e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D. C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2009
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number
001-34176
ASCENT MEDIA CORPORATION
(Exact name of Registrant as
specified in its charter)
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State of Delaware
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26-2735737
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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12300 Liberty Boulevard
Englewood, Colorado
(Address of principal
executive offices)
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80112
(Zip Code)
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Registrants telephone number, including area code:
(720) 875-5622
Indicate by check mark whether the Registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, any
Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(Section 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The number of outstanding shares of Ascent Media
Corporations common stock as of October 31, 2009 was:
Series A common stock 13,427,479 shares; and
Series B common stock 659,156 shares.
TABLE OF CONTENTS
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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September 30,
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December 31,
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2009
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2008
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(Unaudited)
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Amounts in thousands
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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295,960
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341,517
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Trade receivables, net
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100,339
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114,154
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Prepaid expenses
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10,475
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12,223
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Deferred income tax assets, net
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10,595
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10,826
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Income taxes receivable
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22,755
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9,122
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Other current assets
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2,053
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2,776
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Total current assets
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442,177
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490,618
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Investments in marketable securities (note 2)
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41,476
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Property and equipment, net
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206,826
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223,928
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Deferred income tax assets, net
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20,025
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22,545
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Other assets, net
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13,230
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8,213
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Total assets
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$
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723,734
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745,304
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
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20,883
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22,633
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Accrued payroll and related liabilities
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19,653
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22,258
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Other accrued liabilities
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23,997
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31,172
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Deferred revenue
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13,331
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15,139
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|
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Total current liabilities
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77,864
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91,202
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Other liabilities
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30,879
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28,792
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Total liabilities
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108,743
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119,994
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Commitments and contingencies (note 9)
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Stockholders Equity:
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Preferred stock, $.01 par value. Authorized
5,000,000 shares; no shares issued
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Series A common stock, $.01 par value. Authorized
45,000,000 shares; issued and outstanding
13,427,479 shares at September 30, 2009
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134
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134
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Series B common stock, $.01 par value. Authorized
5,000,000 shares; issued and outstanding
659,156 shares at September 30, 2009
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7
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7
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Series C common stock, $.01 par value. Authorized
45,000,000 shares; no shares issued
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Additional paid-in capital
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1,462,191
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1,459,078
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Accumulated deficit
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(846,022
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)
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(825,956
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)
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Accumulated other comprehensive loss
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(1,319
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)
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(7,953
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)
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Total stockholders equity
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614,991
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625,310
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Total liabilities and stockholders equity
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$
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723,734
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745,304
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See accompanying notes to condensed consolidated financial
statements.
2
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and
Comprehensive Earnings (Loss)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2009
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2008
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2009
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2008
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(Unaudited)
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Amounts in thousands, except per share amounts
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Net revenue
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$
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111,957
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146,146
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349,901
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472,602
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Operating expenses:
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Cost of services
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80,182
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108,596
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250,080
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352,641
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Selling, general, and administrative, including stock-based and
long-term incentive compensation (note 6)
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25,418
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32,755
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82,600
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|
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90,209
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|
Restructuring and other charges
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|
1,160
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|
|
|
1,436
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2,646
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2,699
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|
Gain on sale of operating assets, net
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|
(340
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)
|
|
|
(7,332
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)
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|
(130
|
)
|
|
|
(7,152
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)
|
Depreciation and amortization
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|
15,384
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|
|
|
15,103
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44,850
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45,785
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|
|
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|
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121,804
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150,558
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|
380,046
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484,182
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|
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|
|
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|
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|
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Operating loss
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|
(9,847
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)
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|
|
(4,412
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)
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|
|
(30,145
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)
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|
|
(11,580
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)
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Other income:
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|
|
|
|
|
|
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|
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|
|
|
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Interest income
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|
742
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|
|
|
1,661
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|
|
|
1,898
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|
|
|
5,160
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|
Other income (expense), net
|
|
|
(92
|
)
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|
|
1,274
|
|
|
|
(809
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)
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|
|
(34
|
)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650
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|
|
|
2,935
|
|
|
|
1,089
|
|
|
|
5,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(9,197
|
)
|
|
|
(1,477
|
)
|
|
|
(29,056
|
)
|
|
|
(6,454
|
)
|
Income tax benefit (expense) from continuing operations
|
|
|
2,783
|
|
|
|
27
|
|
|
|
8,990
|
|
|
|
(4,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(6,414
|
)
|
|
|
(1,450
|
)
|
|
|
(20,066
|
)
|
|
|
(10,966
|
)
|
Discontinued operations (note 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations
|
|
|
|
|
|
|
70,857
|
|
|
|
|
|
|
|
77,236
|
|
Income tax expense
|
|
|
|
|
|
|
(30,079
|
)
|
|
|
|
|
|
|
(33,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations, net of income tax
|
|
|
|
|
|
|
40,778
|
|
|
|
|
|
|
|
44,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
(6,414
|
)
|
|
|
39,328
|
|
|
|
(20,066
|
)
|
|
|
33,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(1,026
|
)
|
|
|
(5,296
|
)
|
|
|
4,400
|
|
|
|
(4,729
|
)
|
Unrealized holding gains arising during the period, net of
income tax
|
|
|
817
|
|
|
|
|
|
|
|
2,134
|
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
34
|
|
|
|
98
|
|
|
|
100
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (loss)
|
|
|
(175
|
)
|
|
|
(5,198
|
)
|
|
|
6,634
|
|
|
|
(4,631
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive earnings (loss)
|
|
$
|
(6,589
|
)
|
|
|
34,130
|
|
|
|
(13,432
|
)
|
|
|
28,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share (note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.46
|
)
|
|
|
(0.10
|
)
|
|
|
(1.43
|
)
|
|
|
(0.78
|
)
|
Discontinued operations
|
|
|
|
|
|
|
2.90
|
|
|
|
|
|
|
|
3.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(0.46
|
)
|
|
|
2.80
|
|
|
|
(1.43
|
)
|
|
|
2.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share (note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.46
|
)
|
|
|
(0.10
|
)
|
|
|
(1.43
|
)
|
|
|
(0.78
|
)
|
Discontinued operations
|
|
|
|
|
|
|
2.90
|
|
|
|
|
|
|
|
3.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(0.46
|
)
|
|
|
2.80
|
|
|
|
(1.43
|
)
|
|
|
2.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
3
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
Amounts in thousands
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(20,066
|
)
|
|
|
33,269
|
|
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations, net of income tax
|
|
|
|
|
|
|
(44,235
|
)
|
Depreciation and amortization
|
|
|
44,850
|
|
|
|
45,785
|
|
Stock based compensation
|
|
|
1,852
|
|
|
|
|
|
Deferred income tax expense
|
|
|
1,307
|
|
|
|
3,527
|
|
Gain on sale of operating assets
|
|
|
(130
|
)
|
|
|
(7,152
|
)
|
Other non-cash activity, net
|
|
|
549
|
|
|
|
61
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
14,191
|
|
|
|
(15,058
|
)
|
Prepaid expenses and other current assets
|
|
|
(8,921
|
)
|
|
|
(1,250
|
)
|
Payables and other liabilities
|
|
|
(14,663
|
)
|
|
|
19,956
|
|
Operating activities from discontinued operations, net
|
|
|
|
|
|
|
(6,597
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
18,969
|
|
|
|
28,306
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(22,491
|
)
|
|
|
(28,931
|
)
|
Purchases of marketable securities (note 2)
|
|
|
(43,274
|
)
|
|
|
|
|
Proceeds from sales of marketable securities (note 2)
|
|
|
6,112
|
|
|
|
23,545
|
|
Cash paid for acquisitions (note 4)
|
|
|
(2,702
|
)
|
|
|
|
|
Proceeds from sale of discontinued operations
|
|
|
|
|
|
|
127,833
|
|
Proceeds from sale of operating assets
|
|
|
959
|
|
|
|
11,398
|
|
Equity investments
|
|
|
(1,785
|
)
|
|
|
|
|
Investing activities from discontinued operations, net
|
|
|
|
|
|
|
(5,455
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(63,181
|
)
|
|
|
128,390
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net cash transfers from Discovery Holding Company
(DHC)
|
|
|
|
|
|
|
(1,735
|
)
|
Payment of capital lease obligations
|
|
|
(1,345
|
)
|
|
|
(516
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(1,345
|
)
|
|
|
(2,251
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(45,557
|
)
|
|
|
154,445
|
|
Cash and cash equivalents at beginning of period
|
|
|
341,517
|
|
|
|
201,633
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
295,960
|
|
|
|
356,078
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
4
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Condensed Consolidated Financial Statements
|
|
(1)
|
Basis of
Presentation
|
On September 17, 2008, Discovery Holding Company
(DHC) completed the spin off of 100% of the capital
stock of Ascent Media Corporation (Ascent Media or
the Company) on a pro rata basis to the holders of
DHC Series A and Series B common stock (the
Ascent Media Spin Off). For periods prior to the
Ascent Media Spin Off, the accompanying condensed consolidated
financial statements of Ascent Media represent a combination of
the historical financial information of (1) Ascent Media
Group, LLC (AMG), then a wholly-owned subsidiary of
DHC, (2) Ascent Media CANS, LLC (AccentHealth),
a wholly-owned subsidiary of DHC until its sale on
September 4, 2008 and (3) cash and investment assets
of DHC. For periods following the Ascent Media Spin Off, the
accompanying condensed consolidated financial statements of
Ascent Media represent Ascent Media and its consolidated
subsidiaries. The Ascent Media Spin Off has been accounted for
at historical cost due to the pro rata nature of the
distribution.
The Company has two reportable segments: the Content Services
group and the Creative Services group. The Companys
reportable segments are strategic business units that offer
different products and services. They are managed separately
because each segment requires different technologies,
distribution channels and marketing strategies.
The accompanying interim condensed consolidated financial
statements are unaudited but, in the opinion of management,
reflect all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the results for
such periods. The results of operations for any interim period
are not necessarily indicative of results for the full year.
These condensed consolidated financial statements should be read
in conjunction with the Ascent Media Annual Report on
Form 10-K
for the year ended December 31, 2008.
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles
(GAAP) requires management to make estimates and
assumptions that affect the reported amounts of revenue and
expenses for each reporting period. The significant estimates
made in preparation of the Companys condensed consolidated
financial statements primarily relate to long-lived assets,
deferred tax assets, and the amount of the allowance for
doubtful accounts. Actual results could differ from the
estimates upon which the carrying values were based. Ascent
Media has performed an evaluation of subsequent events through
November 13, 2009, which is the date the financial
statements were issued.
|
|
(2)
|
Investments
in Marketable Securities
|
During 2009, Ascent Media purchased marketable securities
consisting of diversified corporate bond funds and selected
equity securities for cash. The following table presents the
activity of these investments, which have all been classified as
available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2009
|
|
|
September 30, 2009
|
|
|
|
|
|
|
Amounts in thousands
|
|
|
|
|
|
Beginning Balance
|
|
$
|
32,173
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
13,309
|
|
|
|
43,274
|
|
|
|
|
|
Sales(1)
|
|
|
(5,376
|
)
|
|
|
(5,376
|
)
|
|
|
|
|
Unrealized gain
|
|
|
1,370
|
|
|
|
3,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
41,476
|
|
|
|
41,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Proceeds from the sales totaled $6,112,000, which included a
pre-tax gain of $736,000, for both the three and nine month
periods ended September 30, 2009. |
5
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Condensed Consolidated Financial
Statements (Continued)
The following table presents the net after-tax unrealized and
realized gains on the investment in marketable securities that
was recorded into accumulated other comprehensive income on the
consolidated balance sheet and in other comprehensive income on
the consolidated statements of operations and comprehensive
earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2009
|
|
|
September 30, 2009
|
|
|
|
|
|
|
Amounts in thousands
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
1,317
|
|
|
|
|
|
|
|
|
|
Unrealized gains, net of tax(1)
|
|
|
1,256
|
|
|
|
2,573
|
|
|
|
|
|
Gains recognized into earnings, net of tax(2)
|
|
|
(439
|
)
|
|
|
(439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
2,134
|
|
|
|
2,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts are net of tax of $850,000 and $1,741,000 for the three
and nine months ended September 30, 2009, respectively. |
|
(2) |
|
Amounts are net of tax of $297,000 for both the three and nine
months ended September 30, 2009. |
|
|
(3)
|
Discontinued
Operations
|
In 2008, Ascent Media completed the sales of its interests in
AccentHealth, Ascent Media Systems & Technology
Services, LLC in Palm Bay, Florida (Palm Bay) and
Visiontext Limited (Visiontext) which were treated
as discontinued operations.
The following table presents the results of operations of the
discontinued operations that are included in earnings from
discontinued operations, net of income tax:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30, 2008
|
|
September 30, 2008
|
|
|
Amounts in thousands
|
|
Revenue
|
|
$
|
8,699
|
|
|
$
|
30,394
|
|
Earnings before income taxes(1)
|
|
$
|
70,857
|
|
|
$
|
77,236
|
|
|
|
|
(1) |
|
Includes a $63,929,000 gain on the sale of AccentHealth, a
$3,370,000 gain on the sale of Palm Bay and a $1,777,000 gain on
the sale of Visiontext. |
|
|
(4)
|
Supplemental
Cash Flow Information (amounts in thousands)
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2009
|
|
|
Cash paid for acquisitions:
|
|
|
|
|
Fair value of assets acquired
|
|
$
|
6,285
|
|
Net liabilities assumed
|
|
|
(421
|
)
|
|
|
|
|
|
Net assets acquired
|
|
|
5,864
|
|
Estimated fair value of contingent consideration for acquisitions
|
|
|
(3,162
|
)
|
|
|
|
|
|
Cash paid for acquisitions
|
|
$
|
2,702
|
|
|
|
|
|
|
|
|
(5)
|
Restructuring
Charges
|
During the three and nine months ended September 30, 2009,
Ascent Media recorded restructuring charges of $1,160,000 and
$2,646,000, respectively, related to severance and facility
costs in conjunction with ongoing restructuring and cost
mitigation measures undertaken across both of the reportable
segments. During the three and nine months ended
September 30, 2008, the Company recorded restructuring
charges of $1,436,000 and
6
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Condensed Consolidated Financial
Statements (Continued)
$2,699,000, respectively, related to severance and facility
costs in conjunction with the closing of its Creative Services
operations in Mexico.
The following table provides the activity and balances of the
restructuring reserve (amounts in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
Additions
|
|
|
Deductions(a)
|
|
|
September 30, 2008
|
|
|
Severance
|
|
$
|
1,357
|
|
|
|
1,979
|
|
|
|
(2,629
|
)
|
|
|
707
|
|
Excess facility costs
|
|
|
1,622
|
|
|
|
720
|
|
|
|
(1,545
|
)
|
|
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,979
|
|
|
|
2,699
|
|
|
|
(4,174
|
)
|
|
|
1,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Additions
|
|
|
Deductions(a)
|
|
|
September 30, 2009
|
|
|
Severance
|
|
$
|
2,526
|
|
|
|
2,632
|
|
|
|
(4,289
|
)
|
|
|
869
|
(b)
|
Excess facility costs
|
|
|
3,294
|
|
|
|
14
|
|
|
|
(1,353
|
)
|
|
|
1,955
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,820
|
|
|
|
2,646
|
|
|
|
(5,642
|
)
|
|
|
2,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Primarily represents cash payments. |
|
(b) |
|
Substantially all of this amount is expected to be paid in 2009. |
|
(c) |
|
Substantially all of this amount is expected to be paid by 2012. |
|
|
(6)
|
Stock-Based
and Long-Term Incentive Compensation
|
During the first quarter of 2009, certain key employees were
granted a total of 116,740 options to purchase Ascent Media
Series A common stock for a weighted average exercise price
of $25.30 per share. Such options vest quarterly over four years
from the date of grant, terminate 10 years from the date of
grant and had a weighted-average fair value at the date of grant
of $12.30, as determined using the Black-Scholes Model. For the
2009 stock grants, the assumptions used in the Black-Scholes
Model to determine grant date fair value were a volatility
factor of 50%, a risk-free interest rate of 1.51%, an expected
life of 6.1 years and a dividend yield of zero.
|
|
(7)
|
Basic and
Diluted Earnings (Loss) Per Common Share
Series A and Series B
|
Basic and diluted earnings (loss) per common share
(EPS) is computed by dividing net earnings (loss) by
the number of aggregate Series A and Series B common
shares outstanding for the respective period. The total weighted
average shares outstanding for the Series A and
Series B shares for the three and nine months ended
September 30, 2009 was 14,081,872 and
14,076,216 shares, respectively. The total weighted average
shares outstanding for the Series A and Series B
shares for the three and nine months ended September 30,
2008 was 14,058,831. Since the Company recorded a loss from
continuing operations for the three and nine months ended
September 30, 2009, diluted EPS is computed the same as
basic EPS.
During the first quarter of 2008, Liberty Media Corporation
(Liberty) reached an agreement with the IRS with
respect to certain tax items that related to periods prior to
DHCs spin off from Liberty in July 2005. The IRS agreement
resulted in a reduction of $5,370,000 and $30,808,000 to the
amount of federal and California net operating losses
(NOLs), respectively, that Liberty allocated to the
Company at the time of the 2005 spin off. The reduction in the
Companys federal NOLs resulted in tax expense of
$1,880,000 (35% of $5,370,000). The Company did not expect to
utilize the California NOLs, and had thus recorded a valuation
allowance with respect to such NOLs. Therefore, the reduction in
California NOLs was offset by a reduction in the corresponding
valuation allowance and resulted in no net tax expense.
7
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Condensed Consolidated Financial
Statements (Continued)
|
|
(9)
|
Commitments,
Contingencies and Other Liabilities
|
The Company is involved in litigation and similar claims
incidental to the conduct of its business. In managements
opinion, none of the pending actions is likely to have a
material adverse impact on the Companys financial position
or results of operations.
|
|
(10)
|
Fair
Value Measurements
|
According to the Fair Value Measurements and Disclosures Topic
of the FASB Accounting Standards Codification, fair value is
defined as the amount that would be received for selling an
asset or paid to transfer a liability in an orderly transaction
between market participants and requires that assets and
liabilities carried at fair value are classified and disclosed
in the following three categories:
|
|
|
|
|
Level 1 Quoted prices for identical instruments
in active markets.
|
|
|
|
Level 2 Quoted prices for similar instruments
in active or inactive markets and valuations derived from models
where all significant inputs are observable in active markets.
|
|
|
|
Level 3 Valuations derived from valuation
techniques in which one or more significant inputs are
unobservable in any market.
|
The following summarizes the fair value level of assets and
liabilities that are measured on a recurring basis at
September 30, 2009 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
Investments in marketable securities
|
|
$
|
41,476
|
|
|
|
|
|
|
|
|
|
|
|
41,476
|
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
(7,557
|
)
|
|
|
(7,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,476
|
|
|
|
|
|
|
|
(7,557
|
)
|
|
|
33,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Level 3 liabilities relate to contingent consideration
and other participating residual interests related to business
acquisitions which were computed using discounted cash flow
models which use estimated discount rates. For the three and
nine months ended September 30, 2009, a loss of $169,000
was recorded for the Level 3 liabilities into other income,
net on the consolidated statements of operations and
comprehensive earnings (loss).
Ascent Medias financial instruments, including cash and
cash equivalents, accounts receivable and accounts payable are
carried at cost, which approximates their fair value because of
their short-term maturity.
|
|
(11)
|
Related
Party Transactions
|
Ascent Media provides services, such as satellite uplink,
systems integration, origination, and post-production, to
Discovery Communications, Inc. (DCI). Ascent Media,
previously a wholly-owned subsidiary of DHC, and DCIs
predecessor, previously an equity investment of DHC, were
related parties through the date of the Ascent Media Spin Off.
DHC and that predecessor are now both wholly-owned subsidiaries
of DCI. Revenue recorded by Ascent Media for these services
through the date of the Ascent Media Spin Off for the three and
nine months ended September 30, 2008 was $5,372,000 and
$24,727,000, respectively. Ascent Media continues to provide
services to DCI subsequent to the Ascent Media Spin Off that are
believed to be at arms-length rates.
|
|
(12)
|
Information
About Reportable Segments
|
Ascent Media evaluates the performance of its reportable
segments based on financial measures such as revenue and
adjusted operating income before depreciation and amortization
(which is referred to as adjusted OIBDA). Ascent
Media defines adjusted OIBDA as revenue less cost of
services and selling, general and administrative expenses
(excluding stock and other equity-based compensation and
accretion expense on asset retirement obligations) and defines
segment adjusted OIBDA as adjusted OIBDA as
determined in each case for the indicated operating segment or
segments only. Ascent Media believes that segment adjusted OIBDA
is an important indicator of the operational strength and
performance of its businesses, including the businesses
ability
8
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Condensed Consolidated Financial
Statements (Continued)
to fund their ongoing capital expenditures and service any debt.
In addition, this measure is used by management to evaluate
operating results and perform analytical comparisons and
identify strategies to improve performance. Adjusted OIBDA
excludes depreciation and amortization, stock and other
equity-based compensation, accretion expense on asset retirement
obligations, restructuring and impairment charges, gains/losses
on sale of operating assets and other income and expense that
are included in the measurement of earnings (loss) before income
taxes pursuant to GAAP. Accordingly, adjusted OIBDA and segment
adjusted OIBDA should be considered in addition to, but not as a
substitute for, earnings (loss) before income taxes, cash flow
provided by operating activities and other measures of financial
performance prepared in accordance with GAAP. Because segment
adjusted OIBDA excludes corporate and other SG&A (as
defined below), and does not include an allocation for corporate
overhead, segment adjusted OIBDA should not be used as a measure
of Ascent Medias liquidity or as an indication of the
operating results that could be expected if either operating
segment were operated on a stand-alone basis. Adjusted OIBDA and
segment adjusted OIBDA are non-GAAP financial measures. As
companies often define non-GAAP financial measures differently,
adjusted OIBDA and segment adjusted OIBDA as calculated by
Ascent Media should not be compared to any similarly titled
measures reported by other companies.
Summarized financial information concerning the Companys
reportable segments is presented in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
Content
|
|
|
Creative
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Services
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Group
|
|
|
Group
|
|
|
Combined
|
|
|
Other(1)
|
|
|
Total
|
|
|
|
Amounts in thousands
|
|
|
Three months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
70,340
|
|
|
|
41,617
|
|
|
|
111,957
|
|
|
|
|
|
|
|
111,957
|
|
Adjusted OIBDA
|
|
$
|
8,309
|
|
|
|
5,005
|
|
|
|
13,314
|
|
|
|
(6,330
|
)
|
|
|
6,984
|
|
Capital expenditures
|
|
$
|
5,036
|
|
|
|
860
|
|
|
|
5,896
|
|
|
|
191
|
|
|
|
6,087
|
|
Nine months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
227,190
|
|
|
|
122,711
|
|
|
|
349,901
|
|
|
|
|
|
|
|
349,901
|
|
Adjusted OIBDA
|
|
$
|
26,140
|
|
|
|
12,109
|
|
|
|
38,249
|
|
|
|
(19,042
|
)
|
|
|
19,207
|
|
Capital expenditures
|
|
$
|
14,173
|
|
|
|
5,853
|
|
|
|
20,026
|
|
|
|
2,465
|
|
|
|
22,491
|
|
Three months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
99,944
|
|
|
|
46,202
|
|
|
|
146,146
|
|
|
|
|
|
|
|
146,146
|
|
Adjusted OIBDA
|
|
$
|
8,362
|
|
|
|
7,312
|
|
|
|
15,674
|
|
|
|
(7,221
|
)
|
|
|
8,453
|
|
Capital expenditures
|
|
$
|
8,807
|
|
|
|
4,572
|
|
|
|
13,379
|
|
|
|
1,504
|
|
|
|
14,883
|
|
Nine months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
343,537
|
|
|
|
129,065
|
|
|
|
472,602
|
|
|
|
|
|
|
|
472,602
|
|
Adjusted OIBDA
|
|
$
|
35,416
|
|
|
|
17,820
|
|
|
|
53,236
|
|
|
|
(19,981
|
)
|
|
|
33,255
|
|
Capital expenditures
|
|
$
|
17,446
|
|
|
|
7,690
|
|
|
|
25,136
|
|
|
|
3,795
|
|
|
|
28,931
|
|
|
|
|
(1) |
|
Amounts shown in Other provide a reconciliation of combined
reportable segments to the Companys consolidated total.
Included in Other is corporate SG&A expenses and capital
expenditures incurred at a corporate level. |
9
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Condensed Consolidated Financial
Statements (Continued)
The following table provides a reconciliation of the combined
segment adjusted OIBDA for both the Content Services and
Creative Services segments to loss from continuing operations
before income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Combined segment adjusted OIBDA
|
|
$
|
13,314
|
|
|
|
15,674
|
|
|
|
38,249
|
|
|
|
53,236
|
|
Corporate selling, general and administrative expenses
|
|
|
(6,330
|
)
|
|
|
(7,221
|
)
|
|
|
(19,042
|
)
|
|
|
(19,981
|
)
|
Stock-based and long-term incentive compensation
|
|
|
(573
|
)
|
|
|
(3,597
|
)
|
|
|
(1,834
|
)
|
|
|
(3,313
|
)
|
Accretion expense on asset retirement obligations
|
|
|
(54
|
)
|
|
|
(61
|
)
|
|
|
(152
|
)
|
|
|
(190
|
)
|
Restructuring and other charges
|
|
|
(1,160
|
)
|
|
|
(1,436
|
)
|
|
|
(2,646
|
)
|
|
|
(2,699
|
)
|
Depreciation and amortization
|
|
|
(15,384
|
)
|
|
|
(15,103
|
)
|
|
|
(44,850
|
)
|
|
|
(45,785
|
)
|
Gain on sale of operating assets, net
|
|
|
340
|
|
|
|
7,332
|
|
|
|
130
|
|
|
|
7,152
|
|
Other income, net
|
|
|
650
|
|
|
|
2,935
|
|
|
|
1,089
|
|
|
|
5,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
$
|
(9,197
|
)
|
|
|
(1,477
|
)
|
|
|
(29,056
|
)
|
|
|
(6,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information as to the Companys operations in different
geographic areas is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Amounts in thousands
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
83,875
|
|
|
|
110,098
|
|
|
|
270,748
|
|
|
|
351,613
|
|
United Kingdom
|
|
|
22,539
|
|
|
|
31,439
|
|
|
|
62,298
|
|
|
|
104,106
|
|
Singapore
|
|
|
5,543
|
|
|
|
4,609
|
|
|
|
16,855
|
|
|
|
16,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
111,957
|
|
|
|
146,146
|
|
|
|
349,901
|
|
|
|
472,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
155,340
|
|
|
|
165,008
|
|
United Kingdom
|
|
|
36,925
|
|
|
|
41,227
|
|
Singapore
|
|
|
14,561
|
|
|
|
17,693
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
206,826
|
|
|
|
223,928
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Certain statements in this Quarterly Report on
Form 10-Q
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including
statements regarding our business, marketing and operating
strategies, integration of acquired businesses, new service
offerings, financial prospects, and anticipated sources and uses
of capital. Where, in any forward-looking statement, we express
an expectation or belief as to future results or events, such
expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the
expectation or belief will result or be achieved or
accomplished. The following include some but not all of the
factors that could cause actual results or events to differ
materially from those anticipated:
|
|
|
|
|
lack of operating history as a stand-alone company;
|
|
|
|
general economic and business conditions and industry trends
including the timing of, and spending on, motion picture,
television and television advertising;
|
|
|
|
integration of acquired businesses;
|
|
|
|
the regulatory and competitive environment of the industries in
which we and our customers operate;
|
|
|
|
retention of our largest customer accounts;
|
|
|
|
availability of third-party satellite and terrestrial
connectivity services relied on by us to provide our services;
|
|
|
|
the possibility of an industry-wide strike or other job action
affecting a major entertainment industry union, or the duration
of any existing strike or job action;
|
|
|
|
rapid technological changes;
|
|
|
|
present and future financial conditions, including availability
and terms of capital;
|
|
|
|
the outcome of any pending or threatened litigation;
|
|
|
|
availability of qualified personnel;
|
|
|
|
changes in, or failure or inability to comply with, government
regulations, including, without limitation, regulations of the
Federal Communications Commission, and adverse outcomes from any
regulatory proceedings;
|
|
|
|
competitor and overall market response to our products and
services, including acceptance of the pricing of such products
and services; and
|
|
|
|
risk of loss from earthquakes and other catastrophic events.
|
For additional risk factors, please see our Annual Report on
Form 10-K
for the year ended December 31, 2008. These risks,
uncertainties and other factors and the forward-looking
statements contained herein speak only as of the date of this
Quarterly Report, and we expressly disclaim any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statement, to reflect any change in our
expectations with regard thereto, or any other change in events,
conditions or circumstances on which any such statement is based.
In addition to the risk factors in our Annual Report on
Form 10-K
for the year ended December 31, 2008, the following factors
relating to our businesses, and the industries in which we
operate, may have a material adverse effect on our businesses,
prospects, financial condition, results of operations
and/or cash
flows, if adversely determined.
The recent worldwide credit crisis and resulting economic
downturn may reduce the level of investment by independent
motion picture producers, as well as spending by other producers
of filmed entertainment and television commercials, which would
have a material adverse effect on our revenue and
profitability. The recent worldwide financial
crisis significantly reduced the availability of liquidity and
credit to fund business and investment activity and resulted in
a broad economic downturn. Such economic conditions make it more
difficult for motion picture producers and television
programmers to maintain prior levels of production activity. The
advertising industry is also highly dependent on economic
conditions, and a continued economic downturn may result in a
significant decline in both the number of new television
commercials created and amounts budgeted for
11
production of new commercials. Independent producers, who
generally require access to external capital to fund production
of motion pictures and television pilots, have been particularly
hard hit by the reduced availability of capital. Demand for
AMGs services is driven in large part by the volume of
motion picture and television content being created and
distributed. A substantial decrease in such production
activities would have a material adverse effect on AMGs
business and financial results.
Runaway production and higher state taxes in California could
adversely affect AMGs business. Over the
past two decades, the U.S. entertainment industry,
including the business of producing major motion pictures and
primetime television programming, has experienced an increasing
trend of runaway production, or the migration of
production activities for economic reasons from the United
States and in particular from the traditional
industry centers of Southern California and New York
to facilities and locations in foreign countries and other
states. This trend is the result of both high operating and tax
costs in the traditional entertainment industry hubs and the
availability of economic subsidies and other film production
incentives provided by such other jurisdictions. Although AMG
has facilities in various locations in the United States, the
United Kingdom and Singapore and serves customers throughout the
world via a global fiber-based network that is integrated with
AMGs work flows, as well as services delivered over the
Internet, a significant acceleration of the runaway production
trend could adversely affect AMGs business if film studios
and production companies send post-production and other work to
competitors in other geographic markets, whether to take
advantage of subsidies and incentives offered in those
jurisdictions or to use facilities geographically closer to the
place of production. The runaway production trend may also
result in an increase in competition for post-production and
other entertainment and media services, as the growth of the
entertainment industry in areas outside Southern California and
New York may encourage the development of new service providers
in such locations. In addition, the adverse effects of the
runaway production trend may be significantly exacerbated by
recent changes to the California State tax regime, including a
one percentage point increase in state sales and use tax rates
and, effective January 1, 2011, changes to the manner of
calculating California income for state corporate income tax
purposes. Although the sales tax increase is scheduled to expire
July 1, 2011, the combined effect of these changes may
discourage content producers, owners and distributors from using
California-based facilities for post-production and other media
services, which could have a material adverse effect on
AMGs business and financial results.
We may not be able to earn a rate of return on cash
investments that exceeds the rate of
inflation. We currently have a significant
balance of cash and cash equivalents in excess of that required
for working capital purposes. While we may use a portion of our
excess capital to fund potential strategic acquisitions or
investment opportunities, there can be no assurance that we will
consummate any such transaction in the near-term. Currently, our
cash balances are invested in highly liquid, highly-rated
short-term investments. However, such short-term investments
generally bear a low effective interest rate, and investments
producing higher rates of return are likely to be more risky and
may bear a substantial risk of loss of principal. Accordingly,
there can be no assurance that the rate of return on our cash
investments will exceed the rate of inflation. Additionally,
although inflation has been relatively stable in the United
States over the recent past, there is a risk that inflation will
increase in the future, whether as a result of increased
economic stimulus spending by the United States and other
nations or other factors. Any sustained period of significantly
higher inflation rates would have the effect of reducing the
relative purchasing power of our cash and cash equivalents,
which could have an adverse effect on our financial position or
results of operations, and on our ability to execute our
business strategy.
The following discussion and analysis provides information
concerning our results of operations and financial condition.
This discussion should be read in conjunction with our
accompanying condensed consolidated financial statements and the
notes thereto included elsewhere herein and in our Annual Report
on
Form 10-K
for the year ended December 31, 2008.
Overview
We are a holding company and own 100% of our principal operating
subsidiary, Ascent Media Group, LLC (AMG), as well
as cash, cash equivalents and marketable securities. In
September 2008, we sold our other wholly-owned operating
subsidiary, Ascent Media CANS, LLC (AccentHealth).
12
Ascent
Media Group
AMG provides creative services and content management and
delivery services to the media and entertainment industries in
the United States, the United Kingdom and Singapore. AMGs
clients include major motion picture studios, independent
producers, broadcast networks, programming networks, advertising
agencies and other companies that produce, own
and/or
distribute entertainment, news, sports, corporate, educational,
industrial and advertising content. AMGs operations are
organized into the following two groups: the Content Services
group and the Creative Services group.
In June 2009, the members of the Screen Actors Guild
(SAG) voted in favor of ratifying a new contract for
theatrical motion picture and television performances that was
reached between SAG and the Alliance of Motion Picture and
Television Producers (AMPTP). The new agreement
expires on June 30, 2011. The previous contract had expired
on June 30, 2008 and SAG had continued to work under the
terms of the expired contract until the new contract was
ratified. In May 2009, the members of SAG and the American
Federation of Television and Radio Artists (AFTRA)
voted in favor of ratifying new contracts between SAG, AFTRA and
the advertising industry for television, radio and internet/new
media commercials. The new contracts expire on March 31,
2012. The previous contract had expired on March 31, 2009.
Any future labor dispute could have an adverse effect on the
television
and/or
motion picture production industries, including AMGs
business, and in the case of a severe or prolonged work
stoppage, the adverse effect on AMGs business, operations,
results of operations
and/or
financial condition could be material.
In recent years, AMG has been challenged by increasing
competition and resulting downward rate pressure for certain of
its services. Such factors have caused margin compression and
lower operating income. AMG is continuing to focus on leveraging
its broad array of traditional media and file-based services to
be a full service provider to new and existing customers within
the feature film, television production and advertising
industries. Its strategy focuses on providing a unified
portfolio of
business-to-business
services intended to enable media companies to realize
increasing benefits from digital distribution. With facilities
in the United States, the United Kingdom and Singapore, AMG
hopes to increase its services to multinational companies on a
worldwide basis. The challenges that it faces include the
continued successful development of
end-to-end
file-based solutions, increased competition in both its Creative
Services and Content Services groups, the need to differentiate
its products and services to help maintain or increase operating
margins and financing capital expenditures for equipment and
other items to meet customers requirements including their
need for both integrated and file-based workflows.
Adjusted
OIBDA
We evaluate the performance of our operating segments based on
financial measures such as revenue and adjusted operating income
before depreciation and amortization (which we refer to as
adjusted OIBDA). We define adjusted
OIBDA as revenue less cost of services and selling,
general and administrative expense (excluding stock-based and
long-term incentive compensation and accretion expense on asset
retirement obligations) and define segment adjusted
OIBDA as adjusted OIBDA as determined in each case for the
indicated operating segment or segments only. We believe this
non-GAAP financial measure is an important indicator of the
operational strength and performance of our businesses,
including each businesss ability to fund its ongoing
capital expenditures and service any debt. In addition, this
measure is used by management to evaluate operating results and
perform analytical comparisons and identify strategies to
improve performance. Adjusted OIBDA excludes depreciation and
amortization, stock-based and long-term incentive compensation,
accretion expense on asset retirement obligations, restructuring
and impairment charges, gains/losses on sale of operating assets
and other income and expense that are included in the
measurement of earnings (loss) before income taxes pursuant to
GAAP. Accordingly, adjusted OIBDA and segment adjusted OIBDA
should be considered in addition to, but not as a substitute
for, earnings (loss) before income taxes, cash flow provided by
operating activities and other measures of financial performance
prepared in accordance with GAAP. Because segment adjusted OIBDA
excludes corporate and other SG&A (as defined below), and
does not include an allocation for corporate overhead, segment
adjusted OIBDA should not be used as a measure of our liquidity
or as an indication of the operating results that could be
expected if either operating segment were operated on a
stand-alone basis. Adjusted OIBDA and segment adjusted OIBDA are
non-GAAP financial measures. As companies often define non-GAAP
financial measures differently, adjusted OIBDA and segment
adjusted OIBDA as calculated by Ascent Media should not be
compared to any similarly titled measures reported by other
companies.
13
Results
of Operations
Our operations are organized into the following reportable
segments: the Content Services group and the Creative Services
group.
The Content Services groups revenue consists of fees
relating to facilities and services necessary to optimize,
archive, manage, reformat and repurpose completed media assets
for global distribution via freight, satellite, fiber and the
internet. In addition, the Content Services group includes the
facilities, technical infrastructure, and operating staff
necessary to assemble programming content for cable and
broadcast networks and to distribute media signals via satellite
and terrestrial networks. The Content Services group includes
AMGs digital media distribution center, which provides
file-based services in areas such as digital imaging, digital
vault, distribution services and interactive media to new and
existing distribution platforms. Additionally, the Content
Services group provides owners of film libraries a broad range
of restoration, preservation, archiving, professional mastering
and duplication services. The scope of these services vary in
duration from one day to several months depending on the nature
of the service, and fees typically range from less than $1,000
to $100,000 per project. For the nine months ended
September 30, 2009, approximately 41% of the Content
Services groups revenue relates to broadcast services,
satellite operations and fiber services that are earned monthly
under long-term contracts ranging generally from one to seven
years. Additionally, approximately 18% of revenue relates to
systems integration and engineering services that are provided
on a project basis over terms generally ranging from three to
twelve months.
AMGs Creative Services group generates revenue primarily
from fees for various technical and creative services necessary
to complete principal photography into final products.
Generally, these services pertain to the completion of feature
films, television programs, television commercials and new
digital media. These services are referred to generally in the
entertainment industry as post-production services.
These projects normally span from a few days to three months or
more in length, and fees for these projects typically range from
$10,000 to $1,000,000 per project.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollar amounts in thousands
|
|
|
Dollar amounts in thousands
|
|
|
Consolidated Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
111,957
|
|
|
|
146,146
|
|
|
|
349,901
|
|
|
|
472,602
|
|
Loss from continuing operations before income taxes
|
|
$
|
(9,197
|
)
|
|
|
(1,477
|
)
|
|
|
(29,056
|
)
|
|
|
(6,454
|
)
|
Net income (loss)
|
|
$
|
(6,414
|
)
|
|
|
39,328
|
|
|
|
(20,066
|
)
|
|
|
33,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Result of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group
|
|
$
|
70,340
|
|
|
|
99,944
|
|
|
|
227,190
|
|
|
|
343,537
|
|
Creative Services group
|
|
$
|
41,617
|
|
|
|
46,202
|
|
|
|
122,711
|
|
|
|
129,065
|
|
Segment Adjusted OIBDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group
|
|
$
|
8,309
|
|
|
|
8,362
|
|
|
|
26,140
|
|
|
|
35,416
|
|
Creative Services group
|
|
|
5,005
|
|
|
|
7,312
|
|
|
|
12,109
|
|
|
|
17,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined segment adjusted OIBDA(a)
|
|
$
|
13,314
|
|
|
|
15,674
|
|
|
|
38,249
|
|
|
|
53,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted OIBDA as a percentage of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group
|
|
|
11.8
|
%
|
|
|
8.4
|
%
|
|
|
11.5
|
%
|
|
|
10.3
|
%
|
Creative Services group
|
|
|
12.0
|
%
|
|
|
15.8
|
%
|
|
|
9.9
|
%
|
|
|
13.8
|
%
|
|
|
|
(a) |
|
See reconciliation to loss from continuing operations before
income taxes below. |
Revenue. Our consolidated revenue decreased
$34,189,000 or 23.4% and $122,701,000 or 26.0% for the three
months and nine months ended September 30, 2009,
respectively, as compared to the corresponding prior year
periods. The Content Services group revenue decreased
$29,604,000 or 29.6% and $116,347,000 or 33.9% for the three
months and nine months ended September 30, 2009,
respectively, compared to the prior year periods. The Creative
Services group revenue decreased by $4,585,000 or 9.9% and
$6,354,000 or 4.9% for such periods.
14
The decrease in the Content Services group revenue for the three
month period was mainly due to (i) a decrease of
$20,834,000 in system integration services revenue due to a
significant number of large projects in the United States
and the United Kingdom in the prior year and a decline in system
integration projects in 2009 as customers reduced their spending
in response to a weaker economic climate, (ii) a decrease
of $4,596,000 due to a decline in traditional media services in
the United States and United Kingdom including tape,
duplication, audio and lab services and (iii) unfavorable
changes in foreign currency exchange rates of $3,094,000. These
decreases were partially offset by an increase of $915,000 due
to higher digital services revenues due to an increase in
volumes from existing customers. The decrease in the Content
Services group revenue for the nine month period was mainly due
to (i) a decrease of $88,872,000 in system integration
services revenue due to a significant number of large projects
in the United States and the United Kingdom in the prior year
and a decline in system integration projects in 2009 as
customers reduced their spending in response to a weaker
economic climate, (ii) a decrease of $12,152,000 due to a
decline in traditional media services in the United States and
United Kingdom including tape, duplication, lab and audio
services and (iii) unfavorable changes in foreign currency
exchange rates of $15,161,000. These decreases were partially
offset by an increase of (i) $4,782,000 due to higher
digital services revenues due to an increase in volumes from
existing customers and (ii) $2,326,000 due to higher
content origination and transport services in the United Kingdom
and Singapore.
The decrease in the Creative Services group revenue for the
three month period was due to (i) a decrease of $5,159,000
in commercial revenues driven by a weaker worldwide production
market in 2009 compared to the prior year, (ii) a decrease
of $1,718,000 from television and ancillary post production
services as production slowed in the quarter compared to the
prior year which had seen increased production due to the ending
of the Writers Guild strike in March 2008, (iii) a decrease
of $940,000 resulting from the shutdown of certain operations in
the United States and (iv) unfavorable changes in foreign
currency exchange rates of $471,000. These decreases were
partially offset by an increase of $4,295,000 in editorial
services in the United States. The decrease in Creative Services
group revenue for the nine month period was due to (i) a
decrease of $14,451,000 in commercial revenues driven by a
weaker worldwide production market for the first nine months of
2009 compared to the prior year period, (ii) a decrease of
$3,483,000 resulting from the shutdown of certain operations in
Mexico and the United States and (iii) unfavorable changes
in foreign currency exchange rates of $2,130,000. These
decreases were partially offset by (i) an increase of
$7,369,000 in editorial services in the United States,
(ii) an increase of $6,773,000 in feature film revenue
driven by increased titles for digital intermediate services and
(iii) an increase of $443,000 from television post
production services.
For the three months and nine months ended September 30,
2009, $5,699,000 and $25,394,000, respectively, of the Content
Services group revenue was generated by one customer, Motorola,
Inc., under system integration services contracts. For the three
months and nine months ended September 30, 2008, these
Motorola contracts generated $12,576,000 and $65,178,000,
respectively, of Content Services revenues. Our system
integration contracts have a limited duration. Following any
termination or expiration of our contracts with Motorola we
could only continue to sustain our current level of system
integration revenue if we enter into other contracts of this
same magnitude, for which there can be no assurance.
Cost of Services. Cost of services decreased
$28,414,000 or 26.2% and $102,561,000 or 29.1% for the three and
nine months ended September 30, 2009, respectively, as
compared to the corresponding prior year periods. The decrease
for the three and nine month periods was primarily due to
Content Services resulting from lower volumes of system
integration services, driving significant decreases in
production material costs and, to a lesser extent, labor costs.
Further, we restructured the company at the end of 2008, by
among other things combining facilities and reducing the number
of employees at certain locations, which resulted in an
additional reduction in labor and facility costs for the three
and nine months ended September 30, 2009, compared to the
corresponding prior periods. We also had lower production
equipment and outside services expenses due to our efforts to
reduce costs. In addition, cost of services decreased as a
result of favorable changes in foreign currency exchange rates
of $2,346,000 and $11,653,000 for the three and nine months
ended September 30, 2009, respectively.
As a percent of revenue, cost of services was 71.6% and 74.3%
for the three month periods ended September 30, 2009 and
2008, respectively. As a percent of revenue, cost of services
was 71.5% and 74.6% for the nine month periods ended
September 30, 2009 and 2008, respectively. The decrease in
cost of services as a percent of revenue is mainly a result of
revenue mix as system integration projects, which incur higher
production material costs, were significantly lower in 2009. The
percentage decrease was also the result of the restructuring and
cost mitigation measures that were enacted across both segments.
15
Selling, General and Administrative. Our
selling, general and administrative expenses
(SG&A) are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Amounts in thousands
|
|
|
SG&A(a)
|
|
$
|
24,791
|
|
|
|
29,097
|
|
|
|
80,614
|
|
|
|
86,706
|
|
Stock-based and long-term incentive compensation
|
|
|
573
|
|
|
|
3,597
|
|
|
|
1,834
|
|
|
|
3,313
|
|
Accretion expense on asset retirement obligations (AROs)
|
|
|
54
|
|
|
|
61
|
|
|
|
152
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SG&A
|
|
$
|
25,418
|
|
|
|
32,755
|
|
|
|
82,600
|
|
|
|
90,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
SG&A includes corporate SG&A of $6,330,000 and
$7,221,000 for the three months ended September 30, 2009
and 2008, respectively, and $19,042,000 and $19,981,000 for the
nine months ended September 30, 2009 and 2008,
respectively, which are not included in combined segment
adjusted OIBDA. |
Our SG&A, excluding stock-based and long-term incentive
compensation and accretion expense on AROs, decreased $4,306,000
or 14.8% and $6,092,000 or 7.0% for the three and nine months
ended September 30, 2009, respectively, compared to the
corresponding prior year periods. The decrease for the three and
nine months periods was mainly driven by lower labor, travel and
entertainment costs which declined due to the implementation of
restructuring and cost mitigation measures. These decreases were
partially offset by higher professional fees and other public
company costs and higher facility costs related to duplicative
rent as a result of a Creative Services business unit relocating
to a new facility. In addition, SG&A was impacted by
favorable changes in foreign currency exchange rates of $714,000
and $3,901,000 for the three and nine months ended
September 30, 2009, respectively. As a percent of revenue,
our SG&A, excluding stock-based and long-term incentive
compensation, accretion expense on AROs and loss on sale of
operating assets, net, was 22.1% and 19.9% for the three months
ended September 30, 2009 and 2008, respectively, and 23.0%
and 18.3% for the nine months ended September 30, 2009 and
2008, respectively.
Stock-based and Long-term Incentive
Compensation. Stock-based and long-term incentive
compensation is included in SG&A in our consolidated
statements of operations. The 2009 expense for the three and
nine months ended September 30, 2009, was related to
restricted stock and stock option awards granted to certain
executives subsequent to the Ascent Media Spin Off. The 2008
expense for the three and nine months ended September 30,
2008, relates primarily to awards granted in 2006 under the 2006
Long-Term Incentive Plan (2006 LTIP). The 2006 LTIP
was amended in connection with the sale of AccentHealth in
September 2008 and, as a result of the amendment, a cash
distribution was made to certain executives.
Gain on Sale of Operating Assets, net. The
2009 amounts relates to the gain on sale of certain property and
equipment. The 2008 amounts include a gain on sale of $7,780,000
for the sale of creative services group United Kingdom real
estate for net cash proceeds of $9,564,000.
Restructuring Charges. During the three and
nine months ended September 30, 2009, we recorded
restructuring charges of $1,160,000 and $2,646,000,
respectively, related to severance costs in conjunction with
ongoing restructuring and cost mitigation measures undertaken
across all of our businesses. During the three and nine months
ended September 30, 2008, we recorded restructuring charges
of $1,436,000 and $2,699,000 related to severance and facility
costs in conjunction with the closing of our Creative Services
operations in Mexico.
16
The following table provides the activity and balances of the
restructuring reserve (all amounts are in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
Additions
|
|
|
Deductions(a)
|
|
|
September 30, 2008
|
|
|
Severance
|
|
$
|
1,357
|
|
|
|
1,979
|
|
|
|
(2,629
|
)
|
|
|
707
|
|
Excess facility costs
|
|
|
1,622
|
|
|
|
720
|
|
|
|
(1,545
|
)
|
|
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,979
|
|
|
|
2,699
|
|
|
|
(4,174
|
)
|
|
|
1,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Additions
|
|
|
Deductions(a)
|
|
|
September 30, 2009
|
|
|
Severance
|
|
$
|
2,526
|
|
|
|
2,632
|
|
|
|
(4,289
|
)
|
|
|
869
|
(b)
|
Excess facility costs
|
|
|
3,294
|
|
|
|
14
|
|
|
|
(1,353
|
)
|
|
|
1,955
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,820
|
|
|
|
2,646
|
|
|
|
(5,642
|
)
|
|
|
2,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Primarily represents cash payments. |
|
(b) |
|
Substantially all of this amount is expected to be paid in 2009. |
|
(c) |
|
Substantially all of this amount is expected to be paid by 2012. |
Depreciation and Amortization. Depreciation
and amortization expense increased $281,000 or 1.9% and
decreased $935,000 or 2.0% for the three and nine months ended
September 30, 2009, respectively, compared to the
corresponding prior year periods. These changes included the
favorable impact of changes in foreign currency exchange rates
of $621,000 and $3,003,000 for the three and nine months ended
September 30, 2009, respectively. Excluding such exchange
rate effects, depreciation and amortization expense increased
for both three and nine month periods. This is due to the
depreciation expense on property and plant from acquisitions
that occurred at the end of 2008 and in 2009.
Income Taxes from Continuing Operations. For
the three months ended September 30, 2009, we had a pre-tax
loss from continuing operations of $9,197,000 and an income tax
benefit from continuing operations of $2,783,000, for an
effective tax benefit rate of 30.3%. For the nine months ended
September 30, 2009, we had a pre-tax loss from continuing
operations of $29,056,000 and an income tax benefit from
continuing operations of $8,990,000, for an effective tax
benefit rate of 30.9%. For the three months ended
September 30, 2008, we had a pre-tax loss from continuing
operations of $1,477,000 and an income tax benefit from
continuing operations of $27,000. For the nine months ended
September 30, 2008, we had a pre-tax loss from continuing
operations of $6,454,000, but incurred $4,512,000 of income tax
expense from continuing operations. The income tax expense for
the nine month period of 2008 was mainly due to federal income
tax expense and an agreement reached with the IRS which resulted
in a reduction of certain net operating losses which had been
previously utilized. During the first quarter of 2008, Liberty
Media reached an agreement with the IRS with respect to certain
tax items that related to periods prior to DHCs spin off
from Liberty Media in July 2005. The IRS agreement resulted in a
reduction of $5,370,000 and $30,808,000 to the amount of federal
and California net operating losses (NOLs),
respectively, that Liberty Media allocated to us at the time of
the 2005 spin off. The reduction in our federal NOLs resulted in
tax expense of $1,880,000 (35% of $5,370,000). We had no
expectation that we would be able to utilize the California
NOLs, and had thus recorded a valuation allowance with respect
to such NOLs. Therefore, the reduction in California NOLs was
offset by a reduction in the corresponding valuation allowance
and resulted in no net tax expense.
Earnings from Discontinued Operations, Net of Income Taxes
We recorded earnings from discontinued operations, net of
income taxes of $40,778,000 and $44,235,000 for the three and
nine months ended September 30, 2008, respectively. These
amounts included the gain on the sales of AccentHealth, Palm Bay
and Visiontext, which were all sold in the third quarter of 2008.
17
Adjusted OIBDA. The following table provides a
reconciliation of the combined segment adjusted OIBDA for both
the Content Services and Creative Services segments to loss from
continuing operations before income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Combined segment adjusted OIBDA
|
|
$
|
13,314
|
|
|
|
15,674
|
|
|
|
38,249
|
|
|
|
53,236
|
|
Corporate selling, general and administrative expenses
|
|
|
(6,330
|
)
|
|
|
(7,221
|
)
|
|
|
(19,042
|
)
|
|
|
(19,981
|
)
|
Stock-based and long-term incentive compensation
|
|
|
(573
|
)
|
|
|
(3,597
|
)
|
|
|
(1,834
|
)
|
|
|
(3,313
|
)
|
Accretion expense on asset retirement obligations
|
|
|
(54
|
)
|
|
|
(61
|
)
|
|
|
(152
|
)
|
|
|
(190
|
)
|
Restructuring and other charges
|
|
|
(1,160
|
)
|
|
|
(1,436
|
)
|
|
|
(2,646
|
)
|
|
|
(2,699
|
)
|
Depreciation and amortization
|
|
|
(15,384
|
)
|
|
|
(15,103
|
)
|
|
|
(44,850
|
)
|
|
|
(45,785
|
)
|
Gain on sale of operating assets, net
|
|
|
340
|
|
|
|
7,332
|
|
|
|
130
|
|
|
|
7,152
|
|
Other income, net
|
|
|
650
|
|
|
|
2,935
|
|
|
|
1,089
|
|
|
|
5,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
$
|
(9,197
|
)
|
|
|
(1,477
|
)
|
|
|
(29,056
|
)
|
|
|
(6,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group segment adjusted OIBDA as a percentage of
its revenue was 11.8% and 8.4% for the three months ended
September 30, 2009 and 2008, respectively, and 11.5% and
10.3% for the nine months ended September 30, 2009 and
2008, respectively. The increase in the Content Services group
segment adjusted OIBDA margin for the three and nine months
ended September 30, 2009, was due to lower labor, travel
and entertainment costs as a result of our 2009 cost mitigation
measures and a $1.7 million loss that was recorded in 2008
on a system integration contract.
Creative Services group segment adjusted OIBDA as a percentage
of its revenue was 12.0% and 15.8% for the three months ended
September 30, 2009 and 2008, respectively, and 9.9% and
13.8% for the nine months ended September 30, 2009 and
2008, respectively. The decrease in the segment adjusted OIBDA
margin for the Creative Services group for the three and nine
months ended September 30, 2009, was due to higher labor as
a percentage of revenue in television and ancillary post
production as a result of revenue compression and a change in
the mix of key services, higher material and equipment rental
costs and duplicative rent as a result of a business unit
relocating to a new facility.
The primary cost components for the Content Services group are
labor and materials, with these costs comprising over 64% of the
segment revenue. The other cost components for the Content
Services group are facility costs, production equipment and
general and administrative expense. Content Services group
segment adjusted OIBDA decreased $53,000 or less than 1% for the
three months ended September 30, 2009, compared to the
prior year period. This decrease was due to a decrease of
$913,000 from lower system integration revenues and unfavorable
changes in foreign currency exchange rates of $595,000 which
were almost entirely offset by an increase of $1,505,000 from
content distribution and transport services mainly in Singapore
and the United Kingdom. Content Services group segment
adjusted OIBDA decreased $9,276,000 or 26.2% for the nine months
ended September 30, 2009, compared to the prior year
period. This decrease was due to (i) a decrease of
$10,155,000 from lower system integration revenues,
(ii) $1,201,000 from lower revenues due to businesses that
were sold in the United Kingdom in 2008, (iii) $859,000 of
costs for development of new business initiatives and research
and development and (iv) unfavorable changes in foreign
currency exchanges rates of $2,512,000. This decrease was
partially offset by (i) $4,312,000 from higher content
origination and transport service revenues in the United Kingdom
and Singapore and (ii) $2,813,000 due to higher digital
services revenue.
The services provided by the Creative Services group are labor
intensive and they require high labor and facility costs, with
these costs representing over 74% of the segment revenue. The
Creative Services groups other primary cost components are
production equipment, materials cost and general and
administrative expenses. Creative Services group segment
adjusted OIBDA decreased $2,307,000 or 31.6% for the three
months ended September 30, 2009, compared to the prior
period. This decrease was due to (i) a decrease of
$2,500,000 due to lower worldwide commercial revenues as a
result of a weaker commercial production market in 2009 and
(ii) $1,544,000 from lower television and ancillary post
production revenues. This decrease was partially offset by an
increase of $1,019,000 as a result of higher feature film
revenue driven by increased titles for digital intermediate
18
services. Creative Services group segment adjusted OIBDA
decreased $5,711,000 or 32.0% for the nine months ended
September 30, 2009, compared to the prior period. This
decrease was due to (i) $8,846,000 due to lower worldwide
commercial revenues as a result of a weaker commercial
production market in 2009 and (ii) $2,286,000 in television
and ancillary post production services as weak production in
2009 more than offset the impact of the Writers Guild strike in
2008 This decrease was partially offset by an increase of
$4,311,000 as a result of higher feature film revenue driven by
increased titles for digital intermediate services. As a result
of the above, the Creative Services group segment adjusted OIBDA
margin was lower in both the three and nine month periods ended
September 30, 2009, compared to the prior periods.
Liquidity
and Capital Resources
At September 30, 2009, we have $295,960,000 of cash and
cash equivalents on a consolidated basis. In addition, we have
investments in marketable securities of $41,476,000, which are
generally liquid and available for sale. We may use a portion of
these assets to fund potential strategic acquisitions or
investment opportunities. The cash is invested in highly liquid,
highly-rated short-term investments.
Additionally, our other source of funds is AMGs cash flows
from operating activities. During the nine months ended
September 30, 2009 and 2008, our cash from operating
activities was $18,969,000 and $28,306,000, respectively. The
primary driver of our cash flow from operating activities is
segment adjusted OIBDA. Fluctuations in our segment adjusted
OIBDA are discussed in Results of Operations above.
In addition, our cash flow from operating activities is impacted
by changes in working capital, which are generally due to the
timing of purchases and payments for equipment and the timing of
billings and collections for revenue, as well as corporate
SG&A expenses which are not included in segment adjusted
OIBDA.
During the nine months ended September 30, 2009 and 2008,
we used cash of $22,491,000 and $28,931,000, respectively, to
fund our capital expenditures. These expenditures relate to the
purchase of new equipment, the upgrade of facilities and the
buildout of our existing facilities to meet specific customer
contracts, which are capitalized as additions and remain our
property, not that of the customer. During the nine months ended
September 30, 2009, we purchased marketable securities
consisting of diversified corporate bond funds for cash of
$43,274,000 in order to improve our investment rate of return.
We sold a portion of these securities for cash proceeds of
$6,112,000. During the nine months ended September 30,
2008, we sold marketable securities for cash of $23,545,000.
For the next twelve months, we expect to have sufficient
available cash and cash equivalents and net cash from AMGs
operating activities to meet our working capital needs and
capital expenditure requirements. We may seek external equity or
debt financing in the event of any new investment opportunities,
additional capital expenditures or our operations requiring
additional funds, but there can be no assurance that we will be
able to obtain equity or debt financing on terms that would be
acceptable to us.
Our ability to seek additional sources of funding depends on our
future financial position and results of operations, which are
subject to general conditions in or affecting our industry and
our customers and to general economic, political, financial,
competitive, legislative and regulatory factors beyond our
control.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosure about Market Risk
|
Foreign
Currency Risk
We continually monitor our economic exposure to changes in
foreign exchange rates and may enter into foreign exchange
agreements where and when appropriate. Substantially all of our
foreign transactions are denominated in foreign currencies,
including the liabilities of our foreign subsidiaries. Although
our foreign transactions are not generally subject to
significant foreign exchange transaction gains or losses, the
financial statements of our foreign subsidiaries are translated
into United States dollars as part of our consolidated financial
reporting. As a result, fluctuations in exchange rates affect
our financial position, results of operations and cash flows.
19
|
|
Item 4T.
|
Controls
and Procedures
|
In accordance with Exchange Act
Rules 13a-15
and 15d-15,
the Company carried out an evaluation, under the supervision and
with the participation of management, including its chairman,
president and principal accounting officer (the
Executives), of the effectiveness of its disclosure
controls and procedures as of the end of the period covered by
this report. Based on that evaluation, the Executives concluded
that the Companys disclosure controls and procedures were
effective as of September 30, 2009 to provide reasonable
assurance that information required to be disclosed in its
reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules
and forms.
There has been no change in the Companys internal controls
over financial reporting that occurred during the three months
ended September 30, 2009 that has materially affected, or
is reasonably likely to materially affect, its internal controls
over financial reporting.
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
Please see Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations
for a description of additional risk factors not previously
disclosed in our Annual Report on
Form 10-K
for the year ended December 31, 2008.
Listed below are the exhibits which are included as a part of
this Report (according to the number assigned to them in
Item 601 of
Regulation S-K):
|
|
|
|
|
|
4
|
.1
|
|
Form of Amendment No. 1 to Rights Agreement by and between
Ascent Media Corporation and Computershare Trust Company,
N.A (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed September 17, 2009 (File
No. 001-34176)).
|
|
31
|
.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification*
|
|
31
|
.2
|
|
Rule 13a-14(a)/15d-14(a)
Certification*
|
|
31
|
.3
|
|
Rule 13a-14(a)/15d-14(a)
Certification*
|
|
32
|
|
|
Section 1350 Certification**
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
Furnished herewith. |
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ASCENT MEDIA CORPORATION
|
|
|
|
By:
|
/s/ William
R. Fitzgerald
|
William R. Fitzgerald
Chairman and Chief Executive Officer
Date: November 13, 2009
Jose A. Royo
President and Chief Operating Officer
Date: November 13, 2009
|
|
|
|
By:
|
/s/ George
C. Platisa
|
George C. Platisa
Executive Vice President andChief Financial Officer
Date: November 13, 2009
21
EXHIBIT INDEX
Listed below are the exhibits which are included as a part of
this Report (according to the number assigned to them in
Item 601 of
Regulation S-K):
|
|
|
|
|
|
4
|
.1
|
|
Form of Amendment No. 1 to Rights Agreement by and between
Ascent Media Corporation and Computershare Trust Company,
N.A (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed September 17, 2009 (File
No. 001-34176)).
|
|
31
|
.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification*
|
|
31
|
.2
|
|
Rule 13a-14(a)/15d-14(a)
Certification*
|
|
31
|
.3
|
|
Rule 13a-14(a)/15d-14(a)
Certification*
|
|
32
|
|
|
Section 1350 Certification**
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
Furnished herewith. |