SEC Filing | AMC Networks Inc.

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amcx-20200630

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 June 30, 2020


☐			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 July 24, 2020:


Class A Common Stock par value $0.01 per share			40,557,330
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			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			46
Item 4. Controls and Procedures			47
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			48
Item 1A. Risk Factors			48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			49
Item 6. Exhibits			49
SIGNATURES			50

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	June 30, 2020		December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	889,887	$	816,170
Accounts receivable, trade (less allowance for doubtful accounts of $9,440 and $5,733)	796,834		857,143
Current portion of program rights, net	17,354		426,624
Prepaid expenses and other current assets	189,683		230,360
Total current assets	1,893,758		2,330,297
Property and equipment, net of accumulated depreciation of $235,687 and $347,302	259,783		283,752
Program rights, net	1,370,500		1,038,060
Intangible assets, net	425,233		524,531
Goodwill	665,890		701,980
Deferred tax asset, net	55,792		51,545
Operating lease right-of-use asset	154,676		170,056
Other assets	480,324		496,465
Total assets	$	5,305,956	$	5,596,686
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	89,971	$	94,306
Accrued liabilities	245,281		251,214
Current portion of program rights obligations	286,143		304,692
Deferred revenue	58,871		63,921
Current portion of long-term debt	81,000		56,250
Current portion of lease obligations	33,179		33,959
Total current liabilities	794,445		804,342
Program rights obligations	222,631		239,813
Long-term debt	2,807,890		3,039,979
Lease obligations	214,334		211,047
Deferred tax liability, net	150,046		136,911
Other liabilities	133,933		163,638
Total liabilities	4,323,279		4,595,730
Commitments and contingencies
Redeemable noncontrolling interests	307,532		309,451
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 64,348 and 63,886 shares issued and 40,557 and 44,078 shares outstanding, respectively	643		639
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	308,288		286,491
Accumulated earnings	1,691,100		1,609,428
Treasury stock, at cost (23,790 and 19,808 shares Class A Common Stock, respectively)	(1,166,119)		(1,063,181)
Accumulated other comprehensive loss	(182,111)		(167,711)
Total AMC Networks stockholders' equity	651,916		665,781
Non-redeemable noncontrolling interests	23,229		25,724
Total stockholders' equity	675,145		691,505
Total liabilities and stockholders' equity	$	5,305,956	$	5,596,686

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues, net	$	646,291	$	772,299	$	1,380,666	$	1,556,520
Operating expenses:
Technical and operating (excluding depreciation and amortization)	282,503		385,623		626,563		725,771
Selling, general and administrative	155,163		173,364		339,812		345,876
Depreciation and amortization	25,905		25,893		52,635		49,949
Impairment charges	130,411		—		130,411		—
Restructuring and other related charges	3,507		17,162		9,473		19,804
Total operating expenses	597,489		602,042		1,158,894		1,141,400
Operating income	48,802		170,257		221,772		415,120
Other income (expense):
Interest expense	(34,301)		(39,716)		(71,865)		(79,361)
Interest income	3,727		4,745		8,282		8,945
Loss on extinguishment of debt	—		—		(2,908)		—
Miscellaneous, net	8,713		(2,697)		(21,226)		(15,482)
Total other (expense) income	(21,861)		(37,668)		(87,717)		(85,898)
Income from operations before income taxes	26,941		132,589		134,055		329,222
Income tax (expense) benefit	(9,707)		1,396		(43,295)		(45,080)
Net income including noncontrolling interests	17,234		133,985		90,760		284,142
Net income attributable to noncontrolling interests	(2,273)		(5,242)		(7,132)		(12,002)
Net income attributable to AMC Networks' stockholders	$	14,961	$	128,743	$	83,628	$	272,140

Net income per share attributable to AMC Networks' stockholders:
Basic	$	0.29	$	2.28	$	1.55	$	4.81
Diluted	$	0.28	$	2.25	$	1.54	$	4.73

Weighted average common shares:
Basic	52,311		56,590		53,894		56,589
Diluted	52,797		57,335		54,429		57,529

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income including noncontrolling interests	$	17,234	$	133,985	$	90,760	$	284,142
Other comprehensive income (loss):
Foreign currency translation adjustment	14,190		553		(14,092)		(5,210)
Unrealized gain (loss) on interest rate swaps	341		(1,625)		(1,656)		(2,263)
Other comprehensive income (loss), before income taxes	14,531		(1,072)		(15,748)		(7,473)
Income tax (expense) benefit	(79)		374		386		523
Other comprehensive income (loss), net of income taxes	14,452		(698)		(15,362)		(6,950)
Comprehensive income	31,686		133,287		75,398		277,192
Comprehensive income attributable to noncontrolling interests	(2,472)		(5,033)		(6,170)		(11,831)
Comprehensive income attributable to AMC Networks' stockholders	$	29,214	$	128,254	$	69,228	$	265,361

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, March 31, 2020	$	643	$	115	$	282,153	$	1,676,139	$	(1,149,138)	$	(196,364)	$	613,548	$	23,848	$	637,396
Net income attributable to AMC Networks’ stockholders	—		—		—		14,961		—		—		14,961		—		14,961
Net loss attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		(818)		(818)


Settlement of treasury stock	—		—		10,988		—		—		—		10,988		—		10,988
Other comprehensive income	—		—		—		—		—		14,253		14,253		199		14,452
Share-based compensation expense	—		—		15,235		—		—		—		15,235		—		15,235


Treasury stock acquired	—		—		—		—		(16,981)		—		(16,981)		—		(16,981)
Restricted stock units converted to shares	—		—		(88)		—		—		—		(88)		—		(88)
Balance, June 30, 2020	$	643	$	115	$	308,288	$	1,691,100	$	(1,166,119)	$	(182,111)	$	651,916	$	23,229	$	675,145


	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, 2019	$	639	$	115	$	286,491	$	1,609,428	$	(1,063,181)	$	(167,711)	$	665,781	$	25,724	$	691,505
Net income attributable to AMC Networks’ stockholders	—		—		—		83,628		—		—		83,628		—		83,628
Net loss attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		(1,085)		(1,085)
Adoption of ASU 2016-13, credit losses	—		—		—		(1,956)		—		—		(1,956)		—		(1,956)
Distributions to noncontrolling member	—		—		—		—		—		—		—		(448)		(448)

Other comprehensive loss	—		—		—		—		—		(14,400)		(14,400)		(962)		(15,362)
Share-based compensation expense	—		—		30,747		—		—		—		30,747		—		30,747


Treasury stock acquired	—		—		—		—		(102,938)		—		(102,938)		—		(102,938)
Restricted stock units converted to shares	4		—		(8,950)		—		—		—		(8,946)		—		(8,946)
Balance, June 30, 2020	$	643	$	115	$	308,288	$	1,691,100	$	(1,166,119)	$	(182,111)	$	651,916	$	23,229	$	675,145

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, March 31, 2019	$	634	$	115	$	242,322	$	1,372,339	$	(993,574)	$	(166,446)	$	455,390	$	29,147	$	484,537
Net income attributable to AMC Networks’ stockholders	—		—		—		128,743		—		—		128,743		—		128,743
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		128		128
Distributions to noncontrolling member	—		—		—		—		—		—		—		(2,374)		(2,374)


Treasury stock not yet settled	—		—		(832)		—		—		—		(832)		—		(832)

Other comprehensive loss	—		—		—		—		—		(698)		(698)		(208)		(906)

Share-based compensation expense	—		—		16,725		—		—		—		16,725		—		16,725
Treasury stock acquired	—		—		—		—		(57,448)		—		(57,448)		—		(57,448)
Restricted stock units converted to shares	5		—		(65)		—		—		—		(60)		—		(60)
Balance, June 30, 2019	$	639	$	115	$	258,150	$	1,501,082	$	(1,051,022)	$	(167,144)	$	541,820	$	26,693	$	568,513


	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	—		—		—		272,140		—		—		272,140		—		272,140
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		1,070		1,070
Distributions to noncontrolling member	—		—		—		—		—		—		—		(2,735)		(2,735)


Treasury stock not yet settled	—		—		(832)		—		—		—		(832)		—		(832)
Other comprehensive loss	—		—		—		—		—		(6,950)		(6,950)		(170)		(7,120)
Share-based compensation expense	—		—		36,624		—		—		—		36,624		—		36,624
Proceeds from the exercise of stock options	—		—		4,630		—		—		—		4,630		—		4,630
Treasury stock acquired	—		—		986		—		(58,439)		—		(57,453)		—		(57,453)
Restricted stock units converted to shares	6		—		(23,025)		—		—		—		(23,019)		—		(23,019)
Balance, June 30, 2019	$	639	$	115	$	258,150	$	1,501,082	$	(1,051,022)	$	(167,144)	$	541,820	$	26,693	$	568,513

See accompanying notes to consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income including noncontrolling interests	$	90,760	$	284,142
Adjustments to reconcile net income to net cash from operating activities: