EXHIBIT 99.1
LIONSGATE REPORTS REVENUES OF $254.5 MILLION FOR THIRD
QUARTER OF FISCAL 2007, 11% INCREASE FROM PRIOR YEAR
QUARTER; NET INCOME OF $20.5 MILLION INCREASES FROM NET
INCOME OF $3.1 MILLION IN PRIOR YEAR QUARTER
QUARTER OF FISCAL 2007, 11% INCREASE FROM PRIOR YEAR
QUARTER; NET INCOME OF $20.5 MILLION INCREASES FROM NET
INCOME OF $3.1 MILLION IN PRIOR YEAR QUARTER
Company Reports Continued Strong Free Cash Flow For F2007 Third Quarter
Santa Monica, CA, and Vancouver, BC, February 9, 2007 -— Lionsgate (NYSE: LGF), the leading independent filmed entertainment studio, reported revenues of $254.5 million and net income of $20.5 million for its fiscal 2007 third quarter ended December 31, 2006, the Company announced today.
Lionsgate reported basic net income per common share of $0.19 on 107.6 million weighted average common shares outstanding compared to basic net income per common share of $0.03 on 103.9 million weighted average common shares outstanding in the prior year quarter. The Company reported free cash flow (a non-GAAP metric) of $50.7 million for the third quarter.
“We are pleased that all of our core businesses made important contributions to our profitability and free cash flow for the quarter,” said Lionsgate Chief Executive Officer Jon Feltheimer. “We remain focused on our unique business plan, and our financial results reflect our continued progress toward a successful fiscal 2007 in every one of our key businesses as well as for the Company as a whole.”
Feltheimer noted that Lionsgate’s filmed entertainment backlog grew to a record $347.4 million in the third quarter, which now includes the backlog of approximately $66.9 million from Lionsgate’s recently-acquired television syndication company Debmar-Mercury. At quarter end on December 31, 2006, Lionsgate also had total cash and auction rate notes of more than $245 million on its balance sheet.
Overall motion picture revenue for the quarter was $221.6 million, an increase of 9% compared to $203.3 million in the prior year’s quarter. Within this segment, theatrical revenue of $46.0 million during the third quarter decreased 8% compared to $49.9 million in the prior year quarter. Principal revenue drivers for the quarter were the box office hits SAW III and EMPLOYEE OF THE MONTH as the Company continued to consistently generate successful theatrical wide releases. Lionsgate’s SAW franchise has now grossed more than $400 million worldwide, and the DVD release of SAW III debuted at number one on the nationwide charts last week.
Lionsgate’s home video revenue of $113.6 million in the third quarter decreased 2% compared to $115.9 million in the prior year’s quarter. Major DVD titles included the continuing sales of AKEELAH AND THE BEE, AN AMERICAN HAUNTING, the 15th anniversary special edition of RESERVOIR DOGS, continued sales of SAW II, SEE NO EVIL and THE DESCENT. The Company’s DVD release slate remains heavily skewed toward the end of the fiscal year. Shortly after the close of the third quarter, Lionsgate released several major DVD titles and placed four of the top seven releases and six of the top 20 titles on the nationwide DVD charts in the final week of January. SAW III and CRANK both debuted at number one on the DVD charts in January.
International revenue of $27.6 million in the third quarter increased 90% compared to $14.5 million in the prior year’s quarter, driven by revenues from Lionsgate U.K. as well as strong foreign sales of CRANK, SAW II, SAW III and THE LOST CITY.
Television revenue included in the motion picture segment was $31.2 million in the third quarter, a 55% increase compared to $20.2 million in the prior year’s quarter.
The gain was attributable to several strong theatrical titles with television windows opening in the third quarter, including HOSTEL and Tyler Perry’s MADEA’S FAMILY REUNION. The Company also recorded continued strong television sales of THE PUNISHER.
Television production revenue of $32.9 million in the third quarter increased 27% compared to $26.0 million in the prior year’s quarter, driven by deliveries of the third season of WILDFIRE (ABC Family), DIRTY DANCING: THE REALITY SERIES (WE), I PITY THE FOOL (TV Land) and THE LOST ROOM (Sci Fi Network). Domestic licensing for the third quarter included $4.7 million in revenues from the July 2006 acquisition of the television syndication company Debmar-Mercury. Deliveries of additional new Lionsgate television series, including THE DRESDEN FILES (Sci Fi Network), HIDDEN PALMS (CW Network), KILL PIT (Spike TV) and MAD MEN (AMC) are anticipated in future quarters. Lionsgate’s Golden Globe-winning hit comedy WEEDS has also been ordered by Showtime for a third full season, which is expected to debut in the summer. WILDFIRE has already been picked up for a fourth season by ABC Family.
Lionsgate senior management will hold its analyst and investor conference call to discuss its fiscal 2007 third quarter financial results at 9:00 A.M. ET/6:00 A.M. PT, Monday, February 12, 2007. Interested parties may participate live in the conference call by calling 1-888-428-4478 (1-612-288-0340 outside the U.S. and Canada). A full digital replay will be available from Monday morning, February 12, through Monday, February 19, by dialing 1-800-475-6701 (1-320-365-3844 outside the U.S. and Canada) and using access code 860068.
Lionsgate is the leading independent filmed entertainment studio, winning the 2006 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 10,000 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
* * * * *
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For further information, contact:
Peter D. Wilkes
Lionsgate
310-255-3726
pwilkes@lionsgate.com
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
December 31, | March 31, | |||||||
2006 | 2006 | |||||||
(Unaudited) | ||||||||
(Amounts in thousands, | ||||||||
except share amounts) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 39,473 | $ | 46,978 | ||||
Restricted cash | 9,970 | 820 | ||||||
Investments — auction rate securities | 206,643 | 167,081 | ||||||
Investments — equity securities | 14,080 | 14,921 | ||||||
Accounts receivable, net of reserve for video returns and allowances of $71,252 (March 31, 2006 - $73,366) and provision for doubtful accounts of $9,455 (March 31, 2006 - $10,934) | 117,040 | 182,659 | ||||||
Investment in films and television programs | 535,452 | 417,750 | ||||||
Property and equipment | 13,319 | 7,218 | ||||||
Goodwill | 197,805 | 185,117 | ||||||
Other assets | 23,869 | 30,705 | ||||||
$ | 1,157,651 | $ | 1,053,249 | |||||
LIABILITIES | ||||||||
Accounts payable and accrued liabilities | $ | 168,391 | $ | 188,793 | ||||
Unpresented bank drafts | — | 14,772 | ||||||
Participation and residuals | 170,710 | 164,326 | ||||||
Film obligations | 194,359 | 120,661 | ||||||
Subordinated notes | 325,000 | 385,000 | ||||||
Deferred revenue | 81,184 | 30,427 | ||||||
939,644 | 903,979 | |||||||
Commitments and contingencies | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common shares, no par value, 500,000,000 shares authorized, 116,750,808 at December 31, 2006 and 104,422,765 at March 31, 2006 shares issued and outstanding | 395,444 | 328,771 | ||||||
Series B preferred shares (10 shares issued and outstanding) | — | — | ||||||
Restricted share units | — | 5,178 | ||||||
Unearned compensation | — | (4,032 | ) | |||||
Accumulated deficit | (174,671 | ) | (177,130 | ) | ||||
Accumulated other comprehensive loss | (2,766 | ) | (3,517 | ) | ||||
218,007 | 149,270 | |||||||
$ | 1,157,651 | $ | 1,053,249 | |||||
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, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||
Revenues | $ | 254,531 | $ | 229,313 | $ | 645,156 | $ | 633,130 | ||||||||
Expenses: | ||||||||||||||||
Direct operating | 110,921 | 110,128 | 274,189 | 318,352 | ||||||||||||
Distribution and marketing | 95,803 | 99,486 | 296,194 | 290,655 | ||||||||||||
General and administration | 23,347 | 12,887 | 64,307 | 45,229 | ||||||||||||
Depreciation | 824 | 416 | 1,949 | 1,348 | ||||||||||||
Total expenses | 230,895 | 222,917 | 636,639 | 655,584 | ||||||||||||
Operating Income (Loss) | 23,636 | 6,396 | 8,517 | (22,454 | ) | |||||||||||
Other Expense (Income): | ||||||||||||||||
Interest expense | 4,601 | 4,698 | 14,181 | 13,954 | ||||||||||||
Interest rate swaps mark-to-market | — | — | — | 123 | ||||||||||||
Interest income | (2,906 | ) | (1,046 | ) | (7,753 | ) | (2,962 | ) | ||||||||
Total other expenses | 1,695 | 3,652 | 6,428 | 11,115 | ||||||||||||
Income (Loss) Before Equity Interests and Income Taxes | 21,941 | 2,744 | 2,089 | (33,569 | ) | |||||||||||
Equity interests | (425 | ) | (44 | ) | (802 | ) | (98 | ) | ||||||||
Income (Loss) Before Income Taxes | 21,516 | 2,700 | 1,287 | (33,667 | ) | |||||||||||
Income tax provision (benefit) | 1,061 | (221 | ) | (1,172 | ) | 240 | ||||||||||
Income (Loss) before discontinued operations | 20,455 | 2,921 | 2,459 | (33,907 | ) | |||||||||||
Income from discontinued operations, net of tax of $579 | — | 221 | — | 1,124 | ||||||||||||
Net Income (Loss) | $ | 20,455 | $ | 3,142 | $ | 2,459 | $ | (32,783 | ) | |||||||
Basic Per Share Data: | ||||||||||||||||
Basic Income (Loss) Per Common Share From Continuing Operations | $ | 0.19 | $ | 0.03 | $ | 0.02 | $ | (0.33 | ) | |||||||
Basic Income Per Common Share From Discontinued Operations | — | — | — | 0.01 | ||||||||||||
Basic Net Income (Loss) per Common Share | $ | 0.19 | $ | 0.03 | $ | 0.02 | $ | (0.32 | ) | |||||||
Diluted Per Share Data: | ||||||||||||||||
Diluted Earnings (Loss) Per Common Share From Continuing Operations | $ | 0.17 | $ | 0.03 | $ | 0.02 | $ | (0.33 | ) | |||||||
Diluted Earnings Per Common Share From Discontinued Operations | — | — | — | 0.01 | ||||||||||||
Diluted Net Income (Loss) per Common Share | $ | 0.17 | $ | 0.03 | $ | 0.02 | $ | (0.32 | ) | |||||||
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 of common shares 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 | 1,097,387 | 3,280 | 3,280 | |||||||||||||||||||||||||||||||||||||
Stock based compensation, net of share units withholding tax obligations of $440 | 99,424 | 4,117 | 4,117 | |||||||||||||||||||||||||||||||||||||
Issuance of common shares to directors for services | 25,568 | 238 | 238 | |||||||||||||||||||||||||||||||||||||
Conversion of 4.875% notes, net of unamortized issuance costs | 11,105,664 | 57,892 | 57,892 | |||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||
Net income | 2,459 | $ | 2,459 | 2,459 | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 1,791 | 1,791 | 1,791 | |||||||||||||||||||||||||||||||||||||
Net unrealized loss on foreign exchange contracts | (200 | ) | (200 | ) | (200 | ) | ||||||||||||||||||||||||||||||||||
Unrealized loss on investments — available for sale | (840 | ) | (840 | ) | (840 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive income | $ | 3,210 | — | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | 116,750,808 | $ | 395,444 | 10 | $ | — | $ | — | $ | — | $ | (174,671 | ) | $ | (2,766 | ) | $ | 218,007 | ||||||||||||||||||||||
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months | Nine Months | |||||||
Ended | Ended | |||||||
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(Amounts in thousands) | ||||||||
Operating Activities: | ||||||||
Net income (loss) | $ | 2,459 | $ | (32,783 | ) | |||
Income from discontinued operations | — | 1,124 | ||||||
Income (loss) from continuing operations | 2,459 | (33,907 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||
Depreciation of property and equipment | 1,949 | 1,348 | ||||||
Amortization of deferred financing costs | 2,915 | 2,814 | ||||||
Amortization of films and television programs | 142,982 | 191,337 | ||||||
Amortization of intangible assets | 702 | 1,760 | ||||||
Non-cash stock-based compensation | 4,795 | 1,403 | ||||||
Interest rate swaps mark-to-market | — | 123 | ||||||
Equity interests | 802 | 98 | ||||||
Changes in operating assets and liabilities: | ||||||||
Restricted cash | (9,150 | ) | 2,117 | |||||
Accounts receivable, net | 76,829 | 13,076 | ||||||
Investment in films and television programs | (246,567 | ) | (215,192 | ) | ||||
Other assets | 5,079 | (3,511 | ) | |||||
Accounts payable and accrued liabilities | (23,733 | ) | 43,083 | |||||
Unpresented bank drafts | (14,772 | ) | — | |||||
Participation and residuals | 1,048 | 39,203 | ||||||
Film obligations | 70,134 | 33,840 | ||||||
Deferred revenue | 50,233 | (20,467 | ) | |||||
Net Cash Flows Provided By Operating Activities — continuing operations | 65,705 | 57,125 | ||||||
Net Cash Flows Provided By Operating Activities — discontinued operations | — | 1,808 | ||||||
Net Cash Flows Provided By Operating Activities | 65,705 | 58,933 | ||||||
Investing Activities: | ||||||||
Purchases of investments — auction rate securities | (575,789 | ) | (163,400 | ) | ||||
Sales of investments — auction rate securities | 536,226 | 82,500 | ||||||
Purchases of investments — equity securities | — | (3,470 | ) | |||||
Funding of joint venture — FEARnet | (5,000 | ) | — | |||||
Cash received from sale of investment | — | 2,945 | ||||||
Acquisition of Debmar, net of cash acquired | (24,137 | ) | — | |||||
Acquisition of Redbus, net of cash acquired | — | (27,122 | ) | |||||
Purchases of property and equipment | (7,737 | ) | (4,173 | ) | ||||
Net Cash Flows Used In Investing Activities — continuing operations | (76,437 | ) | (112,720 | ) | ||||
Net Cash Flows Provided By Investing Activities — discontinued operations | — | 114 | ||||||
Net Cash Flows Used In Investing Activities | (76,437 | ) | (112,606 | ) | ||||
Financing Activities: | ||||||||
Issuance of common shares | 3,280 | 779 | ||||||
Financing fees | — | (240 | ) | |||||
Repayment of subordinated notes | — | (5,000 | ) | |||||
Net Cash Flows Provided By (Used In) Financing Activities — continuing operations | 3,280 | (4,461 | ) | |||||
Net Cash Flows Used In Financing Activities — discontinued operations | — | (2,523 | ) | |||||
Net Cash Flows Provided By (Used In) Financing Activities | 3,280 | (6,984 | ) | |||||
Net Change In Cash And Cash Equivalents | (7,452 | ) | (60,657 | ) | ||||
Foreign Exchange Effects on Cash — continuing operations | (53 | ) | (1,774 | ) | ||||
Foreign Exchange Effects on Cash — discontinued operations | — | 140 | ||||||
Foreign Exchange Effects on Cash | (53 | ) | (1,634 | ) | ||||
Cash and Cash Equivalents — Beginning Of Period | 46,978 | 112,839 | ||||||
Cash and Cash Equivalents — End Of Period | $ | 39,473 | $ | 50,548 | ||||
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
OPERATING ACTIVITIES TO FREE CASH FLOW
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Net Cash Flows Provided By Operating Activities | $ | 54,923 | $ | 21,205 | $ | 65,705 | $ | 58,933 | ||||||||
Purchases of property and equipment | (4,200 | ) | (2,016 | ) | (7,737 | ) | (4,173 | ) | ||||||||
Decrease in Unpresented Bank Drafts | — | — | 14,772 | — | ||||||||||||
Free Cash Flow, as defined | $ | 50,723 | $ | 19,189 | $ | 72,740 | $ | 54,760 | ||||||||
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.