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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Ascent Capital Group, Inc.a12-11855_18k.htm

Exhibit 99.1

 

 

ASCENT CAPITAL GROUP ANNOUNCES FINANCIAL RESULTS FOR THE

QUARTER ENDED MARCH 31, 2012

 

Englewood, CO — May 8, 2012 - Ascent Capital Group, Inc (“Ascent” or the “Company”) (Nasdaq: ASCMA) has reported results for the quarter ended March 31, 2012. Ascent is a holding company that owns Monitronics International, Inc. (“Monitronics”), one of the nation’s largest and fastest-growing home security alarm monitoring companies.

 

Highlights:

 

·                  Ascent’s Q1 2012 Net Revenue increased 10.8% to $81.9 million, driven by strong year-over-year revenue growth within its principal operating subsidiary, Monitronics International

·                  Ascent’s balance sheet remains strong with $239 million of cash and marketable securities as of March 31, 2012

·                  Monitronics’ Q1 2012 Adjusted EBITDA(1) increased 9.4% to $56.5 million year-over-year

 

·                  Subscriber accounts at Monitronics as of March 31, 2012 increased 3.9% year-over-year to 706,881

·                  Recurring Monthly Revenue (“RMR”) at Monitronics as of March 31, 2012 grew 7.0% year-over-year to $26.7 million

·                  Monitronics successfully completed its debt refinancing in March, 2012, further strengthening its balance sheet

 

Ascent Chief Executive Officer, Bill Fitzgerald stated, “Monitronics continues to perform very well, delivering solid revenue and Adjusted EBITDA growth in the quarter.  Importantly, in March, we successfully completed the refinancing of Monitronics’ debt, extending our maturities and creating greater operational flexibility. With this significant event behind us, Monitronics is well positioned to build on its record of consistent operating performance.

 

“We continue to explore opportunities to maximize returns for our shareholders, in part by seeking acquisitions that would allow us to leverage the existing Monitronics operating platform and expand further into the security industry.”

 

Monitronics

 

Headquartered in Dallas, Texas, Monitronics provides security alarm monitoring services to more than 700,000 residential and commercial customers.  Monitronics’ long-term monitoring contracts provide high margin recurring revenue that results in predictable and stable cash flow.

 

“We posted solid first quarter results and achieved strong operational execution across all areas of our business,” said Mike Haislip, President and Chief Executive Officer of Monitronics. “Our high quality portfolio of accounts continued to perform well and drove year-over-year increases in both top line revenue and Adjusted EBITDA.  Attrition remained relatively flat year-over-year due to our consistent account acquisition practices, operational execution and loyal and predictable subscriber base. While

 


(1)  For a definition of Adjusted EBITDA and applicable reconciliations, see the Appendix to this release.

 



 

quarterly purchases were down modestly year-over-year as a result of a large bulk purchase made in Q1 2011, we had strong growth in ongoing dealer purchases in the recent quarter.”

 

Mr. Haislip continued, “The residential home security market remains an attractive and highly competitive space and we believe this is truly a unique time to be involved in the industry. Features such as home automation and interactive services are becoming more mainstream and encouraging a greater number of consumers to purchase and retain home security systems. While we are excited for the opportunities ahead, as always, we will remain disciplined in our approach to managing quality and costs. We are also keeping a close eye on unfolding industry dynamics to ensure the long-term strength of our business.”

 

First Quarter 2012 Results

 

Ascent Capital Group, Inc.

 

For the three months ended March 31, 2012, Ascent reported net revenue of $81.9 million, an increase of 10.8% compared to $73.9 million for the three months ended March 31, 2011. The increase in net revenue is primarily attributable to increases in Monitronics’ subscriber accounts and average RMR per subscriber.

 

Ascent’s total cost of services for the three months ended March 31, 2012 increased 21.0% to $11.1 million. This increase is attributable to higher telecommunications and service costs at Monitronics.

 

Ascent’s selling, general & administrative (“SG&A”) costs for the three months ended March 31, 2012 decreased 10.8 percent to $17.8 million. The reduction in SG&A is primarily attributable to decreased administrative and corporate expenses at the Ascent corporate level. Offsetting the declines in total SG&A was a $0.7 million increase in stock-based compensation expense related to restricted stock and stock option awards granted to certain executives and directors of Ascent in 2011, which partially vested in 2012.

 

For the three months ended March 31, 2012, Ascent’s Adjusted EBITDA increased 22.1% to $56.1 million. The increase in Adjusted EBITDA was primarily due to revenue growth at Monitronics and decreased selling, general and administrative costs at the Ascent corporate level.

 

Ascent reported a net loss from continuing operations for the first quarter of 2012 of $4.9 million, compared to a net loss from continuing operations of $6.9 million for the three months ended March 31, 2011.

 

Monitronics International

 

For the three months ended March 31, 2012, Monitronics reported net revenue of $81.9 million, an increase of 10.8% compared to $73.9 million for the three months ended March 31, 2011. The increase in net revenue is primarily attributable to a 5.9% increase in Monitronics’ weighted average subscriber accounts and a 3.2% increase in average RMR per subscriber to $37.74 as of March 31, 2012.  Also, contributing to the year-over-year increase in Monitronics’ net revenue is a $2.3 million fair value adjustment that decreased revenue during the three months ended March 31, 2011 in connection with purchase accounting adjustments relating to Ascent’s acquisition of Monitronics in the fourth quarter of 2010.

 

Monitronics total cost of services for the three months ended March 31, 2012 increased 21.0% to $11.1 million. This increase is primarily attributable to an increased number of accounts monitored across the cellular network, resulting in higher telecommunications and service costs.

 



 

Monitronics SG&A costs for the three months ended March 31, 2012 increased 9.7% to $14.4 million. The increase in SG&A is primarily attributable to the timing of certain Monitronics marketing expenses and a $0.3 million increase in stock-based compensation expense related to restricted stock and stock option awards granted to certain executives of Monitronics in 2011, which partially vested during 2012.

 

Monitronics Adjusted EBITDA for the three months ended March 31, 2012 was $56.5 million, an increase of 9.4% versus the three months ended March 31, 2011.  The increase in Adjusted EBITDA is primarily due to revenue growth. Monitronics Adjusted EBITDA as a percentage of revenue was 69.0% for the first quarter of 2012, compared to 69.9% for the three months ended March 31, 2011. This moderate decline is primarily attributable to the increased number of accounts monitored across the cellular network, resulting in higher telecommunications and service costs at Monitronics during the quarter.

 

 

 

Twelve Months Ended
March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Beginning balance of accounts

 

680,120

 

626,411

 

Accounts purchased

 

110,801

 

133,957

 

Accounts canceled

 

(78,806

)

(73,383

)

Canceled accounts guaranteed to be refunded from holdback

 

(5,234

)

(6,865

)

Ending balance of accounts

 

706,881

 

680,120

 

Monthly weighted average accounts

 

695,150

 

656,173

 

Attrition rate

 

11.3

%

11.2

%

 

For the three months ended March 31, 2012, Monitronics purchased 24,174 subscriber accounts, compared to 28,064 subscriber accounts in the three months ended March 31, 2011. The quarterly decline in accounts purchased is due to the completion of a bulk purchase in the three months ended March 31, 2011 versus no major bulk purchases in the quarter ended March 31, 2012.

 

Monitronics’ trailing twelve month attrition for the period ended March 31, 2012 remained relatively flat at 11.3% compared to 11.2% for the twelve months ended March 31, 2011.

 

Ascent Liquidity and Capital Resources

 

At March 31, 2012, on a consolidated basis, Ascent had $90.7 million of cash and cash equivalents, $7.8 million of total restricted cash, and $140.5 million of marketable securities.  The Company may use a portion of these assets to fund potential strategic acquisitions or investments or support stock repurchases.

 

During the three months ended March 31, 2012, Ascent’s principal operating subsidiary Monitronics used cash of $37.4 million to purchase subscriber accounts net of holdback and guarantee obligations and $0.9 million to fund capital expenditures. To improve its investment rate of return, the Company purchased additional marketable securities, consisting primarily of diversified corporate bond funds, for $98.2 million.

 

At March 31, 2012, consolidated long-term debt included a principal balance of $960 million under Monitronics’ 9.125% senior notes due 2020 and senior secured credit facility.  As of March 31, 2012, the Monitronics senior notes, due April 1, 2020, had an outstanding principal balance of $410 million.  The term loan portion of the Monitronics senior secured credit facility, which bears interest at LIBOR, subject to a floor of 1.25%, plus 4.25%, had an outstanding principal balance of $550 million, as of March 31,

 



 

2012, and requires principal payments of $1.4 million per quarter beginning on June 30, 2012 with the remaining outstanding balance due on March 23, 2018.  In connection with its March 2012 refinancing, Monitronics also entered into an interest rate swap agreement to reduce the interest rate risk associated with the floating rate term loan under the senior secured credit facility.  As a result of the interest rate swap, the interest rate on the borrowings under the term loan portion of the senior secured credit facility has been effectively converted from variable to fixed at a rate of 6.3%.

 

Conference Call

 

Ascent will host a conference call at 5:00 p.m. ET on May 8, 2012.  To access the call please dial (888) 462-5915 from the United States, or (760) 666-3831from outside the U.S. The conference call I.D. number is 72807190. Participants should dial in 5 to 10 minutes before the scheduled time and must be on a touch-tone telephone to ask questions.

 

A replay of the call can be accessed through May 15, 2012 by dialing (800) 585-8367 from the U.S., or (404) 537-3406 from outside the U.S.  The conference call I.D. number is 72807190.

 

This call will also be available as a live webcast which can be accessed at Ascent’s Investor Relations Website at http://www.ascentcapitalgroupinc.com/Investor-Relations.aspx.

 

Forward Looking Statements

 

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, acquisition opportunities, market potential, future financial prospects and other matters that are not historical facts.  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, possible changes in market acceptance of our services, competitive issues, continued access to capital on terms acceptable to Ascent, our ability to capitalize on acquisition opportunities, general market conditions, and changes in law and government regulations. These forward-looking statements speak only as of the date of this press release, and Ascent expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Ascent’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 Ascent, including the most recent Forms10-Q and 10-K and any subsequently filed Form 8-K, for additional information about Ascent and about the risks and uncertainties related to Ascent’s business which may affect the statements made in this press release.

 

About Ascent Capital Group, Inc.

 

Ascent is a holding company and owns 100 percent of its operating subsidiary, Monitronics, one of the nation’s largest, fastest-growing home security alarm monitoring companies, headquartered in Dallas, TX, and certain former subsidiaries of Ascent Media Group, LLC.

 

Contact:

 

Erica Bartsch

Sloane & Company

212-446-1875

ebartsch@sloanepr.com

 



 

Condensed Consolidated Balance Sheets

Amounts in thousands, except share amounts

(unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

90,729

 

183,558

 

Restricted cash

 

7,776

 

31,196

 

Trade receivables, net of allowance for doubtful accounts of $1,603 in 2012 and $1,815 in 2011

 

10,006

 

10,973

 

Deferred income tax assets, net

 

5,881

 

5,881

 

Marketable securities, at fair value

 

140,508

 

40,377

 

Income taxes receivable

 

308

 

308

 

Prepaid and other current assets

 

14,013

 

17,600

 

Total current assets

 

269,221

 

289,893

 

 

 

 

 

 

 

Restricted cash

 

 

28,000

 

Property and equipment, net of accumulated depreciation of $39,320 in 2012 and $37,537 in 2011

 

71,577

 

74,697

 

Subscriber accounts, net

 

839,410

 

838,441

 

Dealer network, net

 

37,413

 

39,933

 

Goodwill

 

349,227

 

349,227

 

Other assets, net

 

21,000

 

5,706

 

Assets of discontinued operations

 

52

 

62

 

Total assets

 

$

1,587,900

 

1,625,959

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

5,911

 

3,987

 

Accrued payroll and related liabilities

 

2,420

 

5,149

 

Other accrued liabilities

 

18,804

 

19,000

 

Deferred revenue

 

7,272

 

6,803

 

Purchase holdbacks

 

11,423

 

12,273

 

Current portion of long-term debt

 

5,500

 

60,000

 

Liabilities of discontinued operations

 

7,123

 

7,101

 

Total current liabilities

 

58,453

 

114,313

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

Long-term debt

 

949,012

 

892,718

 

Derivative financial instruments

 

2,405

 

36,279

 

Deferred income tax liability, net

 

9,927

 

9,793

 

Other liabilities

 

12,180

 

12,529

 

Total liabilities

 

1,031,977

 

1,065,632

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $.01 par value. Authorized 5,000,000 shares; no shares issued

 

 

 

Series A common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 13,467,247 and 13,471,594 shares at March 31, 2012 and December 31, 2011, respectively

 

135

 

135

 

Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 739,808 and 739,894 shares at March 31, 2012 and December 31, 2011, respectively

 

7

 

7

 

Series C common stock, $.01 par value. Authorized 45,000,000 shares; no shares issued

 

 

 

Additional paid-in capital

 

1,462,706

 

1,461,671

 

Accumulated deficit

 

(901,924

)

(896,710

)

Accumulated other comprehensive loss

 

(5,001

)

(4,776

)

Total stockholders’ equity

 

555,923

 

560,327

 

Total liabilities and stockholders’ equity

 

$

1,587,900

 

1,625,959

 

 



 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Amounts in thousands, except share amounts

(unaudited)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net revenue

 

$

81,881

 

73,870

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Cost of services

 

11,059

 

9,130

 

Selling, general, and administrative, including stock-based and long-term incentive compensation

 

17,807

 

19,956

 

Amortization of subscriber accounts and dealer network

 

38,081

 

37,717

 

Depreciation

 

1,906

 

1,652

 

Restructuring charges

 

 

3,779

 

Loss (gain) on sale of assets, net

 

(737

)

459

 

 

 

68,116

 

72,693

 

 

 

 

 

 

 

Operating income

 

13,765

 

1,177

 

 

 

 

 

 

 

Other income (expense), net:

 

 

 

 

 

Interest income

 

891

 

190

 

Interest expense

 

(11,640

)

(10,400

)

Realized and unrealized loss on derivative financial instruments

 

(2,044

)

(474

)

Refinancing expense

 

(6,241

)

 

Other income, net

 

1,022

 

948

 

 

 

(18,012

)

(9,736

)

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

(4,247

)

(8,559

)

Income tax benefit (expense) from continuing operations

 

(683

)

1,701

 

 

 

 

 

 

 

Net loss from continuing operations

 

(4,930

)

(6,858

)

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

Earnings (loss) from discontinued operations

 

(284

)

64,308

 

Income tax benefit (expense)

 

 

(2,263

)

Earnings (loss) from discontinued operations, net of income tax

 

(284

)

62,045

 

 

 

 

 

 

 

Net income (loss)

 

(5,214

)

55,187

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

Foreign currency translation adjustments

 

221

 

(13,952

)

Unrealized holding gains (losses) arising during the period, net of income tax

 

1,959

 

 

Unrealized loss on derivative contracts

 

(2,405

)

 

Other comprehensive income (loss)

 

(225

)

(13,952

)

 

 

 

 

 

 

Comprehensive income (loss)

 

$

(5,439

)

41,235

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per share (note 6)

 

 

 

 

 

Continuing operations

 

$

(0.35

)

(0.48

)

Discontinued operations

 

(0.02

)

4.36

 

Net income (loss)

 

$

(0.37

)

3.88

 

 



 

Condensed Consolidated Statements of Cash Flows

Amounts in thousands

(unaudited)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

(5,214

)

55,187

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Loss (earnings) from discontinued operations, net of income tax

 

284

 

(62,045

)

Amortization of subscriber accounts and dealer network

 

38,081

 

37,717

 

Depreciation

 

1,906

 

1,652

 

Stock based compensation

 

1,292

 

627

 

Deferred income tax expense

 

134

 

28

 

Unrealized gain on derivative financial instruments

 

(6,793

)

(9,162

)

Refinancing expense

 

6,241

 

 

Loss (gain) on the sale of assets

 

(737

)

459

 

Long-term debt amortization

 

3,915

 

4,103

 

Other non-cash activity, net

 

1,481

 

1,968

 

Changes in assets and liabilities:

 

 

 

 

 

Trade receivables

 

(413

)

(546

)

Prepaid expenses and other assets

 

(110

)

(268

)

Payables and other liabilities

 

(854

)

280

 

Operating activities from discontinued operations, net

 

(252

)

(5,889

)

 

 

 

 

 

 

Net cash provided by operating activities

 

38,961

 

24,111

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(902

)

(743

)

Purchases of subscriber accounts

 

(37,380

)

(36,951

)

Purchases of marketable securities

 

(98,172

)

 

Net proceeds from sale of discontinued operations

 

 

99,488

 

Decrease (increase) in restricted cash

 

51,420

 

(1,000

)

Proceeds from the sale of operating assets

 

4,984

 

 

Investing activities from discontinued operations, net

 

 

(3,196

)

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

(80,050

)

57,598

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from long-term debt

 

967,200

 

11,400

 

Payments to long-term debt

 

(976,000

)

(11,000

)

Refinancing costs

 

(42,940

)

 

Other

 

 

1

 

Financing activities from discontinued operations, net

 

 

(142

)

 

 

 

 

 

 

Net cash used in financing activities

 

(51,740

)

259

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(92,829

)

81,968

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

183,558

 

149,857

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

90,729

 

231,825

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

State taxes paid

 

$

17

 

10

 

Interest paid

 

6,893

 

5,907

 

 



 

Adjusted EBITDA

 

We define “Adjusted EBITDA” as net income before interest expense, interest income, income taxes, depreciation, amortization (including the amortization of subscriber accounts and dealer network), realized and unrealized gain/(loss) on derivative instruments, restructuring charges, stock-based and other non-cash long-term incentive compensation, and other non-cash or nonrecurring charges.   We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of our businesses, including our businesses’ ability to fund their ongoing acquisition of subscriber accounts, their capital expenditures and to service their debt.  In addition, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance.   Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate the financial performance of companies in the security alarm monitoring industry and is one of the financial measures, subject to certain adjustments, by which Monitronics’ covenants are calculated under the agreements governing their debt obligations.  Adjusted EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles, should not be construed as an alternative to net income or loss and is indicative neither of our results of operations nor of cash flows available to fund all of our cash needs.  It is, however, a measurement that we believe is useful to investors in analyzing our operating performance.  Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP.  Adjusted EBITDA is a non-GAAP financial measure.  As companies often define non-GAAP financial measures differently, Adjusted EBITDA as calculated by us should not be compared to any similarly titled measures reported by other companies.

 

The following table provides a reconciliation of Ascent’s total Adjusted EBITDA to net loss from continuing operations (amounts in thousands):

 

Ascent (consolidated)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Total Adjusted EBITDA

 

$

56,066

 

45,900

 

Amortization of subscriber accounts and dealer network

 

(38,081

)

(37,717

)

Depreciation

 

(1,906

)

(1,652

)

Stock-based and long-term incentive compensation

 

(1,292

)

(627

)

Restructuring charges

 

 

(3,779

)

Realized and unrealized loss on derivative instruments

 

(2,044

)

(474

)

Refinancing costs

 

(6,241

)

 

Interest income

 

891

 

190

 

Interest expense

 

(11,640

)

(10,400

)

Income tax benefit (expense) from continuing operations

 

(683

)

1,701

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(4,930

)

(6,858

)

 



 

The following table provides a reconciliation of Monitronics’ Adjusted EBITDA to net income (loss) from continuing operations (amounts in thousands):

 

Monitronics

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

56,484

 

51,653

 

Amortization of subscriber accounts and dealer network

 

(38,081

)

(37,717

)

Depreciation

 

(1,302

)

(1,099

)

Stock-based and long-term incentive compensation

 

(299

)

 

Realized and unrealized loss on derivative instruments

 

(2,044

)

(474

)

Refinancing costs

 

(6,241

)

 

Interest expense

 

(11,622

)

(10,375

)

Income tax expense

 

(667

)

(524

)

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(3,772

)

1,464