Edgar Filing: LIONS GATE ENTERTAINMENT CORP /CN/

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

LGF-2011.12.31-10Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

Form 10-Q

___________________________________________________________

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2011



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 1-14880

___________________________________________________________

Lions Gate Entertainment Corp.

(Exact name of registrant as specified in its charter)

___________________________________________________________



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

1055 West Hastings Street, Suite 2200

Vancouver, British Columbia V6E 2E9

and

2700 Colorado Avenue, Suite 200

Santa Monica, California 90404

(Address of principal executive offices)

___________________________________________________________

(877) 848-3866

(Registrant’s telephone number, including area code)

___________________________________________________________

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

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

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

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

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



Title of Each Class		Outstanding at February 1, 2012
Common Shares, no par value per share		143,423,980 shares

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TABLE OF CONTENTS


Item	Page
PART I — FINANCIAL INFORMATION

1. Financial Statements	4
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
3. Quantitative and Qualitative Disclosures About Market Risk	86
4. Controls and Procedures	88

PART II — OTHER INFORMATION

1. Legal Proceedings	89
1A. Risk Factors	89
2. Unregistered Sales of Equity Securities and Use of Proceeds	89
3. Defaults Upon Senior Securities	90
4. Mine Safety Disclosures	90
5. Other Information	90
6. Exhibits	90

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FORWARD-LOOKING STATEMENTS

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

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those discussed under Part I, Item 1.A. “Risk Factors” found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on May 31, 2011, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. Risk Factors herein. These factors should not be construed as exhaustive and should be read with the other cautionary statements and information in our Annual Report on Form 10-K and this report.

We caution you that forward-looking statements made in this report or anywhere else are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially and adversely from those made in or suggested by the forward-looking statements contained in this report as a result of various important factors, including, but not limited to, the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films and television series, budget overruns, limitations imposed by our credit facilities and notes, unpredictability of the commercial success of our motion pictures and television programming, risks related to our acquisition strategy and integration of acquired businesses, the effects of dispositions of businesses or assets, including individual films or libraries, the cost of defending our intellectual property, difficulties in integrating acquired businesses, technological changes and other trends affecting the entertainment industry, and the other risks and uncertainties discussed under Part I, Item 1.A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 31, 2011, which risk factors are incorporated herein by reference, as updated by the risk factors found under Part II, Item 1A. Risk Factors herein. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.

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

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

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



	December 31, 2011			March 31, 2011
	(Amounts in thousands, except share amounts)
ASSETS
Cash and cash equivalents	$	52,851		$	86,419
Restricted cash	26,496			43,458
Accounts receivable, net of reserves for returns and allowances of $74,047 (March 31, 2011 - $90,715) and provision for doubtful accounts of $2,352 (March 31, 2011 - $2,427)	423,117			330,624
Investment in films and television programs, net	802,872			607,757
Property and equipment, net	8,359			9,089
Equity method investments	159,919			150,585
Goodwill	233,201			239,254
Other assets	55,419			46,322
Assets held for sale	—			44,336
Total assets	$	1,762,234		$	1,557,844
LIABILITIES
Senior revolving credit facility	$	94,500		$	69,750
Senior secured second-priority notes	431,334			226,331
Accounts payable and accrued liabilities	184,000			230,989
Participations and residuals	280,314			297,482
Film obligations and production loans	463,381			326,440
Convertible senior subordinated notes and other financing obligations	71,340			110,973
Deferred revenue	199,446			150,937
Liabilities held for sale	—			17,396
Total liabilities	1,724,315			1,430,298
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Common shares, no par value, 500,000,000 shares authorized, 137,562,995 and 136,839,445 shares issued at December 31, 2011 and March 31, 2011, respectively	648,492			643,200
Accumulated deficit	(528,282		)	(514,230		)
Accumulated other comprehensive loss	(5,203		)	(1,424		)
	115,007			127,546
Treasury shares, no par value, 11,040,493 shares at December 31, 2011 (March 31, 2011 - nil)	(77,088		)	—
Total shareholders’ equity	37,919			127,546
Total liabilities and shareholders’ equity	$	1,762,234		$	1,557,844

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Amounts in thousands, except per share amounts)
Revenues	$	323,026		$	422,905		$	942,366		$	1,205,805
Expenses:
Direct operating	201,957			204,691			547,659			600,480
Distribution and marketing	72,806			158,978			279,194			461,480
General and administration	35,801			35,938			93,151			134,335
Gain on sale of asset disposal group	—			—			(10,967		)	—
Depreciation and amortization	688			1,409			2,603			4,485
Total expenses	311,252			401,016			911,640			1,200,780
Operating income	11,774			21,889			30,726			5,025
Other expenses (income):
Interest expense
Contractual cash based interest	14,468			9,974			40,343			29,679
Amortization of debt discount (premium) and deferred financing costs	2,767			3,389			10,796			12,056
Total interest expense	17,235			13,363			51,139			41,735
Interest and other income	(490		)	(329		)	(1,860		)	(1,082		)
Loss on extinguishment of debt	—			—			967			14,505
Total other expenses, net	16,745			13,034			50,246			55,158
Income (loss) before equity interests and income taxes	(4,971		)	8,855			(19,520		)	(50,133		)
Equity interests income (loss)	3,821			(13,144		)	8,325			(45,566		)
Loss before income taxes	(1,150		)	(4,289		)	(11,195		)	(95,699		)
Income tax provision	585			1,728			2,857			4,045
Net loss	$	(1,735	)	$	(6,017	)	$	(14,052	)	$	(99,744	)
Basic and Diluted Net Loss Per Common Share	$	(0.01	)	$	(0.04	)	$	(0.11	)	$	(0.77	)
Weighted average number of common shares outstanding:
Basic and Diluted	126,451			136,661			132,389			129,338

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY



	Common Shares				Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Shares				Comprehensive Loss
	Number	Amount			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Number	Amount			Comprehensive Loss			Total
	(Amounts in thousands, except share amounts)
Balance at March 31, 2011	136,839,445	$	643,200		$	(514,230	)	$	(1,424	)	—	$	—					$	127,546
Exercise of stock options	28,333	151																151
Stock based compensation, net of withholding tax obligations of $2,630	616,950	4,735																4,735
Issuance of common shares to directors for services	78,267	531																531
May 2011 Repurchase - reduction of equity component of October 2004 2.9375% Notes extinguished		(125		)														(125		)
Repurchase of common shares, no par value											11,040,493	(77,088		)				(77,088		)
Comprehensive loss
Net loss					(14,052		)								$	(14,052	)	(14,052		)
Foreign currency translation adjustments								(4,253		)					(4,253		)	(4,253		)
Net unrealized gain on foreign exchange contracts								474							474			474
Comprehensive loss															$	(17,831	)
Balance at December 31, 2011	137,562,995	$	648,492		$	(528,282	)	$	(5,203	)	11,040,493	$	(77,088	)				$	37,919

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010
	(Amounts in thousands)
Operating Activities:
Net loss	$	(14,052	)	$	(99,744	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	2,383			3,595
Amortization of intangible assets	220			890
Amortization of films and television programs	355,211			400,583
Amortization of debt discount (premium) and deferred financing costs	10,796			12,056
Non-cash stock-based compensation	7,599			26,391
Gain on sale of asset disposal group	(10,967		)	—
Loss on extinguishment of debt	967			14,505
Equity interests (income) loss	(8,325		)	45,566
Changes in operating assets and liabilities:
Restricted cash	17,993			(18,699		)
Accounts receivable, net	(56,928		)	(105,039		)
Investment in films and television programs	(551,806		)	(421,148		)
Other assets	1,698			(1,458		)
Accounts payable and accrued liabilities	(51,767		)	32,375
Participations and residuals	(15,841		)	(21,169		)
Film obligations	52,391			(17,572		)
Deferred revenue	48,576			33,232
Net Cash Flows Used In Operating Activities	(211,852		)	(115,636		)
Investing Activities:
Purchases of restricted investments	—			(13,993		)
Proceeds from the sale of restricted investments	—			20,989
Buy-out of the earn-out associated with the acquisition of Debmar-Mercury, LLC	—			(15,000		)
Proceeds from the sale of asset disposal group, net of transaction costs, and cash disposed of $3,943 (see Note 12)	9,119			—
Investment in equity method investees	(1,030		)	(24,677		)
Increase in loans receivable	(1,500		)	—
Repayment of loans receivable	—			8,113
Purchases of property and equipment	(1,549		)	(1,187		)
Net Cash Flows Provided By (Used In) Investing Activities	5,040			(25,755		)
Financing Activities:
Exercise of stock options	151			—
Tax withholding requirements on equity awards	(2,630		)	(12,919		)
Repurchase of common shares	(77,088		)	—
Borrowings under senior revolving credit facility	263,650			481,750
Repayments of borrowings under senior revolving credit facility	(238,900		)	(274,500		)
Borrowings under individual production loans	198,148			100,203
Repayment of individual production loans	(133,998		)	(143,297		)
Production loan borrowings under film credit facility	43,714			17,721
Production loan repayments under film credit facility	(23,518		)	(31,507		)
Change in restricted cash collateral associated with financing activities	—			3,087
Proceeds from sale of senior secured second-priority notes, net of deferred financing costs	201,955			—
Repurchase of senior secured second-priority notes	(9,852		)	—
Repurchase of convertible senior subordinated notes	(46,059		)	—
Net Cash Flows Provided By Financing Activities	175,573			140,538
Net Change In Cash And Cash Equivalents	(31,239		)	(853		)
Foreign Exchange Effects on Cash	(2,329		)	1,189
Cash and Cash Equivalents - Beginning Of Period	86,419			69,242
Cash and Cash Equivalents - End Of Period	$	52,851		$	69,578

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Nature of Operations

Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” “we,” “us” or “our”) is a leading global entertainment company with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution and new channel platforms.

Basis of Presentation

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

The unaudited condensed consolidated financial statements have been prepared in accordance with United States (the “U.S.”) accounting principles generally accepted (“GAAP”) for interim financial information and the instructions to quarterly report on Form 10-Q under the Exchange Act, and Article 10 of Regulation S-X under the Exchange Act. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the three and nine months ended December 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ended March 31, 2012. The balance sheet at March 31, 2011 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2011.

Certain amounts presented for fiscal 2011 have been reclassified to conform to the fiscal 2012 presentation relating to the sale of Maple Pictures (see Note 12).

Use of Estimates

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

Recent Accounting Pronouncements

The Company intends to early adopt Accounting Standards Update ("ASU") No. 2011-08 “Testing Goodwill for Impairment” for the fiscal year ending March 31, 2012. ASU 2011-08 simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. ASU 2011-08 would have been effective for the Company's fiscal year beginning April 1, 2012, if not for the early adoption. The adoption of ASU 2011-08 is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update relating to the presentation of other comprehensive income. The accounting update eliminates the option to present components of other comprehensive income as part of the statement of stockholders’ equity. Instead, companies must report comprehensive income in either a single continuous statement of comprehensive income (which would contain the current income statement presentation followed by the components of other comprehensive income and a total amount for comprehensive income), or in two separate but consecutive statements. This guidance is effective for the Company’s fiscal year beginning April 1, 2012. The Company does not expect the guidance to have a material impact on its consolidated financial statements.

In May 2011, the FASB issued an accounting standards update related to fair value measurements and disclosures to

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improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards. This guidance includes amendments that clarify the intent about the application of existing fair value measurement requirements, while other amendments change a principle or requirement for measuring fair value or for disclosing information about fair value measurements. Specifically, the guidance requires additional disclosures for fair value measurements that are based on significant unobservable inputs. The updated guidance is to be applied prospectively and is effective for the Company’s interim and annual periods beginning April 1, 2012. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

2. Restricted Cash

Restricted cash represents amounts held as collateral required under our revolving film credit facility, and amounts that are contractually designated for certain theatrical marketing obligations. Additionally, at March 31, 2011, restricted cash also included approximately $14.0 million held in a trust to fund the Company’s cash severance obligations that would have been due to certain executive officers should their employment have been terminated “without cause," in connection with a “change in control” of the Company (in each case, as defined in each of their respective employment contracts). For purposes of the employment agreements with such executive officers, a “change in control” occurred on June 30, 2010 when a certain shareholder became the beneficial owner of 33% or more of the Company’s common shares. Accordingly, the trust became irrevocable, and the Company could not withdraw any trust assets (other than once every six months in an amount that the trustee reasonably determines exceeds the remaining potential severance obligations), until any cash severance obligations that were payable to the executives had been paid or the employment agreements with the executives expired or terminated without those obligations becoming payable. The trust was terminated in December 2011 and the funds were returned to unrestricted cash.

3. Investment in Films and Television Programs



	December 31, 2011		March 31, 2011
	(Amounts in thousands)
Motion Picture Segment - Theatrical and Non-Theatrical Films
Released, net of accumulated amortization	$	243,847	$	212,125
Acquired libraries, net of accumulated amortization	26,744		31,929
Completed and not released	98,491		47,347
In progress	243,599		170,372
In development	8,918		11,825
Product inventory	28,039		29,467
	649,638		503,065
Television Segment - Direct-to-Television Programs
Released, net of accumulated amortization	78,852		92,290
In progress	70,388		10,206
In development	3,994		2,196
	153,234		104,692
	$	802,872	$	607,757

The following table sets forth acquired libraries that represent titles released three years prior to the date of acquisition. These libraries are being amortized over their expected revenue stream from the acquisition date over a period up to 20 years:



		Total Amortization Period	Remaining Amortization Period	Unamortized Costs		Unamortized Costs
Acquired Library	Acquisition Date	Total Amortization Period	Remaining Amortization Period	December 31, 2011		March 31, 2011
		(In years)		(Amounts in thousands)
Trimark Holdings	October 2000	20.00	8.75	$	2,130	$	2,900
Artisan Entertainment	December 2003	20.00	12.00	24,045		28,348
Lionsgate UK	October 2005	20.00	13.75	569		681
Total Acquired Libraries				$	26,744	$	31,929

The Company expects approximately 47% of completed films and television programs, net of accumulated amortization,

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will be amortized during the one-year period ending December 31, 2012. Additionally, the Company expects approximately 80% of completed and released films and television programs, net of accumulated amortization and excluding acquired libraries, will be amortized during the three-year period ending December 31, 2014.

4. Equity Method Investments

The carrying amount of significant equity method investments at December 31, 2011 and March 31, 2011 were as follows:



	December 31, 2011
Equity Method Investee	Ownership Percentage	December 31, 2011		March 31, 2011
		(Amounts in thousands)
Horror Entertainment, LLC (“FEARnet”)	34.5%	$	2,992	$	2,809
NextPoint, Inc. (“Break Media”)	42.0%	11,311		14,293
Roadside Attractions, LLC (“Roadside”)	43.0%	3,016		2,756
Studio 3 Partners, LLC (“EPIX”)	31.2%	32,859		14,664
TV Guide Network	51.0%	109,562		114,940
Tiger Gate Entertainment Limited (“Tiger Gate”)	45.9%	179		1,123
		$	159,919	$	150,585

Equity interests in equity method investments in our unaudited condensed consolidated statements of operations represent our portion of the income or loss of our equity method investees based on our percentage ownership and the elimination of profits on sales to equity method investees. Equity interests in equity method investments for the three and nine months ended December 31, 2011 and 2010 were as follows (income (loss)):



	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
Equity Method Investee	December 31, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Amounts in thousands)
Horror Entertainment, LLC (“FEARnet”)	$	175		$	180		$	183		$	1,144
NextPoint, Inc. (“Break Media”)	(1,007		)	(469		)	(2,983		)	(692		)
Roadside Attractions, LLC (“Roadside”)	213			609			420			685
Studio 3 Partners, LLC (“EPIX”)	7,324			(11,112		)	18,194			(42,929		)
TV Guide Network	(2,139		)	(1,959		)	(5,379		)	(2,918		)
Tiger Gate Entertainment Limited (“Tiger Gate”)	(745		)	(393		)	(2,110		)	(856		)
	$	3,821		$	(13,144	)	$	8,325		$	(45,566	)

Horror Entertainment, LLC. Horror Entertainment, LLC (“FEARnet”), a multiplatform programming and content service provider of horror genre films operating under the branding of “FEARnet.” The Company licenses content to FEARnet for video-on-demand and broadband exhibition. The Company is recording its share of the FEARnet results on a one quarter lag and, accordingly, during the three and nine months ended December 31, 2011, the Company recorded its share of the income generated by FEARnet for the three and nine months ended September 30, 2011.

NextPoint, Inc. NextPoint, Inc. (“Break Media”), an online home entertainment service provider operating under the branding of “Break Media.” The Company is recording its share of the Break Media results on a one quarter lag and, accordingly, during the three and nine months ended December 31, 2011, the Company recorded its share of losses incurred by Break Media for the three and nine months ended September 30, 2011.

Roadside Attractions, LLC. Roadside Attractions, LLC (“Roadside”), an independent theatrical releasing company. The Company is recording its share of the Roadside results on a one quarter lag and, accordingly, during the three and nine months ended December 31, 2011, the Company recorded its share of income earned by Roadside for the three and nine months ended September 30, 2011.

Studio 3 Partners, LLC (“EPIX”). In April 2008, the Company formed a joint venture with Viacom Inc. (“Viacom”), its

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Paramount Pictures unit (“Paramount Pictures”) and Metro-Goldwyn-Mayer Studios Inc. (“MGM”) to create a premium television channel and subscription video-on-demand service named “EPIX”. The Company had invested $80.4 million through September 30, 2010, and no additional amounts have been funded since. The Company is recording its share of the joint venture results on a one quarter lag and, accordingly, during the three and nine months ended December 31, 2011, the Company recorded its share of the net income (loss) earned by the joint venture for the three and nine months ended September 30, 2011. EPIX expects to report net income of approximately $18 million for its quarter ended December 31, 2011.

Transactions with EPIX:

The Company licenses certain of its theatrical releases and other films and television programs to EPIX. A portion of the profits of these licenses reflecting the Company’s ownership share in the venture are eliminated through an adjustment to the equity interest income (loss) of the venture. These profits are recognized as they are realized by EPIX through the amortization of the related asset, recorded on EPIX's balance sheet, over the license period. The table below sets forth the revenues and gross profits recognized by Lionsgate and the calculation of the amounts eliminated in the equity interest line item on the statement of operations:



	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
	(Amounts in thousands)
Revenue recognized on sales to EPIX	$	9,725		$	18,314		$	59,600		$	58,201

Gross profit on sales to EPIX	$	4,564		$	14,379		$	36,461		$	35,139
Ownership interest in EPIX	31.15		%	31.15		%	31.15		%	31.15		%
Elimination of the Company's share of profits on sales to EPIX	$	1,422		$	4,479		$	11,358		$	10,946

EPIX Financial Information:

The following table presents summarized balance sheet data as of September 30, 2011 and December 31, 2010 for EPIX:



	September 30, 2011		December 31, 2010
	(Amounts in thousands)
Current assets	$	165,045	$	117,948
Non-current assets	$	131,370	$	89,648
Current liabilities	$	142,137	$	105,303
Non-current liabilities	$	4,289	$	6,719

The following table presents the summarized statement of operations for the three and nine months ended September 30, 2011 and 2010 for EPIX and a reconciliation of the net income (loss) reported by EPIX to equity interest income (loss) recorded by the Company:

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	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
	(Amounts in thousands)
Revenues	$	79,457		$	37,234		$	236,146		$	46,448
Expenses:
Operating expenses	60,698			58,462			164,936			147,274
Selling, general and administrative expenses	5,777			5,479			16,803			15,549
Operating income (loss)	12,982			(26,707		)	54,407			(116,375		)
Interest income	3			50			8			9
Net income (loss)	$	12,985		$	(26,657	)	$	54,415		$	(116,366	)
Reconciliation of net income (loss) reported by EPIX to equity interest income (loss):
Net income (loss) reported by EPIX	$	12,985		$	(26,657	)	$	54,415		$	(116,366	)
Ownership interest in EPIX	31.15		%	31.15		%	31.15		%	31.15		%
The Company's share of net income (loss)	4,045			(8,304		)	16,950			(36,248		)
Eliminations of the Company’s share of profits on sales to EPIX (1)	(1,422		)	(4,479		)	(11,358		)	(10,946		)
Realization of the Company’s share of profits on sales to EPIX (2)	4,701			1,671			12,602			4,265
Total equity interest income (loss) recorded	$	7,324		$	(11,112	)	$	18,194		$	(42,929	)

__________________

(1) Represents the elimination of the gross profit recognized by Lionsgate on the sale to EPIX in proportion to Lionsgate's ownership interest in EPIX. The amount of intra-entity profit is calculated as the total gross profit recognized on a title by title basis multiplied by Lionsgate's percentage ownership of EPIX. The table above in the Transactions with EPIX section shows the calculation of the profit eliminated.

(2) Represents the realization of a portion of the profits previously eliminated. This profit remains eliminated until realized by EPIX. EPIX initially records the license fee for the title as inventory on its balance sheet and amortizes the inventory over the license period. Accordingly, the profit is realized as the inventory on EPIX's books is amortized. The profit amount realized is calculated by multiplying the percentage of the EPIX inventory amortized in the period reported by EPIX, by the amount of profit initially eliminated, on a title by title basis.

TV Guide Network. The Company’s investment interest in TV Guide Network consists of an equity investment in its common stock units and mandatorily redeemable preferred stock units (see Note 12).

Investment in Mandatorily Redeemable Preferred Stock Units. The mandatorily redeemable preferred stock carries a dividend rate of 10% compounded annually and is mandatorily redeemable in May 2019 at the stated value plus the dividend return and any additional capital contributions less previous distributions. The mandatorily redeemable preferred stock units were initially recorded based on their estimated fair value, as determined using an option pricing model. The mandatorily redeemable preferred stock units and the 10% dividend are being accreted up to their redemption amount over the ten-year period to the redemption date, which is recorded as income within equity interest.

Transactions with TV Guide Network:

The Company licenses certain films and/or television programs to TV Guide Network. A portion of the profits of these licenses reflecting the Company’s ownership share in the venture are eliminated through an adjustment to the equity interest loss of the venture. These profits are recognized as they are realized by TV Guide Network through the amortization of the related asset, recorded on TV Guide Network's balance sheet, over the license period. The table below sets forth the revenues and gross profits recognized by Lionsgate and the calculation of the amounts eliminated in the equity interest line item on the statement of operations:

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	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Amounts in thousands)
Revenue recognized on sales to TV Guide Network	$	—		$	9,675		$	2,925		$	14,175

Gross profit (loss) on sales to TV Guide Network	$	(66	)	$	3,679		$	880		$	5,387
Ownership interest in TV Guide Network	51		%	51		%	51		%	51		%
Elimination of the Company's share of profit (loss) on sales to TV Guide Network	$	(34	)	$	1,876		$	449		$	2,747

TV Guide Network Financial Information:

The following table presents summarized balance sheet data as of December 31, 2011 and March 31, 2011 for TV Guide Network:



	December 31, 2011		March 31, 2011
	(Amounts in thousands)
Current assets	$	43,701	$	43,497
Non-current assets	$	248,135	$	261,245
Current liabilities	$	33,768	$	32,126
Non-current liabilities	$	35,741	$	40,354
Redeemable preferred stock	$	222,602	$	200,724

The following table presents the summarized statement of operations for the three and nine months ended December 31, 2011 and 2010 for TV Guide Network and a reconciliation of the net loss reported by TV Guide Network to equity interest loss recorded by the Company:

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	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Amounts in thousands)
Revenues	$	25,359		$	28,847		$	76,207		$	85,953
Expenses:
Cost of services	14,866			9,208			36,283			26,335
Selling, marketing, and general and administration	11,473			15,595			40,110			46,835
Depreciation and amortization	2,865			3,871			8,741			11,883
Operating income (loss)	(3,845		)	173			(8,927		)	900
Interest expense, net	472			500			1,382			1,336
Accretion of redeemable preferred stock units (1)	7,545			7,057			21,877			20,479
Total interest expense, net	8,017			7,557			23,259			21,815
Loss before income taxes	(11,862		)	(7,384		)	(32,186		)	(20,915		)
Income tax expense	4			19			2			83
Net loss	$	(11,866	)	$	(7,403	)	$	(32,188	)	$	(20,998	)
Reconciliation of net loss reported by TV Guide Network to equity interest loss:
Net loss reported by TV Guide Network	$	(11,866	)	$	(7,403	)	$	(32,188	)	$	(20,998	)
Ownership interest in TV Guide Network	51		%	51		%	51		%	51		%
The Company's share of net loss	(6,052		)	(3,776		)	(16,416		)	(10,709		)
Accretion of dividend and interest income on redeemable preferred stock units (1)	3,848			3,599			11,157			10,444
Eliminations of the Company’s share of (profit) loss on sales to TV Guide Network (2)	34			(1,876		)	(449		)	(2,747		)
Realization of the Company’s share of profits on sales to TV Guide Network (3)	31			94			329			94
Total equity interest loss recorded	$	(2,139	)	$	(1,959	)	$	(5,379	)	$	(2,918	)

___________________

(1)

Accretion of mandatorily redeemable preferred stock units represents TV Guide Network’s 10% dividend and the amortization of discount on its mandatorily redeemable preferred stock units held by the Company and the 49% interest holder. The Company records 51% of this expense as income from the accretion of dividend and discount on mandatorily redeemable preferred stock units within equity interest loss.

(2)

Represents the elimination of the gross profit recognized by Lionsgate on the sale to TV Guide Network in proportion to Lionsgate's ownership interest in TV Guide Network. The amount of intra-entity profit is calculated as the total gross profit recognized on a title by title basis multiplied by Lionsgate's percentage ownership of TV Guide Network. The table above in the Transactions with TV Guide Network section shows the calculation of the profit eliminated.

(3)

Represents the realization of a portion of the profits previously eliminated. This profit remains eliminated until realized by TV Guide Network. TV Guide Network initially records the license fee for the title as inventory on its balance sheet and amortizes the inventory over the license period. Accordingly, the profit is realized as the inventory on TV Guide Network's books is amortized. The profit amount realized is calculated by multiplying the percentage of the TV Guide Network inventory amortized in the period reported by TV Guide Network by the amount of profit initially eliminated, on a title by title basis.

Tiger Gate Entertainment Limited. Tiger Gate Entertainment Limited (“Tigergate”) is an operator of pay television channels and a distributor of television programming and action and horror films across Asia. The Company is recording its share of the joint venture results on a one quarter lag and, accordingly, during the three and nine months ended December 31, 2011, the Company recorded its share of the losses incurred by the joint venture for the three and nine months ended September 30, 2011. The Company funded an additional $1.0 million during the nine months ended December 31, 2011.

5. Other Assets

The composition of the Company’s other assets is as follows as of December 31, 2011 and March 31, 2011:

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	December 31, 2011		March 31, 2011
	(Amounts in thousands)
Deferred financing costs, net of accumulated amortization	$	23,935	$	15,360
Loans receivable	21,096		18,433
Prepaid expenses and other	10,388		12,529
	$	55,419	$	46,322

Deferred Financing Costs. Deferred financing costs primarily include costs incurred in connection with (1) an amended senior revolving credit facility (see Note 6), (2) the issuance of the Senior Secured Second-Priority Notes (see Note 7) and (3) the issuance of the October 2004 2.9375% Notes, the February 2005 3.625% Notes and the April 2009 3.625% Notes (see Note 10) that are deferred and amortized to interest expense using the effective interest method.

Loans Receivable. The following table sets forth the Company’s loans receivable at December 31, 2011 and March 31, 2011:



	Interest Rate	December 31, 2011		March 31, 2011
	(Amounts in thousands)
Third-party producer	3.3%	$	8,980	$	8,777
NextPoint, Inc. (“Break Media”)	5.58% - 20.0%	12,116		9,656
		$	21,096	$	18,433

Prepaid Expenses and Other. Prepaid expenses and other primarily include prepaid expenses and security deposits.

6. Senior Revolving Credit Facility

Outstanding Amount. At December 31, 2011, the Company had borrowings of $94.5 million outstanding (March 31, 2011 — $69.8 million).

Availability of Funds. At December 31, 2011, there was $220.5 million available (March 31, 2011 — $255.2 million). The senior revolving credit facility provides for borrowings and letters of credit up to an aggregate of $340 million. The availability of funds is limited by a borrowing base and also reduced by outstanding letters of credit which amounted to $25.0 million at December 31, 2011 (March 31, 2011 — $15.0 million).

Maturity Date. The senior revolving credit facility expires July 25, 2013.

Interest. As of December 31, 2011, the senior revolving credit facility bore interest of 2.5% over the “Adjusted LIBOR” rate (effective interest rate of 2.8% and 2.74% as of December 31, 2011 and March 31, 2011, respectively).

Commitment Fee. The Company is required to pay a quarterly commitment fee based upon 0.5% per annum on the total senior revolving credit facility of $340 million less the amount drawn.

Security. Obligations under the senior revolving credit facility are secured by collateral (as defined in the credit agreement) granted by the Company and certain subsidiaries of the Company, as well as a pledge of equity interests in certain of the Company’s subsidiaries.

Covenants. The senior revolving credit facility contains a number of affirmative and negative covenants that, among other things, require the Company to satisfy certain financial covenants and restrict the ability of the Company to incur additional debt, pay dividends and make distributions, make certain investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of its business, enter into sale-leaseback transactions, transfer and sell material assets and merge or consolidate.

Change in Control. Under the senior revolving credit facility, the Company may also be subject to an event of default upon a change in control (as defined in the credit agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50% (amended from 20% on June 22, 2010) of the Company’s common shares.

7. Senior Secured Second-Priority Notes

On October 21, 2009, Lions Gate Entertainment Inc. (“LGEI”), the Company’s wholly-owned subsidiary, issued $236.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the “October 2009 Senior Notes”) in a

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private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act.

On May 13, 2011, LGEI issued approximately $200.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the “May 2011 Senior Notes,” and collectively with the October 2009 Senior Notes, the “Senior Notes”) in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act. The May 2011 Senior Notes were issued pursuant to a Supplemental Indenture among LGEI, the Company, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee. The Supplemental Indenture amended the indenture under the October 2009 Senior Notes to, among other things, enable LGEI to issue additional notes having the same terms as the October 2009 Senior Notes, except for the issue date, issue price and first interest payment, in an aggregate principal amount of up to $200.0 million.

In August 2011, a subsidiary of LGEI paid $9.9 million to repurchase $10.0 million of aggregate principal amount (carrying value — $9.9 million) of the Senior Notes. The Company recorded a loss on extinguishment in the quarter ended September 30, 2011 of $0.4 million, which included $0.5 million of deferred financing costs written off. In September 2011, LGEI resold such Senior Notes at 99.0% of the $10.0 million face amount thereof, plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $10.2 million, which were used to repurchase the common shares, as discussed in Note 15.

Outstanding Amount. The outstanding amount is set forth in the tables below:



	December 31, 2011
	Principal		Unamortized Premium/ (Discount)			Net Carrying Amount
	(Amounts in thousands)
Senior Secured Second-Priority Notes	$	436,000	$	(4,666	)	$	431,334

	March 31, 2011
	Principal		Unamortized Discount			Net Carrying Amount
	(Amounts in thousands)
Senior Secured Second-Priority Notes	$	236,000	$	(9,669	)	$	226,331

Maturity Date. The Senior Notes are due November 1, 2016.

Original Issue Discount/Premium. The October 2009 Senior Notes were issued by LGEI at an initial price of 95.222% (original issue discount —4.778%) of the principal amount. The May 2011 Senior Notes were issued by LGEI at an initial price of 102.219% (original issue premium — 2.219%) of the principal amount, plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $204.4 million and net proceeds of approximately $192.4 million after fees and expenses, including $5.6 million paid in connection with the consent solicitation of holders of the October 2009 Senior Notes. The original issue discount/premium, interest and deferred financing costs are being amortized through November 1, 2016 using the effective interest method. As of December 31, 2011, the remaining amortization period was 4.8 years.

Interest. The Senior Notes pay interest semi-annually on May 1 and November 1 of each year at a rate of 10.25% per year.

Security. The Senior Notes are guaranteed on a senior secured basis by the Company, and certain wholly-owned subsidiaries of both the Company and LGEI. The Senior Notes are ranked junior in right of payment to the Company’s senior revolving credit facility, ranked equally in right of payment to the Company’s convertible senior subordinated notes, and ranked senior to any of the Company’s unsecured debt.

Covenants. The 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.

8. Participations and Residuals

The Company expects approximately 68% of accrued participations and residuals will be paid during the one-year period ending December 31, 2012.

Theatrical Slate Participation

On May 29, 2009, the Company terminated its theatrical slate participation arrangement with Pride Pictures, LLC

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(“Pride”), an unrelated entity. Under the arrangement dated May 25, 2007 and amended on January 30, 2008 (the “Master Picture Purchase Agreement”), Pride contributed, in general, 50% of the Company’s production, acquisition, marketing and distribution costs of theatrical feature films and participated in a pro rata portion of the pictures’ net profits or losses similar to a co-production arrangement based on the portion of costs funded. In late 2008, the administrative agent for the senior lenders under Pride’s senior credit facility took the position, among others, that the senior lenders did not have an obligation to continue to fund under the senior credit facility because the conditions precedent to funding set forth in the senior credit facility could not be satisfied. The Company was not a party to the credit facility. Consequently, Pride did not purchase the pictures The Spirit, My Bloody Valentine 3-D and Madea Goes To Jail. Thereafter, on April 20, 2009, after failed attempts by the Company to facilitate a resolution, it gave LG Film Finance I, LLC (“FilmCo”) and Pride notice that FilmCo, through Pride’s failure to make certain capital contributions, was in default of the Master Picture Purchase Agreement. On May 5, 2009, the representative for the Pride equity and the Pride mezzanine investor responded that the required amount was fully funded and that it had no further obligations to make any additional capital contributions. Consequently, on May 29, 2009, the Company gave notice of termination of the Master Picture Purchase Agreement. Since May 29, 2009, there have been no developments with respect to the arrangement. The Company will no longer receive financing as provided from the participation of Pride in its films.

Amounts provided from Pride are reflected as a participation liability. The difference between the ultimate participation expected to be paid to Pride and the amount provided by Pride is amortized as a charge to or a reduction of participation expense under the individual-film-forecast method.

At December 31, 2011, $14.1 million (March 31, 2011 - $19.2 million) was payable to Pride and is included in participations and residuals in the unaudited condensed consolidated balance sheets.

Société Générale de Financement du Québec Filmed Entertainment Participation

On July 30, 2007, the Company entered into a four-year filmed entertainment slate participation agreement with Société Générale de Financement du Québec (“SGF”), the Québec provincial government’s investment arm. SGF was to provide up to 35% of production costs of television and feature film productions produced in Québec for a four-year period for an aggregate participation of up to $140 million, and the Company was to advance all amounts necessary to fund the remaining budgeted costs. The maximum aggregate of budgeted costs over the four-year period was $400 million, including the Company’s portion, but no more than $100 million per year. In connection with this agreement, the Company and SGF proportionally share in the proceeds derived from the productions after the Company deducts a distribution fee, recoups all distribution expenses and releasing costs, and pays all applicable third-party participations and residuals.

Amounts provided from SGF are reflected as a participation liability. The difference between the ultimate participation expected to be paid to SGF and the amount provided by SGF is amortized as a charge to or a reduction of participation expense under the individual-film-forecast method. At December 31, 2011, $7.7 million (March 31, 2011 - $7.1 million) was payable to SGF and is included in participations and residuals in the unaudited condensed consolidated balance sheets. The arrangement expired on July 30, 2011.

9. Film Obligations and Production Loans



	December 31, 2011		March 31, 2011
	(Amounts in thousands)
Film obligations	$	112,578	$	58,681
Production loans
Individual production loans	244,678		181,829
Pennsylvania Regional Center production loans	65,500		65,500
Film credit facility	40,625		20,430
Total film obligations and production loans	$	463,381	$	326,440

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The following table sets forth future three-month and annual repayment of film obligations and production loans:



	Three Months Ended
	March 31,		Year Ended March 31,
	2012		2013		2014		2015		2016		Thereafter		Total
	(Amounts in thousands)
Future annual repayment of Film Obligations and Production Loans recorded as of December 31, 2011
Film obligations	$	50,841	$	23,360	$	19,440	$	14,519	$	9,680	$	—	$	117,840
Production loans
Individual production loans	23,203		206,475		15,000		—		—		—		244,678
Pennsylvania Regional Center production loans	—		—		65,500		—		—		—		65,500
Film Credit Facility	—		40,625		—		—		—		—		40,625
	$	74,044	$	270,460	$	99,940	$	14,519	$	9,680	$	—	468,643
Less imputed interest on film obligations													(5,262		)
													$	463,381

Film Obligations

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

Individual Production Loans

Production loans represent individual loans for the production of film and television programs that the Company produces. Individual production loans have contractual repayment dates either at or near the expected completion date, with the exception of certain loans containing repayment dates on a longer term basis. Individual production loans of $214.7 million incur interest at rates ranging from 3.55% to 4.25%, and approximately $30.0 million of production loans are non-interest bearing.

Pennsylvania Regional Center

General. On April 9, 2008, the Company entered into a loan agreement with the Pennsylvania Regional Center, which provides for the availability of production loans up to $65.5 million on a five-year term for use in film and television productions in the State of Pennsylvania. The amount that was borrowed was limited to approximately one half of the qualified production costs incurred in the State of Pennsylvania through the two-year period ended April 2010, and is subject to certain other limitations. Under the terms of the loan, for every dollar borrowed, the Company’s production companies are required (within a two-year period) to either create a specified number of jobs, or spend a specified amount in certain geographic regions in the State of Pennsylvania.

Outstanding Amount. At December 31, 2011, the Company had borrowings of $65.5 million (March 31, 2011 — $65.5 million).

Availability of Funds. At December 31, 2011, there were no amounts available under this agreement (March 31, 2011 — nil).

Maturity Date. All amounts borrowed under this loan agreement with the Pennsylvania Regional Center are due April 11, 2013, five years from the date that the Company began to borrow under this agreement.

Interest. Amounts borrowed under the agreement carry an interest rate of 1.5%, which is payable semi-annually.

Security. The loan is secured by a first priority security interest in the Company’s film library pursuant to an intercreditor agreement with the Company’s senior lender under the Company’s senior revolving credit facility. Pursuant to the terms of the

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Company’s senior revolving credit facility, the Company is required to maintain certain collateral equal to the loans outstanding plus 5% under this facility. Such collateral can consist of cash, cash equivalents or debt securities, including the Company’s convertible senior subordinated notes repurchased. As of December 31, 2011, $72.8 million principal value (fair value — $72.7 million) of the Company’s convertible senior subordinated notes repurchased in December 2009 (see Note 10) was held as collateral under the Company’s senior revolving credit facility (March 31, 2011 — $72.8 million principal value, $72.4 million fair value).

Film Credit Facility

On October 6, 2009, the Company entered into a revolving film credit facility agreement, as amended effective December 31, 2009 and June 22, 2010 (the “Film Credit Facility”), which provides for borrowings for the acquisition or production of motion pictures.

Outstanding Amount. At December 31, 2011, the Company had borrowings of $40.6 million (March 31, 2011 — $20.4 million).

Availability of Funds. Currently, the Film Credit Facility provides for total borrowings up to $130 million, subject to a borrowing base, which can vary based on the amount of sales contracts in place on pictures financed under the facility. The Film Credit Facility can be increased to $200 million if additional qualified lenders or financial institutions become a party to and provide a commitment under the facility.

Maturity Date. The Film Credit Facility has a maturity date of April 6, 2013. Borrowings under the Film Credit Facility are due the earlier of (a) nine months after delivery of each motion picture or (b) April 6, 2013.

Interest. As of December 31, 2011, the Film Credit Facility bore interest of 3.25% over the “LIBO” rate (as defined in the credit agreement). The weighted average interest rate on borrowings outstanding as of December 31, 2011 was 3.55% (March 31, 2011 — 3.49%).

Commitment Fee. The Company is required to pay a quarterly commitment fee of 0.75% per annum on the unused commitment under the Film Credit Facility.

Security. Borrowings under the Film Credit Facility are subject to a borrowing base calculation and are secured by interests in the related motion pictures, together with certain other receivables from other motion picture and television productions pledged by the Company, including a minimum pledge of such receivables of $25 million. Receivables pledged to the Film Credit Facility must be excluded from the borrowing base calculation under the Company’s senior revolving credit facility, as described in Note 6.

10. Convertible Senior Subordinated Notes and Other Financing Obligations

Accounting Method Description. The Company accounts for its convertible senior subordinated notes by separating the liability and equity components. The liability component is recorded at the date of issuance based on its fair value which is generally determined in a manner that will reflect an interest cost equal to the Company’s nonconvertible debt borrowing rate at the convertible senior subordinated notes issuance date. The amount of the proceeds less the amount recorded as the liability component is recorded as an addition to shareholders’ equity reflecting the equity component (i.e., conversion feature). The difference between the principal amount and the amount recorded as the liability component represents the debt discount. The carrying amount of the liability is accreted up to the principal amount through the amortization of the discount, using the effective interest method, to interest expense over the expected life of the note.

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Outstanding Amount. The following table sets forth the convertible senior subordinated notes and other financing obligations outstanding at December 31, 2011 and March 31, 2011:



	December 31, 2011
	Principal		Unamortized Discount			Net Carrying Amount
	(Amounts in thousands)
Convertible Senior Subordinated Notes
October 2004 2.9375%	$	348	$	—		$	348
February 2005 3.625%	23,470		(294		)	23,176
April 2009 3.625%	66,581		(22,483		)	44,098
	$	90,399	$	(22,777	)	67,622
Other financing obligations						3,718
						$	71,340



	March 31, 2011
	Principal		Unamortized Discount			Net Carrying Amount
	(Amounts in thousands)
Convertible Senior Subordinated Notes
October 2004 2.9375%	$	46,326	$	(1,598	)	$	44,728
February 2005 3.625%	23,470		(1,363		)	22,107
April 2009 3.625%	66,581		(26,161		)	40,420
	$	136,377	$	(29,122	)	107,255
Other financing obligations						3,718
						$	110,973

The following table sets forth future three-month and annual contractual principal payment commitments under convertible senior subordinated notes as of December 31, 2011:



		Three Months Ended
		March 31,		Year Ended March 31,
Note	Next Holder Redemption Date	2012		2013		2014		2015		2016		Thereafter		Total
		(Amounts in thousands)
October 2004 2.9375% Notes	October 2014	$	—	$	—	$	—	$	348	$	—	$	—	$	348
February 2005 3.625% Notes	March 2012	23,470		—		—		—		—		—		23,470
April 2009 3.625% Notes	March 2015	—		—		—		66,581		—		—		66,581
		$	23,470	$	—	$	—	$	66,929	$	—	$	—	$	90,399

The future repayment dates of the convertible senior subordinated notes represent the next redemption date by holders for each series of notes respectively, as described above.

Interest Expense. The effective interest rate on the liability component and the amount of interest expense, which includes both the contractual interest coupon and amortization of the discount on the liability component, for the three and nine months ended December 31, 2011 and 2010 are presented below.

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	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	December 31, 2011		December 31, 2010		December 31, 2011		December 31, 2010
	(Amounts in thousands)
October 2004 2.9375% Convertible Senior Subordinated Notes:
Effective interest rate of liability component (9.65%)
Interest Expense
Contractual interest coupon	$	33	$	340	$	497	$	1,574
Amortization of discount on liability component and debt issuance costs	47		772		1,147		3,488
	80		1,112		1,644		5,062
February 2005 3.625% Convertible Senior Subordinated Notes:
Effective interest rate of liability component (10.03%)
Interest Expense
Contractual interest coupon	213		213		638		1,025
Amortization of discount on liability component and debt issuance costs	394		355		1,154		1,681
	607		568		1,792		2,706
April 2009 3.625% Convertible Senior Subordinated Notes:
Effective interest rate of liability component (17.26%)
Interest Expense
Contractual interest coupon	603		603		1,810		1,810
Amortization of discount on liability component and debt issuance costs	1,280		1,077		3,693		3,107
	1,883		1,680		5,503		4,917
Total
Contractual interest coupon	849		1,156		2,945		4,409
Amortization of discount on liability component and debt issuance costs	1,721		2,204		5,994		8,276
	$	2,570	$	3,360	$	8,939	$	12,685

Fiscal 2011 and 2012 Convertible Senior Subordinated Notes Transactions

October 2011 Redemption of October 2004 2.9375% Notes: On October 15, 2011, certain holders of the 2.9375% Convertible Senior Subordinated Notes (the "October 2004 2.9375% Notes") required LGEI to repurchase $26.6 million in aggregate principal amount (carrying value - $26.6 million) of the October 2004 2.9375% Notes, pursuant to the redemption terms of the October 2004 2.9375% Notes. LGEI paid approximately $27.0 million for the repurchase on October 17, 2011, representing a price equal to 100% of the principal amount, together with accrued and unpaid interest through October 17, 2011.

May 2011 Repurchase of a Portion of October 2004 2.9375% Notes: In May 2011, LGEI paid $19.5 million to repurchase $19.4 million of aggregate principal amount (carrying value — $18.9 million) of the October 2004 2.9375% Notes. The Company recorded a loss on extinguishment in the quarter ended June 30, 2011 of $0.5 million, which includes $0.1 million of deferred financing costs written off. The loss represented the excess of the fair value of the liability component of the October 2004 2.9375% Notes repurchased over their carrying values, plus the deferred financing costs written off. The amount of consideration recorded as a reduction of shareholders’ equity represents the equity component of the October 2004 2.9375% Notes repurchased.

July 2010 Refinancing Exchange Agreement: On July 20, 2010, the Company entered into a Refinancing Exchange Agreement to exchange approximately $36.0 million in aggregate principal amount of the 3.625% Convertible Senior Subordinated Notes (the “February 2005 3.625% Notes”) and approximately $63.7 million in aggregate principal amount of the October 2004 2.9375% Notes for equal principal amounts, respectively, of new 3.625% Convertible Senior Subordinated Notes due 2027 (the “New 3.625% Notes”) and new 2.9375% Convertible Senior Subordinated Notes due 2026 (the “New 2.9375%

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Notes”, and together with the New 3.625% Notes, the “New Notes”). The New Notes took effect immediately and all terms were identical to the February 2005 3.625% Notes and October 2004 2.9375% Notes except that the New Notes had an extended maturity date, extended put rights by two years, and were immediately convertible at an initial conversion rate of 161.2903 common shares of the Company per $1,000 principal amount of New Notes (conversion price per share of $6.20), subject to specified contingencies.

On July 20, 2010, the New Notes were converted into 16,236,305 common shares of the Company. As a result, the New Notes are no longer outstanding as of July 20, 2010.

As a result of the exchange transaction and related conversion, the Company recorded a non-cash loss on extinguishment of debt of $14.5 million during the quarter ended September 30, 2010, which includes the write-off of $0.6 million of unamortized deferred financing costs, an increase to common shares equity of $106.0 million and reduction in the carrying amount of the old notes of approximately $91.2 million. The loss represented the excess of the fair value of the common stock issuable pursuant to conversion terms contained in the New Notes as compared to the fair value of the Company’s common stock issuable pursuant to the conversion terms of the old notes, partially offset by the excess of the carrying amount of the debt extinguished over the fair value of the Company’s common stock issuable pursuant to the conversion terms of the old notes.

Convertible Senior Subordinated Notes Terms

October 2004 2.9375% Notes. In October 2004, LGEI sold $150.0 million of the October 2004 2.9375% Notes.

Outstanding Amount: As of December 31, 2011, $0.3 million of aggregate principal amount (carrying value — $0.3 million) of the October 2004 2.9375% Notes remains outstanding.

Interest: Interest on the October 2004 2.9375% Notes is payable semi-annually on April 15 and October 15.

Maturity Date: The October 2004 2.9375% Notes mature on October 15, 2024.

Redeemable by LGEI: LGEI may redeem the October 2004 2.9375% Notes at 100%.

Redeemable by Holder: The holder may require LGEI to repurchase the October 2004 2.9375% Notes on October 15, 2014 and 2019 or upon a change in control at a price equal to 100% of the principal amount, together with accrued and unpaid interest through the date of repurchase. See above for further information on the October 2004 2.9375% Notes that were redeemed on October 17, 2011 due to the holders exercise of their right to require LGEI to repurchase the October 2004 2.9375% Notes on October 15, 2011.

Conversion Features: The holder may convert the October 2004 2.9375% Notes into the Company’s common shares prior to maturity only if the price of the Company’s common shares issuable upon conversion of a note reaches or falls below a certain specific threshold over a specified period, the notes have been called for redemption, a change in control occurs or certain other corporate transactions occur. Before the close of business on or prior to the trading day immediately before the maturity date, the holder may convert the notes into the Company’s common shares at a conversion rate equal to 86.9565 shares per $1,000 principal amount of the October 2004 2.9375% Notes, subject to adjustment in certain circumstances, which represents a conversion price of approximately $11.50 per share. Upon conversion of the October 2004 2.9375% Notes, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company.

Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all or a portion of their notes or the holder converts the notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of the Company’s common shares on the effective date of the change in control. No make whole premium will be paid if the price of the Company’s common shares at such time is less than $8.79 per share or exceeds $50.00 per share.

February 2005 3.625% Notes. In February 2005, LGEI sold $175.0 million of February 2005 3.625% Notes.

Outstanding Amount: As of December 31, 2011, $23.5 million of aggregate principal amount (carrying value — $23.2 million) of the February 2005 3.625% Notes remains outstanding.

Interest: Interest on the February 2005 3.625% Notes is payable at 3.625% per annum semi-annually on March 15 and September 15 until March 15, 2012 and at 3.125% per annum thereafter until maturity.

Maturity Date: The February 2005 3.625% Notes will mature on March 15, 2025.

Redeemable by LGEI: LGEI may redeem all or a portion of the February 2005 3.625% Notes at its option on or after March 15, 2012 at 100% of their principal amount, together with accrued and unpaid interest through the date of redemption.

Redeemable by Holder: The holder may require LGEI to repurchase the February 2005 3.625% Notes on March 15,

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2012, 2015 and 2020 or upon a change in control at a price equal to 100% of the principal amount, together with accrued and unpaid interest through the date of repurchase.

Conversion Features: The February 2005 3.625% Notes are convertible, at the option of the holder, at any time before the maturity date, if the notes have not been previously redeemed or repurchased, at a conversion rate equal to 70.0133 shares per $1,000 principal amount of the February 2005 3.625% Notes, subject to adjustment in certain circumstances, which represents a conversion price of approximately $14.28 per share. Upon conversion of the February 2005 3.625% Notes, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company.

Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all or a portion of their notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of the Company’s common shares on the effective date of the change in control. No make whole premium will be paid if the price of the Company’s common shares at such time is less than $10.35 per share or exceeds $75.00 per share.

April 2009 3.625% Notes. In April 2009, LGEI issued approximately $66.6 million of 3.625% Convertible Senior Subordinated Notes (the “April 2009 3.625% Notes”).

Outstanding Amount: As of December 31, 2011, $66.6 million of aggregate principal amount (carrying value — $44.1 million) of the April 2009 3.625% Notes remains outstanding.

Interest: Interest on the April 2009 3.625% Notes is payable at 3.625% per annum semi-annually on March 15 and September 15 of each year.

Maturity Date: The April 2009 3.625% Notes will mature on March 15, 2025.

Redeemable by LGEI: On or after March 15, 2015, the Company may redeem the April 2009 3.625% Notes, in whole or in part, at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be redeemed, plus accrued and unpaid interest through the date of redemption.

Redeemable by Holder: The holder may require LGEI to repurchase the April 2009 3.625% Notes on March 15, 2015, 2018 and 2023 or upon a “designated event,” at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be repurchased plus accrued and unpaid interest.

Conversion Features: The April 2009 3.625% Notes may be converted into common shares of the Company at any time before maturity, redemption or repurchase. The initial conversion rate of the April 2009 3.625% Notes is 121.2121 common shares per $1,000 principal amount of the April 2009 3.625% Notes, subject to adjustment in certain circumstances, which represents a conversion price of approximately $8.25 per share. Upon conversion of the April 2009 3.625% Notes, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company.

Other Financing Obligations

On June 1, 2007, the Company entered into a bank financing agreement for $3.7 million to fund the acquisition of certain capital assets. Interest is payable in monthly payments totaling $0.3 million per year for five years at an interest rate of 8.02%, with the entire principal due June 2012.

11. Fair Value Measurements

Fair Value

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

Fair Value Hierarchy

Accounting guidance and standards about fair value establish a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s

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categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The accounting guidance and standards establish three levels of inputs that may be used to measure fair value:


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

•

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 liabilities that are measured at fair value on a recurring basis include the Company’s senior revolving credit facility, convertible senior subordinated notes, individual production loans, Pennsylvania Regional Center Loan, and Senior Notes, which are priced using discounted cash flow techniques that use observable market inputs, such as LIBOR-based yield curves, three- and seven-year swap rates, and credit ratings.


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

The following table sets forth the carrying values and fair values (all determined using Level 2 inputs defined above) of the Company’s investment in TV Guide Network's mandatorily redeemable preferred stock units and outstanding debt at December 31, 2011:



	Carrying Value		Fair Value
			(Level 2)
	(Amounts in thousands)
Assets:
Investment in TV Guide Network's Mandatorily Redeemable Preferred Stock Units	$	109,562	$	143,448
Liabilities:
October 2004 2.9375% Convertible Senior Subordinated Notes	$	348	$	228
February 2005 3.625% Convertible Senior Subordinated Notes	23,176		23,740
April 2009 3.625% Convertible Senior Subordinated Notes	44,098		60,904
Individual production loans	244,678		243,352
Pennsylvania Regional Center Loan	65,500		63,196
Senior Secured Second-Priority Notes	431,334		461,615
	$	809,134	$	853,035

12. Acquisitions and Divestitures

Maple Pictures

On August 10, 2011, the Company sold its interest in Maple Pictures Corp. (“Maple Pictures”) to Alliance Films Holdings Inc. (“Alliance”), a leading Canadian producer and distributor of motion pictures, television programming and home entertainment. The sales price was approximately $35.3 million, net of a working capital adjustment.

Alliance is now responsible for all of Maple Pictures’ distribution, including Maple Pictures’ exclusive five-year output deal for Canadian distribution of the Company’s new motion picture and second window television product and Maple Pictures’ exclusive long-term arrangement for distribution of Canadian rights of the Company’s filmed entertainment library (i.e., distribution rights). The sales price was allocated between the fair value of the distribution rights and the fair value of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights of $17.8 million was recorded as deferred revenue and will be recognized as revenue by the Company as the revenues are earned pursuant to the distribution rights. The sales proceeds less the fair value of the distribution rights constitutes the proceeds allocated to the sale of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights was determined based on an estimate of the cash flows to be generated by Alliance pursuant to the distribution agreements, discounted at risk-adjusted discount rates of the film categories between 10% and 11%.

The sale was treated as the disposal of an asset group rather than a discontinued operation because, due to the distribution rights, the Company will have significant continuing involvement in the cash flows generated pursuant to the distribution rights.

The assets and liabilities were classified as held for sale in the consolidated balance sheet as of March 31, 2011 and were recorded at their carrying value, which is lower than their fair value less costs to sell. At March 31, 2011, the carrying values of

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the Maple Pictures assets sold pursuant to the agreement were as set forth in the table below:



	March 31, 2011
	March 31, 2011
	(Amounts in thousands)
Accounts receivable, net	$	29,197
Investment in films and television programs, net	13,531
Other assets	1,608
Assets held for sale (1)	$	44,336
Liabilities held for sale	$	(17,396	)


(1)	Excludes cash held at Maple Pictures of $3.6 million as of March 31, 2011.

Maple Pictures was included in the Company’s Motion Pictures reporting segment. A portion of Motion Pictures goodwill, amounting to $6.1 million was allocated to the asset group and included in the carrying value of the assets disposed for purposes of calculating the gain on sale. Subsequently, the Company tested for goodwill impairment using the adjusted carrying amount of the Motion Pictures reporting unit and no goodwill impairment was identified. The Company recognized a gain, net of transaction costs, on the sale of Maple Pictures of $11.0 million during the quarter ended September 30, 2011, as set forth in the table below:



	Gain on Sale of
	Maple Pictures
	August 10, 2011
	(Amounts in thousands)
Total sales price for Maple Pictures				$	35,300
Less: Sales proceeds allocated to the fair value of the distribution rights				(17,800		)
Sales proceeds allocated to Maple Pictures, exclusive of the distribution rights				17,500
Less:
Cash	$	(3,943	)
Accounts receivable, net	(16,789		)
Investment in films and television programs, net	(13,536		)
Allocated goodwill	(6,053		)
Other assets	(1,564		)
Participations payable to Lionsgate (1)	23,683
Other liabilities	13,651
Total carrying value (deficit) of Maple Pictures	$	(4,551	)	(4,551		)

Currency translation adjustment				1,298

Transaction and related costs				(3,280		)
Gain on sale of Maple Pictures				$	10,967

(1)

Represents participation liabilities payable to the Company, which were assumed by Alliance and previously eliminated in the consolidated financial statements. The participations payable to Lionsgate represents amounts that Maple owed Lionsgate as of the date of sale from the distribution of Lionsgate's product in Canada pursuant to the distribution agreements. Subsequent to the sale, the amounts due from Alliance are reflected in accounts receivable on the Company's condensed consolidated balance sheets, which will be paid pursant to the terms of the distribution arrangements.

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TV Guide Network

Acquisition of TV Guide Network. On February 28, 2009, the Company purchased all of the issued and outstanding equity interests of TV Guide Network and TV Guide.com (collectively “TV Guide Network”), a network and online provider of entertainment and television guidance-related programming, as well as localized program listings and descriptions primarily in the U.S. The Company paid approximately $241.6 million for all of the equity interest of TV Guide Network, which included a capital lease obligation of $12.1 million, and incurred approximately $1.5 million in direct transaction costs (legal fees, accountant’s fees and other professional fees).

Sale of Non-Controlling Interest in TV Guide Network. On May 28, 2009, the Company entered into a purchase agreement with One Equity Partners (“OEP”), the global private equity investment arm of JPMorgan Chase Bank, N.A., pursuant to which OEP purchased 49% of the Company’s interest in TV Guide Network for approximately $122.4 million in cash. In addition, OEP reserved the option of buying another 1% of TV Guide Network under certain circumstances. The arrangement contains joint control rights, as evidenced in an operating agreement as well as certain transfer restrictions and exit rights. There was no gain or loss on the transaction.

The February 28, 2009 acquisition was accounted for as a purchase, with the results of operations of TV Guide Network included in the Company’s consolidated results from February 28, 2009 through May 27, 2009. Subsequent to the sale of the 49% interest in TV Guide Network to OEP, and pursuant to the new accounting guidance on accounting for VIEs effective April 1, 2010, which the Company has retrospectively applied, the Company’s interest in TV Guide Network is being accounted for under the equity method of accounting (see Note 4).

Acquisition of Mandate Pictures, LLC

On September 10, 2007, the Company purchased all of the membership interests in Mandate Pictures, LLC (“Mandate”), a worldwide independent film producer and distributor. The Company paid approximately $58.6 million, comprised of $46.8 million in cash and 1,282,999 of the Company’s common shares. The value assigned to the shares for purposes of recording the acquisition was $11.8 million and was based on the average price of the Company’s common shares a few days prior and subsequent to the date of the closing of the acquisition, which is when it was publicly announced.

In addition, the Company may be obligated to pay additional amounts pursuant to the purchase agreement should certain films or derivative works meet certain target performance thresholds. Such amounts, to the extent they relate to films or derivative works of films identified at the acquisition date, will be charged to goodwill if the target thresholds are achieved, and such amounts, to the extent they relate to other qualifying films produced in the future, will be accounted for similar to other film participation arrangements. The amount to be paid is the excess of the sum of the following amounts over the performance threshold (i.e., the “Hurdle Amount”):


•	80% of the earnings of certain films for the longer of 5 years from the closing or 5 years from the release of the pictures, plus


•	20% of the earnings of certain pictures which commence principal photography within 5 years from the closing date for a period up to 10 years, plus


•	certain fees designated for derivative works which commence principal photography within 7 years of the initial release of the original picture.

The Hurdle Amount is the purchase price of approximately $56 million plus an interest cost accruing until such hurdle is reached, and certain other costs the Company agreed to pay in connection with the acquisition. Accordingly, the additional consideration is the total of the above in excess of the Hurdle Amount. As of December 31, 2011, the total earnings and fees from identified projects in process are not projected to reach the Hurdle Amount. However, as additional projects are identified in the future and current projects are released in the market place, the total projected earnings and fees from these projects could increase causing additional payments to the sellers to become payable.

13. Direct Operating Expenses

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	Three Months Ended			Three Months Ended		Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010		December 31, 2011			December 31, 2010
	(Amounts in thousands)
Amortization of films and television programs	$	135,997		$	138,095	$	355,211		$	400,583
Participations and residual expense	65,665			66,074		192,479			198,378
Other expenses:
Provision for doubtful accounts	336			505		15			798
Foreign exchange losses (gains)	(41		)	17		(46		)	721
	$	201,957		$	204,691	$	547,659		$	600,480

14. Comprehensive Loss



	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Amounts in thousands)
Net loss	$	(1,735	)	$	(6,017	)	$	(14,052	)	$	(99,744	)
Add (Deduct): Foreign currency translation adjustments	106			1,017			(4,253		)	2,312
Add (Deduct): Net unrealized gain (loss) on foreign exchange contracts	(188		)	518			474			(178		)
Comprehensive loss	$	(1,817	)	$	(4,482	)	$	(17,831	)	$	(97,610	)

15. Net Loss Per Share

Basic and diluted net loss per share is calculated based on the weighted average common shares outstanding for the period. Basic and diluted net loss per share for the three and nine months ended December 31, 2011 and 2010 is presented below:



	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Amounts in thousands)
Basic and Diluted Net Loss Per Common Share:
Numerator:
Net loss	$	(1,735	)	$	(6,017	)	$	(14,052	)	$	(99,744	)
Denominator:
Weighted average common shares outstanding	126,451			136,661			132,389			129,338
Basic and Diluted Net Loss Per Common Share	$	(0.01	)	$	(0.04	)	$	(0.11	)	$	(0.77	)

As of December 31, 2011 and 2010, the outstanding common shares issuable presented below were excluded from diluted net loss per common share because their inclusion would have had an anti-dilutive effect.

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	December 31, 2011	December 31, 2010
	(Amounts in thousands)
Anti-dilutive shares issuable
Conversion of notes	9,743	13,741
Share purchase options	3,282	3,310
Restricted share units	1,278	1,381
Contingently issuable restricted share units	315	274
Total weighted average anti-dilutive shares issuable excluded from Diluted Net Loss Per Common Share	14,618	18,706

The Company had 500,000,000 authorized common shares at December 31, 2011 and March 31, 2011. The table below outlines common shares reserved for future issuance:



	December 31, 2011	March 31, 2011
	(Amounts in thousands)
Stock options outstanding, average exercise price $9.79 (March 31, 2011 - $9.75)	3,282	3,310
Restricted share units — unvested	1,593	1,801
Share purchase options and restricted share units available for future issuance	3,474	3,683
Shares issuable upon conversion of October 2004 2.9375% Notes at conversion price of $11.50 per share	30	4,028
Shares issuable upon conversion of February 2005 3.625% Notes at conversion price of $14.28 per share	1,643	1,643
Shares issuable upon conversion of April 2009 3.625% Notes at conversion price of $8.25 per share	8,070	8,070
Shares reserved for future issuance	18,092	22,535

On August 30, 2011, the Company entered into an agreement with certain shareholders, whereby the Company repurchased 11,040,493 of its common shares at a price of $7.00 per share, for aggregate cash consideration of $77.1 million. The shares repurchased under the agreement are included in treasury shares in the accompanying unaudited consolidated balance sheets and statements of shareholders' equity.

On October 18, 2011, pursuant to the terms of an underwriting agreement, certain selling shareholders sold an aggregate of 19,201,000 common shares of the Company, at a price of $7.00 per share. The Company did not receive any proceeds from the sale of the shares in the offering. The Company paid the underwriter a fee of approximately $3.4 million at the close of the transaction.

16. Accounting for Share-Based Compensation

The Company recognized the following share-based compensation expense during the three and nine months ended December 31, 2011 and 2010:

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	Three Months Ended		Three Months Ended			Nine Months Ended		Nine Months Ended
	December 31, 2011		December 31, 2010			December 31, 2011		December 31, 2010
	(Amounts in thousands)
Compensation Expense:
Stock Options	$	29	$	33		$	89	$	2,615
Restricted Share Units and Other Share-based Compensation	2,531		2,006			7,286		23,776
Stock Appreciation Rights	2,185		(1,848		)	2,357		3,584
Total	$	4,745	$	191		$	9,732	$	29,975

On June 30, 2010, certain unvested equity awards of certain executive officers immediately vested as a result of the triggering of “change in control” provisions in their respective employment agreements. For purposes of the employment agreements with such executive officers, a “change in control” occurred on June 30, 2010, when a certain shareholder became the beneficial owner of 33% or more of the Company’s common shares. As a result, the Company recognized $21.9 million in additional compensation expense during the nine months ended December 31, 2010, which is included in the table above.

There was no income tax benefit recognized in the statements of operations for share-based compensation arrangements during the three and nine months ended December 31, 2011 and 2010.

During the nine months ended December 31, 2011, the Company granted 618,593 restricted share units at a weighted average grant date fair value of $6.86.

Total unrecognized compensation cost related to unvested stock options and restricted share unit awards at December 31, 2011 are $0.1 million and $6.5 million, respectively, and are expected to be recognized over a weighted average period of 0.6 and 1.5 years, respectively.

Stock Appreciation Rights

The Company has the following stock appreciation rights (“SARs”) outstanding as of December 31, 2011:



	Grant Date
	July 14, 2008		August 14, 2008		February 5, 2009		April 6, 2009		March 17, 2010		February 15, 2011
SARs outstanding	750,000		250,000		850,000		700,000		500,000		1,000,000
Vested and exercisable	750,000		250,000		850,000		700,000		500,000		666,667
Exercise price	$	9.56	$	11.16	$	5.45	$	5.17	$	5.95	$	6.13
Original vesting period (see below)	3 years		4 years		3 years		4 years		4 years		3 years
Expiration date	July 14, 2013		June 20, 2012		February 5, 2014		April 6, 2014		March 7, 2015		February 15, 2016
Fair Value as of December 31, 2011	$	1.21	$	0.19	$	3.41	$	3.64	$	3.42	$	3.60
Liability as of December 31, 2011 (in thousands)	$	908	$	48	$	2,896	$	2,549	$	1,711	$	3,223

At December 31, 2011, the Company has a stock-based compensation liability accrual in the amount of $11.3 million(March 31, 2011 — $6.1 million) included in accounts payable and accrued liabilities on the unaudited condensed consolidated balance sheets relating to these SARs.

On June 30, 2010, the SARs granted on February 5, 2009, April 6, 2009 and March 17, 2010 became fully vested due to the triggering of the “change in control” provisions in certain executive officer employment agreements discussed above.

SARs require that upon their exercise, the Company pay the holder the excess of the market value of the Company’s common stock at that time over the exercise price of the SAR multiplied by the number of SARs exercised. SARs can be exercised at any time subsequent to vesting and prior to expiration. The fair value of all unexercised SARs are determined at each reporting period under a Black-Scholes option pricing methodology based on the inputs in the table below and are recorded as a liability over the vesting period. With the exception of the SARs granted on July 14, 2008 and February 15, 2011, the fair value of the SARs is expensed on a pro rata basis over the vesting period or service period, if shorter. Changes in the fair value of vested SARs are expensed in the period of change. SARs granted on July 14, 2008 and February 15, 2011 were

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granted to a third-party producer and vest in 250,000 and 333,333 SAR increments, respectively, over a three-year period based on the commencement of principal photography of certain films. Accordingly, the pro rata portion of the fair value of SARs is recorded as part of the cost of the related films until commencement of principal photography of the motion picture (i.e., vesting) with subsequent changes in the fair value of SARs recorded to expense.

For the nine months ended December 31, 2011, the following assumptions were used in the Black-Scholes option-pricing model:



	Grant Date
	July 14, 2008		August 14, 2008		February 5, 2009		April 6, 2009		March 17, 2010		February 15, 2011
Risk-free interest rate	0.3	%	0.1	%	0.3	%	0.3	%	0.4	%	0.6	%
Expected option lives (in years)	1.5 years		0.5 years		2.1 years		2.3 years		3.2 years		4.1 years
Expected volatility for options	40	%	40	%	40	%	40	%	40	%	40	%
Expected dividend yield	—	%	—	%	—	%	—	%	—	%	—	%

17. Segment Information

Accounting guidance requires the Company to make certain disclosures about each reportable segment. The Company’s reportable segments are determined based on the distinct nature of their operations and each segment is a strategic business unit that offers different products and services and is managed separately. The Company has two reportable business segments: Motion Pictures and Television Production.

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

Television Production consists of the development, production and worldwide distribution of television productions including television series, television movies and mini-series and non-fiction programming.

Segmented information by business unit is as follows:

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	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	December 31, 2011		December 31, 2010		December 31, 2011		December 31, 2010
	(Amounts in thousands)
Segment revenues
Motion Pictures	$	233,327	$	326,695	$	644,745	$	941,125
Television Production	89,699		96,210		297,621		264,680
	$	323,026	$	422,905	$	942,366	$	1,205,805
Direct operating expenses
Motion Pictures	$	134,630	$	130,837	$	329,401	$	401,061
Television Production	67,327		73,854		218,258		199,419
	$	201,957	$	204,691	$	547,659	$	600,480
Distribution and marketing
Motion Pictures	$	63,521	$	146,083	$	257,986	$	437,524
Television Production	9,285		12,895		21,208		23,956
	$	72,806	$	158,978	$	279,194	$	461,480
Segment contribution before general and administration expenses
Motion Pictures	$	35,176	$	49,775	$	57,358	$	102,540
Television Production	13,087		9,461		58,155		41,305
	$	48,263	$	59,236	$	115,513	$	143,845
General and administration
Motion Pictures	$	10,686	$	11,948	$	34,332	$	35,587
Television Production	2,594		2,859		8,289		8,613
	$	13,280	$	14,807	$	42,621	$	44,200
Segment profit
Motion Pictures	$	24,490	$	37,827	$	23,026	$	66,953
Television Production	10,493		6,602		49,866		32,692
	$	34,983	$	44,429	$	72,892	$	99,645
Acquisition of investment in films and television programs
Motion Pictures	$	56,240	$	59,565	$	374,619	$	252,006
Television Production	62,182		47,920		177,187		169,142
	$	118,422	$	107,485	$	551,806	$	421,148

Segment contribution before general and administration expenses is defined as segment revenue less segment direct operating and distribution and marketing expenses.

Segment profit is defined as segment revenue less segment direct operating, distribution and marketing, and general and administration expenses. The reconciliation of total segment profit to the Company’s loss before income taxes is as follows:

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	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Amounts in thousands)
Company’s total segment profit	$	34,983		$	44,429		$	72,892		$	99,645
Less:
Shared services and corporate expenses (1)	(22,521		)	(21,131		)	(50,530		)	(90,135		)
Depreciation and amortization	(688		)	(1,409		)	(2,603		)	(4,485		)
Interest expense	(17,235		)	(13,363		)	(51,139		)	(41,735		)
Interest and other income	490			329			1,860			1,082
Gain on sale of asset disposal group	—			—			10,967			—
Loss on extinguishment of debt	—			—			(967		)	(14,505		)
Equity interests income (loss)	3,821			(13,144		)	8,325			(45,566		)
Loss before income taxes	$	(1,150	)	$	(4,289	)	$	(11,195	)	$	(95,699	)

(1)

Includes share-based compensation expense of $4.7 million and $0.2 million for the three months ended December 31, 2011 and 2010, respectively, and $9.7 million and $30.0 million for the nine months ended December 31, 2011 and 2010, respectively. During the nine months ended December 31, 2010 the Company incurred $21.9 million of share-based compensation expense associated with the immediate vesting of equity awards of certain executive officers triggered by the “change in control” provisions in their respective employment agreements. Also includes charges of $3.1 million and $1.0 million associated with a shareholder activist matter in the three and nine months ended December 31, 2011, respectively, compared to charges of $7.9 million and $20.4 million for the three and nine months ended December 31, 2010, respectively. Charges associated with a shareholder activist matter in the nine months ended December 31, 2011 include a $3.9 million benefit, recorded in the quarter ended June 30, 2011, related to a negotiated settlement with a vendor of costs incurred and recorded in the prior fiscal year. The three and nine months ended December 31, 2011 also include charges relating to the acquisition of Summit Entertainment, LLC of $2.3 million.

The following table sets forth significant assets as broken down by segment and other unallocated assets as of December 31, 2011 and March 31, 2011:



	December 31, 2011						March 31, 2011
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in thousands)
Significant assets by segment
Accounts receivable	$	209,518	$	213,599	$	423,117	$	167,093	$	163,531	$	330,624
Investment in films and television programs, net	649,638		153,234		802,872		503,065		104,692		607,757
Goodwill	204,240		28,961		233,201		210,293		28,961		239,254
	$	1,063,396	$	395,794	$	1,459,190	$	880,451	$	297,184	$	1,177,635
Other unallocated assets (primarily cash, other assets, and equity method investments)					303,044						380,209
Total assets					$	1,762,234					$	1,557,844

During the nine months ended December 31, 2011, a portion of Motion Pictures goodwill, amounting to $6.1 million was allocated to the Maple Pictures asset group and included in the carrying value of the assets disposed for purposes of calculating the gain on sale of Maple Pictures (see Note 12).

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Purchases of property and equipment amounted to $0.3 million and $1.5 million for the three and nine months ended December 31, 2011, respectively, and $0.3 million and $1.2 million for the three and nine months ended December 31, 2010, respectively, all primarily pertaining to purchases for the Company’s corporate headquarters.

18. Contingencies

From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business. While the resolution of these matters cannot be predicted with certainty, the Company does not believe, based on current knowledge, that the outcome of any currently pending claims or legal proceedings in which the Company is currently involved will have a material adverse effect on the Company’s financial statements.

19. Consolidating Financial Information — Convertible Senior Subordinated Notes

The October 2004 2.9375% Notes, the February 2005 3.625% Notes and the April 2009 3.625% Notes, by their terms, are fully and unconditionally guaranteed by the Company.

The following tables present unaudited condensed consolidating financial information as of December 31, 2011 and March 31, 2011, and for the nine months ended December 31, 2011 and 2010 for (1) the Company, on a stand-alone basis, (2) LGEI, on a stand-alone basis, (3) the non-guarantor subsidiaries of the Company (including the subsidiaries of LGEI), on a combined basis (collectively, the “Non-guarantor Subsidiaries”) and (4) the Company, on a consolidated basis.



	As of
	December 31, 2011
	Lions Gate Entertainment Corp.		Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	388	$	39,666		$	12,797		$	—		$	52,851
Restricted cash	—		26,496			—			—			26,496
Accounts receivable, net	1,090		13,127			408,900			—			423,117
Investment in films and television programs, net	2		6,391			797,568			(1,089		)	802,872
Property and equipment, net	—		7,725			634			—			8,359
Equity method investments	179		14,330			146,226			(816		)	159,919
Goodwill	10,173		—			223,028			—			233,201
Other assets	195		46,382			8,842			—			55,419
Subsidiary investments and advances	26,533		(30,190		)	(207,574		)	211,231			—
	$	38,560	$	123,927		$	1,390,421		$	209,326		$	1,762,234
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	94,500		$	—		$	—		$	94,500
Senior secured second-priority notes	—		431,334			—			—			431,334
Accounts payable and accrued liabilities	383		48,383			135,196			38			184,000
Participations and residuals	186		3,411			276,377			340			280,314
Film obligations and production loans	72		—			463,309			—			463,381
Convertible senior subordinated notes and other financing obligations	—		67,622			3,718			—			71,340
Deferred revenue	—		17,831			182,415			(800		)	199,446
Shareholders’ equity (deficiency)	37,919		(539,154		)	329,406			209,748			37,919
	$	38,560	$	123,927		$	1,390,421		$	209,326		$	1,762,234

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	Nine Months Ended
	December 31, 2011
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
				(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues	$	—		$	23,815		$	940,847		$	(22,296	)	$	942,366
EXPENSES:
Direct operating	449			(153		)	552,073			(4,710		)	547,659
Distribution and marketing	(1		)	(11		)	279,302			(96		)	279,194
General and administration	5,853			44,318			43,164			(184		)	93,151
Gain on sale of asset disposal group	(10,967		)	—			—			—			(10,967		)
Depreciation and amortization	—			2,205			398			—			2,603
Total expenses	(4,666		)	46,359			874,937			(4,990		)	911,640
OPERATING INCOME (LOSS)	4,666			(22,544		)	65,910			(17,306		)	30,726
Other expenses (income):
Interest expense	—			46,927			4,995			(783		)	51,139
Interest and other income	(74		)	(2,214		)	(355		)	783			(1,860		)
Loss on extinguishment of debt	—			967			—			—			967
Total other expenses (income)	(74		)	45,680			4,640			—			50,246
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	4,740			(68,224		)	61,270			(17,306		)	(19,520		)
Equity interests income (loss)	(18,869		)	48,922			12,998			(34,726		)	8,325
INCOME (LOSS) BEFORE INCOME TAXES	(14,129		)	(19,302		)	74,268			(52,032		)	(11,195		)
Income tax provision (benefit)	(77		)	1,526			1,408			—			2,857
NET INCOME (LOSS)	$	(14,052	)	$	(20,828	)	$	72,860		$	(52,032	)	$	(14,052	)

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	Nine Months Ended
	December 31, 2011
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments		Lions Gate Consolidated
							(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	71,098		$	(134,559	)	$	(148,391	)	$	—	$	(211,852	)
INVESTING ACTIVITIES:
Proceeds from the sale of asset disposal group, net of transaction costs and cash disposed of $3,943 (see Note 12)	9,119			—			—			—		9,119
Investment in equity method investees	(1,030		)	—			—			—		(1,030		)
Increase in loan receivables	—			(1,500		)	—			—		(1,500		)
Purchases of property and equipment	—			(1,520		)	(29		)	—		(1,549		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	8,089			(3,020		)	(29		)	—		5,040
FINANCING ACTIVITIES:
Exercise of stock options	151			—			—			—		151
Tax withholding requirements on equity awards	(2,630		)	—			—			—		(2,630		)
Repurchase of common shares	(77,088		)	—			—			—		(77,088		)
Borrowings under senior revolving credit facility	—			263,650			—			—		263,650
Repayments of borrowings under senior revolving credit facility	—			(238,900		)	—			—		(238,900		)
Borrowings under individual production loans	—			—			198,148			—		198,148
Repayment of individual production loans	—			—			(133,998		)	—		(133,998		)
Production loan borrowings under film credit facility	—			—			43,714			—		43,714
Production loan repayments under film credit facility	—			—			(23,518		)	—		(23,518		)
Change in restricted cash collateral associated with financing activities	—			—			—			—		—
Proceeds from sale of senior secured second-priority notes, net of deferred financing costs	—			201,955			—			—		201,955
Repurchase of senior secured second-priority notes	—			(9,852		)	—			—		(9,852		)
Repurchase of convertible senior subordinated notes	—			(46,059		)	—			—		(46,059		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(79,567		)	170,794			84,346			—		175,573
NET CHANGE IN CASH AND CASH EQUIVALENTS	(380		)	33,215			(64,074		)	—		(31,239		)
FOREIGN EXCHANGE EFFECTS ON CASH	(27		)	—			(2,302		)	—		(2,329		)
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	795			6,451			79,173			—		86,419
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	388		$	39,666		$	12,797		$	—	$	52,851

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	As of
	March 31, 2011
	Lions Gate Entertainment Corp.		Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	795	$	6,451		$	79,173		$	—		$	86,419
Restricted cash	13,992		29,466			—			—			43,458
Accounts receivable, net	494		4,237			325,893			—			330,624
Investment in films and television programs, net	12		6,391			603,264			(1,910		)	607,757
Property and equipment, net	—		8,292			797			—			9,089
Equity method investments	1,123		17,052			132,410			—			150,585
Goodwill	10,173		—			229,081			—			239,254
Other assets	458		34,214			11,650			—			46,322
Assets held for sale	—		—			44,336			—			44,336
Subsidiary investments and advances	102,680		(171,895		)	(229,913		)	299,128			—
	$	129,727	$	(65,792	)	$	1,196,691		$	297,218		$	1,557,844
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	69,750		$	—		$	—		$	69,750
Senior secured second-priority notes	—		226,331			—			—			226,331
Accounts payable and accrued liabilities	1,910		52,035			177,031			13			230,989
Participations and residuals	195		11,093			286,290			(96		)	297,482
Film obligations and production loans	76		—			326,364			—			326,440
Convertible senior subordinated notes and other financing obligations	—		107,255			3,718			—			110,973
Deferred revenue	—		134			150,803			—			150,937
Liabilities held for sale	—		—			17,396			—			17,396
Shareholders’ equity (deficiency)	127,546		(532,390		)	235,089			297,301			127,546
	$	129,727	$	(65,792	)	$	1,196,691		$	297,218		$	1,557,844

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	Nine Months Ended
	December 31, 2010
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues	$	—		$	17,428		$	1,205,101		$	(16,724	)	$	1,205,805
EXPENSES:
Direct operating	—			1,109			626,332			(26,961		)	600,480
Distribution and marketing	—			737			460,773			(30		)	461,480
General and administration	19,389			70,567			44,514			(135		)	134,335
Depreciation and amortization	—			2,764			1,721			—			4,485
Total expenses	19,389			75,177			1,133,340			(27,126		)	1,200,780
OPERATING INCOME (LOSS)	(19,389		)	(57,749		)	71,761			10,402			5,025
Other expenses (income):
Interest expense	—			39,162			3,131			(558		)	41,735
Interest and other income	(129		)	(1,030		)	(481		)	558			(1,082		)
Loss on extinguishment of debt	—			14,505			—			—			14,505
Total other expenses (income)	(129		)	52,637			2,650			—			55,158
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	(19,260		)	(110,386		)	69,111			10,402			(50,133		)
Equity interests income (loss)	(80,484		)	4,601			(44,704		)	75,021			(45,566		)
INCOME (LOSS) BEFORE INCOME TAXES	(99,744		)	(105,785		)	24,407			85,423			(95,699		)
Income tax provision	—			2,027			2,018			—			4,045
NET INCOME (LOSS)	$	(99,744	)	$	(107,812	)	$	22,389		$	85,423		$	(99,744	)

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	Nine Months Ended
	December 31, 2010
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments		Lions Gate Consolidated
	(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	15,365		$	(208,795	)	$	77,794		$	—	$	(115,636	)
INVESTING ACTIVITIES:
Purchases of restricted investments	—			(13,993		)	—			—		(13,993		)
Proceeds from the sale of restricted investments	—			20,989			—			—		20,989
Buy-out of the earn-out associated with the acquisition of Debmar-Mercury, LLC	—			—			(15,000		)	—		(15,000		)
Investment in equity method investees	(2,000		)	—			(22,677		)	—		(24,677		)
Repayment of loans receivable	—			—			8,113			—		8,113
Purchases of property and equipment	—			(598		)	(589		)	—		(1,187		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	(2,000		)	6,398			(30,153		)	—		(25,755		)
FINANCING ACTIVITIES:
Tax withholding requirements on equity awards	(12,919		)	—			—			—		(12,919		)
Borrowings under senior revolving credit facility	—			481,750			—			—		481,750
Repayments of borrowings under senior revolving credit facility	—			(274,500		)	—			—		(274,500		)
Borrowings under individual production loans	—			—			100,203			—		100,203
Repayment of individual production loans	—			—			(143,297		)	—		(143,297		)
Production loan borrowings under film credit facility	—			—			17,721			—		17,721
Production loan repayments under film credit facility	—			—			(31,507		)	—		(31,507		)
Change in restricted cash collateral associated with financing activities	—			—			3,087			—		3,087
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(12,919		)	207,250			(53,793		)	—		140,538
NET CHANGE IN CASH AND CASH EQUIVALENTS	446			4,853			(6,152		)	—		(853		)
FOREIGN EXCHANGE EFFECTS ON CASH	33			—			1,156			—		1,189
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	814			3,059			65,369			—		69,242
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	1,293		$	7,912		$	60,373		$	—	$	69,578

20. Consolidating Financial Information — Senior Secured Second-Priority Notes

In October 2009, the Company issued $236.0 million aggregate principal amount of the Senior Notes, and in May 2011, the Company issued an additional $200.0 million aggregate principal amount of the Senior Notes, in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act through LGEI.

The Company has agreed to make available to the trustee and the holders of the Senior Notes the following tables which present unaudited condensed consolidating financial information as of December 31, 2011 and March 31, 2011, and for the nine months ended December 31, 2011 and 2010 for (1) the Company, on a stand-alone basis, (2) LGEI, on a stand-alone basis, (3) the guarantor subsidiaries of the Company (including the subsidiaries of LGEI), on a combined basis (4) the non-guarantor subsidiaries of the Company (including the subsidiaries of LGEI), on a combined basis and (5) the Company, on a consolidated basis.

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	As of
	December 31, 2011
	Lions Gate Entertainment Corp.		Lions Gate Entertainment Inc.
						Other Subsidiaries						Consolidating Adjustments			Lions Gate Consolidated
						Guarantors			Non-guarantors			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	388	$	39,666		$	2,810		$	9,987		$	—		$	52,851
Restricted cash	—		26,496			—			—			—			26,496
Accounts receivable, net	1,090		13,127			375,214			33,686			—			423,117
Investment in films and television programs, net	2		6,391			717,346			81,537			(2,404		)	802,872
Property and equipment, net	—		7,725			126			508			—			8,359
Equity method investments	179		14,330			35,782			112,256			(2,628		)	159,919
Goodwill	10,173		—			192,830			30,198			—			233,201
Other assets	195		46,382			7,529			1,313			—			55,419
Subsidiary investments and advances	26,533		(30,190		)	(72,356		)	(142,260		)	218,273			—
	$	38,560	$	123,927		$	1,259,281		$	127,225		$	213,241		$	1,762,234
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	94,500		$	—		$	—		$	—		$	94,500
Senior secured second-priority notes	—		431,334			—			—			—			431,334
Accounts payable and accrued liabilities	383		48,383			110,711			24,485			38			184,000
Participations and residuals	186		3,411			252,872			23,954			(109		)	280,314
Film obligations and production loans	72		—			444,083			19,226			—			463,381
Convertible senior subordinated notes and other financing obligations	—		67,622			3,718			—			—			71,340
Deferred revenue	—		17,831			177,954			4,461			(800		)	199,446
Shareholders’ equity (deficiency)	37,919		(539,154		)	269,943			55,099			214,112			37,919
	$	38,560	$	123,927		$	1,259,281		$	127,225		$	213,241		$	1,762,234

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	Nine Months Ended
	December 31, 2011
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.
							Other Subsidiaries						Consolidating Adjustments			Lions Gate Consolidated
							Guarantors			Non-guarantors			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues	$	—		$	23,815		$	850,186		$	100,650		$	(32,285	)	$	942,366
EXPENSES:
Direct operating	449			(153		)	502,775			60,623			(16,035		)	547,659
Distribution and marketing	(1		)	(11		)	235,383			43,919			(96		)	279,194
General and administration	5,853			44,318			34,900			8,264			(184		)	93,151
Gain on sale of asset disposal group	(10,967		)	—			—			—			—			(10,967		)
Depreciation and amortization	—			2,205			140			258			—			2,603
Total expenses	(4,666		)	46,359			773,198			113,064			(16,315		)	911,640
OPERATING INCOME (LOSS)	4,666			(22,544		)	76,988			(12,414		)	(15,970		)	30,726
Other expenses (income):
Interest expense	—			46,927			4,074			921			(783		)	51,139
Interest and other income	(74		)	(2,214		)	(218		)	(137		)	783			(1,860		)
Loss on extinguishment of debt	—			967			—			—			—			967
Total other expenses (income)	(74		)	45,680			3,856			784			—			50,246
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	4,740			(68,224		)	73,132			(13,198		)	(15,970		)	(19,520		)
Equity interests income (loss)	(18,869		)	48,922			18,377			(5,259		)	(34,846		)	8,325
INCOME (LOSS) BEFORE INCOME TAXES	(14,129		)	(19,302		)	91,509			(18,457		)	(50,816		)	(11,195		)
Income tax provision (benefit)	(77		)	1,526			1,119			289			—			2,857
NET INCOME (LOSS)	$	(14,052	)	$	(20,828	)	$	90,390		$	(18,746	)	$	(50,816	)	$	(14,052	)

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	Nine Months Ended
	December 31, 2011
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.
							Other Subsidiaries						Consolidating Adjustments		Lions Gate Consolidated
							Guarantors			Non-guarantors
	(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	71,098		$	(134,559	)	$	(84,234	)	$	(64,157	)	$	—	$	(211,852	)
INVESTING ACTIVITIES:
Proceeds from the sale of asset disposal group, net of transaction costs and cash disposed of $3,943 (see Note 12)	9,119			—			—			—			—		9,119
Investment in equity method investees	(1,030		)	—			—			—			—		(1,030		)
Increase in loan receivables	—			(1,500		)	—			—			—		(1,500		)
Purchases of property and equipment	—			(1,520		)	—			(29		)	—		(1,549		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	8,089			(3,020		)	—			(29		)	—		5,040
FINANCING ACTIVITIES:
Exercise of stock options	151			—			—						—		151
Tax withholding requirements on equity awards	(2,630		)	—			—			—			—		(2,630		)
Repurchase of common shares	(77,088		)												(77,088		)
Borrowings under senior revolving credit facility	—			263,650			—			—			—		263,650
Repayments of borrowings under senior revolving credit facility	—			(238,900		)	—			—			—		(238,900		)
Borrowings under individual production loans	—			—			193,786			4,362			—		198,148
Repayment of individual production loans	—			—			(127,634		)	(6,364		)	—		(133,998		)
Production loan borrowings under film credit facility	—			—			43,714			—			—		43,714
Production loan repayments under film credit facility	—			—			(23,518		)	—			—		(23,518		)
Change in restricted cash collateral associated with financing activities	—			—			—			—			—		—
Proceeds from sale of senior secured second-priority notes, net of deferred financing costs	—			201,955			—			—			—		201,955
Repurchase of senior secured second-priority notes	—			(9,852		)	—			—			—		(9,852		)
Repurchase of convertible senior subordinated notes	—			(46,059		)	—			—			—		(46,059		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(79,567		)	170,794			86,348			(2,002		)	—		175,573
NET CHANGE IN CASH AND CASH EQUIVALENTS	(380		)	33,215			2,114			(66,188		)	—		(31,239		)
FOREIGN EXCHANGE EFFECTS ON CASH	(27		)	—			—			(2,302		)	—		(2,329		)
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	795			6,451			696			78,477			—		86,419
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	388		$	39,666		$	2,810		$	9,987		$	—	$	52,851

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	As of
	March 31, 2011
	Lions Gate Entertainment Corp.		Lions Gate Entertainment Inc.
						Other Subsidiaries						Consolidating Adjustments			Lions Gate Consolidated
						Guarantors			Non-guarantors			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	795	$	6,451		$	696		$	78,477		$	—		$	86,419
Restricted cash	13,992		29,466			—			—			—			43,458
Accounts receivable, net	494		4,237			292,860			33,033			—			330,624
Investment in films and television programs, net	12		6,391			513,505			89,137			(1,288		)	607,757
Property and equipment, net	—		8,292			189			608			—			9,089
Equity method investments	1,123		17,052			17,405			117,514			(2,509		)	150,585
Goodwill	10,173		—			198,883			30,198			—			239,254
Other assets	458		34,214			10,658			992			—			46,322
Assets held for sale	—		—			—			44,336			—			44,336
Subsidiary investments and advances	102,680		(171,895		)	(28,053		)	(199,205		)	296,473			—
	$	129,727	$	(65,792	)	$	1,006,143		$	195,090		$	292,676		$	1,557,844
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	69,750		$	—		$	—		$	—		$	69,750
Senior secured second-priority notes	—		226,331			—			—			—			226,331
Accounts payable and accrued liabilities	1,910		52,035			141,715			35,288			41			230,989
Participations and residuals	195		11,093			264,320			21,973			(99		)	297,482
Film obligations and production loans	76		—			308,744			17,620			—			326,440
Convertible senior subordinated notes and other financing obligations	—		107,255			3,718			—			—			110,973
Deferred revenue	—		134			123,696			27,107			—			150,937
Liabilities held for sale	—		—			—			17,396			—			17,396
Shareholders’ equity (deficiency)	127,546		(532,390		)	163,950			75,706			292,734			127,546
	$	129,727	$	(65,792	)	$	1,006,143		$	195,090		$	292,676		$	1,557,844

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	Nine Months Ended
	December 31, 2010
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.
							Other Subsidiaries						Consolidating Adjustments			Lions Gate Consolidated
							Guarantors			Non-guarantors
							(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues	$	—		$	17,428		$	1,087,408		$	148,821		$	(47,852	)	$	1,205,805
EXPENSES:
Direct operating	—			1,109			577,800			66,703			(45,132		)	600,480
Distribution and marketing	—			737			398,683			62,090			(30		)	461,480
General and administration	19,389			70,567			33,589			10,922			(132		)	134,335
Depreciation and amortization	—			2,764			1,107			614			—			4,485
Total expenses	19,389			75,177			1,011,179			140,329			(45,294		)	1,200,780
OPERATING INCOME (LOSS)	(19,389		)	(57,749		)	76,229			8,492			(2,558		)	5,025
Other expenses (income):
Interest expense	—			39,162			2,504			627			(558		)	41,735
Interest and other income	(129		)	(1,030		)	(363		)	(118		)	558			(1,082		)
Loss on extinguishment of debt	—			14,505			—			—			—			14,505
Total other expenses (income)	(129		)	52,637			2,141			509			—			55,158
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	(19,260		)	(110,386		)	74,088			7,983			(2,558		)	(50,133		)
Equity interests income (loss)	(80,484		)	4,601			(44,439		)	(265		)	75,021			(45,566		)
INCOME (LOSS) BEFORE INCOME TAXES	(99,744		)	(105,785		)	29,649			7,718			72,463			(95,699		)
Income tax provision (benefit)	—			2,027			1,370			648			—			4,045
NET INCOME (LOSS)	$	(99,744	)	$	(107,812	)	$	28,279		$	7,070		$	72,463		$	(99,744	)

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	Nine Months Ended
	December 31, 2010
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.
							Other Subsidiaries						Consolidating Adjustments		Lions Gate Consolidated
							Guarantors			Non-guarantors
							(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	15,365		$	(208,795	)	$	73,459		$	4,335		$	—	$	(115,636	)
INVESTING ACTIVITIES:
Purchases of restricted investments	—			(13,993		)	—			—			—		(13,993		)
Proceeds from the sale of restricted investments	—			20,989			—			—			—		20,989
Buy-out of the earn-out associated with the acquisition of Debmar-Mercury, LLC	—			—			(15,000		)	—			—		(15,000		)
Investment in equity method investees	(2,000		)	—			(22,677		)	—			—		(24,677		)
Repayment of loans receivable	—			—			8,113			—			—		8,113
Purchases of property and equipment	—			(598		)	(426		)	(163		)	—		(1,187		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	(2,000		)	6,398			(29,990		)	(163		)	—		(25,755		)
FINANCING ACTIVITIES:
Tax withholding requirements on equity awards	(12,919		)	—			—			—			—		(12,919		)
Borrowings under senior revolving credit facility	—			481,750			—			—			—		481,750
Repayments of borrowings under senior revolving credit facility	—			(274,500		)	—			—			—		(274,500		)
Borrowings under individual production loans	—			—			99,625			578			—		100,203
Repayment of individual production loans	—			—			(139,543		)	(3,754		)	—		(143,297		)
Production loan borrowings under film credit facility	—			—			17,721			—			—		17,721
Production loan repayments under film credit facility	—			—			(31,507		)	—			—		(31,507		)
Change in restricted cash collateral associated with financing activities	—			—			3,087			—			—		3,087
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(12,919		)	207,250			(50,617		)	(3,176		)	—		140,538
NET CHANGE IN CASH AND CASH EQUIVALENTS	446			4,853			(7,148		)	996			—		(853		)
FOREIGN EXCHANGE EFFECTS ON CASH	33			—			—			1,156			—		1,189
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	814			3,059			8,152			57,217			—		69,242
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	1,293		$	7,912		$	1,004		$	59,369		$	—	$	69,578

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21. Subsequent Events (Unaudited)

Convertible Senior Subordinated Notes Issuance. On January 11, 2012, LGEI sold $45.0 million in aggregate principal amount of 4.00% Convertible Senior Subordinated Notes with a maturity date of January 11, 2017 (the "January 2012 Notes"). The proceeds were used to fund a portion of the acquisition of Summit Entertainment, LLC discussed below. Interest on the January 2012 Notes is payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2012. The January 2012 Notes are convertible into common shares of the Company at any time prior to maturity or repurchase by the Company, at an initial conversion price of approximately $10.50 per share, subject to adjustment in certain circumstances as specified in the Indenture.

Acquisition of Summit Entertainment, LLC. On January 13, 2012, the Company purchased all of the membership interests in Summit Entertainment, LLC (“Summit”), a worldwide independent film producer and distributor. The aggregate purchase price was approximately $413.7 million, which consisted of $343.5 million in cash paid at closing, 5,837,781 in the Company's common shares paid at closing (a part of which are included in escrow for indemnification purposes), and an additional $20.0 million of cash or the Company's common shares (based on a common share price of $8.39 per share) to be paid or issued, at the Company's option, within 60 days of the date of the transaction. Of the cash portion of the purchase price, approximately $284.4 million was funded with cash on the balance sheet of Summit. The value assigned to the shares for purposes of recording the acquisition was $50.2 million and was based on the closing price of the Company’s common shares on the date of closing of the acquisition. Additionally, the Company may be obligated to pay additional cash consideration of up to $7.5 million pursuant to the purchase agreement, should the domestic theatrical receipts from certain films meet certain target performance thresholds.

In addition, on the date of the close, Summit's existing term loan of $508.0 million was paid off with cash from Lionsgate and the net proceeds of $476.2 million, after fees and expenses, from a new term loan to Summit with a principal amount of $500.0 million, maturing on September 7, 2016 (the "Term Loan"). The Term Loan is secured by collateral of the Summit assets. The Term Loan is repayable in quarterly installments equal to $13.75 million, with the balance payable on the final maturity date. The Term Loan is also repayable periodically to the extent of the excess cash flow, as defined, generated by Summit and its subsidiaries. The Term Loan bears interest by reference to a base rate or the LIBOR rate, in either case plus an applicable margin of 5.00% in the case of base rate loans and 6.00% in the case of LIBOR loans.

The acquisition will be accounted for as a purchase, with the results of operations of Summit included in the Company's consolidated results from January 13, 2012. The following unaudited pro forma condensed consolidated statements of operations presented below illustrate the results of operations of the Company as if the acquisition of Summit as described above and the issuance of the $45.0 million Convertible Senior Subordinated Notes occurred on April 1, 2010. The information below is based on a preliminary estimate of the purchase price allocation to the assets and liabilities acquired. The purchase price allocation is subject to revision, as more detailed analysis of investment in films and intangible assets is completed and additional information on the fair value of assets and liabilities becomes available, including receipts of final appraisals of the net assets acquired. A change in the fair value of the net assets of Summit may change the amount of the purchase price allocable to goodwill, and could impact the amounts of amortization expense included in the pro forma statement of operations information shown below. The statement of operations information below includes the statement of operations of Summit for the nine months ended September 30, 2011 and 2010 combined with the Company's statement of operations for the nine months ended December 31, 2011 and 2010.

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	Nine Months Ended			Nine Months Ended
	December 31, 2011			December 31, 2010
	(Amounts in thousands, except per share amounts)
Revenues	$	1,273,655		$	2,011,114
Operating income	$	41,975		$	202,544
Net income (loss)	$	(27,558	)	$	83,266
Basic Net Income (Loss) Per Common Share	$	(0.20	)	$	0.62
Diluted Net Income (Loss) Per Common Share	$	(0.20	)	$	0.61
Weighted average number of common shares outstanding - Basic	138,227			135,176
Weighted average number of common shares outstanding - Diluted	138,227			148,396

The unaudited pro forma condensed consolidated statements of operations do not include any adjustments for any restructuring activities, operating efficiencies or cost savings.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a leading global entertainment company with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution and new channel platforms.

Revenues

Our revenues are derived from the Motion Pictures and Television Production segments, as described below. Our revenues are derived from the U.S., Canada, the United Kingdom, Australia and other foreign countries; none of the non-U.S. countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2011 and 2010.

Motion Pictures. Motion Pictures includes “Theatrical,” “Home Entertainment,” “Television,” “International,” “Lionsgate UK,” and “Mandate Pictures” revenue.

Theatrical revenues are derived from the theatrical release of motion pictures in the U.S. and Canada which are distributed to theatrical exhibitors on a picture-by-picture basis. The financial terms that we negotiate with our theatrical exhibitors generally provide that we receive a percentage of the box office results and are negotiated on a picture-by-picture basis.

Home Entertainment revenues includes revenues from our own film and television productions and acquired or licensed films, including theatrical and direct-to-video releases, generated from the sale to retail stores and through digital media platforms. In addition, we have revenue sharing arrangements with certain rental stores which generally provide that in exchange for a nominal or no upfront sales price, we share in the rental revenues generated by each such store on a title-by-title basis. We categorized our Home Entertainment revenue as follows:


•	Packaged media revenue: Packaged media revenue consists of the sale or rental of DVDs and Blu-ray devices.


•	Electronic media revenue: Electronic media revenue consists of revenues generated from electronic sell-through or “EST”, digital rental, pay-per-view and video-on-demand platforms.

Television revenues are primarily derived from the licensing of our productions and acquired films to the domestic cable, satellite, and free and pay television markets.

International revenues include revenues from our international subsidiaries from the licensing and sale of our productions, acquired films, our catalog product or libraries of acquired titles and revenues from our distribution to international sub-distributors, on a territory-by-territory basis.

Lionsgate UK revenues include revenues from the licensing and sale of our productions, acquired films, our catalog product or libraries of acquired titles from our subsidiary located in the United Kingdom.

Mandate Pictures revenues include revenues from the sales and licensing of domestic and worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors and to international sub-distributors.

Television Production. Television Production includes the licensing and syndication to domestic and international markets of one-hour and half-hour drama series, television movies and mini-series and non-fiction programming, and home entertainment revenues consisting of television production movies or series.

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, 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 to parties associated with the film, including producers, writers, directors or actors, etc. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild, Directors Guild of America, and Writers Guild of America, based on the performance of the film 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

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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.

General and administration expenses include salaries and other overhead.

Recent Developments

Convertible Senior Subordinated Notes Issuance. On January 11, 2012, LGEI sold $45.0 million in aggregate principal amount of 4.00% Convertible Senior Subordinated Notes with a maturity date of January 11, 2017 (the "January 2012 Notes"). The proceeds were used to fund a portion of the acquisition of Summit discussed above. Interest on the January 2012 Notes is payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2012. The January 2012 Notes are convertible into common shares of the Company at any time prior to maturity or repurchase by the Company, at an initial conversion price of approximately $10.50 per share, subject to adjustment in certain circumstances as specified in the Indenture.

Secondary Public Offering. On October 18, 2011, pursuant to the terms of an underwriting agreement, certain selling shareholders sold an aggregate of 19,201,000 common shares of the Company, at a price of $7.00 per share. The Company did not receive any proceeds from the sale of the shares in the offering. The Company paid the underwriter a fee of approximately $3.4 million at the close of the transaction.

Redemption of October 2004 2.9375% Notes. On October 15, 2011, certain holders of the October 2004 2.9375% Notes required LGEI to repurchase $26.6 million in aggregate principal amount (carrying value - $26.6 million) of the October 2004 2.9375% Notes, pursuant to the redemption terms of the October 2004 2.9375% Notes (see Note 10 of our unaudited condensed consolidated financial statements). LGEI paid approximately $27.0 million for the repurchase, representing a price equal to 100% of the principal amount on October 17, 2011, together with accrued and unpaid interest through October 17, 2011.

Share Repurchases. On August 30, 2011, the Company entered into an agreement with certain shareholders, whereby the Company repurchased 11,040,493 of its common shares at a price of $7.00 per share, for aggregate cash consideration of $77.1 million. The shares repurchased under the agreement are included in treasury shares in the accompanying unaudited consolidated balance sheets and statements of shareholders' equity.

Sale of Maple Pictures. On August 10, 2011, the Company sold its interest in Maple Pictures Corp. (“Maple Pictures”) to Alliance Films Holdings Inc. (“Alliance”), a leading Canadian producer and distributor of motion pictures, television programming and home entertainment. The sales price was approximately $35.3 million, net of a working capital adjustment. Alliance is now responsible for all of Maple Pictures’ distribution, including Maple Pictures’ exclusive five-year output deal for Canadian distribution of the Company’s new motion picture and second window television product and Maple Pictures’ exclusive long-term arrangement for distribution of Canadian rights of the Company’s filmed entertainment library (i.e.,

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distribution rights). The sales price was allocated between the fair value of the distribution rights and the fair value of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights of $17.8 million was recorded as deferred revenue and will be recognized as revenue by the Company as the revenues are earned pursuant to the distribution rights. The sales proceeds less the fair value of the distribution rights constitutes the proceeds allocated to the sale of Maple Pictures exclusive of the distribution rights. The fair value of the distribution rights was determined based on an estimate of the cash flows to be generated by Alliance pursuant to the distribution agreements, discounted at risk-adjusted discount rates of the film categories between 10% and 11%.

Additional Issuance of Senior Secured Second-Priority Notes. On May 13, 2011, Lions Gate Entertainment Inc. (“LGEI”), our wholly-owned subsidiary, issued approximately $200.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the “May 2011 Senior Notes”) in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The May 2011 Senior Notes were issued pursuant to a supplemental indenture dated as of May 13, 2011 (the “Supplemental Indenture”) to the indenture dated as of October 21, 2009 (the “October 2009 Indenture”), among LGEI, the Company, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee. LGEI had issued $236.0 million aggregate principal amount of 10.25% senior secured second priority notes due 2016 (the “October 2009 Senior Notes”) under the October 2009 Indenture on October 21, 2009. The Supplemental Indenture amended the October 2009 Indenture to, among other things, enable LGEI to issue additional notes having the same terms as the October 2009 Senior Notes, except for the issue date, issue price and first interest payment, in an aggregate principal amount of up to $200.0 million. The May 2011 Senior Notes were sold at 102.219% of the principal amount plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $204.4 million and net proceeds of approximately $192.4 million after estimated fees and expenses, including $5.6 million paid in connection with the consent solicitation of holders of the October 2009 Senior Notes. A portion of the proceeds were used to pay down amounts outstanding under our senior secured credit facility. The May 2011 Senior Notes accrue interest at a rate of 10.25% per annum from May 1, 2011 and will be payable semiannually on May 1 and November 1 of each year, commencing on November 1, 2011. The May 2011 Senior Notes will mature on November 1, 2016.

Repurchase and Sale of a Portion of the Senior Secured Second-Priority Notes. In August 2011, a subsidiary of LGEI paid $9.9 million to repurchase $10.0 million of aggregate principal amount (carrying value — $9.9 million) of the Senior Notes. The Company recorded a loss on extinguishment in the quarter ended December 31, 2011 of $0.4 million, which includes $0.5 million of deferred financing costs written off. In September 2011, in connection with the common shares repurchased as discussed in Note 15 to our consolidated financial statements, LGEI resold such Senior Notes at 99.0% of the $10.0 million face amount therof, plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $10.2 million.

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 attached to the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. For example, accounting for films and television programs requires us to estimate future revenue and expense amounts which, due to the inherent uncertainties involved in making such estimates, are likely to differ to some extent from actual results. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 2 to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2011.

Accounting for Films and Television Programs. We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in films and television programs. These costs for an individual film or television program are amortized and participation and residual costs are accrued to direct operating expenses in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the year expected to be recognized from exploitation, exhibition or sale of such film or television program over a period not to exceed ten years from the date of initial release. For previously released film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed 20 years from the date of acquisition.

Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates

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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 than anticipated and some are less successful than anticipated. Our 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 write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value. Our management estimates the ultimate revenue based on experience with similar titles or title genre, the general public appeal of the cast, actual performance (when available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general economic conditions and other tangible and intangible factors, many of which we do not control and which may change.

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.

Revenue Recognition. Revenue from the theatrical release of feature films is recognized at the time of exhibition based on our participation in box office receipts. Revenue from the sale of DVDs/Blu-ray discs 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). Under revenue sharing arrangements, rental revenue is recognized when we are entitled to receipts and such receipts are determinable. Revenues from television licensing are recognized when the feature film or television program is available to the licensee for telecast. For television licenses that include separate availability “windows” during the license period, revenue is allocated over the “windows.” Revenue from sales to international territories are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the sales contract, and the right to exploit the feature film or television program has commenced. For multiple media rights contracts with a fee for a single film or television program where the contract provides for media holdbacks (defined as contractual media release restrictions), the fee is allocated to the various media based on our assessment of the relative fair value of the rights to exploit each media and is recognized as each holdback is released. For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on our assessment of the relative fair value of each title. The primary estimate requiring the most subjectivity and judgment involving revenue recognition is the estimate of sales returns associated with our revenue from the sale of DVD’s/Blu-ray discs in the retail market which is discussed separately below under the caption “Sales Returns Allowance.”

Sales Returns Allowance. Revenues are recorded net of estimated returns and other allowances. We estimate reserves for DVD/Blu-ray 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 DVD/Blu-ray 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 $2.3 million and $4.3 million on our total revenue in the three and nine months ended December 31, 2011, respectively.

Provisions for Accounts Receivable. We estimate provisions for accounts receivable based on historical experience and relevant facts and information regarding the collectability of the accounts receivable. In performing this evaluation, significant judgments and estimates are involved, including an analysis of specific risks on a customer-by-customer basis for our larger customers and an analysis of the length of time receivables have been past due. The financial condition of a given customer and its ability to pay may change over time or could be better or worse than anticipated and could result in an increase or decrease to our allowance for doubtful accounts, which, when the impact of such change is material, is disclosed in our discussion on direct operating expenses elsewhere in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. We recognize a future tax benefit to the extent that realization of such benefit is more likely than not or a valuation allowance is

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applied. In order to realize the benefit of our deferred tax assets we will need to generate sufficient taxable income in the future. Because of our historical operating losses, we have provided a full valuation allowance against our net deferred tax assets. However, the assessment as to whether there will be sufficient taxable income to realize our net deferred tax assets is an estimate which could change in the future depending primarily upon the actual performance of our Company. When we have a history of profitable operations sufficient to demonstrate that it is more likely than not that our deferred tax assets will be realized, the valuation allowance or a portion of the valuation allowance will be reversed and reflected as a benefit in the income tax provision. After that, 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, we may need to reestablish all or a portion of the valuation allowance through a charge to our income tax provision.

Goodwill. Goodwill is reviewed annually for impairment each fiscal year or between the annual tests if an event occurs or circumstances change that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. We perform our annual impairment test as of January 1 in each fiscal year. We performed our last annual impairment test on our goodwill as of January 1, 2011. No goodwill impairment was identified in any of our reporting units. Determining the fair value of reporting units requires various assumptions and estimates. The estimates of fair value include consideration of the future projected operating results and cash flows of the reporting unit. Such projections could be different than actual results. Should actual results be significantly less than estimates, the value of our goodwill could be impaired in the future.

Convertible Senior Subordinated Notes. We account for our convertible senior subordinated notes by separating the liability and equity components. The liability component is recorded at the date of issuance based on its fair value which is generally determined in a manner that will reflect an interest cost equal to our nonconvertible debt borrowing rate at the convertible senior subordinated notes issuance date. The amount of the proceeds, less the amount recorded as the liability component, is recorded as an addition to shareholders’ equity reflecting the equity component (i.e., conversion feature). The difference between the principal amount and the amount recorded as the liability component represents the debt discount. The carrying amount of the liability is accreted up to the principal amount through the amortization of the discount, using the effective interest method, to interest expense over the expected life of the note. The determination of the fair value of the liability component is an estimate dependent on a number of factors, including estimates of market rates for similar nonconvertible debt instruments at the date of issuance. A higher value attributable to the liability component results in a lower value attributed to the equity component and therefore a smaller discount amount and lower interest cost as a result of amortization of the smaller discount. A lower value attributable to the liability component results in a higher value attributed to the equity component and therefore a larger discount amount and higher interest cost as a result of amortization of the larger discount.

Business Acquisitions. We account for business acquisitions as a purchase, whereby the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair value. The excess of the purchase price over estimated fair value of the net identifiable assets is allocated to goodwill. Determining the fair value of assets and liabilities requires various assumptions and estimates. These estimates and assumptions are refined with adjustments recorded to goodwill as information is gathered and final appraisals are completed over a one-year allocation period. The changes in these estimates or different assumptions used in determining these estimates could impact the amount of assets, including goodwill and liabilities, ultimately recorded on our balance sheet and could impact our operating results subsequent to such acquisition. We believe that our assumptions and estimates have been materially accurate in the past.

Recent Accounting Pronouncements

We intend to early adopt Accounting Standards Update ("ASU") No. 2011-08 “Testing Goodwill for Impairment” for the fiscal year ending March 31, 2012. ASU 2011-08 simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. ASU 2011-08 would have been effective for the Company's fiscal year beginning April 1, 2012, if not for the early adoption. The adoption of ASU 2011-08 is not expected to have a significant impact on our consolidated financial statements.

In June 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update relating to the presentation of other comprehensive income. The accounting update eliminates the option to present components of other comprehensive income as part of the statement of stockholders’ equity. Instead, companies must report comprehensive income in either a single continuous statement of comprehensive income (which would contain the current income statement presentation followed by the components of other comprehensive income and a total amount for comprehensive income), or in two separate but consecutive statements. This guidance is effective for our fiscal year beginning April 1, 2012. We do not expect the guidance to have a material impact on our consolidated financial statements.

In May 2011, the FASB issued an accounting standard update related to fair value measurements and disclosures to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance

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with U.S. GAAP and International Financial Reporting Standards. This guidance includes amendments that clarify the intent about the application of existing fair value measurement requirements, while other amendments change a principle or requirement for measuring fair value or for disclosing information about fair value measurements. Specifically, the guidance requires additional disclosures for fair value measurements that are based on significant unobservable inputs. The updated guidance is to be applied prospectively and is effective for our interim and annual periods beginning April 1, 2012. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

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Results of Operations

Three Months Ended December 31, 2011 Compared to Three Months Ended December 31, 2010

The following table sets forth the components of consolidated revenue by segment for the three months ended December 31, 2011 and 2010:



	Three Months Ended		Three Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
			(Amounts in millions)
Consolidated Revenue
Motion Pictures	$	233.3	$	326.7	$	(93.4	)	(28.6	)%
Television Production	89.7		96.2		(6.5		)	(6.8	)%
	$	323.0	$	422.9	$	(99.9	)	(23.6	)%

Our largest component of revenue comes from home entertainment. The following table sets forth total home entertainment revenue for both the Motion Pictures and Television Production reporting segments for the three months ended December 31, 2011 and 2010:



	Three Months Ended		Three Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
			(Amounts in millions)
Home Entertainment Revenue (1)
Motion Pictures	$	128.9	$	181.0	$	(52.1	)	(28.8	)%
Television Production	34.0		16.3		17.7			108.6	%
	$	162.9	$	197.3	$	(34.4	)	(17.4	)%


(1)	See reclassification footnote under the table in the Motion Pictures Revenue discussion below.

Motion Pictures Revenue

The following table sets forth the components of revenue and the changes in these components for the motion pictures reporting segment for the three-month periods ended December 31, 2011 and 2010:



	Three Months Ended		Three Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
	(Amounts in millions)
Motion Pictures (1)
Theatrical	$	8.4	$	53.8	$	(45.4	)	(84.4	)%
Home Entertainment (2)	128.9		181.0		(52.1		)	(28.8	)%
Television (2)	22.6		26.8		(4.2		)	(15.7	)%
International	14.6		21.4		(6.8		)	(31.8	)%
Lionsgate UK	16.6		30.0		(13.4		)	(44.7	)%
Mandate Pictures	40.1		11.3		28.8			254.9	%
Other	2.1		2.4		(0.3		)	(12.5	)%
	$	233.3	$	326.7	$	(93.4	)	(28.6	)%


(1)	For the three months ended December 31, 2010, motion pictures revenue includes Maple Pictures revenue of $25.0

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million. Due to the August 10, 2011 sale of Maple Pictures to Alliance, subsequent to August 10, 2011, revenue generated pursuant to the distribution agreements with Alliance has been recorded net of fees and expenses.

(2)

For the three months ended December 31, 2011, pay-per-view and video-on-demand revenue is included in Home Entertainment revenue rather than Television revenue in order to be consistent with the way management currently categorizes and analyzes those media types. For the three months ended December 31, 2010, $22.9 million of pay-per-view and video-on-demand revenue was reclassified from Television revenue to Home Entertainment revenue to be consistent with the current period presentation.

Motion Pictures — Theatrical Revenue

The following table sets forth the titles contributing significant theatrical revenue by fiscal years theatrical slate and the month of their release for the three-month periods ended December 31, 2011 and 2010:



Three Months Ended December 31,
2011		2010
	Theatrical Release Date		Theatrical Release Date
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Abduction	September 2011	For Colored Girls	November 2010
Direct-to-DVD, acquired and licensed brands, acquired library & other:		The Next Three Days	November 2010
Margin Call (released by Roadside Attractions)	October 2011	Saw 3D	October 2010
		Alpha and Omega	September 2010

Theatrical revenue of $8.4 million decreased $45.4 million, or 84.4%, in the quarter ended December 31, 2011 as compared to the quarter ended December 31, 2010. The decrease in theatrical revenue in the quarter ended December 31, 2011 as compared to the quarter ended December 31, 2010 is due to no theatrical releases in the quarter ended December 31, 2011, as compared to four theatrical releases in the quarter ended December 31, 2010.

Motion Pictures — Home Entertainment Revenue

The following table sets forth the titles contributing significant motion pictures home entertainment revenue for the three-month periods ended December 31, 2011 and 2010:



Three Months Ended December 31,
2011		2010
	DVD Release Date		DVD Release Date
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Warrior	December 2011	The Expendables	November 2010
Conan the Barbarian	November 2011	Killers	September 2010
Madea's Big Happy Family	August 2011	Kick-Ass	August 2010
Fiscal 2011 Theatrical Slate:		Why Did I Get Married Too?	August 2010
The Lincoln Lawyer	July 2011	Fiscal 2010 Theatrical Slate:
Direct-to-DVD, acquired and licensed brands, acquired library & other:		From Paris With Love	June 2010
Margin Call	December 2011	Direct-to-DVD, acquired and licensed brands, acquired library & other:
A Madea Christmas (The Play)	November 2011	Madea's Big Happy Family (The Play)	November 2010
Red State	October 2011	Other:
		Winter's Bone	October 2010

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The following table sets forth the components of home entertainment revenue by product category for the three-month periods ended December 31, 2011 and 2010:



	Three Months Ended December 31,
	2011						2010
	Packaged Media		Electronic Media		Total		Packaged Media		Electronic Media		Total
					(Amounts in millions)
Home entertainment revenues (1)
Fiscal 2012 Theatrical Slate	$	27.4	$	5.3	$	32.7	$	—	$	—	$	—
Fiscal 2011 Theatrical Slate	5.8		9.0		14.8		62.6		17.3		79.9
Fiscal 2010 Theatrical Slate	0.9		0.1		1.0		6.7		5.0		11.7
Fiscal 2009 Theatrical Slate	0.5		0.3		0.8		2.2		0.2		2.4
Fiscal 2008 & Prior Theatrical Slate	2.4		0.8		3.2		7.1		1.0		8.1
Direct-to-DVD, acquired and licensed brands, acquired library & other	56.6		18.5		75.1		69.2		6.5		75.7
Other	0.5		0.8		1.3		2.6		0.6		3.2
	$	94.1	$	34.8	$	128.9	$	150.4	$	30.6	$	181.0

___________________


(1)	See reclassification footnote (2) under the table in the Motion Pictures Revenue discussion above.

Home entertainment revenue of $128.9 million decreased $52.1 million, or 28.8%, in the quarter ended December 31, 2011 as compared to the quarter ended December 31, 2010. The decrease in home entertainment revenue is primarily due to a decrease in the contribution of revenue from the theatrical slates as listed above, and to a lesser extent, a decrease in packaged media revenue from Direct-to-DVD, acquired and licensed brands, acquired library and other, offset in part by an increase in the contribution of electronic media revenue from Direct-to-DVD, acquired and licensed brands, acquired library and other. The decrease in revenue contributed by the theatrical slates is primarily due to the lower aggregate home entertainment revenues generated by the titles from our fiscal 2012 theatrical slate released on DVD in the quarter ended December 31, 2011, as compared to the home entertainment revenues generated by the titles from our fiscal 2011 theatrical slate released on DVD in the quarter ended December 31, 2010, and in particular the significant home entertainment revenues generated by The Expendables in the quarter ended December 31, 2010.

Motion Pictures — Television Revenue

The following table sets forth the titles contributing significant motion pictures television revenue for the three-month periods ended December 31, 2011 and 2010:



Three Months Ended December 31,
2011		2010
Fiscal 2011 Theatrical Slate:		Fiscal 2010 Theatrical Slate:
The Lincoln Lawyer		Daybreakers
Fiscal 2010 Theatrical Slate:		From Paris With Love
Crank: High Voltage		The Spy Next Door
Direct-to-DVD, acquired and licensed brands, acquired library & other:
Night of the Living Fred

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The following table sets forth the components of television revenue by product category for the three-month periods ended December 31, 2011 and 2010:



	Three Months Ended
	December 31,
	2011		2010
	(Amounts in millions)
Television revenues (1)
Fiscal 2011 Theatrical Slate	$	9.7	$	0.7
Fiscal 2010 Theatrical Slate	1.2		18.9
Fiscal 2009 Theatrical Slate	1.7		0.3
Fiscal 2008 & Prior Theatrical Slate	4.3		1.9
Direct-to-DVD, acquired and licensed brands, acquired library & other	5.7		4.5
Other	—		0.5
	$	22.6	$	26.8

____________________


(1)	See reclassification footnote (2) under the table in the Motion Pictures Revenue discussion above.

Television revenue included in motion pictures revenue of $22.6 million decreased $4.2 million, or 15.7%, in the quarter ended December 31, 2011, as compared to the quarter ended December 31, 2010. The decrease in television revenue in the quarter ended December 31, 2011 compared to the quarter ended December 31, 2010, is mainly due to the number and performance of titles in the theatrical slates listed above with television availability windows opening in the quarter ended December 31, 2011. The contribution of television revenue from the titles listed above was $12.3 million in the quarter ended December 31, 2011, compared to $18.9 million in the quarter ended December 31, 2010, and the contribution of television revenue from titles not listed above was $10.3 million in the quarter ended December 31, 2011, compared to $7.9 million in the quarter ended December 31, 2010.

Motion Pictures — International Revenue

The following table sets forth the titles contributing significant motion pictures international revenue for the three-month periods ended December 31, 2011 and 2010:



Three Months Ended December 31,
2011		2010
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Warrior		Alpha and Omega
Direct-to-DVD, acquired and licensed brands, acquired library & other:		Saw 3D
Immortals		The Next Three Days
		Fiscal 2010 Theatrical Slate:
		Saw VI

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The following table sets forth the components of international revenue by product category for the three-month periods ended December 31, 2011 and 2010:



	Three Months Ended
	December 31,
	2011		2010
	(Amounts in millions)
International revenues
Fiscal 2012 Theatrical Slate	$	5.2	$	—
Fiscal 2011 Theatrical Slate	1.7		15.9
Fiscal 2010 Theatrical Slate	0.2		1.6
Fiscal 2009 Theatrical Slate	0.5		0.7
Fiscal 2008 & Prior Theatrical Slate	1.1		1.2
Direct-to-DVD, acquired and licensed brands, acquired library & other	5.7		1.6
Other	0.2		0.4
	$	14.6	$	21.4

International revenue included in motion pictures revenue of $14.6 million decreased $6.8 million, or 31.8%, in the quarter ended December 31, 2011, as compared to the quarter ended December 31, 2010. The decrease in international revenue in the quarter ended December 31, 2011 compared to the quarter ended December 31, 2010, is mainly due to the revenues generated by the titles and product categories listed above.

Motion Pictures — Lionsgate UK Revenue

The following table sets forth the titles contributing significant Lionsgate UK revenue for the three-month periods ended December 31, 2011 and 2010:



Three Months Ended December 31,
2011		2010
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Conan the Barbarian		Killers
Lionsgate UK and third party product:		Saw 3D
George Harrison: Living in the Material World		The Expendables

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The following table sets forth the components of Lionsgate UK revenue by product category for the three-month periods ended December 31, 2011 and 2010:



	Three Months Ended December 31,
	2011		2010
	(Amounts in millions)
Lionsgate UK revenues
Fiscal 2012 Theatrical Slate	$	4.3	$	—
Fiscal 2011 Theatrical Slate	1.3		19.0
Fiscal 2010 Theatrical Slate	0.1		0.9
Fiscal 2009 Theatrical Slate	0.1		0.3
Fiscal 2008 & Prior Theatrical Slate	0.4		0.8
Lionsgate UK and third party product	6.1		5.4
Direct-to-DVD, acquired and licensed brands, acquired library & other	4.2		3.1
Other	0.1		0.5
	$	16.6	$	30.0

Lionsgate UK revenue of $16.6 million decreased $13.4 million, or 44.7%, in the quarter ended December 31, 2011 as compared to the quarter ended December 31, 2010. The decrease in Lionsgate UK revenue in the quarter ended December 31, 2011 compared to the quarter ended December 31, 2010 is mainly due to the revenue generated by the titles and product categories listed above.

Motion Pictures — Mandate Pictures Revenue

The following table sets forth the titles contributing significant Mandate Pictures revenue for the three-month periods ended December 31, 2011 and 2010:



Three Months Ended December 31,
2011		2010
A Very Harold & Kumar 3D Christmas		Juno
Young Adult		The Switch
		Whip It

Mandate Pictures revenue includes revenue from the sales and licensing of domestic and worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors or international sub-distributors. Mandate Pictures revenue of $40.1 million increased $28.8 million, or 254.9%, in the quarter ended December 31, 2011 as compared to the quarter ended December 31, 2010.

Television Production Revenue

Television production revenue of $89.7 million decreased $6.5 million, or 6.8%, in the quarter ended December 31, 2011 as compared to the quarter ended December 31, 2010. The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the three-month periods ended December 31, 2011 and 2010:

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	Three Months Ended		Three Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
			(Amounts in millions)
Television Production
Domestic series licensing
Lionsgate Television	$	23.2	$	28.2	$	(5.0	)	(17.7	)%
Debmar-Mercury	26.2		38.4		(12.2		)	(31.8	)%
Total domestic series licensing	49.4		66.6		(17.2		)	(25.8	)%
International	6.1		12.0		(5.9		)	(49.2	)%
Home entertainment releases of television production	34.0		16.3		17.7			108.6	%
Other	0.2		1.3		(1.1		)	NM
	$	89.7	$	96.2	$	(6.5	)	(6.8	)%

NM — Percentage not meaningful

Revenues included in television production decreased in the quarter ended December 31, 2011, mainly due to lower revenue generated from domestic series licensing, and to a lesser extent, lower revenue generated from international revenue, offset in part by higher revenue generated from the home entertainment category of television production in the quarter ended December 31, 2011 as compared to the quarter ended December 31, 2010.

The following table sets forth the number of television episodes and hours included in Lionsgate Television domestic series licensing revenue in the three-month periods ended December 31, 2011 and 2010, respectively:



		Three Months Ended				Three Months Ended
		December 31, 2011				December 31, 2010
		Episodes	Hours			Episodes	Hours
Blue Mountain State Season 3	1/2hr	9	4.5	Blue Mountain State Season 2	1/2hr	12	6.0
Bloomberg The Mentor Season 2	1/2hr	4	2.0	Running Wilde Season 1	1/2hr	9	4.5
Boss Season 1	1hr	2	2.0	Nurse Jackie Season 3	1/2hr	1	0.5
Mad Men Season 5	1hr	3	3.0	Mad Men Season 4	1hr	2	2.0
		18	11.5			24	13.0

Revenues included in domestic series licensing from Lionsgate Television decreased in the quarter ended December 31, 2011, due to a decrease in the number of television episodes delivered as compared to the quarter ended December 31, 2010. Revenues included in domestic series licensing from Debmar-Mercury decreased in the quarter ended December 31, 2011, primarily because the quarter ended December 31, 2010 included revenue from Weeds Season 3, 4, and 5, with no comparable revenue in the quarter ended December 31, 2011.

International revenue decreased in the quarter ended December 31, 2011, due to a decrease in episodes of programming delivered internationally. International revenue in the quarter ended December 31, 2011 primarily included revenue from Mad Men Season 2. International revenue in the quarter ended December 31, 2010 included revenue from Mad Men Seasons 1, 2, 3, and 4, and Weeds Season 6.

The increase in revenue from home entertainment releases of television production is primarily driven by electronic media revenue from Weeds Seasons 1, 2, 3, 4 and 5, primarily as a result of a licensing contract extension with a customer, and Blue Mountain State Season 3, and to a lesser extent, packaged media revenue from Mad Men Season 4 (released March 2011), and Weeds Season 6 (released February 2011) in the quarter ended December 31, 2011, as compared to packaged and electronic media revenue from Mad Men Season 1 (released July 2008), Mad Men Season 2 (released July 2009), and Mad Men Season 3 (released March 2010), and to a lesser extent, Weeds Season 1 (released July 2006), and Weeds Season 2 (released July 2007) in the quarter ended December 31, 2010.

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Direct Operating Expenses

The following table sets forth direct operating expenses by segment for the three months ended December 31, 2011 and 2010:



	Three Months Ended									Three Months Ended
	December 31, 2011									December 31, 2010
	Motion Pictures			Television Production			Total			Motion Pictures			Television Production			Total
	(Amounts in millions)
Direct operating expenses
Amortization of films and television programs	$	96.7		$	39.3		$	136.0		$	86.1		$	52.0		$	138.1
Participation and residual expense	37.9			27.8			65.7			43.9			22.2			66.1
Other expenses	0.1			0.2			0.3			0.8			(0.3		)	0.5
	$	134.7		$	67.3		$	202.0		$	130.8		$	73.9		$	204.7
Direct operating expenses as a percentage of segment revenues	57.7		%	75.0		%	62.5		%	40.0		%	76.8		%	48.4		%

Direct operating expenses of the motion pictures segment of $134.7 million for the quarter ended December 31, 2011 were 57.7% of motion pictures revenue, compared to $130.8 million, or 40.0% of motion pictures revenue for the quarter ended December 31, 2010. The increase in direct operating expense of the motion pictures segment as a percent of revenue in the quarter ended December 31, 2011 is primarily due to the lower revenues generated by the titles in our fiscal 2012 theatrical slate in the quarter ended December 31, 2011, as compared to the revenues generated from our fiscal 2011 theatrical slate in the quarter ended December 31, 2010. Also contributing to the increase in direct operating expense of the motion pictures segment as a percent of revenue in the quarter ended December 31, 2011, was an increase in direct operating expenses as a percentage of revenue attributed to Mandate Pictures in the quarter ended December 31, 2011. Direct operating expenses of Mandate Pictures are higher in relation to revenue as compared to the rest of the motion pictures segment, however, Mandate Pictures does not incur significant distribution and marketing expenses. Investment in film write-downs of the motion pictures segment during the quarter ended December 31, 2011 totaled approximately $2.7 million, compared to $1.7 million for the quarter ended December 31, 2010. In the three months ended December 31, 2011 and 2010, there were no write-downs that individually exceeded $1.0 million.

Direct operating expenses of the television production segment of $67.3 million for the quarter ended December 31, 2011 were 75.0% of television revenue, compared to $73.9 million, or 76.8%, of television revenue for the quarter ended December 31, 2010. The direct operating expenses as a percent of television revenue were comparable to the quarter ended December 31, 2010. In the quarter ended December 31, 2011, $0.1 million of charges for write-downs of television film costs were included in the amortization of television programs, compared to charges of $2.9 million in the quarter ended December 31, 2010. In the quarter ended December 31, 2010, approximately $1.6 million of the write-down related to one television series.

Distribution and Marketing Expenses

The following table sets forth distribution and marketing expenses by segment for the three months ended December 31, 2011 and 2010:

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	Three Months Ended						Three Months Ended
	December 31, 2011						December 31, 2010
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in millions)
Distribution and marketing expenses
Theatrical	$	8.9	$	—	$	8.9	$	76.7	$	—	$	76.7
Home Entertainment (1)	39.9		4.0		43.9		53.6		4.5		58.1
Television (1)	0.5		4.0		4.5		0.4		5.2		5.6
International	1.4		0.9		2.3		1.3		2.5		3.8
Lionsgate UK	12.4		0.4		12.8		13.5		0.7		14.2
Other	0.4		—		0.4		0.6		—		0.6
	$	63.5	$	9.3	$	72.8	$	146.1	$	12.9	$	159.0

____________________

(1)

For the three months ended December 31, 2011, pay-per-view and video-on-demand distribution and marketing expenses are included in Home Entertainment rather than Television distribution and marketing expenses in order to be consistent with the way management currently categorizes and analyzes those media types. For the three months ended December 31, 2010, $0.6 million of pay-per-view and video-on-demand distribution and marketing expenses were reclassified from Television to Home Entertainment distribution and marketing expenses to be consistent with the current period presentation.

The majority of distribution and marketing expenses relate to the motion pictures segment. Theatrical prints and advertising (“P&A”) in the motion pictures segment in the quarter ended December 31, 2011 of $8.9 million decreased $67.8 million, compared to $76.7 million in the quarter ended December 31, 2010. Domestic theatrical P&A from the motion pictures segment in the quarter ended December 31, 2011 was primarily related to P&A incurred in advance for films to be released in subsequent quarters, such as The Hunger Games, and other titles, due to no theatrical releases during the quarter ended December 31, 2011. Domestic theatrical P&A from the motion pictures segment in the quarter ended December 31, 2010 included P&A incurred on the release of For Colored Girls, Saw 3D, and The Next Three Days. Approximately $4.4 million of P&A was incurred on titles that did not contribute significant revenue in the quarter ended December 31, 2010, primarily related to P&A incurred in advance for films to be released in subsequent quarters, including the title Rabbit Hole.

Home entertainment distribution and marketing costs on motion pictures and television product in the quarter ended December 31, 2011 of $43.9 million decreased $14.2 million, or 24.4%, compared to $58.1 million in the quarter ended December 31, 2010, primarily due to lower distribution and marketing costs associated with lower motion pictures revenues. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues was 26.9% and 29.4% in the quarters ended December 31, 2011 and December 31, 2010, respectively. The decrease in home entertainment distribution and marketing costs as a percentage of home entertainment revenues was primarily due to an increase in home entertainment revenue from electronic media, which requires substantially lower distribution and marketing costs as compared to packaged media, as compared to the quarter ended December 31, 2010.

Lionsgate UK distribution and marketing expenses in the motion pictures segment in the quarter ended December 31, 2011 of $12.4 million decreased slightly from $13.5 million in the quarter ended December 31, 2010.

General and Administrative Expenses

The following table sets forth general and administrative expenses by segment for the three months ended December 31, 2011 and 2010:

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	Three Months Ended			Three Months Ended			Increase (Decrease)
	December 31, 2011			December 31, 2010			Amount			Percent
	(Amounts in millions)
General and administrative expenses
Motion Pictures	$	10.7		$	11.9		$	(1.2	)	(10.1	)%
Television Production	2.6			2.9			(0.3		)	(10.3	)%
Shared services and corporate expenses, excluding items below	12.4			13.0			(0.6		)	(4.6	)%
Total general and administrative expenses before share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses	25.7			27.8			(2.1		)	(7.6	)%
Share-based compensation expense	4.7			0.2			4.5			NM
Shareholder activist matter	3.1			7.9			(4.8		)	(60.8	)%
Transaction costs related to the acquisition of Summit Entertainment, LLC	2.3			—			2.3			100.0	%
	10.1			8.1			2.0			24.7	%
Total general and administrative expenses	$	35.8		$	35.9		$	(0.1	)	(0.3	)%
Total general and administrative expenses as a percentage of revenue	11.1		%	8.5		%
General and administrative expenses excluding share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses, as a percentage of revenue	8.0		%	6.6		%

NM — Percentage not meaningful

Total General and Administrative Expenses

General and administrative expenses decreased by $0.1 million, or 0.3%, as reflected in the table above and further discussed below.

Motion Pictures

General and administrative expenses of the motion pictures segment decreased $1.2 million, or 10.1%. Included in the motion pictures segment in the prior quarter ended December 31, 2010, is $1.4 million in general and administrative expenses associated with Maple Pictures. Due to the sale of Maple Pictures, the Company will no longer incur general and administrative expenses associated with Maple Pictures. In the quarter ended December 31, 2011, $2.6 million of motion pictures production overhead was capitalized compared to $2.3 million in the quarter ended December 31, 2010.

Television Production

General and administrative expenses of the television production segment decreased $0.3 million, or 10.3%. In the quarter ended December 31, 2011, $1.4 million of television production overhead was capitalized compared to $1.1 million in the quarter ended December 31, 2010.

Shared Services and Corporate Expenses

Shared services and corporate expenses excluding share-based compensation expense, shareholder activist matter costs and transaction costs related to the acquisition of Summit, decreased $0.6 million, or 4.6%, mainly due to a decrease of $0.5 million in legal and professional fees not associated with a shareholder activist matter or the acquisition of Summit, a decrease of $0.3 million in salary and related expenses, offset by an increase of $0.2 million in other shared services and corporate expenses.

Shareholder activist matter costs decreased $4.8 million as a result of less shareholder activist or related costs being incurred in the quarter ended December 31, 2011, as compared to the quarter ended December 31, 2010.

Share-Based Compensation Expense. The following table sets forth share-based compensation expense included in shared services and corporate expenses for the three months ended December 31, 2011 and 2010:

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	Three Months Ended		Three Months Ended			Increase (Decrease)
	December 31, 2011		December 31, 2010			Amount		Percent
	(Amounts in millions)
Share-Based Compensation Expense:
Restricted share units and other share-based compensation	$	2.5	$	2.0		$	0.5	25.0	%
Stock appreciation rights	2.2		(1.8		)	4.0		(222.2	)%
	$	4.7	$	0.2		$	4.5	NM

NM — Percentage not meaningful

At December 31, 2011, as disclosed in Note 16 to the unaudited condensed consolidated financial statements, there were unrecognized compensation costs of approximately $6.6 million related to stock options and restricted share units previously granted, including annual installments of share grants that were subject to performance targets, which will be expensed over the remaining vesting periods. At December 31, 2011, 381,698 shares of restricted share units have been awarded to two key executive officers, the vesting of which will be subject to performance targets to be set annually by our Compensation Committee of the Board of Directors. These restricted share units will vest in two annual installments assuming annual performance targets have been met. The fair value of the 381,698 shares, whose future annual performance targets have not been set, was $3.2 million, based on the market price of our common shares as of December 31, 2011. The market value will be remeasured when the annual performance criteria are set and the value will be expensed over the remaining vesting periods once it becomes probable that the performance targets will be satisfied.

Depreciation, Amortization and Other Expenses (Income)

Depreciation and amortization of $0.7 million for the quarter ended December 31, 2011 decreased $0.7 million from $1.4 million in the quarter ended December 31, 2010.

Interest expense of $17.2 million for the quarter ended December 31, 2011 increased $3.8 million, or 28.4%, from $13.4 million for the quarter ended December 31, 2010. The following table sets forth the components of interest expense for the three months ended December 31, 2011 and 2010:



	Three Months Ended		Three Months Ended
	December 31, 2011		December 31, 2010
	(Amounts in millions)
Interest Expense
Cash Based:
Senior revolving credit facility	$	1.0	$	2.0
Convertible senior subordinated notes	0.8		1.2
Senior secured second-priority notes	11.2		6.0
Other	1.4		0.8
	14.4		10.0
Non-Cash Based:
Amortization of discount on liability component of convertible senior subordinated notes	1.7		2.2
Amortization of discount (premium) on senior secured second-priority notes	0.2		0.2
Amortization of deferred financing costs	0.9		1.0
	2.8		3.4
	$	17.2	$	13.4

Interest and other income was $0.5 million for the quarter ended December 31, 2011, compared to $0.3 million in the quarter ended December 31, 2010. The following table represents our portion of the income or (loss) of our equity method investees based on our percentage ownership for the three months ended December 31, 2011 and 2010:

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	December 31, 2011	Three Months Ended			Three Months Ended
	Ownership Percentage	December 31, 2011			December 31, 2010
		(Amounts in millions)
Horror Entertainment, LLC (“FEARnet”)	34.5%	$	0.2		$	0.2
NextPoint, Inc. (“Break Media”)	42.0%	(1.0		)	(0.5		)
Roadside Attractions, LLC	43.0%	0.2			0.6
Studio 3 Partners, LLC (“EPIX”) (1)	31.2%	7.3			(11.1		)
TV Guide Network (2)	51.0%	(2.1		)	(2.0		)
Tiger Gate	45.9%	(0.8		)	(0.4		)
		$	3.8		$	(13.2	)

______________________

(1)

We license certain of our theatrical releases and other films and television programs to EPIX. A portion of the profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity interest income (loss) of the venture. These profits are recognized as they are realized by the venture (see Note 4 to our unaudited consolidated financial statements).


(2)	We license certain films and/or television programs to TV Guide Network. A portion of the profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity interest loss of the venture. These profits are recognized as they are realized by the venture (see Note 4 to our unaudited consolidated financial statements).

Income Tax Provision

We had an income tax expense of $0.6 million, or (50.9%), of loss before income taxes in the three months ended December 31, 2011, compared to an expense of $1.7 million, or (40.3%), of loss before income taxes in the three months ended December 31, 2010. The tax expense reflected in the quarter ended December 31, 2011 is primarily attributable to deferred U.S. income taxes and foreign withholding taxes. Our actual annual effective tax rate will differ from the statutory federal rate as a result of several factors, including changes in the valuation allowance against net deferred tax assets, non-temporary differences, foreign income taxed at different rates, and state and local income taxes. Income tax loss carryforwards, subject to certain limitations that may prevent us from fully utilizing them, amount to approximately $181.7 million for U.S. federal income tax purposes available to reduce income taxes over twenty years, $126.6 million for U.S. state income tax purposes available to reduce income taxes over future years with varying expirations, $29.8 million for Canadian income tax purposes available to reduce income taxes over 20 years with varying expirations, and $13.7 million for UK income tax purposes available indefinitely to reduce future income taxes.

Net Loss

Net loss for the three months ended December 31, 2011 was $1.7 million, or basic and diluted net loss per common share of $0.01 on 126.5 million weighted average common shares outstanding. This compares to net loss for the three months ended December 31, 2010 of $6.0 million, or basic and diluted net loss per common share of $0.04 on 136.7 million weighted average common shares outstanding.

Nine Months Ended December 31, 2011 Compared to Nine Months Ended December 31, 2010

The following table sets forth the components of consolidated revenue by segment for the nine months ended December 31, 2011 and 2010:

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	Nine Months Ended		Nine Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
			(Amounts in millions)
Consolidated Revenue
Motion Pictures	$	644.8	$	941.1	$	(296.3	)	(31.5	)%
Television Production	297.6		264.7		32.9			12.4	%
	$	942.4	$	1,205.8	$	(263.4	)	(21.8	)%



	Nine Months Ended		Nine Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
			(Amounts in millions)
Home Entertainment Revenue (1)
Motion Pictures	$	336.2	$	457.1	$	(120.9	)	(26.4	)%
Television Production	94.7		29.5		65.2			221.0	%
	$	430.9	$	486.6	$	(55.7	)	(11.4	)%


(1)	See reclassification footnote under the table in the Motion Pictures Revenue discussion below.

Motion Pictures Revenue

The following table sets forth the components of revenue and the changes in these components for the motion pictures reporting segment for the nine-month periods ended December 31, 2011 and 2010:



	Nine Months Ended		Nine Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
	(Amounts in millions)
Motion Pictures (1)
Theatrical	$	57.8	$	201.1	$	(143.3	)	(71.3	)%
Home Entertainment (2)	336.2		457.1		(120.9		)	(26.4	)%
Television (2)	94.1		96.4		(2.3		)	(2.4	)%
International	48.6		87.9		(39.3		)	(44.7	)%
Lionsgate UK	51.1		61.9		(10.8		)	(17.4	)%
Mandate Pictures	52.2		33.1		19.1			57.7	%
Other	4.8		3.6		1.2			33.3	%
	$	644.8	$	941.1	$	(296.3	)	(31.5	)%

(1)

For the nine months ended December 31, 2011, Motion Pictures revenue includes Maple Pictures revenue of $17.4 million through the date of sale of August 10, 2011, compared to Maple Pictures revenue of $67.0 million for the nine months ended December 31, 2010. Subsequent to August 10, 2011, revenue generated pursuant to the distribution agreements with Alliance has been recorded net of fees and expenses.


(2)	For the nine months ended December 31, 2011, pay-per-view and video-on-demand revenue is included in Home Entertainment revenue rather than Television revenue in order to be consistent with the way management currently categorizes and analyzes those media types. For the nine months ended December 31, 2010, $63.0 million of pay-per-

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view and video-on-demand revenue was reclassified from Television revenue to Home Entertainment revenue to be consistent with the current period presentation.

Motion Pictures — Theatrical Revenue

The following table sets forth the titles contributing significant theatrical revenue by fiscal years theatrical slate and the month of their release for the nine-month periods ended December 31, 2011 and 2010:



Nine Months Ended December 31,
2011		2010
	Theatrical Release Date		Theatrical Release Date
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Abduction	September 2011	For Colored Girls	November 2010
Warrior	September 2011	The Next Three Days	November 2010
Conan the Barbarian	August 2011	Saw 3D	October 2010
Madea’s Big Happy Family	April 2011	Alpha and Omega	September 2010
		The Expendables	August 2010
		The Last Exorcism	August 2010
		Killers	June 2010
		Why Did I Get Married Too?	April 2010
		Kick-Ass	April 2010

Theatrical revenue of $57.8 million decreased $143.3 million, or 71.3%, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010. The decrease in theatrical revenue in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010, is due largely to a decreased theatrical slate of only five theatrical releases in the nine months ended December 31, 2011, including no theatrical releases in the quarter ended December 31, 2011, as compared to eleven theatrical releases during the nine months ended December 31, 2010. Additionally, the decrease in theatrical revenue is also due to the lower aggregate box office performances of the theatrical releases for the nine months ended December 31, 2011, as compared to the box office performances of the theatrical releases in the nine months ended December 31, 2010, and in particular, the box office performance of The Expendables.

Motion Pictures — Home Entertainment Revenue

The following table sets forth the titles contributing significant motion pictures home entertainment revenue for the nine-month periods ended December 31, 2011 and 2010:



Nine Months Ended December 31,
2011		2010
	DVD Release Date		DVD Release Date
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Warrior	December 2011	The Expendables	November 2010
Conan the Barbarian	November 2011	Killers	September 2010
Madea's Big Happy Family	August 2011	Kick-Ass	August 2010
Fiscal 2011 Theatrical Slate:		Why Did I Get Married Too?	August 2010
The Lincoln Lawyer	July 2011	Fiscal 2010 Theatrical Slate:
The Next Three Days	March 2011	From Paris With Love	June 2010
The Expendables	November 2010	Daybreakers	May 2010
Direct-to-DVD, acquired and licensed brands, acquired library & other:		The Spy Next Door	May 2010
A Madea Christmas (The Play)	November 2011	Brothers	March 2010
The Conspirator	August 2011	Precious	March 2010

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The following table sets forth the components of home entertainment revenue by product category for the nine-month periods ended December 31, 2011 and 2010:



	Nine Months Ended December 31,
	2011						2010
	Packaged Media		Electronic Media		Total		Packaged Media		Electronic Media		Total
					(Amounts in millions)
Home entertainment revenues (1)
Fiscal 2012 Theatrical Slate	$	41.9	$	5.4	$	47.3	$	—	$	—	$	—
Fiscal 2011 Theatrical Slate	42.7		35.3		78.0		117.8		19.6		137.4
Fiscal 2010 Theatrical Slate	3.6		0.6		4.2		70.2		41.3		111.5
Fiscal 2009 Theatrical Slate	2.2		0.9		3.1		7.3		0.8		8.1
Fiscal 2008 & Prior Theatrical Slate	10.5		2.2		12.7		18.2		3.2		21.4
Direct-to-DVD, acquired and licensed brands, acquired library & other	151.8		33.3		185.1		144.7		20.3		165.0
Other	3.9		1.9		5.8		11.0		2.7		13.7
	$	256.6	$	79.6	$	336.2	$	369.2	$	87.9	$	457.1

___________________


(1)	See reclassification footnote (2) under the table in the Motion Pictures Revenue discussion above.

Home entertainment revenue of $336.2 million decreased $120.9 million, or 26.4%, in the nine months ended December 31, 2011 as compared to the nine months ended December 31, 2010. The decrease in home entertainment revenue is primarily due to a decrease in the contribution of revenue from the theatrical slates as listed above, offset in part by an increase in the contribution of revenue from Direct-to-DVD, acquired and licensed brands, acquired library and other. The decrease in revenue contributed by the theatrical slates is primarily due to the lower aggregate home entertainment revenues generated by the titles from our fiscal 2012 theatrical slate released on DVD in the nine months ended December 31, 2011 as compared to the home entertainment revenues generated by the titles from our fiscal 2011 theatrical slate released on DVD in the nine months ended December 31, 2010, and in particular the significant home entertainment revenues generated by The Expendables in the nine months ended December 31, 2010.

Motion Pictures — Television Revenue

The following table sets forth the titles contributing significant motion pictures television revenue for the nine-month periods ended December 31, 2011 and 2010:



Nine Months Ended December 31,
2011		2010
Fiscal 2011 Theatrical Slate:		Fiscal 2010 Theatrical Slate:
Alpha and Omega		Brothers
For Colored Girls		Daybreakers
Saw 3D		From Paris With Love
The Expendables		Gamer
The Last Exorcism		I Can Do Bad All By Myself
The Lincoln Lawyer		Precious
The Next Three Days		Saw VI
Fiscal 2009 Theatrical Slate:		The Spy Next Door
Madea Goes to Jail		Fiscal 2009 Theatrical Slate:
		The Forbidden Kingdom

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The following table sets forth the components of television revenue by product category for the nine-month periods ended December 31, 2011 and 2010:



	Nine Months Ended
	December 31,
	2011		2010
	(Amounts in millions)
Television revenues (1)
Fiscal 2011 Theatrical Slate	$	59.2	$	0.7
Fiscal 2010 Theatrical Slate	1.2		56.3
Fiscal 2009 Theatrical Slate	10.9		5.6
Fiscal 2008 & Prior Theatrical Slate	10.4		19.6
Direct-to-DVD, acquired and licensed brands, acquired library & other	11.4		12.4
Other	1.0		1.8
	$	94.1	$	96.4

____________________


(1)	See reclassification footnote (2) under the table in the Motion Pictures Revenue discussion above.

Television revenue included in motion pictures revenue of $94.1 million decreased $2.3 million, or 2.4%, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010. The slight decrease in television revenue in the nine months ended December 31, 2011, compared to the nine months ended December 31, 2010, is mainly due to the revenues generated by the titles and product categories listed above. The contribution of television revenue from the titles listed above was $62.9 million in the nine months ended December 31, 2011, compared to $61.1 million in the nine months ended December 31, 2010, and the contribution of television revenue from titles not listed above was $31.2 million in the nine months ended December 31, 2011, compared to $35.3 million in the nine months ended December 31, 2010.

Motion Pictures — International Revenue

The following table sets forth the titles contributing significant motion pictures international revenue for the nine-month periods ended December 31, 2011 and 2010:



Nine Months Ended December 31,
2011		2010
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Abduction		Alpha and Omega
Warrior		Kick-Ass
Fiscal 2011 Theatrical Slate:		Killers
Kick-Ass		Saw 3D
Saw 3D		The Next Three Days
Direct-to-DVD, acquired and licensed brands, acquired library & other:		Fiscal 2010 Theatrical Slate:
Immortals		Brothers
		Daybreakers

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The following table sets forth the components of international revenue by product category for the nine-month periods ended December 31, 2011 and 2010:



	Nine Months Ended
	December 31, 2011
	2011		2010
	(Amounts in millions)
International revenues
Fiscal 2012 Theatrical Slate	$	14.0	$	—
Fiscal 2011 Theatrical Slate	11.2		57.9
Fiscal 2010 Theatrical Slate	1.3		13.6
Fiscal 2009 Theatrical Slate	1.6		3.7
Fiscal 2008 & Prior Theatrical Slate	4.5		4.4
Direct-to-DVD, acquired and licensed brands, acquired library & other	14.3		6.9
Other	1.7		1.4
	$	48.6	$	87.9

International revenue included in motion pictures revenue of $48.6 million decreased $39.3 million, or 44.7%, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010. The decrease in international revenue in the nine months ended December 31, 2011, compared to the nine months ended December 31, 2010, is mainly due to the revenues generated by the titles and product categories listed above.

Motion Pictures — Lionsgate UK Revenue

The following table sets forth the titles contributing significant Lionsgate UK revenue for the nine-month periods ended December 31, 2011 and 2010:



Nine Months Ended December 31,
2011		2010
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Conan the Barbarian		Saw 3D
Lionsgate UK and third party product:		The Expendables
Blitz		Fiscal 2010 Theatrical Slate:
Drive Angry 3D		Daybreakers
		Lionsgate UK and third party product:
		Harry Brown
		The Hurt Locker

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The following table sets forth the components of Lionsgate UK revenue by product category for the nine-month periods ended December 31, 2011 and 2010:



	Nine Months Ended December 31,
	2011		2010
	(Amounts in millions)
Lionsgate UK revenues
Fiscal 2012 Theatrical Slate	$	5.2	$	—
Fiscal 2011 Theatrical Slate	7.3		25.1
Fiscal 2010 Theatrical Slate	0.6		7.0
Fiscal 2009 Theatrical Slate	0.3		0.8
Fiscal 2008 & Prior Theatrical Slate	0.9		2.2
Lionsgate UK and third party product	26.9		17.1
Direct-to-DVD, acquired and licensed brands, acquired library & other	9.8		6.6
Other	0.1		3.1
	$	51.1	$	61.9

Lionsgate UK revenue of $51.1 million decreased $10.8 million, or 17.4%, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010. The decrease in Lionsgate UK revenue in the nine months ended December 31, 2011, compared to the nine months ended December 31, 2010 is mainly due to the revenue generated by the titles and product categories listed above.

Motion Pictures — Mandate Pictures Revenue

The following table sets forth the titles contributing significant Mandate Pictures revenue for the nine-month periods ended December 31, 2011 and 2010:



Nine Months Ended December 31,
2011		2010
50/50		Drag Me To Hell
A Very Harold & Kumar 3D Christmas		Juno
Juno		Peacock
Young Adult		The Switch
		Whip It

Mandate Pictures revenue includes revenue from the sales and licensing of domestic and worldwide rights of titles developed or acquired by Mandate Pictures to third-party distributors or international sub-distributors. Mandate Pictures revenue of $52.2 million increased $19.1 million, or 57.7%, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010.

Television Production Revenue

Television production revenue of $297.6 million increased $32.9 million, or 12.4%, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010. The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the nine-month periods ended December 31, 2011 and 2010:

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	Nine Months Ended		Nine Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
			(Amounts in millions)
Television Production
Domestic series licensing
Lionsgate Television	$	72.7	$	100.4	$	(27.7	)	(27.6	)%
Debmar-Mercury	98.4		105.2		(6.8		)	(6.5	)%
Total domestic series licensing	171.1		205.6		(34.5		)	(16.8	)%
International	31.1		28.0		3.1			11.1	%
Home entertainment releases of television production	94.7		29.5		65.2			221.0	%
Other	0.7		1.6		(0.9		)	(56.3	)%
	$	297.6	$	264.7	$	32.9		12.4	%

Revenues included in television production increased in the nine months ended December 31, 2011, mainly due to higher revenue generated from home entertainment releases of television production, and to a lesser extent, higher international revenue, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010, offset in part by lower domestic series licensing revenue.

The following table sets forth the number of television episodes and hours included in Lionsgate Television domestic series licensing revenue in the nine-month periods ended December 31, 2011 and 2010, respectively:



		Nine Months Ended				Nine Months Ended
		December 31, 2011				December 31, 2010
		Episodes	Hours			Episodes	Hours
Weeds Season 7	1/2hr	13	6.5	Weeds Season 6	1/2hr	13	6.5
Blue Mountain State Season 3	1/2hr	13	6.5	Blue Mountain State Season 2	1/2hr	13	6.5
Bloomberg The Mentor Season 2	1/2hr	4	2.0	Running Wilde Season 1	1/2hr	11	5.5
Boss Season 1	1hr	8	8.0	Nurse Jackie Season 3	1/2hr	1	0.5
Mad Men Season 5	1hr	3	3.0	Mad Men Season 4	1hr	13	13.0
Pilots	1/2hr & 1hr	2	1.5	Scream Queens Season 2	1 hr	8	8.0
				Pilots	1/2hr & 1hr	3	2.0
		43	27.5			62	42.0

Revenues included in domestic series licensing from Lionsgate Television decreased in the nine months ended December 31, 2011 due to a decrease in the number of television episodes delivered, as compared to the nine months ended December 31, 2010. Revenues included in domestic series licensing from Debmar-Mercury decreased in the nine months ended December 31, 2011, primarily because the nine months ended December 31, 2010 included revenue from Weeds Season 3, 4, and 5, with no comparable revenue in the nine months ended December 31, 2011.

International revenue increased in the nine months ended December 31, 2011 due to an increase in episodes of programming delivered internationally. International revenue in the nine months ended December 31, 2011 included revenue from Blue Mountain State Season 2, Weeds Seasons 5 and 6, and Mad Men Seasons 1, 2, 3 and 4. International revenue in the nine months ended December 31, 2010 included revenue from Blue Mountain State Season 1, Crash Season 2, and Mad Men Seasons 1, 2, 3 and 4.

The increase in revenue from home entertainment releases of television production is primarily driven by electronic media revenue from Mad Men Seasons 1, 2, 3 and 4, Weeds Seasons 1, 2, 3, 4 and 5, and from Debmar-Mercury's Hell's Kitchen, and to a lesser extent, packaged media revenue from Weeds Season 6 (released February 2011) in the nine months ended December 31, 2011, as compared to packaged media revenue from Weeds Season 5 (released January 2010) and Mad Men Seasons 1, 2 and 3 (released July 2008, July 2009 and March 2010, respectively) in the nine months ended December 31, 2010.

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Direct Operating Expenses

The following table sets forth direct operating expenses by segment for the nine months ended December 31, 2011 and 2010:



	Nine Months Ended									Nine Months Ended
	December 31, 2011									December 31, 2010
	Motion Pictures			Television Production			Total			Motion Pictures			Television Production			Total
	(Amounts in millions)
Direct operating expenses
Amortization of films and television programs	$	226.2		$	129.0		$	355.2		$	266.0		$	134.6		$	400.6
Participation and residual expense	103.1			89.4			192.5			133.5			64.9			198.4
Other expenses	0.1			(0.1		)	—			1.6			(0.1		)	1.5
	$	329.4		$	218.3		$	547.7		$	401.1		$	199.4		$	600.5
Direct operating expenses as a percentage of segment revenues	51.1		%	73.4		%	58.1		%	42.6		%	75.3		%	49.8		%

Direct operating expenses of the motion pictures segment of $329.4 million for the nine months ended December 31, 2011 were 51.1% of motion pictures revenue, compared to $401.1 million, or 42.6% of motion pictures revenue for the nine months ended December 31, 2010. The increase in direct operating expense of the motion pictures segment as a percent of revenue in the nine months ended December 31, 2011 is primarily due to the lower revenues generated by the titles in our fiscal 2012 theatrical slate in the nine months ended December 31, 2011, as compared to the revenues generated from our fiscal 2011 theatrical slate in the nine months ended December 31, 2010. Also contributing to the increase in direct operating expense of the motion pictures segment as a percent of revenue in the nine months ended December 31, 2011, was an increase in direct operating expenses as a percentage of revenue attributed to Mandate Pictures in the nine months ended December 31, 2011. Direct operating expenses of Mandate Pictures are higher in relation to revenue as compared to the rest of the motion pictures segment, however, Mandate Pictures does not incur significant distribution and marketing expenses. Investment in film write-downs of the motion pictures segment during the nine months ended December 31, 2011 totaled approximately $4.2 million, compared to $6.2 million for the nine months ended December 31, 2010. In the nine months ended December 31, 2011, there were no write-downs that individually exceeded $1.0 million. In the nine months ended December 31, 2010, there were two write-downs that individually exceeded $1.0 million, which totaled $2.1 million in the aggregate.

Direct operating expenses of the television production segment of $218.3 million for the nine months ended December 31, 2011 were 73.4% of television revenue, compared to $199.4 million, or 75.3%, of television revenue for the nine months ended December 31, 2010. The decrease in direct operating expenses as a percent of television revenue is primarily due to the continuing success of shows like Mad Men and Weeds, relative to total television revenue, and also due to lower charges for write-downs of television film costs in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010. In the nine months ended December 31, 2011, $2.0 million of charges for write-downs of television film costs were included in the amortization of television programs, compared to $8.0 million in the nine months ended December 31, 2010. In the nine months ended December 31, 2011, there were no write-downs that individually exceeded $1.0 million, and in the nine months ended December 31, 2010, approximately $4.9 million of the write-down related to two television series.

Distribution and Marketing Expenses

The following table sets forth distribution and marketing expenses by segment for the nine months ended December 31, 2011 and 2010:

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	Nine Months Ended						Nine Months Ended
	December 31, 2011						December 31, 2010
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in millions)
Distribution and marketing expenses
Theatrical	$	116.9	$	—	$	116.9	$	258.1	$	—	$	258.1
Home Entertainment (1)	102.2		7.1		109.3		140.2		6.9		147.1
Television (1)	0.6		10.4		11.0		1.2		10.9		12.1
International	3.1		2.6		5.7		4.5		4.4		8.9
Lionsgate UK	33.9		1.0		34.9		32.2		1.5		33.7
Other	1.3		0.1		1.4		1.3		0.3		1.6
	$	258.0	$	21.2	$	279.2	$	437.5	$	24.0	$	461.5

____________________

(1)

For the nine months ended December 31, 2011, pay-per-view and video-on-demand distribution and marketing expenses are included in Home Entertainment rather than Television distribution and marketing expenses in order to be consistent with the way management currently categorizes and analyzes those media types. For the nine months ended December 31, 2010, $2.0 million of pay-per-view and video-on-demand distribution and marketing expenses were reclassified from Television to Home Entertainment distribution and marketing expenses to be consistent with the current period presentation.

The majority of distribution and marketing expenses relate to the motion pictures segment. Theatrical prints and advertising (“P&A”) in the motion pictures segment in the nine months ended December 31, 2011 of $116.9 million decreased $141.2 million, compared to $258.1 million in the nine months ended December 31, 2010. Domestic theatrical P&A from the motion pictures segment in this period included P&A incurred on the release of Abduction, Conan the Barbarian, Madea's Big Happy Family and Warrior. In addition, approximately $16.2 million of P&A was incurred on titles that did not contribute significant revenue in the nine-month period, of which $8.3 million was P&A incurred in advance for films to be released in subsequent quarters, such as Safe, and The Hunger Games. Domestic theatrical P&A from the motion pictures segment in the nine months ended December 31, 2010 included P&A incurred on the release of Alpha and Omega, Buried, For Colored Girls, Kick-Ass, Killers, The Expendables, Saw 3D, The Last Exorcism, The Next Three Days, and Why Did I Get Married Too?. Approximately $14.6 million of P&A was incurred on titles that did not contribute significant revenue in the nine months ended December 31, 2010, of which $4.6 million was P&A related to titles released subsequent to that period.

Home entertainment distribution and marketing costs on motion pictures and television product in the nine months ended December 31, 2011 of $109.3 million decreased $37.8 million, or 25.7%, compared to $147.1 million in the nine months ended December 31, 2010, primarily due to lower distribution and marketing cost associated with lower motion pictures revenues. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues was 25.4% and 30.2% in the nine months ended December 31, 2011 and December 31, 2010, respectively. The decrease in home entertainment distribution and marketing costs as a percentage of home entertainment revenues was primarily due to an increase in revenue from electronic media in the television production segment, which requires substantially lower distribution and marketing costs as compared to packaged media, ,as compared to the nine months ended December 31, 2010.

Lionsgate UK distribution and marketing expenses in the motion pictures segment in the nine months ended December 31, 2011 of $33.9 million increased from $32.2 million in the nine months ended December 31, 2010.

General and Administrative Expenses

The following table sets forth general and administrative expenses by segment for the nine months ended December 31, 2011 and 2010:

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	Nine Months Ended			Nine Months Ended			Increase (Decrease)
	December 31, 2011			December 31, 2010			Amount			Percent
	(Amounts in millions)
General and administrative expenses
Motion Pictures	$	34.4		$	35.6		$	(1.2	)	(3.4	)%
Television Production	8.3			8.6			(0.3		)	(3.5	)%
Shared services and corporate expenses, excluding items below	37.5			39.7			(2.2		)	(5.5	)%
Total general and administrative expenses before share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses	80.2			83.9			(3.7		)	(4.4	)%
Share-based compensation expense	9.7			30.0			(20.3		)	(67.7	)%
Shareholder activist matter	1.0			20.4			(19.4		)	(95.1	)%
Transaction costs related to the acquisition of Summit Entertainment, LLC	2.3			—			2.3			100.0	%
	13.0			50.4			(37.4		)	(74.2	)%
Total general and administrative expenses	$	93.2		$	134.3		$	(41.1	)	(30.6	)%
Total general and administrative expenses as a percentage of revenue	9.9		%	11.1		%
General and administrative expenses excluding share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses, as a percentage of revenue	8.5		%	7.0		%

Total General and Administrative Expenses

General and administrative expenses decreased by $41.1 million, or 30.6%, as reflected in the table above and further discussed below.

Motion Pictures

General and administrative expenses of the motion pictures segment decreased $1.2 million, or 3.4%. Included in the motion pictures segment in the nine months ended December 31, 2011 is $2.4 million in general and administrative expenses associated with Maple Pictures through the date of sale of August 10, 2011, as compared to $4.1 million in general and administrative expenses associated with Maple Pictures in the nine months ended December 31, 2010. Due to the sale of Maple Pictures, the Company will no longer incur general and administrative expenses associated with Maple Pictures. In the nine months ended December 31, 2011, $7.6 million of motion pictures production overhead was capitalized compared to $6.7 million in the nine months ended December 31, 2010.

Television Production

General and administrative expenses of the television production segment decreased $0.3 million, or 3.5%. In the nine months ended December 31, 2011, $4.3 million of television production overhead was capitalized compared to $3.2 million in the nine months ended December 31, 2010.

Shared Services and Corporate Expenses

Shared services and corporate expenses excluding share-based compensation expense, shareholder activist matter costs and transaction costs related to the acquisition of Summit, decreased $2.2 million, or 5.5%, mainly due to a decrease of $1.7 million in salary and related expenses, a decrease of $1.1 million in legal and professional fees not associated with a shareholder activist matter or the acquisition of Summit, offset by an increase of $0.6 million in other shared services and corporate expenses.

Shareholder activist matter costs decreased $19.4 million as a result of less shareholder activist and related costs being incurred in the nine months ended December 31, 2011. Additionally, shareholder activist matter costs in the nine months ended December 31, 2011 include a $3.9 million benefit, recorded in the quarter ended June 30, 2011, related to a negotiated settlement with a vendor of costs incurred and recorded in the prior fiscal year.

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Share-based compensation expense decreased $20.3 million, mainly due to $21.9 million of expense in the nine months ended December 31, 2010 associated with the immediate vesting of equity awards of certain executive officers triggered by the “change in control” provisions in their respective employment agreements.

Share-Based Compensation Expense. The following table sets forth share-based compensation expense included in shared services and corporate expenses for the nine months ended December 31, 2011 and 2010:



	Nine Months Ended		Nine Months Ended		Increase (Decrease)
	December 31, 2011		December 31, 2010		Amount			Percent
	(Amounts in millions)
Share-Based Compensation Expense:
Stock options	$	0.1	$	2.6	$	(2.5	)	(96.2	)%
Restricted share units and other share-based compensation	7.2		23.8		(16.6		)	(69.7	)%
Stock appreciation rights	2.4		3.6		(1.2		)	(33.3	)%
	$	9.7	$	30.0	$	(20.3	)	(67.7	)%

Depreciation, Amortization and Other Expenses (Income)

Depreciation and amortization of $2.6 million in the nine months ended December 31, 2011 decreased $1.9 million from $4.5 million in the nine months ended December 31, 2010.

Interest expense of $51.1 million in the nine months ended December 31, 2011 increased $9.4 million, or 22.5%, from the nine months ended December 31, 2010 of $41.7 million. The following table sets forth the components of interest expense for the nine months ended December 31, 2011 and 2010:

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	Nine Months Ended		Nine Months Ended
	December 31, 2011		December 31, 2010
	(Amounts in millions)
Interest Expense
Cash Based:
Senior revolving credit facility	$	2.8	$	5.4
Convertible senior subordinated notes	2.9		4.4
Senior secured second-priority notes	31.1		18.1
Other	3.5		1.7
	40.3		29.6
Non-Cash Based:
Amortization of discount on liability component of convertible senior subordinated notes	5.8		7.9
Amortization of discount (premium) on senior secured second-priority notes	0.6		0.9
Amortization of deferred financing costs	4.4		3.3
	10.8		12.1
	$	51.1	$	41.7

Interest and other income was $1.9 million for the nine months ended December 31, 2011, compared to $1.1 million in the nine months ended December 31, 2010.

Gain on sale of asset disposal group was $11.0 million for the nine months ended December 31, 2011, resulting from the August 2011 sale of Maple Pictures, compared to nil in the nine months ended December 31, 2010.

Loss on extinguishment of debt was $1.0 million for the nine months ended December 31, 2011, resulting from the May 2011 repurchase of approximately $19.4 million in aggregate principal amount of the October 2004 2.9375% Notes, and the August 2011 repurchase of approximately $10.0 million in aggregate principal amount of the Senior Notes. In the nine months ended December 31, 2010, loss on extinguishment of debt was $14.5 million, resulting from the July 2010 exchange and related conversion of approximately $36.0 million in aggregate principal amount of the February 2005 3.625% Notes and approximately $63.7 million in aggregate principal amount of the October 2004 2.9375% Notes.

The following table represents our portion of the income or (loss) of our equity method investees based on our percentage ownership for the nine months ended December 31, 2011 and 2010:



	December 31, 2011	Nine Months Ended			Nine Months Ended
	Ownership Percentage	December 31, 2011			December 31, 2010
		(Amounts in millions)
Horror Entertainment, LLC (“FEARnet”)	34.5%	$	0.2		$	1.1
NextPoint, Inc. (“Break Media”)	42.0%	(3.0		)	(0.7		)
Roadside Attractions, LLC	43.0%	0.4			0.7
Studio 3 Partners, LLC (“EPIX”) (1)	31.2%	18.2			(42.9		)
TV Guide Network (2)	51.0%	(5.4		)	(2.9		)
Tiger Gate	45.9%	(2.1		)	(0.9		)
		$	8.3		$	(45.6	)

______________________

(1)


(2)	We license certain films and/or television programs to TV Guide Network. A portion of the profits of these licenses reflecting our ownership share in the venture is eliminated through an adjustment to the equity interest loss of the venture. These profits are recognized as they are realized by the venture (see Note 4 to our unaudited consolidated financial

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statements).

Income Tax Provision

We had an income tax expense of $2.9 million, or (25.5%), of loss before income taxes in the nine months ended December 31, 2011, compared to an expense of $4.0 million, or (4.2%), of loss before income taxes in the nine months ended December 31, 2010. The tax expense reflected in the nine months ended December 31, 2011 is primarily attributable to deferred U.S. income taxes and foreign withholding taxes. Our actual annual effective tax rate will differ from the statutory federal rate as a result of several factors, including changes in the valuation allowance against net deferred tax assets, non-temporary differences, foreign income taxed at different rates, and state and local income taxes. Income tax loss carryforwards, subject to certain limitations that may prevent us from fully utilizing them, amount to approximately $181.7 million for U.S. federal income tax purposes available to reduce income taxes over twenty years, $126.6 million for U.S. state income tax purposes available to reduce income taxes over future years with varying expirations, $29.8 million for Canadian income tax purposes available to reduce income taxes over 20 years with varying expirations, and $13.7 million for UK income tax purposes available indefinitely to reduce future income taxes.

Net Loss

Net loss for the nine months ended December 31, 2011 was $14.1 million, or basic and diluted net loss per common share of $0.11 on 132.4 million weighted average common shares outstanding. This compares to net loss for the nine months ended December 31, 2010 of $99.7 million, or basic and diluted net loss per common share of $0.77 on 129.3 million weighted average common shares outstanding.

Liquidity and Capital Resources

Our liquidity and capital resources have been provided principally through cash generated from operations, our senior revolving credit facility, senior secured second-priority notes, issuance of convertible senior subordinated notes, the Film Credit Facility (as hereafter defined), borrowings under individual production loans, our Pennsylvania Regional Center credit facility, and certain participation financing arrangements.

Senior Revolving Credit Facility

Outstanding Amount. At December 31, 2011, we had borrowings of $94.5 million (March 31, 2011 — $69.8 million).

Maturity Date. The senior revolving credit facility expires July 25, 2013.

Commitment Fee. We are required to pay a quarterly commitment fee based upon 0.5% per annum on the total senior revolving credit facility of $340 million less the amount drawn.

Security. Obligations under the senior revolving credit facility are secured by collateral (as defined in the credit agreement) granted by us and certain of our subsidiaries, as well as a pledge of equity interests in certain of our subsidiaries.

Covenants. The senior revolving credit facility contains a number of affirmative and negative covenants that, among other things, require us to satisfy certain financial covenants and restrict our ability to incur additional debt, pay dividends and make distributions, make certain investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of our business, enter into sale-leaseback transactions, transfer and sell material assets and merge or consolidate.

Change in Control. Under the senior revolving credit facility, we may also be subject to an event of default upon a change in control (as defined in the credit agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50% (amended from 20% on June 22, 2010) of our common shares.

Senior Secured Second-Priority Notes

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On October 21, 2009, Lions Gate Entertainment Inc. (“LGEI”), our wholly-owned subsidiary, issued $236.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the “October 2009 Senior Notes”) in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”).

On May 13, 2011, LGEI issued approximately $200.0 million aggregate principal amount of senior secured second-priority notes due 2016 (the “May 2011 Senior Notes”, and collectively with the October 2009 Senior Notes, the “Senior Notes”) in a private offering conducted pursuant to Rule 144A and Regulation S under the Securities Act. The May 2011 Senior Notes were issued pursuant to a Supplemental Indenture among LGEI, us, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee. The Supplemental Indenture amended the October 2009 Senior Notes Indenture to, among other things, enable LGEI to issue additional notes having the same terms as the October 2009 Senior Notes, except for the issue date, issue price and first interest payment, in an aggregate principal amount of up to $200.0 million.

In August 2011, a subsidiary of LGEI paid $9.9 million to repurchase $10.0 million of aggregate principal amount (carrying value — $9.9 million) of the Senior Notes in the open market. We recorded a loss on extinguishment in the quarter ended September 30, 2011 of $0.4 million, which included $0.5 million of deferred financing costs written off. In September 2011, in connection with the common shares repurchased as discussed in Note 15, LGEI resold such Senior Notes at 99.0% of the $10.0 million face amount thereof, plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $10.2 million.

Outstanding Amount. The outstanding amount is set forth in the table below:



	December 31, 2011
	Principal		Unamortized Premium/ (Discount)			Net Carrying Amount
	(Amounts in thousands)
Senior Secured Second-Priority Notes	$	436,000	$	(4,666	)	$	431,334

Maturity Date. The Senior Notes are due November 1, 2016.

Original Issue Discount/Premium. The October 2009 Senior Notes were issued by LGEI at an initial price of 95.222% (original issue discount — 4.778%) of the principal amount. The May 2011 Senior Notes were issued by LGEI at an initial price of 102.219% (original issue premium — 2.219%) of the principal amount, plus accrued interest thereon from May 1, 2011, resulting in gross proceeds of approximately $204.4 million and net proceeds of approximately $192.4 million after fees and expenses, including $5.6 million paid in connection with the consent solicitation of holders of the October 2009 Senior Notes. The original issue discount/premium, interest and deferred financing costs are being amortized through November 1, 2016 using the effective interest method. As of December 31, 2011, the remaining amortization period was 4.8 years.

Interest. The Senior Notes pay interest semi-annually on May 1 and November 1 of each year at a rate of 10.25% per year.

Security. The Senior Notes are guaranteed on a senior secured basis by us, and certain wholly-owned subsidiaries of both us and LGEI. The Senior Notes are ranked junior in right of payment to our senior revolving credit facility, ranked equally in right of payment to our subordinated notes, and ranked senior to any of our unsecured debt.

Covenants. The Senior Notes contain certain restrictions and covenants that, subject to certain exceptions, limit our ability to incur additional indebtedness, pay dividends or repurchase our common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations.

Under the terms of the Senior Notes, there are certain covenants which restrict our ability to incur certain additional indebtedness, make certain “restricted payments” as defined, and other items. These covenants require certain ratios, such as the Secured Leverage Ratio and Consolidated Leverage Ratio (as defined in the indentures), to meet certain specified thresholds before such additional indebtedness, restricted payments or other items are permitted under the terms of the indenture. These ratios are partially based on the net borrowing base amount, as calculated pursuant to the indenture. The following table sets forth the total gross and net borrowing base and certain components of the borrowing base as prescribed by the indenture to the Senior Notes:

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Borrowing Base Definition Clause (2)	Category Name	December 31, 2011
		Gross (1)			Rate	Net (1)
		(Amounts in millions)
(i)	Eligible Major Domestic Receivables	$	228.4	@	100%	$	228.4
(ii)	Eligible Acceptable Domestic Receivables	106.5		@	90%	95.9
(iii)	Eligible Acceptable Foreign Receivables	22.0		@	85%	18.7
(iv)	Acceptable Tax Credits	52.0		@	85%/75%	41.9
(v)	Other Domestic Receivables	12.1		@	50%	6.1
(vi)	Other Foreign Receivables	14.1		@	50%	7.0
	Borrowing Base from Receivables	$	435.1			$	398.0
(vii)	Eligible Film Library	596.6		@	50%	298.3
(viii)	Eligible Video Cassette Inventory	33.4			lesser of 50% or $10 million	10.0
(ix)	Total Home Video, Pay Television, Free Television Credits	129.4			Misc.	129.4
(xiii)	Cash Collateral Accounts	49.6		@	100%	49.6
(xiv)	P&A Credit	3.6		@	50%	1.8
	Borrowing Base at December 31, 2011	$	1,247.7			$	887.1


(1)	Gross amount represents the amount as of each applicable category and the net amount represents the acceptable portion of that amount permitted to be counted in the Borrowing Base (as defined) under the indenture.


(2)	The following numbered clauses from the Borrowing Base definition were either not applicable or not material as of December 31, 2011: (x) Direct to Video Credit; (xi) Foreign Rights Credit; (xii) Eligible L/C Receivables.

Convertible Senior Subordinated Notes

As of December 31, 2011, we have convertible senior subordinated notes outstanding of $90.4 million in aggregate principal amount (carrying value — $67.6 million). In March 2012, October 2014, and March 2015, $23.5 million, $0.3 million and $66.6 million, respectively, of these convertible senior subordinated notes are redeemable by the holder.

October 2011 Redemption of the October 2004 2.9375% Notes. On October 15, 2011, certain holders of the October 2004 2.9375% Notes required LGEI to repurchase $26.6 million in aggregate principal amount (carrying value - $26.6 million) of the October 2004 2.9375% Notes, pursuant to the redemption terms of the October 2004 2.9375% Notes. LGEI paid approximately $27.0 million for the repurchase on October 17, 2011, representing a price equal to 100% of the principal amount, together with accrued and unpaid interest through October 17, 2011.

May 2011 Repurchase of a Portion of the October 2004 2.9375% Notes. In May 2011, LGEI paid $19.5 million to repurchase $19.4 million of aggregate principal amount (carrying value — $18.9 million) of the October 2004 2.9375% Notes. We recorded a loss on extinguishment in the quarter ended June 30, 2011 of $0.5 million, which includes $0.1 million of deferred financing costs written off. The loss represented the excess of the fair value of the liability component of the October 2004 2.9375% Notes repurchased over their carrying values, plus the deferred financing costs written off. The amount of consideration recorded as a reduction of shareholders’ equity represents the equity component of the October 2004 2.9375% Notes repurchased.

July 2010 Refinancing Exchange Agreement. On July 20, 2010, we entered into a Refinancing Exchange Agreement to exchange approximately $36.0 million in aggregate principal amount of the February 2005 3.625% Notes and approximately $63.7 million in aggregate principal amount of the October 2004 2.9375% Notes for equal principal amounts, respectively, of the New 3.625% Notes and the New 2.9375% Notes. The New Notes took effect immediately and all terms were identical to the February 2005 3.625% Notes and October 2004 2.9375% Notes except that the New Notes had an extended maturity date, extended put rights by two years, and were immediately convertible at an initial conversion rate of 161.2903 of our common shares per $1,000 principal amount of New Notes (conversion price per share of $6.20), subject to specified contingencies.

On July 20, 2010, the New Notes were converted into 16,236,305 of our common shares. As a result, the New Notes are no longer outstanding as of July 20, 2010.

Key Terms of Convertible Senior Subordinated Notes:

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October 2004 2.9375% Notes. In October 2004, LGEI sold $150.0 million of the October 2004 2.9375% Notes.

Outstanding Amount: As of December 31, 2011, $0.3 million of aggregate principal amount (carrying value — $0.3 million) of the October 2004 2.9375% Notes remains outstanding.

Interest: Interest on the October 2004 2.9375% Notes is payable semi-annually on April 15 and October 15.

Maturity Date: The October 2004 2.9375% Notes mature on October 15, 2024.

Redeemable by LGEI: LGEI may redeem the October 2004 2.9375% Notes at 100%.

Conversion Features: The holder may convert the October 2004 2.9375% Notes into our common shares prior to maturity only if the price of our common shares issuable upon conversion of a note reaches or falls below a certain specific threshold over a specified period, the notes have been called for redemption, a change in control occurs or certain other corporate transactions occur. Before the close of business on or prior to the trading day immediately before the maturity date, the holder may convert the notes into our common shares. The conversion rate is equal to 86.9565 shares per $1,000 principal amount of the October 2004 2.9375% Notes, subject to adjustment in certain circumstances, which represents a conversion price of approximately $11.50 per share. Upon conversion of the October 2004 2.9375% Notes, we have the option to deliver, in lieu of common shares, cash or a combination of cash and our common shares.

Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all or a portion of our notes or the holder converts the notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of our common shares on the effective date of the change in control. No make whole premium will be paid if the price of our common shares at such time is less than $8.79 per share or exceeds $50.00 per share.

February 2005 3.625% Notes. In February 2005, LGEI sold $175.0 million of the February 2005 3.625% Notes.

Outstanding Amount: As of December 31, 2011, $23.5 million of aggregate principal amount (carrying value — $23.2 million) of the February 2005 3.625% Notes remains outstanding.

Interest: Interest on the February 2005 3.625% Notes is payable at 3.625% per annum semi-annually on March 15 and September 15 until March 15, 2012 and at 3.125% per annum thereafter until maturity.

Maturity Date: The February 2005 3.625% Notes will mature on March 15, 2025.

Redeemable by Holder: The holder may require LGEI to repurchase the February 2005 3.625% Notes on March 15, 2012, 2015 and 2020 or upon a change in control at a price equal to 100% of the principal amount, together with accrued and unpaid interest through the date of repurchase.

Conversion Features: The February 2005 3.625% Notes are convertible, at the option of the holder, at any time before the maturity date, if the notes have not been previously redeemed or repurchased, at a conversion rate equal to 70.0133 shares per $1,000 principal amount of the February 2005 3.625% Notes, subject to adjustment in certain circumstances, which represents a conversion price of approximately $14.28 per share. Upon conversion of the February 2005 3.625% Notes, we have the option to deliver, in lieu of common shares, cash or a combination of cash and our common shares.

Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all or a portion of their notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of our common shares on the effective date of the change in control. No make whole premium will be paid if the price of our common shares at such time is less than $10.35 per share or exceeds $75.00 per share.

April 2009 3.625% Notes. In April 2009, LGEI issued approximately $66.6 million of 3.625% Convertible Senior Subordinated Notes (the “April 2009 3.625% Notes”).

Outstanding Amount: As of December 31, 2011, $66.6 million of aggregate principal amount (carrying value — $44.1

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million) of the April 2009 3.625% Notes remains outstanding.

Interest: Interest on the April 2009 3.625% Notes is payable at 3.625% per annum semi-annually on March 15 and September 15 of each year.

Maturity Date: The April 2009 3.625% Notes will mature on March 15, 2025.

Redeemable by LGEI: On or after March 15, 2015, LGEI may redeem the April 2009 3.625% Notes, in whole or in part, at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be redeemed, plus accrued and unpaid interest through the date of redemption.

Conversion Features: The April 2009 3.625% Notes may be converted into our common shares at any time before maturity, redemption or repurchase. The initial conversion rate of the April 2009 3.625% Notes is 121.2121 common shares per $1,000 principal amount of the April 2009 3.625% Notes, subject to adjustment in certain circumstances, which represents a conversion price of approximately $8.25 per share. Upon conversion of the April 2009 3.625% Notes, we have the option to deliver, in lieu of common shares, cash or a combination of cash and our common shares.

Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all or a portion of their notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of our common shares on the effective date of the change in control. No make whole premium will be paid if the price of our common shares at such time is less than $5.36 per share or exceeds $50.00 per share.

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.

Production Loans and Participation Financing Arrangements

Individual Production Loans

As of December 31, 2011, amounts outstanding under individual production loans were $244.7 million. Individual productions loans represent individual loans for the production of film and television programs that we produce. Individual production loans have contractual repayment dates either at or near the expected completion date, with the exception of certain loans containing repayment dates on a longer term basis. Individual production loans of $214.7 million incur interest at rates ranging from 3.55% to 4.25%, and approximately $30.0 million of production loans are non-interest bearing.

Film Credit Facility

On October 6, 2009, we entered into a revolving film credit facility agreement, as amended effective December 31, 2009 and June 22, 2010 (the “Film Credit Facility”), which provides for borrowings for the acquisition or production of motion pictures.

Outstanding Amount. At December 31, 2011, we had borrowings of $40.6 million (March 31, 2011 — $20.4 million).

Commitment Fee. We are required to pay a quarterly commitment fee of 0.75% per annum on the unused commitment under the Film Credit Facility.

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Security. Borrowings under the Film Credit Facility are subject to a borrowing base calculation and are secured by interests in the related motion pictures, together with certain other receivables from other motion picture and television productions pledged by us, including a minimum pledge of such receivables of $25 million. Receivables pledged to the Film Credit Facility must be excluded from the borrowing base calculation under our senior revolving credit facility as described in Note 6.

Pennsylvania Regional Center

General. On April 9, 2008, we entered into a loan agreement with the Pennsylvania Regional Center which provides for the availability of production loans up to $65.5 million on a five-year term for use in film and television productions in the State of Pennsylvania. The amount that was borrowed was limited to approximately one half of the qualified production costs incurred in the State of Pennsylvania through the two-year period ended April 2010, and is subject to certain other limitations. Under the terms of the loan, for every dollar borrowed, our production companies are required (within a two-year period) to either create a specified number of jobs, or spend a specified amount in certain geographic regions in the State of Pennsylvania.

Outstanding Amount. At December 31, 2011, we had borrowings of $65.5 million.

Availability of Funds. At December 31, 2011, there were no amounts available under this agreement.

Maturity Date. All amounts borrowed under this loan agreement with the Pennsylvania Regional Center are due April 11, 2013, five years from the date that we began to borrow under this agreement.

Interest. Amounts borrowed under the agreement carry an interest rate of 1.5%, which is payable semi-annually.

Security. The loan is secured by a first priority security interest in our film library pursuant to an intercreditor agreement with our senior lender under our senior revolving credit facility. Pursuant to the terms of our senior revolving credit facility, we are required to maintain certain collateral equal to the loans outstanding plus 5% under this facility. Such collateral can consist of cash, cash equivalents or debt securities, including our convertible senior subordinated notes repurchased. As of December 31, 2011, $72.8 million principal value (fair value — $72.7 million) of our convertible senior subordinated notes repurchased in December 2009 (see Note 10) was held as collateral under our senior revolving credit facility.

Participation Financing Arrangements

Theatrical Slate Participation. On May 29, 2009, we terminated our theatrical slate participation arrangement with Pride Pictures, LLC (“Pride”), an unrelated entity. Under the arrangement dated May 25, 2007 and amended on January 30, 2008 (the "Master Picture Purchase Agreement"), Pride contributed, in general, 50% of our production, acquisition, marketing and distribution costs of theatrical feature films and participated in a pro rata portion of the pictures’ net profits or losses similar to a co-production arrangement based on the portion of costs funded. Amounts provided from Pride were reflected as a participation liability. In late 2008, the administrative agent for the senior lenders under Pride’s senior credit facility took the position, among others, that the senior lenders did not have an obligation to continue to fund under the senior credit facility because the conditions precedent to funding set forth in the senior credit facility could not be satisfied. We were not a party to the credit facility. Consequently, Pride did not purchase the pictures The Spirit, My Bloody Valentine 3-D and Madea Goes To Jail. Thereafter, on April 20, 2009, after failed attempts by us to facilitate a resolution, we gave FilmCo and Pride notice that FilmCo, through Pride’s failure to make certain capital contributions, was in default of the Master Picture Purchase Agreement. On May 5, 2009, the representative for the Pride equity and the Pride mezzanine investor responded that the required amount was fully funded and that it had no further obligations to make any additional capital contributions. Consequently, on May 29, 2009, we gave notice of termination of the Master Picture Purchase Agreement. Since May 29, 2009, there have been no developments with respect to the arrangement. Although we will no longer receive financing as provided from the participation of Pride in our films, we do not believe this will have a material adverse effect to our business.

Société Générale de Financement du Québec. On July 30, 2007, we entered into a four-year filmed entertainment slate participation agreement with Société Générale de Financement du Québec (“SGF”), the Québec provincial government’s investment arm. SGF will provide up to 35% of production costs of television and feature film productions produced in Québec for a four-year period for an aggregate participation of up to $140 million, and we were to advance all amounts necessary to fund the remaining budgeted costs. The maximum aggregate of budgeted costs over the four-year period was $400 million, including our portion, but no more than $100 million per year. In connection with this agreement, we and SGF proportionally share in the proceeds derived from the productions after we deduct a distribution fee, recoup all distribution expenses and releasing costs, and pay all applicable third-party participations and residuals. The arrangement expired on July 30, 2011.

Filmed Entertainment Backlog

Filmed Entertainment Backlog. Backlog represents the amount of future revenue not yet recorded from contracts for the licensing of films and television product for television exhibition and in international markets. Backlog at December 31, 2011

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and March 31, 2011 is $607.5 million and $532.0 million, respectively.

Discussion of Operating, Investing, Financing Cash Flows

Cash Flows Used in Operating Activities. Cash flows used in operating activities for the nine months ended December 31, 2011 were $211.9 million compared to cash flows used in operating activities for the nine months ended December 31, 2010 of $115.6 million. The increase in cash used in operating activities was primarily due to increases in investment in films and television programs, the gain on sale of asset disposal group, decreases in amortization of films and television programs, non-cash stock-based compensation, accounts payable and equity interest income for the nine months ended December 31, 2011 compared to loss on extinguishment of debt and equity interest loss for the nine months ended December 31, 2010, offset by increases in cash provided by changes in restricted cash, accounts receivable, participations and residuals, film obligations, deferred revenue and a lower net loss in the nine months ended December 31, 2011 compared to the nine months ended December 31, 2010.

Cash Flows Provided by/Used in Investing Activities. Cash flows provided by investing activities of $5.0 million for the nine months ended December 31, 2011 consisted of $9.1 million of proceeds from the sale of asset disposal group, net of transaction costs and cash disposed of $3.9 million, offset by $1.5 million for purchases of property and equipment, $1.0 million of capital contributions to companies accounted for as equity method investments, and $1.5 million for an increase in loans made to Break Media. Cash flows used in investing activities of $25.8 million for the nine months ended December 31, 2010 consisted of $15.0 million for the buy-out of the earn-out associated with the acquisition of Debmar-Mercury, $1.2 million for purchases of property and equipment and $24.7 million of capital contributions to companies accounted for as equity method investments, partially offset by $8.1 million repayments on loans made to a third-party producer and net proceeds of $7.0 million from the sale of restricted investments.

Cash Flows Provided by Financing Activities. Cash flows provided by financing activities of $175.6 million for the nine months ended December 31, 2011 resulted from the receipt of net proceeds of $202.0 million from the sale of Senior Notes, borrowings of $263.7 million under the senior revolving credit facility and $241.9 million under production loans, partially offset by $238.9 million repayment on the senior revolving credit facility, $157.5 million repayment of production loans, $77.1 million payment for the repurchase of common shares, $46.1 million payment for the repurchase of convertible senior subordinated notes, $9.9 million payment for the repurchase of Senior Notes and $2.6 million paid for tax withholding requirements associated with our equity awards. Cash flows provided by financing activities of $140.5 million for the nine months ended December 31, 2010 resulted from borrowings of $481.8 million under the senior revolving credit facility and increased production loans of $117.9 million, partially offset by $274.5 million repayment on the senior revolving credit facility, $174.8 million repayment of production loans, and $12.9 million paid for tax withholding requirements associated with our equity awards.

Anticipated Cash Requirements. The nature of our business is such that significant initial expenditures are required to produce, acquire, distribute and market films and television programs, while revenues from these films and television programs are earned over an extended period of time after their completion or acquisition. We believe that cash flow from operations, cash on hand, senior revolving credit facility availability, tax-efficient financing, available production financing, and the proceeds from the issuance of our May 2011 Senior Notes will be adequate to meet known operational cash requirements for the foreseeable future, including the funding of future film and television production, film rights acquisitions and theatrical and video release schedules, and future equity method investment funding requirements. 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 senior revolving credit facility, single-purpose production financing, the Film Credit Facility, government incentive programs, film funds, and distribution commitments. In addition, we may acquire businesses or assets, including individual films or libraries that are complementary to our business. Any such transaction could be financed through our cash flow from operations, credit facilities, equity or debt financing. If additional financing beyond our existing cash flows from operations and credit facilities cannot fund such transactions, there is no assurance that such financing will be available on terms acceptable to us. We may also dispose of businesses or assets, including individual films or libraries, and use the net proceeds from such dispositions to fund operations or such acquisitions, or to repay debt.

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Table of Debt and Other Financing Obligations and Contractual Commitments

The following table sets forth our future three-month and annual repayment of debt and other financing obligations outstanding, and our contractual commitments as of December 31, 2011:



	Three Months Ended March 31,		Year Ended March 31,
	2012		2013		2014		2015		2016		Thereafter		Total
Future annual repayment of debt and other financing obligations recorded as of December 31, 2011
Senior revolving credit facility	$	—	$	—	$	94,500	$	—	$	—	$	—	$	94,500
Film obligations(1)	50,841		23,360		19,440		14,519		9,680		—		117,840
Production loans(1)
Individual production loans	23,203		206,475		15,000		—		—		—		244,678
Pennsylvania Regional Center production loans	—		—		65,500		—		—		—		65,500
Film Credit Facility	—		40,625		—		—		—		—		40,625
Principal amounts of convertible senior subordinated notes and other financing obligations (2)
October 2004 2.9375% Notes (carrying value of $0.3 million at December 31, 2011)	—		—		—		348		—		—		348
February 2005 3.625% Notes (carrying value of $23.2 million at December 31, 2011)	23,470		—		—		—		—		—		23,470
April 2009 3.625% Notes (carrying value of $44.1 million at December 31, 2011)	—		—		—		66,581		—		—		66,581
Other financing obligations	—		3,718		—		—		—		—		3,718
Principal amount of senior secured second-priority notes, due November 2016 (carrying value of $431.3 million at December 31, 2011)	—		—		—		—		—		436,000		436,000
	$	97,514	$	274,178	$	194,440	$	81,448	$	9,680	$	436,000	$	1,093,260
Contractual commitments by expected repayment date
Distribution and marketing commitments (3)	$	3,780	$	149,677	$	—	$	—	$	—	$	—	$	153,457
Minimum guarantee commitments (4)	17,417		110,924		18,512		—		—		—		146,853
Production loan commitments (4)	6,545		64,357		—		—		—		—		70,902
Cash interest payments on subordinated notes and other financing obligations	1,706		2,445		2,419		2,419		—		—		8,989
Cash interest payments on senior secured second priority notes	—		44,690		44,690		44,690		44,690		44,690		223,450
Operating lease commitments	2,192		8,808		8,877		8,314		3,499		—		31,690
Other contractual obligations	485		—		—		—		—		—		485
Employment and consulting contracts	11,078		33,890		13,947		3,258		1,889		—		64,062
	$	43,203	$	414,791	$	88,445	$	58,681	$	50,078	$	44,690	$	699,888
Total future commitments under contractual obligations	$	140,717	$	688,969	$	282,885	$	140,129	$	59,758	$	480,690	$	1,793,148

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(1)	Film obligations include minimum guarantees and theatrical marketing obligations. Production loans represent loans for the production of film and television programs that we produce. Repayment dates are based on anticipated delivery or release date of the related film or contractual due dates of the obligation.


(2)	The future repayment dates of the convertible senior subordinated notes represent the next possible redemption date by the holder for each note respectively.


(3)	Distribution and marketing commitments represent contractual commitments for future expenditures associated with distribution and marketing of films which we will distribute. The payment dates of these amounts are primarily based on the anticipated release date of the film.

(4)

Minimum guarantee commitments represent contractual commitments related to the purchase of film rights for pictures to be delivered in the future. Production loan commitments represent amounts committed for future film production and development to be funded through production financing and recorded as a production loan liability when incurred. Future payments under these commitments are based on anticipated delivery or release dates of the related film or contractual due dates of the commitment. The amounts include future interest payments associated with the commitment.

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 audited consolidated financial statements are presented in the above table.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Currency and Interest Rate Risk Management

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

Currency Rate Risk. We enter into forward foreign exchange contracts to hedge our foreign currency exposures on future production expenses denominated in various foreign currencies. As of December 31, 2011, we had outstanding forward foreign exchange contracts to buy Canadian $0.3 million in exchange for US$0.3 million over a period of two months at a weighted average exchange rate of one US$ equals Canadian $0.98. We also had outstanding forward foreign exchange contracts to sell British Pound Sterling £3.9 million in exchange for US$6.4 million over a period of two months at a weighted average exchange rate of one British Pound Sterling equals US$1.63. Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that qualified as effective hedge contracts outstanding during the nine months ended December 31, 2011 amounted to $0.5 million and are included in accumulated other comprehensive loss, a separate component of shareholders’ equity. These contracts are entered into with a major financial institution as counterparty. We are exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of replacing the contracts, at current market rates. We do not require collateral or other security to support these contracts.

Interest Rate Risk. Certain of our borrowings, primarily borrowings under our senior revolving credit facility, certain production loans and the Film Credit Facility, 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 its net income would decrease. The applicable margin with respect to loans under the senior revolving credit facility is a percentage per annum equal to 2.50% plus an adjusted rate based on LIBOR. The applicable margin with respect to loans under the Film Credit Facility is a percentage per annum equal to 3.25% over the “LIBO” rate (as defined in the Film Credit Facility agreement). Assuming the senior revolving credit facility and the Film Credit Facility are fully drawn, based on the applicable LIBOR in effect as of December 31, 2011, each quarter point change in interest rates would result in a $0.9 million change in annual interest expense on the senior revolving credit facility and $0.3 million change in annual interest expense on the Film Credit Facility. The variable interest production loans incur interest at rates ranging from approximately 3.55% to 4.25% and applicable margins ranging from 3.25% over the one, three, or six-month LIBOR to 3.25% over the greater of the one, three or six month LIBOR or 1.0%. A quarter point increase of the interest rates on the outstanding principal amount of our variable rate production loans would result in $0.5 million in additional costs capitalized to the respective film or television asset.

The following table presents 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 with the related weighted-average interest rates by expected maturity dates and the fair value of the instrument as of December 31, 2011:

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	Three Months Ended March 31,			Year Ended March 31,																Fair Value
	2012			2013			2014			2015			2016		Thereafter			Total		December 31, 2011
Variable Rates:
Senior Revolving Credit Facility (1)	$	—		$	—		$	94,500		$	—		$	—	$	—		$	94,500	$	94,500
Average Interest Rate	—			—			2.80		%	—			—		—
Production Loans (2):
Individual production loans	8,203			206,475			—			—			—		—			214,678		214,678
Average Interest Rate	4.05		%	3.86		%	—			—			—		—
Film Credit Facility	—			40,625			—			—			—		—			40,625		40,625
Average Interest Rate	—			3.55		%	—			—			—		—
Fixed Rates:
Production Loans (3):
Pennsylvania Regional Center production loans	—			—			65,500			—			—		—			65,500		63,196
Average Interest Rate	—			—			1.50		%	—			—		—
Principal Amounts of Convertible Senior Subordinated Notes (4):
October 2004 2.9375% Notes	—			—			—			348			—		—			348		228
Average Interest Rate	—			—			—			2.94		%	—		—
February 2005 3.625% Notes	23,470			—			—			—			—		—			23,470		23,740
Average Interest Rate	3.63		%	—			—			—			—		—
April 2009 3.625% Notes	—			—			—			66,581			—		—			66,581		60,904
Average Interest Rate	—			—			—			3.63		%	—		—
Other Financing Obligations (5)	—			3,718			—			—			—		—			3,718		3,718
Average Interest Rate	—			8.02		%	—			—			—		—
Principal Amount of Senior Secured Second-Priority Notes (6)	—			—			—			—			—		436,000			436,000		461,615
Average Interest Rate	—			—			—			—			—		10.25		%
	$	31,673		$	250,818		$	160,000		$	66,929		$	—	$	436,000		$	945,420	$	963,204

____________________


(1)	Senior revolving credit facility, which expires July 25, 2013 bears interest of 2.50% over the Adjusted LIBOR rate.


(2)	Amounts owed to film production entities on anticipated delivery date or release date of the titles or the contractual due dates of the obligation. Production loans of $214.7 million incur interest at rates ranging from approximately 3.55% to 4.25%. Not included in the table above are approximately $30.0 million of production loans which are non-interest bearing.


(3)	Long term production loans with a fixed interest rate equal to 1.5%.


(4)	The future repayment dates of the convertible senior subordinated notes represent the first possible redemption date by the holder for each note respectively.


(5)	Other financing obligation with fixed interest rate equal to 8.02%.


(6)	Senior secured second-priority notes with a fixed interest rate equal to 10.25%.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

As of December 31, 2011, the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective as of December 31, 2011.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, the Company, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, also evaluated whether any changes occurred to the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, such control. Based on that evaluation, there has been no such change during the period covered by this report.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Other than as set forth below and as set forth in the Company's Quarterly Report on Form 10-Q for the second quarter ended September 30, 2011, there were no other material changes to the risk factors previously reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2011.

An increase in the ownership of our common shares by certain shareholders could trigger a change in control under the agreements governing our long-term indebtedness.

The agreements governing certain of our long-term indebtedness contain change in control provisions that are triggered when any of our shareholders, directly or indirectly, acquires ownership or control in excess of a certain percentage of our common shares. As of January 13, 2012, three of our shareholders, Mark H. Rachesky, M.D., FMR LLC and Capital Research Global Investors, and their respective affiliates, beneficially owned approximately 35.8%, 9.8% and 8.8%, respectively, of our outstanding common shares.

Under certain circumstances, including the acquisition of ownership or control by a person or group in excess of 50% of our common shares, the holders of our senior secured notes and our convertible senior subordinated notes may require us to repurchase all or a portion of such notes upon a change in control and the holders of our convertible senior subordinated notes may be entitled to receive a make whole premium based on the price of our common shares on the change in control date. We may not be able to repurchase these notes upon a change in control because we may not have sufficient funds. Further, we may be contractually restricted under the terms of our senior secured credit facility and the Film Credit Facility, from repurchasing all of the notes tendered by holders upon a change in control. Our failure to repurchase our senior secured notes upon a change in control would cause a default under the indentures governing the senior secured notes and the convertible senior subordinated notes and a cross-default under the senior secured credit facility and the Film Credit Facility.

Our senior secured credit facility and the Film Credit Facility also provide that a change in control, which includes a person or group acquiring ownership or control in excess of 50% of our outstanding common shares, will be an event of default that permits lenders to accelerate the maturity of borrowings thereunder and to enforce security interests in the collateral securing such debt, thereby limiting our ability to raise cash to purchase our outstanding senior secured note and convertible senior subordinated notes. Any of our future debt agreements may contain similar provisions.

Failure to manage future growth may adversely affect our business.

We are subject to risks associated with possible acquisitions, business combinations, or joint ventures. From time to time, we engage in discussions and activities with respect to possible acquisitions, sale of assets, business combinations, or joint ventures intended to complement or expand our business, some of which may be significant transactions for us. For instance, in January 2012, we purchased all of the membership interests of Summit Entertainment, LLC, in July 2010, we formed Pantelion Films, in April 2010, we formed Tiger Gate, in February 2009, we acquired TV Guide Network and related assets, and in April 2008, we formed EPIX. We may not realize the anticipated benefit from any of the transactions we pursue. Regardless of whether we consummate any such transaction, the negotiation of a potential transaction (including associated litigation and proxy contests), as well as the integration of the acquired business, could require us to incur significant costs and cause diversion of management's time and resources. Any such transaction could also result in impairment of goodwill and other intangibles, development write-offs and other related expenses. Any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

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

Issuer Purchases of Securities

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On May 31, 2007, our Board of Directors authorized the repurchase of up to $50 million of our common shares. Thereafter, on each of May 29, 2008 and November 6, 2008, as part of its regularly scheduled meetings, our Board of Directors authorized the repurchase up to an additional $50 million of our common shares, subject to market conditions. The additional resolutions increased the total authorization to $150 million. The common shares may be purchased, from time to time, at the Company's discretion, including the quantity, timing and price thereof. Such purchases will be structured as permitted by securities laws and other legal requirements. During the period from the authorization date through December 31, 2011, 6,787,310 shares have been repurchased at a cost of approximately $65.2 million (including commission costs). The share repurchase program has no expiration date.

There were no purchases of shares of our common stock by us during the three months ended December 31, 2011.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.



Exhibit Number		Description of Documents

3.1 (1)		Articles

3.2 (2)		Notice of Articles

3.3 (3)		Vertical Short Form Amalgamation Application

3.4 (3)		Certificate of Amalgamation

10.82 (4)		Underwriting Agreement, dated October 13, 2011, by and among Lions Gate Entertainment Corp., the selling shareholders named therein and Piper Jaffray & Co., as underwriter.

10.83 (5)		Membership Interest Purchase Agreement, dated as of January 13, 2012, among Lions Gate Entertainment Corp., LGAC 1, LLC, LGAC 3, LLC, Summit Entertainment, LLC, S Representative, LLC and the several sellers party thereto

10.84 (6)		Purchase Agreement, dated January 11, 2012 by and among Lions Gate Entertainment Inc., Lions Gate Entertainment Corp. and Kornitzer Capital Management, Inc.

10.85*		Credit, Security, Guaranty and Pledge Agreement dates as of January 13, 2012 among Summit Entertainment, LLC, as Borrower, the Guarantors referred to therein, the Lenders referred to therein, and JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders.

31.1		Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 (7)		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 formatted in Extensible Business Reporting Language (XBRL): (i ) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Shareholder’s Equity, (iv) the Condensed consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements

__________________


(1)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005 as filed on June 29, 2005.

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(2)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2010, as filed on February 9, 2011


(3)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007 as filed on May 30, 2007.


(4)	Incorporated by reference as Exhibit 1.1 to the Company's Current Report on Form 8-K as filed on October 13, 2011.


(5)	Incorporated by reference as Exhibit 2.1 to the Company's Current Report on Form 8-K as filed on January 17, 2012.


(6)	Incorporated by reference as Exhibit 4.1 to the Company's Current Report on Form 8-K as filed on January 17, 2012.

(7)

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

* Confidential treatment has been requested for portions of this exhibit. Portions of this document have been omitted and submitted separately to the Securities and Exchange Commission.

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SIGNATURES

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




		LIONS GATE ENTERTAINMENT CORP.

		By:	/s/ James Keegan
			Name:	James Keegan
Date:	February 9, 2012		Title:	Duly Authorized Officer and Chief Financial Officer