AMCX - 6.30.2015 - 10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
þ
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2015
or
¨
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)
 
Delaware
27-5403694
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
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).
Large accelerated filer
þ
Accelerated filer
¨
 
 
 
 
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 July 31, 2015:
Class A Common Stock par value $0.01 per share
60,877,998
Class B Common Stock par value $0.01 per share
11,484,408





AMC NETWORKS INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
 
 
Page
 
 
 




PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(unaudited)
 
June 30, 2015
 
December 31, 2014
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
241,060

 
$
201,367

Accounts receivable, trade (less allowance for doubtful accounts of $5,325 and $4,276)
607,026

 
587,193

Amounts due from related parties, net
3,975

 
4,102

Current portion of program rights, net
440,483

 
437,302

Prepaid expenses and other current assets
72,206

 
74,294

Deferred tax asset, net
21,741

 
24,822

Total current assets
1,386,491

 
1,329,080

Property and equipment, net of accumulated depreciation of $205,109 and $186,242
140,323

 
133,844

Program rights, net
1,028,927

 
959,941

Deferred carriage fees, net
55,578

 
46,737

Intangible assets, net
562,465

 
590,824

Goodwill
727,206

 
734,356

Other assets
208,620

 
181,805

Total assets
$
4,109,610

 
$
3,976,587

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
146,260

 
$
101,866

Accrued liabilities
154,099

 
204,786

Current portion of program rights obligations
280,641

 
271,199

Deferred revenue
70,604

 
36,888

Promissory note payable

 
40,000

Current portion of long-term debt
111,000

 
74,000

Current portion of capital lease obligations
3,083

 
2,953

Total current liabilities
765,687

 
731,692

Program rights obligations
459,650

 
465,672

Long-term debt
2,612,806

 
2,685,566

Capital lease obligations
25,708

 
27,386

Deferred tax liability, net
131,142

 
128,066

Other liabilities
74,700

 
85,503

Total liabilities
4,069,693

 
4,123,885

Commitments and contingencies


 


Redeemable noncontrolling interests
208,287

 
204,611

Stockholders’ deficiency:
 
 
 
Class A Common Stock, $0.01 par value, 360,000,000 shares authorized, 62,085,674 and 61,762,944 shares issued and 60,875,403 and 60,552,673 shares outstanding, respectively
621

 
618

Class B Common Stock, $0.01 par value, 90,000,000 shares authorized, 11,484,408 shares issued and outstanding, respectively
115

 
115

Preferred stock, $0.01 par value, 45,000,000 shares authorized; none issued

 

Paid-in capital
107,477

 
100,642

Accumulated deficit
(137,960
)
 
(341,889
)
Treasury stock, at cost (1,210,271 shares Class A Common Stock, respectively)
(51,993
)
 
(51,993
)
Accumulated other comprehensive loss
(110,920
)
 
(79,248
)
Total AMC Networks stockholders’ deficiency
(192,660
)
 
(371,755
)
Non-redeemable noncontrolling interests
24,290

 
19,846

Total stockholders’ deficiency
(168,370
)
 
(351,909
)
Total liabilities and stockholders’ deficiency
$
4,109,610

 
$
3,976,587

See accompanying notes to condensed consolidated financial statements.

1


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 2015 and 2014
(In thousands, except per share amounts)
(unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenues, net (including revenues, net from related parties of $6,493, $7,525, $13,212 and $15,214, respectively)
$
601,138

 
$
522,093

 
$
1,269,820

 
$
1,046,647

Operating expenses:
 
 
 
 
 
 
 
Technical and operating (excluding depreciation and amortization)
259,730

 
232,044

 
521,903

 
449,215

Selling, general and administrative (including charges from related parties of $1,269, $890, $2,218 and $1,549, respectively)
158,880

 
141,890

 
313,459

 
287,246

Restructuring expense
2,654

 
1,153

 
3,310

 
1,153

Depreciation and amortization
21,040

 
17,531

 
41,567

 
31,925

 
442,304

 
392,618

 
880,239

 
769,539

Operating income
158,834

 
129,475

 
389,581

 
277,108

Other income (expense):
 
 
 
 
 
 
 
Interest expense
(32,571
)
 
(33,923
)
 
(65,595
)
 
(65,695
)
Interest income
792

 
318

 
1,229

 
659

Miscellaneous, net
11,384

 
869

 
1,154

 
(4,241
)
 
(20,395
)
 
(32,736
)
 
(63,212
)
 
(69,277
)
Income from continuing operations before income taxes
138,439

 
96,739

 
326,369

 
207,831

Income tax expense
(50,997
)
 
(36,559
)
 
(112,251
)
 
(75,664
)
Income from continuing operations
87,442

 
60,180

 
214,118

 
132,167

Loss from discontinued operations, net of income taxes

 
(1,732
)
 

 
(2,482
)
Net income including noncontrolling interests
87,442

 
58,448

 
214,118

 
129,685

Net (income) loss attributable to noncontrolling interests
(4,433
)
 
207

 
(10,189
)
 
337

Net income attributable to AMC Networks’ stockholders
$
83,009

 
$
58,655

 
$
203,929

 
$
130,022

 
 
 
 
 
 
 
 
Basic net income per share attributable to AMC Networks’ stockholders:
 
 
 
 
 
 
Income from continuing operations
$
1.15

 
$
0.84

 
$
2.82

 
$
1.84

Loss from discontinued operations
$

 
$
(0.02
)
 
$

 
$
(0.03
)
Net income
$
1.15

 
$
0.81

 
$
2.82

 
$
1.81

 
 
 
 
 
 
 
 
Diluted net income per share attributable to AMC Networks’ stockholders:
 
 
 
 
 
 
Income from continuing operations
$
1.14

 
$
0.83

 
$
2.81

 
$
1.83

Loss from discontinued operations
$

 
$
(0.02
)
 
$

 
$
(0.03
)
Net income
$
1.14

 
$
0.81

 
$
2.81

 
$
1.80

 
 
 
 
 
 
 
 
Weighted average common shares:
 
 
 
 
 
 
 
Basic weighted average common shares
72,447

 
72,043

 
72,327

 
71,910

Diluted weighted average common shares
73,128

 
72,802

 
72,685

 
72,343

See accompanying notes to condensed consolidated financial statements.

2


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three and Six Months Ended June 30, 2015 and 2014
(Dollars in thousands)
(unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net income including noncontrolling interests
$
87,442

 
$
58,448

 
$
214,118

 
$
129,685

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustment
24,119

 
4,502

 
(36,706
)
 
10,052

Unrealized gain on interest rate swaps
674

 
1,171

 
1,370

 
1,957

Other comprehensive income (loss), before income taxes
24,793

 
5,673

 
(35,336
)
 
12,009

Income tax benefit (expense)
5,943

 
(432
)
 
3,664

 
(722
)
Other comprehensive income (loss), net of income taxes
30,736

 
5,241

 
(31,672
)
 
11,287

Comprehensive income
118,178

 
63,689

 
182,446

 
140,972

Comprehensive (income) loss attributable to noncontrolling interests
(4,433
)
 
207

 
(10,189
)
 
337

Comprehensive income attributable to AMC Networks’ stockholders
$
113,745

 
$
63,896

 
$
172,257

 
$
141,309

See accompanying notes to condensed consolidated financial statements.

3


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2015 and 2014
(Dollars in thousands)
(unaudited)
 
Six Months Ended June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income including noncontrolling interests
$
214,118

 
$
129,685

Loss from discontinued operations

 
2,482

Adjustments to reconcile income from continuing operations to net cash from operating activities:
 
 
 
Depreciation and amortization
41,567

 
31,925

Share-based compensation expense related to equity classified awards
16,089

 
13,839

Amortization and write-off of program rights
343,161

 
291,467

Amortization of deferred carriage fees
8,009

 
5,501

Unrealized foreign currency transaction (gain)
(8,345
)
 
(1,338
)
Unrealized loss (gain) on derivative contracts, net
791

 
(1,038
)
Amortization of deferred financing costs and discounts on indebtedness
4,476

 
4,205

Bad debt expense
1,228

 
1,095

Deferred income taxes
10,069

 
5,300

Excess tax benefits from share-based compensation arrangements
(4,038
)
 
(4,708
)
Other, net
(246
)
 
(339
)
Changes in assets and liabilities:
 
 
 
Accounts receivable, trade
(18,182
)
 
(4,326
)
Amounts due from related parties, net
127

 
891

Prepaid expenses and other assets
(15,359
)
 
35,989

Program rights and obligations, net
(412,205
)
 
(336,284
)
Income taxes payable
2,696

 
11,992

Deferred revenue
33,779

 
19,867

Deferred carriage fees, net
(17,138
)
 
(13,110
)
Accounts payable, accrued expenses and other liabilities
(10,356
)
 
(15,644
)
Net cash provided by operating activities
190,241

 
177,451

Cash flows from investing activities:
 
 
 
Capital expenditures
(33,124
)
 
(18,755
)
Payments for acquisition of a business, net of cash acquired
(6,545
)
 
(993,210
)
Purchases of investments
(24,250
)
 

Proceeds from insurance settlements

 
654

Net cash used in investing activities
(63,919
)
 
(1,011,311
)
Cash flows from financing activities:
 
 
 
Proceeds from the issuance of long-term debt

 
600,000

Principal payments on long-term debt
(37,000
)
 

Payment of Promissory Note
(40,000
)
 

Payments for financing costs

 
(9,266
)
Deemed repurchases of restricted stock/units
(14,320
)
 
(17,804
)
Proceeds from stock option exercises
1,031

 
925

Excess tax benefits from share-based compensation arrangements
4,038

 
4,708

Principal payments on capital lease obligations
(1,449
)
 
(1,312
)
Distributions to noncontrolling member
(3,154
)
 

Contributions from noncontrolling member
1,373

 
835

Net cash (used in) provided by financing activities
(89,481
)
 
578,086

Net increase (decrease) in cash and cash equivalents from continuing operations
36,841

 
(255,774
)
Cash flows from discontinued operations:
 
 
 
Net cash used in operating activities

 
(2,719
)
Net decrease in cash and cash equivalents from discontinued operations

 
(2,719
)
Effect of exchange rate changes on cash and cash equivalents
2,852

 
20,534

Cash and cash equivalents at beginning of period
201,367

 
521,951

Cash and cash equivalents at end of period
$
241,060

 
$
283,992

See accompanying notes to condensed consolidated financial statements.

4

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. The Company is comprised of two operating segments:
National Networks: Principally includes five nationally distributed programming networks: AMC, WE tv, BBC AMERICA, 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, which primarily services most of the nationally distributed programming networks.
International and Other: Principally includes AMC Networks International, the Company’s international programming businesses consisting of a portfolio of channels in Europe, Latin America, the Middle East and parts of Asia and Africa; IFC Films, the Company’s independent film distribution business; AMC Networks International - DMC, the broadcast solutions unit of certain networks of AMC Networks International and third party networks; and various developing digital content distribution initiatives.
Basis of Presentation
Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of AMC Networks, its majority owned or controlled subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Investments in business entities in which the Company lacks control but does have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method.
Unaudited Interim Financial Statements
These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 2014 contained in the Company's Annual Report on Form 10-K (“2014 Form 10-K”) filed with the SEC. The condensed consolidated financial statements as of June 30, 2015 and for the three and six months ended June 30, 2015 and 2014 presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, such financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented.
The results of operations for 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, 2015.
Program Rights
The Company periodically reviews the programming usefulness of its licensed and owned original program rights based on a series of factors, including expected future revenue generation from airings on the Company's networks and other exploitation opportunities, ratings, type and quality of program material, standards and practices, and fitness for exhibition through various forms of distribution. If it is determined that film or other program rights have no future programming usefulness, a write-off of the unamortized cost is recorded in technical and operating expense. Program rights write-offs included in the National Networks segment technical and operating expense of $4,005 and $3,890 were recorded for the three months ended June 30, 2015 and 2014, respectively, and program rights write-offs of $13,580 and $7,493 were recorded for the six months ended June 30, 2015 and 2014, respectively.
Use of Estimates
These condensed consolidated financial statements have been prepared in accordance with GAAP. 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

5

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

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 intangible assets and income taxes.
Reclassifications
Certain reclassifications were made to the prior period amounts to conform to the current period presentation.
Recently Issued Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the debt. ASU 2015-03 will be applied retrospectively and is effective for the fourth quarter of 2015 and early adoption is permitted. The adoption of ASU 2015-03 is not expected to have a material effect on the Company's consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 amends current GAAP principles relating to the requirements of the reporting entity to consolidate other legal entities, which will therefore require all reporting entities that hold variable interests in other legal entities to re-evaluate consolidation assessments and disclosures. The new standard states (i) limited partnerships will be variable interest entities, unless the limited partners have either substantive kick-out or participating rights, (ii) a reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement when certain criteria are met, (iii) less frequent performance of the related-party tiebreaker test (and mandatory consolidation by one of the related parties) than under current GAAP, and (iv) for entities other than limited partnerships, ASU 2015-02 clarifies how to determine whether the equity holders have power over the entity. ASU 2015-02 is effective for the fourth quarter of 2015 and early adoption is permitted. The Company is currently in the process of assessing the impact, if any, the adoption of ASU 2015-02 will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides new guidance related to how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires an evaluation of (i) transfer of control, (ii) variable consideration, (iii) allocation of selling price for multiple elements, (iv) intellectual property licenses, (v) time value of money and (vi) contract costs. The standard also expands the required disclosures related to revenue and cash flows from contracts with customers to provide greater insight into both revenue that has been recognized, and revenue that is expected to be recognized in the future from existing contracts. On July 9, 2015 the FASB voted to approve a one year delay of the effective date of the standard to the first quarter of 2018, and to permit companies to voluntarily adopt the new standard as of the original effective date of January 1, 2017. The new standard will be effective January 1, 2018 for the Company and management is currently determining its implementation approach and assessing the impact the adoption will have on its consolidated financial statements.
Note 2. Acquisitions
BBC AMERICA
In October 2014, a subsidiary of AMC Networks entered into a membership interest purchase agreement with BBC Worldwide Americas, Inc. ("BBCWA"), pursuant to which such subsidiary acquired 49.9% of the limited liability company interests of New Video Channel America, L.L.C. ("New Video"), owner of the cable channel BBC AMERICA (the "Transaction"), for a purchase price of $200,000. The Company funded the purchase price with cash on hand and a $40,000 promissory note, which was paid on April 23, 2015. In addition to the purchase agreement, the Company entered into a Second Amended and Restated Limited Liability Company Agreement with BBCWA and one of its affiliates (the "Joint Venture Agreement") that sets forth certain rights and obligations of the parties, including certain put rights. The Company has operational control of New Video and the BBC AMERICA channel. The joint venture’s results are consolidated in the financial results of AMC Networks from the date of closing and included in the National Networks operating segment. The Company views this joint venture as an important addition to its overall channel portfolio and programming content strategy.
The acquisition accounting for New Video as reflected in these consolidated financial statements is preliminary and based on current estimates and currently available information, and is 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 program rights and related obligations, intangible assets, other assets, accrued liabilities, and redeemable noncontrolling interests.

6

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

The following table summarizes the preliminary valuation of the tangible and identifiable intangible assets acquired and liabilities assumed.
Cash paid, net of cash acquired
$
159,889

Promissory note
40,000

Total consideration transferred
199,889

Redeemable noncontrolling interest
200,000

 
$
399,889

Preliminary allocation:
 
Prepaid expenses and other current assets
621

Accounts receivable, trade
32,240

Program rights
73,219

Deferred carriage fees
567

Property and equipment
111

Intangible assets
113,528

Other assets
46,000

Accounts payable and accrued liabilities
(5,528
)
Program rights obligations
(30,868
)
Deferred revenue
(3,378
)
Fair value of net assets acquired
226,512

Goodwill
173,377

 
$
399,889

Chellomedia
In January 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). AMC Networks funded the purchase price with cash on hand and also borrowed an additional $600 million under its Term Loan A Facility.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information is based on (i) the historical consolidated financial statements of AMC Networks, (ii) the historical financial statements of New Video and (iii) the historical combined financial statements of Chellomedia and is intended to provide information about how the acquisitions and related financing may have affected the Company's historical consolidated financial statements if they had occurred as of January 1, 2014. 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, 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.
 
Pro Forma Financial Information for the
 
Three Months Ended
June 30, 2014
 
Six Months Ended
 June 30, 2014
Revenues, net
$
564,330

 
$
1,157,602

Income from continuing operations, net of income taxes
$
62,812

 
$
140,966

Net income per share, basic
$
0.87

 
$
1.96

Net income per share, diluted
$
0.86

 
$
1.95



7

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

Other Acquisitions
In February 2015, a subsidiary of AMC Networks acquired the shares of a small international channel. This acquisition is included in the International and Other segment and builds on the Company's international expansion strategy and the potential to provide international long-term growth and value.
Pro forma financial information related to this acquisition is not provided as the impact was not material to our condensed consolidated financial statements.
Note 3. Net Income per Share
The condensed 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 stock 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:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Basic weighted average common shares outstanding
72,447,000

 
72,043,000

 
72,327,000

 
71,910,000

Effect of dilution:
 
 
 
 
 
 
 
Stock options
164,000

 
231,000

 
91,000

 
120,000

Restricted stock/units
517,000

 
528,000

 
267,000

 
313,000

Diluted weighted average common shares outstanding
73,128,000

 
72,802,000

 
72,685,000

 
72,343,000

For the three and six months ended June 30, 2015, there were no restricted stock units that would have been anti-dilutive to the diluted weighted average common shares outstanding. For the three and six months ended June 30, 2014, approximately 326,000 restricted stock units have been excluded from diluted weighted average common shares outstanding since they would have been anti-dilutive. Approximately 125,000 and 476,000 restricted stock units for the three and six months ended June 30, 2015 and June 30, 2014, respectively, have been excluded from diluted weighted average common shares outstanding since the performance criteria on these awards was not probable of being achieved in each of the respective periods.
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 advertising sales unit, Atmedia, which was completed in 2014. The operating results of discontinued operations included revenues, net of $11,533 and $18,171, and a net loss of $1,732 and $2,482 for the three and six months ended June 30, 2014, respectively.
Note 5. Restructuring
The Company incurred restructuring expense primarily related to severance charges and other exit costs associated with the elimination of certain positions across the Company.
The following table summarizes the restructuring expense recognized by operating segment:
 
Three Months Ended June 30, 2015
 
Six Months Ended June 30, 2015
National Networks
$
651

 
$
717

International & Other
2,003

 
2,593

Total restructuring expense
$
2,654

 
$
3,310


8

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

The following table summarizes the accrued restructuring costs:
 
Severance and employee-related costs
 
Other exit costs
 
Total
Balance at December 31, 2014
$
6,525

 
$
885

 
$
7,410

Charges incurred
1,568

 
1,742

 
3,310

Cash payments
(6,634
)
 
(114
)
 
(6,748
)
Non-cash adjustments
(38
)
 
(1,742
)
 
(1,780
)
Currency translation
(91
)
 
(84
)
 
(175
)
Balance at June 30, 2015
$
1,330

 
$
687

 
$
2,017

Accrued liabilities for restructuring costs of $1,949 and $68 are included in accrued liabilities and other liabilities, respectively, in the condensed consolidated balance sheet at June 30, 2015. The Company expects that the restructuring will be substantially completed during 2015 and the majority of severance and other costs will be paid in 2015.
Note 6. Goodwill and Other Intangible Assets
The carrying amount of goodwill, by operating segment is as follows:
 
National Networks
 
International and Other
 
Total
December 31, 2014
$
250,595

 
$
483,761

 
$
734,356

Additions and purchase accounting adjustments
(2,994
)
 
3,796

 
802

Amortization of "second component" goodwill
(1,262
)
 

 
(1,262
)
Foreign currency translation

 
(6,690
)
 
(6,690
)
June 30, 2015
$
246,339

 
$
480,867

 
$
727,206

Additions and purchase accounting adjustments included in the National Networks and International and Other segments relate to the acquisition of New Video and a small international channel, respectively.
The reduction of $1,262 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.


9

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

The following tables summarize information relating to the Company’s identifiable intangible assets:
 
June 30, 2015
 
 
 
Gross
 
Accumulated
Amortization
 
Net
 
Estimated Useful Lives
Amortizable intangible assets:
 
 
 
 
 
 
 
Affiliate and customer relationships
$
549,535

 
$
(95,581
)
 
$
453,954

 
17 to 25 years
Advertiser relationships
46,282

 
(2,887
)
 
43,395

 
11 years
Trade names
49,208

 
(4,004
)
 
45,204

 
20 years
Other amortizable intangible assets
15

 
(3
)
 
12

 
 
Total amortizable intangible assets
645,040

 
(102,475
)
 
542,565

 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
Trademarks
19,900

 

 
19,900

 
 
Total intangible assets
$
664,940

 
$
(102,475
)
 
$
562,465

 
 
 
December 31, 2014
 
 
 
Gross
 
Accumulated
Amortization
 
Net
 
 
Amortizable intangible assets:
 
 
 
 
 
 
 
Affiliate and customer relationships
$
555,742

 
$
(80,351
)
 
$
475,391

 
 
Advertiser relationships
45,827

 
(655
)
 
45,172

 
 
Trade names
52,698

 
(2,351
)
 
50,347

 
 
Other amortizable intangible assets
16

 
(2
)
 
14

 
 
Total amortizable intangible assets
654,283

 
(83,359
)
 
570,924

 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
Trademarks
19,900

 

 
19,900

 
 
Total intangible assets
$
674,183

 
$
(83,359
)
 
$
590,824

 
 
Aggregate amortization expense for amortizable intangible assets for the six months ended June 30, 2015 and 2014 was $21,912 and $13,792, respectively. Estimated aggregate amortization expense for intangible assets subject to amortization for each of the following five years is:
Years Ending December 31,
 
2015
$
41,198

2016
38,025

2017
38,025

2018
38,022

2019
38,022

Note 7. Accrued Liabilities
Accrued liabilities consist of the following:
 
June 30, 2015
 
December 31, 2014
Interest
$
28,513

 
$
28,685

Employee related costs
77,020

 
102,608

Income taxes payable
10,143

 
11,876

Other accrued expenses
38,423

 
61,617

Total accrued liabilities
$
154,099

 
$
204,786


10

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

Note 8. Long-term Debt
The Company's long-term debt consists of:
 
June 30, 2015
 
December 31, 2014
Senior Secured Credit Facility: (a)
 
 
 
Term Loan A Facility
$
1,443,000

 
$
1,480,000

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
2,743,000

 
2,780,000

Unamortized discount
(19,194
)
 
(20,434
)
Long-term debt, net
2,723,806

 
2,759,566

Current portion of long-term debt
111,000

 
74,000

Noncurrent portion of long-term debt
$
2,612,806

 
$
2,685,566

(a)
The Company’s $500,000 revolving credit facility remains undrawn at June 30, 2015. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company.
Note 9. 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
 
Total
At June 30, 2015:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash equivalents (a)
 
$
21,081

 
$

 
$
21,081

Foreign currency derivatives
 
$

 
$
3,725

 
$
3,725

Liabilities:
 
 
 
 
 
 
Interest rate swap contracts
 
$

 
$
4,452

 
$
4,452

Foreign currency derivatives
 
$

 
$
3,992

 
$
3,992

 
 
 
 
 
 
 
At December 31, 2014:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash equivalents (a)
 
$
11,058

 
$

 
$
11,058

Foreign currency derivatives
 
$

 
$
3,949

 
$
3,949

Liabilities:
 
 
 
 
 
 
Interest rate swap contracts
 
$

 
$
6,613

 
$
6,613

Foreign currency derivatives
 
$

 
$
2,346

 
$
2,346

(a)
Represents the Company’s investment in funds that invest primarily in money market securities.

11

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

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 and foreign currency derivatives (see Note 10) 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.
The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level III.
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, advertiser relationship 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 analysis, such as forecasts of future cash flows, are based on assumptions. The valuation of affiliate and customer relationships and advertiser 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 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.
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 condensed consolidated balance sheets, are summarized as follows:
 
June 30, 2015
 
Carrying
Amount
 
Estimated
Fair Value
Debt instruments:
 
 
 
Term Loan A Facility
$
1,441,831

 
$
1,424,963

7.75% Notes due July 2021
690,274

 
758,625

4.75% Notes due December 2022
591,701

 
601,500

 
$
2,723,806

 
$
2,785,088

 
 
 
 
 
December 31, 2014
 
Carrying
Amount
 
Estimated
Fair Value
Debt instruments:
 
 
 
Term Loan A Facility
$
1,478,659

 
$
1,465,200

7.75% Notes due July 2021
689,659

 
761,250

4.75% Notes due December 2022
591,248

 
585,000

 
$
2,759,566

 
$
2,811,450

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 10. 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.

12

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

As of June 30, 2015, the Company had interest rate swap contracts outstanding with notional amounts aggregating $455,750, which consists of interest rate swap contracts with notional amounts of $204,600 that are designated as cash flow hedges and interest rate swap contracts with notional amounts of $251,150 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 June 30, 2015, the Company’s interest rate swap contracts designated as cash flow hedges were highly effective.
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our or our subsidiaries' respective functional currencies (non-functional currency risk), such as affiliation agreements, programming contracts, certain accounts payable and trade receivables (including intercompany amounts) that are denominated in a currency other than the applicable functional currency.
The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are as follows:
 
Balance Sheet 
Location
 
June 30,
2015
 
December 31, 2014
Derivatives designated as hedging instruments:
 
 
 
 
 
Liabilities:
 
 
 
 
 
Interest rate swap contracts
Accrued liabilities
 
$
666

 
$
2,388

Derivatives not designated as hedging instruments:
 
 
 
 
 
Assets:
 
 
 
 
 
Foreign currency derivatives
Prepaid expenses and other current assets
 
1,777

 
1,808

Foreign currency derivatives
Other assets
 
1,948

 
2,141

Liabilities:
 
 
 
 
 
Interest rate swap contracts
Other liabilities
 
3,786

 
4,225

Foreign currency derivatives
Accrued liabilities
 
1,852

 
914

Foreign currency derivatives
Other liabilities
 
2,140

 
1,432

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 June 30,
 
 
 
Three Months Ended June 30,
 
2015
 
2014
 
 
 
2015
 
2014
Derivatives in cash flow hedging relationships:
 
 
 
 
 
 
 
 
 
Interest rate swap contracts
$
(197
)
 
$
(340
)
 
Interest expense
 
$
871

 
$
(1,512
)
(a)
There were no gains or losses recognized in earnings related to any ineffective portion of hedging relationships or related to any amount excluded from the assessment of hedge effectiveness for the three months ended June 30, 2015 and 2014.

13

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

 
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)
 
Six Months Ended June 30,
 
 
 
Six Months Ended June 30,
 
2015
 
2014
 
 
 
2015
 
2014
Derivatives in cash flow hedging relationships:
 
 
 
 
 
 
 
 
 
Interest rate swap contracts
$
(469
)
 
$
(636
)
 
Interest expense
 
$
1,839

 
$
2,593

(a)
There were no gains or losses recognized in earnings related to any ineffective portion of hedging relationships or related to any amount excluded from the assessment of hedge effectiveness for the six months ended June 30, 2015 and 2014.
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
 
Amount of Gain or (Loss) Recognized in Earnings on Derivatives
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2015
 
2014
 
2015
 
2014
Derivatives not designated as hedging relationships:
 
 
 
 
 
 
 
 
 
Interest rate swap contracts
Interest expense
 
$
(74
)
 
$
(769
)
 
$
(495
)
 
$
(1,024
)
Foreign currency option contracts
Miscellaneous, net
 

 

 

 
(1,754
)
Foreign currency derivatives
Miscellaneous, net
 
(1,993
)
 
182

 
(1,500
)
 
(268
)
Total
 
 
$
(2,067
)
 
$
(587
)
 
$
(1,995
)
 
$
(3,046
)
Note 11. Income Taxes
For the three and six months ended June 30, 2015, income tax expense attributable to continuing operations was $50,997 and $112,251, respectively, representing an effective tax rate of 37% and 34%, respectively. The effective tax rate differs from the federal statutory rate of 35% due primarily to state and local income tax expense of $2,726 and $6,560, tax benefit from foreign subsidiary earnings indefinitely reinvested outside the U.S. of $939 and $6,201, tax benefit from the domestic production activities deduction of $5,015 and $10,183 and tax expense of $3,957 and $6,788 resulting from an increase in the valuation allowances for foreign and local taxes for the three and six months ended June 30, 2015, respectively.
For the three and six months ended June 30, 2014, income tax expense attributable to continuing operations was $36,559 and $75,664, respectively, representing an effective tax rate of 38% and 36%, respectively. The effective tax rate differs from the federal statutory rate of 35% due to state and local income tax expense of $1,914 and $3,803, tax benefit from foreign subsidiary earnings indefinitely reinvested outside the U.S. of $3,303 and $7,190, tax expense of $3,090 and $6,424 relating to uncertain tax positions, including accrued interest, tax benefit from the domestic production activities deduction of $2,647 and $5,424, tax expense of $2,512 and $3,159 resulting from an increase in valuation allowances for foreign and local taxes partially offset by a decrease in the valuation allowance for foreign tax credits and tax expense of $1,134 and $2,151 for the effect of acquisition costs and other items for the three and six months ended June 30, 2014, respectively.
At June 30, 2015, the Company had foreign tax credit carry forwards of approximately $37,000, expiring on various dates from 2016 through 2025. For the six months ended June 30, 2015, excess tax benefits of $4,038 relating to share-based compensation awards and $800 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).
Note 12. Commitments
As of June 30, 2015, the Company’s contractual obligations not reflected on the Company’s condensed consolidated balance sheet increased $13,089 to $1,420,242 as compared to $1,407,153 at December 31, 2014. The increase relates primarily to program rights obligations and transmission commitments.

14

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

Note 13. Equity Plans
On June 9, 2015, AMC Networks granted 22,659 restricted stock units under the AMC Networks Inc. Amended and Restated 2011 Non-Employee Directors Plan to non-employee directors that vested on the date of grant.
On May 26, 2015, AMC Networks granted 39,099 restricted stock units to an employee under the AMC Networks Inc. Amended and Restated 2011 Employee Stock Plan that vest in equal annual installments over a three year period.
On March 6, 2015, AMC Networks granted 437,717 restricted stock units to certain executive officers and employees under the AMC Networks Inc. Amended and Restated 2011 Employee Stock Plan that vest on the third anniversary of the grant date. The vesting criteria for 125,465 restricted stock units include the achievement of certain performance targets by the Company.
During the six months ended June 30, 2015, 403,491 restricted stock units of AMC Networks Class A Common Stock previously issued to employees of the Company vested. On the vesting date, 171,382 of the shares underlying the restricted stock units were retained by the Company to cover the required statutory tax withholding obligations and 232,109 new shares of the Company's Class A Common Stock were issued in respect of the remaining restricted stock units. The shares retained to satisfy the employees' statutory minimum tax withholding obligations for the applicable income and other employment tax had an aggregate value of $14,320, which has been reflected as a financing activity in the condensed consolidated statement of cash flows for the six months ended June 30, 2015.
Share-based compensation expense included in selling, general and administrative expense, for the three and six months ended June 30, 2015 was $8,801 and $16,089, respectively and $8,760 and $13,839 for the three and six ended June 30, 2014, respectively.
As of June 30, 2015, there was $73,455 of total unrecognized share-based compensation cost related to outstanding unvested restricted stock units. The unrecognized compensation cost is expected to be recognized over a weighted-average remaining period of approximately 3.0 years.
Note 14. Redeemable Noncontrolling Interests
In connection with the acquisition of the Company's 49.9% interest in New Video in 2014, the terms of the agreement provide BBCWA with a right to put all of its 50.1% noncontrolling interest to the Company at the greater of the then fair value or the fair value of the initial equity interest at inception. The put option is exercisable on the fifteenth and twenty-fifth year anniversaries of the agreement.
Additionally, in connection with the creation of a joint venture entity in 2013, the terms of the agreement provide the noncontrolling member with a right to put all of its interest to the Company at the then fair value.
Because exercise of these put rights is outside of the Company's control, the noncontrolling interest in each entity is presented as redeemable noncontrolling interest outside of stockholders' deficiency in the Company's condensed consolidated balance sheet. The activity reflected within redeemable noncontrolling interest for the six months ended June 30, 2015 is presented below.
 
 
Six Months Ended June 30, 2015
Beginning balance
 
$
204,611

Net earnings
 
6,778

Distributions
 
(3,154
)
Non-cash contributions
 
52

Ending balance
 
$
208,287

Note 15. 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 Systems Corporation and its subsidiaries ("Cablevision") and The Madison Square Garden Company and its subsidiaries (“MSG”).
In connection with the spin off from Cablevision in 2011, the Company entered into various agreements with Cablevision, and certain related party arrangements. These agreements govern certain of the Company’s relationships with Cablevision

15

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

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 spin-off as well as a number of on-going commercial relationships. The distribution agreement provides 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 $6,493 and $7,525 for the three months ended June 30, 2015 and 2014, respectively. Revenues, net from related parties amounted to $13,212 and $15,214 for the six months ended June 30, 2015 and 2014, 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 selling, general and administrative expenses, pursuant to transactions with its related parties amounted to $1,269 and $890 for the three months ended June 30, 2015 and 2014, respectively. Selling, general and administrative expenses with its related parties amounted to $2,218 and $1,549 for the six months ended June 30, 2015 and 2014, respectively.
Note 16. Cash Flows
The Company’s non-cash investing and financing activities and other supplemental data are as follows:
 
Six Months Ended June 30,
 
2015
 
2014
Non-Cash Investing and Financing Activities:
 
 
 
Continuing Operations:
 
 
 
Increase in capital lease obligations and related assets
$

 
$
19,036

Capital expenditures incurred but not yet paid
1,957

 
656

Supplemental Data:
 
 
 
Cash interest paid — continuing operations
61,223

 
61,300

Income taxes paid, net — continuing operations
99,177

 
32,187

Note 17. Accumulated Other Comprehensive (Loss) Income
The following table details the components of accumulated other comprehensive (loss) income:
 
Six Months Ended June 30, 2015
 
Six Months Ended June 30, 2014
 
Currency Translation Adjustment
 
Gains (Losses) on Cash Flow Hedges
 
Accumulated Other Comprehensive Income (Loss)
 
Currency Translation Adjustment
 
Gains (Losses) on Cash Flow Hedges
 
Accumulated Other Comprehensive Income (Loss)
Beginning Balance
$
(77,492
)
 
$
(1,756
)
 
$
(79,248
)
 
$

 
$
(4,495
)
 
$
(4,495
)
Other comprehensive (loss) income before reclassifications
(36,706
)
 
(469
)
 
(37,175
)
 
10,052

 
(636
)
 
9,416

Amounts reclassified from accumulated other comprehensive loss

 
1,839

 
1,839

 

 
2,593

 
2,593

Net current-period other comprehensive (loss) income, before income taxes
(36,706
)
 
1,370

 
(35,336
)
 
10,052

 
1,957

 
12,009

Income tax expense
4,165

 
(501
)
 
3,664

 

 
(722
)
 
(722
)
Net current-period other comprehensive (loss) income, net of income taxes
(32,541
)
 
869

 
(31,672
)
 
10,052

 
1,235

 
11,287

Ending Balance
$
(110,033
)
 
$
(887
)
 
$
(110,920
)
 
$
10,052

 
$
(3,260
)
 
$
6,792

Amounts reclassified to net earnings for gains and losses on cash flow hedges are included in interest expense in the condensed consolidated statements of income.

16

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

Note 18. 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). 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 reportable segments below.
 
Three Months Ended June 30, 2015
 
National
Networks
 
International
and Other
 
Inter-segment
eliminations
 
Consolidated
Revenues, net
 
 
 
 
 
 
 
Advertising
$
185,712

 
$
21,778

 
$

 
$
207,490

Distribution
302,896

 
91,105

 
(353
)
 
393,648

Consolidated revenues, net
$
488,608

 
$
112,883

 
$
(353
)
 
$
601,138

Adjusted operating cash flow
$
182,553

 
$
8,610

 
$
166

 
$
191,329

Depreciation and amortization
(7,212
)
 
(13,828
)
 

 
(21,040
)
Share-based compensation expense
(7,043
)
 
(1,758
)
 

 
(8,801
)
Restructuring expense
(651
)
 
(2,003
)
 

 
(2,654
)
Operating income (loss)
$
167,647

 
$
(8,979
)
 
$
166

 
$
158,834

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2014
 
National
Networks
 
International
and Other
 
Inter-segment
eliminations
 
Consolidated
Revenues, net
 
 
 
 
 
 
 
Advertising
$
163,836

 
$
16,475

 
$

 
$
180,311

Distribution
234,168

 
108,125

 
(511
)
 
341,782

Consolidated revenues, net
$
398,004

 
$
124,600

 
$
(511
)
 
$
522,093

Adjusted operating cash flow
$
136,918

 
$
19,537

 
$
464

 
$
156,919

Depreciation and amortization
(5,046
)
 
(12,485
)
 

 
(17,531
)
Share-based compensation expense
(6,624
)
 
(2,136
)
 

 
(8,760
)
Restructuring expense

 
(1,153
)
 

 
(1,153
)
Operating income
$
125,248

 
$
3,763

 
$
464

 
$
129,475



17

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

 
Six Months Ended June 30, 2015
 
National
Networks
 
International
and Other
 
Inter-segment
eliminations
 
Consolidated
Revenues, net
 
 
 
 
 
 
 
Advertising
$
446,151

 
$
40,581

 
$

 
$
486,732

Distribution
605,304

 
178,658

 
(874
)
 
783,088

Consolidated revenues, net
$
1,051,455

 
$
219,239

 
$
(874
)
 
$
1,269,820

Adjusted operating cash flow
$
435,811

 
$
14,289

 
$
447

 
$
450,547

Depreciation and amortization
(14,574
)
 
(26,993
)
 

 
(41,567
)
Share-based compensation expense
(12,453
)
 
(3,636
)
 

 
(16,089
)
Restructuring expense
(717
)
 
$
(2,593
)
 
$

 
$
(3,310
)
Operating income (loss)
$
408,067

 
$
(18,933
)
 
$
447

 
$
389,581

Capital expenditures
$
11,484

 
$
21,640

 
$

 
$
33,124

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014
 
National
Networks
 
International
and Other
 
Inter-segment
eliminations
 
Consolidated
Revenues, net
 
 
 
 
 
 
 
Advertising
$
371,739

 
$
24,489

 
$

 
$
396,228

Distribution
474,945

 
176,689

 
(1,215
)
 
650,419

Consolidated revenues, net
$
846,684

 
$
201,178

 
$
(1,215
)
 
$
1,046,647

Adjusted operating cash flow
$
314,664

 
$
8,488

 
$
873

 
$
324,025

Depreciation and amortization
(9,953
)
 
(21,972
)
 

 
(31,925
)
Share-based compensation expense
(10,789
)
 
(3,050
)
 

 
(13,839
)
Restructuring expense

 
(1,153
)
 

 
(1,153
)
Operating income (loss)
$
293,922

 
$
(17,687
)
 
$
873

 
$
277,108

Capital expenditures
$
7,204

 
$
11,551

 
$

 
$
18,755

Inter-segment eliminations are primarily revenues recognized by AMC Networks Broadcasting & Technology for transmission revenues recognized from the International and Other operating segment as well as distribution licensing revenues recognized between the National Networks and International and Other segments.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Inter-segment revenues
 
 
 
 
 
 
 
National Networks
$
(336
)
 
$
(316
)
 
$
(788
)
 
$
(990
)
International and Other
(17
)
 
(195
)
 
(86
)
 
(225
)
 
$
(353
)
 
$
(511
)
 
$
(874
)
 
$
(1,215
)
The table below summarizes revenues based on customer location:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
United States
$
472,258

 
$
383,610

 
$
1,036,083

 
$
832,760

Europe
78,056

 
107,231

 
153,942

 
157,014

Other
50,824

 
31,252

 
79,795

 
56,873

 
$
601,138

 
$
522,093

 
$
1,269,820

 
$
1,046,647


18

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

The table below summarizes property and equipment based on asset location:
 
June 30, 2015
 
December 31, 2014
Property and equipment, net
 
 
 
United States
$
84,940

 
$
79,832

Europe
35,356

 
33,380

Other
20,027

 
20,632

 
$
140,323

 
$
133,844

Note 19. 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.

19

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)

Condensed Consolidating Balance Sheet
June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 Parent Company
 
 Guarantor Subsidiaries
 
 Non- Guarantor Subsidiaries
 
 Eliminations
 
 Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
894

 
$
122,665

 
$
117,501

 
$

 
$
241,060

 Accounts receivable, trade (less allowance for doubtful accounts)

 
453,121

 
153,905

 

 
607,026

Amounts due from related parties, net

 
3,721

 
254

 

 
3,975

Current portion of program rights, net

 
339,508

 
100,975

 

 
440,483

Prepaid expenses, other current assets and intercompany receivable
24,693

 
159,592

 
18,470

 
(130,549
)
 
72,206

Deferred tax asset, net
19,660

 

 
2,081

 

 
21,741

Total current assets
45,247

 
1,078,607

 
393,186

 
(130,549
)
 
1,386,491

Property and equipment, net of accumulated depreciation

 
85,013

 
55,310

 

 
140,323

Investment in affiliates
2,037,049

 
946,829

 

 
(2,983,878
)
 

Program rights, net

 
929,806

 
99,121

 

 
1,028,927

Long-term intercompany notes receivable
615,906

 
400,258

 
201,598

 
(1,217,762
)
 

Deferred carriage fees, net

 
53,370

 
2,208

 

 
55,578

Intangible assets, net

 
194,913

 
367,552

 

 
562,465

Goodwill

 
72,962

 
654,244

 

 
727,206

Other assets
23,525

 
73,060

 
112,035

 

 
208,620

Total assets
$
2,721,727

 
$
3,834,818

 
$
1,885,254

 
$
(4,332,189
)
 
$
4,109,610

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
12

 
$
102,615

 
$
43,633

 
$

 
$
146,260

Accrued liabilities and intercompany payable
36,994

 
101,626

 
146,028

 
(130,549
)
 
154,099

Current portion of program rights obligations

 
225,383

 
55,258

 

 
280,641

Deferred revenue

 
62,868

 
7,736

 

 
70,604

Current portion of long-term debt
111,000

 

 

 

 
111,000

Current portion of capital lease obligations

 
2,312

 
771

 

 
3,083

Total current liabilities
148,006

 
494,804

 
253,426

 
(130,549
)
 
765,687

Program rights obligations

 
441,316

 
18,334

 

 
459,650

Long-term debt
2,612,806

 

 

 

 
2,612,806

Capital lease obligations

 
10,603

 
15,105

 

 
25,708

Deferred tax liability, net
121,398

 

 
9,744

 

 
131,142

Other liabilities and intercompany notes payable
32,177

 
851,046

 
409,239

 
(1,217,762
)
 
74,700

Total liabilities
2,914,387

 
1,797,769

 
705,848

 
(1,348,311
)
 
4,069,693

Commitments and contingencies

 

 

 

 

Redeemable noncontrolling interests

 

 
208,287

 

 
208,287

Stockholders’ deficiency: