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EXHIBIT 99.1

 

CROWN MEDIA HOLDINGS ANNOUNCES OPERATING RESULTS

FOR THIRD QUARTER OF 2013

 

STUDIO CITY, CA — November 1, 2013 - Crown Media Holdings, Inc. (NASDAQ:CRWN) today reported its operating results for the three and nine months ended September 30, 2013.

 

Operating Highlights

 

·                  Increased Advertising Revenue. Advertising revenue for the quarter ended September 30, 2013, increased 10% over the prior year quarter to $63.6 million on the strength of Hallmark Movie Channel audience increases.

 

·                  Strong Showing for First Scripted Series. Over its 13-week run, Cedar Cove averaged a 2.0 household rating, making Hallmark Channel the #1 cable network during the Saturday 8-9pm time period (Nielsen). Viewers showed their enthusiasm for the new series by actively engaging via social media during its launch - tweeting, posting, liking, and checking in on a variety of platforms, making Cedar Cove’s world premiere the most buzzed about primetime television program overall and #2 in cable on social media on Saturday, July 20, according to Trendrr Research. The series closed on a high note October 12, delivering a 2.2 household rating and more than 3 million unduplicated viewers. The final episode was the highest rated Cedar Cove episode of the season among W25-54 and A25-54 delivery, and ranked as the top program on cable for that Saturday outside of sports.

 

·                  Successful Pilot Debuts for Upcoming Series. The October 12 premiere of Signed, Sealed, Delivered garnered a 1.5 household rating, reaching nearly 2.9 million unduplicated viewers. The #1 cable movie of Saturday and #2 movie of the week, Signed, Sealed, Delivered was recently greenlit as Hallmark Channel’s newest original series, with its 10-episode run scheduled to bow in 2014. The 2-hour pilot for Hallmark Channel’s other scripted series, When Calls the Heart, premiered October 19 with a 1.7 household rating, attracting over 3.2 million unduplicated viewers. One-hour episodes of When Calls the Heart, starring Lori Loughlin, will kick off in January 2014.

 

·                  Hallmark Movie Channel Marks Double-Digit Ratings Increases. Hallmark Movie Channel continues to demonstrate year-over-year growth with double-digit increases in ratings and audience for the period and year-to-date compared to 2012. The network’s most recent original movie, The Mystery Cruise, which debuted on October 5, attracted over 900,000 unduplicated viewers.

 

·                  Holiday Programming Comes to Hallmark Channel and Hallmark Movie Channel. Hallmark Channel’s signature holiday programming franchise, Countdown to Christmas, rolls out November 2 with over 1200 hours of round-the-clock holiday-themed programming, including 12 new original movie titles, through January 1. Complementing Hallmark Channel’s schedule, Hallmark Movie Channel is launching its very own seasonal programming initiative, The Most Wonderful Movies of Christmas, on November 11. The Most Wonderful Movies of Christmas will feature the network’s first-ever original holiday movie, Christmas with Tucker, starring James Brolin and will focus more on the traditional, time honored aspects of the holidays.

 

“Crown Media marked an important milestone in the third quarter as Hallmark Channel launched its first original scripted series, Cedar Cove, to great success. The series maintained strong ratings over the course of its 13-week season and demonstrated that our viewers have an appetite for episodic programming,” said Bill Abbott, President and CEO, Crown Media Family Networks. “In addition, Hallmark Movie Channel has continued its remarkable growth, with double-digit increases in audience delivery. Boosted by this increase, we experienced a solid increase of 10% in advertising revenue for the quarter compared to the same period last year. Going into fourth quarter with amplified holiday programming offerings, we are optimistic and expect to close out a successful 2013.”

 



 

Financial Results

 

Historical financial information is provided in tables at the end of this release.

 

Operating Results

 

For the third quarter of 2013 Crown Media reported revenue of $84.4 million, a 10% increase from $77.1 million in the third quarter of 2012. Advertising revenue increased 10% to $63.6 million from $57.7 million in the third quarter of 2012 due to Hallmark Movie Channel distribution and audience growth. Subscriber fee revenue increased 6% to $20.5 million from $19.3 million in the third quarter of 2012 due to contractual rate increases.

 

For the nine months ended September 30, 2013, Crown Media reported revenue of $259.4 million, a 5% increase from $247.6 million for the nine months ended September 30, 2012. Advertising revenue increased 5% to $197.5 million from $188.1 million for the nine months ended September 30, 2012 due to Hallmark Movie Channel distribution and audience growth. Subscriber fee revenue increased 4% to $61.3 million from $59.0 million during the nine months ended September 30, 2012, due to contractual rate increases.

 

For the third quarter of 2013, cost of services increased 15% to $38.1 million from $33.0 million during the same quarter of 2012.  Programming costs increased 14% due to the amortization of Cedar Cove.  Other costs of services for the three months ended September 30, 2013 increased $0.9 million from the three months ended September 30, 2012, due to the $0.5 million increase in bad debt expense and the $0.5 million increase in salary, consulting and playback expenses.

 

For the nine months ended September 30, 2013, cost of services increased 1% to $109.3 million from $108.4 million during the same period of 2012. Programming costs decreased 1% period over period from $98.4 million to $97.8 million. Other costs of services for the nine months ended September 30, 2013 increased $1.4 million compared to the nine months ended September 30, 2012 primarily due to a $0.7 million increase in bad debt expense and an increase in employee, playback expense and consulting costs of $0.6 million period over period.

 

Selling, general and administrative expense (including depreciation and amortization expense) increased 12% to $15.7 million for the third quarter of 2013 from $14.1 million during the same quarter of 2012 primarily related to a $1.4 million increase in employee costs and a $0.2 million increase in depreciation and amortization expense.

 

Selling, general and administrative expense (including depreciation and amortization expense) increased 8% to $46.7 million for the nine months ended September 30, 2013, from $43.4 million during the same period of 2012 primarily related to a $2.1 million increase in employee costs, a $0.3 million increase in rent, a $0.3 million increase in third party costs directly expensed in conjunction with the March 2013 amendment of the term loan and a $0.3 million increase in depreciation and amortization expense.

 

Marketing expense increased $3.6 million during the third quarter of 2013 versus the third quarter of 2012 due to the marketing and promotion of Cedar Cove. Marketing expense increased $4.0 million during the nine months ended September 30, 2013, versus the nine months ended September 30, 2012, due to the marketing and promotion of Cedar Cove.

 

Interest expense decreased $1.0 million for the third quarter of 2013, as compared to the same quarter of 2012 due to the March 29, 2013 amendment to the Company’s credit facility that reduced the minimum rate on LIBOR borrowings under the term loan from 5.75% to 4.00% and a $17.4 million principal payment made in March 2013. Interest expense on the term loan was $3.0 million and $2.0 million for the quarters ended September 30, 2012 and 2013, respectively.

 

Interest expense decreased $2.4 million for the nine months ended September 30, 2013, as compared to the same period of 2012. Interest expense on the term loan was $9.2 million and $6.9 million for the nine months ended September 30, 2012 and 2013, respectively.

 



 

Provisions for income tax of $6.1 million and $6.6 million reflect corresponding effective tax rates of 37.9% and 36.3% for the quarters ended September 30, 2013 and 2012, respectively. Provisions for income tax of $24.4 million and $22.2 million reflect corresponding effective tax rates of 37.3% for each of the nine months ended September 30, 2013 and 2012, respectively.

 

Adjusted EBITDA was $28.7 million for the third quarter of 2013 compared to $31.3 million for the same period last year. Cash provided by operating activities totaled $12.8 million for the third quarter of 2013 compared to $12.2 million for the same period last year. The net income to common shareholders for the quarter ended September 30, 2013, totaled $10.0 million, or $0.03 per share, compared to $11.5 million, or $0.03 per share, in the third quarter of 2012.

 

Adjusted EBITDA was $103.7 million for the nine months ended September 30, 2013 compared to $99.2 million for the same period last year. Cash provided by operating activities totaled $34.4 million for the nine months ended September 30, 2013, compared to $20.2 million for the same period last year. The net income to common shareholders for the nine months ended September 30, 2013, totaled $41.1 million, or $0.11 per share, compared to $37.2 million, or $0.10 per share, in the nine months ended September 30, 2012.

 

Conference Call and Webcast to be Held Friday, November 1st, at 11:00 a.m. ET

 

Crown Media Holdings’ management will conduct a conference call today at 11:00 a.m., Eastern Time to discuss the results of the three and nine months ended September 30, 2013. Investors and interested parties may listen to the call via a live webcast accessible on the Company’s investor relations page, http://ir.crownmedia.net/, or by dialing (877) 307-0246 (Domestic) or (224) 357-2394 (International) and using the conference number 71104161. 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 of the call. The webcast will be archived on the site, and a telephone replay of the call will be available for 7 days following the call beginning at 1:00 p.m. Eastern Time on Friday, November 1st, at (855) 859-2056 (Domestic) or (404) 537-3406 (International), using the conference number 71104161.

 

ABOUT CROWN MEDIA HOLDINGS

 

Crown Media Holdings, Inc. is the corporate parent for the portfolio of cable networks and related businesses under Crown Media Family Networks. The company currently operates and distributes Hallmark Channel in both high definition (HD) and standard definition (SD) to 88 million subscribers in the U.S. Hallmark Channel is the nation’s leading network in providing quality family programming with an ambitious slate of original TV movies and specials, general entertainment, and an array of home and lifestyle content. Hallmark Channel’s sibling network, Hallmark Movie Channel, is available in nearly 54 million homes in HD and SD. One of America’s fastest-growing cable networks, Hallmark Movie Channel provides family-friendly original movies with a mix of original films, classic theatrical releases, and presentations from the acclaimed Hallmark Hall of Fame library. In addition, Crown Media Family Networks includes the online offerings of HallmarkChannel.com and HallmarkMovieChannel.com.

 

# # #

 

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 and long term incentive plan expense are treated as non-cash items, although they may result in cash payments during subsequent periods. See “Selected 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.

 

For additional information, please contact:

 

Investors and Press

 

Crown Media Family Networks

Annie Howell, 212.445.6690

anniehowell@crownmedia.com

 



 

Crown Media Holdings, Inc.

Unaudited Consolidated Income Statement Information

(In thousands, except per share data)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Revenue:

 

 

 

 

 

 

 

 

 

Advertising

 

$

63,577

 

$

57,739

 

$

195,413

 

$

186,207

 

Advertising by Hallmark Cards

 

 

 

2,112

 

1,911

 

Subscriber fees

 

20,527

 

19,294

 

61,273

 

58,952

 

Other revenue

 

273

 

22

 

614

 

499

 

Total revenue, net

 

84,377

 

77,055

 

259,412

 

247,569

 

Cost of services:

 

 

 

 

 

 

 

 

 

Non-affiliate programming

 

33,133

 

29,066

 

95,393

 

96,322

 

Hallmark Cards affiliate programming

 

688

 

651

 

2,449

 

2,068

 

Amortization of capital lease

 

290

 

289

 

868

 

868

 

Other cost of services

 

3,954

 

3,013

 

10,548

 

9,171

 

Total cost of services

 

38,065

 

33,019

 

109,258

 

108,429

 

Selling, general and administrative expense

 

15,193

 

13,718

 

45,331

 

42,342

 

Marketing expense

 

3,993

 

430

 

5,686

 

1,669

 

Depreciation and amortization expense

 

525

 

373

 

1,369

 

1,069

 

Income from operations before interest and income tax expense

 

26,601

 

29,515

 

97,768

 

94,060

 

Interest expense

 

(10,486

)

(11,451

)

(32,284

)

(34,655

)

Income from operations before income tax expense

 

16,115

 

18,064

 

65,484

 

59,405

 

Income tax expense

 

(6,111

)

(6,566

)

(24,431

)

(22,164

)

Net income and comprehensive income

 

$

10,004

 

$

11,498

 

$

41,053

 

$

37,241

 

Net income per share — basic

 

$

0.03

 

$

0.03

 

$

0.11

 

$

0.10

 

Net income per share — diluted

 

$

0.03

 

$

0.03

 

$

0.11

 

$

0.10

 

Weighted average number of common shares outstanding

 

359,676

 

359,676

 

359,676

 

359,676

 

 



 

Crown Media Holdings, Inc.

Unaudited Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

As of September 30,

 

As of December 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,965

 

$

43,705

 

Accounts receivable, less allowance for doubtful accounts of $1,037 and $245, respectively

 

76,927

 

92,062

 

Programming rights

 

74,544

 

85,946

 

Prepaid programming rights

 

34,633

 

13,820

 

Deferred tax asset, net

 

34,200

 

34,200

 

Prepaid and other assets

 

2,428

 

2,326

 

Total current assets

 

263,697

 

272,059

 

Programming rights

 

196,459

 

174,971

 

Prepaid programming rights

 

9,704

 

13,748

 

Property and equipment, net

 

10,158

 

10,455

 

Deferred tax asset, net

 

202,420

 

225,149

 

Debt issuance costs, net

 

10,438

 

10,421

 

Other assets

 

3,688

 

3,826

 

Goodwill

 

314,033

 

314,033

 

Total assets

 

$

1,010,597

 

$

1,024,662

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

19,118

 

$

25,801

 

Audience deficiency reserve liability

 

6,804

 

5,679

 

Programming rights payable

 

88,105

 

112,503

 

Payables to Hallmark Cards affiliates

 

913

 

1,239

 

Interest payable

 

6,580

 

14,468

 

Current maturities of long-term debt

 

 

19,600

 

Total current liabilities

 

121,520

 

179,290

 

Accrued liabilities

 

14,592

 

15,852

 

Programming rights payable

 

47,763

 

30,121

 

Long-term debt, net of current maturities

 

454,243

 

468,040

 

Total liabilities

 

638,118

 

693,303

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Class A common stock, $.01 par value; 500,000,000 shares authorized; 359,675,936 shares issued and outstanding as of both September 30, 2013, and December 31, 2012

 

3,597

 

3,597

 

Paid-in capital

 

2,062,818

 

2,062,751

 

Accumulated deficit

 

(1,693,936

)

(1,734,989

)

Total stockholders’ equity

 

372,479

 

331,359

 

Total liabilities and stockholders’ equity

 

$

1,010,597

 

$

1,024,662

 

 



 

Crown Media Holdings, Inc.

Selected Unaudited Financial Information

(in thousands)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,004

 

$

11,498

 

$

41,053

 

$

37,241

 

Promotion and placement expense

 

263

 

243

 

788

 

894

 

Depreciation and amortization

 

815

 

662

 

2,237

 

1,937

 

Interest expense

 

10,486

 

11,451

 

32,284

 

34,655

 

Income tax expense

 

6,111

 

6,566

 

24,431

 

22,164

 

Long term incentive plan expense

 

965

 

812

 

2,668

 

2,112

 

Restricted stock unit compensation

 

86

 

43

 

210

 

198

 

Adjusted earnings before interest, taxes, depreciation and amortization

 

$

28,730

 

$

31,275

 

$

103,671

 

$

99,201

 

 

 

 

 

 

 

 

 

 

 

Programming and other amortization

 

34,314

 

29,173

 

99,184

 

92,790

 

Provision for allowance for doubtful account

 

504

 

28

 

794

 

56

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Change to programming rights

 

(53,938

)

(24,598

)

(107,927

)

(69,525

)

Change to prepaid programming rights

 

(3,114

)

(6,214

)

(16,770

)

(26,058

)

Change in programming rights payable

 

18,796

 

(1,619

)

(5,390

)

(23,287

)

Interest paid

 

(17,785

)

(18,787

)

(38,582

)

(43,794

)

Changes in other operating assets and liabilities, net of adjustments above

 

5,323

 

2,976

 

(608

)

(9,198

)

Net cash provided by operating activities

 

$

12,830

 

$

12,234

 

$

34,372

 

$

20,185

 

 



 

Crown Media Holdings, Inc.

Selected Unaudited Cash Flow Statement Information

(in thousands)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

12,830

 

$

12,234

 

$

34,372

 

$

20,185

 

Net cash used in investing activities

 

(546

)

(653

)

(1,402

)

(981

)

Net cash used in financing activities

 

(15,751

)

(823

)

(35,710

)

(19,949

)

Net (decrease) increase in cash and cash equivalents

 

(3,467

)

10,758

 

(2,740

)

(745

)

Cash and cash equivalents, beginning of period

 

44,432

 

23,678

 

43,705

 

35,181

 

Cash and cash equivalents, end of period

 

$

40,965

 

$

34,436

 

$

40,965

 

$

34,436