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Table of Contents
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, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ____________ to  ____________
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)
____________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Class A Voting Common Shares, no par value per share LGF.A New York Stock Exchange
Class B Non-Voting Common Shares, no par value per share LGF.B New York Stock Exchange
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  ☒    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  ☒    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 ☑ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒
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 1, 2021
Class A Voting Common Shares, no par value per share   83,053,499 shares
Class B Non-Voting Common Shares, no par value per share 138,099,538 shares

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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 27, 2020, 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. These factors may also be increased or intensified as a result of events related to the coronavirus (COVID-19 global pandemic), including as a result of the resurgence of the COVID-19 global pandemic due to the increasing rates of infection. The extent to which the COVID-19 global pandemic ultimately impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
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 potential effects of the COVID-19 global pandemic on the Company, economic and business conditions; the substantial investment of capital required to produce and market 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; 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 27, 2020, 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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Table of Contents
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
2020 		March 31,
2020
(Amounts in millions)
ASSETS
Cash and cash equivalents $ 551.5  $ 318.2 
Accounts receivable, net 386.4  522.0 
Program rights —  310.5 
Other current assets 158.7  157.4 
Total current assets 1,096.6  1,308.1 
Investment in films and television programs and program rights, net 1,961.4  1,517.3 
Property and equipment, net 93.8  140.9 
Investments 32.5  40.3 
Intangible assets 1,609.3  1,719.6 
Goodwill 2,833.5  2,833.5 
Other assets 380.9  391.5 
Total assets $ 8,008.0  $ 7,951.2 
LIABILITIES
Accounts payable and accrued liabilities $ 479.6  $ 526.9 
Participations and residuals 477.4  441.9 
Film obligations and production loans 310.1  353.7 
Debt - short term portion 82.7  68.6 
Deferred revenue 141.9  116.6 
Total current liabilities 1,491.7  1,507.7 
Debt 2,562.1  2,664.4 
Participations and residuals 328.2  421.6 
Film obligations and production loans 213.9  96.9 
Other liabilities 382.9  334.9 
Deferred revenue 54.2  61.3 
Deferred tax liabilities 36.4  36.6 
Redeemable noncontrolling interests 191.5  167.8 
Commitments and contingencies (Note 15)
EQUITY
Class A voting common shares, no par value, 500.0 shares authorized, 83.0 shares issued (March 31, 2020 - 83.0 shares issued) 662.1  659.2 
Class B non-voting common shares, no par value, 500.0 shares authorized, 137.9 shares issued (March 31, 2020 - 136.4 shares issued) 2,272.0  2,221.7 
Accumulated deficit (18.8) (16.9)
Accumulated other comprehensive loss (170.1) (206.0)
Total Lions Gate Entertainment Corp. shareholders' equity 2,745.2  2,658.0 
Noncontrolling interests 1.9  2.0 
Total equity 2,747.1  2,660.0 
Total liabilities and equity $ 8,008.0  $ 7,951.2 
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,
2020 2019 2020 2019
  (Amounts in millions, except per share amounts)
Revenues $ 836.4  $ 998.5  $ 2,395.0  $ 2,945.7 
Expenses
Direct operating 459.3  594.6  1,249.0  1,662.0 
Distribution and marketing 176.2  279.1  484.6  791.7 
General and administration 115.6  108.7  343.3  317.3 
Depreciation and amortization 45.8  51.9  142.9  143.0 
Restructuring and other 2.4  3.7  18.9  16.8 
Total expenses 799.3  1,038.0  2,238.7  2,930.8 
Operating income (loss) 37.1  (39.5) 156.3  14.9 
Interest expense (45.0) (48.7) (135.2) (145.7)
Interest and other income 0.5  2.0  2.2  7.0 
Other expense (2.1) (3.6) (4.5) (9.7)
Loss on extinguishment of debt —  (1.4) —  (1.4)
Gain (loss) on investments —  —  0.3  (0.3)
Equity interests loss (0.7) (4.6) (5.1) (15.7)
Income (loss) before income taxes (10.2) (95.8) 14.0  (150.9)
Income tax provision (7.0) (2.0) (6.7) (6.5)
Net income (loss) (17.2) (97.8) 7.3  (157.4)
Less: Net loss attributable to noncontrolling interests 3.3  6.6  11.5  14.0 
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders $ (13.9) $ (91.2) $ 18.8  $ (143.4)
Per share information attributable to Lions Gate Entertainment Corp. shareholders:
Basic net income (loss) per common share $ (0.06) $ (0.42) $ 0.09  $ (0.66)
Diluted net income (loss) per common share $ (0.06) $ (0.42) $ 0.09  $ (0.66)
Weighted average number of common shares outstanding:
Basic 220.8  218.0  220.3  217.2 
Diluted 220.8  218.0  221.4  217.2 
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,
2020 2019 2020 2019
(Amounts in millions)
Net income (loss) $ (17.2) $ (97.8) $ 7.3  $ (157.4)
Foreign currency translation adjustments, net of tax 4.8  (0.9) 5.6  0.5 
Net unrealized gain (loss) on cash flow hedges, net of tax 30.6  23.1  30.3  (43.7)
Comprehensive income (loss) 18.2  (75.6) 43.2  (200.6)
Less: Comprehensive loss attributable to noncontrolling interests 3.3  6.6  11.5  14.0 
Comprehensive income (loss) attributable to Lions Gate Entertainment Corp. shareholders $ 21.5  $ (69.0) $ 54.7  $ (186.6)
See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended
Class A Voting Class B Non-Voting Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Lions Gate Entertainment Corp. Shareholders' Equity Noncontrolling Interests (a)  Total Equity
  Common Shares Common Shares
  Number Amount Number Amount
(Amounts in millions)
Balance at September 30, 2020 82.9  $ 660.8  137.6  $ 2,254.4  $ 2.4  $ (205.5) $ 2,712.1  $ 2.2  $ 2,714.3 
Share-based compensation, net 0.1  1.2  0.3  17.5  —  —  18.7  —  18.7 
Issuance of common shares —  0.1  —  0.1  —  —  0.2  —  0.2 
Noncontrolling interests —  —  —  —  —  —  —  (0.2) (0.2)
Net income (loss) —  —  —  —  (13.9) —  (13.9) (0.1) (14.0)
Other comprehensive income —  —  —  —  —  35.4  35.4  —  35.4 
Redeemable noncontrolling interests adjustments to redemption value —  —  —  —  (7.3) —  (7.3) —  (7.3)
Balance at December 31, 2020 83.0  $ 662.1  137.9  $ 2,272.0  $ (18.8) $ (170.1) $ 2,745.2  $ 1.9  $ 2,747.1 
Balance at September 30, 2019 82.7  $ 652.3  135.2  $ 2,189.0  $ 143.7  $ (145.6) $ 2,839.4  $ 2.9  $ 2,842.3 
Share-based compensation, net 0.1  1.2  0.3  13.7  —  —  14.9  —  14.9 
Issuance of common shares 0.9  8.4  0.8  8.5  —  —  16.9  —  16.9 
Noncontrolling interests —  —  —  —  —  —  —  (0.9) (0.9)
Net income —  —  —  —  (91.2) —  (91.2) 0.2  (91.0)
Other comprehensive loss —  —  —  —  —  22.1  22.1  —  22.1 
Redeemable noncontrolling interests adjustments to redemption value —  —  —  —  (8.0) —  (8.0) —  (8.0)
Balance at December 31, 2019 83.7  $ 661.9  136.3  $ 2,211.2  $ 44.5  $ (123.5) $ 2,794.1  $ 2.2  $ 2,796.3 
_____________________
(a)Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 8).
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LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended
Class A Voting Class B Non-Voting Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Lions Gate Entertainment Corp. Shareholders' Equity Noncontrolling Interests (a)  Total Equity
  Common Shares Common Shares
  Number Amount Number Amount
(Amounts in millions)
Balance at March 31, 2020 83.0  $ 659.2  136.4  $ 2,221.7  $ (16.9) $ (206.0) $ 2,658.0  $ 2.0  $ 2,660.0 
Share-based compensation, net 0.2  3.7  1.5  50.1  —  —  53.8  —  53.8 
Issuance of common shares —  0.2  —  0.2  —  —  0.4  —  0.4 
Repurchase of common shares (0.2) (1.0) —  —  —  —  (1.0) —  (1.0)
Noncontrolling interests —  —  —  —  —  —  —  (0.1) (0.1)
Net income —  —  —  —  18.8  —  18.8  —  18.8 
Other comprehensive income —  —  —  —  —  35.9  35.9  —  35.9 
Redeemable noncontrolling interests adjustments to redemption value —  —  —  —  (20.7) —  (20.7) —  (20.7)
Balance at December 31, 2020 83.0  $ 662.1  137.9  $ 2,272.0  $ (18.8) $ (170.1) $ 2,745.2  $ 1.9  $ 2,747.1 
Balance at March 31, 2019 82.5  $ 649.7  133.5  $ 2,140.6  $ 208.7  $ (80.3) $ 2,918.7  $ 3.2  $ 2,921.9 
Exercise of stock options —  —  0.1  0.5  —  —  0.5  —  0.5 
Share-based compensation, net 0.3  3.7  0.6  33.4  —  —  37.1  —  37.1 
Issuance of common shares 0.9  8.5  2.1  36.7  —  —  45.2  —  45.2 
Noncontrolling interests —  —  —  —  —  —  —  (1.1) (1.1)
Net loss —  —  —  —  (143.4) —  (143.4) 0.1  (143.3)
Other comprehensive loss —  —  —  —  —  (43.2) (43.2) —  (43.2)
Redeemable noncontrolling interests adjustments to redemption value —  —  —  —  (20.8) —  (20.8) —  (20.8)
Balance at December 31, 2019 83.7  $ 661.9  136.3  $ 2,211.2  $ 44.5  $ (123.5) $ 2,794.1  $ 2.2  $ 2,796.3 
_____________________
(a)Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 8).

See accompanying notes.
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LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
December 31,
2020 2019
  (Amounts in millions)
Operating Activities:
Net income (loss) $ 7.3  $ (157.4)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 142.9  143.0 
Amortization of films and television programs and program rights 853.6  1,306.0 
Amortization of debt financing costs and other non-cash interest 30.6  11.2 
Non-cash share-based compensation 60.1  41.4 
Other amortization 51.7  46.1 
Loss on extinguishment of debt —  1.4 
Equity interests loss 5.1  15.7 
Loss (gain) on investments (0.3) 0.3 
Deferred income taxes —  0.8 
Changes in operating assets and liabilities:
Accounts receivable, net and other assets 133.6  271.0 
Investment in films and television programs and program rights, net (984.7) (1,136.1)
Accounts payable and accrued liabilities (7.7) (33.8)
Participations and residuals (58.3) (63.8)
Film obligations (92.6) (3.8)
Deferred revenue 18.0  (7.6)
Net Cash Flows Provided By Operating Activities 159.3  434.4 
Investing Activities:
Proceeds from the sale of other investments 5.1  — 
Investment in equity method investees and other (0.2) (14.8)
Capital expenditures (25.8) (24.0)
Net Cash Flows Used In Investing Activities (20.9) (38.8)
Financing Activities:
Debt - borrowings 160.0  597.1 
Debt - repayments (210.9) (738.6)
Production loans - borrowings 219.2  54.0 
Production loans - repayments (51.9) (290.9)
Interest rate swap settlement payments (15.4) — 
Repurchase of common shares (2.2) — 
Distributions to noncontrolling interest (2.8) (4.5)
Exercise of stock options —  0.5 
Tax withholding required on equity awards (7.0) (3.1)
Net Cash Flows Provided By (Used In) Financing Activities 89.0  (385.5)
Net Change In Cash and Cash Equivalents 227.4  10.1 
Foreign Exchange Effects on Cash and Cash Equivalents 5.9  1.1 
Cash and Cash Equivalents - Beginning Of Period 318.2  184.3 
Cash and Cash Equivalents - End Of Period $ 551.5  $ 195.5 

See accompanying notes.
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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. General
Nature of Operations
Combining the STARZ premium global subscription platform with world-class motion picture and television studio operations, Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) brings a unique and varied portfolio of entertainment to consumers around the world. Its film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and the largest collection of film and television franchises in the independent media space. A digital age company driven by its entrepreneurial culture and commitment to innovation, the Lionsgate brand is synonymous with bold, original, relatable entertainment for the audiences it serves worldwide.
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, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021. The balance sheet at March 31, 2020 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, 2020.
Certain amounts presented in prior periods have been reclassified to conform 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, including the potential impacts arising from the COVID-19 global pandemic, 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 and program rights; estimates of sales returns and other allowances and provisions for doubtful accounts; estimates related to the revenue 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 2021
Fair Value Measurement - Changes to Disclosure Requirements: In August 2018, the Financial Accounting Standards Board ("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. The Company adopted this guidance on April 1, 2020, with no material impact to its consolidated financial statements.

Improvements to Accounting for Costs of Films and License Agreements for Program Materials: On April 1, 2020, the Company adopted, on a prospective basis, FASB guidance on the accounting for costs of films and episodic television series
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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


which aligns the accounting for capitalizing production costs of episodic television series with guidance for films. The following reflects some of the more significant changes under the new guidance:

•Classification in balance sheet: Allows for the classification of licensed program rights as long-term assets. Previously, the Company reported a portion of these rights in current assets. After adoption, the Company now classifies licensed program rights as long-term assets. Accordingly, as of April 1, 2020, the Company has classified $310.5 million of these rights as non-current assets in the balance sheet.

•Removes capitalization constraint for episodic television: The capitalization of production costs for episodic television series is no longer constrained until persuasive evidence of secondary market revenues exists. Previously, theatrical content production costs could be fully capitalized while episodic television production costs were generally limited to the amount of contracted revenues.

•Monetization strategy: Requires the determination of a titles' monetization strategy for purposes of amortization and testing impairment as follows:
◦Monetized individually - lifetime value is predominantly derived from third-party revenues that are directly attributable to the specific film or television title (e.g., theatrical revenues or sales to third-party television programmers).
◦Monetized as a film group - lifetime value is predominantly derived from third-party revenues that are attributable only to a bundle of titles, which is referred to as a "film group" in the updated guidance. A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements.

The determination of the monetization strategy is made at commencement of production on a consolidated basis. Because the new accounting guidance is applied prospectively, the predominant monetization strategy for content released prior to the beginning of fiscal 2021 is determined based on the expected means of monetization over the remaining life of the content. The classification of content as individually monetized or monetized as part of a film group only changes if there is a significant change to the title's monetization strategy relative to its initial assessment.

For these accounting purposes, the Company generally classifies content that is initially intended for use on the Company's Media Networks services (including its linear television networks, OTT services and direct-to-consumer services) as content monetized as a film group. Content initially intended for theatrical release, home entertainment distribution, or for license to third parties, is generally classified as content monetized individually.

•Impairment testing: The new guidance requires that an entity test a film or television program for impairment, when impairment indicators are present, at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements or individually for titles monetized individually. An impairment results when the fair value of the film or film group is less than its carrying value. Under previous guidance, film and television programs accounted for under the broadcasting accounting standard (i.e., licensed product in the Company's Media Networks segment) were carried on the balance sheet at the lower of cost or net realizable value rather than fair value.

See Note 2 for further information.

Financial Instruments - Credit Losses: In June 2016, the FASB issued guidance, as amended, that changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, from the incurred loss methodology under current U.S. GAAP to a new, forward-looking current expected credit loss model that would generally result in the earlier recognition of credit losses. The Company adopted this guidance on April 1, 2020 using a modified retrospective approach, with no material impact to its consolidated financial statements.
Accounting Guidance Not Yet Adopted

Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued guidance that simplifies the accounting for income taxes. The guidance amends the rules for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods. It also reduces complexity in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group. The guidance is effective for the Company's fiscal year beginning April 1, 2021, with early adoption
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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


permitted. The Company does not expect that the adoption of this guidance will have a material effect on its consolidated financial statements.

2. Investment in Films and Television Programs and Licensed Program Rights
Investment in Films and Television Programs
General. Investment in films and television programs includes the unamortized costs of films and television programs, a portion of which are monetized individually (i.e., through domestic theatrical, home entertainment, television, international or other ancillary-market distribution), and a portion of which are monetized as part of a film group (i.e., primarily content internally produced by our Television Production segment for our Media Networks segment).
Recording Cost. Costs of acquiring and producing films and television programs and of acquired libraries are capitalized when incurred. For films and television programs produced by the Company, capitalized costs include all direct production and financing costs, capitalized interest and production overhead. For acquired films and television programs, capitalized costs consist of minimum guarantee payments to acquire the distribution rights.
Amortization. Costs of acquiring and producing films and television programs and of acquired libraries that are monetized individually are amortized using the individual-film-forecast method, whereby these costs are amortized and participations and residuals costs are accrued in the proportion that current year’s revenue bears to management’s estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of the films or television programs.
For investment in films and television programs monetized as a group, see further discussion below under Licensed Program Rights for a description of recording cost and amortization of costs monetized as a group.
Ultimate Revenue. 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 titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.
Development. Films and television programs in development include costs of acquiring film rights to books, stage plays or original screenplays and costs to adapt such projects. Such costs are capitalized and, upon commencement of production, are transferred to production costs. Projects in development are written off at the earlier of the date they are determined not to be recoverable or when abandoned, or three years from the date of the initial investment unless the fair value of the project exceeds its carrying cost.
Licensed Program Rights
General. Licensed program rights include content licensed from third parties that is monetized as part of a film group for distribution on Media Networks distribution platforms. Licensed content is comprised of films or series that have been previously produced by third parties and the Company retains specified airing rights over a contractual term. Program licenses typically have fixed terms and require payments during the term of the license.
Recording Cost. The cost of licensed content is capitalized when the cost is known or reasonably determinable, the license period for programs has commenced, the program materials have been accepted by the Company in accordance with the license agreements, and the programs are available for the first showing. Licensed programming rights may include rights to more than one exploitation window under the Company's 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. Certain license agreements may include additional ancillary rights in addition to the pay television rights. 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.) based on the estimated relative fair values of these markets. Our estimates of fair value for the pay television and ancillary markets and windows of exploitation involve uncertainty and management judgment.
Amortization. The cost of program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on an accelerated or straight-line basis based on the anticipated number of exhibitions or expected and historical viewership patterns or the license period on a title-by-title or episode-by-episode basis. The number of exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the expected usage of the content. Participations and residuals are expensed in line with the amortization of production costs.
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LIONS GATE ENTERTAINMENT CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Changes in management’s estimate of the anticipated exhibitions and viewership patterns of films and original series on our networks could result in the earlier recognition of our programming costs than anticipated. Conversely, scheduled exhibitions and expected viewership patterns 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.
Impairment Assessment for Investment in Films and Television Programs and Licensed Program Rights
General. A film group or individual film or television program is evaluated for impairment when an event or change in circumstances indicates that the fair value of an individual film or film group is less than its unamortized cost. A film group represents the unit of account for impairment testing for a film or license agreement for program material when the film or license agreement is expected to be predominantly monetized with other films and/or license agreements instead of being predominantly monetized on its own. A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements.
Content Monetized Individually. For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), whenever events or changes in circumstances indicate that the fair value of the individual film may be less than its unamortized costs, the unamortized costs of the individual film are compared to the estimated fair value of the individual film. The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title. To the extent the unamortized costs exceed the fair value, an impairment charge is recorded for the excess.
Content Monetized as a Group. For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), whenever events or changes in circumstances indicate that the fair value of the film group may be less than its unamortized costs, the aggregate unamortized costs of the group are compared to the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows are independent of other produced and licensed content. The Company's film groups are generally aligned along the Company's networks and digital content offerings domestically (i.e., Starz Networks and Other Streaming Services) and by territory or groups of territories internationally, wherein content assets are shared across the various territories and therefore, the territory or group of territories is the film group. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group.
Valuation Assumptions. The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement, see Note 7). The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program or film group. The fair value of any film costs associated with a film or television program that management plans to abandon is zero. 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 management’s future revenue estimates.
Impairments. Investment in films and television programs and licensed program rights includes write-downs to fair value, which are included in direct operating expense on the unaudited condensed consolidated statements of operations, and represented the following amounts by segment for the three and nine months ended December 31, 2020 and 2019:
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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,
2020 2019 2020 2019
  (Amounts in millions)
Impairments by segment:
Motion Picture $ 13.7  $ 37.2  $ 14.6  $ 38.8 
Television Production 5.2  —  8.0  0.7 
Impairments not included in segment operating results(1)
—  74.0  15.4  74.0 
$ 18.9  $ 111.2  $ 38.0  $ 113.5 
________________________
(1)Impairments not included in segment operating results in the nine months ended December 31, 2020 represent a charge due to changes in performance expectations resulting from circumstances associated with the COVID-19 global pandemic. In the three and nine months ended December 31, 2019, amounts represent certain programming and content charges recorded as a result of changes to the Company's programming and broadcasting strategy in connection with management changes (see Note 13 and Note 14).
Total investment in films and television programs and licensed program rights by predominant monetization strategy is as follows:
December 31,
2020
  (Amounts in millions)
Investment in Films and Television Programs:
Individual Monetization
Released, net of accumulated amortization $ 389.4 
Completed and not released 139.5 
In progress 304.9 
In development 91.6 
925.4 
Film Group Monetization
Released, net of accumulated amortization $ 229.0 
Completed and not released — 
In progress 292.8 
In development 32.1 
553.9 
Licensed program rights, net of accumulated amortization $ 482.1 
Investment in films and television programs and program rights, net $ 1,961.4 

At December 31, 2020, acquired film and television libraries have remaining unamortized costs of $26.0 million, which are monetized individually and are being amortized using the individual-film-forecast method over a remaining period of approximately 20 years.

Amortization of investment in film and television programs and licensed program rights by predominant monetization strategy is as follows for the three and nine months ended December 31, 2020, and was included in direct operating expense in the unaudited condensed consolidated statement of operations:
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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,
2020 2020
  (Amounts in millions)
Amortization expense:
Individual monetization $ 132.9  $ 361.7 
Film group monetization 78.6  193.2 
Licensed program rights 110.7  298.7 
$ 322.2  $ 853.6 

Amortization of investment in film and television programs and licensed program rights for the three and nine months ended December 31, 2019 was $450.8 million and $1,306.0 million, respectively.

The table below summarizes estimated future amortization expense for the Company's investment in film and television programs and licensed program rights as of December 31, 2020:
Twelve Months Ended
December 31,
2021 2022 2023
  (Amounts in millions)
Estimated future amortization expense:
Released investment in films and television programs:
Individual monetization $ 135.2  $ 64.3  $ 48.0 
Film group monetization $ 102.0  $ 60.7  $ 27.4 
Licensed program rights $ 217.0  $ 87.3  $ 47.8 
Completed and not released investment in films and television programs:
Individual monetization $ 99.4  n/a n/a
Film group monetization $ —  n/a n/a


3. Investments
The Company's investments consisted of the following:
December 31,
2020 		March 31,
2020
  (Amounts in millions)
Investments in equity method investees $ 30.4  $ 34.3 
Other investments(1)
2.1  6.0 
$ 32.5  $ 40.3 
________________
(1)Includes investments in equity securities without readily determinable fair values of nil and $5.4 million at December 31, 2020 and March 31, 2020, respectively.

Equity Method Investments:
The Company has investments in various equity method investees with ownership percentages ranging from approximately 9% to 49%. These investments include:
STARZPLAY Arabia. STARZPLAY Arabia (Playco Holdings Limited) offers a STARZ-branded online subscription video-on-demand service in the Middle East and North Africa.
Roadside Attractions. Roadside Attractions is an independent theatrical distribution company.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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.
Great Point Opportunity Fund. Great Point Opportunity Fund is a partnership to make investments in an operating company that will operate a studio facility in Yonkers, New York.
Other. In addition to the equity method investments discussed above, the Company holds ownership interests in other immaterial equity method investees.
Summarized Financial Information:
STARZPLAY Arabia. Summarized financial information for the Company's equity method investee, STARZPLAY Arabia, is set forth below:
December 31,
2020 		March 31,
2020
  (Amounts in millions)
Current assets $ 30.3  $ 37.0 
Non-current assets $ 49.1  $ 26.0 
Current liabilities $ 131.3  $ 98.8 
Non-current liabilities $ 1.0  $ 0.9 

Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Revenues $ 10.2  $ 9.1  $ 36.6  $ 26.0 
Gross profit $ 0.8  $ 0.9  $ 0.6  $ (0.1)
Net loss $ (8.1) $ (15.1) $ (24.6) $ (36.5)

Other Equity Method Investees. Summarized financial information for all other of the Company's equity method investees on an aggregate basis (excluding STARZPLAY Arabia, which is separately presented above) is set forth below:
December 31,
2020 		March 31,
2020
  (Amounts in millions)
Current assets $ 96.7  $ 101.3 
Non-current assets $ 160.8  $ 136.0 
Current liabilities $ 77.2  $ 68.5 
Non-current liabilities $ 95.1  $ 101.3 

Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Revenues $ 8.0  $ 18.1  $ 28.5  $ 65.7 
Gross profit $ 6.9  $ 10.7  $ 22.1  $ 38.5 
Net loss $ (7.7) $ (6.1) $ (24.9) $ (1.2)


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Gain (Loss) on Investments:

The following table summarizes the components of the gain (loss) on investments:
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Unrealized gains (losses) on equity securities held as of December 31, 2020 and 2019, respectively $ 0.7  $ —  $ 1.4  $ (0.3)
Impairments of equity method investments and other investments(1)
(0.7) —  (5.7) — 
Gain on sale of other investments —  —  4.6  — 
$ —  $ —  $ 0.3  $ (0.3)
________________________
(1)In the nine months ended December 31, 2020, amounts include impairments of $5.0 million on equity securities without readily determinable fair values that were written down to their estimated fair value.

4. Debt

Total debt of the Company, excluding film obligations and production loans, was as follows as of December 31, 2020 and March 31, 2020:
  December 31,
2020 		March 31,
2020
  (Amounts in millions)
Corporate debt:
Revolving Credit Facility $ —  $ — 
Term Loan A 673.1  712.5 
Term Loan B 955.8  965.1 
5.875% Senior Notes 518.7  518.7 
6.375% Senior Notes 545.6  545.6 
Total corporate debt 2,693.2  2,741.9 
Finance lease obligations(1)
0.4  42.4 
Total debt 2,693.6  2,784.3 
Unamortized debt issuance costs, net of fair value adjustment on finance lease obligations (48.8) (51.3)
Total debt, net 2,644.8  2,733.0 
Less current portion (82.7) (68.6)
Non-current portion of debt $ 2,562.1  $ 2,664.4 
________________________
(1)During the nine months ended December 31, 2020, the Company reassessed the lease term of the Starz commercial building, which resulted in a change in classification of this lease from a finance lease to an operating lease (see Note 5 for further information).

Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B)
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, 2020 there was $1.5 billion available. However, borrowing levels are subject to certain financial covenants as discussed below. There were no letters of credit outstanding at December 31, 2020. 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 credit and guarantee agreement dated December 8, 2016, as amended (the "Credit Agreement"), on the total revolving credit facility of $1.5 billion less the amount drawn.
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Maturity Date:
•Revolving Credit Facility & Term Loan A: March 22, 2023.
•Term Loan B: March 24, 2025.
Interest:
•Revolving Credit Facility & Term Loan A: The Revolving Credit Facility and Term Loan A 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 Credit Agreement (effective interest rate of 1.89% as of December 31, 2020, before the impact of interest rate swaps).
•Term Loan B: 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 2.39% as of December 31, 2020, before the impact of interest rate swaps).
Required Principal Payments:
•Term Loan A: Quarterly principal payments, at quarterly rates of 1.25% beginning June 30, 2019, 1.75% beginning June 30, 2020, and 2.50% beginning June 30, 2021 through December 31, 2022, with the balance payable at maturity.
•Term Loan B: Quarterly principal payments 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 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 Credit Agreement) and are secured by a security interest in substantially all of the assets of Lionsgate and the Guarantors (as defined in the 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, 2020, 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 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.
Potential Impact of LIBOR Transition. The Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after the end of 2021. However, for U.S dollar LIBOR, it now appears that the relevant date may be deferred to June 30, 2023 for certain tenors (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S. dollar LIBOR. Despite this potential deferral, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. These actions indicate that the continuation of U.S. LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023. Moreover, it is possible that U.S. LIBOR will be discontinued or modified prior to June 30, 2023.
Under the terms of the Company's Credit Agreement, in the event of the discontinuance of the LIBOR Rate, a mutually agreed-upon alternate benchmark rate will be established to replace the LIBOR Rate. The Company and Lenders (as defined in the Credit Agreement) shall, in good faith, endeavor to establish an alternate benchmark rate that gives due consideration to prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and which places the Lenders and the Company in the same economic position that existed immediately prior to
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


the discontinuation of the LIBOR Rate. The Company does not anticipate that the discontinuance or modification of the LIBOR Rate will materially impact its liquidity or financial position.

5.875% Senior Notes and 6.375% Senior Notes

Interest:
•5.875% Senior Notes: Bears interest at 5.875% annually (payable semi-annually on May and November 1 of each year).
•6.375% Senior Notes: Bears interest at 6.375% annually (payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2019).

Maturity Date:
•5.875% Senior Notes: November 1, 2024.
•6.375% Senior Notes: February 1, 2024.

Optional Redemption:
•5.875% Senior Notes:
(i)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%.
•6.375% Senior Notes:
(i)Prior to February 1, 2021, the 6.375% Senior Notes are redeemable by the Company under certain circumstances (as defined in the indenture governing the 6.375% Senior Notes), in whole at any time, or in part from time to time, at a price equal to 100% of the principal amount of the notes to be redeemed plus the Applicable Premium. 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 February 1, 2021 (see redemption prices below) of the notes redeemed plus interest through February 1, 2021 (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 February 1, 2021, 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 February 1, 2021 - 103.188%; (ii) on or after February 1, 2022 - 101.594%; (iii) on or after February 1, 2023 - 100%.

Security. The 5.875% Senior Notes and 6.375% Senior Notes are unsubordinated, unsecured obligations of the Company.

Covenants. The 5.875% Senior Notes and 6.375% 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, 2020, 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 and 6.375% 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 and 6.375% 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, 2020, the capacity to pay dividends under the Senior Credit Facilities and the 5.875% Senior Notes and the 6.375% Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net income, and therefore the Company's net income of $7.3 million and accumulated deficit of $18.8 million were deemed free of restrictions from paying dividends at December 31, 2020.
Loss on Extinguishment of Debt
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During the three and nine months ended December 31, 2019, the Company recorded a loss on extinguishment of debt of $1.4 million related to early repayments of $101.9 million in principal outstanding on the Term Loan B. There was no loss on extinguishment of debt in the three and nine months ended December 31, 2020.



5. Leases
The Company has operating leases primarily for office space, studio facilities, and other equipment. The Company also has a finance lease for a satellite transponder, and through the first quarter ended June 30, 2020 the Company had classified its lease for the Starz commercial building as a finance lease. During the second quarter ended September 30, 2020, due to a change in the expected lease term of the Starz commercial building, the Company reassessed the lease classification of the Starz commercial building, which resulted in a change in classification of this lease from a finance lease to an operating lease. As a result, the right-of-use assets and lease liabilities (including the fair value adjustment) under finance leases decreased by $42.0 million and $48.6 million, respectively, and the right-of-use assets and lease liabilities under operating leases increased by $6.0 million and $12.6 million, respectively in the nine months ended December 31, 2020. The Company's leases have remaining lease terms of up to approximately 10 years.
Supplemental balance sheet information related to leases was as follows:
Category Balance Sheet Location December 31,
2020 		March 31,
2020
Operating Leases (Amounts in millions)
Right-of-use assets Other assets - non-current $ 128.7  136.9 
Lease liabilities (current) Accounts payable and accrued liabilities $ 39.9  35.3 
Lease liabilities (non-current) Other liabilities - non-current 122.8  129.6 
$ 162.7  164.9 
Finance Leases
Right-of-use assets Property and equipment, net $ 0.8  46.4 
Lease liabilities (current) Debt - short-term portion $ 0.4  3.0 
Lease liabilities (non-current) Debt - non-current —  39.4 
$ 0.4  42.4 

December 31,
2020 		March 31,
2020
Weighted average remaining lease term (in years):
Operating leases 5.4 6.1
Finance leases 0.2 21.6
Weighted average discount rate:
Operating leases 3.90  % 4.10  %
Finance leases 7.00  % 6.40  %
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


The expected future payments relating to the Company's operating and finance lease liabilities at December 31, 2020 are as follows:
Operating Leases Finance Leases
(Amounts in millions)
Three months ending March 31, 2021 $ 13.5  $ 0.4 
Year ending March 31,
2022 40.9  — 
2023 37.5  — 
2024 25.3  — 
2025 15.0  — 
Thereafter 49.4  — 
Total lease payments 181.6  0.4 
Less imputed interest (18.9) — 
Total $ 162.7  $ 0.4 

6. Film Obligations and Production Loans
 
December 31,
2020 		March 31,
2020
  (Amounts in millions)
Film obligations $ 205.1  $ 299.3 
Production loans 320.1  151.4 
Total film obligations and production loans 525.2  450.7 
Unamortized debt issuance costs (1.2) (0.1)
Total film obligations and production loans, net 524.0  450.6 
Less current portion (310.1) (353.7)
Total non-current film obligations and production loans $ 213.9  $ 96.9 
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 LIBOR-based interest at rates ranging from 2.28% to 2.96% (before the impact of interest rate swaps, see Note 16 for interest rate swaps).


7. 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
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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, 2020 and March 31, 2020:
December 31, 2020 March 31, 2020
Level 1 Level 2 Total Level 1 Level 2 Total
Assets: (Amounts in millions)
Available-for-sale equity securities $ 2.1  $ —  $ 2.1  $ 0.6  $ —  $ 0.6 
Forward exchange contracts (see Note 16) —  2.3  2.3  —  0.6  0.6 
Interest rate swaps (see Note 16)(1)
—  110.5  110.5  —  —  — 
Liabilities:
Forward exchange contracts (see Note 16) —  (1.0) (1.0) —  (0.9) (0.9)
Interest rate swaps (see Note 16) —  (121.1) (121.1) —  (187.9) (187.9)
________________
(1)Amounts exclude $100.7 million of financing component of interest rate swaps presented in the table below.
The following table sets forth the carrying values and fair values of the Company’s outstanding debt and interest rate swaps at December 31, 2020 and March 31, 2020:
 
December 31, 2020 March 31, 2020
(Amounts in millions)
Carrying
Value
Fair Value(1)
Carrying Value
Fair Value(1)
(Level 2) (Level 2)
Term Loan A $ 663.5  $ 652.9  $ 699.8  $ 637.7 
Term Loan B 945.3  931.9  952.9  845.7 
5.875% Senior Notes 506.1  526.5  504.0  430.5 
6.375% Senior Notes 540.4  559.3  539.2  452.9 
Production loans 318.9  320.1  151.3  151.3 
Financing component of interest rate swaps(2)
156.9  154.9  —  — 
________________
(1)The Company measures the fair value of its outstanding debt and interest rate swaps using discounted cash flow techniques that use observable market inputs, such as LIBOR-based yield curves, swap rates, and credit ratings (Level 2 measurements).
(2)Amounts include $100.7 million recorded as a reduction of assets under master netting arrangements.

The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, other liabilities, borrowings under the Revolving Credit Facility, if any, and finance lease obligations. The carrying values of these financial instruments approximated the fair values at December 31, 2020 and March 31, 2020.


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8. Noncontrolling Interests
Redeemable Noncontrolling Interests

The table below presents the reconciliation of changes in redeemable noncontrolling interests:
Nine Months Ended
December 31,
2020 2019
(Amounts in millions)
Beginning balance $ 167.8  $ 127.6 
Net loss attributable to redeemable noncontrolling interests (11.6) (14.1)
Noncontrolling interests discount accretion 17.1  19.1 
Adjustments to redemption value 20.7  20.8 
Cash distributions (2.5) (3.3)
Ending balance $ 191.5  $ 150.1 

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.

3 Arts Entertainment. 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.

Pilgrim Media Group. The noncontrolling interest holder has a right to put and the Company has a right to call a portion of the noncontrolling interest, equal to 17.5% of Pilgrim Media Group, at fair value, until February 19, 2021, as amended. In addition, the noncontrolling interest holder has a right to put and the Company has a right to call the remaining amount of noncontrolling interest at fair value, subject to a cap, exercisable at seven years after the acquisition date of November 12, 2015.

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 or accumulated deficit.
Other Noncontrolling Interests

The Company has other noncontrolling interests that are not redeemable.



9. Revenue

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, other direct-to-consumer content streaming services and other distribution revenue.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Revenue by Segment, Market or Product Line
The table below presents revenues by segment, market or product line for the three and nine months ended December 31, 2020 and 2019:
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
(Amounts in millions)
Revenue by Type:
Motion Picture
Theatrical $ 1.8  $ 109.0  $ 2.1  $ 316.5 
Home Entertainment
Digital Media 123.1  115.5  367.0  312.1 
Packaged Media 36.4  75.4  109.8  197.0 
Total Home Entertainment 159.5  190.9  476.8  509.1 
Television 36.2  74.5  153.9  177.7 
International 48.0  96.1  146.0  256.6 
Other 4.8  3.4  9.8  17.7 
Total Motion Picture revenues 250.3  473.9  788.6  1,277.6 
Television Production
Television 119.7  144.2  332.3  526.4 
International 26.0  17.4  120.4  113.3 
Home Entertainment
Digital Media 58.0  10.0  119.8  47.6 
Packaged Media 3.1  0.6  4.9  2.2 
Total Home Entertainment 61.1  10.6  124.7  49.8 
Other 21.4  17.2  43.6  53.7 
Total Television Production revenues 228.2  189.4  621.0  743.2 
Media Networks - Programming Revenues
Domestic(1)
388.5  376.3  1,119.8  1,115.2 
International 17.7  6.1  41.9  13.6 
406.2  382.4  1,161.7  1,128.8 
Intersegment eliminations (48.3) (47.2) (176.3) (203.9)
Total revenues $ 836.4  $ 998.5  $ 2,395.0  $ 2,945.7 
___________________
(1)Media Networks domestic revenues include revenue from the Company's Other Streaming Services product line of $13.2 million and $38.0 million, respectively, in the three and nine months ended December 31, 2020 (2019 - $8.7 million and $22.8 million, respectively).
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, 2020 are as follows:
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Rest of Year Ending March 31, 2021 Year Ending March 31,
2022 2023 Thereafter Total
(Amounts in millions)
Remaining Performance Obligations $ 491.8  $ 694.2  $ 196.9  $ 219.6  $ 1,602.5 
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 $57.7 million and $217.0 million, respectively, including variable and fixed fee arrangements, were recognized during the three and nine months ended December 31, 2020, respectively, from performance obligations satisfied prior to March 31, 2020. 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.

Accounts Receivable, 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, 2020 and March 31, 2020, accounts receivable, contract assets and deferred revenue are as follows.
Item Balance Sheet Location December 31,
2020 		March 31,
2020 		Addition (Reduction)
  (Amounts in millions)
Accounts receivable, net - current Accounts receivable, net $ 386.4  $ 522.0  $ (135.6)
Accounts receivable, net - non-current Other assets - non-current 49.9  53.6  (3.7)
Contract asset - current
Other assets - current(1)
16.1  18.8  (2.7)
Contract asset - non-current
Other assets - non-current(1)
4.2  10.5  (6.3)
Deferred revenue - current Deferred revenue - current 141.9  116.6  25.3 
Deferred revenue - non-current Deferred revenue - non-current 54.2  61.3  (7.1)
__________________
(1)Included in prepaid expenses and other (see Note 17).

Accounts Receivable. Accounts receivable are presented net of a provision for doubtful accounts. The Company estimates provisions for accounts receivable based on historical experience for the respective risk categories and current and future expected economic conditions. To assess collectibility, the Company analyzes market trends, economic conditions, the aging of receivables and customer specific risks, and records a provision for estimated credit losses expected over the lifetime of the receivables in direct operating expense.

The Company performs ongoing credit evaluations and monitors its credit exposure through active review of customers' financial condition, aging of receivable balances, historical collection trends, and expectations about relevant future events that may significantly affect collectibility. The Company generally does not require collateral for its trade accounts receivable.

Changes in the provision for doubtful accounts consisted of the following:
March 31, 2020
(Benefit) provision for doubtful accounts(1)
Uncollectible accounts written-off December 31,
2020
(Amounts in millions)
Trade accounts receivable $ 9.3  $ (0.6) $ (0.2) $ 8.5 
_______________________
(1)Represents collections on accounts receivable previously reserved.
Contract Assets. 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
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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 the balance of contract assets is primarily due to the satisfaction of the condition related to payment holdbacks.

Deferred Revenue. Deferred revenue relates primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation. Revenues of $18.0 million and $76.2 million were recognized during the three and nine months ended December 31, 2020, respectively, related to the balance of deferred revenue at March 31, 2020.


10. 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, 2020 and 2019 is presented below:
 
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (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 $ (13.9) $ (91.2) $ 18.8  $ (143.4)
Denominator:
Weighted average common shares outstanding 220.8  218.0  220.3  217.2 
Basic net income (loss) per common share $ (0.06) $ (0.42) $ 0.09  $ (0.66)

Diluted net income (loss) per common share reflects share purchase options, including 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, 2020 and 2019 is presented below:
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
(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 $ (13.9) $ (91.2) $ 18.8  $ (143.4)
Denominator:
Weighted average common shares outstanding 220.8  218.0  220.3  217.2 
Effect of dilutive securities:
Share purchase options —  —  0.1  — 
Restricted share units and restricted stock —  —  1.0  — 
Adjusted weighted average common shares outstanding 220.8  218.0  221.4  217.2 
Diluted net income (loss) per common share $ (0.06) $ (0.42) $ 0.09  $ (0.66)
As a result of the net loss in the three months ended December 31, 2020 and the three and nine months ended December 31, 2019, the dilutive effect of the share purchase options, restricted share units and restricted stock, and contingently issuable shares were considered anti-dilutive and, therefore, excluded from diluted net loss per share. The weighted average anti-dilutive shares excluded from the calculation due to the net loss for the three months ended December 31, 2020 totaled 1.9 million (three and nine months ended December 31, 2019 - 1.9 million and 2.8 million, respectively).
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Additionally, for the three and nine months ended December 31, 2020 and 2019, 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 regardless of net income or loss in the period.
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Anti-dilutive shares issuable
Share purchase options 23.8  33.7  26.6  31.4 
Restricted share units 1.3  2.5  1.8  2.4 
Other issuable shares 2.8  5.2  3.5  3.7 
Total weighted average anti-dilutive shares issuable excluded from diluted net income (loss) per common share 27.9  41.4  31.9  37.5 





11. 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, 2020 and March 31, 2020. The table below outlines common shares reserved for future issuance:
 
December 31,
2020 		March 31,
2020
  (Amounts in millions)
Stock options and SARs outstanding 26.8  35.7 
Restricted stock and restricted share units — unvested 9.1  3.7 
Common shares available for future issuance 15.5  11.5 
Shares reserved for future issuance 51.4  50.9 


(b) Share-based Compensation

On September 15, 2020, the Company’s shareholders approved an amendment to the Lions Gate Entertainment Corp. 2019 Performance Incentive Plan (the “2019 Plan”) previously adopted by the Board of Directors of the Company to increase the maximum number of the Company’s common shares that may be issued or transferred pursuant to awards under the 2019 Plan by an additional 10.0 million shares so that the new aggregate share limit under the 2019 Plan is 16.1 million common shares (not including shares that were originally approved for issuance under the Company’s prior stock incentive plans that have become available for issuance under the 2019 Plan pursuant to the terms of the 2019 Plan).

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


The Company recognized the following share-based compensation expense during the three and nine months ended December 31, 2020 and 2019:
 
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Compensation Expense:
Stock options $ 4.4  $ 5.5  $ 13.7  $ 14.3 
Restricted share units and other share-based compensation 14.3  9.8  37.6  23.1 
Share appreciation rights 1.3  1.9  5.9  3.6 
20.0  17.2  57.2  41.0 
Impact of accelerated vesting on equity awards(1)
—  —  2.8  0.3 
Total share-based compensation expense $ 20.0  $ 17.2  $ 60.0  $ 41.3 
Tax impact(2)
(3.9) (3.6) (12.2) (8.7)
Reduction in net income $ 16.1  $ 13.6  $ 47.8  $ 32.6 
___________________
(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 unaudited condensed consolidated statements of operations for share-based compensation arrangements prior to the effects of changes in the valuation allowance.

Share-based compensation expense, by expense category, consisted of the following:
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Share-Based Compensation Expense:
Direct operating $ 0.5  $ 0.7  $ 1.5  $ 1.1 
Distribution and marketing 0.2  0.2  0.5  0.4 
General and administration 19.3  16.3  55.2  39.5 
Restructuring and other —  —  2.8  0.3 
$ 20.0  $ 17.2  $ 60.0  $ 41.3 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


The following table sets forth the stock option, SARs, restricted stock and restricted share unit activity during the nine months ended December 31, 2020:
Stock Options and 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
(Number of shares in millions)
Outstanding at March 31, 2020 7.2  $26.21 28.5  $19.03 — 
(1)
$14.89 3.8  $14.63
Granted —  —  4.9 
(2)
$8.74 — 
(1)
$9.87 8.1  $7.80
Options exercised or restricted stock or RSUs vested —  —  — 
(1)
7.13  — 
(1)
$16.57 (2.4) $14.48
Awards canceled in exchange program (1.1) $31.56 (4.1) $26.49 —  —  —  — 
Awards issued in exchange program 0.1  $7.70 0.8  $7.13 —  —  —  — 
Forfeited or expired (0.7) $31.28 (8.8) $16.49 —  —  (0.4) $8.82
Outstanding at December 31, 2020 5.5  $24.20 21.3  $15.82 — 
(1)
$11.10 9.1  $8.81
__________________
(1)Represents less than 0.1 million shares.
(2)During the nine months ended December 31, 2020, the Company granted 3.6 million SARs.
Exchange Program

On January 10, 2020, the Company’s Board of Directors authorized, and on April 2, 2020, the Company’s shareholders approved, a stock option and share appreciation rights exchange program (the “Exchange Program”) that permitted certain current employees to exchange certain outstanding stock options and share appreciation rights with exercise prices substantially above the current market price of the Company’s Class A voting shares and the Company’s Class B non-voting shares for a lesser number of stock options and share appreciation rights that have a fair value that is lower than the fair value of the “out of the money” stock options and share appreciation rights. The program began on April 9, 2020 and was completed on May 7, 2020. As a result of this program 1.1 million outstanding eligible stock options and share appreciation rights of Class A voting shares were exchanged for 0.1 million new stock options and share appreciation rights at an exercise price of $7.70 per share and 4.3 million outstanding eligible stock options and share appreciation rights of Class B non-voting shares were exchanged for 0.8 million new stock options and share appreciation rights at an exercise price of $7.13.

(c) Share Repurchases
During the three months ended December 31, 2020, the Company did not repurchase any common shares. During the nine months ended December 31, 2020, the Company repurchased 0.2 million of its Class A voting shares for an aggregate cost of $1.0 million, with an average repurchase price per share of $5.75. During the three and nine months ended December 31, 2019 the Company did not repurchase any common shares. To date, approximately $288.1 million common shares have been repurchased, leaving approximately $179.9 million of authorized potential repurchases.

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12. Income Taxes
The income tax provision for the three and nine months ended December 31, 2020 is calculated by estimating the Company's annual effective tax rate (estimated annual tax provision divided by estimated annual income before income taxes), and then applying the effective tax rate to income before income taxes for the period, plus or minus the tax effects of items that relate discretely to the period, if any. 
For the three and nine months ended December 31, 2019, the Company determined that a small change in its estimated pretax results for the year ended March 31, 2020 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, for the three and nine months ended December 31, 2019, the Company computed its tax provision using the cut-off method, which reflects the actual taxes attributable to year-to-date earnings or losses.
The Company's income tax provision 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, changes in the valuation allowance against the Company's deferred tax assets, and certain minimum taxes and foreign withholding taxes. The Company's income tax provision for the three and nine months ended December 31, 2020 was also impacted by the change in uncertain tax benefits due to the expiration of statutory limitations and additional settlements with tax authorities.
The Company's income tax provision 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, changes in uncertain tax positions, further interpretation and legislative guidance regarding the new Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items.

13. Restructuring and Other

Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable. During the three and nine months ended December 31, 2020, the Company also incurred certain other unusual charges related to the COVID-19 global pandemic, and during the three and nine months ended December 31, 2019, certain other unusual charges related to programming write-downs, which are included in direct operating and distribution and marketing expense in the unaudited condensed consolidated statement of operations. The following table sets forth restructuring and other and these unusual programming and COVID-19 related charges and the statement of operations line items they are included in for the three and nine months ended December 31, 2020 and 2019:
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Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Restructuring and other:
Severance(1)
Cash $ 0.9  $ 1.8  $ 11.6  $ 7.7 
Accelerated vesting on equity awards (see Note 11) —  —  2.8  0.3 
Total severance costs 0.9  1.8  14.4  8.0 
COVID-19 related charges included in restructuring and other(2)
0.8  —  1.6  — 
Transaction and related costs(3)
0.7  1.9  2.9  8.8 
Total Restructuring and Other 2.4  3.7  18.9  16.8 
Programming and content charges and COVID-19 related charges not included in restructuring and other:
Programming and content charges included in direct operating expense(4)
—  74.0  —  74.0 
COVID-19 related charges included in:
Direct operating expense(5)
8.6  —  36.6  — 
Distribution and marketing expense(5)
5.4  —  16.1  — 
Total restructuring and other, programming and content charges, and COVID-19 related charges $ 16.4  $ 77.7  $ 71.6  $ 90.8 
_______________________
(1)Severance costs in the three and nine months ended December 31, 2020 and 2019 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.
(2)During the three and nine months ended December 31, 2020, the Company has incurred certain costs including costs primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.
(3)Transaction and related costs in the three and nine months ended December 31, 2020 and 2019 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
(4)In the three months ended December 31, 2019, in connection with management changes, the Company implemented changes to its programming and broadcasting strategy including programming acquired or produced under prior management. As a result, the Company recorded certain programming and content charges of $74.0 million in the three and nine months ended December 31, 2019, which are included in direct operating expense in the unaudited condensed consolidated statement of operations.
(5)In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of theaters, international travel restrictions and the pausing of motion picture and television productions, during the three and nine months ended December 31, 2020 the Company incurred certain incremental costs which were expensed in the period. The costs included in direct operating expense primarily represent incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, and in the nine months ended December 31, 2020 include film impairment due to changes in performance expectations resulting from circumstances associated with the COVID-19 global pandemic. In addition, the costs included in distribution and marketing expense primarily consist of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit. The Company is in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore no material amounts of insurance proceeds have been recorded in the consolidated financial statements.

Changes in the restructuring and other severance liability were as follows for the nine months ended December 31, 2020 and 2019:
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Nine Months Ended
December 31,
2020 2019
  (Amounts in millions)
Severance liability
Beginning balance $ 11.1  $ 14.7 
Accruals 11.6  17.0 
Severance payments (15.7) (13.0)
Ending balance(1)
$ 7.0  $ 18.7 
_______________________
(1)As of December 31, 2020, the remaining severance liability of approximately $7.0 million is expected to be paid in the next 12 months.

14. 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.
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. Television Production includes the licensing of Starz original series productions to Starz Networks and STARZPLAY International, and the ancillary market distribution of Starz original productions and licensed product. Additionally, the Television Production segment includes the results of operations of 3 Arts Entertainment.
Media Networks. Media Networks consists of the following product lines (i) Starz Networks, which includes the domestic licensing of premium subscription video programming to distributors, and on a direct-to-consumer basis (ii) STARZPLAY International, which represents revenues primarily from the OTT distribution of the Company's STARZ branded premium subscription video services internationally and (iii) Other Streaming Services, which represents primarily our majority owned premium Spanish language streaming services business, Pantaya.
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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Segment information is presented in the table below:
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Segment revenues
Motion Picture $ 250.3  $ 473.9  $ 788.6  $ 1,277.6 
Television Production 228.2  189.4  621.0  743.2 
Media Networks 406.2  382.4  1,161.7  1,128.8 
Intersegment eliminations (48.3) (47.2) (176.3) (203.9)
$ 836.4  $ 998.5  $ 2,395.0  $ 2,945.7 
Intersegment revenues
Motion Picture $ 6.5  $ 3.8  $ 16.7  $ 13.9 
Television Production 41.8  42.8  159.6  188.2 
Media Networks —  0.6  —  1.8 
$ 48.3  $ 47.2  $ 176.3  $ 203.9 
Gross contribution
Motion Picture $ 76.2  $ 74.0  $ 313.9  $ 183.7 
Television Production 39.0  4.4  105.8  58.8 
Media Networks 104.5  124.4  311.6  330.0 
Intersegment eliminations (4.0) 2.0  (14.3) 2.6 
$ 215.7  $ 204.8  $ 717.0  $ 575.1 
Segment general and administration
Motion Picture $ 26.2  $ 25.0  $ 79.8  $ 76.1 
Television Production 9.5  10.1  31.5  26.9 
Media Networks 22.8  22.3  65.3  62.7 
$ 58.5  $ 57.4  $ 176.6  $ 165.7 
Segment profit
Motion Picture $ 50.0  $ 49.0  $ 234.1  $ 107.6 
Television Production 29.5  (5.7) 74.3  31.9 
Media Networks 81.7  102.1  246.3  267.3 
Intersegment eliminations (4.0) 2.0  (14.3) 2.6 
$ 157.2  $ 147.4  $ 540.4  $ 409.4 

The Company's primary measure of segment performance is segment profit. Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses. Segment profit excludes corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, and, when applicable, certain charges related to the COVID-19 global pandemic and purchase accounting and related adjustments. The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enables them to understand the fundamental performance of the Company's businesses. Media Networks gross contribution and segment profit for the three and nine months ended December 31, 2019 includes a benefit of $4.6 million and $41.3 million, respectively, in direct operating expenses associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates.

The reconciliation of total segment profit to the Company’s income (loss) before income taxes is as follows:
 
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Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Company’s total segment profit $ 157.2  $ 147.4  $ 540.4  $ 409.4 
Corporate general and administrative expenses (23.4) (23.4) (76.9) (73.0)
Adjusted depreciation and amortization(1)
(10.8) (10.5) (32.9) (31.5)
Restructuring and other(2)
(2.4) (3.7) (18.9) (16.8)
COVID-19 related charges included in direct operating expense and distribution and marketing expense(3)
(14.0) —  (52.7) — 
Programming and content charges(4)
—  (74.0) —  (74.0)
Adjusted share-based compensation expense(5)
(20.0) (17.2) (57.2) (41.0)
Purchase accounting and related adjustments(6)
(49.5) (58.1) (145.5) (158.2)
Operating income (loss) 37.1  (39.5) 156.3  14.9 
Interest expense (45.0) (48.7) (135.2) (145.7)
Interest and other income 0.5  2.0  2.2  7.0 
Other expense (2.1) (3.6) (4.5) (9.7)
Loss on extinguishment of debt —  (1.4) —  (1.4)
Gain (loss) on investments —  —  0.3  (0.3)
Equity interests loss (0.7) (4.6) (5.1) (15.7)
Income (loss) before income taxes $ (10.2) $ (95.8) $ 14.0  $ (150.9)
___________________
(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,
2020 2019 2020 2019
  (Amounts in millions)
Depreciation and amortization $ 45.8  $ 51.9  $ 142.9  $ 143.0 
Less: Amount included in purchase accounting and related adjustments (35.0) (41.4) (110.0) (111.5)
Adjusted depreciation and amortization $ 10.8  $ 10.5  $ 32.9  $ 31.5 
(2)Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable (see Note 13).
(3)In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, during the three and nine months ended December 31, 2020 the Company has incurred $14.0 million and $52.7 million, respectively, in incremental direct operating and distribution and marketing expense (see Note 13). These charges are excluded from segment operating results.
(4)In the three months ended December 31, 2019, in connection with management changes, the Company implemented changes to its programming and broadcasting strategy including programming acquired or produced under prior management. As a result, the Company recorded certain programming and content charges of $74.0 million in the three and nine months ended December 31, 2019, which are included in direct operating expense in the unaudited condensed consolidated statement of operations.
(5)The following table reconciles total share-based compensation expense to adjusted share-based compensation expense:
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Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Total share-based compensation expense $ 20.0  $ 17.2  $ 60.0  $ 41.3 
Less:
Amount included in restructuring and other(i)
—  —  (2.8) (0.3)
Adjusted share-based compensation $ 20.0  $ 17.2  $ 57.2  $ 41.0 
(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.
(6)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 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,
2020 2019 2020 2019
  (Amounts in millions)
Purchase accounting and related adjustments:
Direct operating $ 0.1  $ 5.1  $ 0.9  $ 7.6 
General and administrative expense 14.4  11.6  34.6  39.1 
Depreciation and amortization 35.0  41.4  110.0  111.5 
$ 49.5  $ 58.1  $ 145.5  $ 158.2 

See Note 9 for revenues by media or product line as broken down by segment for the three and nine months ended December 31, 2020 and 2019.

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,
2020 2019 2020 2019
(Amounts in millions)
General and administration
Segment general and administrative expenses $ 58.5  $ 57.4  $ 176.6  $ 165.7 
Corporate general and administrative expenses 23.4  23.4  76.9  73.0 
Share-based compensation expense included in general and administrative expense 19.3  16.3  55.2  39.5 
Purchase accounting and related adjustments 14.4  11.6  34.6  39.1 
$ 115.6  $ 108.7  $ 343.3  $ 317.3 

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The reconciliation of total segment assets to the Company’s total consolidated assets is as follows:
 
December 31,
2020 		March 31,
2020
  (Amounts in millions)
Assets
Motion Picture $ 1,255.8  $ 1,266.9 
Television Production 1,433.6  1,414.8 
Media Networks 4,516.2  4,671.4 
Other unallocated assets(1)
802.4  598.1 
$ 8,008.0  $ 7,951.2 
_____________________
(1)Other unallocated assets primarily consist of cash, other assets and investments.


15. Contingencies

From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business.

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.

Insurance 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"). 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 provided 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 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. The Company is continuing to seek additional insurance reimbursement, including pursuant to a lawsuit filed by the Company on November 7, 2018 against certain insurers.

On November 5, 2018, an insurer that entered into an agreement and contributed $10.0 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.


16. 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
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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, 2020, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 13 months from December 31, 2020):
December 31, 2020
Foreign Currency Foreign Currency Amount US Dollar Amount Weighted Average Exchange Rate Per $1 USD
  (Amounts in millions) (Amounts in millions)
British Pound Sterling £4.7  in exchange for $6.0  £0.78
Hungarian Forint HUF 2,085.0  in exchange for $7.1  HUF 293.74
Euro €0.7  in exchange for $0.9  €0.84
Canadian Dollar C$14.8  in exchange for $11.3  C$1.31
Croatian Kuna HRK3.3  in exchange for $0.5  HRK6.32
Czech Koruna CZK177.1  in exchange for $7.7  CZK23.01


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 generally 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 designated cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur. Changes in the fair value of interest rate swaps that are not designated as hedges are recorded in interest expense (see further explanation below).

As of March 31, 2020, the Company had the following pay-fixed interest rate swaps outstanding (all related to the Company's LIBOR-based debt, see Note 4 and 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
Total $1,700.0 

During the nine months ended December 31, 2020, the Company completed a series of transactions to amend and extend certain interest rate swap agreements. These transactions effectively replaced $1.4 billion of the interest rate swaps presented in the table above, and resulted in an extension of the maturity date on an aggregate of $1.4 billion of the Company's interest rate swaps by an additional 2 to 5 years, subject to mandatory early termination dates, and a decrease of the weighted average fixed pay rate from 2.870% to 2.250% per annum.

These interest rate swap transactions consisted of the following in the nine months ended December 31, 2020: (i) $1.4 billion of the interest rate swaps presented in the table above were de-designated as cash flow hedges, (ii) the Company entered
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into $1.4 billion of pay-variable receive-fixed interest rate swaps which are designed to offset the terms of the $1.4 billion of swaps in (i) and which are not designated as cash flow hedges, and (iii) the Company entered into $1.4 billion of new pay-fixed interest rate swaps with extended maturities. These new pay-fixed interest rate swaps are considered hybrid instruments with a financing component and an embedded at-market derivative that was designated as a cash flows hedge (see discussion of cash flow presentation below).

Key terms of the new offsetting pay-variable receive-fixed interest rate swaps outstanding at December 31, 2020 are presented below (not designated as hedges):
Effective Date Notional Amount (in millions) Fixed Rate Received Maturity Date
May 19, 2020 $700.0  2.915% March 24, 2025
May 19, 2020 $300.0  2.885% March 23, 2025
May 19, 2020 $50.0  2.744% March 23, 2025
June 15, 2020 $100.0  2.808% March 23, 2025
June 15, 2020 $50.0  2.728% March 23, 2025
August 14, 2020 $200.0  2.723% March 23, 2025
Total $1,400.0 

Key terms of the new designated cash flow hedge pay-fixed interest rate swaps outstanding at December 31, 2020 are presented below:
Effective Date Notional Amount (in millions) Fixed Rate Paid
Maturity Date(1)
May 19, 2020 $700.0  1.923% March 23, 2030
May 19, 2020 $350.0  2.531% March 23, 2027
June 15, 2020 $150.0  2.343% March 23, 2027
August 14, 2020 $200.0  1.840% March 23, 2030
Total $1,400.0 
__________________
(1)Subject to a mandatory early termination date of March 23, 2025.

At the time of the de-designation of the above $1.4 billion in interest rate swaps, there was approximately $163.0 million of unrealized losses recorded in accumulated other comprehensive income (loss). This amount will be amortized to interest expense through the remaining term of the original de-designated swaps unless it becomes probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the loss will be recorded to interest expense at that time. The $1.4 billion of interest rate swaps de-designated as cash flow hedges and the $1.4 billion of offsetting swaps will be marked to market with changes in fair value recognized, along with the fixed and variable payments on these swaps, in interest expense, which are expected to nearly offset each other.

Cash settlements related to interest rate contracts are generally classified as operating activities on the consolidated statements of cash flows. However, due to an other-than-insignificant financing element on a portion of our interest rate swaps (see table above for new designated cash flow hedge pay-fixed interest rate swaps), the cash flows related to these contracts are classified as financing activities.

Financial Statement Effect of Derivatives
Unaudited condensed consolidated statement of operations and comprehensive loss: The following table presents the pre-tax effect of the Company's derivatives on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss for the three and nine months ended December 31, 2020 and 2019:
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Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts
Gain recognized in accumulated other comprehensive loss $ 2.0  $ 0.1  $ 1.5  $ 1.7 
Gain reclassified from accumulated other comprehensive loss into direct operating expense $ 0.3  $ 0.4  $ 0.3  $ 1.9 
Interest rate swaps
Gain (loss) recognized in accumulated other comprehensive loss $ 12.2  $ 18.8  $ (16.0) $ (52.3)
Loss reclassified from accumulated other comprehensive loss into interest expense $ (8.2) $ (4.5) $ (25.2) $ (8.9)
Derivatives not designated as cash flow hedges:
Forward exchange contracts
Gain recognized in direct operating expense $ —  $ 0.1  $ 0.3  $ 0.2 
Interest rate swaps
Loss reclassified from accumulated other comprehensive loss into interest expense $ (8.5) $ —  $ (20.0) $ — 
Total direct operating expense on consolidated statements of operations $ 459.3  $ 594.6  $ 1,249.0  $ 1,662.0 
Total interest expense on consolidated statements of operations $ 45.0  $ 48.7  $ 135.2  $ 145.7 

Unaudited condensed consolidated balance sheets: The Company classifies its forward foreign exchange contracts and interest rate swap agreements within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (see Note 7). The portion of the swaps reflecting the financing component of the hybrid instrument discussed above is recorded at amortized cost and reduced over time based on payments. Pursuant to the Company's accounting policy to offset the fair value amounts recognized for derivative instruments, the Company presents the asset or liability position of the swaps that are with the same counterparty under a master netting arrangement net as either an asset or liability in its unaudited condensed consolidated balance sheets. The gross amount of swaps in an asset and liability position that were subject to a master netting arrangement was $165.8 million and $261.6 million, respectively, resulting in an asset recorded in other assets - non current of $9.9 million and a liability recorded in other liabilities - non-current of $105.7 million as of December 31, 2020.
As of December 31, 2020 and March 31, 2020, the Company had the following amounts recorded in the accompanying unaudited condensed consolidated balance sheets related to the Company's use of derivatives:
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December 31, 2020
Other Current Assets Other Non-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  $ —  $ 1.0  $ — 
Interest rate swaps —  14.5  —  30.2 
Derivatives not designated as cash flow hedges:
Interest rate swaps(1)
—  (4.6) —  147.2 
Fair value of derivatives $ 2.3  $ 9.9  $ 1.0  $ 177.4 
________________
(1)Includes $100.7 million and $56.3 million included in other non-current assets and other non-current liabilities, respectively, representing the financing element of certain hybrid instruments, which is offset by the new pay-variable receive-fixed interest rate swaps outstanding at December 31, 2020.
March 31, 2020
Other Current Assets Accounts Payable and Accrued Liabilities Other Non-Current Liabilities
  (Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts $ 0.6  $ 0.5  $ — 
Interest rate swaps —  —  187.9 
Derivatives not designated as cash flow hedges:
Forward exchange contracts —  0.4  — 
Fair value of derivatives $ 0.6  $ 0.9  187.9 

As of December 31, 2020, based on the current release schedule, the Company estimates approximately $1.3 million of gains associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive loss will be reclassified into earnings during the one-year period ending December 31, 2021.  
As of December 31, 2020, the Company estimates approximately $47.7 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, 2021.  


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17. 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, 2020 and March 31, 2020:
 
December 31,
2020 		March 31,
2020
  (Amounts in millions)
Other current assets
Prepaid expenses and other $ 65.5  $ 65.7 
Product inventory(1)
14.1  13.4 
Tax credits receivable 79.1  78.3 
$ 158.7  $ 157.4 
Other non-current assets
Prepaid expenses and other $ 18.6  $ 34.3 
Accounts receivable 49.9  53.6 
Tax credits receivable 173.8  166.7 
Operating lease right-of-use assets 128.7  136.9 
Interest rate swap assets 9.9  — 
$ 380.9  $ 391.5 
___________________
(1)Home entertainment product inventory consists of Packaged Media and is stated at the lower of cost or market value (first-in, first-out method). Costs of Packaged Media sales, including shipping and handling costs, are included in distribution and marketing expenses.

Accounts Receivable Monetization

Under the Company's accounts receivable monetization programs, the Company has entered into (1) individual agreements to monetize certain of its trade accounts receivable directly with third-party purchasers and (2) a revolving agreement to monetize designated pools of trade accounts receivable with various financial institutions, as further described below. Under these programs, the Company transfers receivables to purchasers in exchange for cash proceeds, and the Company continues to service the receivables for the purchasers. The Company accounts for the transfers of these receivables as a sale, removes (derecognizes) the carrying amount of the receivables from its balance sheets and classifies the proceeds received as cash flows from operating activities in the statements of cash flows. The Company records a loss on the sale of these receivables reflecting the net proceeds received (net of any obligations incurred), less the carrying amount of the receivables transferred. The loss is reflected in the "other expense" line item on the unaudited condensed consolidated statements 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, 2020 and 2019.
 
Individual Monetization Agreements. The Company enters into individual agreements to monetize trade accounts receivable. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers. The following table sets forth a summary of the receivables transferred under individual agreements or purchases during the three and nine months ended December 31, 2020 and 2019:
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Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Carrying value of receivables transferred and derecognized $ 353.2  $ 448.8  $ 1,008.3  $ 1,279.2 
Net cash proceeds received 351.5  446.5  1,004.3  1,270.8 
Loss recorded related to transfers of receivables 1.7  2.3  3.9  8.4 

At December 31, 2020, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheets, but which the Company continues to service, related to the Company's individual agreements to monetize trade accounts receivable was $540.9 million (March 31, 2020 - $529.8 million).

Pooled Monetization Agreement. In December 2019, the Company entered into a revolving agreement to transfer up to $150.0 million of certain receivables to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. As customers pay their balances, the Company transfers additional receivables into the program. The transferred receivables are fully guaranteed by a bankruptcy-remote wholly-owned subsidiary of the Company, which holds additional receivables in the amount of $44.0 million as of December 31, 2020 that are pledged as collateral under this agreement. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers.

The following table sets forth a summary of the receivables transferred under the pooled monetization agreement during the three and nine months ended December 31, 2020:
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 2020 2019
  (Amounts in millions)
Gross cash proceeds received for receivables transferred and derecognized $ 40.8  $ 111.3  $ 126.8  $ 111.3 
Less amounts from collections reinvested under revolving agreement (32.5) (19.7) (107.4) (19.7)
Proceeds from new transfers 8.3  91.6  19.4  91.6 
Collections not reinvested and remitted or to be remitted (11.5) (13.5) (25.8) (13.5)
Net cash proceeds received $ (3.2) $ 78.1  $ (6.4) $ 78.1 
Carrying value of receivables transferred and derecognized (1)
$ 40.4  $ 110.9  $ 126.0  $ 110.9 
Obligations recorded $ 0.7  $ 1.6  $ 1.4  $ 1.6 
Loss recorded related to transfers of receivables $ 0.3  $ 1.3  $ 0.5  $ 1.3 
___________________
(1)Receivables net of unamortized discounts on long-term, non-interest bearing receivables.

At December 31, 2020, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheet, but which the Company continues to service, related to the pooled monetization agreement was approximately $86.1 million (March 31, 2020 - $92.5 million).


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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 loss on cash flow hedges Total
(Amounts in millions)
March 31, 2020 $ (18.8) $ (187.2) $ (206.0)
Other comprehensive income 5.6  30.3  35.9 
December 31, 2020 $ (13.2) $ (156.9) $ (170.1)


Cash, Cash Equivalents and Restricted Cash

There was no restricted cash in the unaudited condensed consolidated balance sheets as of December 31, 2020 or March 31, 2020.

Supplemental Cash Flow Information

Significant non-cash transactions during the nine months ended December 31, 2020 include certain interest rate swap agreements, which are discussed in Note 16, "Derivative Instruments and Hedging Activities".

The supplemental schedule of non-cash investing and financing activities is presented below:
Nine Months Ended
December 31,
2020 2019
(Amounts in millions)
Non-cash investing activities:
Decrease in finance lease right-of-use asset due to a reassessment event $ (42.0) $ — 
Non-cash financing activities:
Decrease in finance lease liability due to a reassessment event $ (48.6) $ — 

Supplemental cash flow information related to leases was as follows:
Nine Months Ended
December 31,
2020 2019
(Amounts in millions)
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases $ 14.2  $ 2.1 
Increase in right-of-use assets and lease liability due to a reassessment event:
Operating leases - increase in right-of-use assets $ 6.0  $ — 
Operating leases - increase in lease liability $ 12.6  $ — 


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18. Subsequent Events

In January 2021, certain subsidiaries of the Company (the “Borrowers”) entered into a senior secured revolving credit facility with the lenders from time to time party thereto and MUFG Union Bank, N.A., as administrative agent, based on the Company’s tax credit receivables (the “Facility”). The maximum principal amount of the Facility is $120.0 million, subject to availability under the borrowing base, which is based on specified percentages of amounts payable to the Borrowers by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction. Maximum capacity under the Facility may be increased to $200.0 million through the exercise by the Borrowers of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. Borrowings under the Facility shall bear interest at a rate equal to, at the Borrowers’ option, LIBOR plus 1.50% per annum or the base rate plus 0.50% per annum. The proceeds of the Facility shall be used to pay transaction fees, costs and interest associated with the Facility and the transactions contemplated thereby, and for repayment of debt and other general corporate purposes. The Facility is expected to mature on January 27, 2025.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview
Combining the STARZ premium global subscription platform with world-class motion picture and television studio operations, Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) brings a unique and varied portfolio of entertainment to consumers around the world. Its film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and the largest collection of film and television franchises in the independent media space. A digital age company driven by its entrepreneurial culture and commitment to innovation, the Lionsgate brand is synonymous with bold, original, relatable entertainment for the audiences it serves worldwide. We classify our operations through three reporting segments: Motion Picture, Television Production, and Media Networks (see further discussion below).
Impact of COVID-19

The impacts associated with the ongoing COVID-19 global pandemic and measures to prevent its spread, and the resulting economic uncertainty, continue to affect our business in a number of ways. We continue to experience delays in theatrical distribution of our films, both domestically and internationally, as well as delays in the production of film and television content (resulting in continued changes in future release dates for some titles and series). While we have begun (and have, in certain instances, completed) production on a number of films and television series, and theaters have begun to reopen in certain locations with reduced capacity, we are not able to accurately predict when theaters will re-open at scale, at what level consumers will return to movie theaters, when film production will fully resume, whether productions that have resumed will be paused again, the impact of incremental costs required to adhere to new health and safety protocols, or if and when certain of our content will be released. The full extent of impacts related to the COVID-19 global pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. See Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 27, 2020, as updated by the risk factors found under Part II, Item 1A. "Risk Factors" herein.

Conversely, television and streaming consumption around the globe continues to increase, as well as home entertainment demand. STARZ continues to achieve an increase in viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally. However, it is too early to say whether this increase is indicative of future results and whether growth may slow as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic. We continue, however, to adapt to these new circumstances. For instance, we have changed the release strategies of several of our theatrical films by releasing solely and/or earlier on streaming platforms, initially releasing in the premium video-on-demand ("Premium VOD") market, or by licensing directly to streaming platforms. We have also begun and completed post-production of a number of our television series and continue the development of film properties and television series.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of most theaters, international travel restrictions and the pausing of motion picture and television productions, during the three and nine months ended December 31, 2020 we have incurred $14.8 million and $54.3 million, respectively, in incremental costs which were expensed in the period. These costs include $8.6 million and $36.6 million, respectively, reflected in direct operating expense, which include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, and in the nine months ended December 31, 2020 include film impairment due to changes in performance expectations resulting from circumstances associated with the COVID-19 global pandemic. In addition, these costs include $5.4 million and $16.1 million, respectively, reflected in distribution and marketing expense, which primarily consists of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit, and $0.8 million and $1.6 million in restructuring and other costs primarily due to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic during these periods. We expect to incur additional incremental costs in future periods. We are in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore no material amounts of insurance proceeds have been recorded in our consolidated financial statements. See further discussion in the Results of Operations section below.

The economic impact of the COVID-19 global pandemic and resulting societal changes will depend on numerous evolving factors that cannot be predicted with certainty. There are a number of ways in which these uncertainties resulting from the
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COVID-19 global pandemic have impacted our current results of operations and could continue to impact our future results of operations. These impacts include the incremental costs and losses discussed in the previous paragraph, lower revenues from the closure of movie theaters and postponement of theatrical releases, partially offset by lower theatrical production and marketing costs; increased expenses associated with new health and safety protocols on motion picture and television productions; changes in the timing of revenues for motion pictures and television productions associated with delays in production and delivery or release; and while STARZ has experienced an increase in viewership of its content, future growth could be impacted by the timing of when productions will fully resume, and whether productions that have resumed will be paused again.

We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any U.S. Food and Drug Administration ("FDA")-approved COVID-19 vaccines), and global economic conditions related to the COVID-19 global pandemic. All of these impacts could place limitations on our ability to execute on our business plan and materially and adversely affect our business, financial condition and results of operations. We have implemented policies, procedures and protocols to address the situation and expect to continue to adjust our current policies and procedures as more information and guidance become available. In addition, recent resurgences of COVID-19 in certain parts of the world, including the United States and parts of Europe, and the discovery of new variants of the virus, have resulted in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19. These measures could result in further interruptions to our operations. Due to the evolving and uncertain nature of this situation, we are not able to estimate the full extent of the impact on our operating results, cash flows and financial position, particularly over the near to medium term.
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, 2020 and 2019.
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 (including 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 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 and related content (games, music, location-based entertainment royalties, etc.) to other ancillary markets.
Television Production
Our Television Production segment includes revenues derived from the following.
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•Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television and 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 we earn 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 earned and executive producer fees 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 domestic distribution of our STARZ branded premium subscription video services through our over-the-top ("OTT") service, U.S. multichannel video programming distributors (“MVPDs”) including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”) pursuant to affiliation agreements, and on a direct-to-consumer basis through our Starz App.
•STARZPLAY International. STARZPLAY International revenues are primarily derived from OTT distribution of the Company's STARZ branded premium subscription video services internationally.
•Other Streaming Services. Other Streaming Services revenues are derived primarily from our majority owned premium Spanish language streaming services business, Pantaya, which includes subscriber based streaming revenue and other distribution revenue.
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.
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 DVD/Blu-ray 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. DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products. DVD/Blu-ray 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
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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 of the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. In addition, the evolving and uncertain nature of the COVID-19 global pandemic could materially impact our estimates, particularly those that require consideration of forecasted financial information, in the near to medium term. Accordingly, actual results could differ materially from our estimates. 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 27, 2020.
Accounting for Films and Television Programs and Licensed Program Rights
Investment in Films and Television Programs:
General. We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in films and television programs, a portion of which are monetized individually (i.e., through domestic theatrical, home entertainment, television, international or other ancillary-market distribution), and a portion of which are monetized as part of a film group (i.e., primarily content internally produced by our Television Production segment for our Media Networks segment).
Recording Cost. Costs of acquiring and producing films and television programs and of acquired libraries are capitalized when incurred. For films and television programs produced by the Company, capitalized costs include all direct production and financing costs, capitalized interest and production overhead. For acquired films and television programs, capitalized costs consist of minimum guarantee payments to acquire the distribution rights.
Amortization. Costs of acquiring and producing films and television programs and of acquired libraries that are monetized individually are amortized using the individual-film-forecast method, whereby these costs are amortized and participations and residuals costs are accrued in the proportion that current year’s revenue bears to management’s estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of the films or television programs.
For investment in films and television programs monetized as a group, see further discussion below under Licensed Program Rights for a description of recording cost and amortization of costs monetized as a group.
Ultimate Revenue. 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 titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following 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 (see below). Management estimates the ultimate revenue based on experience with similar titles or title genre, the general public appeal of the cast, audience test results when available, 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.
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
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expense within direct operating expenses in our consolidated statements of operations. See further discussion below under Impairment Assessment for Investment in Films and Television Programs and Licensed Program Rights.

Licensed Program Rights:
General. Licensed program rights include content licensed from third parties that is monetized as part of a film group for distribution on Media Networks distribution platforms. Licensed content is comprised of films or series that have been previously produced by third parties and the Company retains specified airing rights over a contractual term. Program licenses typically have fixed terms and require payments during the term of the license.
Recording Cost. The cost of licensed content is capitalized when the cost is known or reasonably determinable, the license period for programs has commenced, the program materials have been accepted by the Company in accordance with the license agreements, and the programs are available for the first showing. Licensed programming rights may include rights to more than one exploitation window under the Company's 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. Certain license agreements may include additional ancillary rights in addition to the pay television rights. 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.) based on the estimated relative fair values of these markets. Our estimates of fair value for the pay television and ancillary markets and windows of exploitation involve uncertainty and management judgment. 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.
Amortization. The cost of program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on an accelerated or straight-line basis based on the anticipated number of exhibitions or expected and historical viewership patterns or the license period on a title-by-title or episode-by-episode basis. The number of exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the expected usage of the content. Participations and residuals are expensed in line with the amortization of production costs.
Changes in management’s estimate of the anticipated exhibitions and viewership patterns of films and original series on our networks could result in the earlier recognition of our programming costs than anticipated. Conversely, scheduled exhibitions and expected viewership patterns 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.
Impairment Assessment for Investment in Films and Television Programs and Licensed Program Rights:
General. A film group or individual film or television program is evaluated for impairment when an event or change in circumstances indicates that the fair value of an individual film or film group is less than its unamortized cost. A film group represents the unit of account for impairment testing for a film or license agreement for program material when the film or license agreement is expected to be predominantly monetized with other films and/or license agreements instead of being predominantly monetized on its own. A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements.
Content Monetized Individually. For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), whenever events or changes in circumstances indicate that the fair value of the individual film may be less than its unamortized costs, the unamortized costs of the individual film are compared to the estimated fair value of the individual film. The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title. To the extent the unamortized costs exceed the fair value, an impairment charge is recorded for the excess.
Content Monetized as a Group. For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), whenever events or changes in circumstances indicate that the fair value of the film group may be less than its unamortized costs, the aggregate unamortized costs of the group are compared to the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows are independent of other produced and licensed content. The Company's film groups are generally aligned along the Company's networks and digital content offerings domestically (i.e., Starz Networks and Other Streaming Services) and by territory or groups of territories internationally, wherein content assets are shared across the various territories and therefore, the territory or group of territories is the film group. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group.
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Valuation Assumptions. The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement, see Note 7 to our unaudited condensed consolidated financial statements). The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program or film group. The fair value of any film costs associated with a film or television program that management plans to abandon is zero. 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 management’s future revenue estimates.
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 from our majority owned premium Spanish language streaming services business, Pantaya, which includes subscriber based streaming revenue and other distribution revenue.
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 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 discrete benefit are recorded as distribution and marketing costs, and payments to distributors for which Starz receives no discrete benefit are recorded as a reduction of revenue.
Goodwill and Indefinite-Lived Intangibles. At December 31, 2020, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively. Our indefinite-lived intangible assets consist of trade names primarily representing the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as
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of December 8, 2016. Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (component level). Reporting units are determined by the discrete financial information available for the component and whether that information is regularly reviewed by segment management. Components are aggregated into a single reporting unit if they share similar economic characteristics. Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at December 31, 2020, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $2.04 billion), and our Television (goodwill of $309 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.
Goodwill and indefinite-lived intangible assets are not amortized but are 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 or indefinite-lived intangible asset is less than its carrying value. We perform our annual impairment test as of January 1 in each fiscal year. A goodwill or indefinite-lived intangible asset impairment loss would be recognized for the amount that the carrying amount of a reporting unit, including goodwill or an indefinite-lived intangible asset, exceeds its fair value. An entity may perform a qualitative assessment of the likelihood of the existence of a goodwill or indefinite-lived intangible asset impairment. The qualitative assessment is an evaluation, based on all identified events and circumstances which impact the fair value of the reporting unit or indefinite-lived intangible asset, of whether or not it is more-likely-than-not that the fair value is less than the carrying value of the reporting unit or indefinite-lived intangible asset. If we believe that as a result of our qualitative assessment it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is greater than its carrying amount, a quantitative impairment test is not required but may be performed at the option of the Company. A quantitative assessment requires determining the fair value of our reporting units or indefinite-lived intangible assets. The determination of fair value requires considerable judgment and requires assumptions and estimates of many factors, including revenue and market growth, operating margins and cash flows, market multiples and discount rates.
In performing a quantitative assessment of goodwill, we determine the fair value of our reporting units by using a combination of discounted cash flow ("DCF") analyses and market-based valuation methodologies. The models rely on significant judgments and assumptions surrounding general market and economic conditions, short-term and long-term growth rates, discount rates, income tax rates, and detailed management forecasts of future cash flow and operating margin projections, and other assumptions, all of which are based on our internal forecasts of future performance as well as historical trends. The market-based valuation method utilizes EBITDA multiples from guideline public companies operating in similar industries and a control premium. The results of these valuation methodologies are weighted as to their relative importance and a single fair value is determined. The fair value of our reporting units is reconciled to the market value of our equity, determined based on the average prices of our common shares just prior to the period end. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual or interim goodwill impairment tests will prove to be an accurate prediction of the future.
Goodwill Impairment Assessment:
For our annual goodwill impairment test for fiscal 2020, due to the decline in the market price of our common shares in the fourth quarter ended March 31, 2020, which was significantly impacted by the economic uncertainty and market volatility resulting from the COVID-19 global pandemic, we updated our quantitative impairment assessment for all of our reporting units as of March 31, 2020. The DCF analysis of fair values were determined primarily by discounting estimated future cash flows, which included perpetual nominal growth rates ranging from 1.5% to 4.0%, at a weighted average cost of capital (discount rate) ranging from 11.5% to 15%, which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a whole. Based on our annual quantitative impairment assessment for fiscal 2020, we determined that two of our reporting units (Television and Media Networks) were at risk for impairment.
We evaluated the sensitivity of our most critical assumptions used in the fair value analysis of our Television and Media Networks reporting units, including the discount rate, perpetual nominal growth rate and annual revenue growth rates. For our Television business reporting unit, we determined that an increase in the discount rate of up to 3.3% would not have impacted the test results, assuming no changes to other factors. For our Media Networks reporting unit, we determined that an increase in the discount rate of up to 0.7% or a reduction of the perpetual nominal growth rate of up to 1.33% would not have impacted the test results, assuming no changes to other factors. We also performed a sensitivity analysis on annual revenue growth. We determined that a decrease in annual revenue growth by 0.5% for our Television business reporting unit and 0.3% for our Media Networks reporting unit, and holding film cost spend and amortization the same and maintaining other expenses at the same percentage of revenue, the results would have triggered an impairment.
During the three and nine months ended December 31, 2020, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our goodwill impairment test, or that would indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.
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Management will continue to monitor all of its reporting units for changes in the business environment that could impact the recoverability of goodwill in future periods. The recoverability of goodwill is dependent upon the continued growth of revenue and cash flows from our business activities. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our reporting units may include the duration of the COVID-19 global pandemic, its impact on the global economy and the creation and consumption of our content, and the timing of when remaining production can resume and remaining theaters can re-open; adverse macroeconomic conditions; volatility in the equity and debt markets which could result in higher weighted-average cost of capital; the commercial success of our television programming and our motion pictures; our continual contractual relationships with our customers; including our affiliate agreements of our Media Networks business; our subscriber growth rates domestically and internationally across our traditional and OTT platforms and changes in consumer behavior. While historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.
Indefinite-Lived Intangibles Other Than Goodwill Impairment Assessment:
For fiscal 2020, we performed a qualitative impairment assessment of our indefinite-lived trade names. Based on the qualitative impairment assessment of our trade names, we concluded that it is more-likely-than-not that the fair value of our trade names was more than its carrying amount, and therefore our trade names were not considered at risk of impairment. This qualitative analysis considered the relative impact of market-specific and macroeconomic factors. The market-specific factors considered included recent projections of revenues and growth in OTT subscribers, both domestic and internationally, associated with the STARZ brand name. The Company also considered the macroeconomic impact including the uncertainty around the COVID-19 global pandemic, and the resulting uncertain long-term economic impact on discount rates and growth rates, as well as the impact from tax law changes inclusive of the reduction of the federal tax rate since the acquisition of Starz.
During the three and nine months ended December 31, 2020, there were no events or circumstances that have changed that would have resulted in changes to the underlying key assumptions and judgments used in our impairment assessment of our indefinite-lived trade names, or that would indicate that it is more-likely-than-not that the fair value of our indefinite-lived trade names is less than its carrying value.
Finite-Lived Intangible Assets. At December 31, 2020, the carrying value of our finite-lived intangible assets was approximately $1.36 billion. Our finite-lived intangible assets primarily relate to customer relationships associated with U.S. MVPDs, including cable operators, satellite television providers and telecommunications companies ("Traditional Affiliate"), which amounted to $1.35 billion. The amount of our customer relationship asset related to these Traditional Affiliate relationships reflects the estimated fair value of these customer relationships determined in connection with the acquisition of Starz on December 8, 2016, net of amortization recorded since the date of the Starz acquisition. Identifiable intangible assets with finite lives are amortized to depreciation and amortization expense over their estimated useful lives, ranging from 5 to 17 years. Through the quarter ended June 30, 2019, we amortized the Starz Traditional Affiliate customer relationships on a straight-line basis over 17 years.
Amortizable intangible assets are tested for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount of the asset may not be recoverable. If a triggering event has occurred, an impairment analysis is required. The impairment test first requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. The impairment test is performed at the lowest level of cash flows associated with the asset. If the carrying value of the asset exceeds the undiscounted future cash flows, the asset would not be deemed to be recoverable. Impairment would then be measured as the excess of the asset’s carrying value over its fair value.
The Company monitors its finite-lived intangible assets and changes in the underlying circumstances each reporting period for indicators of possible impairments or a change in the useful life or method of amortization of our finite-lived intangible assets. Due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption, in the quarter ended September 30, 2019, the Company determined it was appropriate to change the pattern of amortization of its Traditional Affiliate customer relationship intangible asset. Accordingly, beginning in the quarter ended September 30, 2019, the Company has adopted an amortization method that reflects amortization in the proportion that current period revenues bear to management’s estimate of future revenue over the remaining estimated useful life of the asset. This method results in greater amortization in the earlier years of the estimated useful life of the asset than the latter years.
During the fiscal year ended March 31, 2020, due to industry factors discussed in the preceding paragraph and the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our amortizable intangible assets. The impairment analysis requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. Based on our impairment analysis, the estimated undiscounted cash flows exceeded the carrying amount of the assets and therefore no impairment charge was required.
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During the three and nine months ended December 31, 2020, there were no events or circumstances that have changed that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.
Determining whether an intangible asset is recoverable or impaired requires various estimates and assumptions, including whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining estimates of future cash flows for the assets involved and, when applicable, the assumptions applied in determining fair value, including discount rates, growth rates, market risk premiums and other assumptions about the economic environment. Should the revenues from our Traditional Affiliate relationships decline more than the assumed attrition rates used in our current estimates, either as a result of decreases in subscriber rates or changes of the terms of our renewals of our Traditional Affiliate contracts, we may have indicators of impairment which could result in an impairment of our customer relationships intangible assets, or we may need to further shorten the useful life or adopt a more accelerated method of amortization both of which would increase the amount of amortization expense we record.
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 $0.6 million and $1.6 million on our total revenue in the three and nine months ended December 31, 2020, respectively (2019 - $1.1 million and $2.7 million, respectively).
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. As of March 31, 2020, we had a valuation allowance of $435.8 million against certain U.S. and foreign deferred tax assets that may not be realized on a more likely than not basis.
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 benefit (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 benefit (provision) during the quarter in which the change in estimate occurs so that the year-to-date income tax benefit (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 three and nine months ended December 31, 2019, we calculate the income tax benefit (provision) using the cut-off method.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, and has resulted in significant changes to the U.S. federal corporate tax law. Additionally, several state jurisdictions have enacted legislation to comply with federal changes and some foreign jurisdictions have enacted similar tax incentive legislation. The
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impact of the CARES Act to our current and deferred income tax expense as of December 31, 2020 was immaterial, however we are continuing to analyze the impact of these tax law changes to future periods.
Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the overall level of pre-tax income (loss), the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, any changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, further interpretation and legislative guidance regarding the new CARES Act, changes in valuation allowances against our deferred tax assets, tax planning strategies available to us and other discrete items.
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 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).
We regularly review our investments for impairment, including when the carrying value of an investment exceeds its market value and whether the decline in value is other-than-temporary. For investments accounted for using the equity method of accounting or equity investments without a readily determinable fair value, we evaluate information available (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market prices, if any, in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults and subsequent rounds of financing at an amount below the cost basis of our investment. The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions. As of December 31, 2020, our investments included investments in equity method investees of $30.4 million, and other investments of $2.1 million.
If we determine that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to earnings. Factors that are considered by us in determining whether an other-than-temporary decline in value has occurred include (i) the market value of the security in relation to its cost basis, (ii) the financial condition of the investee, and (iii) our intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

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, 2020 Compared to Three Months Ended December 31, 2019
Consolidated Results of Operations
The following table sets forth our consolidated results of operations for the three months ended December 31, 2020 and 2019:
54
Three Months Ended
December 31, Increase (Decrease)
2020 2019 Amount Percent
  (Amounts in millions)
Revenues
Motion Picture $ 250.3  $ 473.9  $ (223.6) (47.2) %
Television Production 228.2  189.4  38.8  20.5  %
Media Networks 406.2  382.4  23.8  6.2  %
Intersegment eliminations (48.3) (47.2) (1.1) 2.3  %
Total revenues 836.4  998.5  (162.1) (16.2) %
Expenses:
Direct operating 459.3  594.6  (135.3) (22.8) %
Distribution and marketing 176.2  279.1  (102.9) (36.9) %
General and administration 115.6  108.7  6.9  6.3  %
Depreciation and amortization 45.8  51.9  (6.1) (11.8) %
Restructuring and other 2.4  3.7  (1.3) (35.1) %
Total expenses 799.3  1,038.0  (238.7) (23.0) %
Operating income (loss) 37.1  (39.5) 76.6  (193.9) %
Interest expense (45.0) (48.7) 3.7  (7.6) %
Interest and other income 0.5  2.0  (1.5) (75.0) %
Other expense (2.1) (3.6) 1.5  (41.7) %
Loss on extinguishment of debt —  (1.4) 1.4  (100.0) %
Equity interests loss (0.7) (4.6) 3.9  (84.8) %
Loss before income taxes (10.2) (95.8) 85.6  nm
Income tax provision (7.0) (2.0) (5.0) 250.0  %
Net loss (17.2) (97.8) 80.6  nm
Less: Net loss attributable to noncontrolling interest 3.3  6.6  (3.3) (50.0) %
Net loss attributable to Lions Gate Entertainment Corp. shareholders $ (13.9) $ (91.2) $ 77.3  nm
_______________________
nm - Percentage not meaningful.
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Revenues. Consolidated revenues decreased in the three months ended December 31, 2020 primarily due to a decrease in Motion Picture revenues, which were negatively impacted by the COVID-19 global pandemic, partially offset by increased Television Production and Media Networks revenues.
With theaters mostly closed during the quarter due to circumstances associated with the COVID-19 global pandemic, Motion Picture revenue decreased primarily due to lower theatrical and international revenue. The decrease was also, to a lesser extent, due to lower home entertainment packaged media revenue due to fewer home entertainment releases in the quarter, and lower television revenue.
Television Production revenue increased due to higher home entertainment revenue and, to a lesser extent, increased international revenue. These increases were partially offset by lower domestic television revenue due to significant revenue in the prior year's quarter from House of Payne.
The increase in Media Networks revenue was due to increased revenue across STARZPLAY International, Starz Networks and Other Streaming Services. 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, 2020 and 2019:
Three Months Ended
December 31,
2020 2019 Increase (Decrease)
Amount % of Segment Revenues Amount % of Segment Revenues Amount Percent
  (Amounts in millions)
Direct operating expenses
Motion Picture $ 136.6  54.6  % $ 222.9  47.0  % $ (86.3) (38.7) %
Television Production 182.6  80.0  178.3  94.1  4.3  2.4  %
Media Networks 175.2  43.1  162.8  42.6  12.4  7.6  %
COVID-19 related charges 8.6  nm —  nm 8.6  n/a
Other 0.6  nm 79.8  nm (79.2) (99.2) %
Intersegment eliminations (44.3) nm (49.2) nm 4.9  (10.0) %
$ 459.3  54.9  % $ 594.6  59.5% $ (135.3) (22.8) %
_______________________
nm - Percentage not meaningful.
Direct operating expenses decreased in the three months ended December 31, 2020, primarily due to lower Motion Picture revenue and lower other direct operating expense related to certain programming and content charges in the prior year's quarter (as further described below). These decreases were partially offset by an increase from Media Networks and COVID-19 related charges (as further described below). The increase in Media Networks direct operating expense was due to increases at Starz Networks from higher programming amortization in the current year's quarter, partially offset by lower direct operating expense at STARZPLAY International. In addition, intersegment eliminations decreased slightly in the quarter, primarily due to lower Television Production revenue and direct operating costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment. See further discussion in the Segment Results of Operations section below.

COVID-19 Related Charges. In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended December 31, 2020 we incurred $8.6 million in incremental costs which were expensed in the period which are included in consolidated direct operating expense and are excluded from segment direct operating expense. These costs include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic. We expect to incur additional incremental costs in future periods. We are in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore no material amounts of insurance proceeds have been recorded in our consolidated financial statements.

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Other. During the three months ended December 31, 2019, in connection with management changes, we implemented changes to our programming and broadcasting strategy including programming acquired or produced under prior management. As a result, we recorded certain programming and content charges of $74.0 million in the prior year's quarter, which are excluded from segment operating results, but included in direct operating expense in the unaudited condensed consolidated statement of operations and reflected in the "other" line item above. In addition, "other" direct operating expenses in the table above includes 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, 2020 and 2019:
Three Months Ended
December 31, Increase (Decrease)
2020 2019 Amount Percent
  (Amounts in millions)
Distribution and marketing expenses
Motion Picture $ 37.5  $ 177.0  $ (139.5) (78.8) %
Television Production 6.6  6.7  (0.1) (1.5) %
Media Networks 126.5  95.2  31.3  32.9  %
COVID-19 related charges 5.4  —  5.4  n/a
Other 0.2  0.2  —  —  %
$ 176.2  $ 279.1  $ (102.9) (36.9) %
U.S. theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 7.4  $ 120.9  $ (113.5) (93.9) %

Distribution and marketing expenses decreased in the three months ended December 31, 2020, primarily due to a decrease in Motion Picture theatrical P&A, partially offset by increased Media Networks distribution and marketing expense. The decrease in Motion Picture theatrical P&A was primarily impacted by the COVID-19 global pandemic and associated closure of theaters. The increase in Media Networks distribution and marketing expense was driven by increases at Starz Networks, and STARZPLAY International. See further discussion in the Segment Results of Operations section below.
In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended December 31, 2020 we incurred $5.4 million in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit. These charges are excluded from segment operating results. We expect to incur additional incremental costs in future periods.

General and Administrative Expenses. General and administrative expenses by segment were as follows for the three months ended December 31, 2020 and 2019:
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Three Months Ended
  December 31, Increase (Decrease)
  2020 % of Revenues 2019 % of Revenues Amount Percent
  (Amounts in millions)
General and administrative expenses
Motion Picture $ 26.2  $ 25.0  $ 1.2  4.8  %
Television Production 9.5  10.1  (0.6) (5.9) %
Media Networks 22.8  22.3  0.5  2.2  %
Corporate 23.4  23.4  —  —  %
81.9  9.8% 80.8  8.1% 1.1  1.4  %
Share-based compensation expense 19.3  16.3  3.0  18.4  %
Purchase accounting and related adjustments 14.4  11.6  2.8  24.1  %
Total general and administrative expenses $ 115.6  13.8% $ 108.7  10.9% $ 6.9  6.3  %

General and administrative expenses increased in the three months ended December 31, 2020, resulting from increases in Motion Picture and Media Networks general and administrative expenses and increases in share-based compensation expense and purchase accounting and related adjustments, partially offset by decreased Television Production general and administrative expenses. See further discussion in the Segment Results of Operations section below.
Corporate general and administrative expenses were comparable to the prior year's quarter.
The increase in share-based compensation expense included in general and administrative expense in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019 is primarily due to an increase in the number of share-based payment awards incurring expense in the current quarter as compared to the prior year's quarter. The following table reconciles this amount to total share-based compensation expense:
Three Months Ended
December 31,
2020 2019
  (Amounts in millions)
Share-based compensation expense by expense category
General and administrative expense $ 19.3  $ 16.3 
Direct operating expense 0.5  0.7 
Distribution and marketing expense 0.2  0.2 
Total share-based compensation expense $ 20.0  $ 17.2 

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, 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. Purchase accounting and related adjustments increased $2.8 million, or 24.1%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.
Depreciation and Amortization Expense. Depreciation and amortization of $45.8 million in the three months ended December 31, 2020 decreased $6.1 million, from $51.9 million in the three months ended December 31, 2019.
Restructuring and Other. Restructuring and other decreased $1.3 million in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019, 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, 2020 and 2019 (see Note 13 to our unaudited condensed consolidated financial statements):
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Three Months Ended
December 31, Increase (Decrease)
2020 2019 Amount Percent
  (Amounts in millions)
Restructuring and other:
Severance(1)
$ 0.9  $ 1.8  $ (0.9) (50.0) %
COVID-19 related charges(2)
0.8  —  0.8  n/a
Transaction and related costs(3)
0.7  1.9  (1.2) (63.2) %
$ 2.4  $ 3.7  $ (1.3) (35.1) %
_______________________
(1)Severance costs in the three months ended December 31, 2020 and 2019 were primarily related to restructuring activities in connection with recent acquisitions, and other cost-saving initiatives.
(2)During the three months ended December 31, 2020, the Company has incurred certain costs primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.
(3)Transaction and related costs in the three months ended December 31, 2020 and 2019 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
Interest Expense. Interest expense of $45.0 million for the three months ended December 31, 2020 decreased $3.7 million, from $48.7 million in the three months ended December 31, 2019, due to lower interest expense on the term loans partially offset by an increase in amortization of debt financing costs and other non-cash interest. The decrease in interest expense on the term loans is primarily due to reductions of the outstanding principal amounts from required and voluntary principal payments since the prior year's quarter ended December 31, 2019, and the lower LIBOR rate in the current quarter. The increase in amortization of debt financing costs and other non-cash interest is due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements). The following table sets forth the components of interest expense for the three months ended December 31, 2020 and 2019:
 
Three Months Ended
December 31,
2020 2019
  (Amounts in millions)
Interest Expense
Cash Based:
Revolving credit facilities $ 1.2  $ 1.9 
Term loans 9.2  18.2 
5.875% Senior Notes 7.7  7.7 
6.375% Senior Notes 8.9  8.9 
Other(1)
5.9  8.3 
32.9  45.0 
Amortization of debt financing costs and other non-cash interest(2)
12.1  3.7 
Total interest expense $ 45.0  $ 48.7 
_______________________
(1)Amounts include payments associated with the Company's interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).
(2)Amounts include the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).
Other Expense. Other expense of $2.1 million for the three months ended December 31, 2020 compared to other expense of $3.6 million for the three months ended December 31, 2019, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).
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Loss on Extinguishment of Debt. Loss on extinguishment of debt for the three months ended December 31, 2019 was $1.4 million related to early repayments of $101.9 million in principal outstanding on the Term Loan B, with no comparable loss in the three months ended December 31, 2020. See Note 4 to our unaudited condensed consolidated financial statements.
Equity Interests Loss. Equity interests loss of $0.7 million in the three months ended December 31, 2020 compared to equity interests loss of $4.6 million in the three months ended December 31, 2019.

Income Tax Provision. We had an income tax provision of $7.0 million in the three months ended December 31, 2020, compared to an income tax provision of $2.0 million in the three months ended December 31, 2019. Our income tax provision 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, changes in the valuation allowance against our deferred tax assets, and certain minimum taxes and foreign withholding taxes. Our income tax provision for the three months ended December 31, 2020 was also impacted by the change in uncertain tax benefits due to the expiration of statutory limitations and additional settlements with tax authorities.

Net Loss Attributable to Lions Gate Entertainment Corp. Shareholders. Net loss attributable to our shareholders for the three months ended December 31, 2020 was $13.9 million, or basic and diluted net loss per common share of $0.06 on 220.8 million weighted average common shares outstanding. This compares to net loss attributable to our shareholders for the three months ended December 31, 2019 of $91.2 million, or basic and diluted net loss per common share of $0.42 on 218.0 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 unaudited condensed consolidated statements of operations.
The Company's primary measure of segment performance is segment profit. Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses. Segment profit excludes corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, and, when applicable, certain charges related to the COVID-19 global pandemic, and purchase accounting and related adjustments. The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enables them to understand the fundamental performance of the Company's businesses. The reconciliation of segment profit to the Company's consolidated income (loss) before income taxes is presented in Note 14 to the unaudited condensed consolidated financial statements.
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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, 2020 and 2019:
  Three Months Ended
  December 31, Increase (Decrease)
2020 2019 Amount Percent
(Amounts in millions)
Motion Picture Segment:
Revenue $ 250.3  $ 473.9  $ (223.6) (47.2) %
Expenses:
Direct operating expense 136.6  222.9  (86.3) (38.7) %
Distribution & marketing expense 37.5  177.0  (139.5) (78.8) %
Gross contribution 76.2  74.0  2.2  3.0  %
General and administrative expenses 26.2  25.0  1.2  4.8  %
Segment profit $ 50.0  $ 49.0  $ 1.0  2.0  %
U.S. theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 7.4  $ 120.9  $ (113.5) (93.9) %
Direct operating expense as a percentage of revenue 54.6  % 47.0  %
Gross contribution as a percentage of revenue 30.4  % 15.6  %
Revenue. The table below sets forth Motion Picture revenue by media and product category for the three months ended December 31, 2020 and 2019:
  Three Months Ended December 31,
  2020 2019 Total Increase (Decrease)
 
Feature Film(1)
Other Film(2)
Total
Feature Film(1)
Other Film(2)
Total
      (Amounts in millions)    
Motion Picture Revenue
Theatrical $ 1.5  $ 0.3  $ 1.8  $ 101.0  $ 8.0  $ 109.0  $ (107.2)
Home Entertainment
Digital Media 63.1  60.0  123.1  69.6  45.9  115.5  7.6 
Packaged Media 17.1  19.3  36.4  42.4  33.0  75.4  (39.0)
Total Home Entertainment 80.2  79.3  159.5  112.0  78.9  190.9  (31.4)
Television 28.2  8.0  36.2  60.9  13.6  74.5  (38.3)
International 27.8  20.2  48.0  68.4  27.7  96.1  (48.1)
Other 3.1  1.7  4.8  2.1  1.3  3.4  1.4 
$ 140.8  $ 109.5  $ 250.3  $ 344.4  $ 129.5  $ 473.9  $ (223.6)
____________________
(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)Other Film: Includes 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 investees, Roadside Attractions and Pantelion Films, and other titles.
With theaters mostly closed during the quarter due to circumstances associated with the COVID-19 global pandemic, theatrical revenue decreased $107.2 million, or 98.3%, in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019. The prior year's quarter included significant revenue from Knives Out and Midway.
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Home entertainment revenue decreased $31.4 million, or 16.4%, in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019, primarily due to a decrease of $39.0 million in packaged media revenues from our fiscal 2021 theatrical slate in our Feature Film category and decreases in our Other Film category. Digital media revenues this quarter includes revenues from the initial release on a streaming platform of Run, and to a lesser extent, revenue from the Premium VOD release of Antebellum, both of which represented a change in initial release strategy from theatrical release due to circumstances associated with the COVID-19 global pandemic. In addition, the prior year's quarter included significant revenue from Angel Has Fallen, Rambo: Last Blood, and John Wick: Chapter 3 - Parabellum.
Television revenue decreased $38.3 million, or 51.4%, in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019, due to fewer television windows opening (and revenue recognized) than in the prior year's quarter.
International revenue decreased $48.1 million, or 50.1%, in the three months ended December 31, 2020, as compared to the three months ended December 31, 2019 due to lower revenue from our fiscal 2021 theatrical slate in the current quarter, which had no new significant theatrical releases due to circumstances associated with the COVID-19 global pandemic, as compared to the revenue generated from our fiscal 2020 theatrical slate in the prior year's quarter, which included significant revenue from Knives Out and John Wick: Chapter 3 - Parabellum.
We expect that Motion Picture segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international theatrical distribution and production as a result of the closure of theaters and paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic. The extent of the impact on Motion Picture segment revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, global economic conditions, the ability for theaters to re-open at a scale to attract motion pictures and the rate of consumers' return to the theater.

Direct Operating Expense. The decrease in direct operating expenses is due to a decrease in Motion Picture revenues. The increase 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. The prior year's quarter included significant revenue from Knives Out, John Wick: Chapter 3 - Parabellum, Angel Has Fallen and Rambo: Last Blood, and the current quarter had fewer theatrical releases and lower revenues from our fiscal 2021 theatrical slate due to circumstances associated with the COVID-19 global pandemic. Investment in film write-downs included in Motion Picture segment direct operating expense for the quarter were $13.7 million in the three months ended December 31, 2020, as compared to $37.2 million in the three months ended December 31, 2019.
Distribution and Marketing Expense. The decrease in distribution and marketing expense in the three months ended December 31, 2020 is due to lower theatrical P&A expense associated with the closure of theaters during the quarter due to circumstances associated with the COVID-19 global pandemic. Theatrical P&A and Premium VOD expense in the current quarter includes expense associated with the theatrical and Premium VOD release of Fatale. In the three months ended December 31, 2020, approximately $1.7 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters. In the three months ended December 31, 2019, approximately $7.0 million of P&A was incurred in advance for films to be released in subsequent quarters, such as Barb and Star Go To Vista Del Mar and I Still Believe.
Gross Contribution. While Motion Picture revenue declined during the quarter as discussed above, gross contribution of the Motion Picture segment for the three months ended December 31, 2020 increased 3.0% as compared to the three months ended December 31, 2019, due to lower distribution and marketing expense as a percentage of Motion Picture revenue.
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General and Administrative Expense. General and administrative expenses of the Motion Picture segment increased $1.2 million, or 4.8%, primarily due to an increase in incentive compensation partially offset by decreases in salaries and related expenses, rent, facility and travel and related expenses.
Television Production
The table below sets forth Television Production gross contribution and segment profit for the three months ended December 31, 2020 and 2019:
  Three Months Ended
  December 31, Increase (Decrease)
2020 2019 Amount Percent
(Amounts in millions)
Television Production Segment:
Revenue $ 228.2  $ 189.4  $ 38.8  20.5  %
Expenses:
Direct operating expense 182.6  178.3  4.3  2.4  %
Distribution & marketing expense 6.6  6.7  (0.1) (1.5) %
Gross contribution 39.0  4.4  34.6  nm
General and administrative expenses 9.5  10.1  (0.6) (5.9) %
Segment profit $ 29.5  $ (5.7) $ 35.2  nm
Direct operating expense as a percentage of revenue 80.0  % 94.1  %
Gross contribution as a percentage of revenue 17.1  % 2.3  %
________________________
nm - Percentage not meaningful.
Revenue. The table below sets forth Television Production revenue and changes in revenue by media for the three months ended December 31, 2020 and 2019:
 
Three Months Ended
  December 31, Increase (Decrease)
  2020 2019 Amount Percent
  (Amounts in millions)  
Television Production Revenue
Television $ 119.7  $ 144.2  $ (24.5) (17.0) %
International 26.0  17.4  8.6  49.4  %
Home Entertainment
Digital 58.0  10.0  48.0  nm
Packaged Media 3.1  0.6  2.5  nm
Total Home Entertainment 61.1  10.6  50.5  nm
Other 21.4  17.2  4.2  24.4  %
$ 228.2  $ 189.4  $ 38.8  20.5  %
________________________
nm - Percentage not meaningful.
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The primary component of Television Production revenue is domestic television revenue. Domestic television revenue decreased in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019, primarily due to significant revenue in the prior year's quarter from House of Payne.
International revenue in the three months ended December 31, 2020 increased $8.6 million, or 49.4%, primarily due to increased intersegment revenues from STARZPLAY International from the licensing of Starz original series.
Home entertainment revenue in the three months ended December 31, 2020 increased $50.5 million due to significant digital media revenue in the current quarter for Power Season 6 and Mad Men Seasons 1 to 7.
Other revenue includes revenue from 3 Arts Entertainment, which increased in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019 driven by new producer fees and back-end participations as production activity increased in the quarter. Revenue from 3 Arts Entertainment was negatively impacted in prior quarters as a result of the COVID-19 global pandemic related disruptions. The extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases returning to and remaining at pre COVID-19 levels.
We expect that Television Production segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international distribution and production as a result of paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic. The extent of the impact of the COVID-19 global pandemic related disruptions on Television Production revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global economic conditions related to the COVID-19 global pandemic.
Direct Operating Expense. Direct operating expense of the Television Production segment in the three months ended December 31, 2020 increased $4.3 million, or 2.4%. Direct operating expenses as a percentage of television production revenue decreased primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter. In particular, the current quarter included significant revenue from higher margin television series, such as Mad Men, as compared to the prior year's quarter which included newer television programs, which typically result in higher amortization expenses in relation to revenues initially.
Gross Contribution. Gross contribution of the Television Production segment for the three months ended December 31, 2020 increased as compared to the three months ended December 31, 2019, due to increased television production revenue and lower direct operating expenses as a percentage of television production revenue.
General and Administrative Expense. General and administrative expenses of the Television Production segment decreased $0.6 million, or 5.9%, primarily due to decreases in rent, facility and travel and related costs.
Media Networks
The table below sets forth Media Networks gross contribution and segment profit for the three months ended December 31, 2020 and 2019.
  Three Months Ended
  December 31, Increase (Decrease)
2020 2019 Amount Percent
(Amounts in millions)
Media Networks Segment:
Revenue $ 406.2  $ 382.4  $ 23.8  6.2  %
Expenses:
Direct operating expense 175.2  162.8  12.4  7.6  %
Distribution & marketing expense 126.5  95.2  31.3  32.9  %
Gross contribution 104.5  124.4  (19.9) (16.0) %
General and administrative expenses 22.8  22.3  0.5  2.2  %
Segment profit $ 81.7  $ 102.1  $ (20.4) (20.0) %
Direct operating expense as a percentage of revenue 43.1  % 42.6  %
Gross contribution as a percentage of revenue 25.7  % 32.5  %
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The following table sets forth the Media Networks segment profit by product line:
  Three Months Ended Three Months Ended
  December 31, 2020 December 31, 2019
Starz Networks STARZPLAY International Other Streaming Services Total Media Networks Starz Networks STARZPLAY International Other Streaming Services Total Media Networks
(Amounts in millions)
Media Networks Segment:
Revenue $ 375.3  $ 17.7  $ 13.2  $ 406.2  $ 367.6  $ 6.1  $ 8.7  $ 382.4 
Expenses:
Direct operating expense 148.3  23.8  3.1  175.2  128.4  32.6  1.8  162.8 
Distribution & marketing expense 90.5  25.4  10.6  126.5  70.5  9.5  15.2  95.2 
Gross contribution 136.5  (31.5) (0.5) 104.5  168.7  (36.0) (8.3) 124.4 
General and administrative expenses 15.7  4.6  2.5  22.8  17.1  3.7  1.5  22.3 
Segment profit $ 120.8  $ (36.1) $ (3.0) $ 81.7  $ 151.6  $ (39.7) $ (9.8) $ 102.1 

Subscriber Data. The number of period-end service subscribers is a key metric to evaluate a non-ad supported subscription video service as a growing or decreasing subscriber base is a key indicator of the health of the overall business. Service subscribers may impact revenue differently depending on specific distribution agreements we have with our distributors which may include fixed fees, rates per basic video household or a rate per STARZ subscriber. The table below sets forth, for the periods presented, subscriptions to our Media Networks and STARZPLAY Arabia services.

The pro forma subscriber data as of December 31, 2019 reflects the number of subscribers as of December 31, 2019, adjusted to remove the estimated number of subscribers to MVPD video packages or MVPD bundles that include the Starz service for distributors who dropped or removed Starz from these highly distributed MVPD video packages or MVPD bundles. This is a key metric to show prior period subscribers on a comparable basis to December 31, 2020 quarter-end subscribers. An MVPD video package is an offering by our distributors to its customers of multiple distinct video networks or services for a single recurring price where there is no distinction of price on any one specific network. An MVPD bundle is an offering by our distributors to its customers of two or more distinct MVPD services, such as video, internet and phone, sold on a subscription basis to a consumer or subscriber for a single price, and may include additional premium channels, like STARZ, to promote the bundle offering. 
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Pro Forma
December 31, December 31, December 31,
2020 2019 2019
(Amounts in millions)
Domestic Subscribers
STARZ 21.0  23.5  17.3 
Other Streaming Services(1)
0.9  0.6  0.6 
21.9  24.1  17.9 
International Subscribers
STARZPLAY International 4.3  2.7  2.7 
STARZPLAY Arabia(2)
1.8  1.7  1.7 
6.1  4.4  4.4 
Total Domestic and International Subscribers 28.0  28.5  22.3 
Subscribers by Platform:
Linear Subscribers 13.4  19.9  13.7 
OTT Subscribers(3)
14.6  8.6  8.6 
Total Global Subscribers 28.0  28.5  22.3 
___________________
(1)Represents subscribers of our premium Spanish-language streaming service, Pantaya, which was launched in the quarter ended September 30, 2017.
(2)Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee.
(3)OTT subscribers includes subscribers of STARZPLAY Arabia, as presented above.

Revenue. The increase in Media Networks' revenue was driven by increased STARZPLAY International revenue of $11.6 million, increased Starz Networks revenue of $7.7 million and increased revenue from Other Streaming Services of $4.5 million. STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since December 31, 2019. Starz Networks' revenue increased as a result of higher OTT revenue resulting from increased subscriptions, which was partially offset by declines in revenue from traditional linear services.
As a result of events related to the COVID-19 global pandemic, television and streaming consumption around the globe continues to increase, as well as home entertainment demand. STARZ continues to achieve an increase in viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally. This increase in subscribers is dependent upon future economic conditions, our ability to deliver original content and may vary due to changes in consumer viewing and subscription patterns. However, it is too early to say whether this increase is indicative of future results and whether growth may slow as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic.
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During the three months ended December 31, 2020 and 2019, the following original series premiered on STARZ:
Three Months Ended December 31, 2020* Three Months Ended December 31, 2019
Seduced: Inside the NXIVM Cult Dublin Murders
The Spanish Princess Season 2
Leavenworth
*In addition, while Power Book II: Ghost premiered in the three months ended September 30, 2020, the series returned with a mid-season premiere in December 2020.
Direct Operating and Distribution and Marketing Expenses. Direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively. The level of programming 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 original series and first-run output theatrical movies premiering on the network during the period. Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere. In addition, the launch of the STARZPLAY international service has and will continue to result in an increase in expenses as the service continues to expand.
The increase in Media Networks direct operating expenses is due to higher direct operating expenses at Starz Networks, partially offset by lower direct operating expense at STARZPLAY International in the three months ended December 31, 2020. The increase in Starz Networks direct operating expense was primarily due to higher programming amortization related to our Starz Originals, and to a lesser extent, a benefit in the prior year's quarter of $4.6 million associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates. Direct operating expenses at STARZPLAY International decreased as a result of write downs of programming cost in the three months ended December 31, 2019 and prior quarters, which reduced the cost being amortized in the current quarter, partially offset by the continued expansion of STARZPLAY International.
The increase in Media Networks distribution and marketing expense is due to an increase at Starz Networks, and STARZPLAY International. Starz Networks' distribution and marketing expense increased due to increased marketing spend to drive subscriber growth on the STARZ app and for Starz Original series during the three months ended December 31, 2020 as compared to the three months ended December 31, 2019. Distribution and marketing expense for STARZPLAY International increased due to an increase in advertising and marketing costs in order to drive subscriber growth in the international territories previously launched, and additional territories launched since December 31, 2019.
Gross Contribution. The decrease in gross contribution of the Media Networks segment compared to the prior year's quarter was due to a decrease at Starz Networks due to increased direct operating expenses and distribution and marketing expenses as discussed above, which was partially offset by lower negative contributions from STARZPLAY International and Other Streaming Services.
General and Administrative Expense. General and administrative expenses of the Media Networks segment in the three months ended December 31, 2020 increased slightly from the prior year's quarter, driven by slightly increased general and administrative expenses for STARZPLAY International and Other Streaming Services, partially offset by a slight decrease in Starz Networks.


Nine Months Ended December 31, 2020 Compared to Nine Months Ended December 31, 2019

Consolidated Results of Operations
The following table sets forth our consolidated results of operations for the nine months ended December 31, 2020 and 2019:
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Nine Months Ended
December 31, Increase (Decrease)
2020 2019 Amount Percent
  (Amounts in millions)
Revenues
Motion Picture $ 788.6  $ 1,277.6  $ (489.0) (38.3) %
Television Production 621.0  743.2  (122.2) (16.4) %
Media Networks 1,161.7  1,128.8  32.9  2.9  %
Intersegment eliminations (176.3) (203.9) 27.6  (13.5) %
Total revenues 2,395.0  2,945.7  (550.7) (18.7) %
Expenses:
Direct operating 1,249.0  1,662.0  (413.0) (24.8) %
Distribution and marketing 484.6  791.7  (307.1) (38.8) %
General and administration 343.3  317.3  26.0  8.2  %
Depreciation and amortization 142.9  143.0  (0.1) (0.1) %
Restructuring and other 18.9  16.8  2.1  12.5  %
Total expenses 2,238.7  2,930.8  (692.1) (23.6) %
Operating income 156.3  14.9  141.4  949.0  %
Interest expense (135.2) (145.7) 10.5  (7.2) %
Interest and other income 2.2  7.0  (4.8) (68.6) %
Other expense (4.5) (9.7) 5.2  (53.6) %
Loss on extinguishment of debt —  (1.4) 1.4  (100.0) %
Gain (loss) on investments 0.3  (0.3) 0.6  nm
Equity interests loss (5.1) (15.7) 10.6  (67.5) %
Income (loss) before income taxes 14.0  (150.9) 164.9  (109.3) %
Income tax provision (6.7) (6.5) (0.2) 3.1  %
Net income (loss) 7.3  (157.4) 164.7  (104.6) %
Less: Net loss attributable to noncontrolling interest 11.5  14.0  (2.5) (17.9) %
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders $ 18.8  $ (143.4) $ 162.2  (113.1) %
_______________________
nm - Percentage not meaningful.
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Revenues. Consolidated revenues decreased in the nine months ended December 31, 2020, primarily due to decreases in Motion Picture and Television Production revenues, which were negatively impacted by the COVID-19 global pandemic, partially offset by increased Media Networks revenues and lower intersegment eliminations associated with lower Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.
With theaters mostly closed during the period due to circumstances associated with the COVID-19 global pandemic, Motion Picture revenue decreased primarily due to lower theatrical and international revenue, and to a lesser extent, lower home entertainment packaged media revenue due to fewer home entertainment releases in the period, lower television and other revenue.
Television Production revenue decreased due to lower domestic television revenue with fewer television episodes delivered, largely because of the pausing of productions associated with the COVID-19 global pandemic, and to a lesser extent, due to lower other revenue. These decreases were partially offset by an increase in home entertainment revenue and international revenue.
The increase in Media Networks revenue was due to increased revenue across STARZPLAY International and Other Streaming Services, partially offset by decreased revenue at Starz Networks. See further discussion in the Segment Results of Operations section below.

Direct Operating Expenses. Direct operating expenses by segment were as follows for the nine months ended December 31, 2020 and 2019:
Nine Months Ended
December 31,
2020 2019 Increase (Decrease)
Amount % of Segment Revenues Amount % of Segment Revenues Amount Percent
  (Amounts in millions)
Direct operating expenses
Motion Picture $ 373.0  47.3  % $ 625.1  48.9  % $ (252.1) (40.3) %
Television Production 494.3  79.6  660.9  88.9  (166.6) (25.2) %
Media Networks 504.6  43.4  499.8  44.3  4.8  1.0  %
COVID-19 related charges 36.6  nm —  nm 36.6  n/a
Other 2.5  nm 82.7  nm (80.2) (97.0) %
Intersegment eliminations (162.0) nm (206.5) nm 44.5  (21.5) %
$ 1,249.0  52.2  % $ 1,662.0  56.4  % $ (413.0) (24.8) %
_______________________
nm - Percentage not meaningful.
Direct operating expenses decreased in the nine months ended December 31, 2020 primarily due to lower Motion Picture and Television Production revenue and lower other direct operating expense related to certain programming and content charges in the prior year's period (as further described below). These decreases were partially offset by an increase from Media Networks and COVID-19 related charges (as further described below). The decrease in Television Production direct operating expense was partially offset by the decrease in intersegment eliminations, which primarily relate to Television Production direct operating costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment. The increase from Media Networks was due to a benefit at Starz Networks in the prior year's period of $41.3 million associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates, which was partially offset by lower programming amortization at STARZPLAY International. See further discussion in the Segment Results of Operations section below.

COVID-19 Related Charges. In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the nine months ended December 31, 2020 we incurred $36.6 million in incremental costs which were expensed in the period which are included in consolidated direct operating expense and are excluded from segment direct operating expense. These costs include incremental costs associated with film impairment due to changes in performance expectations, the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs
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resulting from circumstances associated with the COVID-19 global pandemic. We expect to incur additional incremental costs in future periods. We are in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore no material amounts of insurance proceeds have been recorded in our consolidated financial statements.

Other. During the nine months ended December 31, 2019, in connection with management changes, we implemented changes to our programming and broadcasting strategy including programming acquired or produced under prior management. As a result, we recorded certain programming and content charges of $74.0 million in the prior year's period, which are excluded from segment operating results, but included in direct operating expense in the unaudited condensed consolidated statement of operations and reflected in the "other" line item above. In addition, "other" direct operating expenses in the table above includes 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 nine months ended December 31, 2020 and 2019:
Nine Months Ended
December 31, Increase (Decrease)
2020 2019 Amount Percent
  (Amounts in millions)
Distribution and marketing expenses
Motion Picture $ 101.7  $ 468.8  $ (367.1) (78.3) %
Television Production 20.9  23.5  (2.6) (11.1) %
Media Networks 345.5  299.0  46.5  15.6  %
COVID-19 related charges 16.1  —  16.1  n/a
Other 0.4  0.4  —  —  %
$ 484.6  $ 791.7  $ (307.1) (38.8) %
U.S. theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense(1)
$ 24.9  $ 318.0  $ (293.1) (92.2) %
 ______________________
(1)Amounts in the nine months ended December 31, 2020 include $17.5 million from the quarter ended September 30, 2020 not previously included in the prior disclosure of solely U.S. theatrical P&A (none from the quarter ended June 30, 2020).
Distribution and marketing expenses decreased in the nine months ended December 31, 2020, primarily due to a decrease in Motion Picture theatrical P&A, partially offset by increased Media Networks distribution and marketing expense and COVID-19 related charges (as further described below). The decrease in Motion Picture theatrical P&A was primarily impacted by the COVID-19 global pandemic and associated closure of theaters. The increase in Media Networks distribution and marketing expense was driven by increases at STARZPLAY International. See further discussion in the Segment Results of Operations section below.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the nine months ended December 31, 2020 we incurred $16.1 million in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit. These charges are excluded from segment operating results. We expect to incur additional incremental costs in future periods.

General and Administrative Expenses. General and administrative expenses by segment were as follows for the nine months ended December 31, 2020 and 2019:
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Nine Months Ended
  December 31, Increase (Decrease)
  2020 % of Revenues 2019 % of Revenues Amount Percent
  (Amounts in millions)
General and administrative expenses
Motion Picture $ 79.8  $ 76.1  $ 3.7  4.9  %
Television Production 31.5  26.9  4.6  17.1  %
Media Networks 65.3  62.7  2.6  4.1  %
Corporate 76.9  73.0  3.9  5.3  %
253.5  10.6% 238.7  8.1% 14.8  6.2  %
Share-based compensation expense 55.2  39.5  15.7  39.7  %
Purchase accounting and related adjustments 34.6  39.1  (4.5) (11.5) %
Total general and administrative expenses $ 343.3  14.3% $ 317.3  10.8% $ 26.0  8.2  %

General and administrative expenses increased in the nine months ended December 31, 2020, resulting from increases in Corporate, Motion Picture, Media Networks and Television Production general and administrative expenses and an increase in share-based compensation expense, partially offset by decreased purchase accounting and related adjustments. See further discussion in the Segment Results of Operations section below.
Corporate general and administrative expenses increased $3.9 million, or 5.3%, primarily due to an increase in incentive based compensation partially offset by a decrease in professional fees.
The increase in share-based compensation expense included in general and administrative expense in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019 is primarily due to an increase in the number of share-based payment awards incurring expense in the current period as compared to the prior year's period. Additionally, the increase in share-based compensation expense is due to higher fair values associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved. The following table reconciles this amount to total share-based compensation expense:
Nine Months Ended
December 31,
2020 2019
  (Amounts in millions)
Share-based compensation expense by expense category
General and administrative expense $ 55.2  $ 39.5 
Restructuring and other(1)
2.8  0.3 
Direct operating expense 1.5  1.1 
Distribution and marketing expense 0.5  0.4 
Total share-based compensation expense $ 60.0  $ 41.3 
_______________________
(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.

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, 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. Purchase accounting and related adjustments decreased $4.5 million, or 11.5%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.
Depreciation and Amortization Expense. Depreciation and amortization of $142.9 million for the nine months ended December 31, 2020 decreased $0.1 million, from $143.0 million in the nine months ended December 31, 2019.
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Restructuring and Other. Restructuring and other increased $2.1 million in the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019, 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, 2020 and 2019 (see Note 13 to our unaudited condensed consolidated financial statements):
Nine Months Ended
December 31, Increase (Decrease)
2020 2019 Amount Percent
  (Amounts in millions)
Restructuring and other:
Severance(1)
Cash $ 11.6  $ 7.7  $ 3.9  50.6  %
Accelerated vesting on equity awards (see Note 11 to our unaudited condensed consolidated financial statements) 2.8  0.3  2.5  nm
Total severance costs 14.4  8.0  6.4  80.0  %
COVID-19 related charges(2)
1.6  —  1.6  n/a
Transaction and related costs(3)
2.9  8.8  (5.9) (67.0) %
$ 18.9  $ 16.8  $ 2.1  12.5  %
_______________________
nm - Percentage not meaningful.
(1)Severance costs in the nine months ended December 31, 2020 and 2019 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.
(2)During the nine months ended December 31, 2020, the Company has incurred certain costs including costs primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.
(3)Transaction and related costs in the nine months ended December 31, 2020 and 2019 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.
Interest Expense. Interest expense of $135.2 million in the nine months ended December 31, 2020 decreased $10.5 million from the nine months ended December 31, 2019, due to lower interest expense on the term loans partially offset by an increase in amortization of debt financing costs and other non-cash interest. The decrease in interest expense on the term loans is primarily due to reductions of the outstanding principal amounts from required and voluntary principal payments since the prior year's period ended December 31, 2019, and the lower LIBOR rate in the current period. The increase in amortization of debt financing costs and other non-cash interest is due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements). The following table sets forth the components of interest expense for the nine months ended December 31, 2020 and 2019:
 
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Nine Months Ended
December 31,
2020 2019
  (Amounts in millions)
Interest Expense
Cash Based:
Revolving credit facility $ 3.2  $ 5.2 
Term loans 29.2  59.9 
5.875% Senior Notes 22.8  22.9 
6.375% Senior Notes 26.1  26.2 
Other(1)
23.3  20.3 
104.6  134.5 
Amortization of debt financing costs and other non-cash interest(2)
30.6  11.2 
Total interest expense $ 135.2  $ 145.7 
 ______________________
(1)Amounts include payments associated with the Company's interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).
(2)Amounts include the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).
Other Expense. Other expense of $4.5 million for the nine months ended December 31, 2020 compared to other expense of $9.7 million for the nine months ended December 31, 2019, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).
Loss on Extinguishment of Debt. Loss on extinguishment of debt for the nine months ended December 31, 2019 was $1.4 million related to early repayments of $101.9 million in principal outstanding on the Term Loan B, with no comparable loss in the nine months ended December 31, 2020. See Note 4 to our unaudited condensed consolidated financial statements.
Gain (Loss) on Investments. Gain on investments of $0.3 million for the nine months ended December 31, 2020 represented a gain on sale of equity securities without readily determinable fair values and unrealized gains on equity securities, offset by impairments of equity method investments and equity securities without readily determinable fair values that were written down to their estimated fair value. This compared to loss on investments of $0.3 million for the nine months ended December 31, 2019 which represented unrealized losses on equity securities.
Equity Interests Loss. Equity interests loss of $5.1 million in the nine months ended December 31, 2020 compared to equity interests loss of $15.7 million in the nine months ended December 31, 2019 due to lower losses from our equity method investees.

Income Tax Provision. We had an income tax provision of $6.7 million in the nine months ended December 31, 2020, compared to an income tax provision of $6.5 million in the nine months ended December 31, 2019. Our income tax provision 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, changes in the valuation allowance against our deferred tax assets, and certain minimum taxes and foreign withholding taxes. Our income tax provision for the nine months ended December 31, 2020 was also impacted by the change in uncertain tax benefits due to the expiration of statutory limitations and additional settlements with tax authorities.

Net Income (Loss) Attributable to Lions Gate Entertainment Corp. Shareholders. Net income attributable to our shareholders for the nine months ended December 31, 2020 was $18.8 million, or basic net income per common share of $0.09 on 220.3 million weighted average common shares outstanding and diluted net income per common share of $0.09 on 221.4 million weighted average common shares outstanding. This compares to net loss attributable to our shareholders for the nine months ended December 31, 2019 of $143.4 million, or basic and diluted net loss per common share of $0.66 on 217.2 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
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eliminated when presenting consolidated results, and exclude items separately identified in the restructuring and other line item in the unaudited condensed consolidated statements of operations.
The Company's primary measure of segment performance is segment profit. Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses. Segment profit excludes corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, and, when applicable, certain charges related to the COVID-19 global pandemic, and purchase accounting and related adjustments. The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enables them to understand the fundamental performance of the Company's businesses. The reconciliation of segment profit to the Company's consolidated income (loss) before income taxes is presented in Note 14 to the unaudited condensed consolidated financial statements.

Motion Picture
The table below sets forth Motion Picture gross contribution and segment profit for the nine months ended December 31, 2020 and 2019:
  Nine Months Ended
  December 31, Increase (Decrease)
2020 2019 Amount Percent
(Amounts in millions)
Motion Picture Segment:
Revenue $ 788.6  $ 1,277.6  $ (489.0) (38.3) %
Expenses:
Direct operating expense 373.0  625.1  (252.1) (40.3) %
Distribution & marketing expense 101.7  468.8  (367.1) (78.3) %
Gross contribution 313.9  183.7  130.2  70.9  %
General and administrative expenses 79.8  76.1  3.7  4.9  %
Segment profit $ 234.1  $ 107.6  $ 126.5  117.6  %
U.S. theatrical P&A and Premium VOD expense included in distribution and marketing expense(1)
$ 24.9  $ 318.0  $ (293.1) (92.2) %
Direct operating expense as a percentage of revenue 47.3  % 48.9  %
Gross contribution as a percentage of revenue 39.8  % 14.4  %
 ______________________
(1)Amounts in the nine months ended December 31, 2020 include $17.5 million from the quarter ended September 30, 2020 not previously included in the prior disclosure of solely U.S. theatrical P&A (none from the quarter ended June 30, 2020).
Revenue. The table below sets forth Motion Picture revenue by media and product category for the nine months ended December 31, 2020 and 2019:
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  Nine Months Ended December 31,
  2020 2019 Total Increase (Decrease)
 
Feature Film(1)
Other Film(2)
Total
Feature Film(1)
Other Film(2)
Total
      (Amounts in millions)    
Motion Picture Revenue
Theatrical $ 1.5  $ 0.6  $ 2.1  $ 289.2  $ 27.3  $ 316.5  $ (314.4)
Home Entertainment
Digital Media 193.9  173.1  367.0  188.0  124.1  312.1  54.9 
Packaged Media 55.7  54.1  109.8  114.2  82.8  197.0  (87.2)
Total Home Entertainment 249.6  227.2  476.8  302.2  206.9  509.1  (32.3)
Television 121.7  32.2  153.9  138.4  39.3  177.7  (23.8)
International 86.6  59.4  146.0  193.4  63.2  256.6  (110.6)
Other 5.8  4.0  9.8  15.8  1.9  17.7  (7.9)
$ 465.2  $ 323.4  $ 788.6  $ 939.0  $ 338.6  $ 1,277.6  $ (489.0)
____________________
(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)Other Film: Includes 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 investees, Roadside Attractions and Pantelion Films, and other titles.
With theaters mostly closed during the period due to circumstances associated with the COVID-19 global pandemic, theatrical revenue decreased $314.4 million, or 99.3%, in the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019. The prior year's period included significant revenue from John Wick: Chapter 3 - Parabellum, Knives Out, Scary Stories to Tell in the Dark, Angel Has Fallen, Midway and Rambo: Last Blood.

Home entertainment revenue decreased $32.3 million, or 6.3%, in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019, due to a decrease of $87.2 million in packaged media revenues as a result of fewer home entertainment releases from our fiscal 2021 theatrical slate in our Feature Film category due to circumstances associated with the COVID-19 global pandemic, and decreases in our Other Films category. The decrease in packaged media revenues was partially offset by increased digital media revenues of $54.9 million, which included increases in our Other Films category from The Secret: Dare to Dream and Force of Nature. Digital media revenue also increased in our Feature Film category from the initial release on a streaming platform of Run, and the Premium VOD release of Antebellum, and from our fiscal 2020 theatrical slate (I Still Believe and Knives Out), as compared to the prior year's period which included significant digital media revenue from John Wick: Chapter 3 - Parabellum.
Television revenue decreased $23.8 million, or 13.4%, in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019 due to fewer television windows opening (and revenue recognized) than in the prior year's period.
International revenue decreased $110.6 million, or 43.1%, in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019 due to lower revenue from our fiscal 2021 theatrical slate in the current period, which had no new significant theatrical releases due to circumstances associated with the COVID-19 global pandemic, as compared to the revenue generated from our fiscal 2020 theatrical slate in the prior year's period, which included significant international revenue from John Wick: Chapter 3 - Parabellum.
We expect that Motion Picture segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international theatrical distribution and production as a result of the closure of theaters and paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic. The extent of the impact on Motion Picture segment revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, global economic conditions, the ability for theaters to re-open at a scale to attract motion pictures and the rate of consumers' return to the theater.
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Direct Operating Expense. The decrease in direct operating expenses is due to a 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 period as compared to the prior year's period. In particular, the decrease was impacted by the lower amortization rate of the fiscal 2020 and prior theatrical slate titles generating revenue in the current period as compared to the prior year's period. Investment in film write-downs included in Motion Picture segment direct operating expense for the period were $14.6 million in the nine months ended December 31, 2020, as compared to $38.8 million in the nine months ended December 31, 2019.
Distribution and Marketing Expense. The decrease in distribution and marketing expense in the nine months ended December 31, 2020 is due to lower theatrical P&A expense associated with the closure of theaters during the period due to circumstances associated with the COVID-19 global pandemic. Theatrical P&A and Premium VOD expense in the current period includes expense associated with the Premium VOD release of Antebellum and the theatrical and Premium VOD release of Fatale. In the nine months ended December 31, 2020, approximately $3.6 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters. In the nine months ended December 31, 2019, approximately $11.4 million of P&A was incurred in advance for films to be released in subsequent quarters, such as I Still Believe, Barb and Star Go to Vista Del Mar, and Antebellum.
Gross Contribution. While Motion Picture revenue declined during the period as discussed above, gross contribution of the Motion Picture segment for the nine months ended December 31, 2020 increased 70.9% as compared to the nine months ended December 31, 2019 due to lower Motion Picture distribution and marketing expense as a percentage of Motion Picture revenue.
General and Administrative Expense. General and administrative expenses of the Motion Picture segment in the nine months ended December 31, 2020 increased $3.7 million, or 4.9%, primarily due to an increase in incentive based compensation partially offset by decreases in rent, facility and travel and related costs.
Television Production
The table below sets forth Television Production gross contribution and segment profit for the nine months ended December 31, 2020 and 2019:
  Nine Months Ended
  December 31, Increase (Decrease)
2020 2019 Amount Percent
(Amounts in millions)
Television Production Segment:
Revenue $ 621.0  $ 743.2  $ (122.2) (16.4) %
Expenses:
Direct operating expense 494.3  660.9  (166.6) (25.2) %
Distribution & marketing expense 20.9  23.5  (2.6) (11.1) %
Gross contribution 105.8  58.8  47.0  79.9  %
General and administrative expenses 31.5  26.9  4.6  17.1  %
Segment profit $ 74.3  $ 31.9  $ 42.4  132.9  %
Direct operating expense as a percentage of revenue 79.6  % 88.9  %
Gross contribution as a percentage of revenue 17.0  % 7.9  %
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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, 2020 and 2019:
Nine Months Ended
  December 31, Increase (Decrease)
  2020 2019 Amount Percent
Television Production (Amounts in millions)  
Television $ 332.3  $ 526.4  $ (194.1) (36.9) %
International 120.4  113.3  7.1  6.3  %
Home Entertainment
Digital 119.8  47.6  72.2  151.7  %
Packaged Media 4.9  2.2  2.7  122.7  %
Total Home Entertainment 124.7  49.8  74.9  150.4  %
Other 43.6  53.7  (10.1) (18.8) %
$ 621.0  $ 743.2  $ (122.2) (16.4) %

The primary component of Television Production revenue is domestic television revenue. Domestic television revenue decreased in the nine months ended December 31, 2020, as compared to the nine months ended December 31, 2019, due to fewer television episodes delivered, decreased intersegment revenues from the licensing of Starz original series, and decreased revenue from reality television series, all of which were negatively impacted by disruptions associated with the COVID-19 global pandemic and the associated pausing of productions which resulted in the delay of television episodes delivered in the current period. In addition, the prior year's period included significant revenue from House of Payne.
International revenue in the nine months ended December 31, 2020 increased $7.1 million, or 6.3% as compared to the nine months ended December 31, 2019 due to increased intersegment revenues from STARZPLAY International from the licensing of Starz original series.
Home entertainment revenue in the nine months ended December 31, 2020 increased $74.9 million driven by digital media revenue in the current period for Mad Men Seasons 1 - 7 and Power Season 6, partially offset by digital media revenue in the prior year's period for Power Season 5.
Other revenue decreased in the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019. Revenue of 3 Arts Entertainment was negatively impacted in the nine months ended December 31, 2020 as a result of the COVID-19 global pandemic related disruptions. The extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases returning to and remaining at pre COVID-19 levels.
We expect that Television Production segment revenues will decrease in fiscal 2021 as compared to fiscal 2020 due to delays in domestic and international distribution and production as a result of paused productions throughout the U.S., Canada, and worldwide due to circumstances associated with the COVID-19 global pandemic. The extent of the impact of the COVID-19 global pandemic related disruptions on Television Production revenues, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global economic conditions related to the COVID-19 global pandemic.
Direct Operating Expense. Direct operating expense of the Television Production segment in the nine months ended December 31, 2020 decreased $166.6 million, or 25.2% due to the decrease in Television Production revenues. Direct operating expenses as a percentage of television production revenue decreased primarily due to the mix of titles generating revenue in the current period as compared to the prior year's period, and in particular, due to the COVID-19 global pandemic related disruptions, the current period included fewer deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue.
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Gross Contribution. Gross contribution of the Television Production segment for the nine months ended December 31, 2020 increased as compared to the nine months ended December 31, 2019, due to lower direct operating expenses as a percentage of television production revenue, partially offset by lower television production revenue.
General and Administrative Expense. General and administrative expenses of the Television Production segment increased $4.6 million, or 17.1%, primarily due to increases in incentive compensation and salaries and related expenses partially offset by decreases in travel and related expenses.
Media Networks
The table below sets forth Media Networks gross contribution and segment profit for the nine months ended December 31, 2020 and 2019:
  Nine Months Ended
  December 31, Increase (Decrease)
2020 2019 Amount Percent
(Amounts in millions)
Media Networks Segment:
Revenue $ 1,161.7  $ 1,128.8  $ 32.9  2.9  %
Expenses:
Direct operating expense 504.6  499.8  4.8  1.0  %
Distribution & marketing expense 345.5  299.0  46.5  15.6  %
Gross contribution 311.6  330.0  (18.4) (5.6) %
General and administrative expenses 65.3  62.7  2.6  4.1  %
Segment profit $ 246.3  $ 267.3  $ (21.0) (7.9) %
Direct operating expense as a percentage of revenue 43.4  % 44.3  %
Gross contribution as a percentage of revenue 26.8  % 29.2  %

The following table sets forth the Media Networks segment profit by product line:
  Nine Months Ended Nine Months Ended
  December 31, 2020 December 31, 2019
Starz Networks STARZPLAY International Other Streaming Services Total Media Networks Starz Networks STARZPLAY International Other Streaming Services Total Media Networks
(Amounts in millions)
Media Networks Segment:
Revenue $ 1,081.8  $ 41.9  $ 38.0  $ 1,161.7  $ 1,092.4  $ 13.6  $ 22.8  $ 1,128.8 
Expenses:
Direct operating expense 438.3  58.3  8.0  504.6  400.8  95.1  3.9  499.8 
Distribution & marketing expense 256.5  59.5  29.5  345.5  248.5  21.5  29.0  299.0 
Gross contribution 387.0  (75.9) 0.5  311.6  443.1  (103.0) (10.1) 330.0 
General and administrative expenses 47.5  12.6  5.2  65.3  47.5  10.6  4.6  62.7 
Segment profit $ 339.5  $ (88.5) $ (4.7) $ 246.3  $ 395.6  $ (113.6) $ (14.7) $ 267.3 

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Revenue. The increase in Media Networks' revenue was driven by higher STARZPLAY International revenue of $28.3 million, and increased Other Streaming Services revenue of $15.2 million due to subscriber growth, which was partially offset by decreased Starz Networks' revenue of $10.6 million. STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since December 31, 2019. Starz Networks' revenue decreased as a result of declines in revenue from traditional linear services, which was partially offset by higher OTT revenue resulting from increased subscriptions.
As a result of events related to the COVID-19 global pandemic, television and streaming consumption around the globe continues to increase, as well as home entertainment demand. STARZ continues to achieve an increase in viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally. This increase in subscribers is dependent upon future economic conditions, our ability to deliver original content and may vary due to changes in consumer viewing and subscription patterns. However, it is too early to say whether this increase is indicative of future results and whether growth may slow as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic.
During the nine months ended December 31, 2020 and 2019, the following original series premiered on STARZ:
Nine Months Ended December 31, 2020 Nine Months Ended December 31, 2019
First Quarter: First Quarter:
Vida Season 3
The Spanish Princess
Hightown Season 1
Vida Season 2
The Rook Season 1
Second Quarter: Second Quarter:
P-Valley Season 1
Sweetbitter Season 2
Power Book II: Ghost
Power Season 6
Power Confidential Season 1
Third Quarter:* Third Quarter:
Seduced: Inside the NXIVM Cult Dublin Murders
The Spanish Princess Season 2
Leavenworth
*In addition, while Power Book II: Ghost premiered in the second quarter ended September 30, 2020, the series returned with a mid-season premiere in the third quarter in December 2020.
Direct Operating and Distribution and Marketing Expenses. Direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively. The level of programming 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 original series and first-run output theatrical movies premiering on the network during the period. Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere. In addition, the launch of the STARZPLAY international service has and will continue to result in an increase in expenses as the service continues to expand.
The increase in Media Networks direct operating expenses is due to increases at Starz Networks and, to a lesser extent, Other Streaming Services, partially offset by lower direct operating expenses at STARZPLAY International in the nine months ended December 31, 2020. The increase in Starz Networks direct operating expense was primarily due to a benefit in the prior year's period of $41.3 million associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates, and higher programming amortization related to theatrical releases under our programming output agreement, partially offset by lower programming amortization and development expense related to our Starz Originals due to fewer series premieres. Direct operating expenses at STARZPLAY International decreased as a result of write downs of programming cost in the nine months ended December 31, 2019 and prior periods, which reduced the cost being amortized in the current period, partially offset by the continued expansion of STARZPLAY International.
The increase in Media Networks distribution and marketing expense is due to an increase at STARZPLAY International. Distribution and marketing expense for STARZPLAY International increased due to an increase in advertising and marketing costs in order to drive subscriber growth in the international territories previously launched, and additional territories launched since December 31, 2019.
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Gross Contribution. The decrease in gross contribution compared to the nine months ended December 31, 2019 was due to a decrease at Starz Networks primarily due to the benefit in direct operating expense in the prior year's period as discussed above, partially offset by lower negative contributions from STARZPLAY International and Other Streaming Services.
General and Administrative Expense. General and administrative expenses of the Media Networks segment in the nine months ended December 31, 2020 increased slightly from the prior year's period, driven by increased general and administrative expenses for STARZPLAY International.


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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. As of December 31, 2020, we had cash and cash equivalents of $551.5 million. Our debt at December 31, 2020 primarily consisted of a $1.5 billion five-year revolving credit facility (with no amounts outstanding at December 31, 2020) due March 2023 (the "Revolving Credit Facility"), a five-year term loan A facility due March 2023 (the "Term Loan A"), a seven-year term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), 5.875% senior notes due 2024 (the "5.875% Senior Notes"), and 6.375% senior notes due 2024 (the "6.375% Senior Notes").
In January 2021, certain subsidiaries of the Company (the “Borrowers”) entered into a senior secured revolving credit facility with the lenders from time to time party thereto and MUFG Union Bank, N.A., as administrative agent, based on the Company’s tax credit receivables (the “Facility”). The maximum principal amount of the Facility is $120.0 million, subject to availability under the borrowing base, which is based on specified percentages of amounts payable to the Borrowers by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction. Maximum capacity under the Facility may be increased to $200.0 million through the exercise by the Borrowers of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. Borrowings under the Facility shall bear interest at a rate equal to, at the Borrowers’ option, LIBOR plus 1.50% per annum or the base rate plus 0.50% per annum. The proceeds of the Facility shall be used to pay transaction fees, costs and interest associated with the Facility and the transactions contemplated thereby, and for repayment of debt and other general corporate purposes. The Facility is expected to mature on January 27, 2025. See Note 18 - Subsequent Events to our unaudited condensed consolidated financial statements.
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 method or other equity 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 $191.5 million as of December 31, 2020 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.
The 3 Arts Entertainment 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 Pilgrim Media Group noncontrolling interest holder has a right to put and the Company has a right to call a portion of the noncontrolling interest, equal to 17.5% of Pilgrim Media Group, at fair value, until February 19, 2021, as amended. In addition, the noncontrolling interest holder has a right to put and the Company has a right to call the remaining amount of noncontrolling interest at fair value, subject to a cap, exercisable at seven years after the acquisition date of November 12, 2015.
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. In addition, the launch of the Company's STARZPLAY international service has and will require capital investment as the service expands to other international territories.
In the short-term, while a portion of our revenue has been reduced as a result of disruptions associated with the COVID-19 global pandemic, our cash requirements for productions and marketing spends have also been reduced. In some areas, we have experienced increases in revenue and viewership of our content. We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, and global
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economic conditions. As a result, we cannot predict the outcome of the full extent of the disruptions associated with the COVID-19 global pandemic on our operating results, cash flows and financial position.
However, we currently believe that cash flow from operations, cash on hand, revolving credit facility availability, the monetization of trade accounts receivable, tax-efficient financing, the availability of our senior secured revolving credit facility based on our tax credit receivables, and available production financing will be adequate to meet known operational cash and debt service (i.e. principal and interest payments) requirements for the foreseeable future, including the funding of future film and television production, film and programming rights acquisitions and theatrical and home entertainment release schedules, and future equity method or other investment funding requirements, and international expansion. 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, the monetization of trade accounts receivable, and our senior secured revolving credit facility based on our tax credit receivables. In addition, we continue to expand our STARZPLAY international service and 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. Our ability to obtain any additional financing will depend on, among other things, our business plans, operating performance and the condition of the capital markets at the time we seek financing. Additionally, circumstances related to the COVID-19 global pandemic has caused disruption in the capital markets, which could make financing more difficult and/or expensive, and we may not be able to obtain such financing. 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.
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, 2020, the Company was in compliance with all applicable covenants.

The 5.875% Senior Notes and 6.375% 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, 2020, 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 $288.1 million of our common shares have been purchased under the plan, leaving approximately $179.9 million of authorized potential repurchases. The remaining $179.9 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. During the three months ended December 31, 2020, the Company did not repurchase any common shares. During the nine months ended December 31, 2020, the Company repurchased 0.2 million of its Class A voting shares for an aggregate cost of $1.0 million, with an average repurchase price per share of $5.75.
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. In November 2018, our Board of Directors suspended our quarterly cash dividend to focus on driving long-term shareholder value by investing in global growth opportunities for Starz, while also strengthening the Company's balance sheet.
Capacity to Pay Dividends. At December 31, 2020, the capacity to pay dividends under the Senior Credit Facilities and the 5.875% Senior Notes and 6.375% Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net income, and therefore the Company's net income of $7.3 million and accumulated deficit of $18.8 million were deemed free of restrictions from paying dividends at December 31, 2020.
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Discussion of Operating, Investing, Financing Cash Flows
Cash and cash equivalents increased by $227.4 million for the nine months ended December 31, 2020 and increased by $10.1 million for the nine months ended December 31, 2019, 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, 2020 and 2019 were as follows:
Nine Months Ended
December 31,
2020 2019 Net Change
(Amounts in millions)
Operating income $ 156.3  $ 14.9  $ 141.4 
Depreciation and amortization 142.9  143.0  (0.1)
Amortization of films and television programs and program rights 853.6  1,306.0  (452.4)
Non-cash share-based compensation 60.1  41.4  18.7 
Cash interest (104.7) (134.5) 29.8 
Current income tax provision (6.7) (5.7) (1.0)
Other non-cash charges included in operating activities 49.5  43.4  6.1 
Cash flows from operations before changes in operating assets and liabilities 1,151.0  1,408.5  (257.5)
Changes in operating assets and liabilities:
Accounts receivable, net and other assets 133.6  271.0  (137.4)
Investment in films and television programs and program rights (984.7) (1,136.1) 151.4 
Accounts payable and accrued liabilities (7.7) (33.8) 26.1 
Other changes in operating assets and liabilities (132.9) (75.2) (57.7)
Changes in operating assets and liabilities (991.7) (974.1) (17.6)
Net Cash Flows Provided By Operating Activities $ 159.3  $ 434.4  $ (275.1)

Cash flows provided by operating activities for the nine months ended December 31, 2020 were $159.3 million compared to cash flows provided by operating activities of $434.4 million for the nine months ended December 31, 2019. The decrease in cash provided by operating activities for the nine months ended December 31, 2020 as compared to the nine months ended December 31, 2019 is due to lower cash flows from operations before changes in operating assets and liabilities, and to a lesser extent, greater cash used from changes in operating assets and liabilities as shown above. The greater use of cash from changes in operating assets and liabilities was driven by lower decreases in accounts receivable, net and other assets, and greater use of cash from changes in other operating assets and liabilities driven by decreases in film obligations, as reflected above. These decreases were partially offset by lower cash used for investment in films and television programs and program rights as reflected above, and the receipt of $64.3 million from the Internal Revenue Service related to the Company's net operating loss carryback claim which is subject to review and included in other liabilities until the review is completed. In addition, cash flows provided by operating activities for the nine months ended December 31, 2020 included a net benefit of approximately $7.0 million from the monetization of accounts receivables programs, as compared to a benefit of $280.9 million for the nine months ended December 31, 2019 (see Note 17 to our unaudited condensed consolidated financial statements).
Investing Activities. Cash flows used in investing activities for the nine months ended December 31, 2020 and 2019 were as follows:
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Nine Months Ended
December 31,
2020 2019
(Amounts in millions)
Proceeds from the sale of other investments $ 5.1  $ — 
Investment in equity method investees and other (0.2) (14.8)
Capital expenditures (25.8) (24.0)
Net Cash Flows Used In Investing Activities $ (20.9) $ (38.8)
Cash used in investing activities of $20.9 million for the nine months ended December 31, 2020 compared to cash used in investing activities of $38.8 million for the nine months ended December 31, 2019, as reflected above.
Financing Activities. Cash flows used in financing activities for the nine months ended December 31, 2020 and 2019 were as follows:
Nine Months Ended
December 31,
2020 2019
(Amounts in millions)
Debt - borrowings $ 160.0  $ 597.1 
Debt - repayments (210.9) (738.6)
Net borrowings (repayments) of debt (50.9) (141.5)
Production loans - borrowings 219.2  54.0 
Production loans - repayments (51.9) (290.9)
Net proceeds from (repayments of) production loans 167.3  (236.9)
Repurchase of common shares (2.2) — 
Other financing activities (25.2) (7.1)
Net Cash Flows Provided By (Used In) Financing Activities $ 89.0  $ (385.5)
Cash flows provided by financing activities of $89.0 million for the nine months ended December 31, 2020 compared to cash flows used in financing activities of $385.5 million for the nine months ended December 31, 2019. Cash flows provided by financing activities for the nine months ended December 31, 2020 primarily reflects net production loan borrowings of $167.3 million as production activity increased in the quarter, and net debt repayments of $50.9 million representing required repayments on our term loans. In addition, other financing activities in the nine months ended December 31, 2020 includes $15.4 million for interest rate swap settlement payments due to an other-than-insignificant financing element on a portion of our interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).
Cash flows used in financing activities for the nine months ended December 31, 2019 primarily reflects net production loan repayments of $236.9 million and net debt repayments of $141.5 million, which consisted of early repayments of $101.9 million in principal outstanding on the Term Loan B and required repayments on our term loans.

Debt
See Note 4 to our unaudited condensed consolidated financial statements for a discussion of our debt.
Production Loans

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

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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, 2020:
 
  Three Months Ending March 31, Year Ending March 31,
  2021 2022 2023 2024 2025 Thereafter Total
(Amounts in millions)
Future annual repayment of debt recorded as of December 31, 2020 (on-balance sheet arrangements)
Revolving credit facility $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Term Loan A 13.1  75.0  585.0  —  —  —  673.1 
Term Loan B 3.2  12.5  12.5  12.5  915.1  —  955.8 
5.875% Senior Notes —  —  —  —  518.7  —  518.7 
6.375% Senior Notes —  —  —  545.6  —  —  545.6 
Film obligations and production loans(1)
18.4  301.6  78.8  119.7  4.6  2.1  525.2 
Operating lease obligations 13.5  40.9  37.5  25.3  15.0  49.4  181.6 
Finance lease obligations 0.4  —  —  —  —  —  0.4 
48.6  430.0  713.8  703.1  1,453.4  51.5  3,400.4 
Contractual commitments by expected repayment date (off-balance sheet arrangements)
Film obligation and production loan commitments(2)
124.4  500.1  58.1  155.9  36.8  31.8  907.1 
Interest payments(3)
34.3  136.3  134.0  115.5  72.1  —  492.2 
Other contractual obligations 66.8  90.4  54.8  15.2  8.4  49.0  284.6 
225.5  726.8  246.9  286.6  117.3  80.8  1,683.9 
Total future repayment of debt and other commitments under contractual obligations (4)
$ 274.1  $ 1,156.8  $ 960.7  $ 989.7  $ 1,570.7  $ 132.3  $ 5,084.3 
 ___________________
(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 (including interest on finance lease obligations), 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 $191.5 million of redeemable noncontrolling interests, 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 8 to our unaudited condensed consolidated financial statements). In addition, in January 2021, we entered into a senior secured revolving credit facility based on our tax credit receivables. The maximum principal amount of the Facility
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is $120.0 million, subject to availability under the borrowing base, which is based on specified percentages of amounts payable to the Borrowers by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction. Maximum capacity under the Facility may be increased to $200.0 million through the exercise by the Borrowers of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Facility is expected to mature on January 27, 2025. See Note 18 - Subsequent Events 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 9 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.6 billion at December 31, 2020 (March 31, 2020 - $1.6 billion). 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, 2020 (March 31, 2020 - $1.0 billion).
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 unaudited condensed 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 unaudited condensed 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. 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. See Note 16 to our unaudited condensed consolidated financial statements for additional information on our financial instruments.
Interest Rate Risk. At December 31, 2020, we had interest rate swap agreements to fix the interest rate on $1.7 billion of variable rate LIBOR-based debt. See Note 16 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
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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, 2020, each quarter point change in interest rates would result in a $3.6 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 2.28% to 2.96% and applicable margins ranging from 1.75% over the one, two, or three-month LIBOR to 2.25% 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 $0.8 million in additional costs capitalized to the respective film or television asset.

At December 31, 2020, our 5.875% Senior Notes and 6.375% Senior Notes had an outstanding carrying value of $1,046.5 million, and an estimated fair value of $1,085.8 million. A 1% increase in the level of interest rates would decrease the fair value of the 5.875% Senior Notes and 6.375% Senior Notes by approximately $19.3 million, and a 1% decrease in the level of interest rates would increase the fair value of the 5.875% Senior Notes and 6.375% Senior Notes by approximately $12.0 million.

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, 2020:
 
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  Three Months Ending March 31, Year Ending March 31, Fair Value
  2021 2022 2023 2024 2025 Thereafter Total December 31,
2020
(Amounts in millions)
Debt and Production Loans
Variable Rates:
Revolving Credit Facility(1)
$ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Average Interest Rate —  —  —  —  —  — 
Term Loan A(1)
13.1  75.0  585.0  —  —  —  673.1  652.9 
Average Interest Rate 1.89  % 1.89  % 1.89  % —  —  — 
Term Loan B(1)
3.2  12.5  12.5  12.5  915.1  —  955.8  931.9 
Average Interest Rate 2.39  % 2.39  % 2.39  % 2.39  % 2.39  % — 
Production loans —  160.4  53.3  106.4  —  —  320.1  320.1 
Average Interest Rate —  2.82  % 2.46  % 2.39  % —  — 
Fixed Rates:
5.875% Senior Notes —  —  —  —  518.7  —  518.7  526.5 
Interest Rate —  —  —  —  5.875  % — 
6.375% Senior Notes —  —  —  545.6  —  —  545.6  559.3 
Interest Rate —  —  —  6.375  % —  — 
Interest Rate Swaps(2)
Variable to fixed notional amount —  —  —  —  300.0  1,400.0  1,700.0  165.5 
 ____________________
(1)The effective interest rate in the table above is before the impact of interest rate swaps.
(2)Represents interest rate swap agreements on certain of our LIBOR-based floating-rate debt with fixed rates paid ranging from 1.840% to 2.915% with maturities beginning in March 2025 through March 2030. See Note 16 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, 2020, 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, 2020.
Changes in Internal Control over Financial Reporting
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, there has been no such change during the period covered by this report. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to disruptions related to the COVID-19 global pandemic, but we are continually monitoring and assessing the COVID-19 situation on our internal controls.




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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 15 - 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.

Other than as set forth below, there were no other material changes to the risk factors previously reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

The impact of the COVID-19 global pandemic could materially and adversely affect our business, financial condition and results of operations.

The impacts associated with the ongoing COVID-19 global pandemic and measures to prevent its spread, and the resulting economic uncertainty, continue to affect our business in a number of ways. We continue to experience delays in theatrical distribution of our films, both domestically and internationally, as well as delays in the production of film and television content (resulting in continued changes in future release dates for some titles and series). While we have begun (and have, in certain instances, completed) production of a number of films and television series, and theaters have begun to reopen in certain locations with reduced capacity, we are not able to accurately predict when theaters will re-open at scale, at what level consumers will return to movie theaters, when film production will fully resume, whether productions that have resumed will be paused again, the impact of incremental costs required to adhere to new health and safety protocols, or if and when certain of our content will be released. The full extent of impacts related to the COVID-19 global pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. See Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 27, 2020.

Conversely, television and streaming consumption around the globe continues to increase, as well as home entertainment demand. STARZ continues to achieve an increase in viewership of its content across all platforms as well as an increase in subscribers to its OTT services, both domestically and internationally. However, it is too early to say whether this increase is indicative of future results and whether growth may slow as governmental and other restrictions are relaxed, and as a result of the current and possible longer term negative economic impact of the pandemic. We continue, however, to adapt to these new circumstances. For instance, we have changed the release strategies of several of our theatrical films by releasing solely and/or earlier on streaming platforms, initially releasing in the premium video-on-demand ("Premium VOD") market, or by licensing directly to streaming platforms. We have also begun and completed post-production of a number of our television series and continue the development of film properties and television series.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of most theaters, international travel restrictions and the pausing of motion picture and television productions, during the three and nine months ended December 31, 2020 we have incurred $14.8 million and $54.3 million, respectively, in incremental costs which were expensed in the period. These costs include $8.6 million and $36.6 million, respectively, reflected in direct operating expense, which include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, and in the nine months ended December 31, 2020 include film impairment due to changes in performance expectations resulting from circumstances associated with the COVID-19 global pandemic. In addition, these costs include $5.4 million and $16.1 million, respectively, reflected in distribution and marketing expense, which primarily consists of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit, and $0.8 million and $1.6 million in restructuring and other costs primarily due to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic during these periods. We expect to incur additional incremental costs in future periods. We are in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore no material amounts of insurance proceeds have been recorded in our consolidated financial statements.

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We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), and global economic conditions related to the COVID-19 global pandemic. All of these impacts could place limitations on our ability to execute on our business plan and materially and adversely affect our business, financial condition and results of operations. We have implemented policies, procedures and protocols to address the situation and expect to continue to adjust our current policies and procedures as more information and guidance become available. In addition, recent resurgences of COVID-19 in certain parts of the world, including the United States and parts of Europe, and the discovery of new variants of the virus, have resulted in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19. These measures could result in further interruptions to our operations. Due to the evolving and uncertain nature of this situation, we are not able to estimate the full extent of the impact on our operating results, cash flows and financial position, particularly over the near to medium term.


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 $288.1 million (or 16,608,796) of our common shares have been purchased, leaving approximately $179.9 million of authorized potential repurchases. The remaining $179.9 million of our common shares 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, 2020.

Additionally, during the three months ended December 31, 2020, 4,719 Class A voting shares and 195,540 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
Form Exhibit Filing Date/
Period End Date
3.1 8-K 3.1 12/8/2016
3.2 8-K/A 3.1 12/9/2016
10.40* 8-K 10.1 12/21/2020
10.41*x
31.1x
31.2x
32.1x
101x The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, formatted in Inline XBRL: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104x The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 (formatted as Inline XBRL and contained in Exhibit 101).
__________________________
* 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/ JAMES W. BARGE
 
    Name: James W. Barge  
DATE: February 4, 2021
  Title: Duly Authorized Officer and Chief Financial Officer  



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Exhibit 10.41











LIONS GATE ENTERTAINMENT INC.
DEFERRED COMPENSATION PLAN



EFFECTIVE DATE
SEPTEMBER 1, 2018










    

ARTICLE I
Establishment and Purpose

Lions Gate Entertainment Inc., a Delaware corporation (the “Company”), establishes the Lions Gate Entertainment Inc. Deferred Compensation Plan (the “Plan”) effective September 1, 2018 (the “Effective Date”) and as amended November 11, 2020.
The purpose of the Plan is to attract and retain key employees by providing Participants with an opportunity to defer receipt of a portion of their Salary, Bonus, Commissions and/or other specified compensation. The Plan is not intended to meet the qualification requirements of Code Section 401(a), but is intended to meet the requirements of Code Section 409A, and shall be operated and interpreted consistent with that intent.
The Plan constitutes an unsecured promise by each Participating Employer to pay benefits in the future. Participants in the Plan shall have the status of general unsecured creditors of the Company or the Adopting Employers, as applicable. Each Participating Employer shall be solely responsible for payment of the benefits of its Participants and their beneficiaries. The Plan is unfunded for federal tax purposes, and is intended to be an unfunded arrangement for eligible employees who are part of a select group of management or highly compensated employees of the Employer within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Accordingly, the Plan is intended to qualify for the exemptions provided in Sections 201, 301, and 401 of ERISA. Any amounts set aside to defray the liabilities assumed by the Company or an Adopting Employer will remain the general assets of the Company or the Adopting Employers, and shall remain subject to the claims of the Company’s or the Adopting Employers’ creditors, until such amounts are distributed to the Participants.
ARTICLE II
Definitions

2.1    Account. Account means a bookkeeping account maintained by the Committee to record the payment obligation of a Participating Employer to a Participant as determined under the terms of the Plan. The Committee may maintain an Account to record the total obligation to a Participant, and component Accounts to reflect amounts payable at different times and in different forms. Reference to an Account means any such Account established by the Committee, as the context requires. Each Account is intended to constitute an unfunded obligation within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
2.2    Account Balance. Account Balance means, with respect to any Account, the total payment obligation owed to a Participant from such Account as of the most recent Valuation Date.

    

2.3    Adopting Employer. Adopting Employer means an Affiliate who, with the consent of the Company, has adopted the Plan for the benefit of its Eligible Employees.
2.4    Affiliate. Affiliate means any corporation, trade or business that, together with the Company, is treated as a single employer under Code Section 414(b) or (c).
2.5    Bonus. Bonus means any cash compensation (including any amounts that are denominated in dollars that the Committee determines will be awarded as fully vested shares rather than cash), in addition to Salary and Commissions, for services performed by a Participant for a Service Recipient during the applicable Plan Year (or applicable Plan Years or Fiscal Year(s), as the case may be), whether or not paid in such Plan Year (or Fiscal Year) or included on the federal income tax form W-2 for such year (or years), payable to a Participant as an Employee under any Employer’s annual, semi-annual, or quarterly bonus plans or short-term cash incentive plans, excluding any amounts that may be payable with respect to any long-term incentive plans, stock options, stock appreciation rights, restricted stock and/or restricted stock units. Bonus shall be calculated before any reduction for compensation voluntarily deferred or contributed by the Participant pursuant to any qualified or nonqualified plans of any Employer, other than any cafeteria plan of any Employer maintained pursuant to Code Section 125. The Committee, in its discretion, will specify the types of bonuses that may be deferred under the Plan.
2.6    Beneficiary. Beneficiary means a natural person, estate, or trust designated by a Participant to receive payments to which a Beneficiary is entitled upon the death of a Participant in accordance with the provisions of the Plan.
2.7    Board of Directors. Board of Directors means the board of directors of the Company.
2.8    Business Day. Business Day means each day on which the New York Stock Exchange is open for business.
2.9    Change in Control. Change in Control means the occurrence of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of a corporation, as determined in accordance with this Section. In order for an event described below to constitute a Change in Control with respect to a Participant, except as otherwise provided in part (b)(ii) of this Section, the applicable event must relate to the corporation for which the Participant is providing services, the corporation that is liable for payment of the Participant’s Account Balance (or all corporations liable for payment if more than one), as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(ii)(A)(2), or such other corporation as is determined in accordance with Treas. Reg. §1.409A-3(i)(5)(ii)(A)(3).
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In determining whether an event shall be considered a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of a corporation, the following provisions shall apply:
(a)    A “change in the ownership” of the applicable corporation shall occur on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of such corporation that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(v). If a person or group is considered either to own more than 50% of the total fair market value or total voting power of the stock of such corporation, or to have effective control of such corporation within the meaning of part (b) of this Section, and such person or group acquires additional stock of such corporation, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the ownership” of such corporation.
(b)    A “change in the effective control” of the applicable corporation shall occur on either of the following dates:
(i)    The date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of such corporation possessing 30% or more of the total voting power of the stock of such corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi). If a person or group is considered to possess 30% or more of the total voting power of the stock of a corporation, and such person or group acquires additional stock of such corporation, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the effective control” of such corporation; or
(ii)    The date on which a majority of the members of the applicable corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such corporation’s board of directors before the date of the appointment or election, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi). In determining whether the event described in the preceding sentence has occurred, the applicable corporation to which the event must relate shall only include a corporation identified in accordance with Treas. Reg. §1.409A-3(i)(5)(ii) for which no other corporation is a majority shareholder.
(c)    A “change in the ownership of a substantial portion of the assets” of the applicable corporation shall occur on the date on which any one person, or more than one person acting as a group, acquires (or has acquired during the
3
    

12-month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the corporation immediately before such acquisition or acquisitions, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vii). A transfer of assets shall not be treated as a “change in the ownership of a substantial portion of the assets” when such transfer is made to an entity that is controlled by the shareholders of the transferor corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vii)(B).
(d)    The determination of whether an event constitutes a Change in Control shall be made in compliance with Treas. Reg. §1.409A-3(i)(5).
2.10    Change in Control Benefit. Change in Control Benefit means the benefit payable in a single lump sum to a Participant in the event such Participant experiences a Separation from Service within one year following a Change in Control, as provided in Section 6.1 of the Plan.
2.11    Claimant. Claimant means a Participant or Beneficiary filing a claim under Article XII of this Plan.
2.12    Code. Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation or regulation amending, supplementing, or superseding such section or regulation
2.13    Code Section 409A. Code Section 409A means Section 409A of the Code, and regulations and other guidance issued by the Treasury Department and Internal Revenue Service thereunder.
2.14    Commissions. Commissions means any compensation (including quarterly sales incentives) in addition to Salary and Bonus, for services performed during any applicable Plan Year (or Fiscal Year, as the case may be), whether or not paid in such Plan Year (or Fiscal Year) or included on the federal income tax form W2 for such year, payable to a Participant as an Employee under any Employer's commission or sales incentive agreement.
2.15    Committee. Committee means the committee appointed by the Board of Directors or the Compensation Committee to administer the Plan. If no designation is made, the Chief Executive Officer of the Company, or his or her delegate, shall have the powers of the Committee.
2.16    Company. Company means Lions Gate Entertainment Inc., a Delaware corporation.
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2.17    Compensation. Compensation means a Participant’s Salary, Bonus, Commissions, and such other cash compensation (if any) approved by the Committee as Compensation that may be deferred under this Plan. Compensation shall not include any compensation that has been previously deferred under this Plan or any other arrangement subject to Code Section 409A.
2.18    Compensation Committee. Compensation Committee means the Compensation Committee of the Board of Directors.
2.19    Compensation Deferral Agreement. Compensation Deferral Agreement means an agreement between a Participant and a Participating Employer that specifies: (a) the amount of each component of Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV, and (b) the Payment Schedule applicable to one or more Accounts. The Committee may permit different deferral amounts for each component of Compensation and may establish a maximum deferral amount for each such component. A Compensation Deferral Agreement may also specify the investment allocation described in Section 8.4.
2.20    Death Benefit. Death Benefit means the benefit payable in a single lump sum under the Plan to a Participant’s Beneficiary(ies) upon the Participant’s death as provided in Section 6.1 of the Plan.
2.21    Deferral. Deferral means a credit to a Participant’s Account(s) that records that portion of the Participant’s Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV. Unless the context of the Plan clearly indicates otherwise, a reference to Deferrals includes Earnings attributable to such Deferrals. Except as otherwise specified in the Plan, Deferrals shall be calculated with respect to the gross cash Compensation payable to the Participant prior to any deductions or withholdings. Notwithstanding any contrary Plan provision, Deferrals shall be reduced by the Committee as necessary so that they do not exceed 100% of the cash Compensation of the Participant remaining after deduction of all applicable tax withholdings and other deductions required by applicable law.
2.22    Director. Director means a member of the Board of Directors of the Company.
2.23    Disability Benefit. Disability Benefit means the benefit payable in a single lump sum to a Participant in the event such Participant is determined to be Disabled as provided in Section 6.1 of the Plan.
2.24    Disabled or Disability. Disabled or Disability means that a Participant is, by reason of any medically-determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months: (a) unable to engage in any substantial gainful activity, or (b) receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s
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Employer. The Committee shall determine whether a Participant is Disabled in accordance with Code Section 409A, provided, however, that a Participant shall be deemed to be Disabled if determined to be totally disabled by the Social Security Administration. The determination of whether a Participant is Disabled shall be made in compliance with Treas. Reg. §1.409A-3(i)(4).
2.25    Discretionary Contribution. Discretionary Contribution means a credit by a Participating Employer to a Participant’s Account(s) in accordance with the provisions of Section 5.1 of the Plan. Discretionary Contributions are credited at the sole discretion of the Participating Employer, and the fact that a Discretionary Contribution is credited in one year shall not obligate the Participating Employer to continue to make such Discretionary Contributions in subsequent years. A Discretionary Contribution may be made to one or more Participants, and the amount contributed to each such Participant may differ. Unless the context clearly indicates otherwise, a reference to a Discretionary Contribution shall include Earnings attributable to such a contribution.
2.26    Earnings. Earnings mean a positive or negative adjustment to the value of an Account, based upon the allocation of the Account by the Participant among deemed investment options in accordance with Article VIII.
2.27    Eligible Employee. Eligible Employee means a member of a “select group of management or highly compensated employees” of a Participating Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, as determined by the Committee from time to time in its sole discretion, who meets eligibility requirements set by the Committee for participation in the Plan.
2.28    Employee. Employee means a common-law employee of an Employer.
2.29    Employer. Employer means, with respect to Employees it employs, the Company or any Adopting Employer.
2.30    ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific section of ERISA shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation or regulation amending, supplementing, or superseding such section or regulation.
2.31    Fiscal Year. Fiscal Year means the Company’s fiscal year.
2.32    Fiscal Year Compensation. Fiscal Year Compensation means any Bonus, Commissions or other Compensation relating to a period of service coextensive with one or more consecutive Fiscal Years, of which no amount is paid or payable during the Fiscal Year or Fiscal Years constituting the period of service to which such Compensation relates. Compensation is Fiscal Year Compensation only if it qualifies as fiscal year compensation under Treas. Reg. §1.409A-2(a)(6).
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2.33    401(k) Plan. 401(k) Plan means the Lions Gate Entertainment Inc. 401(k) Plan, as amended from time to time.
2.34    Participant. Participant means an Eligible Employee who: (a) has received written notification of his or her eligibility to participate in the Plan, (b) meets all requirements specified by the Committee for participation in the Plan, and (c) is providing services to an Employer on the participation start date specified by the Committee. A Participant’s continued participation in the Plan shall be governed by Section 3.2 of the Plan.
2.35    Participating Employer. Participating Employer means the Company and each Adopting Employer.
2.36    Payment Schedule. Payment Schedule means the date as of which payment of one or more benefits under the Plan will commence and the form in which payment of such benefits will be made.
2.37    Performance-Based Compensation. Performance-Based Compensation means any Bonus or other compensation amount to the extent that it is: (a) contingent on the satisfaction of pre-established organizational or individual performance criteria, (b) not readily ascertainable at the time the deferral election is made, and (c) based on services performed over a period of at least 12 months. For this purpose, performance criteria are “pre-established” if they are established in writing no later than 90 days after the commencement of the service period to which the criteria relate, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-Based Compensation shall not include any Bonus or other compensation that is paid due to the Participant’s death, or because the Participant becomes Disabled, without regard to the satisfaction of the performance criteria. Compensation is Performance-Based Compensation only if it qualifies as performance-based compensation under Treas. Reg. §1.409A-1(e).
2.38    Plan. Generally, the term Plan means the “Lions Gate Entertainment Inc. Deferred Compensation Plan” as documented herein, and as may be amended from time to time hereafter. However, to the extent permitted or required under Code Section 409A, the term Plan may, in the appropriate context, also mean a portion of the Plan that is treated as a single plan under Treas. Reg. §1.409A-1(c), or the Plan or portion of the Plan and any other nonqualified deferred compensation plan or portion thereof that is treated as a single plan under such section.
2.39    Plan Year. For the first year, Plan Year means a period beginning on September 1, 2018 and ending on December 31, 2018, and for each subsequent year, a period beginning on January 1 and ending on December 31 of the same calendar year.
2.40    Salary. Salary means the Participant’s annual rate of base pay for services performed for a Service Recipient as an Employee during the applicable Plan Year, whether or not paid in such Plan Year, or included on the federal income tax form
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W-2 for such year, excluding bonuses, commissions, overtime, fringe benefits, stock options, stock appreciation rights, restricted stock, relocation expenses, payments of unused vacation days or paid-time-off days, long term or other incentive payments, non-monetary awards, other non-monetary compensation, severance pay, and automobile and other allowances paid to the Participant. Salary shall be calculated before any reduction for compensation voluntarily deferred or contributed by the Participant pursuant to any qualified or nonqualified plans of any Employer, other than any cafeteria plan of any Employer maintained pursuant to Code Section 125.
2.41    Separation from Service.
(a)    With respect to a Service Provider who is an Employee, Separation from Service means either (i) termination of the Employee’s employment with the Company and all Affiliates due to death, retirement or other reasons, or (ii) a permanent reduction in the level of bona fide services the Employee provides to the Company and all Affiliates to an amount that is 20% or less of the average level of bona fide services the Employee provided to the Company in the immediately preceding 36 months, with the level of bona fide service calculated in accordance with Treas. Reg. §1.409A-1(h)(1)(ii). For purposes of determining whether a Separation from Service has occurred, the definition of “Affiliate” shall be modified by substituting 50% for 80% in each place it appears in Code Section 1563(a)(1), (2) and (3), for purposes of Code Section 414(b), and in each place it appears in Treas. Reg. §1.414(c)-2, for purposes of Code Section 414(c).
The Employee’s employment relationship is treated as continuing while the Employee is on military leave, sick leave, or other bona fide leave of absence (if the period of such leave does not exceed six months or, if longer, so long as the Employee’s right to reemployment with the Company or an Affiliate is provided either by statute or contract). If the Employee’s period of leave exceeds six months and the Employee’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such six-month period. Whether a termination of employment has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United States Treasury Department pursuant to Code Section 409A.
(b)    If a Participant provides services for an Employer as both an Employee and a Director, to the extent permitted by Treas. Reg. §1.409A-1(h)(5) the services provided by such Participant as a Director shall not be taken into account in determining whether the Participant has experienced a Separation from Service as an Employee, and the services provided by such Participant
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as an Employee shall not be taken into account in determining whether the Participant has experienced a Separation from Service as a Director.

The determination of whether a Service Provider has had a Separation from Service shall be made in compliance with Treas. Reg. §1.409A-1(h).
2.42    Separation from Service Account. Separation from Service Account means one or more Accounts established by the Committee to record the amounts payable to a Participant upon Separation from Service.
2.43    Separation from Service Benefit. Separation from Service Benefit means the benefit payable to a Participant under the Plan following the Participant’s Separation from Service as provided in Section 6.1 of the Plan.
2.44    Service Provider. Service Provider means a Participant or any other “service provider,” as defined in Treas. Reg. §1.409A-1(f).
2.45    Service Recipient. Service Recipient means, with respect to a Participant, the Employer and all Affiliates.
2.46    Specified Date Account. Specified Date Account means one or more Accounts established by the Committee to record the amounts payable at a future date as specified in the Participant’s Compensation Deferral Agreement. The Committee may in its discretion establish a maximum number of Specified Date Accounts for Plan Participants. A Specified Date Account may be identified in enrollment materials as an “In-Service Account,” “Short-Term Account,” “Scheduled Distributions Account” or such other name as established by the Committee without affecting the meaning thereof.
2.47    Specified Date Benefit. Specified Date Benefit means the benefit payable to a Participant under the Plan in accordance with Section 6.1(b).
2.48    Specified Employee. Specified Employee means an Employee who, as of the date of his Separation from Service, is a "key employee" of the Company or any Affiliate, any stock of which is actively traded on an established securities market or otherwise. An Employee is a key employee if he meets the requirements of Code Section 416(i)(l)(A)(i), (ii), or (iii) (applied in accordance with applicable regulations thereunder and without regard to Code Section 416(i)(5)) at any time during the 12-month period ending on the Specified Employee Identification Date. Such Employee shall be treated as a key employee for the entire 12-month period beginning on the Specified Employee Effective Date.
For purposes of determining whether an Employee is a Specified Employee, the compensation of the Employee shall be determined in accordance with the definition of compensation provided under Treasury Regulation Section 1.415(c)-2(d)(3) (wages within the meaning of Code section 3401(a) for purposes of
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income tax withholding at the source, plus amounts excludible from gross income under section 125(a),· 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b), without regard to rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed); provided, however, that, with respect to a nonresident alien who is not a Participant in the Plan, compensation shall not include compensation that is not includible in the gross income of the Employee under Code Section 872, 893, 894, 911, 931 and 933, provided such compensation is not effectively connected with the conduct of a trade or business within the United States.

Notwithstanding anything in this paragraph to the contrary, (i) if a different definition of compensation has been designated by the Company with respect to another nonqualified deferred compensation plan in which a key employee participates, the definition of compensation shall be the definition provided in Treasury Regulation Section 1.409A-1(i)(2); and (ii) the Company may through action that is legally binding with respect to all nonqualified deferred compensation plans maintained by the Company, elect to use a different definition of compensation.

In the event of corporate transactions described in Treasury Regulation Section 1.409A-1(i)(6), the identification of Specified Employees shall be determined in accordance with the default rules described therein, unless the Employer elects to utilize the available alternative methodology through designations made within the timeframes specified therein.

2.49    Specified Employee Identification Date. Specified Employee Identification Date means December 31, unless the Employer has elected a different date through action that is legally binding with respect to all nonqualified deferred compensation plans maintained by the Employer.

Specified Employee Effective Date. Specified Employee Effective Date means the first day of the fourth month following the Specified Employee Identification Date, or such earlier date as is selected by the Committee.

2.50    Substantial Risk of Forfeiture. Substantial Risk of Forfeiture means the description specified in Treas. Reg. §1.409A-1(d).
2.51    Unforeseeable Emergency. Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s dependent (as defined in Code Section 152, without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)), or the Participant’s Beneficiary; loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the
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Participant. The types of events which may qualify as an Unforeseeable Emergency may be limited by the Committee.
The determination of whether a Participant has had an Unforeseeable Emergency shall be made in compliance with Treas. Reg. §1.409A-3(i)(3).
2.52    Valuation Date. Valuation Date means each Business Day.
ARTICLE III
Eligibility and Participation

3.1    Eligibility and Participation. The Committee shall designate the eligibility requirements for participation in the Plan in its sole and absolute discretion, in accordance with applicable law and the terms and conditions of the Plan. The Committee’s eligibility determination shall be in writing and as determined in the discretion of the Committee, may be changed from time to time. An Eligible Employee shall become eligible to accrue deferred compensation under the Plan or receive a Discretionary Contribution on the date such person becomes a Participant.
3.2    Duration. A Participant shall continue to be eligible to make Deferrals of Compensation and receive allocations of Discretionary Contributions, if any, subject to the terms of the Plan, for as long as such Participant remains an Eligible Employee or until the Committee, in its discretion, decides the Participant no longer is entitled to participate in the Plan. A Participant who ceases to be an Eligible Employee or who no longer is entitled to participate in the Plan but who has not Separated from Service or otherwise qualified for and received (or has had a Beneficiary receive) a complete distribution of his or her Account Balance from the Plan, shall not make further Deferrals of Compensation effective as of the first day of the Plan Year following the Plan Year in which the Participant ceases to be an Eligible Employee. Such individual may otherwise exercise all of the rights of a Participant under the Plan with respect to his or her Account(s). On and after a Separation from Service, a Participant shall remain a Participant as long as his or her Account Balance is greater than zero, and during such time may continue to make investment allocation elections as provided in Section 8.4. An individual shall cease being a Participant in the Plan when all benefits under the Plan to which he or she is entitled have been paid.
3.3    Reemployment. If a former Eligible Employee is rehired by an Employer and is again selected as eligible to participate in the Plan, he or she shall reenter the Plan on the first day of any Plan Year commencing after the date he or she is selected in accordance with the provisions of Section 3.1. If such individual meets the requirements of Treas. Reg. §1.409A-2(a)(7) as of such reentry date, he or she will be treated as initially eligible to participate in the Plan for purposes of Section 4.2(a). Such Eligible Employee’s reentry into the Plan shall have no impact on any
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distributions that have been made or are being made in accordance with Article VI. Any amounts previously forfeited from the Participant’s Accounts pursuant to this Plan shall not be restored or reinstated upon the Participant’s subsequent reentry into the Plan.
3.4    Adoption by Affiliates. An employee of an Affiliate may not become a Participant in the Plan unless the Affiliate has become an Adopting Employer. An Affiliate may become an Adopting Employer only by adopting the Plan with the approval of the Board of Directors or the Compensation Committee (or their respective authorized delegates). By adopting this Plan, the Adopting Employer shall be deemed to have agreed to assume the obligations and liabilities imposed upon it by this Plan, agreed to comply with all of the other terms and provisions of this Plan, delegated to the Committee the power and responsibility to administer this Plan with respect to the Adopting Employer’s Employees, and delegated to the Company (by action of the Board of Directors or the Compensation Committee, or their respective authorized delegates) the full power to amend or terminate this Plan with respect to the Adopting Employer’s Employees.
ARTICLE IV
Deferrals

4.1    Deferral Elections, Generally.
(a)    A Participant may elect to make Deferrals of Compensation by submitting a Compensation Deferral Agreement during the enrollment periods established by the Committee, and in the manner specified by the Committee, but in any event, in accordance with Section 4.2 and Code Section 409A. A Compensation Deferral Agreement that is not timely filed with respect to a service period or component of Compensation shall be considered void, and shall have no effect with respect to such service period or Compensation. The Committee may accept or reject any Compensation Deferral Agreement and may modify it as necessary to comply with Section 2.19 prior to the date the election becomes irrevocable under the rules of Section 4.2.
(b)    A Participant shall specify on his or her Compensation Deferral Agreement the amount of the Deferral for the Plan Year, and whether to allocate the Deferral: (i) to the Separation from Service Account, (ii) to or among one or more Specified Date Accounts, or (iii) among the Separation from Service Account and one or more Specified Date Accounts. If no allocation is indicated, or if an invalid allocation is made (such as a Deferral allocated to a Specified Date Account with a distribution date occurring in the same calendar year as the Plan Year to which the Deferral election refers), the Deferral shall be allocated to the Separation from Service Account. A
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Participant may also specify in his or her Compensation Deferral Agreement the Payment Schedule applicable to his or her benefits, including his or her Separation from Service Benefit and Specified Date Benefit(s). If the Payment Schedule for a Separation from Service Benefit is not specified in a Compensation Deferral Agreement, the Payment Schedule shall be in a single lump sum and the distribution will be made in the first 60 days of the calendar year that follows the calendar year of the Participant’s Separation from Service. Notwithstanding the foregoing, if a Participant is a Specified Employee on the date of such Participant’s Separation from Service, a distribution based on a Separation of Service will be made no earlier than the first day of the seventh calendar month following the calendar month in which the Separation from Service occurs and then otherwise in accordance with the applicable distribution schedule.
4.2    Timing Requirements for Compensation Deferral Agreements.
(a)    First Year of Eligibility. In the case of the first year in which an Eligible Employee becomes eligible to participate in the Plan, he or she shall have up to 30 days following the date on which he or she becomes eligible to participate in the Plan, to submit a Compensation Deferral Agreement with respect to Compensation to be earned during or after such Plan Year following the date such agreement becomes irrevocable. A completed Compensation Deferral Agreement described in this paragraph shall become irrevocable upon the end of such 30-day period, or upon a shorter period as determined by the Committee. The determination of whether an Eligible Employee may file a Compensation Deferral Agreement under this paragraph shall be determined in accordance with the rules of Code Section 409A, including the provisions of Treas. Reg. §1.409A-2(a)(7).
A Compensation Deferral Agreement filed under this paragraph applies to Compensation earned for services performed after the date the Compensation Deferral Agreement becomes irrevocable. Any Compensation Deferral Agreement under this subsection (a) shall satisfy the requirements of Treas. Reg. §1.409A-2(a)(7).
(b)    Prior Year Election. Except as otherwise provided in this Section 4.2, Participants may defer Compensation by filing a Compensation Deferral Agreement no later than December 31st of the calendar year prior to the calendar year in which the Compensation to be deferred is earned, or such earlier deadline determined by the Committee in its discretion. A Compensation Deferral Agreement described in this paragraph shall become irrevocable with respect to such Compensation no later than December 31st of the calendar year prior to the calendar year in which such Compensation is earned.
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(c)    Fiscal Year Compensation. To the extent permitted by the Committee, Participants may file a Compensation Deferral Agreement with respect to Fiscal Year Compensation no later than the last day of the Fiscal Year that immediately precedes the Fiscal Year (or the first Fiscal Year, as applicable) in which any services are performed by the Participant for which such Fiscal Year Compensation is payable. A Compensation Deferral Agreement described in this paragraph shall become irrevocable with respect to such Fiscal Year Compensation no later than the last day of the Fiscal Year that immediately precedes the Fiscal Year (or the first Fiscal Year, as applicable) in which any services are performed by the Participant for which such Fiscal Year Compensation is payable.
(d)    Performance-Based Compensation. To the extent permitted by the Committee, Participants may file a Compensation Deferral Agreement with respect to Performance-Based Compensation no later than the date that is six months before the end of the performance period, provided that:
(i)    the Participant performs services continuously from the later of the beginning of the performance period or the date the criteria are established through the date the Compensation Deferral Agreement is submitted; and
(ii)    the amount of the Compensation is not readily ascertainable as of the date the Compensation Deferral Agreement is filed.
A Compensation Deferral Agreement becomes irrevocable with respect to Performance-Based Compensation as of the date on which the deadline for filing such election occurs. The Committee shall determine the deadline for filing such an election in compliance with Code Section 409A. Any Compensation Deferral Agreement under this subsection (d) shall satisfy the requirements of Treas. Reg. §1.409A-2(a)(8).
(e)    Short-Term Deferrals. Compensation that meets the definition of a “short-term deferral” described in Treas. Reg. §1.409A-1(b)(4) may be deferred in accordance with the rules of Article VII, applied as if the date the Substantial Risk of Forfeiture lapses is the date on which payments were originally scheduled to commence. Any Compensation Deferral Agreement under this subsection (e) shall satisfy the requirements of Treas. Reg. §1.409A-2(a)(4).
(f)    Certain Forfeitable Rights. With respect to a legally binding right to a payment in a subsequent year that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least 12 months from the date the Participant obtains the legally binding right, an election to defer such Compensation may be made on or before the 30th day after the Participant obtains the legally binding right to the Compensation,
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provided that the election is made at least 12 months in advance of the earliest date at which the forfeiture condition could lapse. The Compensation Deferral Agreement described in this paragraph becomes irrevocable on such 30th day. If the forfeiture condition applicable to the payment lapses before the end of the required 12-month service period as a result of the Participant’s death or disability (as defined in Treas. Reg. §1.409A-3(i)(4)) or upon a Change in Control (as defined in Treas. Reg. §1.409A-3(i)(5)), the Compensation Deferral Agreement will be void unless it would be considered timely under another rule described in this Section. Any Compensation Deferral Agreement under this subsection (f) shall satisfy the requirements of Treas. Reg. §1.409A-2(a)(5).
(g)    Deferral Elections Generally. Deferral elections under the Plan are effective for a single Plan Year (or Fiscal Year, as the case may be); new elections must be made in order to defer Compensation during the following Plan Year (or Fiscal Year).
4.3    Allocation of Deferrals. The Committee may, in its discretion, establish a specific deferral period for each Specified Date Account.
4.4    Deductions from Compensation. The Committee shall have the authority to determine the payroll practices under which any component of Compensation subject to a Compensation Deferral Agreement will be deducted from a Participant’s Compensation.
4.5    Vesting. Participant Deferrals shall be 100% vested at all times.
4.6    Cancellation of Deferrals. The Committee may cancel a Participant’s Deferral election: (a) for the balance of the Plan Year (or Fiscal Year, as the case may be with respect to Fiscal Year Compensation) in which an Unforeseeable Emergency (as defined in Section 2.51) occurs in accordance with Treas. Reg. §1.409A-3(j)(4)(viii), (b) if the Participant receives a hardship distribution under the 401(k) Plan or any other qualified 401(k) plan maintained by an Affiliate in accordance with Treas. Reg. §1.401(k)-1(d)(3) (relating to in-service distributions of 401(k) plan elective contributions as a result of an immediate and heavy financial need), in accordance with Treas. Reg. §1.409A-3(j)(4)(viii), or (c) during periods in which the Participant is unable to perform the duties of his or her position or any substantially similar position due to a mental or physical impairment that can be expected to result in death or last for a continuous period of at least six months, provided cancellation occurs by the later of the end of the taxable year of the Participant or the 15th day of the third month following the date the Participant incurs the disability (as defined in this paragraph) in accordance with Treas. Reg. §1.409A-3(j)(4)(xii).
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ARTICLE V
Discretionary Contributions

5.1    Discretionary Contributions. A Participating Employer may credit one or more Discretionary Contributions to a Participant’s Account in such amounts and at such times as are determined by the Committee from time to time in its sole discretion. Any such amounts shall be credited at the sole discretion of the Committee, and the fact that a Discretionary Contribution is credited in one year shall not obligate the Participating Employer or the Committee to continue to make such Discretionary Contributions in subsequent years. Any such Discretionary Contributions shall be subject to the approval of the Board of Directors or the Compensation Committee to the extent required by applicable law. Neither the Participating Employer nor the Committee shall have any obligation to make any such Discretionary Contributions or to make them on a consistent basis among similarly-situated Participants. Any Discretionary Contributions credited to a Participant’s Account pursuant to this Section shall be credited on a date or dates to be determined by the Committee in its sole and absolute discretion, and the crediting date or dates may be different for different Participants. Unless the context clearly indicates otherwise, a reference to Discretionary Contributions shall include Earnings attributable to such contributions. Any Discretionary Contribution will be credited to the Account(s) determined by the Committee in its discretion, and the Committee must specify the Account(s) on or before the date on which the Participant obtains a legally binding right to such Discretionary Contribution.
5.2    Vesting of Discretionary Contributions. A Participant shall be vested in his or her Discretionary Contributions described in this Section 5.1, if any, in accordance with the vesting schedules established by the Committee in its discretion, at the time such amount is first credited to the Participant’s Account under this Plan. The Committee may, at any time, in its sole and absolute discretion (subject to any approval by the Board of Directors or the Compensation Committee required by applicable law), increase a Participant’s vested interest in a Discretionary Contribution. Notwithstanding the foregoing, all Discretionary Contributions shall become 100% vested upon the occurrence of the earliest of: (i) the death of the Participant prior to Separation from Service, (ii) the Disability of the Participant prior to Separation from Service, or (iii) a Change in Control prior to Separation from Service. The portion of a Participant’s Accounts that remains unvested upon his or her Separation from Service after the application of the terms of this Section shall be forfeited immediately following the Separation from Service.
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ARTICLE VI
Benefits

6.1    Benefits, Generally. A Participant shall be entitled to the following benefits under the Plan:
(a)    Separation from Service Benefit. Except as provided in Section 6.1(e) below, upon the Participant’s Separation from Service, he or she shall be entitled to a Separation from Service Benefit. The Separation from Service Benefit shall be equal to the vested portion of the Participant’s Separation from Service Account and any Specified Date Accounts with respect to which payments have not yet commenced at the time of the Separation from Service, based on the value of those Accounts as of the end of the calendar month next preceding the calendar month of distribution. Payment of the Separation from Service Benefit will be made (or begin in the case of installments) according to the Participant’s election: (i) in the first 60 days of the calendar year that follows the end of the calendar year in which the Separation from Service occurs, or (ii) the first anniversary of the date specified in the immediately preceding (i). Notwithstanding the foregoing, if a Participant is a Specified Employee on the date of such Participant’s Separation from Service, and elects to receive or begin receiving the distribution before the date that is 6 months following the Separation from Service, such distribution will be made or begin on the first day of the seventh calendar month following the calendar month in which the Separation from Service occurs. If the Separation from Service Benefit is to be paid in the form of installments, any subsequent installment payments will be paid on the anniversary of the date such payments commence.
(b)    Specified Date Benefit. If the Participant has established one or more Specified Date Accounts, and has not experienced a Separation from Service prior to the designated distribution date of such Specified Date Accounts, he or she shall be entitled to a Specified Date Benefit with respect to each such Specified Date Account. The Specified Date Benefit shall be equal to the vested portion of the Specified Date Accounts, based on the value of those Accounts as of the end of the calendar month next preceding the calendar month of distribution. Payment of the Specified Date Benefit will be made (or begin in the case of installments) in the first 60 days of the calendar year specified in his or her Compensation Deferral Agreement.
(c)    Disability Benefit. In the event that a Participant becomes Disabled, he or she shall be entitled to a Disability Benefit. The Disability Benefit shall be equal to the vested portion of all of the Participant’s Accounts. The payment date for the Disability Benefit shall be as soon as administratively practical on or after the first Business Day of the calendar month next
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following the calendar month in which the Committee determined that the Participant has become Disabled, and the Disability Benefit shall be based on the value of the Accounts as of the last day of the calendar month in which the Committee makes a determination as to the Participant’s Disability. The Disability Benefit shall be paid in a single lump sum.
(d)    Death Benefit. In the event of the Participant’s death, his or her designated Beneficiary(ies) shall be entitled to a Death Benefit. The Death Benefit shall be equal to the vested portion of all of the Participant’s Accounts. The payment date for the Death Benefit shall be as soon as administratively practical on or after the first Business Day of the calendar month next following the calendar month in which the Committee is notified of, and provided reasonably satisfactory proof of, the Participant’s death, and the Account(s) will be valued as of the end of the calendar month in which such notification and proof are received. The Death Benefit shall be paid in a single lump sum.
Each Participant may, pursuant to such procedures as the Committee may specify, designate one or more Beneficiaries in connection with the Plan. If a Participant is married and names someone other than his or her spouse as a primary Beneficiary with respect to any portion of his or her Accounts, spousal consent shall be required to be provided in a form designated by the Committee, executed by such Participant’s spouse and returned to the Committee. A Participant may change or revoke a Beneficiary designation by delivering to the Committee a new designation (or revocation). Any designation or revocation shall be effective only if it is received in proper form by the Committee. However, when so received, the designation or revocation shall be effective as of the date the notice is executed (whether or not the Participant still is living), but without prejudice to any Employer on account of any payment made before the change is recorded. The last effective designation received by the Committee shall supersede all prior designations. If a Participant dies without having effectively designated a Beneficiary, or if no Beneficiary survives the Participant, the Death Benefit shall be payable (i) to his or her surviving spouse, or (ii) if the Participant is not survived by his or her spouse, to his or her estate. A former spouse shall have no interest under the Plan, as Beneficiary or otherwise, unless the Participant designates such person as a Beneficiary after dissolution of the marriage, except to the extent provided under the terms of a domestic relations order as described in Code Section 414(p)(1)(B).
(e)    Change in Control Benefit. Notwithstanding Section 6.1(a), in the event a Participant experiences a Separation from Service within one year following a Change in Control, the Participant shall be entitled to a Change in Control Benefit. The Change in Control Benefit shall be equal to the vested portion of all of the Participant’s Accounts. Payment of the Change in Control
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Benefit will be made as soon as administratively practical on or after the first Business Day of the calendar month next following the calendar month in which the Separation of Service (within one year following a Change in Control) takes place. Notwithstanding the foregoing, if a Participant is a Specified Employee on the date of such Participant’s Separation from Service, a distribution based on a Separation from Service will be made no earlier than as allowed under Treas. Reg. Sections 409A-1(c)(3)(v) and 1.409A-3(i)(2).
(f)    Unforeseeable Emergency. A Participant who experiences an Unforeseeable Emergency may submit a written request to the Committee to receive payment of all or any portion of his or her vested Accounts. Whether a Participant is faced with an Unforeseeable Emergency permitting an emergency payment shall be determined by the Committee based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency may not be made to the extent that such emergency is or may be reimbursed through insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of Deferrals under this Plan. If an emergency payment is approved by the Committee, the amount of the payment shall not exceed the amount reasonably necessary to satisfy the need, taking into account the additional compensation that is available to the Participant as the result of cancellation of Deferrals under the Plan, including amounts necessary to pay any taxes or penalties that the Participant reasonably anticipates will result from the payment. The amount of the emergency payment shall be subtracted first from the vested portion of the Participant's Specified Date Accounts, beginning with the Specified Date Account with the latest payment commencement date. Emergency payments shall be paid in a single lump sum within the 90-day period following the date the payment is approved by the Committee. No Participant may receive more than one distribution on account of an Unforeseeable Emergency in any Plan Year. A Participant who receives a distribution on account of an Unforeseeable Emergency, and who is still employed by an Employer shall be prohibited from making Deferrals for the remainder of the Plan Year (or Fiscal Year, as the case may be with respect to Fiscal Year Compensation) in which the distribution is made.
(g)    Code Section 409A. Notwithstanding anything to the contrary contained in this Plan, any provision that would cause the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A).
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(h)    Forfeiture of Unvested Account Balances. Unless otherwise set forth herein or as determined by the Committee, the unvested portion of a Participant’s Accounts shall be forfeited upon the occurrence of the Participant’s Separation from Service, the Participant’s death, the Participant’s Disability or the occurrence of a Change in Control.
6.2    Form of Payment.
(a)    Separation from Service Benefit.
(i)    A Participant who is entitled to receive a Separation from Service Benefit shall receive payment of such benefit in a single lump sum, unless the Participant elects an alternate form of payment on the initial Compensation Deferral Agreement upon which an allocation of Deferrals is made to the Separation from Service Account.
(ii)    Permissible alternate forms of payment for the Separation from Service Benefit are: (A) substantially equal annual installments over a period of two to ten years, as elected by the Participant, or (B) a lump sum payment of a designated percentage of the Separation from Service Benefit, with the balance paid in substantially equal annual installments over a period of two to ten years, as elected by the Participant.
(b)    Specified Date Benefit. The Specified Date Benefit shall be paid in a single lump sum, unless the Participant elects on the Compensation Deferral Agreement with which the Account was established to have the Specified Date Account paid in substantially equal annual installments over a period of two to five years, as elected by the Participant.
Notwithstanding any Specified Date election of a Participant, if a Participant Separates from Service before distributions with respect to one or more Specified Date Accounts have commenced, dies or becomes Disabled, all such Accounts shall be paid in a single lump sum, in accordance with the time of payment applicable to the Participant’s Separation from Service Benefit, Death Benefit, or Disability Benefit (as applicable). With respect to Specified Date Account Balances that have commenced to be paid in installment payments prior to the date of the Separation from Service, such Specified Date Accounts shall continue to be paid in accordance with the form of payment election applicable to the Specified Date Account.
(c)    Disability Benefit. In the event of the Participant’s Disability, he or she shall be entitled to a Disability Benefit as set forth in Section 6.1(c). The Disability Benefit shall be payable in a single lump sum.
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(d)    Death Benefit. In the event of the Participant’s death, his or her designated Beneficiary(ies) shall be entitled to a Death Benefit as set forth in Section 6.1(d). The Death Benefit shall be payable in a single lump sum.
(e)    Change in Control Benefit. In the event a Participant experiences a Separation from Service within one year following a Change in Control, he or she shall be entitled to a Change in Control Benefit as set forth in Section 6.1(e). The Change in Control Benefit shall be payable in a single lump sum.
6.3    Acceleration of or Delay in Payments. The Committee, in its sole and absolute discretion, may elect to accelerate the time or form of payment of a benefit owed to the Participant hereunder, provided such acceleration is permitted under Treas. Reg. §1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of a benefit owed to the Participant hereunder, to the extent permitted under Treas. Reg. §1.409A-2(b)(7). Subject to the following sentence, if the Plan receives a domestic relations order (within the meaning of Code Section 414(p)(1)(B)) directing that all or a portion of a Participant’s Accounts be paid to an “alternate payee,” any amounts to be paid to the alternate payee(s) shall be paid only in a single lump sum, and such amounts will be subtracted from the Participant’s Accounts. Any domestic relations order will have effect under the Plan only if the Committee determines that it complies with such policies and procedures as the Committee (in its discretion) may specify from time to time.
6.4    Distributions Treated as Made Upon a Designated Event. If the Company fails to make any distribution on account of any of the events listed in Section 6.1, either intentionally or unintentionally, within the time period specified in Section 6.2, but the payment is made within the same calendar year, such distribution will be treated as made within the time period specified in Section 6.2 pursuant to Treas. Reg. §1.409A-3(d). In addition, if a distribution is not made due to a dispute with respect to such distribution, the distribution may be delayed in accordance with Treas. Reg. §1.409A-3(g).
ARTICLE VII
Modifications to Payment Schedules

7.1    Participant’s Right to Modify. A Participant may modify any or all of the Payment Schedules with respect to the Participant’s Separation from Service Account or Specified Date Account(s), consistent with the permissible Payment Schedules available under the Plan, provided such modification complies with the requirements of this Article VII and Code Section 409A and Treas. Reg. §1.409A-2(b). Modifications of Payment Schedules with respect to Accounts not explicitly identified in the immediately preceding sentence are not permissible under the Plan.
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7.2    Time of Election. The date on which a modification election is submitted to the Committee must be at least 12 months prior to the date on which payment is scheduled to commence under the Payment Schedule in effect prior to the modification in accordance with Treas. Reg. §1.409A-2(b)(1)(iii).
7.3    Date of Payment under Modified Payment Schedule. The date on which payments are to commence under the modified Payment Schedule must be no earlier than five years after the date on which payment would have commenced under the original Payment Schedule (or, in the case of installment payments treated as a single payment, five years after the first amount was scheduled to be paid) in accordance with Treas. Reg. §1.409A-2(b)(1)(ii). Under no circumstances may a modification election result in an acceleration of payments in violation of Code Section 409A.
7.4    Effective Date. A modification election submitted in accordance with this Article VII is irrevocable upon receipt by the Committee and shall not become effective until 12 months after such date in accordance with Treas. Reg. §1.409A-2(b)(1)(i).
7.5    Effect on Accounts. An election to modify a Payment Schedule is specific to the Account or payment event to which it applies, and shall not be construed to affect the Payment Schedules of any other Accounts.
ARTICLE VIII
Valuation of Account Balances; Investments

8.1    Valuation. Deferrals shall be credited to the appropriate Account(s) on or about the date such Compensation would have been paid to the Participant absent the Compensation Deferral Agreement. Discretionary Contributions shall be credited at the time or times determined by the Committee in its sole discretion. Valuation of Accounts shall be performed under procedures approved by the Committee.
8.2    Adjustment for Earnings. Each Account will be adjusted to reflect Earnings on each Business Day. Adjustments shall reflect the net earnings, gains, losses, expenses, appreciation and depreciation associated with the investment option for the deemed investment of each portion of the Account allocated to such option (“investment allocation”).
8.3    Investment Options. The options for the deemed investment of Accounts will be determined by the Committee. The Committee, in its sole discretion, shall be permitted to add, remove or substitute investment options from the Plan from time to time; provided however, that any such additions, removals or substitutions of investment options shall not be effective with respect to any period prior to the effective date of such change. In addition, following a Change in Control, the Committee may add or remove an investment option, provided however, that (i) any decision to add or remove an investment option shall be made in good faith, and (ii)
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there shall at all times be no less than the number of investment options that existed immediately prior to the Change of Control.
8.4    Investment Allocations. Notwithstanding anything else in this Plan to the contrary, a Participant’s investment allocation constitutes a deemed, not actual, investment among the investment options comprising the investment menu. At no time shall a Participant have any real or beneficial ownership in any investment option included in the investment menu, nor shall the Participating Employer or any trustee acting on its behalf have any obligation to purchase actual securities as a result of a Participant’s investment allocation. A Participant’s investment allocation shall be used solely for purposes of adjusting the value of a Participant’s Account Balances.
A Participant shall specify a deemed investment allocation for each of his or her Accounts in accordance with procedures established by the Committee in its discretion and from time to time. Unless otherwise determined by the Committee, (a) allocation among the investment options must be designated in increments of 1%, and (b) the Participant’s investment allocation will become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day.

A Participant may change an investment allocation on any Business Day, both with respect to future credits to the Plan and with respect to existing Account Balances, in accordance with procedures adopted by the Committee. Changes shall become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day, and shall be applied prospectively.
8.5    Unallocated Deferrals and Accounts. If the Participant fails to make an investment allocation with respect to an Account, such Account shall be deemed invested in an investment option, the primary objective of which is the preservation of capital, as determined by the Committee in its discretion.
8.6    No Warranties. Neither the Company nor the Committee warrants or represents that the value of any Participant’s Account will increase. Each Participant assumes the risk in connection with the deemed investment of his or her Accounts.
ARTICLE IX
Administration

9.1    Plan Administration. The Plan shall be administered by the Committee. The Committee shall have the authority to control and manage the operation and administration of the Plan, including the authority and ability to delegate administrative functions to a third party. Claims for benefits shall be filed with the Committee and resolved in accordance with the claims procedures in Article XII.
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9.2    Actions by Committee. Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee. The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.
9.3    Powers of Committee. The Committee shall have all powers and discretionary authority necessary or appropriate to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not by way of limitation, the following powers and discretionary authority:
(a)    To interpret and determine the meaning and validity of the provisions of the Plan, and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan, or any amendment thereto;
(b)    To determine any and all considerations affecting the eligibility of any Employee to become a Participant or remain a Participant in the Plan;
(c)    To cause one or more separate Accounts to be maintained for each Participant;
(d)    To cause Deferrals and Discretionary Contributions, if applicable, as well as deemed Earnings thereon, to be credited to Participants’ Accounts;
(e)    To establish and revise an accounting method or formula for the Plan;
(f)    To determine the status and rights of Participants and their spouses, Beneficiaries or estates;
(g)    To employ such counsel, agents, and advisers, and to obtain such legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;
(h)    To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan;
(i)    To arrange for periodic distribution to each Participant of a statement of benefits accrued under the Plan;
(j)    To publish a claims and appeal procedure satisfying the minimum standards of Section 503 of ERISA pursuant to which individuals or estates may claim Plan benefits and appeal denials of such claims;
(k)    To determine the form, manner and time for making elections under the Plan (provided that the deadlines prescribed by the Committee may be earlier, but not later, than the deadlines otherwise specified in the Plan);
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(l)    To delegate to any one or more of its members or to any other person, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan; and
(m)    To decide all issues and questions regarding Account balances, and the time, form, manner, and amount of distributions to Participants.
9.4    Administration Upon Change in Control. Upon a Change in Control, the Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Committee. The individual who was the Chief Executive Officer of the Company immediately prior to the Change in Control (the “Ex-CEO”) shall have the authority (but shall not be obligated) to appoint an independent third party to act as the Committee.
After a Change in Control, no member of the Committee may be removed (and/or replaced) by the Company without the consent of either (a) 2/3 of the members of the Board of Directors and a majority of Participants and Beneficiaries with Account Balances or (b) the Ex-CEO or, in the event the Ex-CEO is no longer a Participant, his or her appointee who is a Participant.

The Participating Employers shall, with respect to the Committee identified under this Section: (a) directly pay all reasonable expenses and fees of the Committee (or promptly reimburse the Committee, with all such reimbursements to be made in a manner that avoids subjecting the Committee to any taxes, costs or income inclusion under Code Section 409A), (b) indemnify the Committee (including individuals serving as Committee members) in accordance with Section 9.6, and (c) supply full and timely information to the Committee on all matters related to the Plan, Participants, Beneficiaries and Accounts as the Committee may reasonably require.

9.5    Withholding. The Participating Employer shall have the right to withhold from any payment due under the Plan (or with respect to any amounts credited to the Plan) any taxes or other amounts required by law to be withheld in respect of such payment (or credit). Withholdings with respect to amounts credited to the Plan shall be deducted from Compensation that has not been deferred to the Plan.
9.6    Indemnification. The Participating Employer shall indemnify and hold harmless each employee, officer, member of the Board of Directors, member of the Compensation Committee, agent or organization, to whom or to which are delegated duties, responsibilities, and authority under the Plan or otherwise with respect to administration of the Plan, including, without limitation, the Compensation Committee and its agents, and the Committee and its agents, against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him or her or it (including but not limited to reasonable attorneys’ fees) which arise as a result of his or her or its actions or failure to act in connection
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with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by the Participating Employer. Notwithstanding the foregoing, the Participating Employer shall not indemnify any individual or entity if his or her or its actions or failure to act were not taken or omitted in good faith. Further, the Participating Employer shall have the right to direct and control any settlement or compromise of any action under this Section 9.6.
9.7    Delegation of Authority. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with legal counsel who shall be legal counsel to the Company.
9.8    Binding Decisions or Actions. The decision or action of the Committee in respect of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations thereunder shall be final, conclusive and binding upon all persons having any interest in the Plan, and shall be given the maximum deference permitted by law.
9.9    Eligibility to Participate. No member of the Committee who also is an Eligible Director or Eligible Employee shall be excluded from participating in the Plan, but as a member of the Committee, he or she shall not be entitled to act or pass upon any matters pertaining specifically to his or her own Account.
9.10    Administrative Expenses. All expenses incurred in the administration of the Plan by the Committee, or otherwise, including legal fees and expenses, shall be paid and borne by the Participating Employers.
9.11    Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and any such determinations may be made selectively among Participants.
ARTICLE X
Amendment and Termination

10.1    Termination. The Company and each other Participating Employer intend to continue the Plan indefinitely, and to maintain each Participant’s Account until it is scheduled to be paid to him or her in accordance with the provisions of the Plan. However, the Plan is voluntary on the part of the Company and the other Participating Employers, and the Participating Employers do not guarantee to continue the Plan. Accordingly, the Company reserves the right to discontinue its sponsorship of the Plan (or the sponsorship of another Participating Employer) and/or to terminate the Plan at any time with respect to any or all of the participating
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Eligible Employees, by action of the Board of Directors. Upon the termination of the Plan with respect to any Participating Employer, the participation of the affected Participants who are employed by that Participating Employer shall terminate. However, after the Plan termination, the Account Balances of such Participants shall continue to be credited with Deferrals attributable to a deferral election that was in effect prior to the Plan termination to the extent deemed necessary to comply with Code Section 409A and related Treasury Regulations, and additional amounts shall continue to credited or debited to such Participants’ Account Balances pursuant to Article VIII. The investment options available to Participants following the termination of the Plan shall be comparable in number and type to those investment options available to Participants in the Plan Year preceding the Plan Year in which the Plan termination is effective. In addition, following a Plan termination, Participant Account Balances shall remain in the Plan and shall not be distributed until such amounts become eligible for distribution in accordance with the other applicable provisions of the Plan. Notwithstanding the preceding sentence, to the extent permitted by Treas. Reg. §1.409A-3(j)(4)(ix), the Company may provide that, upon termination of the Plan, all Account Balances of the Participants shall be distributed, subject to and in accordance with any rules established by the Company deemed necessary to comply with the applicable requirements and limitations of Treas. Reg. §1.409A-3(j)(4)(ix).
10.2    Amendments.
(a)    The Company, by action taken by the Board of Directors or its authorized delegates, may amend the Plan at any time and for any reason, provided that any such amendment shall not reduce the vested Account Balances of any Participant accrued as of the date of any such amendment or restatement (as if the Participant had incurred a Separation from Service on such date). The Compensation Committee or its authorized delegates shall have the authority to amend the Plan for the purpose of: (i) conforming the Plan to the requirements of law (which amendments, notwithstanding any provisions in this Section 10.2 to the contrary, may also be made without the consent of any Participant or any other individual or entity), (ii) facilitating the administration of the Plan, (iii) clarifying provisions based on the Compensation Committee’s (or its delegates’) interpretation of the document, and (iv) making such other amendments as the Board of Directors or its authorized delegates may authorize.
(b)    Notwithstanding anything to the contrary in the Plan, if and to the extent the Compensation Committee or its authorized delegates shall determine that the terms of the Plan may result in the failure of the Plan, or amounts deferred by or for any Participant under the Plan, to comply with the requirements of Code Section 409A, or any applicable regulations or guidance promulgated by the Secretary of the Treasury in connection therewith, the Compensation Committee or its authorized delegates shall
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have authority to take such action to amend, modify, cancel or terminate the Plan (effective with respect to all Employers) or distribute any or all of the vested amounts deferred by or for a Participant, as it deems necessary or advisable, including without limitation:
(i)    Any amendment or modification of the Plan to conform the Plan to the requirements of Code Section 409A or any regulations or other guidance thereunder (including, without limitation, any amendment or modification of the terms of any applicable to any Participant’s Accounts regarding the timing or form of payment).    
(ii)    Any cancellation or termination of any unvested interest in a Participant’s Accounts without any payment to the Participant.
(iii)    Any cancellation or termination of any vested interest in any Participant’s Accounts, with immediate payment to the Participant of the amount otherwise payable to such Participant.
(iv)    Any such amendment, modification, cancellation, or termination of the Plan that may adversely affect the rights of a Participant without the Participant’s consent.
ARTICLE XI
Informal Funding

11.1    General Assets. Obligations established under the terms of the Plan may be satisfied from the general funds of the Participating Employers, or a trust described in this Article XI. No Participant, spouse or Beneficiary shall have any right, title or interest whatever in any assets of the Participating Employers. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Participating Employers and any Employee, spouse, or Beneficiary. To the extent that any person acquires a right to receive payments hereunder, such rights are no greater than the right of an unsecured general creditor of the Participating Employers.
11.2    Rabbi Trust. A Participating Employer may, in its sole discretion, establish a grantor trust, commonly known as a rabbi trust, as a vehicle for accumulating assets to pay benefits under the Plan. Payments under the Plan may be paid from the general assets of the Participating Employers or from the assets of any such rabbi trust. Payment from any such source shall reduce the obligation owed to the Participant or Beneficiary under the Plan.
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ARTICLE XII
Claims

12.1    Claim Procedure. A Participant or Beneficiary (the “Claimant”) must file with the Committee a written claim for Plan benefits if the Claimant believes he or she has not received the benefits he or she is entitled to receive.
(a)    In General. Notice of a denial of a claim for benefits (other than benefits due to Disability) will be provided by the Committee to the Claimant within 90 days after the Committee’s receipt of the Claimant’s written claim for benefits, provided that the Committee, in its discretion, may determine that an additional 90-day extension is warranted if it needs additional time to review the claim due to special circumstances. In such event, the Committee shall notify the Claimant prior to the end of the initial 90-day period that an extension is needed, the reason therefor and the date by which the Committee expects to render a decision.
(b)    Disability Claims. Notice of a denial of a claim for benefits due to Disability (a “Disability Claim”) will be provided within 45 days of the Committee’s receipt of the Claimant’s Disability Claim. If the Committee determines that it needs additional time to review the Disability Claim due to matters beyond the control of the Committee, the time period for making a determination may be extended for up to 30 days. In such event, the Committee will provide the Claimant with a notice of the extension before the end of the initial 45-day period. If the Committee determines that a decision cannot be made within the first extension period due to matters beyond the control of the Committee, the time period for making a determination may be further extended for an additional 30 days. If such an additional extension is necessary, the Committee shall notify the Claimant prior to the expiration of the initial 30 day extension. Any notice of extension shall indicate the circumstances necessitating the extension of time, the date by which the Committee expects to furnish a notice of decision, the specific standards on which such entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim and any additional information needed to resolve those issues. A Claimant will be provided a minimum of 45 days to submit any necessary additional information to the Committee. In the event that a 30 day extension is necessary due to a Claimant’s failure to submit information necessary to decide a claim, the period for furnishing a notice of decision shall be tolled from the date on which the notice of the extension is sent to the Claimant until the earlier of the date the Claimant responds to the request for additional information or the response deadline
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(c)    Contents of Notice. If a Claimant’s request for benefits is denied, the notice of denial shall be in writing and shall contain the following information:
(i)    The specific reason or reasons for the denial in plain language;
(ii)    A specific reference to the pertinent Plan provisions on which the denial is based;
(iii)    A description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary;
(iv)    An explanation of the claims review procedures and the time limits applicable to such procedures;
(v)    A statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse determination upon review; and
(vi)    In the case of a complete or partial denial of a Disability Claim, the notice shall provide a statement that the Committee will provide to the Claimant, upon request and free of charge, a copy of any internal rule, guideline, protocol or other similar criterion that was relied upon in making the decision.
12.2    Appeal of Denied Claims.
(a)    In General. A Claimant whose claim (other than a Disability Claim) has been wholly or partially denied shall be entitled to appeal the claim denial by filing a written appeal to the Committee within 60 days after Claimant’s receipt of the Committee’s decision denying the claim. Any claim filed more than 60 days after Claimant’s receipt of the decision will be untimely. A Claimant who timely appeals a denied claim will have the opportunity, upon request and free of charge, to have reasonable access to and copies of all documents, records and other information relevant to the Claimant’s appeal. The Claimant may submit written comments, documents, records and other information relating to his or her claim with the appeal. The Committee will review all comments, documents, records and other information submitted by the Claimant relating to the claim, regardless of whether such information was submitted or considered in the initial claim determination. The Committee shall make a determination on the appeal within 60 days after receiving the Claimant’s written appeal, provided that the Committee may determine that an additional 60-day extension is necessary due to special circumstances, in which event the Committee shall notify the Claimant prior to the end of the initial 60-day period that an
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extension is needed, the reason therefor and the date by which the Committee expects to render a decision.
(b)    Disability Claims. An appeal of a denied Disability Claim must be filed in writing with the Committee no later than 180 days after receipt of the written notification of such claim denial. The review shall be conducted by the Committee (exclusive of the person who made the initial adverse decision or such person’s subordinate). In reviewing the appeal, the Committee shall: (i) not afford deference to the initial denial of the Disability Claim, (ii) consult a medical professional who has appropriate training and experience in the field of medicine relating to the Claimant’s Disability and who was neither consulted as part of the initial denial nor is the subordinate of such individual and (iii) identify the medical or vocational experts whose advice was obtained with respect to the initial benefit denial, without regard to whether the advice was relied upon in making the decision. The Committee shall make its decision regarding the merits of the denied Disability Claim within 45 days following receipt of the appeal (or within 90 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The notice will indicate the special circumstances requiring the extension of time and the date by which the Committee expects to render the determination on review. Following its review of any additional information submitted by the Claimant, the Committee shall render a decision on its review of the denied Disability Claim.
(c)    Contents of Notice. If the Claimant’s appeal is denied in whole or part, the Committee shall provide written notice to the Claimant of such denial. The written notice shall include the following information:
(i)    The specific reason or reasons for the denial;
(ii)    A specific reference to the pertinent Plan provisions on which the denial is based;
(iii)    A statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the Claimant’s claim;
(iv)    A statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA; and
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(v)    For the denial of a Disability Claim, the notice will also include a statement that the Committee will provide, upon request and free of charge, (A) any internal rule, guideline, protocol or other similar criterion relied upon in making the decision, (B) any medical opinion relied upon to make the decision and (C) the required statement under Section 2560.503-1(j)(5)(iii) of the Department of Labor regulations.
12.3    Relevance. For purposes of Section 12.1 and Section 12.2, documents, records, or other information shall be considered “relevant” to a Claimant’s claim for benefits if such documents, records or other information:
(a)    were relied upon in making the benefit determination;
(b)    were submitted, considered, or generated in the course of making the benefit determination, without regard to whether such documents, records or other information were relied upon in making the benefit determination; or
(c)    demonstrate compliance with the administrative processes and safeguards required pursuant to Section 12.1 and Section 12.2 regarding the making of the benefit determination.
12.4    Six Month Deadline for Filing Suit. A Claimant dissatisfied with the Committee’s decision upon appeal under Section 12.2 must file any lawsuit challenging that decision no later than six months after the Committee mails the notice of denial, regardless of any state or federal statues establishing provisions relating to limitations on actions. Any suit brought more than six months after the denial on appeal shall be deemed untimely. In ruling on any such suit, the court shall uphold the Committee’s determinations unless they constitute an abuse of discretion or fraud. No Claimant may institute any action or proceeding in any state or federal court of law or equity, or before any administrative tribunal or arbitrator, for a claim for benefits under the Plan until he or she first has exhausted the procedures set forth in Sections 12.1 and 12.2.
12.5    Decisions of Committee. All actions, interpretations, and decisions of the Committee shall be conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
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ARTICLE XIII
General Provisions

13.1    Assignment. No interest of any Participant, spouse or Beneficiary under this Plan and no benefit payable hereunder shall be assigned as security for a loan, and any such purported assignment shall be null, void and of no effect, nor shall any such interest or any such benefit be subject in any manner, either voluntarily or involuntarily, to anticipation, sale, transfer, assignment or encumbrance by or through any Participant, spouse or Beneficiary. Notwithstanding anything to the contrary herein, however, the Committee has the discretion to make payments to an alternate payee in accordance with the terms of a domestic relations order (as defined in Code Section 414(p)(1)(B)).
A Participating Employer may assign any or all of its liabilities under this Plan in connection with any restructuring, recapitalization, sale of assets or other similar transactions affecting such Participating Employer without the consent of the Participant or any other individual or entity.
13.2    No Legal or Equitable Rights or Interest. No Participant or other person or entity shall have any legal or equitable rights or interest in this Plan that are not expressly granted in this Plan. Participation in this Plan does not give any person any right to be retained in the service of a Participating Employer. The right and power of a Participating Employer to dismiss or discharge an Employee is expressly reserved.
13.3    No Guarantee of Tax Consequences. While the Plan is intended to provide U.S. income tax deferral for Participants, the Plan is not a guarantee that the intended tax deferral will be achieved. Participants are solely responsible and liable for the satisfaction of all taxes, costs and penalties that may arise in connection with this Plan (including any taxes arising under Code Section 409A). No Participating Employer or any of their directors, officers or employees shall have any obligation to indemnify or otherwise hold any Participant harmless from any such taxes, penalties or costs. No Participating Employer makes any representations or warranties as to the tax consequences to a Participant or a Participant’s Beneficiary(ies) resulting from eligibility for, or participation in, the Plan.
13.4    No Effect on Service. Neither the establishment or maintenance of the Plan, the making of any Deferrals nor any action of a Participating Employer or the Committee, shall be held or construed to confer upon any individual: (a) any right to be continued as an employee or (b) upon dismissal, any right or interest in any specific assets of any Participating Employer or the Committee other than as provided in the Plan. Each Participating Employer expressly reserves the right to discharge any employee at any time, with or without cause. Nothing contained herein shall be construed to constitute a contract of employment between an Employee and any Participating Employer.
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13.5    Notice. Any notice or filing required or permitted to be delivered to the Committee under this Plan shall be delivered in writing, in person, or through such electronic means as is established by the Committee. Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Written transmission shall be sent by certified mail to:
LIONS GATE ENTERTAINMENT INC.
2700 COLORADO AVENUE
SANTA MONICA, CA 90404
ATTN: GENERAL COUNSEL

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing or hand-delivered, or sent by mail to the last known address of the Participant.
13.6    Headings. The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control.
13.7    Invalid or Unenforceable Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Committee may elect in its sole discretion to construe such invalid or unenforceable provisions in a manner that conforms to applicable law or as if such provisions, to the extent invalid or unenforceable, had not been included.
13.8    Lost Participants or Beneficiaries. Any Participant or Beneficiary who is entitled to a benefit from the Plan has the duty to keep the Committee advised of his or her current mailing address. If benefit payments are returned to the Plan or are not presented for payment after a reasonable amount of time, the Committee shall presume that the payee is missing. The Committee, after making such efforts as in its discretion it deems reasonable and appropriate to locate the payee, shall stop payment on any uncashed checks and may discontinue making future payments until contact with the payee is restored to the extent permitted by Code Section 409A.
13.9    Facility of Payment to a Minor. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Committee may, in its discretion, make such distribution: (a) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (b) to the conservator or committee or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Committee, the Participating Employers, and the Plan from further liability on account thereof.
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13.10    Governing Law. The provisions of the Plan shall be construed, administered and enforced in accordance with ERISA, and to the extent not preempted by ERISA, with the laws of the State of California (other than California’s conflict of laws provisions).
13.11    Compliance with Code Section 409A. This Plan is intended to be administered in compliance with Code Section 409A and each provision of the Plan shall be interpreted, to the extent possible, to comply with Code Section 409A.

IN WITNESS WHEREOF, the undersigned executed this amended Plan as of the 11th day of November 2020.


LIONS GATE ENTERTAINMENT INC.


/s/ Adrian Kuzycz (Signature)

By: Adrian Kuzycz

Its: President and Secretary


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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/ JON FELTHEIMER
Jon Feltheimer
Chief Executive Officer

 Date: February 4, 2021


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.;
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/ JAMES W. BARGE
James W. Barge
Chief Financial Officer
Date: February 4, 2021


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, 2020, 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/ JON FELTHEIMER
  Jon Feltheimer
  Chief Executive Officer
Date: February 4, 2021  
 
/s/ JAMES W. BARGE
  James W. Barge
  Chief Financial Officer
Date: February 4, 2021