Edgar Filing: LIONS GATE ENTERTAINMENT CORP /CN/

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LGF 2012.9.30 10-Q

Table of Contents

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 September 30, 2012



¨	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 November 1, 2012
Common Shares, no par value per share		146,090,466 shares

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	48
3. Quantitative and Qualitative Disclosures About Market Risk	85
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	90
3. Defaults Upon Senior Securities	91
4. Mine Safety Disclosures	91
5. Other Information	92
6. Exhibits	92

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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 30, 2012, 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, as amended, 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 30, 2012, 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



	September 30, 2012			March 31, 2012
	(Amounts in thousands, except share amounts)
ASSETS
Cash and cash equivalents	$	54,399		$	64,298
Restricted cash	6,634			11,936
Accounts receivable, net of reserves for returns and allowances of $114,861 (March 31, 2012 - $93,860) and provision for doubtful accounts of $3,849 (March 31, 2012 - $4,551)	701,354			784,530
Investment in films and television programs, net	1,350,672			1,329,053
Property and equipment, net	8,728			9,772
Equity method investments	172,606			171,262
Goodwill	326,004			326,633
Other assets	89,966			90,511
Total assets	$	2,710,363		$	2,787,995
LIABILITIES
Senior revolving credit facility	$	268,724		$	99,750
Senior secured second-priority notes	431,881			431,510
Term loan	294,929			477,514
Accounts payable and accrued liabilities	367,921			371,092
Participations and residuals	418,547			420,325
Film obligations and production loans	437,579			561,150
Convertible senior subordinated notes and other financing obligations	83,704			108,276
Deferred revenue	260,863			228,593
Total liabilities	2,564,148			2,698,210
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Common shares, no par value, 500,000,000 shares authorized, 145,785,044 and 143,980,754 shares issued at September 30, 2012 and March 31, 2012, respectively	736,663			712,623
Accumulated deficit	(510,710		)	(542,039		)
Accumulated other comprehensive loss	(2,650		)	(3,711		)
	223,303			166,873
Treasury shares, no par value, 11,040,493 shares at September 30, 2012 and March 31, 2012	(77,088		)	(77,088		)
Total shareholders’ equity	146,215			89,785
Total liabilities and shareholders’ equity	$	2,710,363		$	2,787,995

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
				As adjusted (Note 1)						As adjusted (Note 1)
	(Amounts in thousands, except per share amounts)
Revenues	$	706,968		$	358,081		$	1,178,788		$	619,340
Expenses:
Direct operating	323,230			206,344			569,048			345,702
Distribution and marketing	236,442			141,642			415,151			206,388
General and administration	44,030			29,428			96,374			57,350
Gain on sale of asset disposal group	—			(10,967		)	—			(10,967		)
Depreciation and amortization	2,115			681			4,220			1,915
Total expenses	605,817			367,128			1,084,793			600,388
Operating income (loss)	101,151			(9,047		)	93,995			18,952
Other expenses (income):
Interest expense
Contractual cash based interest	18,908			14,160			41,636			25,875
Amortization of debt discount (premium) and deferred financing costs	4,377			3,409			9,139			8,029
Total interest expense	23,285			17,569			50,775			33,904
Interest and other income	(1,029		)	(928		)	(1,979		)	(1,370		)
Loss on extinguishment of debt	1,000			436			9,159			967
Total other expenses, net	23,256			17,077			57,955			33,501
Income (loss) before equity interests and income taxes	77,895			(26,124		)	36,040			(14,549		)
Equity interests income	1,755			1,889			1,610			1,849
Income (loss) before income taxes	79,650			(24,235		)	37,650			(12,700		)
Income tax provision	4,121			1,071			6,321			2,272
Net income (loss)	$	75,529		$	(25,306	)	$	31,329		$	(14,972	)
Basic Net Income (Loss) Per Common Share	$	0.56		$	(0.19	)	$	0.23		$	(0.11	)
Diluted Net Income (Loss) Per Common Share	$	0.53		$	(0.19	)	$	0.23		$	(0.11	)
Weighted average number of common shares outstanding:
Basic	134,390			133,755			133,815			135,374
Diluted	148,696			133,755			134,610			135,374

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
				As adjusted (Note 1)						As adjusted (Note 1)
	(Amounts in thousands)
Net income (loss)	$	75,529		$	(25,306	)	$	31,329		$	(14,972	)
Foreign currency translation adjustments	2,999			(4,433		)	1,078			(4,359		)
Net unrealized gain (loss) on foreign exchange contracts	(512		)	626			(17		)	662
Comprehensive income (loss)	$	78,016		$	(29,113	)	$	32,390		$	(18,669	)

See accompanying notes.

LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY



	Common Shares			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Shares
	Number	Amount		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Number	Amount			Total
	(Amounts in thousands, except share amounts)
Balance at March 31, 2012	143,980,754	$	712,623	$	(542,039	)	$	(3,711	)	11,040,493	$	(77,088	)	$	89,785
Exercise of stock options	10,000	52		—			—			—	—			52
Stock based compensation, net of withholding tax obligations of $4,005	546,665	6,906		—			—			—	—			6,906
Conversion of February 2005 3.625% and April 2009 3.625% Notes, net of reacquisition of the equity component	1,230,010	16,832												16,832
Issuance of common shares to directors for services	17,615	250		—			—			—	—			250
Net income	—	—		31,329			—			—	—			31,329
Foreign currency translation adjustments	—	—		—			1,078			—	—			1,078
Net unrealized loss on foreign exchange contracts	—	—		—			(17		)	—	—			(17		)
Balance at September 30, 2012	145,785,044	$	736,663	$	(510,710	)	$	(2,650	)	11,040,493	$	(77,088	)	$	146,215

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011
				As adjusted (Note 1)
	(Amounts in thousands)
Operating Activities:
Net income (loss)	$	31,329		$	(14,972	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of property and equipment	1,525			1,765
Amortization of intangible assets	2,695			150
Amortization of films and television programs	394,664			219,214
Amortization of debt discount (premium) and deferred financing costs	9,139			8,029
Non-cash stock-based compensation	10,917			4,802
Gain on sale of asset disposal group	—			(10,967		)
Loss on extinguishment of debt	9,159			967
Equity interests income	(1,610		)	(1,849		)
Changes in operating assets and liabilities:
Restricted cash	5,302			23,996
Accounts receivable, net	84,026			(23,381		)
Investment in films and television programs	(423,120		)	(433,384		)
Other assets	(1,544		)	1,522
Accounts payable and accrued liabilities	2,149			15,425
Participations and residuals	(1,015		)	12,331
Film obligations	(13,820		)	10,998
Deferred revenue	32,339			44,792
Net Cash Flows Provided By (Used In) Operating Activities	142,135			(140,562		)
Investing Activities:
Proceeds from the sale of asset disposal group, net of transaction costs and cash disposed of $3,943	—			9,119
Investment in equity method investees	—			(828		)
Increase in loans receivable	—			(1,500		)
Repayment of loans receivable	4,274			—
Purchases of property and equipment	(976		)	(1,253		)
Net Cash Flows Provided By Investing Activities	3,298			5,538
Financing Activities:
Exercise of stock options	52			—
Tax withholding requirements on equity awards	(4,005		)	(1,932		)
Repurchase of common shares	—			(77,088		)
Borrowings under senior revolving credit facility	681,424			153,650
Repayments of borrowings under senior revolving credit facility	(512,450		)	(200,400		)
Deferred financing costs associated with the amended and restated senior revolving credit facility	(15,198		)	—
Borrowings under individual production loans	108,948			134,870
Repayment of individual production loans	(182,930		)	(122,886		)
Production loan borrowings under film credit facility	3,897			33,002
Production loan repayments under film credit facility	(39,055		)	(9,187		)
Change in restricted cash collateral associated with financing activities	—			(3,043		)
Repayments of borrowings under Term Loan associated with the acquisition of Summit	(185,504		)	—
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	(7,639		)	(19,476		)
Repayment of other financing obligations	(3,710		)	—
Net Cash Flows Provided By (Used In) Financing Activities	(156,170		)	79,613
Net Change In Cash And Cash Equivalents	(10,737		)	(55,411		)
Foreign Exchange Effects on Cash	838			(1,482		)
Cash and Cash Equivalents - Beginning Of Period	64,298			86,419
Cash and Cash Equivalents - End Of Period	$	54,399		$	29,526

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 six months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2013. The balance sheet at March 31, 2012 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K and Amendment No. 1 to the Form 10-K for the fiscal year ended March 31, 2012 (collectively "Form 10-K").

Adjustments to prior period for elimination of lag in reporting of EPIX

As a result of the elimination of a one quarter lag in recording the Company's share of EPIX's results (discussed in Note 7 to the consolidated financial statements as included in the Company's Form 10-K) for the year ended March 31, 2012, prior year amounts presented for fiscal 2012 have been adjusted from amounts previously reported.

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.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Investment in Films and Television Programs



	September 30, 2012		March 31, 2012
	(Amounts in thousands)
Motion Picture Segment - Theatrical and Non-Theatrical Films
Released, net of accumulated amortization	$	530,856	$	557,003
Acquired libraries, net of accumulated amortization	24,507		29,320
Completed and not released	72,850		53,258
In progress	472,393		512,712
In development	25,625		19,399
Product inventory	34,056		31,000
	1,160,287		1,202,692
Television Segment - Direct-to-Television Programs
Released, net of accumulated amortization	112,127		93,499
In progress	74,636		30,781
In development	3,622		2,081
	190,385		126,361
	$	1,350,672	$	1,329,053

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
Acquired Library	Acquisition Date	Total Amortization Period	Remaining Amortization Period	September 30, 2012		March 31, 2012
		(In years)		(Amounts in thousands)
Trimark Holdings	October 2000	20.00	8.00	$	1,129	$	1,660
Artisan Entertainment	December 2003	20.00	11.25	19,093		22,112
Lionsgate UK	October 2005	20.00	13.00	474		532
Summit Entertainment	January 2012	20.00	19.25	3,811		5,016
Total acquired libraries				$	24,507	$	29,320

The Company expects approximately 45% of completed films and television programs, net of accumulated amortization, will be amortized during the one-year period ending September 30, 2013. Additionally, the Company expects approximately 81% 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 September 30, 2015.

3. Equity Method Investments

The carrying amount of significant equity method investments at September 30, 2012 and March 31, 2012 were as follows:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	September 30, 2012
Equity Method Investee	Ownership Percentage	September 30, 2012		March 31, 2012
		(Amounts in thousands)
Horror Entertainment, LLC (“FEARnet”)	34.5%	$	2,934	$	2,880
NextPoint, Inc. (“Break Media”)	42.0%	5,994		8,477
Roadside Attractions, LLC (“Roadside”)	43.0%	2,938		3,118
Studio 3 Partners, LLC (“EPIX”)	31.2%	62,493		50,381
TV Guide Network	51.0%	98,247		106,406
		$	172,606	$	171,262

Equity interests in equity method investments in our 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 six months ended September 30, 2012, and 2011 were as follows (income (loss)):



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
Equity Method Investee	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
				As adjusted						As adjusted
	(Amounts in thousands)
Horror Entertainment, LLC (“FEARnet”)	$	2		$	(48	)	$	54		$	8
NextPoint, Inc. (“Break Media”)	(828		)	(660		)	(2,483		)	(1,976		)
Roadside Attractions, LLC (“Roadside”)	203			246			87			207
Studio 3 Partners, LLC (“EPIX”)	5,525			5,333			12,112			8,215
TV Guide Network	(3,147		)	(2,304		)	(8,160		)	(3,240		)
Tiger Gate Entertainment Limited (“Tiger Gate”)	—			(678		)	—			(1,365		)
	$	1,755		$	1,889		$	1,610		$	1,849

Horror Entertainment, LLC. Horror Entertainment, LLC (“FEARnet”), is 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 six months ended September 30, 2012, the Company recorded its share of the income generated by FEARnet for the three and six months ended June 30, 2012.

NextPoint, Inc. NextPoint, Inc. (“Break Media”), is 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 six months ended September 30, 2012, the Company recorded its share of losses incurred by Break Media for the three and six months ended June 30, 2012.

Roadside Attractions, LLC. Roadside Attractions, LLC (“Roadside”), is 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 six months ended September 30, 2012, the Company recorded its share of the income generated by Roadside for the three and six months ended June 30, 2012.

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

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

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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			Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(Amounts in thousands)
Revenue recognized on sales to EPIX	$	6,256		$	14,721		$	22,772		$	49,875

Gross profit on sales to EPIX	$	2,185		$	10,838		$	9,170		$	32,480
Ownership interest in EPIX	31.15		%	31.15		%	31.15		%	31.15		%
Elimination of the Company's share of profits on sales to EPIX	$	681		$	3,376		$	2,856		$	10,118

EPIX Financial Information:

The following table presents summarized balance sheet data as of September 30, 2012 and March 31, 2012 for EPIX:



	September 30, 2012		March 31, 2012
	(Amounts in thousands)
Current assets	$	194,777	$	196,903
Non-current assets	$	172,495	$	140,532
Current liabilities	$	131,250	$	140,684
Non-current liabilities	$	9,321	$	4,723

The following table presents the summarized statement of operations for the three and six months ended September 30, 2012 and 2011 for EPIX and a reconciliation of the net income reported by EPIX to equity interest income recorded by the Company:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(Amounts in thousands)
Revenues	$	82,842		$	79,457		$	170,606		$	158,861
Expenses:
Operating expenses	62,959			60,698			123,692			116,867
Selling, general and administrative expenses	6,498			5,777			12,241			11,698
Operating income	13,385			12,982			34,673			30,296
Interest income	—			3			—			6
Net income	$	13,385		$	12,985		$	34,673		$	30,302
Reconciliation of net income reported by EPIX to equity interest income:
Net income reported by EPIX	$	13,385		$	12,985		$	34,673		$	30,302
Ownership interest in EPIX	31.15		%	31.15		%	31.15		%	31.15		%
The Company's share of net income	4,169			4,045			10,801			9,439
Eliminations of the Company’s share of profits on sales to EPIX (1)	(681		)	(3,376		)	(2,856		)	(10,118		)
Realization of the Company’s share of profits on sales to EPIX (2)	2,037			4,664			4,167			8,894
Total equity interest income recorded	$	5,525		$	5,333		$	12,112		$	8,215

__________________

(1)

Represents the elimination of the gross profit recognized by Lionsgate on sales 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. On February 28, 2009, the Company purchased all of the issued and outstanding equity interests of TV Guide Network. The Company paid approximately $241.6 million for all of the equity interest of TV Guide Network. On May 28, 2009, the Company sold 49% of the Company’s interest in TV Guide Network for approximately $122.4 million in cash.

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, the Company determined it is not the primary beneficiary of TV Guide Network because pursuant to the operating agreement of the entity, the power to direct the activities that most significantly impact the economic performance of TV Guide Network is shared with the 49% owner of TV Guide Network. Accordingly, the Company’s interest in TV Guide Network is being accounted for under the equity method of accounting.

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.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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:



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(Amounts in thousands)
Revenue recognized on sales to TV Guide Network	$	—		$	—		$	2,925		$	2,925

Gross profit on sales to TV Guide Network	$	—		$	—		$	735		$	948
Ownership interest in TV Guide Network	51		%	51		%	51		%	51		%
Elimination of the Company's share of profit on sales to TV Guide Network	$	—		$	—		$	375		$	483

TV Guide Network Financial Information:

The following table presents summarized balance sheet data as of September 30, 2012 and March 31, 2012 for TV Guide Network:



	September 30, 2012		March 31, 2012
	(Amounts in thousands)
Current assets	$	30,792	$	41,548
Non-current assets	$	228,744	$	236,855
Current liabilities	$	30,659	$	30,979
Non-current liabilities	$	31,068	$	33,407
Redeemable preferred stock	$	246,863	$	230,412

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the summarized statement of operations for the three and six months ended September 30, 2012 and 2011 for TV Guide Network and a reconciliation of the net loss reported by TV Guide Network to equity interest loss recorded by the Company:



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(Amounts in thousands)
Revenues	$	19,931		$	22,589		$	41,995		$	50,849
Expenses:
Cost of services	12,197			11,228			26,836			21,417
Selling, marketing, and general and administration	11,143			12,842			25,419			28,635
Depreciation and amortization	2,621			2,925			5,330			5,876
Operating loss	(6,030		)	(4,406		)	(15,590		)	(5,079		)
Interest expense, net	427			454			868			910
Accretion of redeemable preferred stock units (1)	8,368			7,290			16,452			14,332
Total interest expense, net	8,795			7,744			17,320			15,242
Net loss	$	(14,825	)	$	(12,150	)	$	(32,910	)	$	(20,321	)
Reconciliation of net loss reported by TV Guide Network to equity interest loss:
Net loss reported by TV Guide Network	$	(14,825	)	$	(12,150	)	$	(32,910	)	$	(20,321	)
Ownership interest in TV Guide Network	51		%	51		%	51		%	51		%
The Company's share of net loss	(7,561		)	(6,197		)	(16,784		)	(10,364		)
Accretion of dividend and interest income on redeemable preferred stock units (1)	4,268			3,717			8,390			7,309
Eliminations of the Company’s share of profit on sales to TV Guide Network (2)	—			—			(375		)	(483		)
Realization of the Company’s share of profits on sales to TV Guide Network (3)	146			176			609			298
Total equity interest loss recorded	$	(3,147	)	$	(2,304	)	$	(8,160	)	$	(3,240	)

___________________

(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 sales 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.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Other Assets

The composition of the Company’s other assets is as follows as of September 30, 2012 and March 31, 2012:



	September 30, 2012		March 31, 2012
	(Amounts in thousands)
Deferred financing costs, net of accumulated amortization	$	44,433	$	39,130
Loans receivable	21,530		24,767
Prepaid expenses and other	14,721		14,637
Finite-lived intangible assets	9,282		11,977
	$	89,966	$	90,511

Deferred Financing Costs. Deferred financing costs primarily include costs incurred in connection with (1) the amended and restated senior revolving credit facility, (2) the issuance of the Senior Secured Second-Priority Notes, (3) the Term Loan associated with the acquisition of Summit and (4) the issuance of the April 2009 3.625% Notes and the January 2012 4.00% Notes (see Note 5) 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 September 30, 2012 and March 31, 2012:



	Interest Rate	September 30, 2012		March 31, 2012
	(Amounts in thousands)
Third-party producer	3.2%	$	4,592	$	9,049
NextPoint, Inc. (“Break Media”)	5.46% - 20.0%	16,938		15,718
		$	21,530	$	24,767

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

Finite-lived Intangible Assets. Finite-lived intangibles consist primarily of sales agency relationships and trademarks. The composition of the Company's finite-lived intangible assets and the associated accumulated amortization is as follows as of September 30, 2012 and March 31, 2012:



			September 30, 2012						March 31, 2012
	Weighted Average Remaining Life	Range of Remaining Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)		(Amounts in thousands)
Finite-lived intangible assets:
Trademarks	5	1 - 5	$	8,200	$	2,918	$	5,282	$	8,200	$	1,623	$	6,577
Sales agency relationships	5	5	6,200		2,200		4,000		6,200		800		5,400
			$	14,400	$	5,118	$	9,282	$	14,400	$	2,423	$	11,977

The aggregate amount of amortization expense associated with the Company's intangible assets for the three and six months ended September 30, 2012 was approximately $1.3 million and $2.7 million, respectively (2011 - $0.1 million and $0.2 million, respectively). The estimated aggregate amortization expense for each of the years ending March 31, 2013 through 2017 is approximately $2.6 million, $3.7 million, $1.8 million, $0.8 million, and $0.4 million, respectively.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Corporate Debt

The total carrying values of corporate debt of the Company, excluding film obligations and production loans, were as follows as of September 30, 2012 and March 31, 2012:



	September 30, 2012		March 31, 2012
	(Amounts in thousands)
Senior revolving credit facility	$	268,724	$	99,750
Senior secured second-priority notes	431,881		431,510
Term loan	294,929		477,514
Convertible senior subordinated notes	83,704		104,498
Other financing obligations	—		3,778
	$	1,079,238	$	1,117,050

The following table sets forth future annual contractual principal payment commitments under corporate debt as of September 30, 2012:



	Maturity Date or	Year Ended March 31,
Debt Type	Next Holder Redemption Date (1)	2013		2014		2015		2016		2017		Thereafter		Total
		(Amounts in thousands)
Senior revolving credit facility	May 2016 (2)	$	—	$	—	$	—	$	—	$	268,724	$	—	$	268,724
Senior secured second-priority notes	November 2016	—		—		—		—		436,000		—		436,000
Term loan	September 2016 (3)	—		—		3,762		35,587		259,811		—		299,160
Principal amounts of convertible senior subordinated notes:
October 2004 2.9375% Notes (conversion price of $11.50 per share)	October 2014	—		—		348		—		—		—		348
April 2009 3.625% Notes (conversion price of $8.25 per share)	March 2015	—		—		65,574		—		—		—		65,574
January 2012 4.00% Notes (conversion price of $10.50 per share)	January 2017	—		—		—		—		45,000		—		45,000
		$	—	$	—	$	69,684	$	35,587	$	1,009,535	$	—	1,114,806
Less aggregate unamortized (discount) premium, net														(35,568		)
														$	1,079,238

(1) 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 below.

(2) Amended and restated senior revolving credit facility expires the earlier of (i) September 27, 2017 or (ii) six (6) months prior to the maturity of the senior secured second-priority notes

(3) The Term Loan was to mature on September 7, 2016. On October 18, 2012, the Company terminated and paid off all amounts outstanding under the Term Loan of $299.2 million, as well as all accrued but unpaid interest (see Note 18).

Senior Revolving Credit Facility

On September 27, 2012, the Company amended and restated its senior revolving credit facility. The amended and restated senior revolving credit facility provides for borrowings up to $800 million, subject to a borrowing base and other restrictions. The amended credit agreement amends and restates the previous $340 million senior revolving credit facility.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of September 30, 2012, the indenture governing the Company's senior secured second-priority notes restricted the Company from borrowing in excess of $340 million under the Company's credit facility, unless certain financial ratios were met. Subsequently on October 15, 2012, the Company entered into a supplemental indenture to amend the indenture (the “Indenture”) governing the Company's senior secured second-priority notes. The supplemental indenture amends the previous Indenture to, among other things, enable the Company to incur additional secured indebtedness under the amended and restated senior revolving credit facility, in an aggregate principal amount not to exceed $650 million (an increase from the $340 million limit previously specified in the Indenture) (see Note 18).

Outstanding Amount. At September 30, 2012, the Company had borrowings of $268.7 million outstanding (March 31, 2012 — $99.8 million).

Availability of Funds. At September 30, 2012, there was $62.7 million available (March 31, 2012 — $230.2 million). The senior revolving credit facility provides for borrowings and letters of credit up to an aggregate of $800 million, however, due to restrictions in the Company's senior secured second-priority notes indenture as discussed above, the maximum borrowing capacity as of September 30, 2012 was $340 million, which was subsequently adjusted on October 15, 2012 to $650 million pursuant to a supplemental indenture which amended the indenture governing the senior secured second-priority notes. The availability of funds is also limited by a borrowing base and reduced by outstanding letters of credit which amounted to $8.6 million at September 30, 2012 (March 31, 2012 — $10.0 million).

Maturity Date. The senior revolving credit facility expires the earlier of (i) September 27, 2017 or (ii) six (6) months prior to the maturity of the Company’s senior secured second-priority notes.

Interest. Interest is payable at an alternative base rate, as defined, plus 1.5%, or LIBOR plus 2.5% as designated by the Company. As of September 30, 2012, the senior revolving credit facility bore interest of 2.5% over the LIBOR rate (effective interest rate of 2.71% and 2.74% on borrowings outstanding as of September 30, 2012 and March 31, 2012, respectively).

Commitment Fee. The Company is required to pay a quarterly commitment fee of 0.0375% to 0.5% per annum, depending on the average balance of borrowings outstanding during the period, on the total senior revolving credit facility of $800 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.

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 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 have the same terms as the October 2009 Senior Notes, except for the issue date, issue price and first interest payment.

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.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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



	September 30, 2012			March 31, 2012
	(Amounts in thousands)
Principal amount of Senior Secured Second-Priority Notes	$	436,000		$	436,000
Unamortized Aggregate Premium/ (Discount), net	(4,119		)	(4,490		)
Net carrying amount of Senior Secured Second-Priority Notes	$	431,881		$	431,510

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. The original issue discount/premium and deferred financing costs are being amortized through November 1, 2016 using the effective interest method. As of September 30, 2012, the remaining amortization period was 4.1 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.

Term Loan

In connection with the acquisition of Summit (see Note 9), the Company entered into a new $500.0 million principal amount term loan agreement (the "Term Loan") and received net proceeds of $476.2 million, after original issue discount and offering fees and expenses. The net proceeds were used in connection with the acquisition of Summit to pay off Summit's existing term loan.

During the three months ended June 30, 2012 , the Company made voluntary early repayments of the Term Loan of approximately $163.3 million, in addition to required repayments of $22.2 million. As a result, the Company wrote off a proportionate amount of the related deferred financing costs and unamortized discount in the aggregate of $8.2 million, which is included in loss on extinguishment of debt in the consolidated statements of operations.

On October 18, 2012, the Company terminated and paid off all amounts outstanding under the Term Loan of $299.2 million, as well as all accrued but unpaid interest (see Note 18).

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



	September 30, 2012			March 31, 2012
	(Amounts in thousands)
Principal amount	$	299,160		$	484,664
Unamortized discount	(4,231		)	(7,150		)
Net carrying amount	$	294,929		$	477,514

Maturity Date. The Term Loan was to mature on September 7, 2016. The Term Loan was repayable in quarterly installments equal to $13.75 million, with the balance payable on the final maturity date.

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest. Interest was based on a base rate, as defined, or the LIBOR rate (subject to a LIBOR floor of 1.25%), in either case plus an applicable margin of 4.50% in the case of base rate loans and 5.50% in the case of LIBOR loans (effective interest rate of 7.75% and 6.75%, respectively as of September 30, 2012).

Security. The Term Loan was secured by collateral of the Summit assets.

Covenants. The Term Loan contained a number of affirmative and negative covenants that, among other things, require Summit to satisfy certain financial covenants.

Convertible Senior Subordinated Notes

Outstanding Amount. The following table sets forth the convertible senior subordinated notes outstanding at September 30, 2012 and March 31, 2012:



	September 30, 2012							March 31, 2012
	Principal		Unamortized Discount			Net Carrying Amount		Principal		Unamortized Discount			Net Carrying Amount
	(Amounts in thousands)
Convertible Senior Subordinated Notes
October 2004 2.9375% Notes (conversion price of $11.50 per share)	$	348	$	—		$	348	$	348	$	—		$	348
February 2005 3.625% Notes (conversion price of $14.28 per share)	—		—			—		23,464		—			23,464
April 2009 3.625% Notes (conversion price of $8.25 per share)	65,574		(18,266		)	47,308		66,581		(21,119		)	45,462
January 2012 4.00% Notes (conversion price of $10.50 per share)	45,000		(8,952		)	36,048		45,000		(9,776		)	35,224
	$	110,922	$	(27,218	)	$	83,704	$	135,393	$	(30,895	)	$	104,498

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 six months ended September 30, 2012 and 2011 are presented below.

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
	(Amounts in thousands)
October 2004 2.9375% Convertible Senior Subordinated Notes:
Effective interest rate of liability component (9.65%)
Interest expense
Contractual interest coupon	$	—	$	198	$	5	$	464
Amortization of discount on liability component and debt issuance costs	—		484		—		1,100
	—		682		5		1,564
February 2005 3.625% Convertible Senior Subordinated Notes:
Effective interest rate of liability component (10.03%)
Interest expense
Contractual interest coupon	80		212		328		425
Amortization of discount on liability component and debt issuance costs	—		386		6		760
	80		598		334		1,185
April 2009 3.625% Convertible Senior Subordinated Notes:
Effective interest rate of liability component (17.26%)
Interest expense
Contractual interest coupon	604		604		1,207		1,207
Amortization of discount on liability component and debt issuance costs	1,470		1,238		2,868		2,413
	2,074		1,842		4,075		3,620
January 2012 4.00% Convertible Senior Subordinated Notes:
Effective interest rate of liability component (9.56%)
Interest expense
Contractual interest coupon	450		—		900		—
Amortization of discount on liability component and debt issuance costs	429		—		849		—
	879		—		1,749		—
Total
Contractual interest coupon	1,134		1,014		2,440		2,096
Amortization of discount on liability component and debt issuance costs	1,899		2,108		3,723		4,273
	$	3,033	$	3,122	$	6,163	$	6,369

Fiscal 2013 Convertible Senior Subordinated Notes Transactions

February 2005 3.625% Notes. On July 17, 2012, the Company completed the optional redemption of the February 2005 3.625% Notes. Of the $23.5 million of February 2005 3.625% notes called for redemption, $7.7 million were redeemed for cash at 100% of their principal amount, plus accrued and unpaid interest and $15.8 million were converted into common shares at a conversion rate of 70.0133 common shares per $1,000 in principal amount, or a conversion price of approximately $14.28 per share for an aggregate of 1,107,950 common shares (plus cash in lieu of fractional shares). Following the redemption, the February 2005 3.625% Notes are no longer outstanding. There was no gain or loss on the redemption because the fair value of the liability equaled the carrying value of the liability and all deferred financing costs were fully amortized.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

April 2009 3.625% Notes. On September 18, 2012, $1.0 million of the principal amount of the April 2009 3.625% Notes were converted into common shares at a conversion rate of 121.2121 common shares per $1,000 in principal amount, or a conversion price of approximately $8.25 per share for an aggregate of 122,060 common shares (plus cash in lieu of fractional shares). The gain on the conversion was not significant because the carrying value of the April 2009 3.625% Notes plus the unamortized deferred financing costs approximated the fair value of the liability component of the 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, of which $50.1 million was allocated to the equity component.

Outstanding Amount: As of September 30, 2012, $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.

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.

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”), of which $16.2 million was allocated to the equity component.

Outstanding Amount: As of September 30, 2012, $65.6 million of aggregate principal amount (carrying value — $47.3 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.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 $5.36 per share or exceeds $50.00 per share.

January 2012 4.00% Notes. In January 2012, LGEI issued approximately $45.0 million of January 2012 4.00% Notes, of which $10.1 million was allocated to the equity component.

Outstanding Amount: As of September 30, 2012, $45.0 million of aggregate principal amount (carrying value — $36.0 million) of the January 2012 4.00% Notes remains outstanding.

Interest: Interest on the January 2012 4.00% Notes is payable at 4.00% per annum semi-annually on January 15 and July 15 of each year, commencing on July 15, 2012.

Maturity Date: The January 2012 4.00% Notes will mature on January 11, 2017.

Redeemable by Holder: The holder may require LGEI to repurchase the January 2012 4.00% Notes upon a “designated event” consisting of certain changes in control, change of management or termination of trading, at a price equal to 100% of the principal amount of the January 2012 4.00% Notes to be repurchased plus accrued and unpaid interest.

Conversion Features: The January 2012 4.00% 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. Upon conversion of the January 2012 4.00% 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 was payable in monthly payments totaling $0.3 million per year at an interest rate of 8.02%, with the entire principal due June 2012. In June 2012, the Company repaid this financing obligation.

6. Participations and Residuals

The Company expects approximately 69% of accrued participations and residuals will be paid during the one-year period ending September 30, 2013.

7. Film Obligations and Production Loans



	September 30, 2012		March 31, 2012
	(Amounts in thousands)
Film obligations	$	84,319	$	98,750
Production loans
Individual production loans	278,978		352,960
Pennsylvania Regional Center production loans	65,500		65,500
Film credit facility	8,782		43,940
Total film obligations and production loans	$	437,579	$	561,150

The following table sets forth future annual repayment of film obligations and production loans as of September 30, 2012:

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	Six Months Ended
	March 31,		Year Ended March 31,
	2013		2014		2015		2016		2017		Thereafter		Total
	(Amounts in thousands)
Film obligations	$	36,161	$	19,440	$	16,020	$	11,680	$	2,000	$	3,000	$	88,301
Production loans
Individual production loans	125,295		114,949		38,734		—		—		—		278,978
Pennsylvania Regional Center production loans	—		65,500		—		—		—		—		65,500
Film credit facility	—		8,782		—		—		—		—		8,782
	$	161,456	$	208,671	$	54,754	$	11,680	$	2,000	$	3,000	441,561
Less imputed interest on film obligations													(3,982		)
													$	437,579

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 $264.0 million incur interest at rates ranging from 3.36% to 3.69%, and approximately $15.0 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 September 30, 2012, the Company had borrowings of $65.5 million (March 31, 2012 — $65.5 million).

Availability of Funds. At September 30, 2012, there were no amounts available under this agreement (March 31, 2012 — 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 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 September 30, 2012, $59.4 million principal value (fair value — $72.1 million) of the Company’s convertible senior subordinated notes repurchased was held as collateral under the Company’s senior revolving credit facility (March 31, 2012 — $72.8 million principal value, $83.1 million fair value).

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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 September 30, 2012, the Company had borrowings of $8.8 million (March 31, 2012 — $43.9 million).

Availability of Funds. Currently, the Film Credit Facility provides for total borrowings up to $20 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 Company reduced the borrowing commitment from $130 million to $60 million in July 2012 and then to $20 million in September 2012.

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 September 30, 2012, 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 September 30, 2012 was 3.46% (March 31, 2012 — 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.

8. Fair Value Measurements

Fair Value

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

Fair Value Hierarchy

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 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 not required to be measured at fair value on a recurring basis include the Company’s convertible senior subordinated notes, individual production loans, Pennsylvania Regional Center Loan, Senior Notes, and Term Loan, 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 Company measures the fair value of its investment in TV Guide Network's Mandatorily Redeemable Preferred Stock Units using primarily a discount cash flow analysis based on the expected cash flows of the investment. The analysis reflects the contractual terms of the investment, including the period to maturity, and uses a discount rate commensurate with the risk associated with the investment.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the carrying values and fair values of the Company’s investment in TV Guide Network's mandatorily redeemable preferred stock units and outstanding debt at September 30, 2012 and March 31, 2012:



	September 30, 2012				March 31, 2012
	(Amounts in thousands)
	Carrying Value		Fair Value		Carrying Value		Fair Value
			(Level 3)				(Level 3)
Assets:
Investment in TV Guide Network's Mandatorily Redeemable Preferred Stock Units	$	98,247	$	150,466	$	106,406	$	145,029

	Carrying Value		Fair Value		Carrying Value		Fair Value
			(Level 2)				(Level 2)
Liabilities:
October 2004 2.9375% convertible senior subordinated notes	$	348	$	256	$	348	$	237
February 2005 3.625% convertible senior subordinated notes	—		—		23,464		19,295
April 2009 3.625% convertible senior subordinated notes	47,308		53,567		45,462		59,083
January 2012 4.00% convertible senior subordinated notes	36,048		36,423		35,224		35,619
Individual production loans	278,978		278,269		352,960		351,911
Pennsylvania Regional Center production loans	65,500		64,567		65,500		63,679
Senior secured second-priority notes	431,881		482,195		431,510		479,055
Term Loan	294,929		294,900		477,514		480,423
	$	1,154,992	$	1,210,177	$	1,431,982	$	1,489,302

9. Acquisitions and Divestitures

Summit

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 $412.1 million, which consisted of $361.9 million in cash and 5,837,781 in the Company's common shares (a part of which are included in escrow for indemnification purposes). Approximately $279.4 million of the purchase price and acquisition costs were 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 $507.8 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 with a principal amount of $500.0 million, maturing on September 7, 2016 (see Note 5).

The acquisition was accounted for as a purchase, with the results of operations of Summit included in the Company's consolidated results from January 13, 2012. The Company made a provisional allocation of the estimated purchase price of Summit to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair value. During the measurement period, the Company adjusted the provisional allocation of the estimated purchase price for new information obtained about facts and circumstances that existed as of the acquisition date, that if known, would have affected the measurements of the amounts recognized at that date. The measurement period adjustments were not considered significant to retrospectively adjust the provisional allocation as of January 13, 2012. The allocation of the purchase price is as follows:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



Purchase price consideration:	(Amounts in thousands)
Cash	$	361,914
Fair value of 5,837,781 of Lionsgate's shares issued	50,205
Purchase price	412,119

Fair value of contingent consideration	5,900
Required repayment of Summit's existing Term Loan	507,775
Total purchase consideration including debt repayment	$	925,794

Provisional allocation of the estimated total purchase consideration (1):
Cash and cash equivalents	$	315,932
Restricted cash	5,126
Accounts receivable, net	161,203
Investment in films and television programs, net	627,679
Other assets acquired	7,972
Finite-lived intangible assets:
Sales agency relationships	6,200
Tradenames	6,600
Other liabilities assumed	(297,721		)
Fair value of net assets acquired	832,991
Goodwill	92,803
	$	925,794

(1) Measurement period adjustments include a decrease to investment in films and television programs, net of $7.2 million and a decrease to other liabilities assumed of $7.8 million, resulting in a net increase of $0.6 million of the fair value of net assets acquired and a decrease of $0.6 million to goodwill.

Goodwill of $92.8 million represents the excess of the purchase price over the preliminary estimate of the fair value of the underlying tangible and identifiable intangible assets acquired and liabilities assumed. The acquisition goodwill arises from the opportunity for synergies of the combined companies, strengthening our global distribution infrastructure and building a stronger presence in the entertainment industry allowing for enhanced positioning for motion picture projects and selling opportunities. Although the goodwill will not be amortized for financial reporting purposes, it is anticipated that substantially all of the goodwill will be deductible for federal tax purposes over the statutory period of 15 years.

The following unaudited pro forma condensed consolidated statement 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 January 2012 4.00% Notes issued in connection with the acquisition occurred at the beginning of the prior period presented. The information below is based on the provisional estimate of the purchase price allocation to the assets and liabilities acquired as shown above. The statements of operations information below includes the statements of operations of Summit for the six months ended June 30, 2011 combined with the Company's statements of operations for the six months ended September 30, 2011.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 2011

Revenues	$	882,443
Operating income	$	43,233
Net income	$	(7,279	)
Basic Net Income Per Common Share	$	(0.05	)
Diluted Net Income Per Common Share	$	(0.05	)
Weighted average number of common shares outstanding - Basic	141,212
Weighted average number of common shares outstanding - Diluted	141,212

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

In connection with the Summit acquisition, the Company incurred severance charges of $8.7 million, which was included in general and administrative expenses on the consolidated statement of operations for the year ended March 31, 2012 as part of management's plan to integrate and restructure the combined companies. An additional $0.3 million and $2.0 million of severance charges were incurred in the three and six months ended September 30, 2012, respectively. As of September 30, 2012, $0.7 million of the severance costs remained unpaid and are reflected in accounts payable and accrued liabilities on the consolidated balance sheet. All severance costs relate to the Motion Pictures segment.

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 (excluding Summit titles) 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.

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:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	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 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 consolidated balance sheets, which will be paid pursant to the terms of the distribution arrangements.

10. Direct Operating Expenses



	Three Months Ended		Three Months Ended		Six Months Ended			Six Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012			September 30, 2011
	(Amounts in thousands)
Amortization of films and television programs	$	227,567	$	134,231	$	394,664		$	219,214
Participations and residual expense	94,560		71,678		173,163			126,814
Other expenses:
Provision (benefit) for doubtful accounts	305		97		(382		)	(321		)
Foreign exchange losses (gains)	798		338		1,603			(5		)
	$	323,230	$	206,344	$	569,048		$	345,702

11. Net Income (Loss) Per Share

Basic net income (loss) per share is calculated based on the weighted average common shares outstanding for the period. Basic net income (loss) per share for the three and six months ended September 30, 2012 and 2011 is presented below:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
			As adjusted (Note 1)					As adjusted (Note 1)
	(Amounts in thousands)
Basic Net Income (Loss) Per Common Share:
Numerator:
Net income (loss)	$	75,529	$	(25,306	)	$	31,329	$	(14,972	)
Denominator:
Weighted average common shares outstanding	134,390		133,755			133,815		135,374
Basic Net Income (Loss) Per Common Share	$	0.56	$	(0.19	)	$	0.23	$	(0.11	)

Diluted net income (loss) per common share reflects the potential dilutive effect, if any, of the conversion of the October 2004 2.9375% Notes, the February 2005 3.625% Notes, the April 2009 3.625% Notes and the January 2012 4.00% Notes under the "if converted" method. Diluted net income (loss) per common share also reflects share purchase options and restricted share units using the treasury stock method when dilutive, and any contingently issuable shares when dilutive. Diluted net income (loss) per common share for the three and six months ended September 30, 2012 and 2011 is presented below:



	Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
			As adjusted (Note 1)					As adjusted (Note 1)
	(Amounts in thousands)
Diluted Net Income (Loss) Per Common Share:
Numerator:
Net income (loss)	$	75,529	$	(25,306	)	$	31,329	$	(14,972	)
Add:
Interest on convertible notes, net of tax	2,828		—			5		—
Amortization of deferred financing costs, net of tax	19		—			—		—
Numerator for Diluted Net Income (Loss) Per Common Share	$	78,376	$	(25,306	)	$	31,334	$	(14,972	)

Denominator:
Weighted average common shares outstanding	134,390		133,755			133,815		135,374
Effect of dilutive securities:
Conversion of notes	12,613		—			30		—
Share purchase options	935		—			402		—
Restricted share units	758		—			363		—
Adjusted weighted average common shares outstanding	148,696		133,755			134,610		135,374
Diluted Net Income (Loss) Per Common Share	$	0.53	$	(0.19	)	$	0.23	$	(0.11	)

As of September 30, 2012 and 2011, the outstanding common shares issuable presented below were excluded from diluted net income (loss) per common share because their inclusion would have had an anti-dilutive effect.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	September 30, 2011
	(in thousands)
Anti-dilutive shares issuable under share purchase options and restricted share units
Share purchase options	3,310
Restricted share units	1,335
Contingently issuable restricted share units	303
Total	4,948

In addition, the dilutive effect of the conversion of the Company's convertible senior subordinated notes of 13.3 million shares were excluded from diluted net income per common share for the six months ended September 30, 2012, and 12.1 million shares and 12.4 million shares were excluded from diluted net loss per common share for the three and six months ended September 30, 2011, respectively, because their inclusion would have had an anti-dilutive effect.

12. Capital Stock

(a) Common Shares

The Company had 500 million authorized common shares at September 30, 2012 and March 31, 2012. The table below outlines common shares reserved for future issuance:



	September 30, 2012	March 31, 2012
	(Amounts in thousands)
Stock options outstanding, average exercise price $10.80 (March 31, 2012 - $10.20)	3,749	3,157
Restricted share units — unvested	2,085	1,867
Share purchase options and restricted share units available for future issuance	17,873	1,984
Shares issuable upon conversion of October 2004 2.9375% Notes at conversion price of $11.50 per share	30	30
Shares issuable upon conversion of February 2005 3.625% Notes at conversion price of $14.28 per share	—	1,643
Shares issuable upon conversion of April 2009 3.625% Notes at conversion price of $8.25 per share	7,948	8,070
Shares issuable upon conversion of January 2012 4.00% Notes at conversion price of $10.50 per share	4,286	4,286
Shares reserved for future issuance	35,971	21,037

In September 2012, the Company adopted the 2012 Performance Incentive Plan (the "2012 Plan"). The 2012 Plan provides for the issuance of up to an additional 18.3 million shares of common shares of the Company, stock options, share appreciation rights, restricted stock, stock bonuses and other forms of awards granted or denominated in common shares or units of common shares, as well as certain cash bonus awards to eligible directors of the Company, officers or employees of the Company or any of its subsidiaries, and certain consultants and advisors to the Company or any of its subsidiaries.

(b) Share-based Compensation

The Company recognized the following share-based compensation expense during the three and six months ended September 30, 2012, and 2011:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
	(Amounts in thousands)
Compensation Expense:
Stock Options	$	356	$	29		$	655	$	60
Restricted Share Units and Other Share-based Compensation	4,404		2,525			11,628		4,755
Stock Appreciation Rights	2,139		(173		)	4,365		172
Total	$	6,899	$	2,381		$	16,648	$	4,987

There was no income tax benefit recognized in the statements of operations for share-based compensation arrangements during the three and six months ended September 30, 2012 and 2011.

During the six months ended September 30, 2012, the Company granted 696,909 and 1,056,938 stock options and restricted share units, respectively, at a weighted-average grant-date fair value of $4.50 and $12.92, respectively.

The total intrinsic value of options exercised as of each exercise date during the six months ended September 30, 2012 and 2011 was $0.1 million and nil, respectively.

Total unrecognized compensation cost related to unvested stock options and restricted share unit awards at September 30, 2012 are $3.4 million and $14.6 million, respectively, and are expected to be recognized over a weighted average period of 2.2 and 1.5 years, respectively.

Stock Appreciation Rights

The Company has the following stock appreciation rights (“SARs”) outstanding as of September 30, 2012:



Grant Date	SARs Outstanding	Vested and Exercisable	Exercise Price		Original Vesting Period (see below)	Expiration Date	Fair Value September 30, 2012		Liability September 30, 2012
									(in thousands)
February 5, 2009	150,000	150,000	$	5.45	3 years	February 5, 2014	$	9.87	$	1,481
April 6, 2009	75,000	75,000	$	5.17	4 years	April 6, 2014	$	10.16	$	762
March 17, 2010	500,000	500,000	$	5.95	4 years	March 17, 2015	$	9.52	$	4,759
January 19, 2012	2,400,000	—	$	9.48	3 years	January 19, 2017	$	7.43	$	4,150
February 9, 2012	350,000	—	$	11.01	3 years	February 9, 2017	$	6.61	$	495

At September 30, 2012, the Company has a stock-based compensation liability accrual in the amount of $11.6 million (March 31, 2012 — $32.4 million) included in accounts payable and accrued liabilities on the consolidated balance sheets relating to these SARs.

During the year ended March 31, 2012, certain individuals exercised 700,000 and 625,000 SARs granted on February 5, 2009 and April 6, 2009, respectively. During the three months ended September 30, 2012, a certain third-party producer exercised 1,750,000 SARs granted on July 14, 2008 and February 15, 2011.

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. 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.

At September 30, 2012, the following assumptions were used in the Black-Scholes option-pricing model:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



Grant Date	Risk-Free Interest Rate	Expected Option Lives (in years)	Expected Volatility for Options	Expected Dividend Yield
February 5, 2009	0.2%	1.4 years	45%	—%
April 6, 2009	0.2%	1.5 years	45%	—%
March 17, 2010	0.2%	2.5 years	40%	—%
January 19, 2012	0.5%	4.3 years	38%	—%
February 9, 2012	0.5%	4.4 years	38%	—%

13. 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 as of September 30, 2012: 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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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
	(Amounts in thousands)
Segment revenues
Motion Pictures	$	607,972	$	218,900		$	1,014,506	$	411,418
Television Production	98,996		139,181			164,282		207,922
	$	706,968	$	358,081		$	1,178,788	$	619,340
Direct operating expenses
Motion Pictures	$	243,325	$	108,585		$	437,007	$	194,771
Television Production	79,905		97,759			132,041		150,931
	$	323,230	$	206,344		$	569,048	$	345,702
Distribution and marketing
Motion Pictures	$	229,134	$	135,366		$	402,035	$	194,465
Television Production	7,308		6,276			13,116		11,923
	$	236,442	$	141,642		$	415,151	$	206,388
Segment contribution before general and administration expenses
Motion Pictures	$	135,513	$	(25,051	)	$	175,464	$	22,182
Television Production	11,783		35,146			19,125		45,068
	$	147,296	$	10,095		$	194,589	$	67,250
General and administration
Motion Pictures	$	15,105	$	11,461		$	31,950	$	23,646
Television Production	2,922		3,023			5,635		5,695
	$	18,027	$	14,484		$	37,585	$	29,341
Segment profit
Motion Pictures	$	120,408	$	(36,512	)	$	143,514	$	(1,464	)
Television Production	8,861		32,123			13,490		39,373
	$	129,269	$	(4,389	)	$	157,004	$	37,909
Acquisition of investment in films and television programs
Motion Pictures	$	183,483	$	167,772		$	264,534	$	318,379
Television Production	78,632		63,836			158,586		115,005
	$	262,115	$	231,608		$	423,120	$	433,384

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

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 income (loss) before income taxes is as follows:



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
				As adjusted						As adjusted
	(Amounts in thousands)
Company’s total segment profit (loss)	$	129,269		$	(4,389	)	$	157,004		$	37,909
Less:
Shared services and corporate expenses (1)	(26,003		)	(14,944		)	(58,789		)	(28,009		)
Depreciation and amortization	(2,115		)	(681		)	(4,220		)	(1,915		)
Interest expense	(23,285		)	(17,569		)	(50,775		)	(33,904		)
Interest and other income	1,029			928			1,979			1,370
Gain on sale of asset disposal group	—			10,967			—			10,967
Loss on extinguishment of debt	(1,000		)	(436		)	(9,159		)	(967		)
Equity interests income	1,755			1,889			1,610			1,849
Income (loss) before income taxes	$	79,650		$	(24,235	)	$	37,650		$	(12,700	)

(1)

Includes share-based compensation expense of $6.9 million and $16.6 million for the three and six months ended September 30, 2012, respectively, and $2.4 million and $5.0 million for the three and six months ended September 30, 2011, respectively. The three and six months ended September 30, 2012 also includes severance and transaction costs related to the acquisition of Summit of $0.3 million and $2.0 million, respectively. The six months ended September 30, 2011 includes a benefit for charges associated with a shareholder activist matter of $2.0 million related to a negotiated settlement with a vendor of costs incurred and recorded in fiscal year 2011, and insurance recoveries of related litigation offset by other costs.

The following table sets forth significant assets as broken down by segment and other unallocated assets as of September 30, 2012 and March 31, 2012:



	September 30, 2012						March 31, 2012
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in thousands)
Significant assets by segment
Accounts receivable	$	500,439	$	200,915	$	701,354	$	577,463	$	207,067	$	784,530
Investment in films and television programs, net	1,160,287		190,385		1,350,672		1,202,692		126,361		1,329,053
Goodwill	297,043		28,961		326,004		297,672		28,961		326,633
	$	1,957,769	$	420,261	$	2,378,030	$	2,077,827	$	362,389	$	2,440,216
Other unallocated assets (primarily cash, other assets, and equity method investments)					332,333						347,779
Total assets					$	2,710,363					$	2,787,995

Purchases of property and equipment amounted to $0.6 million and $1.0 million for the three and six months ended September 30, 2012 , respectively, and $0.8 million and $1.3 million for the three and six months September 30, 2011, respectively.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. 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.

15. Consolidating Financial Information — Convertible Senior Subordinated Notes

The October 2004 2.9375% Notes, the February 2005 3.625% Notes, the April 2009 3.625% Notes, and the January 2012 4.00% by their terms, are fully and unconditionally guaranteed by the Company.

The following tables present condensed consolidating financial information as of September 30, 2012 and March 31, 2012, and for the six months ended September 30, 2012 and 2011 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
	September 30, 2012
	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	$	1,036	$	8,983		$	44,380		$	—		$	54,399
Restricted cash	—		2,789			3,845			—			6,634
Accounts receivable, net	509		7,787			693,058			—			701,354
Investment in films and television programs, net	254		6,391			1,346,947			(2,920		)	1,350,672
Property and equipment, net	—		6,768			1,960			—			8,728
Equity method investments	—		8,935			164,488			(817		)	172,606
Goodwill	10,173		—			315,831			—			326,004
Other assets	49,201		56,125			33,640			(49,000		)	89,966
Subsidiary investments and advances	86,056		266,617			(375,680		)	23,007			—
	$	147,229	$	364,395		$	2,228,469		$	(29,730	)	$	2,710,363
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	268,724		$	—		$	—		$	268,724
Senior secured second-priority notes	—		431,881			—			—			431,881
Term loan	—		—			294,929			—			294,929
Accounts payable and accrued liabilities	747		81,343			285,794			37			367,921
Participations and residuals	192		3,411			414,590			354			418,547
Film obligations and production loans	75		—			437,504			—			437,579
Convertible senior subordinated notes and other financing obligations	—		83,704			49,000			(49,000		)	83,704
Deferred revenue	—		17,039			243,824			—			260,863
Shareholders’ equity (deficiency)	146,215		(521,707		)	502,828			18,879			146,215
	$	147,229	$	364,395		$	2,228,469		$	(29,730	)	$	2,710,363

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 2012
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
				(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues	$	—		$	7,660		$	1,171,128		$	—		$	1,178,788
EXPENSES:
Direct operating	—			1,166			567,882			—			569,048
Distribution and marketing	(1		)	1,084			414,068			—			415,151
General and administration	902			57,149			38,577			(254		)	96,374
Depreciation and amortization	—			905			3,315			—			4,220
Total expenses	901			60,304			1,023,842			(254		)	1,084,793
OPERATING INCOME (LOSS)	(901		)	(52,644		)	147,286			254			93,995
Other expenses (income):
Interest expense	—			35,184			16,091			(500		)	50,775
Interest and other income	(6		)	(1,735		)	(738		)	500			(1,979		)
Loss on extinguishment of debt	—			633			8,526			—			9,159
Total other expenses (income)	(6		)	34,082			23,879			—			57,955
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	(895		)	(86,726		)	123,407			254			36,040
Equity interests income (loss)	32,224			118,254			4,006			(152,874		)	1,610
INCOME (LOSS) BEFORE INCOME TAXES	31,329			31,528			127,413			(152,620		)	37,650
Income tax provision (benefit)	—			2,392			3,929			—			6,321
NET INCOME (LOSS)	31,329			29,136			123,484			(152,620		)	31,329
Foreign currency translation adjustments	1,061			2,358			460			(2,801		)	1,078
Net unrealized gain on foreign exchange contracts	—			—			(17		)	—			(17		)
COMPREHENSIVE INCOME (LOSS)	$	32,390		$	31,494		$	123,927		$	(155,421	)	$	32,390

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 2012
	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	$	4,433		$	(136,699	)	$	274,401		$	—	$	142,135
INVESTING ACTIVITIES:
Repayment of loans receivable	—			—			4,274			—		4,274
Purchases of property and equipment	—			(932		)	(44		)	—		(976		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	—			(932		)	4,230			—		3,298
FINANCING ACTIVITIES:
Exercise of stock options	52			—			—			—		52
Tax withholding requirements on equity awards	(4,005		)	—			—			—		(4,005		)
Borrowings under senior revolving credit facility	—			681,424			—			—		681,424
Repayments of borrowings under senior revolving credit facility	—			(512,450		)	—			—		(512,450		)
Deferred financing costs associated with the amended and restated senior revolving credit facility	—			(15,198		)	—			—		(15,198		)
Borrowings under individual production loans	—			—			108,948			—		108,948
Repayment of individual production loans	—			—			(182,930		)	—		(182,930		)
Production loan borrowings under film credit facility	—			—			3,897			—		3,897
Production loan repayments under film credit facility	—			—			(39,055		)	—		(39,055		)
Repayments of borrowings under Term Loan associated with the acquisition of Summit	—			—			(185,504		)	—		(185,504		)
Repurchase of convertible senior subordinated notes	—			(7,639		)	—			—		(7,639		)
Repayment of other financing obligations	—			—			(3,710		)	—		(3,710		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(3,953		)	146,137			(298,354		)	—		(156,170		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	480			8,506			(19,723		)	—		(10,737		)
FOREIGN EXCHANGE EFFECTS ON CASH	(5		)	—			843			—		838
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	561			477			63,260			—		64,298
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	1,036		$	8,983		$	44,380		$	—	$	54,399

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	As of
	March 31, 2012
	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	$	561	$	477		$	63,260		$	—		$	64,298
Restricted cash	—		7,169			4,767			—			11,936
Accounts receivable, net	498		11,046			772,986			—			784,530
Investment in films and television programs, net	2		6,391			1,325,337			(2,677		)	1,329,053
Property and equipment, net	—		7,236			2,536			—			9,772
Equity method investments	—		11,598			160,481			(817		)	171,262
Goodwill	10,173		—			316,460			—			326,633
Other assets	49,198		48,923			41,390			(49,000		)	90,511
Subsidiary investments and advances	30,136		98,990			(311,142		)	182,016			—
	$	90,568	$	191,830		$	2,376,075		$	129,522		$	2,787,995
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	99,750		$	—		$	—		$	99,750
Senior secured second-priority notes	—		431,510			—			—			431,510
Term loan	—		—			477,514			—			477,514
Accounts payable and accrued liabilities	520		88,065			282,438			69			371,092
Participations and residuals	189		3,411			416,227			498			420,325
Film obligations and production loans	74		—			561,076			—			561,150
Convertible senior subordinated notes and other financing obligations	—		104,498			52,778			(49,000		)	108,276
Deferred revenue	—		17,798			210,795			—			228,593
Shareholders’ equity (deficiency)	89,785		(553,202		)	375,247			177,955			89,785
	$	90,568	$	191,830		$	2,376,075		$	129,522		$	2,787,995

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 2011
	Lions Gate Entertainment Corp.			Lions Gate Entertainment Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			Lions Gate Consolidated
	(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues	$	—		$	20,342		$	617,972		$	(18,974	)	$	619,340
EXPENSES:
Direct operating	457			141			349,812			(4,708		)	345,702
Distribution and marketing	—			(126		)	206,580			(66		)	206,388
General and administration	686			27,135			29,654			(125		)	57,350
Gain on sale of asset disposal group	(10,967		)	—			—			—			(10,967		)
Depreciation and amortization	—			1,656			259			—			1,915
Total expenses	(9,824		)	28,806			586,305			(4,899		)	600,388
OPERATING INCOME (LOSS)	9,824			(8,464		)	31,667			(14,075		)	18,952
Other expenses (income):
Interest expense	—			30,801			3,518			(415		)	33,904
Interest and other income	(66		)	(1,451		)	(268		)	415			(1,370		)
Loss on extinguishment of debt	—			967			—			—			967
Total other expenses (income)	(66		)	30,317			3,250			—			33,501
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	9,890			(38,781		)	28,417			(14,075		)	(14,549		)
Equity interests income (loss)	(24,908		)	14,918			4,983			6,856			1,849
INCOME (LOSS) BEFORE INCOME TAXES	(15,018		)	(23,863		)	33,400			(7,219		)	(12,700		)
Income tax provision (benefit)	(46		)	1,093			1,225			—			2,272
NET INCOME (LOSS)	(14,972		)	(24,956		)	32,175			(7,219		)	(14,972		)
Foreign currency translation adjustments	(3,697		)	8,975			18,965			(28,602		)	(4,359		)
Net unrealized gain on foreign exchange contracts	—			—			662			—			662
COMPREHENSIVE INCOME (LOSS)	$	(18,669	)	$	(15,981	)	$	51,802		$	(35,821	)	$	(18,669	)

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 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	$	73,947		$	(129,504	)	$	(85,005	)	$	—	$	(140,562	)
INVESTING ACTIVITIES:
Proceeds from the sale of asset disposal group, net of transaction costs and cash disposed of $3,943	9,119			—			—			—		9,119
Investment in equity method investees	(828		)	—			—			—		(828		)
Increase in loans receivable	—			(1,500		)	—			—		(1,500		)
Purchases of property and equipment	—			(1,253		)	—			—		(1,253		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	8,291			(2,753		)	—			—		5,538
FINANCING ACTIVITIES:
Tax withholding requirements on equity awards	(1,932		)	—			—			—		(1,932		)
Repurchase of common shares	(77,088		)	—			—			—		(77,088		)
Borrowings under senior revolving credit facility	—			153,650			—			—		153,650
Repayments of borrowings under senior revolving credit facility	—			(200,400		)	—			—		(200,400		)
Borrowings under individual production loans	—			—			134,870			—		134,870
Repayment of individual production loans	—			—			(122,886		)	—		(122,886		)
Production loan borrowings under film credit facility	—			—			33,002			—		33,002
Production loan repayments under film credit facility	—			—			(9,187		)	—		(9,187		)
Change in restricted cash collateral associated with financing activities	—			—			(3,043		)	—		(3,043		)
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	—			(19,476		)	—			—		(19,476		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(79,020		)	125,877			32,756			—		79,613
NET CHANGE IN CASH AND CASH EQUIVALENTS	3,218			(6,380		)	(52,249		)	—		(55,411		)
FOREIGN EXCHANGE EFFECTS ON CASH	451			—			(1,933		)	—		(1,482		)
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	795			6,451			79,173			—		86,419
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	4,464		$	71		$	24,991		$	—	$	29,526

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16. 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 condensed consolidating financial information as of September 30, 2012 and March 31, 2012, and for the six months ended September 30, 2012, and 2011 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.



	As of
	September 30, 2012
	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	$	1,036	$	8,983		$	1,007		$	43,373		$	—		$	54,399
Restricted cash	—		2,789			—			3,845			—			6,634
Accounts receivable, net	509		7,787			510,577			182,481			—			701,354
Investment in films and television programs, net	254		6,391			816,801			530,073			(2,847		)	1,350,672
Property and equipment, net	—		6,768			103			1,857			—			8,728
Equity method investments	—		8,935			65,358			99,559			(1,246		)	172,606
Goodwill	10,173		—			192,830			123,001			—			326,004
Other assets	49,201		56,125			8,021			25,619			(49,000		)	89,966
Subsidiary investments and advances	86,056		266,617			(223,514		)	(164,468		)	35,309			—
	$	147,229	$	364,395		$	1,371,183		$	845,340		$	(17,784	)	$	2,710,363
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	268,724		$	—		$	—		$	—		$	268,724
Senior secured second-priority notes	—		431,881			—			—			—			431,881
Term loan	—		—			—			294,929			—			294,929
Accounts payable and accrued liabilities	747		81,343			205,351			80,443			37			367,921
Participations and residuals	192		3,411			288,316			125,911			717			418,547
Film obligations and production loans	75		—			348,887			88,617			—			437,579
Convertible senior subordinated notes and other financing obligations	—		83,704			—			49,000			(49,000		)	83,704
Deferred revenue	—		17,039			158,095			85,729			—			260,863
Shareholders’ equity (deficiency)	146,215		(521,707		)	370,534			120,711			30,462			146,215
	$	147,229	$	364,395		$	1,371,183		$	845,340		$	(17,784	)	$	2,710,363

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 2012
	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	$	—		$	7,660		$	1,008,467		$	234,123		$	(71,462	)	$	1,178,788
EXPENSES:
Direct operating	—			1,166			515,467			146,947			(94,532		)	569,048
Distribution and marketing	(1		)	1,084			360,231			53,837			—			415,151
General and administration	902			57,149			32,013			6,564			(254		)	96,374
Depreciation and amortization	—			905			168			3,147			—			4,220
Total expenses	901			60,304			907,879			210,495			(94,786		)	1,084,793
OPERATING INCOME (LOSS)	(901		)	(52,644		)	100,588			23,628			23,324			93,995
Other expenses (income):
Interest expense	—			35,184			2,467			13,624			(500		)	50,775
Interest and other income	(6		)	(1,735		)	(506		)	(232		)	500			(1,979		)
Loss on extinguishment of debt	—			633			367			8,159			—			9,159
Total other expenses (income)	(6		)	34,082			2,328			21,551			—			57,955
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	(895		)	(86,726		)	98,260			2,077			23,324			36,040
Equity interests income (loss)	32,224			118,254			12,166			(8,394		)	(152,640		)	1,610
INCOME (LOSS) BEFORE INCOME TAXES	31,329			31,528			110,426			(6,317		)	(129,316		)	37,650
Income tax provision (benefit)	—			2,392			783			3,146			—			6,321
NET INCOME (LOSS)	31,329			29,136			109,643			(9,463		)	(129,316		)	31,329
Foreign currency translation adjustments	1,061			2,358			511			(51		)	(2,801		)	1,078
Net unrealized gain on foreign exchange contracts	—			—			78			7			(102		)	(17		)
COMPREHENSIVE INCOME (LOSS)	$	32,390		$	31,494		$	110,232		$	(9,507	)	$	(132,219	)	$	32,390

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 2012
	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	$	4,433		$	(136,699	)	$	89,650		$	184,751		$	—	$	142,135
INVESTING ACTIVITIES:
Repayment of loans receivable	—			—			4,274			—			—		4,274
Purchases of property and equipment	—			(932		)	(11		)	(33		)	—		(976		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	—			(932		)	4,263			(33		)	—		3,298
FINANCING ACTIVITIES:
Exercise of stock options	52			—			—			—			—		52
Tax withholding requirements on equity awards	(4,005		)	—			—			—			—		(4,005		)
Borrowings under senior revolving credit facility	—			681,424			—			—			—		681,424
Repayments of borrowings under senior revolving credit facility	—			(512,450		)	—			—			—		(512,450		)
Deferred financing costs associated with the amended and restated senior revolving credit facility	—			(15,198		)	—			—			—		(15,198		)
Borrowings under individual production loans	—			—			107,618			1,330			—		108,948
Repayment of individual production loans	—			—			(163,181		)	(19,749		)	—		(182,930		)
Production loan borrowings under film credit facility	—			—			3,897			—			—		3,897
Production loan repayments under film credit facility	—			—			(39,055		)	—			—		(39,055		)
Repayments of borrowings under Term Loan associated with the acquisition of Summit	—			—			—			(185,504		)	—		(185,504		)
Repurchase of convertible senior subordinated notes	—			(7,639		)	—			—			—		(7,639		)
Repayment of other financing obligations	—			—			(3,710		)	—			—		(3,710		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(3,953		)	146,137			(94,431		)	(203,923		)	—		(156,170		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	480			8,506			(518		)	(19,205		)	—		(10,737		)
FOREIGN EXCHANGE EFFECTS ON CASH	(5		)	—			—			843			—		838
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	561			477			1,525			61,735			—		64,298
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	1,036		$	8,983		$	1,007		$	43,373		$	—	$	54,399

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	As of
	March 31, 2012
	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	$	561	$	477		$	1,525		$	61,735		$	—		$	64,298
Restricted cash	—		7,169			—			4,767			—			11,936
Accounts receivable, net	498		11,046			482,003			290,983			—			784,530
Investment in films and television programs, net	2		6,391			710,459			612,548			(347		)	1,329,053
Property and equipment, net	—		7,236			121			2,415			—			9,772
Equity method investments	—		11,598			52,889			108,255			(1,480		)	171,262
Goodwill	10,173		—			192,830			123,630			—			326,633
Other assets	49,198		48,923			6,414			34,976			(49,000		)	90,511
Subsidiary investments and advances	30,136		98,990			(7,532		)	(310,562		)	188,968			—
	$	90,568	$	191,830		$	1,438,709		$	928,747		$	138,141		$	2,787,995
Liabilities and Shareholders’ Equity (Deficiency)
Senior revolving credit facility	$	—	$	99,750		$	—		$	—		$	—		$	99,750
Senior secured second-priority notes	—		431,510			—			—			—			431,510
Term loan	—		—			—			477,514			—			477,514
Accounts payable and accrued liabilities	520		88,065			202,535			79,903			69			371,092
Participations and residuals	189		3,411			272,780			144,037			(92		)	420,325
Film obligations and production loans	74		—			481,359			79,717			—			561,150
Convertible senior subordinated notes and other financing obligations	—		104,498			3,718			49,060			(49,000		)	108,276
Deferred revenue	—		17,798			166,292			44,503			—			228,593
Shareholders’ equity (deficiency)	89,785		(553,202		)	312,025			54,013			187,164			89,785
	$	90,568	$	191,830		$	1,438,709		$	928,747		$	138,141		$	2,787,995

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 2011
	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	$	—		$	20,342		$	564,367		$	59,871		$	(25,240	)	$	619,340
EXPENSES:
Direct operating	457			141			327,983			29,614			(12,493		)	345,702
Distribution and marketing	—			(126		)	176,084			30,496			(66		)	206,388
General and administration	686			27,135			23,250			6,404			(125		)	57,350
Gain on sale of asset disposal group	(10,967		)	—			—			—			—			(10,967		)
Depreciation and amortization	—			1,656			52			207			—			1,915
Total expenses	(9,824		)	28,806			527,369			66,721			(12,684		)	600,388
OPERATING INCOME (LOSS)	9,824			(8,464		)	36,998			(6,850		)	(12,556		)	18,952
Other expenses (income):
Interest expense	—			30,801			2,963			555			(415		)	33,904
Interest and other income	(66		)	(1,451		)	(163		)	(105		)	415			(1,370		)
Loss on extinguishment of debt	—			967			—			—			—			967
Total other expenses (income)	(66		)	30,317			2,800			450			—			33,501
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES	9,890			(38,781		)	34,198			(7,300		)	(12,556		)	(14,549		)
Equity interests income (loss)	(24,908		)	14,918			8,223			(3,055		)	6,671			1,849
INCOME (LOSS) BEFORE INCOME TAXES	(15,018		)	(23,863		)	42,421			(10,355		)	(5,885		)	(12,700		)
Income tax provision (benefit)	(46		)	1,093			935			290			—			2,272
NET INCOME (LOSS)	(14,972		)	(24,956		)	41,486			(10,645		)	(5,885		)	(14,972		)
Foreign currency translation adjustments	(3,697		)	8,975			21,268			(2,303		)	(28,602		)	(4,359		)
Net unrealized gain on foreign exchange contracts	—			—			94			568			—			662
COMPREHENSIVE INCOME (LOSS)	$	(18,669	)	$	(15,981	)	$	62,848		$	(12,380	)	$	(34,487	)	$	(18,669	)

Table of Contents

LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended
	September 30, 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	$	73,947		$	(129,504	)	$	(32,388	)	$	(52,617	)	$	—	$	(140,562	)
INVESTING ACTIVITIES:
Proceeds from the sale of asset disposal group, net of transaction costs and cash disposed of $3,943	9,119			—			—			—			—		9,119
Investment in equity method investees	(828		)	—			—			—			—		(828		)
Increase in loans receivable	—			(1,500		)	—			—			—		(1,500		)
Purchases of property and equipment	—			(1,253		)	—			—			—		(1,253		)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES	8,291			(2,753		)	—			—			—		5,538
FINANCING ACTIVITIES:
Tax withholding requirements on equity awards	(1,932		)	—			—			—			—		(1,932		)
Repurchase of common shares	(77,088		)	—			—			—			—		(77,088		)
Borrowings under senior revolving credit facility	—			153,650			—			—			—		153,650
Repayments of borrowings under senior revolving credit facility	—			(200,400		)	—			—			—		(200,400		)
Borrowings under individual production loans	—			—			132,847			2,023			—		134,870
Repayment of individual production loans	—			—			(120,391		)	(2,495		)	—		(122,886		)
Production loan borrowings under film credit facility	—			—			33,002			—			—		33,002
Production loan repayments under film credit facility	—			—			(9,187		)	—			—		(9,187		)
Change in restricted cash collateral associated with financing activities	—			—			(3,043		)	—			—		(3,043		)
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	—			(19,476		)	—			—			—		(19,476		)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES	(79,020		)	125,877			33,228			(472		)	—		79,613
NET CHANGE IN CASH AND CASH EQUIVALENTS	3,218			(6,380		)	840			(53,089		)	—		(55,411		)
FOREIGN EXCHANGE EFFECTS ON CASH	451			—			—			(1,933		)	—		(1,482		)
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	795			6,451			696			78,477			—		86,419
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	4,464		$	71		$	1,536		$	23,455		$	—	$	29,526

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17. Derivative Instruments and Hedging Activities

The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses denominated in various foreign currencies. As of September 30, 2012, the Company had outstanding forward foreign exchange contracts to sell British Pound Sterling £7.9 million in exchange for US$12.7 million over a period of seven months at a weighted average exchange rate of one British Pound Sterling equals US$1.60. The Company also had outstanding forward foreign exchange options to purchase British Pound Sterling £18.0 million in exchange for US$28.5 million over a period of three months at an exchange rate of one British Pound Sterling equals US$1.59. In addition, the Company had outstanding forward foreign exchange contracts to purchase Canadian $7.8 million in exchange for US$7.8 million over a period of five months at a weighted average exchange rate of one Canadian dollar equals US$1.00. Additionally, we had outstanding forward foreign exchange contracts to purchase Euro €3.2 million in exchange for US$4.1 million over a period of one month at a weighted average exchange rate of one Euro equals US$1.27.

Changes in the fair value representing a net unrealized fair value gain (loss) on foreign exchange contracts that qualified as effective hedge contracts outstanding during the three and six months ended September 30, 2012 were not significant (2011 - $0.6 million and $0.7 million, respectively), and are included in other comprehensive income (loss). Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that did not qualify as effective hedge contracts outstanding during the three and six months ended September 30, 2012 were $0.6 million (2011 - nil) and are included in direct operating expenses in the consolidated statement of operations. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions.

As of September 30, 2012, $0.6 million were included in other assets (March 31, 2012 - $0.2 million in accounts payable and accrued liabilities) in the accompanying consolidated balance sheets related to the Company's use of foreign currency derivatives.

18. Subsequent Events

On October 15, 2012, the Company entered into a supplemental indenture dated as of October 15, 2012 (the “Supplemental Indenture”) to amend the indenture (the “Indenture”) governing the Company's Senior Notes. The Supplemental Indenture amends the Indenture to, among other things, enable the Company to incur additional secured indebtedness under the amended and restated credit facility (see Note 5), in an aggregate principal amount not to exceed $650 million (an increase from the $340 million limit previously specified in the Indenture).

On October 18, 2012, the Company terminated and paid off all amounts outstanding under the Term Loan (see Note 5) of $299.2 million, as well as all accrued but unpaid interest. Additionally, the Company has arranged for Summit and certain of its affiliates to become guarantors of the Company's senior credit facility and the Company's Senior Notes due 2016, and pledge their assets in support of such guaranties, in accordance with their respective terms. As a result of the pay off of the remaining amounts outstanding under the Term Loan, the Company will recognize a charge for unamortized financing costs and debt discount of approximately $14.7 million in the three months ending December 31, 2012.

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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, new channel platforms and international distribution and sales.

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 U.K., Australia and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the three and six months ended September 30, 2012 and 2011.

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 discs.


•	Digital media revenue (formerly referred to as electronic media revenue): Digital media revenue consists of revenues generated from pay-per-view and video-on-demand platforms, electronic sell-through or “EST,” and digital rental.

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.

Table of Contents

Distribution and marketing expenses primarily include the costs of theatrical “prints and advertising” (“P&A”) and of DVD/Blu-ray duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical exhibitors and the advertising and marketing cost associated with the theatrical release of the picture. DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products. DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising.

General and administration expenses include salaries and other overhead.

Recent Developments

Amended and Restated Senior Revolving Credit Facility. On September 27, 2012, we amended and restated our senior revolving credit facility. The amended and restated senior revolving credit facility provides for borrowings up to $800 million, subject to a borrowing base and other restrictions. The amended and restated credit agreement amends and restates the previous $340 million senior revolving credit facility. As of September 30, 2012, the indenture governing our senior secured second-priority notes restricted us from borrowing in excess of $340 million under our credit facility, unless certain financial ratios were met. Subsequently on October 15, 2012, we entered into a supplemental indenture to amend the indenture (the “Indenture”) governing our senior secured second-priority notes. The Supplemental Indenture amends the previous Indenture to, among other things, enable us to incur additional secured indebtedness under the amended and restated credit facility, in an aggregate principal amount not to exceed $650 million (an increase from the $340 million limit previously specified in the Indenture) (see Note 18 to our consolidated financial statements).

Repayment and termination of Term Loan. On October 18, 2012, we terminated and paid off all amounts outstanding under the Term Loan (Note 5) of $299.2 million, as well as all accrued but unpaid interest. Additionally, we have arranged for Summit and certain of its affiliates to become guarantors of our senior credit facility and our Senior Notes due 2016, and pledge their assets in support of such guaranties, in accordance with their respective terms. As a result of the pay off of the remaining amounts outstanding under the Term Loan, we will recognize a charge for unamortized financing costs and debt discount of approximately $14.7 million in the three months ending December 31, 2012 (see Note 18 to our consolidated financial statements).

Redemption and Conversion of February 2005 3.625% Notes. On July 17, 2012, the Company completed the optional redemption of the February 2005 3.625% Notes. Of the $23.5 million of February 2005 3.625% notes called for redemption, $7.7 million were redeemed for cash at 100% of their principal amount, plus accrued and unpaid interest to and $15.8 million were converted into common shares at a conversion rate of 70.0133 common shares per $1,000 in principal amount, or a conversion price of approximately $14.28 per share for an aggregate of 1,107,950 common shares (plus cash in lieu of fractional shares). Following the redemption, the February 2005 3.625% Notes are no longer outstanding. There was no gain or loss on the redemption because the fair value of the liability equaled the carrying value of the liability and all deferred financing costs were fully amortized.

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.

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.

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Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful 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. Investment in films and television programs is stated at the lower of amortized cost or estimated fair value. The valuation of investment in films and television programs is reviewed on a title-by-title basis, when an event or change in circumstances indicates that the fair value of a film or television program is less than its unamortized cost. In determining the fair value of its films and television programs, we employ a discounted cash flows ("DCF") methodology with assumptions for cash flows. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. The fair value of any film costs associated with a film or television program that we plan to abandon is zero. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement. Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film or television program. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in our future revenue estimates.

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

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product) for home entertainment products would have had an impact of approximately $3.1 million and $4.5 million on our total revenue in the three and six months ended September 30, 2012, 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 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, 2012. 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.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011

Note: Due to the acquisition of Summit on January 13, 2012, the results of operations for the three months ended September 30, 2011 do not include the results of Summit.

The following table sets forth the components of consolidated revenue by segment for the three months ended September 30, 2012 and 2011:



	Three Months Ended		Three Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount			Percent
			(Amounts in millions)
Consolidated Revenue
Motion Pictures	$	608.0	$	218.9	$	389.1		177.8	%
Television Production	99.0		139.2		(40.2		)	(28.9	)%
	$	707.0	$	358.1	$	348.9		97.4	%

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 September 30, 2012 and 2011:



	Three Months Ended		Three Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount			Percent
			(Amounts in millions)
Home Entertainment Revenue
Motion Pictures	$	261.9	$	120.4	$	141.5		117.5	%
Television Production	15.9		54.6		(38.7		)	(70.9	)%
	$	277.8	$	175.0	$	102.8		58.7	%

Motion Pictures Revenue

The table below sets forth the components of revenue and the changes in these components for the motion pictures reporting segment for the three months ended September 30, 2012 and 2011. We currently expect our motion pictures segment revenue for fiscal 2013 will exceed our fiscal 2012 motion picture segment revenue. However, actual motion pictures revenue will depend on the performance of our film and home entertainment titles across all media and territories and can vary materially from expectations.



	Three Months Ended		Three Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount		Percent
	(Amounts in millions)
Motion Pictures
Theatrical	$	116.2	$	22.3	$	93.9	421.1	%
Home Entertainment	261.9		120.4		141.5		117.5	%
Television	35.5		28.2		7.3		25.9	%
International	108.0		22.4		85.6		382.1	%
Lionsgate UK	48.4		22.0		26.4		120.0	%
Mandate Pictures	31.6		2.4		29.2		1,216.7	%
Other	6.4		1.2		5.2		433.3	%
	$	608.0	$	218.9	$	389.1	177.8	%

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Motion Pictures — Theatrical Revenue

The following table sets forth the titles contributing approximately five percent or more of theatrical revenue by fiscal years theatrical slate and the month of their release for the three months ended September 30, 2012 and 2011:



Three Months Ended September 30,
2012		2011
	Theatrical Release Date		Theatrical Release Date
Fiscal 2013 Theatrical Slate:		Fiscal 2012 Theatrical Slate:
The Expendables 2	August 2012	Abduction	September 2011
The Possession	August 2012	Warrior	September 2011
Step Up Revolution	July 2012	Conan the Barbarian	August 2011
Madea's Witness Protection	June 2012
Fiscal 2012 Theatrical Slate:
The Hunger Games	March 2012

Theatrical revenue of $116.2 million increased $93.9 million, or 421.1%, in the three months ended September 30, 2012 as compared to the three months ended September 30, 2011. The increase in theatrical revenue in the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 is due to the box office performance of the three wide theatrical releases The Expendables 2, The Possession, and Step Up Revolution in the three months ended September 30, 2012, as well as the performance of Madea's Witness Protection, released in late June 2012. This is compared to the lower aggregate box office performances of the three theatrical releases in the three months ended September 30, 2011.

Motion Pictures — Home Entertainment Revenue

The following table sets forth the titles contributing approximately two percent or more of motion pictures home entertainment revenue for the three months ended September 30, 2012 and 2011:



Three Months Ended September 30,
2012		2011
	DVD Release Date		DVD Release Date
Fiscal 2013 Theatrical Slate:		Fiscal 2012 Theatrical Slate:
Cabin In The Woods	September 2012	Madea's Big Happy Family	August 2011
Safe	September 2012	Fiscal 2011 Theatrical Slate:
What To Expect When You're Expecting	September 2012	The Lincoln Lawyer	July 2011
Fiscal 2012 Theatrical Slate:		The Next Three Days	March 2011
The Hunger Games	August 2012	Managed Brands:
Managed Brands:		Set Up	September 2011
Friends With Kids	July 2012	Everything Must Go	September 2011
		Laugh to Keep From Crying	August 2011
		The Conspirator	August 2011

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The following table sets forth the components of home entertainment revenue by product category for the three months ended September 30, 2012 and 2011:



	Three Months Ended September 30,
	2012						2011
	Packaged Media		Digital Media (1)		Total		Packaged Media		Digital Media (1)		Total
					(Amounts in millions)
Home entertainment revenues
Fiscal 2013 Theatrical Slate	$	34.3	$	0.9	$	35.2	$	—	$	—	$	—
Fiscal 2012 Theatrical Slate	130.4		20.9		151.3		14.5		—		14.5
Fiscal 2011 Theatrical Slate	1.8		0.4		2.2		28.8		9.0		37.8
Fiscal 2010 Theatrical Slate	1.4		0.3		1.7		1.7		0.3		2.0
Fiscal 2009 & Prior Theatrical Slates	3.9		1.1		5.0		5.3		1.0		6.3
Total Theatrical Slates	171.8		23.6		195.4		50.3		10.3		60.6
Summit Titles Released Theatrically Pre-Acquisition	7.4		7.1		14.5		—		—		—
Managed Brands (2)	33.5		18.0		51.5		52.2		6.0		58.2
Other	0.4		0.1		0.5		1.0		0.6		1.6
	$	213.1	$	48.8	$	261.9	$	103.5	$	16.9	$	120.4

___________________


(1)	Digital media revenue (formerly referred to as electronic media revenue) consists of revenues generated from pay-per-view and video-on-demand platforms, electronic sell-through or “EST,” and digital rental.


(2)	Managed Brands consists of Direct-to-DVD, acquired and licensed brands, acquired library and other product.

Home entertainment revenue of $261.9 million increased $141.5 million, or 117.5%, in the three months ended September 30, 2012 as compared to the three months ended September 30, 2011. The increase in home entertainment revenue is primarily due to an increase in the contribution of revenue from the theatrical slates as listed above and from Summit titles released theatrically pre-acquisition, with no comparable revenue in fiscal 2012. The increase in revenue contributed by the theatrical slates is primarily due to the performance of The Hunger Games DVD release in the period from our fiscal 2012 theatrical slate, as compared to the performance in the prior period of the titles released on DVD from our fiscal 2012 and 2011 theatrical slates.

Motion Pictures — Television Revenue

The following table sets forth the titles contributing significant motion pictures television revenue for the three months ended September 30, 2012 and 2011:



Three Months Ended September 30,
2012		2011
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
One For The Money		The Next Three Days
Fiscal 2009 Theatrical Slate:		The Last Exorcism
The Family That Preys		Fiscal 2009 Theatrical Slate:
Summit Titles Released Theatrically Pre-Acquisition:		Madea Goes to Jail
Knowing
Push
The Hurt Locker

The following table sets forth the components of television revenue by product category for the three months ended September 30, 2012 and 2011:

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	Three Months Ended
	September 30,
	2012		2011
	(Amounts in millions)
Television revenues
Fiscal 2012 Theatrical Slate	$	6.3	$	—
Fiscal 2011 Theatrical Slate	0.1		14.1
Fiscal 2010 Theatrical Slate	3.6		—
Fiscal 2009 & Prior Theatrical Slates	4.7		10.5
Total Theatrical Slates	14.7		24.6
Summit Titles Released Theatrically Pre-Acquisition	17.6		—
Managed Brands	3.1		3.2
Other	0.1		0.4
	$	35.5	$	28.2

Television revenue included in motion pictures revenue of $35.5 million increased $7.3 million, or 25.9%, in the three months ended September 30, 2012, as compared to the three months ended September 30, 2011. The increase in television revenue in the three months ended September 30, 2012 compared to the three months ended September 30, 2011, is mainly due to contribution of revenue from Summit titles released theatrically pre-acquisition, with no comparable revenue in fiscal 2012, partially offset by the decrease in revenue contributed from our theatrical slates listed above. The contribution of television revenue from the titles listed above was $23.9 million in the three months ended September 30, 2012, compared to $18.3 million in the three months ended September 30, 2011, and the contribution of television revenue from titles not listed above was $11.6 million in the three months ended September 30, 2012, compared to $9.9 million in the three months ended September 30, 2011.

Motion Pictures — International Revenue

The following table sets forth the titles contributing significant motion pictures international revenue for the three months ended September 30, 2012 and 2011:



Three Months Ended September 30,
2012		2011
Fiscal 2013 Theatrical Slate:		Fiscal 2012 Theatrical Slate:
Cabin In The Woods		Abduction
Cold Light Of Day		Warrior
Step Up Revolution		Fiscal 2011 Theatrical Slate:
What To Expect When You're Expecting		Kick-Ass
Fiscal 2012 Theatrical Slate:
The Hunger Games
Summit Titles Released Theatrically Pre-Acquisition:
The Twilight Saga: New Moon
The Twilight Saga: Breaking Dawn - Part 1

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The following table sets forth the components of international revenue by product category for the three months ended September 30, 2012 and 2011:



	Three Months Ended
	September 30,
	2012		2011
	(Amounts in millions)
International revenues
Fiscal 2013 Theatrical Slate	$	41.2	$	—
Fiscal 2012 Theatrical Slate	36.3		8.5
Fiscal 2011 Theatrical Slate	0.7		3.8
Fiscal 2010 Theatrical Slate	0.4		0.2
Fiscal 2009 & Prior Theatrical Slates	1.1		2.8
Total Theatrical Slates	79.7		15.3
Summit Titles Released Theatrically Pre-Acquisition	24.2		—
Managed Brands	3.2		5.7
Other	0.9		1.4
	$	108.0	$	22.4

International revenue included in motion pictures revenue of $108.0 million increased $85.6 million, or 382.1%, in the three months ended September 30, 2012, as compared to the three months ended September 30, 2011. The increase in international revenue in the three months ended September 30, 2012 compared to the three months ended September 30, 2011, 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 months ended September 30, 2012 and 2011:



Three Months Ended September 30,
2012		2011
Fiscal 2013 Theatrical Slate:		Lionsgate UK and third party product:
The Expendables 2		Blitz
Fiscal 2012 Theatrical Slate:		Drive Angry 3D
Abduction
The Hunger Games
Lionsgate UK and third party product:
Magic Mike
Salmon Fishing In The Yemen

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The following table sets forth the components of Lionsgate UK revenue by product category for the three months ended September 30, 2012 and 2011:



	Three Months Ended
	September 30,
	2012		2011
	(Amounts in millions)
Lionsgate UK revenues
Fiscal 2013 Theatrical Slate	$	5.5	$	—
Fiscal 2012 Theatrical Slate	16.3		0.9
Fiscal 2011 Theatrical Slate	1.7		1.6
Fiscal 2010 Theatrical Slate	0.9		0.2
Fiscal 2009 & Prior Theatrical Slates	0.2		0.3
Total Theatrical Slates	24.6		3.0
Summit Titles Released Theatrically Pre-Acquisition	1.8		—
Lionsgate UK and third party product	19.1		15.9
Managed Brands	2.9		3.0
Other	—		0.1
	$	48.4	$	22.0

Lionsgate UK revenue of $48.4 million increased $26.4 million, or 120.0%, in the three months ended September 30, 2012 as compared to the three months ended September 30, 2011. The increase in Lionsgate UK revenue in the three months ended September 30, 2012 compared to the three months ended September 30, 2011 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 months ended September 30, 2012 and 2011:



Three Months Ended September 30,
2012		2011
Hope Springs		50/50
LOL		The Switch

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 $31.6 million increased $29.2 million in the three months ended September 30, 2012 as compared to the three months ended September 30, 2011.

Television Production Revenue

Television production revenue of $99.0 million decreased $40.2 million, or 28.9%, in the three months ended September 30, 2012 as compared to the three months ended September 30, 2011. The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the three months ended September 30, 2012 and 2011:

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	Three Months Ended		Three Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount			Percent
			(Amounts in millions)
Television Production
Domestic series licensing
Lionsgate Television	$	51.5	$	41.5	$	10.0		24.1	%
Debmar-Mercury	21.9		30.2		(8.3		)	(27.5	)%
Total domestic series licensing	73.4		71.7		1.7			2.4	%
International	9.0		12.5		(3.5		)	(28.0	)%
Home entertainment releases of television production	15.9		54.6		(38.7		)	(70.9	)%
Other	0.7		0.4		0.3			75.0	%
	$	99.0	$	139.2	$	(40.2	)	(28.9	)%

The following table sets forth the number of television episodes and hours included in Lionsgate Television domestic series licensing revenue in the three months ended September 30, 2012 and 2011, respectively:



		Three Months Ended				Three Months Ended
		September 30, 2012				September 30, 2011
		Episodes	Hours			Episodes	Hours
Weeds Season 8	1/2hr	10	5.0	Weeds Season 7	1/2hr	11	5.5
Boss Season 2	1hr	8	8.0	Boss Season 1	1hr	6	6.0
Anger Management	1/2hr	8	4.0	Blue Mountain State Season 3	1/2hr	4	2.0
				Pilots	1/2hr	1	0.5
		26	17.0			22	14.0

Revenues included in domestic series licensing from Lionsgate Television increased in the three months ended September 30, 2012, due to an increase in the number of television episodes delivered as compared to the three months ended September 30, 2011. Revenues included in domestic series licensing from Debmar-Mercury decreased in the three months ended September 30, 2012, primarily because the three months ended September 30, 2011 included higher revenues generated from Are We There Yet and House of Payne as compared to the three months ended September 30, 2012.

International revenue decreased in the three months ended September 30, 2012 due to a decrease in episodes of programming delivered internationally. International revenue in the three months ended September 30, 2012 primarily included revenue from the Anger Management television series. International revenue in the three months ended September 30, 2011 included revenue from Mad Men Season 1, 2, 3, and 4, and Weeds Seasons 6 and 7.

The decrease in revenue from home entertainment releases of television production is primarily driven by higher digital media revenue from Mad Men Seasons 1,2,3,and 4, and Debmar Mercury's Hell's Kitchen as a result of licensing in the three months ended September 30, 2011 with a lower amount of digital media licensing revenue primarily from Weeds Season 7 in the three months ended September 30, 2012.

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Direct Operating Expenses

The following table sets forth direct operating expenses by segment for the three months ended September 30, 2012 and 2011:



	Three Months Ended									Three Months Ended
	September 30, 2012									September 30, 2011
	Motion Pictures			Television Production			Total			Motion Pictures			Television Production			Total
	(Amounts in millions)
Direct operating expenses
Amortization of films and television programs	$	166.9		$	60.4		$	227.3		$	71.7		$	62.5		$	134.2
Participation and residual expense	75.3			19.2			94.5			36.2			35.5			71.7
Other expenses	1.1			0.3			1.4			0.6			(0.2		)	0.4
	$	243.3		$	79.9		$	323.2		$	108.5		$	97.8		$	206.3
Direct operating expenses as a percentage of segment revenues	40.0		%	80.7		%	45.7		%	49.6		%	70.3		%	57.6		%

Direct operating expenses of the motion pictures segment of $243.3 million for the three months ended September 30, 2012 were 40.0% of motion pictures revenue, compared to $108.5 million, or 49.6% of motion pictures revenue for the three months ended September 30, 2011. The decrease in direct operating expense of the motion pictures segment as a percentage of revenue in the three months ended September 30, 2012 is primarily due to the change in the mix of product generating revenue compared to the quarter ended September 30, 2011, and is primarily driven by the titles in our theatrical slates. The direct operating expense as a percentage of revenue in the prior year period was primarily driven by the performance of the titles in our fiscal 2012 theatrical slate. The direct operating expense as a percentage of revenues in the current fiscal period is driven by the performance of The Hunger Games and, to a lesser extent, the titles released in our fiscal 2013 theatrical slate, offset by the generally higher direct operating expense as a percentage of revenue associated with the acquisition of the Summit titles as a result of the increase in film cost associated with valuing those titles at fair value on our balance sheet under purchase accounting rules. Investment in film write-downs of the motion pictures segment during the three months ended September 30, 2012 totaled approximately $0.7 million, compared to $1.5 million for the three months ended September 30, 2011.

Direct operating expenses of the television production segment of $79.9 million for the three months ended September 30, 2012 were 80.7% of television revenue, compared to $97.8 million, or 70.3%, of television revenue for the three months ended September 30, 2011. The increase in direct operating expenses as a percentage of television revenue in the three months ended September 30, 2012 is primarily due to the change in the mix of titles generating revenue as compared to the three months ended September 30, 2011 and the higher revenues generated in the three months ended September 30, 2011 as compared to the current period. In the three months ended September 30, 2012, $3.1 million of charges for write-downs of television film costs were included in the amortization of television programs, compared to charges of $0.2 million in the three months ended September 30, 2011. There was one write-down that exceeded $1.0 million for the three months ended September 30, 2012.

Distribution and Marketing Expenses

The following table sets forth distribution and marketing expenses by segment for the three months ended September 30, 2012 and 2011:

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	Three Months Ended						Three Months Ended
	September 30, 2012						September 30, 2011
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in millions)
Distribution and marketing expenses
Theatrical	$	136.2	$	—	$	136.2	$	81.4	$	—	$	81.4
Home Entertainment	66.8		2.0		68.8		37.5		1.8		39.3
Television	0.5		3.9		4.4		0.1		3.7		3.8
International	2.1		1.2		3.3		0.7		0.6		1.3
Lionsgate UK	20.7		0.2		20.9		14.9		0.2		15.1
Other	2.8		—		2.8		0.7		—		0.7
	$	229.1	$	7.3	$	236.4	$	135.3	$	6.3	$	141.6

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 three months ended September 30, 2012 of $136.2 million increased $54.8 million, compared to $81.4 million in the three months ended September 30, 2011, largely due to four wide theatrical releases in the three months ended September 30, 2012, as compared to three wide theatrical releases in the three months ended September 30, 2011. Domestic theatrical P&A from the motion pictures segment in the three months ended September 30, 2012 included P&A incurred on the release of The Expendables 2, Dredd 3D, The Possession, and Step Up Revolution. Approximately $55.5 million of P&A was incurred on titles that generated less than 5% of theatrical revenue in the three months ended September 30, 2012, of which approximately $24.0 million was P&A incurred in advance for films to be released in subsequent quarters, such as Alex Cross, Sinister, The Impossible and The Twilight Saga: Breaking Dawn - Part 2. Domestic theatrical P&A from the motion pictures segment in the three months ended September 30, 2011 included P&A incurred on the release of Abduction, Conan the Barbarian and Warrior. In addition, approximately $2.3 million of P&A was incurred on titles that did not contribute significant revenue in the three months ended September 30, 2011 primarily related to P&A incurred in advance for films to be released in subsequent quarters. We currently expect that distribution and marketing expenses of the motion pictures segment for fiscal 2013 will increase as compared to fiscal 2012 due to an increase in the number of theatrical releases anticipated in our fiscal 2013 theatrical slate as compared to our fiscal 2012 slate.

Home entertainment distribution and marketing costs on motion pictures and television product in the three months ended September 30, 2012 of $68.8 million increased $29.5 million, or 75.1%, compared to $39.3 million in the three months ended September 30, 2011, primarily due to higher distribution and marketing costs associated with higher motion pictures home entertainment revenues. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues was 24.8% and 22.5% in the three months ended September 30, 2012 and the three months ended September 30, 2011, respectively.

Lionsgate UK distribution and marketing expenses in the motion pictures segment in the three months ended September 30, 2012 of $20.7 million increased from $14.9 million in the three months ended September 30, 2011.

General and Administrative Expenses

The following table sets forth general and administrative expenses by segment for the three months ended September 30, 2012 and 2011:

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	Three Months Ended			Three Months Ended			Increase (Decrease)
	September 30, 2012			September 30, 2011			Amount			Percent
	(Amounts in millions)
General and administrative expenses
Motion Pictures	$	15.1		$	11.5		$	3.6		31.3	%
Television Production	2.9			3.0			(0.1		)	(3.3	)%
Shared services and corporate expenses, excluding items below	18.8			10.8			8.0			74.1	%
Total general and administrative expenses before share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses	36.8			25.3			11.5			45.5	%
Share-based compensation expense	6.9			2.4			4.5			187.5	%
Shareholder activist matter	—			1.8			(1.8		)	(100.0	)%
Severance and transaction costs related to the acquisition of Summit Entertainment, LLC	0.3			—			0.3			100.0	%
	7.2			4.2			3.0			71.4	%
Total general and administrative expenses	$	44.0		$	29.5		$	14.5		49.2	%
Total general and administrative expenses as a percentage of revenue	6.2		%	8.2		%
General and administrative expenses excluding share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses, as a percentage of revenue	5.2		%	7.1		%

Total General and Administrative Expenses

General and administrative expenses increased by $14.5 million, or 49.2%, as reflected in the table above and further discussed below.

Motion Pictures

General and administrative expenses of the motion pictures segment increased $3.6 million, or 31.3%. The increase in motion pictures general and administrative expenses is primarily due to increases in salaries and related expenses, rents and facilities expenses and professional fees. The increases are primarily due to increased personnel associated with the acquisition of Summit Entertainment on January 13, 2012. Included in the motion pictures segment in the three months ended September 30, 2011 is $0.9 million in general and administrative expenses associated with Maple Pictures, which was sold on August 10, 2011. In the three months ended September 30, 2012, $2.5 million of motion pictures production overhead was capitalized compared to $2.6 million in the three months ended September 30, 2011.

Television Production

General and administrative expenses of the television production segment in the three months ended September 30, 2012 were comparable to the three months ended September 30, 2011. In the three months ended September 30, 2012, $1.5 million of television production overhead was capitalized compared to $1.4 million in the three months ended September 30, 2011.

Shared Services and Corporate Expenses

Shared services and corporate expenses excluding share-based compensation expense, shareholder activist matter costs and severance and transaction costs related to the acquisition of Summit, increased $8.0 million, or 74.1%, mainly due to increases in salaries and related expenses, incentive related compensation and legal and professional fees.

Shareholder activist matter costs were nil in the three months ended September 30, 2012 compared to $1.8 million in the three months ended September 30, 2011.

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 September 30, 2012 and 2011:

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	Three Months Ended		Three Months Ended			Increase (Decrease)
	September 30, 2012		September 30, 2011			Amount		Percent
	(Amounts in millions)
Share-based compensation expense:
Stock options	$	0.4	$	—		$	0.4	100.0	%
Restricted share units and other share-based compensation	4.4		2.5			1.9		76.0	%
Stock appreciation rights	2.1		(0.1		)	2.2		NM
	$	6.9	$	2.4		$	4.5	187.5	%

Depreciation, Amortization and Other Expenses (Income)

Depreciation and amortization of $2.1 million for the three months ended September 30, 2012 increased $1.4 million from $0.7 million in the three months ended September 30, 2011, primarily due to the amortization of finite-lived intangible assets associated with the Summit acquisition in the three months ended September 30, 2012, with no comparable amortization in the three months ended September 30, 2011.

Interest expense of $23.3 million for the three months ended September 30, 2012 increased $5.7 million, or 32.4%, from $17.6 million in the three months ended September 30, 2011, primarily due to the addition of the Term Loan in connection with the Summit acquisition. As a result of the pay off of the term loan subsequent to the end of the quarter (see Note 18 to our consolidated financial statements), we expect a reduction in our overall effective interest rate on our corporate debt. The following table sets forth the components of interest expense for the three months ended September 30, 2012 and 2011:



	Three Months Ended		Three Months Ended
	September 30, 2012		September 30, 2011
	(Amounts in millions)
Interest Expense
Cash Based:
Senior revolving credit facility	$	2.0	$	1.0
Convertible senior subordinated notes	1.1		1.0
Senior secured second-priority notes	11.2		11.1
Term loan	3.8		—
Other	0.8		1.1
	18.9		14.2
Non-Cash Based:
Amortization of discount (premium) on:
Liability component of convertible senior subordinated notes	1.9		2.0
Senior secured second-priority notes	0.2		0.2
Term loan	0.2		—
Amortization of deferred financing costs	2.1		1.2
	4.4		3.4
	$	23.3	$	17.6

Interest and other income was $1.0 million in the three months ended September 30, 2012, compared to $0.9 million in the three months ended September 30, 2011.

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 September 30, 2012 and 2011:

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	September 30, 2012	Three Months Ended			Three Months Ended
	Ownership Percentage	September 30, 2012			September 30, 2011
					As adjusted (2)
		(Amounts in millions)
Horror Entertainment, LLC (“FEARnet”)	34.5%	$	—		$	—
NextPoint, Inc. (“Break Media”)	42.0%	(0.8		)	(0.7		)
Roadside Attractions, LLC	43.0%	0.2			0.2
Studio 3 Partners, LLC (“EPIX”) (1)	31.2%	5.5			5.3
TV Guide Network (1)	51.0%	(3.1		)	(2.3		)
Tiger Gate Entertainment Limited ("Tiger Gate")	16.0%	—			(0.7		)
		$	1.8		$	1.8

______________________

(1)

We license certain of our theatrical releases and other films and television programs to EPIX and 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 income (loss) of the venture. These profits are recognized as they are realized by the venture (see Note 3 to our consolidated financial statements).


(2)	Due to the elimination of the one-quarter lag in reporting EPIX's results, equity interest income for EPIX for the three months ended ended September 30, 2011 has been adjusted as shown above.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $1.0 million for the three months ended September 30, 2012, primarily resulting from the write-off of a portion of deferred financing costs associated with amending and restating our senior revolving credit facility. For the three months ended September 30, 2011, the loss on extinguishment of debt was $0.4 million resulting from the August 2011 repurchase of approximately $10.0 million in aggregate principal amount of the Senior Notes.

Income Tax Provision

We had an income tax expense of $4.1 million, or 5.2%, of income before income taxes in the three months ended September 30, 2012, compared to an expense of $1.1 million, or (4.4%), of loss before income taxes in the three months ended September 30, 2011. The tax expense reflected in the three months ended September 30, 2012 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 $225.3 million for U.S. federal income tax purposes available to reduce income taxes over twenty years, $209.9 million for U.S. state income tax purposes available to reduce income taxes over future years with varying expirations, $34.9 million for Canadian income tax purposes available to reduce income taxes over 20 years with varying expirations, and $8.7 million for U.K. income tax purposes available indefinitely to reduce future income taxes.

Net Income (Loss)

Net income for the three months ended September 30, 2012 was $75.5 million, or basic net income per common share of $0.56 on 134.4 million weighted average common shares outstanding and diluted net income per common share of $0.53 on 148.7 million weighted average common shares outstanding. This compares to net loss for the three months ended September 30, 2011 of $25.3 million, or basic and diluted net loss per common share of $0.19 on 133.8 million weighted average common shares outstanding.

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RESULTS OF OPERATIONS

Six Months Ended September 30, 2012 Compared to Six Months Ended September 30, 2011

Note: Due to the acquisition of Summit on January 13, 2012, the results of operations for the six months ended September 30, 2011 do not include the results of Summit.

The following table sets forth the components of consolidated revenue by segment for the six months ended September 30, 2012 and 2011:



	Six Months Ended		Six Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount			Percent
			(Amounts in millions)
Consolidated Revenue
Motion Pictures	$	1,014.5	$	411.4	$	603.1		146.6	%
Television Production	164.3		207.9		(43.6		)	(21.0	)%
	$	1,178.8	$	619.3	$	559.5		90.3	%



	Six Months Ended		Six Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount			Percent
			(Amounts in millions)
Home Entertainment Revenue
Motion Pictures	$	394.5	$	207.2	$	187.3		90.4	%
Television Production	29.4		60.7		(31.3		)	(51.6	)%
	$	423.9	$	267.9	$	156.0		58.2	%

Motion Pictures Revenue

The table below sets forth the components of revenue and the changes in these components for the motion pictures reporting segment for the six months ended September 30, 2012 and 2011. We currently expect our motion pictures segment revenue for fiscal 2013 will exceed our fiscal 2012 motion picture segment revenue. However, actual motion pictures revenue will depend on the performance of our film and home entertainment titles across all media and territories and can vary materially from expectations.



	Six Months Ended		Six Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount		Percent
	(Amounts in millions)
Motion Pictures
Theatrical	$	253.8	$	49.4	$	204.4	413.8	%
Home Entertainment	394.5		207.2		187.3		90.4	%
Television	72.6		71.5		1.1		1.5	%
International	156.6		34.0		122.6		360.6	%
Lionsgate UK	80.9		34.5		46.4		134.5	%
Mandate Pictures	44.4		12.1		32.3		266.9	%
Other	11.7		2.7		9.0		333.3	%
	$	1,014.5	$	411.4	$	603.1	146.6	%

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Motion Pictures — Theatrical Revenue



Six Months Ended September 30,
2012		2011
	Theatrical Release Date		Theatrical Release Date
Fiscal 2013 Theatrical Slate:		Fiscal 2012 Theatrical Slate:
The Possession	August 2012	Abduction	September 2011
The Expendables 2	August 2012	Warrior	September 2011
Step Up Revolution	July 2012	Conan the Barbarian	August 2011
Madea's Witness Protection	June 2012	Madea’s Big Happy Family	April 2011
What To Expect When You're Expecting	May 2012
Cabin In The Woods	April 2012
Fiscal 2012 Theatrical Slate:
The Hunger Games	March 2012

Theatrical revenue of $253.8 million increased $204.4 million, or 413.8%, in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011. The increase in theatrical revenue in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011 is due to the successful box office performance of The Hunger Games released in late March 2012 and due to six wide theatrical releases in the six months ended September 30, 2012, as compared to four theatrical releases in the six months ended September 30, 2011.

Motion Pictures — Home Entertainment Revenue

The following table sets forth the titles contributing approximately two percent or more of motion pictures home entertainment revenue for the six months ended September 30, 2012 and 2011:



Six Months Ended September 30,
2012		2011
	DVD Release Date		DVD Release Date
Fiscal 2013 Theatrical Slate:		Fiscal 2012 Theatrical Slate:
Cabin In The Woods	September 2012	Madea's Big Happy Family	August 2011
What To Expect When You're Expecting	September 2012	Fiscal 2011 Theatrical Slate:
Safe	September 2012	The Lincoln Lawyer	July 2011
Fiscal 2012 Theatrical Slate:		Rabbit Hole	April 2011
The Hunger Games	August 2012	The Next Three Days	March 2011
Good Deeds	June 2012	The Expendables	November 2010
Man On A Ledge	May 2012	Managed Brands:
Gone	May 2012	The Conspirator	August 2011
One For The Money	May 2012
Summit Titles Released Theatrically Pre-Acquisition:
The Darkest Hour	April 2012
The Twilight Saga: Breaking Dawn - Part 1	February 2012
Managed Brands:
Haywire	May 2012

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The following table sets forth the components of home entertainment revenue by product category for the six months ended September 30, 2012 and 2011:



	Six Months Ended September 30,
	2012						2011
	Packaged Media		Digital Media (1)		Total		Packaged Media		Digital Media (1)		Total
					(Amounts in millions)
Home entertainment revenues
Fiscal 2013 Theatrical Slate	$	34.3	$	0.9	$	35.2	$	—	$	—	$	—
Fiscal 2012 Theatrical Slate	164.6		28.6		193.2		14.5		—		14.5
Fiscal 2011 Theatrical Slate	2.9		0.7		3.6		36.8		26.4		63.2
Fiscal 2010 Theatrical Slate	2.6		0.5		3.1		2.7		0.5		3.2
Fiscal 2009 & Prior Theatrical Slates	5.6		2.1		7.7		9.8		2.1		11.9
Total Theatrical Slates	210.0		32.8		242.8		63.8		29.0		92.8
Summit Titles Released Theatrically Pre-Acquisition	16.3		29.3		45.6		—		—		—
Managed Brands (2)	76.7		27.9		104.6		95.1		14.8		109.9
Other	0.6		0.9		1.5		3.4		1.1		4.5
	$	303.6	$	90.9	$	394.5	$	162.3	$	44.9	$	207.2

___________________


(1)	Digital media revenue (formerly referred to as electronic media revenue) consists of revenues generated from pay-per-view and video-on-demand platforms, electronic sell-through or “EST,” and digital rental.


(2)	Managed Brands consists of Direct-to-DVD, acquired and licensed brands, acquired library and other product.

Home entertainment revenue of $394.5 million increased $187.3 million, or 90.4%, in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011. The increase in home entertainment revenue is primarily due to an increase in the contribution of revenue from the theatrical slates as listed above and from Summit titles released theatrically pre-acquisition, with no comparable revenue in fiscal 2012. The increase in revenue contributed by the theatrical slates is primarily due to the performance of The Hunger Games DVD released in the current period from our fiscal 2012 theatrical slate, as compared to the performance in the prior period of the five titles released on DVD from our fiscal 2012 and 2011 theatrical slates.

Motion Pictures — Television Revenue

The following table sets forth the titles contributing significant motion pictures television revenue for the six months ended September 30, 2012 and 2011:



Six Months Ended September 30,
2012		2011
Fiscal 2012 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Abduction		Alpha and Omega
Conan the Barbarian		For Colored Girls
One For The Money		Saw 3D
Summit Titles Released Theatrically Pre-Acquisition:		The Expendables
Knowing		The Last Exorcism
Push		The Next Three Days
Source Code		Fiscal 2009 Theatrical Slate:
		Madea Goes to Jail

The following table sets forth the components of television revenue by product category for the six months ended September 30, 2012 and 2011:

Table of Contents



	Six Months Ended
	September 30,
	2012		2011
	(Amounts in millions)
Television revenues
Fiscal 2012 Theatrical Slate	$	21.2	$	—
Fiscal 2011 Theatrical Slate	0.2		49.5
Fiscal 2010 Theatrical Slate	10.7		—
Fiscal 2009 & Prior Theatrical Slates	7.1		15.3
Total Theatrical Slates	39.2		64.8
Summit Titles Released Theatrically Pre-Acquisition	25.1		—
Managed Brands	8.1		5.7
Other	0.2		1.0
	$	72.6	$	71.5

Television revenue included in motion pictures revenue of $72.6 million increased $1.1 million, or 1.5%, in the six months ended September 30, 2012, as compared to the six months ended September 30, 2011. The increase in television revenue in the six months ended September 30, 2012 compared to the six months ended September 30, 2011, is mainly due to the Summit titles released theatrically pre-acquisition, with no comparable revenue in fiscal 2012, offset by a decrease in television revenue from the theatrical slates as listed above. The contribution of television revenue from the titles listed above was $38.2 million in the six months ended September 30, 2012, compared to $53.2 million in the six months ended September 30, 2011, and the contribution of television revenue from titles not listed above was $34.4 million in the six months ended September 30, 2012, compared to $18.3 million in the six months ended September 30, 2011.

Motion Pictures — International Revenue

The following table sets forth the titles contributing significant motion pictures international revenue for the six months ended September 30, 2012 and 2011:



Six Months Ended September 30,
2012		2011
Fiscal 2013 Theatrical Slate:		Fiscal 2012 Theatrical Slate:
Cold Light of Day		Abduction
Step Up Revolution		Fiscal 2011 Theatrical Slate:
What To Expect When You're Expecting		Kick-Ass
Fiscal 2012 Theatrical Slate:		Saw 3D
The Hunger Games
Summit Titles Released Theatrically Pre-Acquisition:
The Twilight Saga: New Moon
The Twilight Saga: Breaking Dawn - Part 1

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The following table sets forth the components of international revenue by product category for the six months ended September 30, 2012 and 2011:



	Six Months Ended
	September 30,
	2012		2011
	(Amounts in millions)
International revenues
Fiscal 2013 Theatrical Slate	$	54.8	$	—
Fiscal 2012 Theatrical Slate	45.4		8.8
Fiscal 2011 Theatrical Slate	2.0		9.5
Fiscal 2010 Theatrical Slate	0.6		1.1
Fiscal 2009 & Prior Theatrical Slates	1.9		4.4
Total Theatrical Slates	104.7		23.8
Summit Titles Released Theatrically Pre-Acquisition	44.6		—
Managed Brands	6.3		8.5
Other	1.0		1.7
	$	156.6	$	34.0

International revenue included in motion pictures revenue of $156.6 million increased $122.6 million, or 360.6%, in the six months ended September 30, 2012, as compared to the six months ended September 30, 2011. The increase in international revenue in the six months ended September 30, 2012 compared to the six months ended September 30, 2011, 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 six months ended September 30, 2012 and 2011:



Six Months Ended September 30,
2012		2011
Fiscal 2013 Theatrical Slate:		Fiscal 2011 Theatrical Slate:
Cabin In The Woods		The Next Three Days
Fiscal 2012 Theatrical Slate:		Lionsgate UK and third party product:
The Hunger Games		Blitz
Lionsgate UK and third party product:		Drive Angry 3D
Magic Mike
Salmon Fishing In The Yemen

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The following table sets forth the components of Lionsgate UK revenue by product category for the six months ended September 30, 2012 and 2011:



	Six Months Ended
	September 30,
	2012		2011
	(Amounts in millions)
Lionsgate UK revenues
Fiscal 2013 Theatrical Slate	$	9.5	$	—
Fiscal 2012 Theatrical Slate	28.4		0.9
Fiscal 2011 Theatrical Slate	2.3		6.0
Fiscal 2010 Theatrical Slate	1.5		0.5
Fiscal 2009 & Prior Theatrical Slates	0.4		0.7
Total Theatrical Slates	42.1		8.1
Summit Titles Released Theatrically Pre-Acquisition	2.3		—
Lionsgate UK and third party product	30.6		20.9
Managed Brands	5.7		4.9
Other	0.2		0.6
	$	80.9	$	34.5

Lionsgate UK revenue of $80.9 million increased $46.4 million, or 134.5%, in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011. The increase in Lionsgate UK revenue in the six months ended September 30, 2012 compared to the six months ended September 30, 2011 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 six months ended September 30, 2012 and 2011:



Six Months Ended September 30,
2012		2011
Hope Springs		50/50
LOL		Juno
Seeking A Friend For The End of The World		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 $44.4 million increased $32.3 million, or 266.9%, in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011.

Television Production Revenue

Television production revenue of $164.3 million decreased $43.6 million, or 21.0%, in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011. The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the six months ended September 30, 2012 and 2011:

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	Six Months Ended		Six Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount			Percent
			(Amounts in millions)
Television Production
Domestic series licensing
Lionsgate Television	$	65.2	$	49.4	$	15.8		32.0	%
Debmar-Mercury	49.0		72.2		(23.2		)	(32.1	)%
Total domestic series licensing	114.2		121.6		(7.4		)	(6.1	)%
International	19.8		25.1		(5.3		)	(21.1	)%
Home entertainment releases of television production	29.4		60.7		(31.3		)	(51.6	)%
Other	0.9		0.5		0.4			80.0	%
	$	164.3	$	207.9	$	(43.6	)	(21.0	)%

The following table sets forth the number of television episodes and hours included in Lionsgate Television domestic series licensing revenue in the six months ended September 30, 2012 and 2011, respectively:



		Six Months Ended				Six Months Ended
		September 30, 2012				September 30, 2011
		Episodes	Hours			Episodes	Hours
Weeds Season 8	1/2hr	13	6.5	Weeds Season 7	1/2hr	13	6.5
Boss Season 2	1hr	10	10.0	Blue Mountain State Season 3	1/2hr	4	2.0
Anger Management	1/2hr	10	5.0	Boss Season 1	1hr	6	6.0
				Pilots	1/2hr & 1hr	2	1.5
		33	21.5			25	16.0

Revenues included in domestic series licensing from Lionsgate Television increased in the six months ended September 30, 2012, due to an increase in the number of television episodes delivered as compared to the six months ended September 30, 2011. Revenues included in domestic series licensing from Debmar-Mercury decreased in the six months ended September 30, 2012, primarily because the six months ended September 30, 2011 included higher revenues generated from House of Payne and Are We There Yet as compared to the six months ended September 30, 2012.

International revenue decreased in the six months ended September 30, 2012 due to a decrease in episodes of programming delivered internationally. International revenue in the six months ended September 30, 2012 primarily included revenue from Anger Management, Boss Season 1, and Mad Men Seasons 4 and 5. International revenue in the six months ended September 30, 2011 included revenue from Blue Mountain State Season 2, Weeds Seasons 5,6, and 7, Mad Men Seasons 2,3, and 4, and Paris Hilton's My New BFF: Dubai.

The decrease in revenue from home entertainment releases of television production is primarily due to a decrease in digital media revenue. Home entertainment releases of television product in the six months ended September 30, 2012 primarily included revenue from Weeds Seasons 6 and 7 and Mad Men Season 5, as compared to digital media revenue from Mad Men Seasons 1,2,3, and 4 as well as digital media revenue from Debmar Mercury's Hell's Kitchen in the six months ended September 30, 2011.

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Direct Operating Expenses

The following table sets forth direct operating expenses by segment for the six months ended September 30, 2012 and 2011:



	Six Months Ended									Six Months Ended
	September 30, 2012									September 30, 2011
	Motion Pictures			Television Production			Total			Motion Pictures			Television Production			Total
	(Amounts in millions)
Direct operating expenses
Amortization of films and television programs	$	300.4		$	94.2		$	394.6		$	129.6		$	89.6		$	219.2
Participation and residual expense	135.7			37.4			173.1			65.3			61.6			126.9
Other expenses	0.9			0.4			1.3			(0.1		)	(0.3		)	(0.4		)
	$	437.0		$	132.0		$	569.0		$	194.8		$	150.9		$	345.7
Direct operating expenses as a percentage of segment revenues	43.1		%	80.3		%	48.3		%	47.4		%	72.6		%	55.8		%

Direct operating expenses of the motion pictures segment of $437.0 million for the six months ended September 30, 2012 were 43.1% of motion pictures revenue, compared to $194.8 million, or 47.4% of motion pictures revenue for the six months ended September 30, 2011. The decrease in direct operating expense of the motion pictures segment as a percentage of revenue in the six months ended September 30, 2012 is primarily due to the change in the mix of product generating revenue compared to the six months ended September 30, 2011, and is primarily driven by the titles in our theatrical slates. The direct operating expense as a percentage of revenue in the prior year period was primarily driven by the performance of the titles in our fiscal 2012 theatrical slate. The direct operating expense as a percentage of revenues in the current fiscal period is driven by the performance of The Hunger Games and, to a lesser extent, the titles released in our fiscal 2013 theatrical slate offset by the generally higher direct operating expense as a percentage of revenue associated with the acquisition of the Summit titles as a result of the increase in film cost associated with valuing those titles at fair value on our balance sheet under purchase accounting rules. Investment in film write-downs of the motion pictures segment during the six months ended September 30, 2012 totaled approximately $2.3 million, compared to $1.6 million for the six months ended September 30, 2011. In the six months ended September 30, 2012, there were no write-downs that individually exceeded $1.0 million. Due to the January 2012 acquisition of Summit, we currently expect that direct operating expenses of the motion pictures segment for fiscal 2013 will increase as compared to fiscal 2012.

Direct operating expenses of the television production segment of $132.0 million for the six months ended September 30, 2012 were 80.3% of television revenue, compared to $150.9 million, or 72.6%, of television revenue for the six months ended September 30, 2011. The increase in direct operating expenses as a percentage of television revenue is primarily due to the change in mix of titles generating revenue compared to the six months ended September 30, 2011, in addition to higher charges for write-downs of television costs in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011. In the six months ended September 30, 2012, $5.2 million of charges for write-downs of television film costs were included in the amortization of television programs, compared to charges of $1.9 million in the six months ended September 30, 2011. In the six months ended September 30, 2012, there were two write-downs that individually exceeded $1.0 million, and in the six months ended September 30, 2011, there were no write-downs that individually exceeded $1.0 million.

Distribution and Marketing Expenses

The following table sets forth distribution and marketing expenses by segment for the six months ended September 30, 2012 and 2011:

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	Six Months Ended						Six Months Ended
	September 30, 2012						September 30, 2011
	Motion Pictures		Television Production		Total		Motion Pictures		Television Production		Total
	(Amounts in millions)
Distribution and marketing expenses
Theatrical	$	252.5	$	0.1	$	252.6	$	107.8	$	—	$	107.8
Home Entertainment	101.4		2.9		104.3		62.3		3.3		65.6
Television	1.9		7.1		9.0		0.1		6.4		6.5
International	4.4		2.7		7.1		1.7		1.7		3.4
Lionsgate UK	37.0		0.3		37.3		21.5		0.5		22.0
Other	4.9		—		4.9		1.1		—		1.1
	$	402.1	$	13.1	$	415.2	$	194.5	$	11.9	$	206.4

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 six months ended September 30, 2012 of $252.5 million increased $144.7 million, compared to $107.8 million in the six months ended September 30, 2011, largely due to eight wide theatrical releases in the six months ended September 30, 2012, as compared to four wide theatrical release in the six months ended September 30, 2011. Domestic theatrical P&A from the motion pictures segment in the six months ended September 30, 2012 included P&A incurred on the release of Cabin In The Woods, Dredd 3D, Madea's Witness Protection, Safe, Step Up Revolution, The Expendables 2, The Possession and What to Expect When You're Expecting. Approximately $81.7 million of P&A was incurred on titles that generated less than 5% of theatrical revenue in the six months ended September 30, 2012, of which approximately $25.8 million was P&A incurred in advance for films to be released in subsequent quarters, such as Alex Cross, Sinister, The Impossible and The Twilight Saga: Breaking Dawn - Part 2. Domestic theatrical P&A from the motion pictures segment in the six months ended September 30, 2011 included P&A incurred on the release of Abduction, Conan the Barbarian, Madea's Big Happy Family and Warrior. In addition, approximately $7.5 million of P&A was incurred on titles that did not contribute significant revenue in the six months ended September 30, 2011, of which $2.6 million was P&A incurred in advance for films to be released in subsequent quarters. We currently expect that distribution and marketing expenses of the motion pictures segment for fiscal 2013 will increase as compared to fiscal 2012 due to an increase in the number of theatrical releases anticipated in our fiscal 2013 theatrical slate as compared to our fiscal 2012 slate.

Home entertainment distribution and marketing costs on motion pictures and television product in the six months ended September 30, 2012 of $104.3 million increased $38.7 million, or 59.0%, compared to $65.6 million in the six months ended September 30, 2011, primarily due to higher distribution and marketing costs associated with higher motion pictures home entertainment revenues. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues was 24.6% and 24.5% in the six months ended September 30, 2012 and the six months ended September 30, 2011, respectively.

Lionsgate UK distribution and marketing expenses in the motion pictures segment in the six months ended September 30, 2012 of $37.0 million increased from $21.5 million in the six months ended September 30, 2011.

General and Administrative Expenses

The following table sets forth general and administrative expenses by segment for the six months ended September 30, 2012 and 2011:

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	Six Months Ended			Six Months Ended			Increase (Decrease)
	September 30, 2012			September 30, 2011			Amount			Percent
	(Amounts in millions)
General and administrative expenses
Motion Pictures	$	32.0		$	23.6		$	8.4		35.6	%
Television Production	5.6			5.7			(0.1		)	(1.8	)%
Shared services and corporate expenses, excluding items below	40.2			25.1			15.1			60.2	%
Total general and administrative expenses before share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses	77.8			54.4			23.4			43.0	%
Share-based compensation expense	16.6			5.0			11.6			232.0	%
Shareholder activist matter	—			(2.0		)	2.0			(100.0	)%
Severance and transaction costs related to the acquisition of Summit Entertainment, LLC	2.0			—			2.0			100.0	%
	18.6			3.0			15.6			520.0	%
Total general and administrative expenses	$	96.4		$	57.4		$	39.0		67.9	%
Total general and administrative expenses as a percentage of revenue	8.2		%	9.3		%
General and administrative expenses excluding share-based compensation expense, shareholder activist matter expenses, and acquisition related expenses, as a percentage of revenue	6.6		%	8.8		%

Total General and Administrative Expenses

General and administrative expenses increased by $39.0 million, or 67.9%, as reflected in the table above and further discussed below.

Motion Pictures

General and administrative expenses of the motion pictures segment increased $8.4 million, or 35.6%. The increase in motion pictures general and administrative expenses is primarily due to increases in salaries and related expenses, rents and facilities expenses and professional fees. The increases are primarily due to increased personnel associated with the acquisition of Summit Entertainment on January 13, 2012. Included in the motion pictures segment in the six months ended September 30, 2011 is $2.4 million in general and administrative expenses associated with Maple Pictures, which was sold on August 10, 2011. In the six months ended September 30, 2012, $5.9 million of motion pictures production overhead was capitalized compared to $5.1 million in the six months ended September 30, 2011.

Television Production

General and administrative expenses of the television production segment in the six months ended September 30, 2012 were comparable to the six months ended September 30, 2011. In the six months ended September 30, 2012 and 2011, $2.9 million of television production overhead was capitalized in each period.

Shared Services and Corporate Expenses

Shared services and corporate expenses excluding share-based compensation expense, shareholder activist matter costs and severance and transaction costs related to the acquisition of Summit, increased $15.1 million, or 60.2%, mainly due to increases in salaries and related expenses, incentive related compensation and legal and professional fees.

Shareholder activist matter costs were nil in the six months ended September 30, 2012. Shareholder activist matter costs in the six months ended September 30, 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, and insurance recoveries of related litigation offset by other costs incurred.

Share-Based Compensation Expense. The following table sets forth share-based compensation expense included in shared services and corporate expenses for the six months ended September 30, 2012 and 2011:

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	Six Months Ended		Six Months Ended		Increase (Decrease)
	September 30, 2012		September 30, 2011		Amount		Percent
	(Amounts in millions)
Share-based compensation expense:
Stock options	$	0.6	$	0.1	$	0.5	500.0	%
Restricted share units and other share-based compensation	11.6		4.7		6.9		146.8	%
Stock appreciation rights	4.4		0.2		4.2		2,100.0	%
	$	16.6	$	5.0	$	11.6	232.0	%

Depreciation, Amortization and Other Expenses (Income)

Depreciation and amortization of $4.2 million for the six months ended September 30, 2012 increased $2.3 million from $1.9 million in the six months ended September 30, 2011, primarily due to the amortization of finite-lived intangible assets associated with the Summit acquisition in the six months ended September 30, 2012, with no comparable amortization in the six months ended September 30, 2011.

Interest expense of $50.8 million for the six months ended September 30, 2012 increased $16.9 million, or 49.9%, from $33.9 million in the six months ended September 30, 2011, primarily due to the addition of the Term Loan in connection with the Summit acquisition. As a result of the pay off of the term loan subsequent to the end of the quarter (see Note 18 to our consolidated financial statements), we expect a reduction in our overall effective interest rate on our corporate debt. The following table sets forth the components of interest expense for the six months ended September 30, 2012 and 2011:



	Six Months Ended		Six Months Ended
	September 30, 2012		September 30, 2011
	(Amounts in millions)
Interest Expense
Cash Based:
Senior revolving credit facility	$	3.8	$	1.8
Convertible senior subordinated notes	2.4		2.1
Senior secured second-priority notes	22.3		19.9
Term loan	11.1		—
Other	2.0		2.1
	41.6		25.9
Non-Cash Based:
Amortization of discount (premium) on:
Liability component of convertible senior subordinated notes	3.7		4.1
Senior secured second-priority notes	0.4		0.4
Term loan	0.6		—
Amortization of deferred financing costs	4.5		3.5
	9.2		8.0
	$	50.8	$	33.9

Interest and other income was $2.0 million in the six months ended September 30, 2012, compared to $1.4 million in the six months ended September 30, 2011.

The following table represents our portion of the income or (loss) of our equity method investees based on our percentage ownership for the six months ended September 30, 2012 and 2011:

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	September 30, 2012	Six Months Ended			Six Months Ended
	Ownership Percentage	September 30, 2012			September 30, 2011
					As adjusted (2)
		(Amounts in millions)
Horror Entertainment, LLC (“FEARnet”)	34.5%	$	0.1		$	—
NextPoint, Inc. (“Break Media”)	42.0%	(2.5		)	(2.0		)
Roadside Attractions, LLC	43.0%	0.1			0.2
Studio 3 Partners, LLC (“EPIX”) (1)	31.2%	12.1			8.2
TV Guide Network (1)	51.0%	(8.2		)	(3.2		)
Tiger Gate Entertainment Limited ("Tiger Gate")	16.0%	—			(1.4		)
		$	1.6		$	1.8

______________________

(1)


(2)	Due to the elimination of the one-quarter lag in reporting EPIX's results, equity interest income for EPIX for the three and six months ended September 30, 2011 has been adjusted as shown above.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $9.2 million for the six months ended September 30, 2012, primarily due to the voluntary early repayments of the Term Loan of approximately $163.3 million. The loss represents the write off of a portion of deferred financing costs and unamortized discount. For the six months ended September 30, 2011, the loss on extinguishment of debt was $1.0 million 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.

Income Tax Provision

We had an income tax expense of $6.3 million, or 16.8%, of income before income taxes in the six months ended September 30, 2012, compared to an expense of $2.3 million, or (17.9)%, of loss before income taxes in the six months ended September 30, 2011. The tax expense reflected in the six months ended September 30, 2012 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 $225.3 million for U.S. federal income tax purposes available to reduce income taxes over twenty years, $209.9 million for U.S. state income tax purposes available to reduce income taxes over future years with varying expirations, $34.9 million for Canadian income tax purposes available to reduce income taxes over 20 years with varying expirations, and $8.7 million for U.K. income tax purposes available indefinitely to reduce future income taxes.

Net Income (Loss)

Net income for the six months ended September 30, 2012 was $31.3 million, or basic net income per common share of $0.23 on 133.8 million weighted average common shares outstanding and diluted net income per common share of $0.23 on 134.6 million weighted average common shares outstanding. This compares to net loss for the six months ended September 30, 2011 of $15.0 million, or basic and diluted net loss per common share of $0.11 on 135.4 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, our issuance of senior secured second-priority notes, term loan, issuance of convertible senior subordinated notes, the Film Credit Facility (as hereafter defined), borrowings under individual production loans, and our Pennsylvania Regional Center credit facility.

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Senior Revolving Credit Facility

Outstanding Amount. At September 30, 2012, we had borrowings of $268.7 million (March 31, 2012 — $99.8 million).

Availability of Funds. At September 30, 2012, there was $62.7 million available (March 31, 2012 — $230.2 million). On September 27, 2012 the Company amended and restated its senior revolving credit facility. The amended and restated senior revolving credit facility provides for borrowings and letters of credit up to an aggregate of $800 million, subject to a borrowing base and other restrictions, as compared to $340 million borrowing capacity under the previous senior revolving credit facility. Due to restrictions in our senior secured second-priority notes indenture, the maximum borrowing allowed as of September 30, 2012 was $340 million, however, on October 15, 2012 this restriction was amended to limit the borrowings up to $650 million, unless certain ratios are met, pursuant to a supplemental indenture which amended the senior secured second-priority notes indenture. The availability of funds is limited by a borrowing base and also reduced by outstanding letters of credit which amounted to $8.6 million at September 30, 2012 (March 31, 2012 — $10.0 million).

Maturity Date. The senior revolving credit facility expires the earlier of (i) September 27, 2017 or (ii) six (6) months prior

to the maturity of the our senior secured second-priority notes.

Interest. Interest is payable at an alternative base rate, as defined, plus 1.5% or LIBOR plus 2.5% as designated by the

Company. As of September 30, 2012, the senior revolving credit facility bore interest of 2.5% over the LIBOR rate (effective interest rate of 2.71% and 2.74% on borrowings outstanding as of September 30, 2012 and March 31, 2012, respectively).

Commitment Fee. We are required to pay a quarterly commitment fee of 0.0375% to 0.5% per annum, depending

on the average balance of borrowings outstanding during the period, on the total senior revolving credit facility of $800 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

On October 21, 2009, 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.

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 have the same terms as the October 2009 Senior Notes, except for the issue date, issue price and first interest payment.

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



	September 30, 2012
	Principal		Unamortized Premium/ (Discount)			Net Carrying Amount
	(Amounts in thousands)
Senior Secured Second-Priority Notes	$	436,000	$	(4,119	)	$	431,881

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

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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 convertible senior 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:



Borrowing Base Definition Clause (2)	Category Name	September 30, 2012
		Gross (1)			Rate	Net (1)
		(Amounts in millions)
(i)	Eligible Major Domestic Receivables	$	346.8	@	100%	$	346.8
(ii)	Eligible Acceptable Domestic Receivables	223.5		@	90%	201.1
(iii)	Eligible Acceptable Foreign Receivables	34.2		@	85%	29.1
(iv)	Acceptable Tax Credits	47.7		@	85%/75%	38.1
(v)	Other Receivables	16.5		@	50%	8.2
	Borrowing Base from Receivables	$	668.7			$	623.3
(vii)	Unsold Rights Valuation	489.1		@	50%	244.6
(viii)	Eligible Video Cassette Inventory	33.3			lesser of 50% or $10 million	10.0
(ix)	Total Home Video, Pay Television, Free Television Credits	200.9			Misc.	165.4
(xiii)	Cash Collateral Accounts	1.9		@	100%	1.9
(xiv)	P&A Credit	19.2		@	50%	9.6
	Borrowing Base at September 30, 2012	$	1,413.1			$	1,054.8


(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 September 30, 2012: (x) Direct to Video Credit; (xi) Foreign Rights Credit; (xii) Eligible L/C Receivables.

Term Loan

In connection with the acquisition of Summit (see Note 9 to our consolidated financial statements), we entered into a new $500.0 million principal amount term loan agreement (the "Term Loan") and received net proceeds of $476.2 million, after original issue discount and offering fees and expenses. The net proceeds were used in connection with the acquisition of Summit to pay off Summit's existing term loan.

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

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	September 30, 2012
	(Amounts in thousands)
Principal amount	$	299,160
Unamortized discount	(4,231		)
Net carrying amount	$	294,929

Maturity Date. The Term Loan was to mature on September 7, 2016. The Term Loan was repayable in quarterly installments equal to $13.75 million, with the balance payable on the final maturity date. During the three months ended June 30, 2012 , we made voluntary early repayments of the Term Loan of approximately $163.3 million, in addition to required repayments of $22.2 million. On October 18, 2012, we terminated and paid off all amounts outstanding under the Term Loan of $299.2 million, as well as all accrued but unpaid interest.

Interest. The Term Loan carried interest at a reference to a base rate or the LIBOR rate (subject to a LIBOR floor of 1.25%), in either case plus an applicable margin of 4.50% in the case of base rate loans and 5.50% in the case of LIBOR loans (effective interest rate of 7.75% and 6.75%, respectively, as of September 30, 2012).

Security. The Term Loan was secured by collateral of the Summit assets.

Covenants. The Term Loan contains a number of affirmative and negative covenants that, among other things, require Summit to satisfy certain financial covenants.

Convertible Senior Subordinated Notes

As of September 30, 2012, we have convertible senior subordinated notes outstanding of $110.9 million in aggregate principal amount (carrying value — $83.7 million). In October 2014, $0.3 million of these convertible senior subordinated notes are redeemable by the holder and beginning in March 2015, an additional $65.6 million of these convertible senior subordinated notes are redeemable by the holder.

Transactions:

February 2005 3.625% Notes: On July 17, 2012, we completed the optional redemption of the February 2005 3.625% Notes. Of the $23.5 million of February 2005 3.625% notes called for redemption, $7.7 million were redeemed for cash at 100% of their principal amount, plus accrued and unpaid interest, and $15.8 million were converted into common shares at a conversion rate of 70.0133 common shares per $1,000 in principal amount, or a conversion price of approximately $14.28 per share for an aggregate of 1,107,950 common shares (plus cash in lieu of fractional shares). Following the redemption, the February 2005 3.625% Notes are no longer outstanding. There was no gain or loss on the redemption because the fair value of the liability equaled the carrying value of the liability and all deferred financing costs were fully amortized.

April 2009 3.625% Notes: On September 18, 2012, $1.0 million of the principal amount of the April 2009 3.635% Notes

were converted into common shares at a conversion rate of 121.2121 common shares per $1,000 in principal amount, or a

conversion price of approximately $8.25 per share for an aggregate of 122,060 common shares (plus cash in lieu of fractional

shares). The gain on the conversion was not significant because the carrying value of the April 2009 3.625%

Notes plus the unamortized deferred financing costs approximated the fair value of the liability component of the notes.

Key Terms of Convertible Senior Subordinated Notes:

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

Outstanding Amount: As of September 30, 2012, $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% of the principal amount, together with accrued and unpaid interest up to, but excluding the date of redemption.

Repurchase Events: 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 or termination of trading at a price equal to 100% of the principal amount, together with accrued and unpaid interest up to, but excluding the date of repurchase. See above for further information on the October 2004

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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 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.

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 September 30, 2012, $65.6 million of aggregate principal amount (carrying value — $47.3 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 up to, but excluding the date of redemption.

Repurchase Events: The holder may require LGEI to repurchase the April 2009 3.625% Notes on March 15, 2015, 2018 and 2023 or upon a change in control or termination of trading 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 up to, but excluding the date of repurchase.

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.

January 2012 4.00% Notes. In January 2012, LGEI issued approximately $45.0 million of January 2012 4.00% Notes.

Outstanding Amount: As of September 30, 2012, $45.0 million of aggregate principal amount (carrying value — $36.0 million) of the January 2012 4.00% Notes remains outstanding.

Interest: Interest on the January 2012 4.00% Notes is payable at 4.00% per annum semi-annually on January 15 and July 15 of each year, commencing on July 15, 2012.

Maturity Date: The January 2012 4.00% Notes will mature on January 11, 2017.

Conversion Features: The January 2012 4.00% Notes are convertible into our common shares at any time prior to maturity or repurchase by us, at an initial conversion price of approximately $10.50 per share, subject to adjustment in certain circumstances as specified in the Indenture. Upon conversion of the January 2012 4.00% Notes, we have the option to deliver, in lieu of common shares, cash or a combination of cash and our common shares.

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Repurchase Events: The holder may require LGEI to repurchase the January 2012 4.00% Notes upon a “designated event” consisting of certain changes in control, change of management or termination of trading, at a price equal to 100% of the principal amount of the January 2012 4.00% Notes to be repurchased, plus accrued and unpaid interest up to, but excluding the date of repurchase.

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 September 30, 2012, amounts outstanding under individual production loans were $279.0 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 $264.0 million incur interest at rates ranging from 3.36% to 3.69%, and approximately $15.0 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 September 30, 2012, we had borrowings of $8.8 million (March 31, 2012 — $43.9 million).

Availability of Funds. Currently, the Film Credit Facility provides for total borrowings up to $20 million, subject to a borrowing base, which can vary based on the amount of sales contracts in place on pictures financed under the facility. We reduced the borrowing commitment from $130 million to $60 million in July 2012 and then to $20 million in September 2012.

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.

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.

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 September 30, 2012, we had borrowings of $65.5 million (March 31, 2012 — $65.5 million).

Availability of Funds. At September 30, 2012, 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.

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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 September 30, 2012, $59.4 million principal value (fair value — $72.1 million) of our convertible senior subordinated notes repurchased (see Note 7 to our consolidated financial statements) was held as collateral under our senior revolving credit facility.

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 September 30, 2012 and March 31, 2012 was $1.2 billion and $999.7 million, respectively.

Discussion of Operating, Investing, Financing Cash Flows

Cash Flows Provided by/Used in Operating Activities. Cash flows provided by operating activities for the six months ended September 30, 2012 were $142.1 million compared to cash flows used in operating activities for the six months ended September 30, 2011 of $140.6 million. The increase in cash provided by operating activities was primarily due to higher net income before non-cash charges, and to a lesser extent, the changes in operating assets and liabilities. The increase from changes in operating assets and liabilities were primarily due to higher collections of accounts receivable, offset by decreases in accounts payable and accrued liabilities, participations and residuals, film obligations, deferred revenue, and changes in restricted cash during the six months ended September 30, 2012 as compared to the six months ended September 30, 2011.

Cash Flows Provided by Investing Activities. Cash flows provided by investing activities of $3.3 million for the six months ended September 30, 2012 consisted of $4.3 million in repayments of loans receivables offset by $1.0 million for purchases of property and equipment. Cash flows provided by investing activities of $5.5 million for the six months ended September 30, 2011 consisted of $9.1 million of proceeds from the sale of asset group, net of transaction costs and cash disposed of $3.9 million, offset by $1.3 million for purchases of property and equipment, $0.8 million of capital contributions to companies accounted as equity method investments, and $1.5 million for an increase in loans made to Break Media.

Cash Flows Provided by Financing Activities. Cash flows used in financing activities of $156.2 million for the six months ended September 30, 2012 consisted of $185.5 million of repayments under the Term Loan, $222.0 million repayment of production loans, $512.5 million repayment on the senior revolving credit facility, $15.2 million of deferred financing costs associated with the amended and restated senior revolving credit facility, $7.6 million payment for the repurchase of convertible senior subordinated notes, $3.7 million repayment of certain other financing obligations, and $4.0 million paid for tax withholding requirements associated with our equity awards, offset by borrowings of $681.4 million under the senior revolving credit facility and borrowings of $112.8 million under production loans. Cash flows provided by financing activities of $79.6 million for the six months ended September 30, 2011 resulted from the receipt of net proceeds of $202.0 million from the sale of Senior Notes, borrowings of $153.7 million under the senior revolving credit facility and $167.9 million under production loans, partially offset by $200.4 million repayment on the senior revolving credit facility, $132.1 million repayment of production loans, $77.1 million payment for the repurchase of common shares, $19.5 million payment for the repurchase of convertible senior subordinated notes, $9.9 million payment for the repurchase of Senior Notes, $3.0 million increase in restricted cash collateral requirement under the Film Credit Facility and $1.9 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, and available production financing will be adequate to meet known operational cash and debt service (i.e. principal and interest payments) requirements for the foreseeable future, including the funding of future film and television production, film 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, 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

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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.

Table of Debt and Other Financing Obligations and Contractual Commitments

The following table sets forth our future annual repayment of debt and other financing obligations outstanding, and our contractual commitments as of September 30, 2012:



	Six Months Ended March 31,		Year Ended March 31,
	2013		2014		2015		2016		2017		Thereafter		Total
Future annual repayment of debt and other financing obligations recorded as of September 30, 2012
Senior revolving credit facility	$	—	$	—	$	—	$	—	$	268,724	$	—	$	268,724
Principal amount of senior secured second-priority notes, due November 2016 (carrying value of $441.9 million at September 30, 2012)	—		—		—		—		436,000		—		436,000
Principal amount of Term loan (carrying value of $294.9 million at September 30, 2012) (1)	—		—		3,762		35,587		259,811		—		299,160
Film obligations (2)	36,161		19,440		16,020		11,680		2,000		3,000		88,301
Production loans (2)
Individual production loans	125,295		114,949		38,734		—		—		—		278,978
Pennsylvania Regional Center production loans	—		65,500		—		—		—		—		65,500
Film credit facility	—		8,782		—		—		—		—		8,782
Principal amounts of convertible senior subordinated notes and other financing obligations (3)
October 2004 2.9375% Notes (carrying value of $0.3 million at September 30, 2012)	—		—		348		—		—		—		348
April 2009 3.625% Notes (carrying value of $47.3 million at September 30, 2012)	—		—		65,574		—		—		—		65,574
January 2012 4.00% Notes (carrying value of $36.0 million at September 30, 2012)	—		—		—		—		45,000		—		45,000
	161,456		208,671		124,438		47,267		1,011,535		3,000		1,556,367
Contractual commitments by expected repayment date
Distribution and marketing commitments (4)	62,201		90,661		—		—		—		—		152,862
Minimum guarantee commitments (5)	111,180		106,332		8,698		5,726		4,000		4,000		239,936
Production loan commitments (5)	26,079		82,108		132,127		—		—		—		240,314
Cash interest payments on subordinated notes and other financing obligations	2,094		4,187		4,187		1,800		1,800		—		14,068
Cash interest payments on senior secured second priority notes	44,690		44,690		44,690		44,690		44,690		—		223,450
Operating lease commitments	5,521		10,078		8,454		3,499		—		—		27,552
Other contractual obligations	881		1,914		1,929		418		—		—		5,142
Employment and consulting contracts	26,917		35,470		17,420		3,813		—		—		83,620
	279,563		375,440		217,505		59,946		50,490		4,000		986,944
Total future commitments under contractual obligations (6)	$	441,019	$	584,111	$	341,943	$	107,213	$	1,062,025	$	7,000	$	2,543,311

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(1)	The Term Loan was to mature on September 7, 2016. On October 18, 2012, the Company terminated and paid off all amounts outstanding under the Term Loan of $299.2 million, as well as all accrued but unpaid interest (see Note 18 to our consolidated financial statements).


(2)	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.


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


(4)	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.

(5)

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.


(6)	Excludes the interest payments on the senior revolving credit facility and Term Loan as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

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 September 30, 2012, we had outstanding forward foreign exchange contracts to sell British Pound Sterling £7.9 million in exchange for US$12.7 million over a period of seven months at a weighted average exchange rate of one British Pound Sterling equals US$1.60. We also had outstanding forward foreign exchange options to purchase British Pound Sterling £18.0 million in exchange for US$28.5 million over a period of three months at an exchange rate of one British Pound Sterling equals US$1.59. In addition, we had outstanding forward foreign exchange contracts to purchase Canadian $7.8 million in exchange for US$7.8 million over a period of five months at a weighted average exchange rate of one Canadian dollar equals US$1.00. Additionally, we had outstanding forward foreign exchange contracts to purchase Euro €3.2 million in exchange for US$4.1 million over a period of one month at a weighted average exchange rate of one Euro equals US$1.27. Changes in the fair value representing a net unrealized fair value loss on foreign exchange contracts that qualified as effective hedge contracts outstanding during the six months ended September 30, 2012 were not significant and are included in accumulated other comprehensive loss, a separate component of shareholders’ equity. Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that did not qualify as effective hedge contracts outstanding during the three and six months ended September 30, 2012 were $0.6 million and are included in direct operating expenses in the consolidated statement of operations. 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 amended and restated senior revolving credit facility, Term Loan, 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 our net income would decrease. The applicable margin with respect to loans under the amended and restated 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 Term Loan was a percentage per annum equal to 4.50% plus an adjusted rate based on Alternative Base Rate Loans (as defined therein) and 5.50% plus an adjusted rate based on LIBOR loans (subject to a LIBOR floor of 1.25%). However, due to the termination and pay off of all amounts outstanding under the Term Loan on October 18, 2012 (see Note 18 to our consolidated financial statements), we no longer are exposed to interest rate risk associated with the Term Loan. 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 amended and restated senior revolving credit facility is drawn up to its maximum borrowing capacity of $650 million (as permitted by the Supplemental Indenture discussed in Note 18 to our consolidated financial statements) and the Film Credit Facility are fully drawn, based on the applicable LIBOR in effect as of September 30, 2012, each quarter point change in interest rates would result in a $1.6 million change in annual interest expense on the amended and restated senior revolving credit facility and $0.1 million change in annual interest expense on the Film Credit Facility. The variable interest production loans incur interest at rates ranging from approximately 3.36% to 3.69% and applicable margins ranging from 2.50% over the one, three, or six-month LIBOR to 3.25% over the one, three or six month LIBOR. A quarter point increase of the interest rates on the outstanding principal amount of our variable rate production loans would result in $0.7 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 September 30, 2012:

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	Six Months Ended March 31,			Year Ended March 31,																Fair Value
	2013			2014			2015			2016			2017			Thereafter		Total		9/30/2012
Variable Rates:
Senior Revolving Credit Facility (1)	$	—		$	—		$	—		$	—		$	268,724		$	—	$	268,724	$	268,724
Average Interest Rate	—			—			—			—			2.71		%	—
Principal Amount of Senior Secured Second-Priority Notes (2)	—			—			—			—			436,000			—		436,000		482,195
Average Interest Rate	—			—			—			—			10.25		%	—
Term Loan (3)	—			—			3,762			35,587			259,811			—		299,160		294,900
Average Interest Rate	—			—			7.25		%	7.25		%	7.25		%	—
Production Loans (4):
Individual production loans	125,295			99,948			38,734			—			—			—		263,977		263,977
Average Interest Rate	3.55		%	3.57		%	3.36		%	—			—			—
Film Credit Facility	—			8,782			—			—			—			—		8,782		8,782
Average Interest Rate	—			3.46		%	—			—			—			—
Fixed Rates:
Production Loans (5):
Pennsylvania Regional Center production loans	—			65,500			—			—			—			—		65,500		64,567
Average Interest Rate	—			1.50		%	—			—			—			—
Principal Amounts of Convertible Senior Subordinated Notes (6):
October 2004 2.9375% Notes	—			—			348			—			—			—		348		256
Average Interest Rate	—			—			2.94		%	—			—			—
April 2009 3.625% Notes	—			—			65,574			—			—			—		65,574		53,056
Average Interest Rate	—			—			3.63		%	—			—			—
January 2012 4.00% Notes	—			—			—			—			45,000			—		45,000		36,423
Average Interest Rate	—			—			—			—			4.00		%	—
	$	125,295		$	174,230		$	108,418		$	35,587		$	1,009,535		$	—	$	1,453,065	$	1,472,880

____________________


(1)	Amended and restated senior revolving credit facility, which expires the earlier of (i) September 27, 2017 or (ii) six (6) months prior to the maturity of the senior secured second-priority notes bears interest of 2.50% over the Adjusted LIBOR rate.


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

(3)

The Term Loan was to mature on September 7, 2016. On October 18, 2012, the Company terminated and paid off all amounts outstanding under the Term Loan of $299.2 million, as well as all accrued but unpaid interest (see Note 18 to our consolidated financial statements). The Term Loan bore interest by reference to a base rate or the LIBOR rate (subject to a LIBOR floor of 1.25%), in either case plus an applicable margin of 4.50% in the case of base rate loans and 5.50% in the case of LIBOR loans.


(4)	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 $279.0 million incur interest at rates ranging from approximately 3.36% to 3.69%. Not included in the table above are approximately $15.0 million of production loans which are non-interest bearing.

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


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

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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 September 30, 2012, 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 September 30, 2012.

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

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

Other than as set forth below, there were no other material changes to the risk factors previously reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

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 October 30, 2012, three of our shareholders, Mark H. Rachesky, M.D., Capital Research Global Investors, and FMR LLC, and their respective affiliates, beneficially owned approximately 35.1%, 11.3% and 4.8%, 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 our revolving 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 our senior secured credit facility and our revolving film credit facility.

Our senior secured credit facility and our revolving 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 notes and convertible senior subordinated notes. Summit's senior secured term loan facility also provides that a change of control, which includes a person or group acquiring ownership or control in excess of 90% of the membership interests in Summit, will be an event of default that permits lenders to accelerate the maturity of borrowings thereunder. Any of our future debt agreements may contain similar provisions.

Certain shareholders own a majority of our outstanding common shares.

As of October 30, 2012, three of our shareholders beneficially owned an aggregate of 74,797,638 of our common shares, or approximately 51.2% of the outstanding shares. In addition, one of these shareholders, Mark H. Rachesky, M.D., the beneficial owner of approximately 35.1% of our outstanding common shares, currently serves as the Chairman of our Board of Directors. Accordingly, these three shareholders, collectively, have the power to exercise substantial influence over us and on matters requiring approval by our shareholders, including the election of directors, the approval of mergers and other significant corporate transactions. This concentration of ownership may make it more difficult for other shareholders to effect substantial changes in our company and may also have the effect of delaying, preventing or expediting, as the case may be, a change in control of our company.

Sales of a substantial number of shares of our common shares, or the perception that such sales might occur, could have an adverse effect on the price of our common shares, and therefore our ability to raise additional capital to fund our operations.

As of October 30, 2012, over 51.2% of our common shares were held beneficially by certain individuals and institutional investors who each had ownership of greater than 5% of our common shares. We also recently filed a resale registration statement to enable

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certain shareholders who received our common shares in connection with our acquisition of Summit and certain holders of debt convertible into our common shares to resell our common shares. Sales by such individuals and institutional investors of a substantial number of shares of our common shares into the public market, or the perception that such sales might occur, could have an adverse effect on the price of our common shares, which could materially impair our ability to raise capital through the sale of common shares or debt that is convertible into our common shares.

Despite our current indebtedness levels, we and our subsidiaries may be able to incur additional debt in the future.

Although each of our senior secured credit facility, Summit's senior secured term loan facility and the indenture governing our senior secured notes contains covenants that, among other things, limit our ability to incur additional indebtedness, including guarantees, make restricted payments and investments, and grant liens on our assets, the covenants contained in such debt documents provide a number of important exceptions and thus, do not prohibit us or our subsidiaries from doing so. Such exceptions will provide us substantial flexibility to incur indebtedness, grant liens and expend funds to operate our business. For example, under the terms of the indenture governing our senior secured notes (i) with few restrictions, we may incur indebtedness in connection with certain film and television financing arrangements, including without limitation, purchasing or acquiring rights in film or television productions or financing print and advertising expenses, and such indebtedness may be secured by liens senior to the liens in respect of our senior secured notes, and (ii) in limited circumstances, we may make investments in assets that are not included in the borrowing base supporting our senior secured notes, in each case, without having to meet the leverage ratio tests for debt incurrence or to fit such investments within the restricted payments “build-up basket” or within other categories of funds applicable to making investments and other restricted payments under the indenture governing our senior secured notes.

In addition, we may incur additional indebtedness through our amended and restated $800.0 million senior secured credit facility (which replaced our previous $340.0 million credit facility). At September 30, 2012, we have borrowed approximately $268.7 million under our senior secured credit facility and have approximately $8.6 million in letters of credit outstanding. We could borrow some or all of the remaining permitted amount in the future. The amount we have available to borrow under this facility depends upon our borrowing base, which in turn depends on the value of our existing library of films and television programs, as well as accounts receivable and cash held in collateral accounts.

If new debt is added to our and our subsidiaries' existing high debt levels, this has the potential to magnify the risks discussed above relating to our ability to service our indebtedness and the potential adverse impact our high level of indebtedness could have on us.

New regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.

On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, the SEC adopted new requirements for companies that use certain minerals and metals, known as conflict minerals, in their products, whether or not these products are manufactured by third parties. These requirements will require companies to diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. We will have to diligence whether such minerals are used in the manufacture of our products. However, the implementation of these new requirements could adversely affect the sourcing, availability and pricing of such minerals if they are found to be used in the manufacture of our products. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. Since our supply chain is complex, we may not be able to sufficiently verify the origins for these minerals and metals used in our products through the due diligence procedures that we implement, which may harm our reputation. In such event, we may also face difficulties in satisfying customers who require that all of the components of our products are certified as conflict mineral free. The first report is due on May 31, 2014 for the 2013 calendar year. However, in October 2012, the U.S. Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable filed a petition challenging the adoption of the rules by the SEC. It is presently unclear if this challenge will delay the effectiveness of the rule.

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

Issuer Purchases of Securities

On May 31, 2007, our Board of Directors authorized the repurchase of up to $50 million of our common shares. 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

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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 September 30, 2012.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable.

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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
4.1(4)		Supplemental Indenture dated October 15, 2012 among Lions Gate Entertainment Inc., Lions Gate Entertainment Corp., the subsidiary guarantors named therein and U.S. Bank National Association, as trustee
10.91*		Third Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated September 27, 2012 with JPMorgan Chase Bank, N.A., as administrative agent and issuing bank, J.P. Morgan Securities LLC, Barclays Bank PLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Royal Bank of Canada, as co-syndication agents, joint bookrunners and joint lead arrangers, Wells Fargo Bank, National Association, as co-syndication agent, SunTrust Bank and Union Bank, N.A., as co-documentation agents, and the other guarantors and lenders that are parties thereto
31.1		Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2		Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1		Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101(5)		The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Shareholder's Equity, (iv) the Consolidated Statements of Cash Flows and (v) Notes to 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.


(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 to the Company's Current Report on Form 8-K as filed on October 15, 2012

(5)

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.


*	Filed herewith. 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: November 8, 2012		Title:	Duly Authorized Officer and Chief Financial Officer