LIONS GATE ENTERTAINMENT CORP /CN/ (Form: 10-Q, Received: 02/07/2019 16:19:38)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

Form 10-Q

___________________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2018

Commission File No.: 1-14880

___________________________________________________________

Lions Gate Entertainment Corp.

(Exact name of registrant as specified in its charter)

___________________________________________________________



British Columbia, Canada		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

250 Howe Street, 20th Floor

Vancouver, British Columbia V6C 3R8

and

2700 Colorado Avenue

Santa Monica, California 90404

(Address of principal executive offices)

___________________________________________________________

(877) 848-3866

(Registrant’s telephone number, including area code)

___________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	þ	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.



Title of Each Class		Outstanding at February 4, 2019
Class A Voting Shares, no par value per share		82,541,433 shares
Class B Non-Voting Shares, no par value per share		133,029,193 shares

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Item	Page
PART I — FINANCIAL INFORMATION

1. Financial Statements	4
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
3. Quantitative and Qualitative Disclosures About Market Risk	82
4. Controls and Procedures	85

PART II — OTHER INFORMATION

1. Legal Proceedings	86
1A. Risk Factors	86
2. Unregistered Sales of Equity Securities and Use of Proceeds	86
3. Defaults Upon Senior Securities	86
4. Mine Safety Disclosures	86
5. Other Information	86
6. Exhibits	87

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FORWARD-LOOKING STATEMENTS

This report includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “potential,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “may,” “will,” “could,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on May 24, 2018, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. "Risk Factors" herein. These risk factors should not be construed as exhaustive and should be read with the other cautionary statements and information in our Annual Report on Form 10-K, and this report.

We caution you that forward-looking statements made in this report or anywhere else are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially and adversely from those made in or suggested by the forward-looking statements contained in this report as a result of various important factors, including, but not limited to: the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films and television series; budget overruns; limitations imposed by our credit facilities and notes; unpredictability of the commercial success of our motion pictures and television programming; risks related to acquisition and integration of acquired businesses; the effects of dispositions of businesses or assets, including individual films or libraries; the cost of defending our intellectual property; technological changes and other trends affecting the entertainment industry; potential adverse reactions or changes to business or employee relationships; litigation relating to the acquisition of Starz; and the other risks and uncertainties discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 24, 2018, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. "Risk Factors" herein. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.

Any forward-looking statements, which we make in this report, speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

This Quarterly Report on Form 10-Q may contain references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.

Unless otherwise indicated or the context requires, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” refer to Lions Gate Entertainment Corp., a corporation organized under the laws of the province of British Columbia, Canada, and its direct and indirect subsidiaries.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



	December 31, 2018			March 31, 2018
	(Amounts in millions)
ASSETS
Cash and cash equivalents	$	106.2		$	378.1
Accounts receivable, net	833.1			946.0
Program rights	247.0			253.2
Other current assets	227.7			195.8
Total current assets	1,414.0			1,773.1
Investment in films and television programs and program rights, net	1,670.0			1,692.0
Property and equipment, net	153.4			161.7
Investments	122.6			164.9
Intangible assets	1,900.0			1,937.7
Goodwill	2,833.5			2,740.8
Other assets	453.6			458.6
Deferred tax assets	33.2			38.8
Total assets	$	8,580.3		$	8,967.6
LIABILITIES
Accounts payable and accrued liabilities	$	432.5		$	447.7
Participations and residuals	499.6			504.5
Film obligations and production loans	441.2			327.9
Debt - short term portion	44.4			79.1
Dissenting shareholders' liability	—			869.3
Deferred revenue	173.0			183.9
Total current liabilities	1,590.7			2,412.4
Debt	2,967.9			2,478.3
Participations and residuals	458.1			438.3
Film obligations and production loans	148.5			171.3
Other liabilities	83.7			46.4
Deferred revenue	70.0			70.3
Deferred tax liabilities	46.8			91.9
Redeemable noncontrolling interest	144.3			101.8
Commitments and contingencies (Note 16)
EQUITY
Class A voting common shares, no par value, 500.0 shares authorized, 82.5 shares issued (March 31, 2018 - 81.8 shares issued)	647.9			628.7
Class B non-voting common shares, no par value, 500.0 shares authorized, 132.9 shares issued (March 31, 2018 - 129.3 shares issued)	2,117.5			2,020.3
Retained earnings	346.0			516.6
Accumulated other comprehensive loss	(44.4		)	(9.7		)
Total Lions Gate Entertainment Corp. shareholders' equity	3,067.0			3,155.9
Noncontrolling interests	3.3			1.0
Total equity	3,070.3			3,156.9
Total liabilities and equity	$	8,580.3		$	8,967.6

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions, except per share amounts)
Revenues	$	933.2		$	1,142.7		$	2,766.9		$	3,088.8
Expenses
Direct operating	502.0			650.1			1,495.2			1,726.6
Distribution and marketing	176.9			237.1			608.3			669.7
General and administration	110.0			114.2			335.2			337.4
Depreciation and amortization	41.0			39.7			122.1			119.0
Restructuring and other	16.5			21.4			42.1			35.8
Total expenses	846.4			1,062.5			2,602.9			2,888.5
Operating income	86.8			80.2			164.0			200.3
Interest expense
Interest expense	(42.7		)	(31.9		)	(116.9		)	(105.7		)
Interest on dissenting shareholders' liability	(2.6		)	(14.4		)	(35.3		)	(41.6		)
Total interest expense	(45.3		)	(46.3		)	(152.2		)	(147.3		)
Shareholder litigation settlements	—			—			(114.1		)	—
Interest and other income	2.9			2.2			9.0			7.7
Other expense	(1.8		)	—			(1.8		)	—
Loss on extinguishment of debt	—			(6.2		)	—			(24.2		)
Gain (loss) on investments	(6.2		)	(29.2		)	(43.2		)	171.8
Equity interests loss	(11.0		)	(13.8		)	(28.8		)	(34.8		)
Income (loss) before income taxes	25.4			(13.1		)	(167.1		)	173.5
Income tax benefit (provision)	(5.3		)	204.2			26.6			205.0
Net income (loss)	20.1			191.1			(140.5		)	378.5
Less: Net loss attributable to noncontrolling interests	2.8			1.9			11.5			3.8
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	22.9		$	193.0		$	(129.0	)	$	382.3

Per share information attributable to Lions Gate Entertainment Corp. shareholders:
Basic net income (loss) per common share	$	0.11		$	0.92		$	(0.61	)	$	1.84
Diluted net income (loss) per common share	$	0.10		$	0.87		$	(0.61	)	$	1.74

Weighted average number of common shares outstanding:
Basic	214.2			208.8			213.2			207.8
Diluted	220.8			221.6			213.2			219.7

Dividends declared per common share	$	—		$	—		$	0.18		$	—

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Net income (loss)	$	20.1		$	191.1		$	(140.5	)	$	378.5
Foreign currency translation adjustments, net of tax	0.7			0.5			(7.2		)	2.1
Net unrealized gain (loss) on available-for-sale securities, net of tax	—			(2.3		)	—			0.8
Net unrealized loss on cash flow hedges, net of tax benefit of $10.2 million, $0.1 million, $8.9 million and $0.2 million	(29.5		)	(0.3		)	(24.9		)	(0.5		)
Comprehensive income (loss)	(8.7		)	189.0			(172.6		)	380.9
Less: Comprehensive loss attributable to noncontrolling interests	2.8			1.9			11.5			3.8
Comprehensive income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	(5.9	)	$	190.9		$	(161.1	)	$	384.7

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EQUITY



	Class A Voting Common Shares			Class B Non-Voting Common Shares			Retained Earnings			Accumulated Other Comprehensive Loss			Lions Gate Entertainment Corp. Shareholders' Equity			Noncontrolling Interests (a)		Total Equity
	Number	Amount		Number	Amount		Retained Earnings			Accumulated Other Comprehensive Loss			Lions Gate Entertainment Corp. Shareholders' Equity			Noncontrolling Interests (a)		Total Equity
	(Amounts in millions)
Balance at March 31, 2018	81.8	$	628.7	129.3	$	2,020.3	$	516.6		$	(9.7	)	$	3,155.9		$	1.0	$	3,156.9
Cumulative effect of accounting changes	—	—		—	—		21.3			(2.6		)	18.7			—		18.7
Exercise of stock options	—	0.6		0.2	2.1		—			—			2.7			—		2.7
Share-based compensation, net	0.3	10.1		0.3	27.6		—			—			37.7			—		37.7
Issuance of common shares related to acquisitions and other	0.4	8.5		3.1	67.5		—			—			76.0			—		76.0
Noncontrolling interests	—	—		—	—		—			—			—			2.2		2.2
Dividends declared	—	—		—	—		(38.5		)	—			(38.5		)	—		(38.5		)
Net income (loss)	—	—		—	—		(129.0		)	—			(129.0		)	0.1		(128.9		)
Other comprehensive loss	—	—		—	—		—			(32.1		)	(32.1		)	—		(32.1		)
Redeemable noncontrolling interests adjustments to redemption value	—	—		—	—		(24.4		)	—			(24.4		)	—		(24.4		)
Balance at December 31, 2018	82.5	$	647.9	132.9	$	2,117.5	$	346.0		$	(44.4	)	$	3,067.0		$	3.3	$	3,070.3

_____________________


(a)	Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 9 ).

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine Months Ended
	December 31,
	2018			2017
	(Amounts in millions)
Operating Activities:
Net income (loss)	$	(140.5	)	$	378.5
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	122.1			119.0
Amortization of films and television programs and program rights	1,105.3			1,232.8
Interest on dissenting shareholders' liability	(72.0		)	41.6
Amortization of debt discount and financing costs	9.0			11.0
Non-cash share-based compensation	43.7			74.5
Other non-cash items	20.5			5.7
Distributions from equity method investee	1.8			—
Loss on extinguishment of debt	—			24.2
Equity interests loss	28.8			34.8
Loss (gain) on investments	43.2			(171.8		)
Deferred income taxes (benefit)	(36.3		)	(189.3		)
Changes in operating assets and liabilities:
Accounts receivable, net and other assets	308.5			48.6
Investment in films and television programs and program rights, net	(1,073.5		)	(1,088.0		)
Accounts payable and accrued liabilities	(66.8		)	(220.4		)
Participations and residuals	(17.1		)	38.3
Film obligations	(10.3		)	5.3
Deferred revenue	(10.7		)	24.5
Net Cash Flows Provided By Operating Activities	255.7			369.3
Investing Activities:
Proceeds from the sale of equity method investee, net of transaction costs	—			393.7
Investment in equity method investees	(39.6		)	(47.6		)
Business acquisitions, net of cash acquired of $5.5 and $18.7, respectively (see Note 2)	(77.3		)	(1.8		)
Capital expenditures	(28.9		)	(28.4		)
Net Cash Flows Provided By (Used In) Investing Activities	(145.8		)	315.9
Financing Activities:
Debt - borrowings	2,909.5			161.6
Debt - repayments	(2,468.8		)	(992.1		)
Production loans - borrowings	246.9			299.5
Production loans - repayments	(208.2		)	(267.2		)
Payment of dissenter liability accrued at acquisition	(797.3		)	—
Dividends paid	(57.4		)	—
Distributions to noncontrolling interest	(2.3		)	(6.0		)
Exercise of stock options	4.2			31.6
Tax withholding required on equity awards	(6.9		)	(17.0		)
Net Cash Flows Used In Financing Activities	(380.3		)	(789.6		)
Net Change In Cash, Cash Equivalents and Restricted Cash	(270.4		)	(104.4		)
Foreign Exchange Effects on Cash, Cash Equivalents and Restricted Cash	(1.5		)	(3.6		)
Cash, Cash Equivalents and Restricted Cash - Beginning Of Period	378.1			324.7
Cash and Cash Equivalents - End Of Period	$	106.2		$	216.7

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Nature of Operations

Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,”, “Lions Gate”, “we,” “us” or “our”) is a global content platform whose films, television series, digital products and linear and over-the-top platforms reach next generation audiences around the world. In addition to our filmed entertainment leadership, Lionsgate content drives a growing presence in interactive and location-based entertainment, gaming, virtual reality and other new entertainment technologies. Lionsgate's content initiatives are backed by a nearly 17,000-title film and television library and delivered through a global licensing infrastructure.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Lionsgate and all of its majority-owned and controlled subsidiaries.

The unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to quarterly report on Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the three and nine months ended December 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019. The balance sheet at March 31, 2018 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2018 , as updated by the Current Report on Form 8-K filed with the SEC on October 15, 2018.

Certain amounts presented in prior periods have been reclassified to conform to the current period presentation. In particular, as a result of the segment reorganization in the first quarter of fiscal 2019 (see Note 15 ), the Company has presented prior period segment data in a manner that conforms to the current period presentation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The most significant estimates made by management in the preparation of the financial statements relate to ultimate revenue and costs used for the amortization of investment in films and television programs; estimates of sales returns and other allowances and provisions for doubtful accounts; estimates related to the recognition of sales or usage-based royalties; fair value of equity-based compensation; fair value of assets and liabilities for allocation of the purchase price of companies acquired; income taxes including the assessment of valuation allowances for deferred tax assets; accruals for contingent liabilities; and impairment assessments for investment in films and television programs, property and equipment, equity investments, goodwill and intangible assets. Actual results could differ from such estimates.

Recent Accounting Pronouncements

Accounting Guidance Adopted in Fiscal 2019

Revenue Recognition : On April 1, 2018, the Company adopted, on a modified retrospective basis, accounting guidance that establishes a new revenue recognition framework in U.S. GAAP for all companies and industries. The core principle of the new revenue framework is that an entity should recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive for those goods or services. The revenue framework includes a five-step model to determine the timing and amount of revenue to recognize related to contracts with customers.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The adoption of the new accounting guidance did not result in significant changes to the Company's reported operating results. The Company recorded a transition adjustment for all open contracts existing as of April 1, 2018, of $18.7 million as an increase to the opening balance of retained earnings related principally to the areas noted below:

Sales or Usage Based Royalties: The Company currently receives royalties from certain domestic and international distributors and other transactional digital distribution partners based on the sales made by these distributors after recoupment of a minimum guarantee, if applicable. Under prior guidance, the Company recorded these sales or usage based royalties after receiving statements from the licensee and/or film distributor. Under the new guidance, revenues are recorded based on best estimates available of the amounts due to the Company in the period of the customer's sales or usage. Accordingly, the timing of the revenue recognition is accelerated; however, the Company continues to have a consistent number of periods of sales or usage based royalties in each reporting period, and therefore the impact of the new guidance depends on the timing and performance of the titles released in those reporting periods. This change primarily impacts the Motion Picture and Television Production segments.

Renewals of Licenses of Intellectual Property: Under the prior guidance, when the term of an existing license agreement was extended, without any other changes to the provisions of the license, revenue for the renewal period was recognized when the agreement was renewed or extended. Under the new guidance, revenue associated with renewals or extensions of existing license agreements is recognized as revenue when the licensed content becomes available for the customer to use and benefit from under the renewal or extension. This change impacts the timing of revenue recognition (i.e., revenue is recorded at a later time) as compared with prior revenue recognition guidance. While revenues from renewal do occur, they are not a significant portion of our revenue and thus do not have a material impact on our revenue recognition. This change primarily impacts the Motion Picture and Television Production segments.

Also, under the new guidance, the Company presents sales returns and certain sales incentive allowances as refund liabilities instead of as contra asset allowances within accounts receivable. On April 1, 2018, the liabilities for such sales returns and incentives were $86.9 million and were recorded in accounts payable and accrued liabilities on the unaudited condensed consolidated balance sheet.

Changes to the opening balances of current assets, total assets, current liabilities and total liabilities resulting from the adoption of the new guidance were as follows:



	March 31, 2018		Impact of Adoption		April 1, 2018
	(Amounts in millions)
Current assets	$	1,773.1	$	174.4	$	1,947.5
Total assets	$	8,967.6	$	143.6	$	9,111.2
Current liabilities	$	2,412.4	$	104.1	$	2,516.5
Total liabilities	$	5,708.9	$	124.9	$	5,833.8

For further information, including the impact of adoption of the new guidance on the current period, see Note 10 .

Recognition and Measurement of Financial Instruments : In January 2016, the Financial Accounting Standards Board ("FASB") issued new guidance that addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other provisions, the new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. For investments without readily determinable fair values, entities have the option to either measure these investments at fair value or at cost adjusted for changes in observable prices minus impairment. The guidance is effective for the Company's fiscal year beginning April 1, 2018. Upon adoption of the new guidance, the Company recorded a transition adjustment of $2.6 million to reclassify the unrealized gains recorded through March 31, 2018 for the Company's investments in equity securities with a readily determinable fair market value from accumulated other comprehensive loss to retained earnings. After adoption of the new guidance, changes in the fair value of the Company's investments in equity securities with a readily determinable fair market value will be recognized in net income. The adoption of the new guidance will also impact the accounting for the Company's investments in equity securities without a readily determinable fair value, which will now be measured at cost less any impairment, adjusted for observable price changes in orderly transactions in the investees' securities that are identical or similar to the Company's investments in the investee. The impact of this change will depend on the nature and extent of changes in observable prices, if any. See Note 4 .

Restricted Cash : In November 2016, the FASB issued guidance to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The guidance requires entities to show the changes in the total of

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. This guidance became effective for the Company as of April 1, 2018, and has been applied on a retrospective basis. Upon adoption, in the unaudited condensed consolidated statement of cash flows for the nine months ended December 31, 2017 , cash provided by operating activities was reduced by $2.8 million , and beginning cash and cash equivalents was increased by $2.8 million to include restricted cash. There was no restricted cash in the unaudited condensed consolidated balance sheets as of December 31, 2018 or March 31, 2018.

Accounting Guidance Not Yet Adopted

Accounting for Leases : In February 2016, the FASB issued guidance on accounting for leases which requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The new guidance also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The guidance is effective for the Company's fiscal year beginning April 1, 2019, with early adoption permitted, and is required to be implemented using a modified retrospective approach. The Company is currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial statements; however, the Company currently believes the most significant change will be related to the increases in assets and liabilities for the recognition of right-of-use assets and lease liabilities on the Company's balance sheet for its operating leases.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income : In February 2018, the FASB issued guidance that permits a company to reclassify the income tax effects of the Tax Cuts and Jobs Act (the "Tax Act") on items in accumulated other comprehensive income to retained earnings, eliminating the stranded tax effects resulting from the Tax Act. The new guidance only applies to the tax effects resulting from the Tax Act, and does not change the underlying guidance to recognize the effect of a change in tax laws or rates in income from continuing operations. This guidance is effective for the Company's fiscal year beginning April 1, 2019, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial statements.

Disclosure Update and Simplification: In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification , amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of shareholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of shareholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective for the first quarter of the Company's fiscal year beginning April 1, 2019.

Fair Value Measurement - Changes to Disclosure Requirements : In August 2018, the FASB issued guidance that eliminates, adds and modifies certain disclosure requirements for fair value measurements. This guidance eliminates the requirement that entities disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but requires public companies to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, among other changes. This guidance is effective for the Company's fiscal year beginning April 1, 2020, with early adoption permitted. The Company does not expect that the adoption of this guidance will have a material effect on its consolidated financial statements.

2. Acquisitions

3 Arts Entertainment

On May 29, 2018, the Company purchased a 51% membership interest in 3 Arts Entertainment LLC, a talent management and television/film production company. The purchase price was approximately $166.6 million , of which 50% was paid in cash at closing, 32.5% was paid in the Company's Class B non-voting common shares at closing, and 17.5% will be paid in the Company's Class B non-voting common shares on the one -year anniversary of closing, subject to certain conditions. The number of shares issued and to be issued was determined by dividing the dollar value of the portion of the purchase price to be paid by the daily weighted average closing price of the Company's Class B non-voting common shares on the New York Stock Exchange for the twenty ( 20 ) consecutive trading days immediately preceding the closing date. The value of the shares issued or to be issued was based on the closing price of the Company's Class B non-voting common shares at closing. A portion of the purchase price, up to $38.3 million , may be recoupable for a five -year period commencing on the acquisition date of May 29,

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2018, contingent upon the continued employment of certain employees, or the achievement of certain EBITDA targets, as defined in the 3 Arts Entertainment acquisition and related agreements. Accordingly, $38.3 million is recorded as a deferred compensation arrangement within other current and non-current assets and is being amortized in general and administrative expenses over a five -year period.

The acquisition was accounted for as a purchase, with the results of operations of 3 Arts Entertainment included in the Company's consolidated results from May 29, 2018. Based on a preliminary purchase price allocation, $92.7 million was allocated to goodwill, $47.0 million was allocated to the fair value of finite-lived intangible assets (including measurement period adjustments recorded, see Note 5 ) and $38.3 million was allocated to deferred compensation arrangements, as discussed above. The remainder of the purchase price was primarily allocated to cash and cash equivalents, accounts receivable, other assets, and accounts payable and accrued liabilities, and $15.8 million was recorded as a redeemable noncontrolling interest, representing the noncontrolling interest holders' 49% equity interest in 3 Arts Entertainment (see Note 9 ). The acquired finite-lived intangible assets primarily represent customer relationships and are being amortized over a weighted average estimated useful life of 12 years. The Company incurred approximately $1.3 million of acquisition-related costs that were expensed in restructuring and other expenses during the nine months ended December 31, 2018.

The preliminary allocation of the estimated purchase price is based upon management's estimates and is subject to revision, as a more detailed analysis of intangible assets, certain tangible assets, and other assets and liabilities is completed and additional information on the fair value of assets and liabilities becomes available, including receipt of final appraisals of the net assets acquired. A change in the fair value of the net assets may change the amount of the purchase price allocable to goodwill, and could impact the amounts of amortization expense. The Company used discounted cash flows ("DCF") analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation, including acquired intangible assets and the redeemable noncontrolling interest.

The acquisition goodwill arises from the opportunity for synergies of the combined companies to grow and strengthen the Company's television operations by expanding the Company's talent relationships, and improving the Company's television production capabilities. The goodwill recorded as part of this acquisition is included in the Television Production segment. The goodwill is not amortized for financial reporting purposes, but is deductible for federal tax purposes.

Good Universe

On October 11, 2017, the Company purchased all of the membership interests in True North Media, LLC ("Good Universe"), a motion picture production and global sales company. The purchase price consisted of $20.4 million in cash paid at closing, and an additional $1.4 million in cash and 119,751 of Class B non-voting common shares to be paid and issued after one -year of the closing date. In addition, the Company assumed $23.6 million of corporate debt and production loans, of which $14.9 million was paid off shortly following the acquisition during the fiscal year ended March 31, 2018. The acquisition was accounted for as a purchase, with the results of operations of Good Universe included in the Company's consolidated results from October 12, 2017. Based on the purchase price allocation, $29.0 million was allocated to goodwill, with the remainder primarily allocated to the fair values of investment in film and television programs, cash and cash equivalents, and other liabilities. The goodwill recorded as part of this acquisition arises from the executive management personnel and their extensive experience and key relationships in the entertainment industry, and is included in the Motion Picture segment (see Note 5 ). The goodwill is not amortized for financial reporting purposes, but is deductible for federal tax purposes.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Investment in Films and Television Programs and Program Rights



	December 31, 2018			March 31, 2018 ⁽¹⁾
	(Amounts in millions)
Motion Picture Segment - Theatrical and Non-Theatrical Films
Released, net of accumulated amortization	$	416.9		$	410.5
Acquired libraries, net of accumulated amortization	1.5			2.1
Completed and not released	59.4			55.0
In progress	263.4			347.2
In development	25.8			24.6
	767.0			839.4
Television Production Segment - Direct-to-Television Programs
Released, net of accumulated amortization	184.5			238.9
In progress	297.3			186.6
In development	22.3			4.8
	504.1			430.3
Media Networks Segment
Released program rights, net of accumulated amortization	552.5			616.9
In progress	81.5			45.6
In development	56.2			30.0
	690.2			692.5

Intersegment eliminations	(44.3		)	(17.0		)

Investment in films and television programs and program rights, net	1,917.0			1,945.2
Less current portion of program rights	(247.0		)	(253.2		)
Non-current portion	$	1,670.0		$	1,692.0

__________________


(1)	As a result of the segment reorganization in the first quarter of fiscal 2019 (see Note 15 ), the Company has presented prior period segment data in a manner that conforms to the current period presentation.

During the three and nine months ended December 31, 2018 and 2017, the Company performed fair value measurements related to films having indicators of impairment. In determining the fair value of its films, the Company employs a DCF methodology that includes cash flow estimates of a film’s ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on the Company’s weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement (see Note 8 ). During the three and nine months ended December 31, 2018 , the Company recorded $10.5 million and $17.4 million , respectively, of fair value film write-downs (2017 - $24.2 million and $26.8 million , respectively).

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Investments

The Company's investments consisted of the following:



	December 31, 2018		March 31, 2018
	(Amounts in millions)
Investments in equity method investees	$	121.1	$	127.0
Other investments	1.5		37.9
	$	122.6	$	164.9

Equity Method Investments:

Pop. Pop is the Company's joint venture with CBS, in which the Company has a 50.0% ownership interest (carrying value of $95.7 million at December 31, 2018, $91.3 million at March 31, 2018). During the three and nine months ended December 31, 2018 , the Company made contributions to Pop of $4.0 million and $9.0 million , respectively.

Pop Financial Information:

The following table presents summarized balance sheet data as of December 31, 2018 and March 31, 2018 for Pop:



	December 31, 2018		March 31, 2018
	(Amounts in millions)
Current assets	$	77.7	$	48.2
Non-current assets	$	194.7	$	191.6
Current liabilities	$	48.5	$	37.2
Non-current liabilities ⁽¹⁾	$	755.0	$	654.9
Redeemable preferred stock ⁽¹⁾	$	725.0	$	638.4

_________________________


(1)	Non-current liabilities includes mandatorily redeemable preferred stock units.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the summarized statements of operations for the three and nine months ended December 31, 2018 , and 2017 for Pop and a reconciliation of the net loss reported by Pop to equity interest loss recorded by the Company:



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017

Revenues	$	24.3		$	33.0		$	75.8		$	86.0
Expenses:
Cost of services	17.9			19.8			43.4			50.5
Selling, marketing, and general and administration	11.6			14.1			35.1			37.3
Depreciation and amortization	1.9			2.0			5.9			6.1
Operating loss	(7.1		)	(2.9		)	(8.6		)	(7.9		)
Interest expense, net	0.7			0.2			1.6			0.6
Accretion of redeemable preferred stock units ⁽¹⁾	24.3			20.1			68.6			58.1
Total interest expense, net	25.0			20.3			70.2			58.7
Net loss	$	(32.1	)	$	(23.2	)	$	(78.8	)	$	(66.6	)
Reconciliation of net loss reported by Pop to equity interest loss:
Net loss reported by Pop	$	(32.1	)	$	(23.2	)	$	(78.8	)	$	(66.6	)
Ownership interest in Pop	50		%	50		%	50		%	50		%
The Company's share of net loss	(16.1		)	(11.6		)	(39.4		)	(33.3		)
Accretion of dividend and interest income on redeemable preferred stock units ⁽¹⁾	12.1			10.1			34.3			29.0
Elimination of the Company's share of profits on licensing sales to Pop	—			(0.2		)	(0.2		)	(0.3		)
Realization of the Company’s share of profits on licensing sales to Pop	0.4			0.3			0.6			0.7
Total equity interest loss recorded	$	(3.6	)	$	(1.4	)	$	(4.7	)	$	(3.9	)

___________________

(1)

Accretion of mandatorily redeemable preferred stock units represents Pop's 10% dividend and the amortization of discount on its mandatorily redeemable preferred stock units held by the Company and the other interest holder. The Company recorded its share of this expense as income from the accretion of dividend and discount on mandatorily redeemable preferred stock units within equity interest loss.

Other Equity Method Investments

The Company has investments in various other equity method investees with ownership percentages ranging from approximately 11% to 50% . These investments include:

Playco. Playco Holdings Limited ("Playco") offers a STARZ-branded online subscription video-on-demand service in the Middle East and North Africa.

Laugh Out Loud. A streaming service for content created or curated by Kevin Hart which includes original series starring Kevin Hart.

Roadside Attractions . Roadside Attractions is an independent theatrical distribution company.

Pantelion Films. Pantelion Films is a joint venture with Videocine, an affiliate of Televisa, which produces, acquires and distributes a slate of English and Spanish language feature films that target Hispanic moviegoers in the U.S.

Atom Tickets. Atom Tickets is the first-of-its-kind theatrical mobile ticketing platform and app. The Company is accounting for its investment in Atom Tickets, a limited liability company, under the equity method of accounting due to the Company's board representation that provides significant influence over the investee.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other. In addition to the equity method investments discussed above, the Company holds ownership interests in other immaterial equity method investees.

Summarized Financial Information. Summarized financial information for the Company's "other equity method investees", on an aggregate basis, is set forth below:



	December 31, 2018		March 31, 2018
	(Amounts in millions)
Current assets	$	156.4	$	232.7
Non-current assets	$	55.9	$	130.0
Current liabilities	$	132.9	$	201.5
Non-current liabilities	$	18.8	$	45.0



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Revenues	$	31.5		$	61.0		$	85.0		$	148.7
Gross profit	$	8.1		$	12.3		$	27.7		$	30.2
Net loss	$	(26.5	)	$	(32.7	)	$	(81.8	)	$	(95.2	)

Other Investments:

Other investments include equity securities that are measured at fair value and equity securities without readily determinable fair values, as described below:

Equity Securities Measured at Fair Value. Investments in equity securities that are measured at fair value are classified within Level 1 of the fair value hierarchy as the valuation inputs are based on quoted prices in active markets (see Note 8 ).

As a result of the adoption of new accounting guidance for Recognition and Measurement of Financial Instruments (see Note 1 ), effective April 1, 2018 changes in the fair value of the Company's equity securities with a readily determinable fair market value are recognized in net income. At December 31, 2018 and March 31, 2018, "other investments" include investments in equity securities measured at fair value of $1.0 million and $7.3 million , respectively. Accordingly, during the three and nine months ended December 31, 2018 , the Company recognized $3.6 million and $6.4 million , respectively in unrealized losses on equity securities held as of December 31, 2018 which are reflected in the gain (loss) on investments line item on the unaudited condensed consolidated statement of operations.

Equity Securities Without Readily Determinable Fair Values. Investments in equity securities without readily determinable fair values are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities. At December 31, 2018 and March 31, 2018, "other investments" include investments in equity securities without readily determinable fair values of $0.5 million and $30.6 million , respectively.

Gain (Loss) on Investments:

The following table summarizes the components of the gain (loss) on investments:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Impairments of investments ⁽¹⁾	$	(2.6	)	$	(29.2	)	$	(36.8	)	$	(29.2	)
Unrealized losses on equity securities held as of December 31, 2018	(3.6		)	—			(6.4		)	—
Gain on sale of EPIX ⁽²⁾	—			—			—			201.0
	$	(6.2	)	$	(29.2	)	$	(43.2	)	$	171.8

_________________

(1)

In the three and nine months ended December 31, 2018 and 2017, amounts represent impairments of equity method investments, and the nine months ended December 31, 2018 also includes other-than-temporary impairments of $34.2 million on investments in equity securities without readily determinable fair values and notes receivable (previously included in other assets) which were written down to their estimated fair value of zero .


(2)	In May 2017, the Company sold all of its 31.15% equity interest in EPIX, and recorded a gain before income taxes of approximately $201.0 million . Prior to the sale of its interest in EPIX, the Company had accounted for such interest as an equity method investment.

5. Goodwill

Changes in the carrying value of goodwill by reporting segment were as follows:



	Motion Picture		Television Production		Media Networks		Total
	(Amounts in millions)
Balance as of March 31, 2018	$	393.7	$	309.2	$	2,037.9	$	2,740.8
Business acquisitions ⁽¹⁾	—		92.0		—		92.0
Measurement period adjustments ⁽¹⁾	—		0.7		—		0.7
Balance as of December 31, 2018	$	393.7	$	401.9	$	2,037.9	$	2,833.5

______________________


(1)	Represents the goodwill and measurement period adjustments resulting from the acquisition of 3 Arts Entertainment (see Note 2 ). Measurement period adjustments represented a decrease to the fair value of finite-lived intangible assets and a corresponding increase to goodwill.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Debt

Total debt of the Company, excluding film obligations and production loans, was as follows as of December 31, 2018 and March 31, 2018 :



	December 31, 2018			March 31, 2018
	(Amounts in millions)
Corporate debt:
Revolving Credit Facility	$	520.0		$	—
Term Loan A ⁽¹⁾	750.0			750.0
Term Loan B ⁽¹⁾	1,240.6			1,250.0
5.875% Senior Notes	520.0			520.0
Total corporate debt	3,030.6			2,520.0
Convertible senior subordinated notes ⁽²⁾	—			60.0
Capital lease obligations	46.1			50.5
Total debt	3,076.7			2,630.5
Unamortized discount and debt issuance costs, net of fair value adjustment on capital lease obligations	(64.4		)	(73.1		)
Total debt, net	3,012.3			2,557.4
Less current portion	(44.4		)	(79.1		)
Non-current portion of debt	$	2,967.9		$	2,478.3

_____________________


(1)	To manage interest rate risk on certain of its LIBOR-based floating-rate corporate debt, as of December 31, 2018 , the Company has entered into interest rate swaps to effectively convert the floating interest rates to fixed interest rates on a $1.7 billion notional amount (see Note 17 for further information).


(2)	On April 15, 2018, the 1.25% convertible senior subordinated notes due April 2018 (the "April 2013 1.25% Notes") matured, and upon maturity, the Company repaid the outstanding principal amount, together with accrued and unpaid interest.

Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B)

Issuance. On March 22, 2018, the Company amended its credit and guarantee agreement issued December 8, 2016 (the "Amended Credit Agreement"), and in connection with the amendment and repayment of amounts previously outstanding under the credit and guarantee agreement, obtained a new $1.5 billion five -year revolving credit facility (the "Revolving Credit Facility"), incurred a new five -year term loan A in aggregate principal amount of $750.0 million (the "Term Loan A") and incurred a new seven -year term loan B in aggregate principal amount of $1,250.0 million (the "Term Loan B", and together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities").

Revolving Credit Facility Availability of Funds & Commitment Fee. The Revolving Credit Facility provides for borrowings and letters of credit up to an aggregate of $1.5 billion , and at December 31, 2018 there was $980.0 million available. However, borrowing levels are subject to certain financial covenants as discussed below. There were no letters of credit outstanding at December 31, 2018 . The Company is required to pay a quarterly commitment fee on the Revolving Credit Facility of 0.250% to 0.375% per annum, depending on the achievement of certain leverage ratios, as defined in the Amended Credit Agreement, on the total Revolving Credit Facility of $1.5 billion less the amount drawn.

Maturity Date:

• Revolving Credit Facility & Term Loan A: March 22, 2023.

• Term Loan B: March 24, 2025.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest:

•

Revolving Credit Facility & Term Loan A: Initially bear interest at a rate per annum equal to LIBOR plus 1.75% (or an alternative base rate plus 0.75% ) margin, with a LIBOR floor of zero . The margin is subject to potential increases of up to 50 basis points ( two ( 2 ) increases of 25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the Amended Credit Agreement (effective interest rate of 4.25% as of December 31, 2018 ).


•	Term Loan B: As of March 22, 2018, pursuant to the Amended Credit Agreement described above, the Term Loan B bears interest at a rate per annum equal to LIBOR plus 2.25% margin, with a LIBOR floor of zero (or an alternative base rate plus 1.25% margin) (effective interest rate of 4.75% as of December 31, 2018 ).

Required Principal Payments:


•	Term Loan A: Quarterly principal payments which began on June 30, 2018 (the last day of the first full fiscal quarter ending after March 22, 2018), at quarterly rates of 0.00% for the first year, 1.25% for the second year, 1.75% for the third year, and 2.50% for the fourth and fifth years, with the balance payable at maturity.


•	Term Loan B: Quarterly principal payments which began on June 30, 2018 (the last day of the first full fiscal quarter ending after March 22, 2018), at a quarterly rate of 0.25% , with the balance payable at maturity.

The Term Loan A and Term Loan B also require mandatory prepayments in connection with certain asset sales, subject to certain significant exceptions, and the Term Loan B is subject to additional mandatory repayment from specified percentages of excess cash flow, as defined in the Amended Credit Agreement.

Optional Prepayment:


•	Revolving Credit Facility & Term Loan A: The Company may voluntarily prepay the Revolving Credit Facility and Term Loan A at any time without premium or penalty.


•	Term Loan B: The Company may voluntarily prepay the Term Loan B at any time.

Security. The Senior Credit Facilities are guaranteed by the Guarantors (as defined in the Amended Credit Agreement) and are secured by a security interest in substantially all of the assets of Lionsgate and the Guarantors (as defined in the Amended Credit Agreement), subject to certain exceptions.

Covenants. The Senior Credit Facilities contain representations and warranties, events of default and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant exceptions, restrictions on the ability to declare or pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. 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. As of December 31, 2018 , the Company was in compliance with all applicable covenants.

Change in Control. The Company may also be subject to an event of default upon a change in control (as defined in the Amended Credit Agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50% of the Company’s common shares.

5.875% Senior Notes

Issuance. On October 27, 2016, Lions Gate Entertainment Corp. issued $520.0 million aggregate principal amount of 5.875% senior notes due 2024 (the "2016 5.875% Senior Notes"). On March 28, 2018, in connection with a private exchange offer of the $520.0 million aggregate principal amount of its 2016 5.875% Senior Notes, an indirect, wholly owned subsidiary of the Company issued $512.3 million aggregate principal amount of new 5.875% senior notes due 2024 (the "2018 5.875% Senior Notes", and collectively with the 2016 5.875% Senior Notes, the " 5.875% Senior Notes"). The new 2018 5.875% Senior Notes were exchanged by the Company for $512.3 million of the 2016 5.875% Senior Notes.

Interest. Bears interest at 5.875% annually.

Maturity Date. November 1, 2024.

Optional Redemption:


(i)	Prior to November 1, 2019, the 5.875% Senior Notes are redeemable under certain circumstances (as defined in the indenture governing the 5.875% Senior Notes), in whole at any time or in part from time to time, at a price equal to 100% of the principal amount, plus the Applicable Premium (as defined in the indenture governing the 5.875%

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Senior Notes). The Applicable Premium is the greater of (i) 1.0% of the principal amount redeemed and (ii) the excess of the present value of the redemption amount at November 1, 2019 (see below) of the notes redeemed plus interest through the redemption date (discounted at the treasury rate on the redemption date plus 50 basis points) over the principal amount of the notes redeemed on the redemption date.

(ii)

On and after November 1, 2019, redeemable by the Company, in whole or in part, at the redemption prices set forth as follows (as a percentage of the principal amount redeemed), plus accrued and unpaid interest to the redemption date: (i) on or after November 1, 2019 - 104.406% ; (ii) on or after November 1, 2020 - 102.938% ; (iii) on or after November 1, 2021 - 101.439% ; and (iv) on or after November 1, 2022 - 100% .

Security. The 5.875% Senior Notes are guaranteed on an unsubordinated, unsecured basis.

Covenants. The 5.875% 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. As of December 31, 2018 , the Company was in compliance with all applicable covenants.

Change in Control. The occurrence of a change of control will be a triggering event requiring the Company to offer to purchase from holders all of the 5.875% Senior Notes, at a price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase. In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the 5.875% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest, if any to the date of purchase.

Capacity to Pay Dividends

At December 31, 2018 , the capacity to pay dividends under the Senior Credit Facilities and the 5.875% Senior Notes significantly exceeded the amount of the Company's retained earnings or net loss, and therefore the Company's net loss of $140.5 million and retained earnings of $346.0 million were deemed free of restrictions at December 31, 2018 .

6.375% Senior Notes

On February 4, 2019 the Company closed a private offering of $550.0 million of senior notes due 2024 (the " 6.375% Senior Notes"). See Note 19 for further information.

Interest Expense

The table below sets forth the composition of the Company’s interest expense for the three and nine months December 31, 2018 and 2017 :



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
	(Amounts in millions)
Interest expense
Cash interest	$	39.7	$	28.3	$	107.9	$	94.7
Amortization of debt discount and financing costs	3.0		3.6		9.0		11.0
	42.7		31.9		116.9		105.7
Interest on dissenting shareholders' liability (see Note 16)	2.6		14.4		35.3		41.6
Total interest expense	$	45.3	$	46.3	$	152.2	$	147.3

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Film Obligations and Production Loans



	December 31, 2018			March 31, 2018
	(Amounts in millions)
Film obligations	$	198.8		$	146.7
Production loans	391.6			352.9
Total film obligations and production loans	590.4			499.6
Unamortized debt issuance costs	(0.7		)	(0.4		)
Total film obligations and production loans, net	589.7			499.2
Less current portion	(441.2		)	(327.9		)
Total non-current film obligations and production loans	$	148.5		$	171.3

Film Obligations

Film obligations include minimum guarantees and accrued licensed program rights obligations, which represent amounts payable for film rights that the Company has acquired and certain theatrical marketing obligations for amounts received from third parties that are contractually committed for theatrical marketing expenditures associated with specific titles.

Production Loans

Production loans represent individual loans for the production of film and television programs that the Company produces. The majority of production loans have contractual repayment dates either at or near the expected completion date, with the exception of certain loans containing repayment dates on a longer term basis, and incur interest at rates ranging from 4.73% to 5.61% .

8. Fair Value Measurements

Fair Value

Accounting guidance and standards about fair value define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair Value Hierarchy

Fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The accounting guidance and standards establish three levels of inputs that may be used to measure fair value:


•	Level 1 — Quoted prices in active markets for identical assets or liabilities.

•

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

The following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of December 31, 2018 and March 31, 2018 :

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	December 31, 2018								March 31, 2018
	Level 1		Level 2			Total			Level 1		Level 2			Total
Assets:	(Amounts in millions)
Available-for-sale equity securities (see Note 4)	$	1.0	$	—		$	1.0		$	7.3	$	—		$	7.3
Forward exchange contracts (see Note 17)	—		2.3			2.3			—		0.3			0.3

Liabilities:
Forward exchange contracts (see Note 17)	—		(0.9		)	(0.9		)	—		(0.6		)	(0.6		)
Interest rate swaps (see Note 17)	—		(35.1		)	(35.1		)	—		—			—
	$	1.0	$	(33.7	)	$	(32.7	)	$	7.3	$	(0.3	)	$	7.0

The following table sets forth the carrying values and fair values of the Company’s investment in Pop's mandatorily redeemable preferred stock units and outstanding debt at December 31, 2018 and March 31, 2018 :



	December 31, 2018				March 31, 2018
	(Amounts in millions)
	Carrying Value		Fair Value		Carrying Value		Fair Value
			(Level 3)				(Level 3)
Assets:
Investment in Pop's mandatorily redeemable preferred stock units ⁽¹⁾	$	95.7	$	125.0	$	91.3	$	125.0

	Carrying Value		Fair Value		Carrying Value		Fair Value
			(Level 2)				(Level 2)
Liabilities ⁽²⁾ :
Term Loan A	732.5		722.8		729.7		750.9
Term Loan B	1,221.8		1,226.6		1,229.3		1,251.6
5.875% Senior Notes	502.2		509.6		500.4		539.5
April 2013 1.25% Notes	—		—		60.0		60.3
Production loans	390.9		391.6		352.6		352.9
	$	2,847.4	$	2,850.6	$	2,872.0	$	2,955.2

________________

(1)

The Company measures the fair value of its investment in Pop's mandatorily redeemable preferred stock units using primarily a discounted cash flow analysis based on the expected cash flows of the investment (a Level 3 measurement). The analysis reflects the contractual terms of the investment, including the period to maturity, and uses a discount rate commensurate with the risk associated with the investment.


(2)	The Company measures the fair value of its outstanding debt using discounted cash flow techniques that use observable market inputs, such as LIBOR-based yield curves, swap rates, and credit ratings (Level 2 measurements).

The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, borrowings under the Revolving Credit Facility, if any, and capital lease obligations. The carrying values of these financial instruments approximated the fair values at December 31, 2018 and March 31, 2018 .

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9. Noncontrolling Interests

Redeemable Noncontrolling Interests

The table below presents the reconciliation of changes in redeemable noncontrolling interests:



	Nine Months Ended
	December 31,
	2018			2017
	(Amounts in millions)
Beginning balance	$	101.8		$	93.8
Initial fair value of redeemable noncontrolling interest of 3 Arts Entertainment	15.8			—
Net income (loss) attributable to redeemable noncontrolling interests	(11.6		)	0.3
Noncontrolling interests discount accretion	15.7			4.5
Adjustments to redemption value	24.4			5.4
Cash distributions	(1.8		)	(5.5		)
Ending balance	$	144.3		$	98.5

Redeemable noncontrolling interests (included in temporary equity on the unaudited condensed consolidated balance sheets) relate to the November 12, 2015 acquisition of a controlling interest in Pilgrim Media Group and the May 29, 2018 acquisition of a controlling interest in 3 Arts Entertainment.

Redeemable noncontrolling interests are measured at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date less the amount attributed to unamortized noncontrolling interest discount if applicable, or (ii) the historical value resulting from the original acquisition date value plus or minus any earnings or loss attribution, plus the amount of amortized noncontrolling interest discount, less the amount of cash distributions that are not accounted for as compensation, if any. The amount of the redemption value in excess of the historical values of the noncontrolling interest, if any, is recognized as an increase to redeemable noncontrolling interest and a charge to retained earnings.

In connection with the acquisition of a controlling interest in 3 Arts Entertainment on May 29, 2018, the Company recorded a non-compensatory (see below) redeemable noncontrolling interest of $15.8 million , representing the noncontrolling interest holders 49% equity interest in 3 Arts Entertainment (see Note 2 ). The 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. 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. The put and call options have been determined to be embedded in the noncontrolling interest, and because the put rights are outside the control of the Company, the noncontrolling interest holder's interest is presented as redeemable noncontrolling interest outside of shareholders' equity on the Company's consolidated balance sheets.

In addition, the noncontrolling interest holders have continued as employees of 3 Arts Entertainment. Pursuant to the various 3 Arts Entertainment acquisition and related agreements, a portion of the noncontrolling interest holders' participation in the put and call proceeds is based on the noncontrolling interest holders' performance during the period. Further, if the employment of a noncontrolling interest holder is terminated, under certain circumstances, their participations in distributions cease and the put and call value is discounted from the fair value of their equity ownership percentage. Accordingly, earned distributions are accounted for as compensation and are being expensed within general and administrative expense as incurred. Additionally, the amount of the put and call proceeds subject to the discount is also accounted for as compensation, and is being amortized over the vesting period within general and administrative expense and reflected as an addition to redeemable noncontrolling interest.

Other Noncontrolling Interests

The Company has other noncontrolling interests that are not redeemable. These noncontrolling interests primarily relate to Pantaya (a joint venture between the Company and Hemisphere Media Group), a premium Spanish-language streaming service

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in which the Company owns a controlling interest. The Pantaya service was launched in the three months ended September 30, 2017.

10. Revenue

General. The Company's 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. The Company's Media Networks segment generates revenue primarily from the distribution of the Company's STARZ branded premium subscription video services and, to a lesser extent, direct-to-consumer content streaming services.

Revenue is recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services or goods. Revenues do not include taxes collected from customers on behalf of taxing authorities such as sales tax and value-added tax.

Licensing Arrangements. The Company's content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales or usage based royalties.

Fixed Fee or Minimum Guarantees: The Company's fixed fee or minimum guarantee arrangements may, in some cases, include multiple titles, multiple license periods (windows) with a substantive period in between the windows, rights to exploitation in different media, or rights to exploitation in multiple territories, which may be considered distinct performance obligations. When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or territory) are recognized when the content has been delivered, and the window for the exploitation right in that territory has begun, which is the point in time at which the customer is able to begin to use and benefit from the content.

Sales or Usage Based Royalties: Sales or usage based royalties represent amounts due to the Company based on the “sale” or “usage” of the Company's content by the customer, and revenues are recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which some or all the sales or usage-based royalty has been allocated has been satisfied (or partially satisfied). Generally when the Company licenses completed content (with standalone functionality, such as a movie, or television show), its performance obligation will be satisfied prior to the sale or usage. When the Company licenses intellectual property that does not have stand-alone functionality (e.g., brands, themes, logos, etc.), its performance obligation is generally satisfied in the same period as the sale or usage. The actual amounts due to the Company under these arrangements are generally not reported to the Company until after the close of the reporting period. The Company records revenue under these arrangements for the amounts due and not yet reported to the Company based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. Such estimates are based on information from the Company's customers, historical experience with similar titles in that market or territory, the performance of the title in other markets, and/or data available in the industry.

Revenues by Market or Product Line. The following describes the revenues generated by market or product line. Theatrical revenues are included in the Motion Picture segment; home entertainment, television, international and other revenues are applicable to both the Motion Picture and Television Production segments; Media Networks programming revenues are included in the Media Networks segment.

•

Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (distributed by the Company directly in the United States and through a sub-distributor in Canada). Revenue from the theatrical release of feature films are treated as sales or usage- based royalties and recognized starting at the exhibition date and based on the Company's participation in box office receipts of the theatrical exhibitor .


•	Home Entertainment. Home entertainment consists of Digital Media and Packaged Media.


◦	Digital Media. Digital media includes digital transaction revenue sharing arrangements (pay-per-view and video-on-demand platforms, electronic sell through ("EST"), and digital rental) and licenses of content to digital platforms for a fixed fee.

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Digital Transaction Revenue Sharing Arrangements : Primarily represents revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, the Company shares in the rental or sales revenues generated by the platform on a title-by-title basis. These digital media platforms generate revenue from rental and EST arrangements, such as download-to-own, download-to-rent, and video-on-demand. These revenue sharing arrangements are recognized as sales or usage based royalties based on the performance of these platforms and pursuant to the terms of the contract, as discussed above.

Licenses of Content to Digital Platforms: Primarily represents the licensing of content to subscription-video-on-demand ("SVOD") or other digital platforms for a fixed fee. As discussed above, revenues are recognized when the content has been delivered and the window for the exploitation right in that territory has begun.


◦	Packaged Media. Packaged media revenues represent the sale of motion pictures and television shows (produced or acquired) on physical discs (DVD’s, Blu-Ray, 4K Ultra HD) in the retail market. Revenues are recognized, net of an allowance for estimated returns and other allowances, on the later of receipt by the customer or “street date” (when it is available for sale by the customer).

•

Television . Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television markets, syndication) of motion pictures (including theatrical productions and acquired films) and scripted and unscripted television series, television movies, mini-series, and non-fiction programming. Television revenues include fixed fee arrangements as well as arrangements in which the Company earns advertising revenue from the exploitation of certain content on television networks. Television also includes revenue from licenses to SVOD platforms in which the initial license of a television series is to an SVOD platform. Revenues associated with a title, right, or window from television licensing arrangements are recognized when the feature film or television program is delivered (on an episodic basis for television product) and the window for the exploitation right has begun.

•

International. International revenues are derived from (1) licensing of the Company's productions, acquired films, catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom; and (3) licensing to international markets of scripted and unscripted series, television movies, mini-series and non-fiction programming. License fees and minimum guarantee amounts associated with title, window, media or territory, are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the contract, and the right to exploit the feature film or television program in that window, media or territory has commenced. Revenues are also generated from sales or usage based royalties received from international distributors based on their distribution performance pursuant to the terms of the contracts after the recoupment of certain costs in some cases, and the initial minimum guarantee, if any, and are recognized when the sale by our customer generating a royalty due to us has occurred.


•	Other. Other revenues are derived from, among others, the following:


◦	the licensing of our film and television content to other ancillary markets;


◦	the Company's interactive ventures and games division, its global franchise management division (including location-based entertainment) and merchandising rights, all of which may include licenses of motion picture or television characters, brands, storylines, themes or logos (i.e., symbolic intellectual property);


◦	the sales and licensing of music from the theatrical exhibition of our films and the television broadcast of our productions; and


◦	commissions due to 3 Arts Entertainment related to talent management.

Revenues from the licensing of film and television content and the sales and licensing of music are recognized when the content has been delivered and the license period has begun, as discussed above. Revenues from the licensing of symbolic intellectual property is recognized over the corresponding license term. Commissions are recognized as such services are provided.


•	Media Networks - Programming Revenues. Media Networks’ revenues are primarily derived from the distribution of the Company's STARZ branded premium subscription video services pursuant to affiliation agreements with U.S. multichannel video programming distributors (“MVPDs”), including cable operators, satellite television providers and

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telecommunications companies, and over-the-top (“OTT”) (collectively, “Distributors”) and on a direct-to-consumer basis. Media Networks revenues also include international revenues from the OTT distribution of the Company's STARZ branded premium subscription video services.

Pursuant to the Company’s distribution agreements, revenues may be based on a fixed fee, subject to nominal annual escalations, or a variable fee (i.e., a fee based on number of subscribers who receive the Company's networks or other factors). Programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor. The variable distribution fee arrangements represent sales or usage based royalties and are recognized over the period of such sales or usage by the Company's distributor, which is the same period that the content is provided to the distributor.

The table below presents revenues by segment, market or product line for the three and nine months ended December 31, 2018 and 2017. As a result of the segment reorganization described in Note 15 , the Company has presented prior period segment data in a manner that conforms to the current period presentation. The prior year information in the below table has not been adjusted under the modified retrospective method of adoption of the new revenue recognition guidance.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Revenue by Type:
Motion Picture
Theatrical ⁽¹⁾	$	28.5		$	117.4		$	147.9		$	226.1
Home Entertainment
Digital Media	81.7			85.0			253.0			277.1
Packaged Media ⁽¹⁾	68.0			104.0			209.0			311.5
Total Home Entertainment	149.7			189.0			462.0			588.6
Television ⁽¹⁾	74.8			90.5			207.6			222.3
International	104.7			134.4			254.3			336.9
Other ⁽¹⁾	4.9			7.8			35.1			23.1
Total Motion Picture revenues	$	362.6		$	539.1		1,106.9			1,397.0

Television Production
Television	$	151.5		$	184.6		454.4			515.5
International	35.9			51.1			94.7			118.8
Home Entertainment
Digital Media	10.9			25.7			54.1			92.4
Packaged Media	2.5			4.1			5.9			10.0
Total Home Entertainment	13.4			29.8			60.0			102.4
Other	15.7			0.7			39.0			2.0
Total Television Production revenues	$	216.5		$	266.2		648.1			738.7

Media Networks - Programming Revenues	$	366.8		$	353.5		1,099.0			1,057.8

Intersegment eliminations	(12.7		)	(16.1		)	(87.1		)	(104.7		)
Total revenues	$	933.2		$	1,142.7		$	2,766.9		$	3,088.8

___________________

(1)

Certain amounts in the prior period have been reclassified in order to conform to the current period presentation. In particular, in the three and nine months ended December 31, 2017, within the Motion Picture segment $16.9 million was reclassified from Other revenue to Theatrical revenue ( $8.1 million ), Home Entertainment Packaged Media revenue ( $3.7 million ), and Television revenue ( $5.1 million ).

Remaining Performance Obligations

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). Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2018 are as follows:



	Rest of Year Ending March 31, 2019		Year Ended March 31,
	Rest of Year Ending March 31, 2019		2020		2021		Thereafter		Total
	(Amounts in millions)
Remaining Performance Obligations	$	490.0	$	783.7	$	240.7	$	279.0	$	1,793.4

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The above table does not include estimates of variable consideration for transactions involving sales or usage-based royalties in exchange for licenses of intellectual property. The revenues included in the above table include all fixed fee contracts regardless of duration.

Revenues of $64.6 million and $186.8 million , including variable and fixed fee arrangements, were recognized during the three and nine months ended December 31, 2018, respectively, from performance obligations satisfied prior to March 31, 2018. These revenues were primarily associated with the distribution of television and theatrical product in electronic sell-through and video-on-demand formats, and to a lesser extent, the distribution of theatrical product in the domestic and international markets related to films initially released in prior periods.

Payment Terms, Contract Assets and Deferred Revenue

The timing of revenue recognition, billings and cash collections affects the recognition of accounts receivable, contract assets and deferred revenue. At December 31, 2018 and April 1, 2018, accounts receivable, contract assets and deferred revenue are as follows:



	December 31, 2018		April 1, 2018		Addition (Reduction)
	(Amounts in millions)
Accounts receivable, net - current	$	833.1	$	1,042.2	$	(209.1	)
Accounts receivable, net - non-current ⁽¹⁾	228.7		257.7		(29.0		)
Contract asset - current ⁽²⁾	69.0		78.3		(9.3		)
Contract asset - non-current ⁽³⁾	28.0		71.5		(43.5		)
Deferred revenue - current	173.0		183.8		(10.8		)
Deferred revenue - non-current	70.0		70.5		(0.5		)

__________________


(1)	Included in accounts receivable within non-current other assets in the unaudited condensed consolidated balance sheets.


(2)	Included in prepaid expenses and other within other current assets in the unaudited condensed consolidated balance sheets.


(3)	Included in prepaid expenses and other within non-current other assets in the unaudited condensed consolidated balance sheets.

Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables). Amounts relate primarily to contractual payment holdbacks in cases in which the Company is required to deliver additional episodes or seasons of television content in order to receive payment, complete certain administrative activities, such as guild filings, or allow the Company's customers' audit rights to expire. The change in balance of contract assets is primarily due to the satisfaction of the condition related to payment holdbacks.

Deferred revenue relates primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation. Revenues of $23.6 million and $128.8 million were recognized during the three and nine months ended December 31, 2018 , respectively, related to the balance of deferred revenue at April 1, 2018.

Payment terms vary by location and type of customer and the nature of the licensing arrangement, however, other than certain multi-year license arrangements, generally payment is due within 60 days after revenue is recognized. For certain multi-year licensing arrangements, primarily in the television, digital media, and international markets, payments may be due over a longer period. When we expect the period between fulfillment of our performance obligation and the receipt of payment to be greater than a year, a significant financing component is present. In these cases, such payments are discounted to present value based on a discount rate reflective of a separate financing transaction between the customer and the Company, at contract inception. The significant financing component is recorded as a reduction to revenue and accounts receivable initially, with such accounts receivable discount amortized to interest income over the period to receipt of payment. The Company does not assess contracts with deferred payments for significant financing components if, at contract inception, we expect the period between fulfillment of the performance obligation and subsequent payment to be one year or less.

In other cases, customer payments are made in advance of when the Company fulfills its performance obligation and recognizes revenue. This primarily occurs under television production contracts, in which payments may be received as the

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production progresses, international motion picture contracts, where a portion of the payments are received prior to the completion of the movie and prior to license rights start dates, and pay television contracts with multiple windows with a portion of the revenues deferred until the subsequent exploitation windows commence. These arrangements do not contain significant financing components because the reason for the payment structure is not for the provision of financing to the Company, but rather to mitigate the Company's risk of customer non-performance and incentivize the customer to exploit the Company's content.

Summarized Balance Sheet and Income Statement Comparison of New and Prior Revenue Recognition Guidance

The following table presents the line items impacted by the adoption of the new revenue recognition guidance (described in Note 1 ) on the unaudited condensed consolidated balance sheet and statement of operations:



	December 31, 2018
	As Reported		Impact of Adoption			Without Adoption of New Revenue Guidance
Balance Sheet Information:	(Amounts in millions)
Assets
Accounts receivable, net - current	$	833.1	$	(109.2	)	$	723.9
Other assets - current	227.7		(69.1		)	158.6
Other assets - non-current	453.6		(2.1		)	451.5
Investment in films and television programs and program rights, net	1,670.0		38.0			1,708.0

Liabilities
Accounts payable and accrued liabilities	432.5		(95.7		)	336.8
Participations and residuals - current	499.6		(26.0		)	473.6
Deferred revenue - current	173.0		(0.5		)	172.5
Deferred revenue - non-current	70.0		0.7			70.7
Deferred tax liabilities	46.8		(4.2		)	42.6

Equity
Retained earnings	346.0		(16.7		)	329.3



	Three Months Ended December 31, 2018
	As Reported			Impact of Adoption			Without Adoption of New Revenue Guidance
Statement of Operations Information:	(Amounts in millions)
Revenues	$	933.2		$	(7.4	)	$	925.8
Direct operating	502.0			(2.3		)	499.7
Operating income	86.8			(5.1		)	81.7
Interest and other income	2.9			0.1			3.0
Income before income taxes	25.4			(5.0		)	20.4
Income tax provision	(5.3		)	1.1			(4.2		)
Net income	20.1			(3.9		)	16.2

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Nine Months Ended December 31, 2018
	As Reported			Impact of Adoption			Without Adoption of New Revenue Guidance
Statement of Operations Information:	(Amounts in millions)
Revenues	$	2,766.9		$	5.7		$	2,772.6
Direct operating	1,495.2			2.4			1,497.6
Operating income	164.0			3.3			167.3
Interest and other income	9.0			(0.2		)	8.8
Loss before income taxes	(167.1		)	3.1			(164.0		)
Income tax benefit	26.6			(1.1		)	25.5
Net loss	(140.5		)	2.0			(138.5		)

11. Net Income (Loss) Per Share

Basic net income (loss) per share is calculated based on the weighted average common shares outstanding for the period. Basic net income (loss) per share for the three and nine months ended December 31, 2018 and 2017 is presented below:



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2018		2017		2018			2017
	(Amounts in millions, except per share amounts)
Basic Net Income (Loss) Per Common Share:
Numerator:
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	22.9	$	193.0	$	(129.0	)	$	382.3
Denominator:
Weighted average common shares outstanding	214.2		208.8		213.2			207.8
Basic net income (loss) per common share	$	0.11	$	0.92	$	(0.61	)	$	1.84

Diluted net income (loss) per common share reflects the potential dilutive effect, if any, of the conversion of convertible senior subordinated notes under the "if converted" method. Diluted net income (loss) per common share also reflects share purchase options, including equity-settled share appreciation rights ("SARs"), restricted share units ("RSUs") and restricted stock using the treasury stock method when dilutive, and any contingently issuable shares when dilutive. Diluted net income (loss) per common share for the three and nine months ended December 31, 2018 and 2017 is presented below:

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	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2018		2017		2018			2017
	(Amounts in millions, except per share amounts)
Diluted Net Income (Loss) Per Common Share:
Numerator:
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	22.9	$	193.0	$	(129.0	)	$	382.3
Add:
Interest on convertible notes, net of tax	—		0.1		—			0.4
Numerator for diluted net income (loss) per common share	$	22.9	$	193.1	$	(129.0	)	$	382.7

Denominator:
Weighted average common shares outstanding	214.2		208.8		213.2			207.8
Effect of dilutive securities:
Conversion of notes	—		2.1		—			2.1
Share purchase options	3.3		8.4		—			7.5
Restricted share units and restricted stock	0.2		0.7		—			0.7
Contingently issuable shares	3.1		1.6		—			1.6
Adjusted weighted average common shares outstanding	220.8		221.6		213.2			219.7
Diluted net income (loss) per common share	$	0.10	$	0.87	$	(0.61	)	$	1.74

As a result of the net loss in the nine months ended December 31, 2018 , the dilutive effect of the convertible notes, share purchase options, restricted share units and restricted stock, and contingently issuable shares were considered anti-dilutive and, therefore, excluded from diluted loss per share. Anti-dilutive shares excluded from the calculation for the nine months ended December 31, 2018 totaled 7.9 million .

For the three and nine months ended December 31, 2018 and 2017 , the outstanding common shares issuable presented below were excluded from diluted net income (loss) per common share because their inclusion would have had an anti-dilutive effect.



	Three Months Ended		Nine Months Ended
	December 31,		December 31,
	2018	2017	2018	2017
	(Amounts in millions)
Anti-dilutive shares issuable
Share purchase options	21.9	8.7	20.3	12.0
Restricted share units	1.3	0.2	0.9	0.2
Other issuable shares	2.9	1.1	2.5	1.2
Total weighted average anti-dilutive shares issuable excluded from diluted net income (loss) per common share	26.1	10.0	23.7	13.4

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Capital Stock

(a) Common Shares

The Company had 500 million authorized Class A voting shares and 500 million authorized Class B non-voting shares at December 31, 2018 and March 31, 2018 . The table below outlines common shares reserved for future issuance:



	December 31, 2018	March 31, 2018
	(Amounts in millions)
Stock options and equity-settled SARs outstanding	34.1	32.1
Restricted stock and restricted share units — unvested	2.2	2.2
Common shares available for future issuance under the 2017 Plan (as defined below)	7.7	10.3
Shares issuable upon conversion of April 2013 1.25% Notes	—	2.1
Shares reserved for future issuance	44.0	46.7

On September 12, 2017, the Company’s shareholders approved the Lions Gate Entertainment Corp. 2017 Performance Incentive Plan (the “2017 Plan”) previously adopted by the Board of Directors (the “Board”) of the Company. The types of awards that may be granted under the 2017 Plan include stock options, SARs, restricted stock, restricted share units, stock bonuses and other forms of awards granted or denominated in Class A voting shares and Class B non-voting shares ("Common Shares") or units of Common Shares, as well as certain cash bonus awards. Persons eligible to receive awards under the 2017 Plan include directors of the Company, officers or employees of the Company or any of its subsidiaries, and certain consultants and advisors to the Company or any of its subsidiaries.

(b) Share-based Compensation

The Company recognized the following share-based compensation expense during the three and nine months ended December 31, 2018 , and 2017 :



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Compensation Expense:
Stock options	$	4.7		$	11.3		$	18.2		$	35.3
Restricted share units and other share-based compensation	5.9			11.2			19.8			31.5
Share appreciation rights	0.5			1.7			3.3			4.8
	11.1			24.2			41.3			71.6
Impact of accelerated vesting on equity awards ⁽¹⁾	2.4			2.9			2.4			2.9
Total share-based compensation expense	$	13.5		$	27.1		$	43.7		$	74.5

Tax impact ⁽²⁾	(3.2		)	(8.8		)	(10.1		)	(24.5		)
Reduction in net income	$	10.3		$	18.3		$	33.6		$	50.0

___________________


(1)	Represents the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.


(2)	Represents the income tax benefit recognized in the statements of operations for share-based compensation arrangements.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Share-based compensation expense, by expense category, consisted of the following:



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
	(Amounts in millions)
Share-Based Compensation Expense:
Direct operating	$	0.4	$	0.6	$	0.8	$	1.0
Distribution and marketing	0.2		0.3		0.3		0.7
General and administration	10.5		23.3		40.2		69.9
Restructuring and other	2.4		2.9		2.4		2.9
	$	13.5	$	27.1	$	43.7	$	74.5

The following table sets forth the stock option, equity-settled SARs, restricted stock and restricted share unit activity during the nine months ended December 31, 2018 :



	Stock Options and Equity-Settled SARs						Restricted Stock and Restricted Share Units
	Class A Voting Shares			Class B Non-Voting Shares			Class A Voting Shares			Class B Non-Voting Shares
	Number of Shares		Weighted-Average Exercise Price	Number of Shares		Weighted-Average Exercise Price	Number of Shares		Weighted-Average Grant-Date Fair Value	Number of Shares		Weighted-Average Grant-Date Fair Value
Outstanding at March 31, 2018	8,636,437		$26.93	23,463,115		$20.56	230,561		$28.49	2,001,049		$27.97
Granted	155,705		$28.07	3,190,256		$23.37	30,001		$23.51	830,972		$22.05
Options exercised or restricted stock or RSUs vested	(25,657	)	$21.74	(277,609	)	$14.97	(133,560	)	$29.56	(649,659	)	$28.07
Forfeited or expired	(392,788	)	$33.49	(630,510	)	$30.47	(12,767	)	$25.30	(84,597	)	$27.07
Outstanding at December 31, 2018	8,373,697		$26.66	25,745,252		$20.74	114,235		$26.28	2,097,765		$25.63

In connection with an amendment of an affiliation agreement with a customer and effective upon the close of the Starz merger (December 8, 2016), Lionsgate agreed to issue to the customer three $16.67 million annual installments of equity (or cash at Lionsgate's election). The total value of the contract of $50 million is being amortized as a reduction of revenue over the period from December 8, 2016 to August 31, 2019. During the three months ended December 31, 2018, Lionsgate issued to the customer 431,332 Class A voting shares valued at $8.3 million and 467,902 Class B voting shares valued at $8.3 million (2017 - 266,667 Class A voting shares valued at $8.3 million and 278,334 Class B non-voting shares valued at $8.3 million ).

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

13. Income Taxes

On December 22, 2017, the Tax Act was signed into law, making significant changes to the taxation of U.S. business entities. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21% , imposed a one-time transition tax in connection with the move from a worldwide tax system to a territorial tax system, provided for accelerated deductions for certain U.S. film production costs, imposed limitations on certain tax deductions such as executive compensation in future periods, and included numerous other provisions. As the Company has a March 31 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal rate of approximately 31.5% for the fiscal year ended March 31, 2018, and 21% for subsequent fiscal years. The Company's U.S. tax provision consists primarily of deferred tax benefits calculated at the 21% tax rate.

In connection with the Tax Act, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to provide guidance to companies that have not completed their accounting for the income tax effects of the Tax Act. Under SAB 118, provisional amounts can be recorded to the extent a reasonable estimate can be made. Additional tax effects and adjustments to previously recorded provisional amounts can be recorded upon obtaining, preparing, or analyzing additional information (including computations) within one year from the enactment date of the Tax Act. The Company previously made provisional estimates of the effects of the Tax Act, such as the measurement of deferred tax assets and liabilities, the tax effects of executive compensation, the one-time transition tax, net operating loss carryovers, foreign tax credits, and accelerated deductions for U.S. film costs. The estimated impact of the Tax Act was based on a preliminary review of the new law, subject to revision based upon further analysis and interpretation of the Tax Act. During the quarter ended December 31, 2018, the Company completed its analysis and its accounting for the Tax Act, and there were no material adjustments to its provisional estimates.

For the quarters ended December 31, 2018 and 2017, the Company determined that a small change in its estimated pretax results for the years ending March 31, 2019 and 2018, respectively, would create a large change in its expected annual effective rate. Accordingly, it was determined that a reliable estimate of the expected annual effective tax rate could not be made. As a result, the Company computed its tax (provision) benefit using the cut-off method, which reflects the actual taxes attributable to year-to-date earnings or losses.

The Company's income tax (provision) benefit differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of the Company's pre-tax income (loss) generated across the various jurisdictions in which the Company operates and the tax deductions generated by the Company's capital structure. In addition, the Company's income tax benefit was impacted by certain minimum taxes imposed by the Tax Act and the nondeductible portion of the Company's shareholder litigation settlements.

The Company's income tax (provision) benefit can be affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, further interpretation and legislative guidance regarding the new Tax Act, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items.

14. Restructuring and Other

Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable, and were as follows for the three and nine months ended December 31, 2018 and 2017 :

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
	(Amounts in millions)
Restructuring and other:
Severance ⁽¹⁾
Cash	$	13.3	$	9.1	$	17.0	$	10.1
Accelerated vesting on equity awards (see Note 11)	2.4		2.9		2.4		2.9
Total severance costs	15.7		12.0		19.4		13.0
Transaction and related costs ⁽²⁾	0.8		1.0		22.7		14.4
Development expense ⁽³⁾	—		8.4		—		8.4
	$	16.5	$	21.4	$	42.1	$	35.8

_______________________


(1)	Severance costs in the three and nine months ended December 31, 2018 and 2017 were primarily related to restructuring activities in connection with recent acquisitions, and other cost-saving initiatives. As of December 31, 2018 , the remaining severance liability was approximately $18.7 million , which is expected to be paid in the next 12 months.

(2)

Transaction and related costs in the three and nine months ended December 31, 2018 and 2017 reflect transaction, integration and legal costs associated with certain strategic transactions and legal matters. In the three and nine months ended December 31, 2018 , these costs were primarily related to the legal fees associated with the Starz class action lawsuits and other matters and, to a lesser extent, costs related to the acquisition of 3 Arts Entertainment and other strategic transactions. In the three and nine months ended December 31, 2017 , these costs were primarily related to the sale of EPIX (see Note 4 ), the legal fees associated with the Starz class action lawsuits and other matters, and the integration of Starz.


(3)	Development expense in the three and nine months ended December 31, 2017 represents write-downs resulting from the restructuring of the Motion Picture business in connection with the acquisition of Good Universe and new management's decisions around the creative direction on certain development projects which were abandoned in the three months ended December 31, 2017.

Changes in the restructuring and other severance liability were as follows for the nine months ended December 31, 2018 and 2017:



	Nine Months Ended
	December 31,
	2018			2017
	(Amounts in millions)
Severance liability
Beginning balance	$	14.7		$	22.2
Accruals	17.0			10.1
Severance payments	(13.0		)	(16.8		)
Other ⁽¹⁾	—			(0.7		)
Ending balance	$	18.7		$	14.8

_______________________


(1)	In the nine months ended December 31, 2017, other represents non-cash reductions related to the settlement of certain liabilities relating to employee compensation with equity instruments.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15. Segment Information

The Company’s reportable segments have been determined based on the distinct nature of their operations, the Company's internal management structure, and the financial information that is evaluated regularly by the Company's chief operating decision maker.

The Company has three reportable business segments: (1) Motion Picture, (2) Television Production and (3) Media Networks.

Segment Reorganization. During the quarter ended June 30, 2018, the Company reorganized its operational reporting of the Television Production segment to include the production and licensing to Starz Networks of Starz original series (previously produced by and included in the Media Networks segment) and the ancillary market distribution of Starz original productions and licensed product (also previously included in the Media Networks segment). This reorganization aligns the segment presentation of the Starz original product to be consistent with the Company's other television productions included in the Television Production segment. This alignment of operational reporting and business operations will allow our chief operating decision maker to review all of the Company's television production related activity in a consistent manner, and as part of one segment (i.e., the Television Production segment). The changes resulting from the segment reorganization are as follows: (i) the Television Production segment includes licensing revenues from the licensing of Starz original series productions to Starz Networks which are eliminated in consolidation as intersegment transactions; and (ii) the Television Production segment now includes the associated ancillary market distribution of Starz original productions and licensed product that were previously included in Content and Other within the Media Networks segment. As a result of the segment reorganization, the Company has presented prior period segment data in a manner that conforms to the current period presentation.

Motion Picture. Motion Picture consists of the development and production of feature films, acquisition of North American and worldwide distribution rights, North American theatrical, home entertainment and television distribution of feature films produced and acquired, and worldwide licensing of distribution rights to feature films produced and acquired.

Television Production. Television Production consists of the development, production and worldwide distribution of television productions including television series, television movies and mini-series, and non-fiction programming. As described under the Segment Reorganization section above, as of April 1, 2018, Television Production now includes the licensing of Starz original series productions to Starz Networks and the ancillary market distribution of Starz original productions and licensed product. Additionally, the results of operations of 3 Arts Entertainment is included in the Television Production segment from the acquisition date of May 29, 2018 (see Note 2 ).

Media Networks. Media Networks consists of (i) Starz Networks, which includes the licensing of premium subscription video programming to Distributors, and on a direct-to-consumer basis and (ii) Streaming Services, which represents the Lionsgate legacy start-up direct to consumer streaming services on its SVOD platforms.

In the ordinary course of business, the Company's reportable segments enter into transactions with one another. The most common types of intersegment transactions include licensing motion pictures or television programming (including Starz original productions) from the Motion Picture and Television Production segments to the Media Networks segment. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses, assets, or liabilities recognized by the segment that is the counterparty to the transaction) are eliminated in consolidation and, therefore, do not affect consolidated results.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Segment information by business unit is presented in the table below:



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Segment revenues
Motion Picture	$	362.6		$	539.1		$	1,106.9		$	1,397.0
Television Production	216.5			266.2			648.1			738.7
Media Networks	366.8			353.5			1,099.0			1,057.8
Intersegment eliminations	(12.7		)	(16.1		)	(87.1		)	(104.7		)
	$	933.2		$	1,142.7		$	2,766.9		$	3,088.8
Intersegment revenues
Motion Picture	$	3.2		$	2.3		$	7.6		$	8.4
Television Production	9.5			13.2			79.4			95.4
Media Networks	—			0.6			0.1			0.9
	$	12.7		$	16.1		$	87.1		$	104.7
Gross contribution
Motion Picture	$	69.2		$	82.1		$	186.3		$	230.9
Television Production	32.6			36.4			79.4			117.8
Media Networks	157.2			147.8			418.7			390.0
Intersegment eliminations	(1.2		)	0.5			(3.4		)	(8.0		)
	$	257.8		$	266.8		$	681.0		$	730.7
Segment general and administration
Motion Picture	$	25.7		$	27.8		$	78.6		$	81.1
Television Production	11.4			8.6			32.9			28.3
Media Networks	23.1			25.4			73.3			75.5
	$	60.2		$	61.8		$	184.8		$	184.9
Segment profit
Motion Picture	$	43.5		$	54.3		$	107.7		$	149.8
Television Production	21.2			27.8			46.5			89.5
Media Networks	134.1			122.4			345.4			314.5
Intersegment eliminations	(1.2		)	0.5			(3.4		)	(8.0		)
	$	197.6		$	205.0		$	496.2		$	545.8

Segment profit is defined as gross contribution (segment revenues, less segment direct operating and distribution and marketing expense) less segment general and administration expenses. Segment direct operating expenses, distribution and marketing expenses and general and administrative expenses exclude share-based compensation, other than annual bonuses granted in stock, and include annual bonuses paid in cash. Segment profit excludes purchase accounting and related adjustments.

The reconciliation of total segment profit to the Company’s income (loss) before income taxes is as follows:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Company’s total segment profit	$	197.6		$	205.0		$	496.2		$	545.8
Corporate general and administrative expenses	(26.2		)	(27.4		)	(79.2		)	(78.1		)
Adjusted depreciation and amortization ⁽¹⁾	(10.1		)	(9.8		)	(30.4		)	(29.2		)
Restructuring and other ⁽²⁾	(16.5		)	(21.4		)	(42.1		)	(35.8		)
Adjusted share-based compensation expense ⁽³⁾	(11.1		)	(24.2		)	(41.3		)	(71.6		)
Purchase accounting and related adjustments ⁽⁴⁾	(46.9		)	(42.0		)	(139.2		)	(130.8		)
Operating income	86.8			80.2			164.0			200.3
Interest expense	(45.3		)	(46.3		)	(152.2		)	(147.3		)
Shareholder litigation settlements ⁽⁵⁾	—			—			(114.1		)	—
Interest and other income	2.9			2.2			9.0			7.7
Other expense	(1.8		)	—			(1.8		)	—
Loss on extinguishment of debt	—			(6.2		)	—			(24.2		)
Gain (loss) on investments	(6.2		)	(29.2		)	(43.2		)	171.8
Equity interests loss	(11.0		)	(13.8		)	(28.8		)	(34.8		)
Income (loss) before income taxes	$	25.4		$	(13.1	)	$	(167.1	)	$	173.5

___________________

(1)

Adjusted depreciation and amortization represents depreciation and amortization as presented on our unaudited condensed consolidated statements of operations less the depreciation and amortization related to the non-cash fair value adjustments to property and equipment and intangible assets acquired in recent acquisitions which are included in the purchase accounting and related adjustments line item above, as shown in the table below:



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Depreciation and amortization	$	41.0		$	39.7		$	122.1		$	119.0
Less: Amount included in purchase accounting and related adjustments	(30.9		)	(29.9		)	(91.7		)	(89.8		)
Adjusted depreciation and amortization	$	10.1		$	9.8		$	30.4		$	29.2


(2)	Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable (see Note 14 ).


(3)	The following table reconciles total share-based compensation expense to adjusted share-based compensation expense:



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
							(Amounts in millions)
Total share-based compensation expense	$	13.5		$	27.1		$	43.7		$	74.5
Less: Amount included in restructuring and other ⁽ⁱ⁾	(2.4		)	(2.9		)	(2.4		)	(2.9		)
Adjusted share-based compensation	$	11.1		$	24.2		$	41.3		$	71.6


(i)	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.

(4)

Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in recent acquisitions. These adjustments include 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 the earned distributions related to 3 Arts Entertainment, all of which are

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

accounted for as compensation and are included in general and administrative expense. The following sets forth the amounts included in each line item in the financial statements:



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
	(Amounts in millions)
Purchase accounting and related adjustments:
Direct operating	$	2.9	$	10.4	$	16.5	$	36.5
General and administrative expense	13.1		1.7		31.0		4.5
Depreciation and amortization	30.9		29.9		91.7		89.8
	$	46.9	$	42.0	$	139.2	$	130.8

(5)

Shareholder litigation settlements of $114.1 million in the nine months ended December 31, 2018 includes the following: (i) $54.8 million for the net expense recorded for the settlement of the Fiduciary Litigation (representing the settlement amount of $92.5 million , net of aggregate insurance reimbursement of $37.8 million and (ii) $59.3 million related to the Appraisal Litigation, representing the amount by which the settlement amount of approximately $964 million exceeds the previously accrued dissenting shareholders' liability including interest through the date agreed in the settlement. See Note 16 .

See Note 10 for revenues by media or product line as broken down by segment for the three and nine months ended December 31, 2018 and 2017 .

The following table reconciles segment general and administration expense to the Company's total consolidated general and administration expense:



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
	(Amounts in millions)
General and administration
Segment general and administrative expenses	$	60.2	$	61.8	$	184.8	$	184.9
Corporate general and administrative expenses	26.2		27.4		79.2		78.1
Share-based compensation expense included in general and administrative expense	10.5		23.3		40.2		69.9
Purchase accounting and related adjustments	13.1		1.7		31.0		4.5
	$	110.0	$	114.2	$	335.2	$	337.4

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reconciliation of total segment assets to the Company’s total consolidated assets is as follows:



	December 31, 2018		March 31, 2018
	(Amounts in millions)
Assets
Motion Picture	$	1,774.8	$	1,757.4
Television Production	1,476.5		1,400.5
Media Networks	4,902.5		5,166.5
Other unallocated assets ⁽¹⁾	426.5		643.2
	$	8,580.3	$	8,967.6

_____________________


(1)	Other unallocated assets primarily consist of cash, other assets and investments.

16. Contingencies

From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business. In addition, the matters discussed below under the captions Fiduciary Litigation and Appraisal Litigation have arisen in connection with the Starz merger.

The Company establishes an accrued liability for claims and legal proceedings when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.

Due to the inherent difficulty of predicting the outcome of claims and legal proceedings, the Company often cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, if any, related to each pending matter may be. Accordingly, at this time, the Company has determined a loss related to these matters in excess of accrued liabilities is reasonably possible, however a reasonable estimate of the possible loss or range of loss cannot be made at this time.

Fiduciary Litigation

Between July 19, 2016 and August 30, 2016, seven putative class action complaints were filed by purported Starz stockholders in the Court of Chancery of the State of Delaware (the "Fiduciary Litigation"). These actions were consolidated into In re Starz Stockholder Litigation , Consolidated C.A. No. 12584-VCG, and the plaintiffs in the consolidated action filed a verified consolidated class action complaint on August 16, 2016. On August 18, 2016, plaintiffs filed a motion for expedited proceedings. On September 22, 2016, the court denied the motion. The defendants filed answers to the verified consolidated class action complaint on January 24, 2017. On May 16, 2018, the plaintiffs filed a verified amended consolidated class action complaint. The amended complaint named as defendants former members of the board of directors of Starz Susan Lyne, Andrew Heller, Greg Maffei, Christopher Albrecht, Daniel E. Sanchez, and Charles Y. Tanabe. The amended complaint also named as defendants Dr. Malone and Lions Gate. The amended complaint alleged, among other things, that the members of the Starz board of directors breached fiduciary duties owed to Starz and the holders of Starz Series A common stock in connection with the merger and related transactions; that Dr. Malone was a controlling stockholder of Starz who breached fiduciary duties owed to other Starz stockholders in connection with the merger and related transactions; and that Lions Gate aided and abetted such breaches of fiduciary duty. On June 18, 2018, the defendants (except Mr. Heller and Ms. Lyne) filed answers to the amended complaint. On July 3, 2018, Mr. Heller and Ms. Lyne filed a motion seeking summary judgment on the claims against them.

On August 9, 2016, a putative class action complaint was filed by a purported Starz stockholder in the District Court for the City and County of Denver, Colorado: Gross v. John C. Malone, et al. , 2016-CV-32873. The complaint named as defendants the members of the board of directors of Starz, Dr. Malone and Robert Bennett, as well as Lions Gate and an affiliated entity. The complaint alleges, among other things, that the members of the Starz board of directors breached fiduciary duties owed to Starz and the holders of Starz Series A common stock in connection with the merger and the transactions contemplated by the merger

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

agreement, and that Dr. Malone, Mr. Bennett, Lions Gate, and Merger Sub aided and abetted such breaches of fiduciary duty. On December 10, 2016, the court granted the defendants’ unopposed motion to stay the action pending final resolution of the consolidated Delaware action.

As disclosed in the Company's Current Report on Form 8-K filed on August 24, 2018, on August 22, 2018, the parties to the Fiduciary Litigation reached an agreement in principle providing for the settlement of the Fiduciary Litigation on the terms and conditions set forth in an executed term sheet. On October 9, 2018, the parties to the Litigation executed a stipulation of settlement, which was filed with the court (the "Stipulation"). The Stipulation provides for, among other things, the final dismissal of the Fiduciary Litigation in exchange for a settlement payment made in the amount of $92.5 million , of which $37.8 million was reimbursed by insurance. The Company is continuing to seek additional insurance reimbursement, including pursuant to a lawsuit submitted by the Company on November 7, 2018 against certain insurers. Accordingly, in the nine months ended December 31, 2018, the Company has recorded the net expense of $54.8 million in the "shareholder litigation settlements" line item in the unaudited condensed consolidated statement of operations related to these items. The Fiduciary Litigation settlement was approved by the Court of Chancery of the State of Delaware and the settlement amount and insurance reimbursement discussed above were paid during the quarter ended December 31, 2018. On November 5, 2018, an insurer that entered into an agreement and contributed $10 million to the Company's aggregate insurance reimbursement filed a lawsuit seeking declaratory judgment for reimbursement of its agreed upon payment. The Company believes the lawsuit to be without merit and intends to vigorously defend it.

Appraisal Litigation

Between December 8, 2016 and March 16, 2017, five verified petitions for appraisal (representing approximately 22.5 million shares of Starz Series A common stock) were filed by purported Starz stockholders (dissenting shareholders) in the Court of Chancery of the State of Delaware (the "Appraisal Litigation"). These actions were consolidated into In re Starz Appraisal , Consolidated C.A. No. 12968-VCG. On November 8, 2018, the parties to the Appraisal Litigation entered into a settlement agreement that provides for, among other things, the final dismissal of the Appraisal Litigation in exchange for a settlement payment made by the Company of approximately $964 million , which the Company paid during the three months ended December 31, 2018. During the nine months ended December 31, 2018, the Company recorded a shareholder litigation charge of $59.3 million in the "shareholder litigation settlements" line item in the unaudited condensed consolidated statement of operations related to the Appraisal Litigation, representing the amount by which the settlement amount exceeds the previously accrued dissenting shareholders' liability including interest through the date agreed in the settlement. The portion of the settlement payment representing the $797.3 million value of the original merger consideration attributable to the dissenting shareholders that was accrued at the time of acquisition is reflected within cash flows from financing activities in the statement of cash flows, with the remainder of the settlement payment reflected within cash flows from operating activities in the statement of cash flows. The Appraisal Litigation settlement was approved by the Court of Chancery of the State of Delaware and the claims in the Appraisal Litigation were dismissed on November 19, 2018.

17. Derivative Instruments and Hedging Activities

Forward Foreign Exchange Contracts

The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. Changes in the fair value of the foreign exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income (loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged.

As of December 31, 2018 , the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 15 months from December 31, 2018 ):

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



December 31, 2018
Foreign Currency	Foreign Currency Amount			US Dollar Amount		Weighted Average Exchange Rate Per $1 USD
	(Amounts in millions)			(Amounts in millions)
British Pound Sterling		£6.8	in exchange for		$9.6	£0.71
Canadian Dollar		C$21.8	in exchange for		$17.1	C$1.27
Australian Dollar		A$4.4	in exchange for		$3.5	A$1.28

Interest Rate Swaps

The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows. The Company primarily uses pay-fixed interest rate swaps to facilitate its interest rate risk management activities, which the Company designates as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur.

As of December 31, 2018 and March 31, 2018, the total notional amount of the Company’s pay-fixed interest rate swaps was $1.7 billion and nil , respectively.

The major terms of the Company's interest rate swap agreements as of December 31, 2018 are as follows (all related to the Company's LIBOR-based debt, see Note 6 ):



Effective Date	Notional Amount (in millions)	Fixed Rate Paid	Maturity Date
May 23, 2018	$1,000.0	2.915%	March 24, 2025
June 25, 2018	$200.0	2.723%	March 23, 2025
July 31, 2018	$300.0	2.885%	March 23, 2025
December 24, 2018	$50.0	2.744%	March 23, 2025
December 24, 2018	$100.0	2.808%	March 23, 2025
December 24, 2018	$50.0	2.728%	March 23, 2025

The following table presents the effect of the Company's derivatives on the accompanying consolidated statements of operations and comprehensive income (loss) for the three and nine months ended December 31, 2018 and 2017:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts
Gain (loss) recognized in accumulated other comprehensive income (loss)	$	0.8		$	(0.3	)	$	1.2		$	(0.5	)
Loss reclassified from accumulated other comprehensive income (loss) into direct operating expense	$	(0.4	)	$	—		$	(0.2	)	$	—

Interest rate swap agreements
Loss recognized in accumulated other comprehensive income (loss)	$	(40.5	)	$	—		$	(35.1	)	$	—
Loss reclassified from accumulated other comprehensive income (loss) into interest expense	(2.3		)	—			(6.1		)	—

Derivatives not designated as cash flow hedges:
Forward exchange contracts
Gain (loss) recognized in direct operating expense	$	0.1		$	(0.2	)	$	0.1		$	—

Total direct operating expense on consolidated statements of operations	$	502.0		$	650.1		$	1,495.2		$	1,726.6
Total interest expense on consolidated statements of operations ⁽¹⁾	$	42.7		$	31.9		$	116.9		$	105.7

________________

(1) Represents interest expense before interest on dissenting shareholders' liability.

The Company classifies its forward foreign exchange contracts and interest rate contracts within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (see Note 8 ). As of December 31, 2018 and March 31, 2018 , the Company had the following amounts recorded in the accompanying consolidated balance sheets related to the Company's use of derivatives:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	December 31, 2018
	Other Current Assets		Accounts Payable and Accrued Liabilities		Other Non-Current Liabilities
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts	$	2.3	$	0.9	$	—
Interest rate swap agreements	—		—		35.1
Fair value of derivatives	$	2.3	$	0.9	$	35.1



	March 31, 2018
	Other Current Assets			Accounts Payable and Accrued Liabilities
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts	$	0.3		$	0.6
Fair value of derivatives	$	0.3	⁽¹⁾	$	0.6	⁽¹⁾

_____________


(1)	Includes an immaterial amount of forward foreign exchange contracts not designated as hedging instruments as of March 31, 2018.

As of December 31, 2018 , based on the current release schedule, the Company estimates approximately $0.4 million of losses associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive loss to be reclassified into earnings during the one-year period ending December 31, 2019.

As of December 31, 2018 , the Company estimates approximately $4.0 million of losses recorded in accumulated other comprehensive loss associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending December 31, 2019.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

18. Additional Financial Information

The following tables present supplemental information related to the unaudited condensed consolidated financial statements.

Other Assets

The composition of the Company’s other assets is as follows as of December 31, 2018 and March 31, 2018:



	December 31, 2018		March 31, 2018
	(Amounts in millions)
Other current assets
Prepaid expenses and other	$	121.6	$	34.1
Product inventory	19.4		20.3
Tax credits receivable	86.7		141.4
	$	227.7	$	195.8
Other non-current assets
Prepaid expenses and other	$	67.9	$	23.8
Accounts receivable	228.7		325.2
Tax credits receivable	157.0		109.6
	$	453.6	$	458.6

Accounts Receivable Monetization

The Company has entered into agreements to monetize certain of its trade accounts receivable directly with third-party purchasers. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers. Upon transfer of the receivables, the Company receives cash proceeds from the third-party purchaser, and the Company continues to service the receivables for the purchasers. The Company accounts for the transfers of these receivables as a sale, and classifies the proceeds as cash flows from operating activities in the statement of cash flows. During the three and nine months ended December 31, 2018, the Company monetized trade accounts receivable with a carrying value of $132.9 million with third-party purchasers, which were derecognized from the Company's unaudited condensed consolidated balance sheet, in exchange for net cash proceeds of $131.1 million . The amount of proceeds received is based on the present value of the timing of the payment of the underlying trade accounts receivable transferred discounted at an average rate which is lower than the Company’s average borrowing rate under its Revolving Credit Facility. The Company recorded a loss of $1.8 million , which is included in the "other expense" line item on the unaudited condensed consolidated statement of operations. The Company receives fees for servicing the accounts receivable for the purchasers, which represent the fair value of the services and were immaterial for the three and nine months ended December 31, 2018. At December 31, 2018, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheets, but which the Company continues to service, was $125.9 million .

Accumulated Other Comprehensive Loss

The following table summarizes the changes in the components of accumulated other comprehensive loss, net of tax:



	Foreign currency translation adjustments			Net unrealized gain (loss) on available-for-sale securities			Net unrealized gain (loss) on cash flow hedges			Total
	(Amounts in millions)
March 31, 2018	$	(12.4	)	$	2.6		$	0.1		$	(9.7	)
Cumulative effect of accounting changes	—			(2.6		)	—			(2.6		)
Other comprehensive loss	(7.2		)	—			(24.9		)	(32.1		)
December 31, 2018	$	(19.6	)	$	—		$	(24.8	)	$	(44.4	)

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash, Cash Equivalents and Restricted Cash

There was no restricted cash in the unaudited condensed consolidated balance sheets as of December 31, 2018 or March 31, 2018.

Supplemental Cash Flow Information

The supplemental schedule of non-cash investing activities is presented below:



	Nine Months Ended December 31,
	2018		2017
	(Amounts in millions)
Non-cash investing activities:
Common shares related to business acquisitions (see Note 2)	$	83.7	$	—

There were no significant non-cash financing activities for the nine months ended December 31, 2018 and 2017.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19. Subsequent Events

On February 4, 2019 the Company closed a private offering of $550.0 million of 6.375% Senior Notes. The 6.375% Senior Notes bear interest at a rate of 6.375% per annum and mature on February 1, 2024. The Company expects to use the proceeds of the 6.375% Senior Notes to pay down outstanding amounts under its Revolving Credit Facility and for working capital purposes.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

We classify our operations through three reporting segments: Motion Picture, Television Production, and Media Networks (see further discussion below).

Segment Reorganization

During the quarter ended June 30, 2018, we reorganized our operational reporting of the Television Production segment to include the production and licensing to Starz Networks of Starz original series (previously produced by and included in the Media Networks segment) and the ancillary market distribution of Starz original productions and licensed product (also previously included in the Media Networks segment). This reorganization aligns the segment presentation of the Starz original product to be consistent with our other television productions included in the Television Production segment. This alignment of operational reporting and business operations will allow our chief operating decision maker to review all of the Company's television production related activity in a consistent manner, and as part of one segment (i.e., the Television Production segment). The changes resulting from the segment reorganization are as follows: (i) the Television Production segment includes licensing revenues from the licensing of Starz original series productions to Starz Networks which are eliminated in consolidation as intersegment transactions; and (ii) the Television Production segment now includes the associated ancillary market distribution of Starz original productions and licensed product that were previously included in Content and Other within the Media Networks segment. See Note 15 to our unaudited condensed consolidated financial statements for our segment information disclosure.

Revenues

Our revenues are derived from the Motion Picture, Television Production and Media Networks segments, as described below. Our revenues are derived from the U.S., Canada, the United Kingdom and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2018 and 2017.

Motion Picture

Our Motion Picture segment includes revenues derived from the following:

•

Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (distributed by us directly in the U.S. and through a sub-distributor in Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we receive a percentage of the box office results.

•

Home Entertainment. Home entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) on packaged media and through digital media platforms (pay-per-view and video-on-demand platforms, electronic sell through, and digital rental). In addition, we have revenue sharing arrangements with certain digital media platforms

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which generally provide that, in exchange for a nominal or no upfront sales price, we share in the rental or sales revenues generated by the platform on a title-by-title basis.


•	Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the linear pay, basic cable and free television markets.


•	International. International revenues are derived from (1) licensing of our productions, acquired films, our catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; and (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.

•

Other. Other revenues are derived from, among others, the licensing of our film and television content to other ancillary markets, our interactive ventures and games division, our global franchise management and strategic partnerships division (which includes location-based entertainment), and the sales and licensing of music from the theatrical exhibition of our films and the television broadcast of our productions.

Television Production

As described under the Segment Reorganization section above, as of April 1, 2018, Television Production now includes the licensing of Starz original series productions to Starz Networks and the ancillary market distribution of Starz original productions and licensed product.

Our Television Production segment includes revenues derived from the following.

•

Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television markets, syndication) of scripted and unscripted series, television movies, mini-series and non-fiction programming. Television revenues include fixed fee arrangements as well as arrangements in which the Company earns advertising revenue from the exploitation of certain content on television networks. Television revenues also include revenue from licenses to subscription-video-on-demand ("SVOD") platforms in which the initial license of a television series is to an SVOD platform.


•	International. International revenues are derived from the licensing and syndication to international markets of scripted and unscripted series, television movies, mini-series and non-fiction programming.


•	Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series on packaged media and through digital media platforms.


•	Other. Other revenues are derived from, among others, the licensing of our television programs to other ancillary markets, the sales and licensing of music from the television broadcasts of our productions, and from commissions due to 3 Arts Entertainment related to talent management.

Media Networks

Our Media Networks segment includes revenues derived from the following:

•

Starz Networks. Starz Networks’ revenues are derived from the distribution of our STARZ branded premium subscription video services pursuant to affiliation agreements with U.S. multichannel video programming distributors (“MVPDs”), including cable operators, satellite television providers and telecommunications companies, and over-the-top ("OTT") (collectively, “Distributors”), and on a direct-to-consumer basis. Starz Networks' revenues also include international revenues from the OTT distribution of the Company's STARZ branded premium subscription video services.


•	Streaming Services. Streaming services revenues are derived from the Lionsgate legacy start-up direct to consumer streaming services on SVOD platforms.

Expenses

Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and administration expenses.

Direct operating expenses include amortization of film and television production or acquisition costs, amortization of programming production or acquisition costs and programming related salaries, participation and residual expenses, provision for doubtful accounts, and foreign exchange gains and losses.

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Participation costs represent contingent consideration payable based on the performance of the film or television program to parties associated with the film or television program, including producers, writers, directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild - American Federation of Television and Radio Artists, Directors Guild of America, and Writers Guild of America, based on the performance of the film or television program in certain ancillary markets or based on the individual’s (i.e., actor, director, writer) salary level in the television market.

Distribution and marketing expenses primarily include the costs of theatrical prints and advertising (“P&A”) and of physical discs (DVD’s, Blu-Ray, 4K Ultra HD) duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical exhibitors and the advertising and marketing cost associated with the theatrical release of the picture. Physical discs duplication represents the cost of the DVD/Blu-ray/4K Ultra HD product and the manufacturing costs associated with creating the physical products. Physical discs marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising. Marketing costs for Media Networks includes advertising, consumer marketing, distributor marketing support and other marketing costs. In addition, distribution and marketing costs includes our Media Networks segment operating costs for the direct-to-consumer service, transponder expenses and maintenance and repairs.

General and administration expenses include salaries and other overhead.

CRITICAL ACCOUNTING POLICIES

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. The application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. As described more fully below, these estimates bear the risk of change due to the inherent uncertainty attached to the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. For example, accounting for films and television programs requires us to estimate future revenue and expense amounts which, due to the inherent uncertainties involved in making such estimates, are likely to differ to some extent from actual results. To the extent that there are material differences between these estimates and actual results, 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. 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 24, 2018, as updated by the Current Report on Form 8-K filed with the SEC on October 15, 2018.

Accounting for Films and Television Programs and Program Rights. We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in films and television programs. These costs for an individual film or television program are amortized and participation and residual costs are accrued to direct operating expenses in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of such film or television program. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. 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. For previously released film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed twenty years from the date of acquisition.

Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful or less successful than anticipated. 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. Management estimates the ultimate revenue based on experience with similar titles or title genre, the general public appeal of the cast, 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.

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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. These write-downs are included in amortization expense within direct operating expenses in our consolidated statements of operations. Investment in films and television programs is stated at the lower of amortized cost or estimated fair value. The valuation of investment in films and television programs is reviewed on a title-by-title basis, when an event or change in circumstances indicates that the fair value of a film or television program is less than its unamortized cost. In determining the fair value of our films and television programs, we employ a discounted cash flows ("DCF") methodology with assumptions for cash flows. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. The fair value of any film costs associated with a film or television program that we plan to abandon is zero. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement (as defined in Note 8 to our unaudited condensed consolidated financial statements). Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film or television program. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in our future revenue estimates.

Program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on a title-by-title or episode-by-episode basis over the anticipated number of exhibitions or license period. We estimate the number of exhibitions based on the number of exhibitions allowed in the agreement and the expected usage of the content. Certain other program rights are amortized to expense on a straight-line basis over the respective lives of the agreements. Programming rights may include rights to more than one exploitation window under its 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. 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.

The cost of the Media Networks' segments produced original content generally represents the license fees charged from the Television Production segment which are eliminated in consolidation. The amount associated with the pay television market is reclassified to program rights when the program is aired and the portion attributable to the ancillary markets remains in investment in films and television programs. 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.) distributed by the Television Production segment based on the estimated relative fair values of these markets. Costs of programming on Starz Networks are amortized to expense over the anticipated number of exhibitions for each original series and the costs of production or ancillary rights in the Television Production segment are amortized to expense based on the proportion that current revenue from the original series bears to its ultimate revenue. Estimates of fair value for the pay television and ancillary markets involve uncertainty as well as estimates of ultimate revenue. All the costs of programming produced by the Television Production segment are included in investment in films and television programs and program rights, net and are classified as long term. Amounts included in program rights, other than internally produced programming, that are expected to be amortized within a year from the balance sheet date are classified as short-term.

Changes in management’s estimate of the anticipated exhibitions of films and original series on our networks could result in the earlier recognition of our programming costs than anticipated. Conversely, scheduled exhibitions 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.

Revenue Recognition. 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. Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services and, to a lesser extent, direct-to-consumer content streaming services.

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Our content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales or usage based royalties. Our fixed fee or minimum guarantee licensing arrangements in the television, digital media and international markets may, in some cases, include multiple titles, multiple license periods (windows) with a substantive period in between the windows, rights to exploitation in different media, or rights to exploitation in multiple territories, which may be considered distinct performance obligations. When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or territory) are recognized when the content has been delivered, and the window for the exploitation right in that territory has begun, which is the point in time at which the customer is able to begin to use and benefit from the content.

Sales or usage based royalties represent amounts due to us based on the “sale” or “usage” of our content by the customer, and revenues are recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which some or all the sales or usage-based royalty has been allocated has been satisfied (or partially satisfied). Generally, when we license completed content (with standalone functionality, such as a movie, or television show), our performance obligation will be satisfied prior to the sale or usage. When we license intellectual property that does not have stand-alone functionality (e.g., brands, themes, logos, etc.), our performance obligation is generally satisfied in the same period as the sale or usage. The actual amounts due to us under these arrangements are generally not reported to us until after the close of the reporting period. We record revenue under these arrangements for the amounts due and not yet reported to us based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. Such estimates are based on information from our customers, historical experience with similar titles in that market or territory, the performance of the title in other markets and/or data available data in the industry. While we believe these estimates are reasonable estimates of the amounts due under these arrangements, such estimated amounts could differ from the actual amounts to be subsequently reported by the customer, which could be higher or lower than our estimates, and could result in an adjustment to revenues in future periods.

Revenue from the theatrical release of feature films are treated as sales or usage-based royalties and recognized starting at the exhibition date and based on our participation in box office receipts of the theatrical exhibitor .

Digital media revenue sharing arrangements are recognized as sales or usage based royalties.

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).

Revenue from commissions are recognized as such services are provided.

Media Networks revenues may be based on a fixed fee, subject to nominal annual escalations, or a variable fee (i.e., a fee based on number of subscribers who receive our networks or other factors). Media Networks programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor. The variable distribution fee arrangements represent sales or usage based royalties and are recognized over the period of such sales or usage by the Company's distributor, which is the same period that the content is provided to the distributor. Payments to distributors for marketing support costs for which Starz receives a direct benefit are recorded as distribution and marketing costs.

Sales Returns Allowance. Revenues are recorded net of estimated returns and other allowances. 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. 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. We believe that our estimates have been materially accurate in the past; however, due to the judgment involved in establishing reserves, we may have adjustments to our historical estimates in the future. Our estimate of future returns affects reported revenue and operating income. 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. 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. 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 $1.2 million and $3.3 million on our total revenue in the three and nine months ended December 31, 2018 , respectively (2017 - $1.6 million and $4.7 million, respectively).

Provisions for Accounts Receivable. We estimate provisions for accounts receivable based on historical experience and relevant facts and information regarding the collectability of the accounts receivable. In performing this evaluation, significant judgments and estimates are involved, including an analysis of specific risks on a customer-by-customer basis for our larger customers and an analysis of the length of time receivables have been past due. The financial condition of a given customer and

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its ability to pay may change over time or could be better or worse than anticipated and could result in an increase or decrease to our allowance for doubtful accounts, which is recorded in direct operating expenses.

Income Taxes. We are subject to federal and state income taxes in the U.S., and in several foreign jurisdictions. We record deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves in 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; otherwise a valuation allowance is applied. In order to realize the benefit of our deferred tax assets, we will need to generate sufficient taxable income in the future in each of the jurisdictions which have these deferred tax assets. However, the assessment as to whether there will be sufficient taxable income in a jurisdiction to realize our net deferred tax assets in that jurisdiction is an estimate which could change in the future depending primarily upon the actual performance of our Company. We will be required to continually evaluate the more likely than not assessment that our net deferred tax assets will be realized, and if operating results deteriorate in a particular jurisdiction, we may need to record a valuation allowance for all or a portion of our deferred tax assets through a charge to our income tax provision.

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. 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 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. 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.

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 quarters ended December 31, 2018 and 2017, we calculate the income tax benefit (provision) using the cut-off method.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was signed into law, making significant changes to the taxation of U.S. business entities. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, imposed a one-time transition tax in connection with the move from a worldwide tax system to a territorial tax system, provided for accelerated deductions for certain U.S. film production costs, imposed limitations on certain tax deductions such as executive compensation in future periods, and included numerous other provisions. We previously reported provisional amounts reflecting our reasonable estimates of the impact of the Tax Act. The estimated impact of the Tax Act was based on a preliminary review of the new law, subject to revision based upon further analysis and interpretation of the Tax Act. During the quarter ended December 31, 2018, we completed our analysis and our accounting for the Tax Act, and there were no material adjustments to our provisional estimates.

Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the overall level of pre-tax income, mix of our pre-tax income generated across the various jurisdictions in which we operate, changes in tax laws and regulations in those jurisdictions, further interpretation and legislative guidance regarding the new Tax Act, changes in valuation allowances on our deferred tax assets, tax planning strategies available to us and other discrete items.

Goodwill. Goodwill is 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 is less than its carrying value. We perform our annual impairment test as of January 1 in each fiscal year. We performed our last annual impairment test on our goodwill as of January 1, 2018 by comparing the fair value of each reporting unit to its carrying amount to determine if there was a potential goodwill impairment. Based on our qualitative assessments, including but not limited to, the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, industry and market conditions, cash flows, and changes in our share price, we concluded that it was more likely than not that the fair value of our reporting units was greater than their carrying value.

Consolidation and Other Investments. 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. 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. 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. 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

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the investees' securities that are identical or similar to our investments in the investee. The unrealized gains and losses and the adjustments related to the observable price changes are recognized in net income (loss).

Business Combinations. We account for our business combinations under the acquisition method of accounting. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. 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. 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.

Recent Accounting Pronouncements

See Note 1 to the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2018 Compared to Three Months Ended December 31, 2017

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the three months ended December 31, 2018 and 2017 . As previously described in the Overview section, as of April 1, 2018 the Television Production segment now includes the licensing of Starz original series productions to Starz Networks and the ancillary market distribution of Starz original productions and licensed product (previously included in the Media Networks segment). As a result, the Company has presented prior period segment data in a manner that conforms to the current period presentation.

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	Three Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Revenues
Motion Picture	$	362.6		$	539.1		$	(176.5	)	(32.7	)%
Television Production	216.5			266.2			(49.7		)	(18.7	)%
Media Networks	366.8			353.5			13.3			3.8	%
Intersegment eliminations	(12.7		)	(16.1		)	3.4			(21.1	)%
Total revenues	933.2			1,142.7			(209.5		)	(18.3	)%
Expenses:
Direct operating	502.0			650.1			(148.1		)	(22.8	)%
Distribution and marketing	176.9			237.1			(60.2		)	(25.4	)%
General and administration	110.0			114.2			(4.2		)	(3.7	)%
Depreciation and amortization	41.0			39.7			1.3			3.3	%
Restructuring and other	16.5			21.4			(4.9		)	(22.9	)%
Total expenses	846.4			1,062.5			(216.1		)	(20.3	)%
Operating income	86.8			80.2			6.6			8.2	%
Interest expense	(45.3		)	(46.3		)	1.0			(2.2	)%
Interest and other income	2.9			2.2			0.7			31.8	%
Other expense	(1.8		)	—			(1.8		)	n/a
Loss on extinguishment of debt	—			(6.2		)	6.2			(100.0	)%
Loss on investments	(6.2		)	(29.2		)	23.0			(78.8	)%
Equity interests loss	(11.0		)	(13.8		)	2.8			(20.3	)%
Income (loss) before income taxes	25.4			(13.1		)	38.5			(293.9	)%
Income tax (provision) benefit	(5.3		)	204.2			(209.5		)	(102.6	)%
Net income	20.1			191.1			(171.0		)	(89.5	)%
Less: Net loss attributable to noncontrolling interest	2.8			1.9			0.9			47.4	%
Net income attributable to Lions Gate Entertainment Corp. shareholders	$	22.9		$	193.0		$	(170.1	)	(88.1	)%

_____________________

nm - Percentage not meaningful

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Revenues. Consolidated revenues decreased in the three months ended December 31, 2018 , due to a decrease in Motion Picture revenues, and to a lesser extent, a decrease in Television Production revenues, partially offset by increased Media Networks revenues. The decrease in Motion Picture revenue was primarily due to lower theatrical revenue driven by fewer theatrical releases in the quarter ended December 31, 2018 as compared to the three months ended December 31, 2017, and the successful box office performance of Wonder in the prior year's quarter. The decrease in Motion Picture revenue was also attributable to lower home entertainment, international and television revenue. The decrease in Television Production revenue was primarily due to lower domestic television revenue, and to a lesser extent, lower international and home entertainment revenue, offset partially by increased other revenue. The increase in Media Networks revenue was primarily driven by higher average subscriptions and OTT revenue growth. See further discussion in the Segment Results of Operations section below.

Direct Operating Expenses. Direct operating expenses by segment were as follows for the three months ended December 31, 2018 and 2017 :



	Three Months Ended
	December 31,
	2018					2017					Increase (Decrease)
	Amount			% of Segment Revenues		Amount			% of Segment Revenues		Amount			Percent
	(Amounts in millions)
Direct operating expenses
Motion Picture	$	195.7		54.0	%	$	292.0		54.2	%	$	(96.3	)	(33.0	)%
Television Production	174.4			80.6		219.0			82.3		(44.6		)	(20.4	)%
Media Networks	140.1			38.2		144.7			40.9		(4.6		)	(3.2	)%
Other	3.3			nm		11.0			nm		(7.7		)	(70.0	)%
Intersegment eliminations	(11.5		)	nm		(16.6		)	nm		5.1			(30.7	)%
	$	502.0		53.8	%	$	650.1		56.9	%	$	(148.1	)	(22.8	)%

_______________________

nm - Percentage not meaningful.

Direct operating expenses decreased in the three months ended December 31, 2018 , primarily due to decreased Motion Picture and Television Production revenue. See further discussion in the Segment Results of Operations section below.

Other primarily consists of 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. Distribution and marketing expenses by segment were as follows for the three months ended December 31, 2018 and 2017 :



	Three Months Ended
	December 31,				Increase (Decrease)
	2018		2017		Amount			Percent
	(Amounts in millions)
Distribution and marketing expenses
Motion Picture	$	97.7	$	165.0	$	(67.3	)	(40.8	)%
Television Production	9.5		10.8		(1.3		)	(12.0	)%
Media Networks	69.5		61.0		8.5			13.9	%
Other	0.2		0.3		(0.1		)	(33.3	)%
	$	176.9	$	237.1	$	(60.2	)	(25.4	)%

U.S. theatrical P&A expense included in Motion Picture distribution and marketing expense	$	48.6	$	97.8	$	(49.2	)	(50.3	)%

_______________________

nm - Percentage not meaningful.

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Distribution and marketing expenses decreased in the three months ended December 31, 2018 , due primarily to decreased Motion Picture theatrical distribution and marketing expense driven by fewer Feature Films released and, to a lesser extent, lower home entertainment and international distribution and marketing expense, offset by a slight increase in Media Networks distribution and marketing expense. See further discussion in the Segment Results of Operations section below.

General and Administrative Expenses. General and administrative expenses by segment were as follows for the three months ended December 31, 2018 and 2017 :



	Three Months Ended
	December 31,						Increase (Decrease)
	2018		% of Revenues	2017		% of Revenues	Amount			Percent
	(Amounts in millions)
General and administrative expenses
Motion Picture	$	25.7		$	27.8		$	(2.1	)	(7.6	)%
Television Production	11.4			8.6			2.8			32.6	%
Media Networks	23.1			25.4			(2.3		)	(9.1	)%
Corporate	26.2			27.4			(1.2		)	(4.4	)%
	86.4		9.3%	89.2		7.8%	(2.8		)	(3.1	)%
Share-based compensation expense	10.5			23.3			(12.8		)	(54.9	)%
Purchase accounting and related adjustments	13.1			1.7			11.4			nm
Total general and administrative expenses	$	110.0	11.8%	$	114.2	10.0%	$	(4.2	)	(3.7	)%

_______________________

nm - Percentage not meaningful.

General and administrative expenses decreased in the three months ended December 31, 2018 , resulting primarily from lower share-based compensation expense partially offset by increased purchase accounting and related adjustments. See further discussion in the Segment Results of Operations section below.

Corporate general and administrative expenses decreased $1.2 million , or 4.4% , primarily due to a decrease in incentive compensation.

The decrease in share-based compensation expense included in general and administrative expense is primarily due to lower compensation expense associated with the replacement of Starz share-based payment awards and lower fair values associated with stock option and other equity awards in the three months ended December 31, 2018 , as compared to the three months ended December 31, 2017 . The following table reconciles this amount to total share-based compensation expense:



	Three Months Ended
	December 31,
	2018		2017
	(Amounts in millions)
Share-based compensation expense by expense category
Other general and administrative expense	$	10.5	$	23.3
Restructuring and other ⁽¹⁾	2.4		2.9
Direct operating expense	0.4		0.6
Distribution and marketing expense	0.2		0.3
Total share-based compensation expense	$	13.5	$	27.1

(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.

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financial statements and Note 11 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the SEC on May 24, 2018, as updated by the Current Report on Form 8-K filed with the SEC on October 15, 2018, for further information).

Depreciation and Amortization Expense. Depreciation and amortization of $41.0 million in the three months ended December 31, 2018 was comparable to $39.7 million in the three months ended December 31, 2017 .

Restructuring and Other. Restructuring and other decreased $4.9 million in the three months ended December 31, 2018 as compared to the three months ended December 31, 2017 , and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable. Restructuring and other costs were as follows for the three months ended December 31, 2018 and 2017 (see Note 14 to our unaudited condensed consolidated financial statements):



	Three Months Ended
	December 31,				Increase (Decrease)
	2018		2017		Amount			Percent
	(Amounts in millions)
Restructuring and other:
Severance ⁽¹⁾
Cash	$	13.3	$	9.1	$	4.2		46.2	%
Accelerated vesting on equity awards (see Note 11)	2.4		2.9		(0.5		)	(17.2	)%
Total severance costs	15.7		12.0		3.7			30.8	%
Transaction and related costs ⁽²⁾	0.8		1.0		(0.2		)	(20.0	)%
Development expense ⁽³⁾	—		8.4		(8.4		)	(100.0	)%
	$	16.5	$	21.4	$	(4.9	)	(22.9	)%

_______________________


(1)	Severance costs in the three months ended December 31, 2018 were primarily related to restructuring activities in connection with recent acquisitions, and other cost-saving initiatives.


(2)	Transaction and related costs in the three months ended December 31, 2018 and 2017 reflect transaction, integration and legal costs associated with certain strategic transactions and legal matters.


(3)	Development expense in the three months ended December 31, 2017 represents write-downs resulting from the restructuring of the Motion Picture business in connection with the acquisition of Good Universe and new management's decisions around the creative direction on certain development projects which were abandoned in the three months ended December 31, 2017.

Interest Expense. Interest expense of $45.3 million for the three months ended December 31, 2018 decreased $1.0 million , from $46.3 million in the three months ended December 31, 2017 . The following table sets forth the components of interest expense for the three months ended December 31, 2018 and 2017 :

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	Three Months Ended
	December 31,
	2018		2017
	(Amounts in millions)
Interest Expense
Cash Based:
Revolving credit facilities	$	5.3	$	0.7
Term loans	22.2		17.6
5.875% Senior Notes	7.7		7.7
Other ⁽¹⁾	4.5		2.3
	39.7		28.3
Amortization of debt discount and financing costs	3.0		3.6
	42.7		31.9

Interest on dissenting shareholders' liability ⁽²⁾	2.6		14.4
Total interest expense	$	45.3	$	46.3

_______________________


(1)	In the three months ended December 31, 2018, amounts include interest expense related to the Company's interest rate swap agreements (see Note 17 to our unaudited condensed consolidated financial statements).


(2)	Represents interest accrued in connection with the previously outstanding dissenting shareholders' liability associated with the Starz merger (see Note 16 to our unaudited condensed consolidated financial statements).

Other Expense. Other expense of $1.8 million for the three months ended December 31, 2018 represented the loss recorded related to our monetization of accounts receivable to third-party purchasers (see Note 18 to our unaudited condensed consolidated financial statements). There was no comparable charge in the three months ended December 31, 2017 .

Loss on Extinguishment of Debt. Loss on extinguishment of debt was $6.2 million in the three months ended December 31, 2017 , related to the write-off of deferred financing costs associated with the prepayment and repricing of the previous Term Loan B issued December 8, 2016, and issuance and voluntary repayments of the previous Term Loan B-1 facility. There was no comparable charge in the three months ended December 31, 2018 .

Loss on Investments. The following table sets forth the components of the loss on investments for the three months ended December 31, 2018 , (see Note 4 to our unaudited condensed consolidated financial statements):



	Three Months Ended
	December 31,
	2018			2017
	(Amounts in millions)
Impairments of investments ⁽¹⁾	$	(2.6	)	$	(29.2	)
Unrealized losses on equity securities held as of December 31, 2018 ⁽²⁾	(3.6		)	—
	$	(6.2	)	$	(29.2	)

______________________


(1)	Represents other-than-temporary impairments on our investments.


(2)	Represents the unrealized losses recorded for the change in fair value of our investment in available-for-sale equity securities measured at fair value.

Equity Interests Loss. Equity interests loss of $11.0 million in the three months ended December 31, 2018 primarily consisted of losses from Atom Tickets, Pop and Laugh Out Loud. This compared to equity interests loss of $13.8 million in the three months ended December 31, 2017 , which primarily consisted of losses from Laugh Out Loud, Playco and Atom Tickets.

Income Tax (Provision) Benefit. We had an income tax provision of $5.3 million in the three months ended December 31, 2018 , compared to an income tax benefit of $204.2 million in the three months ended December 31, 2017 . Our income tax (provision) benefit 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 and the tax deductions generated by our capital structure, which includes certain foreign affiliate dividends in our Canadian jurisdiction that can be received without being

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subject to tax under Canadian tax law. In addition, our income tax provision for the three months ended December 31, 2018 included certain minimum taxes imposed by the Tax Act (further discussed below).

On December 22, 2017, the Tax Act was signed into law, making significant changes to the taxation of U.S. business entities. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, imposed a one-time transition tax in connection with the move from a worldwide tax system to a territorial tax system, changed the ability to claim certain tax deductions, and included numerous other provisions. As we have a March 31 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal rate of approximately 31.5% for our fiscal year ended March 31, 2018, and 21% for subsequent fiscal years. Our U.S. tax provision consists primarily of deferred tax benefits calculated at the 21% tax rate.

In the three months ended December 31, 2017, we recorded provisional amounts reflecting reasonable estimates of the impact of the Tax Act, which included a $165.0 million income tax benefit related to the impact of the corporate income tax rate reduction on our net deferred tax liabilities. In addition, we made provisional estimates of other effects of the Tax Act, such as the tax effects of executive compensation, the one-time transition tax, net operating loss carryovers, foreign tax credits, and accelerated deductions for U.S. film costs. The estimated impact of the Tax Act was based on a preliminary review of the new law, subject to revision based upon further analysis and interpretation of the Tax Act. During the quarter ended December 31, 2018, we completed our analysis and our accounting for the Tax Act, and there were no material adjustments our provisional estimates.

Net Income Attributable to Lions Gate Entertainment Corp. Shareholders. Net income attributable to our shareholders for the three months ended December 31, 2018 was $22.9 million , or basic net income per common share of $0.11 on 214.2 million weighted average common shares outstanding and diluted net income per common share of $0.10 on 220.8 million weighted average common shares outstanding. This compares to net income attributable to our shareholders for the three months ended December 31, 2017 of $193.0 million , or basic net income per common share of $0.92 on 208.8 million weighted average common shares outstanding and diluted net income per common share of $0.87 on 221.6 million weighted average common shares outstanding.

Segment Results of Operations

The segment results of operations presented below do not include the elimination of intersegment transactions which are eliminated when presenting consolidated results, and exclude items separately identified in the restructuring and other line item in the consolidated statement of operations.

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Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended December 31, 2018 and 2017 :



	Three Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Motion Picture Segment:
Revenue	$	362.6		$	539.1		$	(176.5	)	(32.7	)%
Expenses:
Direct operating expense	195.7			292.0			(96.3		)	(33.0	)%
Distribution & marketing expense	97.7			165.0			(67.3		)	(40.8	)%
Gross contribution	69.2			82.1			(12.9		)	(15.7	)%
General and administrative expenses	25.7			27.8			(2.1		)	(7.6	)%
Segment profit	$	43.5		$	54.3		$	(10.8	)	(19.9	)%

U.S. theatrical P&A expense included in distribution and marketing expense	$	48.6		$	97.8		$	(49.2	)	(50.3	)%

Direct operating expense as a percentage of revenue	54.0		%	54.2		%

Gross contribution as a percentage of revenue	19.1		%	15.2		%

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Revenue. The table below sets forth Motion Picture revenue by media and product category for the three months ended December 31, 2018 and 2017 :



	Three Months Ended December 31,
	2018						2017						Total Increase (Decrease)
	Feature Film ⁽¹⁾		Other Than Feature Film ⁽²⁾		Total		Feature Film ⁽¹⁾		Other Than Feature Film ⁽²⁾⁽³⁾		Total		Total Increase (Decrease)
					(Amounts in millions)
Motion Picture Revenue
Theatrical	$	27.6	$	0.9	$	28.5	$	108.1	$	9.3	$	117.4	$	(88.9	)
Home Entertainment
Digital Media	41.0		40.7		81.7		41.3		43.7		85.0		(3.3		)
Packaged Media	37.9		30.1		68.0		45.4		58.6		104.0		(36.0		)
Total Home Entertainment	78.9		70.8		149.7		86.7		102.3		189.0		(39.3		)
Television	45.8		29.0		74.8		71.4		19.1		90.5		(15.7		)
International	89.3		15.4		104.7		96.8		37.6		134.4		(29.7		)
Other	3.4		1.5		4.9		6.4		1.4		7.8		(2.9		)
	$	245.0	$	117.6	$	362.6	$	369.4	$	169.7	$	539.1	$	(176.5	)

____________________


(1)	Feature Film: Includes 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.

(2)

Other Than Feature Film: Includes Managed Brands, which represents 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 investee, Roadside Attractions. This category also includes certain specialty theatrical releases with our equity method investee, Pantelion Films, and other titles.


(3)	Certain amounts in the prior period have been reclassified in order to conform to the current period presentation. In particular, in the three months ended December 31, 2017, within the Motion Picture segment $16.9 million was reclassified from Other revenue to Theatrical revenue ( $8.1 million ), Home Entertainment Packaged Media revenue ( $3.7 million ), and Television revenue ( $5.1 million ).

Theatrical revenue decreased $88.9 million , or 75.7% , in the three months ended December 31, 2018 as compared to the three months ended December 31, 2017 , driven by fewer Feature Films released in the current quarter as compared to the prior year's quarter, and the prior year's quarter included significant theatrical revenue from the successful performance of Wonder .

Home entertainment revenue decreased $39.3 million , or 20.8% , in the three months ended December 31, 2018 , as compared to the three months ended December 31, 2017 , driven by a decrease of $31.5 million from Other Than Feature Film, and a decrease of $7.8 million from Feature Films. The decrease in home entertainment revenue from Other Than Feature Film was primarily due to lower packaged media revenue from the Starz third party distribution business, and the prior year's quarter included packaged media revenues from a library distribution agreement. The decrease in home entertainment revenue from Feature Films was due to the performance of the titles released on packaged media from our Fiscal 2019 Theatrical Slate in the current quarter as compared to the performance of the titles released on packaged media from our Fiscal 2018 Theatrical Slate in the prior year's quarter, which included The Hitman's Bodyguard and American Assassin .

Television revenue decreased $15.7 million , or 17.3% , in the three months ended December 31, 2018 , as compared to the three months ended December 31, 2017 , primarily due to a decrease of $25.6 million of television revenue from our Feature Films in the current quarter as a result of lower revenue generated in the current quarter from our smaller Fiscal 2018 Theatrical Slate as compared to the revenue generated in the prior year's quarter from our Fiscal 2017 Theatrical Slate. This decrease was partially offset by an increase of $9.9 million of television revenue from Other Than Feature Film driven by revenue from I Can Only Imagine in the current quarter.

International revenue decreased $29.7 million , or 22.1% , in the three months ended December 31, 2018 , as compared to the three months ended December 31, 2017 primarily due to lower revenue from Other Than Feature Film as a result of significant revenues in the prior year's quarter from a library distribution agreement and UK third-party product . The decrease was also, to a lesser extent, driven by lower revenue from Feature Films due to our smaller Fiscal 2018 Theatrical Slate as compared to the revenue generated in the the prior year's quarter from our Fiscal 2017 Theatrical Slate, offset partially by

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increased revenue in the current quarter from Sicario: Day of the Soldado .

Direct Operating Expense. The decrease in direct operating expenses is due to the decrease in Motion Picture revenues. The slight 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 quarter as compared to the prior year's quarter, and a decrease in investment in film write-downs. Investment in film write-downs were approximately $10.5 million in the three months ended December 31, 2018 , as compared to approximately $24.2 million in the three months ended December 31, 2017 .

Distribution and Marketing Expense. The decrease in distribution and marketing expense in the three months ended December 31, 2018 is primarily due to lower theatrical distribution and marketing costs driven by fewer Feature Films released in the current quarter as compared to the prior year's quarter. The decrease was, to a lesser extent, due to lower home entertainment and international distribution and marketing expenses associated with lower home entertainment and international revenue. In the three months ended December 31, 2018 , approximately $5.9 million of P&A was incurred in advance for films to be released in subsequent quarters, such as Cold Pursuit , Five Feet Apart and Hellboy. In the three months ended December 31, 2017 , approximately $12.4 million of P&A was incurred in advance for films to be released in subsequent quarters, such as The Commuter and Early Man.

Gross Contribution. Gross contribution of the Motion Picture segment for the three months ended December 31, 2018 decreased as compared to the three months ended December 31, 2017 , due to lower Motion Picture revenue, offset partially by lower distribution and marketing expense as a percentage of Motion Picture revenue.

General and Administrative Expense. General and administrative expenses of the Motion Picture segment decreased $2.1 million , or 7.6% , primarily due to decreases in salaries and related expenses and incentive compensation.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the three months ended December 31, 2018 and 2017 :



	Three Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Television Production Segment:
Revenue	$	216.5		$	266.2		$	(49.7	)	(18.7	)%
Expenses:
Direct operating expense	174.4			219.0			(44.6		)	(20.4	)%
Distribution & marketing expense	9.5			10.8			(1.3		)	(12.0	)%
Gross contribution	32.6			36.4			(3.8		)	(10.4	)%
General and administrative expenses	11.4			8.6			2.8			32.6	%
Segment profit	$	21.2		$	27.8		$	(6.6	)	(23.7	)%

Direct operating expense as a percentage of revenue	80.6		%	82.3		%

Gross contribution as a percentage of revenue	15.1		%	13.7		%

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Revenue. The table below sets forth Television Production revenue and changes in revenue by media for the three months ended December 31, 2018 and 2017 :



	Three Months Ended
	December 31,				Increase (Decrease)
	2018		2017		Amount			Percent
	(Amounts in millions)
Television Production Revenue
Television	$	151.5	$	184.6	$	(33.1	)	(17.9	)%
International	35.9		51.1		(15.2		)	(29.7	)%
Home Entertainment
Digital	10.9		25.7		(14.8		)	(57.6	)%
Packaged Media	2.5		4.1		(1.6		)	(39.0	)%
Total Home Entertainment	13.4		29.8		(16.4		)	(55.0	)%
Other	15.7		0.7		15.0			nm
	$	216.5	$	266.2	$	(49.7	)	(18.7	)%

________________________

nm - Percentage not meaningful.

The primary component of Television Production revenue is television revenue. Television revenue decreased in the three months ended December 31, 2018 as compared to the three months ended December 31, 2017 , due to fewer television episodes delivered, and slightly lower revenue from the licensing of Starz original series in the current quarter as compared to the prior year's quarter.

International revenue decreased in the three months ended December 31, 2018 as compared to the three months ended December 31, 2017 , primarily due to lower revenue from the licensing of Starz original series in the current quarter as compared to the prior year's quarter, which included revenue from The Girlfriend Experience Season 2 and Ash Vs. Evil Dead Seasons 1 & 2.

Home entertainment revenue decreased in the three months ended December 31, 2018 as compared to the three months ended December 31, 2017 driven by lower digital media revenue, and in particular, the prior year's quarter included significant digital media revenue from The Royals Season 3, and from the licensing of the Starz original series Ash Vs. Evil Dead .

Other revenue increased in the three months ended December 31, 2018 as compared to the three months ended December 31, 2017 due to revenue in the current quarter from the May 29, 2018 acquisition of 3 Arts Entertainment.

Direct Operating Expense. Direct operating expense of the Television Production segment in the three months ended December 31, 2018 decreased $44.6 million , or 20.4% , primarily driven by decreased revenue. The decrease in direct operating expenses as a percentage of television production revenue is primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter.

Gross Contribution. Gross contribution of the Television Production segment for the three months ended December 31, 2018 decreased as compared to the three months ended December 31, 2017 , primarily due to lower television production revenue.

General and Administrative Expense. General and administrative expenses of the Television Production segment increased $2.8 million , or 32.6% , primarily due to increases in salaries and related expenses. The three months ended December 31, 2018 includes general and administrative expenses of 3 Arts Entertainment, acquired on May 29, 2018.

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Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the three months ended December 31, 2018 and 2017 .



	Three Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Media Networks Segment:
Revenue	$	366.8		$	353.5		$	13.3		3.8	%
Expenses:
Direct operating expense	140.1			144.7			(4.6		)	(3.2	)%
Distribution & marketing expense	69.5			61.0			8.5			13.9	%
Gross contribution	157.2			147.8			9.4			6.4	%
General and administrative expenses	23.1			25.4			(2.3		)	(9.1	)%
Segment profit	$	134.1		$	122.4		$	11.7		9.6	%

Direct operating expense as a percentage of revenue	38.2		%	40.9		%

Gross contribution as a percentage of revenue	42.9		%	41.8		%

The following table sets forth the Media Networks segment revenue and segment profit by product line:



	Three Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount		Percent
	(Amounts in millions)
Segment Revenue:
Starz Networks	$	362.1		$	351.8		$	10.3	2.9	%
Streaming Services	4.7			1.7			3.0		176.5	%
	$	366.8		$	353.5		$	13.3	3.8	%
Segment Profit:
Starz Networks	$	135.5		$	134.3		$	1.2	0.9	%
Streaming Services	(1.4		)	(11.9		)	10.5		(88.2	)%
	$	134.1		$	122.4		$	11.7	9.6	%

Revenue. The table below sets forth, for the periods presented, domestic subscriptions to our STARZ network:



	December 31,	December 31,
	2018	2017
	(Amounts in millions)
Period End Subscriptions:
STARZ	25.1	24.0

The increase in Media Networks revenue was driven by higher Starz Networks' revenue of $10.3 million , due to an $8.0 million increase due to higher average subscriptions and a $2.3 million increase in effective rates primarily as a result of OTT revenue growth. During the three months ended December 31, 2018 , the original series Outlander Season 4 and Counterpart Season 2 premiered on STARZ as compared to The Girlfriend Experience Season 2 in the prior year's quarter.

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level of programing 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 shows and particularly new original series premiering on the network during the period. Programming cost amortization and advertising and marketing costs generally increase in periods where new original series are premiering on STARZ.

The decrease in Media Networks direct operating expense is primarily due to lower Streaming Services expenses, partially offset by a slight increase in Starz Networks' expenses.

T he increase in Media Networks' distribution and marketing expense is primarily due to higher advertising and marketing costs due to increased spend associated with our Starz Originals and the launch of STARZ with Amazon in the United Kingdom and Germany.

Gross Contribution. Gross contribution and gross contribution margin of the Media Networks segment for the three months ended December 31, 2018 and 2017 was primarily from Starz Networks, and increased compared to the prior year's quarter due to the increase in Starz Networks' revenue and lower Streaming Services direct operating expenses, partially offset by an increase in distribution and marketing expense.

General and Administrative Expense. General and administrative expenses of the Media Networks segment in the three months ended December 31, 2018 decreased slightly from the prior year's quarter, due to decreases at Starz Networks and Streaming Services primarily due to a decrease in payroll and related costs.

Nine Months Ended December 31, 2018 Compared to Nine Months Ended December 31, 2017

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the nine months ended December 31, 2018 and 2017 :

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	Nine Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Revenues
Motion Picture	$	1,106.9		$	1,397.0		$	(290.1	)	(20.8	)%
Television Production	648.1			738.7			(90.6		)	(12.3	)%
Media Networks	1,099.0			1,057.8			41.2			3.9	%
Intersegment eliminations	(87.1		)	(104.7		)	17.6			(16.8	)%
Total revenues	2,766.9			3,088.8			(321.9		)	(10.4	)%
Expenses:
Direct operating	1,495.2			1,726.6			(231.4		)	(13.4	)%
Distribution and marketing	608.3			669.7			(61.4		)	(9.2	)%
General and administration	335.2			337.4			(2.2		)	(0.7	)%
Depreciation and amortization	122.1			119.0			3.1			2.6	%
Restructuring and other	42.1			35.8			6.3			17.6	%
Total expenses	2,602.9			2,888.5			(285.6		)	(9.9	)%
Operating income	164.0			200.3			(36.3		)	(18.1	)%
Interest expense	(152.2		)	(147.3		)	(4.9		)	3.3	%
Shareholder litigation settlements	(114.1		)	—			(114.1		)	n/a
Interest and other income	9.0			7.7			1.3			16.9	%
Other expense	(1.8		)	—			(1.8		)	n/a
Loss on extinguishment of debt	—			(24.2		)	24.2			(100.0	)%
Gain (loss) on investments	(43.2		)	171.8			(215.0		)	(125.1	)%
Equity interests income (loss)	(28.8		)	(34.8		)	6.0			(17.2	)%
Income (loss) before income taxes	(167.1		)	173.5			(340.6		)	(196.3	)%
Income tax benefit	26.6			205.0			(178.4		)	(87.0	)%
Net income (loss)	(140.5		)	378.5			(519.0		)	(137.1	)%
Less: Net loss attributable to noncontrolling interest	11.5			3.8			7.7			202.6	%
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	(129.0	)	$	382.3		$	(511.3	)	(133.7	)%

_____________________

nm - Percentage not meaningful

Revenues. Consolidated revenues decreased in the nine months ended December 31, 2018 , due to a decrease in Motion Picture revenues, and to a lesser extent, Television Production revenues, partially offset by increased Media Networks revenues and lower intersegment eliminations principally related to lower intersegment revenues in the Television Production segment. The decrease in Motion Picture revenue was primarily due to fewer Feature Films released in the current period as compared to the prior year's period. The decrease in Television Production revenue was due to lower domestic television, home entertainment revenue, and international revenue, offset partially by increased other revenue. The increase in Media Networks revenue was primarily driven by OTT revenue growth. See further discussion in the Segment Results of Operations section below.

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Direct Operating Expenses. Direct operating expenses by segment were as follows for the nine months ended December 31, 2018 and 2017 :



	Nine Months Ended
	December 31,
	2018					2017					Increase (Decrease)
	Amount			% of Segment Revenues		Amount			% of Segment Revenues		Amount			Percent
	(Amounts in millions)
Direct operating expenses
Motion Picture	$	579.4		52.3	%	$	746.9		53.5	%	$	(167.5	)	(22.4	)%
Television Production	539.7			83.3		590.8			80.0		(51.1		)	(8.6	)%
Media Networks	442.5			40.3		448.1			42.4		(5.6		)	(1.2	)%
Other	17.3			nm		37.5			nm		(20.2		)	(53.9	)%
Intersegment eliminations	(83.7		)	nm		(96.7		)	nm		13.0			(13.4	)%
	$	1,495.2		54.0	%	$	1,726.6		55.9	%	$	(231.4	)	(13.4	)%

_______________________

nm - Percentage not meaningful.

Direct operating expenses decreased in the nine months ended December 31, 2018 , primarily due to decreased Motion Picture and Television Production revenue. See further discussion in the Segment Results of Operations section below.

Distribution and Marketing Expenses. Distribution and marketing expenses by segment were as follows for the nine months ended December 31, 2018 and 2017 :



	Nine Months Ended
	December 31,				Increase (Decrease)
	2018		2017		Amount			Percent
	(Amounts in millions)
Distribution and marketing expenses
Motion Picture	$	341.2	$	419.2	$	(78.0	)	(18.6	)%
Television Production	29.0		30.1		(1.1		)	(3.7	)%
Media Networks	237.8		219.7		18.1			8.2	%
Other	0.3		0.7		(0.4		)	(57.1	)%
	$	608.3	$	669.7	$	(61.4	)	(9.2	)%

U.S. theatrical P&A expense included in Motion Picture distribution and marketing expense	$	197.6	$	232.1	$	(34.5	)	(14.9	)%

_______________________

nm - Percentage not meaningful.

Distribution and Marketing expenses decreased in the nine months ended December 31, 2018 , due to decreased Motion Picture theatrical, and to a lesser extent, home entertainment and international distribution and marketing expenses, which were offset by increased Media Networks distribution and marketing expense. See further discussion in the Segment Results of Operations section below.

General and Administrative Expenses. General and administrative expenses by segment were as follows for the nine months ended December 31, 2018 and 2017 :

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	Nine Months Ended
	December 31,						Increase (Decrease)
	2018		% of Revenues	2017		% of Revenues	Amount			Percent
	(Amounts in millions)
General and administrative expenses
Motion Picture	$	78.6		$	81.1		$	(2.5	)	(3.1	)%
Television Production	32.9			28.3			4.6			16.3	%
Media Networks	73.3			75.5			(2.2		)	(2.9	)%
Corporate	79.2			78.1			1.1			1.4	%
	264.0		9.5%	263.0		8.5%	1.0			0.4	%
Share-based compensation expense	40.2			69.9			(29.7		)	(42.5	)%
Purchase accounting and related adjustments	31.0			4.5			26.5			nm
Total general and administrative expenses	$	335.2	12.1%	$	337.4	10.9%	$	(2.2	)	(0.7	)%

_______________________

nm - Percentage not meaningful.

General and administrative expenses decreased in the nine months ended December 31, 2018 , resulting from lower share-based compensation expense and decreases in Motion Picture and Media Networks general and administrative expenses, partially offset by increased purchase accounting and related adjustments and increased Corporate and Television Production general and administrative expenses. See further discussion in the Segment Results of Operations section below.

Corporate general and administrative expenses increased $1.1 million , or 1.4% , primarily due to increases in salaries and related expenses and rent and facilities costs, partially offset by a decrease in incentive compensation.

The decrease in share-based compensation expense included in general and administrative expense is primarily due to lower compensation expense associated with the replacement of Starz share-based payment awards and lower fair values associated with stock option and other equity awards in the nine months ended December 31, 2018 , as compared to the nine months ended December 31, 2017 . The following table reconciles this amount to total share-based compensation expense:



	Nine Months Ended
	December 31,
	2018		2017
	(Amounts in millions)
Share-based compensation expense by expense category
Other general and administrative expense	$	40.2	$	69.9
Restructuring and other ⁽¹⁾	2.4		2.9
Direct operating expense	0.8		1.0
Distribution and marketing expense	0.3		0.7
Total share-based compensation expense	$	43.7	$	74.5

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, and 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 (see Note 9 to our unaudited condensed consolidated financial statements and Note 11 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the SEC on May 24, 2018, as updated by the Current Report on Form 8-K filed with the SEC on October 15, 2018, for further information).

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Depreciation and Amortization Expense. Depreciation and amortization of $122.1 million for the nine months ended December 31, 2018 was comparable to $119.0 million in the nine months ended December 31, 2017 .

Restructuring and Other. Restructuring and other increased $6.3 million in the nine months ended December 31, 2018 as compared to the nine months ended December 31, 2017, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable. Restructuring and other costs were as follows for the nine months ended December 31, 2018 and 2017 (see Note 14 to our unaudited condensed consolidated financial statements):



	Nine Months Ended
	December 31,				Increase (Decrease)
	2018		2017		Amount			Percent
	(Amounts in millions)
Restructuring and other:
Severance ⁽¹⁾
Cash	$	17.0	$	10.1	$	6.9		68.3	%
Accelerated vesting on equity awards (see Note 11)	2.4		2.9		(0.5		)	(17.2	)%
Total severance costs	19.4		13.0		6.4			49.2	%
Transaction and related costs ⁽²⁾	22.7		14.4		8.3			57.6	%
Development expense ⁽³⁾	—		8.4		(8.4		)	(100.0	)%
	$	42.1	$	35.8	$	6.3		17.6	%

_______________________


(1)	Severance costs in the nine months ended December 31, 2018 and 2017 were primarily related to restructuring activities in connection with recent acquisitions, and other cost-saving initiatives.

(2)

Transaction and related costs in the nine months ended December 31, 2018 and 2017 reflect transaction, integration and legal costs associated with certain strategic transactions and legal matters. In the nine months ended December 31, 2018 , these costs were primarily related to the legal fees associated with the Starz class action lawsuits and other matters and, to a lesser extent, costs related to the acquisition of 3 Arts Entertainment and other strategic transactions. In the nine months ended December 31, 2017 , these costs were primarily related to the sale of EPIX (see Note 4 to our unaudited condensed consolidated financial statements), the legal fees associated with the Starz class action lawsuits and other matters, and the integration of Starz.


(3)	Development expense in the nine months ended December 31, 2017 represents write-downs resulting from the restructuring of the Motion Picture business in connection with the acquisition of Good Universe and new management's decisions around the creative direction on certain development projects which were abandoned in the prior year's period.

Interest Expense. Interest expense of $152.2 million in the nine months ended December 31, 2018 increased $4.9 million from the nine months ended December 31, 2017 . The following table sets forth the components of interest expense for the nine months ended December 31, 2018 and 2017 :

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	Nine Months Ended
	December 31,
	2018		2017
	(Amounts in millions)
Interest Expense
Cash Based:
Revolving credit facility	$	7.2	$	3.0
Term loans	63.5		61.1
5.875% Senior Notes	22.9		23.0
Other ⁽¹⁾	14.3		7.6
	107.9		94.7
Amortization of debt discount and financing costs	9.0		11.0
	116.9		105.7
Interest on dissenting shareholders' liability ⁽²⁾	35.3		41.6
Total interest expense	$	152.2	$	147.3

______________________


(1)	In the nine months ended December 31, 2018, amounts include interest expense related to the Company's interest rate swap agreements (see Note 17 to our unaudited condensed consolidated financial statements).


(2)	Represents interest accrued in connection with the previously outstanding dissenting shareholders' liability associated with the Starz merger. See Note 16 to our unaudited condensed consolidated financial statements

Shareholder Litigation Settlements. Shareholder litigation settlements of $114.1 million in the nine months ended December 31, 2018 includes the following: (i) $54.8 million for the net expense recorded for the settlement of the Fiduciary Litigation (representing the settlement amount of $92.5 million , net of aggregate insurance reimbursement of $37.8 million , and (ii) $59.3 million related to the Appraisal Litigation, representing the amount by which the settlement amount of approximately $964 million exceeds the previously accrued dissenting shareholders' liability including interest through the date agreed in the settlement. There were no comparable charges in the nine months ended December 31, 2017 . See Note 16 to our unaudited condensed consolidated financial statements.

Other Expense. Other expense of $1.8 million for the nine months ended December 31, 2018 represented the loss recorded related to our monetization of accounts receivable to third-party purchasers (see Note 18 to our unaudited condensed consolidated financial statements). There was no comparable charge in the nine months ended December 31, 2017 .

Loss on Extinguishment of Debt. Loss on extinguishment of debt was $24.2 million in the nine months ended December 31, 2017 related to the write-off of deferred financing costs associated with the prepayment and repricing of the previous Term Loan B issued December 8, 2016. and issuance and voluntary repayments of the previous Term Loan B-1 facility, with no comparable charge in the nine months ended December 31, 2018 .

Gain (Loss) on Investments The following table sets forth the components of the gain (loss) on investments for the nine months ended December 31, 2018 and 2017 (see Note 4 to our unaudited condensed consolidated financial statements):



	Nine Months Ended
	December 31,
	2018			2017
	(Amounts in millions)
Impairments of investments ⁽¹⁾	$	(36.8	)	$	(29.2	)
Unrealized losses on equity securities held as of December 31, 2018 ⁽²⁾	(6.4		)	—
Gain on sale of EPIX ⁽³⁾	—			201.0
	$	(43.2	)	$	171.8

___________________


(1)	Represents other-than-temporary impairments on our investments.


(2)	Represents the unrealized losses recorded for the change in fair value of our investment in available-for-sale equity securities measured at fair value.


(3)	Represents the gain recorded in connection with the May 11, 2017 sale of our 31.15% equity interest in EPIX.

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Equity Interests Loss. Equity interests loss of $28.8 million in the three months ended December 31, 2018 primarily consisted of losses from Atom Tickets, Laugh Out Loud, Playco and Pop. This compared to equity interests loss of $34.8 million in the three months ended December 31, 2017 , which primarily consisted of losses from Laugh Out Loud, Playco, Defy Media Group and Pop.

Income Tax Benefit. We had an income tax benefit of $26.6 million in the nine months ended December 31, 2018 , compared to an income tax benefit of $205.0 million in the nine months ended December 31, 2017 . Our income tax benefit 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 and the tax deductions generated by our capital structure, which includes certain foreign affiliate dividends in our Canadian jurisdiction that can be received without being subject to tax under Canadian tax law. In addition, our income tax benefit for the nine months ended December 31, 2018 was partially offset by certain minimum taxes imposed by the Tax Act (further discussed below) and the nondeductible portion of our shareholder litigation settlements.

On December 22, 2017, the Tax Act was signed into law, making significant changes to the taxation of U.S. business entities. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, imposed a one-time transition tax in connection with the move from a worldwide tax system to a territorial tax system, changed the ability to claim certain tax deductions, and included numerous other provisions. As we have a March 31 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal rate of approximately 31.5% for our fiscal year ended March 31, 2018, and 21% for subsequent fiscal years. Our U.S. tax provision consists primarily of deferred tax benefits calculated at the 21% tax rate.

In the nine months ended December 31, 2017, we recorded provisional amounts reflecting reasonable estimates of the impact of the Tax Act, which included a $165.0 million income tax benefit related to the impact of the corporate income tax rate reduction on our net deferred tax liabilities. In addition, we made provisional estimates of other effects of the Tax Act, such as the tax effects of executive compensation, the one-time transition tax, net operating loss carryovers, foreign tax credits, and accelerated deductions for U.S. film costs. The estimated impact of the Tax Act was based on a preliminary review of the new law, subject to revision based upon further analysis and interpretation of the Tax Act. During the quarter ended December 31, 2018, we completed our analysis and our accounting for the Tax Act, and there were no material adjustments to our provisional estimates.

Net Income (Loss) Attributable to Lions Gate Entertainment Corp. Shareholders. Net loss attributable to our shareholders for the nine months ended December 31, 2018 was $129.0 million , or basic and diluted net loss per common share of $0.61 on 213.2 million weighted average common shares outstanding. This compares to net income attributable to our shareholders for the nine months ended December 31, 2017 of $382.3 million , or basic net income per common share of $1.84 on 207.8 million weighted average common shares outstanding and diluted net income per common share of $1.74 on 219.7 million weighted average common shares outstanding.

Segment Results of Operations

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Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the nine months ended December 31, 2018 and 2017 :



	Nine Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Motion Picture Segment:
Revenue	$	1,106.9		$	1,397.0		$	(290.1	)	(20.8	)%
Expenses:
Direct operating expense	579.4			746.9			(167.5		)	(22.4	)%
Distribution & marketing expense	341.2			419.2			(78.0		)	(18.6	)%
Gross contribution	186.3			230.9			(44.6		)	(19.3	)%
General and administrative expenses	78.6			81.1			(2.5		)	(3.1	)%
Segment profit	$	107.7		$	149.8		$	(42.1	)	(28.1	)%

U.S. theatrical P&A expense included in distribution and marketing expense	$	197.6		$	232.1		$	(34.5	)	(14.9	)%

Direct operating expense as a percentage of revenue	52.3		%	53.5		%

Gross contribution as a percentage of revenue	16.8		%	16.5		%

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Revenue. The table below sets forth Motion Picture revenue by media and product category for the nine months ended December 31, 2018 and 2017 :



	Nine Months Ended December 31,
	2018						2017						Total Increase (Decrease)
	Feature Film ⁽¹⁾		Other Than Feature Film ⁽²⁾⁽³⁾		Total		Feature Film ⁽¹⁾		Other Than Feature Film ⁽²⁾⁽³⁾		Total		Total Increase (Decrease)
					(Amounts in millions)
Motion Picture Revenue
Theatrical	$	101.8	$	46.1	$	147.9	$	200.8	$	25.3	$	226.1	$	(78.2	)
Home Entertainment
Digital Media	109.8		143.2		253.0		153.2		123.9		277.1		(24.1		)
Packaged Media	82.4		126.6		209.0		163.2		148.3		311.5		(102.5		)
Total Home Entertainment	192.2		269.8		462.0		316.4		272.2		588.6		(126.6		)
Television	159.4		48.2		207.6		193.0		29.3		222.3		(14.7		)
International	200.8		53.5		254.3		266.0		70.9		336.9		(82.6		)
Other	31.4		3.7		35.1		18.9		4.2		23.1		12.0
	$	685.6	$	421.3	$	1,106.9	$	995.1	$	401.9	$	1,397.0	$	(290.1	)

____________________


(1)	Feature Film: 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.

(2)

(3)

Certain amounts in the prior year's period have been reclassified in order to conform to the current period presentation. In particular, in the nine months ended December 31, 2017, within the Motion Picture segment $16.9 million was reclassified from Other revenue to Theatrical revenue ( $8.1 million ), Home Entertainment Packaged Media revenue ( $3.7 million ), and Television revenue ( $5.1 million ).

Theatrical revenue decreased $78.2 million , or 34.6% , in the nine months ended December 31, 2018 as compared to the nine months ended December 31, 2017 , driven by fewer Feature Films released in the current period as compared to the prior year's period, and the prior year's period included significant theatrical revenue from Wonder and The Hitman's Bodyguard. The decrease in revenue from our Feature Films was offset by an increase in revenue from Other Than Feature Film product categories, driven by the performance of Pantelion Films' Overboard in the current period, as compared to How to Be a Latin Lover in the prior year's period, and revenues from the Good Universe film, Extinction in the current period.

Home entertainment revenue decreased $126.6 million , or 21.5% , in the nine months ended December 31, 2018 , as compared to the nine months ended December 31, 2017 , primarily due to a decrease of $124.2 million of home entertainment revenue from our Feature Films, driven by lower packaged media revenue (and to a lesser extent, digital media revenue) in the current period from our smaller Fiscal 2018 Theatrical Slate, as compared to the revenue in the prior year's period from our Fiscal 2017 Theatrical Slate, which included the home entertainment release of La La Land and John Wick: Chapter 2 .

International revenue decreased $82.6 million , or 24.5% , in the nine months ended December 31, 2018 , as compared to the nine months ended December 31, 2017 , primarily driven by lower revenue in the current period from our Feature Films due to our smaller Fiscal 2018 Theatrical Slate, as compared to the revenue generated in the prior year's period from our Fiscal 2017 Theatrical Slate , which included international revenue from La La Land, Power Rangers and John Wick: Chapter 2. This decrease was partially offset by increased revenue in the current period from Sicario: Day of the Soldado. The decrease in international revenue was also, to a lesser extent, driven by lower revenue from Other Than Feature Film as a result of significant revenues in the prior year's period from a library distribution agreement and UK third-party product.

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Direct Operating Expense. The decrease in direct operating expenses is due to the decrease in Motion Picture revenues. 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 quarter as compared to the prior year's quarter, and a decrease in investment in film write-downs. Investment in film write-downs were approximately $17.4 million in the nine months ended December 31, 2018 , as compared to approximately $26.8 million in the nine months ended December 31, 2017 .

Distribution and Marketing Expense. The decrease in distribution and marketing expense in the nine months ended December 31, 2018 is primarily due to lower theatrical distribution and marketing costs driven by fewer Feature Films released in the current period as compared to the prior year's period, offset partially by increased theatrical P&A expense attributable to titles released from our Other Than Feature Film category. The decrease was also, to a lesser extent, due to lower home entertainment and international distribution and marketing expenses associated with lower home entertainment and international revenue. In the nine months ended December 31, 2018 , approximately $6.6 million of P&A was incurred in advance for films to be released in subsequent quarters, such as Cold Pursuit, Five Feet Apart and Hellboy. In the nine months ended December 31, 2017 , approximately $14.8 million of P&A was incurred in advance for films to be released in subsequent periods, such as The Commuter, Early Man and Robin Hood.

Gross Contribution. Gross contribution of the Motion Picture segment for the nine months ended December 31, 2018 decreased as compared to the nine months ended December 31, 2017 , primarily due to a decrease in Motion Picture revenue.

General and Administrative Expense. General and administrative expenses of the Motion Picture segment in the nine months ended December 31, 2018 decreased $2.5 million , or 3.1% , primarily due to decreases in incentive compensation and professional fees.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the nine months ended December 31, 2018 and 2017 :



	Nine Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Television Production Segment:
Revenue	$	648.1		$	738.7		$	(90.6	)	(12.3	)%
Expenses:
Direct operating expense	539.7			590.8			(51.1		)	(8.6	)%
Distribution & marketing expense	29.0			30.1			(1.1		)	(3.7	)%
Gross contribution	79.4			117.8			(38.4		)	(32.6	)%
General and administrative expenses	32.9			28.3			4.6			16.3	%
Segment profit	$	46.5		$	89.5		$	(43.0	)	(48.0	)%

Direct operating expense as a percentage of revenue	83.3		%	80.0		%

Gross contribution as a percentage of revenue	12.3		%	15.9		%

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Revenue. The table below sets forth Television Production revenue and changes in revenue by media for the nine months ended December 31, 2018 and 2017 :



	Nine Months Ended
	December 31,				Increase (Decrease)
	2018		2017		Amount			Percent
Television Production	(Amounts in millions)
Television	$	454.4	$	515.5	$	(61.1	)	(11.9	)%
International	94.7		118.8		(24.1		)	(20.3	)%
Home Entertainment
Digital	54.1		92.4		(38.3		)	(41.5	)%
Packaged Media	5.9		10.0		(4.1		)	(41.0	)%
Total Home Entertainment	60.0		102.4		(42.4		)	(41.4	)%
Other	39.0		2.0		37.0			nm
	$	648.1	$	738.7	$	(90.6	)	(12.3	)%

_____________________

nm - Percentage not meaningful

The primary component of Television Production revenue is television revenue. Television revenue decreased in the nine months ended December 31, 2018 , as compared to the nine months ended December 31, 2017 , primarily due to fewer television episodes delivered, and to a lesser extent, decreased revenues from the licensing of Starz original series in the current period as compared to the prior year's period. These decreases were offset partially by increased license fees from unscripted television programs.

International revenue in the nine months ended December 31, 2018 decreased $24.1 million , or 20.3% as compared to the nine months ended December 31, 2017 , primarily due to lower revenue in the current period for library television titles, such as Mad Men and Dirty Dancing, and the licensing of the Starz original series The Girlfriend Experience Season 2 in the prior year's period.

Home entertainment revenue in the nine months ended December 31, 2018 decreased $42.4 million , or 41.4% , primarily driven by a significant contribution of revenues from a digital media licensing arrangement in the prior year's period for the Starz original series, Power Seasons 1 - 4.

Other revenue increased in the nine months ended December 31, 2018 as compared to the nine months ended December 31, 2017 due to revenue in the current period from the May 29, 2018 acquisition of 3 Arts Entertainment.

Direct Operating Expense. Direct operating expense of the Television Production segment in the nine months ended December 31, 2018 decreased $51.1 million , or 8.6% , primarily driven by lower Television Production revenue. The increase in direct operating expenses as a percentage of television production revenue is primarily due to the mix of titles generating revenue in the current period as compared to the prior year's period, and in particular, the increase in revenue from unscripted television programs in the current period relative to total television production revenue.

Gross Contribution. Gross contribution and gross contribution margin of the Television Production segment for the nine months ended December 31, 2018 decreased as compared to the nine months ended December 31, 2017 primarily due to lower television production revenue and higher direct operating expenses as a percentage of television production revenue.

General and Administrative Expense. General and administrative expenses of the Television Production segment increased $4.6 million , or 16.3% , primarily due to increases in salaries and related expenses. The nine months ended December 31, 2018 includes general and administrative expenses of 3 Arts Entertainment from the acquisition date of May 29, 2018.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the nine months ended December 31, 2018 and 2017 :

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	Nine Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount			Percent
	(Amounts in millions)
Media Networks Segment:
Revenue	$	1,099.0		$	1,057.8		$	41.2		3.9	%
Expenses:
Direct operating expense	442.5			448.1			(5.6		)	(1.2	)%
Distribution & marketing expense	237.8			219.7			18.1			8.2	%
Gross contribution	418.7			390.0			28.7			7.4	%
General and administrative expenses	73.3			75.5			(2.2		)	(2.9	)%
Segment profit	$	345.4		$	314.5		$	30.9		9.8	%

Direct operating expense as a percentage of revenue	40.3		%	42.4		%

Gross contribution as a percentage of revenue	38.1		%	36.9		%

The following table sets forth the Media Networks segment revenue and segment profit by product line:



	Nine Months Ended
	December 31,						Increase (Decrease)
	2018			2017			Amount		Percent
	(Amounts in millions)
Segment Revenue:
Starz Networks	$	1,087.0		$	1,053.7		$	33.3	3.2	%
Streaming Services	12.0			4.1			7.9		192.7	%
	$	1,099.0		$	1,057.8		$	41.2	3.9	%
Segment Profit:
Starz Networks	$	354.9		$	345.6		$	9.3	2.7	%
Streaming Services	(9.5		)	(31.1		)	21.6		(69.5	)%
	$	345.4		$	314.5		$	30.9	9.8	%

Revenue. The table below sets forth, for the periods presented, domestic subscriptions to our STARZ network:



	December 31,	December 31,
	2018	2017
	(Amounts in millions)
Period End Subscriptions:
STARZ	25.1	24.0

The increase in Media Networks revenue was driven by higher Starz Networks' revenue of $33.3 million due to a $34.8 million increase in effective rates primarily as a result of OTT revenue growth, partially offset by a $1.5 million decrease due to lower average subscriptions related to subscriber losses at certain MVPDs. During the nine months ended December 31, 2018 , the original series Howards End , Sweetbitter Season 1 , Vida Season 1 , Wrong Man, Power Season 5, America to Me, Warriors of Liberty City, Outlander Season 4, and Counterpart Season 2 premiered on STARZ as compared to The White Princess , American Gods Season 1, Power Season 4, Survivor's Remorse Season 4, Outlander Season 3, and The Girlfriend Experience Season 2 in the prior year's period.

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Direct Operating and Distribution and Marketing Expenses . Starz Networks' direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively. The level of programing 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 shows and particularly new original series premiering on the network during the period. Programming cost amortization and advertising and marketing costs generally increase in periods where new original series are premiering on STARZ.

The decrease in Media Networks direct operating expense is primarily due to lower Streaming Services expenses, partially offset by an increase in Starz Networks' expenses. The increase in Starz Networks’ direct operating expense is due to higher programming cost amortization related to our Starz Originals and the launch of STARZ with Amazon in the United Kingdom and Germany, partially offset by a decrease in programming cost amortization related to our programming output agreements.

T he increase in Media Networks distribution and marketing expense is due to an increase in Starz Networks' OTT related advertising and marketing costs, and a slight increase in distribution and marketing expense for Streaming Services.

Gross Contribution. Gross contribution of the Media Networks segment for the nine months ended December 31, 2018 was primarily from Starz Networks and increased compared to the prior year's period due to the increase in Starz Networks' revenue and lower Streaming Services direct operating expenses, partially offset by an increase in distribution and marketing expense.

General and Administrative Expense. General and administrative expenses of the Media Networks segment in the nine months ended December 31, 2018 decreased slightly from the prior year's period, driven by a decrease in Streaming Services, offset partially by a slight increase at Starz Networks.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Our liquidity and capital resources have been provided principally through cash generated from operations, debt, and our production loans. Our debt at December 31, 2018 primarily consisted of a $1.5 billion five-year revolving credit facility entered into on March 22, 2018 (the "Revolving Credit Facility"), a five-year term loan A facility issued March 22, 2018 (the "Term Loan A"), a seven-year term loan B facility issued March 22, 2018 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), and 5.875% senior notes due 2024 (the " 5.875% Senior Notes").

On February 4, 2019 the Company closed a private offering of $550.0 million of senior notes due 2024 (the " 6.375% Senior Notes"). The 6.375% Senior Notes bear interest at a rate of 6.375% per annum and mature on February 1, 2024. The Company expects to use the proceeds of the 6.375% Senior Notes to pay down outstanding amounts under its Revolving Credit Facility and for working capital purposes.

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. We also use cash for debt service (i.e. principal and interest payments) requirements, equity or cost method investments, quarterly cash dividends, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of businesses.

In addition, the Company has a redeemable noncontrolling interest balance of $144.3 million 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.

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. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Anticipated Cash Requirements. The nature of our business is such that significant initial expenditures are required to produce, acquire, distribute and market films and television programs, while revenues from these films and television programs are earned over an extended period of time after their completion or acquisition. We believe that cash flow from operations, cash on hand, revolving credit facility availability, the monetization of trade accounts receivable, tax-efficient financing, and available production financing will be adequate to meet known operational cash, and debt service (i.e. principal and interest

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payments) requirements for the foreseeable future, including the funding of future film and television production, film and programming rights acquisitions and theatrical and video release schedules, and future equity or cost method investment funding requirements, and the purchase of common shares under our share repurchase program. 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.

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, and the monetization of trade accounts receivable. In addition, we may acquire businesses or assets, including individual films or libraries that are complementary to our business. Any such transaction could be financed through our cash flow from operations, credit facilities, equity or debt financing. If additional financing beyond our existing cash flows from operations and credit facilities cannot fund such transactions, there is no assurance that such financing will be available on terms acceptable to us. We may also dispose of businesses or assets, including individual films or libraries, and use the net proceeds from such dispositions to fund operations or such acquisitions, or to repay debt.

The 5.875% 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. As of December 31, 2018 , the Company was in compliance with all applicable covenants.

Share Repurchase Plan. On February 2, 2016, our Board of Directors authorized to increase our previously announced share repurchase plan from $300 million to $468 million. To date, approximately $283.2 million of our common shares have been purchased under the plan, leaving approximately $184.7 million of authorized potential purchases. The remaining $184.7 million of our common shares authorized under the plan may be purchased from time to time at our discretion, including quantity, timing and price thereof, and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal requirements. We did not repurchase any shares during the three months ended December 31, 2018.

Dividends. 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. Our Board of Directors will not declare future quarterly cash dividends, as the Company focuses on driving long-term shareholder value by investing in global growth opportunities for Starz, while also strengthening its balance sheet.

Capacity to Pay Dividends. At December 31, 2018 , the capacity to pay dividends under the Senior Credit Facilities and the 5.875% Senior Notes significantly exceeded the amount of the Company's retained earnings or net loss, and therefore the Company's net loss of $140.5 million and retained earnings of $346.0 million were deemed free of restrictions at December 31, 2018 .

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Discussion of Operating, Investing, Financing Cash Flows

Cash and cash equivalents decreased by $270.4 million for the nine months ended December 31, 2018 and decreased by $104.4 million for the nine months ended December 31, 2017 , before foreign exchange effects on cash. Components of these changes are discussed below in more detail.

Operating Activities. Cash flows provided by operating activities for the nine months ended December 31, 2018 and 2017 were as follows:



	Nine Months Ended
	December 31,
	2018			2017			Net Change
	(Amounts in millions)
Operating income	$	164.0		$	200.3		$	(36.3	)
Amortization of films and television programs and program rights	1,105.3			1,232.8			(127.5		)
Non-cash share-based compensation	43.7			74.5			(30.8		)
Cash interest	(107.9		)	(94.7		)	(13.2		)
Current income tax provision	(9.7		)	15.7			(25.4		)
Shareholder litigation settlement charges and interest	(221.3		)	—			(221.3		)
Other non-cash charges included in operating activities	151.6			132.4			19.2
Cash flows from operations before changes in operating assets and liabilities	1,125.7			1,561.0			(435.3		)

Changes in operating assets and liabilities:
Accounts receivable, net and other assets	308.5			48.6			259.9
Investment in films and television programs and program rights	(1,073.5		)	(1,088.0		)	14.5
Other changes in operating assets and liabilities	(105.0		)	(152.3		)	47.3
Changes in operating assets and liabilities	(870.0		)	(1,191.7		)	321.7
Net Cash Flows Provided By Operating Activities	$	255.7		$	369.3		$	(113.6	)

Cash flows provided by operating activities for the nine months ended December 31, 2018 were $255.7 million compared to cash flows provided by operating activities of $369.3 million for the nine months ended December 31, 2017 . The decrease in cash provided by operating activities for the nine months ended December 31, 2018 as compared to the nine months ended December 31, 2017 is due to lower cash flows from operations before changes in operating assets and liabilities, which includes the portion of the shareholder litigation settlement and dissenting shareholders' liability payments in excess of the amounts originally accrued at the acquisition date associated with the Starz merger which are included in the financing activities below. These decreases were partially offset by lower cash used from changes in operating assets and liabilities, which were primarily driven by higher decreases on accounts receivable and other assets and lower decreases in accounts payable and accrued liabilities (included in "other changes in operating assets and liabilities" above). The higher decreases in accounts receivables were impacted by the $132.9 million monetization of accounts receivables (see Note 18 to our unaudited condensed consolidated financial statements) which contributed to the cash flows provided by operating activities. Cash flows provided by operating activities and cash on hand were primarily used to pay down debt.

Investing Activities. Cash flows provided by (used in) investing activities for the nine months ended December 31, 2018 and 2017 were as follows:

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	Nine Months Ended
	December 31,
	2018			2017
	(Amounts in millions)
Proceeds from the sale of equity method investee, net of transaction costs	$	—		$	393.7
Investment in equity method investees	(39.6		)	(47.6		)
Business acquisitions, net of cash acquired of $5.5	(77.3		)	(1.8		)
Capital expenditures	(28.9		)	(28.4		)
Net Cash Flows Provided By (Used In) Investing Activities	$	(145.8	)	$	315.9

Cash used in investing activities of $145.8 million for the nine months ended December 31, 2018 compared to cash provided by investing activities of $315.9 million for the nine months ended December 31, 2017 , as reflected above. The change was primarily due to proceeds from the sale of our equity interest in EPIX in the nine months ended December 31, 2017 (see Note 4 to our unaudited condensed consolidated financial statements), compared to cash used for the purchase of 3 Arts Entertainment, net of cash acquired (see Note 2 to our unaudited condensed consolidated financial statements) in the nine months ended December 31, 2018 .

Financing Activities. Cash flows used in financing activities for the nine months ended December 31, 2018 and 2017 were as follows:



	Nine Months Ended
	December 31,
	2018			2017
	(Amounts in millions)
Debt - borrowings	$	2,909.5		$	161.6
Debt - repayments	(2,468.8		)	(992.1		)
Net repayments of debt	440.7			(830.5		)

Production loans - borrowings	246.9			299.5
Production loans - repayments	(208.2		)	(267.2		)
Net proceeds from (repayments of) production loans	38.7			32.3

Payment of dissenter liability accrued at acquisition	(797.3		)	—
Other financing activities	(62.4		)	8.6
Net Cash Flows Used In Financing Activities	$	(380.3	)	$	(789.6	)

Cash flows used in financing activities of $380.3 million for the nine months ended December 31, 2018 compared to cash flows used in financing activities of $789.6 million for the nine months ended December 31, 2017 . Cash flows used in financing activities for the nine months ended December 31, 2018 primarily reflects the payment of the dissenting shareholders' liability accrued at acquisition associated with the Starz merger (see Note 16 to our unaudited condensed consolidated financial statements), the repayment of the April 2013 1.25% Notes in the amount of $60.0 million, and required repayments on our term loans. The debt borrowings and repayments above reflect an intercompany refinancing transaction during the nine months ended December 31, 2018. In addition, cash flows used in financing activities in the nine months ended December 31, 2018 reflects net production loan borrowings of $38.7 million , and cash paid for dividends of $57.4 million .

Cash flows used in financing activities for the nine months ended December 31, 2017 primarily reflects cash used for debt repayments, including the early prepayment of $740.0 million in principal amount of the previously outstanding Term Loan B issued December 8, 2016, required repayments on the previously outstanding term loans issued December 8, 2016, and the refinancing of $925.0 million of the previously outstanding Term Loan B and issuance of the Term Loan B-1. In addition, cash flows provided by financing activities in the nine months ended December 31, 2017 reflects net production loan borrowings of $32.3 million .

Debt

See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our debt.

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Production Loans

See Note 7 to our unaudited condensed consolidated financial statements for a discussion of our production loans.

Table of Debt and Contractual Commitments

The following table sets forth our future annual repayment of debt, and our contractual commitments as of December 31, 2018 :



	Three Months Ended March 31,		Year Ended March 31,
	2019		2020		2021		2022		2023		Thereafter		Total
					(Amounts in millions)
Future annual repayment of debt recorded as of December 31, 2018 (on-balance sheet arrangements)
Revolving credit facility	$	—	$	—	$	—	$	—	$	520.0	$	—	$	520.0
Term Loan A	—		37.5		52.5		75.0		585.0		—		750.0
Term Loan B	3.1		12.5		12.5		12.5		12.5		1,187.5		1,240.6
5.875% Senior Notes	—		—		—		—		—		520.0		520.0
Film obligations and production loans ⁽¹⁾	126.4		425.1		20.1		10.9		5.0		2.9		590.4
Capital lease obligations	0.7		3.0		3.0		0.9		0.9		37.6		46.1
	130.2		478.1		88.1		99.3		1,123.4		1,748.0		3,667.1
Contractual commitments by expected repayment date (off-balance sheet arrangements)
Film obligation and production loan commitments ⁽²⁾	289.8		612.9		120.9		133.5		17.9		12.9		1,187.9
Interest payments ⁽³⁾	47.8		111.5		109.2		106.4		103.1		185.9		663.9
Operating lease commitments	9.4		36.5		35.3		33.9		26.5		48.2		189.8
Other contractual obligations	65.0		87.8		46.5		24.8		11.4		0.9		236.4
	412.0		848.7		311.9		298.6		158.9		247.9		2,278.0
Total future commitments under contractual obligations ⁽⁴⁾⁽⁵⁾	$	542.2	$	1,326.8	$	400.0	$	397.9	$	1,282.3	$	1,995.9	$	5,945.1

___________________


(1)	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.

(2)

Film obligation commitments include distribution and marketing commitments, minimum guarantee commitments, and program rights commitments. Distribution and marketing commitments represent contractual commitments for future expenditures associated with distribution and marketing of films which we will distribute. The payment dates of these amounts are primarily based on the anticipated release date of the film. Minimum guarantee commitments represent contractual commitments related to the purchase of film rights for pictures to be delivered in the future. Program rights commitments represent contractual commitments under programming license agreements related to films that are not available for exhibition until some future date (see below for further details). Production loan commitments represent amounts committed for future film production and development to be funded through production financing and recorded as a production loan liability when incurred. Future payments under these commitments are based on anticipated delivery or release dates of the related film or contractual due dates of the commitment. The amounts include estimated future interest payments associated with the commitment.


(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 $144.3 million of redeemable noncontrolling interest, 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 9 to our unaudited condensed consolidated financial statements).

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(5)	Subsequent to December 31, 2018 , on February 4, 2019 the Company closed a private offering of $550.0 million of 6.375% Senior Notes due 2024, which are not reflected in the amounts above. See Note 19 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. by Sony’s Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels through 2021. We do not license films produced by Sony Pictures Animation. The programming fees to be paid by us to Sony are based on the quantity and domestic theatrical exhibition receipts of qualifying films. Since the term of the output programming agreement with Sony applies to all films released theatrically through December 31, 2021, the Company is obligated to pay fees for films that have not yet been released in theaters. We are unable to estimate the amounts to be paid under these agreements for films that have not yet been released in theaters, however, such amounts are expected to be significant. We have also entered into agreements with a number of other motion picture producers and are obligated to pay fees for the rights to exhibit certain films that are released by these producers.

Remaining Performance Obligations and Backlog

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). As disclosed in Note 10 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.8 billion at December 31, 2018. The decline in remaining performance obligations as compared to the prior quarter is primarily due to the timing of a fixed fee arrangement transitioning to a variable fee arrangement in the Media Networks segment and therefore is excluded from the disclosure of remaining performance obligations. 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, 2018 and March 31, 2018, respectively.

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements and other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provided off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in leasing, hedging or research and development services that could expose us to liability that is not reflected on the face of our consolidated financial statements. Our commitments to fund operating leases, minimum guarantees, production loans, equity method investment funding requirements and all other contractual commitments not reflected on the face of our consolidated financial statements are presented in the table above.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Currency and Interest Rate Risk Management

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates. Our exposure to interest rate risk results from the financial debt instruments that arise from transactions entered into during the normal course of business. As part of our overall risk management program, we evaluate and manage our exposure to changes in interest rates and currency exchange risks on an ongoing basis. Hedges and derivative financial instruments will continue to be used in the future in order to manage our interest rate and currency exposure. We have no intention of entering into financial derivative contracts, other than to hedge a specific financial risk.

Currency Rate Risk. We enter into forward foreign exchange contracts to hedge our foreign currency exposures on future production expenses denominated in various foreign currencies. As of December 31, 2018 , we had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 15 months from December 31, 2018 ):



December 31, 2018
Foreign Currency	Foreign Currency Amount			US Dollar Amount		Weighted Average Exchange Rate Per $1 USD
	(Amounts in millions)			(Amounts in millions)
British Pound Sterling		£6.8	in exchange for		$9.6	£0.71
Canadian Dollar		C$21.8	in exchange for		$17.1	C$1.27
Australian Dollar		A$4.4	in exchange for		$3.5	A$1.28

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Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that qualified as effective hedge contracts outstanding during the three and nine months ended December 31, 2018 were $0.8 million and $1.2 million , respectively, net of tax, (2017 - losses of $0.3 million and $0.5 million , respectively), and are included in accumulated other comprehensive loss, a separate component of shareholders’ equity. Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that did not qualify as effective hedge contracts outstanding during the three and nine months ended December 31, 2018 were $0.1 million and $0.1 million , respectively (2017 - loss of $0.2 million and nil , respectively) and were included in direct operating expenses in the accompanying unaudited condensed consolidated statements of operations. These contracts are entered into with major financial institutions as counterparties. We are exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of replacing the contracts, at current market rates. We do not require collateral or other security to support these contracts.

Interest Rate Risk. At December 31, 2018 , we had interest rate swap agreements to fix the interest rate on $1.7 billion of variable rate LIBOR-based debt. See Note 17 to our unaudited condensed consolidated financial statements for additional information. The difference between the fixed rate to be paid and the variable rate received under the terms of the interest rate swap agreements will be recognized as interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.

Certain of our borrowings, primarily borrowings under our Senior Credit Facilities and certain production loans, are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. The applicable margin with respect to loans under the revolving credit facility and Term Loan A is a percentage per annum equal to a LIBOR rate plus 1.75%. The applicable margin with respect to loans under our Term Loan B is a percentage per annum equal to a LIBOR rate plus 2.25%. Assuming the revolving credit facility is drawn up to its maximum borrowing capacity of $1.5 billion, based on the applicable LIBOR in effect as of December 31, 2018 , each quarter point change in interest rates would result in a $4.5 million change in annual net interest expense on the revolving credit facility, Term Loan A, Term Loan B and interest rate swap agreements.

The variable interest production loans incur interest at rates ranging from approximately 4.73% to 5.61% and applicable margins ranging from 1.50% over the one, two, or three-month LIBOR to 2.50% over the one, two, or three-month LIBOR. A quarter point increase of the interest rates on the outstanding principal amount of our variable rate production loans would result in $1.0 million in additional costs capitalized to the respective film or television asset.

At December 31, 2018 , our 5.875% Senior Notes had an outstanding principal value of $520.0 million, and an estimated fair value of $509.6 million . A 1% increase or decrease in the level of interest rates would decrease or increase the fair value of the 5.875% Senior Notes by approximately $24.1 million and $20.8 million, respectively.

The following table presents information about our financial instruments that are sensitive to changes in interest rates. The table also presents the cash flows of the principal amounts of the financial instruments, or the cash flows associated with the notional amounts of interest rate derivative instruments, and related weighted-average interest rates by expected maturity or required principal payment dates and the fair value of the instrument as of December 31, 2018 :

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	Three Months Ended March 31,			Year Ended March 31,																	Fair Value
	2019			2020			2021			2022			2023			Thereafter			Total		December 31, 2018
							(Amounts in millions)
Debt and Production Loans
Variable Rates:
Revolving Credit Facility ⁽¹⁾	$	—		$	—		$	—		$	—		$	520.0		$	—		$	520.0	$	520.0
Average Interest Rate	—			—			—			—			4.25		%	—
Term Loan A ⁽¹⁾	—			37.5			52.5			75.0			585.0			—			750.0		722.8
Average Interest Rate	—			4.25		%	4.25		%	4.25		%	4.25		%	—
Term Loan B ⁽²⁾	3.1			12.5			12.5			12.5			12.5			1,187.5			1,240.6		1,226.6
Average Interest Rate	4.75		%	4.75		%	4.75		%	4.75		%	4.75		%	4.75		%
Production loans ⁽³⁾	17.5			374.1			—			—			—			—			391.6		391.6
Average Interest Rate	5.27		%	5.02		%	—			—			—			—
Fixed Rates:
5.875% Senior Notes ⁽⁴⁾	—			—			—			—			—			520.0			520.0		509.6
Average Interest Rate	—			—			—			—			—			5.88		%
Interest Rate Swaps ⁽⁵⁾
Variable to fixed notional amount	$	—		$	—		$	—		$	—		$	—		$	1,700.0		$	1,700.0	$	(35.1	)

____________________

(1)

Revolving credit facility and Term Loan A expire on March 22, 2023 and initially bear interest at a rate per annum equal to LIBOR plus 1.75% margin, with a LIBOR floor of zero (or an alternative base rate plus 0.75% margin). The margin is subject to potential increases of up to 50 basis points (two (2) increases of 25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the Amended Credit Agreement.


(2)	Term Loan B maturing on March 24, 2025, and initially bears interest at a rate per annum equal to LIBOR plus 2.25% margin, with a LIBOR floor of zero (or an alternative base rate plus 1.25% margin).


(3)	Represents amounts owed to film production entities on anticipated delivery date or release date of the titles or the contractual due dates of the obligation, that incur interest at rates ranging from approximately 4.73% to 5.61% .


(4)	Senior notes with a fixed interest rate equal to 5.875%.


(5)	Represents interest rate swap agreements on certain of our LIBOR-based floating-rate corporate debt with fixed rates paid ranging from 2.723% to 2.915% maturing in March 2025. See Note 17 to our unaudited condensed consolidated financial statements.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2018 , the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective as of December 31, 2018 .

Changes in Internal Control over Financial Reporting

On May 29, 2018, we purchased a 51% membership interest in 3 Arts Entertainment LLC ("3 Arts Entertainment") and, as a result, we have begun integrating the processes, systems and controls relating to 3 Arts Entertainment into our existing system of internal control over financial reporting in accordance with our integration plans. As required by Rule 13a-15(d) of the Exchange Act, the Company, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, has evaluated whether any changes occurred to the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, such control. Based on that evaluation, except for the processes, systems and controls relating to the integration of 3 Arts Entertainment, there has been no such change during the period covered by this report.

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PART II

Item 1. Legal Proceedings.

From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business. Due to the inherent difficulty of predicting the outcome of litigation and claims, the Company often cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, if any, related to each pending matter may be.

For a discussion of certain claims and legal proceedings, see Note 16 - Contingencies to our unaudited condensed consolidated financial statements, which discussion is incorporated by reference into this Part II, Item 1, Legal Proceedings.

Item 1A. Risk Factors.

There were no material changes to the risk factors previously reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Securities

On May 31, 2007, our Board of Directors authorized the repurchase of up to $50 million of our common shares. On each of May 29, 2008 and November 6, 2008, our Board of Directors authorized additional repurchases up to an additional $50 million of our common shares. On December 17, 2013, our Board of Directors authorized the Company to increase its stock repurchase plan to $300 million and on February 2, 2016, our Board of Directors authorized the Company to further increase its stock repurchase plan to $468 million. To date, approximately $283.2 million (or 15,729,923) of our common shares have been purchased under the plan, leaving approximately $184.7 million of authorized potential purchases. The remaining $184.7 million of our common shares authorized under the plan may be purchased from time to time at the Company’s discretion, including quantity, timing and price thereof, and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal requirements. The share repurchase program has no expiration date.

No common shares were purchased by us during the three months ended December 31, 2018.

Additionally, during the three months ended December 31, 2018, 4,020 Class A voting shares and 133,786 Class B non-voting shares were withheld upon the vesting of restricted share units and restricted awards, share issuances and stock option exercises to satisfy minimum statutory federal, state and local tax withholding obligations.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.



Exhibit Number	Exhibit Description	Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date/ Period End Date
3.1	Articles	8-K	3.1	12/8/2016
3.2	Notice of Articles	8-K/A	3.1	12/9/2016
10.39*x	Employment Agreement between Lions Gate Entertainment Corp. and Brian Goldsmith dated as of October 1, 2018
31.1x	Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2x	Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1x	Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101	The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statement of Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements

__________________________



*	Management contract or compensatory plan or arrangement.
x	Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	LIONS GATE ENTERTAINMENT CORP.
	By:	/s/ J AMES W. B ARGE
		Name:	James W. Barge
DATE: February 7, 2019		Title:	Duly Authorized Officer and Chief Financial Officer

Exhibit 10.39

As of October 1, 2018

Mr. Brian Goldsmith

2700 Colorado Ave., Suite 200

Santa Monica, California 90404

RE: Employment Agreement

Dear Mr. Goldsmith:

On behalf of Lions Gate Entertainment Corp. (the “Company” or Lions Gate), this agreement (“Agreement”) shall confirm the terms of your employment by the Company. We refer to you herein as “Employee.” The terms of Employee’s employment are as follows:

1. TERM

(a) The term of this Agreement will begin October 1, 2018 and end September 30, 2022, subject to earlier termination as provided for in Section 8 below (the “Term”). Until October 1, 2018 the employment agreement dated November 13, 2015 between the Company and Employee (the “Prior Agreement”) shall govern the terms and conditions of Employee’s employment. During the Term of this Agreement, Employee will serve as the Company’s, Chief Operating Officer, reporting to the Company’s Chief Executive Officer (the “CEO”), currently Jon Feltheimer, with additional dotted-line reporting to the Company’s Vice Chairman, currently Michael Burns. In such capacity, among other duties reasonably assigned by the Company, Employee shall: (i) act as the Company’s head of corporate development (having non-exclusive oversight of mergers and acquisitions); (ii) strategically oversee existing and future joint ventures, channels and digital ventures/initiatives (excluding digital licensing); (iii) oversee the Company’s Board of Directors’ (“Board”) materials/memoranda relating to the financial analysis of the Company’s operations and strategic initiatives; (iv) oversee financial analysis and strategy with respect to business unit operations and performance; and, (v) exclusively or non-exclusively, as may be determined on a case-by-case basis, oversee corporate and project finance and capital structure and related transactions. During the Term, the Company shall reserve the right to appoint a CoChief Operating Officer. To the extent such appointment is made and Employee’s responsibilities, as outlined herein, are not diminished, Company and Employee agree that Employee’s title may revert to that of Co-Chief Operating Officer. For the sake of clarity, such appointment shall not give rise to a termination for “Good Reason” Employee shall render such services as are customarily rendered by persons in Employee’s capacity in the entertainment industry and as may be reasonably requested by the Company.

Mr. Brian Goldsmith

As of October 1, 2018

Page 2 of 24

(b) So long as this Agreement shall continue in effect, Employee shall devote Employee’s full business time, energy and ability exclusively to the business, affairs and interests of the Company and matters related thereto, shall use Employee’s best efforts and abilities to promote the Company’s interests, and shall perform the services contemplated by this Agreement in accordance with policies established by the Company. As long as Employee’s meaningful business time is devoted to the Company, Employee may devote a reasonable amount of time to management of personal investments and charitable, political and civic activities, so long as these activities do not conflict with the Company’s interests or otherwise interfere with Employee’s performance under this Agreement.

(c) Subject to travel required by Employee’s position and consistent with the reasonable business of the Company, Employee will be based in the Los Angeles, California area.

2. COMPENSATION

(a) Salary . During the Term, Employee will be paid a base salary at the rate of One Million Dollars ($1,000,000.00) per year (“Base Salary”), payable in accordance with the Company’s normal payroll practices in effect.

(b) Payroll . Nothing in this Agreement shall limit the Company’s right to modify its payroll practices, as it deems necessary.

(c) Bonuses . During the Term, Employee shall be eligible to receive annual performance bonuses with an annual target opportunity of one hundred percent (100%) of Employee’s Base Salary based upon such Company and/or individual performance criteria as determined by the Compensation Committee (the “CCLG”) of the Board of Lions Gate, in consultation with the CEO, currently Jon Feltheimer, or the Company’s designee. Such annual performance bonuses shall be subject to performance metrics that shall be established by the CCLG within the first ninety (90) days of the Term,. Except as expressly set forth herein, Employee must be employed with the Company through the end of the applicable performance period to be eligible to receive a bonus for that period. Any such bonus will be paid as soon as practicable after the end of the applicable fiscal year and in all events within the “short-term deferral” period provided under Treasury Regulation Section 1.409A-1(a)(4) (generally within two and one-half months after the end of the fiscal year for which the bonus is paid). Notwithstanding the foregoing, in the event that Employee’s employment with Company does not continue beyond the Term or Employee’s employment is terminated pursuant to Sections 8(a)(ii), 8(a)(iii), 8(a)(v) or 8(a)(vi) of the Agreement, Employee shall remain eligible for a prorated bonus based upon the amount of time worked during the fiscal year in which the termination occurs, paid at the same time that such bonuses are paid to employees of the Company, but in any event no later than when bonuses are paid to other senior-level executives.

Mr. Brian Goldsmith

As of October 1, 2018

Page 3 of 24

(d) Tax Withholding . Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.

3. BENEFITS

(a) As an employee of the Company, Employee will continue to be eligible to participate in all benefit plans to the same extent as other similarly situated salaried employees of the Company and in all events subject to the terms of such plans as in effect from time to time. For the sake of clarity, such plans do not include compensation and/or any bonus plans.

(b) The Company shall pay for the continued services of Employee’s exclusive executive assistant for the duration of the Term.

4. VACATION AND TRAVEL

(a) Employee shall be entitled to take paid time off without a reduction in salary, subject to: (i) the approval of Employee’s supervisor; and, (ii) the demands and requirements of Employee’s duties and responsibilities under this Agreement. Employee shall accrue no paid vacation.

(b) Employee will be eligible to be reimbursed for any business expenses in accordance with the Company’s current Travel and Entertainment policy.

(c) In addition, to the extent all of the following are within the Company’s policy and practice for similarly situated employees, Employee shall be entitled to: (i) business class travel for flights in excess of four (4) hours; (ii) all customary “perqs” of division heads within the Company; (iii) a cell phone, which may be expensed; and (iv) a reserved parking space.

5. STOCK

(a) Signing Equity Awards . On November 12, 2018 (the “Award Date”) the CCLG approved the equity awards set forth in this Section 5(a) to Employee (collectively, the “Signing Equity Awards”).


(i)	Signing Grant . An award of Lions Gate restricted share units (the “Signing Grant”), with the number of restricted share units subject to the Signing Grant determined by dividing Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) by the closing price (in regular trading) of a share of Lions Gate Class B non-voting common shares

Mr. Brian Goldsmith

As of October 1, 2018

Page 4 of 24

(“Class B Shares”) on the New York Stock Exchange (“NYSE”) on the Award Date (the “Closing Price”).

(ii)

Signing Option . A non-qualified stock option (the “Signing Option”) to purchase a number of Class B Shares determined by dividing Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) by the per-share fair value of the option on the Award Date (such per-share value to be based upon the Black – Scholes or similar valuation method and assumptions then generally used by Lions Gate in valuing its options and similar awards for financial statement purposes). The exercise price per share for the Signing Option shall be the Closing Price.


(iii)	Performance-Based Signing Grant . An additional award of Lions Gate restricted share units (the “Performance-Based Signing Grant”), with the number of restricted share units subject to the Performance-Based Signing Grant determined by dividing Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) by the Closing Price.

(iv)

Performance-Based Signing Option . An additional non-qualified stock option to purchase a number of shares of Lions Gate Class B Shares determined by dividing Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) (the “Performance-Based Signing Option”) by the per-share fair value of the option on the Award Date (such per-share value to be based upon the Black – Scholes or similar valuation method and assumptions then generally used by Lions Gate in valuing its options for financial statement purposes). The exercise price per share for the Performance-Based Signing Option shall be the Closing Price.

(b) Vesting . Subject to Section 5(g) below:


i.	The Signing Grant and the Signing Option shall vest as to one-third of the total shares subject to the applicable award on each of the following dates: March 11, 2020, September 11, 2020 and September 11, 2021.

ii.

The Performance-Based Signing Grant and Performance-Based Signing Option (collectively, the “Performance-Based Signing Equity Awards”) shall be eligible to vest as to one-third of the shares subject to the applicable award on each of the following dates: March 11, 2020, September 11, 2020 and September 11, 2021 (each, a “Performance Vesting Date”). Such Performance-Based Signing Equity Awards shall be subject to an assessment of Employee’s performance over the twelve (12) month period ending on such Performance Vesting Date, based in part on metrics established by

Mr. Brian Goldsmith

As of October 1, 2018

Page 5 of 24

the CCLG, in consultation with Lions Gate’s CEO, currently Jon Feltheimer, or the Company’s designee within the first ninety (90) days of the Term. Determination of the vesting of the Performance-Based Signing Equity Awards on each respective Performance Vesting Date, if any, shall be made by the CCLG, in consultation with Lions Gate’s CEO, currently Jon Feltheimer, or the Company’s designee. Any portion of a Performance-Based Signing Equity Award that is eligible to vest on a particular Performance Vesting Date and that does not vest on that date shall expire on that date with no possibility of further vesting. Notwithstanding the foregoing, the CCLG may, in its sole discretion, provide that any portion of a Performance-Based Signing Equity Award eligible to vest on any such Performance Vesting Date that does not vest may vest on any future Performance Vesting Date (but in no event shall any Performance-Based Signing Equity Award vest as to more than 100% of the shares subject to such award).

a. Annual Equity Awards . The Company shall request that, at the first CCLG meeting to be held following each of July 1, 2019, July 1, 2020, July 1, 2021 and July 1, 2022 (the date of each such meeting, an “Annual Award Date”) and subject to Employee’s continued employment with the Company through the applicable Annual Award Date, the CCLG grant Employee an annual equity award (each, an “Annual Equity Award”) equivalent in value to Three Million Five Hundred Thousand Dollars ($3,500,000), to be allocated as follows:


(i)	An award of Lions Gate restricted share units, such award to have a value as determined under Section 5(d) equal to Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) (the “Annual Time-Based Grant”);


(ii)	A non-qualified stock option to purchase Lions Gate’s Class B Shares, such option to have a value as determined under Section 5(d) equal to Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) (the “Annual Time-Based Option”);


(iii)	An additional award of Lions Gate performance-based restricted share units, such award to have a value as determined under Section 5(d) equal to Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) (the “Annual Performance-Based Grant”); and,


(iv)	An additional performance-based non-qualified stock option to purchase Class B Shares, such option to have a value as determined under Section 5(d) equal to Eight Hundred Seventy-Five Thousand Dollars ($875,000.00) (the “Annual Performance-Based Option”).

Mr. Brian Goldsmith

As of October 1, 2018

Page 6 of 24

b. Determination of Annual Equity Awards . Unless otherwise provided by the CCLG in approving the particular grant, the number of Class B shares subject to such Annual Equity Awards shall be determined as follows:


(i)	the number of Class B Shares subject to the Annual Time-Based Grant and Annual Performance-Based Grant shall be determined by dividing the applicable dollar amount for such award set forth above by the closing price (in regular trading) of a share of Lions Gate’s Class B Shares on the NYSE on the applicable Annual Award Date (the “Annual Closing Price”); and,

(ii)

the number of Class B Shares subject to each of the Annual Time-Based Option and Annual Performance-Based Option shall be determined by dividing the applicable dollar amount for such award set forth above by the per-share fair value of the option on the Annual Award Date (such per‑share value to be based upon the Black – Scholes or similar valuation method and assumptions then generally used by Lions Gate in valuing its options for financial statement purposes). The exercise price per share for the Annual Time-Based Option and Annual Performance-Based Option shall be the Annual Closing Price.

c. Vesting of Annual Equity Awards . Unless otherwise provided by the CCLG in approving the particular grant and subject to Section 5(g) below, such Annual Equity Awards shall vest (or be eligible to vest) as follows:


i.	each Annual Time-Based Grant and Annual Time-Based Option shall vest as to one-third of the shares subject to the applicable award on each of the first, second and third anniversaries of the applicable Annual Award Date; and,

ii.

each Annual Performance-Based Grant and Annual Performance-Based Option shall be eligible to vest as to one-third of the shares subject to the applicable award on each of the first, second and third anniversaries of the applicable Annual Award Date (each, an “Annual Performance Vesting Date”). Such Annual Equity Awards shall be subject to an assessment of Employee’s performance over the twelve (12) month period ending on such Annual Performance Vesting Date based in part on metrics established annually by the CCLG, in consultation with Lions Gate’s CEO, currently Jon Feltheimer, or the Company’s designee. Determination of the vesting of the Annual Performance-Based Grant and Annual Performance‑Based Option on each respective Annual Performance Vesting Date, if any, shall be made by the CCLG in consultation with Lions Gate’s CEO, currently Jon Feltheimer, or the Company’s designee. Any portion of any such

Mr. Brian Goldsmith

As of October 1, 2018

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award that is eligible to vest on a particular Performance Vesting Date and does not vest on that date shall expire on that date with no possibility of further vesting. Notwithstanding the foregoing, the CCLG may, in its sole discretion, provide that any portion of an Annual Performance-Based Grant or Annual Performance-Based Option eligible to vest on any such Annual Performance Vesting Date that does not vest on that date may vest on any future Annual Performance Vesting Date (but in no event shall any such award vest as to more than 100% of the shares subject to such award).

d. Terms of Awards in General . Each of the Signing Equity Awards (and, if granted, each of the Annual Equity Awards) set forth above are (and shall be) granted in accordance with the terms and conditions of the Lions Gate 2017 Performance Incentive Plan or a successor plan thereto (the “Plan”). For the avoidance of doubt, any shares to be issued under the Plan hereunder shall only be Class B Shares. Each of the Signing Equity Awards (and, if granted, each of the Annual Equity Awards) shall be evidenced by and subject to the terms of an award agreement in the form generally then used by Lions Gate to evidence grants of the applicable type of award under the Plan.

e. Continuance of Employment . Subject to the exceptions in Section 5(h) below, the vesting schedules in Sections 5(b) and 5(e) above require Employee’s continued employment with the Company through each applicable vesting date as a condition to the vesting of the applicable installment of the equity awards and the rights and benefits thereto. Except as expressly provided herein, Employee’s then-unvested awards will terminate on any termination of Employee’s employment with the Company, and Employee will have no further rights with respect thereto.

f. Acceleration of Equity Awards .

(i)

In the event that Employee’s employment terminates due to: (A) his death pursuant to Section 8(a)(ii); or, (B) his total disability (which shall be applicable only in the instance where Employee qualifies for long-term disability benefits under the Company’s long-term disability plan as determined by Company’s insurer pursuant to the requirements set forth in such insurer’s policies therein) pursuant to Section 8(a)(iii), the portions of the Signing Equity Awards and the Annual Equity Awards (if any), that are then granted and not yet vested and scheduled to vest within the period of twenty-four (24) months following the date of such termination of Employee’s employment, shall accelerate and become fully vested (subject to Employee’s satisfying the requirement to provide a general release of claims in accordance with Section 8(a)(v) in the event of a termination pursuant to Sections 8(a)(iii)), provided, however, that any such portions shall vest only to the extent such portions are: (x) granted, outstanding and not yet vested on Employee’s termination

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date; and, (y) scheduled to vest on or before the last day of the Term provided in Section 1(a) above (and any portion of each such award that is not vested, after giving effect to such acceleration provision, shall terminate on Employee’s termination date).

(ii)

In the event that during the Term of this Agreement: (A) Employee’s employment terminates due to a termination “without cause” (and other than a termination described in paragraph (iii) of this Section 5(h)) pursuant to Section 8(a)(v); or, (B) the employment of both Jon Feltheimer and Michael Burns with the Company terminates (the second such termination to occur, a “Change in Management”) and on or within twelve (12) months following such Change in Management, Employee’s employment is terminated by Employee for “Good Reason” as defined in Section 8(a)(vi) below, (x) the portions of the Signing Equity Awards and the Annual Equity Awards (if any), that are then granted and not yet vested and scheduled to vest within the period of twelve (12) months following the date of such termination of Employee’s employment, shall accelerate and become fully vested on the termination date; and, (y) and fifty percent (50%) of the portions of the Signing Equity Awards and the Annual Equity Awards (if any) that are then granted and not yet vested and are scheduled to vest within the period commencing twelve (12) months following such termination of employment and ending twenty-four (24) months following such termination of employment shall accelerate and become fully vested on the termination date (subject to Employee’s satisfying the requirement to provide a general release of claims in accordance with Section 8(a)(v)), provided, however, that any such portion shall vest only to the extent it is: (x) granted, outstanding and not yet vested on Employee’s termination date; and, (y) scheduled to vest on or before the last day of the Term provided in Section 1(a) above (and any portion of each such award that is not vested after giving effect to such acceleration provision shall terminate on Employee’s termination date).

(iii)

In the event that during the Term, a Change of Control (as defined herein) occurs during the Term of this Agreement and on or within twelve (12) months following such Change of Control, Employee’s employment is terminated by the Company “without cause” as such term is defined in Section 8(a)(v) below or Employee’s employment is terminated by Employee for “Good Reason” as such term is defined in Section 8(a)(vi) below, the following provision shall apply:

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(A)

the portions of the Signing Equity Awards and the Annual Equity Awards (if any), that are then granted and not yet vested, shall immediately accelerate and become fully vested (subject to Employee’s satisfying the requirement to provide a general release of claims in accordance with Section 8(a)(v)), provided, however, that any such portion shall vest only to the extent it is: (x) granted and not yet vested on Employee’s termination date; and, (y) scheduled to vest on or before the last day of the Term provided in Section 1(a) above (and any portion of each such award that is not vested after giving effect to such acceleration provision shall terminate on Employee’s termination date); and,

(B)

with respect to the portions of each Annual Equity Award(s) (if any) that: (I) are contemplated by Section 5(c) above; (II) are scheduled to be granted pursuant to Section 5(c) above after the date of Employee’s termination; and, (III) include one or more installments that are scheduled to vest pursuant to Section 5(e) on or before the last day of the Term provided in Section 1(a) above (any such vesting installment that is scheduled to vest within the period described in clause (III), an “Eligible Equity Installment”), Employee shall be entitled to a lump sum payment (subject to Employee’s provision of a general release of claims in accordance with Section 8(a)(v)), to be made not later than sixty (60) days after Employee’s termination date (provided, that if such 60-day period spans two calendar years, such payment will be made in the second year), in an amount equal to fifty percent (50%) of the aggregate dollar value of all such Eligible Equity Installments, with the dollar value of each Eligible Equity Installment to be determined based on the total value of the applicable award set forth in Section 5(c) and the portion of such total award value that corresponds to the particular installment (i.e., as to an award with a total value of $100,000 that vests in three annual installments, the value of each such installment would be approximately $33,333). Such payment shall be made in cash, provided that the Company may, at its election, provide for Lions Gate to make all or a portion of such payment in the form of a number of Class B Shares determined by dividing the dollar amount of such payment by the closing price (in regular trading) of the Class B Shares on the payment date.

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(iv)

Notwithstanding any provision to the contrary herein, Section 5(c)(iv) of the Prior Agreement shall remain in full force and effect. Additionally, for any other equity-based awards granted during the Term at any time after the date of this Agreement that are (A) outstanding as of the date of this Agreement; or, (B) granted during the Term at any time after the date of this Agreement (unless otherwise expressly provided by the CCLG at the time it approves the applicable grant), the provisions for accelerated vesting of equity awards in this Section 5(h) shall apply.

(i) Definition of Change in Control . For the purposes of this Agreement, “Change of Control” shall mean:

(i)

if any person, other than (A) any person who holds or controls entities that, in the aggregate (including the holdings of such person), hold or control thirty-three percent (33%) or more of the outstanding shares of Lions Gate on the date of execution of this Agreement by each party hereto (collectively, a “Thirty-Three Percent Holder”) or (B) a trustee or other fiduciary holding securities of Lions Gate under an employee benefit plan of Lions Gate, becomes the beneficial owner, directly or indirectly, of securities of Lions Gate representing thirty-three percent (33%) or more of the outstanding shares as a result of one or more related transactions in the context of a merger, consolidation, sale or other disposition of equity interests or assets of Lions Gate, excluding any transactions or series of transactions involving a sale or other disposition of securities of Lions Gate by a Thirty-Three Percent Holder;


(ii)	if, as a result of one or more related transactions in the context of a merger, consolidation, sale or other disposition of equity interests or assets of Lions Gate, there is a sale or disposition of thirty-three percent (33%) or more of Lions Gate's assets (or consummation of any transaction, or series of related transactions, having similar effect);


(iii)	if, as a result of one or more related transactions in the context of a merger, consolidation, sale or other disposition of equity interests or assets of Lions Gate, there occurs a change or series of changes

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in the composition of the Board as a result of which half or less than half of the directors are incumbent directors;

(iv)

if, as a result of one or more related transactions in the context of a merger, consolidation, sale or other disposition of equity interests or assets of Lions Gate (excluding any sale or other disposition of securities of Lions Gate by a Thirty-Three Percent Holder in a single transaction or a series of transactions), a shareholder or group of shareholders acting in concert, other than a Thirty-Three Percent Holder in a single transaction or a series of transactions, obtain control of thirty-three percent (33%) or more of the outstanding shares of Lions Gate;

(v)

if, as a result of one or more related transactions in the context of a merger, consolidation, sale or other disposition of equity interests or assets of Lions Gate, a shareholder or group of shareholders acting in concert obtain control of at least half of the Board, excluding any transactions or series of transactions involving a sale or other disposition of securities of Lions Gate by a Thirty-Three Percent Holder;


(vi)	if there is a dissolution or liquidation of Lions Gate; or


(vii)	if there is any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing, excluding any transaction or series of transactions involving a Thirty-Three Percent Holder.

6. HANDBOOK

Employee agrees that the Company Employee Handbook (the “Handbook”) outlines other policies in addition to the terms set forth in this Agreement, which will apply to Employee’s employment with the Company, and Employee acknowledges receipt of the Handbook. Employee acknowledges and agrees that it is Employee’s obligation to read, understand and adhere to the rules and policies set forth in the Handbook. Employee acknowledges and agrees that the Company retains the right to revise, modify or delete any such policy or any employee benefit plan it deems appropriate and in its sole discretion. Please be advised, Employee shall also be obligated to abide by the policies on the Company’s intranet site as not all Company policies are included in the Handbook.

7. PUBLIC MORALS

Employee shall act at all times with due regard to public morals, conventions and Company policies. If Employee shall have committed or does commit any act, or if Employee shall have conducted or does conduct Employee’s behavior in a manner, which:

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(a) shall be an offense involving moral turpitude under federal, state or local laws, or which might tend to bring Employee to public disrepute, contempt, scandal or ridicule; and, (b) has a substantial adverse effect on the business or reputation of the Company, the Company shall have the right to terminate this Agreement upon notice to Employee given at any time following the date on which the commission of such act, or such conduct, shall have become known to the Company pursuant to Section 8(a)(iv)(D) of this Agreement.

8. TERMINATION


(a)	This Agreement and the Term shall terminate upon the happening of any one or more of the following events:


(i)	The mutual written agreement between the Company and Employee;


(ii)	The death of Employee;


(iii)	Employee’s having become so physically or mentally disabled as to be incapable, even with a reasonable accommodation, of satisfactorily performing Employee’s duties hereunder for a period of ninety (90) days or more, provided that Employee has not cured disability within ten (10) days of written notice, and such termination is legally permissible at such time;


(iv)	The determination on the part of the Company that “cause” exists for termination of this Agreement. As used herein, “cause” is defined as the occurrence of any of the following:


(A)	Employee’s conviction of a felony or plea of nolo contendere to a felony (other than a traffic violation);


(B)	commission, by act or omission, of any material act of dishonesty in the performance of Employee’s duties hereunder;


(C)	material breach of this Agreement by Employee; or


(D)	any offense: (i) involving moral turpitude under federal, state or local laws, or which might tend to bring Employee to public disrepute, contempt, scandal or ridicule; and, (ii) which has a substantial adverse effect on the business or reputation of the Company, including but not limited to, a termination pursuant to Section 7 above;

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Prior to terminating Employee’s employment for “cause,” the Company shall provide Employee with written notice of the grounds for the proposed termination. If the grounds for termination are capable of cure, the Employee shall have fifteen (15) days after receiving such notice in which to cure such grounds to the extent such cure is possible. If cure is not possible or Employee has failed to cure, Employee’s employment shall terminate upon the fifteenth (15 ^th ) day following notice of termination.

(v)

Employee is terminated “without cause.” Termination “without cause” shall be defined as Employee being terminated by the Company for any reason other than as set forth in Sections 8(a)(i)-(iv) above. In the event of a termination “without cause,” subject to Employee’s execution and delivery to the Company of a general release of claims in a form acceptable to the Company not more than twenty-one (21) days (or forty-five (45) days, as required by law) after the date the Company provides such release (and Employee’s not revoking such release within any revocation period provided under applicable law), Employee shall be entitled to receive a severance payment equal to the greater of: (A) 50% of the aggregate amount of the Base Salary that Employee would have been entitled to receive pursuant to Section 2(a) hereof for the period commencing on the date of such termination and ending on the last day of the scheduled Term then in effect had Employee continued to be employed with the Company through the last day of the scheduled Term; (B) fifteen (15) months’ Base Salary at the rate then in effect; or, (C) the cash amount Employee would be entitled to pursuant to the Company severance plan in effect at the time of termination. Subject to the release provision set forth above, such payment shall be made in cash in a lump sum as soon as practicable after (and in all events within sixty (60) days after) the date of Employee’s “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) with the Company; provided, however, that if the 60-day period following Employee’s separation from service spans two calendar years, such lump sum payment shall be made within such 60-day period but in the second of the two calendar years. The Company shall provide the final form of release agreement to Employee not later than seven (7) days following the termination date. The Company’s payment of the amount referred to in this Section 8(a)(v), in addition to the Company’s payment of the amounts described in Section 5, Section 8(a)(vii) and the accrued obligations described in Section 8(b) below, shall relieve the Company of any and all obligations to Employee.

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(vi) The foregoing notwithstanding, if: Employee’s employment with the Company terminates without cause as defined in Section 8(a)(v) or for “Good Reason” as defined below, on or within twelve (12) months following a Change of Control or a Change in Management then in lieu of the severance provided in Section 8(a)(v) above, Employee shall be entitled to receive: a severance payment equal to the greater of: (A) 100% of the aggregate amount of the base salary that Employee would have been entitled to receive pursuant to Section 2(a) hereof for the period commencing on the date of such termination and ending on the last day of the scheduled Term then in effect had Employee continued to be employed with the Company through the last day of the scheduled Term; (B) eighteen (18) months’ Base Salary at the rate then in effect; or, (C) the cash amount Employee would be entitled to pursuant to the Company severance plan in effect at the time of termination. Subject to the release provision set forth above, such payment shall be made in cash in a lump sum as soon as practicable after (and in all events within sixty (60) days after) the date of Employee’s “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) with the Company; provided, however, that if the 60-day period following Employee’s separation from service spans two calendar years, such lump sum payment shall be made within such 60-day period but in the second of the two calendar years. The Company shall provide the final form of release agreement to Employee not later than seven (7) days following the termination date. The Company’s payment of the amount referred to in this Section 8(a)(vi), in addition to the Company’s payment of the amounts described in Section 5, Section 8(a)(vii) and the accrued obligations described in Section 8(b) below, shall relieve the Company of any and all obligations to Employee.

For purposes of this Agreement, “Good Reason” shall mean any change in the location of Employee’s principal place of employment with the Company in excess of twenty-five (25) miles, any material diminution by the Company in Employee’s responsibilities as measured against Employee’s responsibilities prior to the Change of Control or Change in Management, as applicable, or any change in the positions to which Employee reports which results in Employee reporting to individuals with a materially lower level of authority than the individuals to whom Employee currently reports; provided, however, that any such condition shall not constitute “Good Reason” unless both (x) Employee provides written notice to the Company of the condition claimed to constitute Good Reason within ninety (90) days of the initial existence of such condition, and (y) the Company fails to remedy such condition within

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thirty (30) days of receiving such written notice thereof; and provided, further, that in all events the termination of Employee’s employment with the Company shall not be treated as a termination for “Good Reason” unless such termination occurs not more than one (1) year following the initial existence of the condition claimed to constitute “Good Reason.” For these purposes, if the Company is purchased by another entity, it shall not be considered a material diminution in responsibility if Employee is made Co-Chief Operating Officer (or similar role) at that other entity.

(vii) In addition, if Employee becomes entitled to receive the severance benefits provided in either Section 8(a)(v) or 8(a)(vi) above and subject to the release requirement set forth therein, Employee shall also be entitled to the following: (A) remaining eligible for payment by the Company of any bonus payable pursuant to Section 2 on a prorated basis for the fiscal year in which such termination of employment occurs based on the amount of such fiscal year worked by Employee (any such bonus to be paid at the time provided in Section 2 above and no such bonus to be payable for any fiscal year subsequent to the year of termination of employment); (B) any amounts due under Section 5(h) above; and, (C) if Employee opts to convert and continue Employee’s health insurance after the termination date, as may be required or authorized by law under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), as amended, Company shall pay Employee’s COBRA premiums for twelve (12) months. The Company’s payment of the amounts referred to herein and in Sections 8(a)(v)-(vi) above, in addition to the Company’s payment of the accrued obligations described in Section 8(b) below, shall relieve the Company of any and all obligations to Employee.

(b) In the event that this Agreement is terminated pursuant to Sections 8(a)(i)-(iv) above, neither the Company nor Employee shall have any remaining duties or obligations hereunder, except that: (i) the Company shall pay to Employee any base salary that had accrued but had not been paid as of the date of termination; (ii) Employee shall be reimbursed for any approved, unreimbursed business expenses so long as appropriate receipts and/or documentation have been provided to Company; (iii) Company shall pay to Employee any vested amounts due as of the termination date under Company benefit plans and/or programs; and, (iv) in the event of a termination pursuant to Sections 8(a)(ii) or 8(a)(iii), Employee shall remain eligible for any amounts due under Sections 2(c) and 5(h) above and the benefits provided in Section 8(a)(vii). Following the termination of the Term and/or this Agreement for any reason, Sections 10-15 shall, notwithstanding anything else herein to the contrary, survive and continue to be binding upon the parties following such termination.

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9. EXCLUSIVITY AND SERVICE

Employee’s services shall be exclusive to the Company during the Term. Employee shall render such services as are customarily rendered by persons in Employee’s capacity in the entertainment industry and as may be reasonably requested by the Company. Employee hereby agrees to comply with all reasonable requirements, directions and requests, and with all reasonable rules and regulations made by the Company in connection with the regular conduct of its business. Employee further agrees to render services during Employee’s employment hereunder whenever, wherever and as often as the Company may reasonably require in a competent, conscientious and professional manner, and as instructed by the Company in all matters, including those involving artistic taste and judgment, but there shall be no obligation on the Company to cause or allow Employee to render any services, or to include all or any of Employee’s work or services in any motion picture or other property or production.

10. INTELLECTUAL PROPERTY

(a) Employee agrees that the Company shall be the sole and exclusive owner throughout the universe in perpetuity of all of the results and proceeds of Employee’s services, work and labor in connection with Employee’s employment by the Company, during the Term and any other period of employment with the Company, free and clear of any claims, liens or encumbrances. Employee shall promptly and fully disclose to the Company, with all necessary detail for a complete understanding of the same, any and all work product, developments, clients and potential client lists, discoveries, inventions, improvements, conceptions, ideas, writings, processes, information, logos, marketing plans, software, formulae, designs, schematics, discoveries, inventions, algorithms, contracts, methods, works, improvements on existing processes, and devices, whether or not patentable or copyrightable, which are conceived, created, reduced to practice, made, acquired, or written by Employee, solely or jointly with another, while employed by the Company (whether or not at the request or upon the suggestion of the Company and whether or not during normal business hours) and which (a) are conceived, created or reduced to practice through any use of Company facilities, resources, information or equipment; (b) relate to the work or services Employee performs or performed for the Company; or (c) relate to the Company’s business or actual or demonstrably anticipated research and development (or that of the Company’s parent, affiliates, or subsidiaries) (collectively, “Proprietary Rights”).

(b) All copyrightable works that Employee conceives, creates or reduces to practice in connection with Employee’s obligations under this Agreement and any other period of employment with the Company, its parent, affiliates, or subsidiaries, whether or not during normal business hours, shall be considered “work made for hire” and therefore the sole and exclusive property of the Company. To the extent any work so produced or other intellectual property so generated by Employee is not deemed to be a “work made for hire,” Employee hereby assigns and transfers and agrees to assign and transfer to the Company (or as otherwise directed by the Company) Employee's full rights, title and

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interests in the Proprietary Rights to the Company or its designee. In addition, Employee shall deliver to the Company any and all drawings, notes, specifications and data relating to the Proprietary Rights. Whenever requested to do so by the Company, Employee shall execute and deliver to the Company any and all applications, assignments and other instruments and do such other acts that the Company shall reasonably request to apply for and obtain patents and/or copyrights in any and all countries or to otherwise protect the Company’s interest in the Proprietary Rights and/or to vest title thereto to the Company. Employee further agrees not to charge the Company for time spent in complying with these obligations. This Section 10 shall apply only to that intellectual property if: (a) it was conceived, created or reduced to practice through any use of Company facilities, resources, information or equipment; (b) it relates to the work or services you perform or performed for the Company; or (c) it relates to the Company’s business or actual or demonstrably anticipated research and development (or that of the Company’s parent, affiliates, or subsidiaries). Employee hereby acknowledges receipt of written notice from the Company pursuant to California Labor Code Section 2872 that this Agreement (to the extent it requires an assignment or offer to assign rights to any invention of Employee) does not apply to an invention which qualifies fully under California Labor Code Section 2870. Without limiting the foregoing, Employee agrees to abide by the provisions contained in the Handbook with respect to intellectual property.

11. ASSIGNMENT AND DELEGATION

Employee shall not assign any of Employee’s rights or delegate any of Employee’s duties granted under this Agreement. Any such assignment or delegation shall be deemed void ab initio .

12. TRADE SECRETS

(a) Employee agrees that during and after Employee’s employment with the Company, Employee will hold in the strictest confidence, and will not use (except for the benefit of the Company during Employee’s employment) or disclose to any person, firm, or corporation (without written authorization of the CEO of the Company) any Company Confidential Information. Employee understands that his unauthorized use or disclosure of Company Confidential Information during Employee’s employment may lead to disciplinary action, up to and including immediate termination and legal action by the Company. Employee understands that “Company Confidential Information” means information that is not generally known to the public and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Employee or to which Employee gained access while employed by the Company concerning (i) the business or affairs of the Company, (ii) products or services, (iii) revenues, costs and pricing structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports, (vii) computer software, including operating systems, applications and program listings, (viii) flow charts, manuals and documentation,

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(ix) data bases, (x) accounting and business methods, (xi) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) customers and clients (and customer or client lists), (xiii) customer preferences and contact information, (xiv) the personnel information of other employees (including, but not limited to, skills, performance, discipline, and compensation), (xv) other copyrightable works, (xvi) all production methods, processes, technology and trade secrets, and (xvii) all similar and related information in whatever form. Confidential Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. Employee further understands that Confidential Information does not include any of the foregoing items that have become publicly known and made generally available through no wrongful act (or failure to act) of Employee or of others who were under confidentiality obligations as to the item or items involved or improvements or new versions thereof. Employee acknowledges that, as between the Company and Employee, all Confidential Information shall be the sole and exclusive property of the Company and its assigns.

(b) Employee agrees that Employee will not, during Employee’s employment with the Company, improperly use or disclose any proprietary information (including, but not limited to, software, source and object code, developments, techniques, inventions, processes, technology, designs and drawings) or trade secrets of any former or concurrent employer or other person or entity and that Employee will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.

(c) Employee recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Employee agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out Employee’s work for the Company consistent with the Company’s agreement with such third party.

(d) Employee agrees that for a period of eighteen (18) months immediately following the termination of Employee’s relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly solicit, encourage or recruit any of the Company’s employees or consultants to become employed or engaged by any third party or Employee, solicit, encourage or recruit any of the Company’s employees or consultants to terminate their employment or consulting relationship with the Company. Employee acknowledges that the covenants in this Section 12(d) are reasonable and necessary to protect the Company’s trade secrets and stable workforce.

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(e) Employee understands that nothing in this Agreement is intended to (i) limit or restrict Employee’s rights as an employee to discuss the terms, wages, and working conditions of Employee’s employment as protected by applicable labor laws; and (ii) limit or restrict in any way Employee’s immunity from liability for disclosing the Company’s trade secrets as specifically permitted by 18 U.S. Code Section 1833, which provides, in pertinent part, as follows:

“(b) Immunity From Liability For Confidential Disclosure Of A Trade Secret To The Government Or In A Court Filing.

(1) Immunity. An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

(2) Use of Trade Secret Information in Anti-Retaliation Lawsuit. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

13. CONFLICTING EMPLOYMENT

(a) Employee agrees that during the term of Employee’s employment with the Company, Employee will not engage in or undertake any other employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved or becomes involved or has plans to become involved, nor will Employee engage in any other activities that conflict with Employee’s obligations to the Company.

(b) Without limiting Section 13(a), Employee represents that Employee has no other agreements, relationships, or commitments to any other person or entity that conflict with Employee’s obligations to the Company under this Agreement or Employee’s ability to become employed and perform the services for which Employee is being hired by the Company. Employee further agrees that if Employee has signed a confidentiality agreement or similar type of agreement with any former employer or other entity, Employee will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. Employee represents and warrants that after undertaking a careful search (including searches of Employee’s computers, cell phones, electronic devices, and

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documents), Employee has returned all property and confidential information belonging to all prior employers. Moreover, Employee agrees to fully indemnify the Company, its directors, officers, agents, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from Employee’s breach of Employee’s obligations under any agreement to which Employee is a party or obligation to which Employee is bound, as well as any reasonable attorneys’ fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.

14. ARBITRATION

Any and all non-time barred, legally actionable dispute, controversy or claim arising under or in connection with this Agreement, the inception or termination of the Employee’s employment, or any alleged discrimination or tort claim related to such employment, including issues raised regarding the Agreement’s enforcement, arbitrability, validity, interpretation or breach, default, or misrepresentation in connection with any of the provisions shall be settled exclusively by individual, final and binding arbitration pursuant to the Federal Arbitration Act (“FAA”), to be held in Los Angeles County, before a single arbitrator selected from Judicial Arbitration and Mediation Services, Inc. (“JAMS”), in accordance with the then-current JAMS Arbitration Rules and Procedures for employment disputes, as modified by the terms and conditions of this Section (which may be found at www.jamsadr.com under the Rules/Clauses tab). The parties will select the arbitrator by mutual agreement or, if the parties cannot agree, then by striking from a list of qualified arbitrators supplied by JAMS from their labor and employment panel. Final resolution of any dispute through arbitration may include any remedy or relief that is provided for through any applicable state or federal statutes, or common law. Statutes of limitations shall be the same as would be applicable were the action to be brought in court. The arbitrator selected pursuant to this Agreement may order such discovery as is necessary for a full and fair exploration of the issues and dispute, consistent with the expedited nature of arbitration. At the conclusion of the arbitration, the arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the arbitrator’s award or decision is based. Any award or relief granted by the arbitrator under this Agreement shall be final and binding on the parties to this Agreement and may be enforced by any court of competent jurisdiction. The Company will pay those arbitration costs that are unique to arbitration, including the arbitrator’s fee (recognizing that each side bears its own deposition, witness, expert and attorneys’ fees and other expenses to the same extent as if the matter were being heard in court). If, however, any party prevails on a statutory claim, which affords the prevailing party attorneys’ fees and costs, then the arbitrator may award reasonable fees and costs to the prevailing party. The arbitrator may not award attorneys’ fees to a party that would not otherwise be entitled to such an award under the applicable statute. The arbitrator shall resolve any dispute as to the reasonableness of any fee or cost. The parties acknowledge and agree that they are hereby waiving any rights to trial by jury or a court in any action or proceeding brought by either of the parties against the other

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in connection with any matter whatsoever arising out of or in any way connected with this Agreement or Employee’s employment .

15. INDEMNIFICATION

Except with respect to claims resulting from Employee’s willful misconduct or acts outside the scope of his employment hereunder, Employee shall continue to be defended, indemnified and held harmless by Company in respect of all claims arising from or in connection with his position or services as an Employee of the Company to the maximum extent permitted in accordance with Lions Gate’s Articles of Incorporation, Bylaws, Board Resolutions and under applicable California and British Columbia law (including, without limitation and as applicable, attorney’s fees), and shall be covered by the Company’s applicable directors and officers insurance policy.

16. INTEGRATION, AMENDMENT, NOTICE, SEVERABILITY, AND FORUM

(a) This Agreement expresses the binding and entire agreement between Employee and the Company and, from and after the Effective Date, shall replace and supersede all prior arrangements and representations, either oral or written, as to the subject matter hereof. Notwithstanding the foregoing, Section 5 of the Prior Agreement, the terms of any equity grants that have been made under any other employment agreements between Company and Employee, and the terms of any equity grants that have been provided by Company to Employee outside the terms of any employment agreement, in each case to the extent the applicable equity award is outstanding on the date hereof, shall remain in full force and effect (subject in each case to Section 5(h)(iv) above).

(b) All modifications or amendments to this Agreement must be made in writing and signed by both parties.

(c) Any notice required herein shall be in writing and shall be deemed to have been duly given when delivered by hand, received via electronic mail or on the depositing of said notice in any U.S. Postal Service mail receptacle with postage prepaid, addressed to the Company at 2700 Colorado Avenue, Suite 200, Santa Monica, California 90404 and to Employee at the address set forth above, or to such address as either party may have furnished to the other in writing in accordance herewith.

(d) If any portion of this Agreement is held unenforceable under any applicable statute or rule of law then such portion only shall be deemed omitted and shall not affect the validity of enforceability of any other provision of this Agreement.

(e) Except for Section 14, which shall be governed by the FAA (both substantively and procedurally), this Agreement shall be governed by the laws of the State of California. The state and federal courts (or arbitrators appointed as described herein) located in Los Angeles, California shall, subject to the arbitration agreement set forth in Section 14 above,

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be the sole forum for any action for relief arising out of or pursuant to the enforcement or interpretation of this Agreement. Each party to this Agreement consents to the personal jurisdiction and arbitration in such forum and courts and each party hereto covenants not to, and waives any right to, seek a transfer of venue from such jurisdiction on any grounds.

17. LIMIT ON BENEFITS

(a) Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement and benefits provided to, or for the benefit of, Employee under any other Company plan or agreement (such payments or benefits are collectively referred to as the “Benefits” for purposes of this Section 17) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the Benefits shall be reduced (but not below zero) if and to the extent that a reduction in the Benefits would result in Employee retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if Employee received all of the Benefits (such reduced amount is referred to hereinafter as the “Limited Benefit Amount”). In such case, unless Employee has given prior written notice to the Company specifying a different order to effectuate the reduction of the Benefits (any such notice consistent with the requirements of Section 409A of the Code to avoid the imputation of any tax, penalty or interest thereunder), the Benefits shall be reduced or eliminated by first reducing or eliminating cash severance payments, then by reducing or eliminating other cash payments, then by reducing or eliminating those payments or benefits which are not payable in cash, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as hereinafter defined). Any notice given by Employee pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing Employee’s rights and entitlements to any benefits or compensation.

(b) A determination as to whether the Benefits shall be reduced to the Limited Benefit Amount pursuant to this Agreement and the amount of such Limited Benefit Amount shall be made by Company’s independent public accountants or another certified public accounting firm of national reputation designated by Lions Gate (the “Accounting Firm”). Company and Employee shall use their reasonable efforts to cause the Accounting Firm to provide its determination (the “Determination”), together with detailed supporting calculations and documentation to Company and Employee within five (5) days of the date of termination of Employee’s employment, if applicable, or such other time as requested by Company or Employee (provided Employee reasonably believes that any of the Benefits may be subject to the Excise Tax), and if the Accounting Firm determines that no Excise Tax is payable by Employee with respect to any Benefits, Company and Employee shall use their reasonable efforts to cause the Accounting Firm to furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Benefits. Unless Employee provides written notice to Company within ten (10)

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days of the delivery of the Determination to Employee that he disputes such Determination, the Determination shall be binding, final and conclusive upon Company and Employee.

18. SECTION 409A

(a) It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the U.S. Internal Revenue Code (including the Treasury regulations and other published guidance relating thereto) (“Code Section 409A”) so as not to subject Employee to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to Employee.

(b) Notwithstanding any provision of this Agreement to the contrary, if Employee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of Employee’s separation from service (as defined above), Employee shall not be entitled to any payment or benefits pursuant to Section 8(a)(v) or 8(a)(vi) and 8(a)(vii) until the earlier of (i) the date which is six (6) months after Employee’s separation from service for any reason other than death, or (ii) the date of Employee’s death. Any amounts otherwise payable to Employee upon or in the six (6) month period following Employee’s separation from service that are not so paid by reason of this paragraph shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after Employee’s separation from service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of Employee’s death). The provisions of this paragraph shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A.

(c) To the extent that any reimbursements pursuant to the provisions of this Agreement are taxable to Employee, any such reimbursement payment shall be paid to Employee on or before the last day of Employee’s taxable year following the taxable year in which the related expense was incurred. The benefits and reimbursements pursuant to such provisions are not subject to liquidation or exchange for another benefit and the amount of such benefits and reimbursements that Employee receives in one taxable year shall not affect the amount of such benefits or reimbursements that Employee receives in any other taxable year.

(d) Each payment made pursuant to any provision of this Agreement shall be considered a separate payment and not one of a series of payments for purposes of Code Section 409A. While it is intended that all payments and benefits provided under this Agreement to Employee will be exempt from or comply with Code Section 409A, the Company makes no representation or covenant to ensure that the payments under this Agreement are exempt from or compliant with Code Section 409A. The Company will have no liability to Employee or any other person or entity if a payment or benefit under this Agreement is challenged by any taxing authority or is ultimately determined not to be

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exempt or compliant. Employee further understands and agrees that he will be entirely responsible for any and all taxes on any benefits payable to him as a result of this Agreement.

Please acknowledge your confirmation of the above terms by signing below where indicated.

Very truly yours,

LIONS GATE ENTERTAINMENT CORP.

/s/ Corii D. Berg

Corii D. Berg

Executive Vice President and General Counsel, Lions Gate Entertainment Corp.

AGREED AND ACCEPTED

This ___ day of __________, 2018

/s/ Brian Goldsmith

BRIAN GOLDSMITH

Exhibit 31.1

CERTIFICATION

I, Jon Feltheimer certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lions Gate Entertainment Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ J ON F ELTHEIMER

Jon Feltheimer

Chief Executive Officer

Date: February 7, 2019

Exhibit 31.2

CERTIFICATION

I, James W. Barge certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lions Gate Entertainment Corp.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ J AMES W . B ARGE

James W. Barge

Chief Financial Officer

Date: February 7, 2019

Exhibit 32.1

WRITTEN STATEMENT

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned officers of Lions Gate Entertainment Corp. (the “Company”), pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, to their knowledge:


(i)	the Form 10-Q of the Company (the “Report”) for the quarterly period ended December 31, 2018 , fully complies with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934; and


(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for the periods presented in this report.



		/s/ J ON F ELTHEIMER
		Jon Feltheimer
		Chief Executive Officer
Date:	February 7, 2019
		/s/ J AMES W. B ARGE
		James W. Barge
		Chief Financial Officer
Date:	February 7, 2019