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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Ascent Capital Group, Inc.a13-18349_18k.htm

Exhibit 99.1

 

 

ASCENT CAPITAL GROUP ANNOUNCES FINANCIAL RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013

 

Englewood, CO — August 8, 2013 — Ascent Capital Group, Inc. (“Ascent” or the “Company”) (Nasdaq: ASCMA) has reported results for the three and six months ended June 30, 2013. 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.

 

Headquartered in Dallas, Texas, Monitronics provides security alarm monitoring services to more than 838,000 residential and commercial customers. Monitronics’ long-term monitoring contracts provide high margin recurring revenue that results in predictable and stable cash flow.

 

Highlights(1):

 

·                  Ascent’s net revenue for the three and six months ended June 30, 2013 increased 22.8% and 22.5%, respectively, driven by growth in the number of subscriber accounts at Monitronics and the related increase in monthly recurring revenue

·                  Ascent’s Adjusted EBITDA(2) for the three and six months ended June 30, 2013 increased 25.9% and 26.5%, respectively

·                  Ascent’s balance sheet remains strong with $224.0 million of cash as of June 30, 2013

·                  Monitronics’ Adjusted EBITDA for the three and six months ended June 30, 2013 increased 23.1% and 23.0%

·                  Monitronics subscriber accounts as of June 30, 2013 increased 17.8% to 838,723

·                  The growth in subscriber accounts reflects strong performance in the core account generation engine and bulk purchases of approximately 18,200 accounts in May 2013

·                  Monitronics average monthly revenue per subscriber as of June 30, 2013 increased 5.3% to $39.98

·                  Monitronics’ proposed acquisition of Security Networks, LLC continues as planned; transaction expected to close in mid-August

·                  Successfully issued a $103.5 million convertible bond and a $175.0 million high yield bond in July and received commitments on $225.0 million of term loans which will be funded, subject to customary conditions, in conjunction with the closing of the Security Networks acquisition in mid-August

·                  Acquisition will result in Monitronics eclipsing 1 million subscribers

 

Ascent Chairman and Chief Executive Officer, Bill Fitzgerald stated, “I am very pleased with the Company’s performance in the second quarter and first half of 2013. Monitronics turned in another strong quarter, delivering over 20% growth in both revenue and Adjusted EBITDA.  I am also happy to report that the proposed acquisition of Security Networks continues to progress as expected. In July we took significant steps towards completing the necessary financing to fund the transaction and we remain on target for a mid-August close.  Looking ahead, we remain committed to exploring additional accretive acquisition opportunities within the alarm monitoring and related security industry.”

 

Mike Haislip, President and Chief Executive Officer of Monitronics said, “Monitronics continued to deliver strong growth in the second quarter. Both revenue and Adjusted EBITDA increased a solid 23% and total subscriber accounts were up

 


(1)  Comparisons are year-over-year unless otherwise specified.

(2)  For a definition of Adjusted EBITDA and applicable reconciliations, see the Appendix to this release. Ascent’s net income for the three months and six ended June 30, 2013 totaled $65,000 and $2.8 million, respectively. Monitronics’ net income for the corresponding periods totaled $592,000 and $1.9 million, respectively.

 



 

17.8%, on strong growth in account acquisitions through our dealer program combined with 18,200 in bulk account purchases.”

 

Mr. Haislip continued, “Our recently announced proposed acquisition of Security Networks will bring our total subscriber base to over 1 million accounts, and position the company very well for continued growth.  Because of its superior operating performance, strong growth profile and impressive and growing dealer affiliate network, we are confident Security Networks will be a strong complement to Monitronics’ existing operations. More importantly, the combination of two very successful home security industry leaders positions us for accelerated growth and ongoing strong profitability.”

 

Three and Six Months Ended June 30, 2013 Results

 

Ascent Capital Group, Inc.

 

For the three months ended June 30, 2013, Ascent reported net revenue of $102.3 million, an increase of 22.8% compared to $83.3 million for the three months ended June 30, 2012. For the six months ended June 30, 2013 net revenue increased 22.5% to $202.4 million. The increase in net revenue for the three and six month time periods is primarily attributable to increases in Monitronics’ subscriber accounts and average monthly revenue per subscriber.

 

Ascent’s total cost of services for the three and six months ended June 30, 2013 increased 36.9% and 37.2% to $15.6 million and $30.8 million, respectively. The increase for the three and six months ended June 30, 2013 is primarily due to an increased number of accounts monitored across the cellular network and having interactive and home automation services, resulting in higher operating and service costs.

 

Selling, general & administrative (“SG&A”) costs increased 19.3% to $21.5 million for the three months ended June 30, 2013 and increased 15.1% to $41.2 million for the first six months of 2013. The increase is primarily attributable to increases in Monitronics SG&A costs due to increased payroll expenses of approximately $616,000 and $1.6 million for the three and six months ended June 30, 2013, respectively, and increases in professional services expenses primarily related to $1.4 million of Security Networks Acquisition transaction costs. Additionally, Ascent’s consolidated stock-based compensation expense increased approximately $692,000 and $1.2 million for the three and six months ended June 30, 2013, related to restricted stock and option awards granted to certain employees.

 

Ascent’s Adjusted EBITDA increased 25.9% to $71.2 million during the quarter and 26.5% to $142.5 million for the six months ended June 30, 2013. The increase in Adjusted EBITDA for the three and six months ended June 30, 2013 was primarily due to revenue and subscriber growth at Monitronics, partially offset by higher operating and service costs.

 

Ascent reported net income from continuing operations for the three and six months ended June 30, 2013 of $212,000 and $2.5 million, respectively, compared to a net loss from continuing operations of $5.7 million and $10.7 million for the three and six months ended June 30, 2012.

 

Monitronics International

 

For the three months ended June 30, 2013, Monitronics reported net revenue of $102.3 million, an increase of 22.8% compared to $83.3 million for the three months ended June 30, 2012. For the six months ended June 30, 2013 net revenue increased 22.5% to $202.4 million. The increase in net revenue for the three and six month time periods is primarily attributable to a 17.8% increase in the number of subscriber accounts, a 24.0% increase in recurring monthly revenue to $33.5 million and a 5.3% increase in average monthly revenue per subscriber to $39.98 as of June 30, 2013.

 

Monitronics’ total cost of services for the three and six months ended June 30, 2013 increased 36.9% and 37.2% to $15.6 million and $30.8 million, respectively. The increases are primarily due to an increased number of accounts monitored across the cellular network and having interactive and home automation services, resulting in higher operating and service costs.

 



 

Monitronics’ SG&A costs increased 23.6% to $18.1 million for the three months ended June 30, 2013 and increased 17.3% to $34.0 million for the first six months of 2013. The increases are attributable to higher payroll expenses of approximately $616,000 and $1.6 million for the three and six months ended June 30, 2013, respectively, and increases in professional services expenses primarily related to $1.4 million of Security Networks Acquisition transaction costs incurred in the three and six months ended June 30, 2013.

 

Monitronics’ Adjusted EBITDA for the three months ended June 30, 2013 was $70.4 million, an increase of 23.1% over the three months ended June 30, 2012. For the six months ended June 30, 2013, Monitronics’ Adjusted EBITDA increased 23.0% to $139.8 million. The increase in Adjusted EBITDA is primarily due to revenue and subscriber growth. Monitronics’ Adjusted EBITDA as a percentage of revenue was 68.8% in the second quarter of 2013, compared to 68.7% for the three months ended June 30, 2012. Monitronics’ Adjusted EBITDA as a percentage of revenue for the six months ended June 30, 2013 totaled 69.1%, compared to 68.8% for the prior year period.

 

Monitronics reported net income for the three months ended June 30, 2013 of $592,000 compared to a net loss of $3.8 million in the prior year period. Net income for the six months ended June 30, 2013 was $1.9 million compared to a net loss of $7.5 million in the prior year period.

 

The table below summarizes subscriber data for the twelve months ended June 30, 2013:

 

 

 

Twelve Months Ended
June 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Beginning balance of accounts

 

711,832

 

688,119

 

Accounts purchased (a)

 

228,040

 

108,600

 

Accounts canceled (b)

 

(98,107

)

(81,747

)

Canceled accounts guaranteed to be refunded from holdback

 

(3,042

)

(3,140

)

Ending balance of accounts

 

838,723

 

711,832

 

Monthly weighted average accounts

 

787,735

 

701,515

 

Attrition rate

 

(12.5

)%

(11.7

)%

 

For the three months ended June 30, 2013, Monitronics purchased 47,733 subscriber accounts, compared to the 26,358 subscriber accounts in the three months ended June 30, 2012. During the six months ended June 30, 2013 and 2012, Monitronics purchased 76,193 and 50,532 subscriber accounts, respectively. The account purchases for the three and six months ended June 30, 2013 include bulk buy purchases of approximately 18,200 accounts.

 

Monitronics’ trailing twelve month attrition for the period ended June 30, 2013 increased to 12.5% compared to 11.7% for the twelve months ended June 30, 2012.

 

Security Networks Transaction

 

On July 10, 2013 Monitronics signed a definitive agreement to acquire Security Networks, LLC. The transaction consideration will consist of $487.5 million of cash and 253,333 newly issued shares of Ascent Series A common stock with an agreed value of $20 million. The purchase price is subject to adjustment at closing and is based upon Security Networks delivering recurring monthly revenue (as defined in the acquisition agreement, “Acquisition RMR”) of $8.8 million. The transaction will be financed primarily with new debt at the Ascent and Monitronics levels, as well as an incremental amount of cash from Ascent’s balance sheet. The transaction is expected to close in mid-August 2013, subject to customary closing conditions, including regulatory approvals.

 



 

The cash portion of the Security Networks Purchase Price will be funded by cash on hand at Ascent Capital and new debt, which is to consist of the $103.5 million of Convertible Notes issued by Ascent Capital, the $175.0 million New Senior Notes issued by Monitronics and the expected Incremental Term Loan of $225 million to be provided under Monitronics’ Credit Facility.  The Convertible Notes offering was completed on July 17, 2013 with the notes maturing on July 15, 2020 and bearing interest at 4.00% per annum from July 17, 2013.  Interest will be payable semi-annually on January 15 and July 15 of each year.

 

The New Senior Notes offering was completed on July 17, 2013 by Monitronics Escrow Corporation (the “Escrow Issuer”), a wholly-owned subsidiary of Ascent Capital, and the proceeds from this offering have been placed in escrow.  In connection with the completion of the Security Networks Acquisition, the Escrow Issuer will be merged into Monitronics and Monitronics will assume the New Senior Notes.  The New Senior Notes will mature on April 1, 2020 and bear interest at 9.125% per annum, with interest being payable semi-annually on April 1 and October 1 of each year.

 

Monitronics expects that the Incremental Term Loan will be entered into upon the closing of the Security Networks Acquisition.  Monitronics expects that the Incremental Term Loan will mature on March 23, 2018 and will bear interest based on LIBOR plus an applicable margin to be agreed, subject to a LIBOR floor to be agreed.  In addition, Monitronics has evaluated its borrowing capacity subsequent to the Security Networks Acquisition, upon which it expects to increase the borrowing available under Monitronics’ Credit Facility revolver by an amount equal to $75 million.

 

Ascent Liquidity and Capital Resources

 

At June 30, 2013, on a consolidated basis, Ascent had $84.1 million of cash and cash equivalents, $2.6 million of restricted cash, and $141.4 million of marketable securities on a consolidated basis.  The Company may use a portion of these assets to decrease debt obligations, fund stock repurchases, or fund potential strategic acquisitions or investment opportunities, including the Security Networks Acquisition.

 

During the six months ended June 30, 2013, Monitronics used cash of $113.2 million to fund purchases of subscriber accounts net of holdback and guarantee obligations.

 

At June 30, 2013, the existing long-term debt of Monitronics includes the principal balance of $1.1 billion under its Senior Notes, Credit Facility, and Credit Facility revolver. The Senior Notes have an outstanding principal balance of $410.0 million as of June 30, 2013 and mature on April 1, 2020. The Credit Facility term loan has an outstanding principal balance of $687.0 million as of June 30, 2013 and requires principal payments of approximately $1.7 million per quarter with the remaining outstanding balance becoming due on March 23, 2018. The Credit Facility revolver has an outstanding balance of $33.6 million as of June 30, 2013 and becomes due on December 22, 2017.

 

Conference Call

 

Ascent will host a conference call today, August 8, 2013, at 5:00 p.m. ET. To access the call please dial (888) 462-5915 from the United States, or (760) 666-3831 from outside the U.S. The conference call I.D. number is 22171654. 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 August 15, 2013 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 22171654.

 

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, consumer demand for interactive and home automation services, the pending acquisition of Security Networks, the integration of acquired assets and businesses (including the consolidated performance of Monitronics after giving effect to the pending acquisition), the terms of the anticipated amendments to Monitronics’ Credit Facility (including the size of its revolver capacity), 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, technological innovations in the alarm monitoring industry, competitive issues, Monitronics’ ability to complete the acquisition of Security Networks (including the completion of the acquisition financing), continued access to capital on terms acceptable to Ascent, our ability to capitalize on acquisition opportunities, general market and economic 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 Form 10-K and 10-Q, 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

 



 

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

Amounts in thousands, except share amounts

(unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2013

 

2012

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

84,149

 

$

78,422

 

Restricted cash

 

2,640

 

2,640

 

Marketable securities, at fair value

 

141,438

 

142,587

 

Trade receivables, net of allowance for doubtful accounts of $1,575 in 2013 and $1,436 in 2012

 

12,114

 

10,891

 

Deferred income tax assets, net

 

3,780

 

3,780

 

Income taxes receivable

 

49

 

132

 

Prepaid and other current assets

 

12,595

 

15,989

 

Assets held for sale

 

6,119

 

7,205

 

Total current assets

 

262,884

 

261,646

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $33,399 in 2013 and $30,570 in 2012

 

54,743

 

56,491

 

Subscriber accounts, net of accumulated amortization of $393,760 in 2013 and $308,487 in 2012

 

1,020,664

 

987,975

 

Dealer network, net of accumulated amortization of $25,620 in 2013 and $20,580 in 2012

 

24,813

 

29,853

 

Goodwill

 

349,227

 

349,227

 

Other assets, net

 

25,410

 

22,634

 

Assets of discontinued operations

 

54

 

54

 

Total assets

 

$

1,737,795

 

$

1,707,880

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

5,398

 

$

3,664

 

Accrued payroll and related liabilities

 

3,372

 

3,504

 

Other accrued liabilities

 

28,217

 

27,181

 

Deferred revenue

 

9,704

 

10,327

 

Purchase holdbacks

 

15,725

 

10,818

 

Current portion of long-term debt

 

6,905

 

6,950

 

Liabilities of discontinued operations

 

6,907

 

7,369

 

Total current liabilities

 

76,228

 

69,813

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

Long-term debt

 

1,119,201

 

1,101,433

 

Derivative financial instruments

 

2,663

 

12,359

 

Deferred income tax liability, net

 

8,346

 

8,187

 

Other liabilities

 

5,463

 

5,990

 

Total liabilities

 

1,211,901

 

1,197,782

 

 

 

 

 

 

 

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 13,397,131 and 13,389,821 shares at June 30, 2013 and December 31, 2012, respectively

 

134

 

134

 

Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 736,505 and 737,166 shares at June 30, 2013 and December 31, 2012, respectively

 

7

 

7

 

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

 

 

 

Additional paid-in capital

 

1,457,261

 

1,453,700

 

Accumulated deficit

 

(931,388

)

(934,213

)

Accumulated other comprehensive loss

 

(120

)

(9,530

)

Total stockholders’ equity

 

525,894

 

510,098

 

Total liabilities and stockholders’ equity

 

$

1,737,795

 

$

1,707,880

 

 



 

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Amounts in thousands, except share amounts

(unaudited)

 

 

 

Three months ended
June 30,

 

Six months ended
June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

102,273

 

83,315

 

$

202,431

 

165,196

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of services

 

15,594

 

11,391

 

30,796

 

22,450

 

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

 

21,509

 

18,030

 

41,246

 

35,837

 

Amortization of subscriber accounts and dealer network

 

45,998

 

39,349

 

90,313

 

77,430

 

Depreciation

 

2,141

 

2,696

 

4,055

 

4,602

 

Gain on sale of operating assets, net

 

(2,065

)

(576

)

(5,456

)

(1,313

)

 

 

83,177

 

70,890

 

160,954

 

139,006

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

19,096

 

12,425

 

41,477

 

26,190

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest income

 

927

 

1,075

 

1,907

 

1,966

 

Interest expense

 

(19,485

)

(19,319

)

(40,628

)

(30,959

)

Realized and unrealized loss on derivative financial instruments

 

 

 

 

(2,044

)

Refinancing expense

 

 

(4

)

 

(6,245

)

Other income, net

 

588

 

827

 

1,458

 

1,849

 

 

 

(17,970

)

(17,421

)

(37,263

)

(35,433

)

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

1,126

 

(4,996

)

4,214

 

(9,243

)

Income tax expense from continuing operations

 

(914

)

(765

)

(1,688

)

(1,448

)

Net income (loss) from continuing operations

 

212

 

(5,761

)

2,526

 

(10,691

)

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

Earnings (loss) from discontinued operations

 

(107

)

(1,506

)

339

 

(1,790

)

Income tax benefit (expense)

 

(40

)

74

 

(40

)

74

 

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

 

(147

)

(1,432

)

299

 

(1,716

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

65

 

(7,193

)

2,825

 

(12,407

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

7

 

(160

)

(368

)

61

 

Unrealized holding gains (losses) on marketable securities

 

(1,468

)

(1,366

)

(2,152

)

593

 

Unrealized gain (loss) on derivative contracts

 

11,671

 

(8,835

)

11,930

 

(11,240

)

Total other comprehensive income (loss), net of tax

 

10,210

 

(10,361

)

9,410

 

(10,586

)

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

10,275

 

(17,554

)

$

12,235

 

(22,993

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.02

 

(0.41

)

$

0.18

 

(0.76

)

Discontinued operations

 

(0.01

)

(0.10

)

0.02

 

(0.12

)

Net income (loss)

 

$

0.01

 

(0.51

)

$

0.20

 

(0.88

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.01

 

(0.41

)

$

0.17

 

(0.76

)

Discontinued operations

 

(0.01

)

(0.10

)

0.02

 

(0.12

)

Net income (loss)

 

$

0.00

 

(0.51

)

$

0.19

 

(0.88

)

 



 

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Amounts in thousands

(unaudited)

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

2,825

 

(12,407

)

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

 

 

 

 

 

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

 

(299

)

1,716

 

Amortization of subscriber accounts and dealer network

 

90,313

 

77,430

 

Depreciation

 

4,055

 

4,602

 

Stock based compensation

 

3,783

 

2,563

 

Deferred income tax expense

 

204

 

219

 

Unrealized gain on derivative financial instruments

 

 

(6,793

)

Refinancing expense

 

 

6,245

 

Gain on the sale of operating assets, net

 

(5,456

)

(1,313

)

Long-term debt amortization

 

387

 

4,101

 

Other non-cash activity, net

 

4,556

 

4,314

 

Changes in assets and liabilities:

 

 

 

 

 

Trade receivables

 

(4,126

)

(2,165

)

Prepaid expenses and other assets

 

2,909

 

1,025

 

Payables and other liabilities

 

1,517

 

938

 

Operating activities from discontinued operations, net

 

(163

)

(1,368

)

 

 

 

 

 

 

Net cash provided by operating activities

 

100,505

 

79,107

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(3,990

)

(2,657

)

Purchases of subscriber accounts

 

(113,199

)

(78,885

)

Purchases of marketable securities

 

(1,003

)

(99,667

)

Decrease in restricted cash

 

 

51,479

 

Proceeds from the sale of operating assets

 

7,872

 

6,486

 

 

 

 

 

 

 

Net cash used in investing activities

 

(110,320

)

(123,244

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from long-term debt

 

62,100

 

967,200

 

Payments to long-term debt

 

(44,764

)

(977,375

)

Refinancing costs

 

(1,794

)

(44,114

)

Purchases and retirement of common stock

 

 

(684

)

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

15,542

 

(54,973

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

5,727

 

(99,110

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

78,422

 

183,558

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

84,149

 

84,448

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

State taxes paid

 

$

2,350

 

2,064

 

Interest paid

 

38,649

 

15,332

 

 



 

Adjusted EBITDA

 

We evaluate the performance of our operations based on financial measures such as revenue and “Adjusted EBITDA.”  Adjusted EBITDA is defined as net income (loss) 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.   Ascent Capital believes that Adjusted EBITDA is an important indicator of the operational strength and performance of its business, including the business’ ability to fund its ongoing acquisition of subscriber accounts, its capital expenditures and to service its 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 (“GAAP”), 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 Ascent Capital believes is useful to investors in analyzing its 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 Ascent Capital 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 income (loss) from continuing operations (amounts in thousands):

 

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Total Adjusted EBITDA

 

$

71,224

 

56,568

 

$

142,524

 

112,634

 

Amortization of subscriber accounts and dealer network

 

(45,998

)

(39,349

)

(90,313

)

(77,430

)

Depreciation

 

(2,141

)

(2,696

)

(4,055

)

(4,602

)

Stock-based and long-term incentive compensation

 

(1,963

)

(1,271

)

(3,783

)

(2,563

)

Acquisition related costs

 

(1,438

)

 

(1,438

)

 

Realized and unrealized loss on derivative instruments

 

 

 

 

(2,044

)

Refinancing costs

 

 

(4

)

 

(6,245

)

Interest income

 

927

 

1,075

 

1,907

 

1,966

 

Interest expense

 

(19,485

)

(19,319

)

(40,628

)

(30,959

)

Income tax expense from continuing operations

 

(914

)

(765

)

(1,688

)

(1,448

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

212

 

(5,761

)

$

2,526

 

(10,691

)

 



 

The following table provides a reconciliation of Monitronics’ total Adjusted EBITDA to net income (loss):

 

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Total Adjusted EBITDA

 

$

70,408

 

57,218

 

$

139,822

 

113,703

 

Amortization of subscriber accounts and dealer network

 

(45,998

)

(39,349

)

(90,313

)

(77,430

)

Depreciation

 

(1,721

)

(1,320

)

(3,209

)

(2,622

)

Stock-based and long-term incentive compensation

 

(402

)

(280

)

(763

)

(580

)

Acquisition related costs

 

(1,438

)

 

(1,438

)

 

Realized and unrealized loss on derivative instruments

 

 

 

 

(2,044

)

Refinancing costs

 

 

(4

)

 

(6,245

)

Interest expense

 

(19,466

)

(19,347

)

(40,593

)

(30,969

)

Income tax expense from continuing operations

 

(791

)

(671

)

(1,565

)

(1,338

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

592

 

(3,753

)

$

1,941

 

(7,525

)