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 October 27, 2016. |
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 October 27, 2016. |
• | Starz Networks reported revenue of $348.6 million; 6% year-over-year growth and largest increase since Q2 2013 |
• | Reported consolidated revenue of $407.8 million; operating income of $74.0 million; fully diluted earnings per share of $0.34 and Adjusted OIBDA (2) of $89.9 million |
• | Starz Networks operating income of $80.4 million and Adjusted OIBDA of $92.9 million |
• | Increased STARZ subscriptions by 1.2 million year-over-year; 300,000 since June 30, 2016 to a new high of 24.5 million |
◦ | Combined STARZ and STARZ ENCORE subscriptions of 56.0 million |
• | Nearly 1 million STARZ OTT subscriptions driven by strong Amazon and Starz OTT app subscriber growth |
• | Completed multi-year AT&T/DIRECTV deal extension; licensed STARZ for upcoming DIRECTV Now service |
• | “Power” third season set multiplatform record viewership for STARZ Original series with 7.3 million viewers and counting (3) |
• | “Survivor’s Remorse” renewed for fourth season based on continuing viewership growth of 53% since the series first premiered (3) |
• | Licensed “Ash vs. Evil Dead” to Amazon Prime Video for Germany; |
◦ | Anchor Bay Blu-ray/DVD sales of season one marked the best-selling 30-minute episodic |
◦ | season one TV title in its first week of release since September 2010 |
(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 October 27, 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: Starz internal estimates of linear and non-linear/time-shifted results from Nielsen (NPower), Rentrak (On Demand Essentials) and internal analysis of broadband data. |
• | Unless otherwise noted, the foregoing discussion compares financial information for the three months ended September 30, 2016 to the same period in 2015. |
(amounts in millions, except per share data) | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 |
Starz Networks | $ 329.3 | $ 327.8 | $ 339.9 | $ 343.1 | $ 348.6 |
Starz Distribution (1) | 65.6 | 100.1 | 92.7 | 60.0 | 60.9 |
Starz Animation | 9.3 | 1.5 | 0 | 0 | 0 |
Eliminations | (0.1) | (1.8) | (0.7) | (0.5) | (1.7) |
Revenue | $ 404.1 | $ 427.6 | $ 431.9 | $ 402.6 | $ 407.8 |
Starz Networks | $ 101.6 | $ 52.0 | $ 105.3 | $ 121.1 | $ 80.4 |
Starz Distribution | 0.9 | 5.0 | 9.7 | (5.4) | (2.5) |
Starz Animation | (0.2) | 0 | 0 | 0 | 0 |
Eliminations/Other | (0.5) | (2.1) | (0.9) | (10.3) | (3.9) |
Operating income | $ 101.8 | $ 54.9 | $ 114.1 | $ 105.4 | $ 74.0 |
Starz Networks | $ 113.1 | $ 63.6 | $ 116.8 | $ 132.1 | $ 92.9 |
Starz Distribution | 1.8 | 5.9 | 10.6 | (4.6) | (1.7) |
Starz Animation | (0.1) | (0.1) | 0 | 0 | 0 |
Eliminations | (0.1) | (1.4) | (0.3) | (0.1) | (1.3) |
Adjusted OIBDA | $ 114.7 | $ 68.0 | $ 127.1 | $ 127.4 | $ 89.9 |
Net income | $ 59.5 | $ 27.9 | $ 67.0 | $ 54.4 | $ 34.3 |
Earnings per share (diluted) | $ 0.57 | $ 0.26 | $ 0.65 | $ 0.54 | $ 0.34 |
Starz Networks | $ 48.6 | $ 57.9 | $ 81.1 | $ 61.5 | $ 76.3 |
Starz Distribution | 2.8 | 6.2 | 15.1 | 2.8 | 26.2 |
Total IFT (2) | $ 51.4 | $ 64.1 | $ 96.2 | $ 64.3 | $ 102.5 |
Subscription units - STARZ | 23.3 | 23.6 | 24.0 | 24.2 | 24.5 |
Subscription units - STARZ ENCORE | 32.5 | 32.2 | 32.4 | 31.8 | 31.5 |
Total subscription units | 55.8 | 55.8 | 56.4 | 56.0 | 56.0 |
(1) Includes the following home video net sales | $ 34.3 | $ 56.8 | $ 34.5 | $ 16.0 | $ 26.2 |
(2) Cash paid for investment in films and television programs |
(amounts in millions) | 9/30/15 | 12/31/15 | 3/31/16 | 6/30/16 | 9/30/16 |
Cash | $ 17.0 | $ 10.7 | $ 9.8 | $ 12.9 | $ 14.0 |
Debt: | |||||
Revolving credit facility | $ 425.0 | $ 308.0 | $ 391.0 | $ 352.0 | $ 268.0 |
5% senior notes | 677.1 | 676.9 | 676.8 | 676.7 | 676.6 |
Debt issuance costs, net | (12.6) | (11.9) | (11.1) | (10.4) | (9.6) |
Transponder capital lease | 22.8 | 21.6 | 20.4 | 19.1 | 17.9 |
Building capital lease | 43.3 | 43.2 | 43.0 | 42.9 | 42.7 |
Total debt | $ 1,155.6 | $ 1,037.8 | $ 1,120.1 | $ 1,080.3 | $ 995.6 |
Starz Consolidated | |||||
(amounts in millions) | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 |
Adjusted OIBDA | $ 114.7 | $ 68.0 | $ 127.1 | $ 127.4 | $ 89.9 |
Stock compensation | (8.1) | (8.4) | (8.3) | (7.3) | (8.1) |
Merger related costs | 0 | 0 | 0 | (9.5) | (2.1) |
Depreciation and amortization | (4.8) | (4.7) | (4.7) | (5.2) | (5.7) |
Operating income | $ 101.8 | $ 54.9 | $ 114.1 | $ 105.4 | $ 74.0 |
Starz Networks | |||||
(amounts in millions) | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 |
Adjusted OIBDA | $ 113.1 | $ 63.6 | $ 116.8 | $ 132.1 | $ 92.9 |
Stock compensation | (7.4) | (7.6) | (7.5) | (6.6) | (7.4) |
Depreciation and amortization | (4.1) | (4.0) | (4.0) | (4.4) | (5.1) |
Operating income | $ 101.6 | $ 52.0 | $ 105.3 | $ 121.1 | $ 80.4 |
Starz Distribution | |||||
(amounts in millions) | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 |
Adjusted OIBDA | $ 1.8 | $ 5.9 | $ 10.6 | $ (4.6) | $ (1.7) |
Stock compensation | (0.5) | (0.6) | (0.6) | (0.5) | (0.5) |
Depreciation and amortization | (0.4) | (0.3) | (0.3) | (0.3) | (0.3) |
Operating income (loss) | $ 0.9 | $ 5.0 | $ 9.7 | $ (5.4) | $ (2.5) |
Eliminations/Other | |||||
(amounts in millions) | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 |
Adjusted OIBDA | $ (0.1) | $ (1.4) | $ (0.3) | $ (0.1) | $ (1.3) |
Stock compensation | (0.1) | (0.2) | (0.2) | (0.2) | (0.2) |
Merger related costs | 0 | 0 | 0 | (9.5) | (2.1) |
Depreciation and amortization | (0.3) | (0.5) | (0.4) | (0.5) | (0.3) |
Operating loss | $ (0.5) | $ (2.1) | $ (0.9) | $ (10.3) | $ (3.9) |
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 14.0 | $ | 10.7 | |||
Trade accounts receivable, net of allowances of $20.6 and $35.2 | 271.9 | 252.9 | |||||
Program rights, net | 353.8 | 316.1 | |||||
Other current assets | 66.5 | 90.1 | |||||
Total current assets | 706.2 | 669.8 | |||||
Program rights | 316.2 | 335.9 | |||||
Investment in films and television programs, net | 206.6 | 215.6 | |||||
Property and equipment, net of accumulated depreciation of $143.8 and $134.5 | 88.5 | 89.2 | |||||
Deferred income taxes | 22.5 | 21.2 | |||||
Goodwill | 131.8 | 131.8 | |||||
Other assets, net | 103.8 | 100.7 | |||||
Total assets | $ | 1,575.6 | $ | 1,564.2 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Current portion of debt | $ | 5.9 | $ | 5.6 | |||
Trade accounts payable | 5.9 | 8.0 | |||||
Accrued liabilities | 251.1 | 267.7 | |||||
Deferred revenue | 9.9 | 10.3 | |||||
Total current liabilities | 272.8 | 291.6 | |||||
Debt | 989.7 | 1,032.2 | |||||
Other liabilities | 34.6 | 22.7 | |||||
Total liabilities | 1,297.1 | 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 87,557,505 and 91,468,763 shares at September 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 September 30, 2016 and December 31, 2015, respectively | 0.1 | 0.1 | |||||
Additional paid-in capital | 8.9 | — | |||||
Accumulated other comprehensive loss, net of taxes | (2.8 | ) | (1.5 | ) | |||
Retained earnings | 271.4 | 218.2 | |||||
Total equity | 278.5 | 217.7 | |||||
Commitments and contingencies | |||||||
Total liabilities and equity | $ | 1,575.6 | $ | 1,564.2 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue: | |||||||||||||||
Programming networks and other services | $ | 381.6 | $ | 369.8 | $ | 1,165.6 | $ | 1,165.9 | |||||||
Home video net sales | 26.2 | 34.3 | 76.7 | 106.6 | |||||||||||
Total revenue | 407.8 | 404.1 | 1,242.3 | 1,272.5 | |||||||||||
Costs and expenses: | |||||||||||||||
Programming (including amortization) | 181.9 | 159.0 | 480.7 | 459.5 | |||||||||||
Production and acquisition (including amortization) | 43.0 | 39.7 | 144.3 | 146.3 | |||||||||||
Home video cost of sales | 7.6 | 9.2 | 20.1 | 29.6 | |||||||||||
Operating | 7.6 | 15.2 | 20.7 | 40.9 | |||||||||||
Selling, general and administrative | 85.9 | 74.4 | 255.8 | 227.1 | |||||||||||
Merger related | 2.1 | — | 11.6 | — | |||||||||||
Depreciation and amortization | 5.7 | 4.8 | 15.6 | 14.3 | |||||||||||
Total costs and expenses | 333.8 | 302.3 | 948.8 | 917.7 | |||||||||||
Operating income | 74.0 | 101.8 | 293.5 | 354.8 | |||||||||||
Other expense: | |||||||||||||||
Interest expense, net of amounts capitalized | (11.7 | ) | (11.5 | ) | (35.1 | ) | (34.0 | ) | |||||||
Other expense, net | (3.7 | ) | (4.5 | ) | (10.0 | ) | (8.8 | ) | |||||||
Income before income taxes | 58.6 | 85.8 | 248.4 | 312.0 | |||||||||||
Income tax expense | (24.3 | ) | (26.3 | ) | (92.7 | ) | (103.4 | ) | |||||||
Net income | 34.3 | 59.5 | 155.7 | 208.6 | |||||||||||
Net loss (income) attributable to noncontrolling interest | — | 0.7 | — | (0.4 | ) | ||||||||||
Net income attributable to stockholders | $ | 34.3 | $ | 60.2 | $ | 155.7 | $ | 208.2 | |||||||
Basic net income per common share | $ | 0.36 | $ | 0.59 | $ | 1.60 | $ | 2.06 | |||||||
Diluted net income per common share | $ | 0.34 | $ | 0.57 | $ | 1.54 | $ | 1.96 | |||||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 96.5 | 101.3 | 97.4 | 101.3 | |||||||||||
Diluted | 100.0 | 106.5 | 100.9 | 106.4 | |||||||||||
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Operating activities: | |||||||
Net income | $ | 155.7 | $ | 208.6 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 15.6 | 14.3 | |||||
Amortization of program rights | 438.4 | 426.8 | |||||
Program rights payments | (271.5 | ) | (350.2 | ) | |||
Amortization of investment in films and television programs | 104.1 | 107.0 | |||||
Investment in films and television programs | (263.0 | ) | (285.0 | ) | |||
Stock compensation | 23.7 | 24.5 | |||||
Deferred income taxes | (1.3 | ) | (15.3 | ) | |||
Other non-operating and non-cash items | — | (2.1 | ) | ||||
Changes in assets and liabilities: | |||||||
Current and other assets | 16.1 | (1.1 | ) | ||||
Payables and other liabilities | (21.1 | ) | (39.0 | ) | |||
Net cash provided by operating activities | 196.7 | 88.5 | |||||
Investing activities: | |||||||
Purchases of property and equipment | (13.9 | ) | (9.4 | ) | |||
Investment in and advances to equity investee | (16.0 | ) | (3.8 | ) | |||
Net cash used in investing activities | (29.9 | ) | (13.2 | ) | |||
Financing activities: | |||||||
Borrowings of debt | 384.0 | 769.0 | |||||
Payments of debt | (428.2 | ) | (779.9 | ) | |||
Debt issuance costs | — | (5.0 | ) | ||||
Repurchases of common stock | (121.6 | ) | (64.7 | ) | |||
Exercise of stock options | 3.4 | 11.8 | |||||
Minimum withholding of taxes related to stock compensation | (5.0 | ) | (18.5 | ) | |||
Excess tax benefit from stock compensation | 3.7 | 15.6 | |||||
Net cash used in financing activities | (163.7 | ) | (71.7 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 0.2 | — | |||||
Net increase in cash and cash equivalents | 3.3 | 3.6 | |||||
Cash and cash equivalents: | |||||||
Beginning of period | 10.7 | 13.4 | |||||
End of period | $ | 14.0 | $ | 17.0 |
• | 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 October 27, 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 83652679 at least 10 minutes prior to the call. Replays of the conference call can be accessed through November 26, 2016 at 8:00 PM ET, by dialing (855) 859-2056 or (404) 537-3406 plus the passcode 83652679. 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 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, 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. |
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