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(the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) brings a unique and varied portfolio of entertainment to consumers around the world.
−Removed: 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.
−Removed: 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.
+Added: Our film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and one of the largest collections of film and television franchises in the independent media space.
We classify our operations through three reporting segments:
Motion Picture, Television Production, and Media Networks (see further discussion below).
−Removed: Impact of COVID-19
+Added: COVID-19 Global Pandemic
The impacts associated with the ongoing COVID-19 global pandemic and measures to prevent its spread, and the resulting economic uncertainty, continue to affect our business in a number of ways.
−Removed: We continue to experience delays in theatrical distribution of our films, both domestically and internationally, as well as delays in the production of film and television content (resulting in continued changes in future release dates for some titles and series).
−Removed: While we have begun (and have, in certain instances, completed) production on a number of films and television series, and theaters have begun to reopen in certain locations with reduced capacity, we are not able to accurately predict when theaters will re-open at scale, at what level consumers will return to movie theaters, when film production will fully resume, whether productions that have resumed will be paused again, the impact of incremental costs required to adhere to new health and safety protocols, or if and when certain of our content will be released.
+Added: We have experienced delays in theatrical distribution of our films, both domestically and internationally, as well as delays in the production of film and television content (resulting in continued changes in future release dates for some titles and series).
+Added: While we have begun (and have, in certain instances, completed) production on a number of films and television series, and theaters have begun to reopen in certain locations with reduced capacity, we are not able to accurately predict when theaters will re-open at scale, at what level consumers will return to movie theaters, when film production will fully resume, whether productions that have resumed will be paused again, the impact of incremental costs required to adhere to health and safety protocols, or if and when certain of our content will be released.
The full extent of impacts related to the COVID-19 global pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict.
See Part I, Item 1A.
−Removed: “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 27, 2020, as updated by the risk factors found under Part II, Item 1A.
+Added: “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 28, 2021, as updated by any risk factors found under Part II, Item 1A.
"Risk Factors" herein.
−Removed: Conversely, television and streaming consumption around the globe continues to increase, as well as home entertainment demand.
−Removed: STARZ continues to achieve an increase in viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally.
−Removed: However, it is too early to say whether this increase is indicative of future results and whether growth may slow as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic.
−Removed: We continue, however, to adapt to these new circumstances.
−Removed: For instance, we have changed the release strategies of several of our theatrical films by releasing solely and/or earlier on streaming platforms, initially releasing in the premium video-on-demand ("Premium VOD") market, or by licensing directly to streaming platforms.
−Removed: We have also begun and completed post-production of a number of our television series and continue the development of film properties and television series.
−Removed: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of most theaters, international travel restrictions and the pausing of motion picture and television productions, during the three and nine months ended December 31, 2020 we have incurred $14.8 million and $54.3 million, respectively, in incremental costs which were expensed in the period.
−Removed: These costs include $8.6 million and $36.6 million, respectively, reflected in direct operating expense, which include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, 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.
−Removed: In addition, these costs include $5.4 million and $16.1 million, respectively, reflected in distribution and marketing expense, which primarily consists of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit, and $0.8 million and $1.6 million in restructuring and other costs primarily due to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic during these periods.
+Added: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of most theaters, international travel restrictions and the pausing of motion picture and television productions, during the three months ended June 30, 2021 we have incurred $1.9 million in incremental costs which were expensed in the period.
+Added: These costs include $1.6 million reflected in direct operating expense, which include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, net of insurance recoveries.
+Added: In addition, these costs include $0.3 million in restructuring and other costs primarily due to incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic during these periods.
+Added: During the three months ended June 30, 2020, we incurred $10.9 million in incremental costs which were expensed in the period, including $5.7 million in direct operating expense, $4.7 million in distribution and marketing expense primarily consisting of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit, and $0.5 million in restructuring and other costs primarily due to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.
We expect to incur additional incremental costs in future periods.
−Removed: We are 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 our consolidated financial statements.
+Added: However, if the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021.
+Added: We are in the process of seeking additional insurance recovery for some of these costs.
+Added: The ultimate amount of insurance recovery cannot be estimated at this time.
See further discussion in the Results of Operations section below.
The economic impact of the COVID-19 global pandemic and resulting societal changes will depend on numerous evolving factors that cannot be predicted with certainty.
−Removed: There are a number of ways in which these uncertainties resulting from the
−Removed: COVID-19 global pandemic have impacted our current results of operations and could continue to impact our future results of operations.
−Removed: These impacts include the incremental costs and losses discussed in the previous paragraph, lower revenues from the closure of movie theaters and postponement of theatrical releases, partially offset by lower theatrical production and marketing costs;
+Added: There are a number of ways in which these uncertainties resulting from the ongoing COVID-19 global pandemic have impacted our current results of operations and could continue to impact our future results of operations.
+Added: These impacts include the incremental costs and losses discussed in the previous paragraph, lower revenues from the closure or limited reopenings of movie theaters and postponement of theatrical releases, partially offset by lower theatrical production and marketing costs;
increased expenses associated with new health and safety protocols on motion picture and television productions;
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and while STARZ has experienced an increase in viewership of its content, future growth could be impacted by the timing of when productions will fully resume, and whether productions that have resumed will be paused again.
−Removed: We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any U.S.
+Added: We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact
+Added: of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any U.S.
Food and Drug Administration ("FDA")-approved COVID-19 vaccines), and global economic conditions related to the COVID-19 global pandemic.
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We have implemented policies, procedures and protocols to address the situation and expect to continue to adjust our current policies and procedures as more information and guidance become available.
−Removed: In addition, recent resurgences of COVID-19 in certain parts of the world, including the United States and parts of Europe, and the discovery of new variants of the virus, have resulted in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19.
+Added: In addition, resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus, may result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19.
These measures could result in further interruptions to our operations.
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None of the non-U.S.
−Removed: countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2020 and 2019.
+Added: countries individually comprised greater than 10% of total revenues for the three months ended June 30, 2021 and 2020.
Motion Picture
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• Starz Networks.
−Removed: Starz Networks’ revenues are derived from the domestic distribution of our STARZ branded premium subscription video services through our over-the-top ("OTT") service, U.S.
−Removed: multichannel video programming distributors (“MVPDs”) including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”) pursuant to affiliation agreements, and on a direct-to-consumer basis through our Starz App.
+Added: Starz Networks’ revenues are derived from the domestic distribution of our STARZ branded premium subscription video services through over-the-top ("OTT") platforms and U.S.
+Added: multichannel video programming distributors (“MVPDs”) including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”), and on a direct-to-consumer basis through the Starz App.
• STARZPLAY International.
−Removed: STARZPLAY International revenues are primarily derived from OTT distribution of the Company's STARZ branded premium subscription video services internationally.
−Removed: • Other Streaming Services.
−Removed: Other Streaming Services revenues are derived primarily from our majority owned premium Spanish language streaming services business, Pantaya, which includes subscriber based streaming revenue and other distribution revenue.
+Added: STARZPLAY International revenues are primarily derived from OTT distribution of the Company's STARZ branded premium subscription video services outside of the U.S.
+Added: Through March 31, 2021, our Media Networks segment also included revenues derived from Other Streaming Services, which represented revenues derived primarily from our formerly majority owned premium Spanish language streaming services business, Pantaya, which included subscriber based streaming revenue and other distribution revenue.
+Added: We sold our interest in Pantaya on March 31, 2021, for approximately $123.6 million in cash, subject to certain customary adjustments pursuant to the terms of the agreement.
+Added: 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.
+Added: See Note 2 to our unaudited condensed consolidated financial statements for further information.
Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and administration expenses.
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General and administration expenses include salaries and other overhead.
−Removed: CRITICAL ACCOUNTING POLICIES
+Added: CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
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Accordingly, actual results could differ materially from our estimates.
−Removed: To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected.
+Added: To the extent that there are material differences between these estimates and actual results,
+Added: our financial condition or results of operations will be affected.
We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.
+Added: We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments.
For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on May 28, 2021.
Accounting for Films and Television Programs and Licensed Program Rights
−Removed: Investment in Films and Television Programs:
−Removed: We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in 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).
−Removed: Recording Cost.
−Removed: Costs of acquiring and producing films and television programs and of acquired libraries are capitalized when incurred.
−Removed: For films and television programs produced by the Company, capitalized costs include all direct production and financing costs, capitalized interest and production overhead.
−Removed: For acquired films and television programs, capitalized costs consist of minimum guarantee payments to acquire the distribution rights.
−Removed: Amortization.
−Removed: 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.
−Removed: 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.
−Removed: Ultimate Revenue.
−Removed: Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture.
+Added: Capitalized costs for films or television programs are amortized and tested for impairment based on whether the content is predominantly monetized individually or as a group.
+Added: Film and Television Programs Monetized Individually.
+Added: For films and television programs monetized individually, film cost amortization, participations and residuals expense are based on management's estimates.
+Added: Costs of acquiring and producing films and television programs and of acquired libraries that are monetized individually are amortized and estimated liabilities for participations and residuals costs are accrued using the individual-film-forecast method, based on the ratio of the current period's revenues to management’s estimated remaining total gross revenues to be earned ("ultimate revenue").
+Added: Management's judgment is required in estimating ultimate revenue and the costs to be incurred throughout the life of each film or television program.
+Added: Management estimates ultimate revenues based on historical experience with similar titles or the title genre, the general public appeal of the cast, audience test results when available, actual performance (when available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general economic conditions and other tangible and intangible factors, many of which we do not control and which may change.
+Added: For motion pictures, ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture.
+Added: The most sensitive factor affecting our estimate of ultimate revenues for a film intended for theatrical release is the film's theatrical performance, as subsequent revenues from the licensing and sale in other markets have historically been highly correlated to its theatrical performance.
+Added: After a film's release, our estimates of revenue from succeeding markets are revised based on historical relationships and an analysis of current market trends.
For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later.
+Added: The most sensitive factors affecting our estimate of ultimate revenues for a television series is whether the series will be ordered for a subsequent season and estimates of revenue in secondary markets other than the initial license fee.
+Added: The initial estimate of ultimate revenue may include estimates of revenues outside of the initial license window (i.e., international, home entertainment and other distribution platforms) and are based on historical experience for similar programs (genre, duration, etc.) based on the estimated number of seasons.
+Added: We regularly monitor the performance of each season, and evaluate whether impairment indicators are present (i.e., low ratings, cancellations or the season is not reordered), and based upon our review, we revise our estimates as needed and perform an impairment assessment if impairment indicators are present (see below).
For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.
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Management regularly reviews and revises when necessary its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value (see below).
−Removed: Management estimates the ultimate revenue based on experience with similar titles or title genre, the general public appeal of the cast, audience test results when available, actual performance (when available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general economic conditions and other tangible and intangible factors, many of which we do not control and which may change.
An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results in an impairment requiring a write-down of the film cost to the title’s fair value.
−Removed: These write-downs are included in amortization
−Removed: expense within direct operating expenses in our consolidated statements of operations.
−Removed: See further discussion below under Impairment Assessment for Investment in Films and Television Programs and Licensed Program Rights .
−Removed: Licensed Program Rights:
−Removed: 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.
−Removed: 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.
−Removed: Program licenses typically have fixed terms and require payments during the term of the license.
−Removed: Recording Cost.
−Removed: 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.
+Added: These write-downs are included in amortization expense within direct operating expenses in our consolidated statements of operations.
+Added: See further discussion below under Impairment Assessment .
+Added: Film and Television Programs Monetized as a Group.
Licensed programming rights may include rights to more than one exploitation window under the Company's output and library agreements.
For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated fair value of each window which generally results in the majority of the cost allocated to the first window on newer releases.
−Removed: Certain license agreements may include additional ancillary rights in addition to the pay television rights.
−Removed: 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.
+Added: Certain license agreements and productions may include additional ancillary rights in addition to the pay television rights.
+Added: The cost of the Media Networks’ third-party licensed content and produced content is allocated between the pay television market distributed by the Media Networks’ segment and the ancillary revenue markets (e.g., home video, digital platforms, international television, etc.) based on the estimated relative fair values of these markets.
Our estimates of fair value for the pay television and ancillary markets and windows of exploitation involve uncertainty and management judgment.
Programming costs vary due to the number of airings and cost of our original series, the number of films licensed and the cost per film paid under our output and library programming agreements.
−Removed: 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.
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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.
−Removed: Impairment Assessment for Investment in Films and Television Programs and Licensed Program Rights:
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Content Monetized Individually.
−Removed: 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.
−Removed: The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title.
−Removed: To the extent the unamortized costs exceed the fair value, an impairment charge is recorded for the excess.
−Removed: Content Monetized as a Group.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Impairment Assessment.
+Added: A film group or individual film or television program is evaluated for impairment when events or changes in circumstances indicate that the fair value of an individual film or film group is less than its unamortized cost.
+Added: If the result of the impairment test indicates that the carrying value exceeds the estimated fair value, an impairment charge will then be recorded for the amount of the difference.
+Added: Estimate of Fair Value.
+Added: For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), the fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title.
+Added: For motion pictures intended for theatrical release, the discounted cash flow analysis used in the impairment evaluation prior to theatrical release is subjective as key inputs include estimates of future anticipated revenues, estimates of box office performance, which may differ from future actual results.
+Added: These estimates are based in part on the historical performance of similar films, test audience results when available, information regarding competing film releases, and critic reviews.
+Added: See further discussion of Valuation Assumptions below.
+Added: For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), the fair value is determined based on the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows are independent of other produced and licensed content.
+Added: The Company's film groups are generally aligned along the Company's networks and digital content offerings domestically (i.e., Starz Networks and, through March 31, 2021, Other Streaming Services) and by territory or groups of territories internationally, wherein content assets are shared across the various territories and therefore, the territory or group of territories is the film group.
Valuation Assumptions.
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Our Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places.
−Removed: Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services and from our majority owned premium Spanish language streaming services business, Pantaya, which includes subscriber based streaming revenue and other distribution revenue.
+Added: Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services and, through Mach 31, 2021, from our formerly majority owned premium Spanish language streaming services business, Pantaya, which includes subscriber based streaming revenue and other distribution revenue.
+Added: We sold our interest in Pantaya on March 31, 2021, see Note 2 to our unaudited condensed consolidated financial statements for further information.
Our content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales or usage based royalties.
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Revenue from the sale of physical discs (DVDs, Blu-ray or 4K Ultra HD), referred to as "Packaged Media", in the retail market, net of an allowance for estimated returns and other allowances, is recognized on the later of receipt by the customer or “street date” (when it is available for sale by the customer).
+Added: We estimate reserves for Packaged Media returns based on previous returns experience, point-of-sale data available from certain retailers, current economic trends, and projected future sales of the title to the consumer based on the actual performance of similar titles on a title-by-title basis in each of the Packaged Media businesses.
+Added: Factors affecting actual returns include, among other factors, limited retail shelf space at various times of the year, success of advertising or other sales promotions, and the near term release of competing titles.
+Added: We believe that our estimates have been materially accurate in the past;
+Added: however, due to the judgment involved in establishing reserves, we may have adjustments to our historical estimates in the future.
+Added: Our estimate of future returns affects reported revenue and operating income.
+Added: If we underestimate the impact of future returns in a particular period, then we may record less revenue in later periods when returns exceed the estimated amounts.
+Added: If we overestimate the impact of future returns in a particular period, then we may record additional revenue in later periods when returns are less than estimated.
+Added: An incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related product) for home entertainment products would have had an impact of approximately $0.5 million on our total revenue in the three months ended June 30, 2021 (2020 - $0.5 million).
Revenue from commissions are recognized as such services are provided.
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Goodwill and Indefinite-Lived Intangibles.
−Removed: At December 31, 2020, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively.
−Removed: Our indefinite-lived intangible assets consist of trade names primarily representing the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as
−Removed: of December 8, 2016.
+Added: At June 30, 2021, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively.
+Added: Our indefinite-lived intangible assets consist of trade names primarily representing the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as of December 8, 2016.
Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (component level).
−Removed: Reporting units are determined by the discrete financial information available for the component and whether that information is regularly reviewed by segment management.
+Added: Reporting units are determined by the discrete financial information available for the
+Added: component and whether that information is regularly reviewed by segment management.
Components are aggregated into a single reporting unit if they share similar economic characteristics.
−Removed: Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at December 31, 2020, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $2.04 billion), and our Television (goodwill of $309 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.
+Added: Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at June 30, 2021, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $1.97 billion), and our Television (goodwill of $309 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.
Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment each fiscal year or between the annual tests if an event occurs or circumstances change that indicates it is more-likely-than-not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value.
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Goodwill Impairment Assessment:
−Removed: For our annual goodwill impairment test for fiscal 2020, due to the decline in the market price of our common shares in the fourth quarter ended March 31, 2020, which was significantly impacted by the economic uncertainty and market volatility resulting from the COVID-19 global pandemic, we updated our quantitative impairment assessment for all of our reporting units as of March 31, 2020.
−Removed: The DCF analysis of fair values were determined primarily by discounting estimated future cash flows, which included perpetual nominal growth rates ranging from 1.5% to 4.0%, at a weighted average cost of capital (discount rate) ranging from 11.5% to 15%, which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a whole.
−Removed: Based on our annual quantitative impairment assessment for fiscal 2020, we determined that two of our reporting units (Television and Media Networks) were at risk for impairment.
−Removed: We evaluated the sensitivity of our most critical assumptions used in the fair value analysis of our Television and Media Networks reporting units, including the discount rate, perpetual nominal growth rate and annual revenue growth rates.
−Removed: For our Television business reporting unit, we determined that an increase in the discount rate of up to 3.3% would not have impacted the test results, assuming no changes to other factors.
−Removed: For our Media Networks reporting unit, we determined that an increase in the discount rate of up to 0.7% or a reduction of the perpetual nominal growth rate of up to 1.33% would not have impacted the test results, assuming no changes to other factors.
−Removed: We also performed a sensitivity analysis on annual revenue growth.
−Removed: We determined that a decrease in annual revenue growth by 0.5% for our Television business reporting unit and 0.3% for our Media Networks reporting unit, and holding film cost spend and amortization the same and maintaining other expenses at the same percentage of revenue, the results would have triggered an impairment.
−Removed: During the three and nine months ended December 31, 2020, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our goodwill impairment test, or that would indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.
−Removed: Management will continue to monitor all of its reporting units for changes in the business environment that could impact the recoverability of goodwill in future periods.
+Added: For our annual goodwill impairment test for fiscal 2021, due to the increase in the market price of our common shares since our most recent quantitative impairment assessment at March 31, 2020, the performance of the Television and Media Networks reporting units in fiscal 2021, and the improvement of overall economic conditions associated with the COVID-19 pandemic, we performed a qualitative assessment for all reporting units.
+Added: This assessment included consideration of, but not limited to, the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, industry and market conditions, performance and current and projected cash flows of our reporting units, and changes in our share price.
+Added: Based upon our qualitative assessment, we concluded that it was more-likely-than-not that the fair value of our reporting units was greater than their carrying value.
+Added: During the three months ended June 30, 2021, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our goodwill impairment test, or that would indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.
+Added: Management will continue to monitor all of its reporting units for changes in the business environment that could impact the recoverability in future periods.
The recoverability of goodwill is dependent upon the continued growth of revenue and cash flows from our business activities.
6 unchanged sentences
our subscriber growth rates domestically and internationally across our traditional and OTT platforms and changes in consumer behavior.
−Removed: While historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.
+Added: historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.
Indefinite-Lived Intangibles Other Than Goodwill Impairment Assessment:
4 unchanged sentences
The Company also considered the macroeconomic impact including the uncertainty around the COVID-19 global pandemic, and the resulting uncertain long-term economic impact on discount rates and growth rates, as well as the impact from tax law changes inclusive of the reduction of the federal tax rate since the acquisition of Starz.
−Removed: During the three and nine months ended December 31, 2020, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our impairment assessment of our indefinite-lived trade names, or that would indicate that it is more-likely-than-not that the fair value of our indefinite-lived trade names is less than its carrying value.
+Added: During the three months ended June 30, 2021, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our impairment assessment of our indefinite-lived trade names, or that would indicate that it is more-likely-than-not that the fair value of our indefinite-lived trade names is less than its carrying value.
Finite-Lived Intangible Assets.
−Removed: At December 31, 2020, the carrying value of our finite-lived intangible assets was approximately $1.36 billion.
+Added: At June 30, 2021, the carrying value of our finite-lived intangible assets was approximately $1.29 billion.
Our finite-lived intangible assets primarily relate to customer relationships associated with U.S.
2 unchanged sentences
Identifiable intangible assets with finite lives are amortized to depreciation and amortization expense over their estimated useful lives, ranging from 5 to 17 years.
−Removed: Through the quarter ended June 30, 2019, we amortized the Starz Traditional Affiliate customer relationships on a straight-line basis over 17 years.
+Added: The Starz Traditional Affiliate customer relationship intangible asset is amortized in the proportion that current period revenues bear to management’s estimate of future revenue over the remaining estimated useful life of the asset, which results in greater amortization in the earlier years of the estimated useful life of the asset than the latter years.
Amortizable intangible assets are tested for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount of the asset may not be recoverable.
5 unchanged sentences
The Company monitors its finite-lived intangible assets and changes in the underlying circumstances each reporting period for indicators of possible impairments or a change in the useful life or method of amortization of our finite-lived intangible assets.
−Removed: Due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption, in the quarter ended September 30, 2019, the Company determined it was appropriate to change the pattern of amortization of its Traditional Affiliate customer relationship intangible asset.
−Removed: Accordingly, beginning in the quarter ended September 30, 2019, the Company has adopted an amortization method that reflects amortization in the proportion that current period revenues bear to management’s estimate of future revenue over the remaining estimated useful life of the asset.
−Removed: This method results in greater amortization in the earlier years of the estimated useful life of the asset than the latter years.
−Removed: During the fiscal year ended March 31, 2020, due to industry factors discussed in the preceding paragraph and the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our amortizable intangible assets.
+Added: During the fiscal year ended March 31, 2021, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption and the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our amortizable intangible assets.
The impairment analysis requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset.
Based on our impairment analysis, the estimated undiscounted cash flows exceeded the carrying amount of the assets and therefore no impairment charge was required.
−Removed: During the three and nine months ended December 31, 2020, there were no events or circumstances that have changed that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.
+Added: During the three months ended June 30, 2021, there were no events or circumstances that have changed that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.
Determining whether an intangible asset is recoverable or impaired requires various estimates and assumptions, including whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining estimates of future cash flows for the assets involved and, when applicable, the assumptions applied in determining fair value, including discount rates, growth rates, market risk premiums and other assumptions about the economic environment.
Should the revenues from our Traditional Affiliate relationships decline more than the assumed attrition rates used in our current estimates, either as a result of decreases in subscriber rates or changes of the terms of our renewals of our Traditional Affiliate contracts, we may have indicators of impairment which could result in an impairment of our customer relationships intangible assets, or we may need to further shorten the useful life or adopt a more accelerated method of amortization both of which would increase the amount of amortization expense we record.
−Removed: Sales Returns Allowance.
−Removed: Revenues are recorded net of estimated returns and other allowances.
−Removed: We estimate reserves for Packaged Media returns based on previous returns experience, point-of-sale data available from certain retailers, current economic trends, and projected future sales of the title to the consumer based on the actual performance of similar titles on a title-by-title basis in each of the Packaged Media businesses.
−Removed: Factors affecting actual returns include, among other factors, limited retail shelf space at various times of the year, success of advertising or other sales promotions, and the near term release of competing titles.
−Removed: We believe that our estimates have been materially accurate in the past;
−Removed: however, due to the judgment involved in establishing reserves, we may have adjustments to our historical estimates in the future.
−Removed: Our estimate of future returns affects reported revenue and operating income.
−Removed: If we underestimate the impact of future returns in a particular period, then we may record less revenue in later periods when returns exceed the estimated amounts.
−Removed: If we overestimate the impact of future returns in a particular period, then we may record additional revenue in later periods when returns are less than estimated.
−Removed: An incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related product) for home entertainment products would have had an impact of approximately $0.6 million and $1.6 million on our total revenue in the three and nine months ended December 31, 2020, respectively (2019 - $1.1 million and $2.7 million, respectively).
Income Taxes.
We are subject to federal and state income taxes in the U.S., and in several foreign jurisdictions.
−Removed: We record deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves in these jurisdictions.
+Added: We record deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves in
+Added: these jurisdictions.
We recognize a future tax benefit to the extent that realization of such benefit is more likely than not on a jurisdiction-by-jurisdiction basis;
5 unchanged sentences
and foreign deferred tax assets that may not be realized on a more likely than not basis.
−Removed: Our quarterly income tax benefit (provision) and our corresponding annual effective tax rate are based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate.
−Removed: For interim financial reporting, except in circumstances as described in the following paragraph, we estimate the annual effective tax rate based on projected taxable income for the full year and record a quarterly tax benefit (provision) in accordance with the expected annual effective tax rate.
+Added: Our quarterly income tax provision and our corresponding annual effective tax rate are based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate.
+Added: For interim financial reporting, we estimate the annual effective tax rate based on projected taxable income for the full year and record a quarterly tax provision in accordance with the expected annual effective tax rate.
As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results.
This continual estimation process often results in a change to our expected annual effective tax rate for the year.
−Removed: When this occurs, we adjust our income tax benefit (provision) during the quarter in which the change in estimate occurs so that the year-to-date income tax benefit (provision) reflects the expected annual effective tax rate.
+Added: When this occurs, we adjust our income tax provision during the quarter in which the change in estimate occurs so that the year-to-date income tax provision reflects the expected annual effective tax rate.
Significant judgment is required in determining our expected annual effective tax rate and in evaluating our tax positions.
−Removed: When a small change in our estimated pretax results would create a large change in our expected annual effective rate such that a reliable estimate of the expected annual effective tax rate cannot be made, as was the case for the three and nine months ended December 31, 2019, we calculate the income tax benefit (provision) using the cut-off method.
−Removed: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, and has resulted in significant changes to the U.S.
−Removed: federal corporate tax law.
−Removed: Additionally, several state jurisdictions have enacted legislation to comply with federal changes and some foreign jurisdictions have enacted similar tax incentive legislation.
−Removed: impact of the CARES Act to our current and deferred income tax expense as of December 31, 2020 was immaterial, however we are continuing to analyze the impact of these tax law changes to future periods.
−Removed: Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the overall level of pre-tax income (loss), the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, any changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, further interpretation and legislative guidance regarding the new CARES Act, changes in valuation allowances against our deferred tax assets, tax planning strategies available to us and other discrete items.
−Removed: Consolidation and Other Investments.
−Removed: We consolidate entities in which we own more than 50% of the voting common stock and control operations and also variable interest entities for which we are the primary beneficiary.
−Removed: Investments in nonconsolidated affiliates in which we own more than 20% of the voting common stock or otherwise exercise significant influence over operating and financial policies, but not control of the nonconsolidated affiliate, are accounted for using the equity method of accounting.
−Removed: Investments in nonconsolidated affiliates in which we own less than 20% of the voting common stock, or do not exercise significant influence over operating and financial policies, are recorded at fair value using quoted market prices if the investment has a readily determinable fair value.
−Removed: If an equity investment's fair value is not readily determinable, we will recognize it at cost less any impairment, adjusted for observable price changes in orderly transactions in the investees' securities that are identical or similar to our investments in the investee.
−Removed: The unrealized gains and losses and the adjustments related to the observable price changes are recognized in net income (loss).
−Removed: We regularly review our investments for impairment, including when the carrying value of an investment exceeds its market value and whether the decline in value is other-than-temporary.
−Removed: For investments accounted for using the equity method of accounting or equity investments without a readily determinable fair value, we evaluate information available (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market prices, if any, in determining whether an other-than-temporary decline in value exists.
−Removed: Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults and subsequent rounds of financing at an amount below the cost basis of our investment.
−Removed: The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions.
−Removed: As of December 31, 2020, our investments included investments in equity method investees of $30.4 million, and other investments of $2.1 million.
−Removed: If we determine that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to earnings.
−Removed: Factors that are considered by us in determining whether an other-than-temporary decline in value has occurred include (i) the market value of the security in relation to its cost basis, (ii) the financial condition of the investee, and (iii) our intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.
−Removed: Business Combinations.
−Removed: We account for our business combinations under the acquisition method of accounting.
−Removed: Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value.
−Removed: Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities.
−Removed: Determining the fair value of assets acquired, liabilities assumed and noncontrolling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items.
−Removed: Recent Accounting Pronouncements
−Removed: See Note 1 to the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.
+Added: Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the overall level of pre-tax income (loss), the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, any changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, changes in valuation allowances against our deferred tax assets, tax planning strategies available to us and other discrete items.
RESULTS OF OPERATIONS
−Removed: Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019
+Added: Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
Consolidated Results of Operations
−Removed: The following table sets forth our consolidated results of operations for the three months ended December 31, 2020 and 2019:
+Added: The following table sets forth our consolidated results of operations for the three months ended June 30, 2021 and 2020.
+Added: The Media Networks segment results of operations for the three months ended June 30, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of Other Streaming Services).
+Added: We sold our interest in Pantaya on March 31, 2021.
+Added: See Note 2 to our unaudited condensed consolidated financial statements for further information.
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 2020 Amount Percent
3 unchanged sentences
Media Networks 382.3 367.3 15.0 4.1 %
−Removed: Intersegment eliminations (48.3) (47.2) (1.1) 2.3 %
+Added: Intersegment eliminations (158.4) (30.0) (128.4) nm
Total revenues 901.2 813.7 87.5 10.8 %
5 unchanged sentences
Total expenses 880.9 724.3 156.6 21.6 %
−Removed: Operating income (loss) 37.1 (39.5) 76.6 (193.9) %
+Added: Operating income 20.3 89.4 (69.1) (77.3) %
Interest expense (41.7) (44.4) 2.7 (6.1) %
1 unchanged sentence
Other expense (1.7) (1.7) — — %
−Removed: Loss on extinguishment of debt — (1.4) 1.4 (100.0) %
−Removed: Equity interests loss (0.7) (4.6) 3.9 (84.8) %
−Removed: Loss before income taxes (10.2) (95.8) 85.6 nm
+Added: Loss on extinguishment of debt (26.6) — (26.6) n/a
+Added: Gain (loss) on investments (0.1) 5.1 (5.2) nm
+Added: Equity interests income (loss) 0.7 (2.6) 3.3 (126.9) %
+Added: Income (loss) before income taxes (45.2) 47.5 (92.7) (195.2) %
Income tax provision (6.5) (1.3) (5.2) 400.0 %
−Removed: Net loss (17.2) (97.8) 80.6 nm
+Added: Net income (loss) (51.7) 46.2 (97.9) (211.9) %
Net loss attributable to noncontrolling interest 6.3 4.9 1.4 28.6 %
−Removed: Net loss attributable to Lions Gate Entertainment Corp.
−Removed: shareholders $ (13.9) $ (91.2) $ 77.3 nm
+Added: Net income (loss) attributable to Lions Gate Entertainment Corp.
+Added: shareholders $ (45.4) $ 51.1 $ (96.5) (188.8) %
_______________________
nm - Percentage not meaningful.
−Removed: Consolidated revenues decreased in the three months ended December 31, 2020 primarily due to a decrease in Motion Picture revenues, which were negatively impacted by the COVID-19 global pandemic, partially offset by increased Television Production and Media Networks revenues.
−Removed: With theaters mostly closed during the quarter due to circumstances associated with the COVID-19 global pandemic, Motion Picture revenue decreased primarily due to lower theatrical and international revenue.
−Removed: The decrease was also, to a lesser extent, due to lower home entertainment packaged media revenue due to fewer home entertainment releases in the quarter, and lower television revenue.
−Removed: Television Production revenue increased due to higher home entertainment revenue and, to a lesser extent, increased international revenue.
−Removed: These increases were partially offset by lower domestic television revenue due to significant revenue in the prior year's quarter from House of Payne .
−Removed: The increase in Media Networks revenue was due to increased revenue across STARZPLAY International, Starz Networks and Other Streaming Services.
+Added: Consolidated revenues increased in the three months ended June 30, 2021, due to an increase in Television Production revenue, and to a lesser extent, increases in Media Networks and Motion Picture revenues, partially offset by increased intersegment eliminations associated with higher Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.
+Added: As theaters have begun to reopen in certain locations with reduced capacity, Motion Picture revenue increased in the current quarter due to higher theatrical and international revenue associated with a greater number of theatrical and international releases, offset partially by lower home entertainment and television revenue.
+Added: Television Production revenue increased due to higher domestic television revenue with a greater number of television episodes delivered, and increased intersegment revenues from the licensing of Starz original series as compared to the prior year's quarter, which was negatively impacted by the pausing of productions associated with the COVID-19 global pandemic.
+Added: The increase was also, to a lesser extent, due to higher international revenue and other revenue.
+Added: These increases were partially offset by decreased home entertainment digital media revenue.
+Added: Media Networks revenue increased due to increased revenue across STARZPLAY International and Starz Networks, partially offset by a decrease due to the prior year's quarter including revenue from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line).
See further discussion in the Segment Results of Operations section below.
Direct Operating Expenses.
−Removed: Direct operating expenses by segment were as follows for the three months ended December 31, 2020 and 2019:
+Added: Direct operating expenses by segment were as follows for the three months ended June 30, 2021 and 2020:
Three Months Ended
6 unchanged sentences
Media Networks 158.8 41.5 168.0 45.7 (9.2) (5.5) %
−Removed: COVID-19 related charges 8.6 nm — nm 8.6 n/a
+Added: COVID-19 related charges 1.6 nm 5.7 nm (4.1) (71.9) %
Other 0.5 nm 0.7 nm (0.2) (28.6) %
−Removed: Intersegment eliminations (44.3) nm (49.2) nm 4.9 (10.0) %
+Added: Intersegment eliminations (167.0) nm (22.3) nm (144.7) nm
$ 486.2 54.0 % $ 423.0 52.0 % $ 63.2 14.9 %
1 unchanged sentence
nm - Percentage not meaningful.
−Removed: Direct operating expenses decreased in the three months ended December 31, 2020, primarily due to lower Motion Picture revenue and lower other direct operating expense related to certain programming and content charges in the prior year's quarter (as further described below).
−Removed: These decreases were partially offset by an increase from Media Networks and COVID-19 related charges (as further described below).
−Removed: The increase in Media Networks direct operating expense was due to increases at Starz Networks from higher programming amortization in the current year's quarter, partially offset by lower direct operating expense at STARZPLAY International.
−Removed: In addition, intersegment eliminations decreased slightly in the quarter, primarily due to lower Television Production revenue and direct operating costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.
+Added: Direct operating expenses increased in the three months ended June 30, 2021 primarily due to higher Television Production revenue, partially offset by slightly lower Media Networks and Motion Picture direct operating expense and lower COVID-19 related charges (as further described below).
+Added: The increase in Television Production direct operating expense was partially offset by the increase in intersegment eliminations, which primarily relate to Television Production direct operating costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.
+Added: Media Networks direct operating expense decreased due to a decrease at Starz Networks, partially offset by an increase at STARZPLAY International.
See further discussion in the Segment Results of Operations section below.
COVID-19 Related Charges.
−Removed: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended December 31, 2020 we incurred $8.6 million in incremental costs which were expensed in the period which are included in consolidated direct operating expense and are excluded from segment direct operating expense.
−Removed: These costs include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.
+Added: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended June 30, 2021 and 2020, we incurred $1.6 million and $5.7 million, respectively, in incremental costs which were expensed in the periods which are included in consolidated direct operating expense and are excluded from segment direct operating expense.
+Added: These costs include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries.
We expect to incur additional incremental costs in future periods.
−Removed: We are 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 our consolidated financial statements.
−Removed: During the three months ended December 31, 2019, in connection with management changes, we implemented changes to our programming and broadcasting strategy including programming acquired or produced under prior management.
−Removed: As a result, we recorded certain programming and content charges of $74.0 million in the prior year's quarter, which are excluded from segment operating results, but included in direct operating expense in the unaudited condensed consolidated statement of operations and reflected in the "other" line item above.
−Removed: In addition, "other" direct operating expenses in the table above includes the amortization of the non-cash fair value adjustments on film and television assets associated with the application of purchase accounting related to recent acquisitions.
+Added: If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to
+Added: improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021.
+Added: We are in the process of seeking additional insurance recovery for some of these costs.
+Added: The ultimate amount of insurance recovery cannot be estimated at this time.
+Added: Other direct operating expenses in the table above includes the amortization of the non-cash fair value adjustments on film and television assets associated with the application of purchase accounting related to recent acquisitions.
Distribution and Marketing Expenses.
−Removed: Distribution and marketing expenses by segment were as follows for the three months ended December 31, 2020 and 2019:
+Added: Distribution and marketing expenses by segment were as follows for the three months ended June 30, 2021 and 2020:
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 2020 Amount Percent
4 unchanged sentences
Media Networks 114.2 107.0 7.2 6.7 %
−Removed: COVID-19 related charges 5.4 — 5.4 n/a
−Removed: Other 0.2 0.2 — — %
+Added: COVID-19 related charges — 4.7 (4.7) (100.0) %
+Added: Other 0.1 — 0.1 n/a
$ 217.6 $ 141.7 $ 75.9 53.6 %
−Removed: theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 7.4 $ 120.9 $ (113.5) (93.9) %
−Removed: Distribution and marketing expenses decreased in the three months ended December 31, 2020, primarily due to a decrease in Motion Picture theatrical P&A, partially offset by increased Media Networks distribution and marketing expense.
−Removed: The decrease in Motion Picture theatrical P&A was primarily impacted by the COVID-19 global pandemic and associated closure of theaters.
−Removed: The increase in Media Networks distribution and marketing expense was driven by increases at Starz Networks, and STARZPLAY International.
+Added: theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 57.9 $ — $ 57.9 n/a
+Added: Distribution and marketing expenses increased in the three months ended June 30, 2021, due to an increase in Motion Picture theatrical P&A as theaters have begun to reopen in certain locations with reduced capacity, and increased Media Networks distribution and marketing expense, partially offset by lower COVID-19 related charges (as further described below).
+Added: The increase in Media Networks distribution and marketing expense was due to an increase at Starz Networks, partially offset by a decrease due to the prior year's quarter including distribution and marketing expense from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line).
See further discussion in the Segment Results of Operations section below.
−Removed: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended December 31, 2020 we incurred $5.4 million in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit.
+Added: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended June 30, 2021 and 2020, we incurred immaterial amounts and $4.7 million, respectively, in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit.
These charges are excluded from segment operating results.
We expect to incur additional incremental costs in future periods.
+Added: If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021.
General and Administrative Expenses.
−Removed: General and administrative expenses by segment were as follows for the three months ended December 31, 2020 and 2019:
+Added: General and administrative expenses by segment were as follows for the three months ended June 30, 2021 and 2020:
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 % of Revenues 2020 % of Revenues Amount Percent
9 unchanged sentences
Total general and administrative expenses $ 130.6 14.5% $ 109.0 13.4% $ 21.6 19.8 %
−Removed: General and administrative expenses increased in the three months ended December 31, 2020, resulting from increases in Motion Picture and Media Networks general and administrative expenses and increases in share-based compensation expense and purchase accounting and related adjustments, partially offset by decreased Television Production general and administrative expenses.
+Added: General and administrative expenses increased in the three months ended June 30, 2021, resulting from increases in share-based compensation expense, purchase accounting and related adjustments, and a slight increase in Media Networks general and administrative expenses, partially offset by decreased Motion Picture, Corporate and Television Production general and administrative expenses.
See further discussion in the Segment Results of Operations section below.
−Removed: Corporate general and administrative expenses were comparable to the prior year's quarter.
−Removed: The increase in share-based compensation expense included in general and administrative expense in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019 is primarily due to an increase in the number of share-based payment awards incurring expense in the current quarter as compared to the prior year's quarter.
+Added: Corporate general and administrative expenses decreased $2.1 million, or 8.0%, primarily due to a decrease in incentive based compensation.
+Added: The increase in share-based compensation expense included in general and administrative expense in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020 is primarily due to higher fair values associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved.
+Added: Additionally, the increase in share-based compensation expense is due to an increase in the number of share-based payment awards incurring expense in the current quarter as compared to the prior year's quarter.
The following table reconciles this amount to total share-based compensation expense:
9 unchanged sentences
Depreciation and Amortization Expense.
−Removed: Depreciation and amortization of $45.8 million in the three months ended December 31, 2020 decreased $6.1 million, from $51.9 million in the three months ended December 31, 2019.
+Added: Depreciation and amortization of $43.3 million for the three months ended June 30, 2021 decreased $4.3 million, from $47.6 million in the three months ended June 30, 2020.
Restructuring and Other.
−Removed: Restructuring and other decreased $1.3 million in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.
−Removed: Restructuring and other costs were as follows for the three months ended December 31, 2020 and 2019 (see Note 13 to our unaudited condensed consolidated financial statements):
+Added: Restructuring and other increased $0.2 million in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.
+Added: Restructuring and other costs were as follows for the three months ended June 30, 2021 and 2020 (see Note 13 to our unaudited condensed consolidated financial statements):
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 2020 Amount Percent
4 unchanged sentences
COVID-19 related charges (2)
−Removed: 0.8 — 0.8 n/a
+Added: 0.3 0.5 (0.2) (40.0) %
Transaction and related costs (3)
2 unchanged sentences
_______________________
−Removed: (1) Severance costs in the three months ended December 31, 2020 and 2019 were primarily related to restructuring activities in connection with recent acquisitions, and other cost-saving initiatives.
−Removed: (2) During the three months ended December 31, 2020, the Company has incurred certain costs primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.
−Removed: (3) Transaction and related costs in the three months ended December 31, 2020 and 2019 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
+Added: (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.
+Added: (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.
+Added: 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.
+Added: (3) Transaction and related costs in the three months ended June 30, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
Interest Expense.
−Removed: Interest expense of $45.0 million for the three months ended December 31, 2020 decreased $3.7 million, from $48.7 million in the three months ended December 31, 2019, due to lower interest expense on the term loans partially offset by an increase in amortization of debt financing costs and other non-cash interest.
−Removed: The decrease in interest expense on the term loans is primarily due to reductions of the outstanding principal amounts from required and voluntary principal payments since the prior year's quarter ended December 31, 2019, and the lower LIBOR rate in the current quarter.
−Removed: The increase in amortization of debt financing costs and other non-cash interest is due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).
−Removed: The following table sets forth the components of interest expense for the three months ended December 31, 2020 and 2019:
+Added: Interest expense of $41.7 million in the three months ended June 30, 2021 decreased $2.7 million from the three months ended June 30, 2020, due to lower interest expense on the term loans, Senior Notes and other cash-based interest related to payments associated with the Company's interest rate swaps.
+Added: These decreases were partially offset by an increase in amortization of debt financing costs, and other non-cash interest due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).
+Added: The following table sets forth the components of interest expense for the three months ended June 30, 2021 and 2020:
Three Months Ended
1 unchanged sentence
Interest Expense
−Removed: Revolving credit facilities $ 1.2 $ 1.9
+Added: Revolving credit facility $ 1.4 $ 1.1
Term loans 8.6 10.7
Senior Notes 13.4 15.9
−Removed: 6.375% Senior Notes 8.9 8.9
Amortization of debt financing costs, and other non-cash interest (2)
4 unchanged sentences
Other Expense.
−Removed: Other expense of $2.1 million for the three months ended December 31, 2020 compared to other expense of $3.6 million for the three months ended December 31, 2019, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).
+Added: Other expense of $1.7 million for the three months ended June 30, 2021 compared to other expense of $1.7 million for the three months ended June 30, 2020, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).
Loss on Extinguishment of Debt.
−Removed: Loss on extinguishment of debt for the three months ended December 31, 2019 was $1.4 million related to early repayments of $101.9 million in principal outstanding on the Term Loan B, with no comparable loss in the three months ended December 31, 2020.
+Added: Loss on extinguishment of debt for the three months ended June 30, 2021 related to the write-off of a portion of debt issuance costs (including a portion of call premiums) associated with the redemption of the 5.875% Senior Notes and 6.375% Senior Notes and associated issuance of the 5.500% Senior Notes, the amendment of our
+Added: credit agreement to extend the maturity of a portion of our revolving credit commitments and a portion of our outstanding term A loans, and repurchases of the Term Loan B.
+Added: There was no comparable loss in the three months ended June 30, 2020.
See Note 5 to our unaudited condensed consolidated financial statements.
−Removed: Equity Interests Loss.
−Removed: Equity interests loss of $0.7 million in the three months ended December 31, 2020 compared to equity interests loss of $4.6 million in the three months ended December 31, 2019.
+Added: Gain (Loss) on Investments.
+Added: Loss on investments of $0.1 million for the three months ended June 30, 2021 compared to a gain on investments of $5.1 million for the three months ended June 30, 2020, primarily due to a gain on sale of equity securities without readily determinable fair values in the prior year's quarter.
+Added: Equity Interests Income (Loss).
+Added: Equity interests income of $0.7 million in the three months ended June 30, 2021 compared to equity interests loss of $2.6 million in the three months ended June 30, 2020 due to lower losses from our equity method investees in the current quarter.
Income Tax Provision.
−Removed: We had an income tax provision of $7.0 million in the three months ended December 31, 2020, compared to an income tax provision of $2.0 million in the three months ended December 31, 2019.
+Added: We had an income tax provision of $6.5 million in the three months ended June 30, 2021, compared to an income tax provision of $1.3 million in the three months ended June 30, 2020.
Our income tax provision differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, changes in the valuation allowance against our deferred tax assets, and certain minimum taxes and foreign withholding taxes.
−Removed: Our income tax provision for the three 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.
−Removed: Net Loss Attributable to Lions Gate Entertainment Corp.
+Added: Our income tax provision for the three months ended June 30, 2021 was also impacted by the additional accrual of interest and penalties on uncertain tax benefits.
+Added: Our income tax provision for the three months ended June 30, 2020 was also impacted by the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.
+Added: Net Income (Loss) Attributable to Lions Gate Entertainment Corp.
Shareholders.
−Removed: Net loss attributable to our shareholders for the three months ended December 31, 2020 was $13.9 million, or basic and diluted net loss per common share of $0.06 on 220.8 million weighted average common shares outstanding.
−Removed: This compares to net loss attributable to our shareholders for the three months ended December 31, 2019 of $91.2 million, or basic and diluted net loss per common share of $0.42 on 218.0 million weighted average common shares outstanding.
+Added: Net loss attributable to our shareholders for the three months ended June 30, 2021 was $45.4 million, or basic and diluted net loss per common share of $0.20 on 221.8 million weighted average common shares outstanding.
+Added: This compares to net income attributable to our shareholders for the three months ended June 30, 2020 of $51.1 million, or basic net income per common share of $0.23 on 219.5 million weighted average common shares outstanding and diluted net income per common share of $0.23 on 219.9 million weighted average common shares outstanding.
Segment Results of Operations
2 unchanged sentences
Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses.
−Removed: 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.
+Added: 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.
1 unchanged sentence
Motion Picture
−Removed: The table below sets forth Motion Picture gross contribution and segment profit for the three months ended December 31, 2020 and 2019:
+Added: The table below sets forth Motion Picture gross contribution and segment profit for the three months ended June 30, 2021 and 2020:
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 2020 Amount Percent
3 unchanged sentences
Direct operating expense 127.1 127.7 (0.6) (0.5) %
−Removed: Distribution & marketing expense 37.5 177.0 (139.5) (78.8) %
+Added: Distribution & marketing expense 95.4 23.1 72.3 nm
Gross contribution 68.7 129.9 (61.2) (47.1) %
1 unchanged sentence
Segment profit $ 44.3 $ 101.1 $ (56.8) (56.2) %
−Removed: theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 7.4 $ 120.9 $ (113.5) (93.9) %
+Added: theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 57.9 $ — $ 57.9 n/a
Direct operating expense as a percentage of revenue 43.6 % 45.5 %
Gross contribution as a percentage of revenue 23.6 % 46.3 %
−Removed: The table below sets forth Motion Picture revenue by media and product category for the three months ended December 31, 2020 and 2019:
−Removed: Three Months Ended December 31,
+Added: _______________________
+Added: nm - Percentage not meaningful.
+Added: The table below sets forth Motion Picture revenue by media and product category for the three months ended June 30, 2021 and 2020:
+Added: Three Months Ended June 30,
2021 2020 Total Increase (Decrease)
19 unchanged sentences
Includes direct-to-DVD motion pictures, acquired and licensed brands, third-party library product and ancillary-driven platform theatrical releases through our specialty films distribution labels including Lionsgate Premiere, through Good Universe, and with our equity method investees, Roadside Attractions and Pantelion Films, and other titles.
−Removed: With theaters mostly closed during the quarter due to circumstances associated with the COVID-19 global pandemic, theatrical revenue decreased $107.2 million, or 98.3%, in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019.
−Removed: The prior year's quarter included significant revenue from Knives Out and Midway .
−Removed: Home entertainment revenue decreased $31.4 million, or 16.4%, in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019, primarily due to a decrease of $39.0 million in packaged media revenues from our fiscal 2021 theatrical slate in our Feature Film category and decreases in our Other Film category.
−Removed: Digital media revenues this quarter includes revenues from the initial release on a streaming platform of Run, and to a lesser extent, revenue from the Premium VOD release of Antebellum, both of which represented a change in initial release strategy from theatrical release due to circumstances associated with the COVID-19 global pandemic.
−Removed: In addition, the prior year's quarter included significant revenue from Angel Has Fallen, Rambo:
−Removed: Last Blood, and John Wick:
−Removed: Chapter 3 - Parabellum.
−Removed: Television revenue decreased $38.3 million, or 51.4%, in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019, due to fewer television windows opening (and revenue recognized) than in the prior year's quarter.
−Removed: International revenue decreased $48.1 million, or 50.1%, in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019 due to lower revenue from our fiscal 2021 theatrical slate in the current quarter, which had no new significant theatrical releases due to circumstances associated with the COVID-19 global pandemic, as compared to the revenue generated from our fiscal 2020 theatrical slate in the prior year's quarter, which included significant revenue from Knives Out and John Wick:
−Removed: Chapter 3 - Parabellum.
−Removed: We expect that Motion Picture segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international theatrical distribution and production as a result of the closure of theaters and paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic.
−Removed: The extent of the impact on Motion Picture segment revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, global economic conditions, the ability for theaters to re-open at a scale to attract motion pictures and the rate of consumers' return to the theater.
+Added: Theatrical revenue increased $28.1 million in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 due to revenue in the quarter from The Hitman's Wife's Bodyguard and Spiral, as theaters have begun to reopen in certain locations with reduced capacity.
+Added: In the prior year's quarter, theaters were mostly closed due to circumstances associated with the COVID-19 global pandemic.
+Added: Home entertainment revenue decreased $21.0 million, or 12.6%, in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, due to lower digital media and packaged media revenues as a result of fewer home entertainment releases from our fiscal 2021 theatrical slate in our Feature Film category due to circumstances associated with the COVID-19 global pandemic.
+Added: Digital media revenue in the prior year's quarter included significant revenue from our fiscal 2020 theatrical slate ( I Still Believe and Knives Out).
+Added: Television revenue decreased $7.7 million, or 13.2%, in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020 due to fewer television windows opening (and revenue recognized) than in the prior year's quarter.
+Added: International revenue increased $10.3 million, or 19.6%, in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020 due to higher revenue from our fiscal 2021 and 2022 theatrical slates in the current quarter as theaters have begun to reopen in certain locations with reduced capacity, while the prior year's quarter had no new theatrical releases due to circumstances associated with the COVID-19 global pandemic.
+Added: If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we currently expect that Motion Picture segment revenues will increase in fiscal 2022 as compared to fiscal 2021.
+Added: The extent of the increase, if any, to Motion Picture segment revenues, will depend on, among other things, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, general global economic conditions, the rate at which theaters are able to re-open at scale, the rate of consumers' return to the theaters, and the impact of a potentially crowded marketplace from movies which are awaiting theatrical release in the market.
+Added: The evolving and uncertain nature of the situation could result in
+Added: further interruptions to our operations, including delays in domestic and international theatrical distribution and production and the pausing of productions, which could impact Motion Picture segment revenues.
Direct Operating Expense.
−Removed: The decrease in direct operating expenses is due to a decrease in Motion Picture revenues.
−Removed: The increase in direct operating expenses as a percentage of motion picture revenue was driven by the change in the mix of titles and product categories generating revenue in the current quarter as compared to the prior year's quarter.
−Removed: The prior year's quarter included significant revenue from Knives Out, John Wick:
−Removed: Chapter 3 - Parabellum, Angel Has Fallen and Rambo:
−Removed: Last Blood , and the current quarter had fewer theatrical releases and lower revenues from our fiscal 2021 theatrical slate due to circumstances associated with the COVID-19 global pandemic.
−Removed: Investment in film write-downs included in Motion Picture segment direct operating expense for the quarter were $13.7 million in the three months ended December 31, 2020, as compared to $37.2 million in the three months ended December 31, 2019.
+Added: The decrease in direct operating expenses is due to lower direct operating expenses as a percentage of motion picture revenue, driven by the change in the mix of titles and product categories generating revenue in the current quarter as compared to the prior year's quarter.
+Added: In particular, the decrease was impacted by the lower amortization rate of the fiscal 2022 and prior theatrical slate titles generating revenue in the current quarter as compared to the prior year's quarter.
+Added: There were no investment in film write-downs included in Motion Picture segment direct operating expense in the three months ended June 30, 2021, as compared to $0.6 million in the three months ended June 30, 2020.
Distribution and Marketing Expense.
−Removed: The decrease in distribution and marketing expense in the three months ended December 31, 2020 is due to lower theatrical P&A expense associated with the closure of theaters during the quarter due to circumstances associated with the COVID-19 global pandemic.
−Removed: Theatrical P&A and Premium VOD expense in the current quarter includes expense associated with the theatrical and Premium VOD release of Fatale.
−Removed: In the three months ended December 31, 2020, approximately $1.7 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters.
−Removed: In the three months ended December 31, 2019, approximately $7.0 million of P&A was incurred in advance for films to be released in subsequent quarters, such as Barb and Star Go To Vista Del Mar and I Still Believe .
+Added: The increase in distribution and marketing expense in the three months ended June 30, 2021 is due to higher theatrical P&A and premium video-on-demand ("Premium VOD") expense compared to the prior year's quarter, which had no theatrical P&A expense in the Motion Picture segment due to the closure of theaters as a result of circumstances associated with the COVID-19 global pandemic.
+Added: Theatrical P&A and Premium VOD expense in the three months ended June 30, 2021 includes expense associated with the release of The Hitman's Wife's Bodyguard, Spiral and Voyagers.
+Added: In the three months ended June 30, 2021, approximately $2.7 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, with no comparable expense in the Motion Picture segment in the prior year's quarter.
Gross Contribution.
−Removed: While Motion Picture revenue declined during the quarter as discussed above, gross contribution of the Motion Picture segment for the three months ended December 31, 2020 increased 3.0% as compared to the three months ended December 31, 2019, due to lower distribution and marketing expense as a percentage of Motion Picture revenue.
+Added: Gross contribution of the Motion Picture segment for the three months ended June 30, 2021 decreased as compared to the three months ended June 30, 2020 due to higher Motion Picture distribution and marketing expense as a percentage of Motion Picture revenue.
General and Administrative Expense.
−Removed: General and administrative expenses of the Motion Picture segment increased $1.2 million, or 4.8%, primarily due to an increase in incentive compensation partially offset by decreases in salaries and related expenses, rent, facility and travel and related expenses.
+Added: General and administrative expenses of the Motion Picture segment in the three months ended June 30, 2021 decreased $4.4 million, or 15.3%, primarily due to decreases in incentive based compensation and salaries and related compensation.
Television Production
−Removed: The table below sets forth Television Production gross contribution and segment profit for the three months ended December 31, 2020 and 2019:
+Added: The table below sets forth Television Production gross contribution and segment profit for the three months ended June 30, 2021 and 2020:
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 2020 Amount Percent
4 unchanged sentences
Distribution & marketing expense 7.9 6.9 1.0 14.5 %
−Removed: Gross contribution 39.0 4.4 34.6 nm
+Added: Gross contribution 13.0 45.6 (32.6) (71.5) %
General and administrative expenses 10.0 10.7 (0.7) (6.5) %
−Removed: Segment profit $ 29.5 $ (5.7) $ 35.2 nm
+Added: Segment profit $ 3.0 $ 34.9 $ (31.9) (91.4) %
Direct operating expense as a percentage of revenue 94.6 % 73.2 %
Gross contribution as a percentage of revenue 3.4 % 23.3 %
−Removed: ________________________
−Removed: nm - Percentage not meaningful.
−Removed: The table below sets forth Television Production revenue and changes in revenue by media for the three months ended December 31, 2020 and 2019:
+Added: The table below sets forth Television Production revenue and changes in revenue by media for the three months ended June 30, 2021 and 2020:
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 2020 Amount Percent
−Removed: (Amounts in millions)
−Removed: Television Production Revenue
+Added: Television Production (Amounts in millions)
Television $ 272.2 $ 95.9 $ 176.3 183.8 %
1 unchanged sentence
Home Entertainment
−Removed: Digital 58.0 10.0 48.0 nm
−Removed: Packaged Media 3.1 0.6 2.5 nm
−Removed: Total Home Entertainment 61.1 10.6 50.5 nm
+Added: Digital 24.5 45.9 (21.4) (46.6) %
+Added: Packaged Media 2.3 0.7 1.6 228.6 %
+Added: Total Home Entertainment 26.8 46.6 (19.8) (42.5) %
Other 19.6 6.8 12.8 188.2 %
$ 386.1 $ 195.7 $ 190.4 97.3 %
−Removed: ________________________
−Removed: nm - Percentage not meaningful.
The primary component of Television Production revenue is domestic television revenue.
−Removed: Domestic television revenue decreased in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019, primarily due to significant revenue in the prior year's quarter from House of Payne .
−Removed: International revenue in the three months ended December 31, 2020 increased $8.6 million, or 49.4%, primarily due to increased intersegment revenues from STARZPLAY International from the licensing of Starz original series.
−Removed: Home entertainment revenue in the three months ended December 31, 2020 increased $50.5 million due to significant digital media revenue in the current quarter for Power Season 6 and Mad Men Seasons 1 to 7.
−Removed: Other revenue includes revenue from 3 Arts Entertainment, which increased in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019 driven by new producer fees and back-end participations as production activity increased in the quarter.
−Removed: Revenue from 3 Arts Entertainment was negatively impacted in prior quarters as a result of the COVID-19 global pandemic related disruptions.
−Removed: The extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases returning to and remaining at pre COVID-19 levels.
−Removed: We expect that Television Production segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international distribution and production as a result of paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic.
−Removed: The extent of the impact of the COVID-19 global pandemic related disruptions on Television Production revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global economic conditions related to the COVID-19 global pandemic.
+Added: Domestic television revenue increased in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, due to a greater number of television episodes delivered, increased intersegment revenues from the licensing of Starz original series (Power Book III:
+Added: Raising Kanan, Blindspotting Season 1, Heels Season 1 among others), and increased revenue from reality television series, all of which were negatively impacted in the prior year's quarter by disruptions associated with the COVID-19 global pandemic and the associated pausing of productions.
+Added: International revenue in the three months ended June 30, 2021 increased $21.1 million, or 45.5% as compared to the three months ended June 30, 2020 due to revenue in the current quarter from Dear White People Season 4 and higher intersegment revenues from STARZPLAY International from the licensing of Starz original series.
+Added: Home entertainment revenue in the three months ended June 30, 2021 decreased $19.8 million due to significant digital media revenue in the prior year's quarter for Mad Men Seasons 1 - 7.
+Added: Other revenue increased in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
+Added: The increase is primarily due to revenue of 3 Arts Entertainment, which was negatively impacted in the three months ended June 30, 2020 as a result of the COVID-19 global pandemic related disruptions.
+Added: While television production has mostly resumed, the extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases fully returning to and remaining at pre COVID-19 levels.
+Added: If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we currently expect that Television Production segment revenues will increase in fiscal 2022 as compared to fiscal 2021.
+Added: The extent of the increase, if any, to Television Production segment revenues, will depend on, among other things, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, and general global economic conditions.
+Added: The evolving and uncertain nature of the situation could result in further interruptions to our operations, including delays in domestic and international distribution and production throughout the U.S., Canada and worldwide, and the pausing of productions, which could impact Television Production segment revenues.
Direct Operating Expense.
−Removed: Direct operating expense of the Television Production segment in the three months ended December 31, 2020 increased $4.3 million, or 2.4%.
−Removed: Direct operating expenses as a percentage of television production revenue decreased primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter.
−Removed: In particular, the current quarter included significant revenue from higher margin television series, such as Mad Men , as compared to the prior year's quarter which included newer television programs, which typically result in higher amortization expenses in relation to revenues initially.
+Added: Direct operating expense of the Television Production segment in the three months ended June 30, 2021 increased $222.0 million, or 155.0% due to the increase in Television Production revenues.
+Added: Direct operating expenses as a percentage of television production revenue increased primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter, and in particular, due to the recent ramp up of production, the current quarter included a greater number of deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue.
+Added: Due to the increase in cost associated with production and changes in season orders, the current quarter also included increased write-downs to fair value of investment in film and television programs amounting to $25.0 million in aggregate.
+Added: This compared to lower direct operating expenses as a percentage of television revenue in the prior year's quarter, which included fewer deliveries of newer shows primarily associated with the pausing of productions due to the COVID-19
+Added: global pandemic related disruptions.
Gross Contribution.
−Removed: Gross contribution of the Television Production segment for the three months ended December 31, 2020 increased as compared to the three months ended December 31, 2019, due to increased television production revenue and lower direct operating expenses as a percentage of television production revenue.
+Added: Gross contribution of the Television Production segment for the three months ended June 30, 2021 decreased as compared to the three months ended June 30, 2020, due to higher direct operating expenses as a percentage of television production revenue, partially offset by higher television production revenue.
General and Administrative Expense.
−Removed: General and administrative expenses of the Television Production segment decreased $0.6 million, or 5.9%, primarily due to decreases in rent, facility and travel and related costs.
+Added: General and administrative expenses of the Television Production segment decreased $0.7 million, or 6.5%.
Media Networks
−Removed: The table below sets forth Media Networks gross contribution and segment profit for the three months ended December 31, 2020 and 2019.
+Added: The table below sets forth Media Networks gross contribution and segment profit for the three months ended June 30, 2021 and 2020.
+Added: The Media Networks segment results of operations for the three months ended June 30, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of our former Other Streaming Services product line).
+Added: We sold our interest in Pantaya on March 31, 2021.
+Added: See Note 2 to our unaudited condensed consolidated financial statements for further information.
Three Months Ended
−Removed: December 31, Increase (Decrease)
+Added: June 30, Increase (Decrease)
2021 2020 Amount Percent
11 unchanged sentences
Three Months Ended Three Months Ended
−Removed: December 31, 2020 December 31, 2019
−Removed: Starz Networks STARZPLAY International Other Streaming Services Total Media Networks Starz Networks STARZPLAY International Other Streaming Services Total Media Networks
+Added: June 30, 2021 June 30, 2020
+Added: Starz Networks STARZPLAY International Total Media Networks Starz Networks STARZPLAY International Other Streaming Services Total Media Networks
(Amounts in millions)
10 unchanged sentences
The table below sets forth, for the periods presented, subscriptions to our Media Networks and STARZPLAY Arabia services.
−Removed: The pro forma subscriber data as of December 31, 2019 reflects the number of subscribers as of December 31, 2019, adjusted to remove the estimated number of subscribers to MVPD video packages or MVPD bundles that include the Starz service for distributors who dropped or removed Starz from these highly distributed MVPD video packages or MVPD bundles.
−Removed: This is a key metric to show prior period subscribers on a comparable basis to December 31, 2020 quarter-end subscribers.
−Removed: An MVPD video package is an offering by our distributors to its customers of multiple distinct video networks or services for a single recurring price where there is no distinction of price on any one specific network.
−Removed: An MVPD bundle is an offering by our distributors to its customers of two or more distinct MVPD services, such as video, internet and phone, sold on a subscription basis to a consumer or subscriber for a single price, and may include additional premium channels, like STARZ, to promote the bundle offering.
−Removed: December 31, December 31, December 31,
−Removed: 2020 2019 2019
+Added: June 30, June 30,
(Amounts in millions)
−Removed: Domestic Subscribers
−Removed: STARZ 21.0 23.5 17.3
−Removed: Other Streaming Services (1)
−Removed: 21.9 24.1 17.9
−Removed: International Subscribers
+Added: Starz Domestic
+Added: Linear Subscribers 10.4 11.6
+Added: OTT Subscribers 9.7 7.4
+Added: Total 20.1 19.0
STARZPLAY International
+Added: Linear Subscribers 1.8 2.0
+Added: OTT Subscribers 5.2 1.4
+Added: Total 7.0 3.4
+Added: Linear Subscribers 12.2 13.6
+Added: OTT Subscribers 14.9 8.8
+Added: Total Starz 27.1 22.4
STARZPLAY Arabia (1)
5 unchanged sentences
___________________
−Removed: (1) Represents subscribers of our premium Spanish-language streaming service, Pantaya, which was launched in the quarter ended September 30, 2017.
(1) Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee.
+Added: (2) Due to the March 31, 2021 sale of Pantaya, total domestic and international subscribers, OTT subscribers and total global subscribers amounts have been adjusted from amounts previously reported for June 30, 2020 to exclude Pantaya in order to be consistent with the presentation at June 30, 2021.
+Added: Subscribers of Pantaya (all OTT) at June 30, 2020 amounted to 0.8 million.
(3) OTT subscribers includes subscribers of STARZPLAY Arabia, as presented above.
−Removed: The increase in Media Networks' revenue was driven by increased STARZPLAY International revenue of $11.6 million, increased Starz Networks revenue of $7.7 million and increased revenue from Other Streaming Services of $4.5 million.
−Removed: STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since December 31, 2019.
+Added: The increase in Media Networks' revenue was due to higher STARZPLAY International revenue of $14.1 million, and increased Starz Networks' revenue of $12.4 million, partially offset by a decrease due to the prior year's quarter including revenue from Pantaya (representing substantially all of Other Streaming Services), which was sold on March 31, 2021.
+Added: STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since June 30, 2020.
Starz Networks' revenue increased as a result of higher OTT revenue resulting from increased subscriptions, which was partially offset by declines in revenue from traditional linear services.
−Removed: As a result of events related to the COVID-19 global pandemic, television and streaming consumption around the globe continues to increase, as well as home entertainment demand.
−Removed: STARZ continues to achieve an increase in viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally.
−Removed: This increase in subscribers is dependent upon future economic conditions, our ability to deliver original content and may vary due to changes in consumer viewing and subscription patterns.
−Removed: However, it is too early to say whether this increase is indicative of future results and whether growth may slow as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic.
−Removed: During the three months ended December 31, 2020 and 2019, the following original series premiered on STARZ:
−Removed: Three Months Ended December 31, 2020* Three Months Ended December 31, 2019
−Removed: Inside the NXIVM Cult Dublin Murders
−Removed: The Spanish Princess Season 2
−Removed: * In addition, while Power Book II:
−Removed: Ghost premiered in the three months ended September 30, 2020, the series returned with a mid-season premiere in December 2020.
−Removed: Direct Operating and Distribution and Marketing Expenses .
−Removed: Direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively.
−Removed: The level of programming cost amortization and advertising and marketing costs and thus the gross contribution margin for the Media Networks' segment can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the network during the period.
−Removed: Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere.
−Removed: In addition, the launch of the STARZPLAY international service has and will continue to result in an increase in expenses as the service continues to expand.
−Removed: The increase in Media Networks direct operating expenses is due to higher direct operating expenses at Starz Networks, partially offset by lower direct operating expense at STARZPLAY International in the three months ended December 31, 2020.
−Removed: The increase in Starz Networks direct operating expense was primarily due to higher programming amortization related to our Starz Originals, and to a lesser extent, a benefit in the prior year's quarter of $4.6 million associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates.
−Removed: Direct operating expenses at STARZPLAY International decreased as a result of write downs of programming cost in the three months ended December 31, 2019 and prior quarters, which reduced the cost being amortized in the current quarter, partially offset by the continued expansion of STARZPLAY International.
−Removed: The increase in Media Networks distribution and marketing expense is due to an increase at Starz Networks, and STARZPLAY International.
−Removed: Starz Networks' distribution and marketing expense increased due to increased marketing spend to drive subscriber growth on the STARZ app and for Starz Original series during the three months ended December 31, 2020 as compared to the three months ended December 31, 2019.
−Removed: Distribution and marketing expense for STARZPLAY International increased due to an increase in advertising and marketing costs in order to drive subscriber growth in the international territories previously launched, and additional territories launched since December 31, 2019.
−Removed: Gross Contribution.
−Removed: The decrease in gross contribution of the Media Networks segment compared to the prior year's quarter was due to a decrease at Starz Networks due to increased direct operating expenses and distribution and marketing expenses as discussed above, which was partially offset by lower negative contributions from STARZPLAY International and Other Streaming Services.
−Removed: General and Administrative Expense.
−Removed: General and administrative expenses of the Media Networks segment in the three months ended December 31, 2020 increased slightly from the prior year's quarter, driven by slightly increased general and administrative expenses for STARZPLAY International and Other Streaming Services, partially offset by a slight decrease in Starz Networks.
−Removed: Nine Months Ended December 31, 2020 Compared to Nine Months Ended December 31, 2019
−Removed: Consolidated Results of Operations
−Removed: The following table sets forth our consolidated results of operations for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 2019 Amount Percent
−Removed: (Amounts in millions)
−Removed: Motion Picture $ 788.6 $ 1,277.6 $ (489.0) (38.3) %
−Removed: Television Production 621.0 743.2 (122.2) (16.4) %
−Removed: Media Networks 1,161.7 1,128.8 32.9 2.9 %
−Removed: Intersegment eliminations (176.3) (203.9) 27.6 (13.5) %
−Removed: Total revenues 2,395.0 2,945.7 (550.7) (18.7) %
−Removed: Direct operating 1,249.0 1,662.0 (413.0) (24.8) %
−Removed: Distribution and marketing 484.6 791.7 (307.1) (38.8) %
−Removed: General and administration 343.3 317.3 26.0 8.2 %
−Removed: Depreciation and amortization 142.9 143.0 (0.1) (0.1) %
−Removed: Restructuring and other 18.9 16.8 2.1 12.5 %
−Removed: Total expenses 2,238.7 2,930.8 (692.1) (23.6) %
−Removed: Operating income 156.3 14.9 141.4 949.0 %
−Removed: Interest expense (135.2) (145.7) 10.5 (7.2) %
−Removed: Interest and other income 2.2 7.0 (4.8) (68.6) %
−Removed: Other expense (4.5) (9.7) 5.2 (53.6) %
−Removed: Loss on extinguishment of debt — (1.4) 1.4 (100.0) %
−Removed: Gain (loss) on investments 0.3 (0.3) 0.6 nm
−Removed: Equity interests loss (5.1) (15.7) 10.6 (67.5) %
−Removed: Income (loss) before income taxes 14.0 (150.9) 164.9 (109.3) %
−Removed: Income tax provision (6.7) (6.5) (0.2) 3.1 %
−Removed: Net income (loss) 7.3 (157.4) 164.7 (104.6) %
−Removed: Net loss attributable to noncontrolling interest 11.5 14.0 (2.5) (17.9) %
−Removed: Net income (loss) attributable to Lions Gate Entertainment Corp.
−Removed: shareholders $ 18.8 $ (143.4) $ 162.2 (113.1) %
−Removed: _______________________
−Removed: nm - Percentage not meaningful.
−Removed: Consolidated revenues decreased in the nine months ended December 31, 2020, primarily due to decreases in Motion Picture and Television Production revenues, which were negatively impacted by the COVID-19 global pandemic, partially offset by increased Media Networks revenues and lower intersegment eliminations associated with lower Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.
−Removed: With theaters mostly closed during the period due to circumstances associated with the COVID-19 global pandemic, Motion Picture revenue decreased primarily due to lower theatrical and international revenue, and to a lesser extent, lower home entertainment packaged media revenue due to fewer home entertainment releases in the period, lower television and other revenue.
−Removed: Television Production revenue decreased due to lower domestic television revenue with fewer television episodes delivered, largely because of the pausing of productions associated with the COVID-19 global pandemic, and to a lesser extent, due to lower other revenue.
−Removed: These decreases were partially offset by an increase in home entertainment revenue and international revenue.
−Removed: The increase in Media Networks revenue was due to increased revenue across STARZPLAY International and Other Streaming Services, partially offset by decreased revenue at Starz Networks.
−Removed: See further discussion in the Segment Results of Operations section below.
−Removed: Direct Operating Expenses.
−Removed: Direct operating expenses by segment were as follows for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: 2020 2019 Increase (Decrease)
−Removed: Amount % of Segment Revenues Amount % of Segment Revenues Amount Percent
−Removed: (Amounts in millions)
−Removed: Direct operating expenses
−Removed: Motion Picture $ 373.0 47.3 % $ 625.1 48.9 % $ (252.1) (40.3) %
−Removed: Television Production 494.3 79.6 660.9 88.9 (166.6) (25.2) %
−Removed: Media Networks 504.6 43.4 499.8 44.3 4.8 1.0 %
−Removed: COVID-19 related charges 36.6 nm — nm 36.6 n/a
−Removed: Other 2.5 nm 82.7 nm (80.2) (97.0) %
−Removed: Intersegment eliminations (162.0) nm (206.5) nm 44.5 (21.5) %
−Removed: $ 1,249.0 52.2 % $ 1,662.0 56.4 % $ (413.0) (24.8) %
−Removed: _______________________
−Removed: nm - Percentage not meaningful.
−Removed: Direct operating expenses decreased in the nine months ended December 31, 2020 primarily due to lower Motion Picture and Television Production revenue and lower other direct operating expense related to certain programming and content charges in the prior year's period (as further described below).
−Removed: These decreases were partially offset by an increase from Media Networks and COVID-19 related charges (as further described below).
−Removed: The decrease in Television Production direct operating expense was partially offset by the decrease in intersegment eliminations, which primarily relate to Television Production direct operating costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.
−Removed: The increase from Media Networks was due to a benefit at Starz Networks in the prior year's period of $41.3 million associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates, which was partially offset by lower programming amortization at STARZPLAY International.
−Removed: See further discussion in the Segment Results of Operations section below.
−Removed: COVID-19 Related Charges.
−Removed: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the nine months ended December 31, 2020 we incurred $36.6 million in incremental costs which were expensed in the period which are included in consolidated direct operating expense and are excluded from segment direct operating expense.
−Removed: These costs include incremental costs associated with film impairment due to changes in performance expectations, the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs
−Removed: resulting from circumstances associated with the COVID-19 global pandemic.
−Removed: We expect to incur additional incremental costs in future periods.
−Removed: We are 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 our consolidated financial statements.
−Removed: During the nine months ended December 31, 2019, in connection with management changes, we implemented changes to our programming and broadcasting strategy including programming acquired or produced under prior management.
−Removed: As a result, we recorded certain programming and content charges of $74.0 million in the prior year's period, which are excluded from segment operating results, but included in direct operating expense in the unaudited condensed consolidated statement of operations and reflected in the "other" line item above.
−Removed: In addition, "other" direct operating expenses in the table above includes the amortization of the non-cash fair value adjustments on film and television assets associated with the application of purchase accounting related to recent acquisitions.
−Removed: Distribution and Marketing Expenses.
−Removed: Distribution and marketing expenses by segment were as follows for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 2019 Amount Percent
−Removed: (Amounts in millions)
−Removed: Distribution and marketing expenses
−Removed: Motion Picture $ 101.7 $ 468.8 $ (367.1) (78.3) %
−Removed: Television Production 20.9 23.5 (2.6) (11.1) %
−Removed: Media Networks 345.5 299.0 46.5 15.6 %
−Removed: COVID-19 related charges 16.1 — 16.1 n/a
−Removed: Other 0.4 0.4 — — %
−Removed: $ 484.6 $ 791.7 $ (307.1) (38.8) %
−Removed: theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense (1)
−Removed: $ 24.9 $ 318.0 $ (293.1) (92.2) %
−Removed: ______________________
−Removed: (1) Amounts in the nine months ended December 31, 2020 include $17.5 million from the quarter ended September 30, 2020 not previously included in the prior disclosure of solely U.S.
−Removed: theatrical P&A (none from the quarter ended June 30, 2020).
−Removed: Distribution and marketing expenses decreased in the nine months ended December 31, 2020, primarily due to a decrease in Motion Picture theatrical P&A, partially offset by increased Media Networks distribution and marketing expense and COVID-19 related charges (as further described below).
−Removed: The decrease in Motion Picture theatrical P&A was primarily impacted by the COVID-19 global pandemic and associated closure of theaters.
−Removed: The increase in Media Networks distribution and marketing expense was driven by increases at STARZPLAY International.
−Removed: See further discussion in the Segment Results of Operations section below.
−Removed: In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the nine months ended December 31, 2020 we incurred $16.1 million in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit.
−Removed: These charges are excluded from segment operating results.
−Removed: We expect to incur additional incremental costs in future periods.
−Removed: General and Administrative Expenses.
−Removed: General and administrative expenses by segment were as follows for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 % of Revenues 2019 % of Revenues Amount Percent
−Removed: (Amounts in millions)
−Removed: General and administrative expenses
−Removed: Motion Picture $ 79.8 $ 76.1 $ 3.7 4.9 %
−Removed: Television Production 31.5 26.9 4.6 17.1 %
−Removed: Media Networks 65.3 62.7 2.6 4.1 %
−Removed: Corporate 76.9 73.0 3.9 5.3 %
−Removed: 253.5 10.6% 238.7 8.1% 14.8 6.2 %
−Removed: Share-based compensation expense 55.2 39.5 15.7 39.7 %
−Removed: Purchase accounting and related adjustments 34.6 39.1 (4.5) (11.5) %
−Removed: Total general and administrative expenses $ 343.3 14.3% $ 317.3 10.8% $ 26.0 8.2 %
−Removed: General and administrative expenses increased in the nine months ended December 31, 2020, resulting from increases in Corporate, Motion Picture, Media Networks and Television Production general and administrative expenses and an increase in share-based compensation expense, partially offset by decreased purchase accounting and related adjustments.
−Removed: See further discussion in the Segment Results of Operations section below.
−Removed: Corporate general and administrative expenses increased $3.9 million, or 5.3%, primarily due to an increase in incentive based compensation partially offset by a decrease in professional fees.
−Removed: The increase in share-based compensation expense included in general and administrative expense in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019 is primarily due to an increase in the number of share-based payment awards incurring expense in the current period as compared to the prior year's period.
−Removed: Additionally, the increase in share-based compensation expense is due to higher fair values associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved.
−Removed: The following table reconciles this amount to total share-based compensation expense:
−Removed: Nine Months Ended
−Removed: (Amounts in millions)
−Removed: Share-based compensation expense by expense category
−Removed: General and administrative expense $ 55.2 $ 39.5
−Removed: Restructuring and other (1)
−Removed: Direct operating expense 1.5 1.1
−Removed: Distribution and marketing expense 0.5 0.4
−Removed: Total share-based compensation expense $ 60.0 $ 41.3
−Removed: _______________________
−Removed: (1) 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.
−Removed: Purchase accounting and related adjustments represent the charge for the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the amortization of the recoupable portion of the purchase price and the expense associated with earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense.
−Removed: Purchase accounting and related adjustments decreased $4.5 million, or 11.5%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.
−Removed: Depreciation and Amortization Expense.
−Removed: Depreciation and amortization of $142.9 million for the nine months ended December 31, 2020 decreased $0.1 million, from $143.0 million in the nine months ended December 31, 2019.
−Removed: Restructuring and Other.
−Removed: Restructuring and other increased $2.1 million in the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.
−Removed: Restructuring and other costs were as follows for the nine months ended December 31, 2020 and 2019 (see Note 13 to our unaudited condensed consolidated financial statements):
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 2019 Amount Percent
−Removed: (Amounts in millions)
−Removed: Restructuring and other:
−Removed: Severance (1)
−Removed: Cash $ 11.6 $ 7.7 $ 3.9 50.6 %
−Removed: Accelerated vesting on equity awards (see Note 11 to our unaudited condensed consolidated financial statements) 2.8 0.3 2.5 nm
−Removed: Total severance costs 14.4 8.0 6.4 80.0 %
−Removed: COVID-19 related charges (2)
−Removed: 1.6 — 1.6 n/a
−Removed: Transaction and related costs (3)
−Removed: 2.9 8.8 (5.9) (67.0) %
−Removed: $ 18.9 $ 16.8 $ 2.1 12.5 %
−Removed: _______________________
−Removed: nm - Percentage not meaningful.
−Removed: (1) Severance costs in the nine months ended December 31, 2020 and 2019 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.
−Removed: (2) During the 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.
−Removed: (3) Transaction and related costs in the nine months ended December 31, 2020 and 2019 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
−Removed: Interest Expense.
−Removed: Interest expense of $135.2 million in the nine months ended December 31, 2020 decreased $10.5 million from the nine months ended December 31, 2019, due to lower interest expense on the term loans partially offset by an increase in amortization of debt financing costs and other non-cash interest.
−Removed: The decrease in interest expense on the term loans is primarily due to reductions of the outstanding principal amounts from required and voluntary principal payments since the prior year's period ended December 31, 2019, and the lower LIBOR rate in the current period.
−Removed: The increase in amortization of debt financing costs and other non-cash interest is due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).
−Removed: The following table sets forth the components of interest expense for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: (Amounts in millions)
−Removed: Interest Expense
−Removed: Revolving credit facility $ 3.2 $ 5.2
−Removed: Term loans 29.2 59.9
−Removed: 5.875% Senior Notes 22.8 22.9
−Removed: 6.375% Senior Notes 26.1 26.2
−Removed: Amortization of debt financing costs and other non-cash interest (2)
−Removed: Total interest expense $ 135.2 $ 145.7
−Removed: ______________________
−Removed: (1) Amounts include payments associated with the Company's interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).
−Removed: (2) Amounts include the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).
−Removed: Other Expense.
−Removed: Other expense of $4.5 million for the nine months ended December 31, 2020 compared to other expense of $9.7 million for the nine months ended December 31, 2019, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).
−Removed: Loss on Extinguishment of Debt.
−Removed: Loss on extinguishment of debt for the nine months ended December 31, 2019 was $1.4 million related to early repayments of $101.9 million in principal outstanding on the Term Loan B, with no comparable loss in the nine months ended December 31, 2020.
−Removed: See Note 4 to our unaudited condensed consolidated financial statements.
−Removed: Gain (Loss) on Investments.
−Removed: Gain on investments of $0.3 million for the nine months ended December 31, 2020 represented a gain on sale of equity securities without readily determinable fair values and unrealized gains on equity securities, offset by impairments of equity method investments and equity securities without readily determinable fair values that were written down to their estimated fair value.
−Removed: This compared to loss on investments of $0.3 million for the nine months ended December 31, 2019 which represented unrealized losses on equity securities.
−Removed: Equity Interests Loss.
−Removed: Equity interests loss of $5.1 million in the nine months ended December 31, 2020 compared to equity interests loss of $15.7 million in the nine months ended December 31, 2019 due to lower losses from our equity method investees.
−Removed: Income Tax Provision.
−Removed: We had an income tax provision of $6.7 million in the nine months ended December 31, 2020, compared to an income tax provision of $6.5 million in the nine months ended December 31, 2019.
−Removed: Our income tax provision differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, changes in the valuation allowance against our deferred tax assets, and certain minimum taxes and foreign withholding taxes.
−Removed: Our income tax provision for the 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.
−Removed: Net Income (Loss) Attributable to Lions Gate Entertainment Corp.
−Removed: Shareholders.
−Removed: Net income attributable to our shareholders for the nine months ended December 31, 2020 was $18.8 million, or basic net income per common share of $0.09 on 220.3 million weighted average common shares outstanding and diluted net income per common share of $0.09 on 221.4 million weighted average common shares outstanding.
−Removed: This compares to net loss attributable to our shareholders for the nine months ended December 31, 2019 of $143.4 million, or basic and diluted net loss per common share of $0.66 on 217.2 million weighted average common shares outstanding.
−Removed: Segment Results of Operations
−Removed: The segment results of operations presented below do not include the elimination of intersegment transactions which are
−Removed: eliminated when presenting consolidated results, and exclude items separately identified in the restructuring and other line item in the unaudited condensed consolidated statements of operations.
−Removed: The Company's primary measure of segment performance is segment profit.
−Removed: Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses.
−Removed: 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.
−Removed: 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.
−Removed: The reconciliation of segment profit to the Company's consolidated income (loss) before income taxes is presented in Note 14 to the unaudited condensed consolidated financial statements.
−Removed: Motion Picture
−Removed: The table below sets forth Motion Picture gross contribution and segment profit for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 2019 Amount Percent
−Removed: (Amounts in millions)
−Removed: Motion Picture Segment:
−Removed: Revenue $ 788.6 $ 1,277.6 $ (489.0) (38.3) %
−Removed: Direct operating expense 373.0 625.1 (252.1) (40.3) %
−Removed: Distribution & marketing expense 101.7 468.8 (367.1) (78.3) %
−Removed: Gross contribution 313.9 183.7 130.2 70.9 %
−Removed: General and administrative expenses 79.8 76.1 3.7 4.9 %
−Removed: Segment profit $ 234.1 $ 107.6 $ 126.5 117.6 %
−Removed: theatrical P&A and Premium VOD expense included in distribution and marketing expense (1)
−Removed: $ 24.9 $ 318.0 $ (293.1) (92.2) %
−Removed: Direct operating expense as a percentage of revenue 47.3 % 48.9 %
−Removed: Gross contribution as a percentage of revenue 39.8 % 14.4 %
−Removed: ______________________
−Removed: (1) Amounts in the nine months ended December 31, 2020 include $17.5 million from the quarter ended September 30, 2020 not previously included in the prior disclosure of solely U.S.
−Removed: theatrical P&A (none from the quarter ended June 30, 2020).
−Removed: The table below sets forth Motion Picture revenue by media and product category for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended December 31,
−Removed: 2020 2019 Total Increase (Decrease)
−Removed: Feature Film (1)
−Removed: Other Film (2)
−Removed: Total Feature Film (1)
−Removed: Other Film (2)
−Removed: (Amounts in millions)
−Removed: Motion Picture Revenue
−Removed: Theatrical $ 1.5 $ 0.6 $ 2.1 $ 289.2 $ 27.3 $ 316.5 $ (314.4)
−Removed: Home Entertainment
−Removed: Digital Media 193.9 173.1 367.0 188.0 124.1 312.1 54.9
−Removed: Packaged Media 55.7 54.1 109.8 114.2 82.8 197.0 (87.2)
−Removed: Total Home Entertainment 249.6 227.2 476.8 302.2 206.9 509.1 (32.3)
−Removed: Television 121.7 32.2 153.9 138.4 39.3 177.7 (23.8)
−Removed: International 86.6 59.4 146.0 193.4 63.2 256.6 (110.6)
−Removed: Other 5.8 4.0 9.8 15.8 1.9 17.7 (7.9)
−Removed: $ 465.2 $ 323.4 $ 788.6 $ 939.0 $ 338.6 $ 1,277.6 $ (489.0)
−Removed: ____________________
−Removed: (1) Feature Film:
−Removed: Includes theatrical releases through our Lionsgate and Summit Entertainment film labels, which includes films developed and produced in-house, films co-developed and co-produced and films acquired from third parties.
−Removed: (2) Other Film:
−Removed: Includes direct-to-DVD motion pictures, acquired and licensed brands, third-party library product and ancillary-driven platform theatrical releases through our specialty films distribution labels including Lionsgate Premiere, through Good Universe, and with our equity method investees, Roadside Attractions and Pantelion Films, and other titles.
−Removed: With theaters mostly closed during the period due to circumstances associated with the COVID-19 global pandemic, theatrical revenue decreased $314.4 million, or 99.3%, in the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019.
−Removed: The prior year's period included significant revenue from John Wick:
−Removed: Chapter 3 - Parabellum, Knives Out, Scary Stories to Tell in the Dark, Angel Has Fallen, Midway and Rambo:
−Removed: Home entertainment revenue decreased $32.3 million, or 6.3%, in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019, due to a decrease of $87.2 million in packaged media revenues as a result of fewer home entertainment releases from our fiscal 2021 theatrical slate in our Feature Film category due to circumstances associated with the COVID-19 global pandemic, and decreases in our Other Films category.
−Removed: The decrease in packaged media revenues was partially offset by increased digital media revenues of $54.9 million, which included increases in our Other Films category from The Secret:
−Removed: Dare to Dream and Force of Nature.
−Removed: Digital media revenue also increased in our Feature Film category from the initial release on a streaming platform of Run, and the Premium VOD release of Antebellum, and from our fiscal 2020 theatrical slate ( I Still Believe and Knives Out), as compared to the prior year's period which included significant digital media revenue from John Wick:
−Removed: Chapter 3 - Parabellum.
−Removed: Television revenue decreased $23.8 million, or 13.4%, in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019 due to fewer television windows opening (and revenue recognized) than in the prior year's period.
−Removed: International revenue decreased $110.6 million, or 43.1%, in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019 due to lower revenue from our fiscal 2021 theatrical slate in the current period, which had no new significant theatrical releases due to circumstances associated with the COVID-19 global pandemic, as compared to the revenue generated from our fiscal 2020 theatrical slate in the prior year's period, which included significant international revenue from John Wick:
−Removed: Chapter 3 - Parabellum.
−Removed: We expect that Motion Picture segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international theatrical distribution and production as a result of the closure of theaters and paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic.
−Removed: The extent of the impact on Motion Picture segment revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, global economic conditions, the ability for theaters to re-open at a scale to attract motion pictures and the rate of consumers' return to the theater.
−Removed: Direct Operating Expense.
−Removed: The decrease in direct operating expenses is due to a decrease in Motion Picture revenues.
−Removed: The decrease in direct operating expenses as a percentage of motion picture revenue was driven by the change in the mix of titles and product categories generating revenue in the current period as compared to the prior year's period.
−Removed: In particular, the decrease was impacted by the lower amortization rate of the fiscal 2020 and prior theatrical slate titles generating revenue in the current period as compared to the prior year's period.
−Removed: Investment in film write-downs included in Motion Picture segment direct operating expense for the period were $14.6 million in the nine months ended December 31, 2020, as compared to $38.8 million in the nine months ended December 31, 2019.
−Removed: Distribution and Marketing Expense.
−Removed: The decrease in distribution and marketing expense in the nine months ended December 31, 2020 is due to lower theatrical P&A expense associated with the closure of theaters during the period due to circumstances associated with the COVID-19 global pandemic.
−Removed: Theatrical P&A and Premium VOD expense in the current period includes expense associated with the Premium VOD release of Antebellum and the theatrical and Premium VOD release of Fatale.
−Removed: In the nine months ended December 31, 2020, approximately $3.6 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters.
−Removed: In the nine months ended December 31, 2019, approximately $11.4 million of P&A was incurred in advance for films to be released in subsequent quarters, such as I Still Believe, Barb and Star Go to Vista Del Mar, and Antebellum .
−Removed: Gross Contribution.
−Removed: While Motion Picture revenue declined during the period as discussed above, gross contribution of the Motion Picture segment for the nine months ended December 31, 2020 increased 70.9% as compared to the nine months ended December 31, 2019 due to lower Motion Picture distribution and marketing expense as a percentage of Motion Picture revenue.
−Removed: General and Administrative Expense.
−Removed: General and administrative expenses of the Motion Picture segment in the nine months ended December 31, 2020 increased $3.7 million, or 4.9%, primarily due to an increase in incentive based compensation partially offset by decreases in rent, facility and travel and related costs.
−Removed: Television Production
−Removed: The table below sets forth Television Production gross contribution and segment profit for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 2019 Amount Percent
−Removed: (Amounts in millions)
−Removed: Television Production Segment:
−Removed: Revenue $ 621.0 $ 743.2 $ (122.2) (16.4) %
−Removed: Direct operating expense 494.3 660.9 (166.6) (25.2) %
−Removed: Distribution & marketing expense 20.9 23.5 (2.6) (11.1) %
−Removed: Gross contribution 105.8 58.8 47.0 79.9 %
−Removed: General and administrative expenses 31.5 26.9 4.6 17.1 %
−Removed: Segment profit $ 74.3 $ 31.9 $ 42.4 132.9 %
−Removed: Direct operating expense as a percentage of revenue 79.6 % 88.9 %
−Removed: Gross contribution as a percentage of revenue 17.0 % 7.9 %
−Removed: The table below sets forth Television Production revenue and changes in revenue by media for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 2019 Amount Percent
−Removed: Television Production (Amounts in millions)
−Removed: Television $ 332.3 $ 526.4 $ (194.1) (36.9) %
−Removed: International 120.4 113.3 7.1 6.3 %
−Removed: Home Entertainment
−Removed: Digital 119.8 47.6 72.2 151.7 %
−Removed: Packaged Media 4.9 2.2 2.7 122.7 %
−Removed: Total Home Entertainment 124.7 49.8 74.9 150.4 %
−Removed: Other 43.6 53.7 (10.1) (18.8) %
−Removed: $ 621.0 $ 743.2 $ (122.2) (16.4) %
−Removed: The primary component of Television Production revenue is domestic television revenue.
−Removed: Domestic television revenue decreased in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019, due to fewer television episodes delivered, decreased intersegment revenues from the licensing of Starz original series, and decreased revenue from reality television series, all of which were negatively impacted by disruptions associated with the COVID-19 global pandemic and the associated pausing of productions which resulted in the delay of television episodes delivered in the current period.
−Removed: In addition, the prior year's period included significant revenue from House of Payne .
−Removed: International revenue in the nine months ended December 31, 2020 increased $7.1 million, or 6.3% as compared to the nine months ended December 31, 2019 due to increased intersegment revenues from STARZPLAY International from the licensing of Starz original series.
−Removed: Home entertainment revenue in the nine months ended December 31, 2020 increased $74.9 million driven by digital media revenue in the current period for Mad Men Seasons 1 - 7 and Power Season 6, partially offset by digital media revenue in the prior year's period for Power Season 5.
−Removed: Other revenue decreased in the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019.
−Removed: Revenue of 3 Arts Entertainment was negatively impacted in the nine months ended December 31, 2020 as a result of the COVID-19 global pandemic related disruptions.
−Removed: The extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases returning to and remaining at pre COVID-19 levels.
−Removed: We expect that Television Production segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international distribution and production as a result of paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic.
−Removed: The extent of the impact of the COVID-19 global pandemic related disruptions on Television Production revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global economic conditions related to the COVID-19 global pandemic.
−Removed: Direct Operating Expense.
−Removed: Direct operating expense of the Television Production segment in the nine months ended December 31, 2020 decreased $166.6 million, or 25.2% due to the decrease in Television Production revenues.
−Removed: Direct operating expenses as a percentage of television production revenue decreased primarily due to the mix of titles generating revenue in the current period as compared to the prior year's period, and in particular, due to the COVID-19 global pandemic related disruptions, the current period included fewer deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue.
−Removed: Gross Contribution.
−Removed: Gross contribution of the Television Production segment for the nine months ended December 31, 2020 increased as compared to the nine months ended December 31, 2019, due to lower direct operating expenses as a percentage of television production revenue, partially offset by lower television production revenue.
−Removed: General and Administrative Expense.
−Removed: General and administrative expenses of the Television Production segment increased $4.6 million, or 17.1%, primarily due to increases in incentive compensation and salaries and related expenses partially offset by decreases in travel and related expenses.
−Removed: Media Networks
−Removed: The table below sets forth Media Networks gross contribution and segment profit for the nine months ended December 31, 2020 and 2019:
−Removed: Nine Months Ended
−Removed: December 31, Increase (Decrease)
−Removed: 2020 2019 Amount Percent
−Removed: (Amounts in millions)
−Removed: Media Networks Segment:
−Removed: Revenue $ 1,161.7 $ 1,128.8 $ 32.9 2.9 %
−Removed: Direct operating expense 504.6 499.8 4.8 1.0 %
−Removed: Distribution & marketing expense 345.5 299.0 46.5 15.6 %
−Removed: Gross contribution 311.6 330.0 (18.4) (5.6) %
−Removed: General and administrative expenses 65.3 62.7 2.6 4.1 %
−Removed: Segment profit $ 246.3 $ 267.3 $ (21.0) (7.9) %
−Removed: Direct operating expense as a percentage of revenue 43.4 % 44.3 %
−Removed: Gross contribution as a percentage of revenue 26.8 % 29.2 %
−Removed: The following table sets forth the Media Networks segment profit by product line:
−Removed: Nine Months Ended Nine Months Ended
−Removed: December 31, 2020 December 31, 2019
−Removed: Starz Networks STARZPLAY International Other Streaming Services Total Media Networks Starz Networks STARZPLAY International Other Streaming Services Total Media Networks
−Removed: (Amounts in millions)
−Removed: Media Networks Segment:
−Removed: Revenue $ 1,081.8 $ 41.9 $ 38.0 $ 1,161.7 $ 1,092.4 $ 13.6 $ 22.8 $ 1,128.8
−Removed: Direct operating expense 438.3 58.3 8.0 504.6 400.8 95.1 3.9 499.8
−Removed: Distribution & marketing expense 256.5 59.5 29.5 345.5 248.5 21.5 29.0 299.0
−Removed: Gross contribution 387.0 (75.9) 0.5 311.6 443.1 (103.0) (10.1) 330.0
−Removed: General and administrative expenses 47.5 12.6 5.2 65.3 47.5 10.6 4.6 62.7
−Removed: Segment profit $ 339.5 $ (88.5) $ (4.7) $ 246.3 $ 395.6 $ (113.6) $ (14.7) $ 267.3
−Removed: The increase in Media Networks' revenue was driven by higher STARZPLAY International revenue of $28.3 million, and increased Other Streaming Services revenue of $15.2 million due to subscriber growth, which was partially offset by decreased Starz Networks' revenue of $10.6 million.
−Removed: STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since December 31, 2019.
−Removed: Starz Networks' revenue decreased as a result of declines in revenue from traditional linear services, which was partially offset by higher OTT revenue resulting from increased subscriptions.
−Removed: As a result of events related to the COVID-19 global pandemic, television and streaming consumption around the globe continues to increase, as well as home entertainment demand.
−Removed: STARZ continues to achieve an increase in viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally.
+Added: As a result of events related to the COVID-19 global pandemic, television and streaming consumption around the globe increased, as well as home entertainment demand.
+Added: STARZ experienced an increase in viewership in the prior year of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally.
This increase in subscribers is dependent upon future economic conditions, our ability to deliver original content and may vary due to changes in consumer viewing and subscription patterns.
−Removed: However, it is too early to say whether this increase is indicative of future results and whether growth may slow as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic.
−Removed: During the nine months ended December 31, 2020 and 2019, the following original series premiered on STARZ:
−Removed: Nine Months Ended December 31, 2020 Nine Months Ended December 31, 2019
+Added: However, it is too early to say whether this increase is indicative of future results and whether the slowing of growth will continue as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic.
+Added: During the three months ended June 30, 2021 and 2020, the following original series premiered on STARZ:
+Added: Three Months Ended June 30, 2021 Three Months Ended June 30, 2020
First Quarter:
First Quarter:
+Added: The Girlfriend Experience Season 3
Vida Season 3
−Removed: The Spanish Princess
+Added: Run the World Season 1
Hightown Season 1
−Removed: Vida Season 2
−Removed: The Rook Season 1
−Removed: Second Quarter:
−Removed: Second Quarter:
−Removed: P-Valley Season 1
−Removed: Sweetbitter Season 2
−Removed: Power Book II:
−Removed: Ghost Power Season 6
−Removed: Power Confidential Season 1
−Removed: Third Quarter:* Third Quarter:
−Removed: Inside the NXIVM Cult Dublin Murders
−Removed: The Spanish Princess Season 2
−Removed: * In addition, while Power Book II:
−Removed: Ghost premiered in the second quarter ended September 30, 2020, the series returned with a mid-season premiere in the third quarter in December 2020.
+Added: Blindspotting Season 1
Direct Operating and Distribution and Marketing Expenses .
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In addition, the launch of the STARZPLAY international service has and will continue to result in an increase in expenses as the service continues to expand.
−Removed: The increase in Media Networks direct operating expenses is due to increases at Starz Networks and, to a lesser extent, Other Streaming Services, partially offset by lower direct operating expenses at STARZPLAY International in the nine months ended December 31, 2020.
−Removed: The increase in Starz Networks direct operating expense was primarily due to a benefit in the prior year's period of $41.3 million associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates, and higher programming amortization related to theatrical releases under our programming output agreement, partially offset by lower programming amortization and development expense related to our Starz Originals due to fewer series premieres.
−Removed: Direct operating expenses at STARZPLAY International decreased as a result of write downs of programming cost in the nine months ended December 31, 2019 and prior periods, which reduced the cost being amortized in the current period, partially offset by the continued expansion of STARZPLAY International.
−Removed: The increase in Media Networks distribution and marketing expense is due to an increase at STARZPLAY International.
−Removed: Distribution and marketing expense for STARZPLAY International increased due to an increase in advertising and marketing costs in order to drive subscriber growth in the international territories previously launched, and additional territories launched since December 31, 2019.
+Added: The decrease in Media Networks direct operating expenses is due to lower direct operating expenses at Starz Networks, partially offset by an increase at STARZPLAY International in the three months ended June 30, 2021.
+Added: In addition, the prior year's quarter included direct operating expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.
+Added: The decrease in Starz Networks direct operating expense was due to lower programming amortization related to theatrical releases under our programming output agreement with Sony, lower programming cost amortization related to our Starz Originals due to a higher number of lower cost series premieres, and lower programming cost amortization related to our library content.
+Added: Direct operating expenses at STARZPLAY International increased as a result of the continued expansion of STARZPLAY International.
+Added: The increase in Media Networks distribution and marketing expense is due to an increase at Starz Networks due to an increase in operating expense related to continued growth in the OTT service and increased advertising and marketing due to increased spend on our Starz Originals, partially offset by a decrease due to the prior year's quarter including distribution and marketing expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021, and a slight decrease at STARZPLAY International.
Gross Contribution.
−Removed: The decrease in gross contribution compared to the nine months ended December 31, 2019 was due to a decrease at Starz Networks primarily due to the benefit in direct operating expense in the prior year's period as discussed above, partially offset by lower negative contributions from STARZPLAY International and Other Streaming Services.
+Added: The increase in gross contribution compared to the three months ended June 30, 2020 was due to an increase at Starz Networks driven by higher revenues and lower direct operating expense.
General and Administrative Expense.
−Removed: General and administrative expenses of the Media Networks segment in the nine months ended December 31, 2020 increased slightly from the prior year's period, driven by increased general and administrative expenses for STARZPLAY International.
+Added: General and administrative expenses of the Media Networks segment in the three months ended June 30, 2021 increased slightly from the prior year's quarter, driven by slightly increased general and administrative expenses at STARZPLAY International, which were partially offset by a decrease due to the prior year's quarter including general and administrative expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
−Removed: Our liquidity and capital resources have been provided principally through cash generated from operations, debt, and our production loans.
−Removed: As of December 31, 2020, we had cash and cash equivalents of $551.5 million.
−Removed: Our debt at December 31, 2020 primarily consisted of a $1.5 billion five-year revolving credit facility (with no amounts outstanding at December 31, 2020) due March 2023 (the "Revolving Credit Facility"), a five-year term loan A facility due March 2023 (the "Term Loan A"), a seven-year term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), 5.875% senior notes due 2024 (the "5.875% Senior Notes"), and 6.375% senior notes due 2024 (the "6.375% Senior Notes").
−Removed: 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”).
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The Facility is expected to mature on January 27, 2025.
−Removed: See Note 18 - Subsequent Events to our unaudited condensed consolidated financial statements.
+Added: Our liquidity and capital resources have been provided principally through cash generated from operations, corporate debt, our production loans, the monetization of trade accounts receivable and our $220.0 million non-recourse senior secured revolving credit facility due January 2025 based on collateral consisting of certain of the Company’s tax credit receivables (the "Production Tax Credit Facility") (with $184.5 million outstanding, and no amounts available at June 30, 2021).
+Added: As of June 30, 2021, we had cash and cash equivalents of $261.6 million.
+Added: Our debt at June 30, 2021 consisted of the following:
+Added: • Senior Credit Facilities:
+Added: ◦ Revolving Credit Facility.
+Added: We have a $1.5 billion revolving credit facility (with no amounts outstanding at June 30, 2021).
+Added: A portion of the revolving credit commitments, amounting to $1.25 billion, is due April 2026 (the "2026 Revolving Credit Facility"), and a portion of the revolving credit commitments, amounting to $250.0 million, is due March 2023 (the "2023 Revolving Credit Facility, and together with the 2026 Revolving Credit Facility, the "Revolving Credit Facility").
+Added: ◦ Term Loan A.
+Added: We have a term loan A facility, of which a portion of its outstanding loans, amounting to $444.9 million at June 30, 2021 is due April 2026 (the "2026 Term Loan A") and a portion of its outstanding loans, amounting to $209.7 million at June 30, 2021 is due March 2023 (the "2023 Term Loan A" and together with the 2026 Term Loan A, the "Term Loan A").
+Added: ◦ Term Loan B.
+Added: We have a term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), with $898.0 million outstanding at June 30, 2021.
+Added: • Senior Notes:
+Added: ◦ 5.500% Senior Notes.
+Added: We have $1.0 billion outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at June 30, 2021.
+Added: Subsequent to June 30, 2021, in July 2021, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "IP Credit Facility") based on the collateral consisting solely of the Company’s rights in certain library titles, including the Spyglass and other recently acquired libraries and non-recourse to other assets of the Company.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: The IP Credit Facility matures on July 30, 2026.
+Added: See Note 18 - Subsequent Events in the unaudited condensed consolidated financial statements.
Our principal uses of cash in operations include the funding of film and television productions, film and programming rights acquisitions, and the distribution and marketing of films and television programs.
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principal and interest payments) requirements, equity method or other equity investments, quarterly cash dividends, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of businesses.
−Removed: In addition, the Company has a redeemable noncontrolling interest balance of $191.5 million as of December 31, 2020 related to its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests.
−Removed: The 3 Arts Entertainment noncontrolling interest holders have a right to put the noncontrolling interest of 3 Arts Entertainment, at fair value, exercisable at five years after the acquisition date of May 29, 2018, for a 60 day period.
−Removed: 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.
−Removed: The Pilgrim Media Group 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.
−Removed: 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.
+Added: In addition, the Company has a redeemable noncontrolling interest balance of $231.4 million as of June 30, 2021 related to its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests (see Note 8 to our unaudited condensed consolidated financial statements).
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise.
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In the short-term, while a portion of our revenue has been reduced as a result of disruptions associated with the COVID-19 global pandemic, our cash requirements for productions and marketing spends have also been reduced.
−Removed: In some areas, we have experienced increases in revenue and viewership of our content.
−Removed: We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global
−Removed: economic conditions.
−Removed: As a result, we cannot predict the outcome of the full extent of the disruptions associated with the COVID-19 global pandemic on our operating results, cash flows and financial position.
−Removed: However, we currently believe that cash flow from operations, cash on hand, revolving credit facility availability, the monetization of trade accounts receivable, tax-efficient financing, the availability of our senior secured revolving credit facility based on our tax credit receivables, and available production financing will be adequate to meet known operational cash and debt service (i.e.
+Added: While we cannot predict the outcome of the disruptions associated with the COVID-19 global pandemic on our operating results, cash flows and financial position, we currently expect that as production activity increases and theaters begin to reopen, our cash requirements for productions and marketing spends will increase in fiscal 2022 as compared to fiscal 2021.
+Added: However, we currently believe that cash flow from operations, cash on hand, revolving credit facility availability, the monetization of trade accounts receivable, tax-efficient financing, the availability of our Production Tax Credit Facility, and available production financing will be adequate to meet known operational cash and debt service (i.e.
principal and interest payments) requirements for the foreseeable future, including the funding of future film and television production, film and programming rights acquisitions and theatrical and home entertainment release schedules, and future equity method or other investment funding requirements, and international expansion.
We monitor our cash flow liquidity, availability, fixed charge coverage, capital base, film spending and leverage ratios with the long-term goal of maintaining our credit worthiness.
−Removed: Our current financing strategy is to fund operations and to leverage investment in films and television programs through our cash flow from operations, our revolving credit facility, single-purpose production financing, government incentive programs, film funds, distribution commitments, the monetization of trade accounts receivable, and our senior secured revolving credit facility based on our tax credit receivables.
+Added: Our current financing strategy is to fund operations and to leverage investment in films and television programs through our cash flow from operations, our revolving credit facility, single-purpose production financing, government incentive programs, film funds, distribution commitments, the monetization of trade accounts receivable, and our Production Tax Credit Facility.
In addition, we continue to expand our STARZPLAY international service and may acquire businesses or assets, including individual films or libraries that are complementary to our business.
6 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.
−Removed: As of December 31, 2020, the Company was in compliance with all applicable covenants.
−Removed: 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.
−Removed: As of December 31, 2020, the Company was in compliance with all applicable covenants.
+Added: As of June 30, 2021, the Company was in compliance with all applicable covenants.
+Added: 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.
+Added: As of June 30, 2021, the Company was in compliance with all applicable covenants.
Share Repurchase Plan.
3 unchanged sentences
Such purchases will be structured as permitted by securities laws and other legal requirements.
−Removed: During the three months ended December 31, 2020, the Company did not repurchase any common shares.
−Removed: 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.
+Added: During the three months ended June 30, 2021, the Company did not repurchase any common shares.
The amount of dividends, if any, that we pay to our shareholders is determined by our Board of Directors, at its discretion, and is dependent on a number of factors, including our financial position, results of operations, cash flows, capital requirements and restrictions under our credit agreements, and shall be in compliance with applicable law.
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Capacity to Pay Dividends.
−Removed: At December 31, 2020, the capacity to pay dividends under the Senior Credit Facilities and the 5.875% Senior Notes and 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.
+Added: At June 30, 2021, the capacity to pay dividends under the Senior Credit Facilities and the Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $51.7 million and accumulated deficit of $139.1 million were deemed free of restrictions from paying dividends at June 30, 2021.
Discussion of Operating, Investing, Financing Cash Flows
−Removed: Cash and cash equivalents increased by $227.4 million for the nine months ended December 31, 2020 and increased by $10.1 million for the nine months ended December 31, 2019, before foreign exchange effects on cash.
+Added: Cash, cash equivalents and restricted cash decreased by $261.3 million for the three months ended June 30, 2021 and increased by $57.8 million for the three months ended June 30, 2020, before foreign exchange effects on cash.
Components of these changes are discussed below in more detail.
Operating Activities.
−Removed: Cash flows provided by operating activities for the nine months ended December 31, 2020 and 2019 were as follows:
−Removed: Nine Months Ended
+Added: Cash flows provided by (used in) operating activities for the three months ended June 30, 2021 and 2020 were as follows:
+Added: Three Months Ended
2021 2020 Net Change
14 unchanged sentences
Changes in operating assets and liabilities (810.4) (330.3) (480.1)
−Removed: Net Cash Flows Provided By Operating Activities $ 159.3 $ 434.4 $ (275.1)
−Removed: Cash flows provided by operating activities for the nine months ended December 31, 2020 were $159.3 million compared to cash flows provided by operating activities of $434.4 million for the nine months ended December 31, 2019.
−Removed: The decrease in cash provided by operating activities for the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019 is due to lower cash flows from operations before changes in operating assets and liabilities, and to a lesser extent, greater cash used from changes in operating assets and liabilities as shown above.
−Removed: The greater use of cash from changes in operating assets and liabilities was driven by lower decreases in accounts receivable, net and other assets, and greater use of cash from changes in other operating assets and liabilities driven by decreases in film obligations, as reflected above.
−Removed: These decreases were partially offset by lower cash used for investment in films and television programs and program rights as reflected above, and the receipt of $64.3 million from the Internal Revenue Service related to the Company's net operating loss carryback claim which is subject to review and included in other liabilities until the review is completed.
−Removed: In addition, cash flows provided by operating activities for the nine months ended December 31, 2020 included a net benefit of approximately $7.0 million from the monetization of accounts receivables programs, as compared to a benefit of $280.9 million for the nine months ended December 31, 2019 (see Note 17 to our unaudited condensed consolidated financial statements).
+Added: Net Cash Flows Provided By (Used In) Operating Activities $ (348.7) $ 81.4 $ (430.1)
+Added: Cash flows used in operating activities for the three months ended June 30, 2021 were $348.7 million compared to cash flows provided by operating activities of $81.4 million for the three months ended June 30, 2020.
+Added: The decrease in cash provided by operating activities for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 is due to greater cash used from changes in operating assets and liabilities as shown above, partially offset by increased cash flows from operations before changes in operating assets and liabilities.
+Added: The greater use of cash from changes in operating assets and liabilities was driven by increased cash used for investment in films and television programs and program rights, and increases in accounts receivable, net and other assets, partially offset by lower cash used from changes in other operating assets and liabilities and lower cash used for accounts payable and accrued liabilities as reflected above.
+Added: In addition, cash flows provided by operating activities for the three months ended June 30, 2021 included a net use of cash of approximately $51.0 million from the monetization of accounts receivables programs, as compared to a net use of cash of approximately $16.5 million for the three months ended June 30, 2020 (see Note 17 to our unaudited condensed consolidated financial statements).
Investing Activities.
−Removed: Cash flows used in investing activities for the nine months ended December 31, 2020 and 2019 were as follows:
−Removed: Nine Months Ended
+Added: Cash flows provided by (used in) investing activities for the three months ended June 30, 2021 and 2020 were as follows:
+Added: Three Months Ended
(Amounts in millions)
−Removed: Proceeds from the sale of other investments $ 5.1 $ —
+Added: Proceeds from the sale of Pantaya $ 123.6 $ —
+Added: 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)
−Removed: Net Cash Flows Used In Investing Activities $ (20.9) $ (38.8)
−Removed: Cash used in investing activities of $20.9 million for the nine months ended December 31, 2020 compared to cash used in investing activities of $38.8 million for the nine months ended December 31, 2019, as reflected above.
+Added: Net Cash Flows Provided By (Used In) Investing Activities $ 115.7 $ (1.5)
+Added: Cash provided by investing activities of $115.7 million for the three months ended June 30, 2021 compared to cash used in investing activities of $1.5 million for the three months ended June 30, 2020, primarily due to proceeds from the sale of Pantaya, as reflected above (see Note 2 to our unaudited condensed consolidated financial statements).
Financing Activities.
−Removed: Cash flows used in financing activities for the nine months ended December 31, 2020 and 2019 were as follows:
−Removed: Nine Months Ended
+Added: Cash flows used in financing activities for the three months ended June 30, 2021 and 2020 were as follows:
+Added: Three Months Ended
(Amounts in millions)
−Removed: Debt - borrowings $ 160.0 $ 597.1
−Removed: Debt - repayments (210.9) (738.6)
−Removed: Net borrowings (repayments) of debt (50.9) (141.5)
+Added: Debt - borrowings, net of debt issuance and redemption costs $ 1,199.9 $ 75.0
+Added: Debt - repurchases and repayments (1,373.9) (92.0)
+Added: Net repayments of debt (174.0) (17.0)
Production loans - borrowings 214.3 46.1
Production loans - repayments (113.2) (44.1)
−Removed: Net proceeds from (repayments of) production loans 167.3 (236.9)
+Added: Net proceeds from production loans 101.1 2.0
+Added: Production tax credit facility advances, net of debt issuance costs 94.9 —
+Added: Production tax credit facility repayments (32.8) —
+Added: Net proceeds from production tax credit facility 62.1 —
Repurchase of common shares — (2.2)
Other financing activities (17.5) (4.9)
−Removed: Net Cash Flows Provided By (Used In) Financing Activities $ 89.0 $ (385.5)
−Removed: Cash flows provided by financing activities of $89.0 million for the nine months ended December 31, 2020 compared to cash flows used in financing activities of $385.5 million for the nine months ended December 31, 2019.
−Removed: Cash flows provided by financing activities for the nine months ended December 31, 2020 primarily reflects net production loan borrowings of $167.3 million as production activity increased in the quarter, and net debt repayments of $50.9 million representing required repayments on our term loans.
−Removed: In addition, other financing activities in the nine months ended December 31, 2020 includes $15.4 million for interest rate swap settlement payments due to an other-than-insignificant financing element on a portion of our interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).
−Removed: Cash flows used in financing activities for the nine months ended December 31, 2019 primarily reflects net production loan repayments of $236.9 million and net debt repayments of $141.5 million, which consisted of early repayments of $101.9 million in principal outstanding on the Term Loan B and required repayments on our term loans.
+Added: Net Cash Flows Used In Financing Activities $ (28.3) $ (22.1)
+Added: Cash flows used in financing activities of $28.3 million for the three months ended June 30, 2021 compared to cash flows used in financing activities of $22.1 million for the three months ended June 30, 2020.
+Added: Cash flows used in financing activities for the three months ended June 30, 2021 primarily reflects net debt repayments of $174.0 million, net production loan borrowings of $101.1 million as production activity increased in the quarter, and net Production Tax Credit Facility advances of $62.1 million.
+Added: In addition, other financing activities in the three months ended June 30, 2021 includes $6.9 million for interest rate swap settlement payments due to an other-than-insignificant financing element on a portion of our interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements) and tax withholding required on equity awards of $13.1 million.
+Added: Net debt repayments of $174.0 million in the three months ended June 30, 2021 included the below transactions and associated debt issuance and redemption costs, along with required repayments on our term loans:
+Added: • On April 1, 2021, we redeemed in full all $518.7 million outstanding principal amount of our 5.875% Senior Notes and all $545.6 million outstanding principal amount of our 6.375% Senior Notes, and paid a prepayment premium of $15.2 million and $17.4 million on the 5.875% Senior Notes and 6.375% Senior Notes, respectively, plus accrued and unpaid interest to the date of redemption.
+Added: • On April 1, 2021, in connection with the redemption of the 5.875% Senior Notes and the 6.375% Senior Notes, we issued $1.0 billion aggregate principal amount of 5.500% Senior Notes.
+Added: • On April 6, 2021, we amended our Credit Agreement to, among other things, extend the maturity of a portion of our revolving credit commitments, amounting to $1.25 billion, and a portion of our outstanding term A loans, amounting to $444.9 million to April 6, 2026.
+Added: • 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.
+Added: Cash flows used in financing activities for the three months ended June 30, 2020 primarily reflects net debt repayments of $17.0 million, and net production loan borrowings of $2.0 million.
See Note 5 to our unaudited condensed consolidated financial statements for a discussion of our debt.
−Removed: Production Loans
−Removed: See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our production loans.
+Added: Production Loans and Production Tax Credit Facility
+Added: See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our production loans and Production Tax Credit Facility.
Table of Debt and Contractual Commitments
−Removed: The following table sets forth our future annual repayment of debt, and our contractual commitments as of December 31, 2020:
−Removed: Three Months Ending March 31, Year Ending March 31,
+Added: The following table sets forth our future annual repayment of debt, and our contractual commitments as of June 30, 2021:
+Added: Nine Months Ending March 31, Year Ending March 31,
2022 2023 2024 2025 2026 Thereafter Total
(Amounts in millions)
−Removed: Future annual repayment of debt recorded as of December 31, 2020 (on-balance sheet arrangements)
+Added: Future annual repayment of debt recorded as of June 30, 2021 (on-balance sheet arrangements)
Revolving credit facility $ — $ — $ — $ — $ — $ — $ —
2 unchanged sentences
5.500% Senior Notes — — — — — 1,000.0 1,000.0
−Removed: 6.375% Senior Notes — — — 545.6 — — 545.6
−Removed: Film obligations and production loans (1)
+Added: Film obligations (1)
278.5 330.0 50.9 191.9 4.5 6.6 862.4
Operating lease obligations 44.1 42.7 25.1 16.0 16.1 34.1 178.1
−Removed: Finance lease obligations 0.4 — — — — — 0.4
348.1 601.0 119.6 1,116.0 65.2 1,343.2 3,593.1
Contractual commitments by expected repayment date (off-balance sheet arrangements)
−Removed: Film obligation and production loan commitments (2)
+Added: Film obligations commitments (2)
258.7 616.9 180.0 41.5 47.7 1.0 1,145.8
6 unchanged sentences
___________________
−Removed: (1) Film obligations include minimum guarantees, theatrical marketing obligations, and accrued licensed program rights obligations.
+Added: (1) Film obligations include program rights and other film obligations, production loans and our Production Tax Credit Facility.
+Added: Program rights and other film obligations include minimum guarantees, theatrical marketing obligations, and accrued licensed program rights obligations.
Production loans represent loans for the production of film and television programs that we produce.
Repayment dates are based on anticipated delivery or release date of the related film or contractual due dates of the obligation.
−Removed: (2) Film obligation commitments include distribution and marketing commitments, minimum guarantee commitments, and program rights commitments.
+Added: Production tax credit facility represent amounts due at June 30, 2021 under our
+Added: Production Tax Credit Facility, and the repayment date represents the maturity date of the Production Tax Credit Facility (January 27, 2025), however net advances and payments under the Production Tax Credit Facility can fluctuate depending on the amount of collateral available.
+Added: See Note 6 to our unaudited condensed consolidated financial statements.
+Added: (2) Film obligations commitments include distribution and marketing commitments, minimum guarantee commitments, program rights commitments, and production loan commitments.
Distribution and marketing commitments represent contractual commitments for future expenditures associated with distribution and marketing of films which we will distribute.
5 unchanged sentences
The amounts include estimated future interest payments associated with the commitment.
−Removed: (3) Includes cash interest payments on our debt (including interest on finance lease obligations), excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.
+Added: (3) Includes cash interest payments on our debt, excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.
(4) Not included in the amounts above are $231.4 million of redeemable noncontrolling interests, as future amounts and timing are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future payments (see Note 8 to our unaudited condensed consolidated financial statements).
−Removed: In addition, in January 2021, we entered into a senior secured revolving credit facility based on our tax credit receivables.
−Removed: The maximum principal amount of the Facility
−Removed: 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.
−Removed: 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.
−Removed: The Facility is expected to mature on January 27, 2025.
−Removed: See Note 18 - Subsequent Events to our unaudited condensed consolidated financial statements.
We are obligated to pay programming fees for all qualifying films that are released theatrically in the U.S.
7 unchanged sentences
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).
−Removed: As disclosed in Note 9 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.6 billion at December 31, 2020 (March 31, 2020 - $1.6 billion).
−Removed: The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.2 billion at December 31, 2020 (March 31, 2020 - $1.0 billion).
+Added: As disclosed in Note 9 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.5 billion at June 30, 2021 (March 31, 2021 - $1.6 billion).
+Added: The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.1 billion at June 30, 2021 (March 31, 2021 - $1.2 billion).
Off-Balance Sheet Arrangements
3 unchanged sentences
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.