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Capital Stock

12 Months Ended

Mar. 31, 2022

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, 2022 and March 31, 2021.

The table below outlines common shares reserved for future issuance:


	March 31, 2022	March 31, 2021
	(Amounts in millions)
Stock options and Share Appreciation Rights outstanding	27.6	26.7
Restricted share units and restricted stock — unvested	7.9	9.1
Common shares available for future issuance	18.4	15.6
Shares reserved for future issuance	53.9	51.4

(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, 2022, the Company did not repurchase any common shares. During the fiscal year ended March 31, 2021, the Company repurchased 0.2 million of its Class A voting shares for an aggregate cost of $1.0 million, with an average repurchase price per share of $5.75. 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. To date, approximately $288.1 million common shares have been repurchased, leaving approximately $179.9 million of authorized potential repurchases.

General. 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.

On September 14, 2021, the Company’s shareholders approved an amendment to the 2019 Plan previously adopted by the Board of Directors of the Company to increase the maximum number of the Company’s common shares that may be issued or transferred pursuant to awards under the 2019 Plan by an additional 5.0 million shares so that the new aggregate share limit under the 2019 Plan is 21.1 million common shares (not including shares that were originally approved for issuance under the Company’s prior stock incentive plans that have become available for issuance under the 2019 Plan pursuant to the terms of the 2019 Plan).

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 seven to ten years from the date of grant. Restricted stock and restricted share units generally vest ratably over one to three 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.

Exchange Program. On January 10, 2020, the Company’s Board of Directors authorized, and on April 2, 2020, the Company’s shareholders approved, a stock option and share appreciation rights exchange program (the “Exchange Program”) that permitted certain current employees to exchange certain outstanding stock options and share appreciation rights with exercise prices substantially above the current market price of the Company’s Class A voting shares and the Company’s Class B non-voting shares for a lesser number of stock options and share appreciation rights that have a fair value that is lower than the fair value of the “out of the money” stock options and share appreciation rights. The program began on April 9, 2020 and was completed on May 7, 2020. As a result of this program 1.1 million outstanding eligible stock options and share appreciation rights of Class A voting shares were exchanged for 0.1 million new stock options and share appreciation rights at an exercise price of $7.70 per share and 4.3 million outstanding eligible stock options and share appreciation rights of Class B non-voting shares were exchanged for 0.8 million new stock options and share appreciation rights at an exercise price of $7.13. There was no incremental compensation expense recorded by the Company as a result of the Exchange Program.

Share-Based Compensation Expense. The Company recognized the following share-based compensation expense during the years ended March 31, 2022, 2021 and 2020:


	Year Ended
	March 31,
	2022		2021		2020
	(Amounts in millions)
Compensation Expense:
Stock options	$	19.2	$	18.7	$	17.8
Restricted share units and other share-based compensation	73.4		58.8		29.1
Share appreciation rights	7.4		8.0		3.1
	100.0		85.5		50.0
Impact of accelerated vesting on equity awards(1)	—		3.5		0.6
Total share-based compensation expense	$	100.0	$	89.0	$	50.6

Tax impact(2)	(19.7)		(17.8)		(10.7)
Reduction in net income	$	80.3	$	71.2	$	39.9

___________________

(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 prior to the effects of changes in the valuation allowance.

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


	Year Ended
	March 31,
	2022		2021		2020
	(Amounts in millions)
Share-Based Compensation Expense:
Direct operating	$	1.2	$	2.0	$	1.0
Distribution and marketing	0.5		0.6		0.5
General and administration	98.3		82.9		48.5
Restructuring and other	—		3.5		0.6
	$	100.0	$	89.0	$	50.6

Stock Options

The following table sets forth the stock option, and share appreciation rights ("SARs") activity during the year ended March 31, 2022:


	Stock Options and 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, 2021	5.5		$24.23				21.2		$15.85
Granted	—		—				2.0	(1)	$12.12
Exercised	—	(2)	$10.52				(0.4)		$11.19


Forfeited or expired	(0.1)		$24.31				(0.6)		$24.49
Outstanding at March 31, 2022	5.4		$24.34	2.62	$	0.7	22.2		$15.36	6.00	$	50.7
Vested or expected to vest at March 31, 2022	5.4		$24.35	2.62	$	0.7	22.1		$15.40	5.98	$	49.8
Exercisable at March 31, 2022	4.8		$24.80	2.62	$	0.3	14.5		$18.00	4.94	$	16.8

_____________________

(1)During the year ended March 31, 2022, the Company granted 0.3 million SARs.

(2)Represents less than 0.1 million shares.

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, 2022, 2021 and 2020, 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,
	2022	2021	2020
Weighted average fair value of grants	$6.27	$3.10	$2.08
Weighted average assumptions:
Risk-free interest rate(1)	0.8% - 2.5%	0.2% - 0.9%	0.2% - 2.5%
Expected option lives (in years)(2)	3.3 - 7 years	2.5 - 7 years	0.4 - 7 years
Expected volatility for options(3)	42% - 44%	37% - 42%	34% - 40%
Expected dividend yield(4)	0%	0%	0%

____________________________

(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, 2022 was $2.3 million (2021 — $1.7 million, 2020 — $0.3 million).

During the year ended March 31, 2022, less than 0.1 million shares (2021 — less than 0.1 million shares, 2020 — none) 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, 2022:


	Restricted Share Units and Restricted Stock
	Class A 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, 2021	—	(1)	$11.10	9.1	$8.71
Granted	—	(1)	$13.16	5.1	$14.10
Vested	—	(1)	$12.05	(5.7)	$9.10
Forfeited	—		—	(0.6)	$10.00
Outstanding at March 31, 2022	—	(1)	$11.51	7.9	$11.87

__________________

(1)Represents less than 0.1 million shares.

The fair values of restricted share units and restricted stock 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, 2022 was $67.8 million (2021 - $35.3 million, 2020 - $18.7 million).

The following table summarizes the total remaining unrecognized compensation cost as of March 31, 2022 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	$	17.4	1.0
Restricted Share Units and Restricted Stock	49.5		1.4
Total	$	66.9

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 share units and restricted stock. During the year ended March 31, 2022, 2.3 million shares (2021 — 0.9 million shares, 2020 — 0.4 million shares) were withheld upon the vesting of restricted share units and restricted stock.

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 benefits of $14.9 million associated with its equity awards in its tax provision for the year ended March 31, 2022 (2021 — deficiencies of $12.1 million, 2020 — deficiencies of $11.3 million).

Other Share-Based Compensation

Pursuant to the terms of certain employment agreements, during the year ended March 31, 2022, the Company granted the equivalent of $2.3 million (2021 - $2.3 million, 2020 - $2.3 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, 2022, the Company issued 0.1 million shares (2021 - 0.3 million shares, 2020 - 0.2 million shares), net of shares withheld to satisfy minimum tax withholding obligations.

(d) 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.