Crown Media Holdings, Inc. (NASDAQ:CRWN) today reported its
operating results for the three months and year ended December 31,
2015.
Operating Highlights
- Double-digit advertising
revenue. The addition of 5.1 million Hallmark Channel
subscribers and 6.7 million Hallmark Movies & Mysteries
subscribers, over the last twelve months, coupled with ratings and
pricing improvements particularly on Hallmark Movies &
Mysteries, resulted in 21% advertising revenue growth quarter over
quarter and full year growth of 18%.
- Fall Harvest galvanized the
fourth quarter of 2015. Hallmark Channel kicked off the fall
season with four original movie premiers in October 2015,
delivering increases of 12% among households and 6% among Women 25
to 54 over the same period in 2014.
- Countdown to Christmas again
elevated Hallmark Channel to be the #1 rated cable network in
November and December 2015 among Women 25 to 54. Countdown to
Christmas Thanksgiving Week event featured five back to back
original movie premieres which led Hallmark Channel to its highest
ever week, month, and quarter in audience Prime Time delivery.
- Hallmark Movies & Mysteries’
Most Wonderful Movies of Christmas gained new audiences in
2015. In its third season, Most Wonderful Movies of Christmas
featured four original movie premieres reaching 33.3 million
viewers, a 13% growth from 2014. In addition, Hallmark Movies &
Mysteries achieved its most watched movie premiere among Women and
Adults 25 to 54 (Debbie Macomber’s Dashing through the Snow) and
reached its highest Prime Time week, month, and quarter in network
history.
- Crown Media renewed its carriage
with NCTC members in a multi-year agreement. In December 2015,
Crown Media finalized its renewal agreement with NCTC, extending
the carriage of Hallmark Channel and Hallmark Movies &
Mysteries.
“2015 marked another year of significant achievements with the
expansion of our subscriber base, strong growth in audience for
both channels and double-digit quarterly advertising sales
increases” said Bill Abbott, President and CEO of Crown Media
Family Networks. “Forging ahead in 2016, we will continue to focus
on being the celebration destination for viewers with events such
as Winterfest, Countdown to Valentine’s Day, June Weddings, Fall
Harvest, and Thanksgiving Weekend Event.”
Financial Results
Historical financial information is provided in tables at the
end of this release.
Operating Results
For the fourth quarter of 2015, Crown Media reported revenue of
$158.8 million, an 18% increase from $134.2 million in the fourth
quarter of 2014. Advertising revenue increased 21% to $134.1
million from $111.1 million in the fourth quarter of 2014 due to
audience growth across both channels. Subscriber fee revenue
increased 8% to $22.0 million from $20.3 million in the fourth
quarter of 2014 primarily due to revenue from AT&T. Other
revenue decreased $0.3 million for the quarter to $2.6 million as
compared to $2.9 million in the prior year’s quarter due to the
timing of the Company’s film licensing arrangements in the
international market.
For 2015, Crown Media reported revenue of $478.7 million, a 15%
increase from $415.6 million in 2014. Advertising revenue increased
18% to $386.2 million in 2015 from $327.7 million in 2014. The
increase in advertising revenue was due to subscriber, pricing and
ratings growth across both channels. Subscriber fee revenue
increased 3% to $85.3 million in 2015 from $82.9 million in 2014.
Other revenue increased $2.2 million to $7.2 million year over year
from $5.0 million due to increases in SVOD licensing revenue.
For the fourth quarter of 2015, cost of services increased 65%
to $63.8 million from $38.7 million during the same quarter of
2014. Programming costs increased 66% quarter over quarter due to
higher costs associated with our daytime programming and
accelerated amortization of nearly $15.0 million on programming
titles no longer utilized. Operating costs increased $2.7 million
quarter over quarter due to increases in employee and residual
costs.
For 2015, cost of services increased 21% to $199.2 million from
$165.1 million in 2014. Programming costs increased 19% year over
year due to the accelerated amortization of nearly $15.0 million on
programming titles. Operating costs increased $6.5 million year
over year due to an increase in employee and residual costs.
Selling, general and administrative expense (including
depreciation and amortization expense) increased 1% to $21.8
million for the fourth quarter of 2015 from $21.6 million during
the same quarter of 2014.
Selling, general and administrative expense (including
depreciation and amortization expense) increased 11% to $78.9
million in 2015, from $71.0 million during 2014 due to increases in
employee costs, including contingent compensation and increases in
research costs.
Marketing expense increased $1.5 million during the fourth
quarter of 2015 compared to the fourth quarter of 2014 due to
increases in holiday marketing campaigns. Marketing expense
increased $3.0 million in 2015, compared to 2014.
Interest expense decreased $6.2 million for the fourth quarter
of 2015, as compared to the fourth quarter of 2014, due to the new
credit facility entered into in June 2015, used to repay and redeem
the prior term loan and note. Interest expense also decreased $14.2
million in 2015, as compared to 2014, for similar reasons.
In August 2014, the Company redeemed $8.5 million in principal
amount of the Notes for a price of $9.5 million and wrote-off a
portion of the debt issuance costs of $0.2 million, which resulted
in an aggregate, pre-tax loss of extinguishment of debt of
approximately $1.2 million. In October 2014, the Company redeemed
$20.0 million in principal amount of the Notes for a price of $22.1
million and wrote-off a portion of the debt issuance costs of $0.4
million, which resulted in an aggregate, pre-tax loss of
extinguishment of debt of approximately $2.5 million.
In June 2015, the Company repaid $99.6 million of principal
under its 2011 Term Loan using cash on hand of $19.6 million and
proceeds from the 2015 Term Loan of $80.0 million. In conjunction
with this transaction, it wrote-off $2.7 million of debt issuance
costs and $1.2 million original issue discount costs related to the
2011 Term Loan, which resulted in aggregate a pre-tax loss on
extinguishment of debt of $3.9 million. In July 2015, the Company
redeemed the remaining $271.5 million in principal amount of Notes
for a price of $285.8 million and recorded a charge for the
associated debt issuance costs of approximately $4.3 million, which
resulted in an aggregate, pre-tax loss on extinguishment of debt of
approximately $18.6 million.
Provisions for income tax of $23.6 million and $51.7 million
reflect effective tax rates of 37.8% and 37.5% for the three months
and year ended December 31, 2015, respectively. During the fourth
quarter of 2014, the Company released $22.8 million of valuation
allowance.
In December 2014, the Company reevaluated its remaining
obligations under the terms of the sale of its international
business. Accordingly, the Company increased the carrying amount of
the liability by $1.0 million and recognized a corresponding loss
from the sale of discontinued operations, net of $0.4 million of
taxes.
Adjusted EBITDA was $67.6 million for the fourth quarter of 2015
compared to $69.9 million for the fourth quarter of 2014. Cash
provided by operating activities totaled $5.8 million for the
fourth quarter of 2015 compared to $18.0 million for the fourth
quarter of 2014. Net income to common shareholders for the quarter
ended December 31, 2015, was $38.9 million, or $0.11 per share,
compared to $51.6 million, or $0.14 per share in the fourth quarter
of 2014.
Adjusted EBITDA was $193.7 million for 2015, compared to $174.8
million for 2014. Cash provided by operating activities totaled
$77.5 million for 2015, compared to $69.3 million in 2014. Net
income to common shareholders for 2015, was $86.1 million, or $0.24
per share, compared to $94.5 million, or $0.26 per share for
2014.
Conference Call and Webcast to be Held Friday, February
19th, at 11:00 a.m. ET
Crown Media Holdings’ management will conduct a conference call
on Friday, February 19th, at 11:00 a.m., Eastern Time to discuss
the results of the three months and year ended December 31, 2015.
Investors and interested parties may listen to the call via a live
webcast accessible on the Company's investor relations page,
http://ir.crownmedia.net/, or by dialing (877) 704-4237 (Domestic)
or (201) 493-6718 (International). For those listeners accessing
the call through the company's website, please register and
download audio software at the site at least 15 minutes prior to
the start of the call. The webcast will be archived on the site,
and a telephone replay of the call will be available for 5 days,
beginning approximately one hour after the call on Friday, February
19th at (877) 660-6853 (Domestic) or (201) 612-7415
(International), using the access code 13613865.
About Crown Media Holdings, Inc.
Crown Media Holdings, Inc. is the corporate parent for the
portfolio of cable networks and related businesses under Crown
Media Family Networks. The company currently operates and
distributes Hallmark Channel in both high definition (HD) and
standard definition (SD) to 90 million subscribers in the United
States. Hallmark Channel is the nation’s leading destination for
quality family programming with an ambitious slate of TV movies and
specials; original scripted series, including When Calls the Heart
and Good Witch; as well as some of television’s most beloved
sitcoms and series. Hallmark Channel is also home to annual holiday
franchise, Countdown to Christmas, featuring a lineup of 24/7
holiday programming. Hallmark Channel's sibling network, Hallmark
Movies & Mysteries, is available in 64 million homes in HD and
SD and is one of America’s fastest-growing cable networks. Hallmark
Movies & Mysteries features a unique mix of original movies and
acquired series focusing on the lighter side of the suspense and
mystery genres. The network is also home to the annual holiday
programming franchise, the Most Wonderful Movies of Christmas, as
well as presentations from the award-winning Hallmark Hall of Fame
library. In addition, Crown Media Family Networks includes the
online offerings of HallmarkChannel.com and
HallmarkMoviesandMysteries.com.
Forward-looking Statements
Statements contained in this press release may contain
forward-looking statements as contemplated by the 1995 Private
Securities Litigation Reform Act that are based on management’s
current expectations, estimates and projections. Words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” variations of such words and similar expressions are
intended to identify such forward-looking statements.
Forward-looking statements are subject to risks and uncertainties,
which could cause actual results to differ materially from those
projected or implied in the forward-looking statements. Such risks
and uncertainties include: competition for distribution of
channels, viewers, advertisers, and the acquisition of programming;
fluctuations in the availability of programming; fluctuations in
demand for the programming Crown Media Holdings airs on its
channels; our ability to address our liquidity needs; our
incurrence of losses; our substantial indebtedness affecting our
financial condition and results; and other risks detailed in the
Company’s filings with the Securities and Exchange Commission,
including the Risk Factors stated in the Company’s most recent 10-K
and 10-Q Reports. Crown Media Holdings is not undertaking any
obligation to release publicly any updates to any forward-looking
statements to reflect events or circumstances after the date of
this release or to reflect the occurrence of unanticipated
events.
Use of Adjusted EBITDA
Crown Media Holdings evaluates operating performance based on
several factors, including Adjusted EBITDA. Our calculation of
Adjusted EBITDA adds back non-cash expenses and other items
mentioned below.
Our measure of Adjusted EBITDA differs from the normal
definition of EBITDA (earnings before interest, taxes, depreciation
and amortization) used by most companies. We define Adjusted EBITDA
as earnings before interest, taxes, depreciation, amortization, and
other non-cash expenses. For this purpose, restricted stock unit
compensation and long term incentive plan expense are treated as
non-cash items, although they may result in cash payments during
subsequent periods. See “Selected Unaudited Financial Information”
below for a reconciliation to GAAP net income. Management views
Adjusted EBITDA as a critical measure of our operating performance
and monitors this measure closely. We disclose Adjusted EBITDA so
that our investors can have some of the same information available
to our management to evaluate their investment in our Company.
We also believe that an Adjusted EBITDA provides an indication
of the Company's ability to generate cash flows from operating
activities since our non-cash expenses are excluded from our
calculation of Adjusted EBITDA. The Adjusted EBITDA calculation
allows the Company to assess how much is available to pay debt
service and gives a further indication of how much remains to fund
discretionary expenditures such as the acquisition of programming.
However, Adjusted EBITDA should be considered in addition to, not
as a substitute for, historical operating income or loss, net loss,
cash flow from operations and other measures of financial
performance reported in accordance with accounting principles
generally accepted in the United States.
Adjusted EBITDA differs significantly from cash flows from
operating activities reflected in the consolidated statement of
cash flows. Cash flow from operating activities is net of interest
and taxes paid and is a more comprehensive determination of
periodic income on a cash basis, exclusive of non-cash items of
income and expenses such as depreciation and amortization. In
contrast, Adjusted EBITDA is derived from accrual basis income and
is not reduced for cash invested in working capital. Consequently,
Adjusted EBITDA is not affected by the timing of receivable
collections or when accrued expenses are paid. We are not aware of
any uniform standards for determining EBITDA or our Adjusted EBITDA
and believe that our calculation of Adjusted EBITDA is likely
calculated differently than presentations of EBITDA by other
entities as our calculation was based upon the definition in a bank
credit agreement.
Crown Media Holdings, Inc. Unaudited Consolidated
Income Statement Information (In thousands, except per share
data)
Three Months Ended Year Ended December
31, December 31, 2014
2015 2014
2015 Revenue: Advertising $
108,178 $ 131,877 $ 323,033 $ 382,716 Advertising by Hallmark Cards
2,933 2,269 4,658 3,528 Subscriber fees 20,267 21,988 82,903 85,324
Other revenue 2,863 2,626
5,002 7,166
Total revenue, net 134,241 158,760 415,596 478,734 Cost of
services: Non-affiliate programming 32,714 55,659 144,645 172,806
Hallmark Cards affiliate programming 1,450 905 3,951 3,385
Amortization of capital lease 290 290 1,158 1,158 Other costs of
services 4,261 6,917
15,375 21,846
Total cost of services 38,715 63,771 165,129 199,195
Selling, general and administrative expense 20,915 21,148 68,570
76,165 Marketing expense 6,241 7,786 12,436 15,423 Depreciation and
amortization expense 715 678
2,468 2,700
Income from operations before interest and income tax
expense 67,655 65,377 166,993 185,251 Interest expense (9,222 )
(2,994 ) (39,263 ) (25,028 ) Loss on extinguishment of debt
(2,488 ) - (3,668
) (22,478 ) Income from operations before
income tax and discontinued operations 55,945 62,383 124,062
137,745 Income tax expense (3,716 )
(23,569 ) (28,936 )
(51,662 ) Income from continuing operations 52,229 38,814 95,126
86,083 Loss from sale of discontinued operations, net of tax
(629 ) 44 (629 )
- Net income $ 51,600
$ 38,858 $ 94,497
$ 86,083 Income per share before discontinued
operations $ 0.15 $ 0.11 $ 0.26 $ 0.24 Loss from sale of
discontinued operations (0.00 ) 0.00
(0.00 ) -
Net income per share - diluted $ 0.14 $ 0.11
$ 0.26 $ 0.24
Weighted average number of common
sharesoutstanding
359,676 359,676 359,676 359,676
Crown Media
Holdings, Inc. Unaudited Consolidated Balance Sheets (In
thousands, except share and per share data)
As of December 31, As of December 31,
2014 2015 ASSETS
Cash and cash equivalents $ 60,888 $ 50,604 Accounts
receivable, less allowance for doubtful accounts of $265 and $251,
respectively 118,277 155,813 Programming rights 85,950 108,000
Prepaid programming rights 10,419 - Prepaid and other assets
3,459 4,109 Total current assets
278,993 318,526 Long term receivable - 293 Programming rights
221,664 272,016 Prepaid programming rights 29,363 23,947 Property
and equipment, net 10,763 8,588 Deferred tax asset, net 194,368
146,180 Transaction costs, net 227 805 Other assets 5,051 3,749
Goodwill 314,033 314,033 Total
assets $ 1,054,462 $ 1,088,137
LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts
payable and accrued liabilities $ 29,588 $ 30,920 Audience
deficiency reserve liability 5,926 10,928 Programming rights
payable 66,726 73,654 Payables to Hallmark Cards affiliates 150 353
Interest payable 13,079 1,266 Current maturities of long-term debt
20,000 12,188 Total current
liabilities 135,469 129,309 Accrued liabilities 17,629 19,399
Programming rights payable 45,676 48,909 Derivative payable - 735
Long-term debt, net of current maturities 362,050
310,222 Total liabilities 560,824 508,574
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Class A
common stock, $.01 par value; 500,000,000 shares authorized;
359,675,936 shares issued and outstanding as of both December 31,
2014 and 2015 3,597 3,597 Paid-in capital 2,062,818 2,062,818
Accumulated other comprehensive loss - (158 ) Accumulated deficit
(1,572,777 ) (1,486,694 ) Total stockholders'
equity 493,638 579,563 Total
liabilities and stockholders' equity $ 1,054,462 $
1,088,137
Crown Media Holdings, Inc.
Selected Unaudited Financial Information (in thousands)
Three Months Ended Year Ended December
31, December 31, 2014
2015
2014 2015
Net income $ 51,600 $ 38,858 $ 94,497 $ 86,083 Loss from sale of
discontinued operations 629 (44 ) 629 - Loss on extinguishment of
debt 2,488 - 3,668 22,478 Depreciation and amortization 1,005 968
3,626 3,858 Interest expense 9,222 2,994 39,263 25,028 Income tax
expense 3,716 23,569 28,936 51,662 Long term incentive plan expense
1,279 1,234 4,187 4,550 Restricted stock unit compensation -
- 36
- Adjusted earnings before interest,
taxes, depreciation and amortization $ 69,939 $ 67,579 $ 174,842 $
193,659 Programming and other amortization 34,923 57,256
151,662 179,172 Provision for allowance for doubtful account 64
(344 ) 187 483 Changes in operating assets and liabilities: Change
to programming rights (41,764 ) (112,938 ) (182,733 ) (248,594 )
Change to prepaid programming rights 4,005 (15,872 ) (3,138 )
(15,835 ) Change in programming rights payable (11,718 ) 26,798
(16,472 ) 10,161 Interest paid (1,907 ) (2,311 ) (38,464 ) (34,837
) Changes in other operating assets and liabilities, net of
adjustments above (35,591 ) (14,319 )
(16,574 ) (6,739 ) Net
cash provided by operating activities $ 17,951
$ 5,849 $ 69,310 $ 77,470
Crown Media Holdings, Inc. Selected
Unaudited Cash Flow Statement Information (in thousands)
Three
Months Ended Year Ended December 31,
December 31, 2014
2015 2014
2015 Net cash provided by
operating activities $ 17,951 $ 5,849 $ 69,310 $ 77,470 Net cash
used in investing activities (307 ) (417 ) (2,719 ) (2,115 ) Net
cash used in financing activities (22,460 )
(25,370 ) (69,453 )
(85,639 ) Net decrease in cash and cash equivalents (4,816 )
(19,938 ) (2,862 ) (10,284 ) Cash and cash equivalents, beginning
of period 65,704 70,542
63,750 60,888
Cash and cash equivalents, end of period $ 60,888
$ 50,604 $ 60,888
$ 50,604
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version on businesswire.com: http://www.businesswire.com/news/home/20160218006617/en/
Investors and PressCrown Media Holdings, Inc.Mary Dzabic,
818-755-1261marydzabic@crownmedia.com
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