e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D. C.
20549
Form
10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2009
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OR
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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
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Exchange on Which Registered
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Series A Common Stock, par value $.01 per share
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The Nasdaq Stock Market LLC
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Securities registered pursuant to Section 12(g) of the
Act:
Series B Common Stock, par value $.01 per share
Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act of
1933. Yes o No þ
Indicate by check mark if the Registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of
1934. Yes o No þ
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 has submitted
electronically and posted on its corporate Website, 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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
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 þ
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Non-accelerated filer o
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Smaller reporting company o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the
Act) Yes o No þ
The aggregate market value of the voting stock held by
nonaffiliates of Ascent Media Corporation computed by reference
to the last sales price of such stock, as of the closing of
trading on June 30, 2009, was approximately
$354 million.
The number of shares outstanding of Ascent Media
Corporations common stock as of February 26, 2010
was: Series A common stock 13,448,657 shares; and
Series B common stock 734,127 shares.
DOCUMENTS
INCORPORATED BY REFERENCE
The Registrants definitive proxy statement for its 2010
Annual Meeting of Stockholders is hereby incorporated by
reference into Part III of this Annual Report on
Form 10-K.
ASCENT
MEDIA CORPORATION
2009 ANNUAL REPORT ON
FORM 10-K
Table
of Contents
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ITEM 1.
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DESCRIPTION
OF OUR BUSINESS
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(a)
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General
Development of Business
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Ascent Media Corporation (Ascent Media) was
incorporated in the state of Delaware on May 29, 2008 as a
wholly-owned subsidiary of Discovery Holding Company
(DHC). On September 17, 2008, DHC completed the
spin-off of Ascent Media to DHCs shareholders and we
became an independent, publicly traded company. In the spin-off,
each holder of DHC common stock received 0.05 of a share of our
Series A common stock for each share of DHC Series A
common stock held and 0.05 of a share of our Series B
common stock for each share of DHC Series B common stock
held. 13,401,886 shares of our Series A common stock
and 659,732 shares of our Series B common stock were
issued in the spin-off, which was intended to qualify as a
tax-free transaction.
Our principal assets are our wholly-owned operating subsidiary
Ascent Media Group, LLC (AMG) and cash, cash
equivalents and investments in marketable securities. At
December 31, 2009, we had cash, cash equivalents and
marketable securities, on a consolidated basis, of $349,111,000.
This amount consisted of cash and cash equivalents of
$292,914,000 (which included AMGs cash on hand) and
$56,197,000 of investments in marketable securities.
AMG is primarily engaged in the business of providing content
and creative services to the media and entertainment industries
in the United States, the United Kingdom and Singapore. Through
its Content Services and Creative Services groups, AMG provides
solutions for the creation, management and distribution of
content to major motion picture studios, independent producers,
broadcast networks, programming networks, advertising agencies
and other companies that produce, own
and/or
distribute entertainment, news, sports and advertising content.
AMG also provides solutions for the management and distribution
of content to multichannel video programming distributors such
as cable operators and Internet protocol television
(IPTV) providers. Services are marketed to target
industry segments through AMGs internal sales force and
may be sold on a bundled or individual basis.
Recent
Developments
On December 21, 2009, AMG entered into a letter of intent
to sell the assets and operations of its Chiswick Park facility
in the United Kingdom, which was previously included in the
Content Services group, to Discovery Communications, Inc. The
sale closed in February 2010 for net cash proceeds of
approximately $35 million. AMG expects to recognize a
pre-tax gain of approximately $26 million from the sale,
subject to customary post-closing adjustments. For further
information regarding this transaction, see the MD&A
section of this Annual Report. The Chiswick Park assets and
liabilities have been classified as held for sale and the
results of operations of the Chiswick Park facility have been
treated as discontinued operations in the consolidated financial
statements for all periods presented in this Annual Report.
* * * * *
Certain statements in this Annual Report on
Form 10-K
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. In particular, statements under Item 1.
Business, Item 1A. Risk Factors,
Item 2. Properties, Item 3. Legal
Proceedings, Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations and Item 7A. Quantitative and
Qualitative Disclosures About Market Risk contain
forward-looking statements. 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:
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general economic and business conditions and industry trends
including the timing of, and spending on, feature film,
television and television commercial production;
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spending on domestic and foreign television advertising and
spending on domestic and foreign first-run and existing content
libraries;
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the regulatory and competitive environment of the industries in
which we, and the entities in which we have interests, operate;
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continued consolidation of the broadband distribution and movie
studio industries;
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uncertainties inherent in the development of new business lines
and business strategies;
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integration of acquired businesses;
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retention of our largest customer accounts;
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uncertainties associated with product and service development
and market acceptance, including the development and provision
of programming for new television and telecommunications
technologies;
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changes in the distribution and viewing of television
programming, including the expanded deployment of personal video
recorders, video on demand and internet protocol-based
television and their impact on television advertising revenue;
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availability of third-party satellite and terrestrial
connectivity services relied on by us to provide our services;
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rapid technological changes;
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present and future financial performance, including availability
and terms of capital;
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fluctuations in foreign currency exchange rates;
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political unrest in international markets;
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the ability of suppliers and vendors to deliver products,
equipment, software and services;
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the outcome of any pending or threatened litigation;
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availability of qualified personnel;
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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;
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changes in, or failure or inability to comply with, government
regulations, including, without limitation, regulations of the
Federal Communications Commission, or FCC, and adverse outcomes
from regulatory proceedings;
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changes in the nature of key strategic relationships with
partners and joint venturers;
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competitor and overall market response to our products and
services including acceptance of the pricing of such products
and services;
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threatened terrorists attacks and ongoing military action in the
Middle East and other parts of the world; and
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risk of loss from earthquakes and other catastrophic events.
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These forward-looking statements and such risks, uncertainties
and other factors speak only as of the date of this Annual
Report, and we expressly disclaim any obligation or undertaking
to disseminate any updates or revisions to any forward-looking
statement contained herein, 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. When considering such forward-looking statements, you
should keep in mind the factors described in Item 1A,
Risk Factors and other cautionary statements
contained in this Annual Report. Such risk factors and
statements describe circumstances which could cause actual
results to differ materially from those contained in any
forward-looking statement.
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(b)
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Financial
Information About Reportable Segments
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We identify our reportable segments based on financial
information reviewed by our chief operating decision maker. We
report financial information for our consolidated business
segments that represent more than 10% of our consolidated
revenue or earnings before income taxes.
Based on the foregoing criteria, our two reportable segments are
our Content Services group and our Creative Services group,
which are also operating segments of AMG. Financial information
related to our reportable segments can be found in note 17
to our consolidated financial statements found in Part II
of this Annual Report.
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(c)
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Narrative
Description of Business
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Through our wholly-owned subsidiary AMG, we are primarily
engaged in the business of providing services to the media and
entertainment industries in the United States, the United
Kingdom and Singapore.
AMG provides a wide variety of creative services and content
management and delivery services to the media and entertainment
industries in the United States, the United Kingdom and
Singapore. AMG provides solutions for the creation, management
and distribution of content to major motion picture studios,
independent producers, broadcast networks, programming networks,
advertising agencies and other companies that produce, own
and/or
distribute entertainment, news, sports and advertising content.
AMG also provides solutions for the management and distribution
of content to multichannel video programming distributors such
as cable operators and IPTV providers. Services are marketed to
target industry segments through AMGs internal sales force
and may be sold on a bundled or individual basis.
AMG is organized into two operating groups: businesses that
provide content management and delivery services and businesses
that provide creative services. The content services businesses
provide fully integrated content delivery solutions and services
to its customers. The creative services businesses focus on
providing post-production services to the advertising,
television and movie industries.
Content
Services
AMGs Content Services group provides the services to
archive, optimize, transform, and repurpose completed media
assets for global distribution via satellite, fiber, the
Internet and freight, as well as the post-production 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. AMGs Content Services group operates from
facilities located in California, Connecticut, Minnesota, New
York, New Jersey, Virginia, the United Kingdom and Singapore. As
used in the media services industry, the term
element refers to a unit of created content of any
length, such as a feature film, television episode, commercial
spot, movie trailer, promotional clip or other unique product,
such as a foreign language version or alternate format of any of
the foregoing.
Key services provided by AMGs Content Services group
include the following:
Network origination, playout and master
control. AMG provides outsourced network
origination services to cable, satellite and
pay-per-view
programming networks. This suite of services involves the
digitization and management of client-provided media assets
(programs, advertisements, promotions and secondary events) and
their aggregation into a continuous linear playout stream in
accordance with the programming schedule. Currently, more than
one hundred programming feeds running 24 hours
a day, seven days a week are supported by AMGs
facilities in the United States, London and Singapore. Network
origination services are provided from large-scale technical
platforms with integrated asset management, hierarchical storage
management (a data storage technique which automatically moves
data between high-cost and low-cost storage media), and
broadcast automation capabilities. These platforms, which are
designed, built, owned and operated by AMG, require AMG to
incorporate and integrate hardware and software from multiple
third-party suppliers into a coordinated service solution.
Associated services include
cut-to-clock
and compliance editing, tape library management,
ingest & quality control, format conversion, and tape
duplication. For
multi-language
television services, AMG facilitates the collection,
aggregation, and playout of language-specific materials,
including subtitles and foreign language dubs. On-air graphics
and other secondary events are also integrated with the content.
In conjunction with network origination services, AMG
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operates television production studios and provides complete
post-production services for on-air promotions for some clients.
Transport and connectivity. AMG operates
satellite earth station facilities in Singapore, California, New
York, New Jersey, Minnesota and Connecticut. AMGs
facilities are staffed 24 hours a day and are used for
uplink, downlink and turnaround services. AMG accesses various
distribution points, including basic and premium cable,
broadcast syndication,
direct-to-home
and DBS markets and resells transponder capacity for both
occasional and full-time use. AMGs teleports
are high-bandwidth communications gateways with video switches
and facilities for satellite, optical fiber and microwave
transmission. AMGs facilities offer satellite antennae
capable of transmitting and receiving feeds in both C-Band and
Ku-Band frequencies. AMG operates a global fiber network to
carry real-time video and data services between its various
locations in the US, London, and Singapore. This network is used
to provide full-time program feeds and ad hoc services to
clients and to transport files and real-time signals between AMG
locations. AMG also operates industry-standard encryption and
compression systems as needed for customer satellite
transmission. AMGs transport and connectivity services may
be directly associated with network origination services or may
be provided on a stand-alone basis.
Digital media management services. AMG
provides services that enable content owners to digitize content
once, then store, manage, re-purpose and distribute such content
globally in multiple formats and languages to numerous
providers. These file-based services help AMGs clients
exploit existing and emerging global revenue streams, including
broadband, mobile and other digital outlets and devices,
reducing customer
time-to-market
while providing increased security and flexibility. Such
services can be implemented as a fully outsourced platform or as
individually managed services.
Assembly, formatting and master creation and
duplication. AMG implements clients
creative decisions, including decisions regarding the
integration of sound and visual effects, in order to assemble
source material into its final form. In addition, AMG uses
sophisticated computer graphics equipment to generate titles and
character imagery and to format certain entertainment media
content to meet specific production and distribution
requirements, including time compression and commercial breaks.
Finally, AMG creates and delivers multiple master copies of the
applicable final product for distribution, broadcast, archival
and other purposes designated by the customer.
Transferring film to video or digital media
masters. A considerable amount of film content is
ultimately distributed to the home video, broadcast, cable or
pay-per-view
television markets. This requires film images to be transferred
to a video or digital file format. Each frame must be color
corrected and adapted to the desired aspect ratio in order to
meet required distribution specifications and to ensure the
highest level of conformity to the original film version.
Because certain film formats require transfers with special
characteristics, it is not unusual for a motion picture to be
mastered in many different versions. Technological developments,
such as high definition digital television, the domestic
introduction of television sets with a 16 X 9 aspect ratio and
the implementation of alternate viewing platforms (such as
mobile phones and other handheld devices), have contributed to
the growth of AMGs film transfer business. AMG also
digitally removes dirt and scratches from a damaged film master
that is transferred to a digital file format.
Professional duplication and standards
conversion. AMG provides professional
duplication, which is the process of creating broadcast quality
and resolution independent
sub-masters
for distribution to professional end users. AMG uses master
elements to make
sub-masters
in numerous domestic and international broadcast standards as
well as up to 22 different tape formats. AMG also provides
standards conversion, which is the process of changing the frame
rate of a video signal from one video standard, such as the
United States standard (NTSC), to another, such as a European
standard (PAL or SECAM). Content is regularly copied, converted
and checked by quality control for use in intermediate
processes, such as editing, on-air backup and screening and for
final delivery to cable and
pay-per-view
programmers, broadcast networks, television stations, airlines,
home video duplicators and foreign distributors. AMGs
duplication and standards conversion facilities are technically
advanced with unique characteristics that significantly increase
equipment capacity while reducing error rates and labor cost.
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Advertising distribution. Once a television
commercial has been completed, AMG provides support services to
manufacture and deliver commercials to specific television
broadcasters or radio stations including format
conversion, video and audio duplication, distribution, and
storage and asset management for advertising
agencies, corporate advertisers and other content owners. AMG
uses satellite, fiber-optic, the Internet, terrestrial
broadband, and conventional air freight for the delivery of
television and radio spots to broadcasters and radio stations.
AMGs commercial television distribution facilities in Los
Angeles, New York and San Francisco enable AMG to service
any regional or national client.
Syndicated television distribution. AMGs
syndication services provide AMOL-encoding and closed-captioned
sub-mastering,
commercial integration, library distribution, station list
management and v-chip encoding. AMG distributes syndicated
television content by satellite, fiber, the Internet or freight,
in formats ranging from low-resolution proxy streams to
full-bandwidth high-definition television and streaming media.
Restoration, preservation and asset protection of existing
and damaged content. AMG provides film
restoration, preservation and asset protection services.
AMGs technicians use photochemical and digital processes
to clean, repair and rebuild a films elements in order to
return the content to its original and sometimes to an improved
image quality. AMG also protects film element content from
future degradation by transferring film images to newer archival
film stocks and digital files. AMG also provides asset
protection services for its clients color library titles,
which is a preservation process whereby B/W, silver image,
polyester, positive and color separation masters are created, to
protect the images of new and older films.
DVD compression and authoring and menu
design. AMG provides a full range of DVD
authoring services, including creative menu design, special
feature design and programming, interactive features,
compression, encoding, multi channel audio mixing, and quality
control. AMG supports DVD creation in traditional DVD formats as
well as the BluRay format. AMG also prepares and optimizes
content for evolving formats of digital distribution, such as
video-on-demand
and interactive television.
Storage of elements and working
masters. AMGs physical archives are
designed to store working master videotapes and film elements in
a highly controlled environment protected from temperature and
humidity variation, seismic disturbance, fire, theft and other
external events. In addition to the physical security of the
archive, content owners require frequent and regular access to
their libraries. Physical elements stored in AMGs archive
are uniquely bar-coded and maintained in a library management
system, which offers rapid access to elements, concise reporting
of element status and element tracking throughout its workflow
through AMGs operations. AMG also provides file-based
digital archive services, as discussed under the heading
Digital media management services above.
Engineering and systems integration. AMG
designs, builds, installs and services advanced technical
systems for production, management and delivery of rich media
content to the worldwide broadcast, cable television, broadband,
government and telecommunications industries. AMGs
engineering and systems integration business operates out of
facilities in New Jersey, California, Virginia, and London, and
services global clients including major broadcasters, cable and
satellite networks, telecommunications providers, and corporate
television networks, as well as numerous production and
post-production facilities. Services offered include program
management, engineering design, equipment procurement, software
integration, construction, installation, service and support.
The Content Services group has entered into long-term contracts
mainly for its network origination and transport services and
its systems integration services with many of its largest
customers, including its largest customer, Motorola, Inc. At
February 26, 2010, service commitments that are deemed to
be under long-term contracts totaled $196 million, with
approximately $76 million of this amount expected to be
earned in fiscal year 2010. The total includes a long-term
contract of approximately $40 million that was finalized
subsequent to year end. At December 31, 2008, service
commitments under these types of contracts were
$273 million.
Creative
Services
AMGs Creative Services group provides various technical
and creative services necessary to complete principal
photography into final products, such as television commercials,
internet and new media advertising,
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feature films, movie trailers, documentaries, independent films,
scripted and reality television, TV movies and mini-series,
music videos, interactive games and new digital media,
promotional and identity campaigns and corporate communications.
These services are referred to generally in the entertainment
industry as post-production services.
AMG markets its creative services under various brand names that
are generally well known in the entertainment and advertising
industries, including Beast, Company 3, Encore Hollywood,
Level 3 Post, Method, RIOT Atlanta and Rushes.
The creative services client base comprises advertising
agencies, creative editorial companies, commercial production
companies, major motion picture studios and their international
divisions, independent television production companies,
broadcast networks, cable programming networks, corporate media
producers, independent owners of television and film libraries
and emerging new media distribution channels. The principal
facilities of the Creative Services group are in Los Angeles,
the New York metropolitan area and London, with additional
facilities in Atlanta, Austin, Chicago, Detroit and
San Francisco.
Key services provided by AMGs Creative Services group
include the following:
Creative editorial. After principal
photography of advertising content has been completed,
AMGs editors assemble various elements into a cohesive
story consistent with the messaging, branding and creative
direction of AMGs advertising clients. AMG provides the
tools and talent required through all stages of the
finishing process necessary for creation and
distribution of completed advertising content.
Color correction. The color correction process
allows for the development of a creative look and feel for media
content, which can then be applied to different source elements
that are assembled in sequence to allow for consistency of
visual presentation, notwithstanding variations in the original
source material and the differing color spectrums of film and
other media. AMG employs highly-skilled creative talent who
utilize creative colorizing techniques, equipment and processes
to enable its clients to achieve desired results for creative
content including television commercials, music videos, feature
films and television shows.
Digital intermediates. AMGs digital
intermediate service provides customers with the ability to
convert film to a high resolution digital master file for color
correction, creative editorial and electronic assembly of
masters in other formats. The digital intermediate process
provides filmmakers and commercial producers with greater
creative control through enhanced visual manipulation options
and the ability to see their creative decisions applied in real
time.
Visual effects. Visual effects can be used to
create images that cannot be created physically through a more
cost-effective means, to digitally remove elements captured in
principal photography, and to enhance or supplement original
visual images by integrating computer generated images with
images captured during principal photography. AMG provides its
visual effects services with teams of artists utilizing an array
of graphics and animation workstations and using a variety of
software to accomplish unique effects.
Dailies. Clients that are in production
require daily screening of their previous days footage
captured on film, video or data in order to evaluate technical
and aesthetic qualities of the production and to facilitate the
creative editorial process. AMG provides the services necessary
for clients to view principal photography on a daily basis
(known as dailies in the United States and
rushes in Europe), including film processing and the
transfer of film negatives to video or digital data. Dailies may
be delivered to customers in a variety of videotape or file
based formats. AMG also provides dailies viewing environments at
client locations and in editorial cutting rooms for their
clients productions.
Industry
The entertainment and media services industry supports the
entertainment and media industries in the creation, management
and distribution of various forms of media content, including
motion pictures, movie trailers, television programs, television
commercials, music videos, interactive games, new digital media,
promotional and identity campaigns and corporate communications.
Motion pictures are generally released in a
first-run distribution, such as in a theatrical or
straight-to-DVD
release, or on broadcast or cable networks, and later in one or
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more additional distribution channels, such as home video,
online media providers,
pay-per-view,
or domestic or international syndication. Television content is
generally initially distributed over broadcast or cable
networks, and may be concurrently distributed over secondary
networks or via the Internet on network websites or by online
media providers. Television content may be subsequently
distributed or repurposed in the form of network re-broadcasts,
clip shows, syndicated reruns, on-demand programming, additional
online programming or home video distributions (including series
or season DVD releases).
AMGs business segments benefit from the volume of content
being created and distributed as well as the success or
popularity of an individual motion picture, television program
or other stand-alone media property. The following trends in the
creative media services industry are expected to have an impact
on AMGs business and operations:
Growing worldwide demand for original entertainment
content. The global demand for entertainment
content continues to increase, and the entertainment and media
industry is increasingly reliant on international revenue.
Accordingly, the need for the associated technical and creative
services AMG offers is expanding.
The development of new business opportunities for existing
content libraries. The vast libraries of the
major film and television studios are an ongoing source of
programming for traditional and new channels of media
distribution. For exploitation in a digital environment, these
libraries must be re-mastered, augmented, restored, re-colored,
converted
and/or
reformatted. In addition, current and developing digital media
formats have contributed to the lack of uniformity in worldwide
motion picture and television format, distribution and
presentation standards, thus creating the need for the creation
of new master elements in unique formats.
Continued proliferation of new distribution
channels. Advances in technology and the creation
and market acceptance of such content distribution channels as
video-on-demand,
mobile video over cell phones, and Internet distribution, as
well as the transition to digital television, facilitating the
deployment of high-definition
and/or
multiple standard definition broadcast feeds, require new
technical and operational infrastructure to create, manage and
distribute content. The industry requires technical facilities
and operational management that facilitates the creation,
management, formatting and delivery of that content to the
applicable markets and viewing audiences. At the same time, such
changes have provided content owners the opportunity to create
multiple distribution outlets and revenue streams from the same
programming.
Increased demand for innovation, technical and creative
quality and format options. Advances in
technology, new broadcast standards, growing adoption by
consumers of personal video recorders, which facilitate
time shifting of programming by the television
consumer, and increasing audience fragmentation require content
owners, producers and distributors to cost-effectively increase
image and audio quality and create increasingly innovative,
compelling viewing experiences for audiences. Such advances have
also resulted in audience acceptance of and demand for multiple
content format options, including, in certain markets, standard
and high-definition motion picture and television content, and
variant audio tracks and aspect ratios associated with such
content.
Reality-based programming. Broadcast and cable
programmers continue to rely on reality-based programming for
significant portions of their daytime, primetime and
pre-primetime schedules. Although many such shows have tended to
have lower post-production budgets and costs than scripted
programming, AMG does not believe that the demand for its
services has been negatively impacted by recent increases in
primetime reality-based programming. However, further increased
reliance on such reality-based programming could reduce industry
demand for some of the services that AMG provides.
Content repurposing. Broadcast and cable
programmers have continued to show and distribute more
regular-season reruns in regular time slots, at alternative
viewing times and on-line. To the extent that this practice may
reduce demand for original programming, or erode the traditional
concept of the 24-week television season, such trends could
reduce industry demand for some of AMGs services,
potentially offsetting in whole or in part other industry trends.
Extended use of advertising spots. Although
television commercials have traditionally had a relatively short
shelf-life, with spots updated frequently within a
given advertising campaign, some advertisers have
9
begun to re-use the same television commercials for longer
periods. If it becomes more widespread, this practice may
negatively impact the production of new short-form television
commercials.
Demands of studios and independent production
companies. While the domestic motion picture
industry continues to be dominated by the major studios,
including Paramount Pictures, Sony Pictures Entertainment,
Twentieth Century Fox, Universal Pictures, The Walt Disney
Company, and Warner Bros. Entertainment, smaller studios or
mini-majors and independent production companies
also play an important role in the production of motion pictures
for domestic and international feature film markets. AMG markets
its services to the full-range of content creators, owners and
distributors.
Strategy
We are actively seeking opportunities to leverage our strong
capital position through strategic acquisitions in the
technology, media, telecommunications and other industries. In
evaluating potential acquisition candidates we will consider
various factors, including among other things:
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financial characteristics, including recurring revenue streams
and free cash flow;
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growth potential;
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potential return on investment incorporating appropriate
financial leverage, including the targets existing
indebtedness and opportunities to restructure any existing
target indebtedness; and
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We will consider acquisitions for cash, leveraged acquisitions,
and potentially acquisitions for Ascent Media stock. In addition
to acquisitions, we will consider majority ownership positions,
minority equity investments and, in appropriate circumstances,
senior debt investments that we believe provide either a path to
full ownership or control, the possibility for high returns on
investment, or significant strategic benefits.
In addition, AMGs goal is to be the worlds leading
supplier of integrated digital media services by offering
superior creative and technological solutions to the media and
entertainment industry creating, managing and
distributing rich media content across all distribution channels
on a global basis. We believe we can optimize our position in
the market by pursuing the following strategies:
Provide an integrated suite of
end-to-end
media services. The entertainment services
industry has historically been fragmented, with numerous
providers offering discrete, geographically-limited,
non-integrated services. We provide a broad range of services
from the creation and management of media content to the
distribution of content via multiple transmission paths on a
global basis. We believe our range of service offerings and
in-depth knowledge of media workflows provide us with a
strategic advantage over less-diversified service providers in
developing deep, long-term relationships with creators, owners
and distributors of creative content. In addition, we believe
that the reputations of our highly-respected creative boutiques,
which operate under our own well-known brand names, help
distinguish us from commodity suppliers.
Grow digital media management business. We
seek to increase business with major media and entertainment
clients by creating, storing, managing, repurposing and
distributing their digital media content through traditional
channels as well as emerging new media outlets on a global
basis. In addition, we intend to further extend our digital
management capabilities by providing customers with
transactional services for media and entertainment content,
including services for online publishing and online syndication.
We believe that the technical complexity and scale issues
associated with providing these services will make outsourcing
of activities more attractive to our client base, creating
opportunities for increased market share. The geographical reach
of our proprietary digital media management system includes Los
Angeles, the New York metropolitan area, Singapore and the
United Kingdom.
Invest in core business operations. We intend
to continue to increase our capabilities through internal
investments to improve the capacity, utilization and throughput
of our existing facilities. We will also consider opportunities
that may arise to add scale or service offerings, or to increase
market share. We will also continue to seek opportunities to
divest non-core assets, when appropriate.
10
Seek opportunities to offer new services within core
competencies. We intend to expand our market
share by applying our core capabilities to develop new
value-added service offerings and participating in emerging high
revenue-generating services such as re-versioning content for
distribution to new platforms. We will endeavor to develop
service offerings that meet the unique needs of our customers.
In 2009, we completed initial development of an online business
to business marketplace that gives content owners and rights
holders a platform to license for distribution and sell film,
television, short film and other video content to web
publishers, cable outlets, television networks and stations
world-wide. Now that initial development is complete, we expect
activity in the marketplace to commence. Also in 2009, we formed
a partnership with third parties to provide a solution for
delivering high definition and standard definition syndicated
programming to television broadcast stations in the United
States.
Enter into alliances and accelerate services
development. We will seek to enter into strategic
alliances with third parties in order to extend our customer
reach and innovate for new services. By combining our media and
entertainment services capabilities with third parties who have
expertise in software development or IT services, we believe we
can create differentiated and innovative services and solutions.
For a description of the risks associated with the foregoing
strategies, and with Ascent Medias business in general,
see Risk Factors section beginning on page 12.
Seasonality
For AMGs Creative Services group, demand has historically
been seasonal. For its motion picture services, demand has
historically been higher in the second and fourth quarter while
the demand for television program services has been higher in
the first and fourth quarter. However, as a result of economic
conditions in the United States, shifting patterns of television
cycles and the 2008 Writers Guild of America strike, there
has been increased volatility in the volume of production of
feature films and television program services over the past two
years. The businesses that comprise AMGs Content Services
group provide services on long-term projects where the demand
has historically not been subject to significant seasonal
fluctuations.
Regulatory
Matters
Some of AMGs subsidiary companies hold licenses and
authorizations from the FCC, required for the conduct of their
businesses, including earth station and various classes of
wireless licenses and an authorization to provide certain
services pursuant to Section 214 of the Communications Act
of 1934, as amended. Many of the FCC licenses held by such
subsidiaries are for transmit/receive earth stations, which
cannot be operated without individual licenses. The licenses for
these stations are granted for a period of fifteen years and,
while the FCC generally renews licenses for satellite earth
stations, there can be no assurance that these licenses will be
renewed at their expiration dates. Registration with the FCC,
rather than licensing, is required for receiving transmissions
from domestic satellites from points within the United States.
AMG relies on third party licenses or authorizations when it and
its subsidiaries transmit domestic satellite traffic through
earth stations operated by third parties. The FCC establishes
technical standards for satellite transmission equipment that
change from time to time and requires coordination of earth
stations with land-based microwave systems at certain
frequencies to assure non-interference. Transmission equipment
must also be installed and operated in a manner that avoids
exposing humans to harmful levels of radio-frequency radiation.
The placement of earth stations or other antennae also is
typically subject to regulation under local zoning ordinances.
Wireless licenses generally are granted for a period of ten
years. The FCC regulates technical standards governing wireless
licenses. The transfer of control and assignment of
transmit/receive earth stations and most wireless licenses are
subject to the prior approval of the FCC.
Competition
The entertainment and media services industry is highly
competitive, with much of the competition centered in Los
Angeles, California, the largest and most competitive market,
particularly for domestic television and feature film production
as well as for the management of content libraries. We expect
that competition will increase as a result of industry
consolidation and alliances, as well as from the emergence of
new competitors. In particular, major motion picture studios
such as Paramount Pictures, Sony Pictures Entertainment,
Twentieth Century Fox,
11
Universal Pictures, The Walt Disney Company, and Warner Bros.
Entertainment, while AMGs customers, can perform similar
services in-house with substantially greater financial resources
than AMGs, and in some cases significant marketing
advantages. These studios may also outsource their requirements
to other independent providers like us or to other studios.
Other major competitors of AMG include: Technicolor S.A.; Laser
Pacific; Deluxe Entertainment Services; and DG FastChannel, Inc.
In addition, there may be new entrants into aspects of the
entertainment and media services industry, which may include new
media companies, such as Google and Amazon, consulting
companies, such as Accenture and Deloitte, and traditional
information technology companies, such as IBM and
Hewlett-Packard. These companies may become competitors of AMG
as well. AMG also actively competes with certain industry
participants that have a unique operating niche or specialty
business. There is no assurance that AMG will be able to compete
effectively against these competitors. AMGs management
believes that important competitive factors include the range of
services offered, reputation for quality and innovation, pricing
and long-term relationships with customers.
Employees
Ascent Media, together with its subsidiaries, has approximately
2,550 full-time employees and an additional
350 employees that are employed on a part-time or freelance
basis. Approximately 2,100 of the employees are employed in the
United States, with the remaining 800 employed outside the
United States, principally in the United Kingdom and the
Republic of Singapore.
Approximately 60 of AMGs employees belong to either the
International Alliance of Theatrical Stage Employees in the
United States or the Broadcasting Entertainment Cinematograph
and Theatre Union in the United Kingdom.
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(d)
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Financial
Information About Geographic Areas
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For financial information related to our geographic areas in
which we do business, see note 17 to our consolidated
financial statements found in Part II of this Annual Report.
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(e)
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Available
Information
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All of our filings with the Securities and Exchange Commission
(the SEC), including our
Form 10-Ks,
Form 10-Qs
and
Form 8-Ks,
as well as amendments to such filings are available on our
Internet website free of charge generally within 24 hours
after we file such material with the SEC. Our website address is
www.ascentmediacorporation.com.
Our corporate governance guidelines, code of business conduct
and ethics, compensation committee charter, nominating and
corporate governance committee charter, and audit committee
charter are available on our website. In addition, we will
provide a copy of any of these documents, free of charge, to any
shareholder who calls or submits a request in writing to
Investor Relations, Ascent Media Corporation, 520 Broadway,
5th Floor, Santa Monica, CA 90401. Telephone No.
(310) 434-7000.
The information contained on our website is not incorporated by
reference herein.
The risks described below and elsewhere in this Annual Report
are not the only ones that relate to our businesses or our
common stock. The risks described below are considered to be the
most material. However, there may be other unknown or
unpredictable economic, business, competitive, regulatory or
other factors that also could have material adverse effects on
our businesses. If any of the events described below were to
occur, our businesses, prospects, financial condition, results
of operations
and/or cash
flows could be materially adversely affected.
12
Factors
Relating to our Corporate Strategy
We
have a limited operating history as a separate company upon
which you can evaluate our performance.
Although our subsidiary AMG was a separate public company prior
to June 2003, we have had an operating history as a separate
public company only since September 2008. There can be no
assurance that our business strategy will be successful on a
long-term basis. We may not be able to grow our businesses as
planned and may not be profitable.
Our
historical financial information may not be representative of
our results as a separate company.
Certain historical financial information included in this Annual
Report reflects our results of operations, financial condition
and cash flow with respect to time periods during which we were
not a stand-alone entity, and may not necessarily reflect what
such metrics would have been had we been a separate, stand-alone
entity pursuing independent strategies during the periods
presented. Past results may not be indicative of future
performance.
We may
not be successful in implementing our acquisition
strategy.
One focus of our corporate strategy is to seek opportunities to
grow free cash flow through strategic acquisitions, which may
include leveraged acquisitions. However, there can be no
assurance that we will be able to consummate that strategy, and
if we are not able to invest our capital in acquisitions that
are accretive to free cash flow it could negatively impact the
growth of our business. Our ability to consummate such
acquisitions may be negatively impacted by various factors,
including among other things:
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failure to identify attractive acquisition candidates on
acceptable terms;
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competition from other bidders;
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inability to raise any required financing; and
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antitrust or other regulatory restrictions, including any
requirements that may be imposed by government agencies as a
condition to any required regulatory approval.
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If we engage in any acquisition, we will incur a variety of
costs, and may never realize the anticipated benefits of the
acquisition. Our business strategy includes the future
acquisition of businesses that we believe are strategically
attractive and that we expect will be accretive to consolidated
free cash flow. If we undertake any acquisition, the process of
operating such acquired business on a stand-alone basis (or, if
necessary, of integrating any acquired business with AMG) may
result in unforeseen operating difficulties and expenditures and
may absorb significant management attention. Moreover, we may
fail to realize the anticipated benefits of any acquisition as
rapidly as expected or at all. Future acquisitions could reduce
our current stockholders ownership percentage, cause us to
incur debt, expose us to future liabilities and result in
amortization expenses related to intangible assets with definite
lives. We may incur significant expenditures in anticipation of
an acquisition that is never realized. In addition, while we
intend to implement appropriate controls and procedures as we
integrate any acquired companies, we may not be able to certify
as to the effectiveness of these companies disclosure
controls and procedures or internal control over financial
reporting within the time periods required by United States
federal securities laws and regulations.
We
cannot be certain that AMG will be successful in integrating any
acquired businesses.
AMGs businesses have historically grown through
acquisitions in selected markets. Integration of new businesses
may present significant challenges, including realizing
economies of scale, eliminating duplicative overheads, and
integrating networks, financial systems and operational systems.
We cannot assure you that, with respect to any past or future
acquisition, AMG will realize anticipated benefits or
successfully integrate any acquired business with its existing
operations.
13
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.
An
inability to access capital markets at attractive rates could
materially increase our expenses.
Although we currently have sufficient cash and investments
available to meet our currently anticipated capital
requirements, we may in the future require access to capital
markets as a source of liquidity for capital expenditures not
satisfied by operating cash flows. However, in such event there
can be no assurance that we will be able to obtain financing on
terms acceptable to us or on any terms. If our ability to access
required capital were to become significantly constrained, we
could incur material interest costs, our financial condition
could be harmed and future results of operations could be
adversely affected.
Factors
Relating to AMGs Operations and the Industries in which
AMG and its Customers Operate
AMGs
business depends on certain client industries.
AMG derives substantially all its revenue from services provided
to the motion picture, television and advertising industries.
Fundamental changes in the business practices of any of these
client industries could cause a material reduction in demand by
AMGs clients for the services offered by AMG. AMGs
business benefits from the volume of motion picture and
television content being created and distributed as well as the
success or popularity of an individual television show.
Accordingly, a decrease in either the supply of, or demand for,
original entertainment content would have a material adverse
effect on AMGs results of operations. Because spending for
television advertising drives the production of new television
programming, as well as the production and deployment of
television commercials and the sale of existing content
libraries for syndication, a reduction in television advertising
spending would adversely affect AMGs business. Factors
that could impact television advertising and the general demand
for original entertainment content include the growing use of
personal video recorders and
video-on-demand
services, continued fragmentation of and competition for the
attention of television audiences, the proliferation of
alternatives to traditional television viewing (including
Internet video services) and general economic conditions.
Further consolidation among companies that produce, own or
distribute entertainment or advertising content could adversely
affect the demand for AMGs services.
We
cannot predict or quantify the impact economic conditions in the
United States and abroad may have on the media and entertainment
industries or the demand for our services.
The media and entertainment industries, as well as our business
and earnings, are affected by general business and economic
conditions in the United States and abroad, and continued or
increased economic weakness could adversely affect demand for
our products and services. Adverse economic conditions, such as
high unemployment rates, fluctuations in debt and equity
markets, poor credit availability, high cost of capital and
declining investor confidence, may cause a significant reduction
in consumer entertainment spending, media production levels,
advertising spending, capital expenditures for systems
integration projects, and media outsourcing demands, which would
in turn materially impair our business and earnings. Our ability
to increase or maintain revenue and earnings could be adversely
affected to the extent that relevant economic environments
remain weak or decline further. We are unable to predict the
extent of any of these potential adverse effects.
14
A loss
of any of AMGs largest customers could substantially
reduce its revenue.
Although AMG serviced over 3,000 customers during the year ended
December 31, 2009, its ten largest customers accounted for
approximately 48% of its consolidated revenue. The ten largest
customers of the Content Services group accounted for
approximately 59% of the revenue of the Content Services
operating segment during the 2009 fiscal year, with one customer
accounting for approximately 13% of the groups revenue.
The ten largest customers of the Creative Services group
accounted for approximately 54% of the revenue of the Creative
Services operating segment during the 2009 fiscal year. The loss
of, and failure to replace, any significant portion of the
revenue generated from sales to any of AMGs largest
customers could have a material adverse effect on the business
of AMG or on the affected operating segment. However, the
Creative Services groups revenue generated by AMGs
largest customers represents various types of services provided
by various facilities within the group for multiple points of
contact at the corporate customer. Network origination services
are generally provided pursuant to contracts with terms of one
to three years or longer. AMGs ten largest customers
include, among others, the parent companies of the six major
motion picture studios.
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.
A
significant labor dispute in AMGs clients industries
could have a material adverse effect on its
business.
An industry-wide strike or other job action by or affecting the
Writers Guild, Screen Actors Guild or other major entertainment
industry union could reduce the supply of original entertainment
content, which would in turn reduce the demand for AMGs
services. An extensive work stoppage would affect feature film
production as well as episodic television and commercial
production and could have a material adverse effect on the
Creative Services group, including the potential loss of key
personnel and the possibility that broadcast and cable networks
will seek to reduce the proportion of their schedules devoted to
scripted programming.
AMG
operates in an increasingly competitive market, and there is a
risk that it may not be able to compete effectively with other
providers in the future.
The entertainment and media services industries in which AMG
competes are highly competitive and service-oriented, and the
network origination and data transmission industries are
currently saturated with companies providing services similar to
AMGs. AMG has few long-term or exclusive service
agreements with its creative
15
services customers. Business generation in these markets is
based primarily on the reputation of the providers
creative talent and customer satisfaction with reliability,
timeliness, quality and price. The major motion picture studios
such as Paramount Pictures, Sony Pictures Entertainment,
Twentieth Century Fox, Universal Pictures, The Walt Disney
Company and Warner Bros. Entertainment, which are AMGs
customers, have the capability to perform similar services
in-house. These studios also have substantially greater
financial resources than AMGs, and in some cases
significant marketing advantages. Thus, depending on the
in-house capacity available to some of these studios, a studio
may be not only a customer but also a competitor. There are also
numerous independent providers of services similar to AMGs
and we actively compete with certain industry participants that
have a unique operating niche or specialty business. If there
were a significant decline in the number of motion pictures or
the amount of original television programming produced, or if
the studios or AMGs other clients either established
in-house post-production facilities or significantly expanded
their in-house capabilities, AMGs operations could be
materially and adversely affected. Such risks could be
exacerbated by continued consolidation among the motion picture,
television and advertising industries.
Piracy
of elements may harm our business.
AMGs customers rely on it to process, complete and deliver
filmed, video and digital footage for motion pictures,
television programming, commercials and other proprietary
content prior to public release and to archive, manage and
distribute copyrighted media elements. Any failure or inability
to protect the intellectual property rights of AMGs
clients from piracy, counterfeiting or other unauthorized use
could negatively affect AMGs business. Although AMG
believes its security policies and procedures are adequate,
there can be no assurances that AMG will not experience
liability losses arising from piracy claims in the future and
any such claims may have a negative impact on AMGs
reputation and our sales.
Loss
of key personnel could negatively impact AMGs
business.
AMGs future success depends in large part on the
retention, continued service and specific abilities of its key
creative, technical and management personnel. A significant
percentage of our revenue can be attributed to services that can
only be performed by certain highly compensated, specialized
employees, and in certain instances, our customers have
identified by name those personnel requested to work on such
customers projects. Competition for highly qualified
employees in the entertainment and media services industry is
intense and the process of locating and recruiting key creative,
technical and management personnel with the combination of
skills and abilities required to execute AMGs strategy is
time-consuming. AMG has employment agreements with many of its
key creative, technical and management personnel. However, there
can be no assurance that AMG will continue to attract, motivate
and retain key personnel, and any inability to do so could
negatively impact our business and our ability to grow.
Changes
in technology may limit the competitiveness of and demand for
AMGs services.
The post-production industry is characterized by technological
change, evolving customer needs and emerging technical
standards. Historically, AMG has expended significant amounts of
capital to obtain equipment using the latest technology.
Obtaining access to any new technologies that may be developed
in AMGs industries will require additional capital
expenditures, which may be significant and may have to be
incurred in advance of any revenue that may be generated by such
new technologies. In addition, the use of some technologies may
require third party licenses, which may not be available on
commercially reasonable terms. Although we believe that AMG will
be able to continue to offer services based on the newest
technologies, we cannot assure you that AMG will be able to
obtain any of these technologies, that AMG will be able to
effectively implement these technologies on a cost-effective or
timely basis or that such technologies will not render obsolete
AMGs role as a provider of motion picture and television
production services. If AMGs competitors providing content
management and delivery services have technology that enables
them to provide services that are more reliable, faster, less
expensive, reach more customers or have other advantages over
the network origination and content distribution services AMG
provides, then the demand for AMGs content management and
delivery services may decrease.
16
Because
AMG uses third-party satellite and terrestrial connectivity
services to provide certain of its creative and content
services, a material disruption to such connectivity services
could have a negative impact on AMGs
operations.
AMG obtains satellite transponder capacity, fiber-optic capacity
and Internet connectivity pursuant to long-term contracts and
other arrangements with third-party vendors. Such connectivity
services are used in connection with many aspects of AMGs
business, including network origination, teleport services,
digital media management, dailies, telecine services,
distribution of advertising, syndicated television programming
and other content, and various Web-based services and
interfaces. Although AMG believes that its arrangements with
connectivity suppliers are adequate, disruptions in such
services may occur from time to time as a result of technical
malfunction, disputes with suppliers, force majeure or other
causes. In the event of any such disruption in satellite or
terrestrial connectivity services, AMG may incur additional
costs to supplement or replace the affected service, and may be
required to compensate its own customers for any resulting
declines in service levels.
While
AMG believes that its business methods and technical processes
do not infringe upon the proprietary rights of any third
parties, there can be no assurances that third parties will not
assert infringement claims against AMG.
AMGs business of providing creative services and content
management and delivery services is highly dependent upon the
technical abilities and knowledge of its personnel and business
methods and processes developed by AMG and its subsidiaries and
their respective predecessors over time. There can be no
assurance that third parties will not bring trade secret,
copyright infringement or other proprietary rights claims
against AMG, or claim that AMGs use of certain
technologies violates a patent. There can be no assurances as to
the outcome of any such claims. However, even if these claims
are not meritorious, they could be costly and could divert
managements attention from other more productive
activities. If it is determined that AMG has infringed upon or
misappropriated a third partys proprietary rights, there
can be no assurance that any necessary license or rights could
be obtained on terms satisfactory to AMG, if at all. The
inability to obtain any such license or rights could result in
the incurrence of expenses and changes in the way AMG operates
its business.
Risk
of loss from earthquakes or other catastrophic events could
disrupt AMGs business.
Some of AMGs purpose-built facilities are located in
Southern California, a region known for seismic activity. Due to
the extensive amount of specialized equipment incorporated into
specially designed editorial suites, digital intermediates
suites and theaters, and other post-production facilities, as
well as teleports, AMGs operations in this region may not
be able to be temporarily relocated to mitigate the impacts of a
catastrophic event. AMG carries insurance for property loss and
business interruption resulting from such events, including
earthquake insurance, subject to deductibles, and for certain
operations has facilities in other geographic locations.
Although we believe AMG has adequate insurance coverage relating
to damage to its property and the temporary disruption of its
business from casualties, and that it could provide services at
other geographic locations, there can be no assurance that such
insurance and other facilities would be sufficient to cover all
of AMGs costs or damages or AMGs loss of income
resulting from its inability to provide services in Southern
California for an extended period of time.
Factors
Relating to Global Financial Conditions
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 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
17
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.
Disruptions
in worldwide credit markets have increased the risk of default
by the issuers of instruments in which we invest cash and other
financial institutions. The failure of any banking institution
in which we deposit our funds or the failure of banking
institutions to operate in the ordinary course could have a
material adverse effect on our results of operations and
financial position.
Recent conditions in global credit and other financial markets
have resulted in significant volatility and disruptions in the
availability of credit and in some cases have pressured the
solvency or liquidity of some financial institutions. Although
we seek to manage the credit risks associated with our cash and
other investments, we are exposed to an increased risk that
financial institutions may fail or that our counterparties may
default on their obligations to us. At December 31, 2009,
our total assets included cash, cash equivalents and investments
of $349 million of which $328 million were invested in
marketable securities, including cash equivalents. Approximately
80% of the marketable securities were invested in money market
funds with the remainder invested in diversified corporate bond
funds. Were one or more of our counterparties to fail or
otherwise become unable to meet its obligations to us, or if any
of the financial institutions with which we invest or in which
we deposit our cash fail or become unable to operate in the
ordinary course, our financial condition could be adversely
affected. An increase in bank failure rates could also have a
material adverse effect on the national or worldwide economy,
which could materially and adversely effect our operations and
the demand for our services.
Factors
Relating to Legislative and Regulatory Matters
Our
businesses are subject to risks of adverse government
regulation.
The industries in which we operate, and those of our customers,
are subject to varying degrees of regulation in the United
States by the FCC and other entities and in foreign countries by
similar entities. There can be no assurance that our businesses,
either directly or through reliance on customers or vendors
impacted by such regulations, will not be adversely affected by
any future legislation, new regulation or deregulation.
Failure
to obtain renewal of FCC licenses could disrupt AMGs
business.
AMG holds licenses, authorizations and registrations from the
FCC required for the conduct of its content services business,
including earth station and various classes of wireless licenses
and an authorization to provide certain services. Many of the
FCC licenses held by AMG are for transmit/receive earth
stations, which cannot be operated without individual licenses.
The licenses for these stations are granted for a period of
fifteen years and, while the FCC generally renews licenses for
satellite earth stations routinely, there can be no assurance
that AMGs licenses will be renewed at their expiration
dates. In addition, AMG relies on third party licenses or
authorizations when it transmits domestic satellite traffic
through earth stations operated by third parties. Our failure,
and the failure of any third parties on which we rely, to obtain
renewals of such FCC licenses could disrupt the content services
segment of AMG and have a material adverse effect on AMG. The
FCC generally grants wireless licenses for ten year terms and
regulates the technical standards governing wireless licenses.
Failure to comply with the FCCs wireless license
regulations may cause the FCC to impose fines and forfeitures on
a licensee. Further material changes in the law and regulatory
requirements must be anticipated, and there can be no assurance
that our businesses will not be adversely affected by future
legislation, new regulation, deregulation or court decisions.
Factors
Relating to our Common Stock
We
have a history of losses and may incur losses in the future,
which could materially and adversely affect the market price of
our common stock.
On a combined basis, our subsidiaries incurred losses in four
out of the last five fiscal years. In future periods, we may not
be able to achieve or sustain profitability on a consistent
quarterly or annual basis. Failure to maintain profitability in
future periods may materially and adversely affect the market
price of our common stock.
18
We
cannot be certain that an active trading market will be
sustained, and our stock price may fluctuate
significantly.
We cannot assure you that an active trading market will be
sustained for our common stock, nor can we predict the prices at
which either series of our common stock may trade. The market
price of our common stock may fluctuate significantly due to a
number of factors, some of which may be beyond our control,
including:
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actual or anticipated fluctuations in our operating results;
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changes in earnings estimated by securities analysts or our
ability to meet those estimates;
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the operating and stock price performance of comparable
companies; and
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domestic and foreign economic conditions.
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It may
be difficult for a third party to acquire us, even if doing so
may be beneficial to our shareholders.
Certain provisions of our certificate of incorporation and
bylaws may discourage, delay or prevent a change in control of
our company that a shareholder may consider favorable. These
provisions include the following:
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a capital structure with multiple series of common stock: a
Series B that entitles the holders to ten votes per share,
a Series A that entitles the holders to one vote per share,
and a Series C that, except in such limited circumstances
as may be required by applicable law, entitles the holders to no
voting rights;
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authorizing the issuance of blank check preferred
stock, which could be issued by our board of directors to
increase the number of outstanding shares and thwart a takeover
attempt;
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classifying our board of directors with staggered three-year
terms, which may lengthen the time required to gain control of
our board of directors;
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limiting who may call special meetings of shareholders;
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prohibiting shareholder action by written consent (subject to
certain exceptions), thereby requiring shareholder action to be
taken at a meeting of the shareholders;
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establishing advance notice requirements for nominations of
candidates for election to our board of directors or for
proposing matters that can be acted upon by shareholders at
shareholder meetings;
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requiring shareholder approval by holders of at least 80% of our
voting power or the approval by at least 75% of our board of
directors with respect to certain extraordinary matters, such as
a merger or consolidation of our company, a sale of all or
substantially all of our assets or an amendment to our
certificate of incorporation;
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requiring the consent of the holders of at least 75% of the
outstanding Series B common stock (voting as a separate
class) to certain share distributions and other corporate
actions in which the voting power of the Series B common
stock would be diluted by, for example, issuing shares having
multiple votes per share as a dividend to holders of
Series A common stock; and
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the existence of authorized and unissued stock which would allow
our board of directors to issue shares to persons friendly to
current management, thereby protecting the continuity of its
management, or which could be used to dilute the stock ownership
of persons seeking to obtain control of us.
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In addition, John C. Malone, a member of our board of directors
and our largest shareholder in terms of voting power,
beneficially owns shares of our common stock that represent 30%
of the aggregate voting power of our outstanding common stock.
We
have adopted a shareholder rights plan in order to encourage
anyone seeking to acquire our company to negotiate with our
board of directors prior to attempting a takeover.
While the plan is designed to guard against coercive or unfair
tactics to gain control of our company, the plan may have the
effect of making more difficult or delaying any attempts by
others to obtain control of our company.
19
Holders
of a single series of our common stock may not have any remedies
if an action by our directors or officers has an adverse effect
on only that series of our common stock.
Principles of Delaware law and the provisions of our certificate
of incorporation may protect decisions of our board of directors
that have a disparate impact upon holders of any single series
of our common stock. Under Delaware law, the board of directors
has a duty to act with due care and in the best interests of all
of our shareholders, including the holders of all series of our
common stock. Principles of Delaware law established in cases
involving differing treatment of multiple classes or series of
stock provide that a board of directors owes an equal duty to
all common shareholders regardless of class or series and does
not have separate or additional duties to any group of
shareholders. As a result, in some circumstances, our directors
may be required to make a decision that is adverse to the
holders of one series of our common stock. Under the principles
of Delaware law referred to above, you may not be able to
challenge these decisions if a majority of our board of
directors is disinterested, independent and adequately informed
with respect to their decisions and acts in good faith, and in
the honest belief that it is acting in the best interest of all
of our stockholders.
Our
Series B common stock trades on the OTC
Bulletin Board, which is often characterized by volatility
and illiquidity.
The OTC Bulletin Board tends to be highly illiquid, in
part, because there is no national quotation system by which
potential investors can track the market price of shares except
through information received or generated by a limited number of
broker-dealers that make markets in particular stocks. There is
also a greater chance of market volatility for securities that
trade on the OTC Bulletin Board as opposed to a national
exchange or quotation system. This volatility is due to a
variety of factors, including a lack of readily available price
quotations, lower trading volume, absence of consistent
administrative supervision of bid and
ask quotations, and market conditions. The potential
for illiquidity and volatility with respect to our Series B
common stock may also be adversely affected by (i) the
relatively small number of shares of our Series B common
stock held by persons other than our officers, directors and
persons who hold in excess of 10% of the Series B common
stock outstanding, (ii) the relatively small number of such
unaffiliated shareholders, and (iii) the low trading volume
of such shares on the OTC Bulletin Board.
Other
Factors
We may
have substantial indemnification obligations under certain
inter-company agreements we entered into in connection with the
spin-off.
Pursuant to our tax sharing agreement with DHC, we have agreed
to be responsible for all taxes attributable to us or any of our
subsidiaries, whether accruing before, on or after the spin-off
(subject to specified exceptions). We have also agreed to be
responsible for and indemnify DHC with respect to
(i) certain taxes attributable to DHC or any of its
subsidiaries (other than Discovery Communications, LLC) and
(ii) all taxes arising as a result of the spin-off (subject
to specified exceptions). Our indemnification obligations under
the tax sharing agreement are not limited in amount or subject
to any cap. Pursuant to the reorganization agreement we entered
into with DHC in connection with the spin-off, we assumed
certain indemnification obligations designed to make our company
financially responsible for substantially all non-tax
liabilities that may exist relating to the business of AMG,
whether incurred prior to or after the spin-off, as well as
certain obligations of DHC. Any indemnification payments under
the tax sharing agreement or the reorganization agreement could
be substantial.
If we
are unable to satisfy the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002, or our internal control over
financial reporting is not effective, the reliability of our
financial statements may be questioned and our stock price may
suffer.
Section 404 of the Sarbanes-Oxley Act of 2002 requires any
company subject to the reporting requirements of the United
States securities laws to do a comprehensive evaluation of its
and its consolidated subsidiaries internal control over
financial reporting. To comply with this statute, we are
required to document and test our internal control procedures;
our management is required to assess and issue a report
concerning our internal control over financial reporting; and
our independent auditors are required to issue an attestation
regarding our internal control
20
over financial reporting. The fiscal year ending
December 31, 2009 is the first year that our compliance
with Section 404 of the Sarbanes-Oxley Act has been
audited. The rules governing the standards that must be met for
management to assess our internal control over financial
reporting are complex, subject to change, and require
significant documentation, testing and possible remediation to
meet the detailed standards under the rules. During the course
of its testing, our management may identify material weaknesses
or deficiencies which may not be remedied in time to meet the
deadline imposed by the Sarbanes-Oxley Act. If our management
cannot favorably assess the effectiveness of our internal
control over financial reporting or our auditors identify
material weaknesses in our internal control, investor confidence
in our financial results may weaken, and our stock price may
suffer.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
All of our real and tangible personal property is owned or
leased by our subsidiaries or affiliates.
The operations of Ascent Media, through its AMG subsidiary, are
conducted at approximately 56 properties. Certain of these
facilities are used by multiple operations within AMG. In the
United States, AMG utilizes owned and leased properties in
California, Connecticut, Georgia, Illinois, Michigan, New
Jersey, New York, Texas and Virginia; the Content Services group
also operates a satellite earth station and related facilities
in Minnesota. Internationally, AMG utilizes owned and leased
properties in the United Kingdom, in London and Milton Keynes.
In addition, the Content Services group operates two leased
facilities in Singapore.
Worldwide, AMG leases approximately 855,000 square feet and
owns another 270,000 square feet, for a total of
1,125,000 square feet. The Content Services group utilizes
670,000 square feet and the Creative Services group
utilizes 270,000 square feet. Approximately
140,000 square feet is shared between the Content Services
group and the Creative Services group, with the remaining
45,000 square feet utilized by Corporate.
In the United States, AMGs leased properties total
approximately 595,000 square feet and have terms expiring
between April 2010 and October 2017. Several of these agreements
have extension options. The leased properties are used for our
technical operations, office space and media storage.
AMGs international leases total approximately
260,000 square feet and have terms that expire between
January 2011 and June 2021, and are also used for technical
operations, office space and media storage. The majority of the
international leases have extension clauses.
Approximately 210,000 square feet of AMGs owned
properties are located in Southern California, with another
45,000 square feet located in Northvale, New Jersey,
Tappan, New York, and Minneapolis, Minnesota. In addition, AMG
owns approximately 15,000 square feet in London, England.
Nearly all of AMGs owned properties are purpose-built for
its technical and creative service operations. AMGs
facilities are adequate to support its current near-term growth
needs.
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ITEM 3.
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LEGAL
PROCEEDINGS
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None.
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ITEM 4.
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(REMOVED
AND RESERVED)
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21
PART II.
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ITEM 5.
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MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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Market
Information
We have two series of common stock outstanding. Holders of our
Series A common stock are entitled to one vote for each
share held, and holders of our Series B common stock are
entitled to 10 votes for each share held, as well as a separate
class vote on certain corporate actions. Each share of the
Series B common stock is convertible, at the option of the
holder, into one share of Series A common stock; the
Series A common stock is not convertible. Except for such
voting rights, conversion rights and designations, shares of
Series A common stock and Series B common stock are
substantially identical.
Our Series A common stock trades on the NASDAQ Global
Select Market under the symbol ASCMA. Our Series B common
stock is eligible for quotation on the OTC Bulletin Board
under the symbol ASCMB, but it is not actively traded. The
following table sets forth the quarterly range of high and low
sales prices of shares of our Series A common stock from
September 18, 2008 to December 31, 2009. High and low
bid information for our Series B common stock is not
available.
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Series A
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High
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Low
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2009
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First quarter
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26.75
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22.58
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Second quarter
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29.65
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25.66
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Third quarter
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28.51
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24.52
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Fourth quarter
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26.54
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22.37
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2008
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Third quarter
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$
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33.81
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24.41
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Fourth quarter
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$
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26.31
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17.00
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Holders
As of January 31, 2010, there were approximately 1,274 and
70 record holders of our Series A common stock and
Series B common stock, respectively (which amounts do not
include the number of shareholders whose shares are held of
record by banks, brokerage houses or other institutions, but
include each institution as one shareholder).
Dividends
We have not paid any cash dividends on our common stock and we
have no present intention of so doing. Payment of cash
dividends, if any, in the future will be determined by our Board
of Directors in light of our earnings, financial condition and
other relevant considerations.
Securities
Authorized for Issuance Under Equity Compensation
Plans
Information required by this item is incorporated by reference
to our definitive proxy statement for our 2010 Annual Meeting of
shareholders.
22
Stock
Performance Graph
The following performance graph and related information shall
not be deemed soliciting material or
filed with the SEC, nor shall such information be
incorporated by reference into any future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
each as amended, except to the extent we specifically
incorporate it by reference into such filing.
The following graph sets forth the percentage change in the
cumulative total shareholder return on our Series A common
stock for the period beginning September 18, 2008 and ended
December 31, 2009 as compared to the S&P Media Index
and the NASDAQ Stock Market Index over the same period. The
graph assumes $100 was originally invested on September 18,
2008 and that all subsequent dividends were reinvested in
additional shares.
The comparisons in the graph below are based on historical data
and are not intended to forecast the possible future performance
of our Series A common stock.
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9/18/08
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12/31/08
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12/31/09
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ASCMA Series A
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$
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100.00
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$
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80.37
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$
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93.83
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S&P Media Index
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$
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100.00
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$
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71.29
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$
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96.43
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NASDAQ Stock Market Index
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$
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100.00
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$
|
71.71
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$
|
103.19
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23
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ITEM 6.
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SELECTED
FINANCIAL DATA
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Effective September 17, 2008, DHC completed a spin off
transaction pursuant to which our capital stock was distributed
as a dividend to holders of DHCs Series A and
Series B common stock. See the Ascent Media
Spin-Off section of Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations for further information.
The following tables present selected historical information
relating to our financial condition and results of operations
for the past five years. The following data should be read in
conjunction with our consolidated financial statements.
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December 31,
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2009
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2008
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2007
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2006
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2005
|
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Amounts in thousands
|
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Summary Balance Sheet Data:
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|
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|
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Current assets
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|
$
|
416,891
|
|
|
|
490,042
|
|
|
|
362,725
|
|
|
|
316,381
|
|
|
|
385,868
|
|
Property and Equipment, net
|
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$
|
187,498
|
|
|
|
211,812
|
|
|
|
240,549
|
|
|
|
251,631
|
|
|
|
230,742
|
|
Total assets
|
|
$
|
682,483
|
|
|
|
745,304
|
|
|
|
830,986
|
|
|
|
952,919
|
|
|
|
996,627
|
|
Current liabilities
|
|
$
|
70,872
|
|
|
|
91,202
|
|
|
|
119,600
|
|
|
|
114,229
|
|
|
|
84,783
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Stockholders equity
|
|
$
|
582,596
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|
|
|
625,310
|
|
|
|
686,896
|
|
|
|
814,696
|
|
|
|
890,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Years Ended December 31,
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|
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2009
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2008
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2007
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2006
|
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2005
|
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Amounts in thousands, except per share amounts
|
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Summary Statement of Operations Data:
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|
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|
|
|
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|
|
|
|
|
|
|
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Net revenue
|
|
$
|
453,681
|
|
|
|
581,625
|
|
|
|
570,731
|
|
|
|
553,326
|
|
|
|
585,049
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|
Operating income (loss)(a)
|
|
$
|
(42,879
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)
|
|
|
(122,999
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)
|
|
|
(175,740
|
)
|
|
|
(118,244
|
)
|
|
|
2,533
|
|
Net earnings (loss) from continuing operations(a)
|
|
$
|
(59,005
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)
|
|
|
(115,397
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)
|
|
|
(151,202
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)
|
|
|
(92,334
|
)
|
|
|
5,703
|
|
Net earnings (loss)(a)
|
|
$
|
(52,897
|
)
|
|
|
(64,619
|
)
|
|
|
(132,331
|
)
|
|
|
(83,007
|
)
|
|
|
8,970
|
|
Basic and diluted earnings (loss) per common share(b)
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|
$
|
(3.76
|
)
|
|
|
(4.60
|
)
|
|
|
(9.41
|
)
|
|
|
(5.90
|
)
|
|
|
0.64
|
|
|
|
|
(a) |
|
Includes impairment of goodwill of $95,069,000, $165,347,000 and
$93,402,000 for the years ended December 31, 2008, 2007 and
2006, respectively. |
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(b) |
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Basic and diluted net earnings (loss) per common share is based
on (1) 14,061,618 shares, which is the number of
shares issued in the spin off, for all periods prior to 2008,
the year of the spin off, and (2) the actual number of
basic and diluted shares for all periods subsequent to the spin
off. |
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ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
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 consolidated financial statements and the notes
thereto included elsewhere herein.
Overview
We are a holding company and own 100% of our principal operating
subsidiary, Ascent Media Group, LLC (AMG). We sold
our other wholly-owned operating subsidiary, Ascent Media CANS,
LLC (dba AccentHealth) (AccentHealth), on
September 4, 2008.
24
Ascent
Media Spin-Off
On September 17, 2008, Discovery Holding Company
(DHC) completed the spin off of our capital stock to
the holders of DHC Series A and Series B common stock
(the Ascent Media Spin Off). The Ascent Media Spin
Off was effected as a distribution by DHC to holders of its
Series A and Series B common stock of shares of our
Series A and Series B common stock. The Ascent Media
Spin Off did not involve the payment of any consideration by the
holders of DHC common stock and is intended to qualify as a
transaction under Section 368(a) and 355 of the Internal
Revenue Code of 1986, as amended, for United States federal
income tax purposes. The Ascent Media Spin Off was accounted for
at historical cost due to the pro rata nature of the
distribution. The Ascent Media Spin Off was made as a dividend
to holders of record of DHC common stock as of the close of
business on September 17, 2008. The Ascent Media Spin Off
was approved by the board of directors of DHC in connection with
a transaction between DHC and Advance/Newhouse Programming
Partnership (Advance/Newhouse), pursuant to which
DHC and Advance/Newhouse combined their respective interests in
Discovery Communications Holding, LLC. It was a condition to the
Ascent Media Spin Off that the agreement between DHC and
Advance/Newhouse relating to that transaction was in effect and
that all conditions precedent to that transaction (other than
the Ascent Media Spin Off and certain conditions to be satisfied
at the closing thereof) had been satisfied or, to the extent
waivable, waived. Following the Ascent Media Spin Off, we are a
separate publicly traded company, and we and DHC operate
independently.
As a result of becoming a separate publicly traded company, we
incurred costs and expenses greater than those we incurred as a
subsidiary of DHC. These increased costs and expenses were due
to various factors, including, but not limited to:
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Costs associated with complying with the federal securities
laws, including compliance with the Sarbanes-Oxley Act of 2002;
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Increased professional fees for annual and quarterly public
reporting requirements, tax consulting and legal counseling;
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|
|
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Fees paid to our board of directors; and
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|
|
|
Fees associated with public company requirements, such as
listing our Series A common stock on the NASDAQ Global
Market, filing and printing our reporting requirements,
stockholder related expenses and investor relations related
expenses.
|
These costs and expenses, in the aggregate, resulted in
approximately $3 million of additional annual expense in
2009 as compared to those historically reported.
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 recent years, AMG has encountered increasingly challenging
media, entertainment and advertising markets which have impacted
our revenues. In addition, 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 development of
end-to-end
file-based solutions, increased competition in both its Creative
Services and Content Services groups, the need to differentiate
its
25
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 these
non-GAAP financial measures are important indicators 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.
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 year ended December 31,
2009, approximately 38% 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 17% 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.
26
|
|
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|
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|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Consolidated Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
453,681
|
|
|
|
581,625
|
|
|
|
570,731
|
|
Loss from continuing operations before income taxes
|
|
$
|
(41,635
|
)
|
|
|
(115,412
|
)
|
|
|
(166,489
|
)
|
Net loss
|
|
$
|
(52,897
|
)
|
|
|
(64,619
|
)
|
|
|
(132,331
|
)
|
Segment Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group
|
|
$
|
281,050
|
|
|
|
409,111
|
|
|
|
385,379
|
|
Creative Services group
|
|
$
|
172,631
|
|
|
|
172,514
|
|
|
|
185,352
|
|
Adjusted OIBDA
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group
|
|
$
|
25,976
|
|
|
|
36,577
|
|
|
|
36,437
|
|
Creative Services group
|
|
$
|
19,108
|
|
|
|
23,184
|
|
|
|
35,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment adjusted OIBDA
|
|
$
|
45,084
|
|
|
|
59,761
|
|
|
|
71,966
|
|
Corporate general and administrative expenses
|
|
$
|
(25,458
|
)
|
|
|
(28,410
|
)
|
|
|
(22,839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjusted OIBDA(a)
|
|
$
|
19,626
|
|
|
|
31,351
|
|
|
|
49,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted OIBDA as a Percentage of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group
|
|
|
9.2
|
%
|
|
|
8.9
|
%
|
|
|
9.5
|
%
|
Creative Services group
|
|
|
11.1
|
%
|
|
|
13.4
|
%
|
|
|
19.2
|
%
|
|
|
|
(a) |
|
See reconciliation to loss from continuing operations before
income taxes below. |
Revenue. Our consolidated revenue decreased
$127,944,000 or 22.0% and increased $10,894,000 or 1.9% for the
years ended December 31, 2009 and 2008, respectively, as
compared to the prior year. In 2009, Content Services revenue
decreased by $128,061,000 or 31.3% due to (i) a decrease of
$95,511,000 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 with one customer,
Motorola, contributing to a significant amount of the decrease,
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 $13,214,000 due to a
decline in traditional media services due to a weaker economic
climate in the United States and United Kingdom including tape,
duplication, lab, syndication and audio services,
(iii) $6,755,000 due to lower content origination and
transport services in the United States and the United Kingdom
and (iv) unfavorable changes in foreign currency exchange
rates of $10,911,000. These decreases were partially offset by
an increase of $4,165,000 in higher digital services revenues
due to an increase in volumes from existing customers.
For the year ended December 31, 2009, $29,272,000 of the
content services revenue was generated by one customer,
Motorola, Inc., under system integration services contracts. For
the year ended December 31, 2008 and 2007, these Motorola
contracts generated content services revenues of $77,088,000 and
$36,011,000, respectively. 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.
In 2009, Creative Services revenue increased by $117,000 or 0.1%
due to (i) an increase of $14,642,000 in editorial services
in the United States and (ii) an increase of $3,886,000 in
feature film revenue driven by an increase in revenue per title
for digital intermediate services. These increases were
partially offset by (i) a decrease of $12,094,000 in
commercial revenues driven by a weaker worldwide production and
advertising market for 2009 compared to the prior year,
(ii) a decrease of $3,863,000 resulting from the shutdown
of certain operations in the United States which occurred in
late 2008 and early 2009 and (iii) unfavorable changes in
foreign currency exchange rates of $2,086,000.
27
In 2008, Content Services revenue increased by $23,732,000 or
6.2% due to (i) an increase of $31,951,000 in system
integration services revenue reflecting a significant number of
larger projects in the United States and Europe in 2008, with
one customer in the United States contributing to a significant
amount of the increase, (ii) an increase of $8,259,000 for
traditional media services both in the United States and the
United Kingdom and (iii) an increase of $1,238,000 for
content origination and transport services primarily with
existing customers worldwide. These increases were partially
offset by (i) a decrease of $6,625,000 in lab revenues
driven by declines in the photochemical market in the United
States and the disruption impact of consolidation of our labs in
the United Kingdom (ii) a decrease of $4,525,000 in
subtitling services in the United Kingdom, (iii) a decrease
of $2,094,000 in DVD services in the United States driven by
lower number of titles due to delayed transition to BluRay and
(iv) unfavorable changes in foreign currency exchange rates
of $5,638,000.
In 2008, Creative Services revenue decreased by $12,838,000 or
6.9% due to (i) a decrease of $8,798,000 in television post
production services primarily driven by the Writers Guild strike
in early 2008, (ii) a decrease of $4,048,000 in commercial
revenue driven by a weaker worldwide commercial production
market particularly in the latter half of 2008 (iii) a
decrease of $4,130,000 resulting from the shut down of certain
operations in Mexico in early 2008 and in the United States in
late 2008 and (iv) unfavorable changes in foreign currency
exchange rates of $1,282,000. These decreases were partially
offset by an increase of $6,282,000 in feature film revenue
driven by increased titles for digital intermediate and
post-production services.
Cost of Services. Our cost of services
decreased $106,357,000 or 24.4% and increased $27,359,000 or
6.7% for the years ended December 31, 2009 and 2008,
respectively, as compared to the corresponding prior year.
Approximately 75% of the decrease related to lower production
material costs mainly resulting from lower volumes of system
integration services in the Content Services group. Labor costs
also declined as a result of the lower volumes of system
integration services. Further, we restructured the company at
the end of 2008, by combining facilities and reducing the number
of employees at certain locations, which resulted in an
additional reduction in labor and facility costs for the year
ended December 31, 2009, compared to the prior year. 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 $9,741,000 for the year ended
December 31, 2009.
Approximately 78% of the 2008 increase related to higher
production material costs mainly resulting from higher volumes
of system integration services in the Content Services group.
Labor costs also increased as a result of the higher volumes of
system integration services. These costs were partially offset
by lower cost of services in Creative Services driven by
decreases in television production services impacted by the
Writers Guild strike. These increases were offset by favorable
changes in foreign currency exchange rates of $6,059,000 for the
year ended December 31, 2008.
As a percent of revenue, cost of services was 72.5%, 74.8% and
71.5% for the years ended December 31, 2009, 2008 and 2007,
respectively. The 2009 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 implemented across both segments. The
2008 percentage increase is mainly a result of revenue mix
primarily driven by the higher production material costs for
system integration projects in the Content Services group.
Additionally, creative services labor costs decreased to a much
lesser degree than revenue during the period of the Writers
Guild strike, with certain fixed costs remaining regardless of
the decline in revenue.
28
Selling, General and Administrative. Our
selling, general and administrative expenses
(SG&A) are comprised of the following:
|
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|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
SG&A(a)
|
|
$
|
105,159
|
|
|
|
115,021
|
|
|
|
113,710
|
|
Stock-based and long-term incentive compensation
|
|
|
2,401
|
|
|
|
3,531
|
|
|
|
262
|
|
Accretion expense on asset retirement obligations
|
|
|
239
|
|
|
|
296
|
|
|
|
296
|
|
Participating residual interest change in fair value
|
|
|
(4,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SG&A
|
|
$
|
103,738
|
|
|
|
118,848
|
|
|
|
114,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
SG&A includes corporate G&A expenses of $25,458,000,
$28,410,000 and $22,839,000 for the years ended
December 31, 2009, 2008 and 2007, respectively, which are
not included in total segment adjusted OIBDA. |
SG&A, excluding stock-based and long-term incentive
compensation, accretion expense on asset retirement obligations
and participating residual interest change in fair value,
decreased $9,862,000 or 8.6% and increased $1,311,000 or 1.2%
for the years ended December 31, 2009 and 2008,
respectively, as compared to the corresponding prior year. For
2009, the decrease was mainly driven by lower labor and other
administrative 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
$3,674,000 for the year ended December 31, 2009.
For 2008, the increase was due to higher public company costs
primarily for professional fees, start up costs relating to
development efforts on new businesses, higher facility costs and
higher bad-debt expense. These increases were partially offset
by lower personnel costs at the Creative Services group as a
result of the strike and the shutdown of Mexico operations and
the impact of headcount reductions made in the fourth quarter in
conjunction with restructuring activities. In addition,
SG&A was impacted by favorable changes in foreign currency
exchange rates of $2,295,000 for the year ended
December 31, 2008. As a percent of revenue, our SG&A,
excluding stock-based and long-term incentive compensation,
accretion expense on asset retirement obligations and
participating residual interest change in fair value, was 23.2%,
19.8% and 19.9% for the years ended December 31, 2009, 2008
and 2007, respectively.
Stock-based and Long-term Incentive
Compensation. Stock-based and long-term incentive
compensation was $2,401,000, $3,531,000 and $262,000 for the
years ended December 31, 2009, 2008 and 2007, respectively,
and is included in SG&A in our consolidated statements of
operations. The expense for the year ended December 31,
2009, was related to restricted stock and stock option awards
granted to certain executives subsequent to the Ascent Media
Spin Off. The expense for the year ended December 31, 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. The expense for the
year ended December 31, 2007 relates primarily to 2006 LTIP
expense of $276,000.
Participating Residual Interest Change in Fair
Value. For the year ended December 31, 2009,
participating residual interest change in fair value was a
credit of $4,061,000. This amount primarily relates to a credit
of $4,092,000 that was recorded for a reduction in the fair
value of a participating residual interest liability related to
a portion of our system integration business that was acquired
in 2003. See footnote 15 in the financial statements for further
information.
Restructuring Charges. During 2009, we
recorded restructuring charges of $7,273,000, related to
severance costs and facility costs in conjunction with ongoing
structural changes commenced in 2008 that were implemented to
align our organization with our strategic goals and with how we
operate, manage and sell our services. Such changes include the
consolidation of certain facilities in the United Kingdom and
further restructuring and labor cost mitigation measures
undertaken across all of our businesses. Approximately
$5.1 million of the 2009 restructuring charges related to
the Content Services group in the United States and United
Kingdom while the
29
remaining amount related mainly to the Creative Services group.
Any additional future restructuring costs for the ongoing
structural changes being implemented is not currently
determinable.
During 2008, we recorded restructuring charges for severance and
facility costs totaling $8,801,000, which included the
consolidation of certain facilities in the United States and the
United Kingdom, the closing of our operations in Mexico and a
reduction in headcount to realign with the new reporting
structure. Approximately $4.8 million of the 2008
restructuring charges related to the Creative Services group in
the United States and United Kingdom while the remaining amount
related mainly to the Content Services group.
During 2007, we recorded restructuring charges of $761,000
related to severance in conjunction with restructuring efforts
primarily in the Creative Services group in the United Kingdom.
The following table provides the activity and balances of the
restructuring reserve.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Additions
|
|
|
Deductions(a)
|
|
|
Balance
|
|
|
|
|
|
|
Amounts in thousands
|
|
|
|
|
|
Severance
|
|
$
|
5,951
|
|
|
|
761
|
|
|
|
(5,355
|
)
|
|
|
1,357
|
|
Excess facility costs
|
|
|
3,764
|
|
|
|
|
|
|
|
(2,142
|
)
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
$
|
9,715
|
|
|
|
761
|
|
|
|
(7,497
|
)
|
|
|
2,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
1,357
|
|
|
|
5,183
|
|
|
|
(4,014
|
)
|
|
|
2,526
|
|
Excess facility costs
|
|
|
1,622
|
|
|
|
3,618
|
|
|
|
(1,946
|
)
|
|
|
3,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
$
|
2,979
|
|
|
|
8,801
|
|
|
|
(5,960
|
)
|
|
|
5,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
2,526
|
|
|
|
4,313
|
|
|
|
(6,140
|
)
|
|
|
699
|
(b)
|
Excess facility costs
|
|
|
3,294
|
|
|
|
2,960
|
|
|
|
(1,879
|
)
|
|
|
4,375
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
$
|
5,820
|
|
|
|
7,273
|
|
|
|
(8,019
|
)
|
|
|
5,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Primarily represents cash payments. |
|
(b) |
|
Substantially all of this amount is expected to be paid in 2010. |
|
(c) |
|
Substantially all of this amount is expected to be paid by 2012. |
Gain on Sale of Operating Assets, net. The
2009 amounts relates to the gain of $467,000 on the sale of
certain property and equipment. The 2008 amounts include a gain
on sale of $10,174,000 for the sale of Creative Services group
real estate in the United Kingdom for net cash proceeds of
$16,215,000.
Depreciation and Amortization. Depreciation
and amortization expense increased $1,429,000 or 2.6% and
decreased $2,973,000 or 5.1% for the years ended
December 31, 2009 and 2008, respectively, as compared to
the corresponding prior year. These changes included the
favorable impact of changes in foreign currency exchange rates
of $2,307,000 and $573,000 for the years ended December 31,
2009 and 2008, respectively. The 2009 increase is due to an
impairment of $972,000 related to a content services facility
and the depreciation expense on property and plant from
acquisitions that occurred at the end of 2008 and in 2009. The
2008 decrease is the result of a decrease in property, plant and
equipment as the amount of assets that were either sold or fully
depreciated exceeded the depreciation on new assets placed in
service during 2008.
Impairment of Goodwill. In connection with our
2008 annual evaluation of the recoverability of our goodwill, we
estimated the value of our commercial TV reporting unit, which
is included in the Creative Services group, using a discounted
cash flow analysis. The result of this valuation indicated that
the fair value of the commercial TV reporting unit was less than
its carrying value. The commercial TV reporting unit fair value
was then used to calculate an implied value of the goodwill
related to this reporting unit. The $95,069,000 excess of the
carrying amount of the Creative Services goodwill over its
implied value was recorded as an impairment charge in the fourth
quarter of 2008. The impairment charge was the result of lower
future expectations for commercial TV operating cash flow due to
the impact of the current global economic climate on our
customers in the entertainment industry.
30
In connection with our 2007 annual evaluation of the
recoverability of our goodwill, we estimated the value of our
reporting units using a discounted cash flow analysis. The
result of this valuation indicated that the fair value of the
former Network Services group, which is now included in the
Content Services group, was less than its carrying value. The
Network Services reporting unit fair value was then used to
calculate an implied value of the goodwill related to this
reporting unit. The $165,347,000 excess of the carrying amount
of the Content Services goodwill over its implied value was
recorded as an impairment charge in the fourth quarter of 2007.
The impairment charge was the result of lower future
expectations for network services operating cash flow due to a
continued decline in operating cash flow margins as a percent of
revenue, resulting from competitive conditions in the
entertainment and media services industries and increasingly
complex customer requirements that are expected to continue for
the foreseeable future.
Income Taxes from Continuing Operations. For
the year ended December 31, 2009, we had a pre-tax loss
from continuing operations of $41,635,000 and an income tax
expense from continuing operations of $17,370,000. For the year
ended December 31, 2008, we had a pre-tax loss from
continuing operations of $115,412,000 and an income tax benefit
from continuing operations of $15,000. For the year ended
December 31, 2007, we had a pre-tax loss from continuing
operations of $166,489,000 and an income tax benefit from
continuing operations of $15,287,000, for an effective tax rate
of 9.2%.
For 2009, we incurred income tax expense despite a pre-tax loss
from operations due to an increase in the valuation allowance of
$34,839,000. For 2008, we incurred a $15,000 income tax benefit
despite a $115,412,000 pre-tax loss from continuing operations
mainly due to (i) the tax impact of $32,290,000 related to
non-deductible goodwill impairment and (ii) an increase in
the valuation allowance of $10,052,000. For 2007, our income tax
rate was significantly lower than the federal income tax rate of
35% primarily from a goodwill impairment charge of $165,347,000
for which we did not receive full tax benefits.
Earnings from Discontinued Operations, Net of Income
Taxes. We recorded earnings from discontinued
operations, net of income taxes of $6,108,000, $50,778,000 and
$18,871,000 for the years ended December 31, 2009, 2008 and
2007, respectively. These amounts included the earnings of the
discontinued operations. The 2008 amount includes the pre-tax
gains on the sale of the discontinued operations totaling
approximately $69 million and $27.4 million in related
income tax expense. See further information about the
discontinued operations below.
Adjusted OIBDA. The following table provides a
reconciliation of total adjusted OIBDA to loss from continuing
operations before income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Total adjusted OIBDA
|
|
$
|
19,626
|
|
|
|
31,351
|
|
|
|
49,127
|
|
Stock-based and long-term incentive compensation
|
|
|
(2,401
|
)
|
|
|
(3,531
|
)
|
|
|
(262
|
)
|
Accretion expense on asset retirement obligations
|
|
|
(239
|
)
|
|
|
(296
|
)
|
|
|
(296
|
)
|
Restructuring and other charges
|
|
|
(7,273
|
)
|
|
|
(8,801
|
)
|
|
|
(761
|
)
|
Depreciation and amortization
|
|
|
(57,120
|
)
|
|
|
(55,691
|
)
|
|
|
(58,664
|
)
|
Gain on sale of operating assets, net
|
|
|
467
|
|
|
|
9,038
|
|
|
|
463
|
|
Impairment of goodwill
|
|
|
|
|
|
|
(95,069
|
)
|
|
|
(165,347
|
)
|
Participating residual interest change in fair value
|
|
|
4,061
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
1,244
|
|
|
|
7,587
|
|
|
|
9,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
$
|
(41,635
|
)
|
|
|
(115,412
|
)
|
|
|
(166,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content Services group segment adjusted OIBDA as a percentage of
revenue was 9.2%, 8.9% and 9.5% for the years ended
December 31, 2009, 2008 and 2007, respectively. The
increase in the Content Services group segment adjusted OIBDA
margin for the year ended December 31, 2009, was due to
lower labor and other administrative costs as a result of our
2009 cost mitigation measures and a $2.7 million loss that
was recorded in 2008 on a system integration contract. The
decrease in Content Services group segment adjusted OIBDA margin
for the year ended
31
December 31, 2008, was mainly the result of revenue mix
from an increase in system integration projects in 2008 which
incur higher production material and labor costs and the
$2.7 million 2008 contract loss mentioned above.
The primary cost components for the Content Services group are
labor and materials, with these costs comprising about 67% of
the segment revenue. The other cost components for the Content
Services group are facility costs, production equipment and
general and administrative expenses.
Content Services group segment adjusted OIBDA decreased
$10,601,000 or 29.0% for the year ended December 31, 2009,
compared to the prior year. This decrease was due to (i) a
decrease of $8,639,000 from lower system integration revenues,
(ii) $1,480,000 from lower revenues for traditional media
services in the United States and (iii) $1,517,000 of costs
for development of new business initiatives and research and
development. This decrease was partially offset by $1,915,000
due to higher digital services revenue.
Content Services group segment adjusted OIBDA increased $140,000
or 0.4% for the year ended December 31, 2008, compared to
the prior year. This increase was due to (i) $6,777,000
driven by higher systems integration revenues and
(ii) $917,000 driven by higher content distribution and
transport services. These increases were partially offset by
(i) a decrease of $2,853,000 in digital media services as
more complex projects increased costs, (ii) a $2,700,000
loss recorded on a systems integration contract, and
(iii) $2,100,000 startup costs relating to development
efforts on new businesses.
Creative Services group segment adjusted OIBDA as a percentage
of revenue was 11.1%, 13.4% and 19.2% for the years ended
December 31, 2009, 2008 and 2007, respectively. The
decrease in the segment adjusted OIBDA margin for the Creative
Services group for the year ended December 31, 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 decrease in the
segment adjusted OIBDA margin for the Creative Services group
for the year ended December 31, 2008, was due to labor
costs which decreased to a much lesser degree than revenue
during the period of the Writers Guild strike, with certain
fixed costs remaining regardless of the decline in revenue.
The services provided by the Creative Services group are labor
intensive and they require high labor and facility costs, with
these costs representing almost 75% 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
$4,076,000 or 17.6% for the year ended December 31, 2009,
compared to the prior year. This decrease was due to
(i) $6,961,000 due to lower worldwide commercial revenues
as a result of a weaker commercial production market in 2009 and
(ii) $2,718,000 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 (i) $2,417,000 due to higher revenues from
editorial services in the United States and (ii) $2,183,000
due to higher feature film revenues driven by an increase in
revenue per title for digital intermediate services.
Creative Services group segment adjusted OIBDA decreased
$12,345,000 or 34.7% for the year ended December 31, 2008,
compared to the prior year. This decrease was due to
(i) $8,018,000 from lower commercial revenues and declines
in the average size of commercial projects resulting in a lower
margin revenue mix, (ii) $5,053,000 from the impact of the
Writers Guild strike as certain fixed costs and staffing levels
continued as revenue declined and (iii) $2,400,000
primarily from duplicative rent and facility closures. These
declines were offset by an increase of $2,537,000 from higher
revenues in feature films and digital intermediate projects.
Discontinued
Operations
Chiswick
Park
On December 21, 2009, we entered into a letter of intent to
sell the assets and operations of our Chiswick Park facility in
the United Kingdom, which was previously included in our Content
Services group, to Discovery Communications, Inc. The sale
closed in February 2010 for net cash proceeds of approximately
$35 million. We expect to recognize a pre-tax gain of
approximately $26 million from the sale, subject to
customary post-closing adjustments. For the year ended
December 31, 2009, the Chiswick Park operations generated
approximately
32
$18.4 million in revenue and contributed $11.8 million
in adjusted OIBDA. The Chiswick Park assets and liabilities have
been classified as held for sale and the results of operations
of the Chiswick Park facility have been treated as discontinued
operations in the consolidated financial statements for all
periods presented.
AccentHealth
AccentHealth, which was acquired in January 2006, operated an
advertising-supported captive audience television network in
doctor office waiting rooms nationwide. AccentHealth was part of
the Content Services group. On September 4, 2008, we
completed the sale of 100% of the ownership interests in
AccentHealth to an unaffiliated third party for net cash
proceeds of $118,641,000. Our board of directors determined that
AccentHealth was a non-core asset, and the sale of AccentHealth
would be consistent with our strategy of continuing to invest in
core business operations while seeking opportunities to divest
our non-core assets. We recognized a pre-tax gain on the sale of
$63,929,000 and $25,566,000 of income tax expense on the gain.
Palm
Bay
Ascent Media Systems & Technology Services, LLC,
located in Palm Bay, Florida (Palm Bay), provided
field service operations through an on-staff network of field
engineers located throughout the United States and was part of
the Content Services group. On September 8, 2008, AMG sold
Palm Bay to an unaffiliated third party for net cash proceeds of
$7,040,000. AMG recognized a gain on this sale of $3,370,000,
and income tax expense of $1,348,000 on such gain.
Visiontext
Visiontext Limited (Visiontext) operated a
post-production subtitling business in the United Kingdom and
United States and was part of the Creative Services group. On
September 30, 2008, AMG sold Visiontext to an unaffiliated
third party for net cash proceeds of $2,150,000. AMG recognized
a gain on this sale of $1,777,000, and income tax expense of
$611,000 on such gain.
Liquidity
and Capital Resources
At December 31, 2009, we have $292,914,000 of cash and cash
equivalents on a consolidated basis. In addition, we have
investments in marketable securities of $56,197,000, 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 our cash flows from
operating activities, which are currently generated entirely
from the operations of AMG. During the years ended
December 31, 2009, 2008 and 2007, our cash flow from
operating activities was $35,974,000, $21,041,000 and
$61,176,000, 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 significantly 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
general and administrative expenses which are not included in
segment adjusted OIBDA.
During the years ended December 31, 2009, 2008 and 2007, we
used cash of $29,986,000, $37,162,000 and $38,852,000,
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 2009, we purchased marketable securities
consisting of diversified corporate bond funds for cash of
$68,126,000 in order to improve our investment rate of return.
We sold a portion of these securities for cash proceeds of
$16,309,000. During 2008, we sold marketable securities for cash
of $23,545,000.
In considering our liquidity requirements for 2010 and
subsequent periods, we evaluated our known future commitments
and our expected capital expenditure requirements, as well as
our cash flow from continuing operations for the fiscal year
2009 and our understanding of the variable factors driving such
cash flow from
33
continuing operations. We considered that currently we have less
than $8 million of capital leases which will be paid over
the next five years and we have no short or long-term bank debt.
In addition, we have approximately $4 million of other
commitments most of which are expected to be paid in three to
five years. Our annual capital expenditure requirements include
expenditures required to maintain or enhance our existing
business and discretionary expenditures that could be adjusted
by management. We do not currently have any commitments for
capital expenditures to be incurred following our 2010 fiscal
year. Based on this analysis, 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 for 2010 and for the
foreseeable future.
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.
Off-Balance
Sheet Arrangements and Contractual Obligations
Information concerning the amount and timing of required
payments under our contractual obligations at December 31,
2009 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
After 5
|
|
|
|
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
Years
|
|
|
Total
|
|
|
|
Amounts in thousands
|
|
|
Operating leases
|
|
$
|
24,453
|
|
|
|
39,496
|
|
|
|
25,486
|
|
|
|
38,648
|
|
|
|
128,083
|
|
Capital lease
|
|
|
2,392
|
|
|
|
4,108
|
|
|
|
1,136
|
|
|
|
|
|
|
|
7,636
|
|
Other
|
|
|
215
|
|
|
|
517
|
|
|
|
2,810
|
|
|
|
89
|
|
|
|
3,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
27,060
|
|
|
|
44,121
|
|
|
|
29,432
|
|
|
|
38,737
|
|
|
|
139,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have contingent liabilities related to legal proceedings and
other matters arising in the ordinary course of business.
Although it is reasonably possible we may incur losses upon
conclusion of such matters, an estimate of any loss or range of
loss cannot be made. In the opinion of management, it is
expected that amounts, if any, which may be required to satisfy
such contingencies will not be material in relation to the
accompanying consolidated financial statements.
Recent
Accounting Pronouncements
In June 2009, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles a replacement of FASB
Statement No. 162). This guidance establishes the
FASB Accounting Standards Codification (ASC) as the
single source of authoritative GAAP and is effective for
financial statements issued for interim and annual periods
ending after September 15, 2009.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events, which has been codified in
the Subsequent Events Topic in the FASB ASC. This statement
establishes principles and requirements for reporting events or
transactions occurring after the balance sheet date. The
guidance requires an entity to disclose the date through which
subsequent events have been evaluated and whether it is the date
the financial statements were issued. This statement is
effective for interim and annual reporting periods ending after
June 15, 2009. The adoption of this guidance did not have a
material effect on the Companys financial statements. In
February 2010, this guidance was amended, effective immediately,
to exclude this disclosure for companies that are required to
file their financial statements with the Securities and Exchange
Commission.
In December 2007, the FASB issued SFAS No. 141(R),
Business Combinations, which has been
codified in the Business Combination Topic in the FASB
Accounting Standards Codification (ASC). The
adoption of the requirements of this statement applies
prospectively to business combinations for which the acquisition
date is on or
34
after fiscal years beginning after December 15, 2008. The
statement significantly changed the accounting for business
combinations, and under this statement, an acquiring entity is
required to recognize all the assets acquired and liabilities
assumed in a transaction at the acquisition-date fair value with
limited exceptions. In addition, the statement changed the
accounting treatment for certain specific items, including
acquisition costs, noncontrolling interests, acquired contingent
liabilities, in-process research and development, restructuring
costs and changes in deferred tax asset valuation allowances and
income tax uncertainties after the acquisition date. We adopted
this statement on January 1, 2009 and all acquisitions
subsequent to that date have been recorded under these new
accounting provisions.
Critical
Accounting Policies and Estimates
Valuation of Long-lived Assets and Amortizable Other
Intangible Assets. We perform impairment tests
for our long-lived assets if an event or circumstance indicates
that the carrying amount of our long-lived assets may not be
recoverable. In response to changes in industry and market
conditions, we may also strategically realign our resources and
consider restructuring, disposing of, or otherwise exiting
businesses. Such activities could result in impairment of our
long-lived assets or other intangible assets. We are subject to
the possibility of impairment of long-lived assets arising in
the ordinary course of business. We regularly consider the
likelihood of impairment and may recognize impairment if the
carrying amount of a long-lived asset or intangible asset is not
recoverable from its undiscounted cash flows in accordance with
the Property, Plant and Equipment Topic of the FASB ASC.
Impairment is measured as the difference between the carrying
amount and the fair value of the asset. We use both the income
approach and market approach to estimate fair value. Our
estimates of fair value are subject to a high degree of judgment
since they include a long-term forecast of future operations.
Accordingly, any value ultimately derived from our long-lived
assets may differ from our estimate of fair value.
Valuation of Trade Receivables. We must make
estimates of the collectability of our trade receivables. Our
management analyzes the collectability based on historical bad
debts, customer concentrations, customer credit- worthiness,
current economic trends and changes in our customer payment
terms. We record an allowance for doubtful accounts based upon
specifically identified receivables that we believe are
uncollectible. In addition, we also record an amount based upon
a percentage of each aged category of our trade receivables.
These percentages are estimated based upon our historical
experience of bad debts. Our trade receivables balance was
$91,414,000, net of allowance for doubtful accounts of
$7,274,000, as of December 31, 2009. As of
December 31, 2008, our trade receivables balance was
$112,473,000, net of allowance for doubtful accounts of
$9,200,000.
Valuation of Deferred Tax Assets. In
accordance with the Income Taxes Topic of the FASB ASC, we
review the nature of each component of our deferred income taxes
for the ability to realize the future tax benefits. As part of
this review, we rely on the objective evidence of our current
performance and the subjective evidence of estimates of our
forecast of future operations. Our estimates of realizability
are subject to a high degree of judgment since they include such
forecasts of future operations. After consideration of all
available positive and negative evidence and estimates, we have
determined that it is more likely than not that we will not
realize the tax benefits associated with our United States
deferred tax assets and certain foreign deferred tax assets, and
as such, we have a valuation allowance which totaled $59,811,000
and $24,461,000 as of December 31, 2009 and 2008,
respectively.
|
|
ITEM 7A.
|
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 and results of operations.
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
Our consolidated financial statements are filed under this Item,
beginning on Page 36. The financial statement schedules
required by
Regulation S-X
are filed under Item 15 of this Annual Report on
Form 10-K.
35
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
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 December 31, 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 control
over financial reporting identified during the three months
ended December 31, 2009 that has materially affected, or is
reasonably likely to materially affect, its internal control
over financial reporting.
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Ascent Medias management is responsible for establishing
and maintaining adequate internal control over the
Companys financial reporting. The Companys internal
control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the consolidated
financial statements and related disclosures in accordance with
generally accepted accounting principles. The Companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions of the Company; (2) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of the consolidated financial statements
and related disclosures in accordance with generally accepted
accounting principles; (3) provide reasonable assurance
that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and
directors of the Company; and (4) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Companys assets that could have a material effect on the
consolidated financial statements and related disclosures.
Because of inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies and procedures may deteriorate.
The Company assessed the design and effectiveness of internal
control over financial reporting as of December 31, 2009.
In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal
Control Integrated Framework.
Based upon our assessment using the criteria contained in COSO,
management has concluded that, as of December 31, 2009,
Ascent Medias internal control over financial reporting is
effectively designed and operating effectively.
Ascent Medias independent registered public accountants
audited the consolidated financial statements and related
disclosures in the Annual Report on
Form 10-K
and have issued an attestation report on the effectiveness of
the Companys internal control over financial reporting.
This report appears on page 37 of this Annual Report on
Form 10-K.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
36
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Ascent Media Corporation:
We have audited Ascent Media Corporations internal control
over financial reporting as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the Managements Report on
Internal Control over Financial Reporting in Item 9A. Our
responsibility is to express an opinion on the Companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Ascent Media Corporation maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2009, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Ascent Media Corporation and
subsidiaries as of December 31, 2009 and 2008, and the
related consolidated statements of operations and comprehensive
loss, cash flows and stockholders equity for each of the
years in the three-year period ended December 31, 2009, and
our report dated March 12, 2010 expressed an unqualified
opinion on those consolidated financial statements.
Los Angeles, California
March 12, 2010
37
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Ascent Media Corporation:
We have audited the accompanying consolidated balance sheets of
Ascent Media Corporation and subsidiaries as of
December 31, 2009 and 2008, and the related consolidated
statements of operations and comprehensive loss, cash flows and
stockholders equity for each of the years in the
three-year period ended December 31, 2009. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Ascent Media Corporation and subsidiaries as of
December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Ascent Media Corporations internal control over financial
reporting as of December 31, 2009, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated March 12, 2010 expressed an unqualified opinion on
the effectiveness of the Companys internal control over
financial reporting.
Los Angeles, California
March 12, 2010
38
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands, except share amounts
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
292,914
|
|
|
|
341,517
|
|
Trade receivables, net of allowance of $7,274 (2009) and
$9,200 (2008)
|
|
|
91,414
|
|
|
|
112,473
|
|
Prepaid expenses
|
|
|
9,756
|
|
|
|
11,410
|
|
Deferred income tax assets, net (note 11)
|
|
|
562
|
|
|
|
10,826
|
|
Assets held for sale (note 8)
|
|
|
2,817
|
|
|
|
1,918
|
|
Income taxes receivable
|
|
|
17,793
|
|
|
|
9,122
|
|
Other current assets
|
|
|
1,635
|
|
|
|
2,776
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
416,891
|
|
|
|
490,042
|
|
Investments in marketable securities (note 9)
|
|
|
56,197
|
|
|
|
|
|
Property and equipment, net (note 5)
|
|
|
187,498
|
|
|
|
211,812
|
|
Deferred income tax assets, net (note 11)
|
|
|
1,029
|
|
|
|
22,545
|
|
Assets held for sale (note 8)
|
|
|
9,261
|
|
|
|
12,116
|
|
Other assets, net (note 6)
|
|
|
11,607
|
|
|
|
8,789
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
682,483
|
|
|
|
745,304
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
18,731
|
|
|
|
22,374
|
|
Accrued payroll and related liabilities
|
|
|
17,778
|
|
|
|
22,258
|
|
Other accrued liabilities
|
|
|
21,647
|
|
|
|
31,103
|
|
Deferred revenue
|
|
|
8,618
|
|
|
|
11,671
|
|
Liabilities related to assets held for sale (note 8)
|
|
|
4,098
|
|
|
|
3,796
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
70,872
|
|
|
|
91,202
|
|
Other liabilities
|
|
|
29,015
|
|
|
|
28,792
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
99,887
|
|
|
|
119,994
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (note 15)
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value. Authorized
5,000,000 shares; no shares issued
|
|
|
|
|
|
|
|
|
Series A common stock, $.01 par value. Authorized
45,000,000 shares; issued and outstanding
13,446,241 shares at December 31, 2009
|
|
|
134
|
|
|
|
134
|
|
Series B common stock, $.01 par value. Authorized
5,000,000 shares; issued and outstanding
734,127 shares at December 31, 2009
|
|
|
7
|
|
|
|
7
|
|
Series C common stock, $.01 par value. Authorized
45,000,000 shares; no shares issued
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
1,464,925
|
|
|
|
1,459,078
|
|
Accumulated deficit
|
|
|
(878,853
|
)
|
|
|
(825,956
|
)
|
Accumulated other comprehensive loss
|
|
|
(3,617
|
)
|
|
|
(7,953
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
582,596
|
|
|
|
625,310
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
682,483
|
|
|
|
745,304
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands, except
|
|
|
|
per share amounts
|
|
|
Net revenue
|
|
$
|
453,681
|
|
|
|
581,625
|
|
|
|
570,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
328,896
|
|
|
|
435,253
|
|
|
|
407,894
|
|
Selling, general, and administrative, including stock-based and
long-term compensation (note 12)
|
|
|
103,738
|
|
|
|
118,848
|
|
|
|
114,268
|
|
Restructuring and other charges (note 7)
|
|
|
7,273
|
|
|
|
8,801
|
|
|
|
761
|
|
Gain on sale of operating assets, net
|
|
|
(467
|
)
|
|
|
(9,038
|
)
|
|
|
(463
|
)
|
Depreciation and amortization
|
|
|
57,120
|
|
|
|
55,691
|
|
|
|
58,664
|
|
Impairment of goodwill (note 6)
|
|
|
|
|
|
|
95,069
|
|
|
|
165,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496,560
|
|
|
|
704,624
|
|
|
|
746,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(42,879
|
)
|
|
|
(122,999
|
)
|
|
|
(175,740
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,660
|
|
|
|
6,579
|
|
|
|
11,066
|
|
Other (expense) income, net
|
|
|
(1,416
|
)
|
|
|
1,008
|
|
|
|
(1,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,244
|
|
|
|
7,587
|
|
|
|
9,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(41,635
|
)
|
|
|
(115,412
|
)
|
|
|
(166,489
|
)
|
Income tax (expense) benefit from continuing operations
(note 11)
|
|
|
(17,370
|
)
|
|
|
15
|
|
|
|
15,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(59,005
|
)
|
|
|
(115,397
|
)
|
|
|
(151,202
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations
|
|
|
7,869
|
|
|
|
83,838
|
|
|
|
15,725
|
|
Income tax (expense) benefit from discontinued operations
|
|
|
(1,761
|
)
|
|
|
(33,060
|
)
|
|
|
3,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations, net of income taxes
|
|
|
6,108
|
|
|
|
50,778
|
|
|
|
18,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(52,897
|
)
|
|
|
(64,619
|
)
|
|
|
(132,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (loss), net of taxes (note 13):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
4,693
|
|
|
|
(18,603
|
)
|
|
|
2,337
|
|
Unrealized holding gains, net of income tax
|
|
|
1,352
|
|
|
|
|
|
|
|
|
|
Pension liability adjustment
|
|
|
(1,709
|
)
|
|
|
(63
|
)
|
|
|
(255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (loss)
|
|
|
4,336
|
|
|
|
(18,666
|
)
|
|
|
2,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(48,561
|
)
|
|
|
(83,285
|
)
|
|
|
(130,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted earnings (loss) per share (note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(4.19
|
)
|
|
|
(8.21
|
)
|
|
|
(10.75
|
)
|
Discontinued operations
|
|
|
0.43
|
|
|
|
3.61
|
|
|
|
1.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3.76
|
)
|
|
|
(4.60
|
)
|
|
|
(9.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
|
(See note 4)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(52,897
|
)
|
|
|
(64,619
|
)
|
|
|
(132,331
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations, net of income tax
|
|
|
(6,108
|
)
|
|
|
(50,778
|
)
|
|
|
(18,871
|
)
|
Depreciation and amortization
|
|
|
57,120
|
|
|
|
55,691
|
|
|
|
58,664
|
|
Stock-based compensation
|
|
|
2,443
|
|
|
|
293
|
|
|
|
|
|
Gain on sale of assets, net
|
|
|
(467
|
)
|
|
|
(9,038
|
)
|
|
|
(463
|
)
|
Impairment of goodwill
|
|
|
|
|
|
|
95,069
|
|
|
|
165,347
|
|
Deferred income tax expense (benefit)
|
|
|
30,802
|
|
|
|
6,059
|
|
|
|
(20,466
|
)
|
Other non-cash credits, net
|
|
|
(2,100
|
)
|
|
|
(8,308
|
)
|
|
|
(592
|
)
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
21,435
|
|
|
|
7,958
|
|
|
|
7,461
|
|
Prepaid expenses and other current assets
|
|
|
(3,023
|
)
|
|
|
1,152
|
|
|
|
(7,203
|
)
|
Payables and other liabilities
|
|
|
(19,635
|
)
|
|
|
(21,160
|
)
|
|
|
(2,084
|
)
|
Operating activities from discontinued operations, net
|
|
|
8,404
|
|
|
|
8,722
|
|
|
|
11,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
35,974
|
|
|
|
21,041
|
|
|
|
61,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(29,986
|
)
|
|
|
(37,162
|
)
|
|
|
(38,852
|
)
|
Cash paid for acquisitions, net of cash acquired
|
|
|
(2,702
|
)
|
|
|
(3,859
|
)
|
|
|
|
|
Purchases of marketable securities
|
|
|
(68,126
|
)
|
|
|
|
|
|
|
|
|
Proceeds from sales of marketable securities
|
|
|
16,309
|
|
|
|
23,545
|
|
|
|
28,292
|
|
Cash proceeds from the sale of discontinued operations
|
|
|
|
|
|
|
127,831
|
|
|
|
|
|
Cash proceeds from the sale of operating assets
|
|
|
1,440
|
|
|
|
18,433
|
|
|
|
1,276
|
|
Other investing activities, net
|
|
|
(1,785
|
)
|
|
|
(93
|
)
|
|
|
(23
|
)
|
Investing activities from discontinued operations, net
|
|
|
(38
|
)
|
|
|
(7,365
|
)
|
|
|
(6,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(84,888
|
)
|
|
|
121,330
|
|
|
|
(15,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash transfers from Discovery Holding Company
(DHC)
|
|
|
|
|
|
|
(1,735
|
)
|
|
|
2,194
|
|
Stock option exercises
|
|
|
2,121
|
|
|
|
|
|
|
|
|
|
Payment of capital lease obligation
|
|
|
(1,810
|
)
|
|
|
(752
|
)
|
|
|
(641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
311
|
|
|
|
(2,487
|
)
|
|
|
1,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(48,603
|
)
|
|
|
139,884
|
|
|
|
47,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
341,517
|
|
|
|
201,633
|
|
|
|
154,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
292,914
|
|
|
|
341,517
|
|
|
|
201,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Preferred
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Parents
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Series A
|
|
|
Series B
|
|
|
Series C
|
|
|
Capital
|
|
|
Investment
|
|
|
Deficit
|
|
|
Earnings (Loss)
|
|
|
Equity
|
|
|
|
Amounts in thousands
|
|
|
Balance at December 31, 2006
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,435,326
|
|
|
|
(629,261
|
)
|
|
|
8,631
|
|
|
|
814,696
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(132,331
|
)
|
|
|
|
|
|
|
(132,331
|
)
|
Other comprehensive earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,082
|
|
|
|
2,082
|
|
Net cash transfers from parent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,194
|
|
|
|
|
|
|
|
|
|
|
|
2,194
|
|
Cumulative effect of accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255
|
|
|
|
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,437,520
|
|
|
|
(761,337
|
)
|
|
|
10,713
|
|
|
|
686,896
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64,619
|
)
|
|
|
|
|
|
|
(64,619
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,666
|
)
|
|
|
(18,666
|
)
|
Contribution of net operating losses from DHC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(553
|
)
|
|
|
23,694
|
|
|
|
|
|
|
|
|
|
|
|
23,141
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
293
|
|
Net cash transfers to parent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,735
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,735
|
)
|
Change in capitalization in connection with Ascent Media Spin
Off (note 2)
|
|
|
|
|
|
|
134
|
|
|
|
7
|
|
|
|
|
|
|
|
1,459,338
|
|
|
|
(1,459,479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
|
|
134
|
|
|
|
7
|
|
|
|
|
|
|
|
1,459,078
|
|
|
|
|
|
|
|
(825,956
|
)
|
|
|
(7,953
|
)
|
|
|
625,310
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,897
|
)
|
|
|
|
|
|
|
(52,897
|
)
|
Other comprehensive earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,336
|
|
|
|
4,336
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,443
|
|
Stock option exercises (note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,121
|
|
Shares withheld for tax liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(263
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
|
|
|
|
134
|
|
|
|
7
|
|
|
|
|
|
|
|
1,464,925
|
|
|
|
|
|
|
|
(878,853
|
)
|
|
|
(3,617
|
)
|
|
|
582,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
42
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
December 31,
2009, 2008 and 2007
|
|
(1)
|
Basis of
Presentation
|
For periods prior to the September 17, 2008 consummation of
the spin off transaction (Ascent Media Spin Off)
described in note 2, the accompanying consolidated
financial statements of Ascent Media Corporation (Ascent
Media or the Company) represent a combination
of the historical financial information of (1) Ascent Media
Group, LLC (AMG), a wholly-owned subsidiary of
Discovery Holding Company (DHC), (2) Ascent
Media CANS, LLC (dba AccentHealth) (AccentHealth), a
wholly-owned subsidiary of DHC until its sale on
September 4, 2008 (see note 8) and (3) cash
and investment assets of DHC. For the periods following
September 17, 2008, the accompanying 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.
Ascent Media is comprised of two reportable segments: Content
Services and Creative Services. The Content Services group
provides a full complement of facilities and services necessary
to optimize, archive, manage, and reformat and repurpose
completed media assets for global distribution via freight,
satellite, fiber and the Internet, as well as 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 Creative Services group provides various technical
and creative services necessary to complete principal
photography into final products, such as feature films, movie
trailers and TV spots, documentaries, independent films,
scripted and reality television, TV movies and mini-series,
television commercials, internet and new media advertising,
music videos, interactive games and new digital media,
promotional and identity campaigns and corporate communications.
These services are referred to generally in the entertainment
industry as post-production services.
AccentHealth operated an advertising-supported captive audience
television network in doctor office waiting rooms nationwide,
and was included as part of the Content Services group for
financial reporting purposes until its sale on September 4,
2008.
|
|
(2)
|
Ascent
Media Spin-Off Transaction
|
During the fourth quarter of 2007, the Board of Directors of DHC
approved a resolution to spin off the capital stock of Ascent
Media to the holders of DHC Series A and Series B
common stock. The Ascent Media Spin Off was approved in
connection with a transaction between DHC and Advance/Newhouse
Programming Partnership (Advance/Newhouse) pursuant
to which DHC and Advance/Newhouse combined their respective
indirect interests in Discovery Communications, LLC
(Discovery).
The Ascent Media Spin Off was completed on September 17,
2008 (the Spin Off Date) and was effected as a
distribution by DHC to holders of its Series A and
Series B common stock of shares of Ascent Media
Series A and Series B common stock, respectively.
Holders of DHC common stock on September 17, 2008 received
0.05 of a share of Ascent Media Series A common stock for
each share of DHC Series A common stock owned and 0.05 of a
share of Ascent Media Series B common stock for each share
of DHC Series B common stock owned. In the Ascent Media
Spin Off, 13,401,886 shares of Ascent Media Series A
common stock and 659,732 shares of Ascent Media
Series B common stock were issued. The Ascent Media Spin
Off did not involve the payment of any consideration by the
holders of DHC common stock and is intended to qualify as a
transaction under Sections 368(a) and 355 of the Internal
Revenue Code of 1986, as amended, for United States federal
income tax purposes.
Following the Ascent Media Spin Off, Ascent Media and DHC
operate independently, and neither has any stock ownership,
beneficial or otherwise, in the other. In connection with the
Ascent Media Spin Off, Ascent Media and DHC entered into certain
agreements in order to govern certain of the ongoing
relationships between Ascent Media and DHC after the Ascent
Media Spin Off and to provide mechanisms for an orderly
transition. These agreements include a Reorganization Agreement,
a Services Agreement and a Tax Sharing Agreement.
43
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
The Reorganization Agreement provided for, among other things,
the principal corporate transactions required to effect the
Ascent Media Spin Off and cross indemnities as well as the
assumption by Ascent Media of certain obligations of DHC
relating to the Ascent Media Spin Off and periods prior to the
effectiveness of the Ascent Media Spin Off and the transfer by
DHC to Ascent Media of approximately $150 million in cash.
Pursuant to the Services Agreement, Ascent Media provided a
subsidiary of DHC with certain general and administrative
services for a one-year period beginning on the date of the
Ascent Media Spin Off, including accounting, finance, human
resources, information technology, payroll and real estate
management services. In consideration for such services,
DHCs subsidiary paid Ascent Media a fee of $1,000,000.
DHCs subsidiary also reimbursed Ascent Media for any
out-of-pocket
expenses incurred by Ascent Media in providing these services.
In addition, during the term of the Services Agreement, Ascent
Media agreed to make cash advances to such subsidiary of DHC
from time to time, in an aggregate principal amount not to
exceed $1.5 million, as reasonably required to meet this
DHC subsidiarys current payroll and to pay third-party
vendors in the ordinary course of its business. Such advances
were due and payable in full on the first anniversary of the
Ascent Media Spin Off and beared interest at the prime rate,
calculated on an average daily balance basis.
Under the Tax Sharing Agreement, Ascent Media was responsible
for all taxes attributable to it or one of its subsidiaries,
whether accruing before, on or after the Ascent Media Spin Off
(other than any such taxes for which DHC is responsible under
the Tax Sharing Agreement). Ascent Media also agreed to be
responsible for and to indemnify DHC with respect to
(i) all taxes attributable to DHC or any of its
subsidiaries (other than Discovery) for any tax period that ends
on or before the date of the Ascent Media Spin Off (and for any
tax period that begins on or before and ends after the date of
the Ascent Media Spin Off, for the portion of that period on or
before the date of the Ascent Media Spin Off), other than such
taxes arising as a result of the Ascent Media Spin Off and
related internal restructuring of DHC and (ii) all taxes
arising as a result of the Ascent Media Spin Off or the internal
restructuring of DHC to the extent such taxes are not the
responsibility of DHC under the Tax Sharing Agreement. DHC is
responsible for (i) all United States federal, state, local
and foreign income taxes attributable to DHC or any of its
subsidiaries for any tax period that began after the date of the
Ascent Media Spin Off (and for any tax period that begins on or
before and ends after the date of the Ascent Media Spin Off, for
the portion of that period after the date of the Ascent Media
Spin Off), other than such taxes arising as a result of the
Ascent Media Spin Off and related internal restructuring of DHC,
(ii) all taxes arising as a result of the Ascent Media Spin
Off to the extent such taxes arise as a result of any breach on
or after the date of the Ascent Media Spin Off of any
representation, warranty, covenant or other obligation of DHC or
of a subsidiary or shareholder of DHC made in connection with
the issuance of the tax opinion relating to the Ascent Media
Spin Off or in the Tax Sharing Agreement, and (iii) all
taxes arising as a result of such internal restructuring of DHC
to the extent such taxes arise as a result of any action
undertaken after the date of the Ascent Media Spin Off by DHC or
a subsidiary or shareholder of DHC.
Pursuant to a Services Agreement between Liberty Media
Corporation (Liberty) and DHC, which was assumed by
Ascent Media in connection with the Ascent Media Spin-Off,
Liberty agreed to provide certain general and administrative
services including legal, tax, accounting, treasury and investor
relations support, as and to the extent requested by Ascent
Media. Ascent Media agreed to reimburse Liberty for direct,
out-of-pocket
expenses incurred by Liberty in providing these services and for
Ascent Medias allocable portion of costs associated with
any shared services or personnel. The Services Agreement
provides for Liberty and Ascent Media to review cost allocations
every six months and adjust such charges, if appropriate.
|
|
(3)
|
Summary
of Significant Accounting Policies
|
Cash
and Cash Equivalents
The Company considers investments with original purchased
maturities of three months or less to be cash equivalents.
44
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
Trade
Receivables
Trade receivables are shown net of an allowance based on
historical collection trends and managements judgment
regarding the collectability of these accounts. These collection
trends, as well as prevailing and anticipated economic
conditions, are routinely monitored by management, and any
adjustments required are reflected in current operations. The
allowance for doubtful accounts as of December 31, 2009 and
2008 was $7,274,000 and $9,200,000, respectively.
A summary of activity in the allowance for doubtful accounts is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
Charged
|
|
|
Write-Offs
|
|
|
End of
|
|
|
|
of Year
|
|
|
to Expense
|
|
|
and Other
|
|
|
Year
|
|
|
|
|
|
|
Amounts in thousands
|
|
|
|
|
|
2009
|
|
$
|
9,200
|
|
|
|
1,581
|
|
|
|
(3,507
|
)
|
|
|
7,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
8,359
|
|
|
|
3,568
|
|
|
|
(2,727
|
)
|
|
|
9,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
8,491
|
|
|
|
2,417
|
|
|
|
(2,549
|
)
|
|
|
8,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentration
of Credit Risk and Significant Customers
For the years ended December 31, 2009 and 2007, no single
customer accounted for more than 10% of consolidated revenue.
For the year ended December 31, 2008, $77,088,000 or 13.3%
of Ascent Medias consolidated revenue was generated by one
customer, Motorola, Inc., under system integration services
contracts.
Fair
Value of Financial Instruments
Fair values of cash equivalents, current accounts receivable and
current accounts payable approximate the carrying amounts
because of their short-term nature. See Note 10 for further
fair value information.
Investments
All investments in marketable securities held by the Company are
classified as
available-for-sale
(AFS) and are carried at fair value generally based
on quoted market prices. The Company records unrealized changes
in the fair value of AFS securities in the consolidated balance
sheet in accumulated other comprehensive income. When these
investments are sold, the gain or loss realized on the sale is
recorded in other income (expense) in the consolidated
statements of operations.
Property
and Equipment
Property and equipment are carried at cost and depreciated using
the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the shorter of
their estimated useful lives or the term of the underlying
lease. Estimated useful lives by class of asset are as follows:
|
|
|
Buildings
|
|
20 years
|
Leasehold improvements
|
|
15 years or lease term, if shorter
|
Machinery and equipment
|
|
5 - 7 years
|
Computer software (included in Machinery and
Equipment in Note 5)
|
|
3 years
|
Depreciation expense for property and equipment was $57,033,000,
$55,548,000 and $58,233,000 for the years ended
December 31, 2009, 2008 and 2007, respectively.
45
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
Goodwill
The Company accounts for its goodwill pursuant to the provisions
of the Intangibles Goodwill and Other Topic of the
FASB ASC. In accordance with the FASB ASC, goodwill is not
amortized, but is tested for impairment annually and whenever
events or changes in circumstances indicate that the carrying
value may not be recoverable. See further discussion of goodwill
impairment in Note 6.
Other
Intangible Assets
Amortizable other intangible assets are amortized on a
straight-line basis over their estimated useful lives of four to
five years, and are reviewed for impairment in accordance with
the Property, Plant and Equipment Topic of FASB ASC.
Long-Lived
Assets
Management reviews the realizability of its long-lived assets
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In
evaluating the value and future benefits of long-term assets,
their carrying value is compared to managements best
estimate of undiscounted future cash flows over the remaining
economic life. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying value of the assets exceeds the estimated fair
value of the assets. For the year ended December 31, 2009,
the Company recorded an asset impairment of $972,000 for one of
its content services facilities, which is included in
depreciation and amortization on the consolidated statement of
operations.
Foreign
Currency Translation
The functional currencies of the Companys foreign
subsidiaries are their respective local currencies. Assets and
liabilities of foreign operations are translated into United
States dollars using exchange rates on the balance sheet date,
and revenue and expenses are translated into United States
dollars using average exchange rates for the period. The effects
of the foreign currency translation adjustments are deferred and
are included in parents investment as a component of
accumulated other comprehensive earnings (loss).
Revenue
Recognition
Revenue from post-production services to customers producing
television programs, feature films and commercial advertising is
recognized when services are provided, based on contracted
rates. Revenue from system integration services is recognized on
the basis of the estimated percentage of completion of
individual contracts. Percentage of completion is calculated
based upon actual labor and equipment costs incurred compared to
total forecasted costs for the contract. Estimated losses on
long-term service contracts are recognized in the period in
which a loss becomes evident. Revenue from content distribution
contracts, which may include multiple elements, is recognized
ratably over the term of the contract as services are provided.
Under such contracts, any services which are not performed
ratably are not material to the contract as a whole.
Prepayments received for services to be performed at a later
date are reflected in the balance sheets as deferred revenue
until such services are provided.
Income
Taxes
The Company accounts for income taxes under the Income Taxes
Topic of the FASB ASC, which prescribes an asset and liability
approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of
events that have been recognized in the Companys
consolidated financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all
expected future events other than proposed changes in the tax
law or rates. Valuation allowances are established when
necessary to reduce
46
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred
tax assets and liabilities.
The Income Taxes Topic of the FASB ASC specifies the accounting
for uncertainty in income taxes recognized in a companys
financial statements and prescribes a recognition threshold and
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. In instances where the Company has taken or
expects to take a tax position in its tax return and the Company
believes it is more likely than not that such tax position will
be upheld by the relevant taxing authority, the Company records
the benefits of such tax position in its consolidated financial
statements.
Advertising
Costs
Advertising costs generally are expensed as incurred.
Advertising expense aggregated $1,606,000, $3,538,000 and
$2,970,000 for the years ended December 31, 2009, 2008 and
2007, respectively.
Stock-Based
Compensation
The Company accounts for stock-based awards pursuant to the
Stock Compensation Topic of the FASB ASC, which requires
companies to measure the cost of employee services received in
exchange for an award of equity instruments (such as stock
options and restricted stock) based on the grant-date fair value
of the award, and to recognize that cost over the period during
which the employee is required to provide service (usually the
vesting period of the award).
The Company calculated the grant-date fair value for all of its
stock options using the Black-Scholes Model. Ascent Media
calculated the expected term of the awards using the simplified
method included in SEC Staff Accounting
Bulletin No. 107. The volatility used in the
calculation is based on the historical volatility of peer
companies. The Company used the risk-free rate for Treasury
Bonds with a term similar to that of the subject options and has
assumed a dividend rate of zero.
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 year. The total weighted
average shares outstanding for the Series A and
Series B shares for the year ended December 31, 2009
and 2008, was 14,086,075 and 14,061,921 shares,
respectively. The number of shares outstanding for the year
ended December 31, 2007 was 14,061,618 shares, which
is the number of shares that were issued on the Spin Off Date.
As of December 31, 2009, the options to purchase Ascent
Media common stock had a dilutive effect of 173,632 shares
for the year and there were 20,000 options that were
anti-dilutive. Since the Company recorded a loss from continuing
operations for the years ended December 31, 2009, 2008 and
2007, diluted EPS is computed the same as basic EPS.
Indemnifications
Pursuant to the tax sharing agreement with DHC, Ascent Media is
responsible for all taxes attributable to it or any of its
subsidiaries, whether accruing before, on or after the Spin-Off
Date. The Company is responsible for and indemnifies DHC with
respect to (i) certain taxes attributable to DHC or any of
its subsidiaries (other than Discovery Communications,
LLC) and (ii) all taxes arising as a result of the
Ascent Media Spin Off. The indemnification obligations under the
tax sharing agreement are not limited in amount or subject to
any cap. Also, pursuant to the reorganization agreement it
entered into with DHC in connection with the Ascent Media Spin
Off, the Company assumed certain indemnification obligations
designed to make it financially responsible for substantially
all non-tax liabilities that may exist relating to the business
of AMG, whether incurred prior to or
47
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
after the spin-off, as well as certain obligations of DHC. As of
December 31, 2009, the Company is not aware of any material
matters under these agreements.
Estimates
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles in the
United States of America (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
consolidated financial statements primarily relate to valuation
of goodwill, other intangible assets, long-lived assets,
deferred tax assets, and the amount of the allowance for
doubtful accounts. These estimates are based on
managements best estimates and judgment. Management
evaluates its estimates and assumptions on an ongoing basis
using historical experience and other factors and adjusts them
when facts and circumstances change. As the effects of future
events cannot be determined with any certainty, actual results
could differ from the estimates upon which the carrying values
were based.
Recent
Accounting Pronouncements
In June 2009, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles a replacement of FASB
Statement No. 162). This guidance establishes the
FASB Accounting Standards Codification (ASC) as the
single source of authoritative GAAP and is effective for
financial statements issued for interim and annual periods
ending after September 15, 2009.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events, which has been codified in
the Subsequent Events Topic in the FASB ASC. This statement
establishes principles and requirements for reporting events or
transactions occurring after the balance sheet date. The
guidance requires an entity to disclose the date through which
subsequent events have been evaluated and whether it is the date
the financial statements were issued. This statement is
effective for interim and annual reporting periods ending after
June 15, 2009. The adoption of this guidance did not have a
material effect on the Companys financial statements. In
February 2010, this guidance was amended, effective immediately,
to exclude this disclosure for companies that are required to
file their financial statements with the Securities and Exchange
Commission.
In December 2007, the FASB issued SFAS No. 141(R),
Business Combinations, which has been
codified in the Business Combination Topic in the FASB
Accounting Standards Codification (ASC). The
adoption of the requirements of this statement applies
prospectively to business combinations for which the acquisition
date is on or after fiscal years beginning after
December 15, 2008. The statement significantly changed the
accounting for business combinations, and under this statement,
an acquiring entity is required to recognize all the assets
acquired and liabilities assumed in a transaction at the
acquisition-date fair value with limited exceptions. In
addition, the statement changed the accounting treatment for
certain specific items, including acquisition costs,
noncontrolling interests, acquired contingent liabilities,
in-process research and development, restructuring costs and
changes in deferred tax asset valuation allowances and income
tax uncertainties after the acquisition date. We adopted this
statement on January 1, 2009 and all acquisitions
subsequent to that date have been recorded under these new
accounting provisions.
48
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
|
|
(4)
|
Supplemental
Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Cash paid for acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired
|
|
$
|
6,285
|
|
|
|
7,937
|
|
|
|
|
|
Net liabilities assumed
|
|
|
(421
|
)
|
|
|
(4,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
5,864
|
|
|
|
3,859
|
|
|
|
|
|
Estimated fair value of contingent consideration for acquisition
|
|
|
(3,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired
|
|
$
|
2,702
|
|
|
|
3,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash paid (received) during the year for income taxes
|
|
$
|
(4,494
|
)
|
|
|
20,921
|
|
|
|
1,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease
|
|
|
|
|
|
|
|
|
|
|
5,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Property
and Equipment
|
Property and equipment at December 31, 2009 and 2008
consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Property and equipment, net:
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
37,055
|
|
|
|
36,654
|
|
Buildings
|
|
|
160,933
|
|
|
|
176,593
|
|
Machinery and equipment
|
|
|
78,804
|
|
|
|
156,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,792
|
|
|
|
369,379
|
|
Accumulated depreciation
|
|
|
(89,294
|
)
|
|
|
(157,567
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
187,498
|
|
|
|
211,812
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Goodwill
and Other Intangible Assets
|
The following table provides the activity and balances of
goodwill in the Creative Services group (amounts in thousands):
|
|
|
|
|
|
|
Goodwill
|
|
|
Balance at January 1, 2008
|
|
$
|
95,069
|
|
Goodwill impairment
|
|
|
(95,069
|
)
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
Acquisitions
|
|
|
1,954
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
1,954
|
|
|
|
|
|
|
In connection with the 2008 annual evaluation of the
recoverability of goodwill, the Company estimated the value of
the commercial TV reporting unit using a discounted cash flow
analysis. The result of this valuation indicated that the fair
value of the commercial TV reporting unit, which is included in
the Creative Services group, was less than its carrying value.
The commercial TV reporting unit fair value was then used to
calculate an implied
49
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
value of the goodwill related to this reporting unit which
resulted in full impairment of the goodwill balance of
$95,069,000 in the fourth quarter of 2008.
In connection with the 2007 annual evaluation of the
recoverability of our goodwill, the Company estimated the value
of its reporting units using a discounted cash flow analysis.
The result of this valuation indicated that the fair value of
the former Network Services group, which is now included in the
Content Services group, was less than its carrying value. The
Network Services reporting unit fair value was then used to
calculate an implied value of the goodwill related to this
reporting unit which resulted in full impairment of the goodwill
balance of $165,347,000 in the fourth quarter of 2007.
For the years ended December 31, 2009, 2008 and 2007, the
Company recorded $87,000, $143,000 and $431,000, respectively,
of amortization expense for other intangible assets.
Amortization expense is expected to be $131,000 per year for the
next five years.
Tradename intangibles of $3,719,000 and $1,848,000 are included
in other assets at December 31, 2009 and 2008,
respectively. The 2009 amount includes $1,871,000 of tradenames
that are being amortized on a straight line basis over
15 years.
|
|
(7)
|
Restructuring
Charges
|
During 2009, 2008 and 2007, the Company completed certain
restructuring activities designed to improve operating
efficiencies and to strengthen its competitive position in the
marketplace primarily through cost and expense reductions. In
connection with these integration and consolidation initiatives,
the Company recorded charges of $7,273,000, $8,801,000 and
$761,000, respectively.
The 2009 restructuring charge related to certain severance and
facility costs in conjunction with ongoing structural changes
commenced in 2008 that were implemented to align our
organization with our strategic goals and with how we operate,
manage and sell our services. Such changes include the
consolidation of certain facilities in the United Kingdom and
further restructuring and labor cost mitigation measures
undertaken across all of our businesses. Approximately
$5.1 million of the 2009 restructuring charges related to
the Content Services group in the United States and United
Kingdom while the remaining amount related mainly to the
Creative Services group. Any additional future restructuring
costs for the ongoing structural changes being implemented is
not currently determinable.
The 2008 restructuring charge related to severance and facility
costs, which included the consolidation of certain facilities in
the United States and the United Kingdom, the closing of our
operations in Mexico and a reduction in headcount to realign
with the new reporting structure. Approximately
$4.8 million of the 2008 restructuring charges related to
the Creative Services group in the United States and United
Kingdom while the remaining amount related mainly to the Content
Services group.
The 2007 restructuring charge related primarily to severance in
the Creative Services group in the United Kingdom.
50
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
The following table provides the activity and balances of the
restructuring reserve. At December 31, 2009, approximately
$3.9 million of the ending liability balance is included in
other accrued liabilities with the remaining amount recorded in
other long-term liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Additions
|
|
|
Deductions(a)
|
|
|
Balance
|
|
|
|
|
|
|
Amounts in thousands
|
|
|
|
|
|
Severance
|
|
$
|
5,951
|
|
|
|
761
|
|
|
|
(5,355
|
)
|
|
|
1,357
|
|
Excess facility costs
|
|
|
3,764
|
|
|
|
|
|
|
|
(2,142
|
)
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
$
|
9,715
|
|
|
|
761
|
|
|
|
(7,497
|
)
|
|
|
2,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
1,357
|
|
|
|
5,183
|
|
|
|
(4,014
|
)
|
|
|
2,526
|
|
Excess facility costs
|
|
|
1,622
|
|
|
|
3,618
|
|
|
|
(1,946
|
)
|
|
|
3,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
$
|
2,979
|
|
|
|
8,801
|
|
|
|
(5,960
|
)
|
|
|
5,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
2,526
|
|
|
|
4,313
|
|
|
|
(6,140
|
)
|
|
|
699
|
(b)
|
Excess facility costs
|
|
|
3,294
|
|
|
|
2,960
|
|
|
|
(1,879
|
)
|
|
|
4,375
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
$
|
5,820
|
|
|
|
7,273
|
|
|
|
(8,019
|
)
|
|
|
5,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Primarily represents cash payments. |
|
(b) |
|
Substantially all of this amount is expected to be paid in 2010. |
|
(c) |
|
Substantially all of this amount is expected to be paid by 2012. |
The consolidated financial statements and accompanying notes of
Ascent Media have been prepared reflecting the following
businesses as discontinued operations in accordance with the
Presentation of Financial Statements Topic of the FASB ASC.
On December 21, 2009, we entered into a letter of intent to
sell the assets and operations of our Chiswick Park facility in
the United Kingdom, which was included in our Content Services
group, to Discovery Communications, Inc. The sale closed in
February 2010 for net cash proceeds of approximately
$35 million. We expect to recognize a pre-tax gain of
approximately $26 million from the sale, subject to
customary post-closing adjustments. For the year ended
December 31, 2009, the Chiswick Park operations generated
approximately $18.4 million in revenue and contributed
$11.8 million in adjusted OIBDA. The Chiswick Park assets
and liabilities have been classified as held for sale and the
results of operations of the Chiswick Park facility have been
treated as discontinued operations in the consolidated financial
statements for all periods presented.
On September 4, 2008, Ascent Media completed the sale of
100% of its ownership interests in AccentHealth, which was part
of the Content Services group, to an unaffiliated third party
for net cash proceeds of $118,641,000. Ascent Media recognized a
pre-tax gain on the sale of $63,929,000, subject to customary
post-closing adjustments, and $25,566,000 of income tax expense
resulting from the gain. Such gain and related income tax
expense are included in earnings from discontinued operations in
the accompanying condensed consolidated statement of operations.
On September 8, 2008, Ascent Media sold 100% of the
outstanding membership interests in Ascent Media
Systems & Technology Services, LLC, which was part of
the Content Services group, located in Palm Bay, Florida
(Palm Bay), to an unaffiliated third party for net
cash proceeds of $7,040,000. Ascent Media recognized a pre-tax
gain on the sale of $3,370,000 and recorded income tax expense
resulting from the gain of $1,348,000. Such gain and related
income tax expense are included in earnings from discontinued
operations in the accompanying condensed consolidated statement
of operations.
51
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
On September 30, 2008, Ascent Media sold 100% of its
ownership interest in Visiontext Limited
(Visiontext), which was part of the Creative
Services group, to an unaffiliated third party for net cash
proceeds of $2,150,000. Ascent Media recognized a pre-tax gain
on the sale of $1,777,000 and recorded income tax expense
resulting from the gain of $611,000. Such gain and related
income tax expense are included in earnings from discontinued
operations in the accompanying condensed consolidated statement
of 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 30,
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
Amounts in thousands
|
|
Revenue
|
|
$
|
18,368
|
|
|
|
49,382
|
|
|
|
60,694
|
|
Earnings before income taxes(a)
|
|
$
|
7,869
|
|
|
|
83,838
|
|
|
|
15,725
|
|
|
|
|
(a) |
|
The 2008 amount 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. |
(9) Investments
in Marketable Securities
During 2009, Ascent Media purchased marketable securities
consisting of diversified corporate bond funds and selected
equity securities for cash. At December 31, 2009, the
investments in marketable securities consisted entirely of
diversified corporate bond funds. The following table presents
the activity of these investments, which have all been
classified as
available-for-sale
securities:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2009
|
|
|
|
Amounts in thousands
|
|
|
Beginning Balance
|
|
$
|
|
|
Purchases
|
|
|
68,126
|
|
Sales (at cost)(a)
|
|
|
(14,259
|
)
|
Unrealized gain
|
|
|
2,330
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
56,197
|
|
|
|
|
|
|
|
|
|
(a) |
|
Total proceeds from the sales were $16,309,000 which included a
pre-tax gain of $2,050,000. |
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):
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2009
|
|
|
|
Amounts in thousands
|
|
|
Accumulated other comprehensive income
|
|
|
|
|
Beginning Balance
|
|
$
|
|
|
Gains, net of tax(a)
|
|
|
2,542
|
|
Gains recognized into earnings, net of tax(b)
|
|
|
(1,190
|
)
|
|
|
|
|
|
Ending Balance
|
|
$
|
1,352
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amount is net of tax of $1,838,000. |
|
(b) |
|
Amount is net of tax of $860,000. |
52
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
(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 December
31 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds(a)
|
|
$
|
327,977
|
|
|
|
|
|
|
|
|
|
|
|
327,977
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
(4,226
|
)
|
|
|
(4,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
327,977
|
|
|
|
|
|
|
|
(4,226
|
)
|
|
|
323,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds(a)
|
|
$
|
272,143
|
|
|
|
|
|
|
|
|
|
|
|
272,143
|
|
Investments in marketable securities(b)
|
|
|
56,197
|
|
|
|
|
|
|
|
|
|
|
|
56,197
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
(3,327
|
)
|
|
|
(3,327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
328,340
|
|
|
|
|
|
|
|
(3,327
|
)
|
|
|
325,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Included in cash and cash equivalents on the consolidated
balance sheet. |
|
(b) |
|
Investments consist entirely of diversified corporate bond funds
and are all classified as available-for-sale securities. |
The Company has elected the practical expedient option for its
investments in money market funds.
The Level 3 liabilities relate to contingent consideration
related to business acquisitions which were computed using
discounted cash flow models which use estimated discount rates.
The following table presents the activity in the Level 3
balances:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Beginning Balance
|
|
$
|
(4,226
|
)
|
|
|
(6,100
|
)
|
Contingent consideration
|
|
|
(3,162
|
)
|
|
|
|
|
Settlements paid in cash
|
|
|
|
|
|
|
1,874
|
|
Amounts credited to income(a)
|
|
|
4,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance(b)
|
|
$
|
(3,327
|
)
|
|
|
(4,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amount consisted of a participating residual interest change in
fair value credit of $4,092,000 and a contingent consideration
change in fair value expense of $31,000. These amounts were
recorded in SG&A on the consolidated statements of
operations. |
53
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
(b) |
|
The 2009 amount consisted of contingent consideration of
$3,193,000 and participating residual interest of $134,000. The
2008 amount consists entirely of participating residual interest. |
For the year ended December 31, 2009, the Company recorded
an asset impairment for one of its content services facilities.
The fair value of the asset was $7,195,000 which resulted in an
impairment charge of $972,000. The fair value was a
non-recurring, Level 3 valuation and was measured using a
discounted cash flow model which uses internal estimates of
future revenues and costs and an estimated discount rate.
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 maturities.
The Companys income tax benefit (expense) from continuing
operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
12,511
|
|
|
|
1,459
|
|
|
|
(5,847
|
)
|
State
|
|
|
204
|
|
|
|
(29
|
)
|
|
|
(712
|
)
|
Foreign
|
|
|
(1,074
|
)
|
|
|
(1,263
|
)
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,641
|
|
|
|
167
|
|
|
|
(6,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(20,098
|
)
|
|
|
2,410
|
|
|
|
16,496
|
|
State
|
|
|
(13,668
|
)
|
|
|
(6,141
|
)
|
|
|
4,294
|
|
Foreign
|
|
|
4,755
|
|
|
|
3,579
|
|
|
|
1,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,011
|
)
|
|
|
(152
|
)
|
|
|
21,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax (expense) benefit
|
|
$
|
(17,370
|
)
|
|
|
15
|
|
|
|
15,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of pretax loss from continuing operations are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Domestic
|
|
$
|
(23,138
|
)
|
|
|
(99,917
|
)
|
|
|
(142,023
|
)
|
Foreign
|
|
|
(18,497
|
)
|
|
|
(15,495
|
)
|
|
|
(24,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(41,635
|
)
|
|
|
(115,412
|
)
|
|
|
(166,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
Income tax benefit differs from the amounts computed by applying
the United States federal income tax rate of 35% as a result of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Computed expected tax benefit
|
|
$
|
14,572
|
|
|
|
40,394
|
|
|
|
58,271
|
|
State and local income taxes, net of federal income taxes
|
|
|
1,918
|
|
|
|
482
|
|
|
|
3,823
|
|
Change in valuation allowance affecting tax expense
|
|
|
(34,839
|
)
|
|
|
(10,052
|
)
|
|
|
(3,188
|
)
|
Goodwill impairment not deductible for tax purposes
|
|
|
|
|
|
|
(32,290
|
)
|
|
|
(35,231
|
)
|
U.S. taxes on foreign income
|
|
|
(776
|
)
|
|
|
(1,436
|
)
|
|
|
(3,323
|
)
|
Non-deductible expenses
|
|
|
(999
|
)
|
|
|
(1,277
|
)
|
|
|
(991
|
)
|
Dividend
|
|
|
|
|
|
|
|
|
|
|
(1,202
|
)
|
Foreign tax credit
|
|
|
|
|
|
|
2,501
|
|
|
|
|
|
Other, net
|
|
|
2,754
|
|
|
|
1,693
|
|
|
|
(2,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit
|
|
$
|
(17,370
|
)
|
|
|
15
|
|
|
|
15,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of deferred tax assets and liabilities as of December
31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Accounts receivable reserves
|
|
$
|
2,974
|
|
|
|
1,653
|
|
Accrued liabilities
|
|
|
11,815
|
|
|
|
17,840
|
|
Other
|
|
|
2,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current deferred tax assets
|
|
|
17,339
|
|
|
|
19,493
|
|
Valuation allowance
|
|
|
(15,992
|
)
|
|
|
(8,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,347
|
|
|
|
11,434
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
26,592
|
|
|
|
20,002
|
|
Property, plant and equipment
|
|
|
2,197
|
|
|
|
2,843
|
|
Intangible assets
|
|
|
16,769
|
|
|
|
16,765
|
|
Other
|
|
|
1,953
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent deferred tax assets
|
|
|
47,511
|
|
|
|
39,670
|
|
Valuation allowance
|
|
|
(43,819
|
)
|
|
|
(16,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,692
|
|
|
|
23,268
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
|
5,039
|
|
|
|
34,702
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Other
|
|
|
(785
|
)
|
|
|
(608
|
)
|
Noncurrent liabilities:
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
(978
|
)
|
|
|
|
|
Other
|
|
|
(1,685
|
)
|
|
|
(723
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,663
|
)
|
|
|
(723
|
)
|
Total deferred tax liabilities
|
|
|
(3,448
|
)
|
|
|
(1,331
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
1,591
|
|
|
|
33,371
|
|
|
|
|
|
|
|
|
|
|
55
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
The Companys deferred tax assets and liabilities are
reported in the accompanying consolidated balance sheets as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Current deferred tax assets, net
|
|
$
|
562
|
|
|
|
10,826
|
|
Long-term deferred tax assets, net
|
|
|
1,029
|
|
|
|
22,545
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
1,591
|
|
|
|
33,371
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, the Company has $286,200,000 and
$30,900,000 in net operating loss carryforwards for state and
foreign tax purposes, respectively. The state net operating
losses expire at various times from 2011 through 2019, and the
foreign net operating losses may be carried forward
indefinitely. The Company has $644,000 of state income tax
credits which will expire at various times through 2011.
Although Ascent Media was included in the DHC consolidated tax
returns while it was a subsidiary of DHC, Ascent Media has
accounted for income taxes on a separate company return basis in
the accompanying condensed consolidated financial statements.
Such methodology resulted in Ascent Media recording income taxes
payable prior to the Ascent Media Spin Off. Because DHC had net
operating losses to offset $23,141,000 of the tax payable in its
consolidated tax return, Ascent Media reduced its income tax
payable by this amount with an offsetting increase to equity.
Prior to July 2005, Ascent Media was a subsidiary of Liberty and
was included in their consolidated tax returns.
During the first quarter of 2008, Liberty reached an agreement
with the IRS with respect to certain tax items that related to
periods prior to the Companys 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 a first quarter 2008 tax expense of
$1,880,000 (35% of $5,370,000). The Company had no expectation
that it 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. During the fourth quarter of 2008,
Liberty closed its IRS audit for tax years through 2005, with no
further adjustments affecting the Company. At December 31,
2008, Ascent Media had fully utilized its federal net operating
losses against its continuing and discontinued operations.
During the current year, the Company performed an assessment of
positive and negative evidence regarding the realization of its
net deferred tax assets. Based on this assessment, management
has determined that it is more likely than not that the Company
will not realize the tax benefits associated with its United
States deferred tax assets and certain foreign deferred tax
assets. As such, for the year ended December 31, 2009, the
Company increased the total valuation allowance by $35,350,000
consisting of an increase of $34,839,000 to tax expense and an
increase of $511,000 to other comprehensive income. At
December 31, 2009, the total valuation allowance balance
was $59,811,000.
The Company believes that the net deferred income tax assets
will be realized based upon its budgeted pre-tax earnings,
adjusted for significant items such as non-recurring charges,
new businesses, and the recognition of taxable income for the
reversal of deferred tax assets and liabilities in the same
future period.
As of December 31, 2009, the Companys income tax
returns for the periods of September 18, 2008 through
December 31, 2008 and the year ended December 31,
2009, as well as the periods July 21, 2005 through
September 17, 2008, while the Company was included in the
consolidated income tax returns of DHC, remain subject to
examination by the IRS.
56
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
A reconciliation of the beginning and ending amount of
unrecognized tax benefits, which is recorded in income taxes
receivable, for the year ended December 31, 2009 is as
follows:
|
|
|
|
|
|
|
2009
|
|
|
|
Amounts in
|
|
|
|
thousands
|
|
|
Balance at January 1, 2009
|
|
$
|
392
|
|
Increases for the tax positions of prior years
|
|
|
14
|
|
Reductions for tax positions of prior years
|
|
|
(88
|
)
|
Foreign currency exchange adjustments
|
|
|
(14
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
304
|
|
|
|
|
|
|
The Company expects to settle approximately $215,000 of the
uncertain tax position during 2010, which will not materially
impact its effective tax rate.
When the tax law requires interest to be paid on an underpayment
of income taxes, the Company recognizes interest expense from
the first period the interest would begin accruing according to
the relevant tax law. Such interest expense is included in other
income, net in the accompanying consolidated statements of
operations. Any accrual of penalties related to underpayment of
income taxes on uncertain tax positions is included in Other
income, net in the accompanying consolidated statements of
operations. As of December 31, 2009, accrued interest and
penalties related to uncertain tax positions were not
significant.
During 2008 and 2007, the Company provided $1,512,000 and
$3,055,000, respectively, of United States tax expense for
future repatriation of cash from its Singapore operations. This
charge represents undistributed earnings from Singapore not
previously taxed in the United States that is anticipated to be
repatriated.
During 2009, the Company restructured its United Kingdom and
Singapore operations which resulted in the Company permanently
reinvesting excess cash from these operations within those
countries. There were no undistributed earnings from these
operations as of December 31, 2009.
|
|
(12)
|
Stock-based
and Long-Term Compensation
|
2006
Ascent Media Group Long-Term Incentive Plan
AMG has made awards to certain employees under its 2006
Long-Term Incentive Plan, as amended, (the 2006
Plan). The 2006 Plan provides the terms and conditions for
the grant of, and payment with respect to, Phantom Appreciation
Rights (PARs) granted to certain officers and other
key personnel of AMG and its subsidiaries. The value of a single
PAR (PAR Value) is equal to the positive amount (if
any) by which (a) the sum of (i) 6% of cumulative free
cash flow (as defined in the 2006 Plan) over a period of up to
six years, divided by 500,000; plus (ii) the calculated
value of AMG, based on a formula set forth in the 2006 Plan,
divided by 10,000,000; exceeds (b) a baseline value
determined at the time of grant. The 2006 Plan is administered
by a committee whose members are designated by our board of
directors. Grants are determined by the committee, with the
first grant occurring on August 3, 2006. The maximum number
of PARs that may be granted under the 2006 Plan is 500,000, and
there were 388,500 PARs granted as of December 31, 2008.
The PARs vest quarterly over a three year period beginning on
the grant date, and vested PARs are payable on March 31,
2012 (or, if earlier, on the six-month anniversary of a
grantees termination of employment for any reason other
than cause) in either cash or stock at the committees
discretion. AMG records a liability and a charge to expense
based on the PAR Value and percent vested at each reporting
period.
Prior to the most recent amendment of the 2006 Plan, the
calculated value and free cash flow of AccentHealth were
included in determining the PAR value. Effective
September 9, 2008, the 2006 Plan was amended to reflect the
sale of AccentHealth. As a result of the amendment, AMG or one
of its subsidiaries will make cash distributions to each grantee
who held PARs on the date of the AccentHealth sale, in an
aggregate amount for each grantee
57
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
representative of the increase in PAR Value related to
AccentHealth from the date of grant of PARs to such grantee
through the date of sale. These cash distributions will be made
over a three year period, beginning in February 2009, with the
majority of grantees receiving their entire distribution in
2009. For the year ended December 31, 2008, AMG recorded a
liability and a charge to selling, general and administrative
expense of $3,523,000 for such distribution.
Ascent
Media Corporation 2008 Incentive Plan
The Ascent Media Corporation 2008 Incentive Plan (the 2008
incentive plan) was adopted by the Board of Directors of
the Company on September 15, 2008. The 2008 incentive plan
is designed to provide additional compensation to certain
employees and independent contractors for services rendered, to
encourage their investment in Ascent Medias capital stock
and to attract persons of exceptional ability to become officers
and employees. The number of individuals who receive awards
under the 2008 incentive plan will vary from year to year and is
not predictable. Awards may be granted as non-qualified stock
options, stock appreciation rights, restricted shares, stock
units, cash awards, performance awards or any combination of the
foregoing (collectively, awards). The maximum number
of shares of Ascent Medias common stock with respect to
which awards may be granted under the 2008 incentive plan is
2,000,000, subject to anti-dilution and other adjustment
provisions of the incentive plan. The base or exercise price of
a stock option or stock appreciation right may not be less than
fair market value on the day it is granted.
Ascent
Media Corporation 2008 Non-Employee Director Incentive
Plan
The Ascent Media Corporation 2008 Non-Employee Director
Incentive Plan (the 2008 director incentive
plan) was adopted by the Board of Directors of the Company
on September 15, 2008. The 2008 director incentive
plan is designed to provide additional compensation to the
non-employee Board of Director members for services rendered and
to encourage their investment in Ascent Medias capital
stock. Awards may be granted as non-qualified stock options,
stock appreciation rights, restricted shares, stock units, cash
awards, performance awards or any combination of the foregoing
(collectively, awards). The maximum number of shares
of Ascent Medias common stock with respect to which awards
may be granted under the 2008 director incentive plan is
500,000, subject to anti-dilution and other adjustment
provisions of the incentive plan. The base or exercise price of
a stock option or stock appreciation right may not be less than
fair market value on the day it is granted.
Other
As of the Spin Off Date, DHC stock options held by an officer
and director of DHC, who is currently a director of DHCs
successor, were converted into options to purchase shares of the
applicable series of Ascent Media common stock and options to
purchase shares of the applicable series of common stock of
DHCs successor. In accordance with the conversion
calculation, the holder received 11,722 Ascent Media
Series A options with exercise prices ranging from $15.21
to $29.42 and 76,210 Ascent Media Series B options with an
exercise price of $25.29. In accordance with the terms of the
original DHC option and the conversion, the holder may elect, at
the exercise date, to convert the Series B options into
93,115 Series A options with an exercise price of $22.53.
All of these options are fully vested. The Ascent Media
Series B options (and the Ascent Media Series A
options into which such Series B options may be converted)
expire in 3 years. The remainder of the Ascent Media
Series A options expire in 5 to 9 years. All of these
options were exercised in 2009.
Grants
of Stock-based Awards
2009
In the fourth quarter of 2009, four non-employee directors were
granted a combined total of 15,923 shares of restricted
stock awards that vest quarterly over two years. The restricted
stock had a fair value of $24.81 per share which was the closing
price of the Ascent Media Series A common stock on the date
of grant.
58
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
In 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.
2008
In the fourth quarter of 2008, each of the three non-employee
directors then on the Board of Ascent Media was granted 11,030
options to purchase Ascent Media Series A common stock with
an exercise price of $21.81. Such options vest quarterly over
two years from the date of grant, terminate 10 years from
the date of grant and had a grant-date fair value of $10.50 per
share, as determined using the Black-Scholes Model. In addition,
the three non-employee directors were each granted 1,146
restricted stock awards that also vest quarterly over two years.
The restricted stock had a fair value of $21.81 per share which
was the closing price of the Ascent Media Series A common
stock on the date of grant.
In the fourth quarter of 2008, two employee officers were
granted a total of 468,858 options to purchase Ascent Media
Series A common stock with a weighted average exercise
price of $22.16 per share. Such options vest quarterly over five
years from the date of the Ascent Media Spin Off, terminate
10 years from the date of Ascent Media Spin Off and had a
weighted-average grant date fair value of $11.14, as determined
using the Black-Scholes Model. In addition, the officers were
granted a total of 126,243 restricted stock awards that vest
quarterly over four years. The restricted stock had a
weighted-average fair value of $22.16 which was equal to the
closing price of the Ascent Media Series A common stock on
the dates of grant.
For the 2008 stock grants discussed above, the weighted average
grant date assumptions used for the Black-Scholes Model were a
volatility factor of 50%, a risk-free interest rate of 2.44%, an
expected life of 5.9 years and a dividend yield of zero.
The following table presents the number and weighted average
exercise price (WAEP) of options to purchase Ascent
Media Series A and Series B common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A
|
|
|
|
|
|
Series B
|
|
|
|
|
|
|
Common Stock
|
|
|
WAEP
|
|
|
Common Stock
|
|
|
WAEP
|
|
|
Outstanding at January 1, 2009
|
|
|
513,670
|
|
|
$
|
20.57
|
|
|
|
76,210
|
|
|
|
|
|
Grants
|
|
|
116,740
|
|
|
$
|
25.30
|
|
|
|
|
|
|
|
|
|
Exercises
|
|
|
(11,722
|
)
|
|
$
|
16.60
|
|
|
|
(76,210
|
)
|
|
$
|
25.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
618,688
|
|
|
$
|
22.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009
|
|
|
155,648
|
|
|
$
|
22.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, the total compensation cost
related to unvested equity awards was approximately $7,540,000.
Such amount will be recognized in the consolidated statements of
operations over a weighted average period of approximately
3.50 years. The intrinsic value of outstanding and
exercisable stock options awards at December 31, 2009 was
$1,182,000 and $563,000, respectively. The weighted average
remaining contractual life of both exercisable and outstanding
awards at December 31, 2009 was 8.75 years.
|
|
(13)
|
Stockholders
Equity
|
Preferred
Stock
The Companys preferred stock is issuable, from time to
time, with such designations, preferences and relative
participating, optional or other rights, qualifications,
limitations or restrictions thereof, as shall be stated and
59
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
expressed in a resolution or resolutions providing for the issue
of such preferred stock adopted by Ascent Medias Board of
Directors. As of December 31, 2009, no shares of preferred
stock were issued.
Common
Stock
Holders of Ascent Media Series A common stock are entitled
to one vote for each share held, and holders of Ascent Media
Series B common stock are entitled to 10 votes for each
share held. Holders of Ascent Media Series C common stock
are not entitled to any voting powers, except as required by
Delaware law. As of December 31, 2009,
13,446,241 shares of Series A common stock was
outstanding. As of December 31, 2009, 734,127 shares
of Series B common stock was outstanding. Each share of the
Series B common stock is convertible, at the option of the
holder, into one share of Series A common stock. As of
December 31, 2009, no shares of Ascent Media Series C
common stock were issued. The following table presents the
activity in the Series A and Series B common stock:
|
|
|
|
|
|
|
|
|
|
|
Series A
|
|
|
Series B
|
|
|
|
Common Stock
|
|
|
Common Stock
|
|
|
Distributed on Spin Off date
|
|
|
13,401,886
|
|
|
|
659,732
|
|
Vesting of restricted stock
|
|
|
7,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
13,409,776
|
|
|
|
659,732
|
|
Conversion from Series B to Series A shares
|
|
|
1,815
|
|
|
|
(1,815
|
)
|
Vesting of restricted stock
|
|
|
22,928
|
|
|
|
|
|
Stock option exercises
|
|
|
11,722
|
|
|
|
76,210
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
13,446,241
|
|
|
|
734,127
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there were 618,688 shares of
Ascent Media Series A common stock reserved for issuance
under exercise privileges of outstanding stock options.
Other
Comprehensive Earnings (Loss)
Accumulated other comprehensive earnings (loss) included in the
consolidated balance sheets and consolidated statement of
stockholders equity reflect the aggregate of foreign
currency translation adjustments and pension adjustments.
The change in the components of accumulated other comprehensive
earnings (loss), net of taxes, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Foreign
|
|
|
Unrealized
|
|
|
|
|
|
Other
|
|
|
|
Currency
|
|
|
Holding
|
|
|
|
|
|
Comprehensive
|
|
|
|
Translation
|
|
|
Gains, Net
|
|
|
Pension
|
|
|
Earnings (Loss),
|
|
|
|
Adjustments(a)
|
|
|
of Income Tax(b)
|
|
|
Adjustments(c)
|
|
|
Net of Taxes
|
|
|
|
|
|
|
Amounts in thousands
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
10,287
|
|
|
|
|
|
|
|
(1,656
|
)
|
|
|
8,631
|
|
Other comprehensive earnings
|
|
|
2,337
|
|
|
|
|
|
|
|
(255
|
)
|
|
|
2,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
12,624
|
|
|
|
|
|
|
|
(1,911
|
)
|
|
|
10,713
|
|
Other comprehensive loss
|
|
|
(18,603
|
)
|
|
|
|
|
|
|
(63
|
)
|
|
|
(18,666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
(5,979
|
)
|
|
|
|
|
|
|
(1,974
|
)
|
|
|
(7,953
|
)
|
Other comprehensive loss
|
|
|
4,693
|
|
|
|
1,352
|
|
|
|
(1,709
|
)
|
|
|
4,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
(1,286
|
)
|
|
|
1,352
|
|
|
|
(3,683
|
)
|
|
|
(3,617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
(a) |
|
No income taxes were recorded on foreign currency translation
amounts for 2009, 2008 and 2007. |
|
(b) |
|
Net of income taxes of $978,000 for 2009. |
|
(c) |
|
No income taxes were recorded on the pension adjustment amounts
for 2009, 2008 and 2007. |
|
|
(14)
|
Employee
Benefit Plans
|
Defined
Contribution Plan
AMG offers a 401(k) defined contribution plan covering most of
its full-time domestic employees. AMG also sponsors a pension
plan for eligible employees of its foreign subsidiaries. The
plans are funded by employee and employer contributions. Total
combined 401(k) plan and pension plan expenses for the years
ended December 31, 2009, 2008 and 2007 were $3,844,000,
$4,328,000 and $4,645,000, respectively.
Management
Incentive Plan
AMG offers a Management Incentive Plan (MIP) which
provides for annual cash incentive awards based on company and
individual performance. Certain executive officers and certain
employees with a title of divisional managing director,
corporate director or higher are eligible to receive awards
under the MIP, as determined by a management incentive plan
compensation committee. To the extent an award is earned, it is
payable no later than two and one-half months following the end
of the applicable plan year. Participants must be employed by
AMG through the payment date to be eligible to receive the
award. The forecasted award liability is accrued on a monthly
basis throughout the plan year. For the year ended
December 31, 2009, the MIP plan was suspended and no
expense was recorded. For the years ended December 31, 2008
and 2007, total MIP expense was $2,567,000 and $2,650,000,
respectively. The MIP liability at December 31, 2008 was
equivalent to the expense for that year.
Defined
Benefit Plans
AMG has two defined benefit plans in the United Kingdom.
Participation in the defined benefit plans is limited with
approximately 142 participants, including retired employees. The
plans are closed to new participants.
AMG uses a measurement date of December 31 for its defined
benefit pension plans.
61
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
The obligations and funded status of the defined benefit plans
for the years ended December 31, 2009 and 2008 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts in thousands
|
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
Benefit Obligation beginning of year
|
|
$
|
7,460
|
|
|
|
11,385
|
|
Service cost
|
|
|
49
|
|
|
|
91
|
|
Interest cost
|
|
|
514
|
|
|
|
475
|
|
Actuarial (gain) loss
|
|
|
1,596
|
|
|
|
(802
|
)
|
Plan amendments
|
|
|
|
|
|
|
114
|
|
Settlements
|
|
|
(81
|
)
|
|
|
(272
|
)
|
Benefits paid
|
|
|
(231
|
)
|
|
|
(421
|
)
|
Member contributions
|
|
|
16
|
|
|
|
22
|
|
Foreign currency exchange rate changes
|
|
|
747
|
|
|
|
(3,132
|
)
|
|
|
|
|
|
|
|
|
|
Benefit Obligation end of year
|
|
|
10,070
|
|
|
|
7,460
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
|
|
|
|
|
Fair Value of plan assets beginning of year
|
|
|
6,215
|
|
|
|
9,124
|
|
Actual return on assets
|
|
|
166
|
|
|
|
(466
|
)
|
Settlements
|
|
|
(99
|
)
|
|
|
(314
|
)
|
Employer contributions
|
|
|
847
|
|
|
|
780
|
|
Member contributions
|
|
|
16
|
|
|
|
22
|
|
Benefits paid
|
|
|
(231
|
)
|
|
|
(421
|
)
|
Foreign currency exchange rate changes
|
|
|
622
|
|
|
|
(2,510
|
)
|
|
|
|
|
|
|
|
|
|
Fair Value of plan assets end of year
|
|
|
7,536
|
|
|
|
6,215
|
|
|
|
|
|
|
|
|
|
|
Unfunded Status
|
|
$
|
(2,534
|
)
|
|
|
(1,245
|
)
|
|
|
|
|
|
|
|
|
|
AMG had recorded the entire unfunded balance in the table above
for each year in the other liability account on the consolidated
balance sheet. The projected benefit obligation and accumulated
benefit obligation at December 31, 2009 and 2008 are equal
to the Benefit obligation end of year
amount in the table above. The accumulated other comprehensive
income balance at December 31, 2009 and 2008, included
pension adjustments of $(3,683,000) and $(1,974,000),
respectively.
The following table sets forth the average assumptions and the
asset category allocations of the defined benefit plans for the
years ended December 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
6.25
|
%
|
Long-term return on plan assets
|
|
|
5.23
|
%
|
|
|
4.83
|
%
|
Price inflation
|
|
|
3.80
|
%
|
|
|
3.00
|
%
|
Asset Category Allocations:
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
44
|
%
|
|
|
49
|
%
|
Equity securities
|
|
|
33
|
%
|
|
|
29
|
%
|
Other
|
|
|
23
|
%
|
|
|
22
|
%
|
62
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
The amount of pension cost recognized for the years ended
December 31, 2009, 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Service cost
|
|
$
|
49
|
|
|
|
104
|
|
|
|
107
|
|
Interest cost
|
|
|
506
|
|
|
|
540
|
|
|
|
551
|
|
Expected return on plan assets
|
|
|
(341
|
)
|
|
|
(419
|
)
|
|
|
(474
|
)
|
Amortization of net loss
|
|
|
141
|
|
|
|
130
|
|
|
|
75
|
|
Recognized transitional liability
|
|
|
|
|
|
|
|
|
|
|
133
|
|
Settlement loss
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
355
|
|
|
|
355
|
|
|
|
457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company employs a mix of investments, insurance policies and
cash at a prudent level of risk in order to maximize the
long-term return on plan assets. The investment objectives are
to meet the future benefit obligations of the pension plans and
to reduce funding volatility as much as possible. The Level 3
activity was not significant during 2009. The fair value of the
plan assets as of December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Cash and cash equivalents
|
|
$
|
440
|
|
|
|
|
|
|
|
|
|
|
|
440
|
|
Pooled investment funds
|
|
|
2,783
|
|
|
|
|
|
|
|
|
|
|
|
2,783
|
|
Debt investments
|
|
|
1,868
|
|
|
|
|
|
|
|
|
|
|
|
1,868
|
|
Insurance policies
|
|
|
1,449
|
|
|
|
|
|
|
|
996
|
|
|
|
2,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,540
|
|
|
|
|
|
|
|
996
|
|
|
|
7,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated future benefit payments as of December 31,
2009 are as follows:
|
|
|
|
|
Year ended December 31:
|
|
|
|
|
2010
|
|
$
|
390
|
|
2011
|
|
$
|
432
|
|
2012
|
|
$
|
167
|
|
2013
|
|
$
|
585
|
|
2014
|
|
$
|
252
|
|
Thereafter
|
|
$
|
1,684
|
|
63
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
|
|
(15)
|
Commitments
and Contingencies
|
Future minimum lease payments under scheduled operating leases,
which are primarily for buildings, equipment and real estate,
having initial or remaining noncancelable terms in excess of one
year are as follows (in thousands):
|
|
|
|
|
Year ended December 31:
|
|
|
|
|
2010
|
|
$
|
24,453
|
|
2011
|
|
$
|
21,935
|
|
2012
|
|
$
|
17,561
|
|
2013
|
|
$
|
12,960
|
|
2014
|
|
$
|
12,526
|
|
Thereafter
|
|
$
|
38,648
|
|
Rent expense for noncancelable operating leases for real
property and equipment was $24,841,000, $25,975,000 and
$22,988,000 for the years ended December 31, 2009, 2008 and
2007, respectively. Various lease arrangements contain options
to extend terms and are subject to escalation clauses.
In December 2003, Ascent Media acquired the operations of Sony
Electronics systems integration center business and
related assets, which is referred to as SIC. In the original
exchange, Sony received the right to be paid by the end of 2008
an amount equal to 20% of the value of the combined business of
Ascent Medias wholly owned subsidiary, AF Associates, Inc.
(AF Associates), and SIC. At the time of the
original exchange, the value of 20% of the combined business of
AF Associates and SIC was estimated at $6,100,000. On
July 30, 2008, Ascent Media and Sony Electronics entered in
to an amended agreement which required Ascent Media to
immediately pay $1,874,000 to Sony Electronics as a partial
payment of the 20% of value, but delayed Sonys right to be
paid further amounts until a date no earlier than
December 31, 2012. In 2009, the combined business of AF
Associates and SIC experienced a significant decline in the
number of large system integration projects as customers reduced
spending in response to a weaker economic climate. As a result,
the fair value of the 20% of the combined business of AF
Associates and SIC was reduced from $6,100,000 to $2,008,000.
Ascent Media recorded a credit of $4,092,000 in SG&A
expense in the consolidated statement of operations. The
remaining liability of $134,000 is included in other liabilities
in the consolidated balance sheet. The combined business of AF
Associates and SIC is included in the Content Services group.
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.
|
|
(16)
|
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 in
2008 through the date of the Ascent Media Spin Off and for the
year ended December 31, 2007 was $24,727,000 and
$41,216,000, 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.
|
|
(17)
|
Information
About Reportable Segments
|
Ascent Medias chief operating decision maker, or his
designee (the CODM), has identified Ascent
Medias reportable segments based on (i) financial
information reviewed by the CODM and (ii) those operating
segments that represent more than 10% of the Ascent Medias
consolidated revenue or earnings before taxes. Based on the
64
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
foregoing criteria, Ascent Medias business units have been
aggregated into two reportable segments: the Content Services
group and the Creative Services group.
Ascent Media is organized into two operating groups: businesses
that provide content services and businesses that provide
creative services. The Content services group provides a full
complement of facilities and services necessary to optimize,
archive, manage, and reformat and repurpose completed media
assets for global distribution via freight, satellite, fiber and
the Internet, as well as the facilities, technical
infrastructure, and operating staff necessary to assemble
programming content for cable and broadcast networks and
distributed media signals via satellite and terrestrial
networks. The Creative Services group provides various technical
and creative services necessary to complete principal
photography into final products, such as feature films, movie
trailers and TV spots, documentaries, independent films,
scripted and reality television, TV movies and mini-series,
television commercials, internet and new media advertising,
music videos, interactive games and new digital media,
promotional and identity campaigns and corporate communications.
These services are referred to generally in the entertainment
industry as post-production services.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies and
are consistent with GAAP.
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 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.
Ascent Medias 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.
65
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
Summarized financial information concerning the reportable
segments is presented in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
Content
|
|
|
Creative
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
Group
|
|
|
Subtotal
|
|
|
Other(1)
|
|
|
Total
|
|
|
|
Amounts in thousands
|
|
|
Year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
281,050
|
|
|
|
172,631
|
|
|
|
453,681
|
|
|
|
|
|
|
|
453,681
|
|
Adjusted OIBDA
|
|
$
|
25,976
|
|
|
|
19,108
|
|
|
|
45,084
|
|
|
|
(25,458
|
)
|
|
|
19,626
|
|
Capital expenditures
|
|
$
|
18,095
|
|
|
|
7,306
|
|
|
|
25,401
|
|
|
|
4,585
|
|
|
|
29,986
|
|
Depreciation and amortization
|
|
$
|
38,528
|
|
|
|
12,867
|
|
|
|
51,395
|
|
|
|
5,725
|
|
|
|
57,120
|
|
Total assets
|
|
$
|
193,750
|
|
|
|
96,493
|
|
|
|
290,243
|
|
|
|
392,240
|
|
|
|
682,483
|
|
Year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
409,111
|
|
|
|
172,514
|
|
|
|
581,625
|
|
|
|
|
|
|
|
581,625
|
|
Adjusted OIBDA
|
|
$
|
36,577
|
|
|
|
23,184
|
|
|
|
59,761
|
|
|
|
(28,410
|
)
|
|
|
31,351
|
|
Capital expenditures
|
|
$
|
22,510
|
|
|
|
9,903
|
|
|
|
32,413
|
|
|
|
4,749
|
|
|
|
37,162
|
|
Depreciation and amortization
|
|
$
|
37,744
|
|
|
|
12,226
|
|
|
|
49,970
|
|
|
|
5,721
|
|
|
|
55,691
|
|
Total assets
|
|
$
|
236,452
|
|
|
|
98,587
|
|
|
|
335,039
|
|
|
|
410,265
|
|
|
|
745,304
|
|
Year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
385,379
|
|
|
|
185,352
|
|
|
|
570,731
|
|
|
|
|
|
|
|
570,731
|
|
Adjusted OIBDA
|
|
$
|
36,437
|
|
|
|
35,529
|
|
|
|
71,966
|
|
|
|
(22,839
|
)
|
|
|
49,127
|
|
Capital expenditures
|
|
$
|
26,055
|
|
|
|
8,965
|
|
|
|
35,020
|
|
|
|
3,832
|
|
|
|
38,852
|
|
Depreciation and amortization
|
|
$
|
37,784
|
|
|
|
14,873
|
|
|
|
52,657
|
|
|
|
6,007
|
|
|
|
58,664
|
|
Total assets
|
|
$
|
331,931
|
|
|
|
207,707
|
|
|
|
539,638
|
|
|
|
291,348
|
|
|
|
830,986
|
|
|
|
|
(1) |
|
Amounts shown in Other provide a reconciliation of total
reportable segments to the Companys consolidated total.
Included in other is (i) corporate SG&A expenses and
capital expenditures incurred at a corporate level and
(ii) assets held at a corporate level mainly comprised of
all cash and cash equivalents, investments in marketable
securities and deferred income tax assets. |
The following table provides a reconciliation of total adjusted
OIBDA to loss from continuing operations before income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Total adjusted OIBDA
|
|
$
|
19,626
|
|
|
|
31,351
|
|
|
|
49,127
|
|
Stock-based and long-term incentive compensation
|
|
|
(2,401
|
)
|
|
|
(3,531
|
)
|
|
|
(262
|
)
|
Accretion expense on asset retirement obligations
|
|
|
(239
|
)
|
|
|
(296
|
)
|
|
|
(296
|
)
|
Restructuring and other charges
|
|
|
(7,273
|
)
|
|
|
(8,801
|
)
|
|
|
(761
|
)
|
Depreciation and amortization
|
|
|
(57,120
|
)
|
|
|
(55,691
|
)
|
|
|
(58,664
|
)
|
Gain on sale of operating assets, net
|
|
|
467
|
|
|
|
9,038
|
|
|
|
463
|
|
Impairment of goodwill
|
|
|
|
|
|
|
(95,069
|
)
|
|
|
(165,347
|
)
|
Participating residual interest change in fair value
|
|
|
4,061
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
1,244
|
|
|
|
7,587
|
|
|
|
9,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
$
|
(41,635
|
)
|
|
|
(115,412
|
)
|
|
|
(166,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
ASCENT
MEDIA CORPORATION AND SUBSIDIARIES
Notes to
Consolidated Financial
Statements (Continued)
Information as to the operations in different geographic areas
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amounts in thousands
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
364,251
|
|
|
|
454,456
|
|
|
|
443,775
|
|
United Kingdom
|
|
|
67,311
|
|
|
|
104,489
|
|
|
|
102,157
|
|
Other countries
|
|
|
22,119
|
|
|
|
22,680
|
|
|
|
24,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
453,681
|
|
|
|
581,625
|
|
|
|
570,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
149,919
|
|
|
|
165,008
|
|
|
|
|
|
United Kingdom
|
|
|
22,914
|
|
|
|
29,111
|
|
|
|
|
|
Other countries
|
|
|
14,665
|
|
|
|
17,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
187,498
|
|
|
|
211,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18)
|
Quarterly
Financial Information (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
|
Amounts in thousands,
|
|
|
|
except per share amounts
|
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
115,257
|
|
|
|
114,269
|
|
|
|
106,949
|
|
|
|
117,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(11,105
|
)
|
|
|
(12,566
|
)
|
|
|
(11,968
|
)
|
|
|
(7,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,448
|
)
|
|
|
(7,204
|
)
|
|
|
(6,414
|
)
|
|
|
(32,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net earnings (loss) per common share
|
|
$
|
(0.46
|
)
|
|
|
(0.51
|
)
|
|
|
(0.46
|
)
|
|
|
(2.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
158,083
|
|
|
|
158,601
|
|
|
|
141,033
|
|
|
|
123,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(6,392
|
)
|
|
|
(3,936
|
)
|
|
|
(6,410
|
)
|
|
|
(106,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(4,515
|
)
|
|
|
(1,543
|
)
|
|
|
39,328
|
|
|
|
(97,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net earnings (loss) per common share
|
|
$
|
(0.32
|
)
|
|
|
(0.11
|
)
|
|
|
2.80
|
|
|
|
(6.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
PART III.
The following required information is incorporated by reference
to our definitive proxy statement for our 2010 Annual Meeting of
Stockholders presently scheduled to be held in the second
quarter of 2010:
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
We will file our definitive proxy statement for our 2010 Annual
Meeting of stockholders with the Securities and Exchange
Commission on or before April 30, 2010.
PART IV.
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a)(1) Financial Statements
Included in Part II of this Annual Report:
Ascent Media Corporation:
|
|
|
|
|
|
|
Page
|
|
|
No.
|
|
|
|
|
37-38
|
|
|
|
|
39
|
|
|
|
|
40
|
|
|
|
|
41
|
|
|
|
|
42
|
|
|
|
|
43
|
|
(a) (2) Financial Statement Schedules
(i) All schedules have been omitted because they are not
applicable, not material or the required information is set
forth in the financial statements or notes thereto.
(a) (3) Exhibits
Listed below are the exhibits which are filed as a part of this
Report (according to the number assigned to them in
Item 601 of
Regulation S-K):
|
|
|
|
|
|
2
|
.1
|
|
Reorganization Agreement, dated as of June 4, 2008, among
Discovery Holding Company, Discovery Communications, Inc.,
Ascent Media Corporation, Ascent Media Group, LLC, and Ascent
Media Creative Sound Services, Inc. (incorporated by reference
to Exhibit 2.1 to Ascent Media Corporations Registration
Statement on Form 10 (File No. 000-53280), filed with the
Commission on June 13, 2008).
|
|
2
|
.2
|
|
Purchase Agreement, dated as of August 8, 2008, by and among
Ascent Media Corporation, Ascent Media CANS, LLC and
AccentHealth Holdings, LLC (incorporated by reference to Exhibit
2.2 to Amendment No. 3 to Ascent Media Corporations
Registration Statement on Form 10 (File No. 000-53280), filed
with the Commission on August 12, 2008).
|
68
|
|
|
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Ascent
Media Corporation (incorporated by reference to Exhibit 3.1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on June 13,
2008).
|
|
3
|
.2
|
|
Bylaws of Ascent Media Corporation (incorporated by reference to
Exhibit 3.2 to Ascent Media Corporations Registration
Statement on Form 10 (File No. 000-53280), filed with the
Commission on June 13, 2008).
|
|
4
|
.1
|
|
Specimen Certificate for shares of Series A common stock, par
value $.01 per share, of Ascent Media Corporation (incorporated
by reference to Exhibit 4.1 to Ascent Media Corporations
Registration Statement on Form 10 (File No. 000-53280), filed
with the Commission on June 13, 2008).
|
|
4
|
.2
|
|
Specimen Certificate for shares of Series B common stock, par
value $.01 per share, of Ascent Media Corporation (incorporated
by reference to Exhibit 4.2 to Ascent Media Corporations
Registration Statement on Form 10 (File No. 000-53280), filed
with the Commission on June 13, 2008).
|
|
4
|
.3
|
|
Rights Agreement between Ascent Media Corporation and
Computershare Trust Company, N.A. (incorporated by reference to
Exhibit 4.3 to Amendment No. 1 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on July 23, 2008).
|
|
4
|
.4
|
|
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 Ascent Media
Corporations Current Report on Form 8-K (File No.
001-34176), filed with the Commission on September 17, 2009).
|
|
10
|
.1
|
|
Services Agreement, dated September 16, 2008, between Ascent
Media Group, LLC and CSS Studios, LLC (incorporated by reference
to Exhibit 10.1 to Amendment No. 8 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
001-34176), filed with the Commission on September 17, 2008).
|
|
10
|
.2
|
|
Tax Sharing Agreement, dated as of September 17, 2008, by and
among Discovery Holding Company, Discovery Communications, Inc.,
Ascent Media Corporation, Ascent Media Group, LLC and CSS
Studios, LLC (incorporated by reference to Exhibit 10.2 to
Amendment No. 8 to Ascent Media Corporations Registration
Statement on Form 10 (File No. 001-34176), filed with the
Commission on September 17, 2008).
|
|
10
|
.3
|
|
Ascent Media Group, LLC 2006 Long-Term Incentive Plan (As
Amended and Restated Effective September 9, 2008) (incorporated
by reference to Exhibit 10.3 to Amendment No. 7 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on September 10, 2008).
|
|
10
|
.4
|
|
Ascent Media Group, LLC 2007 Management Incentive Plan
(incorporated by reference to Exhibit 10.4 to Amendment No. 1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on July 23,
2008).
|
|
10
|
.5
|
|
Ascent Media Corporation 2008 Incentive Plan (incorporated by
reference to Exhibit 4.4 to Ascent Media Corporations
Registration Statement on Form S-8 (File No. 333-156231), filed
with the Commission on December 17, 2008).
|
|
10
|
.6
|
|
Services Agreement, dated as of July 21, 2005, by and between
Discovery Holding Company and Liberty Media Corporation
(incorporated by reference to Exhibit 10 to the Quarterly Report
on Form 10-Q of Discovery Holding Company filed on August 10,
2005).
|
|
10
|
.7
|
|
Form of Indemnification Agreement between the Registrant and its
Directors and Executive Officers (incorporated by reference to
Exhibit 10.7 to Amendment No. 1 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on July 23, 2008).
|
|
10
|
.8
|
|
Employment Agreement, dated as of September 1, 2006, by and
between Ascent Media Group, LLC and William E. Niles
(incorporated by reference to Exhibit 10.8 to Amendment No. 1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on July 23,
2008).
|
|
10
|
.9
|
|
Employment Agreement, dated as of September 1, 2006, by and
between Ascent Media Group, LLC and George C. Platisa
(incorporated by reference to Exhibit 10.9 to Amendment No. 1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on July 23,
2008).
|
69
|
|
|
|
|
|
10
|
.10
|
|
Employment Agreement, dated as of February 11, 2008, by and
between Ascent Media Group, LLC and Jose A. Royo (incorporated
by reference to Exhibit 10.12 to Amendment No. 1 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on July 23, 2008).
|
|
10
|
.11
|
|
Ascent Media Corporation 2008 Non-Employee Director Incentive
Plan (incorporated by reference to Exhibit 10.13 to Amendment
No. 8 to Ascent Media Corporations Registration Statement
on Form 10 (File No. 001-34176), filed with the Commission on
September 17, 2008).
|
|
10
|
.12
|
|
Amendment, dated December 31, 2008, to Employment Agreement,
dated as of September 1, 2006, by and between Ascent Media
Group, LLC and William E. Niles (incorporated by reference to
Exhibit 10.14 to Ascent Media Corporations Annual Report
on Form 10-K (File No. 001-34176), filed with the Commission on
March 31, 2009).
|
|
10
|
.13
|
|
Amendment, dated December 31, 2008, to Employment Agreement,
dated as of September 1, 2006, by and between Ascent Media
Group, LLC and George C. Platisa (incorporated by reference to
Exhibit 10.15 to Ascent Media Corporations Annual Report
on Form 10-K (File No. 001-34176), filed with the Commission on
March 31, 2009).
|
|
10
|
.14
|
|
Employment Agreement, dated February 9, 2009, by and between
Ascent Media Corporation and William R. Fitzgerald (incorporated
by reference to Exhibit 10.16 to Ascent Media Corporations
Annual Report on Form 10-K (File No. 001-34176), filed with the
Commission on March 31, 2009).
|
|
10
|
.15
|
|
Employment Agreement, dated as of April 13, 2009, between Ascent
Media Corporation and John A. Orr (incorporated by reference to
Exhibit 10.1 to Ascent Media Corporations Quarterly Report
on Form 10-Q (File No. 001-34176), filed with the Commission on
August 13, 2009).
|
|
10
|
.16
|
|
Asset Purchase Agreement, dated February 17, 2010, between
Ascent Media Network Services Europe Limited, Ascent Media Group
LLC and Discovery Communications Europe Limited (incorporated by
reference to Exhibit 2.1 to Ascent Media Corporations
Current Report on Form 8-K (File No. 001-34176), filed with the
Commission on February 23, 2010).
|
|
21
|
|
|
List of Subsidiaries of Ascent Media Corporation (incorporated
by reference to Exhibit 21 to Amendment No. 3 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on August 12, 2008).
|
|
23
|
|
|
Consent of KPMG LLP, independent registered public accounting
firm.*
|
|
24
|
|
|
Power of Attorney dated March 12, 2010.*
|
|
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.*
|
70
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Chief Executive Officer
Dated: March 12, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
date indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ William
R. Fitzgerald
William
R. Fitzgerald
|
|
Chairman of the Board, Director
and Chief Executive Officer
|
|
March 12, 2010
|
|
|
|
|
|
/s/ Jose
A. Royo
Jose
A. Royo
|
|
Director, President and
Chief Operating Officer
|
|
March 12, 2010
|
|
|
|
|
|
/s/ Philip
J. Holthouse
Philip
J. Holthouse
|
|
Director
|
|
March 12, 2010
|
|
|
|
|
|
/s/ John
C. Malone
John
C. Malone
|
|
Director
|
|
March 12, 2010
|
|
|
|
|
|
/s/ Brian
C. Mulligan
Brian
C. Mulligan
|
|
Director
|
|
March 12, 2010
|
|
|
|
|
|
/s/ Michael
J. Pohl
Michael
J. Pohl
|
|
Director
|
|
March 12, 2010
|
|
|
|
|
|
/s/ Carl
E. Vogel
Carl
E. Vogel
|
|
Director
|
|
March 12, 2010
|
|
|
|
|
|
/s/ George
C. Platisa
George
C. Platisa
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Accounting Officer)
|
|
March 12, 2010
|
71
EXHIBIT INDEX
Listed below are the exhibits which are filed as a part of this
Report (according to the number assigned to them in
Item 601 of
Regulation S-K):
|
|
|
|
|
|
2
|
.1
|
|
Reorganization Agreement, dated as of June 4, 2008, among
Discovery Holding Company, Discovery Communications, Inc.,
Ascent Media Corporation, Ascent Media Group, LLC, and Ascent
Media Creative Sound Services, Inc. (incorporated by reference
to Exhibit 2.1 to Ascent Media Corporations Registration
Statement on Form 10 (File No. 000-53280), filed with the
Commission on June 13, 2008).
|
|
2
|
.2
|
|
Purchase Agreement, dated as of August 8, 2008, by and among
Ascent Media Corporation, Ascent Media CANS, LLC and
AccentHealth Holdings, LLC (incorporated by reference to Exhibit
2.2 to Amendment No. 3 to Ascent Media Corporations
Registration Statement on Form 10 (File No. 000-53280), filed
with the Commission on August 12, 2008).
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Ascent
Media Corporation (incorporated by reference to Exhibit 3.1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on June 13,
2008).
|
|
3
|
.2
|
|
Bylaws of Ascent Media Corporation (incorporated by reference to
Exhibit 3.2 to Ascent Media Corporations Registration
Statement on Form 10 (File No. 000-53280), filed with the
Commission on June 13, 2008).
|
|
4
|
.1
|
|
Specimen Certificate for shares of Series A common stock, par
value $.01 per share, of Ascent Media Corporation (incorporated
by reference to Exhibit 4.1 to Ascent Media Corporations
Registration Statement on Form 10 (File No. 000-53280), filed
with the Commission on June 13, 2008).
|
|
4
|
.2
|
|
Specimen Certificate for shares of Series B common stock, par
value $.01 per share, of Ascent Media Corporation (incorporated
by reference to Exhibit 4.2 to Ascent Media Corporations
Registration Statement on Form 10 (File No. 000-53280), filed
with the Commission on June 13, 2008).
|
|
4
|
.3
|
|
Rights Agreement between Ascent Media Corporation and
Computershare Trust Company, N.A. (incorporated by reference to
Exhibit 4.3 to Amendment No. 1 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on July
|
|
|
|
|
23, 2008).
|
|
4
|
.4
|
|
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 Ascent Media
Corporations Current Report on Form 8-K (File No.
001-34176), filed with the Commission on September 17, 2009).
|
|
10
|
.1
|
|
Services Agreement, dated September 16, 2008, between Ascent
Media Group, LLC and CSS Studios, LLC (incorporated by reference
to Exhibit 10.1 to Amendment No. 8 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
001-34176), filed with the Commission on September 17, 2008).
|
|
10
|
.2
|
|
Tax Sharing Agreement, dated as of September 17, 2008, by and
among Discovery Holding Company, Discovery Communications, Inc.,
Ascent Media Corporation, Ascent Media Group, LLC and CSS
Studios, LLC (incorporated by reference to Exhibit 10.2 to
Amendment No. 8 to Ascent Media Corporations Registration
Statement on Form 10 (File No. 001-34176), filed with the
Commission on September 17, 2008).
|
|
10
|
.3
|
|
Ascent Media Group, LLC 2006 Long-Term Incentive Plan (As
Amended and Restated Effective September 9, 2008) (incorporated
by reference to Exhibit 10.3 to Amendment No. 7 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on September 10, 2008).
|
|
10
|
.4
|
|
Ascent Media Group, LLC 2007 Management Incentive Plan
(incorporated by reference to Exhibit 10.4 to Amendment No. 1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on July 23,
2008).
|
|
10
|
.5
|
|
Ascent Media Corporation 2008 Incentive Plan (incorporated by
reference to Exhibit 4.4 to Ascent Media Corporations
Registration Statement on Form S-8 (File No. 333-156231), filed
with the Commission on December 17, 2008).
|
|
|
|
|
|
|
10
|
.6
|
|
Services Agreement, dated as of July 21, 2005, by and between
Discovery Holding Company and Liberty Media Corporation
(incorporated by reference to Exhibit 10 to the Quarterly Report
on Form 10-Q of Discovery Holding Company filed on August 10,
2005).
|
|
10
|
.7
|
|
Form of Indemnification Agreement between the Registrant and its
Directors and Executive Officers (incorporated by reference to
Exhibit 10.7 to Amendment No. 1 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on July 23, 2008).
|
|
10
|
.8
|
|
Employment Agreement, dated as of September 1, 2006, by and
between Ascent Media Group, LLC and William E. Niles
(incorporated by reference to Exhibit 10.8 to Amendment No. 1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on July 23,
2008).
|
|
10
|
.9
|
|
Employment Agreement, dated as of September 1, 2006, by and
between Ascent Media Group, LLC and George C. Platisa
(incorporated by reference to Exhibit 10.9 to Amendment No. 1 to
Ascent Media Corporations Registration Statement on Form
10 (File No. 000-53280), filed with the Commission on July 23,
2008).
|
|
10
|
.10
|
|
Employment Agreement, dated as of February 11, 2008, by and
between Ascent Media Group, LLC and Jose A. Royo (incorporated
by reference to Exhibit 10.12 to Amendment No. 1 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on July 23, 2008).
|
|
10
|
.11
|
|
Ascent Media Corporation 2008 Non-Employee Director Incentive
Plan (incorporated by reference to Exhibit 10.13 to Amendment
No. 8 to Ascent Media Corporations Registration Statement
on Form 10 (File No. 001-34176), filed with the Commission on
September 17, 2008).
|
|
10
|
.12
|
|
Amendment, dated December 31, 2008, to Employment Agreement,
dated as of September 1, 2006, by and between Ascent Media
Group, LLC and William E. Niles (incorporated by reference to
Exhibit 10.14 to Ascent Media Corporations Annual Report
on Form 10-K (File No. 001-34176), filed with the Commission on
March 31, 2009).
|
|
10
|
.13
|
|
Amendment, dated December 31, 2008, to Employment Agreement,
dated as of September 1, 2006, by and between Ascent Media
Group, LLC and George C. Platisa (incorporated by reference to
Exhibit 10.15 to Ascent Media Corporations Annual Report
on Form 10-K (File No. 001-34176), filed with the Commission on
March 31, 2009).
|
|
10
|
.14
|
|
Employment Agreement, dated February 9, 2009, by and between
Ascent Media Corporation and William R. Fitzgerald (incorporated
by reference to Exhibit 10.16 to Ascent Media Corporations
Annual Report on Form 10-K (File No. 001-34176), filed with the
Commission on March 31, 2009).
|
|
10
|
.15
|
|
Employment Agreement, dated as of April 13, 2009, between Ascent
Media Corporation and John A. Orr (incorporated by reference to
Exhibit 10.1 to Ascent Media Corporations Quarterly Report
on Form 10-Q (File No. 001-34176), filed with the Commission on
August 13, 2009).
|
|
10
|
.16
|
|
Asset Purchase Agreement, dated February 17, 2010, between
Ascent Media Network Services Europe Limited, Ascent Media Group
LLC and Discovery Communications Europe Limited (incorporated by
reference to Exhibit 2.1 to Ascent Media Corporations
Current Report on Form 8-K (File No. 001-34176), filed with the
Commission on February 23, 2010).
|
|
21
|
|
|
List of Subsidiaries of Ascent Media Corporation (incorporated
by reference to Exhibit 21 to Amendment No. 3 to Ascent Media
Corporations Registration Statement on Form 10 (File No.
000-53280), filed with the Commission on August 12, 2008).
|
|
23
|
|
|
Consent of KPMG LLP, independent registered public accounting
firm.*
|
|
24
|
|
|
Power of Attorney dated March 12, 2010.*
|
|
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.*
|