Starz Reports Fourth Quarter And Year End 2013 Financial Results

Starz Reports Fourth Quarter And Year End 2013 Financial Results

ENGLEWOOD, Colo., Feb. 21, 2014 /PRNewswire/ -- Starz (NASDAQ: STRZA, STRZB) today reported fourth quarter and year end 2013 results. Highlights include ((1)):


-- Achieved annual increases in revenue of 9%, Adjusted OIBDA((2)) of 7%
and operating income of 5% in 2013
-- STARZ/ENCORE combined subscribers reach 57.1 million; leads U.S. premium
television category
-- STARZ subscriptions at 22.2 million; up 1 million, or 5%, since
December 31, 2012
-- ENCORE subscriptions at 34.9 million; up slightly since December 31,
2012
-- Since September 30, 2013, STARZ subscriptions increased by 200K, or 1%,
while ENCORE subscriptions were essentially flat
-- Repurchased 3.7 million shares from November 1, 2013 to January 31,
2014; since trading began on January 14, 2013, Starz has repurchased
10.5% of its outstanding shares
-- Authorized an additional $400.0 million for share repurchase program;
total remaining repurchase authorization of $474.5 million
-- Strong debut for STARZ Original series "Black Sails" - more than 2.9
million average viewers per episode linear + DVR thru first 3 episodes
of the series
-- STARZ Original series "Power" from Curtis "50 Cent" Jackson selected for
MIPTV World Premiere TV Screening in Cannes; will debut on STARZ in
Summer 2014
-- Greenlit STARZ Original series "Survivor's Remorse" half-hour comedy
project from LeBron James and Tom Werner for 2014 Q4 slate, "Flesh and
Bone" ballet drama for 2015
-- Launched STARZ PLAY on Xbox 360; ENCORE PLAY/MOVIEPLEX PLAY and Xbox One
full suite deployments coming in 2014
-- Signed Starz Worldwide Distribution/Amedia 15-country distribution
output deal for Russia, Georgia, and The Baltics for STARZ Original
series and other TV/movie programming
(Logo: http://photos.prnewswire.com/prnh/20080522/LATH063LOGO-b)

"This was another strong quarter for Starz and a strong end to 2013. During 2013, we delivered solid growth in revenue, Adjusted OIBDA, and subscriber performance," said Starz CEO Chris Albrecht. "Over the past year, we increased our investments in exclusive original programming at STARZ and implemented new offerings to our ENCORE thematic channels for African-American, Latino, Baby Boomer, and Millennial audiences."

Albrecht continued, "The new STARZ Original series, 'Black Sails,' is off to an excellent start with worldwide audiences and the strongest ever debut for a new STARZ Original series in the U.S. Through the first three episodes of the debut season, more than 2.9 million viewers in the U.S. have watched on STARZ, with data for on-demand and online viewing yet to be included in the tally. Global sales of 'Black Sails' were robust. The second season of 'Da Vinci's Demons,' and our new 2014 series, 'Power,' 'Outlander,' and the recently greenlit 'Survivor's Remorse' are on the schedule as we finalize the programming slate for the fourth quarter. We remain on track to grow our original programming hours to 65-75 hours in the next few years."

Consolidated
For the year, revenue increased 9% to $1,777.5 million, Adjusted OIBDA increased 7% to $476.9 million and operating income increased 5% to $425.2 million. For the quarter, revenue decreased 2% to $414.7 million, Adjusted OIBDA( )increased 16% to $117.2 million and operating income increased 21% to $103.4 million.

Starz Networks
For the year, revenue increased 2% to $1,297.7 million due to the one-time recognition during Q2 2013 of $18.6 million of previously deferred revenue and annual rate increases. Adjusted OIBDA increased 2% to $456.2 million as a result of the increase in revenue and lower programming costs, partially offset by increased advertising related to original programming, increased cooperative marketing efforts with our distributors, increased litigation related legal costs and costs associated with becoming an independent public company.

For the quarter, revenue increased 2% to $322.0 million primarily as a result of annual rate increases from various distributors. Adjusted OIBDA decreased 2% to $118.8 million due to higher advertising expense in December 2013 associated with the January 2014 premiere of "Black Sails." An increase in cooperative marketing efforts with our distributors and costs associated with becoming an independent public company also contributed to the decrease.

Starz Distribution
For the year, revenue increased 40% to $449.5 million primarily as a result of a greater number of higher performing titles from The Weinstein Company ("Weinstein") including Django Unchained and Silver Linings Playbook, various STARZ Original series titles including "The White Queen," "Spartacus," and "Da Vinci's Demons" and AMC's "The Walking Dead." Adjusted OIBDA increased 588% to $24.0 million primarily due to the increase in revenue and a decrease in impairments of investment in films and television programs during 2013.

For the quarter, revenue decreased 14% to $83.8 million as a result of fewer high performing new releases in Q4 2013 as compared to Q4 2012. Q4 2012 included the Weinstein film Lawless and Season 1 of the STARZ Original series "Magic City." There were no significant new releases in Q4 2013. Adjusted OIBDA increased 98% to ($0.5) million primarily due to lower production and acquisition costs resulting from a decrease in impairments of investment in films and television programs as compared to the prior period.

Starz Animation
The decrease in both revenue and Adjusted OIBDA for the year and the quarter was due to fewer projects in production at the company's Film Roman studio.

Operating Income
The increase for the year was primarily due to the increase in Adjusted OIBDA and lower depreciation and amortization expense partially offset by an increase in stock compensation expense. The increase for the quarter was primarily due to the increase in Adjusted OIBDA, decreased stock compensation expense and lower depreciation and amortization.

Cash Paid for Investment in Films and Television Programs
The increase for the year and quarter was primarily due to payments for certain Weinstein titles partially offset by timing of cash spend related to our original programming.

Share Repurchases
From November 1, 2013 through January 31, 2014, 3.7 million shares of Series A common stock (NASDAQ: STRZA) were purchased at an average cost per share of $28.65 for total cash consideration of $106.4 million. Since trading began on January 14, 2013, Starz has repurchased approximately 12.8 million shares at an average cost per share of $25.50 for aggregate cash consideration of $325.5 million. These repurchases represent 10.5% of the shares outstanding at January 14, 2013. In addition, on February 20, 2014, the Starz board authorized a $400 million increase in the share repurchase program. As of January 31, 2014, $474.5 million remains under the $800 million authorization, which includes the newly authorized amount. Under the share repurchase program, Starz may acquire its common stock from time to time through open market transactions and privately negotiated transactions.

FOOTNOTES



(1) Starz CEO, Christopher
Albrecht, will discuss
these highlights and
other matters during the
Starz earnings conference
call which will begin at
12:00 p.m. (ET) on
February 21, 2014. For
information regarding how
to access the call,
please see "Important
Notice" later in this
document.

(2) For a definition of
Adjusted OIBDA and
applicable reconciliation
see Non-GAAP Financial
Measures and Schedule 1
below.
NOTES


-- Unless otherwise noted, the foregoing discussion compares financial
information for the three months and year ended December 31, 2013 to the
same period in 2012.
SUPPLEMENTAL INFORMATION
As a supplement to Starz's condensed consolidated statements of operations, to be included in its Form 10-K, the following is a presentation of quarterly financial information and operating metrics for the periods indicated.

Please see the definition of Adjusted OIBDA below and a discussion of why management believes the presentation of Adjusted OIBDA provides useful information for investors. Schedule 1 to this press release provides a reconciliation of Adjusted OIBDA to operating income for the same periods, as determined under GAAP.

QUARTERLY SUMMARY



(amounts in millions) 4Q12 1Q13 2Q13 3Q13 4Q13
---- ---- ---- ---- ----

Starz Networks $315.8 $315.8 $340.0 $319.9 $322.0

Starz Distribution (1) 97.0 76.2 171.9 117.6 83.8

Starz Animation 10.9 7.5 6.6 8.7 9.7

Eliminations (1.5) (0.2) (1.1) (0.1) (0.8)
---- ---- ---- ---- ----

Revenue $422.2 $399.3 $517.4 $446.1 $414.7
====== ====== ====== ====== ======


Starz Networks $121.1 $114.4 $116.5 $106.5 $118.8

Starz Distribution (19.8) 2.6 14.5 7.4 (0.5)

Starz Animation (0.4) (0.6) (0.8) (0.5) (0.7)

Eliminations 0.5 0.1 (0.7) 0.3 (0.4)
--- --- ---- --- ----

Adjusted OIBDA $101.4 $116.5 $129.5 $113.7 $117.2
====== ====== ====== ====== ======


Operating income $85.6 $104.9 $116.1 $100.8 $103.4


Starz Networks $62.5 $29.2 $21.8 $43.2 $31.0

Starz Distribution 20.0 24.3 26.3 64.6 62.0
---- ---- ---- ---- ----

Total IFT (2) $82.5 $53.5 $48.1 $107.8 $93.0
===== ===== ===== ====== =====


Subscription units -
STARZ 21.2 21.6 21.8 22.0 22.2

Subscription units -
ENCORE 34.8 35.1 35.1 35.0 34.9


(1) Includes the
following home video net
sales $78.3 $49.8 $126.3 $65.7 $54.7

(2) Cash paid for
investment in films and
television programs


CASH AND DEBT
The following presentation is provided to separately identify cash and debt information.






(amounts in millions) 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13
-------- ------- ------- ------- --------

Cash $749.8 $17.9 $30.9 $30.6 $25.7
====== ===== ===== ===== =====


Debt:

Bank facility $5.0 $235.0 $257.0 $309.5 $306.5

5% senior notes 500.0 678.4 678.3 678.1 678.0

Transponder capital lease 34.8 33.8 32.8 31.7 30.7

Building capital lease - 44.7 44.5 44.5 44.3
--- ---- ---- ---- ----

Total debt $539.8 $991.9 $1,012.6 $1,063.8 $1,059.5
====== ====== ======== ======== ========


NON-GAAP FINANCIAL MEASURES

This press release includes a presentation of Adjusted OIBDA, which is a non-GAAP financial measure, together with a reconciliation to operating income, as determined under GAAP. We define Adjusted OIBDA as revenue less programming costs, production and acquisition costs, home video cost of sales, operating expenses, and selling, general and administrative expenses. Our chief operating decision maker uses this measure of performance in conjunction with other measures to evaluate our operating segments' performance and make decisions about allocating resources among our operating segments. We believe that Adjusted OIBDA is an important indicator of the operational strength and performance of our operating segments, including each operating segment's ability to assist in servicing our debt and to fund investments in films and television programs. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between operating segments and identify strategies to improve performance. This measure of performance excludes stock compensation and depreciation and amortization that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, income before income taxes, net income, net cash provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Please see Schedule 1 below for the applicable reconciliation.

SCHEDULE 1

The following table provides a reconciliation of Adjusted OIBDA for Starz to its operating income calculated in accordance with GAAP for the three months ended December 31, 2012, March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013, respectively.






(amounts in
millions) 4Q12 1Q13 2Q13 3Q13 4Q13
---- ---- ---- ---- ----

Adjusted
OIBDA $101.4 $116.5 $129.5 $113.7 $117.2

Stock
compensation (10.2) (7.2) (9.0) (8.8) (9.3)

Depreciation
and
amortization (5.6) (4.4) (4.4) (4.1) (4.5)
---- ---- ---- ---- ----

Operating
income $85.6 $104.9 $116.1 $100.8 $103.4
===== ====== ====== ====== ======







Starz

Consolidated Balance Sheets

December 31, 2013 and 2012

(Amounts in thousands, except share and per share amounts)

(Unaudited)


2013 2012
---- ----

Assets

Current assets:

Cash and cash
equivalents $25,747 $749,774

Restricted cash 30,077 -

Trade accounts
receivable, net of
allowances of $32,808
and $35,045 247,131 241,415

Program rights 271,798 340,005

Deferred income taxes 527 990

Other current assets 63,845 44,727
------ ------

Total current assets 639,125 1,376,911

Program rights 333,176 338,684

Investment in films and
television programs,
net 194,581 181,673

Property and equipment,
net 95,650 96,280

Deferred income taxes 18,509 12,222

Goodwill 131,760 131,760

Other assets, net 37,197 38,520

Total assets $1,449,998 $2,176,050
======== ========


Liabilities and Equity

Current liabilities:

Current portion of debt $4,943 $4,134

Trade accounts payable 7,254 6,162

Accrued liabilities 297,826 256,062

Due to affiliates - 39,519

Deferred revenue 16,571 24,574
------ ------

Total current
liabilities 326,594 330,451

Debt 1,054,542 535,671

Other liabilities 14,141 7,784
------ -----

Total liabilities 1,395,277 873,906


Stockholders' equity:

Preferred stock, $.01
par value. Authorized
50,000,000 shares; no
shares issued - -

Series A common stock,
$.01 par value.
Authorized
2,000,000,000 shares;
issued and outstanding
101,130,964 and
111,722,828 shares at
December 31, 2013 and
the LMC Spin-Off,
respectively 1,011 -

Series B common stock,
$.01 par value.
Authorized 75,000,000
shares; issued and
outstanding 9,875,737
and 9,882,238 shares at
December 31, 2013 and
the LMC Spin-Off,
respectively 99 -

Additional paid-in
capital 310,651 -

Accumulated other
comprehensive loss, net
of taxes (4,322) -

Accumulated deficit (245,503) -

Member's interest - 1,311,951

Total stockholders'
equity 61,936 1,311,951

Noncontrolling interests
in subsidiaries (7,215) (9,807)

Total equity 54,721 1,302,144
------ ---------

Commitments and contingencies

Total liabilities and
equity $1,449,998 $2,176,050
======== ========







Starz

Consolidated Statements of Operations

Years Ended December 31, 2013, 2012 and 2011

(Amounts in thousands, except per share amounts)

(Unaudited)


2013 2012 2011
---- ---- ----


Revenue:

Programming
networks
and
other
services $1,481,046 $1,419,074 $1,372,141

Home
video
net
sales 296,476 211,622 241,892
------- ------- -------

Total
revenue 1,777,522 1,630,696 1,614,033


Costs and
expenses:

Programming
costs
(including
amortization) 632,255 661,157 651,249

Production
and
acquisition
costs
(including
amortization) 268,560 192,340 158,789

Home
video
cost
of
sales 71,154 63,880 62,440

Operating
expenses 54,673 53,410 53,703

Selling,
general
and
administrative 273,937 215,077 238,264

Stock
compensation 34,296 20,022 7,078

Depreciation
and
amortization 17,426 19,406 17,907
------ ------ ------

Total
costs
and
expenses 1,352,301 1,225,292 1,189,430
--------- --------- ---------


Operating
income 425,221 405,404 424,603


Other income
(expense):

Interest
expense,
net
of
amounts
capitalized (44,994) (25,688) (5,012)

Other
income
(expense),
net 8,953 3,023 (3,505)
----- ----- ------

Income
from
continuing
operations
before
income
taxes 389,180 382,739 416,086


Income
tax
expense (139,380) (130,465) (172,189)
-------- -------- --------


Income
from
continuing
operations 249,800 252,274 243,897


Loss
from 2011),
discontinued net
operations of
(including income
loss taxes
on
sale
of
$12,114
in - - (7,486)
--- --- ------


Net
income 249,800 252,274 236,411


Net
loss
(income)
attributable
to
noncontrolling
interests (2,461) 2,210 3,273
------ ----- -----


Net
income
attributable
to
stockholders
/
member $247,339 $254,484 $239,684
======== ======== ========


Basic
net
income
per
common
share $2.13 $2.12 $2.00
===== ===== =====

Diluted
net
income
per
common
share $2.04 $2.12 $2.00
===== ===== =====

Weighted
average number
of common
shares
outstanding:

Basic 115,925 119,996 119,996
======= ======= =======

Diluted 121,156 120,105 120,101
======= ======= =======




Starz

Consolidated Statements of Cash Flows

Years Ended December 31, 2013, 2012 and 2011

(Amounts in thousands)

(Unaudited)


2013 2012 2011
---- ---- ----

Operating
activities:

Net
income $249,800 $252,274 $236,411

Adjustments to
reconcile net
income to net
cash provided
by operating
activities:

Loss
from
discontinued
operations - - 7,486

Depreciation
and
amortization 17,426 19,406 17,907

Amortization
of
program
rights 581,107 617,789 611,041

Program
rights
payments (399,856) (456,558) (554,341)

Amortization
of
investment
in
films
and
television
programs 212,392 141,553 126,102

Investment
in
films
and
television
programs (302,468) (270,071) (197,418)

Stock
compensation 34,296 20,022 7,078

Payments
of
long
term
incentive
plan (3,195) (33,410) (7,696)

Deferred
income
taxes 8,358 (17,410) 37,023

Other
non-
cash
items 5,727 4,533 11,014

Changes in
assets and
liabilities:

Current
and
other
assets (61,073) (12,233) (45,338)

Due
to
affiliates (39,519) (5,637) 89,271

Payables
and
other
liabilities 9,900 31,819 9,433
----- ------ -----

Net
cash
provided
by
operating
activities 312,895 292,077 347,973
------- ------- -------


Investing
activities
-
purchases
of
property
and
equipment (14,833) (16,214) (7,723)
------- ------- ------


Financing
activities:

Borrowings
of
debt 1,197,000 500,000 505,000

Payments
of
debt (721,632) (504,029) (59,170)

Debt
issuance
costs (2,350) (8,514) (10,191)

Distributions
to
Old
LMC (1,200,000) (600,000) -

Repurchases
of
common
stock (289,864) - -

Distributions
to
Old
LMC
related
to
stock
compensation - (4,689) -

Minimum
withholding
of
taxes
related
to
stock
compensation (9,836) (13,273) -

Excess
tax
benefit
from
stock
compensation 4,655 4,401 -

Contribution
from
noncontrolling
owner
of
subsidiary - - 3,000

Settlement
of
derivative
instruments - 3 (2,863)

Restricted
cash - - 8,226


Net
cash
provided
by
(used
in)
financing
activities (1,022,027) (626,101) 444,002
--------- -------- -------

Effect
of
exchange
rate
changes
on
cash
and
cash
equivalents (62) 125 (17)
--- --- ---

Net
increase
(decrease)
in
cash
and
cash
equivalents (724,027) (350,113) 784,235

Cash and cash
equivalents:

Beginning
of
year 749,774 1,099,887 315,652

End
of
year $25,747 $749,774 $1,099,887
======= ======== ========
IMPORTANT NOTICE


-- Starz (NASDAQ: STRZA, STRZB) CEO, Chris Albrecht will discuss Starz's
financial performance, and may discuss future opportunities in a
conference call which will begin at 12:00 p.m. (ET) on February 21,
2014. The call can be accessed by dialing (877) 718-5095 or (719)
325-4850 at least 10 minutes prior to the start time. Replays of the
conference call can be accessed through 3:00 p.m. (ET) on February 28,
2014, by dialing (888) 203-1112 or (719) 457-0820 plus the passcode
8329263#. The call will also be broadcast live via the Internet and
archived on our website. To access the webcast go to
http://ir.starz.com/events.cfm. Links to this press release will also
be available on the Starz website.
-- This press release includes certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995,
including statements about business strategies, market potential, future
financial prospects, new service and product launches including original
content programming, new distribution platforms for our programming, the
continuation of our stock repurchase plans, international expansion
opportunities 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, market
acceptance of new products or services, the timely launch of our
original programming, the cooperation of our distributors in marketing
our services, competitive issues, regulatory matters affecting our
businesses, continued access to capital on terms acceptable to Starz,
changes in law and market conditions conducive to stock repurchases and
the ability to enter into transactions for international expansion.
These forward-looking statements speak only as of the date of this press
release, and Starz expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statement
contained herein to reflect any change in Starz's expectations with
regard thereto or any change in events, conditions or circumstances on
which any such statement is based. Please refer to the publicly filed
documents of Starz, including the most recent Form 10-K, for additional
information about Starz and about the risks and uncertainties related to
Starz's business which may affect the statements made in this press
release.
About Starz
Starz (NASDAQ: STRZA, STRZB) is a leading integrated global media and entertainment company with operating units that provide premium subscription video programming on domestic U.S. pay television channels (Starz Networks), global content distribution (Starz Distribution) and animated television and movie production (Starz Animation), www.starz.com.

Starz Networks is a leading provider of premium subscription video programming through the flagship STARZ(®) and ENCORE(®) pay TV networks which showcase premium original programming and movies to U.S. multichannel video distributors, including cable operators, satellite television providers, and telecommunications companies. As of December 31, 2013, STARZ and ENCORE serve a combined 57.1 million subscribers, including 22.2 million at STARZ, and 34.9 million at ENCORE, making them the largest pair of premium flagship channels in the U.S. STARZ(®) and ENCORE(®), along with Starz Networks' third network MOVIEPLEX(®), air over 1,000 movies monthly across 17 linear networks, complemented by On Demand and authenticated online offerings through STARZ PLAY, ENCORE PLAY, and MOVIEPLEX PLAY. Starz Distribution develops, produces and acquires entertainment content, distributing it to consumers globally on DVD, digital formats and traditional television. Starz Distribution's home video, digital media and worldwide distribution business units distribute original programming content produced by Starz, as well as entertainment content for itself and third parties. Starz Animation produces animated TV and movie content for studios, networks, distributors and audiences worldwide.



Contacts:

Courtnee Ulrich Theano Apostolou

Investor Relations Corporate Communications

(720) 875-5420 (424) 204-4052

courtnee.ulrich@starz.com theano@starz.com
SOURCE Starz

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http://photoarchive.ap.org/
Starz

Web Site: http://www.starz.com


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