SEC Filing | AMC Networks Inc.

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amcx-20230630

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, 2023


☐			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 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 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 28, 2023:


Class A Common Stock par value $0.01 per share			32,020,270
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			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			41
Item 4. Controls and Procedures			41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43

Item 6. Exhibits			43
SIGNATURES			44

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, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	893,370	$	930,002
Accounts receivable, trade (less allowance for doubtful accounts of $8,962 and $8,725)	660,474		722,185
Current portion of program rights, net	11,162		10,807
Prepaid expenses and other current assets	275,490		286,875
Total current assets	1,840,496		1,949,869
Property and equipment, net of accumulated depreciation of $376,464 and $344,906	186,482		202,034
Program rights, net	1,884,392		1,762,939
Intangible assets, net	312,280		354,676
Goodwill	648,202		643,419
Deferred tax assets, net	14,898		13,618
Operating lease right-of-use assets	97,567		108,229
Other assets	486,164		599,052
Total assets	$	5,470,481	$	5,633,836
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	112,315	$	172,009
Accrued liabilities	374,803		419,065
Current portion of program rights obligations	323,862		374,115
Deferred revenue	75,601		134,883
Current portion of long-term debt	450,625		33,750
Current portion of lease obligations	36,828		36,411
Total current liabilities	1,374,034		1,170,233
Program rights obligations	163,020		200,869
Long-term debt, net	2,349,121		2,778,703
Lease obligations	108,451		124,799
Deferred tax liabilities, net	113,110		112,642
Other liabilities	81,008		139,108
Total liabilities	4,188,744		4,526,354
Commitments and contingencies
Redeemable noncontrolling interests	241,486		253,669
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 66,613 and 66,118 shares issued and 32,020 and 31,525 shares outstanding, respectively	666		661
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	366,553		360,251
Accumulated earnings	2,279,490		2,105,641
Treasury stock, at cost (34,593 and 34,593 shares Class A Common Stock, respectively)	(1,419,882)		(1,419,882)
Accumulated other comprehensive loss	(219,276)		(239,798)
Total AMC Networks stockholders' equity	1,007,666		806,988
Non-redeemable noncontrolling interests	32,585		46,825
Total stockholders' equity	1,040,251		853,813
Total liabilities and stockholders' equity	$	5,470,481	$	5,633,836

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,
	2023		2022		2023		2022
Revenues, net	$	678,628	$	738,025	$	1,396,075	$	1,450,182
Operating expenses:
Technical and operating (excluding depreciation and amortization)	321,961		325,772		648,690		610,009
Selling, general and administrative	194,298		231,819		379,904		462,472
Depreciation and amortization	25,745		27,231		51,620		49,821
Impairment and other charges	24,882		—		24,882		—
Restructuring and other related charges	6,041		—		11,974		—
Total operating expenses	572,927		584,822		1,117,070		1,122,302
Operating income	105,701		153,203		279,005		327,880
Other income (expense):
Interest expense	(38,930)		(31,980)		(76,547)		(62,777)
Interest income	7,342		2,467		15,258		4,927

Miscellaneous, net	10,140		(742)		14,729		5,086
Total other expense	(21,448)		(30,255)		(46,560)		(52,764)
Income from operations before income taxes	84,253		122,948		232,445		275,116
Income tax expense	(22,155)		(33,028)		(59,054)		(74,662)
Net income including noncontrolling interests	62,098		89,920		173,391		200,454
Net (income) loss attributable to noncontrolling interests	8,141		(6,491)		458		(12,837)
Net income attributable to AMC Networks' stockholders	$	70,239	$	83,429	$	173,849	$	187,617

Net income per share attributable to AMC Networks' stockholders:
Basic	$	1.60	$	1.93	$	3.98	$	4.36
Diluted	$	1.60	$	1.91	$	3.97	$	4.29

Weighted average common shares:
Basic	43,842		43,192		43,702		42,987
Diluted	43,900		43,679		43,835		43,697

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,
	2023		2022		2023		2022
Net income including noncontrolling interests	$	62,098	$	89,920	$	173,391	$	200,454
Other comprehensive income (loss):
Foreign currency translation adjustment	9,826		(51,740)		21,644		(70,333)




Comprehensive income	71,924		38,180		195,035		130,121
Comprehensive (income) loss attributable to noncontrolling interests	7,509		(4,463)		(664)		(9,978)
Comprehensive income attributable to AMC Networks' stockholders	$	79,433	$	33,717	$	194,371	$	120,143

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, 2023	$	665	$	115	$	360,117	$	2,209,251	$	(1,419,882)	$	(228,470)	$	921,796	$	47,246	$	969,042
Net income attributable to AMC Networks’ stockholders	—		—		—		70,239		—		—		70,239		—		70,239
Net income (loss) attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		(14,941)		(14,941)


Distribution to noncontrolling member	—		—		—		—		—		—		—		(352)		(352)

Other comprehensive income (loss)	—		—		—		—		—		9,194		9,194		632		9,826
Share-based compensation expenses	—		—		7,648		—		—		—		7,648		—		7,648



Net share issuances under employee stock plans	1		—		(1,212)		—		—		—		(1,211)		—		(1,211)
Balance, June 30, 2023	$	666	$	115	$	366,553	$	2,279,490	$	(1,419,882)	$	(219,276)	$	1,007,666	$	32,585	$	1,040,251


	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, 2022	$	660	$	115	$	335,803	$	2,202,235	$	(1,419,882)	$	(193,580)	$	925,351	$	51,627	$	976,978
Net income attributable to AMC Networks’ stockholders	—		—		—		83,429		—		—		83,429		—		83,429
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		1,870		1,870


Distributions to noncontrolling member	—		—		—		—		—		—		—		(1,394)		(1,394)
Purchase of noncontrolling interest, net of tax	—		—		(3,066)		—		—		—		(3,066)		(1,297)		(4,363)



Other comprehensive income (loss)	—		—		—		—		—		(49,712)		(49,712)		(2,028)		(51,740)

Share-based compensation expenses	—		—		8,683		—		—		—		8,683		—		8,683

Net share issuances under employee stock plans	—		—		(17)		—		—		—		(17)		—		(17)
Balance, June 30, 2022	$	660	$	115	$	341,403	$	2,285,664	$	(1,419,882)	$	(243,292)	$	964,668	$	48,778	$	1,013,446

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, December 31, 2022	$	661	$	115	$	360,251	$	2,105,641	$	(1,419,882)	$	(239,798)	$	806,988	$	46,825	$	853,813
Net income attributable to AMC Networks’ stockholders	—		—		—		173,849		—		—		173,849		—		173,849
Net income (loss) attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		(13,528)		(13,528)


Distributions to noncontrolling member	—		—		—		—		—		—		—		(1,834)		(1,834)

Other comprehensive income (loss)	—		—		—		—		—		20,522		20,522		1,122		21,644
Share-based compensation expenses	—		—		13,530		—		—		—		13,530		—		13,530



Net share issuances under employee stock plans	5		—		(7,228)		—		—		—		(7,223)		—		(7,223)
Balance, June 30, 2023	$	666	$	115	$	366,553	$	2,279,490	$	(1,419,882)	$	(219,276)	$	1,007,666	$	32,585	$	1,040,251


	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, 2021	$	655	$	115	$	347,971	$	2,098,047	$	(1,419,882)	$	(175,818)	$	851,088	$	51,584	$	902,672
Net income attributable to AMC Networks’ stockholders	—		—		—		187,617		—		—		187,617		—		187,617
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		4,309		4,309
Distributions to noncontrolling member	—		—		—		—		—		—		—		(2,959)		(2,959)
Purchase of noncontrolling interest, net of tax	—		—		(3,066)		—		—		—		(3,066)		(1,297)		(4,363)


Other comprehensive income (loss)	—		—		—		—		—		(67,474)		(67,474)		(2,859)		(70,333)
Share-based compensation expenses	—		—		16,812		—		—		—		16,812		—		16,812


Net share issuances under employee stock plans	5		—		(20,314)		—		—		—		(20,309)		—		(20,309)
Balance, June 30, 2022	$	660	$	115	$	341,403	$	2,285,664	$	(1,419,882)	$	(243,292)	$	964,668	$	48,778	$	1,013,446

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,
	2023		2022
Cash flows from operating activities:
Net income including noncontrolling interests	$	173,391	$	200,454
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	51,620		49,821
Impairment and other charges	24,882		—
Share-based compensation expenses related to equity classified awards	13,293		16,812

Amortization of program rights	430,386		396,890
Amortization of deferred carriage fees	10,992		16,902
Unrealized foreign currency transaction loss/(gain)	2,712		(554)
Amortization of deferred financing costs and discounts on indebtedness	3,905		3,828

Bad debt expense	1,070		1,165
Deferred income taxes	(725)		34,115
Gain on investments	—		(4,084)

Other, net	(2,201)		(4,955)
Changes in assets and liabilities:
Accounts receivable, trade	54,221		58,410
Prepaid expenses and other assets	133,471		(50,853)
Program rights and obligations, net	(644,114)		(667,492)
Income taxes payable	1,109		2,241
Deferred revenue	(59,828)		44,874
Deferred carriage fees, net	(6,129)		(11,686)
Accounts payable, accrued liabilities and other liabilities	(163,008)		(68,714)
Net cash provided by operating activities	25,047		17,174
Cash flows from investing activities:
Capital expenditures	(21,450)		(21,554)
Return of capital from investees	—		1,771

Acquisition of investments	(283)		—


Principal payment received on loan to investee	180		—
Proceeds from sale of investments	8,565		9,854
Net cash used in investing activities	(12,988)		(9,929)
Cash flows from financing activities:
Payments for financing costs	(342)		—
Principal payments on long-term debt	(16,875)		(16,875)
Deemed repurchases of restricted stock units	(7,223)		(20,309)

Principal payments on finance lease obligations	(1,946)		(1,663)

Distributions to noncontrolling interests	(27,087)		(25,139)
Purchase of noncontrolling interests	(1,343)		(2,500)
Net cash used in financing activities	(54,816)		(66,486)
Net decrease in cash and cash equivalents from operations	(42,757)		(59,241)
Effect of exchange rate changes on cash and cash equivalents	6,125		(15,636)
Cash and cash equivalents at beginning of period	930,002		892,221
Cash and cash equivalents at end of period	$	893,370	$	817,344

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," "we," "us," or "our") own and operate entertainment businesses and assets. The Company is comprised of two operating segments:

•Domestic Operations: Includes our programming services, which consist of our five national programming networks, our global streaming services, our AMC Studios operation and IFC Films. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. Our global streaming services consist of our targeted subscription streaming services (Acorn TV, Shudder, Sundance Now, ALLBLK, and HIDIVE) and AMC+. Our AMC Studios operation produces original programming for our programming networks and third parties and also licenses programming worldwide, and IFC Films is our film distribution business. The operating segment also includes AMC Networks Broadcasting & Technology, our technical services business, which primarily services most of the national programming networks.

•International and Other: Includes AMC Networks International ("AMCNI"), our international programming businesses consisting of a portfolio of channels around the world, and 25/7 Media, our production services business.

Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the accounts of AMC Networks and its subsidiaries in which a controlling financial interest is maintained or variable interest entities ("VIEs") in which the Company has determined it is the primary beneficiary. 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.

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, 2022 contained in the Company's Annual Report on Form 10-K (our "2022 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, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 useful lives and methodologies used to amortize and assess recoverability of program rights, the estimated useful lives of intangible assets and the valuation and recoverability of goodwill and intangible assets.

Note 2. Revenue Recognition

Transaction Price Allocated to Future Performance Obligations

As of June 30, 2023, other than contracts for which the Company has applied the practical expedients, the aggregate amount of transaction price allocated to future performance obligations was not material to our consolidated revenues.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Contract Balances from Contracts with Customers

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.


(In thousands)	June 30, 2023		December 31, 2022
Balances from contracts with customers:
Accounts receivable (including long-term receivables within Other assets)	$	783,422	$	1,003,505
Contract assets, short-term (included in Prepaid expenses and other current assets)	4,378		48,594

Contract liabilities, short-term (Deferred revenue)	75,601		134,883
Contract liabilities, long-term (Deferred revenue included in Other liabilities)	113		683

Revenue recognized for the six months ended June 30, 2023 and 2022 relating to the contract liability at December 31, 2022 and 2021 was $97.4 million and $45.7 million, respectively.

Note 3. Net Income per Share

The following is a reconciliation between basic and diluted weighted average common shares outstanding:


(In thousands)	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Basic weighted average common shares outstanding	43,842	43,192	43,702	42,987
Effect of dilution:

Restricted stock units	58	487	133	710
Diluted weighted average common shares outstanding	43,900	43,679	43,835	43,697

As of June 30, 2023 and June 30, 2022, 2.1 million and 0.8 million, respectively, of restricted stock units have been excluded from diluted weighted average common shares outstanding, as their impact would have been anti-dilutive.

Stock Repurchase Program

The Company's Board of Directors previously authorized a program to repurchase up to $1.5 billion of its outstanding shares of common stock (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 three and six months ended June 30, 2023 and 2022, the Company did not repurchase any shares of its Class A Common Stock. As of June 30, 2023, the Company had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

Note 4. Restructuring and Other Related Charges

On November 28, 2022, the Company commenced a restructuring plan (the “Plan”) designed to achieve significant cost reductions in light of “cord cutting” and the related impacts being felt across the media industry as well as the broader economic outlook. The Plan encompasses initiatives that include, among other things, strategic programming assessments and organizational restructuring costs. The Plan is intended to improve the organizational design of the Company through the elimination of certain roles and centralization of certain functional areas of the Company. The programming assessments pertain to a broad mix of owned and licensed content, including legacy television series and films that will no longer be in active rotation on the Company’s linear or streaming platforms. As a result of the Plan, the Company recorded restructuring and other related charges of $6.0 million and $12.0 million for the three and six months ended June 30, 2023 consisting primarily of severance and other personnel costs.

There were no restructuring and other related charges for the three and six months ended June 30, 2022.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The following table summarizes the restructuring and other related charges recognized by operating segment:


(In thousands)	Three Months Ended June 30,		Six Months Ended June 30,
	2023			2023
Domestic Operations	$	3,905		$	4,723
International and Other	261			1,646
Corporate / Inter-segment eliminations	1,875			5,605
Total restructuring and other related charges	$	6,041		$	11,974

The following table summarizes the accrued restructuring and other related costs:


(In thousands)	Severance and Employee-Related Costs		Content Impairments and Other Exit Costs		Total
Balance at December 31, 2022	$	37,150	$	74,724	$	111,874
Charges (credits)	13,775		(1,801)		11,974

Cash payments	(36,270)		(52,236)		(88,506)

Other	(34)		685		651
Balance at June 30, 2023	$	14,621	$	21,372	$	35,993

Accrued restructuring and other related costs of $33.7 million and $2.3 million are included in Accrued liabilities and Other liabilities, respectively, in the consolidated balance sheet at June 30, 2023. Accrued restructuring and other related costs of $108.0 million and $3.9 million are included in Accrued liabilities and Other liabilities, respectively, in the consolidated balance sheet at December 31, 2022.

Note 5. Program Rights

Total capitalized produced and licensed content by predominant monetization strategy is as follows:


	June 30, 2023
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	218,360	$	535,004	$	753,364
In-production and in-development	—		297,007		297,007
Total owned original program rights, net	$	218,360	$	832,011	$	1,050,371

Licensed program rights, net:
Licensed film and acquired series	$	1,633	$	594,451	$	596,084
Licensed originals	4,837		153,175		158,012
Advances and content versioning costs	—		91,087		91,087
Total licensed program rights, net	6,470		838,713		845,183
Program rights, net	$	224,830	$	1,670,724	$	1,895,554

Current portion of program rights, net					$	11,162
Program rights, net (long-term)					1,884,392
					$	1,895,554

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


	December 31, 2022
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	215,496	$	322,248	$	537,744
In-production and in-development	45,098		294,086		339,184
Total owned original program rights, net	$	260,594	$	616,334	$	876,928

Licensed program rights, net:
Licensed film and acquired series	$	3,092	$	642,768	$	645,860
Licensed originals	5,373		171,418		176,791
Advances and content versioning costs	—		74,167		74,167
Total licensed program rights, net	8,465		888,353		896,818
Program rights, net	$	269,059	$	1,504,687	$	1,773,746

Current portion of program rights, net					$	10,807
Program rights, net (long-term)					1,762,939
					$	1,773,746

Amortization of owned and licensed program rights, included in Technical and operating expenses in the condensed consolidated statements of income, is as follows:


	Three Months Ended June 30, 2023						Six Months Ended June 30, 2023
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights	$	59,528	$	56,811	$	116,339	$	80,831	$	101,747	$	182,578
Licensed program rights	471		126,503		126,974		2,135		245,673		247,808
Program rights amortization	$	59,999	$	183,314	$	243,313	$	82,966	$	347,420	$	430,386


	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights	$	44,504	$	30,381	$	74,885	$	94,344	$	47,316	$	141,660
Licensed program rights	9,633		119,520		129,153		17,241		237,989		255,230
Program rights amortization	$	54,137	$	149,901	$	204,038	$	111,585	$	285,305	$	396,890

For programming rights predominantly monetized individually or as a group, the Company periodically reviews the programming usefulness of licensed and owned original program rights based on several factors, including expected future revenue generation from airings on the Company's networks and streaming services and other exploitation opportunities, ratings, type and quality of program material, standards and practices, and fitness for exhibition through various forms of distribution. If events or changes in circumstances indicate that the fair value of a film predominantly monetized individually or a film group is less than its unamortized cost, the Company will write off the excess to technical and operating expenses in the consolidated statements of income. Program rights with no future programming usefulness are substantively abandoned resulting in the write-off of remaining unamortized cost. There were no significant program rights write-offs included in technical and operating expenses for the three and six months ended June 30, 2023 or 2022.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

In the normal course of business, the Company may qualify for tax incentives through eligible investments in productions. Receivables related to tax incentives earned on production spend were $188.0 million and $143.1 million as of June 30, 2023 and December 31, 2022, respectively, recorded in Prepaid expenses and other current assets, and $75.0 million and $104.5 million as of June 30, 2023 and December 31, 2022, respectively, recorded in Other assets.

Note 6. Investments

The Company holds several investments in and loans to non-consolidated entities which are included in Other assets in the condensed consolidated balance sheet.

Equity Method Investments

Equity method investments were $83.3 million and $79.6 million at June 30, 2023 and December 31, 2022, respectively.

Marketable Equity Securities

The Company classifies publicly traded investments with readily determinable fair values that are not accounted for under the equity method as marketable equity securities. Marketable equity securities are recorded at cost and adjusted to fair value at each reporting period. The changes in fair value between measurement dates are recorded in miscellaneous, net in the condensed consolidated statements of income.

There were no investments in marketable equity securities at June 30, 2023 or December 31, 2022.

There were no realized or unrealized gains or losses on marketable equity securities for the three and six months ended June 30, 2023. In April 2022, the Company sold its interest in a marketable equity security for $9.9 million. The Company recognized a loss of $0.2 million and a gain of $4.1 million on marketable equity securities for the three and six months ended June 30, 2022, respectively, included in miscellaneous, net in the condensed consolidated statements of income.

Non-marketable Equity Securities

The Company classifies investments without readily determinable fair values that are not accounted for under the equity method as non-marketable equity securities.

Investments in non-marketable equity securities were $41.3 million and $42.7 million at June 30, 2023 and December 31, 2022, respectively. The changes in value as a result of observable price changes, if any, are recorded in miscellaneous, net in the condensed consolidated statement of income. During the three and six months ended June 30, 2023, the Company recognized impairment charges of $0.5 million and $1.7 million, respectively, on certain investments, which were included in miscellaneous, net in the consolidated statements of income.

Note 7. Goodwill and Other Intangible Assets

The carrying amount of goodwill, by operating segment is as follows:


(In thousands)	Domestic Operations		International and Other		Total
December 31, 2022	$	349,292	$	294,127	$	643,419


Impairment charge	—		(1,877)		(1,877)
Amortization of "second component" goodwill	(560)		—		(560)
Foreign currency translation	—		7,220		7,220
June 30, 2023	$	348,732	$	299,470	$	648,202

As of June 30, 2023 and December 31, 2022, accumulated impairment charges in the International and Other segment totaled $165.7 million and $163.8 million, respectively.

The $1.9 million impairment charge for International and Other relates to the 25/7 Media reporting unit. See "Impairment Test of Long-Lived Assets and Goodwill" below for more details.

The reduction of $0.6 million in the carrying amount of goodwill for Domestic Operations 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. As of June 30, 2023, all tax benefits have been realized.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The following tables summarize information relating to the Company's identifiable intangible assets:


(In thousands)	June 30, 2023
	Gross		Accumulated Amortization		Net		Estimated Useful Lives
Amortizable intangible assets:
Affiliate and customer relationships	$	639,664	$	(407,959)	$	231,705	6 to 25 years
Advertiser relationships	46,282		(36,546)		9,736		11 years
Trade names and other amortizable intangible assets	106,755		(55,816)		50,939		3 to 20 years

Total amortizable intangible assets	792,701		(500,321)		292,380
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	812,601	$	(500,321)	$	312,280

(In thousands)	December 31, 2022
	Gross		Accumulated Amortization		Net
Amortizable intangible assets:
Affiliate and customer relationships	$	634,000	$	(373,240)	$	260,760
Advertiser relationships	46,282		(34,443)		11,839
Trade names and other amortizable intangible assets	105,338		(43,161)		62,177

Total amortizable intangible assets	785,620		(450,844)		334,776
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	805,520	$	(450,844)	$	354,676

Aggregate amortization expense for amortizable intangible assets for the three months ended June 30, 2023 and 2022 was $10.5 million and $10.4 million, respectively, and for the six months ended June 30, 2023 and 2022 was $20.9 million and $21.0 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,
2023	$	40,615
2024	39,404
2025	37,667
2026	33,294
2027	28,540

Impairment Test of Long-Lived Assets and Goodwill

25/7 Media is our production services business and is part of our International and Other operating segment. See "Item 1. Business - International and Other" in our 2022 Form 10-K for further details. During the second quarter of 2023, given the impact of market challenges at 25/7 Media, specifically as it relates to reduced demand for new content and series cancellations from third parties, the Company revised its outlook for the 25/7 Media business, resulting in lower expected future cash flows. As a result, the Company determined that sufficient indicators of potential impairment of long-lived assets existed at 25/7 Media. The Company performed a recoverability test and determined that the carrying amount of the 25/7 Media asset group was not recoverable. The carrying value of the asset group exceeded its fair value, therefore an impairment charge of $23.0 million was recorded for identifiable intangible assets, which is included in impairment and other charges in the consolidated statement of income within the International and Other operating segment. Fair values used to determine the impairment charge were determined using an income approach, specifically a discounted cash flow ("DCF") model, and a

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

market comparables approach. The DCF model includes significant assumptions about revenue growth rates, long-term growth rates and enterprise specific discount rates. Given the uncertainty in determining assumptions underlying the DCF approach, actual results may differ from those used in the valuations.

During the second quarter of 2023, the Company also determined that a triggering event had occurred with respect to the 25/7 Media reporting unit, which required an interim goodwill impairment test to be performed. Accordingly, the Company performed a quantitative assessment using an income approach, specifically a DCF model, and a market comparables approach. Based on the valuations performed, a $1.9 million goodwill impairment charge was recorded, which is included in impairment and other charges in the consolidated statement of income, within the International and Other operating segment.

Note 8. Accrued Liabilities

Accrued liabilities consist of the following:


(In thousands)	June 30, 2023		December 31, 2022
Employee related costs	$	70,760	$	97,362
Participations and residuals	160,736		138,384
Interest	37,008		37,105
Restructuring and other related charges	33,718		107,998
Other accrued expenses	72,581		38,216
Total accrued liabilities	$	374,803	$	419,065

Note 9. Long-term Debt

The Company's long-term debt consists of the following:


(In thousands)	June 30, 2023		December 31, 2022
Senior Secured Credit Facility: (a)
Term Loan A Facility	$	624,375	$	641,250
Senior Notes:

5.00% Notes due April 2024	400,000		400,000
4.75% Notes due August 2025	800,000		800,000
4.25% Notes due February 2029	1,000,000		1,000,000

Total long-term debt	2,824,375		2,841,250
Unamortized discount	(16,425)		(18,718)
Unamortized deferred financing costs	(8,204)		(10,079)
Long-term debt, net	2,799,746		2,812,453
Current portion of long-term debt	450,625		33,750
Noncurrent portion of long-term debt	$	2,349,121	$	2,778,703

(a)The Company's revolving credit facility remains undrawn at June 30, 2023. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company.

During the six months ended June 30, 2023, the Company repaid a total of $16.9 million of the principal amount of the Term Loan A Facility in accordance with the terms of the agreement.

In April 2023, the Company entered into Amendment No. 2 ("Amendment No. 2") to the Second Amended and Restated Credit Agreement (the "Credit Agreement"). Amendment No. 2 (i) reduced the aggregate principal amount of the revolving loan commitments under the Credit Agreement from $500 million to $400 million, (ii) replaced the interest rate based on London Interbank Offered Rate with an interest rate based on the Secured Overnight Financing Rate, (iii) increased the Company's ability to incur additional debt in the future to provide additional flexibility for future financings, including increasing the amount of the incremental debt basket to the greater of $1.2 billion and the amount that would not cause the senior secured leverage ratio to exceed 3.00 to 1.00 on a pro forma basis and (iv) made certain other modifications to the Credit Agreement. The maturity date of the Term Loan A Facility and revolving credit facility under the Credit Agreement is

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

February 8, 2026. In connection with the modification of the revolving loan commitments, the Company recorded $0.6 million to write-off a portion of the unamortized deferred financing costs, which is included in interest expense within the consolidated statements of income.

Other Debt

During the second quarter of 2023, a majority owned subsidiary of the Company extended its credit facility totaling $4.5 million to July 21, 2024. The facility bears interest at the greater of 3.5% or the prime rate plus 1%. There were no outstanding borrowings under the credit facility as of June 30, 2023.

Note 10. Leases

The following table summarizes the leases included in the condensed consolidated balance sheets as follows:


(In thousands)	Balance Sheet Location	June 30, 2023		December 31, 2022
Assets
Operating	Operating lease right-of-use assets	$	97,567	$	108,229
Finance	Property and equipment, net	10,433		10,982
Total lease assets		$	108,000	$	119,211
Liabilities
Current:
Operating	Current portion of lease obligations	$	32,383	$	32,207
Finance	Current portion of lease obligations	4,445		4,204
		$	36,828	$	36,411
Noncurrent:
Operating	Lease obligations	$	91,640	$	105,768
Finance	Lease obligations	16,811		19,031
		$	108,451	$	124,799

Total lease liabilities		$	145,279	$	161,210

Note 11. 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.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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, 2023 and December 31, 2022:


(In thousands)	Level I		Level II		Level III		Total
At June 30, 2023:
Assets
Cash equivalents	$	80,000	$	—	$	—	$	80,000



Foreign currency derivatives	—		7,563		—		7,563

Liabilities

Foreign currency derivatives	—		4,762		—		4,762


At December 31, 2022:
Assets
Cash equivalents	$	80,000	$	—	$	—	$	80,000



Foreign currency derivatives	—		536		—		536

Liabilities

Foreign currency derivatives	—		8,965		—		8,965

The Company's cash equivalents (comprised of money market mutual funds) are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.

The Company's foreign currency derivatives are classified within Level II of the fair value hierarchy as their fair values are determined based on a market approach valuation technique that uses readily observable market parameters and the consideration of counterparty risk.

At June 30, 2023 and December 31, 2022, the Company did not have any material 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 and impairment testing. These nonrecurring valuations primarily include the valuation of program rights, goodwill, 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, 2023
	Carrying Amount	Estimated Fair Value
Debt instruments: