LIONS GATE REPORTS FISCAL 2006 SECOND QUARTER REVENUE
OF $212.6 MILLION, NET LOSS OF $14.1 MILLION
AND FREE CASH FLOW OF $6.1 MILLION
OF $212.6 MILLION, NET LOSS OF $14.1 MILLION
AND FREE CASH FLOW OF $6.1 MILLION
Timing of Marketing And Distribution Costs for Wide Release Films Is
Primary Contributor to Negative EBITDA In The Quarter
Primary Contributor to Negative EBITDA In The Quarter
Television Business Generates Another $42.7 Million In Production Revenues, With Six-
Month Total of $88.6 Million, Up Nearly 60% From
Prior Year’s Six-Month Period
Month Total of $88.6 Million, Up Nearly 60% From
Prior Year’s Six-Month Period
SANTA MONICA, CA, and VANCOUVER, BC, November 9, 2005 – Lions Gate Entertainment (NYSE and TSX: LGF), the premier independent filmed entertainment production and distribution studio, today reported $212.6 million in revenues, net loss of $14.1 million, EBITDA (earnings before interest expense, interest rate swaps mark-to-market, interest income, income tax provision, depreciation and minority interests) of negative $9.3 million and free cash flow of $6.1 million for its fiscal 2006 second quarter ended September 30, 2005.
Revenue of $212.6 million decreased $18.5 million, or 8.0%, compared to $231.1 million in the prior year’s quarter. Net loss of $14.1 million, or loss per share of $0.14 on 102.4 million weighted average common shares outstanding, compared to net income of $8.3 million, or basic income per share of $0.09, on 96.3 million weighted average common shares outstanding, in the prior year’s quarter. EBITDA of negative $9.3 million compared to EBITDA of $15.4 million for the three months ended September 30, 2004, and free cash flow of positive $6.1 million compared to free cash flow of $9.8 million in the prior year’s quarter.
The Company noted that it spent approximately $35 million to market and distribute two wide release films,Lord of WarandThe Devil’s Rejects, contributing to a $26 million loss on those films in the quarter. Lions Gate expects that bothLord of WarandThe Devil’s Rejectswill be profitable after release in their DVD and pay television windows.
Principal revenue drivers during the second quarter were the theatrical releasesLord of WarandThe Devil’s Rejects, the DVD titlesCrash,BarbieÔ And The Magic of PegasusandState Property 2along with continuing sales ofDiary of A Mad Black Woman, released late in the first quarter, international sales ofThe Final CutandThe Devil’s Rejectsand domestic deliveries of the one-hour drama seriesWildfire(ABC Family),Missing(Lifetime) andThe Dead Zone(USA) as well as the critically-acclaimed half-hour drama seriesWeeds(Showtime).
“As usual, our fiscal year will be heavily backloaded, especially with the powerful theatrical box office performance and anticipated strong DVD sales ofSaw II,” said Lions Gate Chief Executive Officer Jon Feltheimer. “The second half of our year will be driven by a very exciting theatrical slate, coupled with an expected increase in library sales, forecasted strong seasonal home entertainment DVD revenues in the third quarter and ongoing growth of our television operations.”
Saw IIhas grossed approximately $62 million at the domestic box office in its first 12 days of release, achieving the biggest-grossing opening weekend in Lions Gate’s history, and already eclipsing the $55.2 million domestic box office total of the originalSaw. The Company also noted that it anticipates that five of its seven wide release theatrical films fiscal year-to-date will ultimately be profitable –Crash,The Devil’s Rejects,Lord of War,WaitingandSaw II.Remaining wide releases on Lions Gate’s fiscal 2006 slate include the Usher filmIn The Mix, the horror filmHostel, directed by Eli Roth and presented by Quentin Tarantino, and the next film in the Company’s Tyler Perry franchise,Tyler Perry’s Madea’s Family Reunion.
Lions Gate also reported that its filmed entertainment backlog at September 30, 2005 was $129.4 million, which represents future revenue not yet recorded from executed contracts for the television exhibition and international sales of titles such asDiary of A Mad Black Woman,Saw II, Crash, In The Mixand the television seriesMissing.
For the six months ended September 30, 2005, Lions Gate reported revenues of $406.8 million, down 3.1% compared to $419.8 million for the first six months of fiscal 2005. Net loss for the six months was $35.9 million, or loss per share of $0.35 on 102.1 million weighted average common shares outstanding, compared to net loss of $3.1 million for the prior year’s first six months or loss per share of $0.03 on 95.6 million weighted average common shares outstanding. EBITDA of negative $26.1 million for the first six months of fiscal 2006 compared to EBITDA of $8.1 million for the first six months of fiscal 2005. Six-month free cash flow of $35.6 million compared to free cash flow of $49.2 million in the prior year’s first six months.
Lions Gate senior management will hold its analyst and investor conference call to discuss its fiscal 2006 second quarter financial results at 9:00 AM ET/6:00 AM PT tomorrow, Thursday, November 10, 2005. Interested parties may participate live in the conference call by calling 1-888-428-4480 (1-612-288-0318 outside the U.S. and Canada). A full digital replay will be available from Thursday morning, November 10, through Thursday, November 17, by dialing 1-800-475-6701 (1-320-365-3844 outside the U.S. and Canada) and using access code #799775.
Lions Gate is the premier independent producer and distributor of motion pictures, television programming, home entertainment, family entertainment and video-on-demand content. Its prestigious and prolific library is a valuable source of stable, recurring revenue and is a foundation for the growth of the Company’s core businesses. The Lions Gate brand name is synonymous with original, daring, quality entertainment in markets around the globe.
www.lgf.com
* * * * *
For further information, contact:
Peter D. Wilkes
310-255-3726
pwilkes@lgf.com
310-255-3726
pwilkes@lgf.com
The matters discussed in this press release include forward-looking statements. In some cases, forward-looking statements can be identified by terms such as “will,” “may,” “anticipate,” “assuming,” “expected,” “forecasted” and the negative of these terms. 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 but not limited to the possibility of budget overruns, the uncertainty of commercial success of the motion pictures and television programming we distribute, high costs associated with negotiating acquisitions and integrating new businesses, substantial competition and the other risk factors set forth in Lions Gate’s Form 8-K filed with the Securities and Exchange Commission on June 29, 2005. 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | March 31, | |||||||
| 2005 | 2005 | |||||||
| (Unaudited) | ||||||||
| (Amounts in thousands, | ||||||||
| except share amounts) | ||||||||
ASSETS | ||||||||
| Cash and cash equivalents | $ | 51,347 | $ | 112,839 | ||||
| Restricted cash | 997 | 2,913 | ||||||
| Investments — auction rate preferreds | 90,326 | — | ||||||
| Investments — equity securities* | 14,509 | — | ||||||
| Accounts receivable, net of reserve for video returns of $50,498 (March 31, 2005 — $58,449) and provision for doubtful accounts of $6,592 (March 31, 2005 — $6,102) | 129,590 | 150,019 | ||||||
| Investment in films and television programs | 387,718 | 367,376 | ||||||
| Property and equipment | 32,487 | 30,842 | ||||||
| Goodwill | 161,182 | 161,182 | ||||||
| Other assets | 31,714 | 29,458 | ||||||
| $ | 899,870 | $ | 854,629 | |||||
LIABILITIES | ||||||||
| Bank loans | $ | — | $ | 1,162 | ||||
| Accounts payable and accrued liabilities | 151,299 | 134,200 | ||||||
| Film obligations | 205,601 | 130,770 | ||||||
| Subordinated notes | 385,000 | 390,000 | ||||||
| Mortgages payable | 17,066 | 18,640 | ||||||
| Deferred revenue | 41,916 | 62,459 | ||||||
| Minority interests | — | 259 | ||||||
| 800,882 | 737,490 | |||||||
| Commitments and Contingencies | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
| Common shares, no par value, 500,000,000 shares authorized, 103,384,036 at September 30, 2005 and 101,843,708 at March 31, 2005 shares issued and outstanding | 320,128 | 305,662 | ||||||
| Series B preferred shares (10 shares issued and outstanding) | — | — | ||||||
| Restricted common share units | 3,268 | — | ||||||
| Unearned compensation | (2,966 | ) | — | |||||
| Accumulated deficit | (219,151 | ) | (183,226 | ) | ||||
| Accumulated other comprehensive loss | (2,291 | ) | (5,297 | ) | ||||
| 98,988 | 117,139 | |||||||
| $ | 899,870 | $ | 854,629 | |||||
* Image Entertainment, Inc. common shares
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months | Three Months | Six Months | Six Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
| (Amounts in thousands, except per share amounts) | ||||||||||||||||
Revenues | $ | 212,588 | $ | 231,064 | $ | 406,817 | $ | 419,788 | ||||||||
Expenses: | ||||||||||||||||
| Direct operating | 109,015 | 94,262 | 209,279 | 175,072 | ||||||||||||
| Distribution and marketing | 97,688 | 104,217 | 191,169 | 202,283 | ||||||||||||
| General and administration | 15,133 | 17,850 | 32,462 | 34,977 | ||||||||||||
| Depreciation | 597 | 714 | 1,345 | 1,389 | ||||||||||||
| Total expenses | 222,433 | 217,043 | 434,255 | 413,721 | ||||||||||||
Operating Income (Loss) | (9,845 | ) | 14,021 | (27,438 | ) | 6,067 | ||||||||||
Other Expense (Income): | ||||||||||||||||
| Interest expense | 4,905 | 5,652 | 9,789 | 11,113 | ||||||||||||
| Interest rate swaps mark-to-market | (238 | ) | 71 | 99 | (1,989 | ) | ||||||||||
| Interest income | (851 | ) | — | (1,916 | ) | (37 | ) | |||||||||
| Minority interests | — | 144 | — | 21 | ||||||||||||
| Other income | — | (825 | ) | — | (825 | ) | ||||||||||
| Total other expenses | 3,816 | 5,042 | 7,972 | 8,283 | ||||||||||||
Income (Loss) Before Equity Interests and Income Taxes | (13,661 | ) | 8,979 | (35,410 | ) | (2,216 | ) | |||||||||
| Equity interests | (54 | ) | (200 | ) | (54 | ) | (200 | ) | ||||||||
Income (Loss) Before Income Taxes | (13,715 | ) | 8,779 | (35,464 | ) | (2,416 | ) | |||||||||
| Income tax provision | (391 | ) | (449 | ) | (461 | ) | (716 | ) | ||||||||
Net Income (Loss) | $ | (14,106 | ) | $ | 8,330 | $ | (35,925 | ) | $ | (3,132 | ) | |||||
Basic Income (Loss) Income Per Common Share | $ | (0.14 | ) | $ | 0.09 | $ | (0.35 | ) | $ | (0.03 | ) | |||||
Diluted Income (Loss) Per Common Share | $ | (0.14 | ) | $ | 0.08 | $ | (0.35 | ) | $ | (0.03 | ) | |||||
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| Series B | Restricted | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Common Shares | Preferred Shares | Common | Comprehensive | Other | |||||||||||||||||||||||||||||||||||||
| 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, 2004 | 93,615,896 | $ | 280,501 | 10 | $ | — | $ | (203,507 | ) | $ | (7,385 | ) | $ | 69,609 | |||||||||||||||||||||||||||
| Exercise of stock options | 4,991,141 | 13,871 | 13,871 | ||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | 3,220,867 | 10,842 | 10,842 | ||||||||||||||||||||||||||||||||||||||
| Issuance to directors for services | 15,804 | 137 | 137 | ||||||||||||||||||||||||||||||||||||||
| Impact of previously modified stock options | — | 311 | 311 | ||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Net income | 20,281 | $ | 20,281 | 20,281 | |||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | 2,374 | 2,374 | 2,374 | ||||||||||||||||||||||||||||||||||||||
| Net unrealized loss on foreign exchange contracts | (286 | ) | (286 | ) | (286 | ) | |||||||||||||||||||||||||||||||||||
| Comprehensive income | $ | 22,369 | — | ||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2005 | 101,843,708 | $ | 305,662 | 10 | $ | — | $ | (183,226 | ) | $ | (5,297 | ) | $ | 117,139 | |||||||||||||||||||||||||||
| Exercise of stock options | 205,612 | 681 | 681 | ||||||||||||||||||||||||||||||||||||||
| Issuance to directors for services | 6,250 | 62 | 62 | ||||||||||||||||||||||||||||||||||||||
| Impact of previously modified stock options | — | 27 | 27 | ||||||||||||||||||||||||||||||||||||||
| Issuance of common shares in connection with acquisition of film assets | 399,042 | 4,000 | 4,000 | ||||||||||||||||||||||||||||||||||||||
| Issuance of common shares in connection with acquisition of common shares of Image Entertainment | 885,258 | 9,251 | 9,251 | ||||||||||||||||||||||||||||||||||||||
| Issuance of restricted share units | $ | 3,713 | $ | (3,713 | ) | — | |||||||||||||||||||||||||||||||||||
| Amortization of restricted share units | 747 | 747 | |||||||||||||||||||||||||||||||||||||||
| Vesting of restricted share units | 44,166 | 445 | (445 | ) | — | ||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Net loss | (35,925 | ) | (35,925 | ) | (35,925 | ) | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | 1,248 | 1,248 | 1,248 | ||||||||||||||||||||||||||||||||||||||
| Net unrealized gain on foreign exchange contracts | (29 | ) | (29 | ) | (29 | ) | |||||||||||||||||||||||||||||||||||
| Unrealized gain on investments - available for sale | 1,787 | 1,787 | 1,787 | ||||||||||||||||||||||||||||||||||||||
| Comprehensive loss | $ | (32,919 | ) | — | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2005 | 103,384,036 | $ | 320,128 | 10 | $ | — | $ | 3,268 | $ | (2,966 | ) | $ | (219,151 | ) | $ | (2,291 | ) | $ | 98,988 | ||||||||||||||||||||||
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months | Six Months | |||||||
| Ended | Ended | |||||||
| September 30, | September 30, | |||||||
| 2005 | 2004 | |||||||
| (Amounts in thousands) | ||||||||
Operating Activities: | ||||||||
| Net loss | $ | (35,925 | ) | $ | (3,132 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation of property and equipment | 1,345 | 1,389 | ||||||
| Amortization of deferred financing costs | 1,849 | 1,700 | ||||||
| Amortization of films and television programs | 134,409 | 124,370 | ||||||
| Amortization of intangible assets | 1,240 | 1,096 | ||||||
| Non-cash stock-based compensation | 836 | 364 | ||||||
| Interest rate swaps mark-to-market | 99 | (1,989 | ) | |||||
| Gain on disposition of assets | — | (666 | ) | |||||
| Minority interests | — | 21 | ||||||
| Equity interests | 54 | 200 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in restricted cash | 1,916 | — | ||||||
| Accounts receivable, net | 14,929 | (42,889 | ) | |||||
| Increase in investment in films and television programs | (157,411 | ) | (83,830 | ) | ||||
| Other assets | (2,916 | ) | (19 | ) | ||||
| Accounts payable and accrued liabilities | 20,823 | 16,003 | ||||||
| Film obligations | 76,632 | 39,003 | ||||||
| Deferred revenue | (20,152 | ) | (2,282 | ) | ||||
Net Cash Flows Provided By Operating Activities | 37,728 | 49,339 | ||||||
Investing Activities: | ||||||||
Purchases of investments—auction rate preferreds | (137,827 | ) | — | |||||
Purchases of investments—equity securities | (3,470 | ) | — | |||||
Sales of investments—auction rate preferreds | 47,500 | — | ||||||
| Cash received from sale of investment | 2,945 | — | ||||||
| Cash received from disposition of assets, net | — | 882 | ||||||
| Purchases of property and equipment | (2,092 | ) | (175 | ) | ||||
Net Cash Flows Provided By (Used In) Investing Activities | (92,944 | ) | 707 | |||||
Financing Activities: | ||||||||
| Issuance of common shares | 681 | 12,108 | ||||||
| Financing fees | (260 | ) | (1,221 | ) | ||||
| Repayment of subordinated notes | (5,000 | ) | — | |||||
| Decrease in bank loans | — | (63,663 | ) | |||||
| Repayment of mortgages payable | (2,211 | ) | (840 | ) | ||||
Net Cash Flows Used In Financing Activities | (6,790 | ) | (53,616 | ) | ||||
Net Change In Cash And Cash Equivalents | (62,006 | ) | (3,570 | ) | ||||
Foreign Exchange Effects On Cash | 514 | 2,016 | ||||||
Cash and Cash Equivalents — Beginning Of Period | 112,839 | 7,089 | ||||||
Cash and Cash Equivalents — End Of Period | $ | 51,347 | $ | 5,535 | ||||
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF EBITDA TO NET INCOME (LOSS)
| Three Months | Three Months | Six Months | Six Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
| (Amounts in thousands) | ||||||||||||||||
EBITDA, as defined | $ | (9,302 | ) | $ | 15,360 | $ | (26,147 | ) | $ | 8,081 | ||||||
| Depreciation | (597 | ) | (714 | ) | (1,345 | ) | (1,389 | ) | ||||||||
| Interest expense | (4,905 | ) | (5,652 | ) | (9,789 | ) | (11,113 | ) | ||||||||
| Interest rate swaps mark-to-market | 238 | (71 | ) | (99 | ) | 1,989 | ||||||||||
| Interest income | 851 | — | 1,916 | 37 | ||||||||||||
| Minority interests | — | (144 | ) | — | (21 | ) | ||||||||||
| Income tax provision | (391 | ) | (449 | ) | (461 | ) | (716 | ) | ||||||||
Net income (loss) | $ | (14,106 | ) | $ | 8,330 | $ | (35,925 | ) | $ | (3,132 | ) | |||||
EBITDA is defined as earnings before interest expense, interest rate swaps mark-to-market, interest income, income tax provision, depreciation and minority interests.
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
FROM OPERATIONS (AFTER DEBT SERVICE)
FROM OPERATIONS (AFTER DEBT SERVICE)
| Three Months | Three Months | Six Months | Six Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
| (Amounts in thousands) | ||||||||||||||||
Net Cash Flows Provided By Operating Activities | $ | 7,561 | $ | 9,932 | $ | 37,728 | $ | 49,339 | ||||||||
| Purchases of property and equipment | (1,463 | ) | (130 | ) | (2,092 | ) | (175 | ) | ||||||||
Free Cash Flow From Operations (after debt service), as defined | $ | 6,098 | $ | 9,802 | $ | 35,636 | $ | 49,164 | ||||||||
Free cash flow is defined as net cash flows provided by operating activities less purchases of property and equipment.