EX-99.1 2 v22920exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1
(LIONSGATE)
LIONSGATE REPORTS PRETAX LOSS OF $5.0 MILLION
FOR FIRST QUARTER OF FISCAL 2007 COMPARED TO
PRETAX LOSS OF $21.7 MILLION IN PRIOR YEAR
QUARTER
First Quarter Revenue of $172.5 Million Declines 11% From
Prior Year, Primarily Reflecting Timing of Television Deliveries
SANTA MONICA, CA, and VANCOUVER, BC, August 9, 2006 — Lionsgate (NYSE: LGF), the leading independent filmed entertainment studio, reported revenues of $172.5 million, free cash flow of negative $2.1 million and a pretax loss of $5.0 million for its fiscal 2007 first quarter ended June 30, 2006, the Company announced today.
Lionsgate reported a basic loss per common share of $0.03 on 103.3 million weighted average common shares outstanding compared to a basic loss per common share of $0.21 on 101.9 million weighted average common shares outstanding in the prior year quarter.
“We are continuing to grow the business in line with our expectations,” said Lionsgate Chief Executive Officer Jon Feltheimer. “As expected, our first quarter reflects lower revenues due to the timing of television deliveries compared to the prior-year quarter. However, with the heart of our film slate upcoming and expansion of our television business to 11 prime time series, which are slated to air in subsequent quarters, we are well positioned for a very successful year in fiscal 2007.”
Feltheimer noted that Lionsgate’s recent acquisition of the Debmar-Mercury syndication company, a distribution deal for the Studio Canal library and a deal to continue distribution of most of the Republic library reflect several of the Company’s recent growth initiatives, all of which were completed or announced shortly after the close of the quarter.
The Company also noted that its filmed entertainment backlog during the first quarter increased to $240.5 million, its highest level ever, reflecting future revenue not yet recorded from contracts.
Theatrical revenue of $18.5 million during the quarter decreased 17% compared to $22.3 in the prior year quarter, with only two wide releases, Akeelah And The Bee and See No Evil, in the period. Larry The Cable Guy and the Company’s first Spanish-language feature film, La Mujer De Mi Hermano, also contributed to the quarter’s revenue.

 

 

Lionsgate’s home video revenue continued its strong growth. First quarter video revenue grew to $114.8 million, an increase of 18% compared to $97.4 million in the prior year quarter. Significant revenue drivers included the strong sales of Madea’s Family Reunion and two other DVDs from the Tyler Perry catalogue, Madea Goes To Jail and Why Did I Get Married, as well as the Academy Award ® -winning Crash, Barbie Diaries, and additional revenue from such fiscal 2006 fourth quarter video releases as Lord of War, Waiting and Saw II.
International revenue of $15.5 million in the first quarter increased 55% compared to $10.0 million in the prior year quarter, reflecting international sales of Saw II, Hard Candy and Fierce People as well as revenues from several titles released by Lionsgate U.K., which was formed by the October 2005 acquisition of Redbus Film Distributors.
Television revenues included in the motion picture segment were $14.8 million, a 9% decrease compared to $16.3 million in the prior year quarter. The Devil’s Rejects and Crash were the principal revenue drivers.
Television production revenue of $7.3 million in the first quarter decreased 84% compared to $45.9 million in the prior year quarter due to timing of the deliveries of Lionsgate’s television programming. Lionsgate’s television business has grown to include 11 prime time series on nine networks slated to air in fiscal 2007, including The Dead Zone (USA), Weeds (Showtime), Wildfire (ABC Family), Lovespring International (Lifetime), Hidden Palms (CW), The Dresden Files (Sci-Fi Network), Motel Man (Sci-Fi), I Pity The Fool (TV Land), Dirty Dancing: The Ultimate Reality (WE), and two recent additions, White Boyz N The Hood (Showtime) and Mad Men (AMC). Revenues from these series will be reflected in subsequent fiscal quarters, and the Company reaffirmed its television revenue guidance of at least $140 million for the fiscal year.
Lionsgate senior management will hold its analyst and investor conference call to discuss its fiscal 2007 first quarter financial results at 4:30 P.M. ET/1:30 P.M. PT today, Wednesday, August 9, 2006. Interested parties may participate live in the conference call by calling 1-800-230-1096 (1-612-288-0318 outside the U.S. and Canada). A full digital replay will be available from Wednesday evening, August 9, through Thursday, August 17, by dialing 1-800-475-6701 (1-320-365-3844 outside the U.S. and Canada) and using access code # 837968.
Lionsgate is the leading independent filmed entertainment studio, winning this year’s Best Picture Academy Award ® for Crash, and the Company is a premier producer and distributor of motion pictures, television programming, home entertainment, family entertainment and video-on-demand content. Its prestigious and prolific library of more than 7,800 titles is a valuable source of recurring revenue and a foundation for the growth of the Company’s core businesses. The Lionsgate brand is synonymous with original, daring, quality entertainment in markets around the globe.

 

 

www.lionsgate.com
*                     *                    *                    *                     *
For further information, contact:
 
Peter D. Wilkes
Lionsgate
310-255-3726
pwilkes@lionsgate.com
The matters discussed in this press release include forward-looking statements, including those regarding the timing of our upcoming film slate, the expansion of our television business, the success of our fiscal 2007, and the timing of revenues expected from our upcoming television series. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films, budget overruns, limitations imposed by our credit facilities, unpredictability of the commercial success of our motion pictures and television programming, the cost of defending our intellectual property, difficulties in integrating acquired businesses, technological changes and other trends affecting the entertainment industry, and the risk factors as set forth in Lionsgate’s Form 10-K filed with the Securities and Exchange Commission on June 14, 2006. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances
This press release, and the accompanying tables, include both financial measures in accordance with accounting principles generally accepted in the United States of America, or GAAP, as well as non-GAAP financial measures. The tables attached to this press release include reconciliations of non-GAAP financial measures to GAAP financial measures.

 

 

LIONS GATE ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
                 
    June 30,     March 31,  
    2006     2006  
    (Unaudited)          
    (Amounts in thousands,  
    except share amounts)  
ASSETS
Cash and cash equivalents
   $ 54,858     $ 46,978  
Restricted cash
     736       820  
Investments — auction rate securities
     142,107       167,081  
Investments — equity securities
     14,556       14,921  
Accounts receivable, net of reserve for video returns and allowances of $72,740 (March 31, 2006 - $73,366) and provision for doubtful accounts of $8,692 (March 31, 2006 - $10,934)
     90,801       182,659  
Investment in films and television programs
     445,888       417,750  
Property and equipment
     8,509       7,218  
Goodwill
     185,517       185,117  
Other assets
     25,534       30,705  
 
            
 
   $ 968,506     $ 1,053,249  
 
            
 
                
LIABILITIES
 
                
Accounts payable and accrued liabilities
   $ 121,113     $ 188,793  
Unpresented bank drafts
     —       14,772  
Film obligations
     275,405       284,987  
Subordinated notes
     385,000       385,000  
Deferred revenue
     38,789       30,427  
 
            
 
     820,307       903,979  
 
            
Commitments and contingencies
                
 
                
SHAREHOLDERS’ EQUITY
Common shares, no par value, 500,000,000 shares authorized, 104,632,164 at June 30, 2006 and 104,422,765 at March 31, 2006 shares issued and outstanding
     331,246       328,771  
Series B preferred shares (10 shares issued and outstanding)
     —       —  
Restricted share units
     —       5,178  
Unearned compensation
     —       (4,032 )
Accumulated deficit
     (180,734 )     (177,130 )
Accumulated other comprehensive loss
     (2,313 )     (3,517 )
 
            
 
     148,199       149,270  
 
            
 
   $ 968,506     $ 1,053,249  
 
            

 

 

LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 
    Three     Three  
    Months     Months  
    Ended     Ended  
    June 30,     June 30,  
    2006     2005  
    (Amounts in thousands,  
    except per share amounts)  
 
                
Revenues
   $ 172,456     $ 194,229  
 
            
 
                
Expenses:
                
Direct operating
     68,545       100,264  
Distribution and marketing
     87,046       93,481  
General and administration
     19,233       17,329  
Depreciation
     544       748  
 
            
Total expenses
     175,368       211,822  
 
            
Operating Loss
     (2,912 )     (17,593 )
 
            
Other Expense (Income):
                
Interest expense
     4,676       4,884  
Interest rate swaps mark-to-market
     —       337  
Interest income
     (2,561 )     (1,065 )
 
            
Total other expenses
     2,115       4,156  
Loss Before Equity Interests and Income Taxes
     (5,027 )     (21,749 )
Equity interests
     58       —  
 
            
Loss Before Income Taxes
     (4,969 )     (21,749 )
Income tax provision (benefit)
     (1,365 )     70  
 
            
Netloss
   $ (3,604 )   $ (21,819 )
 
            
Basic and Diluted Loss Per Common Share
   $ (0.03 )   $ (0.21 )
 
            

 

 

LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
                                                                                 
                                                                    Accumulated        
                    Series B     Restricted                     Comprehensive     Other        
    Common Shares     Preferred Shares     Share   Unearned     Accumulated     Income     Comprehensive        
    Number     Amount     Number     Amount     Units   Compensation   Deficit     (Loss)     Loss     Total  
                            (Amounts in thousands, except share amounts)                          
 
                                                                                
Balance at March 31, 2005
     101,843,708     $ 305,662       10     $ —     $ —     $ —     $ (183,226 )           $ (5,297 )   $ 117,139  
Exercise of stock options
     361,310       1,408                                                               1,408  
Issuance to directors for services
     20,408       203                                                               203  
Impact of previously modified stock options
     —       27                                                               27  
Issuance of common shares in connection with acquisition of film assets
     399,042       3,775                                                               3,775  
Issuance of common shares in connection with acquisition of common shares of Image Entertainment
     1,104,004       11,537                                                               11,537  
Issuance of common shares in connection with acquisition of Redbus
     643,460       5,643                                                               5,643  
Issuance of restricted share units
                                     5,694       (5,694 )                             —  
Amortization of restricted share units
                                             1,662                               1,662  
Vesting of restricted share units
     50,833       516                       (516 )                                     —  
Comprehensive income (loss)
                                                                                
Net income
                                                     6,096       6,096               6,096  
Foreign currency translation adjustments
                                                             2,223       2,223       2,223  
Net unrealized loss on foreign exchange contracts
                                                             (356 )     (356 )     (356 )
Unrealized loss on investments — available for sale
                                                             (87 )     (87 )     (87 )
 
    
Comprehensive income
                                                           $ 7,876                  
 
                                                            
Balance at March 31, 2006
     104,422,765       328,771       10     $ —       5,178     $ (4,032 )   $ (177,130 )           $ (3,517 )   $ 149,270  
Reclassification of unearned compensation and restricted share common units upon adoption of SFAS No. 123(R )
             1,146                       (5,178 )     4,032                               —  
Exercise of stock options
     123,633       355                                                               355  
Vesting of restricted share units
     85,766                                                                       —  
Stock based compensation
             974                                                               974  
Comprehensive income (loss)
                                                                                
Net loss
                                                     (3,604 )     (3,604 )             (3,604 )
Foreign currency translation adjustments
                                                             1,550       1,550       1,550  
Net unrealized gain on foreign exchange contracts
                                                             17       17       17  
Unrealized loss on investments — available for sale
                                                             (363 )     (363 )     (363 )
 
                                                                              
Comprehensive loss
                                                           $ (2,400 )             —  
 
                                                            
Balance at June 30, 2006
     104,632,164     $ 331,246       10     $ —       —     $ —     $ (180,734 )           $ (2,313 )   $ 148,199  
 
                                                              

 

 

LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Three Months     Three Months  
    Ended     Ended  
    June 30,     June 30,  
    2006     2005  
    (Amounts in thousands)  
 
                
Operating Activities:
                
Net loss
   $ (3,604 )   $ (21,819 )
Adjustments to reconcile net loss to net cash provided by operating activities
                
Depreciation of property and equipment
     544       748  
Amortization of deferred financing costs
     975       898  
Amortization of films and television programs
     33,193       65,376  
Amortization of intangible assets
     244       548  
Non-cash stock-based compensation
     974       89  
Interest rate swaps mark-to-market
     —       337  
Equity interests
     (58 )     —  
Changes in operating assets and liabilities:
                
Decrease in restricted cash
     84       1,945  
Accounts receivable, net
     93,013       40,774  
Increase in investment in films and television programs
     (60,439 )     (69,195 )
Other assets
     4,717       (140 )
Accounts payable and accrued liabilities
     (68,278 )     (588 )
Unpresented bank drafts
     (14,772 )     9,702  
Film obligations
     (9,936 )     15,247  
Deferred revenue
     8,319       (13,755 )
 
            
Net Cash Flows Provided By (Used In) Operating Activities
     (15,024 )     30,167  
 
            
Investing Activities:
                
Purchases of investments — auction rate securities
     (165,620 )     —  
Sales of investments — auction rate securities
     190,594       —  
Cash received from sale of investment
     —       2,011  
Purchases of property and equipment
     (1,831 )     (629 )
 
            
Net Cash Flows Provided By Investing Activities
     23,143       1,382  
 
            
Financing Activities:
                
Issuance of common shares
     353       61  
Repayment of subordinated notes
     —       (5,000 )
Repayment of mortgages payable
     —       (285 )
 
            
Net Cash Flows Provided By (Used In) Financing Activities
     353       (5,224 )
 
            
Net Change In Cash And Cash Equivalents
     8,472       26,325  
Foreign Exchange Effects on Cash
     (592 )     (892 )
Cash and Cash Equivalents — Beginning Of Period
     46,978       112,839  
 
            
Cash and Cash Equivalents — End Of Period
   $ 54,858     $ 138,272  
 
            

 

 

LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
                 
    Three Months Ended  
    June 30,  
    2006     2005  
    (Amounts in thousands)  
Net Cash Flows Provided By (Used In) Operating Activities
   $ (15,024 )   $ 30,167  
Purchases of property and equipment
     (1,831 )     (629 )
Decrease (Increase) in Unpresented Bank Drafts
     14,772       (9,702 )
 
            
Free Cash Flow, as defined
   $ (2,083 )   $ 19,836  
 
            
Free cash flow is defined as net cash flows provided by or used in operating activities less purchases of property and equipment and unpresented bank drafts. Unpresented bank drafts represent checks issued and not yet presented for payment in excess of the cash balances at custodial banks. The applicable bank accounts are funded at the time the checks are presented for payment.
Free cash flow is a non-GAAP financial measure as defined in Regulation G promulgated by the Securities and Exchange Commission. This non-GAAP financial measure is in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with Generally Accepted Accounting Principles.
Management believes this non-GAAP measure provides useful information to investors regarding cash that our operating businesses generate before taking into account cash movements that are non-operational. Free cash flow is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry. Not all companies calculate free cash flow in the same manner and the measure as presented may not be comparable to similarly titled measures presented by other companies.