STRZ US Equity☆

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section of our Annual Report Form 10-K includes a discussion and analysis of our financial condition and results of operation for the fiscal years ended March 31, 2020 and 2019, and year-to-year comparisons between fiscal 2020 and fiscal 2019. A discussion and analysis of our financial condition and results of operation for the fiscal year ended March 31, 2018 and year-to-year comparisons between fiscal 2019 and fiscal 2018 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019, and is herein incorporated by reference.

Overview

Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) is a global content leader whose films, television series, digital products and linear and over-the-top platforms reach next generation audiences around the world. Lionsgate’s film and television properties support location-based entertainment venues and other branded attractions, as well as a video game business. Lionsgate's content initiatives are backed by a nearly 17,000-title film and television library and delivered through a global sales and licensing infrastructure. We classify our operations through three reporting segments: Motion Picture,Television Production, and Media Networks (see further discussion below).

Impact of COVID-19

The impact of the ongoing COVID-19 global pandemic and measures to prevent its spread, and the resulting unprecedented economic uncertainty, are affecting our business in a number of ways. To date, we have experienced early termination of the theatrical run of one of our films domestically and one of our films in the UK, delayed theatrical distribution of several films domestically and internationally, the delayed production of film and television content (resulting in changes in future release dates for some titles and series). Our partners have also closed several location-based entertainment attractions based on our film and television properties. We may not be able to accurately predict when theaters re-open, production resumes or if and when certain of our content will be released. The full extent of the impact of 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 Item 1A. Risk Factors for further details.

Conversely, television and streaming consumption around the globe has increased as well as home entertainment demand. STARZ has experienced 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, however, may not be indicative of future results and 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. In a number of instances, we have also been able to adapt to these new circumstances by releasing one of our theatrical films earlier on streaming platforms, completing post-production of one of our television series remotely and continuing the development of a number of our television series utilizing virtual writers’ rooms. These changes in the way we operate may be helpful to partially offset some of the negative impacts from the pandemic, however the ultimate impact of these changes and the COVID-19 global pandemic cannot be predicted with certainty.

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 fourth quarter of fiscal 2020 we have incurred $50.5 million in incremental costs which were expensed in the period. These costs include $46.0 million reflected in direct operating expense, which include certain motion picture and television impairments and development charges associated with changes in performance expectations or the feasibility of completing the project, costs associated with the pausing of productions, including certain cast and crew costs and incremental costs associated with bad debt reserves. In addition, these costs include $4.2 million reflected in distribution and marketing expense, which primarily consists of early marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit, and $0.3 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 this period. 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 have not been recorded in our consolidated financial statements. See further discussion in the Results of Operations section below.

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

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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 as a result of 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 continue to monitor the situation, have actively implemented policies and procedures to address the situation, and may adjust our current policies and procedures as more information and guidance become available to address the evolving situation. Accordingly, 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 years ended March 31, 2020, 2019 and 2018.

Motion Picture

Our Motion Picture segment includes revenues derived from the following:

Television Production

Our Television Production segment includes revenues derived from the following:

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Media Networks

Our Media Networks segment includes revenues derived from the following product lines:

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

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States 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. 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 consolidated financial statements.

Accounting for Films and Television Programs and Program Rights. We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in films and television programs. These costs for an

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individual film or television program are amortized and participation and residual costs are accrued to direct operating expenses in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of such film or television program. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. For previously released film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed twenty years from the date of acquisition.

Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful or less successful than anticipated. Management regularly reviews and revises when necessary its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value. Management estimates the ultimate revenue based on experience with similar titles or title genre, the general public appeal of the cast, 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 expense within direct operating expenses in our consolidated statements of operations. Investment in films and television programs is stated at the lower of amortized cost or estimated fair value. The valuation of investment in films and television programs, whether released or unreleased, is reviewed on a title-by-title basis, when an event or change in circumstances indicates that the fair value of a film or television program is less than its unamortized cost. In determining the fair value of our films and television programs, we generally employ a discounted cash flows ("DCF") methodology with assumptions for cash flows (a Level 3 fair value measurement, see Note 11 to our consolidated financial statements). Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue as discussed above, and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. The fair value of any film costs associated with a film or television program that we plan to abandon is zero. Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film or television program. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in our future revenue estimates.

Program rights include content licensed from third parties and content produced by and licensed from the Television Production segment. Program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on a title-by-title or episode-by-episode basis over the anticipated number of exhibitions or license period. We estimate the number of exhibitions based on the number of exhibitions allowed in the agreement and the expected usage of the content. Certain other program rights are amortized to expense on a straight-line basis over the respective lives of the agreements. Programming rights may include rights to more than one exploitation window under its output and library agreements. For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated fair value of each window which generally results in the majority of the cost allocated to the first window on newer releases. Programming costs vary due to the number of airings and cost of our original series, the number of films licensed and the cost per film paid under our output and library programming agreements.

The cost of the Media Networks' segments produced original content generally represents the license fees charged from the Television Production segment which are eliminated in consolidation. The amount associated with the pay television market is reclassified to program rights when the program is aired and the portion attributable to the ancillary markets remains in investment in films and television programs. The cost of the Media Networks’ third-party licensed content is allocated between the pay television market distributed by the Media Networks’ segment and the ancillary revenue markets (e.g., home video, digital platforms, international television, etc.) distributed by the Television Production segment based on the estimated relative fair values of these markets. Estimates of fair value for the pay television and ancillary markets involve uncertainty as well as estimates of ultimate revenue. All the costs of programming produced by the Television Production segment are included in investment in films and television programs and program rights, net and are classified as long term. Amounts included in

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program rights, other than internally produced programming, that are expected to be amortized within a year from the balance sheet date are classified as short-term.

Licensed content is stated at the lower of amortized cost or net realizable value, and produced original content is stated at the lower of amortized cost or estimated fair value, as discussed above. Changes in management’s estimate of the anticipated exhibitions of films and original series on our networks could result in the earlier recognition of our programming costs than anticipated. Conversely, scheduled exhibitions may not capture the appropriate usage of the program rights in current periods which would lead to the write-off of additional program rights in future periods and may have a significant impact on our future results of operations and our financial position.

Revenue Recognition. Our Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places. Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services and from our majority owned premium Spanish language streaming services business, Pantaya.

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.

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

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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 $3.6 million, $4.2 million and $6.0 million on our total revenue in the fiscal years ended March 31, 2020, 2019, and 2018, respectively.

Goodwill and Indefinite-Lived Intangibles. At March 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 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 March 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 fiscal 2019, due primarily to the decline in the market price of our common shares, we performed a quantitative goodwill impairment assessment for all of our reporting units. Our quantitative goodwill impairment analysis of our reporting units indicated that the fair value of the reporting units exceeded their respective carrying values. However, our Television business reporting unit was considered at risk for impairment due to relatively small changes in certain key assumptions that could cause an impairment of goodwill. As a result, during fiscal 2020 we monitored all of our reporting units for changes in the business environment that could impact recoverability.

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For the second quarter of fiscal 2020, due primarily to the sustained decline in the market price of our common shares, we updated our quantitative impairment assessment for three (Television, Media Networks and Motion Picture) of our reporting units. 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 10% to 14%, 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 quantitative impairment assessment for the second quarter of fiscal 2020, we determined that there were no goodwill impairments; however, two of our reporting units (Television and Media Networks) were at risk for impairment due to relatively small changes in certain key assumptions that could cause an impairment of goodwill.

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.

Management will continue to monitor all of its reporting units for changes in the business environment that could impact the recoverability 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 production can resume and 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.

Finite-Lived Intangible Assets. At March 31, 2020, the carrying value of our finite-lived intangible assets was approximately $1.47 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 $1.45 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

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years. Through the first quarter of fiscal 2020, we amortized the Starz Traditional Affiliate customer relationships discussed above 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 second quarter of the fiscal year ended March 31, 2020, the Company determined it was appropriate to change the pattern of amortization of its Traditional Affiliate customer relationship intangible asset. Accordingly, beginning in the second quarter of the fiscal year ended March 31, 2020, 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. See Note 1 to our consolidated financial statements under the Finite-Lived Intangible Assets section for further details.

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.

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 $3.6 million, $4.2 million and $6.0 million on our total revenue in the fiscal years ended March 31, 2020, 2019, and 2018, 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

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all or a portion of our deferred tax assets through a charge to our income tax provision. As of March 31, 2020, we have 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.

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 legislations to comply with federal changes and some foreign jurisdictions have enacted similar tax incentive legislations. As the enactment dates of these laws are before the end of the reporting period, we have considered the applicable tax law changes to our current and deferred income tax expense as of March 31, 2020 and concluded that the impact was immaterial. 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 March 31, 2020, our investments included investments in equity method investees of $34.3 million, and other investments of $6.0 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 consolidated financial statements for a discussion of recent accounting guidance.

RESULTS OF OPERATIONS

Fiscal 2020 Compared to Fiscal 2019

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Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended

March 31, Increase (Decrease)

(Amounts in millions)

Revenues

Expenses:

Shareholder litigation settlements — (114.1 ) 114.1 n/a

Gain (loss) on extinguishment of debt 5.4 (1.9 ) 7.3 (384.2 )%

Income tax (provision) benefit (3.3 ) 8.5 (11.8 ) (138.8 )%

Less: Net loss attributable to noncontrolling interest 18.0 15.4 2.6 16.9 %

Revenues. Consolidated revenues increased in fiscal 2020, due to increases in Motion Picture, Television Production and to a lesser extent, Media Networks revenues. These increases were partially offset by increases in intersegment eliminations due to higher 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. Motion Picture revenue increased due to higher theatrical and home entertainment revenue primarily driven by the performance of the films released from our Fiscal 2020 Theatrical Slate, offset partially by lower television and other revenue. Media Networks revenue increased due to increased revenue across STARZPLAY International and Other Streaming Services, offset by a slight decrease from Starz Networks. See further discussion in the Segment Results of Operations section below.

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Direct Operating Expenses. Direct operating expenses by segment were as follows for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended March 31,

Amount % of Segment Revenues Amount % of Segment Revenues Amount Percent

(Amounts in millions)

Direct operating expenses

COVID-19 related costs 46.0 nm — nm 46.0 n/a

_______________________

nm - Percentage not meaningful.

Direct operating expenses increased in fiscal 2020, due to increases from Media Networks and Motion Picture, as well as COVID-19 related costs, and certain programming and content charges included in "other" (as further described below). The increase in Television Production direct operating expense were more than offset by the increase 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. Media Networks direct operating expense increased due to higher programming amortization at STARZPLAY International, which was partially offset by lower direct operating expense at Starz Networks, which included a benefit of $39.7 million associated with the modification of a content licensing arrangement net of amortization for related changes in content availability and air dates. Motion Picture direct operating expense increased due to increased Motion Picture revenue and higher investment-in-film write-downs. See further discussion in the Segment Results of Operations section below.

COVID-19 Related Costs.As a direct result of the COVID-19 global pandemic, during the fourth quarter of fiscal 2020 we have incurred $46.0 million in incremental costs which were expensed in the period, reflected in consolidated direct operating expense, and are excluded from segment direct operating expense. These costs include certain motion picture and television impairments and development charges associated with changes in performance expectations or the feasibility of completing the project, and costs associated with the pausing of productions, including certain cast and crew costs and incremental costs associated with bad debt reserves. We expect to incur additional incremental costs in future periods. A majority of these costs relate to our Motion Picture segment. We are in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore have not been recorded in our consolidated financial statements.

Other. During fiscal 2020 and 2019, in connection with recent 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 $76.5 million and $35.1 million in fiscal 2020 and 2019, respectively, which are excluded from segment operating results but included in direct operating expense in the 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 fiscal years endedMarch 31, 2020 and 2019:

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Year Ended March 31, Increase (Decrease)

(Amounts in millions)

Distribution and marketing expenses

COVID-19 related costs 4.2 — 4.2 n/a

_______________________

nm - Percentage not meaningful.

Distribution and marketing expenses increased in fiscal 2020 primarily due to increased Media Networks distribution and marketing expense across Starz Networks, STARZPLAY International and Other Streaming Services, and to a lesser extent, increased Motion Picture theatrical P&A associated with an increased number of theatrical releases, partially offset by a slight decrease in Television Production distribution and marketing expense. See further discussion in the Segment Results of Operations section below.

As a direct result of the COVID-19 global pandemic, during the fourth quarter of fiscal 2020 we have incurred $4.2 million in costs primarily related to early 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 fiscal years endedMarch 31, 2020 and 2019:

Year Ended

March 31, Increase (Decrease)

2020 % of Revenues 2019 % of Revenues Amount Percent

(Amounts in millions)

General and administrative expenses

Share-based compensation expense 48.5 50.6 (2.1 ) (4.2 )%

Purchase accounting and related adjustments 52.6 43.8 8.8 20.1 %

_______________________

nm - Percentage not meaningful.

General and administrative expenses decreased in fiscal 2020, resulting from decreases in Media Networks, Corporate, Television Production, and Motion Picture general and administrative expenses and a slight decrease in share-based compensation expense, partially offset by increased purchase accounting and related adjustments. See further discussion in the Segment Results of Operations section below.

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Corporate general and administrative expenses decreased$4.5 million, or 4.3%, primarily due to decreases in professional fees.

The decrease in share-based compensation expense included in general and administrative expense in the year endedMarch 31, 2020, as compared to the year endedMarch 31, 2019 is primarily due to lower compensation expense associated with the replacement of Starz share-based payment awards. Additionally, the decrease in share-based compensation expense is due to lower 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 presents share-based compensation expense by financial statement line item:

Year Ended

(Amounts in millions)

Share-based compensation expense included in:

General and administrative expense $ 48.5 $ 50.6

Restructuring and other(1) 0.6 16.0

Direct operating expense 1.0 1.1

Distribution and marketing expense 0.5 0.4

Total share-based compensation expense $ 50.6 $ 68.1

_______________________

(1)Represents share-based compensation expense included in restructuring and other expenses reflecting the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.

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. The increase reflects amounts related to 3 Arts Entertainment, as fiscal 2019 included purchase accounting and related adjustments from the acquisition date of May 29, 2018, as compared to a full year in fiscal 2020.

Depreciation and Amortization Expense. Depreciation and amortization of $197.7 million for fiscal 2020increased$34.3 million from $163.4 million in fiscal 2019, due to a change in the amortization method for the Starz Traditional Affiliate customer relationships in the second quarter of fiscal 2020, which resulted in an increase to amortization expense of $38.7 million in fiscal 2020. See Note 1 to our consolidated financial statements under the Finite-Lived Intangible Assets section for further details.

Restructuring and Other. Restructuring and other decreased$53.7 million in fiscal 2020 as compared to fiscal 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 fiscal year endedMarch 31, 2020 and 2019 (see Note 16 to our consolidated financial statements):

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Year Ended March 31, Increase (Decrease)

(Amounts in millions)

Restructuring and other:

Severance(1)

Accelerated vesting on equity awards (see Note 14) 0.6 16.0 (15.4 ) (96.3 )%

COVID-19 related costs(2) 0.3 — 0.3 n/a

_______________________

Interest Expense. Interest expense of $191.3 million in fiscal 2020decreased$7.6 million from fiscal 2019. The following table sets forth the components of interest expense for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended

(Amounts in millions)

Interest Expense

Cash Based:

Revolving credit facility $ 6.4 $ 10.9

Amortization of debt discount and financing costs 14.9 11.6

Interest on dissenting shareholders' liability(3) — 35.3

______________________

Shareholder Litigation Settlements.Shareholder litigation settlements of $114.1 million in fiscal 2019 was related to previous shareholder litigation in connection with the Starz merger and includes the following: (i) $54.8 million for the net

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expense recorded for the settlement of the fiduciary litigation (representing the settlement amount of $92.5 million, net of aggregate insurance reimbursement of $37.8 million, and (ii) $59.3 million related to the appraisal litigation, representing the amount by which the settlement amount of approximately $964 million exceeded the previously accrued (at date of acquisition) dissenting shareholders' liability plus interest through the date agreed in the settlement. There were no comparable charges in fiscal 2020.

Other Expense. Other expense of $11.1 million for fiscal 2020 compared to other expense of $4.7 million for fiscal 2019, and represented the loss related to our monetization of accounts receivable programs (see Note 20 to our consolidated financial statements).

Gain (Loss) on Extinguishment of Debt. Gain on extinguishment of debt of $5.4 million in fiscal 2020 related primarily to the repurchase of a portion of the 5.875% Senior Notes, 6.375% Senior Notes and Term Loan B. This compared to a loss of $1.9 million in fiscal 2019 related to early repayments on the Term Loan B. See Note 7 to our consolidated financial statements.

Loss on Investments. Loss on investments of $0.5 million for fiscal 2020compared to loss on investments of $87.6 millionfor fiscal 2019. The loss on investments in fiscal 2020 represents unrealized losses on equity securities. The loss on investments in fiscal 2019 included a loss of $44.6 million in connection with the March 15, 2019 sale of our 50.0% equity interest in Pop, and other-than-temporary impairments on our investments of $36.8 million.

Equity Interests Loss. Equity interests loss of $17.2 million in fiscal 2020 compared to equity interests loss of $42.9 million in fiscal 2019. In fiscal 2019, the equity interest loss included equity losses from Pop (50.0% equity interest sold in March 2019), and higher equity losses from other equity investees.

Income Tax (Provision) Benefit. We had an income tax provision of $3.3 million in fiscal 2020, compared to a benefit of $8.5 million in fiscal 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 fiscal 2020 was also impacted by the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

In fiscal 2019, our income tax benefit was also impacted by the tax deductions generated by our capital structure, which included certain foreign affiliate dividends in our Canadian jurisdiction that could be received without being subject to tax under Canadian tax law. However, our income tax benefit for the fiscal year ended March 31, 2019 was offset by valuation allowances against certain U.S. and foreign deferred tax assets, certain minimum taxes imposed by the Tax Act, and the nondeductible portion of our shareholder litigation settlements.

At March 31, 2020, we had U.S. net operating loss carryforwards of approximately $1,660.6 million available to reduce future federal income taxes which expire beginning in 2029 through 2039, state net operating loss carryforwards of approximately $881.2 million available to reduce future state income taxes which expire in varying amounts beginning 2021, Canadian loss carryforwards of $57.2 million which will expire beginning in 2034, and Luxembourg loss carryforwards of $768.8 million which will expire beginning in 2036. In addition, at March 31, 2020, we had U.S. credit carryforwards related to foreign taxes paid of approximately $76.2 million to offset future federal income taxes that will expire beginning in 2021.

Net Income (Loss) Attributable to Lions Gate Entertainment Corp. Shareholders. Net loss attributable to our shareholders for the fiscal year ended March 31, 2020 was $188.4 million, or basic and diluted net loss per common share of $0.86 on 217.9 million weighted average common shares outstanding. This compares to net loss attributable to our shareholders for the fiscal year ended March 31, 2019 of $284.2 million, or basic and diluted net loss per common share of $1.33 on 213.7 million weighted average common shares outstanding.

Segment Results of Operations

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

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and content strategy, and, when applicable, certain costs 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 17 to the consolidated financial statements.

Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended

March 31, Increase (Decrease)

(Amounts in millions)

Motion Picture Segment:

Expenses:

General and administrative expenses 104.8 105.6 (0.8 ) (0.8 )%

Direct operating expense as a percentage of revenue 48.5 % 51.8 %

Gross contribution as a percentage of revenue 18.8 % 16.0 %

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Revenue. The table below sets forth Motion Picture revenue by media and product category for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended March 31,

Feature Film(1) Other Film(2) Total Feature Film(1) Other Film(2) Total

(Amounts in millions)

Motion Picture Revenue

Home Entertainment

____________________

Theatrical revenue increased$139.8 million, or 64.8%, in fiscal 2020 as compared to fiscal 2019, primarily driven by the performance of the Feature Films released in fiscal 2020, and included significant revenue from Knives Out, John Wick: Chapter 3 - Parabellum, Angel Has Fallen, Midway and Rambo: Last Blood. In addition, fiscal 2020 included the release of 12 Feature Films, as compared to 11 Feature Films released in fiscal 2019. This increase waspartially offset by a decrease from Other Film driven by theatrical revenue in the prior year period from Overboard and Extinction. As a result of the COVID-19 global pandemic, in March 2020 we had to prematurely terminate the theatrical run of our Feature Film, I Still Believe, which was released on March 13, 2020 and had its theatrical run suspended on March 17, 2020. Accordingly, theatrical revenues for fiscal 2020 were impacted by this early termination. See further discussion below on the impact of COVID-19.

Home entertainment revenue increased$112.6 million, or 19.0%, in fiscal 2020, as compared to fiscal 2019, driven by an increase of $165.2 million from our Feature Films, which was partially offset by a decrease of $52.6 million from Other Film. The increase in Feature Film home entertainment revenue was due to the performance of our Fiscal 2020 Theatrical Slate, and in particular, significant digital and packaged media revenues from John Wick: Chapter 3 - Parabellum. The increase was also, to a lesser extent, due to a greater number of Feature Films released on home entertainment. The decrease in revenue from Other Film was primarily due to home entertainment revenue in fiscal 2019 from I Can Only Imagine, Overboard, and Hostiles.

Television revenue decreased$27.3 million, or 9.9%, in fiscal 2020, as compared to fiscal 2019, due primarily to fewer Feature Films from our 2019 Theatrical Slates with television windows opening in fiscal 2020 as compared to the number of Feature Films from our Fiscal 2018 Theatrical Slate with television windows opening in fiscal 2019.

Other revenue decreased $18.5 million, or 45.2%, in fiscal 2020, as compared to fiscal 2019, due to Feature Film revenues from an other ancillary market licensing arrangement in fiscal 2019.

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We expect that Motion Picture segment revenues will decrease in fiscal 2021 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 COVID-19. 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 increase in direct operating expenses is due to an increase in Motion Picture revenues, andhigher investment-in-film write-downs, which were partially offset by decreased direct operating expenses as a percentage of motion pictures revenue. Investment in film write-downs included in Motion Picture segment direct operating expense for the period increased to $42.1 million in fiscal 2020, as compared to approximately $22.9 million in fiscal 2019. 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 fiscal 2020 as compared to fiscal 2019, and in particular, the Fiscal 2020 Theatrical Slate releases in fiscal 2020 (John Wick: Chapter 3 - Parabellum, Knives Out, Angel Has Fallen, Midway) as compared to the Fiscal 2019 Theatrical Slate releases in fiscal 2019 (The Spy Who Dumped Me, Robin Hood).

Distribution and Marketing Expense.The increase in distribution and marketing expense in fiscal 2020 is primarily due to higher theatrical P&A spending on a greater number of Feature Film theatrical releases. In fiscal 2020, approximately $10.8 million of P&A was incurred in advance for films to be released in fiscal 2021, such as Antebellum, Spiral, Barb and Star Go to Visa Del Mar, and Run. In fiscal 2019, approximately $31.6 million of P&A was incurred in advance for films to be released in fiscal 2020, such as Hellboy, Long Shot and John Wick: Chapter 3.

Gross Contribution. Gross contribution of the Motion Picture segment for fiscal 2020increased as compared to fiscal 2019, primarily due to increased Motion Picture revenue and lower direct operating expenses as a percentage of Motion Picture revenue.

General and Administrative Expense. General and administrative expenses of the Motion Picture segment decreased$0.8 million, or 0.8%, primarily due to decreases in professional fees.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended

March 31, Increase (Decrease)

(Amounts in millions)

Television Production Segment:

Expenses:

Distribution & marketing expense 30.7 36.8 (6.1 ) (16.6 )%

General and administrative expenses 37.3 43.5 (6.2 ) (14.3 )%

Direct operating expense as a percentage of revenue 87.9 % 84.1 %

Gross contribution as a percentage of revenue 9.1 % 11.9 %

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Revenue. The table below sets forth Television Production revenue and the changes in revenue by media for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended

March 31, Increase (Decrease)

Television Production (Amounts in millions)

Home Entertainment Revenue

The primary component of Television Production revenue is domestic television revenue. Domestic television revenue increased in fiscal 2020 as compared to fiscal 2019, due to an increase in syndicated licensing revenue, and increased intersegment revenues from the licensing of Starz original series. These increases were offset partially by decreased revenue from fewer television episodes delivered, and decreased license fees from unscripted television programs in fiscal 2020 as compared to fiscal 2019.

International revenue in fiscal 2020 increased $16.7 million, or 12.3%, as compared to fiscal 2019, primarily due to revenue from Mythic Quest: Raven's Banquet Season 1, Orange Is the New Black Season 7, Dear White People Season 3, and Greenleaf Season 4, and intersegment revenue from STARZPLAY International from the Starz original series The Rook Season 1, Power Season 6, Vida Season 2, and The Spanish Princess Season 1 in fiscal 2020. This compared to revenue in fiscal 2019 from Orange Is the New Black Seasons 6 & 7, Step Up: High Water Season 2, Greenleaf Season 3, Ash vs. Evil Dead Season 3, and Power Season 5.

Home entertainment revenue in fiscal 2020 decreased $13.7 million, or 18.4%, as compared to fiscal 2019, primarily driven by decreases from digital media revenue in fiscal 2019 for The Royals, and the Starz original series, The Missing Season 2 and Black Sails Season 4, which were partially offset by increased digital media revenue in fiscal 2020 for Are We There Yet.

Other revenue increased in fiscal 2020 as compared to fiscal 2019 due to a full year of revenue in fiscal 2020 from 3 Arts Entertainment, which compared to revenue in fiscal 2019 from the acquisition date of May 29, 2018 to March 31, 2019. Revenue of 3 Arts Entertainment was negatively impacted by a small amount in our fiscal year ended March 31, 2020 as a result of the COVID-19 global pandemic, and will be more significantly impacted in the fiscal year ended March 31, 2021, the extent of which will depend on when film and television productions and releases return to pre COVID-19 levels.

The extent of the impact of the COVID-19 global pandemic 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.

Direct Operating Expense. Direct operating expense of the Television Production segment in fiscal 2020 increased $105.4 million, or 13.6%, due to the increase in Television Production revenues. Direct operating expenses as a percentage of television production revenue increased primarily due to the mix of titles generating revenue in fiscal 2020 as compared to fiscal 2019. In particular, fiscal 2019 included significant revenue from higher margin television series, such as Orange Is The New Black and Step Up: High Water as compared to fiscal 2020 which included new television programs (Manhunt, Zoey's Extraordinary Playlist, Mythic Quest: Raven's Banquet, Kevin Hart: Don't F**k This Up, The Rook, Ambitions), which typically result in higher amortization expenses in relation to revenues initially.

Gross Contribution. Gross contribution of the Television Production segment for fiscal 2020decreased as compared to fiscal 2019 even though revenues increased, due to higher direct operating expenses as a percentage of television production revenue, partially offset by lower distribution and marketing expense.

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General and Administrative Expense. General and administrative expenses of the Television Production segment decreased$6.2 million, or 14.3%, primarily due to decreases in salaries and related expenses, incentive compensation and professional fees. Fiscal 2019 includes general and administrative expenses of 3 Arts Entertainment from the acquisition date of May 29, 2018.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the fiscal years endedMarch 31, 2020 and 2019:

Year Ended

March 31, Increase (Decrease)

(Amounts in millions)

Media Networks Segment:

Expenses:

General and administrative expenses 87.5 97.7 (10.2 ) (10.4 )%

Direct operating expense as a percentage of revenue 45.7 % 41.1 %

Gross contribution as a percentage of revenue 25.6 % 36.6 %

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

Year Ended Year Ended

(Amounts in millions)

Media Networks Segment:

Expenses:

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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 March 31, 2019 reflects the number of subscribers as of March 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 March 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.

Pro Forma

(Amounts in millions)

Domestic Subscribers

Other Streaming Services(1) 0.7 0.3 0.3

International Subscribers

STARZPLAY International 3.2 2.0 2.0

Total Domestic and International Subscribers 24.6 28.1 20.2

Subscribers by Platform:

___________________

Revenue. The increase in Media Networks' revenue was driven by higher STARZPLAY International revenue of $20.8 million, increased Other Streaming Services revenue of $15.8 million, partially offset by decreased Starz Networks' revenue of $10.8 million. STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories launched in fiscal 2019, and additional territories launched since March 31, 2019. Other Streaming Services revenue increased due to subscriber growth. Starz Networks' revenue decreased as a result of declines in revenue from traditional linear services, which was mostly offset by higher OTT revenue resulting from increased subscriptions.

As a result of the COVID-19 global pandemic, television and streaming consumption around the globe has increased and home entertainment demand continues. For instance, STARZ has experienced 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, such as declining linear subscribers and increasing subscribers to OTT services. This increase may not be indicative of future results and 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 fiscal 2020 and fiscal 2019, the following original series premiered on STARZ:

First Quarter: First Quarter:

The Spanish Princess Howard's End

Vida Season 2 Sweetbitter Season 1

The Rook Season 1 Vida Season 1

Wrong Man Season 1

Second Quarter: Second Quarter:

Sweetbitter Season 2 Power Season 5

Power Season 6A America to Me

Power Confidential Season 1 Warriors of Liberty City

Third Quarter: Third Quarter:

Dublin Murders Outlander Season 4

Leavenworth Counterpart Season 2

Fourth Quarter: Fourth Quarter:

Power Season 6B American Gods Season 2

Wrong Man Season 2 Now Apocalypse Season 1

Outlander Season 5

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 programing cost amortization and advertising and marketing costs and thus the gross contribution margin for the Media Networks' segment can fluctuate from period to period depending on the number of new 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 STARZPLAY International, which were partially offset by lower Starz Networks' direct operating expenses in fiscal 2020. Direct operating expenses at STARZPLAY International increased as a result of higher programming cost amortization related to the launch and operation of STARZPLAY in additional international territories since March 31, 2019. The decrease in direct operating expense at Starz Networks was due to a benefit of $39.7 million associated with the modification of a content licensing arrangement, net of amortization for related changes in content availability and air dates, and lower programming amortization related to our Starz Originals. This benefit was partially offset by higher programming amortization related to theatrical releases under our programming output agreement, and higher development expense related to our Starz Originals.

The increase in Media Networks distribution and marketing expense is due to increases at Starz Networks, STARZPLAY International, and to a lesser extent, Other Streaming Services. Starz Networks' distribution and marketing expense increased due to increased operating costs associated with increased OTT revenue and increased marketing spend. 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 launched in fiscal 2019, and additional territories launched since March 31, 2019. The increase in distribution and marketing expense for Other Streaming Services was primarily attributable to increased advertising and marketing costs in order to drive subscriber growth.

Gross Contribution. Gross contribution of the Media Networks segment for fiscal 2020 was primarily from Starz Networks, offset partially by negative contributions from STARZPLAY International which has continued to expand in additional territories, and to a lesser extent, negative contribution from Other Streaming Services. The decrease in gross contribution compared to fiscal 2019 was primarily due to higher negative contributions from STARZPLAY International, and lower gross contribution from Starz Networks driven by increased distribution and marketing expense.

General and Administrative Expense. General and administrative expenses of the Media Networks segment in fiscal 2020 decreased from fiscal 2019, driven by a decrease in Starz Networks, partially offset by increased general and administrative expenses for STARZPLAY International. The decrease in Starz Networks resulted from a decrease in payroll and related costs.

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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 March 31, 2020, we had cash and cash equivalents of $318.2 million. Our debt at March 31, 2020 primarily consisted of a $1.5 billion five-year revolving credit facility (with no amounts outstanding at March 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").

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 $167.8 million related to its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests (see Note 12 to our consolidated financial statements).

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 the COVID-19 global pandemic, our cash requirements for productions and marketing spends have also been reduced. As previously discussed, 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 economic conditions. As a result, we cannot predict the outcome of the full extent of 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, 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. However, we may seek alternative sources of capital in connection with the STARZPLAY 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, and the monetization of trade accounts receivable. 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, 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

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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 March 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 March 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, including repurchases subsequent to March 31, 2020 of approximately $1.0 million, approximately $288.1 million of our common shares have been purchased under the plan, leaving approximately $179.9 million of authorized potential purchases. 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 fiscal year ended March 31, 2020, we repurchased 0.7 million of our Class A voting shares for an aggregate cost of $3.8 million, with a weighted average repurchase price per share of $5.43.

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 March 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 loss, and therefore the Company's net loss of $206.4 million and accumulated deficit of $16.9 million were deemed free of restrictions at March 31, 2020.

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Discussion of Operating, Investing, Financing Cash Flows

Cash and cash equivalents increased by $136.8 million for the fiscal year ended March 31, 2020 and decreased by $193.5 million for the fiscal year ended March 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 fiscal years ended March 31, 2020 and 2019 were as follows:

Year Ended March 31,

(Amounts in millions)

Operating Activities:

Non-cash share-based compensation 50.5 68.1 (17.6 )

Current income tax provision (4.2 ) (15.1 ) 10.9

Shareholder litigation settlement charges and interest — (221.3 ) 221.3

Other non-cash charges included in operating activities 263.9 201.5 62.4

Changes in operating assets and liabilities:

Accounts receivable, net and other assets 397.5 470.8 (73.3 )

Other changes in operating assets and liabilities (80.9 ) (101.1 ) 20.2

Changes in operating assets and liabilities (1,228.7 ) (1,100.2 ) (128.5 )

Net Cash Flows Provided By Operating Activities $ 614.6 $ 427.5 $ 187.1

Cash flows provided by operating activities for the fiscal year ended March 31, 2020 were $614.6 million compared to cash flows provided by operating activities of $427.5 million for the fiscal year ended March 31, 2019. The increase in cash provided by operating activities for fiscal 2020 as compared to fiscal 2019 is due to higher cash flows from operations before changes in operating assets and liabilities, which in fiscal 2019 included the portion of the shareholder litigation settlement associated with the Starz merger. The increase was partially offset by an increase in cash used from changes in operating assets and liabilities which were driven by lower decreases in accounts receivable and other assets, and increases in investment in films and television programs and program rights. In addition, cash flows provided by operating activities for the year endedMarch 31, 2020 benefited by approximately $253.0 million from the monetization of accounts receivables programs, as compared to a benefit of $347.0 million for the year ended March 31, 2019 (see Note 20 to our consolidated financial statements).

Investing Activities. Cash flows used in investing activities for the fiscal years ended March 31, 2020 and 2019 were as follows:

Year Ended March 31,

(Amounts in millions)

Investing Activities:

Investment in equity method investees and other (20.6 ) (48.6 )

Business acquisitions, net of cash acquired of $5.5 in 2019 — (77.3 )

Capital expenditures (31.1 ) (43.8 )

Net Cash Flows Used In Investing Activities $ (51.7 ) $ (121.7 )

Cash used in investing activities of $51.7 million for the fiscal year ended March 31, 2020 compared to cash used in investing activities of $121.7 million for the fiscal year ended March 31, 2019, as reflected above. The change was primarily due to cash used in fiscal 2019 for the purchase of 3 Arts Entertainment, net of cash acquired, and less cash used in fiscal 2020

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for investment in equity method investees and capital expenditures, offset partially by the net proceeds from the sale of our equity interest in Pop in fiscal 2019.

Financing Activities. Cash flows used in financing activities for the fiscal years ended March 31, 2020 and 2019 were as follows:

Year Ended March 31,

(Amounts in millions)

Debt - repurchases and repayments (1,033.4 ) (3,212.7 )

Net (repayments of) proceeds from debt (181.3 ) 328.5

Production loans - borrowings 59.0 338.1

Production loans - repayments (293.8 ) (305.4 )

Net (repayments of) proceeds from production loans (234.8 ) 32.7

Repurchase of common shares (2.6 ) —

Payment of dissenter liability accrued at acquisition — (797.3 )

Other financing activities (7.4 ) (63.2 )

Net Cash Flows Used In Financing Activities $ (426.1 ) $ (499.3 )

Cash flows used in financing activities of $426.1 million for the fiscal year ended March 31, 2020 compared to cash flows used in financing activities of $499.3 million for the fiscal year ended March 31, 2019.

Cash flows used in financing activities for fiscal 2020 primarily reflects net production loan repayments of $234.8 million and net debt repurchases and repayments of $181.3 million. In addition, cash flows used in financing activities for fiscal 2020 reflects cash used for the repurchase of common shares of $2.6 million. Net debt repurchases and repayments of $181.3 million in fiscal 2020 included the below transactions:

Cash flows used in financing activities for fiscal 2019 primarily reflects the payment of the dissenting shareholders' liability accrued at acquisition associated with the Starz merger, net debt borrowings of $328.5 million, net production loan borrowings of $32.7 million, and cash paid for dividends of $57.4 million. Net debt borrowings of $328.5 million in fiscal 2019 included the below transactions:

Debt

See Note 7 to our consolidated financial statements for a discussion of our debt.

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Production Loans

See Note 10 to our consolidated financial statements for a discussion of our production loans.

Table of Debt and Contractual Commitments

The following table sets forth our future annual repayment of debt, and our contractual commitments as of March 31, 2020:

Year Ended March 31,

(Amounts in millions)

Revolving credit facility $ — $ — $ — $ — $ — $ — $ —

___________________

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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.

For additional details of commitments and contingencies, see Note 18 to our consolidated financial statements.

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 13 to our consolidated financial statements, remaining performance obligations were $1.6 billion at March 31, 2020 (March 31, 2019 - $1.8 billion). The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.0 billion at March 31, 2020 (March 31, 2019 - $1.2 billion), respectively.

Off-Balance Sheet Arrangements

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

ITEM 7A.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 19 to our consolidated financial statements for additional information on our financial instruments.

Interest Rate Risk. At March 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 19 and Note 23 to our consolidated financial statements for additional information. The difference between the fixed rate to be paid and the variable rate received under the terms of the interest rate swap agreements will be recognized as interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.

Certain of our borrowings, primarily borrowings under our Senior Credit Facilities and certain production loans, are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. The applicable margin with respect to loans under the revolving credit facility and Term Loan

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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 March 31, 2020, each quarter point change in interest rates would result in a $3.7 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 3.24% to 3.74% 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 $0.4 million in additional costs capitalized to the respective film or television asset.

At March 31, 2020, our 5.875% Senior Notes and 6.375% Senior Notes had an outstanding principal value of $1,043.2 million, and an estimated fair value of $883.4 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 $17.7 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 $45.5 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 March 31, 2020:

Year Ended March 31, Fair Value

(Amounts in millions)

Debt and Production Loans

Variable Rates:

Revolving Credit Facility(1) $ — $ — $ — $ — $ — $ — $ — $ —

Average Interest Rate — — — — — —

Average Interest Rate 2.74 % 2.74 % 2.74 % — — —

Average Interest Rate 3.68 % — 3.24 % — — —

Fixed Rates:

Average Interest Rate — — — — 5.875 % —

Average Interest Rate — — — 6.375 % — —

Interest Rate Swaps(2)

____________________

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$1.05 billion of interest rate swaps by an additional 2 to 5 years, subject to Mandatory Early Termination Dates of March 23, 2025. This resulted in a decrease of the weighted average fixed pay rate from 2.87028% to 2.39293% per annum representing an annual cash interest savings of approximately $8.1 million compared to the prior swaps. See Note 23 to our consolidated financial statements.

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Auditors’ Report and our Consolidated Financial Statements and Notes thereto appear in a separate section of this report (beginning on page F-1 following Part IV). The index to our Consolidated Financial Statements is included in Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the 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. We periodically review the design and effectiveness of our disclosure controls and internal control over financial reporting. We make modifications to improve the design and effectiveness of our disclosure controls and internal control structure, and may take other corrective action, if our reviews identify a need for such modifications or actions.

As of March 31, 2020, the end of the period covered by this report, the Company's management had 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 Rules 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 March 31, 2020.

Internal Control Over Financial Reporting

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that:

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management has made an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2020. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).

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Based on this assessment, our management has concluded that, as of March 31, 2020, the Company maintained effective internal control over financial reporting. The effectiveness of the Company's internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm. Their report is included below.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting during the fiscal fourth quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 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 the COVID-19 global pandemic, but we are continually monitoring and assessing the COVID-19 situation on our internal controls.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Lions Gate Entertainment Corp.

Opinion on Internal Control Over Financial Reporting

We have audited Lions Gate Entertainment Corp.’s (the Company) internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements and the related notes and schedule listed in the Index at Item 15(a) and our report dated May 27, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Los Angeles, California

May 27, 2020

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ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this Item is incorporated by reference to our Proxy Statement for our 2020 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2020.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is incorporated by reference to our Proxy Statement for our 2020 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2020.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.

The information required by this Item is incorporated by reference to our Proxy Statement for our 2020 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2020.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this Item is incorporated by reference to our Proxy Statement for our 2020 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2020.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by this Item is incorporated by reference to our Proxy Statement for our 2020 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2020.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are filed as part of this report:

(1) Financial Statements

The financial statements listed on the accompanying Index to Financial Statements are filed as part of this report at pages F-1 to F-69.

(2) Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts

All other Schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule.

(3) and (b) Exhibits

The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.

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Item 15(a).

Schedule II. Valuation and Qualifying Accounts

Lions Gate Entertainment Corp.

March 31, 2020

(In Millions)

Additions

Reserves:

Provision for doubtful accounts $ 5.4 $ 5.7 $ — $ (1.8 ) (3) $ 9.3

Reserves:

Provision for doubtful accounts $ 7.5 $ (2.0 ) $ — $ (0.1 ) (3) $ 5.4

Reserves:

Provision for doubtful accounts $ 9.0 $ (1.0 ) $ — $ (0.5 ) (3) $ 7.5

Deferred tax valuation allowance $ 5.9 $ 67.3 $ — $ — $ 73.2

____________________________

(1) Charges for returns and allowances are charges against revenue.

(2) Actual returns and fluctuations in foreign currency exchange rates.

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Item 15(b).

INDEX TO EXHIBITS

Exhibit Number Exhibit Description Incorporated by Reference

Form Exhibit Filing Date/ Period End Date

4.5 Description of Class A voting shares, no par value per share S-4 — 8/1/2016

10.1*x Director Compensation Summary

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Exhibit Number Exhibit Description Incorporated by Reference

Form Exhibit Filing Date/ Period End Date

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Exhibit Number Exhibit Description Incorporated by Reference

Form Exhibit Filing Date/ Period End Date

21.1x Subsidiaries of the Company

23.1x Consent of Ernst & Young LLP

24.1x Power of Attorney (Contained on Signature Page)

31.1x Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2x Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002

_____________________________

* Management contract or compensatory plan or arrangement.

x Filed herewith

ITEM 16. FORM 10-K SUMMARY.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on May 27, 2020.

LIONS GATE ENTERTAINMENT CORP.

By: /s/ James W. Barge

James W. Barge

Chief Financial Officer

DATE: May 27, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates so indicated.

Each person whose signature appears below authorizes each of Jon Feltheimer, Michael Burns, Corii Berg and James W. Barge, severally and not jointly, to be his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in such person’s name, place and stead, in any and all capacities, to sign any amendments to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020; granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.

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Signature Title Date

James W. Barge

/s/ MICHAEL BURNS Director May 27, 2020

Michael Burns

/s/ GORDON CRAWFORD Director May 27, 2020

Gordon Crawford

/s/ ARTHUR EVRENSEL Director May 27, 2020

Arthur Evrensel

Jon Feltheimer

/s/ EMILY FINE Director May 27, 2020

Emily Fine

/s/ MICHAEL T. FRIES Director May 27, 2020

Michael T. Fries

/s/ SIR LUCIAN GRAINGE Director May 27, 2020

Sir Lucian Grainge

/s/ SUSAN MCCAW Director May 27, 2020

Susan McCaw

/s/ YVETTE OSTOLAZA Director May 27, 2020

Yvette Ostolaza

/s/ MARK H. RACHESKY, M.D. Chairman of the Board of Directors May 27, 2020

Mark H. Rachesky, M.D.

/s/ DANIEL SANCHEZ Director May 27, 2020

Daniel Sanchez

/s/ DARYL SIMM Director May 27, 2020

Daryl Simm

/s/ HARDWICK SIMMONS Director May 27, 2020

Hardwick Simmons

/s/ DAVID M. ZASLAV Director May 27, 2020

David M. Zaslav

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INDEX TO FINANCIAL STATEMENTS

Page

Number

Audited Financial Statements

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets — March 31, 2020 and 2019 F-3

Notes to Audited Consolidated Financial Statements F-8

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Lions Gate Entertainment Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lions Gate Entertainment Corp. (the Company) as of March 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended March 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated May 27, 2020 expressed an unqualified opinion thereon.

Adoption of ASU No. 2016-02

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in fiscal 2020 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-2

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Valuation of Goodwill

Pre-release Film Impairments

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2001.

Los Angeles, California

May 27, 2020

F-3

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LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS