Delaware | 001-35294 | 20-8988475 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Exhibit No. | Name |
99.1 | Press Release of Starz, dated July 28, 2016. |
99.2 | Excerpts of communications relating to the proposed merger with Lions Gate. |
STARZ | ||
By: | /s/ Scott D. Macdonald | |
Name: Scott D. Macdonald | ||
Title: Chief Financial Officer, Executive Vice President and Treasurer |
Exhibit No. | Name |
99.1 | Press Release of Starz, dated July 28, 2016. |
99.2 | Excerpts of communications relating to the proposed merger with Lions Gate. |
· | Reached $4.4 billion cash and stock deal to merge with Lions Gate |
· | Reported consolidated revenue of $402.6 million; operating income of $105.4 million; fully diluted earnings per share of $0.54 and Adjusted OIBDA(2) of $127.4 million |
· | Starz Networks reported revenue of $343.1 million; operating income of $121.1 million and Adjusted OIBDA of $132.1 million |
· | Increased STARZ subscriptions by 200,000 since March 31, 2016 to a new high of 24.2 million; combined STARZ and STARZ ENCORE subscriptions of 56.0 million |
· | Starz Digital licensed “The Girlfriend Experience” to Amazon in the UK, Germany, Austria and Japan |
· | Launched STARZ app on Roku and Android TV platforms |
· | STARZ PLAY Arabia officially launched in Egypt and Saudi Arabia, now serving 19 Middle East/North Africa countries |
· | “Power” third season premiere episode telecast set new record viewership for STARZ Original series(3); renewed for seasons four and five |
· | “Outlander” concluded successful second book; renewed series for books three and four |
(1) | Starz’s President and CEO Chris Albrecht and CFO Scott Macdonald will discuss these highlights and other matters during the Starz earnings conference call, which will begin at 5:00 p.m. (ET) on July 28, 2016. For information regarding how to access the call, please see “Important Notice” later in this document. |
(2) | For a definition of Adjusted OIBDA and applicable reconciliations see Non-GAAP Financial Measures and Reconciling Schedule below. |
(3) | Source: Nielsen NPower, July 17, 2017 9PM airing of “Power’s” season premiere, Live +3 P2+ Projections (000s) |
· | Unless otherwise noted, the foregoing discussion compares financial information for the three months ended June 30, 2016 to the same period in 2015. |
(amounts in millions, except per share data) | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | |||
Starz Networks | $ 333.3 | $ 329.3 | $ 327.8 | $ 339.9 | $ 343.1 | |||
Starz Distribution(1) | 78.4 | 65.6 | 100.1 | 92.7 | 60.0 | |||
Starz Animation | 6.5 | 9.3 | 1.5 | — | — | |||
Eliminations | (0.5) | (0.1) | (1.8) | (0.7) | (0.5) | |||
Revenue | $ 417.7 | $ 404.1 | $ 427.6 | $ 431.9 | $ 402.6 | |||
Starz Networks | $ 110.9 | $ 101.6 | $ 52.0 | $ 105.3 | $ 121.1 | |||
Starz Distribution | 1.1 | 0.9 | 5.0 | 9.7 | (5.4) | |||
Starz Animation | (0.7) | (0.2) | — | — | — | |||
Eliminations/Other | (0.8) | (0.5) | (2.1) | (0.9) | (10.3) | |||
Operating income | $ 110.5 | $ 101.8 | $ 54.9 | $ 114.1 | $ 105.4 | |||
Starz Networks | $ 122.2 | $ 113.1 | $ 63.6 | $ 116.8 | $ 132.1 | |||
Starz Distribution | 2.0 | 1.8 | 5.9 | 10.6 | (4.6) | |||
Starz Animation | (0.7) | (0.1) | (0.1) | — | — | |||
Eliminations | (0.1) | (0.1) | (1.4) | (0.3) | (0.1) | |||
Adjusted OIBDA | $ 123.4 | $ 114.7 | $ 68.0 | $ 127.1 | $ 127.4 | |||
Net income | $ 63.0 | $ 59.5 | $ 27.9 | $ 67.0 | $ 54.4 | |||
Earnings per share (diluted) | $ 0.59 | $ 0.57 | $ 0.26 | $ 0.65 | $ 0.54 | |||
Starz Networks | $ 71.2 | $ 48.6 | $ 57.9 | $ 81.1 | $ 61.5 | |||
Starz Distribution | 53.7 | 2.8 | 6.2 | 15.1 | 2.8 | |||
Total IFT(2) | $ 124.9 | $ 51.4 | $ 64.1 | $ 96.2 | $ 64.3 | |||
Subscription units - STARZ | 23.5 | 23.3 | 23.6 | 24.0 | 24.2 | |||
Subscription units - STARZ ENCORE | 33.3 | 32.5 | 32.2 | 32.4 | 31.8 | |||
Total subscription units | 56.8 | 55.8 | 55.8 | 56.4 | 56.0 | |||
(1) Includes the following home video net sales | $ 37.4 | $ 34.3 | $ 56.8 | $ 34.5 | $ 16.0 | |||
(2) Cash paid for investment in films and television programs |
(amounts in millions) | 6/30/15 | 9/30/15 | 12/31/15 | 3/31/16 | 6/30/16 |
Cash | $ 20.3 | $ 17.0 | $ 10.7 | $ 9.8 | $ 12.9 |
Debt: | |||||
Revolving credit facility | $ 506.0 | $ 425.0 | $ 308.0 | $ 391.0 | $ 352.0 |
5% senior notes | 677.2 | 677.1 | 676.9 | 676.8 | 676.7 |
Debt issuance costs, net | (13.4) | (12.6) | (11.9) | (11.1) | (10.4) |
Transponder capital lease | 23.9 | 22.8 | 21.6 | 20.4 | 19.1 |
Building capital lease | 43.5 | 43.3 | 43.2 | 43.0 | 42.9 |
Total debt | $ 1,237.2 | $ 1,155.6 | $ 1,037.8 | $ 1,120.1 | $ 1,080.3 |
Starz Consolidated | |||||||||
(amounts in millions) | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | ||||
Adjusted OIBDA | $ 123.4 | $ 114.7 | $ 68.0 | $ 127.1 | $ 127.4 | ||||
Stock compensation | (8.1) | (8.1) | (8.4) | (8.3) | (7.3) | ||||
Merger related costs | — | — | — | — | (9.5) | ||||
Depreciation and amortization | (4.8) | (4.8) | (4.7) | (4.7) | (5.2) | ||||
Operating income | $ 110.5 | $ 101.8 | $ 54.9 | $ 114.1 | $ 105.4 | ||||
Starz Networks | |||||||||
(amounts in millions) | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | ||||
Adjusted OIBDA | $ 122.2 | $ 113.1 | $ 63.6 | $ 116.8 | $ 132.1 | ||||
Stock compensation | (7.3) | (7.4) | (7.6) | (7.5) | (6.6) | ||||
Depreciation and amortization | (4.0) | (4.1) | (4.0) | (4.0) | (4.4) | ||||
Operating income | $ 110.9 | $ 101.6 | $ 52.0 | $ 105.3 | $ 121.1 | ||||
Starz Distribution | |||||||||
(amounts in millions) | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | ||||
Adjusted OIBDA | $ 2.0 | $ 1.8 | $ 5.9 | $ 10.6 | $ (4.6) | ||||
Stock compensation | (0.5) | (0.5) | (0.6) | (0.6) | (0.5) | ||||
Depreciation and amortization | (0.4) | (0.4) | (0.3) | (0.3) | (0.3) | ||||
Operating income (loss) | $ 1.1 | $ 0.9 | $ 5.0 | $ 9.7 | $ (5.4) | ||||
Eliminations/Other | |||||||||
(amounts in millions) | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | ||||
Adjusted OIBDA | $ (0.1) | $ (0.1) | $ (1.4) | $ (0.3) | $ (0.1) | ||||
Stock compensation | (0.2) | (0.1) | (0.2) | (0.2) | (0.2) | ||||
Merger related costs | — | — | — | — | (9.5) | ||||
Depreciation and amortization | (0.5) | (0.3) | (0.5) | (0.4) | (0.5) | ||||
Operating loss | $ (0.8) | $ (0.5) | $ (2.1) | $ (0.9) | $ (10.3) | ||||
June 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 12.9 | $ | 10.7 | |||
Trade accounts receivable, net of allowances of $18.4 and $35.2 | 289.8 | 252.9 | |||||
Program rights, net | 375.6 | 316.1 | |||||
Other current assets | 60.5 | 90.1 | |||||
Total current assets | 738.8 | 669.8 | |||||
Program rights | 326.1 | 335.9 | |||||
Investment in films and television programs, net | 223.2 | 215.6 | |||||
Property and equipment, net of accumulated depreciation of $142.3 and $134.5 | 87.8 | 89.2 | |||||
Deferred income taxes | 21.5 | 21.2 | |||||
Goodwill | 131.8 | 131.8 | |||||
Other assets, net | 111.3 | 100.7 | |||||
Total assets | $ | 1,640.5 | $ | 1,564.2 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Current portion of debt | $ | 5.8 | $ | 5.6 | |||
Trade accounts payable | 5.5 | 8.0 | |||||
Accrued liabilities | 272.8 | 267.7 | |||||
Deferred revenue | 12.2 | 10.3 | |||||
Total current liabilities | 296.3 | 291.6 | |||||
Debt | 1,074.5 | 1,032.2 | |||||
Other liabilities | 34.1 | 22.7 | |||||
Total liabilities | 1,404.9 | 1,346.5 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued | — | — | |||||
Series A common stock, $.01 par value. Authorized 2,000,000,000 shares; issued and outstanding 87,217,109 and 91,468,763 shares at June 30, 2016 and December 31, 2015, respectively | 0.9 | 0.9 | |||||
Series B common stock, $.01 par value. Authorized 75,000,000 shares; issued and outstanding 9,858,316 and 9,861,294 shares at June 30, 2016 and December 31, 2015, respectively | 0.1 | 0.1 | |||||
Additional paid-in capital | — | — | |||||
Accumulated other comprehensive loss, net of taxes | (2.5 | ) | (1.5 | ) | |||
Retained earnings | 237.1 | 218.2 | |||||
Total equity | 235.6 | 217.7 | |||||
Commitments and contingencies | |||||||
Total liabilities and equity | $ | 1,640.5 | $ | 1,564.2 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue: | |||||||||||||||
Programming networks and other services | $ | 386.6 | $ | 380.3 | $ | 784.0 | $ | 796.1 | |||||||
Home video net sales | 16.0 | 37.4 | 50.5 | 72.3 | |||||||||||
Total revenue | 402.6 | 417.7 | 834.5 | 868.4 | |||||||||||
Costs and expenses: | |||||||||||||||
Programming (including amortization) | 148.1 | 154.5 | 298.8 | 300.5 | |||||||||||
Production and acquisition (including amortization) | 43.2 | 50.0 | 101.3 | 106.6 | |||||||||||
Home video cost of sales | 5.1 | 10.0 | 12.5 | 20.4 | |||||||||||
Operating | 7.1 | 12.4 | 13.1 | 25.7 | |||||||||||
Selling, general and administrative | 79.0 | 75.5 | 169.9 | 152.7 | |||||||||||
Merger related | 9.5 | — | 9.5 | — | |||||||||||
Depreciation and amortization | 5.2 | 4.8 | 9.9 | 9.5 | |||||||||||
Total costs and expenses | 297.2 | 307.2 | 615.0 | 615.4 | |||||||||||
Operating income | 105.4 | 110.5 | 219.5 | 253.0 | |||||||||||
Other expense: | |||||||||||||||
Interest expense, net of amounts capitalized | (11.5 | ) | (11.3 | ) | (23.4 | ) | (22.5 | ) | |||||||
Other expense, net | (6.7 | ) | (2.1 | ) | (6.3 | ) | (4.3 | ) | |||||||
Income before income taxes | 87.2 | 97.1 | 189.8 | 226.2 | |||||||||||
Income tax expense | (32.8 | ) | (34.1 | ) | (68.4 | ) | (77.1 | ) | |||||||
Net income | 54.4 | 63.0 | 121.4 | 149.1 | |||||||||||
Net loss (income) attributable to noncontrolling interest | — | 0.4 | — | (1.1 | ) | ||||||||||
Net income attributable to stockholders | $ | 54.4 | $ | 63.4 | $ | 121.4 | $ | 148.0 | |||||||
Basic net income per common share | $ | 0.56 | $ | 0.63 | $ | 1.24 | $ | 1.46 | |||||||
Diluted net income per common share | $ | 0.54 | $ | 0.59 | $ | 1.20 | $ | 1.39 | |||||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 96.9 | 101.4 | 98.0 | 101.3 | |||||||||||
Diluted | 100.0 | 106.9 | 101.4 | 106.6 | |||||||||||
Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Operating activities: | |||||||
Net income | $ | 121.4 | $ | 149.1 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 9.9 | 9.5 | |||||
Amortization of program rights | 275.4 | 281.1 | |||||
Program rights payments | (217.2 | ) | (253.5 | ) | |||
Amortization of investment in films and television programs | 74.2 | 80.1 | |||||
Investment in films and television programs | (160.5 | ) | (233.6 | ) | |||
Stock compensation | 15.6 | 16.4 | |||||
Deferred income taxes | (0.3 | ) | (10.2 | ) | |||
Other non-operating and non-cash items | (5.8 | ) | (7.2 | ) | |||
Changes in assets and liabilities: | |||||||
Current and other assets | 0.9 | (23.3 | ) | ||||
Payables and other liabilities | (12.6 | ) | (34.4 | ) | |||
Net cash provided by (used in) operating activities | 101.0 | (26.0 | ) | ||||
Investing activities: | |||||||
Purchases of property and equipment | (7.8 | ) | (5.8 | ) | |||
Investment in and advances to equity investee | (13.5 | ) | — | ||||
Net cash used in investing activities | (21.3 | ) | (5.8 | ) | |||
Financing activities: | |||||||
Borrowings of debt | 260.0 | 734.0 | |||||
Payments of debt | (218.7 | ) | (662.6 | ) | |||
Debt issuance costs | — | (5.0 | ) | ||||
Repurchases of common stock | (120.7 | ) | (32.8 | ) | |||
Exercise of stock options | 2.3 | 7.7 | |||||
Minimum withholding of taxes related to stock compensation | (1.7 | ) | (15.3 | ) | |||
Excess tax benefit from stock compensation | 1.3 | 12.7 | |||||
Net cash provided by (used in) financing activities | (77.5 | ) | 38.7 | ||||
Net increase in cash and cash equivalents | 2.2 | 6.9 | |||||
Cash and cash equivalents: | |||||||
Beginning of period | 10.7 | 13.4 | |||||
End of period | $ | 12.9 | $ | 20.3 |
· | Starz (NASDAQ: STRZA, STRZB) President and CEO Chris Albrecht and CFO Scott Macdonald, will discuss Starz’s financial performance, and may discuss future opportunities in a conference call which will begin at 5:00 p.m. (ET) on July 28, 2016. Participants in the United States/Canada may join the event by calling ReadyTalk at (877) 395-6218 and other international participants may dial (281) 973-6124 with the passcode 24769619 at least 10 minutes prior to the call. Replays of the conference call can be accessed through August 28, 2016 at 8:00 PM ET, by dialing (855) 859-2056 or (404) 537-3406 plus the passcode 24769619. The call will also be broadcast live via the Internet and archived on our website. To access the webcast go to http://ir.starz.com/events.cfm. Links to this press release will also be available on the Starz website. |
· | This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about the proposed transaction with Lions Gate, statements about the anticipated synergies and benefits of the proposed transaction, business strategies, market potential, future financial prospects, new service and product launches including original content programming, new packaging and new distribution platforms for our programming, subscriber growth, international distribution opportunities, the suspension of our stock repurchase plan and other matters that are not historical fact. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, market acceptance of new products or services, the timely launch of our original programming, ongoing relationships with our distributors, competitive issues, regulatory matters affecting our businesses, continued access to capital on terms acceptable to Starz, changes in law, and the ability to enter into transactions for international expansion, and satisfaction of conditions to the proposed transaction with Lions Gate. These forward-looking statements speak only as of the date of this press release, and Starz expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Starz’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of Starz, including the most recent Forms 10-K and 10-Q, for additional information about Starz and about the risks and uncertainties related to Starz’s business which may affect the statements made in this press release. |
· | Reached $4.4 billion cash and stock deal to merge with Lions Gate |
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