SEC Filing | AMC Networks Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019


☐			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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

AMCX

The

NASDAQ

Stock Market LLC

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 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, a smaller reporting company or an emerging growth company (as defined in Exchange Act Rule 12b-2).


Large accelerated filer	þ	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	☐

		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 October 25, 2019:


Class A Common Stock par value $0.01 per share			44,073,798
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 (unaudited)
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Stockholders' Equity			4
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			54
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			55
Item 6. Exhibits			55
SIGNATURES			56

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	September 30, 2019		December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	773,386	$	554,886
Accounts receivable, trade (less allowance for doubtful accounts of $8,645 and $10,788)	807,481		835,977
Current portion of program rights, net	456,288		440,739
Prepaid expenses and other current assets	187,755		131,809
Total current assets	2,224,910		1,963,411
Property and equipment, net of accumulated depreciation of $333,475 and $293,918	269,287		246,262
Program rights, net	1,051,068		1,214,051
Deferred carriage fees, net	17,332		16,831
Intangible assets, net	540,365		578,907
Goodwill	782,234		798,037
Deferred tax asset, net	61,376		19,272
Operating lease right-of-use asset	172,575		—
Other assets	499,062		441,792
Total assets	$	5,618,209	$	5,278,563
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	123,838	$	107,066
Accrued liabilities	238,937		264,918
Current portion of program rights obligations	310,688		343,589
Deferred revenue	65,725		55,424
Current portion of long-term debt	47,875		21,334
Current portion of lease obligations	33,349		5,090
Total current liabilities	820,412		797,421
Program rights obligations	284,424		373,249
Long-term debt	3,056,692		3,088,221
Lease obligations	215,251		21,427
Deferred tax liability, net	122,384		145,443
Other liabilities	159,641		208,036
Total liabilities	4,658,804		4,633,797
Commitments and contingencies
Redeemable noncontrolling interests	304,606		299,558
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 63,851 and 63,255 shares issued and 44,043 and 44,749 shares outstanding, respectively	639		633
Class B Common Stock, $0.01 par value, 90,000 shares authorized, 11,484 shares issued and outstanding	115		115
Preferred stock, $0.01 par value, 45,000 shares authorized; none issued	—		—
Paid-in capital	272,823		239,767
Accumulated earnings	1,618,005		1,228,942
Treasury stock, at cost (19,808 and 18,507 shares Class A Common Stock, respectively)	(1,063,181)		(992,583)
Accumulated other comprehensive loss	(200,277)		(160,194)
Total AMC Networks stockholders' equity	628,124		316,680
Non-redeemable noncontrolling interests	26,675		28,528
Total stockholders' equity	654,799		345,208
Total liabilities and stockholders' equity	$	5,618,209	$	5,278,563

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)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues, net	$	718,597	$	696,875	$	2,275,117	$	2,199,083
Operating expenses:
Technical and operating (excluding depreciation and amortization)	354,992		346,398		1,080,763		1,043,572
Selling, general and administrative	159,357		156,242		505,233		494,067
Depreciation and amortization	25,619		22,011		75,568		64,034
Impairment and related charges	—		4,486		—		4,486
Restructuring and other related charges	10,191		3,139		29,995		3,139
Total operating expenses	550,159		532,276		1,691,559		1,609,298
Operating income	168,438		164,599		583,558		589,785
Other income (expense):
Interest expense	(39,621)		(38,137)		(118,982)		(115,607)
Interest income	4,626		5,102		13,571		15,453

Miscellaneous, net	(1,490)		28,762		(16,972)		30,989
Total other (expense) income	(36,485)		(4,273)		(122,383)		(69,165)
Income from operations before income taxes	131,953		160,326		461,175		520,620
Income tax expense	(8,727)		(43,666)		(53,807)		(133,092)
Net income including noncontrolling interests	123,226		116,660		407,368		387,528
Net income attributable to noncontrolling interests	(6,303)		(5,403)		(18,305)		(13,220)
Net income attributable to AMC Networks' stockholders	$	116,923	$	111,257	$	389,063	$	374,308

Net income per share attributable to AMC Networks' stockholders:
Basic	$	2.09	$	1.96	$	6.91	$	6.40
Diluted	$	2.07	$	1.93	$	6.80	$	6.31

Weighted average common shares:
Basic	55,847		56,875		56,339		58,519
Diluted	56,605		57,779		57,218		59,281

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Net income including noncontrolling interests	$	123,226	$	116,660	$	407,368	$	387,528
Other comprehensive income (loss):
Foreign currency translation adjustment	(33,281)		(6,094)		(38,490)		(32,679)
Unrealized loss on interest rate swaps	(187)		—		(2,076)		—
Other comprehensive loss, before income taxes	(33,468)		(6,094)		(40,566)		(32,679)
Income tax benefit	335		—		483		—
Other comprehensive loss, net of income taxes	(33,133)		(6,094)		(40,083)		(32,679)
Comprehensive income	90,093		110,566		367,285		354,849
Comprehensive income attributable to noncontrolling interests	(5,217)		(5,218)		(17,048)		(11,954)
Comprehensive income attributable to AMC Networks' stockholders	$	84,876	$	105,348	$	350,237	$	342,895

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, June 30, 2019	$	639	$	115	$	258,150	$	1,501,082	$	(1,051,022)	$	(167,144)	$	541,820	$	26,693	$	568,513
Net income attributable to AMC Networks’ stockholders	—		—		—		116,923		—		—		116,923		—		116,923
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		1,772		1,772
Distributions to noncontrolling member	—		—		—		—		—		—		—		(705)		(705)
Settlement of treasury stock	—		—		832		—		—		—		832		—		832
Other comprehensive income	—		—		—		—		—		(33,133)		(33,133)		(1,085)		(34,218)
Share-based compensation expense	—		—		13,841		—		—		—		13,841		—		13,841


Treasury stock acquired	—		—		—		—		(12,159)		—		(12,159)		—		(12,159)

Balance, September 30, 2019	$	639	$	115	$	272,823	$	1,618,005	$	(1,063,181)	$	(200,277)	$	628,124	$	26,675	$	654,799


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
















Balance, December 31, 2018	$	633	$	115	$	239,767	$	1,228,942	$	(992,583)	$	(160,194)	$	316,680	$	28,528	$	345,208
Net income attributable to AMC Networks’ stockholders	—		—		—		389,063		—		—		389,063		—		389,063
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		2,842		2,842
Distributions to noncontrolling member	—		—		—		—		—		—		—		(3,439)		(3,439)

Other comprehensive income	—		—		—		—		—		(40,083)		(40,083)		(1,256)		(41,339)
Share-based compensation expense	—		—		50,465		—		—		—		50,465		—		50,465

Proceeds from the exercise of stock options	—		—		4,630		—		—		—		4,630		—		4,630
Treasury stock acquired	—		—		985		—		(70,598)		—		(69,613)		—		(69,613)
Restricted stock units converted to shares	6		—		(23,024)		—		—		—		(23,018)		—		(23,018)
Balance, September 30, 2019	$	639	$	115	$	272,823	$	1,618,005	$	(1,063,181)	$	(200,277)	$	628,124	$	26,675	$	654,799

See accompanying notes to consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, June 30, 2018	$	632	$	115	$	215,948	$	1,045,806	$	(951,850)	$	(144,752)	$	165,899	$	29,521	$	195,420
Net income attributable to AMC Networks’ stockholders	—		—		—		111,257		—		—		111,257		—		111,257
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		281		281





Other comprehensive income	—		—		—		—		—		(6,094)		(6,094)		(1,169)		(7,263)

Share-based compensation expense	—		—		16,934		—		—		—		16,934		—		16,934
Treasury stock acquired	—		—		—		—		(24,990)		—		(24,990)		—		(24,990)

Balance, September 30, 2018	$	632	$	115	$	232,882	$	1,157,063	$	(976,840)	$	(150,846)	$	263,006	$	28,633	$	291,639


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, December 31, 2017	$	627	$	115	$	191,303	$	766,725	$	(709,440)	$	(114,386)	$	134,944	$	29,001	$	163,945
Net income attributable to AMC Networks’ stockholders	—		—		—		374,308		—		—		374,308		—		374,308
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		1,882		1,882
Distributions to noncontrolling member	—		—		—		—		—		—		—		(984)		(984)

Cumulative effects of adoption of accounting standards	—		—		—		16,030				(3,781)		12,249		—		12,249

Settlement of treasury stock	—		—		996		—		—		—		996		—		996
Other comprehensive income	—		—		—		—		—		(32,679)		(32,679)		(1,266)		(33,945)
Proceeds from the exercise of stock options	—		—		4,317		—		—		—		4,317		—		4,317
Share-based compensation expense	—		—		52,006		—		—		—		52,006		—		52,006
Treasury stock acquired	—		—		—		—		(267,400)		—		(267,400)		—		(267,400)
Restricted stock units converted to shares	5		—		(15,740)		—		—		—		(15,735)		—		(15,735)
Balance, September 30, 2018	$	632	$	115	$	232,882	$	1,157,063	$	(976,840)	$	(150,846)	$	263,006	$	28,633	$	291,639

See accompanying notes to consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2019		2018
Cash flows from operating activities:
Net income including noncontrolling interests	$	407,368	$	387,528
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	75,568		64,034
Impairment and related charges	—		4,486
Share-based compensation expense related to equity classified awards	50,465		52,006
Non-cash restructuring and other related charges	14,026		—
Amortization and write-off of program rights	696,326		684,289
Amortization of deferred carriage fees