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| 8-K - MAIN - CROWN MEDIA HOLDINGS INC | mainbody.htm |
EXHIBIT 99.1
Crown
Media Holdings Announces Operating Results
for
Second Quarter of 2010
STUDIO CITY, CA – August 12,
2010 - Crown Media Holdings, Inc. (NASDAQ:CRWN) today reported its
operating results for the three and six months ended June 30, 2010.
Operating
Highlights
|
·
|
Introduction of Original
Lifestyle Programming. Hallmark Channel will introduce a
new daytime programming block on September 13th
including the exclusive premiere of season six of The Martha Stewart Show
followed by original programming developed around the lifestyle
genre.
|
|
·
|
Continued development of
Hallmark Movie Channel. Hallmark Movie Channel
subscribers increased to 35.8 million at the end of the second quarter,
adding more than 17 million subscribers in the previous twelve months and
earning the distinction as the fastest-growing cable network among all 92
Nielsen-measured cable channels. As an important step to
unlocking the future revenue potential of this network, Hallmark Movie
Channel became a rated channel during the second
quarter.
|
|
·
|
Strong results for upfront ad
sales season. Based on the strength of the Martha
Stewart Brand, the introduction of an original lifestyle programming
block, and the strong slate of original holiday movies, Hallmark Channel
delivered its best results for the recent upfront ad sales
season.
|
“We are
very excited about the introduction of our new original lifestyle programming on
Hallmark Channel, and the unprecedented move of an original series from
broadcast network to cable,” noted Bill Abbott, President and CEO of Crown
Media. “This is an ideal partnership in terms of brand, audience and
content, and we are looking forward to seeing our vision become a reality on
September 13th. Early
indications from advertisers and distributors confirm our expectations of the
combined value and appeal of our new daytime format.
“Our
results for Hallmark Movie Channel also support our strategy of differentiating
our channels. Distribution gains continue at a robust pace, and the
new ratings we are receiving indicate a steadily growing audience for the
channel. This is already translating into revenues with solid
advertising gains.”
Financial
Results
Historical
financial information is provided in tables at the end of this
release.
Operating
Results
Crown
Media reported revenue of $65.7 million for the second quarter of 2010, a 4%
decrease from $68.2 million for the second quarter of 2009. Subscriber fee
revenue remained constant period over period. Advertising revenue decreased 4%
to $49.8 million during the quarter, from $51.9 million in the second quarter of
2009. The decrease in advertising revenue during the second quarter of 2010 is
primarily due to decreased ratings.
Crown
Media reported revenue of $134.1 million for the six months ended June 30, 2010,
a 4% decrease from $139.1 million for the six months ended June 30, 2009.
Subscriber fee revenue increased 5% to $32.9 million, from $31.2 million in the
prior year’s period. Subscriber revenue increased in 2010 primarily due to
contractual rate increases and increases in Hallmark Channel and Hallmark Movie
Channel subscribers. Advertising revenue decreased 6% to $101.1 million during
the six months ended June 30, 2010, from $107.2 million during the six months
ended June 30, 2009.
For the
second quarter of 2010, cost of services decreased 8% to $32.9 million from
$35.8 million during the same quarter of 2009. Within cost of services,
programming expenses decreased 3% quarter over quarter to $30.2
million. Other cost of services, contract termination and
amortization of our capital lease decreased 40% from $4.5 million to $2.7
million for the second quarter of 2010 primarily due to decreases in bad debt,
salary, severance, and transponder expenses.
For the
six months ended June 30, 2010, cost of services decreased 10% to $64.8 million
from $72.0 million during the same period of 2009. Within cost of services,
programming expenses decreased 7% period over period to $59.4
million. Other cost of services, contract termination and
amortization of our capital lease decreased 36% from $8.5 million to $5.4
million for the six months ended June 30, 2010.
Marketing
expenses of $464,000 for the quarter ended June 30, 2010, decreased from
$842,000 for the quarter ended June 30, 2009.
Marketing
expenses of $1.4 million for the six months ended June 30, 2010, decreased from
$5.6 million for the six months ended June 30, 2009, due to a reduction in major
advertising campaigns.
Income
tax expense of approximately $2.9 million for both the three and six months
ended June 30, 2010 was a result of the recapitalization. This
expense is recorded in accordance with generally accepted accounting principles,
but will not result in any cash payments being made to either Hallmark Cards or
the Internal Revenue Service.
Adjusted
EBITDA was $20.9 million for the second quarter of 2010 compared to $21.3
million for the same period last year. Cash provided by operating activities
totaled $21.0 million for the second quarter of 2010 compared to $13.8 million
for the same period last year. The net loss for the quarter ended
June 30, 2010, totaled $9.0 million, or $0.08 per share, compared to $5.3
million, or $0.05 per share, in the second quarter of 2009.
Adjusted
EBITDA was $45.3 million for the six months ended June 30, 2010 compared to
$39.9 million for the same period last year. Cash provided by operating
activities totaled $28.8 million for the six months ended June 30, 2010 compared
to $13.4 million for the same period last year. The net loss for the
six months ended June 30, 2010, totaled $11.3 million, or $0.11 per share,
compared to $12.8 million, or $0.12 per share, for the six months ended June 30,
2009.
Conference
Call and Webcast to be Held Thursday, August 12th at
11:00 a.m. ET
Crown
Media Holdings’ management will conduct a conference call this morning at 11:00
a.m., Eastern Time to discuss the results of the second quarter of
2010. Investors and interested parties may listen to the call via a
live webcast accessible through the investor relations’ section of the Company’s
web site at www.hallmarkchannel.com,
or by dialing (888) 419-5570 (Domestic) or (617) 896-9871 (International) and
using the pass code number 99031457. 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 time. The
webcast will be archived on the site, while a telephone replay of the call is
available for 7 days beginning at 1:00 p.m. Eastern Time, Thursday, August
12th, at
888-286-8010 (Domestic) or 617-801-6888 (International), using pass code number
73341277.
About
Crown Media Holdings
Crown
Media Holdings, Inc. (NASDAQ:CRWN) owns and operates cable television channels
dedicated to high quality, broad appeal, entertainment
programming. The Company currently operates and distributes Hallmark
Channel in both high definition (HD) and standard definition (SD) to 90 million
subscribers in the U.S. Hallmark Channel is one of the nation’s
leading networks in providing quality family programming with an ambitious slate
of original TV movies, general entertainment and home and lifestyle
content. Crown Media also operates a second 24-hour linear channel,
Hallmark Movie Channel, available in both HD and SD, which focuses on
family-friendly movies with a mix of classic theatrical films, presentations
from the acclaimed Hallmark Hall of Fame library, original Hallmark Channel
movies and special events.
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 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 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, subscriber
acquisition fee amortization, and other non-cash expenses. For this purpose,
restricted stock unit compensation is treated as a non-cash item, although it
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. 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 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 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.
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||||||||||||||||
|
Unaudited
Consolidated Income Statement Information
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||||||||||||||||
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(In
thousands, except per share data)
|
||||||||||||||||
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
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|||||||||||||||
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2010
|
2009
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2010
|
2009
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|||||||||||||
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Revenues:
|
||||||||||||||||
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Subscriber
fees
|
$ | 15,872 | $ | 15,860 | $ | 32,866 | $ | 31,155 | ||||||||
|
Advertising
|
49,682 | 51,756 | 100,928 | 106,881 | ||||||||||||
|
Advertising
by Hallmark Cards
|
144 | 165 | 208 | 334 | ||||||||||||
|
Other
revenue
|
11 | 401 | 85 | 764 | ||||||||||||
|
Total
revenue
|
65,709 | 68,182 | 134,087 | 139,134 | ||||||||||||
|
Cost
of services:
|
||||||||||||||||
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Affiliate
programming
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410 | 306 | 837 | 599 | ||||||||||||
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Non-affiliate
programming
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29,804 | 30,995 | 58,534 | 62,917 | ||||||||||||
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Amortization
of capital lease
|
290 | 290 | 579 | 579 | ||||||||||||
|
Contract
termination
|
- | - | 103 | - | ||||||||||||
|
Other
cost of services
|
2,423 | 4,198 | 4,728 | 7,921 | ||||||||||||
|
Total
cost of services
|
32,927 | 35,789 | 64,781 | 72,016 | ||||||||||||
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Selling,
general and administrative expenses
|
12,259 | 10,711 | 24,287 | 22,792 | ||||||||||||
|
Marketing
expense
|
464 | 842 | 1,437 | 5,617 | ||||||||||||
|
Depreciation
and amortization
|
383 | 484 | 766 | 967 | ||||||||||||
|
Loss
from sale of film assets
|
155 | - | 155 | - | ||||||||||||
|
Income
from operations before interest
|
||||||||||||||||
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and
income tax expense
|
19,521 | 20,356 | 42,661 | 37,742 | ||||||||||||
|
Interest
expense
|
(25,606 | ) | (25,678 | ) | (51,070 | ) | (50,515 | ) | ||||||||
|
Income
from operations before income
tax
expense
|
(6,085 | ) | (5,322 | ) | (8,409 | ) | (12,773 | ) | ||||||||
|
Income
tax expense
|
(2,897 | ) | - | (2,897 | ) | - | ||||||||||
|
Net
income (loss)
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$ | (8,982 | ) | $ | (5,322 | ) | $ | (11,306 | ) | $ | (12,773 | ) | ||||
|
Net
income (loss) per share - basic and diluted
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$ | (0.08 | ) | $ | (0.05 | ) | $ | (0.11 | ) | $ | (0.12 | ) | ||||
|
Weighted
average shares outstanding
|
110,452 | 104,788 | 107,620 | 104,788 | ||||||||||||
|
Crown
Media Holdings, Inc.
|
||||||||
|
Unaudited
Consolidated Balance Sheets
|
||||||||
|
(In
thousands, except share and per share data)
|
||||||||
|
As
of June 30,
|
As
of December 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
ASSETS
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||||||||
|
Cash
and cash equivalents
|
$ | 18,192 | $ | 10,456 | ||||
|
Restricted
cash
|
15,007 | - | ||||||
|
Accounts
receivable, less allowance for doubtful
|
||||||||
|
accounts
of $208 and $476, respectively
|
65,531 | 68,817 | ||||||
|
Program
license fees
|
99,268 | 106,825 | ||||||
|
Prepaid
program license fees
|
11,437 | 1,778 | ||||||
|
Prepaid
and other assets
|
3,925 | 2,271 | ||||||
|
Total
current assets
|
213,360 | 190,147 | ||||||
|
Program
license fees
|
154,337 | 178,332 | ||||||
|
Property
and equipment, net
|
12,701 | 13,176 | ||||||
|
Goodwill
|
314,033 | 314,033 | ||||||
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Prepaid
and other assets
|
1,376 | 2,373 | ||||||
|
Total
assets
|
$ | 695,807 | $ | 698,061 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
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LIABILITIES
|
||||||||
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Accounts
payable and accrued liabilities
|
$ | 19,836 | $ | 19,642 | ||||
|
Audience
deficiency reserve
|
29,003 | 17,872 | ||||||
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License
fees payable
|
88,408 | 99,494 | ||||||
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Payables
to Hallmark Cards affiliates
|
1,555 | 23,745 | ||||||
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Credit
facility and interest payable
|
- | 1,002 | ||||||
|
Notes
and interest payable to HC Crown
|
32,225 | 345,314 | ||||||
|
Company
obligated mandatorily redeemable preferred interest
|
24,047 | 22,902 | ||||||
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Total
current liabilities
|
195,074 | 529,971 | ||||||
|
Accrued
liabilities
|
21,341 | 24,484 | ||||||
|
License
fees payable
|
60,772 | 82,881 | ||||||
|
Notes
payable to HC Crown
|
404,802 | - | ||||||
|
Senior
unsecured note to HC Crown, including accrued interest
|
- | 758,755 | ||||||
|
Total
liabilities
|
681,989 | 1,396,091 | ||||||
|
Commitments
and contingencies
|
||||||||
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||
|
Preferred
stock, $0.01 par value; 1,000,000 shares
|
||||||||
|
authorized; issued
and outstanding shares of 185,000 and 0
|
||||||||
|
as
of June 30, 2010, and December 31, 2009, respectively
|
185,000 | 0 | ||||||
|
Class
A common stock, $.01 par value; 500,000,000 and
|
||||||||
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200,000,000
shares authorized; 359,675,936 and
|
||||||||
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74,117,654
shares issued and outstanding as of
|
||||||||
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June
30, 2010, and December 31, 2009, respectively
|
3,597 | 741 | ||||||
|
Class
B common stock, $.01 par value; 120,000,000 shares
|
||||||||
|
authorized;
0 and 30,670,422 shares issued and outstanding
|
||||||||
|
as
of June 30, 2010, and December 31, 2009, respectively
|
- | 307 | ||||||
|
Paid-in
capital
|
1,992,393 | 1,456,788 | ||||||
|
Accumulated
equity (deficit)
|
(2,167,172 | ) | (2,155,866 | ) | ||||
|
Total
stockholders' equity (deficit)
|
13,818 | (698,030 | ) | |||||
|
Total
liabilities and stockholders' equity (deficit)
|
$ | 695,807 | $ | 698,061 | ||||
|
Crown
Media Holdings, Inc.
|
||||||||||||||||
|
Selected
Unaudited Financial Information
|
||||||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Net
loss
|
$ | (8,982 | ) | $ | (5,322 | ) | $ | (11,306 | ) | $ | (12,773 | ) | ||||
|
Loss
on sale of film assets
|
155 | - | 155 | - | ||||||||||||
|
Subscriber
acquisition fee amortization expense
|
526 | 651 | 1,052 | 1,302 | ||||||||||||
|
Depreciation
and amortization
|
673 | 774 | 1,345 | 1,546 | ||||||||||||
|
Interest
expense
|
25,606 | 25,678 | 51,070 | 50,515 | ||||||||||||
|
Income
tax expense
|
2,897 | - | 2,897 | - | ||||||||||||
|
Restricted
stock unit compensation (benefit)
|
33 | (513 | ) | 109 | (684 | ) | ||||||||||
|
Adjusted
earnings before interest, taxes, depreciation
|
||||||||||||||||
|
and
amortization
|
$ | 20,908 | $ | 21,268 | $ | 45,322 | $ | 39,906 | ||||||||
|
Programming
and other amortization
|
30,322 | 31,226 | 59,565 | 63,400 | ||||||||||||
|
Provision
for allowance for doubtful account
|
6 | 271 | 32 | 893 | ||||||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||||||
|
Change
to program license fees
|
(10,917 | ) | (13,455 | ) | (27,819 | ) | (67,704 | ) | ||||||||
|
Change
in license fees payable
|
(18,065 | ) | (22,543 | ) | (33,196 | ) | (4,844 | ) | ||||||||
|
Change
to subscriber acquisition fees
|
- | - | (750 | ) | (750 | ) | ||||||||||
|
Change
in subscriber acquisition fees payable
|
(1,212 | ) | (750 | ) | (462 | ) | (500 | ) | ||||||||
|
Interest
paid
|
(9,410 | ) | (6,839 | ) | (14,764 | ) | (11,383 | ) | ||||||||
|
Changes
in other operating assets and
|
||||||||||||||||
|
liabilities,
net of adjustments above
|
9,385 | 4,589 | 860 | (5,636 | ) | |||||||||||
|
Net
cash provided by operating activities
|
$ | 21,017 | $ | 13,767 | $ | 28,788 | $ | 13,382 | ||||||||
|
Crown
Media Holdings, Inc.
|
||||||||||||||||
|
Selected
Unaudited Cash Flow Statement Information
|
||||||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Net
cash provided by operating activities
|
$ | 21,017 | $ | 13,767 | $ | 28,788 | $ | 13,382 | ||||||||
|
Net
cash used in investing activities
|
(715 | ) | (344 | ) | (1,112 | ) | (648 | ) | ||||||||
|
Net
cash used in financing activities
|
(18,725 | ) | (11,905 | ) | (19,940 | ) | (8,644 | ) | ||||||||
|
Net
increase in cash and cash equivalents
|
1,577 | 1,518 | 7,736 | 4,090 | ||||||||||||
|
Cash
and cash equivalents, beginning of period
|
16,615 | 5,286 | 10,456 | 2,714 | ||||||||||||
|
Cash
and cash equivalents, end of period
|
$ | 18,192 | $ | 6,804 | $ | 18,192 | $ | 6,804 | ||||||||
For
additional information, please contact:
Investors
and Press
Mindy
Tucker
IR
Focus
914.725.8128
mindy@irfocusllc.com
Nancy
Carr
Crown
Media
818.755.2643
nancycarr@hallmarkchannel.com