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Capital Stock

12 Months Ended

Mar. 31, 2020

Equity and Share-based Compensation [Abstract]

(a) Common Shares

The Company had 500 million authorized Class A voting shares, and 500 million authorized Class B non-voting shares, at March 31, 2020 and March 31, 2019.

The table below outlines common shares reserved for future issuance:



	March 31, 2020	March 31, 2019
	(Amounts in millions)
Stock options and equity-settled SARs outstanding	35.7	34.6
Restricted stock and restricted share units — unvested	3.7	2.0
Common shares available for future issuance	11.5	6.7
Shares reserved for future issuance	50.9	43.3

(b) Share Repurchases

On February 2, 2016, the Company's Board of Directors authorized the Company to increase its previously announced share repurchase plan from a total authorization of $300 million to $468 million. During the fiscal year ended March 31, 2020, the Company repurchased 0.7 million of its Class A voting shares for an aggregate cost of $3.8 million, with an average repurchase price per share of $5.43. During the years ended March 31, 2019 and 2018 the Company did not repurchase any common shares. To date, including repurchases subsequent to March 31, 2020 of approximately $1.0 million, approximately $288.1 million common shares have been repurchased, leaving approximately $179.9 million of authorized potential purchases.

The amount of dividends, if any, that the Company pays to its shareholders is determined by its Board of Directors, at its discretion, and is dependent on a number of factors, including our financial position, results of operations, cash flows, capital requirements and restrictions under its credit agreements, and shall be in compliance with applicable law. In November 2018, the Company's Board of Directors suspended the Company's quarterly cash dividend to focus on driving long-term shareholder value by investing in global growth opportunities for Starz, while also strengthening its balance sheet.

During the fiscal years ended March 31, 2019 and 2018, the Company's Board of Directors declared the following quarterly cash dividends:



	Dividends Declared Per Common Share	Total Amount		Payment Date
		(in millions)
Fiscal Year 2019:
Second quarter ended September 30, 2018	$0.09	$	19.3	November 8, 2018
First quarter ended June 30, 2018	$0.09	19.2		August 9, 2018
Total cash dividends declared in fiscal year 2019	$0.18	$	38.5
Fiscal Year 2018:
Fourth quarter ended March 31, 2018	$0.09	$	19.1	May 1, 2018

As of March 31, 2020, the Company was not limited in its capacity to pay dividends under the Senior Credit Facilities Amended Credit Agreement and the indentures governing the 5.875% Senior Notes and the 6.375% Senior Notes (see Note 7).

(d) Share-based Compensation

On September 10, 2019, the Company’s shareholders approved the Lions Gate Entertainment Corp. 2019 Performance Incentive Plan (the “2019 Plan”) previously adopted by the Board of Directors (the “Board”) of the Company. The types of awards that may be granted under the 2019 Plan include stock options, share appreciation rights, restricted stock, restricted share units, stock bonuses and other forms of awards granted or denominated in the Company’s Class A voting shares and the Company’s Class B non-voting shares ("Common Shares") or units of Common Shares, as well as certain cash bonus awards. Persons eligible to receive awards under the 2019 Plan include 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.

Stock options are generally granted at exercise prices equal to or exceeding the market price of the Company's Common Shares at the date of grant. Substantially all stock options vest ratably over one to five years from the grant date based on continuous service and expire five to ten years from the date of grant. Restricted stock and restricted share units generally vest ratably over one to four years based on continuous service. The Company satisfies stock option exercises and vesting of restricted stock and restricted share units with newly issued shares.

The measurement of all share-based awards uses a fair value method and the recognition of the related share-based compensation expense in the consolidated financial statements is recorded over the requisite service period. Further, the Company estimates forfeitures for share-based awards that are not expected to vest. As share-based compensation expense recognized in the Company’s consolidated financial statements is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

The Company recognized the following share-based compensation expense during the years ended March 31, 2020, 2019 and 2018:



	Year Ended
	March 31,
	2020			2019			2018
	(Amounts in millions)
Compensation Expense:
Stock options	$	17.8		$	23.0		$	43.1
Restricted share units and other share-based compensation	29.1			24.7			36.2
Share appreciation rights	3.1			4.4			6.3
	50.0			52.1			85.6
Impact of accelerated vesting on equity awards⁽¹⁾	0.6			16.0			2.9
Total share-based compensation expense	$	50.6		$	68.1		$	88.5

Tax impact⁽²⁾	(10.7		)	(15.7		)	(29.6		)
Reduction in net income	$	39.9		$	52.4		$	58.9

___________________


(1)	Represents the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.


(2)	Represents the income tax benefit recognized in the statements of operations for share-based compensation arrangements.

Share-based compensation expense, by expense category, consisted of the following:



	Year Ended
	March 31,
	2020		2019		2018
	(Amounts in millions)
Compensation Expense:
Direct operating	$	1.0	$	1.1	$	1.1
Distribution and marketing	0.5		0.4		0.9
General and administration	48.5		50.6		83.6
Restructuring and other	0.6		16.0		2.9
	$	50.6	$	68.1	$	88.5

Stock Options

The following table sets forth the stock option, equity-settled and cash-settled share appreciation rights activity during the year ended March 31, 2020:



	Stock Options, Equity-Settled and Cash-Settled SARs
	Class A Voting Shares						Class B Non-Voting Shares
	Number of Shares		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value		Number of Shares			Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
	(Amounts in millions, except for weighted-average exercise price and years)
Outstanding at March 31, 2019	8.4		$26.70				26.2			$20.72
Granted	—		—				7.8		⁽¹⁾	$12.52
Exercised	—		—				(0.2	)		$9.99
Forfeited or expired	(1.2	)	$29.58				(5.3	)		$17.72
Outstanding at March 31, 2020	7.2		$26.21	4.27	$	—	28.5			$19.03	4.79	$	0.1
Vested or expected to vest at March 31, 2020	7.2		$26.21	4.27	$	—	28.1			$19.11	4.72	$	0.1
Exercisable at March 31, 2020	5.7		$27.15	3.79	$	—	17.3			$21.06	2.76	$	—

_____________________


(1)	During the year ended March 31, 2020, the Company granted 3.3 million cash-settled share-appreciation rights ("CSARs"). The CSARs are revalued each reporting period until settlement using a closed-form option pricing model (Black Scholes).

The fair value of each option award is estimated on the date of grant using a closed-form option valuation model (Black-Scholes). The following table presents the weighted average grant-date fair value of options granted in the years ended March 31, 2020, 2019 and 2018, and the weighted average applicable assumptions used in the Black-Scholes option-pricing model for stock options and share-appreciation rights granted during the years then ended:



	Year Ended March 31,
	2020	2019	2018
Weighted average fair value of grants	$2.08	$5.48	$8.38
Weighted average assumptions:
Risk-free interest rate⁽¹⁾	0.2% - 2.5%	2.2% - 3.1%	1.7% - 2.7%
Expected option lives (in years)⁽²⁾	0.4 - 7 years	1 - 7 years	4 - 6 years
Expected volatility for options⁽³⁾	34% - 40%	34%	35%
Expected dividend yield⁽⁴⁾	0%	0.0% - 1.7%	0.0% - 1.5%

____________________________


(1)	The risk-free rate assumed in valuing the options is based on the U.S. Treasury Yield curve in effect applied against the expected term of the option at the time of the grant.


(2)	The expected term of options granted represents the period of time that options granted are expected to be outstanding.


(3)	Expected volatilities are based on implied volatilities from traded options on the Company’s shares, historical volatility of the Company’s shares and other factors.


(4)	The expected dividend yield is estimated by dividing the expected annual dividend by the market price of the Company's shares at the date of grant.

The total intrinsic value of options exercised during the year ended March 31, 2020 was $0.3 million (2019 — $5.3 million, 2018 — $36.9 million).

During the year ended March 31, 2020, no shares (2019 — less than 0.1 million shares, 2018 — 0.1 million shares) were cancelled to fund withholding tax obligations upon exercise of options.

Restricted Share Units

The following table sets forth the restricted share unit and restricted stock activity during the year ended March 31, 2020:



	Restricted Share Units							Restricted Stock
	Class A Voting Shares			Weighted-Average Grant-Date Fair Value	Class B Non-Voting Shares		Weighted-Average Grant-Date Fair Value	Class B Non-Voting Shares		Weighted-Average Grant-Date Fair Value
	(Amounts in millions, except for weighted-average grant date fair value)
Outstanding at March 31, 2019	0.1			$25.68	1.6		$24.01	0.3		$25.70
Granted	—		⁽¹⁾	$11.01	3.1		$11.93	—		—
Vested	(0.1	)		$25.93	(0.7	)	$23.61	(0.1	)	$25.70
Forfeited	—		⁽¹⁾	$18.90	(0.3	)	$18.78	(0.1	)	$25.70
Outstanding at March 31, 2020	—		⁽¹⁾	$14.89	3.7		$14.46	0.1		$25.70

__________________


(1)	Represents less than 0.1 million shares.

The fair values of restricted stock and restricted share units are determined based on the market value of the shares on the date of grant. The total fair value of restricted share units and restricted stock vested during the year ended March 31, 2020 was $18.7 million (2019 - $33.7 million, 2018 - $41.6 million).

The following table summarizes the total remaining unrecognized compensation cost as of March 31, 2020 related to non-vested stock options and restricted stock and restricted share units and the weighted average remaining years over which the cost will be recognized:



	Total Unrecognized Compensation Cost		Weighted Average Remaining Years
	(Amounts in millions)
Stock Options	$	34.7	2.2
Restricted Stock and Restricted Share Units	28.4		1.6
Total	$	63.1

Under the Company’s stock option and long term incentive plans, the Company withholds shares to satisfy minimum statutory federal, state and local tax withholding obligations arising from the vesting of restricted stock and restricted share units. During the year ended March 31, 2020, 0.4 million shares (2019 — 0.5 million shares, 2018 — 0.7 million shares) were withheld upon the vesting of restricted stock and restricted share units.

The Company becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the stock options and restricted share units when vesting or exercise occurs, the restrictions are released and the shares are issued. Restricted share units are forfeited if the employees are terminated prior to vesting.

The Company recognized excess tax deficiencies of $11.3 million associated with its equity awards in its tax benefit for the year ended March 31, 2020 (2019 — $14.9 million, 2018 — benefit of $5.2 million).

Other Share-Based Compensation

Pursuant to the terms of certain employment agreements, during the year ended March 31, 2020, the Company granted the equivalent of $2.3 million (2019 - $2.3 million, 2018 - $0.8 million) in shares to certain employees through the term of their employment contracts, which were recorded as compensation expense in the applicable period. Pursuant to this arrangement, for the year ended March 31, 2020, the Company issued 0.2 million shares (2019 - 0.1 million shares, 2018 - less than 0.1 million shares), net of shares withheld to satisfy minimum tax withholding obligations.

(e) Other

In connection with an amendment of an affiliation agreement with a customer and effective upon the close of the Starz Merger, the Company has issued to the customer three $16.67 million annual installments of equity. The total value of the contract of $50 million was amortized as a reduction of revenue over the period from December 8, 2016 to August 31, 2019.