EXHIBIT 99.1
LIONSGATE REPORTS REVENUE OF $371.8 MILLION AND NET LOSS OF $65.3
MILLION FOR THIRD QUARTER OF FISCAL 2010, COMPARED TO REVENUE OF $324.0
MILLION AND NET LOSS OF $97.8 MILLION IN PRIOR YEAR THIRD QUARTER
MILLION FOR THIRD QUARTER OF FISCAL 2010, COMPARED TO REVENUE OF $324.0
MILLION AND NET LOSS OF $97.8 MILLION IN PRIOR YEAR THIRD QUARTER
ADJUSTED EBITDA FOR THIRD QUARTER IS NEGATIVE $9.8 MILLION COMPARED TO
NEGATIVE $90.9 MILLION IN PRIOR YEAR THIRD QUARTER
NEGATIVE $90.9 MILLION IN PRIOR YEAR THIRD QUARTER
Basic Net Loss Per Common Share Is $0.55 In Third Quarter Compared To Basic Net Loss Per
Common Share of $0.84 In Prior Year Third Quarter
Common Share of $0.84 In Prior Year Third Quarter
Company Reports Positive Free Cash Flow of $64.5 Million In Third Quarter Compared To Free
Cash Flow of Negative $104.9 Million In Prior Year Third Quarter
Cash Flow of Negative $104.9 Million In Prior Year Third Quarter
Santa Monica, CA, and Vancouver, BC (February 9, 2010) -— Lionsgate (NYSE: LGF), the leading next generation studio, continued to strengthen its financial performance for the quarter and nine months ended December 31, 2009, based on growing television production revenues, new revenue from TV Guide Network and TV Guide.com and reduced theatrical marketing and overhead costs, the Company announced today.
The Company reported revenues of $371.8 million and net loss attributable to Lionsgate shareholders of $65.3 million for the fiscal 2010 third quarter ended December 31, 2009. Revenues increased 15% from the prior year third quarter’s $324.0 million due primarily to increases in television production revenues and new revenue of $29.3 million from TV Guide Networks and TV Guide.com.
The Company had a net loss of $65.3 million in the third quarter compared to a net loss of $97.8 million in the prior year third quarter. Although including $26 million in marketing costs for films that will be released in the fourth or subsequent quarters, net loss in the quarter compared favorably to the prior year quarter.
Basic net loss per common share in the third quarter was $0.55 on 117.7 million weighted average common shares outstanding, compared to basic net loss of $0.84 on 115.8 million weighted average common shares outstanding in the prior year’s third quarter.
The Company reported adjusted EBITDA of negative $9.8 million in the third quarter compared to adjusted EBITDA of negative $90.9 million for the prior year’s third quarter. Adjustments in the quarter were made for non-cash stock options, stock appreciation rights and restricted stock units, certain non-recurring charges and non-risk prints and advertising expense, and the deduction of Lionsgate’s partners’ share of EBITDA attributed to TV Guide. EBITDA is defined as earnings before interest, income tax provision, depreciation and amortization, equity interests and gains or loss on extinguishment of debt and the sale of equity securities.
The Company reported $64.5 million in positive free cash flow, a non-GAAP metric, in the third quarter, compared to free cash flow of negative $104.9 million for the prior year’s third quarter. Free cash flow for the first nine months of the fiscal year was negative $77.4 million compared to free cash flow of negative $141.3 million in the prior year’s first nine months. Free cash flow is defined as net cash flows
provided by (used in) operating activities, less purchases of property and equipment and plus or minus the net increase or decrease in production obligations.
For the nine months ended December 31, 2009, Lionsgate reported revenues of $1.15 billion, net income attributable to Lionsgate shareholders of $2.8 million and adjusted EBITDA of $97.9 million. This compared to revenues of $1.00 billion, net loss of $146.1 million and adjusted EBITDA of negative $109.4 million in the prior year’s first nine months. Basic net income per common share for the nine months ended December 31, 2009 was $0.02 on 117.4 million weighted average common shares outstanding compared to basic net loss of $1.25 on 117.0 million weighted average common shares outstanding in the prior year’s first nine months.
“We had a solid quarter of revenue growth and strong free cash flow, and we remain on track to achieve our full year financial targets,” said Lionsgate Co-Chairman and Chief Executive Officer Jon Feltheimer. “We were particularly pleased to achieve record library revenues in a challenging home entertainment environment, a continuation of strong growth in all areas of our television business and significant progress in our channel investments. Coupled with a film slate that we plan to expand and diversify next year, we believe that our core and newer businesses combine to give us excellent momentum.”
Overall motion picture revenue for the quarter of $251.0 million decreased $3.9 million, or 2%, compared to the prior year’s third quarter. Within the motion picture segment, theatrical revenue was $49.4 million, a decrease of 29% compared to the prior year third quarter, as the Company released Academy Award (R) Best Picture nominatedPrecious,BrothersandSaw VIin the quarter compared to five releases, four of them wide releases, in the prior year’s third quarter.
Lionsgate’s home entertainment revenue from the motion picture segment was $95.0 million in the quarter, relatively unchanged compared to $94.6 million in the prior year’s third quarter. There were no significant new theatrical titles released on home entertainment in the quarter, and the majority of home entertainment revenue in the quarter came from the Company’s filmed entertainment library, which had the best quarterly revenue performance in its history.
Television included in motion pictures revenue rose to $54.7 million in the third quarter, an increase of 40% from the prior year’s third quarter, with a slate ofMadea Goes To Jail, The Haunting In Connecticut, My Bloody Valentine 3-D, New In TownandThe Spiritcomparing favorably to a slate ofMeet The Browns, Rambo, The Bank JobandThe Eyein the prior year’s third quarter.
International revenues of $37.5 million in the third quarter declined 9% from the prior year’s third quarter. The principal revenue contributors in the quarter includedBrothers, My Bloody Valentine 3-DandSaw VIcompared toSaw V, The Eye, Conan The BarbarianandPunisher: War Zonein the prior year’s third quarter. International revenues in the quarter also included Lionsgate UK’s distribution of the third-party filmThe Hurt Locker, also distributed by Lionsgate’s affiliate company Maple Pictures in Canada.
Mandate Pictures’ revenue of $12.9 million in the third quarter increased 55% from the prior year’s third quarter on the filmsJuno, Drag Me To HellandWhip Itcompared to the filmsJuno, Nick and Norah’s Infinite PlaylistandPassengersin the prior year’s third quarter.
Television production revenue increased to $91.5 million in the third quarter, a gain of 32% from the prior year’s third quarter, with a 23% increase in domestic series licensing from Lionsgate Television deliveries of 13 episodes of the new seriesBlue Mountain State(Spike TV), five episodes ofMad Men Season 3(AMC), eight episodes ofCrash Season 2(Starz) and two episodes ofNurse Jackie Season 2(Showtime) along with a 108% increase in revenues from Debmar-Mercury, primarily due to the licensing of such shows asTyler Perry’s House of Payne, its spinoffMeet The BrownsandThe
Wendy Williams Show, as well as a 76% increase in international television sales and a 75% increase in revenue from home entertainment releases of television production.
Lionsgate senior management will hold its analyst and investor conference call to discuss its fiscal year 2010 third quarter financial results at 9:00 A.M. ET/6:00 A.M. PT on Wednesday, February 10, 2010. Interested parties may participate live in the conference call by calling 1-800-288-8968 (612-332-0228 outside the U.S. and Canada). A full digital replay will be available from Wednesday morning, February 10, through Wednesday, February 17, by dialing 1-800-475-6701 (320-365-3844 outside the U.S. and Canada) and using access code 143850.
About Lionsgate
Lionsgate (NYSE: LGF) is the leading next generation studio with a strong and diversified presence in the production and distribution of motion pictures, television programming, home entertainment, family entertainment, video-on-demand and digitally delivered content. The Company has built a strong television presence in production of prime time cable and broadcast network series, distribution and syndication of programming through Debmar-Mercury and an array of channel assets. Lionsgate currently has nearly 20 shows on 10 different networks spanning its prime time production, distribution and syndication businesses, including such critically-acclaimed hits as “Mad Men”, “Weeds” and “Nurse Jackie” along with new series such as “Blue Mountain State” and the syndication successes “Tyler Perry’s House Of Payne”, its spinoff “Meet The Browns” and “The Wendy Williams Show”. Its feature film business has generated more than $400 million at the North American box office in the past year, including the recent critically-acclaimed hit PRECIOUS, which has garnered nearly $50 million at the North American box office and earned six Academy Award (R) nominations, including Best Picture.
The Company’s home entertainment business has grown to more than 7% market share and is an industry leader in box office-to-DVD revenue conversion rate. Lionsgate handles a prestigious and prolific library of approximately 12,000 motion picture and television titles that is an important source of recurring revenue and serves as the foundation for the growth of the Company’s core businesses. The Lionsgate brand remains synonymous with original, daring, quality entertainment in markets around the world.
***
www.lionsgate.com
www.lionsgate.com
For further information, please contact:
Peter D. Wilkes
310-255-3726
pwilkes@lionsgate.com
310-255-3726
pwilkes@lionsgate.com
The matters discussed in this press release include forward-looking statements, including those regarding the performance of our fiscal 2010. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films, budget overruns, limitations imposed by our credit facilities, unpredictability of the commercial success of our motion pictures and television programming, the cost of defending our intellectual property, difficulties in integrating acquired businesses, technological changes and other trends affecting the entertainment industry, and the risk factors as set forth in Lionsgate’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on June 1, 2009, and in Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on October 13, 2009, which risk factors are incorporated herein by reference. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
| December 31, | March 31, | |||||||
| 2009 | 2009 | |||||||
| (Amounts in thousands, | ||||||||
| except share amounts) | ||||||||
ASSETS | ||||||||
| Cash and cash equivalents | $ | 105,090 | $ | 138,475 | ||||
| Restricted cash | 706 | 10,056 | ||||||
| Restricted investments | 6,995 | 6,987 | ||||||
| Accounts receivable, net of reserve for returns and allowances of $83,578 (March 31, 2009 - $98,947) and provision for doubtful accounts of $8,961 (March 31, 2009 - $9,847) | 255,377 | 227,010 | ||||||
| Investment in films and television programs, net | 731,289 | 702,767 | ||||||
| Property and equipment, net | 35,359 | 42,415 | ||||||
| Finite-lived intangible assets, net | 74,412 | 78,904 | ||||||
| Goodwill | 376,853 | 379,402 | ||||||
| Other assets | 113,026 | 81,234 | ||||||
| Total assets | $ | 1,699,107 | $ | 1,667,250 | ||||
LIABILITIES | ||||||||
| Senior revolving credit facility | $ | 12,000 | $ | 255,000 | ||||
| Senior secured second-priority notes | 225,488 | — | ||||||
| Accounts payable and accrued liabilities | 244,969 | 270,561 | ||||||
| Participations and residuals | 286,656 | 371,857 | ||||||
| Film and production obligations | 397,068 | 304,525 | ||||||
| Subordinated notes and other financing obligations | 200,064 | 281,521 | ||||||
| Mandatorily redeemable preferred stock units held by noncontrolling interest | 91,454 | — | ||||||
| Deferred revenue | 136,977 | 142,093 | ||||||
| Total liabilities | 1,594,676 | 1,625,557 | ||||||
| Commitments and contingencies | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
| Lions Gate Entertainment Corp. shareholders’ equity: | ||||||||
| Common shares, no par value, 500,000,000 shares authorized, 117,834,653 and 116,950,512 shares issued at December 31, 2009 and March 31, 2009, respectively | 515,728 | 494,724 | ||||||
| Accumulated deficit | (438,347 | ) | (441,153 | ) | ||||
| Accumulated other comprehensive loss | (5,091 | ) | (11,878 | ) | ||||
| Total Lions Gate Entertainment Corp. shareholders’ equity | 72,290 | 41,693 | ||||||
| Noncontrolling interest | 32,141 | — | ||||||
| Total equity | 104,431 | 41,693 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,699,107 | $ | 1,667,250 | ||||
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (Amounts in thousands, except per share amounts) | ||||||||||||||||
Revenues | $ | 371,783 | $ | 324,027 | $ | 1,153,167 | $ | 1,003,204 | ||||||||
Expenses: | ||||||||||||||||
| Direct operating | 208,907 | 218,451 | 620,013 | 565,761 | ||||||||||||
| Distribution and marketing | 160,303 | 170,400 | 347,531 | 458,782 | ||||||||||||
| General and administration | 39,571 | 27,472 | 123,142 | 96,380 | ||||||||||||
| Depreciation and amortization | 6,685 | 1,575 | 21,087 | 4,376 | ||||||||||||
| Total expenses | 415,466 | 417,898 | 1,111,773 | 1,125,299 | ||||||||||||
Operating income (loss) | (43,683 | ) | (93,871 | ) | 41,394 | (122,095 | ) | |||||||||
Other expenses (income): | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Contractual cash based interest | 7,655 | 3,497 | 18,040 | 10,406 | ||||||||||||
| Amortization of debt discount, deferred financing costs and accretion of redeemable preferred stock units | 9,104 | 4,615 | 22,725 | 14,502 | ||||||||||||
| Total interest expense | 16,759 | 8,112 | 40,765 | 24,908 | ||||||||||||
| Interest and other income | (420 | ) | (860 | ) | (1,228 | ) | (5,062 | ) | ||||||||
| Loss (gain) on extinguishment of debt | 1,783 | (3,023 | ) | (5,675 | ) | (3,023 | ) | |||||||||
| Total other expenses, net | 18,122 | 4,229 | 33,862 | 16,823 | ||||||||||||
Income (loss) before equity interests and income taxes | (61,805 | ) | (98,100 | ) | 7,532 | (138,918 | ) | |||||||||
| Equity interests loss | (6,903 | ) | (1,695 | ) | (10,548 | ) | (5,841 | ) | ||||||||
Loss before income taxes | (68,708 | ) | (99,795 | ) | (3,016 | ) | (144,759 | ) | ||||||||
| Income tax provision (benefit) | (1,752 | ) | (2,039 | ) | 259 | 1,292 | ||||||||||
Net loss | (66,956 | ) | (97,756 | ) | (3,275 | ) | (146,051 | ) | ||||||||
| Add: Net loss attributable to noncontrolling interest | 1,697 | — | 6,081 | — | ||||||||||||
Net income (loss) attributable to Lions Gate Entertainment Corp. Shareholders | $ | (65,259 | ) | $ | (97,756 | ) | $ | 2,806 | $ | (146,051 | ) | |||||
Basic Net Income (Loss) Per Common Share | $ | (0.55 | ) | $ | (0.84 | ) | $ | 0.02 | $ | (1.25 | ) | |||||
Diluted Net Income (Loss) Per Common Share | $ | (0.55 | ) | $ | (0.84 | ) | $ | 0.02 | $ | (1.25 | ) | |||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 117,745 | 115,765 | 117,381 | 117,018 | ||||||||||||
Diluted | 117,745 | 115,765 | 117,579 | 117,018 | ||||||||||||
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (Amounts in thousands) | ||||||||||||||||
Operating Activities: | ||||||||||||||||
| Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders | $ | (65,259 | ) | $ | (97,756 | ) | $ | 2,806 | $ | (146,051 | ) | |||||
| Net loss attributable to noncontrolling interest | (1,697 | ) | — | (6,081 | ) | — | ||||||||||
| Net loss | (66,956 | ) | (97,756 | ) | (3,275 | ) | (146,051 | ) | ||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||
| Depreciation of property and equipment | 3,222 | 1,374 | 11,174 | 3,616 | ||||||||||||
| Amortization of films and television programs | 142,171 | 128,871 | 429,474 | 315,614 | ||||||||||||
| Amortization of debt discount, deferred financing costs and accretion of redeemable preferred stock units | 9,104 | 4,615 | 22,725 | 14,502 | ||||||||||||
| Amortization of intangible assets | 3,463 | 201 | 9,913 | 760 | ||||||||||||
| Non-cash stock-based compensation | 4,055 | 4,511 | 11,741 | 12,027 | ||||||||||||
| Loss (gain) on extinguishment of debt | 1,783 | (3,023 | ) | (5,675 | ) | (3,023 | ) | |||||||||
| Equity interests loss | 6,903 | 1,695 | 10,548 | 5,841 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Restricted cash | 9,190 | 5,235 | 9,350 | (6,700 | ) | |||||||||||
| Accounts receivable, net | (22,665 | ) | 16,278 | (22,966 | ) | 72,945 | ||||||||||
| Investment in films and television programs | (123,795 | ) | (146,132 | ) | (457,271 | ) | (471,308 | ) | ||||||||
| Other assets | 2,066 | (2,753 | ) | (2,315 | ) | (12,191 | ) | |||||||||
| Accounts payable and accrued liabilities | 65,942 | 23,749 | (30,305 | ) | 26,826 | |||||||||||
| Participations and residuals | (17,686 | ) | (40,575 | ) | (85,802 | ) | 24,696 | |||||||||
| Film obligations | 16,882 | 63,036 | (20,019 | ) | 58,711 | |||||||||||
| Deferred revenue | 2,070 | (15,511 | ) | (5,399 | ) | 7,826 | ||||||||||
Net Cash Flows Provided By (Used In) Operating Activities | 35,749 | (56,185 | ) | (128,102 | ) | (95,909 | ) | |||||||||
Investing Activities: | ||||||||||||||||
| Purchases of restricted investments | — | — | (13,994 | ) | — | |||||||||||
| Proceeds from the sale of restricted investments | — | — | 13,985 | — | ||||||||||||
| Purchases of investments — auction rate securities | (6,995 | ) | — | — | — | |||||||||||
| Proceeds from the sale of investments — auction rate securities | 6,998 | (125 | ) | — | — | |||||||||||
| Investment in equity method investees | (26,418 | ) | (4,787 | ) | (41,342 | ) | (15,886 | ) | ||||||||
| Increase in loans receivable | (8,695 | ) | (340 | ) | (362 | ) | (28,767 | ) | ||||||||
| Repayment of loans receivable | 8,333 | — | 8,333 | — | ||||||||||||
| Purchases of property and equipment | (538 | ) | (722 | ) | (4,228 | ) | (6,465 | ) | ||||||||
Net Cash Flows Used In Investing Activities | (27,315 | ) | (5,974 | ) | (37,608 | ) | (51,118 | ) | ||||||||
Financing Activities: | ||||||||||||||||
| Exercise of stock options | — | — | — | 2,894 | ||||||||||||
| Tax withholding requirements on equity awards | (390 | ) | (193 | ) | (1,733 | ) | (3,134 | ) | ||||||||
| Repurchase and cancellation of common shares | — | (231 | ) | — | (44,968 | ) | ||||||||||
| Proceeds from the sale of 49% interest in TV Guide Network | — | — | 122,355 | — | ||||||||||||
| Borrowings under senior revolving credit facility | 100,000 | — | 170,000 | — | ||||||||||||
| Repayments of borrowings under senior revolving credit facility | (343,000 | ) | — | (413,000 | ) | — | ||||||||||
| Borrowings under individual production obligations | 6,493 | 12,276 | 134,587 | 117,662 | ||||||||||||
| Repayment of individual production obligations | (9,395 | ) | (61,082 | ) | (111,885 | ) | (165,298 | ) | ||||||||
| Production obligation borrowings under Pennsylvania Regional Center credit facility | 57,000 | 824 | 57,000 | 8,758 | ||||||||||||
| Production obligation borrowings under film credit facility | 32,217 | — | 32,217 | — | ||||||||||||
| Proceeds from sale of senior secured second-priority notes | 216,232 | — | 216,232 | — | ||||||||||||
| Repurchase of subordinated notes | (75,185 | ) | (5,310 | ) | (75,185 | ) | (5,310 | ) | ||||||||
| Repayment of other financing obligations | (209 | ) | — | (615 | ) | — | ||||||||||
Net Cash Flows Provided By (Used In) Financing Activities | (16,237 | ) | (53,716 | ) | 129,973 | (89,396 | ) | |||||||||
Net Change In Cash And Cash Equivalents | (7,803 | ) | (115,875 | ) | (35,737 | ) | (236,423 | ) | ||||||||
Foreign Exchange Effects on Cash | 241 | (2,317 | ) | 2,352 | (4,453 | ) | ||||||||||
Cash and Cash Equivalents — Beginning Of Period | 112,652 | 248,905 | 138,475 | 371,589 | ||||||||||||
Cash and Cash Equivalents — End Of Period | $ | 105,090 | $ | 130,713 | $ | 105,090 | $ | 130,713 | ||||||||
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF NET LOSS TO EBITDA, AS DEFINED AND EBITDA, AS ADJUSTED
| Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (Amounts in thousands, except per share amounts) | ||||||||||||||||
Net loss | $ | (66,956 | ) | $ | (97,756 | ) | $ | (3,275 | ) | $ | (146,051 | ) | ||||
| Depreciation and amortization | 6,685 | 1,575 | 21,087 | 4,376 | ||||||||||||
| Interest expense | 16,759 | 8,112 | 40,765 | 24,908 | ||||||||||||
| Interest and other income | (420 | ) | (860 | ) | (1,228 | ) | (5,062 | ) | ||||||||
| Income tax provision (benefit) | (1,752 | ) | (2,039 | ) | 259 | 1,292 | ||||||||||
| Equity interests loss | 6,903 | 1,695 | 10,548 | 5,841 | ||||||||||||
| Loss (gain) on extinguishment of debt | 1,783 | (3,023 | ) | (5,675 | ) | (3,023 | ) | |||||||||
EBITDA | $ | (36,998 | ) | $ | (92,296 | ) | $ | 62,481 | $ | (117,719 | ) | |||||
| Stock-based compensation | 4,277 | 1,411 | 12,565 | 8,281 | ||||||||||||
| EBITDA attributable to noncontrolling interest | (3,899 | ) | — | (6,231 | ) | — | ||||||||||
| Non-recurring corporate defense charges | — | — | 1,012 | — | ||||||||||||
| Non-risk prints and advertising expense | 26,798 | — | 28,048 | — | ||||||||||||
EBITDA, as adjusted | $ | (9,822 | ) | $ | (90,885 | ) | $ | 97,875 | $ | (109,438 | ) | |||||
EBITDA is defined as earnings before interest, income tax provision, depreciation and amortization, equity interests, and gains or losses on extinguishment of debt and the sale of equity securities. EBITDA as defined, is a non-GAAP financial measure.
EBITDA as adjusted represents EBITDA as defined above adjusted for stock-based compensation, EBITDA attributable to noncontrolling interest, certain non-recurring charges, and non-risk prints and advertising expense. Stock-based compensation represents compensation expenses associated with stock options, restricted share units and stock appreciation rights. Non-recurring charges represent legal and other professional fees associated with a shareholder activist matter. Non-risk prints and advertising expense represents the amount of theatrical marketing expense for third party titles that the Company funded and expensed for which a third party provides a guarantee that such expense will be recouped from the performance of the film (i.e. there is no risk of loss to the company) net of an amount of the estimated amortization of participation expense that would had been recorded if such amount had not been expensed.
Management believes EBITDA as defined, and EBITDA as adjusted to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations. Presentation of EBITDA as defined, and EBITDA as adjusted, is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. While management considers EBITDA as defined, and EBITDA as adjusted, to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with Generally Accepted Accounting Principles. EBITDA as defined and EBITDA as adjusted, do not reflect cash available to fund cash requirements. Not all companies calculate EBITDA as defined or EBITDA as adjusted, in the same manner and the measure as presented may not be comparable to similarly-titled measures presented by other companies.
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF FREE CASH FLOW, AS DEFINED
TO NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
TO NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
| Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (Amounts in thousands, except per share amounts) | ||||||||||||||||
Net Cash Flows Provided By (Used In) Operating Activities | $ | 35,749 | $ | (56,185 | ) | $ | (128,102 | ) | $ | (95,909 | ) | |||||
| Purchases of property and equipment | (538 | ) | (722 | ) | (4,228 | ) | (6,465 | ) | ||||||||
| Net borrowings under and (repayment) of production obligations | 29,315 | (47,982 | ) | 54,919 | (38,878 | ) | ||||||||||
Free Cash Flow, as defined | $ | 64,526 | $ | (104,889 | ) | $ | (77,411 | ) | $ | (141,252 | ) | |||||
Free cash flow is defined as net cash flows provided by (used in) operating activities, less purchases of property and equipment and plus or minus the net increase or decrease in production obligations. The adjustment for the production obligations is made because the GAAP based cash flows from operations reflects a non-cash reduction of cash flows for the cost of films associated with production obligations prior to the time the Company actually pays for the film. The Company believes that it is more meaningful to reflect the impact of the payment for these films in its free cash flow when the payments are actually made.
Free cash flow is a non-GAAP financial measure as defined in Regulation G promulgated by the Securities and Exchange Commission. This non-GAAP financial measure is in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with Generally Accepted Accounting Principles.
Management believes this non-GAAP measure provides useful information to investors regarding cash that our operating businesses generate whether classified as operating or financing activity (related to the production of our films) within our GAAP based statement of cash flows, before taking into account cash movements that are non-operational. Free cash flow is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry. Not all companies calculate free cash flow in the same manner and the measure as presented may not be comparable to similarly titled measures presented by other companies.