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Operating Highlights
"We were successful in delivering a solid quarter of financial results,
based on a strong advertising market, growth in our subscribers, and our
continuing ability to maintain a cost-effective operating structure in
order to maximize our bottom line" noted
"We are confident in our ability to deliver equally strong results for the remainder of the year, with a solid line-up of Original Movies, a new season of Hallmark Channel daytime programming block with The Martha Stewart Show and the all-new Emeril's Table debuting in September, and continued growth for Hallmark Movie Channel. We expect these revenue drivers to add up to record revenue and Adjusted EBITDA for the 2011. "
Financial Results
Historical financial information is provided in tables at the end of this release.
Operating Results
For the second quarter of 2011, cost of services increased 19% to
For the six months ended
Selling, general and administrative expense increased 2% for the second
quarter of 2011 to
Selling, general and administrative expense increased 16% for the six
months ended
Marketing expenses of
Income tax expense was
Income tax expense of approximately
In
Adjusted EBITDA was
Adjusted EBITDA was
Conference Call and Webcast to be Held
Crown Media Holdings' management will conduct a conference call today 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, 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 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 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 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. | |||||||||||||||||
| Unaudited Consolidated Income Statement Information | |||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Revenues: | |||||||||||||||||
| Subscriber fees | $ | 18,132 | $ | 15,872 | $ | 35,881 | $ | 32,866 | |||||||||
| Advertising | 57,686 | 49,682 | 113,290 | 100,928 | |||||||||||||
| Advertising by Hallmark Cards | 228 | 144 | 358 | 208 | |||||||||||||
| Other revenue | 104 | 11 | 216 | 85 | |||||||||||||
| Total revenue | 76,150 | 65,709 | 149,745 | 134,087 | |||||||||||||
| Cost of services: | |||||||||||||||||
| Hallmark affiliate programming | 405 | 410 | 786 | 837 | |||||||||||||
| Non-affiliate programming | 35,860 | 29,804 | 67,586 | 58,534 | |||||||||||||
| Amortization of capital lease | 290 | 290 | 579 | 579 | |||||||||||||
| Contract termination | - | - | - | 103 | |||||||||||||
| Other cost of services | 2,651 | 2,423 | 5,314 | 4,728 | |||||||||||||
| Total cost of services | 39,206 | 32,927 | 74,265 | 64,781 | |||||||||||||
| Selling, general and administrative expenses | 12,535 | 12,259 | 28,271 | 24,287 | |||||||||||||
| Marketing expense | 543 | 464 | 893 | 1,437 | |||||||||||||
| Depreciation and amortization | 367 | 383 | 752 | 766 | |||||||||||||
| Loss from sale of film assets | - | 155 | - | 155 | |||||||||||||
| Income from operations before interest | |||||||||||||||||
| and income tax expense | 23,499 | 19,521 | 45,564 | 42,661 | |||||||||||||
| Interest expense | (1,535 | ) | (25,606 | ) | (3,330 | ) | (51,070 | ) | |||||||||
| Income (loss) from operations before income tax expense | 21,964 | (6,085 | ) | 42,234 | (8,409 | ) | |||||||||||
| Income tax benefit (expense) | (419 | ) | (2,897 | ) | 43,408 | (2,897 | ) | ||||||||||
| Net income (loss) before gain from sale of discontinued operations | 21,545 | (8,982 | ) | 85,642 | (11,306 | ) | |||||||||||
| Gain from sale of discontinued operations | 189 | - | 189 | - | |||||||||||||
| Net income (loss) | 21,734 | (8,982 | ) | 85,831 | (11,306 | ) | |||||||||||
| Income to Preferred Stockholder | (9,683 | ) | - | (26,277 | ) | - | |||||||||||
| Net income (loss) to common stockholders | $ | 12,051 | $ | (8,982 | ) | $ | 59,554 | $ | (11,306 | ) | |||||||
| Net income (loss) per share - basic | $ | 0.03 | $ | (0.08 | ) | $ | 0.17 | $ | (0.11 | ) | |||||||
| Net income (loss) per share - diluted | $ | 0.03 | $ | (0.08 | ) | $ | 0.17 | $ | (0.11 | ) | |||||||
| Weighted average shares outstanding | 359,676 | 110,452 | 359,676 | 107,620 | |||||||||||||
| Crown Media Holdings, Inc. | ||||||||
| Unaudited Consolidated Balance Sheets | ||||||||
| (In thousands, except share and per share data) | ||||||||
| As of June 30, | As of December 31, | |||||||
| 2011 | 2010 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 7,074 | $ | 30,565 | ||||
| Accounts receivable, less allowance for doubtful | ||||||||
| accounts of $446 and $141, respectively | 68,996 | 77,684 | ||||||
| Program license fees | 102,340 | 99,574 | ||||||
| Deferred tax asset | 3,300 | - | ||||||
| Prepaid program license fees | 15,628 | 4,099 | ||||||
| Prepaid and other assets | 2,370 | 2,367 | ||||||
| Total current assets | 199,708 | 214,289 | ||||||
| Program license fees | 158,351 | 136,503 | ||||||
| Property and equipment, net | 11,803 | 12,701 | ||||||
| Goodwill | 314,033 | 314,033 | ||||||
| Deferred tax asset | 40,900 | - | ||||||
| Prepaid and other assets | 3,090 | 1,008 | ||||||
| Total assets | $ | 727,885 | $ | 678,534 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Accounts payable and accrued liabilities | $ | 20,631 | $ | 27,835 | ||||
| Audience deficiency reserve | 21,101 | 26,954 | ||||||
| License fees payable | 114,678 | 104,286 | ||||||
| Payables to Hallmark Cards affiliates | 7,679 | 1,005 | ||||||
| Notes and interest payable to HC Crown | 2,100 | 38,174 | ||||||
| Total current liabilities | 166,189 | 198,254 | ||||||
| Accrued liabilities | 19,436 | 18,972 | ||||||
| License fees payable | 39,242 | 33,818 | ||||||
| Notes payable to HC Crown | 392,037 | 379,521 | ||||||
| Total liabilities | 616,904 | 630,565 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| REDEEMABLE PREFERRED STOCK, $0.01 par value; | ||||||||
| 1,000,000 shares authorized; issued and outstanding shares | ||||||||
| of 185,000 as of June 30, 2011, and | ||||||||
| December 31, 2010, respectively | 200,571 | 198,934 | ||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Class A common stock, $.01 par value; 500,000,000 shares | ||||||||
| authorized; 359,675,936 shares issued and outstanding as of | ||||||||
| both June 30, 2011, and December 31, 2010, respectively | 3,597 | 3,597 | ||||||
| Paid-in capital | 1,981,182 | 1,991,157 | ||||||
| Accumulated deficit | (2,074,369 | ) | (2,145,719 | ) | ||||
| Total stockholders' deficit | (89,590 | ) | (150,965 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 727,885 | $ | 678,534 | ||||
|
Crown Media Holdings, Inc. |
|||||||||||||||||
|
Selected Unaudited Financial Information |
|||||||||||||||||
|
(in thousands) |
|||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
|
Net income (loss) |
$ | 21,734 | $ | (8,982 | ) | $ | 85,831 | $ | (11,306 | ) | |||||||
| Loss from sale of film assets | - | 155 | - | 155 | |||||||||||||
| Gain from sale of discontinued operations | (189 | ) | - | (189 | ) | - | |||||||||||
| Subscriber acquisition fee amortization expense | 298 | 526 | 596 | 1,052 | |||||||||||||
| Depreciation and amortization | 657 | 673 | 1,331 | 1,345 | |||||||||||||
| Interest expense | 1,535 | 25,606 | 3,330 | 51,070 | |||||||||||||
| Income tax (benefit) expense | 419 | 2,897 | (43,408 | ) | 2,897 | ||||||||||||
| Bank fees | - | - | 2,500 | - | |||||||||||||
| Long term incentive plan expense | 503 | 289 | 867 | 716 | |||||||||||||
| Restricted stock unit compensation | 6 | 33 | 46 | 109 | |||||||||||||
|
Adjusted earnings before interest, taxes, depreciation |
|||||||||||||||||
| and amortization | $ | 24,963 | $ | 21,197 | $ | 50,904 | $ | 46,038 | |||||||||
| Programming and other amortization | 33,567 | 30,322 | 62,971 | 59,565 | |||||||||||||
| Provision for allowance for doubtful account | 129 | 6 | 301 | 32 | |||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Change to program license fees | (33,824 | ) | (10,917 | ) | (87,584 | ) | (27,819 | ) | |||||||||
| Change to prepaid program license fees | 577 | 1,537 | (11,529 | ) | (9,659 | ) | |||||||||||
| Change in license fees payable | (3,478 | ) | (18,065 | ) | 18,363 | (33,196 | ) | ||||||||||
| Change to subscriber acquisition fees | - | - | (750 | ) | (750 | ) | |||||||||||
| Change in subscriber acquisition fees payable | (750 | ) | (1,212 | ) | (250 | ) | (462 | ) | |||||||||
| Interest paid | (929 | ) | (9,410 | ) | (2,187 | ) | (14,764 | ) | |||||||||
| Changes in other operating assets and | |||||||||||||||||
| liabilities, net of adjustments above | (13,307 | ) | 7,559 | (16,109 | ) | 9,803 | |||||||||||
|
Net cash provided by operating activities |
$ | 6,948 | $ | 21,017 | $ | 14,130 | $ | 28,788 | |||||||||
| Crown Media Holdings, Inc. | |||||||||||||||||
| Selected Unaudited Cash Flow Statement Information | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Net cash provided by operating activities | $ | 6,948 | $ | 21,017 | $ | 14,130 | $ | 28,788 | |||||||||
| Net cash used in investing activities | (461 | ) | (715 | ) | (701 | ) | (1,112 | ) | |||||||||
| Net cash used in financing activities | (13,931 | ) | (18,725 | ) | (36,920 | ) | (19,940 | ) | |||||||||
| Net (decrease) increase in cash and cash equivalents | (7,444 | ) | 1,577 | (23,491 | ) | 7,736 | |||||||||||
| Cash and cash equivalents, beginning of period | 14,518 | 16,615 | 30,565 | 10,456 | |||||||||||||
| Cash and cash equivalents, end of period | $ | 7,074 | $ | 18,192 | $ | 7,074 | $ | 18,192 | |||||||||
IR Focus
mindy@irfocusllc.com
or
anniehowell@hallmarkchannel.com
Source:
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