Lionsgate Reports Revenue of $422.9 Million and Adjusted EBITDA of $28.9 Million for Third Quarter of Fiscal 2011

SANTA MONICA, Calif., and VANCOUVER, British Columbia, Feb. 9, 2011 /PRNewswire/ -- Lionsgate (NYSE: LGF) today reported revenue of $422.9 million and adjusted EBITDA of $28.9 million for the third quarter of fiscal year 2011 (quarter ended December 31, 2010). 

Revenue increased 24% compared to the prior year's third quarter driven primarily by increases in home entertainment and international film and TV revenue as well as a slight increase in theatrical revenue.  

The Company reported adjusted EBITDA of $28.9 million in the third quarter compared to negative $9.5 million for the prior year's third quarter.  Net loss was $6.0 million in the quarter compared to net loss of $65.3 million in the prior year's third quarter.  The gain in quarter-to-quarter comparisons was attributable primarily to strong gains in the Company's home entertainment operations, driven by the DVD and digital performance of THE EXPENDABLES, robust international performance, gains in television production and syndication and lower theatrical marketing costs in the quarter despite three wide release films. 

Net loss of $6.0 million in the quarter included non-cash equity interest losses of $13.1 million ($11.1 million attributable to Lionsgate's interest in Epix) and $7.9 million in corporate defense and associated costs related to shareholder activist activities.  

Basic net loss per common share for the quarter was $0.04 on 136.7 million weighted average common shares outstanding, compared to basic net loss per common share of $0.55 on 117.7 million weighted average common shares outstanding in the prior year's third quarter. 

"We had a strong revenue and EBITDA performance in the quarter driven by contributions from our home entertainment, television and international film and TV businesses as well as our filmed entertainment library, despite a challenging environment for packaged media conversion," said Lionsgate Co-Chairman and Chief Executive Officer Jon Feltheimer. "We continue to execute a long-term business plan designed to balance our key priorities – strengthening our balance sheet, maximizing EBITDA and free cash flow and creating long-term value."

Overall motion picture revenue for the third quarter of fiscal 2011 was $326.7 million, an increase of 30% from the third quarter of the prior year.  Within the motion picture segment, theatrical revenue was $53.8 million, an increase of 9% from the prior year's third quarter, attributable to the box office performance of the films THE NEXT THREE DAYS, FOR COLORED GIRLS and SAW 3D.

Lionsgate's home entertainment revenue from both motion pictures and television was $174.4 million in the third quarter, a 63% increase from the third quarter of the prior year, driven by a strong performance from the theatrical title THE EXPENDABLES as well as contributions from a diversified slate including the stage play TYLER PERRY'S MADEA'S BIG HAPPY FAMILY, the theatrical titles KILLERS and KICK ASS, sister company Roadside Attractions' Academy Award-nominated WINTER'S BONE and the television series MAD MEN SEASON 3.  

Television revenue included in motion picture revenue was $49.7 million in the third quarter, a decrease of 9% from the prior year's third quarter.

International motion picture revenue of $21.4 million (excluding Lionsgate U.K.) in the third quarter increased 31% from the prior year's third quarter as the slate of SAW 3D, THE NEXT THREE DAYS and ALPHA AND OMEGA compared favorably to the slate in the prior year's third quarter.

Lionsgate U.K. revenue also increased in the third quarter, growing 42% to $30.0 million, reflecting the continued strength of Lionsgate titles such as THE EXPENDABLES and KILLERS as well as SAW 3D, newly released in the quarter. 

Mandate Pictures' revenue of $11.3 million in the third quarter declined 12% from the prior year's third quarter due to a smaller slate. 

Television production revenue was $96.2 million in the third quarter, an increase of 5% from the prior year's third quarter.  Domestic series licensing from Debmar-Mercury increased 52% in the third quarter due to increased revenue from deliveries of the television series "Tyler Perry's House of Payne," its spinoff "Meet The Browns," "Are We There Yet?," "The Wendy Williams Show" and "Weeds Seasons 3, 4 and 5" (into syndication on TV Guide Network).  Domestic series licensing from Lionsgate Television decreased 32% in the third quarter due to timing of deliveries, which included 12 episodes of "Blue Mountain State Season 2" (Spike), nine episodes of "Running Wilde" (Fox), two episodes of "Mad Men Season 4" (AMC) and one episode of "Nurse Jackie Season 3" (Showtime).    

Lionsgate's filmed entertainment backlog was $459.0 million at December 31, 2010.  Filmed entertainment backlog represents the amount of future revenue not yet recorded from contracts for the licensing of films and television product for television exhibition and in international markets. 

Lionsgate G&A expenses in the quarter were $27.8 million, excluding stock-based compensation and corporate defense costs related to shareholder activist activities.  G&A as a percentage of revenue, excluding stock-based compensation and corporate defense costs, declined to 6.6% in the third quarter of fiscal year 2011 compared to 7.6% in the prior year third quarter.    

Lionsgate senior management will hold its analyst and investor conference call to discuss its fiscal year 2011 third quarter financial results at 9:00 A.M. ET/6:00 A.M. PT on Thursday, February 10, 2011. Interested parties may participate live in the conference call by calling 1-800-230-1766 (612-332-0228 outside the U.S. and Canada).  A full digital replay will be available from Thursday morning, February 10, through Thursday, February 17, by dialing 1-800-475-6701 (320-365-3844 outside the U.S. and Canada) and using access code 191239.

About Lionsgate

Lionsgate (NYSE: LGF) 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 and new channel platforms. The Company has built a strong television presence in production of prime time cable and broadcast network series, distribution and syndication of programming through Debmar-Mercury and an array of channel assets.   Lionsgate currently has 15 shows on more than 10 networks spanning its prime time production, distribution and syndication businesses, including such critically-acclaimed hits as "Mad Men", "Weeds" and "Nurse Jackie" along with the popular comedy "Blue Mountain State" and the syndication successes "Tyler Perry's House Of Payne", its spinoff "Meet The Browns," "The Wendy Williams Show" and "Are We There Yet?".

Its feature film business has generated more than half a billion dollars at the North American box office in the past year, fueled by such hits as THE EXPENDABLES, SAW 3D, THE LAST EXORCISM, TYLER PERRY'S WHY DID I GET MARRIED TOO?, KICK ASS and the critically-acclaimed PRECIOUS, which won two Academy Awards(R) last year.   The Company's home entertainment business has grown to more than 7% market share and is an industry leader in box office-to-DVD revenue conversion rate.  Lionsgate handles a prestigious and prolific library of approximately 13,000 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 brand remains synonymous with original, daring, quality entertainment in markets around the world.

www.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, budget overruns, limitations imposed by our credit facilities, unpredictability of the commercial success of our motion pictures and television programming, the cost of defending our intellectual property, difficulties in integrating acquired businesses, 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 June 1, 2010, 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.

EBITDA is defined as earnings before interest, income tax provision, depreciation and amortization, equity interests, and gains or losses on extinguishment of debt and the sale of equity securities.  EBITDA is a non-GAAP financial measure.

EBITDA, as adjusted represents EBITDA as defined above adjusted for stock-based compensation, EBITDA attributable to TV Guide Network, certain corporate defense and related charges, and non-risk prints and advertising expense. Stock-based compensation represents compensation expenses associated with stock options, restricted share units and stock appreciation rights. EBITDA attributable to TV Guide Network represents the Company's 51% share of TV Guide Network's EBITDA for the three and nine months ended December 31, 2010 and 2009. Corporate defense and related charges represent legal fees, other professional fees, and certain other costs associated with a shareholder activist matter. Non-risk prints and advertising expense represents the amount of theatrical marketing expense for third party titles that the Company funded and expensed for which a third party provides a guarantee that such expense will be recouped from the performance of the film (i.e. there is no risk of loss to the company) net of an amount of the estimated amortization of participation expense that would have been recorded if such amount had not been expensed. The amount is subtracted from EBITDA in the three and nine months ended December 31, 2010 because there was no non-risk prints and advertising expense incurred and the amount represents the estimated amortization of participation expense that would have been recorded if such prior period amounts had not been expensed.

Management believes EBITDA and EBITDA, as adjusted to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations. Presentation of EBITDA and EBITDA, as adjusted is a non-GAAP financial measure 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 EBITDA, as adjusted to be an important measure of comparative operating performance, it 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. EBITDA and EBITDA, as adjusted do not reflect cash available to fund cash requirements. Not all companies calculate EBITDA or EBITDA, as adjusted in the same manner and the measure as presented may not be comparable to similarly-titled measures presented by other companies.

Free cash flow is defined as net cash flows provided by (used in) operating activities, less purchases of property and equipment, plus or minus the net increase or decrease in production loans including production loan activity under the Company's Film Credit Facility, plus or minus the net increase or decrease in restricted cash held in a trust to fund the Company's cash severance obligations that would be due to certain executive officers should their employment be terminated "without cause," (as defined), in connection with a "change in control" of the Company, (as defined in each of their respective employment contracts). For purposes of the employment agreements with such executive officers, a "change in control" occurred on June 30, 2010 when a certain shareholder became the beneficial owner of 33% or more of the Company's common shares. 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 Generally Accepted Accounting Principles.

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.

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.

SOURCE Lionsgate