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CSULB Regional Final
- 1. CFA Institute Research Challenge Ryan Yvonne Matt Devin Henry
- 2. • Industry • Motion Picture and Television Production and Distribution • Niche • “Pure” Content Creator • Concern • Recent Underperformance post-Hunger Games Company Summary Market Profile Closing Price (April 1, 2016) $21.13 52 Week High $41.41 52 Week Low $16.21 Average Volume (3M) 2,689,580 Diluted Shares Outstanding 159,412,000 Market Cap 3.03B Dividend Yield 1.76% Beta 1.01874 EV / Revenue 2.09 EV / EBITDA 68.72 Institutional Holdings 71.90% Insider Holdings 29.01% Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 3. Investment Summary Team Estimate Target Price: $14.97 Price as of (4/1/16): $21.13 Drivers • Motion Picture Margins • Home Entertainment Capitalization • Television Strength • Disciplined Strategy Risks • Uncertainty/Flaw in Content Production Results/Process • Distributors becoming Content Creators • “One-Trick Pony” 8.27% 8.39% 70.64% 12.71% 2012-2015 Box Office Market Share Lions Gate Paramount Major Studios (5) Other Studios Lionsgate: #7 Film Studio Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 4. Five-Forces Model Bargaining Power of Buyers • Ticket Sales • Cinema venue • Home Entertainment platforms Threat of New Entrants • Digital Distributors Degree of Rivalry • Competitive Industry • Consolidations 0 1 2 3 4 5 Bargaining Power of Supplier Bargaining Power of Buyers Threat of Substitution Threat of New Entrants Degree of Rivalry 0 = No threat to LGF 5 = High Threat to LGF Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 5. Threat of Substitution • Piracy • Alternative Entertainment Bargaining Power of Suppliers • Talent Costs • Production Costs Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 0 1 2 3 4 5 Bargaining Power of Supplier Bargaining Power of Buyers Threat of Substitution Threat of New Entrants Degree of Rivalry 0 = No threat to LGF 5 = High Threat to LGF Five-Forces Model
- 6. $- $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $- $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00 $3,500.00 $4,000.00 ($billions) Spending Trend Avg Ann HH Exp on Entertainment US GDP Entmt & Rec Spending 0 20 40 60 80 100 120 $- $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00 $12,000.00 $14,000.00 $16,000.00 ($billions) Demand Driver Disposable Personal Income Consumer Confidence Sources: BEA, BLS Consumer Economy Macro Industry Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 7. Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 7 Sources: National Association of Theatre Owners 5400 5500 5600 5700 5800 5900 6000 6100 6200 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 36000 36500 37000 37500 38000 38500 39000 39500 40000 40500 Cinemas Screens Theatrical Exhibitors Number of U.S. cinemas Number of U.S. screens 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 Tickets Axis Title Box Office Domestic Box Office ($B) Average Ticket Price ($) Tickets (billion) Theater Macro Industry
- 8. Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 8 Sources: National Association of Theatre Owners 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 Tickets Axis Title Box Office Domestic Box Office ($B) Average Ticket Price ($) Tickets (billion) Theater Macro Industry 0 5 10 15 20 25 30 35 40 45 50 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 3-D FIlm 3-D Screens 3-D Releases
- 9. 9 $- $5,000.00 $10,000.00 $15,000.00 $20,000.00 $25,000.00 $30,000.00 $35,000.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ($billion) Television Basic Cable Networks Broadcast networks Syndication International Pay TV Micro Industry Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion $- $20,000.00 $40,000.00 $60,000.00 $80,000.00 $100,000.00 $120,000.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ($billions) Total Filmed Entertainment Film content revenue TV content revenue Total Entertainment Revenues Industry Revenue Sources: SNL Kagan
- 10. 10 $- $20,000.00 $40,000.00 $60,000.00 $80,000.00 $100,000.00 $120,000.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ($billions) Total Filmed Entertainment Film content revenue TV content revenue Total Entertainment Revenues Sources: SNL Kagan Micro Industry Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 0 5000 10000 15000 20000 25000 30000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($billion) Motion Picture Domestic International Industry Revenue
- 11. 11 $- $5,000.00 $10,000.00 $15,000.00 $20,000.00 $25,000.00 $30,000.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($billion Motion Picture Domestic International $- $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00 $12,000.00 $14,000.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($billion) Motion Picture - Domestic Theatrical rentals Basic cable (TV licensing) Pay TV PPV/VOD Home video Industry Revenue Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion Micro Industry Sources: SNL Kagan
- 12. 12 Sources: Digital Entertainment Group, Euromonitor International from trade sources/national statistics - 2,000.00 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 14,000.00 16,000.00 18,000.00 20,000.00 2010 2011 2012 2013 2014 2015 ($millions) Home Entertainment Total Home Entertainment Sell Through Rental Digital Internet Consumption Micro Industry Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 13. Focus on content • 16,000 Content Library • Television Diversification • Distribution • Partners/Affiliates • Movie Genre Disciplined Approach • Greenlighting • Productions and Acquisitions Business Operation - Strategy Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 14. Submit Project to Committee • Artistic Merit • Commercial Viability Revenue - Cost Projections • Legal Review • Financing Options Committee Decision Final Decision Greenlighting Process Disciplined Approach • Greenlighting • Productions and Acquisitions Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 15. Co-Production Agreements Pre-Selling International Distribution Rights Incentive Programs Talent Contractual Agreements Financial Risk Mitigation 15 $140 million Budget $10 million at loss $90 million Budget $10 million at loss Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion Financial Model
- 16. Business Overview Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 16 Source: Lionsgate, 10-K $1,320,012.00 $1,135,110.00 $433,546.00 $421,112.00 $1,753,558.00 $1,556,222.00 $- $200,000.00 $400,000.00 $600,000.00 $800,000.00 $1,000,000.00 $1,200,000.00 $1,400,000.00 $1,600,000.00 $1,800,000.00 $2,000,000.00 ($thousands) Revenue Nine Months ending Dec. 31 Motion Pictures Television Production Total Revenue 75.43% 24.57% 27.31% 2015 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% Revenue Nine Months Ending Dec. 31, 2015 Home Entertainment Television Production Motion Pictures
- 17. 2015 2014 Fiscal 2016 Theatrical Slate: Fiscal 2015 Theatrical Slate Mockingjay - Part 2 Mockingjay - Part 1 Love the Coopers John Wick The Last Witch Hunter Addicted* Freeheld* The Expendables 3 Sicario** Step Up All In Shaun the Sheep Movie The Quiet Ones American Ultra Draft Day The Age of Adaline Child 44* Fiscal 2015 Theatrical Slate: Fiscal 2014 Theatrical Slate Insurgent Divergent Mockingjay - Part 1 Catching Fire Love & Mercy A Most Wanted Man Un Gallo Con Muchos Huevos Cantinflas *limited release **limited release initially; wide release in Oct., 2015 - 50 100 150 200 250 300 350 400 450 500 2014 2015 ($millions) Motion Picture Subsegment Revenues Theatrical Home Entertainment Television International Other Motion Picture Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 18. Financial Analysis Budget ($M) 28 90 160 140 110 Box Office 15.4 140.4 653 132.9 137.4 18 Source: 10-Q Source: Box Office Mojo - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 2014 2015 ($Thousands) Gross Profit Motion Pictures Television Production Total Gross Profit - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 2014 2015 ($thousands) Net Profit Motion Pictures Television Production Total Profit Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion
- 19. Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 19 -60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Profitability Ratios Return on Assets Return on Capital Return on Equity -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Margin Analysis Gross Margin EBITDA Margin Net Income Margin Free Cash Flow Margin Financial Analysis
- 20. Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 20 Source: Bloomberg ROE Profit Margin Asset Turnover Equity Multiplier 2007 11.12% 2.82% 85.89% 4.59% 2011 -21.91% -1.92% 100.01% 11.30% 2015 21.60% 7.58% 72.89% 3.91% -40.00% -20.00% 0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00% DuPont Equation 2007 2011 2015 Financial Analysis
- 21. 2016 2017 2018 2019 Thereafter Total Dec. 31, 2015 Production loans 138,099.00 710,249.00 21,600.00 - - 869,948.00 869,948.00 Average Interest Rate 3.63 3.54 3.60 - - 5.25% Senior Notes - - - 225,000.00 - 225,000.00 231,750.00 Average Interest Rate - - - 5.25 - Term Loan Due 2022 - - - - 400,000.00 400,000.00 396,500.00 Average Interest Rate - - - - 5.00 January 2012 4.00% Notes - 41,850.00 - - - 41,850.00 41,707.00 Average Interest Rate - 4.00 - - - April 2013 1.25% Notes - - - 60,000.00 - 60,000.00 53,218.00 Average Interest Rate - - - 1.25 - Debt/ year 138,099.00 752,099.00 21,600.00 285,000.00 400,000.00 1,596,798.00 1,593,123.00 Debt
- 22. Valuation •Free Cash Flow to Firm Discounted Cash Flow •EV/EBITDA Multiple Relative Valuation Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 22 18 • Quirky, diversified film slate • Failed blockbuster films • Young-Adult loss of appeal Motion Picture • Diversified distribution strategy • Box office-to-home entertainment Home Entertainment • Strong, diversified television slate • Pilgrim Studios Television
- 23. Valuation •Perpetuity growth: 2.00% Discounted Cash Flow •Industry avg.: 12.78% Relative Valuation Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 23 18 • Dependence on television • Uncertain box-office performance Revenue • Decreased expenses • Demand from distributors Margin • Starz Entertainment • Summit Entertainment, Pilgrim Studios Consolidation
- 24. 24 In Millions of Mar 11 A Mar 12 A Mar 13 A Mar 14 A Mar 15 A Mar 16 E Mar 17 E Mar 18 E Mar 19 E Mar 20 E Mar 21 E Revenue 1582.72 1587.579 2708.141 2630.254 2399.64 2183.672 2489.387 2692.249 2789.163 2812.72 2954.13 % YoY Growth 0% 0% 71% -3% -9% -9% 14% 8% 4% 1% 5% Gross Margins 51% 43% 50% 50% 46% 40% 45% 46% 47% 47% 47% Operating Margins 4% 2% 10% 10% 9% 1% 13% 12% 13% 11% 11% Tax Rate 239% 0% 0% 23% 16% 25% 13% 15% 18% 18% 18% WACC 2015-16 8.6% Projections
- 25. 25 In Millions of Mar 11 A Mar 12 A Mar 13 A Mar 14 A Mar 15 A Mar 16 E Mar 17 E Mar 18 E Mar 19 E Mar 20 E Mar 21 E Revenue 1582.72 1587.579 2708.141 2630.254 2399.64 2183.672 2489.387 2692.249 2789.163 2812.72 2954.13 % YoY Growth 0% 0% 71% -3% -9% -9% 14% 8% 4% 1% 5% Gross Margins 51% 43% 50% 50% 46% 40% 45% 46% 47% 47% 47% Operating Margins 4% 2% 10% 10% 9% 1% 13% 12% 13% 11% 11% Tax Rate 239% 0% 0% 23% 16% 25% 13% 15% 18% 18% 18% Worst Case • -2% yoy growth • -1% perpetuity growth • -2% operating margins • Higher tax rate Best Case • +2-3% yoy growth • -2% perpetuity growth • +2% operating margins • Same tax rate Scenario
- 26. In Millions of Mar 11 A Mar 12 A Mar 13 A Mar 14 A Mar 15 A Mar 16 E Mar 17 E Mar 18 E Mar 19 E Mar 20 E Mar 21 E Revenue 1582.72 1587.579 2708.141 2630.254 2399.64 2183.672 2489.387 2692.249 2789.163 2812.72 2954.13 % YoY Growth 0% 0% 71% -3% -9% -9% 14% 8% 4% 1% 5% Gross Margins 51% 43% 50% 50% 46% 40% 45% 46% 47% 47% 47% Operating Margins 4% 2% 10% 10% 9% 1% 13% 12% 13% 11% 11% Tax Rate 239% 0% 0% 23% 16% 25% 13% 15% 18% 18% 18% 26 NOPAT (87) 34 273 201 186 15 282 273 284 255 267 Free Cash Flow (225) 66 (91) 31 486 (2) 244 223 300 313 270 EBITDA 64 68 38 281 267 229 25 330 330 363 323 FCF
- 27. Valuation DCF Analysis • $18.71 Relative Valuation •$17.71 Target Price $18.21 Estimated Downside Potential: Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 27 22
- 28. Risks Business operations Competition Consumers Business Value Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 28 23Perpetuity Growth Model WACC/Growth 0.0% 1.0% 2.0% 3.0% 4.0% 6.6% 20.45 24.23 29.65 38.08 53.00 7.6% 16.88 19.56 23.20 28.42 36.54 8.6% 14.15 16.13 18.71 22.22 27.25 9.6% 11.98 13.49 15.41 17.90 21.28 10.6% 10.23 11.41 12.87 14.71 17.12 Relative Valuation – EV/EBITDA Multiple WACC/ Multiple 8.6x 10.1x 11.6x 13.1x 14.6x 6.6% 13.99 16.35 18.70 21.05 23.41 7.6% 13.60 15.90 18.20 20.50 22.79 8.6% 13.21 15.46 17.71 19.95 22.20 9.6% 12.84 15.03 17.23 19.42 21.62 10.6% 12.47 14.62 16.76 18.91 21.06
- 29. Sell Target $ 18.21 Current: $21.31 Positive: Home Entertainment, Television Negative: Motion Picture Conclusion Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 29 27
- 30. • Affiliates • Senior Management • Board of Directors • Board Committee Structure • Operating Activities • Financing Activities • Investing Activities • Debt Table • Total Debt • Maturity Profile • Bond • Total Loans • International Expansion • Stakeholders • Theatrical Slate • Current Television Slate • Conglomerate • Merger and Acquisition • Top 10 Shareholder • Debt Analysis • Sensitivity Analysis 30 Appendix
- 31. 42.72% 23.09% 60.96% 76.29% 13.81% 50.21% 50.31% 48.80% 26.30% 15.05% 0.00% 20.00% 40.00% 60.00% 80.00% 100.00% Average Dreamworks (B-) Lionsgate (BB-) Viacom (BBB-) Sony (BBB-) Time Warner (BBB) 21st Century Fox (BBB+) Comcast (A-) Disney (A) MGM Holdings Total Debt/ Book Cap 0 5 10 15 20 25 30 35 40 45 (TIMES) Interest Coverage EBITDA minus CAPEX/ Interest EBITDA/ Interest Debt Analysis
- 32. Top 10 Stockholders (as of April 1, 2016) Holder Name % Ownership No. of Shares Held Institution Type 1. MHR FUND MANAGEMENT LLC 20.14% 30,213,805 Hedge Fund Manager 2. CAPITAL GROUP COMPANIES INC 10.94% 16,404,005 Investment Advisor 3. CAPITAL RESEARCH GLOBAL INVESTOR 10.94% 16,404,005 Investment Advisor 4. FIDELITY MANAGEMENT & RESEARCH 7.23% 10,840,751 Investment Advisor 5. JANA PARTNERS LLC 5.69% 8,527,645 Hedge Fund Manager 6. CAPITAL RESEARCH GLOBAL INVESTOR 4.37% 6,559,000 Investment Advisor 7. VANGUARD GROUP INC 4.24% 6,360,972 Investment Advisor 8. CAPITAL RESEARCH GLOBAL INVESTOR 3.95% 5,919,005 Investment Advisor 9. KORNITZER CAPITAL MANAGEMENT INC 2.97% 4,453,970 Investment Advisor 10. NAYA CAPITAL MANAGEMENT UK LTD 2.94% 4,414,250 Hedge Fund Manager
- 33. Affiliates Lionsgate Motion Picture Pantelion Films Roadside Attraction Summit Entertainment Celestial Tiger Entertainment Channels Pop EPIX Starz Nonscipted TV Production Defy Media Demar Mercury Pilgrim Studio
- 34. Senior Management Jon Feltheimer Chief Executive Officer & Director Michael Burns Vice Chairman & Director James W Barge Chief Financial Officer Steven Beeks Co-Chief Operating Officer Co-President of Motion Picture Group President of Lions Gate Entertainment, Inc. Brian Goldsmith Co-Chief Operating Officer Wayne Levin General Counsel & Chief Strategic Officer 34
- 35. Summary Executive Compensation Name and Principal Year Salary Bonus Stock Awards Option Awards Non-Euqity Incentive Plan Compensation All Other Compensatio n Total Jon Feltheimer 2015 $1,500,000.00 $- $1,000,000.00 $- $4,050,000.00 $220,311.00 $6,770,311.00 Chief Executive Officer 2014 $1,465,428.00 $- $14,402,803.00 $41,513,029.00 $8,750,000.00 $197,201.00 $66,328,461.00 2013 $1,264,070.00 $6,000,000.00 $3,625,278.00 $- $1,500,000.00 $184,535.00 $12,573,883.00 Michael Burns* 2015 $1,000,000.00 $- $4,500,000.00 $- $3,000,000.00 $146,965.00 $8,646,965.00 Vice Chairman 2014 $1,000,000.00 $- $3,000,000.00 $- $4,400,000.00 $78,205.00 $8,478,205.00 2013 $970,962.00 $4,000,000.00 $7,900,172.00 $13,995,430.00 $1,300,000.00 $33,484.00 $28,200,048.00 James W. Barge 2015 $812,500.00 $- $1,212,000.00 $719,637.00 $450,000.00 $2,921.00 $3,197,058.00 Chief Financial Officer 2014 $381,538.00 $1,100,000.00 $936,250.00 $2,597,054.00 $- $477.00 $5,015,319.00 Steven Beeks 2015 $900,000.00 $- $1,285,500.00 $1,665,285.00 $371,250.00 $2,921.00 $4,224,956.00 Co-COO 2014 $900,000.00 $- $- $- $825,000.00 $3,657.00 $1,728,657.00 VP Motion Picture 2013 $900,000.00 $850,000.00 $- $- $- $5,960.00 $1,755,960.00 President of LGF Wayne Levin 2015 $825,000.00 $- $1,987,680.00 $1,596,786.00 $471,250.00 $2,921.00 $4,883,637.00 General Counsel 2014 $825,000.00 $- $- $- $825,000.00 $2,932.00 $1,652,932.00 Chief Strategic Officer 2013 $751,442.00 $612,750.00 $1,896,000.00 $1,258,600.00 $187,500.00 $2,960.00 $4,709,252.00
- 36. Board of Director Mark H Rachesky, M.D. (Chairman of board, member of the Strategic Advisory Committee and Compensation Committee) Founder and President of MHR Fund Management LLC 27.2% ownership Michael Burns (Vice Chairman) Past Managing Director and Head of Office at Prudential Securities Inc. of Los Angeles Investment Banking Office 2.4% ownership Jon Feltheimer (CEO and Director) Founder and past President of TriStar Television and past President of Columbia TriStar Television 2.6% ownership Dr. John C. Malone (Director) Chairman of the Board of Liberty Media Corporation; Director of Discovery Communication, Inc. 3% ownership Frank Giustra (Current Director, founded Lionsgate and past Chairman, 1997- 2003) CEO of Fiore Financial Corporation Harald Ludwig (Director) President and CEO of Macluan Capital Corporation 36
- 37. Board of Director Hardwick Simmons (Chairman of the Strategic Advisory Committee and member of the Audit & Risk Committee) Past Chairman and CEO of the NASDAQ Stock Market Inc.; past President and CEO of Prudential Securities Inc. Arthur Evrensel (Chairman of the Compensation Committee) Founding partner of the law firm of Michael, Evrensel & Pawar LLP G. Scott Paterson (Chairman of the Audit & Risk Committee and Financial Expert) Past Chairman & CEO of Yorkton Securities Inc.; past Chairman of the Canadian Venture Stock Exchange and Vice Chairman of the Toronto Stock Exchange Daryl Simm (Member of Nominating and Corporate Governance Committee and member of the Compensation Committee) Chairman and CEO of Omnicorn Media Group Gordon Crawford (Member of Strategic Advisory Committee) Past SVP at Capital Research and Management Phyllis Yaffe (Member of the Audit & Risk Committee and member of the Nominating and Corporate Governance Committee) Past CEO and director of Alliance Atlantis Communicatio ns; Lead Director, the Chair of the Nominating and Governance Committee of Torstar Corporation 37
- 38. Board Committee Structure Chairman Vice Chairman Board Committee Audit & Risk Financial Expert Compensation Nominating and Corporate Governance Strategic Advisory 38
- 39. Operating Activities Operating Activities 2015 2014 Net Change Operating income (loss) $ (4,843) $ 194,421 $ (199,264) Amortization of films and television programs 655,288 639,472 15,816 Non-cash share-based compensation 47,399 48,691 (1,292) Cash interest (32,561) (29,546) (3,015) Current income tax provision (10,292) (19,622) 9,330 Other non-cash charges included in operating activities 9,677 14,661 (4,984) Cash flows from operations before changes in operating assets and liabilities 664,668 848,077 (183,409) Changes in operating assets and liabilities: Accounts receivable, net (36,663) (94,803) 58,140 Investment in films and television programs (771,255) (815,469) 44,214 Other changes in operating assets and liabilities 32,699 (100,846) 133,545 Changes in operating assets and liabilities (775,219) (1,011,118) 235,899 Net Cash Flows Used In Operating Activities $ (110,551) $ (163,041) $ 52,49039
- 40. Investing Activities 40 Investing Acitivies 2015 2014 Proceeds from the sale of equity method investees $ - $ 14,575 Investment in equity method investees (3,954) (14,750) Purchase of Pilgrim Studios, net of cash acquired of $15,816 (126,892) - Purchases of property and equipment (13,680) (11,293) Other investing activities (750) (2,000) Net Cash Flows Used In Investing Activities $ (145,276) $ (13,468)
- 41. Financing Activities 41 Financing Activities 2015 2014 Senior revolving credit facility - borrowings $ 238,000 $ 681,500 Senior revolving credit facility - repayments (238,000) (618,619) Net proceeds from senior revolving credit facility - 62,881 Term Loans $ 24,036.00 $ - Convertible senior subordinated notes - repurchases $ (5.00) $ (16.00) Net proceeds from corporate debt $ 24,031.00 $ 62,865.00 Production loans - borrowings $ 509,569.00 $ 533,781.00 Production loans - repayments $ (240,565.00) $(261,868.00) Net proceeds from production loans $ 269,004.00 $ 271,913.00 Repurchase of common shares $ - $(129,859.00) Other financing activities $ (50,791.00) $ (27,304.00) Net Cash Flows Provided By Financing Activities $ 242,244.00 $ 177,615.00
- 42. Debt Table 2016 2017 2018 2019 Thereafter Total Dec. 31, 2015 Production loans 138,099.00 710,249.00 21,600.00 - - 869,948.00 869,948.00 Average Interest Rate 3.63 3.54 3.60 - - 5.25% Senior Notes - - - 225,000.00 - 225,000.00 231,750.00 Average Interest Rate - - - 5.25 - Term Loan Due 2022 - - - - 400,000.00 400,000.00 396,500.00 Average Interest Rate - - - - 5.00 January 2012 4.00% Notes - 41,850.00 - - - 41,850.00 41,707.00 Average Interest Rate - 4.00 - - - April 2013 1.25% Notes - - - 60,000.00 - 60,000.00 53,218.00 Average Interest Rate - - - 1.25 - Debt/ year 138,099.00 752,099.00 21,600.00285,000.00 400,000.001,596,798.00 1,593,123.00
- 43. Total Loans Total Loans Production loans(2) 5.25% Senior Notes(3) Term Loan Due 2022(4) January 2012 4.00% Notes April 2013 1.25% Notes - 100,000.00 200,000.00 300,000.00 400,000.00 500,000.00 600,000.00 700,000.00 800,000.00 2016 2017 2018 2019 Thereafter Debt Maturity 3.48 3.50 3.52 3.54 3.56 3.58 3.60 3.62 3.64 - 100,000.00 200,000.00 300,000.00 400,000.00 500,000.00 600,000.00 700,000.00 800,000.00 2016 2017 2018 Production Loan Production loans(2) Average Interest Rate Off-balance production loan
- 44. Expenses(Nine Months ending Dec. 31) - 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 2014 2015 ($THOUSANDS) Direct Operating Expense Motion Pictures Television Production Total Direct Operating Expense - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 2014 2015 ($THOUSANDS) General and Administration Motion Pictures Television Production - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 2014 2015 ($THOUSAND) Distribution and Marketing Motion Pictures Television Production Total Distribution and Marketing
- 45. Maturity Profile Date Total Bond Prin Term Loan Out Amount Avail 2016 208.3529 0 208.3529358 0 2017 41.85 41.85 0 800 2018 285 285 0 0 2022 400 0 400 0
- 46. Bond Issuer Cpn Maturity Amt Out(M) Curr Mty Type Principal Due(M) Interest Due(M) Lions Gate Entertainment Inc 401/11/2017 41850USD CONVERTIB LE 41850 818.4 Lions Gate Entertainment Inc 1.2504/15/2018 60000USD CONVERTIB LE 60000 375 Lions Gate Entertainment Corp 5.2508/01/2018 225000USD AT MATURITY 225000 5906.25
- 47. Stakeholders 47 Walmart•8% Verizon•3.81% AT&T •2.32% Best Buy•1.46% Target •1.21% Source: Bloomberg • LGF’s Revenue Sources • Top 5 Stakeholder’s account for 16.8% of revenue
- 48. Theatrical Slate 48Source: Boxofficemojo and J.P. Morgan Estimates
- 49. Current Television Slate The Royals E! Rocket Jump: The Show Hulu Casual Hulu Deadbeat Hulu Nashville ABC Orange is the New Black Netflix 49
- 50. Conglomerate Conglomerate Studio Parent Major Film Unit Other Film Unit Twenty-First Century Fox, Inc. Fox Filmed Entertainment 20th Century Fox Searchlight, Blue Sky The Walt Disney Co. Walt Disney Studios Walt Disney Pictures Pixar Animation, Lucasfilm, Marvel Studios Comcast Corp. NBCUniversal Universal Pictures Illumination, Focus Features Time Warner Inc. Warner Bros. Entertainment Inc. Warner Bros. Pictures DC Comics, New Line, Village Roadshow Viacom Inc. Paramount Motion Pictures Group Paramount Pictures Sony Corp. Sony Pictures Entertainment Columbia Pictures Sony Pictures, TriStar, Screen Gems
- 51. Statement of Cash Flows Cash Flow FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 3/31/2005 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 Net Income 20.3 6.1 27.5 (74.0) (178.5) (19.5) (30.4) (39.1) 232.1 152.0 181.8 Depreciation & Amort., Total 218.7 4.5 3.7 5.5 7.7 12.5 5.8 4.3 8.3 6.5 6.6 Other Non-Cash Adj 10.6 217.6 306.2 453.5 512.7 563.9 639.9 643.2 984.8 1,076.1 955.3 Changes in Non-Cash Capital (154.0) (105.2) (277.6) (295.8) (443.8) (691.8) (573.0) (771.8) (949.1) (982.2) (1,047.2) Cash from Ops. 95.5 123.0 59.7 89.2 (101.9) (135.0) 42.3 (163.5) 276.1 252.5 96.5 Capital Expenditure (2.5) (5.5) (8.3) (3.6) (8.7) (3.7) (2.8) (1.9) (2.6) (8.8) (17.0) Sale of Property, Plant, and Equipment - 34.9 - - - - - - - - - Cash Acquisitions - - - - (28.8) (1.4) (1.0) (4.7) - - - Proceeds from Investment - - - - - - - - - 13.3 - Invest. in Marketable & Equity Securt. - - (870.9) (235.7) (18.0) (14.0) (14.0) - (2.0) - (52.7) Other Investing Activities 1.2 (194.7) 771.6 438.9 (243.1) (24.8) (10.6) (545.6) 9.1 (13.1) 14.6 Cash from Investing (1.3) (165.3) (107.6) 201.3 (298.6) (43.9) (28.4) (552.2) 4.5 (8.6) (55.2) Net Short Term Debt Issued/Repaid (325.1) - - - 222.8 76.1 8.9 820.7 (265.7) (261.3) 84.4 Long-Term Debt Issued 314.8 - 97.1 166.1 - - - - - - 370.7 Long-Term Debt Repaid (1.9) (23.9) (49.0) (111.4) (5.4) (75.3) - - (3.7) - (229.5) Total Debt Issued/Repaid (12.2) (23.9) 48.1 54.8 217.4 0.8 8.9 820.7 (269.4) (261.3) 225.6 Pref. Dividends Paid - - - - - - - - - (6.9) (33.4) Total Dividends Paid - - - - - - - - - (6.9) (33.4) Increase in CapItal Stocks 24.7 1.4 4.3 1.3 2.9 - - 3.5 2.9 12.0 6.8 Decrease in Capital Stocks - - - (22.3) (45.0) - - (77.1) - - (144.8) Other Financing Activities (1.0) (1.0) 0.0 (4.1) (8.0) 108.9 (5.7) (53.6) (16.0) (24.4) (18.6) Cash from Financing 11.6 (23.5) 52.4 29.7 167.4 109.6 3.2 693.5 (282.5) (280.6) 35.7 Net Change in Cash 105.8 (65.9) 4.5 320.1 (233.1) (69.2) 17.2 (22.1) (1.9) (36.7) 77.0
- 52. Balance Sheet Balance Sheet FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 3/31/2005 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 ASSETS Cash And Equivalents 112.8 47.0 51.5 371.6 138.5 69.2 86.4 64.3 62.4 25.7 102.7 Short Term Investments - 182.0 237.5 6.9 - - - - - - - Total Cash & ST Investments 112.8 229.0 289.0 378.5 138.5 69.2 86.4 64.3 62.4 25.7 102.7 Accounts & Notes Receivable 150.0 182.7 130.5 260.3 227.0 292.9 330.6 784.5 787.2 885.6 891.9 Total Receivables 150.0 182.7 130.5 260.3 227.0 292.9 330.6 784.5 787.2 885.6 891.9 Restricted Cash 2.9 0.8 4.9 10.3 17.0 11.1 43.5 11.9 10.7 8.9 2.5 Other Current Assets (2.9) - - - - - 44.3 - 82.7 66.0 - Total Current Assets 262.9 412.5 424.4 649.1 382.5 373.3 504.8 860.8 942.9 986.2 997.1 Net Property, Plant & Equipment 30.8 7.2 13.1 13.6 42.4 12.4 9.1 9.8 8.5 14.6 26.7 Long-term Investments - - - - - - - - - - 438.3 Deferred Charges, LT - - - - - - - - - - 50.1 Other Long-Term Assets 560.9 633.6 699.6 875.0 1,242.3 1,141.5 1,055.2 1,917.5 1,809.5 1,850.9 1,779.9 Total Assets 854.6 1,053.2 1,137.1 1,537.8 1,667.3 1,527.2 1,569.2 2,788.0 2,760.9 2,851.6 3,292.1 LIABILITIES Short-term Borrowings 1.2 14.8 - - 255.0 242.2 296.1 949.7 1,240.1 741.5 825.9 Accounts Payable 134.2 188.8 155.6 245.4 - - - - - - - Other Current Liabilities 130.8 285.0 339.0 663.9 946.9 556.4 528.5 934.1 823.1 882.8 859.9 Total Current Liabilities 266.1 488.6 494.7 909.3 1,201.9 798.6 824.6 1,883.8 2,063.2 1,624.3 1,685.9 Long-Term Debt 408.6 385.0 325.0 328.7 281.5 192.0 358.3 108.3 87.2 354.5 489.1 Unearned Revenue, Non-Current 62.5 30.4 69.5 111.5 142.1 130.9 150.9 228.6 254.0 288.3 274.8 Other Non-Current Liabilities (0.0) - - - - 321.8 96.5 477.5 - - - Total Liabilities 737.2 904.0 889.2 1,349.5 1,625.6 1,443.3 1,430.3 2,698.2 2,404.3 2,267.1 2,449.8 Additional Paid In Capital 305.7 328.8 398.8 434.7 494.7 521.2 643.2 712.6 672.9 743.8 830.8 Retained Earnings (183.2) (177.1) (149.7) (223.6) (441.2) (460.6) (502.9) (542.0) (309.9) (157.9) 13.7 Comprehensive Inc. and Other (5.3) (2.4) (1.3) (0.5) (11.9) (6.6) (1.4) (3.7) (6.5) (1.4) (2.2) Total Common Equity 117.4 149.3 247.9 188.2 41.7 83.9 138.9 89.8 356.5 584.5 842.3 Total Equity 117.4 149.3 247.9 188.2 41.7 83.9 138.9 89.8 356.5 584.5 842.3 Total Liabilities And Equity 854.6 1,053.2 1,137.1 1,537.8 1,667.3 1,527.2 1,569.2 2,788.0 2,760.9 2,851.6 3,292.1
- 53. Income Statement Income Statement FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 3/31/2005 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 Revenue 842.6 951.2 976.7 1,361.0 1,466.4 1,489.5 1,582.7 1,587.6 2,708.1 2,630.3 2,399.6 Total Revenue 842.6 951.2 976.7 1,361.0 1,466.4 1,489.5 1,582.7 1,587.6 2,708.1 2,630.3 2,399.6 Cost Of Goods Sold 359.1 460.9 436.8 660.9 793.8 778.0 795.7 908.4 1,390.6 1,369.4 1,315.8 Gross Profit 483.5 490.3 539.9 700.1 672.6 711.5 787.0 679.2 1,317.6 1,260.9 1,083.9 Selling General & Admin Exp. 66.3 469.6 495.2 754.7 806.1 649.2 718.6 641.4 1,036.2 994.4 855.0 Depreciation & Amort. 3.2 2.5 2.8 5.5 7.7 12.5 5.8 4.3 8.3 6.5 6.6 Other Operating Expense/(Income) 364.3 - - - - - - - - - - Operating Expense., Total 433.7 472.1 498.0 760.2 813.8 661.7 724.4 645.7 1,044.5 1,000.9 861.6 Operating Income 49.8 18.2 41.9 (60.1) (141.2) 49.9 62.5 33.5 273.1 259.9 222.3 Interest Expense 20.4 19.9 17.8 16.4 34.3 47.2 38.9 62.4 75.3 49.0 52.5 Interest Income - 4.3 11.9 11.3 5.8 1.5 1.7 2.8 4.0 6.0 2.8 Net Interest Exp. 20.4 15.6 5.9 5.1 28.5 45.6 37.1 59.7 71.3 42.9 49.7 Currency Exchange (Gains) Loss - - - - 3.1 (0.0) 1.5 (0.3) 2.1 (2.1) - Other Non-Operating Inc. (Exp.) 0.7 (0.1) 0.9 4.7 2.9 22.6 50.0 19.5 43.3 26.7 (40.8) EBT Excl. Unusual Items 28.7 2.7 35.2 (69.9) (175.7) (18.3) (26.1) (45.4) 156.4 192.5 213.4 Gain (Loss) On Sale Of Assets (0.7) (4.9) - - - - - (11.0) - - - Other Unusual Items 1.3 9.7 - - - - - 21.9 - (22.5) - EBT Incl. Unusual Items 29.3 7.5 35.2 (69.9) (175.7) (18.3) (26.1) (34.4) 156.4 185.0 213.4 Income Tax Expense 8.9 1.4 7.7 4.0 2.7 1.2 4.3 4.7 (75.8) 32.9 31.6 Earnings from Cont. Ops. 20.4 6.1 27.5 (74.0) (178.5) (19.5) (30.4) (39.1) 232.1 152.0 181.8 Minority Int. in Earnings 0.1 - - - - - - - - - - Net Income 20.3 6.1 27.5 (74.0) (178.5) (19.5) (30.4) (39.1) 232.1 152.0 181.8
- 54. Summary Executive Compensation Name and Principal Year Salary Bonus Stock Awards Option Awards Non-Euqity Incentive Plan Compensation All Other Compensation Total Jon Feltheimer* 2015 $1,500,000.00 $- $1,000,000.00 $- $4,050,000.00 $220,311.00 $6,770,311.00 Chief Executive Officer 2014 $1,465,428.00 $- $14,402,803.00 $41,513,029.00 $8,750,000.00 $197,201.00 $66,328,461.00 2013 $1,264,070.00 $6,000,000.0 0 $3,625,278.00 $- $1,500,000.00 $184,535.00 $12,573,883.00 Michael Burns* 2015 $1,000,000.00 $- $4,500,000.00 $- $3,000,000.00 $146,965.00 $8,646,965.00 Vice Chairman 2014 $1,000,000.00 $- $3,000,000.00 $- $4,400,000.00 $78,205.00 $8,478,205.00 2013 $970,962.00 $4,000,000.0 0 $7,900,172.00 $13,995,430.00 $1,300,000.00 $33,484.00 $28,200,048.00 James W. Barge 2015 $812,500.00 $- $1,212,000.00 $719,637.00 $450,000.00 $2,921.00 $3,197,058.00 Chief Financial Officer 2014 $381,538.00 $1,100,000.0 0 $936,250.00 $2,597,054.00 $- $477.00 $5,015,319.00 Steven Beeks 2015 $900,000.00 $- $1,285,500.00 $1,665,285.00 $371,250.00 $2,921.00 $4,224,956.00 Co-Chief Operating 2014 $900,000.00 $- $- $- $825,000.00 $3,657.00 $1,728,657.00 Officer and Co-President, 2013 $900,000.00 $850,000.00 $- $- $- $5,960.00 $1,755,960.00 Motion Picture Group Wayne Levin 2015 $825,000.00 $- $1,987,680.00 $1,596,786.00 $471,250.00 $2,921.00 $4,883,637.00 General Counsel and 2014 $825,000.00 $- $- $- $825,000.00 $2,932.00 $1,652,932.00 Chief Strategic Officer 2013 $751,442.00 $612,750.00 $1,896,000.00 $1,258,600.00 $187,500.00 $2,960.00 $4,709,252.00
- 55. Top 10 Stockholders (as of April 7, 2016) Holder Name % Ownership No. of Shares Held Institution Type 1. MHR FUND MANAGEMENT LLC 20.14% 30,213,805 Hedge Fund Manager 2. CAPITAL GROUP COMPANIES INC 10.94% 16,404,005 Investment Advisor 3. CAPITAL RESEARCH GLOBAL INVESTOR 10.94% 16,404,005 Investment Advisor 4. FIDELITY MANAGEMENT & RESEARCH 7.23% 10,840,751 Investment Advisor 5. JANA PARTNERS LLC 5.69% 8,527,645 Hedge Fund Manager 6. CAPITAL RESEARCH GLOBAL INVESTOR 4.37% 6,559,000 Investment Advisor 7. VANGUARD GROUP INC 4.24% 6,360,972 Investment Advisor 8. CAPITAL RESEARCH GLOBAL INVESTOR 3.95% 5,919,005 Investment Advisor 9. KORNITZER CAPITAL MANAGEMENT INC 2.97% 4,453,970 Investment Advisor 10. NAYA CAPITAL MANAGEMENT UK LTD 2.94% 4,414,250 Hedge Fund Manager
- 56. Statement of Cash Flows Cash Flow FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 3/31/2005 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 Net Income 20.3 6.1 27.5 (74.0) (178.5) (19.5) (30.4) (39.1) 232.1 152.0 181.8 Depreciation & Amort., Total 218.7 4.5 3.7 5.5 7.7 12.5 5.8 4.3 8.3 6.5 6.6 Other Non-Cash Adj 10.6 217.6 306.2 453.5 512.7 563.9 639.9 643.2 984.8 1,076.1 955.3 Changes in Non-Cash Capital (154.0) (105.2) (277.6) (295.8) (443.8) (691.8) (573.0) (771.8) (949.1) (982.2) (1,047.2) Cash from Ops. 95.5 123.0 59.7 89.2 (101.9) (135.0) 42.3 (163.5) 276.1 252.5 96.5 Capital Expenditure (2.5) (5.5) (8.3) (3.6) (8.7) (3.7) (2.8) (1.9) (2.6) (8.8) (17.0) Sale of Property, Plant, and Equipment - 34.9 - - - - - - - - - Cash Acquisitions - - - - (28.8) (1.4) (1.0) (4.7) - - - Proceeds from Investment - - - - - - - - - 13.3 - Invest. in Marketable & Equity Securt. - - (870.9) (235.7) (18.0) (14.0) (14.0) - (2.0) - (52.7) Other Investing Activities 1.2 (194.7) 771.6 438.9 (243.1) (24.8) (10.6) (545.6) 9.1 (13.1) 14.6 Cash from Investing (1.3) (165.3) (107.6) 201.3 (298.6) (43.9) (28.4) (552.2) 4.5 (8.6) (55.2) Net Short Term Debt Issued/Repaid (325.1) - - - 222.8 76.1 8.9 820.7 (265.7) (261.3) 84.4 Long-Term Debt Issued 314.8 - 97.1 166.1 - - - - - - 370.7 Long-Term Debt Repaid (1.9) (23.9) (49.0) (111.4) (5.4) (75.3) - - (3.7) - (229.5) Total Debt Issued/Repaid (12.2) (23.9) 48.1 54.8 217.4 0.8 8.9 820.7 (269.4) (261.3) 225.6 Pref. Dividends Paid - - - - - - - - - (6.9) (33.4) Total Dividends Paid - - - - - - - - - (6.9) (33.4) Increase in CapItal Stocks 24.7 1.4 4.3 1.3 2.9 - - 3.5 2.9 12.0 6.8 Decrease in Capital Stocks - - - (22.3) (45.0) - - (77.1) - - (144.8) Other Financing Activities (1.0) (1.0) 0.0 (4.1) (8.0) 108.9 (5.7) (53.6) (16.0) (24.4) (18.6) Cash from Financing 11.6 (23.5) 52.4 29.7 167.4 109.6 3.2 693.5 (282.5) (280.6) 35.7 Net Change in Cash 105.8 (65.9) 4.5 320.1 (233.1) (69.2) 17.2 (22.1) (1.9) (36.7) 77.0
- 57. Balance Sheet Balance Sheet FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 3/31/2005 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 ASSETS Cash And Equivalents 112.8 47.0 51.5 371.6 138.5 69.2 86.4 64.3 62.4 25.7 102.7 Short Term Investments - 182.0 237.5 6.9 - - - - - - - Total Cash & ST Investments 112.8 229.0 289.0 378.5 138.5 69.2 86.4 64.3 62.4 25.7 102.7 Accounts & Notes Receivable 150.0 182.7 130.5 260.3 227.0 292.9 330.6 784.5 787.2 885.6 891.9 Total Receivables 150.0 182.7 130.5 260.3 227.0 292.9 330.6 784.5 787.2 885.6 891.9 Restricted Cash 2.9 0.8 4.9 10.3 17.0 11.1 43.5 11.9 10.7 8.9 2.5 Other Current Assets (2.9) - - - - - 44.3 - 82.7 66.0 - Total Current Assets 262.9 412.5 424.4 649.1 382.5 373.3 504.8 860.8 942.9 986.2 997.1 Net Property, Plant & Equipment 30.8 7.2 13.1 13.6 42.4 12.4 9.1 9.8 8.5 14.6 26.7 Long-term Investments - - - - - - - - - - 438.3 Deferred Charges, LT - - - - - - - - - - 50.1 Other Long-Term Assets 560.9 633.6 699.6 875.0 1,242.3 1,141.5 1,055.2 1,917.5 1,809.5 1,850.9 1,779.9 Total Assets 854.6 1,053.2 1,137.1 1,537.8 1,667.3 1,527.2 1,569.2 2,788.0 2,760.9 2,851.6 3,292.1 LIABILITIES Short-term Borrowings 1.2 14.8 - - 255.0 242.2 296.1 949.7 1,240.1 741.5 825.9 Accounts Payable 134.2 188.8 155.6 245.4 - - - - - - - Other Current Liabilities 130.8 285.0 339.0 663.9 946.9 556.4 528.5 934.1 823.1 882.8 859.9 Total Current Liabilities 266.1 488.6 494.7 909.3 1,201.9 798.6 824.6 1,883.8 2,063.2 1,624.3 1,685.9 Long-Term Debt 408.6 385.0 325.0 328.7 281.5 192.0 358.3 108.3 87.2 354.5 489.1 Unearned Revenue, Non-Current 62.5 30.4 69.5 111.5 142.1 130.9 150.9 228.6 254.0 288.3 274.8 Other Non-Current Liabilities (0.0) - - - - 321.8 96.5 477.5 - - - Total Liabilities 737.2 904.0 889.2 1,349.5 1,625.6 1,443.3 1,430.3 2,698.2 2,404.3 2,267.1 2,449.8 Additional Paid In Capital 305.7 328.8 398.8 434.7 494.7 521.2 643.2 712.6 672.9 743.8 830.8 Retained Earnings (183.2) (177.1) (149.7) (223.6) (441.2) (460.6) (502.9) (542.0) (309.9) (157.9) 13.7 Comprehensive Inc. and Other (5.3) (2.4) (1.3) (0.5) (11.9) (6.6) (1.4) (3.7) (6.5) (1.4) (2.2) Total Common Equity 117.4 149.3 247.9 188.2 41.7 83.9 138.9 89.8 356.5 584.5 842.3 Total Equity 117.4 149.3 247.9 188.2 41.7 83.9 138.9 89.8 356.5 584.5 842.3 Total Liabilities And Equity 854.6 1,053.2 1,137.1 1,537.8 1,667.3 1,527.2 1,569.2 2,788.0 2,760.9 2,851.6 3,292.1
- 58. Income Statement Income Statement FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 3/31/2005 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 Revenue 842.6 951.2 976.7 1,361.0 1,466.4 1,489.5 1,582.7 1,587.6 2,708.1 2,630.3 2,399.6 Total Revenue 842.6 951.2 976.7 1,361.0 1,466.4 1,489.5 1,582.7 1,587.6 2,708.1 2,630.3 2,399.6 Cost Of Goods Sold 359.1 460.9 436.8 660.9 793.8 778.0 795.7 908.4 1,390.6 1,369.4 1,315.8 Gross Profit 483.5 490.3 539.9 700.1 672.6 711.5 787.0 679.2 1,317.6 1,260.9 1,083.9 Selling General & Admin Exp. 66.3 469.6 495.2 754.7 806.1 649.2 718.6 641.4 1,036.2 994.4 855.0 Depreciation & Amort. 3.2 2.5 2.8 5.5 7.7 12.5 5.8 4.3 8.3 6.5 6.6 Other Operating Expense/(Income) 364.3 - - - - - - - - - - Operating Expense., Total 433.7 472.1 498.0 760.2 813.8 661.7 724.4 645.7 1,044.5 1,000.9 861.6 Operating Income 49.8 18.2 41.9 (60.1) (141.2) 49.9 62.5 33.5 273.1 259.9 222.3 Interest Expense 20.4 19.9 17.8 16.4 34.3 47.2 38.9 62.4 75.3 49.0 52.5 Interest Income - 4.3 11.9 11.3 5.8 1.5 1.7 2.8 4.0 6.0 2.8 Net Interest Exp. 20.4 15.6 5.9 5.1 28.5 45.6 37.1 59.7 71.3 42.9 49.7 Currency Exchange (Gains) Loss - - - - 3.1 (0.0) 1.5 (0.3) 2.1 (2.1) - Other Non-Operating Inc. (Exp.) 0.7 (0.1) 0.9 4.7 2.9 22.6 50.0 19.5 43.3 26.7 (40.8) EBT Excl. Unusual Items 28.7 2.7 35.2 (69.9) (175.7) (18.3) (26.1) (45.4) 156.4 192.5 213.4 Gain (Loss) On Sale Of Assets (0.7) (4.9) - - - - - (11.0) - - - Other Unusual Items 1.3 9.7 - - - - - 21.9 - (22.5) - EBT Incl. Unusual Items 29.3 7.5 35.2 (69.9) (175.7) (18.3) (26.1) (34.4) 156.4 185.0 213.4 Income Tax Expense 8.9 1.4 7.7 4.0 2.7 1.2 4.3 4.7 (75.8) 32.9 31.6 Earnings from Cont. Ops. 20.4 6.1 27.5 (74.0) (178.5) (19.5) (30.4) (39.1) 232.1 152.0 181.8 Minority Int. in Earnings 0.1 - - - - - - - - - - Net Income 20.3 6.1 27.5 (74.0) (178.5) (19.5) (30.4) (39.1) 232.1 152.0 181.8
- 59. Industry Outlook 5.53% 83.62% 10.85% 2015 Box Office Market Share Lions Gate Major 6 Studio Other Studio Lions Gate, 8.27% Major 6 Studio, 79.02% Other Studio, 12.71% 2012-2015 Box Office Market Share Lions Gate Major 6 Studio Other Studio Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 59 8 Source: Box-office Mojo 2015 Major Studio Market Share 13.97% 20.71% 21.60% 12.70% 6.17% 8.47% 5.53%
- 60. Industry Outlook 0 10000 20000 30000 2010 2011 2012 2013 2014 2015 2016E2017E2018E2019E INMILLIONSU.S.DOLLARS U.S. Home Entertainment Spending Rental Digital Sell Through • Producers will place greater emphasis on distributing at- home content • Online streaming services expected to exceed movie ticket sales in 2017 $10,500.00 $11,000.00 $11,500.00 $12,000.00 $12,500.00 $13,000.00 INMILLIONSU.S.DOLLARS SOURCE: WWW.IBISWORLD.COM Industry Value Added Industry Value Added 33000 33500 34000 34500 35000 2016E 2017E 2018E 2019E INMILLIONSU.S.DOLLARS Forecasted Industry Revenue Forecasted Industry Revenue
- 61. Financial Exposure • Australian Tax Credit • Distribution Rights • Production Budget: $140 million • LGF’s risk capital: under $10 million • Domestic Box Office: $30.5 million • International Box Office: $102.4 million 61Source: The Numbers
- 62. Financial Exposure • Pittsburgh Tax Credit • Talent Contracts • Production Budget: $90 million • LGF at risk: $10 million • Domestic Box Office: $27.3 million • International Box Office: $113 million 62 Source: Box Office Mojo
- 63. LGF’s International Expansion • China's Hunan TV will incur 25% of film production costs • Alibaba provides an International distribution platform in China • IDC distributes a portion of LGF’s films in Latin America 63
- 64. Equity Method Investment Nine Months ended Dec. 31: 2015 2014 (Ownership Percentage) (Amount in millions) EPIX (31.20%) $ 34.10 $ 27.40 Pop (50.00%) 0.60 (4.70) Other (Various) (5.30) 14.60 Total $ 29.40 $ 37.30 64
- 65. Consumer Purchasing Expenditure 65 9.5 10 10.5 11 11.5 12 12.5 13 13.5 2007 2008 2009 2010 2011 2012 2013 2014 (BILLION$) Consumer Purchasing Expenditures for Motion Picutre
- 66. Video Release Window 66 0 20 40 60 80 100 120 140 160 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Days Average Video Release Window
- 67. Demographic 67 Euromonitor International Analyst Pulse survey; August 2015
- 68. Theatrical 21% Home Entertainment 34% Television 14% International 29% Other 2% MOTION PICTURE SEGMENT Business Overview Motion Picture Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 68 3 Source: Lionsgate, 10-K
- 69. Domestic Television 64% International 26% Home Entertainment Revenue 9% Other 1% TELEVISION PRODUCTION Business Overview Television Production Scripted Non-scripted Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 69 4 Source: Lionsgate, 10-K
- 70. 37% 63% Current Equity and Debt Structure Equity = 955.4 Mil USD Debt = 1620.10 Mil USD 40% 60% 2018E Equity and Debt Structure Equity = 1097.15 Mil USD Debt = 1617.93 Mil USD Debt to Equity Ratio Lions Gate 1.60 Industry Average 1.41 0% 10% 20% 30% 40% 50% 2012 2013 2014 2015 2016E 2017E 2018E Long Term Debt to AssetsFinancial Analysis Debt Analysis Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 70 17
- 71. Sensitivity Analysis Perpetuity Growth EV/EBITDA 0.0% 1.0% 2.0% 3.0% 4.0% 8.6x 10.1x 11.6x 13.1x 14.6x 6.6% 20.45 24.23 29.65 38.08 53.00 13.99 16.35 18.70 21.05 23.41 7.6% 16.88 19.56 23.20 28.42 36.54 13.60 15.90 18.20 20.50 22.79 8.6% 14.15 16.13 18.71 22.22 27.25 13.21 15.46 17.71 19.95 22.20 WACC 9.6% 11.98 13.49 15.41 17.90 21.28 12.84 15.03 17.23 19.42 21.62 10.6% 10.23 11.41 12.87 14.71 17.12 12.47 14.62 16.76 18.91 21.06 6.6% -4% 14% 39% 79% 149% -34% -23% -12% -1% 10% 7.6% -21% -8% 9% 33% 71% -36% -25% -15% -4% 7% 8.6% -34% -24% -12% 4% 28% -38% -27% -17% -6% 4% 9.6% -44% -37% -28% -16% 0% -40% -29% -19% -9% 1% 10.6% -52% -46% -40% -31% -20% -41% -31% -21% -11% -1%
- 72. DCF Valuation Perpetuity Growth Method - Value per Share Free Cash Flow at Year 5 270 WACC 8.6% Perpetuity Growth Rate 2.0% Perpetuity Value at End of Year 5 4,179 Present Value of Perpetuity (@ 8.6% WACC) 2,766 (+) Present Value of Free Cash Flows (@ 8.6% WACC) 1,091 (=) Current Enterprise Value 3,857 Short Term Debt 826 (+) Long Term Debt 489 (-) Cash and Marketable Securities 265 (-) Current Net Debt 1,050 (-) Current Preferred and Minority Interest - (=) Equity Value 2,807 Shares outstanding 150 Estimated Value per Share (USD) 18.71 Current Price (USD) 21.31 3/24/2016 Estimated Upside -12% 72
- 73. Relative Valuation EBITDA Multiple Method - Value per Share Terminal EBITDA at Year 5 339 WACC 8.6% Exit Enterprise Value / EBITDA 11.6x Terminal Value at End of Year 5 3,951 Present Value of Terminal Value (@ 8.6% WACC) 2,615 (+) Present Value of Free Cash Flows (@ 8.6% WACC) 1,091 (=) Current Enterprise Value 3,706.0 Short Term Debt 826 (+) Long Term Debt 489 (-) Cash and Marketable Securities 265 (-) Current Net Debt 1,050 (-) Current Preferred and Minority Interest - (=) Equity Value 2,656 Shares outstanding 150 Estimated Value per Share (USD) 17.71 Current Price (USD) 21.31 Estimated Upside -17% 73
- 74. Valuation Company Market Capitalization Debt Cash Shares Enterprise Value Current Stock Price Relative Stock Price Disney $148,700.00 $17,330.00 $4,269.00 1,600.00 $161,761.00 $98.82 $101.10 Twenty-First Century Fox $27,500.00 $7,262.00 $8,428.00 2,039.00 $26,334.00 $27.84 $12.92 Time Warner $50,800.00 $22,502.00 $1,170.00 283.20 $72,132.00 $194.43 $254.70 Viacom $11,200.00 $12,285.00 $506.00 346.50 $22,979.00 $39.02 $66.32 Lions gate $3,443.00 $1,595.00 $103.00 150.00 $4,292.00 $ 22.92 $28.61 Dream Works $1,600.00 $515.00 $34.00 78.10 $2,081.00 $25.79 $26.65 Comcast $117,700.00 $52,621.00 $2,295.00 2,100.00 $168,026.00 $59.92 $80.01 Sony $25,600.00 $9,336.12 $9,490.00 1,300.00 $25,446.12 $22.11 $19.57 Enterprise Valuation Relative Premium of Est. Enterprise Value over Stock Price Disney 2.3% Twenty First Century Fox -53.6% Time Warner 40.0%% Viacom 69.9% Lions Gate 25.8% DreamWorks 3.3% Comcast 33.5% Sony -11.5% Source: Yahoo Finance In Billions Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 74 21
- 75. Relative Valuation – P/E Projected EPS (Quarterly) P/E Ratio Q1 2016E Q2 2016E Q3 2016E Q4 2016E FY 2016 2016E Disney 1.43 1.55 1.22 1.6 5.8 15.84 Twenty First Century Fox .45 .45 .48 .59 1.97 14.43 Time Warner 1.74 1.84 1.8 2.1 7.48 24.04 Viacom 1.01 1.54 1.67 1.26 5.48 5.98 LionsGate .29 .53 .22 .32 1.36 30.41 DreamWorks .16 -.04 .02 .31 .45 42.57 Comcast .8 .86 .94 .94 3.54 15.79 Sony 1.72 11.78 Industry Average P/E Motion Picture 16.7 Broadcast and Cable TV 21.8 Source: Nasdaq and eTrade Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 75 20
- 76. Relative Valuation – EV/EBITDA 76 Ticker EV/EBITDA STRZA 10.31 DWA 36.02 FOXA 10.72 MGMB 15.82 TWX 9.68 VIAB 8.90 CBS 11.25 DIS 12.16 CMCSA 7.74 SNE 5.21 Industry EV/EBITDA Mean 12.78 Median 10.52 IQR 4.46 Up Limit 19.77
- 77. WACC 2015-16 8.6% Weight Cost W x C Cost of Equity 75.3% 10.8% 8.1% Cost of Debt 24.7% 1.9% .5% Cost of Equity 2015-16 2016-18 Risk Free Rate* 2.25% 2.75% Adjusted Beta 1.10 1.10 MRP 7.75% 7.25% Cost of Equity 10.80% 10.73% Cost of Debt 2015-16 2016-18 Cost of Debt 1.9% 1.8% * Expected 10-Year U.S. Treasury Source: Morningstar DCF Assumptions - WACC Business Overview Industry Outlook & Competitive Positioning Financial Analysis Valuation Risk Analysis Conclusion 77 19
Editor's Notes
- Company Director Management Strategy Risk Financial Analysis Revenue Debt Ratio Financial Highlight Industry 5 forces One trick pony Valuation Scenario analysis Sensitivity Investment Thesis Industry Overview – 5 forces Risk Factors Company strategies based on the industry factors and risk Risk Mitigation Financial anaylsis – Revenue based on performance, Debt for company liquidity/core strength, ratio in comparison to peers and industry Company Valuation
- Stock price volatility creates opportunities
- committee Heads of our production, theatrical distribution, home entertainment, marketing, international distribution, legal and finance departments Committee evaluates project for both artistic merit and commercial viability, considers script, talent, initial budget and story element for financial success Head of domestic and international distribution prepare estimates of projected revenue and costs of marketing and distribution Finance and legal professionals review projections and financing options Committee decides project is worth pursuing by balancing risk and potentialFinal decision made by senior management team CEO, Vice Chairman, Co-Chairs of Motion Picture Group
- Pre-licensing of films to cover between 50% and 75% of LGF’s production costs: before a film is produced Although this is great for mitigating risks it also hinders as it diminishes profits Lionsgate mitigates financial exposure by minimizing risk through Co-Production ventures, Pre-Selling International Distribution Rights, and contractual agreements with talent enabling a reduced initial expenditure in exchange for a share of the box-office success. Additionally Lionsgate capitalizes on government-offered incentives. Lionsgate mitigates financial exposure by minimizing risk through Co-Production ventures allowing for (cost and profit sharing.) Financial exposure is further reduced by Pre-Selling International Distribution Rights. Additionally Lionsgate capitalizes on government-offered incentives and contractual agreements with talent enabling a reduced initial expenditure in exchange for a share of the box-office success???. Give them more info Cost and profit sharing Incentive programs Tax Talent Reduces guaranteed pa International distribution rights Revenue prior to release Lionsgate mitigates financial exposure by minimizing risk through Co-Production and Financing agreements, sharing costs and profits with its partners. Financial exposure is further reduced by Pre-Selling International Distribution Rights. Additionally Lionsgate capitalizes on government-offered incentives and contractual agreements with talent that provides a share of the box-office success for reduced upfront pay. Font size Lionsgate mitigates financial risks by utilizing Co-Production and Financing agreements which provide for joint efforts and cost-sharing between LGF and one or more third-party production companies. Production exposure is further reduced by Pre-Selling International Distribution Rights- (licensing the rights to distribute a film in one or more media generally for a limited term and within a specific territory prior to the completion of the film.) Additionally Lionsgate capitalizes on government incentives more specifically tax incentives. Talent Contractual Agreements further reduce LGF’s financial exposure by allowing actors to participate in the financial success of the motion picture LGF minimizes their guaranteed payment. Production exposure is reduced through financial contributions from broadcasters and distributors, tax credit programs, governments, industry programs, other studios and co-financiers. (PG 28) Government Incentives---Tax incentives (sales tax refunds, transferable tax credits, refundable tax credits), Low interest loans, direct subsidies or cash rebates based on the amount spent in the particular jurisdiction in connection with the production. (PG 16) Co-Production/Co-Financing agreements which provide for joint efforts and cost-sharing between LGF and one or more third-party production companies.(PG 15) Pre-Selling International Distribution Rights- licensing the rights to distribute a film in one or more media generally for a limited term and within a specific territory prior to the completion of the film Talent Contractual Agreements- which reduce the guaranteed payment and allows for them to participate in the financial success of the motion picture Similar approach for acquiring films for theatrical release Whether to greenlight a film Risk Category Source of Risk Mitigating Factors/ Risk Matrix/ Scenario Analysis
- TV Production – 27% Home Entertainment – 27.3%
- For our valuation, we used the discounted cash flow and relative valuation method to incorporate our assumptions of the company. Legitimate concerns regarding the lack of a blockbuster franchise surrounds the company. Home Entertainment is a strong top line contributor, as we expect Lionsgate to maintain a strong box-office to home-entertainment conversion rate. Lionsgate’s bright spot is television, and the acquisition of Pilgrim Studio diversifies Lionsgate’s strong tv slate. Television is expected to be the crutch for the company as they struggle to find an answer after hunger games. Though the upcoming fiscal year is expected to have reduced production costs, the success of their future films will determine if they can continue to profit from pre-selling distribution rights internationally. There is no expectation for a consolidation with Starz, as Lionsgate is known for horizontal mergers.
- Upside or Downside What happens if cost of capital rises 100 basis points? Change numbers on DCF to give my price forecast Lower left quadrant In addition to macroeconomic risks Lionsgate’s business operations, competitors, and consumers may pose risk to Lionsgate’s value by potentially causing a decrease in profit. A decrease in profit is viable if Lionsgate fails to adequately execute business operations, an oversupply of content is released by their competitors, and LGF’s content fails to resonate with audience. failure Decreased Revenues Leverage Problems which would/or could potentially interim limit strategic business opportunities growth= majority of growth through acquisitions constraints in content development revenue stream Risk factors formidable revenue stream therefore 75.9% of Lionsgate’s revenue for the year ended in March 2015 was derived from motion pictures as motion pictures compose a major of LGF’s revenue stream. films which fail to resonate with the audience decrease their major revenue source/stream. A decrease revenue would heighten LGFs financial exposure. There are several factors that have an impact on LGF’s revenue stream, and the value of the business (business prospect): “business operations”, competitors, and consumers. Lionsgate’s operations, competitors, and consumers are contributing factors to Lionsgate’s business prospect. Lionsgate faces substantial competition from larger more diversified studios who's oversupply of films and concurrent/simultaneous release dates may adversely impact LGF a substantial risk to Lionsgate as who’s film success may be detrimental to LGF minimize Lionsgate’s film success Financing market share and revenue. Release dates of others could limit the LGF’s revenue portion of the market share and further diversified LGF’s Competitors pose Cost incurred and when received revenue Films may fail to resonate with audiences Content which resonates with (target) audience Expensive to produce and market motion pictures Film Releases Failure of new releases Film exposure is minimized through joint ventures Profitable franchises 75.9% of Lionsgate’s revenue for the year ended in March 2015 was derived from motion pictures therefore films which fail to resonate with the audience decrease their major revenue source/stream. A decrease revenue would heighten LGFs financial exposure.
- The main concern for Lionsgate is in developing a blockbuster, especially with recent failed attempts. It is hard to believe that their potential tentpoles in the pipeline, including, Power Rangers, Monopoly, and the Odyssey, will be able to outperform the blockbusters of major studios, as other studios are better connected with the audience. As such, we believe Lionsgate has a higher likelihood of underperforming. Although there is much to be appreciated regarding the company’s television segment and its well-positioned home entertainment strategy, motion picture is substantially bigger, and we expect this segment to drag down the company. At the current price of $21.31, we issue a sell recommendation with a target price of $18.21.
- Qualification: Raising equity in media and entertainment industry Investor in media and entertainment industry Leading counsel in entertainment law, expert in international coproductions and bank financing in film industry
- Top 5 Stakeholders comprising 16.8% of LGF’s revenue. Walmart has bargaining power of LGF as they only receive .05% of their revenue from LGF.
- The Movie and Video Production industry is currently in the declining stage of its life cycle. During the 10 years to 2020, industry value added, which measures the industry’s contribution to the overall economy, is forecast to decline at an annualized rate of 0.3% although US GDP is expected to grow at 2.2%
- Example of limited financial exposure PERFORMANCE Domestic Box Office $30,534,041 Details International Box Office $102,400,000 Details Worldwide Box Office $132,934,041 $36 million in China Tax credit Australia, Presold theatrical rights and was under 10 million Box office: 132.6 million USD Conference Call http://www.ausfilm.com.au/why-film-in-australia/financial-incentives/ Financial Incentives Australia’s competitive Screen Production Incentives have enabled large budget feature films, TV shows and documentaries access to significant savings as well as Australia’s world class production services, crew, talent and versatile locations. These incentives are tax based and provide a cash rebate to the producer on Qualifying Australian Production Expenditure (QAPE). Australia has three federal government incentives: 16.5% Location Offset 30% Post, Digital and Visual Effects Offset (PDV) 40% Producer Offset, 40% films and 20% television (including official Co-Production treaties)
- Total Lifetime Grosses Domestic: $27,367,660 19.5%+ Foreign: $113,028,990 80.5%= Worldwide: $140,396,650 Box office Mojo The Numbers Domestic Box Office $27,367,660 Details International Box Office $103,866,746 Details Worldwide Box Office $131,234,406 Film production in Pittsburgh provided a tax credit of approximately $14 million After the state awarded a film tax credit for the project last September, the Lionsgate movie called “The Last Witch Hunter” starring Vin Diesel is finally setting up to shoot in the region. A new film production called “The Last Witch Hunter” set to star Vin Diesel has made a blockbuster-sized film tax credit application with the state of Pennsylvania, state records indicate. The name of the applicant is LWH Productions LLC, which has sought a multi-year tax credit for $14,088,820.00 for “The Last Witch Hunter,” a production pledged to bring 600 jobs to Allegheny County, records indicate. The project is attributed to Summit Entertainment on the Internet Movie Database and slated as a 2014 release. http://www.bizjournals.com/pittsburgh/news/2014/06/26/sources-the-last-witch-hunter-film-production.html http://www.bizjournals.com/pittsburgh/news/2013/09/30/vin-diesel-movie-may-shoot-in-pittsburgh.html The size of the film tax credit “The Last Witch Hunter” has applied for suggests a production budget of more than $56 million. Sources: 'The Last Witch Hunter' film production setting up in Pittsburgh That’s based on a formula in which Pennsylvania’s film program offers a credit of 25 percent of a production’s value. To be eligible for the tax credit, a film project must spend at least 60 percent of its total project budget within the state of Pennsylvania, meaning the full budget for the project could be higher.
- Example of limited financial exposure through Co-Production Ventures Co-Production and Distribution The Asian investment is expected to account for 25 percent of the film production costs incurred by the mini-studio in the next three years, with total budgets to run to $1.5 billion. Lionsgate last year partnered with Chinese e-commerce giant Alibaba to launch a streaming service in China to distribute titles like Divergent and The Twilight Saga: Eclipse, and TV shows like Mad Men, Weeds and The Royals. Increased investment in China Alibaba: subscription and distribution
- Theatrical, Home Entertainment, Television, and International Joint ventures and partnership = lower production cost and diversification Summit Entertainment, Roadside Attraction, Pantelion, Celestial Tiger Entertainment
- Rely on domestic television, International and home entertainment Diversify streams of revenue through partnership Scripted - EPIX, Pop, Defy and Starz Nonscripted - debmar-mercury, pilgrim studios Scripted and non scripted give examples on shows Diversification Television slate 40 shows to 80 shows earnings transcript