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Derivative Instruments and Hedging Activities | 6 Months Ended | 12 Months Ended
--- | --- | ---
Sep. 30, 2024 | Mar. 31, 2024
Derivative [Line Items] |  |
Derivative Instruments and Hedging Activities | 18 . Derivative Instruments and Hedging Activities Forward Foreign Exchange Contracts The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. Changes in the fair value of the foreign exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income (loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged. As of September 30, 2024, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 19 months from September 30, 2024):
September 30, 2024 |
Foreign Currency |  | Foreign Currency Amount |  |  |  |  | US Dollar Amount |  |  | Weighted Average Exchange Rate Per $1 USD |
|  | (Amounts in millions) |  |  |  |  | (Amounts in millions) |  |  |  |
Czech Koruna |  |  | 180.0 CZK |  |  | in exchange for |  | $ | 7.7 |  |  |  | 23.29 CZK |
Euro |  |  | 14.8 EUR |  |  | in exchange for |  | $ | 16.6 |  |  |  | 0.90 EUR |
Canadian Dollar |  |  | 15.0 CAD |  |  | in exchange for |  | $ | 11.1 |  |  |  | 1.35 CAD |
Mexican Peso |  |  | 199.1 MXN |  |  | in exchange for |  | $ | 10.4 |  |  |  | 19.73 MXN |
Hungarian Forint |  |  | 1,498.7 HUF |  |  | in exchange for |  | $ | 3.9 |  |  |  | 371.46 HUF |
New Zealand Dollar |  |  | 3.6 NZD |  |  | in exchange for |  | $ | 2.3 |  |  |  | 1.64 NZD |
Interest Rate Swaps The Company is exposed to the impact of interest rate changes, primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows. The Company primarily uses pay-fixed interest rate swaps to facilitate its interest rate risk management activities, which the Company generally designates as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these designated cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur. Changes in the fair value of interest rate swaps that are not designated as hedges are recorded in interest expense (see further explanation below). Cash settlements related to interest rate contracts are generally classified as operating activities on the consolidated statements of cash flows. In connection with the Separation, Business Combination and Intercompany Note described in Note 7, the Company assumed the rights, obligations, costs and benefits associated with and provided under the terms of Lionsgate’s floating-to-fixed swap contracts. Designated Cash Flow Hedges. As of September 30, 2024 and March 31, 2024, the Company had the following pay-fixed interest rate swaps, which have been designated as cash flow hedges outstanding (all related to the Company’s SOFR-based debt, see Note 7 and Note 8).
Effective Date |  | Notional Amount |  |  | Fixed Rate Paid |  |  | Maturity Date
|  | (in millions) |  |  |  |  |  |
May 23, 2018 |  | $ | 300.0 |  |  |  | 2.915 | % |  | March 24, 2025
May 23, 2018 |  | $ | 700.0 |  |  |  | 2.915 | % |  | March 24, 2025
June 25, 2018 |  | $ | 200.0 |  |  |  | 2.723 | % |  | March 23, 2025
July 31, 2018 |  | $ | 300.0 |  |  |  | 2.885 | % |  | March 23, 2025
December 24, 2018 |  | $ | 50.0 |  |  |  | 2.744 | % |  | March 23, 2025
December 24, 2018 |  | $ | 100.0 |  |  |  | 2.808 | % |  | March 23, 2025
December 24, 2018 |  | $ | 50.0 |  |  |  | 2.728 | % |  | March 23, 2025
August 15, 2024 (1) |  | $ | 65.0 |  |  |  | 4.045 | % |  | September 15, 2026
August 15, 2024 (1) |  | $ | 77.5 |  |  |  | 3.803 | % |  | August 15, 2026
August 15, 2024 (1) |  | $ | 77.5 |  |  |  | 3.810 | % |  | September 15, 2026
Total |  | $ | 1,920.0 |  |  |  |  |  |  |
(1) | Entered into during the three months ended September 30, 2024.
Financial Statement Effect of Derivatives Unaudited condensed consolidated statements of operations and comprehensive income (loss): The following table presents the pre-tax effect of the Company’s derivatives on the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended September 30, 2024 and 2023:
|  | Three Months Ended September 30, |  |  | Six Months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
|  | (Amounts in millions) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forward exchange contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) recognized in accumulated other comprehensive income (loss) |  | $ | 0.8 |  |  | $ | (0.6 | ) |  | $ | 1.0 |  |  | $ | (3.1 | )
Gain (loss) reclassified from accumulated other comprehensive income (loss) into direct operating expense |  | $ | (0.2 | ) |  | $ | (0.4 | ) |  | $ | (1.2 | ) |  | $ | 0.1 |
Interest rate swaps |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) recognized in accumulated other comprehensive income (loss) |  | $ | (6.3 | ) |  | $ | 9.3 |  |  | $ | (2.8 | ) |  | $ | 36.4 |
Gain reclassified from accumulated other comprehensive income (loss) into interest expense |  | $ | 11.4 |  |  | $ | 10.9 |  |  | $ | 22.3 |  |  | $ | 20.1 |
Derivatives not designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss reclassified from accumulated other comprehensive income (loss) into interest expense |  | $ | (1.5 | ) |  | $ | (1.8 | ) |  | $ | (3.1 | ) |  | $ | (3.8 | )
Total direct operating expense on consolidated statements of operations |  | $ | 628.2 |  |  | $ | 510.5 |  |  | $ | 983.8 |  |  | $ | 872.5 |
Total interest expense on consolidated statements of operations |  | $ | 63.0 |  |  | $ | 51.7 |  |  | $ | 121.6 |  |  | $ | 101.6 |
Unaudited condensed consolidated balance sheets: The Company classifies its forward foreign exchange contracts and interest rate swap agreements within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (see Note 9). Pursuant to the Company’s accounting policy to offset the fair value amounts recognized for derivative instruments, the Company presents the asset or liability position of the swaps that are with the same counterparty under a master netting arrangement net as either an asset or liability in its unaudited condensed consolidated balance sheets. As of September 30, 2024 and March 31, 2024, there were no swaps outstanding that were subject to a master netting arrangement. As of September 30, 2024 and March 31, 2024, the Company had the following amounts recorded in the accompanying unaudited condensed consolidated balance sheets related to the Company’s use of derivatives:
|  | September 30, 2024 |
|  | Other Current Assets |  |  | Other Accrued Liabilities (current) |  |  | Other Liabilities (non-current) |
|  | (Amounts in millions) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward exchange contracts |  | $ | — |  |  | $ | 0.6 |  |  | $ | — |
Interest rate swaps |  |  | 12.2 |  |  |  | — |  |  |  | (1.7 | )
Fair value of derivatives |  | $ | 12.2 |  |  | $ | 0.6 |  |  | $ | (1.7 | )
|  | March 31, 2024 |
|  | Other Current Assets |  |  | Other Accrued Liabilities (current) |
|  | (Amounts in millions) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |
Forward exchange contracts |  | $ | — |  |  | $ | 2.8 |
Interest rate swaps |  |  | 35.6 |  |  |  | — |
Fair value of derivatives |  | $ | 35.6 |  |  | $ | 2.8 |
As of September 30, 2024, based on the current release schedule, the Company estimates approximately $ 1.2 million of gains associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive income (loss) will be reclassified into earnings during the one-year period ending September 30, 2025. As of September 30, 2024, the Company estimates approximately $23.4 million of gains recorded in accumulated other comprehensive income (loss) associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending September 30, 2025. | 18. Financial Instruments (a) Credit Risk Concentration of credit risk with the Company’s customers is limited due to the Company’s customer base and the diversity of its sales throughout the world. The Company performs ongoing credit evaluations and maintains a provision for potential credit losses. The Company generally does not require collateral for its trade accounts receivable. (b) Derivative Instruments and Hedging Activities Forward Foreign Exchange Contracts The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. Changes in the fair value of the foreign exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income (loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged. As of March 31, 2024, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 25 months from March 31, 2024):
March 31, 2024 |
Foreign Currency |  | Foreign Currency Amount |  |  |  |  | US Dollar Amount |  |  | Weighted Average Exchange Rate Per $1 USD |
|  | (Amounts in millions) |  |  |  |  | (Amounts in millions) |  |  |  |
British Pound Sterling |  |  | 0.5 GBP |  |  | in exchange for |  | $ | 0.6 |  |  |  | 0.79 GBP |
Czech Koruna |  |  | 180.0 CZK |  |  | in exchange for |  | $ | 7.7 |  |  |  | 23.29 CZK |
Euro |  |  | 0.6 EUR |  |  | in exchange for |  | $ | 0.5 |  |  |  | 0.91 EUR |
Canadian Dollar |  |  | 21.4 CAD |  |  | in exchange for |  | $ | 15.9 |  |  |  | 1.34 CAD |
Mexican Peso |  |  | 56.7 MXN |  |  | in exchange for |  | $ | 3.0 |  |  |  | 18.95 PLN |
Hungarian Forint |  |  | 1,450.0 HUF |  |  | in exchange for |  | $ | 4.0 |  |  |  | 360.17 HUF |
New Zealand Dollar |  |  | 73.9 NZD |  |  | in exchange for |  | $ | 45.3 |  |  |  | 1.64 NZD |
Interest Rate Swaps The Company is exposed to the impact of interest rate changes, primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows. The Company primarily uses pay-fixed interest rate swaps to facilitate its interest rate risk management activities, which the Company generally designates as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these designated cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur. Changes in the fair value of interest rate swaps that are not designated as hedges are recorded in interest expense (see further explanation below). Cash settlements related to interest rate contracts are generally classified as operating activities on the combined statements of cash flows. However, due to a financing component (debt host) on a portion of the Company’s previously outstanding interest rate swaps, the cash flows related to these contracts were classified as financing activities through the date of termination. Designated Cash Flow Hedges. As of March 31, 2024 and March 31, 2023, the Company had the following pay-fixed interest rate swaps, which have been designated as cash flow hedges outstanding (all related to the Company’s SOFR-based debt, see Note 7 and Note 8).
Effective Date |  | Notional Amount |  |  | Fixed Rate Paid |  | Maturity Date |  |  |
|  | (in millions) |  |  |  |  |  |  |  |
May 23, 2018 |  | $ | 300.0 |  |  | 2.915% |  | March 24, 2025 |  |  |  |
May 23, 2018 |  | $ | 700.0 |  |  | 2.915% |  | March 24, 2025 |  |  | (1) |
June 25, 2018 |  | $ | 200.0 |  |  | 2.723% |  | March 23, 2025 |  |  | (1) |
July 31, 2018 |  | $ | 300.0 |  |  | 2.885% |  | March 23, 2025 |  |  | (1) |
December 24, 2018 |  | $ | 50.0 |  |  | 2.744% |  | March 23, 2025 |  |  | (1) |
December 24, 2018 |  | $ | 100.0 |  |  | 2.808% |  | March 23, 2025 |  |  | (1) |
December 24, 2018 |  | $ | 50.0 |  |  | 2.728% |  | March 23, 2025 |  |  | (1) |
Total |  | $ | 1,700.0 |  |  |  |  |  |  |  |  |
(1) | Represents the re-designated swaps as described in the May 2022 Transactions section below that were previously not designated cash flow hedges at March 31, 2022
May 2022 Transactions : In May 2022, the Company terminated certain of its previous interest rate swap contracts (the “Terminated Swaps”). As a result of the terminations, the Company received approximately $56.4 million. Simultaneously with the termination of the Terminated Swaps, the Company re-designated all other swaps previously not designated as cash flow hedges of variable rate debt. The receipt of approximately $56.4 million as a result of the termination was recorded as a reduction of the asset values of the derivatives amounting to $188.7 million and a reduction of the financing component (debt host) of the Terminated Swaps amounting to $131.3 million. At the time of the termination of the Terminated Swaps, there was approximately $180.4 million of unrealized gains recorded in accumulated other comprehensive income (loss) related to these Terminated Swaps. This amount will be amortized as a reduction of interest expense through the remaining term of the swaps unless it becomes probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the gain will be recorded as a reduction to interest expense at that time. In addition, the liability amount of $6.8 million for the Re-designated Swaps at the re-designation date will be amortized as a reduction of interest expense throughout the remaining term of the Re-designated Swaps, unless it becomes probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the loss will be recorded to interest expense at that time. The receipt of approximately $56.4 million was classified in the combined statement of cash flows as cash provided by operating activities of $188.7 million reflecting the amount received for the derivative portion of the termination of swaps, and a use of cash in financing activities of $134.5 million reflecting the pay down of the financing component of the Terminated Swaps (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million). Financial Statement Effect of Derivatives Combined statement of operations and comprehensive income (loss): The following table presents the pre-tax effect of the Company’s derivatives on the accompanying combined statements of operations and comprehensive income (loss) for the years ended March 31, 2024, 2023 and 2022:
|  | Year Ended March 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
|  | (Amounts in millions) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward exchange contracts |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) recognized in accumulated other comprehensive income (loss) |  | $ | (5.8 | ) |  | $ | 1.7 |  |  | $ | 1.7 |
Loss reclassified from accumulated other comprehensive income (loss) into direct operating expense |  |  | (0.3 | ) |  |  | (0.3 | ) |  |  | (0.2 | )
Interest rate swaps |  |  |  |  |  |  |  |  |  |  |  |
Gain recognized in accumulated other comprehensive income (loss) |  | $ | 36.3 |  |  | $ | 81.1 |  |  | $ | 66.5 |
Gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense |  |  | 41.8 |  |  |  | 1.4 |  |  |  | (15.0 | )
Derivatives not designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  |  |  |  |  |  |  |  |  |  |
Loss reclassified from accumulated other comprehensive income (loss) into interest expense |  | $ | (7.2 | ) |  | $ | (11.8 | ) |  | $ | (33.8 | )
Total direct operating expense on combined statements of operations |  | $ | 1,886.7 |  |  | $ | 2,207.9 |  |  | $ | 1,922.1 |
Total interest expense on combined statements of operations |  | $ | 222.5 |  |  | $ | 162.6 |  |  | $ | 115.0 |
Combined balance sheets: The Company classifies its forward foreign exchange contracts and interest rate swap agreements within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (see Note 10). Pursuant to the Company’s accounting policy to offset the fair value amounts recognized for derivative instruments, the Company presents the asset or liability position of the swaps that are with the same counterparty under a master netting arrangement net as either an asset or liability in its combined balance sheets. As of March 31, 2024 and 2023, there were no swaps outstanding that were subject to a master netting arrangement. As of March 31, 2024 and 2023, the Company had the following amounts recorded in the accompanying combined balance sheets related to the Company’s use of derivati ves:
|  | March 31, 2024 |
|  | Other Current Assets |  |  | Other Non- Current Assets |  |  | Other Accrued Liabilities |
|  | (Amounts in millions) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward exchange contracts |  | $ | — |  |  | $ | — |  |  | $ | 2.8 |
Interest rate swaps |  |  | 35.6 |  |  |  | — |  |  |  | — |
Fair value of derivatives |  | $ | 35.6 |  |  | $ | — |  |  | $ | 2.8 |
|  | March 31, 2023 |
|  | Other Current Assets |  |  | Other Non- Current Assets |  |  | Other Accrued Liabilities |
|  | (Amounts in millions) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward exchange contracts |  | $ | 2.9 |  |  | $ | — |  |  | $ | 0.1 |
Interest rate swaps |  |  | — |  |  |  | 41.1 |  |  |  | — |
Fair value of derivatives |  | $ | 2.9 |  |  | $ | 41.1 |  |  | $ | 0.1 |
As of March 31, 2024, based on the current release schedule, the Company estimates approximately $1.5 million of losses associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive income (loss) will be reclassified into earnings during the one-year period ending March 31, 2025. As of March 31, 2024, the Company estimates approximately $30.4 million of gains recorded in accumulated other comprehensive income (loss) associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending March 31, 2025.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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- Definition Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 + Details
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