven by Anger Management, Orange is the New Black and Mad Men was offset by fewer domestic series deliveries due primarily to the timing of Mad Men episode deliveries.

Lionsgate senior management will hold its analyst and investor conference call to discuss its fiscal 2015 first quarter financial results at 9:00 A.M. ET/6:00 A.M. PT on Friday, August 8, 2014.  Interested parties may participate live in the conference call by calling 1-800-230-1085 (612-332-0107 outside the U.S. and Canada).  A full digital replay will be available from Friday morning, August 8 through Friday, August 15 by dialing 1-800-475-6701 (320-365-3844 outside the U.S. and Canada) and using access code 332282.

ABOUT LIONSGATE

Lionsgate is a leading global entertainment company with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution, new channel platforms and international distribution and sales. The Company currently has over 30 television shows on more than 20 networks spanning its primetime production, distribution and syndication businesses, including such critically-acclaimed hits as the multiple Emmy Award-winning Mad Men and Nurse Jackie, the comedy Anger Management, the broadcast network series Nashville, the syndication success The Wendy Williams Show and the critically-acclaimed hit series Orange is the New Black.

Its feature film business has been fueled by such recent successes as the blockbuster first two installments of The Hunger Games franchise, the first installment of the recently-launched Divergent franchise, Now You See Me, Kevin Hart: Let Me Explain, Warm Bodies, The Possession, Sinister, Roadside Attractions' A Most Wanted Man and Pantelion Films' breakout hit Instructions Not Included, the highest-grossing Spanish-language film ever released in the U.S.

Lionsgate's home entertainment business is an industry leader in box office-to-DVD and box office-to-VOD revenue conversion rate. The Company handles a prestigious and prolific library of approximately 15,000 motion picture and television titles that is an important source of recurring revenue and serves as the foundation for the growth of the Company's core businesses. The Lionsgate and Summit brands remain synonymous with original, daring, quality entertainment in markets around the world.

***

For further information, please contact: Peter D. Wilkes 310-255-3726 pwilkes@lionsgate.com

The matters discussed in this press release include forward-looking statements, including those regarding the performance of future fiscal years.  Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films and television series, budget overruns, limitations imposed by our credit facility and notes, unpredictability of the commercial success of our motion pictures and television programming, the cost of defending our intellectual property, difficulties in integrating acquired businesses, risks related to our acquisition strategy and integration of acquired businesses, the effects of disposition of businesses or assets, technological changes and other trends affecting the entertainment industry, and the risk factors as set forth in Lionsgate's Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on May 29, 2014, as amended in Lionsgate's Quarterly Report on Form 10-Q filed with the SEC on August 7, 2014,which risk factors are incorporated herein by reference.  The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.

 

LIONS GATE ENTERTAINMENT CORP.

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,   2014

March 31,   2014

(Amounts in thousands,

except share amounts)

ASSETS

Cash and cash equivalents

$

50,372

$

25,692

Restricted cash

7,534

8,925

Accounts receivable, net of reserves for returns and allowances of $63,419 (March 31, 2014 - $106,680) and provision for doubtful accounts of $2,683 (March 31, 2014 - $4,876)

717,498

885,571

Investment in films and television programs, net

1,380,581

1,274,573

Property and equipment, net

15,092

14,552

Equity method investments

188,996

181,941

Goodwill

323,328

323,328

Other assets

67,396

71,067

Deferred tax assets

61,228

65,983

Total assets

$

2,812,025

$

2,851,632

LIABILITIES

Senior revolving credit facility

$

84,000

$

97,619

Senior secured second-priority notes

225,000

225,000

July 2013 7-Year Term Loan

222,842

222,753

Accounts payable and accrued liabilities

223,386

332,457

Participations and residuals

467,976

469,390

Film obligations and production loans

636,292

499,787

Convertible senior subordinated notes

133,255

131,788

Deferred revenue

283,482

288,300

Total liabilities

2,276,233

2,267,094

Commitments and contingencies

SHAREHOLDERS' EQUITY

Common shares, no par value, 500,000,000 shares authorized, 137,657,820 shares issued (March 31, 2014 - 141,007,461 shares)

651,110

743,788

Accumulated deficit

(114,614)

(157,875)

Accumulated other comprehensive loss

(704)

(1,375)

Total shareholders' equity

535,792

584,538

Total liabilities and shareholders' equity

$

2,812,025

$

2,851,632

 

LIONS GATE ENTERTAINMENT CORP.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

June 30,

2014

2013

(Amounts in thousands, except per share amounts)

Revenues

$

449,383

$

569,728

Expenses:

Direct operating

238,873

306,445

Distribution and marketing

97,321

171,460

General and administration

64,079

56,770

Depreciation and amortization

1,346

1,625

Total expenses

401,619

536,300

Operating income

47,764

33,428

Other expenses (income):

Interest expense

Cash interest

9,442

16,273

Amortization of debt discount and deferred financing costs

3,530

4,541

Total interest expense

12,972

20,814

Interest and other income

(1,018)

(1,496)

Loss on extinguishment of debt

466

Total other expenses, net

11,954

19,784

Income before equity interests and income taxes

35,810

13,644

Equity interests income

18,210

7,977

Income before income taxes

54,020

21,621

Income tax provision

10,759

8,004

Net income

$

43,261

$

13,617

Basic net income per common share

$

0.31

$

0.10

Diluted net income per common share

$

0.30

$

0.10

Weighted average number of common shares outstanding:

Basic

138,509

136,189

Diluted

152,210

140,745

Dividends declared per common share

$

0.05

$

 

LIONS GATE ENTERTAINMENT CORP.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

June 30,

2014

2013

(Amounts in thousands)

Operating Activities:

Net income

$

43,261

$

13,617

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

1,346

1,625

Amortization of films and television programs

158,808

219,364

Amortization of debt discount and deferred financing costs

3,530

4,541

Non-cash share-based compensation

16,537

13,220

Distribution from equity method investee

6,230

9,849

Loss on extinguishment of debt

466

Equity interests income

(18,210)

(7,977)

Deferred income taxes

5,105

2,063

Changes in operating assets and liabilities:

Restricted cash

1,391

1,662

Accounts receivable, net

169,514

(32,516)

Investment in films and television programs

(263,851)

(160,933)

Other assets

382

(1,222)

Accounts payable and accrued liabilities

(95,666)

(33,584)

Participations and residuals

(1,539)

(17,512)

Film obligations

(34,589)

(21,370)

Deferred revenue

(4,883)

(20,582)

Net Cash Flows Used In Operating Activities

(12,634)

(29,289)

Investing Activities:

Proceeds from the sale of equity method investees

14,575

9,000

Investment in equity method investees

(9,650)

(3,750)

Distributions from equity method investee in excess of earnings

4,169

Purchases of property and equipment

(1,427)

(1,428)

Net Cash Flows Provided By Investing Activities

3,498

7,991

Financing Activities:

Senior revolving credit facility - borrowings

170,000

173,000

Senior revolving credit facility - repayments

(183,619)

(172,000)

Senior secured second-priority notes - repurchases

(4,280)

Convertible senior subordinated notes - borrowings

60,000

Convertible senior subordinated notes - repurchases

(16)

Production loans - borrowings

207,953

108,605

Production loans - repayments

(36,859)

(82,292)

Pennsylvania Regional Center credit facility - repayments

(65,000)

Repurchase of common shares

(109,529)

Dividends paid

(7,066)

Excess tax benefits on equity-based compensation awards

2,771

Exercise of stock options

406

543

Tax withholding required on equity awards

(10,247)

(9,019)

Net Cash Flows Provided By Financing Activities

33,794

9,557

Net Change In Cash And Cash Equivalents

24,658

(11,741)

Foreign Exchange Effects on Cash

22

397

Cash and Cash Equivalents - Beginning Of Period

25,692

62,363

Cash and Cash Equivalents - End Of Period

$

50,372

$

51,019

 

LIONS GATE ENTERTAINMENT CORP.

 

RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA

Three Months Ended

June 30,

2014

2013

(Amounts in thousands)

Net income

$

43,261

$

13,617

Depreciation and amortization

1,346

1,625

Cash interest

9,442

16,273

Noncash interest expense

3,530

4,541

Interest and other income

(1,018)

(1,496)

Income tax provision

10,759

8,004

EBITDA

$

67,320

$

42,564

Stock-based compensation (1)

16,421

17,747

Restructuring charges

4,888

Gain on sale of equity method investment

(11,355)

Loss on extinguishment of debt

466

Adjusted EBITDA

$

77,274

$

60,777

(1) The three months ended June 30, 2014 and 2013 include cash settled SARs expense of $1.1 million and $3.3 million, respectively.

EBITDA is defined as earnings before interest, income tax provision or benefit, and depreciation and amortization. EBITDA is a non-GAAP financial measure.

Adjusted EBITDA represents EBITDA as defined above adjusted for stock-based compensation, restructuring charges, gain on sale of equity method investment, and loss on extinguishment of debt. Stock-based compensation represents compensation expenses associated with stock options, restricted share units and cash and equity settled stock appreciation rights ("SARs"). Restructuring charges primarily consist of severance costs associated with the integration of the marketing operations of our Lionsgate and Summit film labels and costs related to the move of our international sales and distribution organization to the United Kingdom. Gain on sale of equity method investment represents the gain on sale of our interest in FEARnet. Adjusted EBITDA is a non-GAAP financial measure.

Management believes EBITDA and Adjusted EBITDA to be meaningful indicators of our performance that provide useful information to investors regarding our financial condition and results of operations. Presentation of EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. While management considers EBITDA and Adjusted EBITDA to be important measures of comparative operating performance, they should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with Generally Accepted Accounting Principles ("GAAP"). EBITDA and Adjusted EBITDA do not reflect cash available to fund cash requirements. Not all companies calculate EBITDA or Adjusted EBITDA in the same manner and the measures as presented may not be comparable to similarly-titled measures presented by other companies.

 

LIONS GATE ENTERTAINMENT CORP.

 

RECONCILIATION OF FREE CASH FLOW TO NET CASH

FLOWS USED IN OPERATING ACTIVITIES

Three Months Ended

June 30,

2014

2013

(Amounts in thousands)

Net Cash Flows Used In Operating Activities

$

(12,634)

$

(29,289)

Purchases of property and equipment

(1,427)

(1,428)

Net borrowings under and (repayment) of production loans

171,094

26,313

Excess tax benefits on equity-based compensation awards

2,771

Free Cash Flow, as defined

$

159,804

$

(4,404)

Free cash flow is defined as net cash flows used in operating activities, less purchases of property and equipment, plus or minus the net increase or decrease in production loans, plus excess tax benefits on equity-based compensation awards. The adjustment for the production loans is made because the GAAP based cash flows from operations reflects a non-cash reduction of cash flows for the cost of films associated with production loans prior to the time the Company actually pays for the film. The Company believes that it is more meaningful to reflect the impact of the payment for these films in its free cash flow when the payments are actually made.

Free cash flow is a non-GAAP financial measure as defined in Regulation G promulgated by the Securities and Exchange Commission. This non-GAAP financial measure is in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Management believes this non-GAAP measure provides useful information to investors regarding cash that our operating businesses generate whether classified as operating or financing activity (related to the production of our films) within our GAAP based statement of cash flows, before taking into account cash movements that are non-operational. Free cash flow is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry. Not all companies calculate free cash flow in the same manner and the measure as presented may not be comparable to similarly titled measures presented by other companies.

 

LIONS GATE ENTERTAINMENT CORP.

 

RECONCILIATION OF EBITDA TO FREE CASH FLOW

Three Months Ended

June 30,

2014

2013

(Amounts in thousands)

EBITDA

$

67,320

$

42,564

Plus: Amortization of film and television programs

158,808

219,364

Less: Cash paid for film and television programs (1)

(127,346)

(155,990)

Amortization of film and television programs in excess of cash paid

31,462

63,374

Plus: Non-cash stock-based compensation

16,537

13,220

Plus: Distribution from equity method investee

6,230

9,849

Less: Equity interests income

(18,210)

(7,977)

Plus: Loss on extinguishment of debt

466

EBITDA adjusted for items above

103,339

121,496

Changes in other operating assets and liabilities:

Restricted cash

1,391

1,662

Accounts receivable, net

169,514

(32,516)

Other assets

382

(1,222)

Accounts payable and accrued liabilities

(95,666)

(33,584)

Participations and residuals

(1,539)

(17,512)

Deferred revenue

(4,883)

(20,582)

69,199

(103,754)

Purchases of property and equipment

(1,427)

(1,428)

Interest, taxes and other (2)

(11,307)

(20,718)

Free Cash Flow, as defined

$

159,804

$

(4,404)

_________________________

(1) Cash paid for film and television programs is calculated using the following amounts as presented in our consolidated statement of cash flows:

Change in investment in film and television programs

$

(263,851)

$

(160,933)

Change in film obligations

(34,589)

(21,370)

Production loans - borrowings

207,953

108,605

Production loans - repayments

(36,859)

(82,292)

Total cash paid for film and television programs

$

(127,346)

$

(155,990)

_________________________

(2) Interest, taxes and other consists of the following:

Cash interest

$

(9,442)

$

(16,273)

Interest and other income

1,018

1,496

Current income tax provision

(5,654)

(5,941)

Excess tax benefits on equity-based compensation awards

2,771

Total interest, taxes and other

$

(11,307)

$

(20,718)

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

 

LIONS GATE ENTERTAINMENT CORP.

 

RECONCILIATION OF INCOME BEFORE INCOME TAXES, NET

INCOME, AND BASIC AND DILUTED EPS TO ADJUSTED INCOME BEFORE

INCOME TAXES, ADJUSTED NET INCOME, AND ADJUSTED BASIC AND DILUTED EPS

Three Months Ended June 30, 2014

(Amounts in thousands, except per share amounts)

Income before income taxes

Net income

Basic EPS*

Diluted EPS*

As reported

$

54,020

$

43,261

$

0.31

$

0.30

Stock-based compensation (1)

16,421

10,401

0.08

0.07

Restructuring charges (2)

4,888

3,096

0.02

0.02

Gain on sale of equity method investment (3)

(11,355)

(7,192)

(0.05)

(0.05)

As adjusted for stock-based compensation, restructuring charges and gain on sale of equity method investment

$

63,974

$

49,566

$

0.36

$

0.34

Three Months Ended June 30, 2013

(Amounts in thousands, except per share amounts)

Income before income taxes

Net income

Basic EPS*

Diluted EPS*

As reported

$

21,621

$

13,617

$

0.10

$

0.10

Stock-based compensation (1)

17,747

11,181

0.08

0.08

Loss on extinguishment of debt (4)

466

294

As adjusted for stock-based compensation and loss on extinguishment of debt

$

39,834

$

25,092

$

0.18

$

0.18

_________________________

* Basic and Diluted EPS amounts may not add precisely due to rounding

Adjusted income before income taxes, adjusted net income and adjusted basic and diluted EPS are adjusted for the following items:

(1) Stock-based compensation: Adjustments for stock-based compensation represents compensation expenses associated with stock options, restricted share units, cash and equity settled SARs. The adjustment to net income is net of the tax impact calculated using the statutory tax rate applicable to each adjustment.

(2) Restructuring charges: This adjusts income before income taxes and net income to eliminate the severance costs associated with the integration of the marketing operations of our Lionsgate and Summit film labels and costs related to the move of our international sales and distribution organization to the United Kingdom. The adjustment to net income is net of the tax impact calculated using the statutory tax rate applicable to each adjustment.

(3) Gain on sale of equity method investment: This adjusts income before income taxes and net income to eliminate the gain on sale of our interest in FEARnet. The adjustment to net income is net of the tax impact calculated using the statutory tax rate applicable to each adjustment.

(4) Loss on extinguishment of debt: This adjusts income before income taxes and net income to eliminate the loss on extinguishment of debt. The adjustment to net income is net of the tax impact calculated using the statutory tax rate applicable to each adjustment.

Management believes that these non-GAAP measures provide useful information to investors regarding the Company's results as compared to historical periods. The Company uses these measures, among other measures, to evaluate the operating performance of the Company. The Company believes that the adjusted results provide relevant and useful information for investors because they clarify the Company's actual operating performance and allow investors to review our operating performance in the same way as our management. Since these measures are not calculated in accordance with generally accepted accounting principles, they should not be considered in isolation of, or as a substitute for income before income taxes, net income, basic and diluted EPS. Not all companies calculate adjusted income before income taxes, adjusted net income, and adjusted basic and diluted EPS in the same manner and the measures as presented may not be comparable to similarly titled measures presented by other companies.

 

SOURCE Lionsgate



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