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Operating Highlights
“Our Company delivered an extremely successful year for 2008 – in terms of operating as well as financial results,” noted
“Right now, Americans are looking for predictability in very unpredictable times. Hallmark Channel and Hallmark Movie Channel offer the kind of poignant and uplifting programming that Americans want and need – and certainly tuned into on our channels in record numbers during the holidays. I am confident that our unique appeal and sound operating structure will help us navigate successfully through the uncertain times ahead.”
Financial Results
Historical financial information is provided in tables at the end of this release.
Operating Results
For the fourth quarter of 2008, cost of services decreased 29% to
For the year ended
Negative film amortization of
Other cost of services increased from
Selling, general and administrative expenses decreased to
for the quarter ended
Selling, general and administrative expenses decreased to
Adjusted EBITDA was
Adjusted EBITDA totaled
Conference Call and Webcast to be Held Thursday, March 5th at
Crown Media Holdings’ management will conduct a conference call tomorrow morning at
About
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
Use of Adjusted EBITDA
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, subscriber acquisition fee amortization, amortization of film assets, impairment charges, and other non-cash expenses.. For this purpose, restricted stock unit compensation and retention program are treated as non-cash items, although they may result in cash payments during subsequent periods. Our credit facility contained a covenant that used this adjusted EBITDA measure. The Company no longer has an EBITDA covenant in its bank credit agreement. See “Selected Fourth Quarter 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. A significant portion of the Company's cost structure related to the amortization of subscriber acquisition costs, which were significant non-cash charges. 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 or additional subscriber base. 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
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, amortization, loss from discontinued operations and impairment of film assets. 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 probably calculated differently than presentations of EBITDA by other entities because our calculation was based upon the definition in a bank credit agreement.
| Crown Media Holdings, Inc. | |||||||||||||||||
| Selected Financial Information |
|||||||||||||||||
| ($ in thousands, except per share data) | |||||||||||||||||
| Three Months Ended December 31*, | Year Ended December 31, | ||||||||||||||||
| 2008 | 2007 | 2008 | 2007 |
||||||||||||||
| Revenues: | |||||||||||||||||
| Subscriber fees | $ | 14,481 | $ | 6,421 | $ | 57,153 | $ | 27,812 | |||||||||
| Advertising | 60,131 | 62,916 | 222,967 | 205,666 | |||||||||||||
| Advertising by Hallmark Cards | 272 | 118 | 429 | 508 | |||||||||||||
| Other revenue | 344 | 118 | 1,245 | 378 | |||||||||||||
Total revenue |
75,228 | 69,573 | 281,794 | 234,364 | |||||||||||||
| Cost of services: | |||||||||||||||||
Hallmark Cards affiliate programming |
269 | 23 | 798 | 82 | |||||||||||||
| Non-affiliate programming | 32,730 | 39,870 | 139,900 | 164,287 | |||||||||||||
| Amortization of film assets | 80 | 40 | (745 | ) | (5,220 | ) | |||||||||||
| Subscriber acquisition fee amortization | - |
8,268 |
- |
30,996 |
|||||||||||||
Amortization of capital lease |
290 | 290 | 1,158 | 1,158 | |||||||||||||
| Other cost of services | 3,189 | 3,029 | 12,668 | 11,222 | |||||||||||||
| Total cost of services | 36,558 | 51,520 | 153,779 | 202,525 | |||||||||||||
| Selling, general & administrative expenses | 8,639 | 21,588 | 46,605 | 61,452 | |||||||||||||
| Marketing expense | 6,512 | 7,883 | 19,603 | 19,733 | |||||||||||||
| Depreciation and amortization | 502 | 386 |
1,932 | 1,656 | |||||||||||||
| Income (loss) from operations before interest expense | 23,017 | (11,804 | ) | 59,875 | (51,002 | ) | |||||||||||
| Interest expense | (24,797 |
) | (25,595 | ) | (100,157 | ) | (108,144 | ) |
|||||||||
| Loss from continuing operations | (1,780 | ) | (37,399 | ) | (40,282 | ) | (159,146 | ) | |||||||||
Gain from sale of discontinued operations |
3,064 | 114 | 3,064 | 114 | |||||||||||||
| Net income (loss) | $ | 1,284 | $ | (37,285 | ) |
$ | (37,218 | ) | $ | (159,032 |
) | ||||||
| Net income (loss) per share | $ | 0.01 | $ | (0.37 | ) | $ | (0.36 |
) | $ | (1.53 | ) | ||||||
| Weighted average shares outstanding | 104,788 | 101,787 | 104,776 | 104,038 | |||||||||||||
| * Unaudited | |||||||||||||||||
| Crown Media Holdings, Inc. | ||||||
| Consolidated Balance Sheet Data |
||||||
| (In thousands) | ||||||
As of December 31, |
As of December 31, | |||||
| 2008 |
2007 | |||||
| ASSETS | ||||||
| Cash and cash equivalents | $ | 2,714 | $ | 1,974 | ||
| Accounts receivable, less allowance for doubtful | ||||||
accounts of $294 and $242, respectively |
66,510 | 68,603 | ||||
Program license fees - Hallmark Cards affiliates |
1,134 | 128 | ||||
Program license fees - non-affiliates |
104,802 | 119,561 | ||||
Prepaid and other assets |
4,067 | 4,478 | ||||
Prepaid program license fee assets |
7,655 | 8,361 | ||||
| Total current assets | 186,882 | 203,105 | ||||
| Program license fees - Hallmark Cards affiliates | 8,872 | 625 | ||||
| Program license fees - non-affiliates | 205,335 | 129,296 | ||||
| Property and equipment, net | 15,392 | 15,962 | ||||
| Goodwill | 314,033 | 314,033 | ||||
| Prepaid and other assets | 8,831 | 13,220 | ||||
| Total assets | $ | 739,345 | $ | 676,241 | ||
| Crown Media Holdings, Inc. | ||||||||
| Consolidated Balance Sheet Data | ||||||||
| (In thousands) | ||||||||
| As of December 31, | As of December 31, | |||||||
| 2008 | 2007 |
|||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
LIABILITIES |
||||||||
| Accounts payable and accrued liabilities | $ |
20,967 | $ |
29,864 | ||||
Audience deficiency reserve |
11,505 | 15,620 | ||||||
| License fees payable to Hallmark Cards affiliates | 1,089 | 550 | ||||||
License fees payable to non-affiliates |
127,549 | 108,827 | ||||||
| Payables to Hallmark Cards affiliates | 14,799 | 13,266 | ||||||
Credit facility and interest payable |
29 | 19,583 | ||||||
| Note and interest payable to Hallmark Cards | 3,941 | - | ||||||
Other current liabilities |
5,874 | 11,664 | ||||||
Total current liabilities |
185,753 | 199,374 | ||||||
| Accrued liabilities | 12,693 | 18,056 | ||||||
License fees payable to Hallmark Cards affiliates |
8,782 | - | ||||||
| License fees payable to non-affiliates | 103,669 | 56,521 | ||||||
Credit facility |
28,570 | 50,000 | ||||||
| Notes and interest payable to Hallmark Cards affiliates | 340,743 | 340,056 | ||||||
Senior unsecured note to HC Crown, including accrued interest |
686,578 | 621,266 | ||||||
| Company obligated mandatorily redeemable preferred interest | 20,822 | 18,690 | ||||||
Other liabilities |
18,668 | 23,273 | ||||||
| Obligation to NICC for the repurchase of Class A common stock, | ||||||||
| extinguished January 2, 2008, $.01 par value; 0 and 4,357,066 | ||||||||
| shares issued and outstanding as of December 31, 2008 and 2007, | ||||||||
| Respectively | - | 32,765 | ||||||
| Total liabilities | 1,406,278 | 1,360,001 | ||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Class A common stock, $.01 par value; 200,000,000 shares | ||||||||
| authorized; 74,117,654 and 69,760,588 shares issued and outstanding | ||||||||
as of December 31, 2008 and 2007, respectively |
741 | 698 | ||||||
| Class B common stock, $.01 par value; 120,000,000 shares | ||||||||
| authorized; 30,670,422 shares issued and outstanding | ||||||||
| as of both December 31, 2008 and 2007 | 307 |
307 |
||||||
| Paid-in capital | 1,465,293 | 1,411,291 | ||||||
| Accumulated deficit | (2,133,274 | ) | (2,096,056 | ) | ||||
| Total stockholders' deficit | (666,933 |
) | (683,760 | ) | ||||
Total liabilities and stockholders' deficit |
$ | 739,345 | $ | 676,241 | ||||
| Crown Media Holdings, Inc. | |||||||||||||||||
| Selected Unaudited Financial Information |
|||||||||||||||||
| ($ in thousands) | |||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, |
||||||||||||||||
| 2008 | 2007 |
2008 | 2007 | ||||||||||||||
| Net income (loss) | $ | 1,284 | $ | (37,285 | ) | $ | (37,218 | ) | $ | (159,032 | ) | ||||||
| Gain on sale of discontinued operations | (3,064 | ) | (114 | ) | (3,064 | ) | (114 | ) | |||||||||
| Subscriber acquisition fee amortization expense | 702 | 9,922 | 2,744 | 37,473 | |||||||||||||
| Depreciation and amortization | 792 | 676 | 3,090 | 2,814 | |||||||||||||
| Amortization of film asset | 80 | 40 | (745 | ) | (5,220 | ) | |||||||||||
| Impairment of film asset | - | - | 176 | - | |||||||||||||
| Interest expense | 24,797 | 25,595 | 100,157 | 108,144 | |||||||||||||
| Restricted stock unit compensation | (1,289 |
) | 392 | 1,091 | 4,637 | ||||||||||||
| Adjusted earnings before interest, taxes, depreciation | |||||||||||||||||
| and amortization | $ | 23,302 |
$ |
(774 | ) | $ | 66,231 | $ | (11,298 | ) |
|||||||
| Programming and other amortization | 33,434 | 39,636 | 140,083 | 163,142 | |||||||||||||
| Provision for allowance for doubtful account | 32 | 71 | 75 | 166 | |||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Additions to program license fees | (74,230 | ) | (14,486 | ) | (210,123 | ) | (116,062 | ) | |||||||||
| Change to subscriber acquisition fees | - | - | (2,693 | ) | 858 | ||||||||||||
| Change in subscriber acquisition fees payable | (250 | ) | (836 | ) | 933 | (2,042 | ) | ||||||||||
| Interest paid | (767 | ) | (1,936 | ) | (4,649 | ) | (8,657 | ) | |||||||||
| Changes in other operating assets and | |||||||||||||||||
| liabilities, net of adjustments above | 24,978 | (4,294 |
) | 58,221 | (11,495 | ) | |||||||||||
| Net cash provided by operating activities | $ | 6,499 | $ | 17,381 | $ | 48,078 | $ | 14,612 | |||||||||
Crown Media Holdings, Inc. |
||||||||||||||||
| Selected Financial Information | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||
| Three Months Ended December 31*, |
Year Ended December 31, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 |
|||||||||||||
| Net cash provided by operating activities | $ | 6,499 | $ | 17,381 | $ | 48,078 | $ | 14,612 | ||||||||
| Net cash used in investing activities | (1,068 | ) | (3,808 | ) | (5,437 | ) | (7,803 | ) | ||||||||
| Net cash used in financing activities | (7,015 | ) |
(11,602 |
) | (41,901 | ) | (18,800 | ) | ||||||||
| Net (decrease) increase in cash and cash equivalents | (1,584 |
) | 1,971 |
740 |
(11,991 |
) | ||||||||||
| Cash equivalents, beginning of period | 4,298 | 3 |
1,974 | 13,965 | ||||||||||||
| Cash equivalents, end of period | $ | 2,714 | $ | 1,974 | $ | 2,714 | $ | 1,974 | ||||||||
|
*Unaudited |
||||||||||||||||
Source:
Investors and Press
IR Focus
Mindy Tucker, 914-725-8128
mindy@irfocusllc.com
or
Media
Crown Media
Jennifer Geisser, 212-455-6654
jennifergeisser@hallmarkchannel.com
Mixx
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