10-K/A 1 lgf201233110-ka.htm LGF 2012.3.31 10-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2012
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No.: 1-14880
LIONS GATE ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter)
British Columbia, Canada
 
N/A
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
 Identification No.)
 
 
 
1055 West Hastings Street, Suite 2200
Vancouver, British Columbia V6E 2E9
 
2700 Colorado Avenue, Suite 200
Santa Monica, California 90404
(877) 848-3866
 
(310) 449-9200
(Address of Principal Executive Offices, Zip Code)
Registrant’s telephone number, including area code:
(877) 848-3866
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Shares, without par value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
___________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 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. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
 
Accelerated filer þ
 
Non accelerated filer o
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2011 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $484,438,857, based on the closing sale price as reported on the New York Stock Exchange.
As of May 25, 2012, 144,245,849 shares of the registrant’s no par value common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
   None.




Explanatory Note

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends Lions Gate Entertainment Corp.'s (the “Company,” “Lionsgate,” “we,” “us” or “our”) Annual Report on Form 10-K for the year ended March 31, 2012, originally filed with the Securities and Exchange Commission (the “SEC”) on May 30, 2012 (the “Original Filing”).
This Amendment is being filed to amend the Original Filing to correct the presentation of certain single picture production loan borrowings by Summit Entertainment, LLC (which was acquired on January 13, 2012) ("Summit") in the consolidated statement of cash flows for the year ended March 31, 2012. The borrowings were included in the change in film obligations line item within the net cash used in operating activities category of the consolidated statement of cash flows rather than in the borrowings under individual production loans line item within the net cash provided by financing activities category. This correction resulted in an increase in the net cash used in operating activities subtotal in the consolidated statement of cash flows of $50.6 million to $214.1 million and an increase in the net cash provided by financing activities of $50.6 million to $747.4 million. As a result of this restatement, the Company determined it had a material weakness as of March 31, 2012 in its controls specifically associated with the classification of certain single picture production loans within the statement of cash flows for the year ended March 31, 2012, with respect to the newly acquired entity (Summit). Accordingly, the Company has revised its conclusion on its disclosure controls and procedures and in management's report on internal controls over financial reporting in Part II, Item 9A. As reflected in Part II, "Item 9A. Controls and Procedures" in the Original Filing and in this Amendment, under Management's Report on Internal Control over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting explicitly excluded the internal controls of Summit due to the short period of time between its acquisition in the fourth quarter on January 13, 2012 and the Company's March 31, 2012 year end. The Report of the Company's Independent Registered Public Accounting Firm also did not include an evaluation of the internal control over financial reporting of Summit.
The change did not impact the consolidated balance sheets, consolidated statements of operations or consolidated statements of shareholders' equity and accordingly, it did not impact net changes in cash or cash equivalents, total assets, liabilities, equity, results of operations, or its non-GAAP metrics of EBITDA and Free Cash Flow for any fiscal year.
The impact of this change is reflected in the following sections of this amendment.

Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Liquidity and Capital Resources)
Part II, Item 8. Financial Statements and Supplementary Data (Consolidated Statements of Cash Flows and Notes 2, 24 and 25 to the Consolidated Financial Statements)
Part II, Item 9A. Controls and Procedures
Part IV, Item 15. Exhibits (for consent of the Company's independent registered public accounting firm and certifications of the Company's Chief Executive Officer and Chief Financial Offer as of the date hereof)

Other than as described above and herein, this Amendment does not reflect events occurring after the filing of the Original Filing or modify or update any other items or disclosures in the Original Filing.





 

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FORWARD-LOOKING STATEMENTS

This Amendment includes statements that are, or may 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 Amendment 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 1.A. “Risk Factors” found in the Original Filing. These factors should not be construed as exhaustive and should be read with the other cautionary statements and information in the Original Filing and this Amendment.

Any forward-looking statements, which we make in this Amendment, 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.
Unless otherwise indicated, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” include reference to our subsidiaries as well.


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PART II


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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

In fiscal 2012 (i.e., the twelve-month period ending March 31, 2012), Lionsgate released 14 motion pictures theatrically, which included films developed and produced in-house, films co-developed and co-produced and films acquired from third parties. On January 13, 2012, we acquired Summit Entertainment, LLC (“Summit”), an independent worldwide theatrical motion picture development, production, and distribution studio. In calendar 2011, Summit released 8 motion pictures theatrically, which included films developed and produced in-house, films co-developed and co-produced and films acquired from third parties. In fiscal 2013, we intend to release approximately 20 motion pictures theatrically, with a smaller theatrical slate of approximately 12 to 14 titles per year to follow for fiscal years thereafter.

Our television business consists of the development, production, syndication and distribution of television productions. We currently produce and syndicate 19 television shows, which air on 14 networks and distribute over 200 series worldwide. In fiscal 2013, we expect to grow our television business through continued production and distribution of original content.

We distribute our library of approximately 13,000 motion picture titles and television episodes and programs directly to retailers, rental kiosks, through various digital media platforms, and pay and free television channels in the United States (the “U.S.”), the United Kingdom (the “U.K.”) and Ireland, and indirectly to other international markets through our subsidiaries and various third parties. We also distribute product through the following joint ventures:

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

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

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

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

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

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

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

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

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Debmar-Mercury, LLC (“Debmar-Mercury”), a media company specializing in syndication, network, cable and ancillary markets (acquired in July 2006);

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

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

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

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

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

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

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

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

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

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

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

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

FEARnet (a 34.5% interest), a multiplatform programming and content service provider (interest acquired in October 2006).
Revenues
Our revenues are derived from the Motion Pictures and Television Production segments, as described below. Our revenues are derived from the U.S., Canada, the U.K., Australia and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the years ended March 31, 2012 and 2011.
Motion Pictures. Motion Pictures includes “Theatrical,” “Home Entertainment,” “Television,” “International,” “Lionsgate UK,” and “Mandate Pictures” revenue.
Theatrical revenues are derived from the theatrical release of motion pictures in the U.S. and Canada which are distributed to theatrical exhibitors on a picture-by-picture basis. The financial terms that we negotiate with our theatrical exhibitors generally provide that we receive a percentage of the box office results and are negotiated on a picture-by-picture basis.
Home Entertainment revenues includes revenues from our own film and television productions and acquired or licensed films, including theatrical and direct-to-video releases, generated from the sale to retail stores and through digital media platforms. In addition, we have revenue sharing arrangements with certain rental stores which generally provide that in exchange for a nominal or no upfront sales price, we share in the rental revenues generated by each such store on a title-by-title basis. We categorized our Home Entertainment revenue as follows:

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Packaged media revenue: Packaged media revenue consists of the sale or rental of DVDs and Blu-ray discs.
Electronic media revenue: Electronic media revenue consists of revenues generated from electronic sell-through or “EST,” digital rental, pay-per-view and video-on-demand platforms.
Television revenues are primarily derived from the licensing of our productions and acquired films to the domestic cable, satellite, and free and pay television markets.
International revenues include revenues from our international subsidiaries from the licensing and sale of our productions, acquired films, our catalog product or libraries of acquired titles and revenues from our distribution to international sub-distributors, on a territory-by-territory basis.
Lionsgate UK revenues include revenues from the licensing and sale of our productions, acquired films, our catalog product or libraries of acquired titles from our subsidiary located in the United Kingdom.
Mandate Pictures revenues include revenues from the sales and licensing of domestic and worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors and to international sub-distributors.
Television Production. Television Production includes the licensing and syndication to domestic and international markets of one-hour and half-hour drama series, television movies and mini-series and non-fiction programming, and home entertainment revenues consisting of television production movies or series.
Media Networks. Media Networks consists of TV Guide Network, including TV Guide Network On Demand, and TV Guide Online (www.tvguide.com), from the acquisition date of February 28, 2009 until its deconsolidation on May 28, 2009. We adopted the new accounting standard pertaining to consolidation accounting for variable interest entities on April 1, 2010 and applied the provisions of the new accounting standard retrospectively. Accordingly, we deconsolidated TV Guide Network on May 28, 2009, the date on which we sold a 49% interest in TV Guide Network to OEP, and retrospectively adjusted our financial statements to account for TV Guide Network under the equity method of accounting since that date. Media Networks revenue includes distribution revenue from multi-system cable operators and digital broadcast satellite providers (distributors generally pay a per subscriber fee for the right to distribute programming) and advertising revenue from the sale of advertising on its television channel and related online media platforms.
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, participation and residual expenses, provision for doubtful accounts, and foreign exchange gains and losses. Participation costs represent contingent consideration payable based on the performance of the film to parties associated with the film, including producers, writers, directors or actors, etc. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild, Directors Guild of America, and Writers Guild of America, based on the performance of the film in certain ancillary markets or based on the individual’s (i.e., actor, director, writer) salary level in the television market.
Distribution and marketing expenses primarily include the costs of theatrical “prints and advertising” (“P&A”) and of DVD/Blu-ray duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical exhibitors and the advertising and marketing cost associated with the theatrical release of the picture. DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products. DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising.
General and administration expenses include salaries and other overhead.
Recent Developments

Acquisition of Summit Entertainment, LLC. On January 13, 2012, the Company purchased all of the membership interests in Summit , a worldwide independent film producer and distributor. The aggregate purchase price was approximately $412.1 million, which consisted of $361.9 million in cash, 5,837,781 in the Company's common shares (a part of which are included in escrow for indemnification purposes). Approximately $279.4 million of the purchase price and acquisition costs were funded with cash on the balance sheet of Summit. The value assigned to the shares for purposes of recording the acquisition was $50.2 million and was based on the closing price of the Company’s common shares on the date of closing of the acquisition.

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Additionally, the Company may be obligated to pay additional cash consideration of up to $7.5 million pursuant to the purchase agreement, should the domestic theatrical receipts from certain films meet certain target performance thresholds.
In addition, on the date of the close, Summit's existing term loan of $507.8 million was paid off with cash from Lionsgate and the net proceeds of $476.2 million, after fees and expenses, from a new term loan with a principal amount of $500.0 million, maturing on September 7, 2016.
Convertible Senior Subordinated Notes Issuance. On January 11, 2012, Lions Gate Entertainment Inc., a wholly-owned subsidiary of the Company ("LGEI"), sold $45.0 million in aggregate principal amount of 4.00% Convertible Senior Subordinated Notes with a maturity date of January 11, 2017 (the "January 2012 4.00% Notes"). The proceeds were used to fund a portion of the acquisition of Summit discussed above. Interest on the January 2012 4.00% Notes is payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2012. The January 2012 4.00% Notes are convertible into common shares of the Company at any time prior to maturity or repurchase by the Company, at an initial conversion price of approximately $10.50 per share, subject to adjustment in certain circumstances, as specified in the Indenture.
Secondary Public Offering. On October 18, 2011, pursuant to the terms of an underwriting agreement, certain selling shareholders sold an aggregate of 19,201,000 common shares of the Company, at a price of $7.00 per share. The Company did not receive any proceeds from the sale of the shares in the offering. The Company paid an underwriting fee of approximately $3.4 million at the close of the transaction.
Redemption of October 2004 2.9375% Notes. On October 15, 2011, certain holders of 2.9375% Convertible Senior Subordinated Notes issued in October 2004 (the "October 2004 2.9375% Notes") required LGEI to repurchase $26.6 million in aggregate principal amount (carrying value - $26.6 million) of the October 2004 2.9375% Notes, pursuant to the redemption terms of the October 2004 2.9375% Notes (see Note 9 of our consolidated financial statements). LGEI paid approximately $27.0 million for the repurchase, representing a price equal to 100% of the principal amount on October 17, 2011, together with accrued and unpaid interest through October 17, 2011.
Share Repurchases. On August 30, 2011, the Company entered into an agreement with certain shareholders, whereby the Company repurchased 11,040,493 of its common shares at a price of $7.00 per share, for aggregate cash consideration of $77.1 million. The shares repurchased under the agreement are included in treasury shares in the accompanying unaudited consolidated balance sheets and statements of shareholders' equity.
Sale of Maple Pictures. On August 10, 2011, the Company sold its interest in Maple Pictures Corp. (“Maple Pictures”) to Alliance Films Holdings Inc. (“Alliance”), a leading Canadian producer and distributor of motion pictures, television programming and home entertainment. The sales price was approximately $35.3 million, net of a working capital adjustment. Alliance is now responsible for all of Maple Pictures’ distribution, including Maple Pictures’ exclusive five-year output deal for Canadian distribution of the Company’s new motion picture and second window television product and Maple Pictures’ exclusive long-term arrangement for distribution of Canadian rights of the Company’s filmed entertainment library (i.e., distribution rights). The sales price was allocated between the fair value of the distribution rights and the fair value of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights of $17.8 million was recorded as deferred revenue and will be recognized as revenue by the Company as the revenues are earned pursuant to the distribution rights. The sales proceeds less the fair value of the distribution rights constitutes the proceeds allocated to the sale of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights was determined based on an estimate of the cash flows to be generated by Alliance pursuant to the distribution agreements, discounted at risk-adjusted discount rates of the film categories between 10% and 11%.
Additional Issuance of Senior Secured Second-Priority Notes. On May 13, 2011, LGEI issued approximately $200.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the “May 2011 Senior Notes” and collectively with $236.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the "October 2009 Senior Notes"), the "Senior Notes") in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The May 2011 Senior Notes have the same terms as the October 2009 Senior Notes, except for the issue date, issue price and first interest payment. The May 2011 Senior Notes were sold at 102.219% of the principal amount plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $204.4 million and net proceeds of approximately $192.4 million after estimated fees and expenses, including $5.6 million paid in connection with the consent solicitation of holders of the October 2009 Senior Notes. A portion of the proceeds were used to pay down amounts outstanding under our senior secured credit facility. The Senior Notes pay interest semi-annually on May 1 and November 1 of each year at a rate of 10.25% per year. The Senior Notes will mature on November 1, 2016.
Repurchase and Sale of a Portion of the Senior Secured Second-Priority Notes. In August 2011, a subsidiary of LGEI paid $9.9 million to repurchase $10.0 million of aggregate principal amount (carrying value — $9.9 million) of the Senior Notes. We recorded a loss on extinguishment in the quarter ended September 30, 2011 of $0.4 million, which includes $0.5 million of

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deferred financing costs written off. In September 2011, in connection with the common shares repurchased as discussed in Note 14 to our consolidated financial statements, LGEI resold such Senior Notes at 99.0% of the $10.0 million face amount therof, plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $10.2 million, which were used to repurchase the common shares, as discussed in Note 14 to our consolidated financial statements.
May 2011 Repurchase of a Portion of the October 2004 2.9375% Notes. In May 2011, LGEI paid $19.5 million to repurchase $19.4 million of aggregate principal amount (carrying value — $18.9 million) of the October 2004 2.9375% Notes.

CRITICAL ACCOUNTING POLICIES
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States 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 attached to the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. For example, accounting for films and television programs requires us to estimate future revenue and expense amounts which, due to the inherent uncertainties involved in making such estimates, are likely to differ to some extent from actual results. 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. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 2 to our audited consolidated financial statements.
Accounting for Films and Television Programs. We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in films and television programs. These costs for an individual film or television program are amortized and participation and residual costs are accrued to direct operating expenses in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the year expected to be recognized from exploitation, exhibition or sale of such film or television program over a period not to exceed ten years from the date of initial release. For previously released film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed 20 years from 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 than anticipated and some are less successful than anticipated. Our 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 write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value. Our management estimates the ultimate revenue based on experience with similar titles or title genre, the general public appeal of the cast, 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.
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.
Revenue Recognition. Revenue from the theatrical release of feature films is recognized at the time of exhibition based on our participation in box office receipts. Revenue from the sale of DVDs/Blu-ray discs 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). Under revenue sharing arrangements, rental revenue is recognized when we are entitled to receipts and such receipts are determinable. Revenues from television licensing are recognized when the feature film or television program is available to the licensee for telecast. For television licenses that include separate availability “windows” during the license period, revenue is allocated over the “windows.” Revenue from sales to international territories are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the sales contract, and the right to exploit the feature film or television program has commenced. For multiple media rights contracts with a fee for a single film or television program where the contract provides for media holdbacks (defined as contractual media release restrictions), the fee is allocated to the various media based on our assessment of the relative fair

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value of the rights to exploit each media and is recognized as each holdback is released. For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on our assessment of the relative fair value of each title. The primary estimate requiring the most subjectivity and judgment involving revenue recognition is the estimate of sales returns associated with our revenue from the sale of DVD’s/Blu-ray discs in the retail market which is discussed separately below under the caption “Sales Returns Allowance.”
Sales Returns Allowance. Revenues are recorded net of estimated returns and other allowances. We estimate reserves for DVD/Blu-ray 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 DVD/Blu-ray 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 $7.0 million and $8.1 million on our total revenue in the fiscal years ended March 31, 2012 and March 31, 2011, respectively.
Provisions for Accounts Receivable. We estimate provisions for accounts receivable based on historical experience and relevant facts and information regarding the collectability of the accounts receivable. In performing this evaluation, significant judgments and estimates are involved, including an analysis of specific risks on a customer-by-customer basis for our larger customers and an analysis of the length of time receivables have been past due. The financial condition of a given customer and its ability to pay may change over time or could be better or worse than anticipated and could result in an increase or decrease to our allowance for doubtful accounts, which, when the impact of such change is material, is disclosed in our discussion on direct operating expenses elsewhere in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. We recognize a future tax benefit to the extent that realization of such benefit is more likely than not or 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. Because of our historical operating losses, we have provided a full valuation allowance against our net deferred tax assets. However, the assessment as to whether there will be sufficient taxable income to realize our net deferred tax assets is an estimate which could change in the future depending primarily upon the actual performance of our Company. When we have a history of profitable operations sufficient to demonstrate that it is more likely than not that our deferred tax assets will be realized, the valuation allowance or a portion of the valuation allowance will be reversed and reflected as a benefit in the income tax provision. After that, 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, we may need to reestablish all or a portion of the valuation allowance through a charge to our income tax provision.
Goodwill. Goodwill is reviewed annually for impairment each fiscal year or between the annual tests if an event occurs or circumstances change that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. We perform our annual impairment test as of January 1 in each fiscal year. We performed our last annual impairment test on our goodwill as of January 1, 2012. No goodwill impairment was identified in any of our reporting units. Determining the fair value of reporting units requires various assumptions and estimates. The estimates of fair value include consideration of the future projected operating results and cash flows of the reporting unit. Such projections could be different than actual results. Should actual results be significantly less than estimates, the value of our goodwill could be impaired in the future.
Convertible Senior Subordinated Notes. We account for our convertible senior subordinated notes by separating the liability and equity components. The liability component is recorded at the date of issuance based on its fair value which is generally determined in a manner that will reflect an interest cost equal to our nonconvertible debt borrowing rate at the convertible senior subordinated notes issuance date. The amount of the proceeds, less the amount recorded as the liability component, is recorded as an addition to shareholders’ equity reflecting the equity component (i.e., conversion feature). The difference between the principal amount and the amount recorded as the liability component represents the debt discount. The carrying amount of the liability is accreted up to the principal amount through the amortization of the discount, using the effective interest method, to interest expense over the expected life of the note. The determination of the fair value of the liability component is an estimate dependent on a number of factors, including estimates of market rates for similar nonconvertible debt instruments at the date of issuance. A higher value attributable to the liability component results in a lower

10


value attributed to the equity component and therefore a smaller discount amount and lower interest cost as a result of amortization of the smaller discount. A lower value attributable to the liability component results in a higher value attributed to the equity component and therefore a larger discount amount and higher interest cost as a result of amortization of the larger discount.
Business Acquisitions. We account for business acquisitions as a purchase, whereby the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair value. The excess of the purchase price over estimated fair value of the net identifiable assets is allocated to goodwill. Determining the fair value of assets and liabilities requires various assumptions and estimates. These estimates and assumptions are refined with adjustments recorded to goodwill as information is gathered and final appraisals are completed over a one-year allocation period. The changes in these estimates or different assumptions used in determining these estimates could impact the amount of assets, including goodwill and liabilities, ultimately recorded on our balance sheet and could impact our operating results subsequent to such acquisition. We believe that our assumptions and estimates have been materially accurate in the past.
Recent Accounting Pronouncements
We adopted Accounting Standards Update ("ASU") No. 2011-08 “Testing Goodwill for Impairment” for the fiscal year ending March 31, 2012. ASU 2011-08 simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The adoption of ASU 2011-08 did not have an impact on our consolidated financial statements.
In June 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update relating to the presentation of other comprehensive income. The accounting update eliminates the option to present components of other comprehensive income as part of the statement of stockholders’ equity. Instead, companies must report comprehensive income in either a single continuous statement of comprehensive income (which would contain the current income statement presentation followed by the components of other comprehensive income and a total amount for comprehensive income), or in two separate but consecutive statements. This guidance is effective for our fiscal year beginning April 1, 2012. We do not expect the guidance to have a material impact on our consolidated financial statements.
In May 2011, the FASB issued an accounting standard update related to fair value measurements and disclosures to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards. This guidance includes amendments that clarify the intent about the application of existing fair value measurement requirements, while other amendments change a principle or requirement for measuring fair value or for disclosing information about fair value measurements. Specifically, the guidance requires additional disclosures for fair value measurements that are based on significant unobservable inputs. The updated guidance is to be applied prospectively and is effective for our interim and annual periods beginning April 1, 2012. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.


11


RESULTS OF OPERATIONS
Fiscal 2012 Compared to Fiscal 2011
The following table sets forth the components of consolidated revenue by segment for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2012
 
March 31, 2011
 
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Consolidated Revenue
 
 
 
 
 
 
 
Motion Pictures
$
1,190.3

 
$
1,229.5

 
$
(39.2
)
 
(3.2
)%
Television Production
397.3

 
353.2

 
44.1

 
12.5
 %
 
$
1,587.6

 
$
1,582.7

 
$
4.9

 
0.3
 %
Our largest component of revenue comes from home entertainment. The following table sets forth total home entertainment revenue for both the Motion Pictures and Television Production reporting segments for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2012
 
March 31, 2011
 
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Home Entertainment Revenue
 
 
 
 
 
 
 
Motion Pictures
$
582.0

 
$
635.6

 
$
(53.6
)
 
(8.4
)%
Television Production
101.5

 
54.4

 
47.1

 
86.6
 %
 
$
683.5

 
$
690.0

 
$
(6.5
)
 
(0.9
)%

Motion Pictures Revenue
The table below sets forth the components of revenue and the changes in these components for the motion pictures reporting segment for the years ended March 31, 2012 and 2011. Due to the acquisition of Summit, motion pictures revenue for fiscal 2012 includes Summit revenue from the acquisition date of January 13, 2012 through March 31, 2012. We currently expect our motion pictures segment revenue for fiscal 2013 will exceed our fiscal 2012 motion picture segment revenue. However, actual motion pictures revenue will depend on the performance of our film and home entertainment titles across all media and territories and can vary materially from expectations.
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2012
 
March 31, 2011
 
Amount
 
Percent
 
(Amounts in millions)
Motion Pictures (1)
 
 
 
 
 
 
 
Theatrical
$
208.9

 
$
205.9

 
$
3.0

 
1.5
 %
Home Entertainment
582.0

 
635.6

 
(53.6
)
 
(8.4
)%
Television
119.9

 
139.8

 
(19.9
)
 
(14.2
)%
International
112.9

 
126.5

 
(13.6
)
 
(10.8
)%
Lionsgate UK
101.5

 
79.2

 
22.3

 
28.2
 %
Mandate Pictures
55.4

 
38.7

 
16.7

 
43.2
 %
Other
9.7

 
3.8

 
5.9

 
155.3
 %
 
$
1,190.3

 
$
1,229.5

 
$
(39.2
)
 
(3.2
)%

(1)
For the fiscal year ended March 31, 2012, Motion Pictures revenue includes Maple Pictures revenue of $17.4 million through the date of sale of August 10, 2011, compared to Maple Pictures revenue of $85.6 million for the fiscal year ended March 31, 2011. Subsequent to August 10, 2011, revenue generated pursuant to the distribution agreements with Alliance has been recorded net of fees and expenses.

12



Motion Pictures — Theatrical Revenue
The following table sets forth the titles contributing approximately five percent or more of theatrical revenue by fiscal years theatrical slate and the month of their release for the fiscal years ended March 31, 2012 and 2011:
 
Year Ended March 31,
2012
 
 
2011
 
 
Theatrical Release Date
 
 
Theatrical Release Date
Fiscal 2012 Theatrical Slate:
 
 
Fiscal 2011 Theatrical Slate:
 
The Hunger Games
March 2012
 
For Colored Girls
November 2010
Good Deeds
February 2012
 
Saw 3D
October 2010
Abduction
September 2011
 
Alpha and Omega
September 2010
Madea's Big Happy Family
April 2011
 
The Expendables
August 2010
 
 
 
The Last Exorcism
August 2010
 
 
 
Killers
June 2010
 
 
 
Why Did I Get Married Too?
April 2010
 
 
 
Kick-Ass
April 2010
Theatrical revenue of $208.9 million increased $3.0 million, or 1.5%, in fiscal 2012 as compared to fiscal 2011. The increase in theatrical revenue in fiscal 2012 as compared to fiscal 2011 is due to the successful box office performance of The Hunger Games in fiscal 2012, offset by only eight theatrical releases in fiscal 2012, as compared to twelve theatrical releases in fiscal 2011. The Hunger Games released on March 23, 2012 and includes eight days of theatrical rentals in fiscal 2012. Also, due to the January 2012 acquisition of Summit, theatrical revenue in fiscal 2012 includes revenue from the release of the Summit titles, Gone and Man on a Ledge, with no comparable revenue in fiscal 2011.

Motion Pictures — Home Entertainment Revenue
The following table sets forth the titles contributing approximately two percent or more of motion pictures home entertainment revenue for the fiscal years ended March 31, 2012 and 2011:
 
Year Ended March 31,
2012
 
2011
 
DVD Release Date
 
 
DVD Release Date
Fiscal 2012 Theatrical Slate:
 
 
 Fiscal 2011 Theatrical Slate:
 
Abduction
January 2012
 
The Next Three Days
March 2011
Warrior
December 2011
 
For Colored Girls
February 2011
Conan the Barbarian
November 2011
 
Saw 3D
January 2011
Madea's Big Happy Family
August 2011
 
Alpha and Omega
January 2011
Fiscal 2011 Theatrical Slate:
 
 
The Expendables
November 2010
The Lincoln Lawyer
July 2011
 
Killers
September 2010
Summit Titles Released Theatrically Pre-Acquisition:
 
 
Kick-Ass
August 2010
The Twilight Saga: Breaking Dawn - Part 1
February 2012
 
Why Did I Get Married Too?
August 2010
Managed Brands:
 
 
Fiscal 2010 Theatrical Slate:
 
50/50
January 2012
 
From Paris With Love
June 2010
 
 
 
Daybreakers
May 2010
 
 
 
The Spy Next Door
May 2010
 
 
 
Precious
March 2010
 
 
 
Managed Brands:
 
 
 
 
The Switch
March 2011

13


The following table sets forth the components of home entertainment revenue by product category for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended March 31,
 
2012
 
2011
 
Packaged
Media
 
Electronic
Media
 
Total
 
Packaged
Media
 
Electronic
Media
 
Total
 
 
 
 
 
(Amounts in millions)
 
 
 
 
Home entertainment revenues
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2012 Theatrical Slate
$
57.1

 
$
17.5

 
$
74.6

 
$

 
$

 
$

Fiscal 2011 Theatrical Slate
46.9

 
36.5

 
83.4

 
192.9

 
38.7

 
231.6

Fiscal 2010 Theatrical Slate
5.1

 
0.9

 
6.0

 
74.4

 
42.3

 
116.7

Fiscal 2009 Theatrical Slate
3.7

 
1.4

 
5.1

 
10.0

 
1.2

 
11.2

Fiscal 2008 & Prior Theatrical Slate
15.3

 
3.6

 
18.9

 
22.8

 
4.2

 
27.0

Total Theatrical Slates
128.1

 
59.9

 
188.0

 
300.1

 
86.4

 
386.5

Summit Titles Released Theatrically Pre-Acquisition
142.9

 
7.1

 
150.0

 

 

 

Managed Brands (1)
193.0

 
45.0

 
238.0

 
201.2

 
32.7

 
233.9

Other
2.9

 
3.1

 
6.0

 
12.0

 
3.2

 
15.2

 
$
466.9

 
$
115.1

 
$
582.0

 
$
513.3

 
$
122.3

 
$
635.6

 ___________________
(1)
Managed Brands consists of Direct-to-DVD, acquired and licensed brands, acquired library and other product.
Home entertainment revenue of $582.0 million decreased $53.6 million, or 8.4%, in fiscal 2012 as compared to fiscal 2011. The decrease in home entertainment revenue is primarily due to a decrease in the contribution of revenue from the theatrical slates as listed above, offset in part by the contribution of packaged media revenue from Summit titles released theatrically pre-acquisition, with no comparable revenue in fiscal 2011, and to a lesser extent, an increase in the contribution of electronic media revenue from managed brands. The decrease in revenue contributed by the theatrical slates is primarily due to only five titles released on DVD in fiscal 2012 from our fiscal 2012 theatrical slate, as compared to ten titles released on DVD in fiscal 2011 from our fiscal 2011 theatrical slate, and also due to the performance of the titles released, and in particular, the significant home entertainment revenues generated by The Expendables in fiscal 2011.
Motion Pictures — Television Revenue
The following table sets forth the titles contributing significant motion pictures television revenue for the fiscal years ended March 31, 2012 and 2011:
 
Year Ended March 31,
2012
  
2011
Fiscal 2012 Theatrical Slate:
  
 Fiscal 2011 Theatrical Slate:
Madea's Big Happy Family
  
Kick-Ass
Fiscal 2011 Theatrical Slate:
  
Killers
Alpha & Omega
  
Why Did I Get Married Too?
For Colored Girls
  
 Fiscal 2010 Theatrical Slate:
Saw 3D
  
Brothers
The Expendables
 
Daybreakers
The Last Exorcism
 
From Paris With Love
The Lincoln Lawyer
 
I Can Do Bad All By Myself
The Next Three Days
 
Precious
Fiscal 2009 Theatrical Slate:
 
Saw VI
Madea Goes to Jail
 
The Spy Next Door
 
 
 Fiscal 2009 Theatrical Slate:
 
 
The Forbidden Kingdom


14


The following table sets forth the components of television revenue by product category for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
March 31,
 
2012
 
2011
 
(Amounts in millions)
Television revenues
 
 
 
Fiscal 2012 Theatrical Slate
$
9.8

 
$

Fiscal 2011 Theatrical Slate
59.2

 
29.4

Fiscal 2010 Theatrical Slate
1.5

 
56.3

Fiscal 2009 Theatrical Slate
12.8

 
13.2

Fiscal 2008 & Prior Theatrical Slate
14.7

 
22.6

Total Theatrical Slates
98.0

 
121.5

Summit Titles Released Theatrically Pre-Acquisition
2.7

 

Managed Brands
18.0

 
16.2

Other
1.2

 
2.1

 
$
119.9

 
$
139.8

 
Television revenue included in motion pictures revenue of $119.9 million decreased $19.9 million, or 14.2%, in fiscal 2012, as compared to fiscal 2011. The decrease in television revenue in fiscal 2012 compared to fiscal 2011, is mainly due to the number and performance of titles in the theatrical slates listed above with television availability windows opening in fiscal 2012. The contribution of television revenue from the titles listed above was $72.7 million in fiscal 2012, compared to $85.0 million in fiscal 2011, and the contribution of television revenue from titles not listed above was $47.2 million in fiscal 2012, compared to $54.8 million in fiscal 2011.
Motion Pictures — International Revenue
The following table sets forth the titles contributing significant motion pictures international revenue for the fiscal years ended March 31, 2012 and 2011:
 
Year Ended March 31,
2012
  
2011
Fiscal 2012 Theatrical Slate:
  
 Fiscal 2011 Theatrical Slate:
Abduction
  
 Alpha and Omega
The Hunger Games
  
Kick-Ass
Warrior
  
Killers
Fiscal 2011 Theatrical Slate:
  
Saw 3D
Kick-Ass
 
The Next Three Days
Summit Titles Released Theatrically Pre-Acquisition:
 
 
The Twilight Saga: Breaking Dawn - Part 1
 
 

15


The following table sets forth the components of international revenue by product category for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
March 31,
 
2012
 
2011
 
(Amounts in millions)
International revenues
 
 
 
Fiscal 2012 Theatrical Slate
$
46.7

 
$

Fiscal 2011 Theatrical Slate
13.1

 
86.8

Fiscal 2010 Theatrical Slate
2.0

 
14.4

Fiscal 2009 Theatrical Slate
1.8

 
4.7

Fiscal 2008 & Prior Theatrical Slate
6.0

 
7.4

Total Theatrical Slates
69.6

 
113.3

Summit Titles Released Theatrically Pre-Acquisition
21.3

 

Managed Brands
19.4

 
10.3

Other
2.6

 
2.9

 
$
112.9

 
$
126.5


International revenue included in motion pictures revenue of $112.9 million decreased $13.6 million, or 10.8%, in fiscal 2012, as compared to fiscal 2011. The decrease in international revenue in fiscal 2012 compared to fiscal 2011, is mainly due to the revenues generated by the titles and product categories listed above.
Motion Pictures — Lionsgate UK Revenue
The following table sets forth the titles contributing significant Lionsgate UK revenue for the fiscal years ended March 31, 2012 and 2011:
 
Year Ended March 31,
2012
  
2011
Fiscal 2012 Theatrical Slate:
  
Fiscal 2011 Theatrical Slate:
The Hunger Games
  
Saw 3D
Fiscal 2011 Theatrical Slate:
  
The Expendables
The Expendables
  
Fiscal 2010 Theatrical Slate:
Lionsgate UK and third party product:
 
Daybreakers
Blitz
 
Lionsgate UK and third party product:
 
 
Harry Brown
 
 
The Hurt Locker

16


The following table sets forth the components of Lionsgate UK revenue by product category for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
March 31,
 
2012
 
2011
 
(Amounts in millions)
Lionsgate UK revenues
 
 
 
Fiscal 2012 Theatrical Slate
$
14.9

 
$

Fiscal 2011 Theatrical Slate
19.4

 
32.2

Fiscal 2010 Theatrical Slate
1.1

 
8.2

Fiscal 2009 Theatrical Slate
3.2

 
1.0

Fiscal 2008 & Prior Theatrical Slate
1.9

 
2.5

Total Theatrical Slates
40.5

 
43.9

Summit Titles Released Theatrically Pre-Acquisition
6.7

 

Lionsgate UK and third party product
38.6

 
22.1

Managed Brands
15.4

 
10.4

Other
0.3

 
2.8

 
$
101.5

 
$
79.2

Lionsgate UK revenue of $101.5 million increased $22.3 million, or 28.2%, in fiscal 2012 as compared to fiscal 2011. The increase in Lionsgate UK revenue in fiscal 2012 compared to fiscal 2011 is mainly due to the revenue generated by the titles and product categories listed above.

Motion Pictures — Mandate Pictures Revenue
The following table sets forth the titles contributing significant Mandate Pictures revenue for the fiscal years ended March 31, 2012 and 2011:
 
Year Ended March 31,
2012
  
2011
50/50
  
Drag Me To Hell
A Very Harold & Kumar 3D Christmas
  
Juno
Juno
  
Peacock
Young Adult
 
The Switch
 
 
Whip It
Mandate Pictures revenue includes revenue from the sales and licensing of domestic and worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors or international sub-distributors. Mandate Pictures revenue of $55.4 million increased $16.7 million, or 43.2%, in fiscal 2012 as compared to fiscal 2011.
Television Production Revenue
Television production revenue of $397.3 million increased $44.1 million, or 12.5%, in fiscal 2012 as compared to fiscal 2011. The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the fiscal years ended March 31, 2012 and 2011:
 

17


 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2012
March 31, 2011
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Television Production
 
 
 
 
 
 
 
Domestic series licensing
 
 
 
 
 
 
 
Lionsgate Television
$
118.0

 
$
123.0

 
$
(5.0
)
 
(4.1
)%
Debmar-Mercury
133.8

 
136.5

 
(2.7
)
 
(2.0
)%
Total domestic series licensing
251.8

 
259.5

 
(7.7
)
 
(3.0
)%
International
37.2

 
37.1

 
0.1

 
0.3
 %
Home entertainment releases of television production
101.5

 
54.4

 
47.1

 
86.6
 %
Other
6.8

 
2.2

 
4.6

 
209.1
 %
 
$
397.3

 
$
353.2

 
$
44.1

 
12.5
 %

Revenues included in television production increased in fiscal 2012, mainly due to higher revenue generated from the home entertainment category of television production, offset in part by lower revenue generated from domestic series licensing in fiscal 2012 as compared to fiscal 2011.

The following table sets forth the number of television episodes and hours included in Lionsgate Television domestic series licensing revenue in the fiscal years ended March 31, 2012 and 2011, respectively:
 
 
 
Year Ended
 
 
 
Year Ended
 
 
March 31, 2012
 
 
 
March 31, 2011
 
 
Episodes
 
Hours
 
 
 
Episodes
 
Hours
Weeds Season 7
1/2hr
13

 
6.5

 
Weeds Season 6
1/2hr
13

 
6.5

Blue Mountain State Season 3
1/2hr
13

 
6.5

 
Blue Mountain State Season 2
1/2hr
13

 
6.5

Bloomberg The Mentor Season 2
1/2hr
8

 
4.0

 
Running Wilde Season 1
1/2hr
13

 
6.5

Nurse Jackie Season 4
1/2hr
10

 
5.0

 
Nurse Jackie Season 3
1/2hr
12

 
6.0

Boss Season 1
1hr
8

 
8.0

 
Mad Men Season 4
1hr
13

 
13.0

Mad Men Season 5
1hr
13

 
13.0

 
Scream Queens Season 2
1hr
8

 
8.0

Pilots
1/2hr & 1hr
2

 
1.5

 
Pilots
1/2hr & 1hr
3

 
2.0

 
 
67

 
44.5

 
 
 
75

 
48.5

Revenues included in domestic series licensing from Lionsgate Television decreased in fiscal 2012, due to a decrease in the number of television episodes delivered as compared to fiscal 2011. Revenues included in domestic series licensing from Debmar-Mercury decreased in fiscal 2012, primarily because fiscal 2011 included revenue from Weeds Seasons 1 through 5, with only comparable revenue from Weeds Season 6 in fiscal 2012.
International revenue in fiscal 2012 was comparable to fiscal 2011. International revenue in fiscal 2012 primarily included revenue from Blue Mountain State Season 2, Mad Men Seasons 1, 2, 3, and 4, and Weeds Seasons 5 and 6. International revenue in fiscal 2011 included revenue from Blue Mountain State Season 1, Crash Season 2, and Mad Men Seasons 1, 2, 3, and 4.
The increase in revenue from home entertainment releases of television production is primarily driven by electronic media revenue from Mad Men Seasons 1, 2, 3, and 4, as a result of a licensing contract, and Weeds Seasons 1, 2, 3, 4 and 5, primarily as a result of an extension of a licensing contract, and to a lesser extent, packaged media revenue from Weeds Season 7 (released February 2012) in fiscal 2012.

18


Direct Operating Expenses
The following table sets forth direct operating expenses by segment for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
Year Ended
 
March 31, 2012
 
March 31, 2011
 
Motion
Pictures
 
Television
Production
 
Total
 
Motion
Pictures
 
Television
Production
 
Total
 
(Amounts in millions)
Direct operating expenses
 
 
 
 
 
 
 
 
 
 
 
Amortization of films and television programs
$
415.5

 
$
188.2

 
$
603.7

 
$
354.4

 
$
175.0

 
$
529.4

Participation and residual expense
187.4

 
116.0

 
303.4

 
170.3

 
95.0

 
265.3

Other expenses
1.5

 
(0.2
)
 
1.3

 
1.2

 
(0.2
)
 
1.0

 
$
604.4

 
$
304.0

 
$
908.4

 
$
525.9

 
$
269.8

 
$
795.7

Direct operating expenses as a percentage of segment revenues
50.8
%
 
76.5
%
 
57.2
%
 
42.8
%
 
76.4
%
 
50.3
%
Direct operating expenses of the motion pictures segment of $604.4 million for fiscal 2012 were 50.8% of motion pictures revenue, compared to $525.9 million, or 42.8% of motion pictures revenue for fiscal 2011. The increase in direct operating expense of the motion pictures segment as a percent of revenue in fiscal 2012 is primarily due to the aggregate increase in the film cost of the Summit film assets as a result of recording the film rights of Summit at their estimated fair values due to the application of purchase accounting under generally accepted accounting principles, which results in higher amortization cost in relation to revenue. Additionally, the increase is, to a lesser extent, due to the change in the mix of product generating revenue compared to fiscal 2011, and is primarily driven by the titles in our theatrical slates. Investment in film write-downs of the motion pictures segment during fiscal 2012 totaled approximately $6.8 million, compared to $6.6 million for fiscal 2011. In fiscal 2012 and in fiscal 2011, there was one write-down that individually exceeded $1.0 million. Due to the January 2012 acquisition of Summit, we currently expect that direct operating expenses of the motion pictures segment for fiscal 2013 will increase as compared to fiscal 2012.
Direct operating expenses of the television production segment of $304.0 million for fiscal 2012 were 76.5% of television revenue, compared to $269.8 million, or 76.4%, of television revenue for fiscal 2011. The direct operating expenses as a percent of television revenue were comparable to fiscal 2011. In fiscal 2012, $3.8 million of charges for write-downs of television film costs were included in the amortization of television programs, compared to charges of $11.6 million in fiscal 2011. In fiscal 2012, there were no write-downs that individually exceeded $1.0 million, and the fiscal 2011 write-downs included write-downs on three titles over $1.0 million, which aggregated $7.9 million, of which $5.3 million related to one television series.

Distribution and Marketing Expenses
The following table sets forth distribution and marketing expenses by segment for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
Year Ended
 
March 31, 2012
 
March 31, 2011
 
Motion
Pictures
 
Television
Production
 
Total
 
Motion
Pictures
 
Television
Production
 
Total
 
(Amounts in millions)
Distribution and marketing expenses
 
 
 
 
 
 
 
 
 
 
 
Theatrical
$
234.4

 
$

 
$
234.4

 
$
267.1

 
$

 
$
267.1

Home Entertainment
164.2

 
8.6

 
172.8

 
191.2

 
12.6

 
203.8

Television
2.0

 
14.6

 
16.6

 
1.6

 
14.8

 
16.4

International
5.0

 
3.8

 
8.8

 
5.3

 
5.3

 
10.6

Lionsgate UK
45.8

 
1.5

 
47.3

 
45.1

 
2.5

 
47.6

Other
3.6

 
0.1

 
3.7

 
1.5

 
0.2

 
1.7

 
$
455.0

 
$
28.6

 
$
483.6

 
$
511.8

 
$
35.4

 
$
547.2


19



The majority of distribution and marketing expenses relate to the motion pictures segment. Theatrical prints and advertising (“P&A”) in the motion pictures segment in fiscal 2012 of $234.4 million decreased $32.7 million, compared to $267.1 million in fiscal 2011, largely due to only eight theatrical releases in fiscal 2012 as compared to twelve theatrical releases in fiscal 2011. Domestic theatrical P&A from the motion pictures segment in fiscal 2012 included P&A incurred on the release of Abduction, Conan the Barbarian, Good Deeds, Madea's Big Happy Family, The Hunger Games, and Warrior. Also, due to the January 2012 acquisition of Summit, domestic theatrical P&A from the motion pictures segment in fiscal 2012 includes P&A incurred on the release of a Summit title, Man on a Ledge, with no comparable expense in fiscal 2011. Approximately $125.1 million of P&A was incurred on titles that generated less than 5% of theatrical revenue in fiscal 2012, of which approximately $15.5 million was P&A incurred in advance for films to be released in fiscal 2013, such as The Cabin in the Woods, Safe and What to Expect When You're Expecting. Domestic theatrical P&A from the motion pictures segment in fiscal 2011 included P&A incurred on the release of Alpha and Omega, Buried, For Colored Girls, Kick-Ass, Killers, Saw 3D, The Expendables, The Last Exorcism, The Next Three Days, and Why Did I Get Married Too?. Approximately $58.7 million of P&A was incurred on titles that generated less than 5% of theatrical revenue in fiscal 2011, of which $7.6 million was P&A incurred in advance for films to be released in fiscal 2012. Due to the January 2012 acquisition of Summit, we currently expect that distribution and marketing expenses of the motion pictures segment for fiscal 2013 will increase as compared to fiscal 2012.
Home entertainment distribution and marketing costs on motion pictures and television product in fiscal 2012 of $172.8 million decreased $31 million, or 15.2%, compared to $203.8 million in fiscal 2011, primarily due to lower distribution and marketing costs associated with lower motion pictures home entertainment revenues. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues was 25.3% and 29.5% in fiscal 2012 and fiscal 2011, respectively. The decrease in home entertainment distribution and marketing costs as a percentage of home entertainment revenues was primarily due to an increase in home entertainment revenue from electronic media, which requires substantially lower distribution and marketing costs as compared to packaged media, as compared to fiscal 2011.
Lionsgate UK distribution and marketing expenses in the motion pictures segment in fiscal 2012 of $45.8 million increased slightly from $45.1 million in fiscal 2011.

General and Administrative Expenses
The following table sets forth general and administrative expenses by segment for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2012
March 31, 2011
Amount
 
Percent
 
(Amounts in millions)
General and administrative expenses
 
 
 
 
 
 
 
Motion Pictures
$
55.5

 
$
48.4

 
$
7.1

 
14.7
 %
Television Production
10.9

 
11.5

 
(0.6
)
 
(5.2
)%
Shared services and corporate expenses, excluding items below
67.1

 
56.2

 
10.9

 
19.4
 %
Total general and administrative expenses before share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses
133.5

 
116.1

 
17.4

 
15.0
 %
Share-based compensation expense
25.0

 
32.4

 
(7.4
)
 
(22.8
)%
Shareholder activist matter
(1.7
)
 
22.9

 
(24.6
)
 
(107.4
)%
Severance and transaction costs related to the acquisition of Summit Entertainment, LLC
12.0

 

 
12.0

 
100.0
 %
 
35.3

 
55.3

 
(20.0
)
 
(36.2
)%
Total general and administrative expenses
$
168.8

 
$
171.4

 
$
(2.6
)
 
(1.5
)%
Total general and administrative expenses as a percentage of revenue
10.6
%
 
10.8
%
 
 
 
 
General and administrative expenses excluding share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses, as a percentage of revenue
8.4
%
 
7.3
%
 
 
 
 

20


Total General and Administrative Expenses
General and administrative expenses decreased by $2.6 million, or 1.5%, as reflected in the table above and further discussed below.
Motion Pictures
General and administrative expenses of the motion pictures segment increased $7.1 million, or 14.7%. The increase in motion pictures general and administrative expenses is primarily due to general and administrative expenses associated with Summit, acquired on January 13, 2012. Included in the motion pictures segment in fiscal 2012, is $2.4 million in general and administrative expenses associated with Maple Pictures. Due to the sale of Maple Pictures, the Company will no longer incur general and administrative expenses associated with Maple Pictures. In fiscal 2012, $11.4 million of motion pictures production overhead was capitalized compared to $9.0 million in fiscal 2011.
Television Production
General and administrative expenses of the television production segment decreased $0.6 million, or 5.2%. In fiscal 2012, $5.8 million of television production overhead was capitalized compared to $4.3 million in fiscal 2011.

Shared Services and Corporate Expenses
Shared services and corporate expenses excluding share-based compensation expense, shareholder activist matter costs and severance and transaction costs related to the acquisition of Summit, increased $10.9 million, or 19.4%, mainly due to increases in incentive related compensation and to a lesser extent, rent and facilities expenses, partially offset by decreases in legal and professional fees.

Shareholder activist matter costs decreased $24.6 million as a result of significantly less shareholder activist activity in fiscal 2012, as compared to fiscal 2011. Additionally, shareholder activist matter costs in fiscal 2012 include a $3.9 million benefit, recorded in the quarter ended June 30, 2011, related to a negotiated settlement with a vendor of costs incurred and recorded in the prior fiscal year, and insurance recoveries of related litigation offset by other costs incurred.

Share-Based Compensation Expense. The following table sets forth share-based compensation expense included in shared services and corporate expenses for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2012
March 31, 2011
Amount
 
Percent
 
(Amounts in millions)
Share-Based Compensation Expense:
 
 
 
 
 
 
 
Stock options (1)
$
0.2

 
$
2.6

 
$
(2.4
)
 
(92.3
)%
Restricted share units and other share-based compensation (1)
9.5

 
26.0

 
(16.5
)
 
(63.5
)%
Stock appreciation rights (2)
15.3

 
3.8

 
11.5

 
302.6
 %
 
$
25.0

 
$
32.4

 
$
(7.4
)
 
(22.8
)%
______________________
(1)
The decrease in share-based compensation from stock options and restricted share units is due to $21.9 million of share-based compensation expense associated with the immediate vesting of equity awards of certain executive officers triggered by the “change in control” provisions in their respective employment agreements during the year ended March 31, 2011.
(2)
The increase in stock appreciation rights expense is primarily associated with the increase in the Company's stock price during the year ended March 31, 2012.
At March 31, 2012, as disclosed in Note 14 to the consolidated financial statements, there were unrecognized compensation costs of approximately $12.0 million related to stock options and restricted share units previously granted, including annual installments of share grants that were subject to performance targets, which will be expensed over the remaining vesting periods. At March 31, 2012, 381,698 shares of restricted share units have been awarded to two key executive officers, the vesting of which will be subject to performance targets to be set annually by the Compensation Committee of the Board of Directors. These restricted share units will vest in two annual installments assuming annual performance targets have been met. The fair value of the 381,698 shares, whose future annual performance targets have not been set, was $5.3 million, based on the market price of our common shares as of March 31, 2012. The market value will be remeasured when the annual performance criteria are set and the value will be expensed over the remaining vesting periods once it becomes probable that the performance targets will be satisfied.

21


Depreciation, Amortization and Other Expenses (Income)
Depreciation and amortization of $4.3 million for fiscal 2012 decreased $1.5 million from $5.8 million in fiscal 2011.
Interest expense of $78.1 million for fiscal 2012 increased $22.9 million, or 41.5%, from $55.2 million in fiscal 2011. The following table sets forth the components of interest expense for the fiscal years ended March 31, 2012 and 2011:
 
 
Year Ended
 
Year Ended
 
March 31, 2012
March 31, 2011
 
(Amounts in millions)
Interest Expense
 
 
 
Cash Based:
 
 
 
Senior revolving credit facility
$
4.1

 
$
6.8

Convertible senior subordinated notes
4.1

 
5.6

Senior secured second-priority notes
42.2

 
24.2

Term loan
6.9

 

Other
5.1

 
2.3

 
62.4

 
38.9

Non-Cash Based:
 
 
 
Amortization of discount (premium) on:
 
 
 
Liability component of convertible senior subordinated notes
7.8

 
10.1

Senior secured second-priority notes
0.7

 
1.2

Term loan
0.4

 

Amortization of deferred financing costs
6.8

 
5.0

 
15.7

 
16.3

 
$
78.1

 
$
55.2

Interest and other income was $2.8 million in fiscal 2012, compared to $1.7 million in fiscal 2011.
The following table represents our portion of the income or (loss) of our equity method investees based on our percentage ownership for the fiscal years ended March 31, 2012 and 2011:
 
 
March 31, 2012
 
 
 
 
 
Ownership
 
Year Ended
Year Ended
 
Percentage
 
March 31, 2012
March 31, 2011
 
 
 
 
 
As adjusted (3)
 
 
 
(Amounts in millions)
Horror Entertainment, LLC (“FEARnet”)
34.5%
 
$
0.1

 
$
0.7

NextPoint, Inc. (“Break Media”)
42.0%
 
(5.9
)
 
(2.4
)
Roadside Attractions, LLC
43.0%
 
0.6

 
0.8

Studio 3 Partners, LLC (“EPIX”) (1)
31.2%
 
24.4

 
(15.0
)
TV Guide Network (2)
51.0%
 
(8.5
)
 
(3.0
)
Tiger Gate Entertainment Limited ("Tiger Gate") (4)
45.9%
 
(2.3
)
 
(1.8
)
 
 
 
$
8.4

 
$
(20.7
)
 ______________________
(1)
We license certain of our theatrical releases and other films and television programs to EPIX. A portion of the profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity interest income (loss) of the venture. These profits are recognized as they are realized by the venture (see Note 7 to our consolidated financial statements).
(2)
We license certain films and/or television programs to TV Guide Network. A portion of the profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity interest loss of the venture. These profits are recognized as they are realized by the venture (see Note 7 to our consolidated financial statements).
(3)
Due to the elimination of the one-quarter lag in reporting EPIX's results at March 31, 2012, equity interest income (loss) for EPIX for the year ended March 31, 2011 has been adjusted as shown above (see Note 7 to our consolidated financial

22


statements for further information).
(4)
Our former joint venture with Saban Capital Group, Inc. (“SCG”). In January 2012, the assets of Tiger Gate were contributed to Celestial Tiger Entertainment Limited (“Celestial Tiger Entertainment”), our joint venture with SCG and Celestial Pictures, a company wholly-owned by Astro Malaysia Holdings Sdn Bhd., of which we own a 16% interest. Accordingly, our interest in Celestial Tiger Entertainment will be accounted under the cost method.

Income Tax Provision
We had an income tax expense of $4.7 million, or (13.6%), of loss before income taxes in fiscal 2012, compared to an expense of $4.3 million, or (16.3%), of loss before income taxes in fiscal 2011. The tax expense reflected in the fiscal year ended March 31, 2012 is primarily attributable to deferred U.S. income taxes and foreign withholding taxes. Our actual annual effective tax rate will differ from the statutory federal rate as a result of several factors, including changes in the valuation allowance against net deferred tax assets, non-temporary differences, foreign income taxed at different rates, and state and local income taxes. Income tax loss carryforwards, subject to certain limitations that may prevent us from fully utilizing them, amount to approximately $187.8 million for U.S. federal income tax purposes available to reduce income taxes over twenty years, $170.4 million for U.S. state income tax purposes available to reduce income taxes over future years with varying expirations, $28.4 million for Canadian income tax purposes available to reduce income taxes over 20 years with varying expirations, and $8.6 million for UK income tax purposes available indefinitely to reduce future income taxes.

Net Loss
Net loss for the fiscal year ended March 31, 2012 was $39.1 million, or basic and diluted net loss per common share of $0.30 on 132.2 million weighted average common shares outstanding. This compares to net loss for the fiscal year ended March 31, 2011 of $30.4 million, or basic and diluted net loss per common share of $0.23 on 131.2 million weighted average common shares outstanding.
    

Fiscal 2011 Compared to Fiscal 2010
The following table sets forth the components of consolidated revenue by segment for the fiscal years ended March 31, 2011 and 2010:
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2011
 
March 31, 2010
 
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Consolidated Revenue
 
 
 
 
 
 
 
Motion Pictures
$
1,229.5

 
$
1,119.3

 
$
110.2

 
9.8
 %
Television Production
353.2

 
350.9

 
2.3

 
0.7
 %
Media Networks

 
19.3

 
(19.3
)
 
(100.0
)%
 
$
1,582.7

 
$
1,489.5

 
$
93.2

 
6.3
 %
Our largest component of revenue comes from home entertainment. The following table sets forth total home entertainment revenue for both the Motion Pictures and Television Production reporting segments for the fiscal years ended March 31, 2011 and 2010:
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2011
 
March 31, 2010
 
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Home Entertainment Revenue
 
 
 
 
 
 
 
Motion Pictures
$
635.6

 
$
591.4

 
$
44.2

 
7.5
 %
Television Production
54.4

 
67.8

 
(13.4
)
 
(19.8
)%
 
$
690.0

 
$
659.2

 
$
30.8

 
4.7
 %
 

Motion Pictures Revenue

23


The following table sets forth the components of revenue and the changes in these components for the motion pictures reporting segment for the fiscal years ended March 31, 2011 and 2010:
 
 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2011
 
March 31, 2010
 
Amount
 
Percent
 
(Amounts in millions)
Motion Pictures (1)
 
 
 
 
 
 
 
Theatrical
$
205.9

 
$
139.4

 
$
66.5

 
47.7
 %
Home Entertainment
635.6

 
591.4

 
44.2

 
7.5
 %
Television
139.8

 
135.8

 
4.0

 
2.9
 %
International
126.5

 
73.4

 
53.1

 
72.3
 %
Lionsgate UK
79.2

 
74.3

 
4.9

 
6.6
 %
Mandate Pictures
38.7

 
99.1

 
(60.4
)
 
(60.9
)%
Other
3.8

 
5.9

 
(2.1
)
 
(35.6
)%
 
$
1,229.5

 
$
1,119.3

 
$
110.2

 
9.8
 %
 

(1)
For the fiscal year ended March 31, 2011, Motion Pictures revenue includes Maple Pictures revenue of $85.6 million, compared to Maple Pictures revenue of $69.7 million for the fiscal year ended March 31, 2010. Subsequent to August 10, 2011, revenue generated pursuant to the distribution agreements with Alliance has been recorded net of fees and expenses.

Motion Pictures — Theatrical Revenue
The following table sets forth the titles contributing approximately five percent or more of theatrical revenue by fiscal years theatrical slate and the month of their release for the fiscal years ended March 31, 2011 and 2010:
 
Year Ended March 31,
2011
 
 
2010
 
 
Theatrical Release Date
 
 
Theatrical Release Date
Fiscal 2011 Theatrical Slate:
 
 
Fiscal 2010 Theatrical Slate:
 
For Colored Girls
November 2010
 
From Paris With Love
February 2010
Saw 3D
October 2010
 
Daybreakers
January 2010
Alpha and Omega
September 2010
 
The Spy Next Door
January 2010
The Expendables
August 2010
 
Brothers
December 2009
The Last Exorcism
August 2010
 
Precious
November 2009
Killers
June 2010
 
Saw VI
October 2009
Why Did I Get Married Too?
April 2010
 
Gamer
September 2009
Kick-Ass
April 2010
 
I Can Do Bad All By Myself
September 2009
 
 
 
Fiscal 2009 Theatrical Slate:
 
 
 
 
The Haunting in Connecticut
March 2009
Theatrical revenue of $205.9 million increased $66.5 million, or 47.7%, in fiscal 2011, as compared to fiscal 2010. The decrease in theatrical revenue in fiscal 2011, as compared to fiscal 2010, is primarily due to higher box office receipts earned during fiscal 2011 as compared to fiscal 2010 on the theatrical releases listed in the table above. The contribution of theatrical revenue from the titles listed above was $188.8 million in fiscal 2011 compared to $126.4 million in fiscal 2010, representing an increase of $62.4 million in revenue from titles individually contributing greater than 5% of theatrical revenue.

Motion Pictures — Home Entertainment Revenue
The following table sets forth the titles contributing approximately two percent or more of motion pictures home entertainment revenue for the fiscal years ended March 31, 2011 and 2010:

24


 
Year Ended March 31,
2011
 
2010
 
DVD Release Date
 
 
DVD Release Date
 Fiscal 2011 Theatrical Slate:
 
 
 Fiscal 2010 Theatrical Slate:
 
The Next Three Days
March 2011
 
Brothers
March 2010
For Colored Girls
February 2011
 
Precious
March 2010
Saw 3D
January 2011
 
Gamer
January 2010
Alpha and Omega
January 2011
 
I Can Do Bad All By Myself
January 2010
The Expendables
November 2010
 
Saw VI
January 2010
Killers
September 2010
 
Crank: High Voltage
September 2009
Kick-Ass
August 2010
 
 Fiscal 2009 Theatrical Slate:
 
Why Did I Get Married Too?
August 2010
 
The Haunting In Connecticut
July 2009
Fiscal 2010 Theatrical Slate:
 
 
Madea Goes to Jail
June 2009
From Paris With Love
June 2010
 
My Bloody Valentine 3-D
May 2009
Daybreakers
May 2010
 
New In Town
May 2009
The Spy Next Door
May 2010
 
The Spirit
April 2009
Precious
March 2010
 
 
 
Managed Brands:
 
 
 
 
The Switch
March 2011
 
 
 

25


The following table sets forth the components of home entertainment revenue by product category for the fiscal years ended March 31, 2011 and 2010:
 
 
Year Ended March 31,
 
2011
 
2010
 
Packaged
Media
 
Electronic
Media
 
Total
 
Packaged
Media
 
Electronic
Media
 
Total
 
 
 
 
 
(Amounts in millions)
 
 
 
 
Home entertainment revenues
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2011 Theatrical Slate
$
192.9

 
$
38.7

 
$
231.6

 
$

 
$

 
$

Fiscal 2010 Theatrical Slate
74.4

 
42.3

 
116.7

 
113.1

 
5.8

 
118.9

Fiscal 2009 Theatrical Slate
10.0

 
1.2

 
11.2

 
129.9

 
41.2

 
171.1

Fiscal 2008 & Prior Theatrical Slate
22.8

 
4.2

 
27.0

 
35.8

 
4.0

 
39.8

Total Theatrical Slates
300.1

 
86.4

 
386.5

 
278.8

 
51.0

 
329.8

Managed Brands (1)
201.2

 
32.7

 
233.9

 
225.2

 
14.8

 
240.0

Other
12.0

 
3.2

 
15.2

 
19.5

 
2.1

 
21.6

 
$
513.3

 
$
122.3

 
$
635.6

 
$
523.5

 
$
67.9

 
$
591.4

 ___________________
(1)
Managed Brands consists of Direct-to-DVD, acquired and licensed brands, acquired library and other product.

Home entertainment revenue of $635.6 million increased $44.2 million, or 7.5%, in fiscal 2011, as compared to fiscal 2010. The increase in home entertainment revenue is primarily due to an increase in revenue from electronic media from $67.9 million in fiscal 2010 to $122.3 million in fiscal 2011, offset by a slight decrease in revenue from packaged media. The increase in electronic media is primarily driven by an increase in revenue generated from the product categories listed in the table above. The slight decrease in revenue from packaged media results from a decrease in managed brands, partially offset by an increase in revenue from the theatrical slates and other products. The increase in revenue contributed by the theatrical slates is primarily due to higher box office receipts and the timing of theatrical releases. The decrease in managed brands is largely due to a decrease in packaged media revenue from fitness and family entertainment titles, as well as a decline in revenue from one previously acquired library.
Motion Pictures — Television Revenue
The following table sets forth the titles contributing significant motion pictures television revenue for the fiscal years ended March 31, 2011 and 2010:
 
Year Ended March 31,
2011
  
2010
 Fiscal 2011 Theatrical Slate:
  
Fiscal 2009 Theatrical Slate:
Kick-Ass
  
Madea Goes to Jail
Killers
  
My Bloody Valentine 3-D
Why Did I Get Married Too?
  
Saw V
 Fiscal 2010 Theatrical Slate:
  
The Family That Preys
Brothers
  
The Haunting In Connecticut
Daybreakers
  
Transporter 3
From Paris With Love
 
W.
I Can Do Bad All By Myself
 
Fiscal 2008 Theatrical Slate:
Precious
 
Why Did I Get Married? - Feature
Saw VI
 
 
The Spy Next Door
 
 
 Fiscal 2009 Theatrical Slate:
 
 
The Forbidden Kingdom
 
 

The following table sets forth the components of television revenue by product category for the fiscal years ended

26


March 31, 2011 and 2010:
 
 
Year Ended
 
March 31,
 
2011
 
2010
 
(Amounts in millions)
Television revenues
 
 
 
Fiscal 2011 Theatrical Slate
$
29.4

 
$

Fiscal 2010 Theatrical Slate
56.3

 
3.5

Fiscal 2009 Theatrical Slate
13.2

 
89.0

Fiscal 2008 & Prior Theatrical Slate
22.6

 
26.8

Total Theatrical Slates
121.5

 
119.3

Managed Brands
16.2

 
13.5

Other
2.1

 
3.0

 
$
139.8

 
$
135.8

 
Television revenue included in motion pictures revenue of $139.8 million increased $4.0 million, or 2.9%, in fiscal 2011 as compared to fiscal 2010. The increase in television revenue in fiscal 2011 compared to fiscal 2010 is mainly due to the revenue generated by the product categories listed above. The contribution of television revenue from the titles listed above was $85.0 million in fiscal 2011, compared to $68.1 million in fiscal 2010, and the contribution of television revenue from titles not listed above was $54.8 million in fiscal 2011, compared to $67.7 million in fiscal 2010.
Motion Pictures — International Revenue
The following table sets forth the titles contributing significant motion pictures international revenue for the fiscal years ended March 31, 2011 and 2010:
 
Year Ended March 31,
2011
  
2010
Fiscal 2011 Theatrical Slate:
  
Fiscal 2010 Theatrical Slate:
Alpha and Omega
  
Brothers
Kick-Ass
  
Saw VI
Killers
  
Fiscal 2009 Theatrical Slate:
Saw 3D
 
My Bloody Valentine 3-D
The Next Three Days
 
Saw V

27


The following table sets forth the components of international revenue by product category for the fiscal years ended March 31, 2011 and 2010:
 
 
Year Ended
 
March 31,
 
2011
 
2010
 
(Amounts in millions)
International revenues
 
 
 
Fiscal 2011 Theatrical Slate
$
86.8

 
$
0.3

Fiscal 2010 Theatrical Slate
14.4

 
21.9

Fiscal 2009 Theatrical Slate
4.7

 
16.0

Fiscal 2008 & Prior Theatrical Slate
7.4

 
11.3

Total Theatrical Slates
113.3

 
49.5

Managed Brands
10.3

 
17.9

Other
2.9

 
6.0

 
$
126.5

 
$
73.4


International revenue included in motion pictures revenue of $126.5 million increased $53.1 million, or 72.3%, in fiscal 2011, as compared to fiscal 2010. The increase in international revenue in fiscal 2011 compared to fiscal 2010 is mainly due to the revenues generated by the titles and product categories listed above.
Motion Pictures — Lionsgate UK Revenue
The following table sets forth the titles contributing significant Lionsgate UK revenue for the fiscal years ended March 31, 2011 and 2010:
 
Year Ended March 31,
2011
  
2010
Fiscal 2011 Theatrical Slate:
  
Fiscal 2010 Theatrical Slate: :
Saw 3D
  
Saw VI
The Expendables
 
Fiscal 2009 Theatrical Slate:
Fiscal 2010 Theatrical Slate:
  
My Bloody Valentine 3-D
Daybreakers
  
LGUK Theatrical Slate:
LGUK Theatrical Slate:
  
Harry Brown
Harry Brown
  
The Hurt Locker
The Hurt Locker
  
Other:
 
 
Drag Me To Hell

28


The following table sets forth the components of Lionsgate UK revenue by product category for the fiscal years ended March 31, 2011 and 2010:
 
 
Year Ended
March 31,
 
2011
 
2010
 
(Amounts in millions)
Lionsgate UK revenues
 
 
 
Fiscal 2011 Theatrical Slate
$
32.2

 
$

Fiscal 2010 Theatrical Slate
8.2

 
10.4

Fiscal 2009 Theatrical Slate
1.0

 
10.0

Fiscal 2008 & Prior Theatrical Slate
2.5

 
8.9

Total Theatrical Slates
43.9

 
29.3

Lionsgate UK and third party product
22.1

 
25.2

Managed Brands
10.4

 
12.3

Other
2.8

 
7.5

 
$
79.2

 
$
74.3

Lionsgate UK revenue of $79.2 million increased $4.9 million, or 6.6%, in fiscal 2011 as compared to fiscal 2010. The increase in Lionsgate UK revenue in fiscal 2011 compared to fiscal 2010 is mainly due to the revenue generated by the titles and product categories listed above.

Motion Pictures — Mandate Pictures Revenue
The following table sets forth the titles contributing significant Mandate Pictures revenue for the fiscal years ended March 31, 2011 and 2010:
 
Year Ended March 31,
2011
  
2010
Drag Me To Hell
  
Drag Me To Hell
Juno
 
Horsemen
Peacock
  
Juno
The Switch
  
Passengers
Whip It
 
Whip It
Mandate Pictures revenue includes revenue from the sales and licensing of domestic and worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors or international sub-distributors. Mandate Pictures revenue of $38.7 million decreased $60.4 million, or 60.9%, in fiscal 2011, as compared to fiscal 2010. The decrease in Mandate Pictures revenue in fiscal 2011 compared to fiscal 2010 is mainly due to the revenue from Drag Me To Hell in fiscal 2010 as compared to fiscal 2011.
Television Production Revenue
Television production revenue of $353.2 million increased $2.3 million, or 0.7%, in fiscal 2011, as compared to fiscal 2010. The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the fiscal years ended March 31, 2011 and 2010:
 

29


 
Year Ended
 
Year Ended
 
Increase (Decrease)
 
March 31, 2011
 
March 31, 2010
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Television Production
 
 
 
 
 
 
 
Domestic series licensing
 
 
 
 
 
 
 
Lionsgate Television
$
123.0

 
$
128.8

 
$
(5.8
)
 
(4.5
)%
Debmar-Mercury
136.5

 
92.2

 
44.3

 
48.0
 %
Ish Entertainment

 
19.0

 
(19.0
)
 
(100.0
)%
Total domestic series licensing
259.5

 
240.0

 
19.5

 
8.1
 %
International
37.1

 
42.3

 
(5.2
)
 
(12.3
)%
Home entertainment releases of television production
54.4

 
67.8

 
(13.4
)
 
(19.8
)%
Other
2.2

 
0.8

 
1.4

 
175.0
 %
 
$
353.2

 
$
350.9

 
$
2.3

 
0.7
 %

Revenues included in domestic series licensing increased in fiscal 2011 mainly due to higher revenue generated from Debmar-Mercury in fiscal 2011 as compared to fiscal 2010, partially offset by no revenue generated from our former collaboration with Ish Entertainment Inc. (“Ish”) in fiscal 2011 compared to fiscal 2010 due to the collaboration ending in fiscal 2010, and slightly lower revenue generated from Lionsgate Television in fiscal 2011 compared to fiscal 2010.

The following table sets forth the number of television episodes and hours included in Lionsgate Television domestic series licensing revenue in the fiscal years ended March 31, 2011 and 2010, respectively:
 
 
 
Year Ended
 
 
 
Year Ended
 
 
March 31, 2011
 
 
 
March 31, 2010
 
 
Episodes
 
Hours
 
 
 
Episodes
 
Hours
Weeds Season 6
1/2hr
13

 
6.5

 
Nurse Jackie Season 2
1/2hr
12

 
6.0

Blue Mountain State Season 2
1/2hr
13

 
6.5

 
Nurse Jackie Season 1
1/2hr
12

 
6.0

Running Wilde Season 1
1/2hr
13

 
6.5

 
Blue Mountain State Season 1
1/2hr
13

 
6.5

Nurse Jackie Season 3
1/2hr
12

 
6.0

 
Weeds Season 5
1/2hr
13

 
6.5

Mad Men Season 4
1hr
13

 
13.0

 
Crash TV Series Season 2
1hr
13

 
13.0

Scream Queens Season 2
1 hr
8

 
8.0

 
Mad Men Season 3
1 hr
13

 
13.0

Pilots
1/2hr & 1hr
3

 
2.0

 
 
 
 
 
 
 
 
75

 
48.5

 
 
 
76

 
51.0


Revenues included in domestic series licensing from Debmar-Mercury increased in fiscal 2011 due to increased revenue from the deliveries of the television series Meet the Browns, Are We There Yet?, Big Lake and The Wendy Williams Show.

Our reality television collaboration with Ish ended in fiscal 2010, resulting in no revenue generated in fiscal 2011. Revenue generated in fiscal 2010 resulted primarily from the production of the domestic series Paris Hilton's My New BFF and My Antonio.
International revenue decreased in fiscal 2011 due to an increase in episodes of programming delivered internationally and no international revenue generated from our former collaboration with Ish. International revenue in fiscal 2011 included revenue from Blue Mountain State Season 1, Crash Season 2, and Mad Men Seasons 1, 2, 3 and 4. International revenue in fiscal 2010 included revenue from Mad Men Seasons 1, 2, and 3, Crash Season 1, Dead Zone Season 1, and Fear Itself.
The decrease in revenue from home entertainment releases of television production is primarily driven by a decrease in revenue from Weeds Seasons 4 and 5 (released June 2009 and January 2010, respectively) and Mad Men Seasons 1 and 2 (released July 2008 and July 2009, respectively) in fiscal 2011 as compared to fiscal 2010, offset slightly by increases in revenue from the releases of Mad Men Season 4 (released March 2011) and Weeds Season 6 (released February 2011) in fiscal 2011.

30



Media Networks Revenue

Media Networks revenue for the fiscal years ended March 31, 2011 and 2010 are nil and $19.3 million, respectively. The acquisition of TV Guide Network occurred on February 28, 2009. The results of operations of TV Guide Network are included in the Company's consolidated results from February 28, 2009 through May 27, 2009. A portion of the entity was sold on May 28, 2009. Subsequent to the sale of TV Guide Network, and pursuant to the new accounting guidance for accounting for variable interest entities effective April 1, 2010, which the Company has retrospectively applied, the Company's interest in TV Guide Network is being accounted for under the equity method of accounting.
Direct Operating Expenses
The following table sets forth direct operating expenses by segment for the fiscal years ended March 31, 2011 and 2010:
 
 
Year Ended
 
Year Ended
 
 
 
March 31, 2011
 
March 31, 2010
 
Motion
Pictures
 
Television
Production
 
Total
 
Motion
Pictures
 
Television
Production
 
Media
Networks
 
Total
 
(Amounts in millions)
Direct operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of films and television programs
$
354.4

 
$
175.0

 
$
529.4

 
$
302.0

 
$
202.4

 
$
7.3

 
$
511.7

Participation and residual expense
170.3

 
95.0

 
265.3

 
188.8

 
75.9

 
0.2

 
264.9

Other expenses
1.2

 
(0.2
)
 
1.0

 
0.8

 
0.7

 
(0.1
)
 
1.4

 
$
525.9

 
$
269.8

 
$
795.7

 
$
491.6

 
$
279.0

 
$
7.4

 
$
778.0

Direct operating expenses as a percentage of segment revenues
42.8
%
 
76.4
%
 
50.3
%
 
43.9
%
 
79.5
%
 
38.3