What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-02-04 · 360 added, 583 removed, 736 unchanged (56% of the section changed)

6 unchanged sentences

Accounts receivable, net 447.2 383.7

Program rights — 310.5

Other current assets 144.5 274.3

9 unchanged sentences

Participations and residuals 484.5 508.8

Film obligations and production loans 310.1 353.7

Film obligations 349.1 385.0

Debt - short term portion 40.0 88.0

3 unchanged sentences

Participations and residuals 308.3 304.6

Film obligations and production loans 213.9 96.9

Film obligations 509.3 318.5

Other liabilities 330.2 337.1

5 unchanged sentences

Class B non-voting common shares, no par value, 500.0 shares authorized, 139.6 shares issued (March 31, 2021 - 138.2 shares issued)

2,318.6 2,296.0

Accumulated deficit ( 139.1 ) ( 82.9 )

8 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions, except per share amounts)

6 unchanged sentences

Total expenses 880.9 724.3

Operating income (loss) 37.1 ( 39.5 ) 156.3 14.9

Operating income 20.3 89.4

Interest expense ( 41.7 ) ( 44.4 )

3 unchanged sentences

Gain (loss) on investments ( 0.1 ) 5.1

Equity interests loss ( 0.7 ) ( 4.6 ) ( 5.1 ) ( 15.7 )

Equity interests income (loss) 0.7 ( 2.6 )

Income (loss) before income taxes ( 45.2 ) 47.5

14 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

1 unchanged sentence

Foreign currency translation adjustments, net of tax 0.1 0.4

Net unrealized gain (loss) on cash flow hedges, net of tax 30.6 23.1 30.3 ( 43.7 )

Net unrealized loss on cash flow hedges, net of tax ( 24.0 ) ( 7.0 )

Comprehensive income (loss) ( 75.6 ) 39.6

11 unchanged sentences

(Amounts in millions)

Balance at September 30, 2020 82.9 $ 660.8 137.6 $ 2,254.4 $ 2.4 $ ( 205.5 ) $ 2,712.1 $ 2.2 $ 2,714.3

Share-based compensation, net 0.1 1.2 0.3 17.5 — — 18.7 — 18.7

Issuance of common shares — 0.1 — 0.1 — — 0.2 — 0.2

Noncontrolling interests — — — — — — — ( 0.2 ) ( 0.2 )

Net income (loss) — — — — ( 13.9 ) — ( 13.9 ) ( 0.1 ) ( 14.0 )

Other comprehensive income — — — — — 35.4 35.4 — 35.4

Redeemable noncontrolling interests adjustments to redemption value — — — — ( 7.3 ) — ( 7.3 ) — ( 7.3 )

Balance at December 31, 2020 83.0 $ 662.1 137.9 $ 2,272.0 $ ( 18.8 ) $ ( 170.1 ) $ 2,745.2 $ 1.9 $ 2,747.1

Balance at September 30, 2019 82.7 $ 652.3 135.2 $ 2,189.0 $ 143.7 $ ( 145.6 ) $ 2,839.4 $ 2.9 $ 2,842.3

Balance at March 31, 2021 83.0 $ 663.2 138.2 $ 2,296.0 $ ( 82.9 ) $ ( 83.3 ) $ 2,793.0 $ 1.6 $ 2,794.6

Exercise of stock options — 0.4 0.2 1.9 — — 2.3 — 2.3

Share-based compensation, net — 1.2 1.2 20.6 — — 21.8 — 21.8

1 unchanged sentence

Noncontrolling interests — — — — — — — 0.7 0.7

Net income — — — — ( 91.2 ) — ( 91.2 ) 0.2 ( 91.0 )

Net loss — — — — ( 45.4 ) — ( 45.4 ) ( 0.1 ) ( 45.5 )

Other comprehensive loss — — — — — ( 23.9 ) ( 23.9 ) — ( 23.9 )

Redeemable noncontrolling interests adjustments to redemption value — — — — ( 10.8 ) — ( 10.8 ) — ( 10.8 )

Balance at December 31, 2019 83.7 $ 661.9 136.3 $ 2,211.2 $ 44.5 $ ( 123.5 ) $ 2,794.1 $ 2.2 $ 2,796.3

_____________________

(a) Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 8).

LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended

Class A Voting Class B Non-Voting Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Lions Gate Entertainment Corp.

Shareholders' Equity Noncontrolling Interests (a) Total Equity

Common Shares Common Shares

Number Amount Number Amount

(Amounts in millions)

Balance at June 30, 2021 83.0 $ 664.9 139.6 $ 2,318.6 $ ( 139.1 ) $ ( 107.2 ) $ 2,737.2 $ 2.2 $ 2,739.4

Balance at March 31, 2020 83.0 $ 659.2 136.4 $ 2,221.7 $ ( 16.9 ) $ ( 206.0 ) $ 2,658.0 $ 2.0 $ 2,660.0

4 unchanged sentences

Net income — — — — 51.1 — 51.1 — 51.1

Other comprehensive income — — — — — 35.9 35.9 — 35.9

Redeemable noncontrolling interests adjustments to redemption value — — — — ( 20.7 ) — ( 20.7 ) — ( 20.7 )

Balance at December 31, 2020 83.0 $ 662.1 137.9 $ 2,272.0 $ ( 18.8 ) $ ( 170.1 ) $ 2,745.2 $ 1.9 $ 2,747.1

Balance at March 31, 2019 82.5 $ 649.7 133.5 $ 2,140.6 $ 208.7 $ ( 80.3 ) $ 2,918.7 $ 3.2 $ 2,921.9

Exercise of stock options — — 0.1 0.5 — — 0.5 — 0.5

Share-based compensation, net 0.3 3.7 0.6 33.4 — — 37.1 — 37.1

Issuance of common shares 0.9 8.5 2.1 36.7 — — 45.2 — 45.2

Noncontrolling interests — — — — — — — ( 1.1 ) ( 1.1 )

Net loss — — — — ( 143.4 ) — ( 143.4 ) 0.1 ( 143.3 )

Other comprehensive loss — — — — — ( 6.6 ) ( 6.6 ) — ( 6.6 )

Redeemable noncontrolling interests adjustments to redemption value — — — — ( 5.9 ) — ( 5.9 ) — ( 5.9 )

Balance at December 31, 2019 83.7 $ 661.9 136.3 $ 2,211.2 $ 44.5 $ ( 123.5 ) $ 2,794.1 $ 2.2 $ 2,796.3

Balance at June 30, 2020 82.9 $ 659.3 136.9 $ 2,232.4 $ 28.3 $ ( 212.6 ) $ 2,707.4 $ 2.1 $ 2,709.5

_____________________

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(Amounts in millions)

1 unchanged sentence

Net income (loss) $ ( 51.7 ) $ 46.2

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 43.3 47.6

4 unchanged sentences

Loss on extinguishment of debt 26.6 —

Equity interests loss 5.1 15.7

Equity interests (income) loss ( 0.7 ) 2.6

Loss (gain) on investments 0.1 ( 5.1 )

5 unchanged sentences

Participations and residuals ( 20.7 ) ( 45.4 )

Film obligations ( 92.6 ) ( 3.8 )

Program rights and other film obligations ( 11.2 ) ( 51.6 )

Deferred revenue 8.6 ( 28.5 )

Net Cash Flows Provided By Operating Activities 159.3 434.4

Net Cash Flows Provided By (Used In) Operating Activities ( 348.7 ) 81.4

Investing Activities:

Proceeds from the sale of other investments 5.1 —

Proceeds from the sale of Pantaya 123.6 —

Proceeds from the sale of equity method and other investments — 5.1

Investment in equity method investees and other ( 1.5 ) ( 0.2 )

Capital expenditures ( 6.4 ) ( 6.4 )

Net Cash Flows Used In Investing Activities ( 20.9 ) ( 38.8 )

Net Cash Flows Provided By (Used In) Investing Activities 115.7 ( 1.5 )

Financing Activities:

Debt - borrowings 160.0 597.1

Debt - repayments ( 210.9 ) ( 738.6 )

Debt - borrowings, net of debt issuance and redemption costs 1,199.9 75.0

Debt - repurchases and repayments ( 1,373.9 ) ( 92.0 )

Production loans - borrowings 214.3 46.1

Production loans - repayments ( 113.2 ) ( 44.1 )

Production tax credit facility advances, net of debt issuance costs 94.9 —

Production tax credit facility repayments ( 32.8 ) —

Interest rate swap settlement payments ( 6.9 ) ( 2.1 )

3 unchanged sentences

Tax withholding required on equity awards ( 13.1 ) ( 2.0 )

Net Cash Flows Provided By (Used In) Financing Activities 89.0 ( 385.5 )

Net Change In Cash and Cash Equivalents 227.4 10.1

Foreign Exchange Effects on Cash and Cash Equivalents 5.9 1.1

Cash and Cash Equivalents - Beginning Of Period 318.2 184.3

Cash and Cash Equivalents - End Of Period $ 551.5 $ 195.5

Net Cash Flows Used In Financing Activities ( 28.3 ) ( 22.1 )

Net Change In Cash, Cash Equivalents and Restricted Cash ( 261.3 ) 57.8

Foreign Exchange Effects on Cash, Cash Equivalents and Restricted Cash — 0.1

Cash, Cash Equivalents and Restricted Cash - Beginning Of Period 528.7 318.2

Cash, Cash Equivalents and Restricted Cash - End Of Period $ 267.4 $ 376.1

See accompanying notes.

4 unchanged sentences

(the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) brings a unique and varied portfolio of entertainment to consumers around the world.

Its film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and the largest collection of film and television franchises in the independent media space.

A digital age company driven by its entrepreneurial culture and commitment to innovation, the Lionsgate brand is synonymous with bold, original, relatable entertainment for the audiences it serves worldwide.

Its film, television, subscription and location-based entertainment businesses are backed by a 17,000 -title library and one of the largest collections of film and television franchises in the independent media space.

Basis of Presentation

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In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements.

Operating results for the three and nine months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021.

Operating results for the three months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2022.

The balance sheet at March 31, 2021 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S.

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GAAP requires management to make estimates and assumptions, including the potential impacts arising from the COVID-19 global pandemic, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

The most significant estimates made by management in the preparation of the financial statements relate to ultimate revenue and costs used for the amortization of investment in films and television programs and program rights;

estimates of sales returns and other allowances and provisions for doubtful accounts;

estimates of sales returns;

estimates related to the revenue recognition of sales or usage-based royalties;

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accruals for contingent liabilities;

and impairment assessments for investment in films and television programs, property and equipment, equity investments, goodwill and intangible assets.

and impairment assessments for investment in films and television programs and licensed program rights, property and equipment, equity investments, goodwill and intangible assets.

Actual results could differ from such estimates.

Recent Accounting Pronouncements

Accounting Guidance Adopted in Fiscal 2021

Fair Value Measurement - Changes to Disclosure Requirements :

In August 2018, the Financial Accounting Standards Board ("FASB") issued guidance that eliminates, adds and modifies certain disclosure requirements for fair value measurements.

This guidance eliminates the requirement that entities disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but requires public companies to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, among other changes.

The Company adopted this guidance on April 1, 2020, with no material impact to its consolidated financial statements.

Improvements to Accounting for Costs of Films and License Agreements for Program Materials :

On April 1, 2020, the Company adopted, on a prospective basis, FASB guidance on the accounting for costs of films and episodic television series

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

which aligns the accounting for capitalizing production costs of episodic television series with guidance for films.

The following reflects some of the more significant changes under the new guidance:

• Classification in balance sheet:

Allows for the classification of licensed program rights as long-term assets.

Previously, the Company reported a portion of these rights in current assets.

After adoption, the Company now classifies licensed program rights as long-term assets.

Accordingly, as of April 1, 2020, the Company has classified $ 310.5 million of these rights as non-current assets in the balance sheet.

• Removes capitalization constraint for episodic television:

The capitalization of production costs for episodic television series is no longer constrained until persuasive evidence of secondary market revenues exists.

Previously, theatrical content production costs could be fully capitalized while episodic television production costs were generally limited to the amount of contracted revenues.

• Monetization strategy:

Requires the determination of a titles' monetization strategy for purposes of amortization and testing impairment as follows:

◦ Monetized individually - lifetime value is predominantly derived from third-party revenues that are directly attributable to the specific film or television title (e.g., theatrical revenues or sales to third-party television programmers).

◦ Monetized as a film group - lifetime value is predominantly derived from third-party revenues that are attributable only to a bundle of titles, which is referred to as a "film group" in the updated guidance.

A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements.

The determination of the monetization strategy is made at commencement of production on a consolidated basis.

Because the new accounting guidance is applied prospectively, the predominant monetization strategy for content released prior to the beginning of fiscal 2021 is determined based on the expected means of monetization over the remaining life of the content.

The classification of content as individually monetized or monetized as part of a film group only changes if there is a significant change to the title's monetization strategy relative to its initial assessment.

For these accounting purposes, the Company generally classifies content that is initially intended for use on the Company's Media Networks services (including its linear television networks, OTT services and direct-to-consumer services) as content monetized as a film group.

Content initially intended for theatrical release, home entertainment distribution, or for license to third parties, is generally classified as content monetized individually.

• Impairment testing:

The new guidance requires that an entity test a film or television program for impairment, when impairment indicators are present, at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements or individually for titles monetized individually.

An impairment results when the fair value of the film or film group is less than its carrying value.

Under previous guidance, film and television programs accounted for under the broadcasting accounting standard (i.e., licensed product in the Company's Media Networks segment) were carried on the balance sheet at the lower of cost or net realizable value rather than fair value.

See Note 2 for further information.

Financial Instruments - Credit Losses:

In June 2016, the FASB issued guidance, as amended, that changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, from the incurred loss methodology under current U.S.

GAAP to a new, forward-looking current expected credit loss model that would generally result in the earlier recognition of credit losses.

The Company adopted this guidance on April 1, 2020 using a modified retrospective approach, with no material impact to its consolidated financial statements.

Accounting Guidance Not Yet Adopted

Simplifying the Accounting for Income Taxes:

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes.

The guidance amends the rules for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods.

It also reduces complexity in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group.

The guidance is effective for the Company's fiscal year beginning April 1, 2021, with early adoption

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company does not expect that the adoption of this guidance will have a material effect on its consolidated financial statements.

On March 31, 2021, the Company sold its 75 % majority interest in Pantaya to Hemisphere Media Group for approximately $ 123.6 million in cash, subject to certain customary adjustments pursuant to the terms of the agreement.

Under the terms of the purchase agreement, control of Pantaya transferred to Hemisphere Media Group on March 31, 2021, with the cash consideration transferred on April 1, 2021.

The receivable for the cash purchase consideration was included in other current assets as of March 31, 2021.

Pantaya was previously reflected in and represented substantially all of "Other Streaming Services" in the Company's Media Networks segment (see Note 14).

The Company recorded a gain before income taxes of approximately $ 44.1 million, which was reflected in the gain on sale of Pantaya line item in the consolidated statement of operations in the year ended March 31, 2021.

This gain amount was net of $ 69.0 million of goodwill allocated from the Media Networks segment as required under the applicable accounting guidance.

Investment in Films and Television Programs and Licensed Program Rights

Investment in Films and Television Programs

Investment in films and television programs includes the unamortized costs of films and television programs, a portion of which are monetized individually (i.e., through domestic theatrical, home entertainment, television, international or other ancillary-market distribution), and a portion of which are monetized as part of a film group (i.e., primarily content internally produced by our Television Production segment for our Media Networks segment).

Recording Cost.

Costs of acquiring and producing films and television programs and of acquired libraries are capitalized when incurred.

For films and television programs produced by the Company, capitalized costs include all direct production and financing costs, capitalized interest and production overhead.

For acquired films and television programs, capitalized costs consist of minimum guarantee payments to acquire the distribution rights.

Amortization.

Costs of acquiring and producing films and television programs and of acquired libraries that are monetized individually are amortized using the individual-film-forecast method, whereby these costs are amortized and participations and residuals costs are accrued in the proportion that current year’s revenue bears to management’s estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of the films or television programs.

For investment in films and television programs monetized as a group, see further discussion below under Licensed Program Rights for a description of recording cost and amortization of costs monetized as a group.

Ultimate Revenue.

Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture.

For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later.

For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.

Films and television programs in development include costs of acquiring film rights to books, stage plays or original screenplays and costs to adapt such projects.

Such costs are capitalized and, upon commencement of production, are transferred to production costs.

Projects in development are written off at the earlier of the date they are determined not to be recoverable or when abandoned, or three years from the date of the initial investment unless the fair value of the project exceeds its carrying cost.

Licensed Program Rights

Licensed program rights include content licensed from third parties that is monetized as part of a film group for distribution on Media Networks distribution platforms.

Licensed content is comprised of films or series that have been previously produced by third parties and the Company retains specified airing rights over a contractual term.

Program licenses typically have fixed terms and require payments during the term of the license.

Recording Cost.

The cost of licensed content is capitalized when the cost is known or reasonably determinable, the license period for programs has commenced, the program materials have been accepted by the Company in accordance with the license agreements, and the programs are available for the first showing.

Licensed programming rights may include rights to more than one exploitation window under the Company's output and library agreements.

For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated fair value of each window which generally results in the majority of the cost allocated to the first window on newer releases.

Certain license agreements may include additional ancillary rights in addition to the pay television rights.

The cost of the Media Networks’ third-party licensed content is allocated between the pay television market distributed by the Media Networks’ segment and the ancillary revenue markets (e.g., home video, digital platforms, international television, etc.) based on the estimated relative fair values of these markets.

Our estimates of fair value for the pay television and ancillary markets and windows of exploitation involve uncertainty and management judgment.

Amortization.

The cost of program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on an accelerated or straight-line basis based on the anticipated number of exhibitions or expected and historical viewership patterns or the license period on a title-by-title or episode-by-episode basis.

The number of exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the expected usage of the content.

Participations and residuals are expensed in line with the amortization of production costs.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Changes in management’s estimate of the anticipated exhibitions and viewership patterns of films and original series on our networks could result in the earlier recognition of our programming costs than anticipated.

Conversely, scheduled exhibitions and expected viewership patterns may not capture the appropriate usage of the program rights in current periods which would lead to the write-off of additional program rights in future periods and may have a significant impact on our future results of operations and our financial position.

Impairment Assessment for Investment in Films and Television Programs and Licensed Program Rights

A film group or individual film or television program is evaluated for impairment when an event or change in circumstances indicates that the fair value of an individual film or film group is less than its unamortized cost.

A film group represents the unit of account for impairment testing for a film or license agreement for program material when the film or license agreement is expected to be predominantly monetized with other films and/or license agreements instead of being predominantly monetized on its own.

A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements.

Content Monetized Individually.

For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), whenever events or changes in circumstances indicate that the fair value of the individual film may be less than its unamortized costs, the unamortized costs of the individual film are compared to the estimated fair value of the individual film.

The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title.

To the extent the unamortized costs exceed the fair value, an impairment charge is recorded for the excess.

Content Monetized as a Group.

For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), whenever events or changes in circumstances indicate that the fair value of the film group may be less than its unamortized costs, the aggregate unamortized costs of the group are compared to the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows are independent of other produced and licensed content.

The Company's film groups are generally aligned along the Company's networks and digital content offerings domestically (i.e., Starz Networks and Other Streaming Services) and by territory or groups of territories internationally, wherein content assets are shared across the various territories and therefore, the territory or group of territories is the film group.

If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group.

Valuation Assumptions.

The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement, see Note 7).

The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program or film group.

The fair value of any film costs associated with a film or television program that management plans to abandon is zero.

Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in management’s future revenue estimates.

Investment in films and television programs and licensed program rights includes write-downs to fair value, which are included in direct operating expense on the unaudited condensed consolidated statements of operations, and represented the following amounts by segment for the three and nine months ended December 31, 2020 and 2019:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

(Amounts in millions)

Impairments by segment:

Motion Picture $ 13.7 $ 37.2 $ 14.6 $ 38.8

Television Production 5.2 — 8.0 0.7

Impairments not included in segment operating results (1)

— 74.0 15.4 74.0

$ 18.9 $ 111.2 $ 38.0 $ 113.5

________________________

(1) Impairments not included in segment operating results in the nine months ended December 31, 2020 represent a charge due to changes in performance expectations resulting from circumstances associated with the COVID-19 global pandemic.

In the three and nine months ended December 31, 2019, amounts represent certain programming and content charges recorded as a result of changes to the Company's programming and broadcasting strategy in connection with management changes (see Note 13 and Note 14).

Total investment in films and television programs and licensed program rights by predominant monetization strategy is as follows:

2021 March 31,

(Amounts in millions)

5 unchanged sentences

In development 92.3 92.9

1,087.9 986.6

Film Group Monetization

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Licensed program rights, net of accumulated amortization 453.1 510.4

Investment in films and television programs and program rights, net $ 1,961.4

At December 31, 2020, acquired film and television libraries have remaining unamortized costs of $ 26.0 million, which are monetized individually and are being amortized using the individual-film-forecast method over a remaining period of approximately 20 years.

Amortization of investment in film and television programs and licensed program rights by predominant monetization strategy is as follows for the three and nine months ended December 31, 2020, and was included in direct operating expense in the unaudited condensed consolidated statement of operations:

Investment in films and television programs and licensed program rights, net $ 2,429.2 $ 2,222.7

At June 30, 2021, acquired film and television libraries have remaining unamortized costs of $ 16.0 million, which are monetized individually and are being amortized using the individual-film-forecast method over a remaining period of approximately 19.25 years.

Amortization of investment in film and television programs and licensed program rights by predominant monetization strategy is as follows for the three months ended June 30, 2021 and 2020, and was included in direct operating expense in the unaudited condensed consolidated statements of operations:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

December 31, December 31,

Three Months Ended

(Amounts in millions)

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$ 371.1 $ 281.2

Amortization of investment in film and television programs and licensed program rights for the three and nine months ended December 31, 2019 was $ 450.8 million and $ 1,306.0 million, respectively.

The table below summarizes estimated future amortization expense for the Company's investment in film and television programs and licensed program rights as of December 31, 2020:

Twelve Months Ended

2021 2022 2023

Three Months Ended

(Amounts in millions)

Estimated future amortization expense:

Released investment in films and television programs:

Individual monetization $ 135.2 $ 64.3 $ 48.0

Film group monetization $ 102.0 $ 60.7 $ 27.4

Licensed program rights $ 217.0 $ 87.3 $ 47.8

Completed and not released investment in films and television programs:

Individual monetization $ 99.4 n/a n/a

Film group monetization $ — n/a n/a

Impairments by segment:

Motion Picture $ — $ 0.6

Television Production 25.0 —

The Company's investments consisted of the following:

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$ 32.8 $ 31.9

________________

(1) Includes investments in equity securities without readily determinable fair values of nil and $ 5.4 million at December 31, 2020 and March 31, 2020, respectively.

Equity Method Investments:

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Roadside Attractions is an independent theatrical distribution company.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pantelion Films.

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Great Point Opportunity Fund is a partnership to make investments in an operating company that will operate a studio facility in Yonkers, New York.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition to the equity method investments discussed above, the Company holds ownership interests in other immaterial equity method investees.

Summarized Financial Information.

STARZPLAY Arabia.

Summarized financial information for the Company's equity method investee, STARZPLAY Arabia, is set forth below:

2020 March 31,

(Amounts in millions)

Current assets $ 30.3 $ 37.0

Non-current assets $ 49.1 $ 26.0

Current liabilities $ 131.3 $ 98.8

Non-current liabilities $ 1.0 $ 0.9

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

(Amounts in millions)

Revenues $ 10.2 $ 9.1 $ 36.6 $ 26.0

Gross profit $ 0.8 $ 0.9 $ 0.6 $ ( 0.1 )

Net loss $ ( 8.1 ) $ ( 15.1 ) $ ( 24.6 ) $ ( 36.5 )

Other Equity Method Investees.

Summarized financial information for all other of the Company's equity method investees on an aggregate basis (excluding STARZPLAY Arabia, which is separately presented above) is set forth below:

Summarized financial information for the Company's equity method investees on an aggregate basis is set forth below:

2021 March 31,

4 unchanged sentences

Non-current liabilities $ 59.6 $ 91.7

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

2 unchanged sentences

Net loss $ ( 11.3 ) $ ( 17.6 )

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Gain (Loss) on Investments:

The following table summarizes the components of the gain (loss) on investments:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

Unrealized gains (losses) on equity securities held as of December 31, 2020 and 2019, respectively $ 0.7 $ — $ 1.4 $ ( 0.3 )

Impairments of equity method investments and other investments (1)

( 0.7 ) — ( 5.7 ) —

Gain on sale of other investments — — 4.6 —

$ — $ — $ 0.3 $ ( 0.3 )

Unrealized gains (losses) on equity securities $ ( 0.6 ) $ 0.5

Gain on sale of other investments and other investment gains 0.5 4.6

$ ( 0.1 ) $ 5.1

(1) In the nine months ended December 31, 2020, amounts include impairments of $ 5.0 million on equity securities without readily determinable fair values that were written down to their estimated fair value.

Total debt of the Company, excluding film obligations and production loans, was as follows as of December 31, 2020 and March 31, 2020:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Total debt of the Company, excluding film obligations, was as follows as of June 30, 2021 and March 31, 2021:

2021 March 31,

3 unchanged sentences

2023 Term Loan A 209.7 660.0

2026 Term Loan A 444.9 —

Term Loan B 898.0 952.6

1 unchanged sentence

5.875 % Senior Notes

6.375 % Senior Notes

Total corporate debt 2,552.6 2,676.9

Finance lease obligations (1)

Total debt 2,693.6 2,784.3

Unamortized debt issuance costs, net of fair value adjustment on finance lease obligations ( 48.8 ) ( 51.3 )

Unamortized debt issuance costs ( 68.2 ) ( 46.0 )

Total debt, net 2,484.4 2,630.9

1 unchanged sentence

Non-current portion of debt $ 2,444.4 $ 2,542.9

________________________

(1) During the nine months ended December 31, 2020, the Company reassessed the lease term of the Starz commercial building, which resulted in a change in classification of this lease from a finance lease to an operating lease (see Note 5 for further information).

Fiscal 2022 Debt Transactions:

Senior Notes Redemption and Issuance.

On April 1, 2021, the Company redeemed in full all $ 518.7 million outstanding principal amount of its 5.875 % Senior Notes due November 2024 (" 5.875 % Senior Notes") and all $ 545.6 million outstanding principal amount of its 6.375 % Senior Notes due February 2024 (" 6.375 % Senior Notes").

In connection with the early redemption of the 5.875 % Senior Notes and the 6.375 % Senior Notes, the Company paid a prepayment premium of $ 15.2 million and $ 17.4 million, respectively, plus accrued and unpaid interest to the date of redemption, pursuant to the terms of the indentures governing the 5.875 % Senior Notes and the 6.375 % Senior Notes, respectively.

In connection with the redemption of the 5.875 % Senior Notes and the 6.375 % Senior Notes, on April 1, 2021, the Company issued $ 1.0 billion aggregate principal amount of 5.500 % Senior Notes due April 15, 2029 (" 5.500 % Senior Notes").

Credit Agreement Amendment.

On April 6, 2021, the Company amended its credit and guarantee agreement dated December 8, 2016, as amended (the "Credit Agreement") to, among other things, extend the maturity (the "Extension") of a portion of its revolving credit commitments, amounting to $ 1.25 billion (the "2026 Revolving Credit Facility"), and a portion of its outstanding term A loans, amounting to $ 444.9 million (the "2026 Term Loan A"), to April 6, 2026, and make certain other changes to the covenants and other provisions therein.

After giving effect to the Extension, $ 250.0 million of revolving credit commitments (the "2023 Revolving Credit Facility) and $ 215.1 million of term A loans (the "2023 Term Loan A", and together with the 2026 Term Loan A, the "Term Loan A") remained outstanding with a maturity of March 22, 2023.

Term Loan B Repurchases.

In April and May 2021, the Company completed a series of repurchases of the Term Loan B and, in aggregate, paid $ 51.1 million to repurchase $ 51.5 million principal amount of the Term Loan B.

See the Loss on Extinguishment of Debt section further below for a description of the accounting for these transactions.

Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B)

Revolving Credit Facility Availability of Funds & Commitment Fee.

The revolving credit facility provides for borrowings and letters of credit up to an aggregate of $ 1.5 billion, and at December 31, 2020 there was $ 1.5 billion available.

The Revolving Credit Facility provides for borrowings and letters of credit up to an aggregate of $ 1.5 billion, and at June 30, 2021 there was $ 1.5 billion available.

However, borrowing levels are subject to certain financial covenants as discussed below.

There were no letters of credit outstanding at December 31, 2020.

The Company is required to pay a quarterly commitment fee on the revolving credit facility of 0.250 % to 0.375 % per annum, depending on the achievement of certain leverage ratios, as defined in the credit and guarantee agreement dated December 8, 2016, as amended (the "Credit Agreement"), on the total revolving credit facility of $ 1.5 billion less the amount drawn.

There were no letters of credit outstanding at June 30, 2021.

The Company is required to pay a quarterly commitment fee on the Revolving Credit Facility of 0.250 % to

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

0.375 % per annum, depending on the achievement of certain leverage ratios, as defined in Credit Agreement, on the total Revolving Credit Facility of $ 1.5 billion less the amount drawn.

Maturity Date:

• Revolving Credit Facility & Term Loan A:

• Revolving Credit Facility:

A portion of the revolving credit commitments, amounting to $ 1.25 billion, matures April 6, 2026, and a portion of the revolving credit commitments, amounting to $ 250.0 million, matures March 22, 2023.

• Term Loan A:

◦ 2023 Term Loan A:

March 22, 2023.

◦ 2026 Term Loan A:

April 6, 2026.

• Term Loan B:

2 unchanged sentences

The Revolving Credit Facility and Term Loan A bear interest at a rate per annum equal to LIBOR plus 1.75 % (or an alternative base rate plus 0.75 %) margin, with a LIBOR floor of zero .

The margin is subject to potential increases of up to 50 basis points ( two ( 2 ) increases of 25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the Credit Agreement (effective interest rate of 1.89 % as of December 31, 2020, before the impact of interest rate swaps).

The margin is subject to potential increases of up to 50 basis points ( two ( 2 ) increases of 25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the Credit Agreement (effective interest rate of 1.85 % as of June 30, 2021, before the impact of interest rate swaps).

• Term Loan B:

The Term Loan B bears interest at a rate per annum equal to LIBOR plus 2.25 % margin, with a LIBOR floor of zero (or an alternative base rate plus 1.25 % margin) (effective interest rate of 2.39 % as of December 31, 2020, before the impact of interest rate swaps).

The Term Loan B bears interest at a rate per annum equal to LIBOR plus 2.25 % margin, with a LIBOR floor of zero (or an alternative base rate plus 1.25 % margin) (effective interest rate of 2.35 % as of June 30, 2021, before the impact of interest rate swaps).

Required Principal Payments:

• Term Loan A:

◦ 2023 Term Loan A:

Quarterly principal payments, at quarterly rates of 1.25 % beginning June 30, 2019, 1.75 % beginning June 30, 2020, and 2.50 % beginning June 30, 2021 through December 31, 2022, with the balance payable at maturity.

◦ 2026 Term Loan A:

Quarterly principal payments beginning September 30, 2022 at a quarterly rate of 1.25 %, then at quarterly rates of 1.75 % beginning September 30, 2023, and 2.50 % beginning September 30, 2024 through March 31, 2026, with the balance payable at maturity.

• Term Loan B:

9 unchanged sentences

In addition, a net first lien leverage maintenance covenant and an interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested quarterly.

As of December 31, 2020, the Company was in compliance with all applicable covenants.

As of June 30, 2021, the Company was in compliance with all applicable covenants.

Change in Control.

The Company may also be subject to an event of default upon a change in control (as defined in the Credit Agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50 % of the Company’s common shares.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Potential Impact of LIBOR Transition.

1 unchanged sentence

Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after the end of 2021.

However, for U.S dollar LIBOR, it now appears that the relevant date may be deferred to June 30, 2023 for certain tenors (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S.

dollar LIBOR.

Despite this potential deferral, the LIBOR administrator has advised that no new contracts using U.S.

For U.S dollar LIBOR, publication of the one-week and two-month LIBOR settings will cease after December 31, 2021, and publication of the overnight and 12-month LIBOR settings will cease after June 30, 2023.

Immediately after June 30, 2023, the one-month, three-month and six-month U.S.

dollar LIBOR settings will no longer be representative.

Given these changes, the LIBOR administrator has advised that no new contracts using U.S.

dollar LIBOR should be entered into after December 31, 2021.

These actions indicate that the continuation of U.S.

LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023.

Moreover, it is possible that U.S.

It is also possible that U.S.

LIBOR will be discontinued or modified prior to June 30, 2023.

Under the terms of the Company's Credit Agreement, in the event of the discontinuance of the LIBOR Rate, a mutually agreed-upon alternate benchmark rate will be established to replace the LIBOR Rate.

The Company and Lenders (as defined in the Credit Agreement) shall, in good faith, endeavor to establish an alternate benchmark rate that gives due consideration to prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and which places the Lenders and the Company in the same economic position that existed immediately prior to

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the discontinuation of the LIBOR Rate.

The Company does not anticipate that the discontinuance or modification of the LIBOR Rate will materially impact its liquidity or financial position.

5.875 % Senior Notes and 6.375 % Senior Notes

• 5.875 % Senior Notes:

Bears interest at 5.875 % annually (payable semi-annually on May and November 1 of each year).

Under the terms of the Company's Credit Agreement, in the event of the discontinuance of LIBOR, a mutually agreed-upon alternate benchmark rate will be established to replace LIBOR.

The Company does not anticipate that the discontinuance or modification of LIBOR will materially impact its liquidity or financial position.

5.500 % Senior Notes

Bears interest at 6.375 % annually (payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2019).

Bears interest at 5.500 % annually (payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2021).

Maturity Date:

• 5.875 % Senior Notes:

November 1, 2024.

• 6.375 % Senior Notes:

February 1, 2024.

April 15, 2029.

Optional Redemption:

• 5.875 % Senior Notes:

(i) Redeemable by the Company, in whole or in part, at the redemption prices set forth as follows (as a percentage of the principal amount redeemed), plus accrued and unpaid interest to the redemption date:

(i) on or after November 1, 2019 - 104.406 %;

(ii) on or after November 1, 2020 - 102.938 %;

(iii) on or after November 1, 2021 - 101.439 %;

and (iv) on or after November 1, 2022 - 100 %.

• 6.375 % Senior Notes:

(i) Prior to February 1, 2021, the 6.375 % Senior Notes are redeemable by the Company under certain circumstances (as defined in the indenture governing the 6.375 % Senior Notes), in whole at any time, or in part from time to time, at a price equal to 100 % of the principal amount of the notes to be redeemed plus the Applicable Premium.

The Applicable Premium is the greater of (i) 1.0 % of the principal amount redeemed and (ii) the excess of the present value of the redemption amount at February 1, 2021 (see redemption prices below) of the notes redeemed plus interest through February 1, 2021 (discounted at the treasury rate on the redemption date plus 50 basis points) over the principal amount of the notes redeemed on the redemption date.

(ii) On and after February 1, 2021, redeemable by the Company, in whole or in part, at the redemption prices set forth as follows (as a percentage of the principal amount redeemed), plus accrued and unpaid interest to the redemption date:

(i) on or after February 1, 2021 - 103.188 %;

(ii) on or after February 1, 2022 - 101.594 %;

(iii) on or after February 1, 2023 - 100 %.

The 5.875 % Senior Notes and 6.375 % Senior Notes are unsubordinated, unsecured obligations of the Company.

The 5.875 % Senior Notes and 6.375 % Senior Notes contain certain restrictions and covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations.

As of December 31, 2020, the Company was in compliance with all applicable covenants.

(i) Prior to April 15, 2024, the Company may redeem the 5.500 % Senior Notes in whole at any time, or in part from time to time, at a price equal to 100 % of the principal amount of the notes to be redeemed plus a "make-whole" premium, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

The make-whole premium is the greater of (i) 1.0 % of the principal amount redeemed and (ii) the excess, if any, of the present value at such redemption date of the redemption price at April 15, 2024 (see redemption prices below) plus interest through April 15, 2024 (discounted to the redemption date at the treasury rate plus 50 basis points) over the principal amount of the notes redeemed on the redemption date.

(ii) On or after April 15, 2024, the Company may redeem the 5.500 % Senior Notes in whole at any time, or in part from time to time, at certain specified redemption prices, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

Such redemption prices are as follows (as a percentage of the principal amount redeemed):

(i) on or after April 15, 2024 - 102.750 %;

(ii) on or after April 15, 2025 - 101.375 %;

and (iii) on or after April 15, 2026 - 100 %.

In addition, the Company may redeem up to 40 % of the aggregate principal amount of the notes at any time and from time to time prior to April 15, 2024 with the net proceeds of certain equity offerings at a price of 105.500 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

The 5.500 % Senior Notes are unsubordinated, unsecured obligations of the Company.

The 5.500 % Senior Notes contain certain restrictions and covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations.

As of June 30, 2021, the Company was in compliance with all applicable covenants.

Change in Control.

The occurrence of a change of control will be a triggering event requiring the Company to offer to purchase from holders all of the 5.875 % Senior Notes and 6.375 % Senior Notes, at a price equal to 101 % of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the 5.875 % Senior Notes and 6.375 % Senior Notes at 100 % of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

The occurrence of a change of control will be a triggering event requiring the Company to offer to purchase from holders all of the 5.500 % Senior Notes, at a price equal to 101 % of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the 5.500 % Senior Notes at 100 % of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

Capacity to Pay Dividends

At December 31, 2020, the capacity to pay dividends under the Senior Credit Facilities and the 5.875 % Senior Notes and the 6.375 % Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net income, and therefore the Company's net income of $ 7.3 million and accumulated deficit of $ 18.8 million were deemed free of restrictions from paying dividends at December 31, 2020.

Loss on Extinguishment of Debt

At June 30, 2021, the capacity to pay dividends under the Senior Credit Facilities and the 5.500 % Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $ 51.7 million and accumulated deficit of $ 139.1 million were deemed free of restrictions from paying dividends at June 30, 2021.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the three and nine months ended December 31, 2019, the Company recorded a loss on extinguishment of debt of $ 1.4 million related to early repayments of $ 101.9 million in principal outstanding on the Term Loan B.

There was no loss on extinguishment of debt in the three and nine months ended December 31, 2020.

The Company has operating leases primarily for office space, studio facilities, and other equipment.

The Company also has a finance lease for a satellite transponder, and through the first quarter ended June 30, 2020 the Company had classified its lease for the Starz commercial building as a finance lease.

During the second quarter ended September 30, 2020, due to a change in the expected lease term of the Starz commercial building, the Company reassessed the lease classification of the Starz commercial building, which resulted in a change in classification of this lease from a finance lease to an operating lease.

As a result, the right-of-use assets and lease liabilities (including the fair value adjustment) under finance leases decreased by $ 42.0 million and $ 48.6 million, respectively, and the right-of-use assets and lease liabilities under operating leases increased by $ 6.0 million and $ 12.6 million, respectively in the nine months ended December 31, 2020.

The Company's leases have remaining lease terms of up to approximately 10 years.

Supplemental balance sheet information related to leases was as follows:

Category Balance Sheet Location December 31,

2020 March 31,

Operating Leases (Amounts in millions)

Right-of-use assets Other assets - non-current $ 128.7 136.9

Lease liabilities (current) Accounts payable and accrued liabilities $ 39.9 35.3

Lease liabilities (non-current) Other liabilities - non-current 122.8 129.6

$ 162.7 164.9

Finance Leases

Right-of-use assets Property and equipment, net $ 0.8 46.4

Lease liabilities (current) Debt - short-term portion $ 0.4 3.0

Lease liabilities (non-current) Debt - non-current — 39.4

2020 March 31,

Weighted average remaining lease term (in years):

Operating leases 5.4 6.1

Finance leases 0.2 21.6

Weighted average discount rate:

Operating leases 3.90 % 4.10 %

Finance leases 7.00 % 6.40 %

Loss on Extinguishment of Debt

Accounting for the Fiscal 2022 Debt Transactions Discussed Above:

Revolving Credit Facility.

• Unamortized debt issuance costs:

Where the borrowing capacity (measured as the amount available under the revolving credit facility multiplied by the remaining term) was less than it was prior to the amendment to the Revolving Credit Facility on a creditor-by-creditor basis, the unamortized debt issuance costs were written off as a loss on extinguishment of debt in proportion to the decrease in borrowing capacity.

The remaining unamortized debt issuance costs were allocated between the 2023 and 2026 Revolving Credit Facility in proportion to the borrowing capacity of each facility and are being amortized over the respective terms of the 2023 and 2026 Revolving Credit Facility, as applicable.

• Fees paid to creditors and third-party costs:

All fees paid to creditors or third parties (i.e., new debt issuance costs) were recorded as a reduction of amounts outstanding under the 2026 Revolving Credit Facility and are being amortized over the term of the 2026 Revolving Credit Facility.

With respect to substantially all creditors participating in the Term Loan A, the amendment was considered a modification of terms since the present value of the cash flows after the amendment differed by less than a 10% change from the present value of the cash flows on a creditor-by-creditor basis prior to the amendment.

Accordingly, the associated costs were accounted for as follows:

• Unamortized debt issuance costs:

Previously incurred unamortized debt issuance costs and fees were allocated between the 2023 Term Loan A and the 2026 Term Loan A based on the relative balances outstanding after the amendment and are being amortized over the respective terms of the 2023 Term Loan A and 2026 Term Loan A.

To the extent there was a reduction of the outstanding balance on a creditor-by-creditor basis (i.e., a partial prepayment of debt), previously incurred unamortized debt issuance costs and fees were expensed as a loss on extinguishment of debt on the unaudited condensed consolidated statement of operations.

• Fees paid to creditors:

Certain fees were paid to creditors based on their 2026 Term Loan A participation.

These fees paid to creditors were recorded as a reduction of amounts outstanding under the 2026 Term Loan A and are being amortized over the term of the 2026 Term Loan A.

• Third-party costs:

Substantially all third-party costs were expensed as a result of the modification and included in loss on extinguishment of debt in the unaudited condensed consolidated statement of operations.

Senior Notes.

In accounting for the issuance and redemption of the 5.875 % and 6.375 % Senior Notes as discussed above, a portion of the Senior Notes redemption and issuance was considered a modification of terms with creditors who participated in both the redeemed Senior Notes and new 5.500 % Senior Notes, a portion was considered a debt extinguishment, and a portion represented new issuances to new creditors, and the debt issuance costs were accounted for as follows:

• Unamortized debt issuance costs:

Previously incurred unamortized debt issuance costs and fees on the redeemed Senior Notes are being amortized over the term of the new Senior Notes, to the extent considered a modification of terms, and expensed as a loss on extinguishment of debt to the extent considered an extinguishment.

• Fees paid to creditors:

Fees paid to creditors or call premiums were recorded as a reduction of amounts outstanding under the new Senior Notes and are being amortized over the term of the new Senior Notes, to the extent considered a modification of terms or associated with new issuances to new creditors, and expensed as a loss on extinguishment of debt to the extent considered an extinguishment or a partial prepayment of debt.

• Third-party costs:

Costs incurred with third parties were recorded as a reduction of amounts outstanding under the new Senior Notes and will be amortized over the term of the new Senior Notes, to the extent considered an extinguishment or associated with new issuances to new creditors, and expensed as a loss on extinguishment of debt to the extent considered a modification of terms.

For all of the above transactions, debt issuance costs recorded as a reduction of outstanding debt are amortized using the effective interest method.

In connection with the repurchases of the Term Loan B discussed above, the Company recorded a loss on extinguishment of debt of $ 0.2 million related to the write-off of debt issuance costs.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The expected future payments relating to the Company's operating and finance lease liabilities at December 31, 2020 are as follows:

Operating Leases Finance Leases

Loss on Extinguishment of Debt.

The following table summarizes the loss on extinguishment of debt recorded related to the transactions described above in the three months ended June 30, 2021.

There was no loss on extinguishment of debt in the three months ended June 30, 2020.

Three Months Ended June 30, 2021

Loss on Extinguishment of Debt Recorded as a Reduction of Outstanding Debt Balances & Amortized Over Life of New Issuances Total

(Amounts in millions)

Three months ending March 31, 2021 $ 13.5 $ 0.4

Year ending March 31,

Thereafter 49.4 —

Total lease payments 181.6 0.4

Less imputed interest ( 18.9 ) —

Total $ 162.7 $ 0.4

Film Obligations and Production Loans

Revolving Credit Facility, Term Loan A and Senior Notes:

New debt issuance costs and call premiums $ 21.2 $ 31.0 $ 52.2

Previously incurred debt issuance costs 5.2 31.1 36.3

$ 26.4 $ 62.1 $ 88.5

Loss on Term Loan B repurchases 0.2

Total loss on extinguishment of debt $ 26.6

Film Obligations

2021 March 31,

(Amounts in millions)

Film obligations $ 205.1 $ 299.3

Program rights and other film obligations $ 203.5 $ 214.6

Production loans 474.6 373.5

Total film obligations and production loans 525.2 450.7

Production tax credit facility 184.5 120.0

Total film obligations 862.6 708.1

Unamortized debt issuance costs ( 4.2 ) ( 4.6 )

Total film obligations and production loans, net 524.0 450.6

Total film obligations, net 858.4 703.5

Less current portion ( 349.1 ) ( 385.0 )

Total non-current film obligations and production loans $ 213.9 $ 96.9

Film Obligations

Film obligations include minimum guarantees and accrued licensed program rights obligations, which represent amounts payable for film rights that the Company has acquired and certain theatrical marketing obligations for amounts received from third parties that are contractually committed for theatrical marketing expenditures associated with specific titles.

Total non-current film obligations $ 509.3 $ 318.5

Program Rights and Other Film Obligations

Program rights and other film obligations include minimum guarantees and accrued licensed program rights obligations, which represent amounts payable for film or television rights that the Company has acquired or licensed and certain theatrical marketing obligations for amounts received from third parties that are contractually committed for theatrical marketing expenditures associated with specific titles.

Production Loans

1 unchanged sentence

The majority of production loans have contractual repayment dates either at or near the expected completion date, with the exception of certain loans containing repayment dates on a longer term basis, and incur LIBOR-based interest at rates ranging from 2.22 % to 2.66 % (before the impact of interest rate swaps, see Note 16 for interest rate swaps).

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Production Tax Credit Facility

In January 2021, as amended on March 31, 2021, the Company entered into a non-recourse senior secured revolving credit facility (the "Production Tax Credit Facility") based on collateral consisting of certain of the Company’s tax credit receivables.

The maximum principal amount of the Production Tax Credit Facility is $ 220.0 million, subject to the amount of collateral available, which is based on specified percentages of amounts payable to the Company by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction.

Advances under the Production Tax Credit Facility bear interest at a rate equal to, at the Company’s option, LIBOR plus 1.50 % per annum or the base rate plus 0.50 % per annum (effective interest rate of 1.60 % at June 30, 2021).

The Production Tax Credit Facility matures on January 27, 2025.

As of June 30, 2021, there were no additional amounts available under the Production Tax Credit Facility.

Fair Value Measurements

2 unchanged sentences

Fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

A financial instrument’s categorization within the fair value hierarchy is based upon the

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

lowest level of input that is significant to the fair value measurement.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The accounting guidance and standards establish three levels of inputs that may be used to measure fair value:

4 unchanged sentences

• Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

The following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of December 31, 2020 and March 31, 2020:

December 31, 2020 March 31, 2020

The following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of June 30, 2021 and March 31, 2021:

June 30, 2021 March 31, 2021

Level 1 Level 2 Total Level 1 Level 2 Total

7 unchanged sentences

________________

(1) Amounts exclude $ 100.7 million of financing component of interest rate swaps presented in the table below.

The following table sets forth the carrying values and fair values of the Company’s outstanding debt and interest rate swaps at December 31, 2020 and March 31, 2020:

December 31, 2020 March 31, 2020

(1) Amounts at June 30, 2021 and March 31, 2021 exclude $ 95.7 million and $ 98.2 million, respectively, of financing component of interest rate swaps presented in the table below.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the carrying values and fair values of the Company’s outstanding debt, production loans, Production Tax Credit Facility and interest rate swaps at June 30, 2021 and March 31, 2021:

June 30, 2021 March 31, 2021

(Amounts in millions)

5 unchanged sentences

5.500 % Senior Notes

963.1 1,052.5 — —

5.875 % Senior Notes

— — 506.7 533.9

6.375 % Senior Notes

— — 540.8 563.0

Production loans 473.7 474.6 372.5 373.5

Production Tax Credit Facility 181.3 184.5 116.5 120.0

Financing component of interest rate swaps (2)

2 unchanged sentences

(1) The Company measures the fair value of its outstanding debt and interest rate swaps using discounted cash flow techniques that use observable market inputs, such as LIBOR-based yield curves, swap rates, and credit ratings (Level 2 measurements).

(2) Amounts include $ 100.7 million recorded as a reduction of assets under master netting arrangements.

The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, other liabilities, borrowings under the Revolving Credit Facility, if any, and finance lease obligations.

The carrying values of these financial instruments approximated the fair values at December 31, 2020 and March 31, 2020.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2) Amounts at June 30, 2021 and March 31, 2021 include $ 95.7 million and $ 98.2 million, respectively, recorded as a reduction of assets under master netting arrangements.

The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, other liabilities, and borrowings under the Revolving Credit Facility, if any.

The carrying values of these financial instruments approximated the fair values at June 30, 2021 and March 31, 2021.

Noncontrolling Interests

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The table below presents the reconciliation of changes in redeemable noncontrolling interests:

Nine Months Ended

Three Months Ended

(Amounts in millions)

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Beginning 30 days after the expiration of the exercise period for the put rights held by the noncontrolling interest holders, the Company has a right to call the noncontrolling interest of 3 Arts Entertainment, at fair value, for a 60 day period.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pilgrim Media Group.

The noncontrolling interest holder has a right to put and the Company has a right to call a portion of the noncontrolling interest, equal to 17.5 % of Pilgrim Media Group, at fair value, until February 19, 2021, as amended.

In addition, the noncontrolling interest holder has a right to put and the Company has a right to call the remaining amount of noncontrolling interest at fair value, subject to a cap, exercisable at seven years after the acquisition date of November 12, 2015.

Pursuant to an amendment dated April 2, 2021, the put and call rights associated with the Pilgrim Media Group noncontrolling interest were extended and modified, such that the noncontrolling interest holder has a right to put and the Company has a right to call a portion of the noncontrolling interest, equal to 25 % of Pilgrim Media Group, at fair value, exercisable for thirty ( 30 ) days beginning November 12, 2022.

In addition, the noncontrolling interest holder has a right to put and the Company has a right to call the remaining amount of noncontrolling interest at fair value, subject to a cap, exercisable for thirty ( 30 ) days beginning November 12, 2024, as amended.

In addition, the noncontrolling interest holder is the President and CEO of Pilgrim Media Group.

Pursuant to the original operating agreement of Pilgrim Media Group, if the employment of the noncontrolling interest holder was terminated, under certain circumstances as defined in the operating agreement, the Company could call and the noncontrolling interest holder could put the noncontrolling interest at a discount to fair value, which was being expensed over the call periods in the original operating agreement.

Pursuant to the amendment to the operating agreement on April 2, 2021, this discount was eliminated and therefore the remaining unamortized discount of $ 2.7 million has been expensed in the three months ended June 30, 2021.

The amortization of the discount through June 30, 2021 was included in general and administrative expense of Pilgrim Media Group and reflected as an addition to redeemable noncontrolling interest.

Redeemable noncontrolling interests are measured at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date less the amount attributed to unamortized noncontrolling interest discount if applicable, or (ii) the historical value resulting from the original acquisition date value plus or minus any earnings or loss attribution, plus the amount of amortized noncontrolling interest discount, less the amount of cash distributions that are not accounted for as compensation, if any.

1 unchanged sentence

Other Noncontrolling Interests

The Company has other noncontrolling interests that are not redeemable.

The Company has other immaterial noncontrolling interests that are not redeemable.

The Company's Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places.

The Company's Media Networks segment generates revenue primarily from the distribution of the Company's STARZ branded premium subscription video services and, to a lesser extent, other direct-to-consumer content streaming services and other distribution revenue.

The Company's Media Networks segment generates revenue primarily from the distribution of the Company's STARZ branded premium subscription video services.

LIONS GATE ENTERTAINMENT CORP.

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Revenue by Segment, Market or Product Line

The table below presents revenues by segment, market or product line for the three and nine months ended December 31, 2020 and 2019:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

The table below presents revenues by segment, market or product line for the three months ended June 30, 2021 and 2020:

Three Months Ended

(Amounts in millions)

20 unchanged sentences

Media Networks - Programming Revenues

388.5 376.3 1,119.8 1,115.2

International 24.1 10.0

406.2 382.4 1,161.7 1,128.8

Intersegment eliminations ( 158.4 ) ( 30.0 )

1 unchanged sentence

___________________

(1) Media Networks domestic revenues include revenue from the Company's Other Streaming Services product line of $ 13.2 million and $ 38.0 million, respectively, in the three and nine months ended December 31, 2020 (2019 - $ 8.7 million and $ 22.8 million, respectively).

(1) Media Networks domestic revenues for the three months ended June 30, 2020 included revenue from the Company's former Other Streaming Services product line of $ 11.5 million, substantially all of which related to the Company's former interest in Pantaya, which was sold on March 31, 2021 (see Note 2).

Remaining Performance Obligations

Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog).

Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2020 are as follows:

Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at June 30, 2021 are as follows:

LIONS GATE ENTERTAINMENT CORP.

6 unchanged sentences

The revenues included in the above table include all fixed fee contracts regardless of duration.

Revenues of $ 57.7 million and $ 217.0 million, respectively, including variable and fixed fee arrangements, were recognized during the three and nine months ended December 31, 2020, respectively, from performance obligations satisfied prior to March 31, 2020.

Revenues of $ 72.8 million, including variable and fixed fee arrangements, were recognized during the three months ended June 30, 2021, from performance obligations satisfied prior to March 31, 2021.

These revenues were primarily associated with the distribution of television and theatrical product in electronic sell-through and video-on-demand formats, and to a lesser extent, the distribution of theatrical product in the domestic and international markets related to films initially released in prior periods.

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The timing of revenue recognition, billings and cash collections affects the recognition of accounts receivable, contract assets and deferred revenue.

At December 31, 2020 and March 31, 2020, accounts receivable, contract assets and deferred revenue are as follows.

Item Balance Sheet Location December 31,

At June 30, 2021 and March 31, 2021, accounts receivable, contract assets and deferred revenue are as follows.

Item Balance Sheet Location June 30,

2021 March 31,

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March 31, 2021 (Benefit) provision for doubtful accounts (1)

Uncollectible accounts written-off December 31,

Uncollectible accounts written-off June 30,

(Amounts in millions)

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(1) Represents collections on accounts receivable previously reserved.

Contract Assets.

Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables).

Amounts relate primarily to contractual payment holdbacks in cases in which the

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company is required to deliver additional episodes or seasons of television content in order to receive payment, complete certain administrative activities, such as guild filings, or allow the Company's customers' audit rights to expire.

The change in the balance of contract assets is primarily due to the satisfaction of the condition related to payment holdbacks.

Contract Assets.

Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables).

Amounts relate primarily to contractual payment holdbacks in cases in which the Company is required to deliver additional episodes or seasons of television content in order to receive payment, complete certain administrative activities, such as guild filings, or allow the Company's customers' audit rights to expire.

Deferred Revenue.

Deferred revenue relates primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation.

Revenues of $ 18.0 million and $ 76.2 million were recognized during the three and nine months ended December 31, 2020, respectively, related to the balance of deferred revenue at March 31, 2020.

Revenues of $ 64.1 million were recognized during the three months ended June 30, 2021 related to the balance of deferred revenue at March 31, 2021.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated based on the weighted average common shares outstanding for the period.

Basic net income (loss) per share for the three and nine months ended December 31, 2020 and 2019 is presented below:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Basic net income (loss) per share for the three months ended June 30, 2021 and 2020 is presented below:

Three Months Ended

(Amounts in millions, except per share amounts)

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Diluted net income (loss) per common share reflects share purchase options, including share appreciation rights ("SARs"), restricted share units ("RSUs") and restricted stock using the treasury stock method when dilutive, and any contingently issuable shares when dilutive.

Diluted net income (loss) per common share for the three and nine months ended December 31, 2020 and 2019 is presented below:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Diluted net income (loss) per common share for the three months ended June 30, 2021 and 2020 is presented below:

Three Months Ended

(Amounts in millions, except per share amounts)

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Effect of dilutive securities:

Share purchase options — — 0.1 —

Restricted share units and restricted stock — 0.4

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Diluted net income (loss) per common share $ ( 0.20 ) $ 0.23

As a result of the net loss in the three months ended December 31, 2020 and the three and nine months ended December 31, 2019, the dilutive effect of the share purchase options, restricted share units and restricted stock, and contingently issuable shares were considered anti-dilutive and, therefore, excluded from diluted net loss per share.

The weighted average anti-dilutive shares excluded from the calculation due to the net loss for the three months ended December 31, 2020 totaled 1.9 million (three and nine months ended December 31, 2019 - 1.9 million and 2.8 million, respectively).

As a result of the net loss in the three months ended June 30, 2021, the dilutive effect of the share purchase options, restricted share units and restricted stock, and contingently issuable shares were considered anti-dilutive and, therefore, excluded from diluted net loss per share.

The weighted average anti-dilutive shares excluded from the calculation due to the net loss for the three months ended June 30, 2021 totaled 7.4 million.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Additionally, for the three and nine months ended December 31, 2020 and 2019, the outstanding common shares issuable presented below were excluded from diluted net income (loss) per common share because their inclusion would have had an anti-dilutive effect regardless of net income or loss in the period.

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Additionally, for the three months ended June 30, 2021 and 2020, the outstanding common shares issuable presented below were excluded from diluted net income (loss) per common share because their inclusion would have had an anti-dilutive effect regardless of net income or loss in the period.

Three Months Ended

(Amounts in millions)

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(a) Common Shares

The Company had 500 million authorized Class A voting shares and 500 million authorized Class B non-voting shares at December 31, 2020 and March 31, 2020.

The Company had 500 million authorized Class A voting shares and 500 million authorized Class B non-voting shares at June 30, 2021 and March 31, 2021.

The table below outlines common shares reserved for future issuance:

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(b) Share-based Compensation

On September 15, 2020, the Company’s shareholders approved an amendment to the Lions Gate Entertainment Corp.

2019 Performance Incentive Plan (the “2019 Plan”) previously adopted by the Board of Directors of the Company to increase the maximum number of the Company’s common shares that may be issued or transferred pursuant to awards under the 2019 Plan by an additional 10.0 million shares so that the new aggregate share limit under the 2019 Plan is 16.1 million common shares (not including shares that were originally approved for issuance under the Company’s prior stock incentive plans that have become available for issuance under the 2019 Plan pursuant to the terms of the 2019 Plan).

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognized the following share-based compensation expense during the three and nine months ended December 31, 2020 and 2019:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

The Company recognized the following share-based compensation expense during the three months ended June 30, 2021 and 2020:

Three Months Ended

(Amounts in millions)

3 unchanged sentences

Share appreciation rights 2.3 1.2

20.0 17.2 57.2 41.0

Impact of accelerated vesting on equity awards (1)

Total share-based compensation expense 34.6 14.4

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___________________

(1) Represents the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.

(1) Represents the income tax benefit recognized in the unaudited condensed consolidated statements of operations for share-based compensation arrangements prior to the effects of changes in the valuation allowance.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Share-based compensation expense, by expense category, consisted of the following:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

3 unchanged sentences

General and administration 34.4 13.9

Restructuring and other — — 2.8 0.3

$ 34.6 $ 14.4

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the stock option, SARs, restricted stock and restricted share unit activity during the nine months ended December 31, 2020:

The following table sets forth the stock option, SARs, restricted stock and restricted share unit activity during the three months ended June 30, 2021:

Stock Options and SARs Restricted Stock and Restricted Share Units

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$ 11.05 ( 0.2 ) $ 11.82 — (1)

Awards canceled in exchange program ( 1.1 ) $ 31.56 ( 4.1 ) $ 26.49 — — — —

Awards issued in exchange program 0.1 $ 7.70 0.8 $ 7.13 — — — —

$ 11.30 ( 2.0 ) $ 9.33

Forfeited or expired — (1)

Outstanding at December 31, 2020 5.5 $ 24.20 21.3 $ 15.82 — (1)

$ 23.08 ( 0.2 ) $ 25.19 — — ( 0.3 ) $ 8.03

Outstanding at June 30, 2021 5.5 $ 24.32 21.3 $ 15.73 — (1)

$ 11.07 7.1 $ 8.70

__________________

(1) Represents less than 0.1 million shares.

(2) During the nine months ended December 31, 2020, the Company granted 3.6 million SARs.

Exchange Program

On January 10, 2020, the Company’s Board of Directors authorized, and on April 2, 2020, the Company’s shareholders approved, a stock option and share appreciation rights exchange program (the “Exchange Program”) that permitted certain current employees to exchange certain outstanding stock options and share appreciation rights with exercise prices substantially above the current market price of the Company’s Class A voting shares and the Company’s Class B non-voting shares for a lesser number of stock options and share appreciation rights that have a fair value that is lower than the fair value of the “out of the money” stock options and share appreciation rights.

The program began on April 9, 2020 and was completed on May 7, 2020.

As a result of this program 1.1 million outstanding eligible stock options and share appreciation rights of Class A voting shares were exchanged for 0.1 million new stock options and share appreciation rights at an exercise price of $ 7.70 per share and 4.3 million outstanding eligible stock options and share appreciation rights of Class B non-voting shares were exchanged for 0.8 million new stock options and share appreciation rights at an exercise price of $ 7.13 .

During the three months ended December 31, 2020, the Company did not repurchase any common shares.

During the nine months ended December 31, 2020, the Company repurchased 0.2 million of its Class A voting shares for an aggregate cost of $ 1.0 million, with an average repurchase price per share of $ 5.75 .

During the three and nine months ended December 31, 2019 the Company did not repurchase any common shares.

During the three months ended June 30, 2021, the Company did not repurchase any common shares.

During the three months ended June 30, 2020, the Company repurchased 0.2 million of its Class A voting shares for an aggregate cost of $ 1.0 million, with an average repurchase price per share of $ 5.75 .

To date, approximately $ 288.1 million common shares have been repurchased, leaving approximately $ 179.9 million of authorized potential repurchases.

The income tax provision for the three months ended June 30, 2021 and 2020 is calculated by estimating the Company's annual effective tax rate (estimated annual tax provision divided by estimated annual income before income taxes), and then applying the effective tax rate to income (loss) before income taxes for the period, plus or minus the tax effects of items that relate discretely to the period, if any.

The Company's income tax provision differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of the Company's pre-tax income (loss) generated across the various jurisdictions in which the Company operates, changes in the valuation allowance against the Company's deferred tax assets, and certain minimum taxes and foreign withholding taxes.

The Company's income tax provision for the quarter ended June 30, 2021 was also impacted by the additional accrual of interest on uncertain tax benefits.

The Company's income tax provision for the quarter ended June 30, 2020 was also impacted by the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The income tax provision for the three and nine months ended December 31, 2020 is calculated by estimating the Company's annual effective tax rate (estimated annual tax provision divided by estimated annual income before income taxes), and then applying the effective tax rate to income before income taxes for the period, plus or minus the tax effects of items that relate discretely to the period, if any.

For the three and nine months ended December 31, 2019, the Company determined that a small change in its estimated pretax results for the year ended March 31, 2020 would create a large change in its expected annual effective rate.

Accordingly, it was determined that a reliable estimate of the expected annual effective tax rate could not be made.

As a result, for the three and nine months ended December 31, 2019, the Company computed its tax provision using the cut-off method, which reflects the actual taxes attributable to year-to-date earnings or losses.

The Company's income tax provision for the three and nine months ended December 31, 2020 was also impacted by the change in uncertain tax benefits due to the expiration of statutory limitations and additional settlements with tax authorities.

The Company's income tax provision can be affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, further interpretation and legislative guidance regarding the new Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items.

The Company's income tax provision can be affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items.

Restructuring and Other

Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.

During the three and nine months ended December 31, 2020, the Company also incurred certain other unusual charges related to the COVID-19 global pandemic, and during the three and nine months ended December 31, 2019, certain other unusual charges related to programming write-downs, which are included in direct operating and distribution and marketing expense in the unaudited condensed consolidated statement of operations.

The following table sets forth restructuring and other and these unusual programming and COVID-19 related charges and the statement of operations line items they are included in for the three and nine months ended December 31, 2020 and 2019:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

During the three months ended June 30, 2021 and 2020, the Company also incurred certain other unusual charges related to the COVID-19 global pandemic.

The following table sets forth restructuring and other and COVID-19 related charges and the statement of operations line items they are included in for the three months ended June 30, 2021 and 2020:

Three Months Ended

(Amounts in millions)

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Severance (1)

Cash $ 0.9 $ 1.8 $ 11.6 $ 7.7

Accelerated vesting on equity awards (see Note 11) — — 2.8 0.3

Total severance costs 0.9 1.8 14.4 8.0

COVID-19 related charges included in restructuring and other (2)

Transaction and related costs (3)

0.7 1.9 2.9 8.8

Total Restructuring and Other 3.2 3.0

Programming and content charges and COVID-19 related charges not included in restructuring and other:

Programming and content charges included in direct operating expense (4)

— 74.0 — 74.0

COVID-19 related charges included in:

COVID-19 related charges not included in restructuring and other, included in:

Direct operating expense (4)

Distribution and marketing expense (4)

Total restructuring and other, programming and content charges, and COVID-19 related charges $ 16.4 $ 77.7 $ 71.6 $ 90.8

Total restructuring and other and COVID-19 related charges $ 4.8 $ 13.4

_______________________

(1) Severance costs in the three and nine months ended December 31, 2020 and 2019 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.

(2) During the three and nine months ended December 31, 2020, the Company has incurred certain costs including costs primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.

(3) Transaction and related costs in the three and nine months ended December 31, 2020 and 2019 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.

(4) In the three months ended December 31, 2019, in connection with management changes, the Company implemented changes to its programming and broadcasting strategy including programming acquired or produced under prior management.

As a result, the Company recorded certain programming and content charges of $ 74.0 million in the three and nine months ended December 31, 2019, which are included in direct operating expense in the unaudited condensed consolidated statement of operations.

(5) In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of theaters, international travel restrictions and the pausing of motion picture and television productions, during the three and nine months ended December 31, 2020 the Company incurred certain incremental costs which were expensed in the period.

The costs included in direct operating expense primarily represent incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, and in the nine months ended December 31, 2020 include film impairment due to changes in performance expectations resulting from circumstances associated with the COVID-19 global pandemic.

(1) Severance costs in the three months ended June 30, 2021 and 2020 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.

(2) During the three months ended June 30, 2021, the Company has incurred certain costs primarily related to incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic.

In the three months ended June 30 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.

(3) Transaction and related costs in the three months ended June 30, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.

(4) In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of theaters, international travel restrictions and the pausing of motion picture and television productions, during the three months ended June 30, 2021 and 2020 the Company incurred certain incremental costs which were expensed in the period.

The costs included in direct operating expense primarily represent incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries.

In addition, the costs included in distribution and marketing expense primarily consist of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit.

The Company is in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore no material amounts of insurance proceeds have been recorded in the consolidated financial statements.

Changes in the restructuring and other severance liability were as follows for the nine months ended December 31, 2020 and 2019:

The Company is in the process of seeking additional insurance recovery for some of these costs.

The ultimate amount of insurance recovery cannot be estimated at this time.

Changes in the restructuring and other severance liability were as follows for the three months ended June 30, 2021 and 2020:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Nine Months Ended

Three Months Ended

(Amounts in millions)

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_______________________

(1) As of December 31, 2020, the remaining severance liability of approximately $ 7.0 million is expected to be paid in the next 12 months.

(1) As of June 30, 2021, the remaining severance liability of approximately $ 4.3 million is expected to be paid in the next 12 months.

Segment Information

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Media Networks.

Media Networks consists of the following product lines (i) Starz Networks, which includes the domestic licensing of premium subscription video programming to distributors, and on a direct-to-consumer basis (ii) STARZPLAY International, which represents revenues primarily from the OTT distribution of the Company's STARZ branded premium subscription video services internationally and (iii) Other Streaming Services, which represents primarily our majority owned premium Spanish language streaming services business, Pantaya.

Media Networks consists of the following product lines (i) Starz Networks, which includes the domestic distribution of STARZ branded premium subscription video services through OTT platforms and Distributors and on a direct-to-consumer basis through the Starz App and (ii) STARZPLAY International, which represents revenues primarily from the OTT distribution of the Company's STARZ branded premium subscription video services outside of the U.S.

Through March 31, 2021, Media Networks also included Other Streaming Services, which represented primarily our formerly majority owned premium Spanish language streaming services business, Pantaya.

The Company sold its interest in Pantaya on March 31, 2021 (see Note 2).

In the ordinary course of business, the Company's reportable segments enter into transactions with one another.

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Segment information is presented in the table below:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

29 unchanged sentences

Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses.

Segment profit excludes corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, and, when applicable, certain charges related to the COVID-19 global pandemic and purchase accounting and related adjustments.

Segment profit excludes, when applicable, corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, certain charges related to the COVID-19 global pandemic and purchase accounting and related adjustments.

The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enables them to understand the fundamental performance of the Company's businesses.

Media Networks gross contribution and segment profit for the three and nine months ended December 31, 2019 includes a benefit of $ 4.6 million and $ 41.3 million, respectively, in direct operating expenses associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates.

The reconciliation of total segment profit to the Company’s income (loss) before income taxes is as follows:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

7 unchanged sentences

( 1.6 ) ( 10.4 )

Programming and content charges (4)

— ( 74.0 ) — ( 74.0 )

Adjusted share-based compensation expense (4)

2 unchanged sentences

( 50.0 ) ( 46.4 )

Operating income (loss) 37.1 ( 39.5 ) 156.3 14.9

Operating income 20.3 89.4

Interest expense ( 41.7 ) ( 44.4 )

3 unchanged sentences

Gain (loss) on investments ( 0.1 ) 5.1

Equity interests loss ( 0.7 ) ( 4.6 ) ( 5.1 ) ( 15.7 )

Equity interests income (loss) 0.7 ( 2.6 )

Income (loss) before income taxes $ ( 45.2 ) $ 47.5

1 unchanged sentence

(1) Adjusted depreciation and amortization represents depreciation and amortization as presented on our unaudited condensed consolidated statements of operations less the depreciation and amortization related to the non-cash fair value adjustments to property and equipment and intangible assets acquired in recent acquisitions which are included in the purchase accounting and related adjustments line item above, as shown in the table below:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

3 unchanged sentences

(2) Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable (see Note 13).

(3) In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, during the three and nine months ended December 31, 2020 the Company has incurred $ 14.0 million and $ 52.7 million, respectively, in incremental direct operating and distribution and marketing expense (see Note 13).

(3) In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, during the three months ended June 30, 2021 and 2020 the Company has incurred $ 1.6 million and $ 10.4 million, respectively, in incremental direct operating and distribution and marketing expense (see Note 13).

These charges are excluded from segment operating results.

(5) The following table reconciles total share-based compensation expense to adjusted share-based compensation expense:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

(Amounts in millions)

Total share-based compensation expense $ 20.0 $ 17.2 $ 60.0 $ 41.3

Amount included in restructuring and other (i)

— — ( 2.8 ) ( 0.3 )

Adjusted share-based compensation $ 20.0 $ 17.2 $ 57.2 $ 41.0

(i) Represents share-based compensation expense included in restructuring and other expenses reflecting the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.

(4) Adjusted share-based compensation represents share-based compensation expense adjusted for amounts included in restructuring and other expenses, when applicable, reflecting the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.

(5) Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in recent acquisitions.

1 unchanged sentence

The following sets forth the amounts included in each line item in the financial statements:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended

(Amounts in millions)

4 unchanged sentences

$ 50.0 $ 46.4

See Note 9 for revenues by media or product line as broken down by segment for the three and nine months ended December 31, 2020 and 2019.

See Note 9 for revenues by media or product line as broken down by segment for the three months ended June 30, 2021 and 2020.

The following table reconciles segment general and administration expense to the Company's total consolidated general and administration expense:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

5 unchanged sentences

$ 130.6 $ 109.0

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reconciliation of total segment assets to the Company’s total consolidated assets is as follows:

11 unchanged sentences

The Company establishes an accrued liability for claims and legal proceedings when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated.

Once established, accruals are adjusted from time to time, as appropriate, in light of additional information.

Once established, accruals are adjusted from time to

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

time, as appropriate, in light of additional information.

The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.

13 unchanged sentences

The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges).

The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

accounting does not apply or the Company elects not to apply hedge accounting.

The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions.

1 unchanged sentence

Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged.

As of December 31, 2020, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 13 months from December 31, 2020):

December 31, 2020

As of June 30, 2021, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 19 months from June 30, 2021):

June 30, 2021

Foreign Currency Foreign Currency Amount US Dollar Amount Weighted Average Exchange Rate Per $1 USD

4 unchanged sentences

Canadian Dollar C$ 3.1 in exchange for $ 2.9 C$ 1.07

Croatian Kuna HRK 3.3 in exchange for $ 0.5 HRK 6.32

Czech Koruna CZK 285.8 in exchange for $ 12.9 CZK 22.08

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest Rate Swaps

5 unchanged sentences

Changes in the fair value of interest rate swaps that are not designated as hedges are recorded in interest expense (see further explanation below).

As of March 31, 2020, the Company had the following pay-fixed interest rate swaps outstanding (all related to the Company's LIBOR-based debt, see Note 4 and Note 6):

Effective Date Notional Amount (in millions) Fixed Rate Paid Maturity Date

May 23, 2018 $ 1,000.0 2.915 % March 24, 2025

June 25, 2018 $ 200.0 2.723 % March 23, 2025

July 31, 2018 $ 300.0 2.885 % March 23, 2025

December 24, 2018 $ 50.0 2.744 % March 23, 2025

December 24, 2018 $ 100.0 2.808 % March 23, 2025

December 24, 2018 $ 50.0 2.728 % March 23, 2025

Total $ 1,700.0

During the nine months ended December 31, 2020, the Company completed a series of transactions to amend and extend certain interest rate swap agreements.

These transactions effectively replaced $ 1.4 billion of the interest rate swaps presented in the table above, and resulted in an extension of the maturity date on an aggregate of $ 1.4 billion of the Company's interest rate swaps by an additional 2 to 5 years, subject to mandatory early termination dates, and a decrease of the weighted average fixed pay rate from 2.870 % to 2.250 % per annum.

These interest rate swap transactions consisted of the following in the nine months ended December 31, 2020:

(i) $ 1.4 billion of the interest rate swaps presented in the table above were de-designated as cash flow hedges, (ii) the Company entered

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

into $ 1.4 billion of pay-variable receive-fixed interest rate swaps which are designed to offset the terms of the $ 1.4 billion of swaps in (i) and which are not designated as cash flow hedges, and (iii) the Company entered into $ 1.4 billion of new pay-fixed interest rate swaps with extended maturities.

These new pay-fixed interest rate swaps are considered hybrid instruments with a financing component and an embedded at-market derivative that was designated as a cash flows hedge (see discussion of cash flow presentation below).

Key terms of the new offsetting pay-variable receive-fixed interest rate swaps outstanding at December 31, 2020 are presented below (not designated as hedges):

Effective Date Notional Amount (in millions) Fixed Rate Received Maturity Date

May 19, 2020 $ 700.0 2.915 % March 24, 2025

May 19, 2020 $ 300.0 2.885 % March 23, 2025

Cash settlements related to interest rate contracts are generally classified as operating activities on the consolidated statements of cash flows.

However, due to an other-than-insignificant financing element on a portion of our interest rate swaps (see designated cash flow hedges table below), the cash flows related to these contracts are classified as financing activities.

Designated Cash Flow Hedges.

As of June 30, 2021, the Company had the following designated cash flow hedge pay-fixed interest rate swaps outstanding (all related to the Company's LIBOR-based debt, see Note 5 and Note 6):

Effective Date Notional Amount Fixed Rate Paid Maturity Date (1)

(in millions)

May 23, 2018 $ 300.0 2.915 % March 24, 2025

June 15, 2020 $ 100.0 2.808 % March 23, 2025

June 15, 2020 $ 50.0 2.728 % March 23, 2025

August 14, 2020 $ 200.0 2.723 % March 23, 2025

Total $ 1,400.0

Key terms of the new designated cash flow hedge pay-fixed interest rate swaps outstanding at December 31, 2020 are presented below:

Effective Date Notional Amount (in millions) Fixed Rate Paid Maturity Date (1)

May 19, 2020 $ 700.0 1.923 % March 23, 2030 (2)

5 unchanged sentences

(1) Subject to a mandatory early termination date of March 23, 2025.

At the time of the de-designation of the above $ 1.4 billion in interest rate swaps, there was approximately $ 163.0 million of unrealized losses recorded in accumulated other comprehensive income (loss).

This amount will be amortized to interest expense through the remaining term of the original de-designated swaps unless it becomes probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the loss will be recorded to interest expense at that time.

The $ 1.4 billion of interest rate swaps de-designated as cash flow hedges and the $ 1.4 billion of offsetting swaps will be marked to market with changes in fair value recognized, along with the fixed and variable payments on these swaps, in interest expense, which are expected to nearly offset each other.

Cash settlements related to interest rate contracts are generally classified as operating activities on the consolidated statements of cash flows.

However, due to an other-than-insignificant financing element on a portion of our interest rate swaps (see table above for new designated cash flow hedge pay-fixed interest rate swaps), the cash flows related to these contracts are classified as financing activities.

Financial Statement Effect of Derivatives

Unaudited condensed consolidated statement of operations and comprehensive loss:

The following table presents the pre-tax effect of the Company's derivatives on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss for the three and nine months ended December 31, 2020 and 2019:

(2) These pay-fixed interest rate swaps are considered hybrid instruments with a financing component and an embedded at-market derivative that was designated as a cash flow hedge (see discussion of cash flow presentation above).

Not Designated.

As of June 30, 2021, the Company had the following pay-fixed receive-variable and offsetting pay-variable receive-fixed interest rate swaps outstanding, which are not designated as cash flow hedges:

Pay-Fixed Receive-Variable (1)

Offsetting Pay-Variable Receive-Fixed (1)

Effective Date Notional Amount Fixed Rate Paid Effective Date Notional Amount Fixed Rate Received Maturity Date

(in millions) (in millions)

May 23, 2018 $ 700.0 2.915 % May 19, 2020 $ 700.0 2.915 % March 24, 2025

June 25, 2018 $ 200.0 2.723 % August 14, 2020 $ 200.0 2.723 % March 23, 2025

July 31, 2018 $ 300.0 2.885 % May 19, 2020 $ 300.0 2.885 % March 23, 2025

December 24, 2018 $ 50.0 2.744 % May 19, 2020 $ 50.0 2.744 % March 23, 2025

December 24, 2018 $ 100.0 2.808 % June 15, 2020 $ 100.0 2.808 % March 23, 2025

December 24, 2018 $ 50.0 2.728 % June 15, 2020 $ 50.0 2.728 % March 23, 2025

Total $ 1,400.0 Total $ 1,400.0

__________________

(1) During the fiscal year ended March 31, 2021, the Company completed a series of transactions to amend and extend certain interest rate swap agreements, and as part of these transactions, the $ 1.4 billion pay-fixed receive-variable interest rate swaps presented in the table above were de-designated, and the Company entered into $ 1.4 billion of pay-variable receive-fixed interest rate swaps, as presented in the table above, which are designed to offset the terms of the $ 1.4 billion of pay-fixed receive-variable swaps in the table above.

At the time of the de-designation of the above $ 1.4 billion in pay-fixed receive-variable interest rate swaps, there was approximately $ 163.0 million of unrealized losses recorded in accumulated other comprehensive income (loss).

This amount is being amortized to interest expense through the remaining term of the de-designated swaps unless it becomes

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the loss will be recorded to interest expense at that time.

The $ 1.4 billion of pay-fixed receive-variable interest rate swaps de-designated as cash flow hedges and the $ 1.4 billion of offsetting pay-variable receive-fixed swaps are marked to market with changes in fair value recognized, along with the fixed and variable payments on these swaps, in interest expense, which are expected to nearly offset each other.

Financial Statement Effect of Derivatives

Unaudited condensed consolidated statements of operations and comprehensive income (loss):

The following table presents the pre-tax effect of the Company's derivatives on the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three months ended June 30, 2021 and 2020:

Three Months Ended

(Amounts in millions)

1 unchanged sentence

Forward exchange contracts

Gain recognized in accumulated other comprehensive loss $ 2.0 $ 0.1 $ 1.5 $ 1.7

Gain reclassified from accumulated other comprehensive loss into direct operating expense $ 0.3 $ 0.4 $ 0.3 $ 1.9

Loss recognized in accumulated other comprehensive loss $ ( 0.2 ) $ ( 0.1 )

Loss reclassified from accumulated other comprehensive loss into direct operating expense $ ( 0.3 ) $ ( 0.1 )

Interest rate swaps

Gain (loss) recognized in accumulated other comprehensive loss $ 12.2 $ 18.8 $ ( 16.0 ) $ ( 52.3 )

Loss recognized in accumulated other comprehensive loss $ ( 40.8 ) $ ( 17.7 )

Loss reclassified from accumulated other comprehensive loss into interest expense $ ( 8.3 ) $ ( 7.4 )

10 unchanged sentences

Pursuant to the Company's accounting policy to offset the fair value amounts recognized for derivative instruments, the Company presents the asset or liability position of the swaps that are with the same counterparty under a master netting arrangement net as either an asset or liability in its unaudited condensed consolidated balance sheets.

The gross amount of swaps in an asset and liability position that were subject to a master netting arrangement was $ 165.8 million and $ 261.6 million, respectively, resulting in an asset recorded in other assets - non current of $ 9.9 million and a liability recorded in other liabilities - non-current of $ 105.7 million as of December 31, 2020.

As of December 31, 2020 and March 31, 2020, the Company had the following amounts recorded in the accompanying unaudited condensed consolidated balance sheets related to the Company's use of derivatives:

As of June 30, 2021, the gross amount of swaps in an asset and liability position that were subject to a master netting arrangement was $ 174.0 million and $ 229.1 million, respectively, resulting in an asset recorded in other assets - non current of $ 24.1 million and a liability recorded in other liabilities - non-current of $ 79.2 million.

As of March 31, 2021, the gross amount of swaps in an asset and liability position that were subject to a master netting arrangement was $ 211.2 million and $ 236.3 million, respectively, resulting in an asset recorded in other assets - non-current of $ 50.8 million and a liability recorded in other liabilities - non-current of $ 75.9 million.

As of June 30, 2021 and March 31, 2021, the Company had the following amounts recorded in the accompanying unaudited condensed consolidated balance sheets related to the Company's use of derivatives:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2020

June 30, 2021

Other Current Assets Other Non-Current Assets Accounts Payable and Accrued Liabilities Other Non-Current Liabilities

8 unchanged sentences

________________

(1) Includes $ 100.7 million and $ 56.3 million included in other non-current assets and other non-current liabilities, respectively, representing the financing element of certain hybrid instruments, which is offset by the new pay-variable receive-fixed interest rate swaps outstanding at December 31, 2020.

(1) Includes $ 95.7 million and $ 52.2 million included in other non-current assets and other non-current liabilities, respectively, representing the financing element of certain hybrid instruments, which is offset by the pay-variable receive-fixed interest rate swaps outstanding at June 30, 2021.

March 31, 2021

Other Current Assets Accounts Payable and Accrued Liabilities Other Non-Current Liabilities

Other Current Assets Other Non-Current Assets Accounts Payable and Accrued Liabilities Other Non-Current Liabilities

(Amounts in millions)

3 unchanged sentences

Derivatives not designated as cash flow hedges:

Forward exchange contracts — 0.4 —

Interest rate swaps (1)

— ( 21.9 ) — 127.1

Fair value of derivatives $ 1.5 50.8 $ 2.6 132.7

As of December 31, 2020, based on the current release schedule, the Company estimates approximately $ 1.3 million of gains associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive loss will be reclassified into earnings during the one-year period ending December 31, 2021.

As of December 31, 2020, the Company estimates approximately $ 47.7 million of losses recorded in accumulated other comprehensive loss associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending December 31, 2021.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

________________

(1) Includes $ 98.2 million and $ 54.3 million included in other non-current assets and other non-current liabilities, respectively, representing the financing element of certain hybrid instruments, which is offset by the pay-variable receive-fixed interest rate swaps outstanding at March 31, 2021.

As of June 30, 2021, based on the current release schedule, the Company estimates approximately $ 0.3 million of gains associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive loss will be reclassified into earnings during the one-year period ending June 30, 2022.

As of June 30, 2021, the Company estimates approximately $ 47.4 million of losses recorded in accumulated other comprehensive loss associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending June 30, 2022.

Additional Financial Information

The following tables present supplemental information related to the unaudited condensed consolidated financial statements.

The composition of the Company’s other assets is as follows as of December 31, 2020 and March 31, 2020:

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the unaudited condensed consolidated balance sheet to the total amounts reported in the unaudited condensed consolidated statement of cash flows at June 30, 2021.

At June 30, 2021, restricted cash included in other current assets represents amounts related to required cash reserves for interest payments associated with the Production Tax Credit Facility.

There were no material amounts of restricted cash in the unaudited condensed consolidated balance sheet as of March 31, 2021.

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in millions)

Cash and cash equivalents $ 261.6

Restricted cash included in other current assets 5.8

Total cash, cash equivalents and restricted cash $ 267.4

The composition of the Company’s other assets is as follows as of June 30, 2021 and March 31, 2021:

2021 March 31,

2 unchanged sentences

Prepaid expenses and other $ 75.1 $ 68.0

Cash consideration receivable for sale of Pantaya (see Note 2) — 123.6

Product inventory 13.8 14.3

8 unchanged sentences

$ 503.9 $ 434.2

___________________

(1) Home entertainment product inventory consists of Packaged Media and is stated at the lower of cost or market value (first-in, first-out method).

Costs of Packaged Media sales, including shipping and handling costs, are included in distribution and marketing expenses.

Accounts Receivable Monetization

4 unchanged sentences

The loss is reflected in the "other expense" line item on the unaudited condensed consolidated statements of operations.

The Company receives fees for servicing the accounts receivable for the purchasers, which represent the fair value of the services and were immaterial for the three and nine months ended December 31, 2020 and 2019.

The Company receives fees for servicing the accounts receivable for the purchasers, which represent the fair value of the services and were immaterial for the three months ended June 30, 2021 and 2020.

Individual Monetization Agreements.

1 unchanged sentence

The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers.

The following table sets forth a summary of the receivables transferred under individual agreements or purchases during the three and nine months ended December 31, 2020 and 2019:

The following table sets forth a summary of the receivables transferred under individual agreements or purchases during the three months ended June 30, 2021 and 2020:

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Three Months Ended

(Amounts in millions)

2 unchanged sentences

Loss recorded related to transfers of receivables 1.9 1.5

At December 31, 2020, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheets, but which the Company continues to service, related to the Company's individual agreements to monetize trade accounts receivable was $ 540.9 million (March 31, 2020 - $ 529.8 million).

At June 30, 2021, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheets, but which the Company continues to service, related to the Company's individual agreements to monetize trade accounts receivable was $ 509.2 million (March 31, 2021 - $ 562.8 million).

Pooled Monetization Agreement.

1 unchanged sentence

As customers pay their balances, the Company transfers additional receivables into the program.

The transferred receivables are fully guaranteed by a bankruptcy-remote wholly-owned subsidiary of the Company, which holds additional receivables in the amount of $ 44.0 million as of December 31, 2020 that are pledged as collateral under this agreement.

The transferred receivables are fully guaranteed by a bankruptcy-remote wholly-owned subsidiary of the Company, which holds additional receivables in the amount of $ 73.1 million as of June 30, 2021 that are pledged as collateral under this agreement.

The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers.

The following table sets forth a summary of the receivables transferred under the pooled monetization agreement during the three and nine months ended December 31, 2020:

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

The following table sets forth a summary of the receivables transferred under the pooled monetization agreement during the three months ended June 30, 2021 and 2020:

Three Months Ended

(Amounts in millions)

7 unchanged sentences

Obligations recorded $ ( 0.1 ) $ 0.4

Loss recorded related to transfers of receivables $ 0.3 $ 1.3 $ 0.5 $ 1.3

Loss (gain) recorded related to transfers of receivables $ ( 0.2 ) $ 0.1

___________________

(1) Receivables net of unamortized discounts on long-term, non-interest bearing receivables.

At December 31, 2020, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheet, but which the Company continues to service, related to the pooled monetization agreement was approximately $ 86.1 million (March 31, 2020 - $ 92.5 million).

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At June 30, 2021, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheet, but which the Company continues to service, related to the pooled monetization agreement was approximately $ 96.4 million (March 31, 2021 - $ 99.0 million).

Accumulated Other Comprehensive Loss

4 unchanged sentences

Other comprehensive income 0.1 ( 24.0 ) ( 23.9 )

December 31, 2020 $ ( 13.2 ) $ ( 156.9 ) $ ( 170.1 )

Cash, Cash Equivalents and Restricted Cash

There was no restricted cash in the unaudited condensed consolidated balance sheets as of December 31, 2020 or March 31, 2020.

Supplemental Cash Flow Information

Significant non-cash transactions during the nine months ended December 31, 2020 include certain interest rate swap agreements, which are discussed in Note 16, "Derivative Instruments and Hedging Activities".

The supplemental schedule of non-cash investing and financing activities is presented below:

Nine Months Ended

(Amounts in millions)

Non-cash investing activities:

Decrease in finance lease right-of-use asset due to a reassessment event $ ( 42.0 ) $ —

Non-cash financing activities:

Decrease in finance lease liability due to a reassessment event $ ( 48.6 ) $ —

Supplemental cash flow information related to leases was as follows:

Nine Months Ended

(Amounts in millions)

Right-of-use assets obtained in exchange for new lease obligations:

Operating leases $ 14.2 $ 2.1

Increase in right-of-use assets and lease liability due to a reassessment event:

Operating leases - increase in right-of-use assets $ 6.0 $ —

Operating leases - increase in lease liability $ 12.6 $ —

June 30, 2021 $ ( 15.0 ) $ ( 92.2 ) $ ( 107.2 )

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental Cash Flow Information

Significant non-cash transactions during the three months ended June 30, 2021 and 2020 include certain interest rate swap agreements, which are discussed in Note 16, "Derivative Instruments and Hedging Activities".

There were no significant non-cash financing activities for the three months ended June 30, 2021 and 2020.

Subsequent Events

In January 2021, certain subsidiaries of the Company (the “Borrowers”) entered into a senior secured revolving credit facility with the lenders from time to time party thereto and MUFG Union Bank, N.A., as administrative agent, based on the Company’s tax credit receivables (the “Facility”).

The maximum principal amount of the Facility is $ 120.0 million, subject to availability under the borrowing base, which is based on specified percentages of amounts payable to the Borrowers by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction.

Maximum capacity under the Facility may be increased to $ 200.0 million through the exercise by the Borrowers of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing.

Borrowings under the Facility shall bear interest at a rate equal to, at the Borrowers’ option, LIBOR plus 1.50 % per annum or the base rate plus 0.50 % per annum.

The proceeds of the Facility shall be used to pay transaction fees, costs and interest associated with the Facility and the transactions contemplated thereby, and for repayment of debt and other general corporate purposes.

The Facility is expected to mature on January 27, 2025.

Film Library Acquisition.

On July 15, 2021, the Company acquired the majority of the Spyglass Media Group, LLC ("Spyglass") feature film library of approximately 200 titles.

In connection with the acquisition of the film library, the Company also formed a strategic content partnership (which provides for an investment of a 20 % minority ownership stake) and entered into a multiyear first-look television arrangement with Spyglass.

IP Credit Facility.

In July 2021, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "IP Credit Facility") based on the collateral consisting solely of the Company’s rights in certain library titles, including the Spyglass and other recently acquired libraries and non-recourse to other assets of the Company.

The maximum principal amount of the IP Credit Facility is $ 100.0 million, subject to the amount of collateral available, which is based on the valuation amount of cash flows from the libraries.

The cash flows generated from the exploitation of the rights will be applied to repay the IP Credit Facility subject to a minimum guaranteed payment amount and are expected to be sufficient to fully repay the facility by the stated maturity date.

Advances under the IP Credit Facility bear interest at a rate equal to, at the Company’s option, LIBOR plus 2.25 % per annum or the base rate plus 1.25 % per annum.

The IP Credit Facility matures on July 30, 2026.

Term Loan B Repurchases.

In July and August 2021, the Company completed a series of repurchases of the Term Loan B, and in aggregate, paid $ 38.7 million to repurchase $ 38.9 million principal amount of the Term Loan B.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements