Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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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 June 30, 2017
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 | ¨ |
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| | Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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, 2017:
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Class A Common Stock par value $0.01 per share | 52,080,739 |
Class B Common Stock par value $0.01 per share | 11,484,408 |
AMC NETWORKS INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Item 1. | Financial Statements. |
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited) |
| | | | | | | |
| June 30, 2017 | | December 31, 2016 |
ASSETS | | | |
Current Assets: | | | |
Cash and cash equivalents | $ | 189,479 |
| | $ | 481,389 |
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Accounts receivable, trade (less allowance for doubtful accounts of $6,818 and $6,064) | 744,647 |
| | 700,655 |
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Amounts due from related parties, net | 488 |
| | 508 |
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Current portion of program rights, net | 450,090 |
| | 441,130 |
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Prepaid expenses and other current assets | 77,612 |
| | 72,661 |
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Assets held for sale | 16,433 |
| | — |
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Total current assets | 1,478,749 |
| | 1,696,343 |
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Property and equipment, net of accumulated depreciation of $257,099 and $272,148 | 159,153 |
| | 166,636 |
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Program rights, net | 1,221,916 |
| | 1,108,586 |
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Deferred carriage fees, net | 37,626 |
| | 43,886 |
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Intangible assets, net | 479,179 |
| | 485,809 |
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Goodwill | 680,234 |
| | 657,708 |
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Deferred tax assets, net | 9,079 |
| | 8,598 |
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Other assets | 412,232 |
| | 313,029 |
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Total assets | $ | 4,478,168 |
| | $ | 4,480,595 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | | | |
Current Liabilities: | | | |
Accounts payable | $ | 90,893 |
| | $ | 88,677 |
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Accrued liabilities | 234,494 |
| | 284,429 |
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Current portion of program rights obligations | 301,527 |
| | 300,845 |
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Deferred revenue | 47,834 |
| | 53,643 |
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Current portion of long-term debt | 259,000 |
| | 222,000 |
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Current portion of capital lease obligations | 4,253 |
| | 4,584 |
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Liabilities held for sale | 16,433 |
| | — |
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Total current liabilities | 954,434 |
| | 954,178 |
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Program rights obligations | 485,883 |
| | 398,175 |
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Long-term debt | 2,453,814 |
| | 2,597,263 |
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Capital lease obligations | 28,341 |
| | 35,282 |
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Deferred tax liabilites, net | 159,996 |
| | 145,791 |
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Other liabilities | 120,890 |
| | 132,219 |
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Total liabilities | 4,203,358 |
| | 4,262,908 |
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Commitments and contingencies |
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Redeemable noncontrolling interests | 217,149 |
| | 219,331 |
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Stockholders’ equity (deficiency): | | | |
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 62,702 and 62,409 shares issued and 53,007 and 57,079 shares outstanding, respectively | 627 |
| | 624 |
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Class B Common Stock, $0.01 par value, 90,000 shares authorized, 11,484 shares issued and outstanding | 115 |
| | 115 |
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Preferred stock, $0.01 par value, 45,000 shares authorized; none issued | — |
| | — |
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Paid-in capital | 158,485 |
| | 142,798 |
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Accumulated earnings | 534,223 |
| | 295,409 |
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Treasury stock, at cost (9,696 and 5,330 shares Class A Common Stock, respectively) | (519,604 | ) | | (275,230 | ) |
Accumulated other comprehensive loss | (144,169 | ) | | (193,798 | ) |
Total AMC Networks stockholders’ equity (deficiency) | 29,677 |
| | (30,082 | ) |
Non-redeemable noncontrolling interests | 27,984 |
| | 28,438 |
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Total stockholders’ equity (deficiency) | 57,661 |
| | (1,644 | ) |
Total liabilities and stockholders’ equity (deficiency) | $ | 4,478,168 |
| | $ | 4,480,595 |
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See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
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| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Revenues, net (including revenues, net from related parties of $1,512, $6,200, $3,079 and $12,906, respectively) | $ | 710,545 |
| | $ | 684,832 |
| | $ | 1,430,734 |
| | $ | 1,391,411 |
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Operating expenses: | | | | | | | |
Technical and operating (excluding depreciation and amortization) | 334,845 |
| | 305,492 |
| | 633,457 |
| | 576,537 |
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Selling, general and administrative (including charges from related parties of $415, $822, $989 and $1,890, respectively) | 162,273 |
| | 179,366 |
| | 325,982 |
| | 336,644 |
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Depreciation and amortization | 20,606 |
| | 21,553 |
| | 44,099 |
| | 41,185 |
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Impairment charges | 17,112 |
| | — |
| | 17,112 |
| | — |
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Restructuring (credit) expense | (81 | ) | | 389 |
| | 2,623 |
| | 354 |
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Total operating expenses | 534,755 |
| | 506,800 |
| | 1,023,273 |
| | 954,720 |
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Operating income | 175,790 |
| | 178,032 |
| | 407,461 |
| | 436,691 |
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Other income (expense): | | | | | | | |
Interest expense | (30,718 | ) | | (32,007 | ) | | (61,217 | ) | | (63,757 | ) |
Interest income | 3,767 |
| | 1,671 |
| | 7,259 |
| | 2,393 |
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Loss on extinguishment of debt | — |
| | (9 | ) | | — |
| | (48,343 | ) |
Miscellaneous, net | 18,980 |
| | (24,910 | ) | | 30,028 |
| | (25,599 | ) |
Total other income (expense) | (7,971 | ) | | (55,255 | ) | | (23,930 | ) | | (135,306 | ) |
Income from operations before income taxes | 167,819 |
| | 122,777 |
| | 383,531 |
| | 301,385 |
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Income tax expense | (60,193 | ) | | (39,390 | ) | | (133,275 | ) | | (97,933 | ) |
Net income including noncontrolling interests | 107,626 |
| | 83,387 |
| | 250,256 |
| | 203,452 |
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Net income attributable to noncontrolling interests | (5,028 | ) | | (6,212 | ) | | (11,442 | ) | | (12,832 | ) |
Net income attributable to AMC Networks’ stockholders | $ | 102,598 |
| | $ | 77,175 |
| | $ | 238,814 |
| | $ | 190,620 |
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Net income per share attributable to AMC Networks’ stockholders: |
Basic | $ | 1.55 |
| | $ | 1.06 |
| | $ | 3.56 |
| | $ | 2.62 |
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Diluted | $ | 1.54 |
| | $ | 1.05 |
| | $ | 3.52 |
| | $ | 2.60 |
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Weighted average common shares: | | | | | | | |
Basic weighted average common shares | 66,224 |
| | 72,729 |
| | 67,117 |
| | 72,654 |
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Diluted weighted average common shares | 66,789 |
| | 73,300 |
| | 67,771 |
| | 73,287 |
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See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
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| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income including noncontrolling interests | $ | 107,626 |
| | $ | 83,387 |
| | $ | 250,256 |
| | $ | 203,452 |
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Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustment | 37,820 |
| | (18,389 | ) | | 47,684 |
| | (3,004 | ) |
Unrealized (loss) gain on interest rate swaps | (180 | ) | | (765 | ) | | 139 |
| | (2,343 | ) |
Unrealized (loss) gain on available for sale securities | (1,083 | ) | | — |
| | 2,938 |
| | — |
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Other comprehensive income, before income taxes | 36,557 |
| | (19,154 | ) | | 50,761 |
| | (5,347 | ) |
Income tax benefit (expense) | 465 |
| | (8,312 | ) | | (1,132 | ) | | (10,211 | ) |
Other comprehensive income (loss), net of income taxes | 37,022 |
| | (27,466 | ) | | 49,629 |
| | (15,558 | ) |
Comprehensive income | 144,648 |
| | 55,921 |
| | 299,885 |
| | 187,894 |
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Comprehensive income attributable to noncontrolling interests | (6,559 | ) | | (4,424 | ) | | (13,364 | ) | | (11,456 | ) |
Comprehensive income attributable to AMC Networks’ stockholders | $ | 138,089 |
| | $ | 51,497 |
| | $ | 286,521 |
| | $ | 176,438 |
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See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) |
| | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 |
Cash flows from operating activities: | | | |
Net income including noncontrolling interests | $ | 250,256 |
| | $ | 203,452 |
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Adjustments to reconcile income from operations to net cash from operating activities: | | | |
Depreciation and amortization | 44,099 |
| | 41,185 |
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Impairment charges | 17,112 |
| | — |
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Share-based compensation expense related to equity classified awards | 27,595 |
| | 19,488 |
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Amortization and write-off of program rights | 433,023 |
| | 373,491 |
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Amortization of deferred carriage fees | 8,803 |
| | 8,187 |
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Unrealized foreign currency transaction (gain) loss | (8,118 | ) | | 28,366 |
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Unrealized (gain) loss on derivative contracts, net | (21,790 | ) | | 1,064 |
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Amortization of deferred financing costs and discounts on indebtedness | 4,551 |
| | 4,638 |
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Loss on extinguishment of debt | — |
| | 48,343 |
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Bad debt expense | 2,208 |
| | 1,449 |
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Deferred income taxes | 11,914 |
| | 4,225 |
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Excess tax benefits from share-based compensation arrangements | — |
| | (781 | ) |
Other, net | (3,642 | ) | | (1,930 | ) |
Changes in assets and liabilities: | | | |
Accounts receivable, trade (including amounts due from related parties, net) | (43,503 | ) | | (45,536 | ) |
Prepaid expenses and other assets | (31,141 | ) | | (17,090 | ) |
Program rights and obligations, net | (458,480 | ) | | (466,288 | ) |
Income taxes payable | (10,094 | ) | | 13,636 |
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Deferred revenue | (9,908 | ) | | 29,308 |
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Deferred carriage fees, net | (3,313 | ) | | (9,910 | ) |
Accounts payable, accrued expenses and other liabilities | (43,595 | ) | | (5,733 | ) |
Net cash provided by operating activities | 165,977 |
| | 229,564 |
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Cash flows from investing activities: | | | |
Capital expenditures | (39,936 | ) | | (24,186 | ) |
Investments in and loans to investees | (43,000 | ) | | — |
|
Payments for acquisition of a business, net of cash acquired | — |
| | (354 | ) |
Net cash used in investing activities | (82,936 | ) | | (24,540 | ) |
Cash flows from financing activities: | | | |
Proceeds from the issuance of long-term debt | — |
| | 982,500 |
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Principal payments on long-term debt | (110,965 | ) | | (728,449 | ) |
Premium and fees paid on extinguishment of debt | — |
| | (39,188 | ) |
Payments for financing costs | — |
| | (2,070 | ) |
Deemed repurchases of restricted stock units | (13,373 | ) | | (10,834 | ) |
Purchase of treasury stock | (244,374 | ) | | (48,227 | ) |
Proceeds from stock option exercises | — |
| | 1,216 |
|
Excess tax benefits from share-based compensation arrangements | — |
| | 781 |
|
Principal payments on capital lease obligations | (2,526 | ) | | (2,075 | ) |
Distributions to noncontrolling interests | (12,930 | ) | | (8,977 | ) |
Net cash (used in) provided by financing activities | (384,168 | ) | | 144,677 |
|
Net (decrease) increase in cash and cash equivalents from operations | (301,127 | ) | | 349,701 |
|
Effect of exchange rate changes on cash and cash equivalents | 9,217 |
| | (22,552 | ) |
Cash and cash equivalents at beginning of period | 481,389 |
| | 316,321 |
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Cash and cash equivalents at end of period | $ | 189,479 |
| | $ | 643,470 |
|
See accompanying notes to condensed consolidated financial statements.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Description of Business and Basis of Presentation
Description of Business
AMC Networks Inc. (“AMC Networks”) and its subsidiaries (collectively referred to as the “Company”) own and operate entertainment businesses and assets. The Company is comprised of two operating segments:
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• | National Networks: Includes activities of our programming businesses, which include our five programming networks, distributed in the U.S. and Canada. These programming networks include AMC, WE tv, BBC AMERICA, IFC, and SundanceTV in the U.S.; and AMC, IFC, and Sundance Channel in Canada. Our AMC Studios operations within the National Networks segment sells rights worldwide to its owned original programming. The National Networks operating segment also includes AMC Networks Broadcasting & Technology, the technical services business, which primarily services most of the programming networks included in the National Networks segment. |
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• | International and Other: Principally includes AMC Networks International (“AMCNI”), 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; AMCNI – DMC, the broadcast solutions unit of certain networks of AMCNI and third-party networks; and various developing on-line content distribution initiatives. The AMCNI – DMC business was sold on July 12, 2017. |
Basis of Presentation
Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of AMC Networks and 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 of accounting, unless the fair value option is elected.
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, 2016 contained in the Company’s Annual Report on Form 10-K (“2016 Form 10-K”) filed with the SEC. The condensed consolidated financial statements 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, 2017.
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 limited, or no future programming usefulness, a write-off of the unamortized cost is recorded in technical and operating expense. Program rights write-offs included in technical and operating expense of $1.4 million and $1.1 million were recorded for the three months ended June 30, 2017 and June 30, 2016, respectively. Program rights write-offs included in technical and operating expense of $1.8 million and $1.1 million were recorded for the six months ended June 30, 2017 and June 30, 2016, respectively.
Assets and Liabilities Held for Sale
In June 2017, we classified the assets and liabilities of AMCNI – DMC as held for sale. Assets held for sale are required to be presented at fair value less estimated sale costs, and as a result, the Company recognized a pre-tax impairment charge of $17.1 million for the three months ended June 30, 2017. Additionally, the Company expects to recognize a pre-tax loss of approximately $12.1 million in the third quarter of 2017 in conjunction with the sale of AMCNI – DMC, completed on July 12, 2017. The loss on sale may vary due to the finalization of certain purchase price adjustments.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(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, derivative assets and liabilities, certain stock compensation awards, 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 tax assets and liabilities.
Recently Adopted and Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
The Company adopted Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting, which became effective for the Company as of January 1, 2017. ASU 2016-09 amends Accounting Standards Codification ("ASC") Topic 718, Compensation – Stock Compensation and simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification in the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recorded as a component of the provision for income taxes in the reporting period in which they occur. Additionally, ASU 2016-09 requires that the Company present excess tax benefits in the statement of cash flows as an operating activity. The Company elected to apply this adoption prospectively; accordingly, prior periods have not been adjusted. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-09 Compensation-Stock Compensation (Topic 718). ASU 2017-09 addresses changes to the terms or conditions of a share-based payment award, specifically regarding which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting. The guidance does not change the accounting for modifications but clarifies that an entity should account for the effects of a modification unless the fair value, vesting conditions, and classification of the modified award are the same immediately before the original award is modified. ASU 2017-09 is effective for the first quarter of 2018, with early adoption permitted. The adoption of ASU 2017-09 is not expected to have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04 Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 removes Step 2 of the current goodwill impairment test under ASC Topic 350 and replaces it with a simplified model. Under the simplified model, a goodwill impairment is calculated as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. The amount of any impairment under the simplified model may differ from what would have been recognized under the two-step test. The ASU is effective for the Company in the first quarter of 2020, with early adoption permitted for any impairment tests performed after a testing date of January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on the Company's consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes – Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory and includes requirements to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs; therefore, eliminating the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 is effective for the Company in first quarter of 2018, with early adoption permitted. Any adjustments as a result of adoption are to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of ASU 2016-16 is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The guidance clarifies the way in which certain cash receipts and cash payments should be classified on the statement of cash flows and also how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU 2016-15 is effective for the first quarter of 2018 with early adoption permitted. The adoption of ASU 2016-15 is not expected to have a material impact on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to record most of their leases on the balance sheet, which will be recognized as a right-of-use asset and a lease liability. The Company will be required to classify each separate lease component as an operating or finance lease at the lease commencement date. Initial measurement of the right-of-use asset and lease liability is the same for operating and finance leases, however expense recognition and amortization
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
of the right-of-use asset differs. Operating leases will reflect lease expense on a straight-line basis similar to current operating leases. The straight-line expense will reflect the interest expense on the lease liability (effective interest method) and amortization of the right-of-use asset, which will be presented as a single line item in the operating expense section of the income statement. Finance leases will reflect a front-loaded expense pattern similar to the pattern for current capital leases. ASU 2016-02 is effective for the first quarter of 2019, with early adoption permitted. The Company is currently determining its implementation approach and assessing the impact the adoption 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 also expands the required disclosures to include the disaggregation of revenue from contracts with customers into categories that depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors. During 2016, the FASB issued additional interpretive guidance relating to the standard which covered the topics of principal versus agent considerations and identifying performance obligations and licensing. The standard is effective for the Company in the first quarter of 2018. The two permitted transition methods under the standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application.
The Company established an implementation team and performed an analysis of each of our revenue streams to assess the impact of the standard on our various revenue contracts, and analyze our current accounting policies and practices to identify potential differences that would result from the implementation of the standard. To date, the Company has made significant progress toward completing its evaluation of the potential changes from adopting the standard on its financial reporting and disclosures. The Company has completed an initial assessment of each of its revenue streams and has begun drafting its revenue recognition policy under the new standard. However, there are a few areas that remain subject to further clarification with respect to the implementation of the new standard on certain of our revenue streams. The Company has been closely monitoring FASB activity related to the new standard, as well as working with various non-authoritative groups to conclude on industry specific interpretative issues.
While significant progress has been made, our final evaluation of the impact of the new revenue standard is ongoing and will continue throughout 2017, including making a final determination about our implementation approach.
Note 2. Net Income per Share
The following is a reconciliation between basic and diluted weighted average shares outstanding: |
| | | | | | | | | | | |
(In thousands) | Three Months Ended June 30, | | Six Months Ended June 30, |
2017 | | 2016 | | 2017 | | 2016 |
Basic weighted average common shares outstanding | 66,224 |
| | 72,729 |
| | 67,117 |
| | 72,654 |
|
Effect of dilution: | | | | | | | |
Stock options | — |
| | 1 |
| | — |
| | 26 |
|
Restricted stock units | 565 |
| | 570 |
| | 654 |
| | 607 |
|
Diluted weighted average common shares outstanding | 66,789 |
| | 73,300 |
| | 67,771 |
| | 73,287 |
|
For the three and six months ended June 30, 2017, there were approximately 388,000 stock options that would have been anti-dilutive to the diluted weighted average common shares outstanding. For the three and six months ended June 30, 2016, there were no stock options or restricted stock units that would have been anti-dilutive to the diluted weighted average common shares outstanding. Approximately 962,000 and 505,000 restricted stock units with performance conditions have been excluded from diluted weighted average common shares outstanding for the three and six months ended June 30, 2017 and June 30, 2016, respectively, since performance conditions on these awards were not met in each of the respective periods.
Stock Repurchase Program
On March 4, 2016, the Company’s Board of Directors authorized a program to repurchase up to $500 million of its outstanding shares of Class A common stock (the “Stock Repurchase Program”). On June 6, 2017, the Board of Directors approved an increase of $500 million in the amount authorized for a total of $1.0 billion authorized under the Stock Repurchase Program. The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. For the six months ended June 30, 2017, the Company repurchased 4.4 million shares of its Class A common stock at an average purchase price of approximately $55.97 per share. As of June 30, 2017, the Company had $532.4 million available for repurchase under the Stock Repurchase Program.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
Note 3. Restructuring
The Company incurred restructuring expense primarily related to severance charges associated with the elimination of certain positions across the Company.
The following table summarizes the restructuring (credit) expense recognized by operating segment:
|
| | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended June 30, | | Six Months Ended June 30, |
2017 | | 2016 | | 2017 | | 2016 |
National Networks | $ | (97 | ) | | $ | 37 |
| | $ | (43 | ) | | $ | 67 |
|
International & Other | 16 |
| | 352 |
| | 2,666 |
| | 287 |
|
Total restructuring expense (credit) | $ | (81 | ) | | $ | 389 |
| | $ | 2,623 |
| | $ | 354 |
|
Restructuring expense in the International and Other segment includes corporate headquarter related charges.
The following table summarizes the accrued restructuring costs:
|
| | | | | | | | | | | |
(In thousands) | Severance and employee-related costs | | Other exit costs | | Total |
Balance at December 31, 2016 | $ | 12,106 |
| | $ | 205 |
| | $ | 12,311 |
|
Charges (credits) | 2,636 |
| | (13 | ) | | 2,623 |
|
Cash payments | (13,396 | ) | | (151 | ) | | (13,547 | ) |
Non-cash adjustments | (52 | ) | | 68 |
| | 16 |
|
Currency translation | 1 |
| | 9 |
| | 10 |
|
Balance at June 30, 2017 | $ | 1,295 |
| | $ | 118 |
| | $ | 1,413 |
|
Accrued liabilities for restructuring costs are included in accrued liabilities in the condensed consolidated balance sheet at June 30, 2017.
Note 4. Investments
RLJE
On October 14, 2016, Digital Entertainment Holdings LLC (“DEH”), a wholly owned subsidiary of the Company, and RLJ Entertainment, Inc. (“RLJE”) entered into a Credit and Guaranty agreement (the “RLJE Credit Agreement”) pursuant to which DEH provided senior secured term loans totaling $65 million to RLJE, consisting of a $5 million Tranche A term loan (the “Tranche A Loan”) and a $60 million Tranche B term loan (the “Tranche B Loan”), and DEH received warrants to purchase at least 20 million shares of RLJE’s common stock, at a price of $3.00 per share (the “RLJE Warrants”). On January 30, 2017, the Company and RLJE amended the terms of the Tranche A Loan to increase the principal amount by $8 million to $13 million and to extend the maturity date of that tranche from October 14, 2017 to June 30, 2019.
On June 16, 2017, DEH and RLJE entered into a second amendment to the RLJE Credit Agreement (the “Second Amendment”) pursuant to which DEH provided an additional tranche of the term loan debt to RLJE in the principal amount of $10 million (the “Tranche A-2 Loan”) with a maturity date of June 30, 2021. In addition, the Second Amendment also (i) extended the maturity date of the Tranche A Loan to June 30, 2020, (ii) provided that, commencing with the interest payment to be made on June 30, 2017, all interest under the RLJE Credit Agreement will be paid in shares of RLJE’s common stock, and (iii) increased the maximum senior leverage ratio, as defined in the terms of the RLJE Credit Agreement. For purposes of calculating the interest to be paid in shares of RLJE common stock, the value of such shares is based on a fixed $3.00 per share.
On June 20, 2017, in connection with the Second Amendment, DEH exercised a portion of its RLJE Class A warrants at $3.00 per share to acquire 1,667,000 shares of RLJE common stock in exchange for the cancellation of $5 million of the Tranche B Loan. Following the cancellation, the outstanding balance of the Tranche B Loan is approximately $55 million.
The increased ownership interest from the warrant exercise, as well as the existing representation on RLJE’s board of directors and the terms of the RLJE Credit Agreement were deemed, for accounting purposes, to provide DEH with the ability to exert significant influence over RLJE. As a result, the RLJE common stock investment held by the Company qualified for the use of the equity method of accounting. The Company has elected the fair value option for its investment in RLJE common stock based on the availability of a quoted market price. For the three months ended June 30, 2017, the Company recognized a gain of $1.3
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
million in the fair value of its investment in RLJE common stock, which is included in Miscellaneous, net in the condensed consolidated income statement.
The RLJE term loans are included in Other assets in the condensed consolidated balance sheet. The Company accounts for the portion of interest on the RLJE term loans payable in RLJE common stock as an embedded derivative. In addition, the RLJE Warrants are accounted for as derivatives. Both the RLJE Warrants and the embedded derivative for the interest payable in RLJE common stock are remeasured at the end of each period with changes in fair value included in Miscellaneous, net in the condensed consolidated statement of income.
Note 5. Goodwill and Other Intangible Assets
The carrying amount of goodwill, by operating segment is as follows:
|
| | | | | | | | | | | |
(In thousands) | National Networks | | International and Other | | Total |
December 31, 2016 | $ | 242,303 |
| | $ | 415,405 |
| | $ | 657,708 |
|
Amortization of “second component” goodwill | (1,272 | ) | | — |
| | (1,272 | ) |
Foreign currency translation | — |
| | 23,798 |
| | 23,798 |
|
June 30, 2017 | $ | 241,031 |
| | $ | 439,203 |
| | $ | 680,234 |
|
The reduction of $1.3 million 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:
|
| | | | | | | | | | | | | |
(In thousands) | June 30, 2017 | | |
Gross | | Accumulated Amortization | | Net | | Estimated Useful Lives |
Amortizable intangible assets: | | | | | | | |
Affiliate and customer relationships | $ | 520,722 |
| | $ | (151,059 | ) | | $ | 369,663 |
| | 10 to 25 years |
Advertiser relationships | 46,282 |
| | (11,302 | ) | | 34,980 |
| | 11 years |
Trade names | 53,055 |
| | (8,046 | ) | | 45,009 |
| | 12 to 20 years |
Other amortizable intangible assets | 10,851 |
| | (1,224 | ) | | 9,627 |
| | 15 years |
Total amortizable intangible assets | 630,910 |
| | (171,631 | ) | | 459,279 |
| | |
Indefinite-lived intangible assets: | | | | | | | |
Trademarks | 19,900 |
| | — |
| | 19,900 |
| | |
Total intangible assets | $ | 650,810 |
| | $ | (171,631 | ) | | $ | 479,179 |
| | |
(In thousands) | December 31, 2016 | | |
Gross | | Accumulated Amortization | | Net | | |
Amortizable intangible assets: | | | | | | | |
Affiliate and customer relationships | $ | 509,992 |
| | $ | (133,932 | ) | | $ | 376,060 |
| | |
Advertiser relationships | 46,282 |
| | (9,198 | ) | | 37,084 |
| | |
Trade names | 49,720 |
| | (6,307 | ) | | 43,413 |
| | |
Other amortizable intangible assets | 10,002 |
| | (791 | ) | | 9,211 |
| | |
Total amortizable intangible assets | 615,996 |
| | (150,228 | ) | | 465,768 |
| | |
Indefinite-lived intangible assets: | | | | | | | |
Trademarks | 20,041 |
| | — |
| | 20,041 |
| | |
Total intangible assets | $ | 636,037 |
| | $ | (150,228 | ) | | $ | 485,809 |
| | |
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
Aggregate amortization expense for amortizable intangible assets for the six months ended June 30, 2017 and 2016 was $18.1 million and $19.6 million, respectively. Estimated aggregate amortization expense for intangible assets subject to amortization for each of the following five years is:
|
| | | |
(In thousands) | |
Years Ending December 31, | |
2017 | $ | 36,375 |
|
2018 | 36,531 |
|
2019 | 36,517 |
|
2020 | 36,502 |
|
2021 | 36,152 |
|
Note 6. Accrued Liabilities
Accrued liabilities consist of the following:
|
| | | | | | | |
(In thousands) | June 30, 2017 | | December 31, 2016 |
Interest | $ | 15,794 |
| | $ | 15,770 |
|
Employee related costs | 87,305 |
| | 122,590 |
|
Income taxes payable | 32,208 |
| | 43,083 |
|
Other accrued expenses | 99,187 |
| | 102,986 |
|
Total accrued liabilities | $ | 234,494 |
| | $ | 284,429 |
|
Note 7. Long-term Debt
The Company’s long-term debt consists of the following:
|
| | | | | | | |
(In thousands) | June 30, 2017 | | December 31, 2016 |
Senior Secured Credit Facility: (a) | | | |
Term Loan A Facility | $ | 1,147,000 |
| | $ | 1,258,000 |
|
Senior Notes: | | | |
5.00% Notes due April 2024 | 1,000,000 |
| | 1,000,000 |
|
4.75% Notes due December 2022 | 600,000 |
| | 600,000 |
|
Total long-term debt | 2,747,000 |
| | 2,858,000 |
|
Unamortized discount | (22,106 | ) | | (23,675 | ) |
Unamortized deferred financing costs | (12,080 | ) | | (15,062 | ) |
Long-term debt, net | 2,712,814 |
| | 2,819,263 |
|
Current portion of long-term debt | 259,000 |
| | 222,000 |
|
Noncurrent portion of long-term debt | $ | 2,453,814 |
| | $ | 2,597,263 |
|
| |
(a) | The Company’s $500 million revolving credit facility remains undrawn at June 30, 2017. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company. |
Issuance of 4.75% Notes due 2025
On July 28, 2017, AMC Networks issued, and certain of AMC Networks’ subsidiaries (hereinafter, the “Guarantors”) guaranteed, $800 million aggregate principal amount of senior notes due August 1, 2025 (the “4.75% Notes due 2025”) in a registered public offering. AMC Networks used approximately $400 million of the net proceeds to repay loans under the Term Loan A Facility under AMC Networks’ senior secured credit facility and to pay fees and expenses related to the issuance. The remaining proceeds will be used for general corporate purposes. The 4.75% Notes due 2025 were issued pursuant to an indenture, dated as of March 30, 2016, as amended by the Second Supplemental Indenture, dated as of July 28, 2017. The 4.75% Notes due 2025 bear interest at a rate of 4.75% per annum and mature on August 1, 2025.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
Amendment and Restatement of the Credit Facility
On July 28, 2017, AMC Networks entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) among AMC Networks and its subsidiary, AMC Network Entertainment LLC, as the Initial Borrowers, certain of AMC Networks’ subsidiaries, as restricted subsidiaries, JPMorgan Chase Bank, N.A., as Administrative Agent, Collateral Agent and an L/C Issuer, the lenders party thereto. The Credit Agreement amends and restates AMC Networks’ prior credit agreement dated December 16, 2013 in its entirety. The Credit Agreement provides the Initial Borrowers with senior secured credit facilities consisting of (a) a $750 million Term Loan A (the “Term Loan A Facility”) after giving effect to the approximate $400 million payment from the proceeds of the 4.75% Notes due 2025 described above and (b) a $500 million revolving credit facility (the “Revolving Facility”) that was not drawn upon initially. Under the Credit Agreement, the maturity date of the Term Loan A Facility was extended to July 28, 2023 and the maturity date of the Revolving Facility was extended to July 28, 2022.
In connection with the issuance of the 4.75% Notes due 2025 and the Credit Agreement, AMC Networks incurred deferred financing costs of approximately $1.8 million, which will be amortized, using the effective interest method, to interest expense over the term of the related borrowing. In connection with the amendment to the Credit Agreement, the Company incurred financing costs of approximately $1.9 million, which were expensed when incurred.
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 at June 30, 2017 and December 31, 2016, including investments for which the fair value option has been elected:
|
| | | | | | | | | | | | | | | | |
(In thousands) | | Level I | | Level II | | Level III | | Total |
At June 30, 2017: | | | | | | | | |
Assets: | | | | | | | | |
Cash equivalents | | $ | 129 |
| | $ | — |
| | $ | — |
| | $ | 129 |
|
Available for sale securities | | 8,249 |
| | — |
| | — |
| | 8,249 |
|
Interest rate swap contracts | | — |
| | 1,611 |
| | — |
| | 1,611 |
|
Investments | | 7,533 |
| | — |
| | — |
| | 7,533 |
|
Foreign currency derivatives | | — |
| | 4,555 |
| | — |
| | 4,555 |
|
Other derivatives | | — |
| | 6,061 |
| | 27,844 |
| | 33,905 |
|
Liabilities: | | | | | | | | |
Interest rate swap contracts | | $ | — |
| | $ | 34 |
| | $ | — |
| | $ | 34 |
|
Foreign currency derivatives | | — |
| | 3,638 |
| | — |
| | 3,638 |
|
At December 31, 2016: | | | | | | | | |
Assets: | | | | | | | | |
Cash equivalents | | $ | 65,384 |
| | $ | — |
| | $ | — |
| | $ | 65,384 |
|
Interest rate swap contracts | | — |
| | 1,471 |
| | — |
| | 1,471 |
|
Foreign currency derivatives | | — |
| | 6,096 |
| | — |
| | 6,096 |
|
Other derivatives | | — |
| | — |
| | 12,308 |
| | 12,308 |
|
Liabilities: | | | | | | | | |
Interest rate swap contracts | | $ | — |
| | $ | 762 |
| | $ | — |
| | $ | 762 |
|
Foreign currency derivatives | | — |
| | 3,147 |
| | — |
| | 3,147 |
|
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
The Company’s cash equivalents and available for sale securities 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, foreign currency derivatives and the embedded derivative for the interest on the RLJE Term Loans to be paid in shares of RLJE common stock (see Note 9) 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 RLJE Warrants held by the Company are classified within Level III of the fair value hierarchy and the Company determines the value of the RLJE Warrants using a Black Scholes option pricing model. Inputs to the model are stock price volatility, contractual warrant terms (remaining life of the warrants), exercise price, risk-free interest rate, and the RLJE stock price. The equity volatility used is based on the equity volatility of RLJE with an adjustment for the changes in the capital structure of RLJE. In arriving at the concluded value of the warrants, a discount for the lack of marketability (DLOM) of 32% was applied. The DLOM, which is unobservable, is determined using the Finnerty Average-Strike Put Option Marketability Discount Model (Finnerty Model), which was applied with a security-specific volatility for the warrants. For the six months ended June 30, 2017, the Company recorded a gain of $17.2 million related to the RLJE Warrants which is included in Miscellaneous, net in the condensed consolidated statement of income.
At June 30, 2017, the Company does not have any other assets or liabilities measured at fair value on a recurring basis 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. 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:
|
| | | | | | | |
(In thousands) | June 30, 2017 |
Carrying Amount | | Estimated Fair Value |
Debt instruments: | | | |
Term Loan A Facility | $ | 1,137,123 |
| | $ | 1,147,000 |
|
5.00% Notes due April 2024 | 982,980 |
| | 1,025,000 |
|
4.75% Notes due December 2022 | 592,711 |
| | 618,750 |
|
| $ | 2,712,814 |
| | $ | 2,790,750 |
|
|
| | | | | | | |
(In thousands) | December 31, 2016 |
Carrying Amount | | Estimated Fair Value |
Debt instruments: | | | |
Term Loan A Facility | $ | 1,245,175 |
| | $ | 1,254,855 |
|
5.00% Notes due April 2024 | 981,949 |
| | 1,002,500 |
|
4.75% Notes due December 2022 | 592,139 |
| | 606,000 |
|
| $ | 2,819,263 |
| | $ | 2,863,355 |
|
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.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
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.
As of June 30, 2017, the Company had interest rate swap contracts outstanding with notional amounts aggregating $300.0 million, which consist of interest rate swap contracts with notional amounts of $200.0 million that are designated as cash flow hedges and interest rate swap contracts with notional amounts of $100.0 million that are not designated as hedging instruments. The Company’s outstanding interest rate swap contracts have varying maturities ranging from July 2017 to October 2018. At June 30, 2017, 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.
Other Derivatives
The RLJE Warrants held by the Company meet the definition of a derivative and are included in Other assets in the condensed consolidated balance sheet. In addition, the interest on the RLJE Term Loans to be paid in shares of RLJE common stock is an embedded derivative. Both the RLJE Warrants and the embedded derivative for the future interest to be paid in shares of RLJE common stock are remeasured at the end of each period with changes in fair value recorded in the condensed consolidated statement of income. For the three and six months ended June 30, 2017, the Company recorded a gain of $9.9 million and $21.1 million, respectively, related to these derivatives, which is included in Miscellaneous, net in the condensed consolidated statements of income.
The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are as follows:
|
| | | | | | | | | |
(In thousands) | Balance Sheet Location | | June 30, 2017 | | December 31, 2016 |
Derivatives designated as hedging instruments: | | | | | |
Assets: | | | | | |
Interest rate swap contracts | Other assets | | $ | 1,611 |
| | $ | 1,471 |
|
Derivatives not designated as hedging instruments: | | | | | |
Assets: | | | | | |
Foreign currency derivatives | Prepaid expenses and other current assets | | $ | 1,191 |
| | $ | 1,684 |
|
Foreign currency derivatives | Other assets | | 3,364 |
| | 4,412 |
|
Other derivatives | Other assets | | 33,905 |
| | 12,308 |
|
Liabilities: | | | | | |
Interest rate swap contracts | Accrued liabilities | | $ | 34 |
| | $ | 762 |
|
Foreign currency derivatives | Accrued liabilities | | 858 |
| | 952 |
|
Foreign currency derivatives | Other liabilities | | 2,780 |
| | 2,195 |
|
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
The amounts of gains and losses related to the Company’s derivative financial instruments designated as hedging instruments are as follows:
|
| | | | | | | | | | | | | | | | | |
(In thousands) | Gain or (Loss) on Derivatives Recognized in OCI | | Location of Gain or (Loss) in Earnings | | Gain or (Loss) Reclassified from Accumulated OCI into Earnings (a) |
Three Months Ended June 30, | | | | Three Months Ended June 30, |
2017 | | 2016 | | | | 2017 | | 2016 |
Derivatives in cash flow hedging relationships: | | | | | | | | | |
Interest rate swap contracts | $ | (65 | ) | | $ | (934 | ) | | Interest expense | | $ | 115 |
| | $ | (169 | ) |
| |
(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, 2017 and 2016. |
|
| | | | | | | | | | | | | | | | | |
(In thousands) | Gain or (Loss) on Derivatives Recognized in OCI | | Location of Gain or (Loss) in Earnings | | Gain or (Loss) Reclassified from Accumulated OCI into Earnings (a) |
Six Months Ended June 30, | | | | Six Months Ended June 30, |
2017 | | 2016 | | | | 2017 | | 2016 |
Derivatives in cash flow hedging relationships: | | | | | | | | | |
Interest rate swap contracts | $ | 256 |
| | $ | (2,675 | ) | | Interest expense | | $ | 117 |
| | $ | (332 | ) |
| |
(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, 2017 and 2016. |
The amounts of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are as follows:
|
| | | | | | | | | | | | | | | | | |
(In thousands) | Location 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, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Derivatives not designated as hedging relationships: | | | | | | | | | |
Interest rate swap contracts | Interest expense | | $ | (7 | ) | | $ | (49 | ) | | $ | (5 | ) | | $ | (229 | ) |
Foreign currency derivatives | Miscellaneous, net | | (1,236 | ) | | 2,158 |
| | (1,503 | ) | | 2,210 |
|
Other derivatives | Miscellaneous, net | | 9,946 |
| | — |
| | 21,063 |
| | — |
|
Total | | | $ | 8,703 |
| | $ | 2,109 |
| | $ | 19,555 |
| | $ | 1,981 |
|
Note 10. Income Taxes
For the three and six months ended June 30, 2017, income tax expense was $60.2 million and $133.3 million, respectively, representing an effective tax rate of 36% and 35%, respectively. The effective tax rate differs from the federal statutory rate of 35% due primarily to the tax benefit from the domestic production activities deduction of $4.4 million and $10.3 million, the tax benefit from foreign subsidiary earnings indefinitely reinvested outside the U.S. of $2.6 million and $6.7 million, the tax expense of $5.2 million and $7.5 million resulting from an increase in the valuation allowances for foreign and local taxes and state and local income tax expense of $2.6 million and $6.0 million for the three and six months ended June 30, 2017, respectively.
For the three and six months ended June 30, 2016, income tax expense was $39.4 million and $97.9 million, respectively, representing an effective tax rate of 32% for both periods. The effective tax rate differs from the federal statutory rate of 35% due primarily to the tax benefit from the domestic production activities deduction of $4.4 million and $9.7 million, the tax benefit from foreign subsidiary earnings indefinitely reinvested outside the U.S. of $5.5 million and $8.9 million, the tax expense of $2.7 million and $4.7 million resulting from an increase in the valuation allowances for foreign and local taxes and state and local income tax expense of $2.1 million and $5.3 million for the three and six months ended June 30, 2016, respectively.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
At June 30, 2017, the Company had foreign tax credit carry forwards of approximately $34 million, expiring on various dates from 2017 through 2027. For the six months ended June 30, 2017, $0.8 million relating to amortization of tax deductible second component goodwill was realized as a reduction in tax liability (as determined on a ‘with-and-without’ approach).
Note 11. Commitments and Contingencies
Commitments
As of June 30, 2017, the Company’s contractual obligations not reflected on the Company’s condensed consolidated balance sheet increased $46.3 million to $1.4 billion. The increase relates primarily to payment guarantees to a production service company for certain production related costs
Legal Matters
On December 17, 2013, Frank Darabont (“Darabont”), Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (together, “Plaintiffs”), filed a complaint in New York Supreme Court in connection with Darabont’s rendering services as a writer, director and producer of the television series entitled The Walking Dead and the agreement between the parties related thereto. The Plaintiffs asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, for an accounting and for declaratory relief. On August 19, 2015, Plaintiffs filed their First Amended Complaint (the “Amended Complaint”), in which they retracted their claims for wrongful termination and failure to apply production tax credits in calculating Plaintiffs’ contingent compensation. Plaintiffs also added a claim that Darabont is entitled to a larger share, on a percentage basis, of contingent compensation than he is currently being accorded. On September 26, 2016, Plaintiffs filed their note of issue and certificate of readiness for trial, which included a claim for damages of $280 million or more and indicated that the parties have completed fact and expert discovery. The parties each filed motions for summary judgment. The Court set August 24, 2017 as the date for oral argument of the summary judgment motions. The Company has opposed the claims in the Complaint, the Amended Complaint and all subsequent complaints. The Company believes that the asserted claims are without merit, denies the allegations and continues to defend the case vigorously. At this time, no determination can be made as to the ultimate outcome of this litigation or the potential liability, if any, on the part of the Company.
The Company is party to various lawsuits and claims in the ordinary course of business, including the matter described above. Although the outcome of these matters cannot be predicted with certainty and while the impact of these matters on the Company’s results of operations in any particular subsequent reporting period could be material, management does not believe that the resolution of these matters will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
Note 12. Equity Plans
On June 6, 2017, AMC Networks granted 32,825 restricted stock units (“RSU’s”) 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 March 9, 2017, AMC Networks granted 578,901 RSUs and 458,962 performance restricted stock units (“PRSUs”) to certain executive officers and employees under the AMC Networks Inc. 2016 Employee Stock Plan. The RSUs vest ratably over a three-year period and the vesting criteria for 175,299 RSUs include the achievement of certain performance targets by the Company. The PRSUs vest on the third anniversary of the grant date.
The target number of PRSUs granted represents the right to receive a corresponding number of shares, subject to adjustment based on the performance of the Company against target performance criteria for a three-year period. The number of shares issuable at the end of the applicable measurement period ranges from 0% to 200% of the target PRSU award.
During the six months ended June 30, 2017, 518,968 RSUs of AMC Networks Class A Common Stock previously issued to employees of the Company vested. On the vesting date, 225,398 RSUs were surrendered to the Company to cover the required statutory tax withholding obligations and 293,570 new shares of AMC Networks Class A Common Stock were issued in respect of the remaining RSUs. The units surrendered to satisfy the employees’ statutory minimum tax withholding obligations for the applicable income and other employment tax had an aggregate value of $13.4 million, which has been reflected as a financing activity in the condensed consolidated statement of cash flows for the six months ended June 30, 2017.
Share-based compensation expense included in selling, general and administrative expense, for the three and six months ended June 30, 2017 was $15.1 million and $27.6 million, respectively, and $11.3 million and $19.5 million for the three and six months ended June 30, 2016, respectively.
As of June 30, 2017, there was $116.5 million of total unrecognized share-based compensation cost related to outstanding unvested share-based awards. The unrecognized compensation cost is expected to be recognized over a weighted-average remaining period of approximately 2.6 years.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
Note 13. Redeemable Noncontrolling Interests
The following table summarizes activity related to redeemable noncontrolling interest for the six months ended June 30, 2017.
|
| | | |
(In thousands) | Six Months Ended June 30, 2017 |
December 31, 2016 | $ | 219,331 |
|
Net earnings | 10,748 |
|
Distributions | (12,930 | ) |
June 30, 2017 | $ | 217,149 |
|
Note 14. 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 AMC Networks outstanding Class B Common Stock and own approximately 2% of the AMC Networks’ outstanding Class A Common Stock. Such shares of the AMC Networks Class A Common Stock and Class B Common Stock, collectively, represent approximately 69% of the aggregate voting power of AMC Networks’ outstanding common stock. Members of the Dolan Family are also the controlling stockholders of The Madison Square Garden Company (“MSG”) and MSG Networks Inc. (“MSG Networks”). Prior to June 21, 2016, members of the Dolan Family were also the controlling stockholders of Cablevision Systems Corporation (“Cablevision”).
On June 21, 2016, Cablevision was acquired by a subsidiary of Altice N.V. and a change in control occurred which resulted in members of the Dolan Family no longer being controlling stockholders of the surviving company, Altice USA. Accordingly, Altice USA is not a related party of AMC Networks.
The Company and its related parties routinely enter into transactions with each other in the ordinary course of business. Revenues, net from related parties amount to $1.5 million and $6.2 million for the three months ended June 30, 2017 and 2016, respectively, and $3.1 million and $12.9 million for the six months ended June 30, 2017 and 2016, respectively. Amounts charged to the Company, included in selling, general and administrative expenses, pursuant to transactions with its related parties amounted to $0.4 million and $0.8 million for the three months ended June 30, 2017 and 2016, respectively, and $1.0 million and $1.9 million for the six months ended June 30, 2017 and 2016, respectively.
On June 16, 2016, AMC Networks entered into an arrangement with the Dolan Family Office, LLC (“DFO”), MSG and MSG Networks providing for the sharing of certain expenses associated with executive office space which will be available to Charles F. Dolan (the Executive Chairman and a director of the Company and a director of MSG and MSG Networks), James L. Dolan (the Executive Chairman and a director of MSG and MSG Networks and a director of the Company), and the DFO which is controlled by Charles F. Dolan. The Company’s share of office expenses is not material.
Note 15. Cash Flows
The Company’s non-cash investing and financing activities and other supplemental data are as follows:
|
| | | | | |
(In thousands) | Six Months Ended June 30, |
2017 | | 2016 |
Non-Cash Investing and Financing Activities: | | | |
Increase in capital lease obligations | — |
| | 10,983 |
|
Treasury stock not yet settled | 8,987 |
| | — |
|
Exercise of RLJE Warrants | 5,001 |
| | — |
|
Capital expenditures incurred but not yet paid | 2,412 |
| | 2,101 |
|
Supplemental Data: | | | |
Cash interest paid | 56,832 |
| | 69,449 |
|
Income taxes paid, net | 124,474 |
| | 75,450 |
|
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
Note 16. Accumulated Other Comprehensive Loss
The following table details the components of accumulated other comprehensive loss:
|
| | | | | | | | | | | | | | | |
(In thousands) | Six Months Ended June 30, 2017 |
Currency Translation Adjustment | | Gains (Losses) on Cash Flow Hedges | | Gains (Losses) on Available for Sale Investments | | Accumulated Other Comprehensive Income (Loss) |
Beginning balance | $ | (194,189 | ) | | $ | 391 |
| | $ | — |
| | $ | (193,798 | ) |
Other comprehensive income before reclassifications | 47,684 |
| | 256 |
| | 2,938 |
| | 50,878 |
|
Amounts reclassified from accumulated other comprehensive loss | — |
| | (117 | ) | | — |
| | (117 | ) |
Net current-period other comprehensive income, before income taxes | 47,684 |
| | 139 |
| | 2,938 |
| | 50,761 |
|
Income tax expense | — |
| | (51 | ) | | (1,081 | ) | | (1,132 | ) |
Net current-period other comprehensive income, net of income taxes | 47,684 |
| | 88 |
| | 1,857 |
| | 49,629 |
|
Ending balance | $ | (146,505 | ) | | $ | 479 |
| | $ | 1,857 |
| | $ | (144,169 | ) |
|
| | | | | | | | | | | | | | | |
(In thousands) | Six Months Ended June 30, 2016 |
Currency Translation Adjustment | | Gains (Losses) on Cash Flow Hedges | | Gains (Losses) on Available for Sale Investments | | Accumulated Other Comprehensive Income (Loss) |
Beginning balance | $ | (136,434 | ) | | $ | 377 |
| | $ | — |
| | $ | (136,057 | ) |
Other comprehensive loss before reclassifications | (3,004 | ) | | (2,675 | ) | | — |
| | (5,679 | ) |
Amounts reclassified from accumulated other comprehensive loss | — |
| | 332 |
| | — |
| | 332 |
|
Net current-period other comprehensive loss, before income taxes | (3,004 | ) | | (2,343 | ) | | — |
| | (5,347 | ) |
Income tax (expense) benefit | (11,069 | ) | | 858 |
| | — |
| | (10,211 | ) |
Net current-period other comprehensive loss, net of income taxes | (14,073 | ) | | (1,485 | ) | | — |
| | (15,558 | ) |
Ending balance | $ | (150,507 | ) | | $ | (1,108 | ) | | $ | — |
| | $ | (151,615 | ) |
Amounts reclassified to net earnings for gains and losses on cash flow hedges designated as hedging instruments are included in interest expense in the condensed consolidated statements of income.
Note 17. Segment Information
The Company classifies its operations into two operating segments: National Networks and International and Other. These operating segments represent strategic business units that are managed separately.
The Company generally allocates all corporate overhead costs within operating expenses 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, 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 income (“AOI”), a non-GAAP measure, defined as operating income (loss) before depreciation and amortization, share-based compensation expense or benefit, impairment charges, and restructuring expense or credit. The Company has presented the components that reconcile adjusted operating income to operating income, an accepted GAAP measure, and other information as to the continuing operations of the Company’s operating segments below.
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
|
| | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended June 30, 2017 |
National Networks | | International and Other | | Inter-segment eliminations | | Consolidated |
Revenues, net | | | | | | | |
Advertising | $ | 245,472 |
| | $ | 21,373 |
| | $ | — |
| | $ | 266,845 |
|
Distribution | 359,451 |
| | 89,471 |
| | (5,222 | ) | | 443,700 |
|
Consolidated revenues, net | $ | 604,923 |
| | $ | 110,844 |
| | $ | (5,222 | ) | | $ | 710,545 |
|
Operating income (loss) | $ | 211,623 |
| | $ | (31,222 | ) | | $ | (4,611 | ) | | $ | 175,790 |
|
Share-based compensation expense | 12,211 |
| | 2,921 |
| | — |
| | 15,132 |
|
Restructuring (credit) expense | (97 | ) | | 16 |
| | — |
| | (81 | ) |
Impairment charges | — |
| | 17,112 |
| | — |
| | 17,112 |
|
Depreciation and amortization | 8,430 |
| | 12,176 |
| | — |
| | 20,606 |
|
Adjusted operating income | $ | 232,167 |
| | $ | 1,003 |
| | $ | (4,611 | ) | | $ | 228,559 |
|
|
| | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended June 30, 2016 |
National Networks | | International and Other | | Inter-segment eliminations | | Consolidated |
Revenues, net | | | | | | | |
Advertising | $ | 239,331 |
| | $ | 25,564 |
| | $ | — |
| | $ | 264,895 |
|
Distribution | 333,302 |
| | 92,716 |
| | (6,081 | ) | | 419,937 |
|
Consolidated revenues, net | $ | 572,633 |
| | $ | 118,280 |
| | $ | (6,081 | ) | | $ | 684,832 |
|
Operating income (loss) | $ | 189,090 |
| | $ | (7,819 | ) | | $ | (3,239 | ) | | $ | 178,032 |
|
Share-based compensation expense | 9,148 |
| | 2,174 |
| | — |
| | 11,322 |
|
Restructuring expense | 37 |
| | 352 |
| | — |
| | 389 |
|
Depreciation and amortization | 8,053 |
| | 13,500 |
| | — |
| | 21,553 |
|
Adjusted operating income | $ | 206,328 |
| | $ | 8,207 |
| | $ | (3,239 | ) | | $ | 211,296 |
|
|
| | | | | | | | | | | | | | | |
(In thousands) | Six Months Ended June 30, 2017 |
National Networks | | International and Other | | Inter-segment eliminations | | Consolidated |
Revenues, net | | | | | | | |
Advertising | $ | 493,014 |
| | $ | 41,443 |
| | $ | — |
| | $ | 534,457 |
|
Distribution | 727,056 |
| | 176,198 |
| | (6,977 | ) | | 896,277 |
|
Consolidated revenues, net | $ | 1,220,070 |
| | $ | 217,641 |
| | $ | (6,977 | ) | | $ | 1,430,734 |
|
Operating income (loss) | $ | 461,230 |
| | $ | (50,439 | ) | | $ | (3,330 | ) | | $ | 407,461 |
|
Share-based compensation expense | 22,119 |
| | 5,476 |
| | — |
| | 27,595 |
|
Restructuring (credit) expense | (43 | ) | | 2,666 |
| | — |
| | 2,623 |
|
Impairment charges | — |
| | 17,112 |
| | — |
| | 17,112 |
|
Depreciation and amortization | 16,834 |
| | 27,265 |
| | — |
| | 44,099 |
|
Adjusted operating income | $ | 500,140 |
| | $ | 2,080 |
| | $ | (3,330 | ) | | $ | 498,890 |
|
Capital expenditures | $ | 8,294 |
| | $ | 31,642 |
| | $ | — |
| | $ | 39,936 |
|
| | | | | | | |
| | | | | | | |
| | | | | | | |
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
|
| | | | | | | | | | | | | | | |
(In thousands) | Six Months Ended June 30, 2016 |
National Networks | | International and Other | | Inter-segment eliminations | | Consolidated |
Revenues, net | | | | | | | |
Advertising | $ | 503,183 |
| | $ | 48,413 |
| | $ | — |
| | $ | 551,596 |
|
Distribution | 668,086 |
| | 178,915 |
| | (7,186 | ) | | 839,815 |
|
Consolidated revenues, net | $ | 1,171,269 |
| | $ | 227,328 |
| | $ | (7,186 | ) | | $ | 1,391,411 |
|
Operating income (loss) | $ | 455,823 |
| | $ | (16,403 | ) | | $ | (2,729 | ) | | $ | 436,691 |
|
Share-based compensation expense | 15,370 |
| | 4,118 |
| | — |
| | 19,488 |
|
Restructuring expense | 67 |
| | 287 |
| | — |
| | 354 |
|
Depreciation and amortization | 16,022 |
| | 25,163 |
| | — |
| | 41,185 |
|
Adjusted operating income | $ | 487,282 |
| | $ | 13,165 |
| | $ | (2,729 | ) | | $ | 497,718 |
|
Capital expenditures | $ | 4,414 |
| | $ | 19,772 |
| | $ | — |
| | $ | 24,186 |
|
Inter-segment eliminations are primarily licensing revenues recognized between the National Networks and International and Other segments as well as revenues recognized by AMC Networks Broadcasting & Technology for transmission revenues recognized from the International and Other operating segment.
|
| | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended June 30, | | Six Months Ended June 30, |
2017 | | 2016 | | 2017 | | 2016 |
Inter-segment revenues | | | | | | | |
National Networks | $ | (5,142 | ) | | $ | (5,991 | ) | | $ | (6,866 | ) | | $ | (6,936 | ) |
International and Other | (80 | ) | | (90 | ) | | (111 | ) | | (250 | ) |
| $ | (5,222 | ) | | $ | (6,081 | ) | | $ | (6,977 | ) | | $ | (7,186 | ) |
The table below summarizes revenues based on customer location:
|
| | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended June 30, | | Six Months Ended June 30, |
2017 | | 2016 | | 2017 | | 2016 |
Revenues | | | | | | | |
United States | $ | 548,555 |
| | $ | 542,803 |
| | $ | 1,148,610 |
| | $ | 1,117,137 |
|
Europe | 108,076 |
| | 103,560 |
| | 186,750 |
| | 197,522 |
|
Other | 53,914 |
| | 38,469 |
| | 95,374 |
| | 76,752 |
|
| $ | 710,545 |
| | $ | 684,832 |
| | $ | 1,430,734 |
| | $ | 1,391,411 |
|
The table below summarizes property and equipment based on asset location:
|
| | | | | | | |
(In thousands) | June 30, 2017 | | December 31, 2016 |
Property and equipment, net | | | |
United States | $ | 112,640 |
| | $ | 104,939 |
|
Europe | 26,329 |
| | 39,976 |
|
Other | 20,184 |
| | 21,721 |
|
| $ | 159,153 |
| | $ | 166,636 |
|
AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
Note 18. Condensed Consolidating Financial Statements
Debt of AMC Networks includes $600.0 million of 4.75% senior notes due December 2022 and $1.0 billion of 5.00% senior notes due April 2024. 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)
(unaudited)
|
| | | | | | | | | | | | | | | | | | | |
Condensed Consolidating Balance Sheet |
June 30, 2017 |
(In thousands) | Parent Company | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated |
ASSETS | | | | | | | | | |
Current Assets: | | | | | | | | | |
Cash and cash equivalents | $ | 116 |
| | $ | 42,368 |
| | $ | 146,995 |
| | $ | — |
| | $ | 189,479 |
|
Accounts receivable, trade (less allowance for doubtful accounts) | — |
| | 559,893 |
| | 184,754 |
| | — |
| | 744,647 |
|
Amounts due from related parties, net | — |
| | 488 |
| | — |
| | — |
| | 488 |
|
Current portion of program rights, net | — |
| | 301,511 |
| | 148,579 |
| | — |
| | 450,090 |
|
Prepaid expenses, other current assets and intercompany receivable | 501 |
| | 170,958 |
| | 13,235 |
| | (107,082 | ) | | 77,612 |
|
Assets held for sale | — |
| | — |
| | 16,433 |
| | — |
| | 16,433 |
|
Total current assets | 617 |
| | 1,075,218 |
| | 509,996 |
| | (107,082 | ) | | 1,478,749 |
|
Property and equipment, net of accumulated depreciation | — |
| | 112,189 |
| | 46,964 |
| | — |
| | 159,153 |
|
Investment in affiliates | 2,998,053 |
| | 882,052 |
| | — |
| | (3,880,105 | ) | | — |
|
Program rights, net | — |
| | 1,046,405 |
| | 175,511 |
| | — |
| | 1,221,916 |
|
Long-term intercompany notes receivable | — |
| | 463,048 |
| | 564 |
| | (463,612 | ) | | — |
|
Deferred carriage fees, net | — |
| | 35,972 |
| | 1,654 |
| | — |
| | 37,626 |
|
Intangible assets, net | — |
| | 175,425 |
| | 303,754 |
| | — |
| | 479,179 |
|
Goodwill | — |
| | 67,881 |
| | 612,353 |
| | — |
| | 680,234 |
|
Deferred tax asset, net | — |
| | — |
| | 9,079 |
| | — |
| | 9,079 |
|
Other assets | 1,610 |
| | 129,289 |
| | 281,333 |
| | — |
| | 412,232 |
|
Total assets | $ | 3,000,280 |
| | $ | 3,987,479 |
| | $ | 1,941,208 |
| | $ | (4,450,799 | ) | | $ | 4,478,168 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current Liabilities: | | | | | | | | | |
Accounts payable | $ | 16 |
| | $ | 45,877 |
| | $ | 45,000 |
| | $ | — |
| | $ | 90,893 |
|
Accrued liabilities and intercompany payable | 53,622 |
| | 149,307 |
| | 138,647 |
| | (107,082 | ) | | 234,494 |
|
Current portion of program rights obligations | — |
| | 228,419 |
| | 73,108 |
| | — |
| | 301,527 |
|
Deferred revenue | — |
| | 32,787 |
| | 15,047 |
| | — |
| | 47,834 |
|
Current portion of long-term debt | 259,000 |
| | — |
| | — |
| | — |
| | 259,000 |
|
Current portion of capital lease obligations | — |
| | 2,703 |
| | 1,550 |
| | — |
| | 4,253 |
|
Liabilities held for sale | — |
| | — |
| | 16,433 |
| | — |
| | 16,433 |
|
Total current liabilities | 312,638 |
| | 459,093 |
| | 289,785 |
| | (107,082 | ) | | 954,434 |
|
Program rights obligations | — |
| | 457,105 |
| | 28,778 |
| | — |
| | 485,883 |
|
Long-term debt, net | 2,453,814 |
| | — |
| | — |
| | — |
| | 2,453,814 |
|
Capital lease obligations | — |
| | 5,325 | |