AMCX - 3.31.2014 - 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2014
or
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¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number: 1-35106
AMC Networks Inc.
(Exact name of registrant as specified in its charter)
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Delaware | 27-5403694 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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11 Penn Plaza, New York, NY | 10001 |
(Address of principal executive offices) | (Zip Code) |
(212) 324-8500
(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 þ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ 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 (as defined in Exchange Act Rule 12b-2).
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Large accelerated filer | þ | Accelerated filer | ¨ |
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Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
The number of shares of common stock outstanding as of April 30, 2014:
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Class A Common Stock par value $0.01 per share | 60,592,409 |
Class B Common Stock par value $0.01 per share | 11,484,408 |
AMC NETWORKS INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
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PART I. | FINANCIAL INFORMATION | |
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Item 1. | Financial Statements | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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PART II. | OTHER INFORMATION | |
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Item 1. | | |
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Item 2. | | |
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Item 6. | | |
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PART I. FINANCIAL INFORMATION
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Item 1. | Financial Statements. |
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(unaudited) |
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
ASSETS | | | |
Current Assets: | | | |
Cash and cash equivalents | $ | 159,454 |
| | $ | 521,951 |
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Accounts receivable, trade (less allowance for doubtful accounts of $38 and $931) | 530,206 |
| | 378,831 |
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Amounts due from related parties, net | 4,364 |
| | 4,774 |
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Current portion of program rights, net | 375,324 |
| | 317,922 |
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Prepaid expenses and other current assets | 63,535 |
| | 65,512 |
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Deferred tax asset, net | 23,877 |
| | 15,668 |
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Assets held for sale | 19,982 |
| | — |
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Total current assets | 1,176,742 |
| | 1,304,658 |
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Property and equipment, net of accumulated depreciation of $169,353 and $164,865 | 106,393 |
| | 71,068 |
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Program rights, net | 916,203 |
| | 853,516 |
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Amounts due from related parties, net | 2,016 |
| | 2,096 |
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Deferred carriage fees, net | 44,407 |
| | 44,032 |
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Intangible assets, net | 516,428 |
| | 209,552 |
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Goodwill | 586,533 |
| | 76,748 |
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Other assets | 135,983 |
| | 75,019 |
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Total assets | $ | 3,484,705 |
| | $ | 2,636,689 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | | |
Current Liabilities: | | | |
Accounts payable | $ | 123,253 |
| | $ | 48,126 |
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Accrued liabilities | 111,938 |
| | 131,290 |
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Current portion of program rights obligations | 234,401 |
| | 210,190 |
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Deferred revenue | 25,141 |
| | 23,429 |
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Current portion of long-term debt | 18,500 |
| | — |
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Current portion of capital lease obligations | 1,760 |
| | 1,718 |
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Liabilities held for sale | 19,434 |
| | — |
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Total current liabilities | 534,427 |
| | 414,753 |
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Program rights obligations | 446,635 |
| | 449,587 |
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Long-term debt | 2,739,263 |
| | 2,157,183 |
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Capital lease obligations | 11,931 |
| | 12,387 |
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Deferred tax liability, net | 143,238 |
| | 95,275 |
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Other liabilities | 87,517 |
| | 78,755 |
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Total liabilities | 3,963,011 |
| | 3,207,940 |
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Commitments and contingencies |
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Stockholders’ deficiency: | | | |
Class A Common Stock, $0.01 par value, 360,000,000 shares authorized, 61,728,148 and 61,692,561 shares issued and 60,592,209 and 60,794,114 shares outstanding, respectively | 617 |
| | 617 |
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Class B Common Stock, $0.01 par value, 90,000,000 shares authorized, 11,484,408 shares issued and outstanding | 115 |
| | 115 |
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Preferred stock, $0.01 par value, 45,000,000 shares authorized; none issued | — |
| | — |
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Paid-in capital | 75,174 |
| | 64,731 |
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Accumulated deficit | (531,319 | ) | | (602,686 | ) |
Treasury stock, at cost (1,135,939 and 898,447 shares Class A Common Stock, respectively) | (47,605 | ) | | (29,801 | ) |
Accumulated other comprehensive income (loss) | 1,551 |
| | (4,495 | ) |
Total AMC Networks stockholders’ deficiency | (501,467 | ) | | (571,519 | ) |
Noncontrolling interests | 23,161 |
| | 268 |
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Total stockholders’ deficiency | (478,306 | ) | | (571,251 | ) |
Total liabilities and stockholders’ deficiency | $ | 3,484,705 |
| | $ | 2,636,689 |
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See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2014 and 2013
(In thousands, except per share amounts)
(unaudited)
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Revenues, net (including revenues, net from related parties of $7,689 and $8,141, respectively) | $ | 524,554 |
| | $ | 381,961 |
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Operating expenses: | | | |
Technical and operating (excluding depreciation and amortization shown below and including charges from related parties of $0 and $155, respectively) | 211,019 |
| | 136,679 |
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Selling, general and administrative (including charges from related parties of $659 and $794, respectively) | 151,508 |
| | 99,453 |
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Depreciation and amortization | 14,394 |
| | 18,345 |
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| 376,921 |
| | 254,477 |
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Operating income | 147,633 |
| | 127,484 |
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Other income (expense): | | | |
Interest expense | (31,772 | ) | | (29,369 | ) |
Interest income | 341 |
| | 253 |
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Miscellaneous, net | (5,110 | ) | | (202 | ) |
| (36,541 | ) | | (29,318 | ) |
Income from continuing operations before income taxes | 111,092 |
| | 98,166 |
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Income tax expense | (39,105 | ) | | (36,649 | ) |
Income from continuing operations | 71,987 |
| | 61,517 |
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Loss from discontinued operations, net of income taxes | (750 | ) | | — |
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Net income including noncontrolling interests | 71,237 |
| | 61,517 |
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Net loss attributable to noncontrolling interests | 130 |
| | — |
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Net income attributable to AMC Networks’ stockholders | $ | 71,367 |
| | $ | 61,517 |
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Basic net income per share attributable to AMC Networks’ stockholders: | | | |
Income from continuing operations | $ | 1.00 |
| | $ | 0.86 |
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Loss from discontinued operations | $ | (0.01 | ) | | $ | — |
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Net income | $ | 0.99 |
| | $ | 0.86 |
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Diluted net income per share attributable to AMC Networks’ stockholders: |
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Income from continuing operations | $ | 0.99 |
| | $ | 0.85 |
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Loss from discontinued operations | $ | (0.01 | ) | | $ | — |
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Net income | $ | 0.98 |
| | $ | 0.85 |
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Weighted average common shares: | | | |
Basic weighted average common shares | 71,775 |
| | 71,290 |
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Diluted weighted average common shares | 72,759 |
| | 72,547 |
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See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended March 31, 2014 and 2013
(Dollars in thousands)
(unaudited)
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Net income including noncontrolling interests | $ | 71,237 |
| | $ | 61,517 |
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Other comprehensive income (loss): | | | |
Foreign currency translation adjustment | 5,550 |
| | — |
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Unrealized gain on interest rate swaps | 786 |
| | 1,852 |
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Other comprehensive income, before income taxes | 6,336 |
| | 1,852 |
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Income tax expense | (290 | ) | | (687 | ) |
Other comprehensive income, net of income taxes | 6,046 |
| | 1,165 |
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Comprehensive income | 77,283 |
| | 62,682 |
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Comprehensive loss attributable to noncontrolling interests | 130 |
| | — |
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Comprehensive income attributable to AMC Networks’ stockholders | $ | 77,413 |
| | $ | 62,682 |
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See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2014 and 2013
(Dollars in thousands)
(unaudited) |
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Cash flows from operating activities: | | | |
Income from continuing operations | $ | 71,987 |
| | $ | 61,517 |
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Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities: | | | |
Depreciation and amortization | 14,394 |
| | 18,345 |
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Share-based compensation expense related to equity classified awards | 5,080 |
| | 4,337 |
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Amortization and write-off of program rights | 149,371 |
| | 98,382 |
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Amortization of deferred carriage fees | 2,750 |
| | 2,710 |
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Foreign transaction loss | 1,718 |
| | — |
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Unrealized gain on derivative contracts, net | (856 | ) | | (718 | ) |
Amortization of deferred financing costs and discounts on indebtedness | 2,012 |
| | 1,819 |
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Bad debt recoveries | (216 | ) | | (8 | ) |
Deferred income taxes | 22,037 |
| | 31,229 |
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Excess tax benefits from share-based compensation arrangements | (4,520 | ) | | (1,333 | ) |
Other, net | — |
| | (657 | ) |
Changes in assets and liabilities: | | | |
Accounts receivable, trade | (16,326 | ) | | (16,504 | ) |
Amounts due from/to related parties, net | 490 |
| | 1,354 |
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Prepaid expenses and other assets | 25,384 |
| | (8,088 | ) |
Program rights and obligations, net | (185,447 | ) | | (93,892 | ) |
Income taxes payable | 4,568 |
| | (80,903 | ) |
Deferred revenue | 4,010 |
| | (12,424 | ) |
Deferred carriage fees and deferred carriage fees payable, net | (3,050 | ) | | (214 | ) |
Accounts payable, accrued expenses and other liabilities | (18,787 | ) | | (42,781 | ) |
Net cash provided by (used in) operating activities | 74,599 |
| | (37,829 | ) |
Cash flows from investing activities: | | | |
Capital expenditures | (6,189 | ) | | (8,003 | ) |
Payment for acquisition of a business, net of cash acquired | (993,210 | ) | | — |
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Proceeds from insurance settlements | 654 |
| | 657 |
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Net cash used in investing activities | (998,745 | ) | | (7,346 | ) |
Cash flows from financing activities: | | | |
Proceeds from the issuance of long-term debt | 600,000 |
| | — |
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Payments for financing costs | (9,036 | ) | | (530 | ) |
Purchase of treasury stock | (17,804 | ) | | (11,950 | ) |
Proceeds from stock option exercises | 843 |
| | 675 |
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Excess tax benefits from share-based compensation arrangements | 4,520 |
| | 1,333 |
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Principal payments on capital lease obligations | (414 | ) | | (375 | ) |
Net cash provided by (used in) financing activities | 578,109 |
| | (10,847 | ) |
Net decrease in cash and cash equivalents from continuing operations | (346,037 | ) | | (56,022 | ) |
Cash flows from discontinued operations: | | | |
Net cash used in operating activities | (485 | ) | | — |
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Net decrease in cash and cash equivalents from discontinued operations | (485 | ) | | — |
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Effect of exchange rate changes on cash and cash equivalents | (15,975 | ) | | — |
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Cash and cash equivalents at beginning of period | 521,951 |
| | 610,970 |
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Cash and cash equivalents at end of period | $ | 159,454 |
| | $ | 554,948 |
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See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(unaudited)
Note 1. Description of Business and Basis of Presentation
Description of Business
AMC Networks Inc. (“AMC Networks”) and collectively with its subsidiaries (the “Company”) own and operate entertainment businesses and assets.
During the three months ended March 31, 2014, following the Chellomedia acquisition on January 31, 2014 (see Note 2), the manner in which the President and Chief Executive Officer, who is the chief operating decision maker, evaluates performance and makes decisions about how to allocate resources changed, resulting in the reorganization of the Company's operating segments. The National Networks operating segment now includes the results of AMC and Sundance Channel in Canada and AMC Networks Broadcasting & Technology, the Company's network technical services business, which primarily services the nationally distributed programming networks of the Company. Previously, the results of these operations were included in the International and Other operating segment. The results of Chellomedia are included in the International and Other operating segment. Operating segment information for the prior period has been recast to reflect these changes.
The Company is comprised of two operating segments:
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• | National Networks: Principally includes four nationally distributed programming networks: AMC, WE tv, IFC and SundanceTV. These programming networks are distributed throughout the United States (“U.S.”) via cable and other multichannel video programming distribution platforms, including direct broadcast satellite (“DBS”) and platforms operated by telecommunications providers (we refer collectively to these cable and other multichannel video programming distributors as “multichannel video programming distributors” or “distributors”). AMC, IFC and SundanceTV are also distributed in Canada. The National Networks operating segment also includes AMC Networks Broadcasting & Technology. |
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• | International and Other: Principally includes Chellomedia and AMC/Sundance Channel Global, the Company’s international programming businesses; IFC Films, the Company’s independent film distribution business; Chello DMC, the broadcast solutions unit of Chellomedia; and various developing on-line content distribution initiatives. AMC/Sundance Channel Global is distributed in Europe, Asia, Latin America, and the Middle East/North Africa. Chellomedia consists of a portfolio of international programming networks in Europe, Latin America, the Middle East and parts of Asia and Africa. |
Basis of Presentation
Principles of Consolidation
These unaudited consolidated financial statements include the accounts of AMC Networks and its majority-owned subsidiaries in which a controlling interest is maintained. All intercompany transactions and balances have been eliminated in consolidation.
These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these unaudited consolidated financial statements do not include all the information and notes required for complete annual financial statements.
These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2013 contained in the Company’s 2013 Annual Report on Form 10-K (“2013 Form 10-K”) filed with the SEC.
The consolidated financial statements as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 are unaudited; however, in the opinion of management, such consolidated financial statements include all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented.
The results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2014.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates and judgments inherent in the preparation of the consolidated financial statements include the valuation of acquisition-related assets and liabilities, the useful lives and methodologies used to amortize and assess recoverability of program rights, the estimated useful lives of intangible assets, valuation and recoverability of goodwill and long-lived intangible assets and income taxes.
Discontinued Operations
In connection with the acquisition of Chellomedia (see Note 2), management committed to a plan to dispose of the operations of Chellomedia's third-party advertising sales unit, Atmedia. Accordingly, the assets and liabilities of Atmedia are classified as held for sale in the consolidated balance sheet as of March 31, 2014 and the operating results have been classified as discontinued operations in the consolidated statement of income for the three months ended March 31, 2014 (see Note 4).
Recently Adopted Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11). ASU 2013-11 states the presentation of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 became effective in the first quarter of 2014. The adoption of ASU 2013-11 did not have any impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08). ASU 2014-08 defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The standard states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. An entity is required to present in the statement of cash flows or disclose in a note either (i) total operating and investing cash flows for discontinued operations, or (ii) depreciation, amortization, capital expenditures, and significant operating and investing noncash items related to discontinued operations. Additional disclosures are required when an entity retains significant continuing involvement with a discontinued operation after its disposal, including the amount of cash flows to and from a discontinued operation. ASU 2014-08 is effective in the first quarter of 2015 and early adoption is permitted. The adoption of ASU 2014-08 is not expected to have a material effect on the Company's consolidated financial statements.
Note 2. Acquisition of Chellomedia
On January 31, 2014, certain subsidiaries of AMC Networks purchased substantially all of Chellomedia (a combination of certain programming and content distribution subsidiaries and assets purchased from Liberty Global plc) for a purchase price of €750 million (approximately $1.0 billion), subject to adjustments for working capital, cash, and indebtedness acquired and for the purchase of certain equity method investments. AMC Networks funded the purchase price with cash on hand and also borrowed an additional of $600 million under its term loan A facility (see Note 7).
The acquisition provides AMC Networks with television channels that are distributed to more than 390 million subscribers in over 130 countries and span a wide range of programming genres, most notably movie and entertainment networks. The acquisition of Chellomedia's operating businesses include: Chello Central Europe, Chello Latin America, Chello Multicanal, Chello Zone, the broadcast solutions unit, Chello DMC and the advertising sales unit, Atmedia. The acquisition provides us with the opportunity to accelerate and enhance our international expansion strategy. The Company views this international opportunity as one that has the potential to provide long-term growth and value.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
We have accounted for the acquisition of Chellomedia using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of Chellomedia based on assessments of their estimated respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill and represents primarily the potential economic benefits that the Company believes may arise from its international expansion strategy. The goodwill associated with the Chellomedia acquisition is generally not deductible for tax purposes.
The acquisition accounting for Chellomedia as reflected in these condensed consolidated financial statements is preliminary and based on current estimates and currently available information, and are subject to revision based on final determinations of fair value and final allocations of purchase price to the identifiable assets and liabilities acquired. The primary estimated fair values that are not yet finalized relate to the valuation of intangible assets, property and equipment, noncontrolling interests acquired and income taxes.
The following table summarizes the preliminary allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed. The excess of the purchase price over those fair values was allocated to goodwill.
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Consideration Transferred (1): | |
Cash, net of cash acquired | $ | 993,210 |
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Preliminary purchase price allocation: | |
Accounts receivable, trade | 133,200 |
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Program rights | 93,505 |
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Prepaid expenses and other current assets | 27,635 |
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Deferred tax asset, net | 12,677 |
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Property and equipment | 39,041 |
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Intangible assets | 306,564 |
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Assets held for sale | 18,928 |
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Other assets | 35,154 |
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Accounts payable | (21,627 | ) |
Accrued liabilities | (45,833 | ) |
Program rights obligations | (31,984 | ) |
Deferred tax liability, net | (17,220 | ) |
Liabilities held for sale | (18,130 | ) |
Other liabilities | (14,119 | ) |
Noncontrolling interests acquired | (22,009 | ) |
Fair value of net assets acquired | 495,782 |
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Goodwill | 497,428 |
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| $ | 993,210 |
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(1) The cash consideration transferred is subject to adjustments in future periods for working capital, net debt acquired and for certain equity method investments that were not acquired at the acquisition date.
The following unaudited pro forma financial information is based on the historical consolidated financial statements of AMC Networks and the historical combined financial statements of Chellomedia and is intended to provide information about how the acquisition of Chellomedia and related financing may have affected AMC Networks' historical consolidated financial statements if they had closed as of January 1, 2013. The unaudited pro forma information has been prepared for comparative purposes only and includes adjustments for additional interest expense associated with the terms of the Company's amended and restated credit agreement (see Note 7), estimated additional depreciation and amortization expense as a result of tangible and identifiable intangible assets acquired, and the reclassification of the operating results of the Atmedia business to discontinued operations (see Note 4). The pro forma information is not necessarily indicative of the results of operations that would have been achieved had the acquisition taken place on the date indicated or that may result in the future.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
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| Pro Forma Financial Information for the Three Months Ended March 31, |
| 2014 | | 2013 |
Revenues, net | $ | 553,681 |
| | $ | 468,995 |
|
Income from continuing operations, net of income taxes | $ | 74,288 |
| | $ | 63,878 |
|
Net income per share, basic | $ | 1.04 |
| | $ | 0.90 |
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Net income per share, diluted | $ | 1.02 |
| | $ | 0.88 |
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Revenues and operating income attributable to Chellomedia of $61,289 and $4,742, respectively (excluding the discontinued operations of Chellomedia's advertising sales unit, Atmedia), are included in the condensed consolidated statement of income from the acquisition date, January 31, 2014 to March 31, 2014. Acquisition related costs of $14,031 (of which, $1,853 are included in the operating results of Chellomedia from the acquisition date to March 31, 2014) were incurred during the three months ended March 31, 2014 and are included in selling, general and administrative expense.
Note 3. Net Income per Share
The consolidated statements of income present basic and diluted net income per share (“EPS”). Basic EPS is based upon net income divided by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the dilutive effects of AMC Networks stock options (including those held by directors and employees of related parties of the Company) and AMC Networks restricted shares/units (including those held by employees of related parties of the Company).
The following is a reconciliation between basic and diluted weighted average shares outstanding:
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Basic weighted average common shares outstanding | 71,775,000 |
| | 71,290,000 |
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Effect of dilution: | | | |
Stock options | 250,000 |
| | 323,000 |
|
Restricted shares/units | 734,000 |
| | 934,000 |
|
Diluted weighted average common shares outstanding | 72,759,000 |
| | 72,547,000 |
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For the three months ended March 31, 2014, approximately 327,023 restricted share units have been excluded from diluted weighted average common shares outstanding since they would have been anti-dilutive. Approximately 122,000 and 80,000 restricted shares/units for the three months ended March 31, 2014 and March 31, 2013, respectively have been excluded from diluted weighted average common shares outstanding since the performance criteria on these awards had not yet been satisfied in each of the respective periods.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Note 4. Discontinued Operations
In connection with the acquisition of Chellomedia (see Note 2), management committed to a plan to dispose of the operations of Chellomedia's third-party advertising sales unit, Atmedia. Accordingly, the assets and liabilities of Atmedia are classified as held for sale in the consolidated balance sheet as of March 31, 2014 and the operating results have been classified as discontinued operations in the consolidated statement of income from the acquisition date, January 31, 2014 to March 31, 2014.
Assets and liabilities of discontinued operations are summarized below:
|
| | | |
Accounts receivable, trade | $ | 13,751 |
|
Prepaid expenses and other current assets | 311 |
|
Property and equipment, net of accumulated depreciation | 2,078 |
|
Amounts due from related parties, net | 3,752 |
|
Deferred taxes | 90 |
|
Assets held for sale | $ | 19,982 |
|
| |
Accounts payable | $ | 14,148 |
|
Accrued liabilities | 4,948 |
|
Deferred revenue | 124 |
|
Deferred tax liability, net | 78 |
|
Other liabilities | 136 |
|
Liabilities held for sale | $ | 19,434 |
|
The operating results of discontinued operations from the acquisition date, January 31, 2014 to March 31, 2014 are summarized below:
|
| | | |
Revenues, net | $ | 6,637 |
|
| |
Loss before income taxes | (883 | ) |
Income tax benefit | 133 |
|
Loss from discontinued operations | $ | (750 | ) |
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Note 5. Goodwill and Other Intangible Assets
The carrying amount of goodwill, by operating segment is as follows:
|
| | | | | | | | | | | |
| National Networks | | International and Other | | Total |
December 31, 2013 | $ | 76,748 |
| | $ | — |
| | $ | 76,748 |
|
Additions—business acquisition | — |
| | 497,428 |
| | 497,428 |
|
Amortization of "second component" goodwill | (639 | ) | | — |
| | (639 | ) |
Foreign currency translation | — |
| | 12,996 |
| | 12,996 |
|
March 31, 2014 | $ | 76,109 |
| | $ | 510,424 |
| | $ | 586,533 |
|
The increase in the carrying amount of goodwill for the International and Other operating segment relates to the acquisition of Chellomedia (see Note 2).
The reduction of $639 in the carrying amount of goodwill for the National Networks is due to the realization of a tax benefit for the amortization of "second component" goodwill at SundanceTV. Second component goodwill is the amount of tax deductible goodwill in excess of goodwill for financial reporting purposes. In accordance with the authoritative guidance at the time of the SundanceTV acquisition, the tax benefits associated with this excess are applied to first reduce the amount of goodwill, and then other intangible assets for financial reporting purposes, if and when such tax benefits are realized in the Company's tax returns.
The following tables summarize information relating to the Company’s identifiable intangible assets:
|
| | | | | | | | | | | |
| March 31, 2014 |
| Gross | | Accumulated Amortization | | Net |
Amortizable intangible assets: | | | | | |
Affiliate and customer relationships | $ | 485,337 |
| | $ | (59,785 | ) | | $ | 425,552 |
|
Trade names | 71,570 |
| | (603 | ) | | 70,967 |
|
Other amortizable intangible assets | 642 |
| | (633 | ) | | 9 |
|
Total amortizable intangible assets | 557,549 |
| | (61,021 | ) | | 496,528 |
|
Indefinite-lived intangible assets: | | | | | |
Trademarks | 19,900 |
| | — |
| | 19,900 |
|
Total intangible assets | $ | 577,449 |
| | $ | (61,021 | ) | | $ | 516,428 |
|
| | | | | |
| December 31, 2013 |
| Gross | | Accumulated Amortization | | Net |
Amortizable intangible assets: | | | | | |
Affiliate relationships | $ | 243,600 |
| | $ | (53,971 | ) | | $ | 189,629 |
|
Other amortizable intangible assets | 644 |
| | (621 | ) | | 23 |
|
Total amortizable intangible assets | 244,244 |
| | (54,592 | ) | | 189,652 |
|
Indefinite-lived intangible assets: | | | | | |
Trademarks | 19,900 |
| | — |
| | 19,900 |
|
Total intangible assets | $ | 264,144 |
| | $ | (54,592 | ) | | $ | 209,552 |
|
Affiliate and customer relationships (with estimated useful lives between 10-25 years), trade names (with estimated useful lives of 20 years) and goodwill increased as a result of the acquisition of Chellomedia and are based on current estimates and currently available information, and are subject to revision based on final determinations of fair value (see Note 2).
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Aggregate amortization expense for amortizable intangible assets for the three months ended March 31, 2014 and 2013 was $7,244 and $12,522, respectively. Estimated aggregate amortization expense for intangible assets subject to amortization for each of the following five years is:
|
| | | |
Years Ending December 31, | |
2014 | $ | 29,697 |
|
2015 | 31,497 |
|
2016 | 31,497 |
|
2017 | 31,497 |
|
2018 | 31,497 |
|
Annual Impairment Test of Goodwill
Based on the Company’s annual impairment test for goodwill as of the end of February 2014, no impairment charge was required for any of the reporting units. The Company performed a qualitative assessment for each reporting unit. The qualitative assessment included, but was not limited to, consideration of the historical significant excesses of the estimated fair value of each reporting unit over its respective carrying value (including allocated goodwill), macroeconomic conditions, industry and market considerations, cost factors and historical and projected cash flows.
In assessing the recoverability of goodwill, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and also the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Estimates of fair value for goodwill impairment testing are primarily determined using discounted cash flows and comparable market transactions methods. These valuation methods are based on estimates and assumptions including projected future cash flows, discount rate and determination of appropriate market comparables and determination of whether a premium or discount should be applied to comparables. Projected future cash flows also include assumptions for renewals of affiliation agreements, the projected number of subscribers and the projected average rates per basic and viewing subscribers and growth in fixed price contractual arrangements used to determine affiliation fee revenue, access to program rights and the cost of such program rights, amount of programming time that is advertiser supported, number of advertising spots available and the sell through rates for those spots, average fee per advertising spot and operating margins, among other assumptions. If these estimates or material related assumptions change in the future, we may be required to record impairment charges related to goodwill.
Annual Impairment Test of Identifiable Indefinite-Lived Intangible Assets
Based on the Company's annual impairment test for identifiable indefinite-lived intangible assets as of the end of February 2014, no impairment charge was required. The Company’s indefinite-lived intangible assets relate to SundanceTV trademarks, which were valued using a relief-from-royalty method in which the expected benefits are valued by discounting estimated royalty revenue over projected revenues covered by the trademarks. In order to evaluate the sensitivity of the fair value calculations for the Company’s identifiable indefinite-lived intangible assets, the Company applied a hypothetical 20% decrease to the estimated fair value of the identifiable indefinite-lived intangible assets. This hypothetical decrease in estimated fair value would not result in an impairment.
Significant judgments inherent in estimating the fair value of indefinite-lived intangible assets include the selection of appropriate discount and royalty rates, estimating the amount and timing of estimated future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible assets.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Note 6. Accrued Liabilities
Accrued liabilities consist of the following:
|
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
Interest | $ | 22,401 |
| | $ | 27,770 |
|
Employee related costs | 63,303 |
| | 88,512 |
|
Other accrued expenses | 26,234 |
| | 15,008 |
|
Total accrued liabilities | $ | 111,938 |
| | $ | 131,290 |
|
Note 7. Debt
Debt consists of:
|
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
Senior Secured Credit Facility: (a) | | | |
Term loan A facility | $ | 1,480,000 |
| | $ | 880,000 |
|
Senior Notes | | | |
7.75% Notes due July 2021 | 700,000 |
| | 700,000 |
|
4.75% Notes due December 2022 | 600,000 |
| | 600,000 |
|
Total long-term debt | 2,780,000 |
| | 2,180,000 |
|
Unamortized discount | (22,237 | ) | | (22,817 | ) |
Long-term debt, net | 2,757,763 |
| | 2,157,183 |
|
Current portion of long-term debt | 18,500 |
| | — |
|
Noncurrent portion of long-term debt | $ | 2,739,263 |
| | $ | 2,157,183 |
|
| |
(a) | The Company’s $500,000 revolving credit facility remains undrawn at March 31, 2014. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company. |
Amended and Restated Senior Secured Credit Facility
On December 16, 2013 (the “Refinancing Date”), AMC Networks and its subsidiary, AMC Network Entertainment LLC (the “Borrowers”), and certain of AMC Networks’ subsidiaries, as restricted subsidiaries, entered into an amended and restated credit agreement, which amended and restated AMC Networks’ prior credit agreement dated June 30, 2011 in its entirety.
The amended and restated credit agreement provides the Borrowers with senior secured credit facilities consisting of (a) an initial $880,000 term loan A that was used by AMC Networks to retire the then outstanding term loan A facility provided under the June 30, 2011 original credit agreement, plus a subsequent $600,000 term loan A (collectively, the “Term Loan A Facility”) which was drawn on January 31, 2014 upon the satisfaction of certain conditions related to consummation of AMC Networks’ acquisition of substantially all of Chellomedia (see Note 2), and (b) a $500,000 revolving credit facility (together with the Term Loan A Facility, collectively, the “Credit Facility”). The Term Loan A Facility matures on December 16, 2019. The revolving credit facility matures on December 16, 2018.
In connection with the subsequent $600,000 term loan A facility, AMC Networks incurred deferred financing costs of $9,006 during the three months ended March 31, 2014, which is amortized to interest expense, utilizing the effective interest method.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Note 8. Fair Value Measurement
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:
| |
• | Level I - Quoted prices for identical instruments in active markets. |
| |
• | Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
| |
• | Level III - Instruments whose significant value drivers are unobservable. |
The following table presents for each of these hierarchy levels, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:
|
| | | | | | | | | | | | | | | | |
| | Level I | | Level II | | Level III | | Total |
At March 31, 2014: | | | | | | | | |
Assets: | | | | | | | | |
Cash equivalents (a) | | $ | 13,032 |
| | $ | — |
| | $ | — |
| | $ | 13,032 |
|
Liabilities: | | | | | | | | |
Interest rate swap contracts | | $ | — |
| | $ | 11,070 |
| | $ | — |
| | $ | 11,070 |
|
| | | | | | | | |
At December 31, 2013: | | | | | | | | |
Assets: | | | | | | | | |
Cash equivalents (a) | | $ | 63,029 |
| | $ | — |
| | $ | — |
| | $ | 63,029 |
|
Foreign currency option contracts | | $ | — |
| | $ | 2,577 |
| | $ | — |
| | $ | 2,577 |
|
Liabilities: | | | | | | | | |
Interest rate swap contracts | | $ | — |
| | $ | 12,713 |
| | $ | — |
| | $ | 12,713 |
|
| |
(a) | Represents the Company’s investment in funds that invest primarily in money market securities. |
The Company’s cash equivalents represents investment in funds that invest primarily in money market securities and are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.
The Company’s interest rate swap contracts (discussed in Note 9 below) are classified within Level II of the fair value hierarchy and their fair values are determined based on a market approach valuation technique that uses readily observable market parameters and the consideration of counterparty risk.
Fair value measurements are also used in nonrecurring valuations performed in connection with acquisition accounting. These nonrecurring valuations primarily include the valuation of affiliate and customer relationships intangible assets and property and equipment. With the exception of certain inputs for our weighted average cost of capital and discount rate calculations that are derived from pricing services, the inputs used in the Company’s discounted cash flow analyses, such as forecasts of future cash flows, are based on assumptions. The valuation of affiliate and customer relationships is primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology requires us to estimate the specific cash flows expected from the affiliate and customer relationships, considering such factors as estimated life of the relationships and the revenue expected to be generated over the life of such relationships. Tangible assets are typically valued using a replacement or reproduction cost approach, considering factors such as current prices of the same or similar equipment, the age of the equipment and economic obsolescence. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level III of the fair value hierarchy.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Credit Facility Debt and Senior Notes
The fair values of each of the Company’s debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities.
The carrying values and estimated fair values of the Company’s financial instruments, excluding those that are carried at fair value in the consolidated balance sheets, are summarized as follows:
|
| | | | | | | |
| March 31, 2014 |
| Carrying Amount | | Estimated Fair Value |
Debt instruments: | | | |
Term Loan A Facility | $ | 1,478,399 |
| | $ | 1,478,150 |
|
7.75% Notes due July 2021 | 688,779 |
| | 792,750 |
|
4.75% Notes due December 2022 | 590,585 |
| | 594,000 |
|
| $ | 2,757,763 |
| | $ | 2,864,900 |
|
| | | |
| December 31, 2013 |
| Carrying Amount | | Estimated Fair Value |
Debt instruments: | | | |
Term Loan A Facility | $ | 878,315 |
| | $ | 876,700 |
|
7.75% Notes due July 2021 | 688,497 |
| | 787,500 |
|
4.75% Notes due December 2022 | 590,371 |
| | 571,500 |
|
| $ | 2,157,183 |
| | $ | 2,235,700 |
|
Fair value estimates related to the Company’s debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Note 9. Derivative Financial Instruments
Interest Rate Risk
To manage interest rate risk, the Company enters into interest rate swap contracts to adjust the amount of total debt that is subject to variable interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to limit the exposure against the risk of rising interest rates. The Company does not enter into interest rate swap contracts for speculative or trading purposes and it has only entered into interest rate swap contracts with financial institutions that it believes are creditworthy counterparties. The Company monitors the financial institutions that are counterparties to its interest rate swap contracts and to the extent possible diversifies its swap contracts among various counterparties to mitigate exposure to any single financial institution.
The Company’s risk management objective and strategy with respect to interest rate swap contracts is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt. The Company is meeting its objective by hedging the risk of changes in its cash flows (interest payments) attributable to changes in the LIBOR index rate, the designated benchmark interest rate being hedged (the “hedged risk”), on an amount of the Company’s debt principal equal to the then-outstanding swap notional. The forecasted interest payments are deemed to be probable of occurring.
The Company assesses, both at the hedge’s inception and on an ongoing basis, hedge effectiveness based on the overall changes in the fair value of the interest rate swap contracts. Hedge effectiveness of the interest rate swap contracts is based on a hypothetical derivative methodology. Any ineffective portion of the interest rate swap contracts is recorded in current-period earnings. Changes in fair value of interest rate swap contracts not designated as hedging instruments are recognized in earnings and included in interest expense.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
As of March 31, 2014, the Company had interest rate swap contracts outstanding with notional amounts aggregating $679,063, which consists of interest rate swap contracts with notional amounts of $479,063 that are designated as cash flow hedges and interest rate swap contracts with notional amounts of $200,000 that are not designated as hedging instruments. The Company’s outstanding interest rate swap contracts have varying maturities ranging from September 2015 to July 2017. At March 31, 2014, the Company’s interest rate swap contracts designated as cash flow hedges were highly effective, in all material respects.
Foreign Currency Exchange Rate Risk
To manage foreign currency exchange rate risk, the Company enters into foreign currency contracts from time to time with financial institutions to limit the exposure to fluctuations in foreign currency exchange rates. The Company does not enter into foreign currency contracts for speculative or trading purposes.
Historically, the Company's exposure to foreign currency fluctuations has been limited to certain trade receivables from the distribution of our programming in certain territories outside of the U.S. that are denominated in a foreign currency. During 2013, in order to mitigate the foreign currency exchange rate risk in fluctuations in the euro denominated purchase price of Chellomedia, the Company purchased euros and entered into foreign currency option contracts. As of December 31, 2013, cash and cash equivalents included €250,000 and prepaid expense and other current assets included $2,577 representing the fair value of foreign currency option contracts with notional amounts aggregating €125,000. Prior to their expiration, and in connection with the purchase of Chellomedia on January 31, 2014, the Company settled these foreign currency option contracts with the counterparties resulting in a realized loss of $1,754 for the three months ended March 31, 2014.
The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are as follows:
|
| | | | | | | | | | | | | | | | | | |
| Asset Derivatives | Liability Derivatives |
| Balance Sheet Location | | | | | Balance Sheet Location | | Fair Value |
| | | March 31, 2014 | | December 31, 2013 | | | March 31, 2014 | | December 31, 2013 |
Derivatives designated as hedging instruments: | | | | | | | | | | |
Interest rate swap contracts | | | $ | — |
| | $ | — |
| Other liabilities | | $ | 5,922 |
| | $ | 7,136 |
|
Derivatives not designated as hedging instruments: | | | | | | | | | | |
Interest rate swap contracts | | | — |
| | — |
| Other liabilities | | 5,148 |
| | 5,577 |
|
Foreign currency option contracts | Prepaid expenses and other current assets | | — |
| | 2,577 |
| | | — |
| | — |
|
Total derivatives | | | $ | — |
| | $ | 2,577 |
| | | $ | 11,070 |
| | $ | 12,713 |
|
The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments are as follows:
|
| | | | | | | | | | | | | | | | | |
| Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) | | Location of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion) | | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)(a) |
| Three Months Ended March 31, | | | | Three Months Ended March 31, |
| 2014 | | 2013 | | | | 2014 | | 2013 |
Derivatives in cash flow hedging relationships: | | | | | | | | | |
Interest rate swap contracts | $ | (295 | ) | | $ | (59 | ) | | Interest expense | | $ | (1,081 | ) | | $ | (1,911 | ) |
| |
(a) | There were no gains or losses recognized in earnings related to any ineffective portion of the hedging relationship or related to any amount excluded from the assessment of hedge effectiveness for the three months ended March 31, 2014 and 2013. |
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
The amount of the gains and losses related to the Company's derivative financial instruments not designated as hedging instruments are as follows:
|
| | | | | | | | | |
| Location of Gain or (Loss) Recognized in Earnings on Derivatives | | Amount of Gain or (Loss) Recognized in Earnings on Derivatives |
| | | Three Months Ended March 31, |
| | | 2014 | | 2013 |
Derivatives not designated as hedging relationships: | | | | | |
Interest rate swap contracts | Interest expense | | $ | (255 | ) | | $ | 79 |
|
Foreign currency option contracts | Miscellaneous, net | | (1,754 | ) | | — |
|
Total | | | $ | (2,009 | ) | | $ | 79 |
|
Note 10. Income Taxes
For the three months ended March 31, 2014, income tax expense attributable to continuing operations was $39,105 representing an effective tax rate of 35%. The items resulting in variances from the federal statutory rate of 35% include state income tax expense of $1,889, tax benefit from foreign subsidiary earnings indefinitely reinvested outside the U.S. of $3,888, tax expense of $3,334 relating to uncertain tax positions, including accrued interest, tax benefit from the domestic production activities deduction of $2,777, tax expense of $1,017 for the effect of acquisition costs and other items and tax expense of $647 for an increase in valuation allowances for foreign and local taxes partially offset by a decrease in the valuation allowance for foreign tax credits.
For the three months ended March 31, 2013, income tax expense attributable to continuing operations was $36,649, representing an effective tax rate of 37%. The effective tax rate differs from the federal statutory rate of 35% due primarily to state and local income tax expense of $2,022 and tax expense of $1,060 related to uncertain tax positions, including accrued interest.
At March 31, 2014, the Company had foreign tax credit carry forwards of approximately $27,000, expiring on various dates from 2014 through 2024. For the three months ended March 31, 2014, excess tax benefits of $4,520 relating to share-based compensation awards and $403 relating to amortization of tax deductible second component goodwill were realized as a reduction in tax liability (as determined on a 'with-and-without' approach).
Under the Company's Tax Disaffiliation Agreement with Cablevision Systems Corporation ("Cablevision"), Cablevision is liable for all income taxes of the Company for periods prior to the Distribution except for New York City Unincorporated Business Tax. The City of New York is currently auditing the Company's Unincorporated Business Tax Return for 2009 through 2011. The Internal Revenue Service is currently auditing the Company's U.S. Corporation Income Tax Return for 2011.
Note 11. Commitments
As of March 31, 2014, the Company’s contractual obligations not reflected on the Company’s consolidated balance sheet increased approximately $152,422 to approximately $481,661 as compared to approximately $329,239 at December 31, 2013. The increase relates primarily to purchase obligations at Chellomedia, including approximately $110,615 and $64,957 for program rights and transmission obligations, respectively.
Note 12. Equity Plans
On March 7, 2014, AMC Networks granted 472,445 restricted stock units to certain executive officers and employees under the AMC Networks Inc. Amended and Restated 2011 Employee Stock Plan. 403,940 of such restricted stock units vest on the third anniversary of the grant date and 68,505 of such restricted stock units vest in equal annual installments over a three-year period. The vesting criteria for 121,944 restricted stock units include the achievement of certain performance targets by the Company.
During the three months ended March 31, 2014, 566,328 restricted shares of AMC Networks Class A common stock previously issued to employees of Cablevision and the Company vested. In connection with the employees’ satisfaction of the statutory minimum tax withholding obligations for the applicable income and other employment taxes, 230,989 of these shares, with an aggregate value of $17,804, were surrendered to the Company. These acquired shares, as well as 6,503 forfeited unvested restricted shares, have been classified as treasury stock.
Share-based compensation expense included in selling, general and administrative expense, for the three months ended March 31, 2014 and 2013 was $5,080 and $4,337, respectively.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
As of March 31, 2014, there was $56,501 of total unrecognized share-based compensation cost related to Company employees who held unvested AMC Networks restricted shares/units. The unrecognized compensation cost is expected to be recognized over a weighted-average remaining period of approximately 2.4 years.
Note 13. Related Party Transactions
Members of the Dolan Family, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, including trusts for the benefit of the Dolan Family, collectively beneficially own all of the Company’s outstanding Class B Common Stock and own less than 2% of the Company’s outstanding Class A Common Stock. Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 66% of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan Family are also the controlling stockholders of both Cablevision and The Madison Square Garden Company and its subsidiaries (“MSG”).
In connection with the spin off from Cablevision, the Company entered into various agreements with Cablevision, such as a distribution agreement, a tax disaffiliation agreement, a transition services agreement, an employee matters agreement and certain related party arrangements. These agreements govern certain of the Company’s relationships with Cablevision subsequent to the spin off and provide for the allocation of employee benefits, taxes and certain other liabilities and obligations attributable to periods prior to the Distribution. These agreements also include arrangements with respect to transition services and a number of on-going commercial relationships. The distribution agreement includes an agreement that the Company and Cablevision agree to provide each other with indemnities with respect to liabilities arising out of the businesses Cablevision transferred to the Company.
The Company records revenues, net from subsidiaries of Cablevision and MSG. Revenues, net from related parties amounted to $7,689 and $8,141 for the three months ended March 31, 2014 and 2013, respectively.
In addition, the Company and its related parties routinely enter into transactions with each other in the ordinary course of business. Amounts charged to the Company, included in technical and operating expenses, pursuant to transactions with its related parties amounted to $155 for the three months ended March 31, 2013; there were no amounts charged for the three months ended March 31, 2014. Amounts charged to the Company, included in selling, general and administrative expenses, pursuant to the transition services agreement and for other transactions with its related parties amounted to $659 and $794 for the three months ended March 31, 2014 and 2013, respectively.
Note 14. Cash Flows
The Company’s non-cash investing and financing activities and other supplemental data are as follows:
|
| | | | | |
| Three Months Ended March 31, |
| 2014 | | 2013 |
Non-Cash Investing and Financing Activities: | | | |
Continuing Operations: | | | |
Increase in capital lease obligations and related assets | — |
| | 865 |
|
Capital expenditures incurred but not yet paid | 1,018 |
| | 815 |
|
Supplemental Data: | | | |
Cash interest paid — continuing operations | 35,997 |
| | 34,561 |
|
Income taxes paid, net — continuing operations | 2,834 |
| | 83,030 |
|
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Note 15. Accumulated Other Comprehensive Income (Loss)
The following table details the components of accumulated other comprehensive income (loss):
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2014 | | Three Months Ended March 31, 2013 |
| Currency Translation Adjustment | | Gains (Losses) on Cash Flow Hedges | | Accumulated Other Comprehensive Income (Loss) | | Gains (Losses) on Cash Flow Hedges | | Accumulated Other Comprehensive Income (Loss) |
Beginning Balance | $ | — |
| | $ | (4,495 | ) | | $ | (4,495 | ) | | $ | (8,446 | ) | | $ | (8,446 | ) |
Other comprehensive loss before reclassifications | 5,550 |
| | (295 | ) | | 5,255 |
| | (59 | ) | | (59 | ) |
Amounts reclassified from accumulated other comprehensive loss | — |
| | 1,081 |
| | 1,081 |
| | 1,911 |
| | 1,911 |
|
Net current-period other comprehensive income, before income taxes | 5,550 |
| | 786 |
| | 6,336 |
| | 1,852 |
| | 1,852 |
|
Income tax expense | — |
| | (290 | ) | | (290 | ) | | (687 | ) | | (687 | ) |
Net current-period other comprehensive income, net of income taxes | 5,550 |
| | 496 |
| | 6,046 |
| | 1,165 |
| | 1,165 |
|
Ending Balance | $ | 5,550 |
| | $ | (3,999 | ) | | $ | 1,551 |
| | $ | (7,281 | ) | | $ | (7,281 | ) |
Amounts reclassified to net earnings for gains and losses on cash flow hedges are included in interest expense in the consolidated statements of income.
Note 16. Segment Information
The Company classifies its operations into two operating segments: National Networks and International and Other. These reportable segments represent strategic business units that are managed separately.
The Company generally allocates all corporate overhead costs to the Company’s two operating segments based upon their proportionate estimated usage of services, including such costs as executive salaries and benefits, costs of maintaining corporate headquarters, facilities and common support functions (such as human resources, legal, finance, tax, accounting, audit, treasury, risk management, strategic planning and information technology) as well as sales support functions and creative and production services.
The Company evaluates segment performance based on several factors, of which the primary financial measure is operating segment adjusted operating cash flow (defined as operating income (loss) before depreciation and amortization, share-based compensation expense or benefit and restructuring expense or credit, a non-GAAP measure. The Company has presented the components that reconcile adjusted operating cash flow to operating income, an accepted GAAP measure and other information as to the continuing operations of the Company’s operating segments below.
During the three months ended March 31, 2014, following the Chellomedia acquisition on January 31, 2014 (see Note 2), the manner in which the President and Chief Executive Officer, who is the chief operating decision maker, evaluates performance and makes decisions about how to allocate resources changed, resulting in the reorganization of the Company's operating segments. The National Networks operating segment now includes the results of AMC and Sundance Channel in Canada and AMC Networks Broadcasting & Technology, the Company's network technical services business, which primarily services the nationally distributed programming networks of the Company. Previously, the results of these operations were included in the International and Other operating segment. The results of Chellomedia are included in the International and Other operating segment. Operating segment information for the prior period has been recast to reflect these changes.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2014 |
| National Networks | | International and Other | | Inter-segment eliminations | | Consolidated |
Revenues, net | | | | | | | |
Advertising | $ | 207,903 |
| | $ | 8,015 |
| | $ | — |
| | $ | 215,918 |
|
Distribution | 240,777 |
| | 68,563 |
| | (704 | ) | | 308,636 |
|
Consolidated revenues, net | $ | 448,680 |
| | $ | 76,578 |
| | $ | (704 | ) | | $ | 524,554 |
|
Adjusted operating cash flow (deficit) | $ | 177,745 |
| | $ | (11,047 | ) | | $ | 409 |
| | $ | 167,107 |
|
Depreciation and amortization | (4,907 | ) | | (9,487 | ) | | — |
| | (14,394 | ) |
Share-based compensation expense | (4,167 | ) | | (913 | ) | | — |
| | (5,080 | ) |
Operating income | $ | 168,671 |
| | $ | (21,447 | ) | | $ | 409 |
| | $ | 147,633 |
|
Capital expenditures | $ | 1,177 |
| | $ | 5,012 |
| | $ | — |
| | $ | 6,189 |
|
| | | | | | | |
| Three Months Ended March 31, 2013 |
| National Networks | | International and Other | | Inter-segment eliminations | | Consolidated |
Revenues, net | | | | | | | |
Advertising | $ | 163,960 |
| | $ | — |
| | $ | — |
| | $ | 163,960 |
|
Distribution | 207,710 |
| | 10,422 |
| | (131 | ) | | 218,001 |
|
Consolidated revenues, net | $ | 371,670 |
| | $ | 10,422 |
| | $ | (131 | ) | | $ | 381,961 |
|
Adjusted operating cash flow (deficit) | $ | 164,594 |
| | $ | (15,394 | ) | | $ | 966 |
| | $ | 150,166 |
|
Depreciation and amortization | (15,299 | ) | | (3,046 | ) | | — |
| | (18,345 | ) |
Share-based compensation expense | (3,784 | ) | | (553 | ) | | — |
| | (4,337 | ) |
Operating income (loss) | $ | 145,511 |
| | $ | (18,993 | ) | | $ | 966 |
| | $ | 127,484 |
|
Capital expenditures | $ | 2,203 |
| | $ | 5,800 |
| | $ | — |
| | $ | 8,003 |
|
Inter-segment eliminations are primarily revenues recognized by AMC Networks Broadcasting & Technology for transmission revenues recognized from the International and Other operating segment.
|
| | | | | | | |
| Three Months Ended March 31, |
| 2014 | | 2013 |
Inter-segment revenues | | | |
National Networks | $ | (674 | ) | | $ | (131 | ) |
International and Other | (30 | ) | | — |
|
| $ | (704 | ) | | $ | (131 | ) |
The table below summarizes revenue based on customer location:
|
| | | |
| Three Months Ended March 31, 2014 |
Revenue | |
United States | $ | 449,150 |
|
Europe | 49,782 |
|
Other | 25,622 |
|
| $ | 524,554 |
|
Prior to the acquisition of Chellomedia, substantially all revenues and assets of the Company were attributed to or located in the U.S.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Note 17. Condensed Consolidating Financial Statements
Long-term debt of AMC Networks includes $700,000 of 7.75% senior notes due July 2021 and $600,000 of 4.75% senior notes due December 2022. All outstanding senior notes issued by AMC Networks are guaranteed on a senior unsecured basis by certain of its existing and future domestic restricted subsidiaries (the “Guarantor Subsidiaries”). All Guarantor Subsidiaries are owned 100% by AMC Networks. The outstanding notes are fully and unconditionally guaranteed by the Guarantor Subsidiaries on a joint and several basis.
Set forth below are condensed consolidating financial statements presenting the financial position, results of operations, comprehensive income, and cash flows of (i) the Parent Company, (ii) the Guarantor Subsidiaries on a combined basis (as such guarantees are joint and several), (iii) the direct and indirect non-guarantor subsidiaries of the Parent Company (the “Non-Guarantor Subsidiaries”) on a combined basis and (iv) reclassifications and eliminations necessary to arrive at the information for the Company on a consolidated basis.
Basis of Presentation
In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) the Parent Company's interests in the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, and (ii) the Guarantor Subsidiaries' interests in the Non-Guarantor Subsidiaries, even though all such subsidiaries meet the requirements to be consolidated under GAAP. All intercompany balances and transactions between the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries have been eliminated, as shown in the column “Eliminations.”
The accounting basis in all subsidiaries, including goodwill and identified intangible assets, have been allocated to the applicable subsidiaries.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
|
| | | | | | | | | | | | | | | | | | | |
Condensed Consolidated Balance Sheet |
March 31, 2014 |
| | | | | | | | | |
| Parent Company | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated |
ASSETS | | | | | | | | | |
Current Assets: | | | | | | | | | |
Cash and cash equivalents | $ | 835 |
| | $ | 117,357 |
| | $ | 41,262 |
| | $ | — |
| | $ | 159,454 |
|
Accounts receivable, trade (less allowance for doubtful accounts) | — |
| | 396,928 |
| | 133,278 |
| | — |
| | 530,206 |
|
Amounts due from related parties, net | — |
| | 4,364 |
| | — |
| | — |
| | 4,364 |
|
Intercompany receivable | 9,216 |
| | 1,848 |
| | — |
| | (11,064 | ) | | — |
|
Current portion of program rights, net | — |
| | 318,093 |
| | 57,231 |
| | — |
| | 375,324 |
|
Prepaid expenses and other current assets | 19,179 |
| | 30,710 |
| | 13,646 |
| | — |
| | 63,535 |
|
Deferred tax asset, net | 21,695 |
| | — |
| | 2,182 |
| | — |
| | 23,877 |
|
Assets held for sale | — |
| | — |
| | 19,982 |
| | — |
| | 19,982 |
|
Total current assets | 50,925 |
| | 869,300 |
| | 267,581 |
| | (11,064 | ) | | 1,176,742 |
|
Property and equipment, net of accumulated depreciation | — |
| | 68,362 |
| | 38,031 |
| | — |
| | 106,393 |
|
Investment in affiliates | 1,637,102 |
| | 912,128 |
| | — |
| | (2,549,230 | ) | | — |
|
Program rights, net | — |
| | 863,893 |
| | 52,310 |
| | — |
| | 916,203 |
|
Amounts due from related parties, net | — |
| | 2,016 |
| | — |
| | — |
| | 2,016 |
|
Long-term intercompany receivable | 710,481 |
| | 119,918 |
| | — |
| | (830,399 | ) | | — |
|
Deferred carriage fees, net | — |
| | 41,891 |
| | 2,516 |
| | — |
| | 44,407 |
|
Intangible assets, net | — |
| | 207,103 |
| | 309,325 |
| | — |
| | 516,428 |
|
Goodwill | — |
| | 76,109 |
| | 510,424 |
| | — |
| | 586,533 |
|
Other assets | 31,621 |
| | 47,512 |
| | 56,850 |
| | — |
| | 135,983 |
|
Total assets | $ | 2,430,129 |
| | $ | 3,208,232 |
| | $ | 1,237,037 |
| | $ | (3,390,693 | ) | | $ | 3,484,705 |
|
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | | | | | | | | |
Current Liabilities: | | | | | | | | | |
Accounts payable | $ | 149 |
| | $ | 61,808 |
| | $ | 61,296 |
| | $ | — |
| | $ | 123,253 |
|
Accrued liabilities and intercompany payable | 22,700 |
| | 71,140 |
| | 28,695 |
| | (10,597 | ) | | 111,938 |
|
Current portion of program rights obligations | — |
| | 200,583 |
| | 33,818 |
| | — |
| | 234,401 |
|
Deferred revenue | — |
| | 23,363 |
| | 1,778 |
| | — |
| | 25,141 |
|
Current portion of long-term debt | 18,500 |
| | — |
| | — |
| | — |
| | 18,500 |
|
Current portion of capital lease obligations | — |
| | 1,760 |
| | — |
| | — |
| | 1,760 |
|
Liabilities held for sale | — |
| | — |
| | 19,434 |
| | — |
| | 19,434 |
|
Total current liabilities | 41,349 |
| | 358,654 |
| | 145,021 |
| | (10,597 | ) | | 534,427 |
|
Program rights obligations | — |
| | 443,968 |
| | 2,667 |
| | — |
| | 446,635 |
|
Long-term debt | 2,739,263 |
| | — |
| | — |
| | — |
| | 2,739,263 |
|
Capital lease obligations | — |
| | 11,931 |
| | — |
| | — |
| | 11,931 |
|
Deferred tax liability, net | 123,305 |
| | — |
| | 19,933 |
| | — |
| | 143,238 |
|
Long-term intercompany payable | — |
| | 710,481 |
| | 119,257 |
| | (829,738 | ) | | — |
|
Other liabilities | 27,936 |
| | 46,252 |
| | 13,329 |
| | — |
| | 87,517 |
|
Total liabilities | 2,931,853 |
| | 1,571,286 |
| | 300,207 |
| | (840,335 | ) | | 3,963,011 |
|
Commitments and contingencies | | | | | | | | | |
Stockholders’ deficiency: | | | | | | | | | |
AMC Networks shareholders’ (deficiency) equity | (501,724 | ) | | 1,637,100 |
| | 913,515 |
| | (2,550,358 | ) | | (501,467 | ) |
Total AMC Networks stockholders’ (deficiency) equity | (501,724 | ) | | 1,637,100 |
| | 913,515 |
| | (2,550,358 | ) | | (501,467 | ) |
Noncontrolling interests | — |
| | (154 | ) | | 23,315 |
| | — |
| | 23,161 |
|
Total Stockholders' (deficiency) equity | (501,724 | ) | | 1,636,946 |
| | 936,830 |
| | (2,550,358 | ) | | (478,306 | ) |
Total liabilities and stockholders’ (deficiency) equity | $ | 2,430,129 |
| | $ | 3,208,232 |
| | $ | 1,237,037 |
| | $ | (3,390,693 | ) | | $ | 3,484,705 |
|
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
|
| | | | | | | | | | | | | | | | | | | |
Condensed Consolidated Statement of Income |
Three Months Ended March 31, 2014 |
| | | | | | | | | |
| Parent Company | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated |
Revenues, net | $ | — |
| | $ | 460,088 |
| | $ | 64,466 |
| | $ | — |
| | $ | 524,554 |
|
Operating expenses: | | | | | | | | | |
Technical and operating | — |
| | 181,451 |
| | 29,568 |
| | — |
| | 211,019 |
|
Selling, general and administrative | — |
| | 126,377 |
| | 25,131 |
| | — |
| | 151,508 |
|
Depreciation and amortization | — |
| | 8,209 |
| | 6,185 |
| | — |
| | 14,394 |
|
| — |
| | 316,037 |
| | 60,884 |
| | — |
| | 376,921 |
|
Operating income | — |
| | 144,051 |
| | 3,582 |
| | — |
| | 147,633 |
|
Other income (expense): | | | | | | | | | |
Interest expense, net | (22,232 | ) | | (8,372 | ) | | (827 | ) | | — |
| | (31,431 | ) |
Share of affiliates income (loss) | 123,173 |
| | (3,592 | ) | | — |
| | (119,581 | ) | | — |
|
Miscellaneous, net | 6,342 |
| | (6,795 | ) | | (4,657 | ) | | — |
| | (5,110 | ) |
| 107,283 |
| | (18,759 | ) | | (5,484 | ) | | (119,581 | ) | | (36,541 | ) |
Income (loss) from continuing operations before income taxes | 107,283 |
| | 125,292 |
| | (1,902 | ) | | (119,581 | ) | | 111,092 |
|
Income tax expense | (35,916 | ) | | (2,541 | ) | | (648 | ) | | — |
| | (39,105 | ) |
Income (loss) from continuing operations | 71,367 |
| | 122,751 |
| | (2,550 | ) | | (119,581 | ) | | 71,987 |
|
Loss from discontinued operations, net of income taxes | — |
| | — |
| | (750 | ) | | — |
| | (750 | ) |
Net income (loss) including noncontrolling interest | 71,367 |
| | 122,751 |
| | (3,300 | ) | | (119,581 | ) | | 71,237 |
|
Net (income) loss attributable to noncontrolling interests | — |
| | 422 |
| | (292 | ) | | — |
| | 130 |
|
Net income (loss) attributable to AMC Networks' stockholders | $ | 71,367 |
| | $ | 123,173 |
| | $ | (3,592 | ) | | $ | (119,581 | ) | | $ | 71,367 |
|
|
| | | | | | | | | | | | | | | | | | | |
Condensed Consolidated Statement of Comprehensive Income |
Three Months Ended March 31, 2014 |
| Parent Company | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net income (loss) | $ | 71,367 |
| | $ | 122,751 |
| | $ | (3,300 | ) | | $ | (119,581 | ) | | $ | 71,237 |
|
Other comprehensive income (loss): | | | | | | | | | |
Foreign currency translation adjustment | 6,153 |
| | 6,153 |
| | (603 | ) | | (6,153 | ) | | 5,550 |
|
Unrealized gain on interest rate swaps | 786 |
| | — |
| | — |
| | — |
| | 786 |
|
Other comprehensive income, before income taxes | 6,939 |
| | 6,153 |
| | (603 | ) | | (6,153 | ) | | 6,336 |
|
Income tax expense | (290 | ) | | — |
| | — |
| | — |
| | (290 | ) |
Other comprehensive income, net of income taxes | 6,649 |
| | 6,153 |
| | (603 | ) | | (6,153 | ) | | 6,046 |
|
Comprehensive income (loss) | 78,016 |
| | 128,904 |
| | (3,903 | ) | | (125,734 | ) | | 77,283 |
|
Comprehensive loss (income) attributable to noncontrolling interests | — |
| | 422 |
| | (292 | ) | | — |
| | 130 |
|
Comprehensive income (loss) attributable to AMC Networks' stockholders | $ | 78,016 |
| | $ | 129,326 |
| | $ | (4,195 | ) | | $ | (125,734 | ) | | $ | 77,413 |
|
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
|
| | | | | | | | | | | | | | | | | | | |
Condensed Consolidated Statement of Cash Flows |
Three Months Ended March 31, 2014 |
| | | | | | | | | |
| Parent Company | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated |
Cash flows from operating activities: | | | | | | | | | |
Net cash provided by (used in) operating activities | 89,738 |
| | (39,066 | ) | | 25,279 |
| | (1,352 | ) | | 74,599 |
|
Cash flows from investing activities: | | | | | | | | | |
Capital expenditures | (1,338 | ) | | (4,131 | ) | | (720 | ) | | — |
| | (6,189 | ) |
(Increase) decrease to investment in affiliates | 37,298 |
| | (63,824 | ) | | — |
| | 26,526 |
| | — |
|
Payment for acquisition of a business, net of cash acquired | — |
| | (1,009,286 | ) | | 16,076 |
| | — |
| | (993,210 | ) |
Proceeds from insurance settlements | — |
| | 654 |
| | — |
| | — |
| | 654 |
|
Net cash used in investing activities | 35,960 |
| | (1,076,587 | ) | | 15,356 |
| | 26,526 |
| | (998,745 | ) |
Cash flows from financing activities: | | | | | | | | | |
Proceeds from the issuance of long-term debt | 600,000 |
| | — |
| | — |
| | — |
| | 600,000 |
|
Payments for financing costs | (9,036 | ) | | — |
| | — |
| | — |
| | (9,036 | ) |
Purchase of treasury stock | (17,804 | ) | | — |
| | — |
| | — |
| | (17,804 | ) |
Proceeds from stock option exercises | 843 |
| | — |
| | — |
| | — |
| | 843 |
|
Excess tax benefits from share-based compensation arrangements | 4,520 |
| | — |
| | — |
| | — |
| | 4,520 |
|
Principal payments on capital lease obligations | — |
| | (414 | ) | | — |
| | — |
| | (414 | ) |
Long-term intercompany debt | (710,481 | ) | | 710,481 |
| | — |
| | — |
| | — |
|
Cash contributions from member | — |
| | (2,600 | ) | | 2,600 |
| | — |
| | — |
|
Net cash provided by (used in) financing activities | (131,958 | ) | | 707,467 |
| | 2,600 |
| | — |
| | 578,109 |
|
Net increase in cash and cash equivalents from continuing operations | (6,260 | ) | | (408,186 | ) | | 43,235 |
| |