Quarterly Report



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
þ
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2017
or
¨
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from          to
Commission File Number: 1-35106
 
AMC Networks Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
27-5403694
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
11 Penn Plaza,
New York, NY
10001
(Address of principal executive offices)
(Zip Code)
(212) 324-8500
(Registrant’s telephone number, including area code)
 
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   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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   þ     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Exchange Act Rule 12b-2).
Large accelerated filer
þ
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   þ
The number of shares of common stock outstanding as of April 28, 2017 :
Class A Common Stock par value $0.01 per share
55,109,130
Class B Common Stock par value $0.01 per share
11,484,408





AMC NETWORKS INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
 
 
Page
 
 
 




PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
March 31, 2017
 
December 31, 2016
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
403,648

 
$
481,389

Accounts receivable, trade (less allowance for doubtful accounts of $6,388  and $6,064)
716,904

 
700,655

Amounts due from related parties, net
536

 
508

Current portion of program rights, net
461,005

 
441,130

Prepaid expenses and other current assets
71,894

 
72,661

Total current assets
1,653,987

 
1,696,343

Property and equipment, net of accumulated depreciation of $287,422  and $272,148
169,223

 
166,636

Program rights, net
1,077,358

 
1,108,586

Deferred carriage fees, net
40,403

 
43,886

Intangible assets, net
478,760

 
485,809

Goodwill
662,076

 
657,708

Deferred tax asset, net
8,906

 
8,598

Other assets
379,341

 
313,029

Total assets
$
4,470,054

 
$
4,480,595

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
97,477

 
$
88,677

Accrued liabilities
300,200

 
284,429

Current portion of program rights obligations
276,083

 
300,845

Deferred revenue
46,902

 
53,643

Current portion of long-term debt
240,500

 
222,000

Current portion of capital lease obligations
4,449

 
4,584

Total current liabilities
965,611

 
954,178

Program rights obligations
397,995

 
398,175

Long-term debt
2,525,544

 
2,597,263

Capital lease obligations
34,161

 
35,282

Deferred tax liability, net
151,149

 
145,791

Other liabilities
121,280

 
132,219

Total liabilities
4,195,740

 
4,262,908

Commitments and contingencies


 


Redeemable noncontrolling interests
214,998

 
219,331

Stockholders’ equity (deficiency):
 
 
 
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 62,696 and 62,409 shares issued and 55,751 and 57,079 shares outstanding, respectively
627

 
624

Class B Common Stock, $0.01 par value, 90,000 shares authorized, 11,484 shares issued and outstanding
115

 
115

Preferred stock, $0.01 par value, 45,000 shares authorized; none issued

 

Paid-in capital
146,928

 
142,798

Accumulated earnings
431,626

 
295,409

Treasury stock, at cost (6,945 and 5,330 shares Class A Common Stock, respectively)
(366,653
)
 
(275,230
)
Accumulated other comprehensive loss
(181,191
)
 
(193,798
)
Total AMC Networks stockholders’ equity (deficiency)
31,452

 
(30,082
)
Non-redeemable noncontrolling interests
27,864

 
28,438

Total stockholders’ equity (deficiency)
59,316

 
(1,644
)
Total liabilities and stockholders’ equity (deficiency)
$
4,470,054

 
$
4,480,595

See accompanying notes to condensed consolidated financial statements.

1


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
Revenues, net (including revenues, net from related parties of $1,567 and $6,706, respectively)
$
720,189

 
$
706,579

Operating expenses:
 
 
 
Technical and operating (excluding depreciation and amortization)
298,612

 
274,274

Selling, general and administrative (including charges from related parties of $575 and $1,069, respectively)
163,709

 
153,901

Depreciation and amortization
23,493

 
19,632

Restructuring expense (credit)
2,704

 
(35
)
Total operating expenses
488,518

 
447,772

Operating income
231,671

 
258,807

Other income (expense):
 
 
 
Interest expense
(30,500
)
 
(31,751
)
Interest income
3,493

 
722

Loss on extinguishment of debt

 
(48,334
)
Miscellaneous, net
11,049

 
(837
)
Total other income (expense)
(15,958
)
 
(80,200
)
Income from operations before income taxes
215,713

 
178,607

Income tax expense
(73,082
)
 
(58,543
)
Net income including noncontrolling interests
142,631

 
120,064

Net income attributable to noncontrolling interests
(6,414
)
 
(6,620
)
Net income attributable to AMC Networks’ stockholders
$
136,217

 
$
113,444

 
 
 
 
Net income per share attributable to AMC Networks’ stockholders:
 
 
 
Basic
$
2.00

 
$
1.56

Diluted
$
1.98

 
$
1.55

 
 
 
 
Weighted average common shares:
 
 
 
Basic weighted average common shares
68,020

 
72,579

Diluted weighted average common shares
68,764

 
73,274

See accompanying notes to condensed consolidated financial statements.

2


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 
Three Months Ended March 31,
 
2017
 
2016
Net income including noncontrolling interests
$
142,631

 
$
120,064

Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustment
9,864

 
15,385

Unrealized gain (loss) on interest rate swaps
319

 
(1,578
)
Unrealized gain on available for sale securities
4,021

 

Other comprehensive income, before income taxes
14,204

 
13,807

Income tax expense
(1,597
)
 
(1,899
)
Other comprehensive income, net of income taxes
12,607

 
11,908

Comprehensive income
155,238

 
131,972

Comprehensive income attributable to noncontrolling interests
(6,805
)
 
(7,032
)
Comprehensive income attributable to AMC Networks’ stockholders
$
148,433

 
$
124,940

See accompanying notes to condensed consolidated financial statements.

3


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income including noncontrolling interests
$
142,631

 
$
120,064

Adjustments to reconcile income from operations to net cash from operating activities:
 
 
 
Depreciation and amortization
23,493

 
19,632

Share-based compensation expense related to equity classified awards
12,464

 
8,165

Amortization and write-off of program rights
199,517

 
170,821

Amortization of deferred carriage fees
4,401

 
3,940

Unrealized foreign currency transaction (gain) loss
(754
)
 
3,530

Unrealized (gain) loss on derivative contracts, net
(11,486
)
 
164

Amortization of deferred financing costs and discounts on indebtedness
2,282

 
2,247

Loss on extinguishment of debt

 
48,334

Bad debt expense
961

 
528

Deferred income taxes
4,061

 
12,139

Excess tax benefits from share-based compensation arrangements

 
(852
)
Other, net
278

 
46

Changes in assets and liabilities:
 
 
 
Accounts receivable, trade
(15,952
)
 
(9,442
)
Amounts due from related parties, net
(28
)
 
1,081

Prepaid expenses and other assets
(18,160
)
 
7,850

Program rights and obligations, net
(211,280
)
 
(192,194
)
Income taxes payable
57,627

 
37,398

Deferred revenue
(11,104
)
 
3,952

Deferred carriage fees, net
(430
)
 
(1,133
)
Accounts payable, accrued expenses and other liabilities
(33,651
)
 
(68,886
)
Net cash provided by operating activities
144,870

 
167,384

Cash flows from investing activities:
 
 
 
Capital expenditures
(20,206
)
 
(12,387
)
Investment in and loans to investees
(28,000
)
 

Net cash used in investing activities
(48,206
)
 
(12,387
)
Cash flows from financing activities:
 
 
 
Proceeds from the issuance of long-term debt

 
982,500

Principal payments on long-term debt
(55,500
)
 
(691,449
)
Premium and fees paid on extinguishment of debt

 
(39,179
)
Payments for financing costs

 
(2,070
)
Deemed repurchases of restricted stock units
(12,796
)
 
(10,413
)
Purchase of treasury stock
(91,423
)
 

Proceeds from stock option exercises

 
1,200

Excess tax benefits from share-based compensation arrangements

 
852

Principal payments on capital lease obligations
(1,401
)
 
(1,086
)
Distributions to noncontrolling interests
(11,712
)
 
(8,968
)
Net cash ( used in)  provided by financing activities
(172,832
)
 
231,387

Net (decrease) increase in cash and cash equivalents from operations
(76,168
)
 
386,384

Effect of exchange rate changes on cash and cash equivalents
(1,573
)
 
95

Cash and cash equivalents at beginning of period
481,389

 
316,321

Cash and cash equivalents at end of period
$
403,648

 
$
702,800


See accompanying notes to condensed consolidated financial statements.

4

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Note 1. Description of Business and Basis of Presentation
Description of Business
AMC Networks Inc. (“AMC Networks”) and its subsidiaries (collectively referred to as the “Company”) own and operate entertainment businesses and assets. The Company is comprised of two operating segments:
National Networks: Includes activities of our programming businesses, which include our five programming networks, distributed in the U.S. and Canada. These programming networks include AMC, WE tv, BBC AMERICA, IFC, and SundanceTV in the U.S.; and AMC, IFC, and Sundance Channel in Canada. Our AMC Studios operations within the National Networks segment sells rights worldwide to its owned original programming. The National Networks operating segment also includes AMC Networks Broadcasting & Technology, the technical services business, which primarily services most of the programming networks included in the National Networks segment.
International and Other: Principally includes AMC Networks International (“AMCNI”), the Company’s international programming businesses consisting of a portfolio of channels in Europe, Latin America, the Middle East and parts of Asia and Africa; IFC Films, the Company’s independent film distribution business; AMCNI- DMC, the broadcast solutions unit of certain networks of AMCNI and third-party networks; and various developing on-line content distribution initiatives.
Basis of Presentation
Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of AMC Networks and its majority owned or controlled subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Investments in business entities in which the Company lacks control but does have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method of accounting.
Unaudited Interim Financial Statements
These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2016 contained in the Company’s Annual Report on Form 10-K (“ 2016 Form 10-K”) filed with the SEC. The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, such financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented.
The results of operations for interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2017 .
Adoption of Accounting Standards
The Company adopted Accounting Standards Update (“ASU”) 2016-09,  Improvements to Employee Share-Based Payment Accounting , which became effective for the Company as of January 1, 2017. ASU 2016-09 amends Accounting Standards Codification ("ASC") Topic 718, Compensation - Stock Compensation and simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification in the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recorded as a component of the provision for income taxes in the reporting period in which they occur. Additionally, ASU 2016-09 requires that the Company present excess tax benefits in the statement of cash flows as an operating activity. The Company elected to apply this adoption prospectively, accordingly prior periods have not been adjusted. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
Program Rights
The Company periodically reviews the programming usefulness of its licensed and owned original program rights based on a series of factors, including expected future revenue generation from airings on the Company’s networks and other exploitation opportunities, ratings, type and quality of program material, standards and practices, and fitness for exhibition through various forms of distribution. If it is determined that film or other program rights have no future programming usefulness, a write-off of the unamortized cost is recorded in technical and operating expense.

5

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates and judgments inherent in the preparation of the consolidated financial statements include the valuation of acquisition-related assets and liabilities, derivative assets and liabilities, certain stock compensation awards, the useful lives and methodologies used to amortize and assess recoverability of program rights, the estimated useful lives of intangible assets, valuation and recoverability of goodwill and intangible assets and income tax assets and liabilities.
Recently Issued Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-04 Intangibles- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 removes Step 2 of the current goodwill impairment test under ASC Topic 350 and replaces it with a simplified model. Under the simplified model, a goodwill impairment will be calculated as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. The amount of any impairment under the simplified model may differ from what would have been recognized under the two-step test. The ASU is effective for the Company in the first quarter of 2020, with early adoption permitted for any impairment tests performed after a testing date of January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on the Company's consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16,  Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory . ASU 2016-16 simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory and includes requirements to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, therefore eliminating the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. Any adjustments as a result of adoption are to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of ASU 2016-16 is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15,  Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments . The guidance clarifies the way in which certain cash receipts and cash payments should be classified on the statement of cash flows and also how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU 2016-15 is effective for the first quarter of 2018 with early adoption permitted. The adoption of ASU 2016-15 is not expected to have a material impact on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . ASU 2016-02 requires lessees to record most of their leases on the balance sheet, which will be recognized as a right-of-use asset and a lease liability. The Company will be required to classify each separate lease component as an operating or finance lease at the lease commencement date. Initial measurement of the right-of-use asset and lease liability is the same for operating and finance leases, however expense recognition and amortization of the right-of-use asset differs. Operating leases will reflect lease expense on a straight-line basis similar to current operating leases. The straight-line expense will reflect the interest expense on the lease liability (effective interest method) and amortization of the right-of-use asset, which will be presented as a single line item in the operating expense section of the income statement. Finance leases will reflect a front-loaded expense pattern similar to the pattern for current capital leases. ASU 2016-02 is effective for the first quarter of 2019, with early adoption permitted. The Company is currently determining its implementation approach and assessing the impact the adoption will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides new guidance related to how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also expands the required disclosures to include the disaggregation of revenue from contracts with customers into categories that depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors. During 2016, the FASB issued additional interpretive guidance relating to the standard which covered the topics of principal versus agent considerations and identifying performance obligations and licensing. The standard is effective for the Company in the first quarter of 2018. The two permitted transition methods under the standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application.
The Company established an implementation team and performed an analysis of each of our revenue streams to assess the impact of the standard on our various revenue contracts, and analyze our current accounting policies and practices to identify

6

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

potential differences that would result from the implementation of the standard. To date, the Company has made significant progress toward completing its evaluation of the potential changes from adopting the standard on its financial reporting and disclosures. The Company has completed an initial assessment of each of its revenue streams and has begun drafting its revenue recognition policy under the new standard. However, there are a few areas that remain subject to further clarification with respect to the implementation of the new standard on certain of our revenue streams. The Company has been closely monitoring FASB activity related to the new standard, as well as working with various non-authoritative groups to conclude on industry specific interpretative issues.
While significant progress has been made, our final evaluation of the impact of the new revenue standard is ongoing and will continue throughout 2017, including making a final determination about our implementation approach.
Note 2. Net Income per Share
The following is a reconciliation between basic and diluted weighted average shares outstanding:
(In thousands)
Three Months Ended March 31,
2017
 
2016
Basic weighted average common shares outstanding
68,020

 
72,579

Effect of dilution:
 
 
 
Stock options

 
51

Restricted stock units
744

 
644

Diluted weighted average common shares outstanding
68,764

 
73,274

For the three months ended March 31, 2017 , there were 388,000 stock options and 404,000 restricted stock units that would have been anti-dilutive to the diluted weighted average common shares outstanding. For the three months ended March 31, 2016 , there were no stock options or restricted stock units that would have been anti-dilutive to the diluted weighted average common shares outstanding. Approximately 175,000 and 137,000 restricted stock units for the three months ended March 31, 2017 and March 31, 2016 , respectively, have been excluded from diluted weighted average common shares outstanding since a performance condition on these awards was not met in each of the respective periods. The Company did not include performance restricted stock units in the calculation of diluted EPS, since the performance conditions for these awards were not met.
Stock Repurchase Program
On March 4, 2016. the Company’s Board of Directors authorized a program to repurchase up to $500 million of its outstanding shares of common stock (the “Stock Repurchase Program”). The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. For the three months ended March 31, 2017 , the Company repurchased 1,615,386 shares of its Class A common stock at an average purchase price of approximately $56.60 per share. As of March 31, 2017 , the Company has $185.3 million available for repurchase under the Stock Repurchase Program.
Note 3. Restructuring
The Company incurred restructuring expense primarily related to severance charges associated with the elimination of certain positions across the Company.
The following table summarizes the restructuring expense (credit) recognized by operating segment:
(In thousands)
Three Months Ended March 31,
2017
 
2016
National Networks
$
54

 
$
30

International & Other
2,650

 
(65
)
Total restructuring expense (credit)
$
2,704

 
$
(35
)
Restructuring expense in the International and Other segment includes corporate headquarter related charges.

7

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

The following table summarizes the accrued restructuring costs:
(In thousands)
Severance and employee-related costs
 
Other exit costs
 
Total
Balance at December 31, 2016
$
12,106

 
$
205

 
$
12,311

Charges (credits)
2,718

 
(14
)
 
2,704

Cash payments
(12,349
)
 
(111
)
 
(12,460
)
Non-cash adjustments

 
17

 
17

Currency translation

 
1

 
1

Balance at March 31, 2017
$
2,475

 
$
98

 
$
2,573

Accrued liabilities for restructuring costs are included in accrued liabilities in the condensed consolidated balance sheet at March 31, 2017 .
Note 4. Goodwill and Other Intangible Assets
The carrying amount of goodwill, by operating segment is as follows:
(In thousands)
National Networks
 
International
and Other
 
Total
December 31, 2016
$
242,303

 
$
415,405

 
$
657,708

Amortization of “second component” goodwill
(636
)
 

 
(636
)
Foreign currency translation

 
5,004

 
5,004

March 31, 2017
$
241,667

 
$
420,409

 
$
662,076

The reduction of $0.6 million in the carrying amount of goodwill for the National Networks is due to the realization of a tax benefit for the amortization of “second component” goodwill at SundanceTV. Second component goodwill is the amount of tax deductible goodwill in excess of goodwill for financial reporting purposes. In accordance with the authoritative guidance at the time of the SundanceTV acquisition, the tax benefits associated with this excess are applied to first reduce the amount of goodwill, and then other intangible assets for financial reporting purposes, if and when such tax benefits are realized in the Company’s tax returns.

8

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

The following tables summarize information relating to the Company’s identifiable intangible assets:
(In thousands)
March 31, 2017
 
 
Gross
 
Accumulated
Amortization
 
Net
 
Estimated Useful Lives
Amortizable intangible assets:
 
 
 
 
 
 
 
Affiliate and customer relationships
$
511,970

 
$
(141,613
)
 
$
370,357

 
10 to 25 years
Advertiser relationships
46,282

 
(10,250
)
 
36,032

 
11 years
Trade names
50,341

 
(7,019
)
 
43,322

 
12 to 20 years
Other amortizable intangible assets
10,119

 
(970
)
 
9,149

 
15 years
Total amortizable intangible assets
618,712

 
(159,852
)
 
458,860

 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
Trademarks
19,900

 

 
19,900

 
 
Total intangible assets
$
638,612

 
$
(159,852
)
 
$
478,760

 
 
(In thousands)
December 31, 2016
 
 
Gross
 
Accumulated
Amortization
 
Net
 
 
Amortizable intangible assets:
 
 
 
 
 
 
 
Affiliate and customer relationships
$
509,992

 
$
(133,932
)
 
$
376,060

 
 
Advertiser relationships
46,282

 
(9,198
)
 
37,084

 
 
Trade names
49,720

 
(6,307
)
 
43,413

 
 
Other amortizable intangible assets
10,002

 
(791
)
 
9,211

 
 
Total amortizable intangible assets
615,996

 
(150,228
)
 
465,768

 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
Trademarks
20,041

 

 
20,041

 
 
Total intangible assets
$
636,037

 
$
(150,228
)
 
$
485,809

 
 
Aggregate amortization expense for amortizable intangible assets for the three months ended March 31, 2017 and 2016 was $9.1 million and $9.9 million , respectively. Estimated aggregate amortization expense for intangible assets subject to amortization for each of the following five years is:
(In thousands)
 
Years Ending December 31,
 
2017
$
35,617

2018
35,641

2019
35,629

2020
35,624

2021
35,301

Note 5. Accrued Liabilities
Accrued liabilities consist of the following:
(In thousands)
March 31, 2017
 
December 31, 2016
Interest
$
35,444

 
$
15,770

Employee related costs
75,913

 
122,590

Income taxes payable
100,318

 
43,083

Other accrued expenses
88,525

 
102,986

Total accrued liabilities
$
300,200

 
$
284,429


9

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

Note 6. Long-term Debt
The Company’s long-term debt consists of the following:
(In thousands)
March 31, 2017
 
December 31, 2016
Senior Secured Credit Facility: (a)
 
 
 
Term Loan A Facility
$
1,202,500

 
$
1,258,000

Senior Notes:
 
 
 
5.00% Notes due April 2024
1,000,000

 
1,000,000

4.75% Notes due December 2022
600,000

 
600,000

Total long-term debt
2,802,500

 
2,858,000

Unamortized discount
(22,899
)
 
(23,675
)
Unamortized deferred financing costs
(13,557
)
 
(15,062
)
Long-term debt, net
2,766,044

 
2,819,263

Current portion of long-term debt
240,500

 
222,000

Noncurrent portion of long-term debt
$
2,525,544

 
$
2,597,263

(a)
The Company’s $500 million revolving credit facility remains undrawn at March 31, 2017 . Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company.
Note 7. Fair Value Measurement
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:
Level I - Quoted prices for identical instruments in active markets.
Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level III - Instruments whose significant value drivers are unobservable.

10

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

The following table presents for each of these hierarchy levels, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis at March 31, 2017 and December 31, 2016 :
(In thousands)
 
Level I
 
Level II
 
Level III
 
Total
At March 31, 2017:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Cash equivalents  
 
$
28,022

 
$

 
$

 
$
28,022

Available for sale securities
 
9,785

 

 

 
9,785

Interest rate swap contracts
 

 
1,790

 

 
1,790

Foreign currency derivatives
 

 
5,370

 

 
5,370

Other derivatives
 

 
2,204

 
21,221

 
23,425

Liabilities:
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
$

 
$
392

 
$

 
$
392

Foreign currency derivatives
 

 
2,571

 

 
2,571

At December 31, 2016:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Cash equivalents
 
$
65,384

 
$

 
$

 
$
65,384

Interest rate swap contracts
 

 
1,471

 

 
1,471

Foreign currency derivatives
 

 
6,096

 

 
6,096

Other derivatives
 

 

 
12,308

 
12,308

Liabilities:
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
$

 
$
762

 
$

 
$
762

Foreign currency derivatives
 

 
3,147

 

 
3,147

The Company’s cash equivalents and available for sale securities are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.
The Company’s interest rate swap contracts, foreign currency derivatives and the embedded derivative for the portion of interest on the RLJE Term Loans to be paid in shares of RLJ Entertainment, Inc. (“RLJE”) common stock (see Note 8 ) are classified within Level II of the fair value hierarchy and their fair values are determined based on a market approach valuation technique that uses readily observable market parameters and the consideration of counterparty risk.
On October 14, 2016 (the “Closing Date”), Digital Entertainment Holdings LLC (“DEH”), a wholly-owned subsidiary of the Company, and RLJE entered into a Credit and Guaranty agreement (the “RLJE Credit Agreement”), pursuant to which DEH provided term loans to RLJE (the “RLJE Term Loans”). In connection with the RLJE credit agreement, DEH received warrants to purchase at least 20 million shares of RLJE’s common stock, at a price of $3.00 per share (the “RLJE Warrants”). The RLJE Warrants held by the Company are classified within Level III of the fair value hierarchy and the Company determines the value of the RLJE Warrants using a Black Scholes option pricing model. Inputs to the model are stock price volatility, contractual warrant terms (remaining life of the warrants), exercise price, risk-free interest rate, and the RLJE stock price. The equity volatility used is based on the equity volatility of RLJE with an adjustment for the changes in the capital structure of RLJE. In arriving at the concluded value of the warrants, a discount for the lack of marketability (DLOM) of 32% was applied. The DLOM, which is unobservable, is determined using the Finnerty Average-Strike Put Option Marketability Discount Model (Finnerty Model), which was applied with a security-specific volatility for the warrants. For the three months ended March 31, 2017 , the Company recorded a gain of $8.9 million related to the RLJE Warrants which is included in Miscellaneous, net in the condensed consolidated statement of income.
At March 31, 2017 , the Company does not have any other assets or liabilities measured at fair value on a recurring basis that would be considered Level III.
Fair value measurements are also used in nonrecurring valuations performed in connection with acquisition accounting. These nonrecurring valuations primarily include the valuation of affiliate and customer relationships intangible assets, advertiser relationship intangible assets and property and equipment. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level III of the fair value hierarchy.

11

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

Credit Facility Debt and Senior Notes
The fair values of each of the Company’s debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities.
The carrying values and estimated fair values of the Company’s financial instruments, excluding those that are carried at fair value in the condensed consolidated balance sheets, are summarized as follows:
(In thousands)
March 31, 2017
Carrying
Amount
 
Estimated
Fair Value
Debt instruments:
 
 
 
Term Loan A Facility
$
1,191,165

 
$
1,202,500

5.00% Notes due April 2024
982,456

 
1,003,750

4.75% Notes due December 2022
592,423

 
603,750

 
$
2,766,044

 
$
2,810,000

(In thousands)
December 31, 2016
Carrying
Amount
 
Estimated
Fair Value
Debt instruments:
 
 
 
Term Loan A Facility
$
1,245,175

 
$
1,254,855

5.00% Notes due April 2024
981,949

 
1,002,500

4.75% Notes due December 2022
592,139

 
606,000

 
$
2,819,263

 
$
2,863,355

Fair value estimates related to the Company’s debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Note 8 . Derivative Financial Instruments
Interest Rate Risk
To manage interest rate risk, the Company enters into interest rate swap contracts to adjust the amount of total debt that is subject to variable interest rates.
As of March 31, 2017 , the Company had interest rate swap contracts outstanding with notional amounts aggregating $300.0 million , which consist of interest rate swap contracts with notional amounts of $200.0 million that are designated as cash flow hedges and interest rate swap contracts with notional amounts of $100.0 million that are not designated as hedging instruments. The Company’s outstanding interest rate swap contracts have varying maturities ranging from July 2017 to October 2018. At March 31, 2017 , the Company’s interest rate swap contracts designated as cash flow hedges were highly effective.
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our or our subsidiaries’ respective functional currencies (non-functional currency risk), such as affiliation agreements, programming contracts, certain accounts payable and trade receivables (including intercompany amounts) that are denominated in a currency other than the applicable functional currency.
Other Derivatives
The RLJE Warrants held by the Company meet the definition of a derivative and are included in Other assets in the condensed consolidated balance sheet. In addition, the portion of interest on the RLJE Term Loans to be paid in shares of RLJE common stock is an embedded derivative. Both the RLJE Warrants and the embedded derivative for the portion of future interest to be paid in shares of RLJE common stock are remeasured at the end of each period with changes in fair value recorded in the condensed consolidated statement of income. For the three months ended March 31, 2017 , the Company recorded a gain of $11.1 million related to these derivatives, which is included in Miscellaneous, net in the condensed consolidated statement of income.

12

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are as follows:
(In thousands)
Balance Sheet 
Location
 
March 31, 2017
 
December 31, 2016
Derivatives designated as hedging instruments:
 
 
 
 
 
Assets:
 
 
 
 
 
Interest rate swap contracts
Other assets
 
$
1,790

 
$
1,471

Derivatives not designated as hedging instruments:
 
 
 
 
 
Assets:
 
 
 
 
 
Foreign currency derivatives
Prepaid expenses and other current assets
 
$
1,449

 
$
1,684

Foreign currency derivatives
Other assets
 
3,921

 
4,412

Other derivatives
Other assets
 
23,425

 
12,308

Liabilities:
 
 
 
 
 
Interest rate swap contracts
Accrued liabilities
 
$
392

 
$
762

Foreign currency derivatives
Accrued liabilities
 
594

 
952

Foreign currency derivatives
Other liabilities
 
1,977

 
2,195

The amounts of gains and losses related to the Company’s derivative financial instruments designated as hedging instruments are as follows:
(In thousands)
Gain or (Loss) on Derivatives
 Recognized in OCI
 
Location of Gain or (Loss) in Earnings
 
Gain or (Loss) Reclassified 
from Accumulated OCI
 into Earnings (a)
Three Months Ended March 31,
 
 
 
Three Months Ended March 31,
2017
 
2016
 
 
 
2017
 
2016
Derivatives in cash flow hedging relationships:
 
 
 
 
 
 
 
 
 
Interest rate swap contracts
$
321

 
$
(1,741
)
 
Interest expense
 
$
2

 
$
(163
)
(a)
There were no gains or losses recognized in earnings related to any ineffective portion of hedging relationships or related to any amount excluded from the assessment of hedge effectiveness for the three months ended March 31, 2017 and 2016 .
The amounts of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are as follows:
(In thousands)
Location of Gain or (Loss) Recognized in Earnings
 on Derivatives
 
Amount of Gain or (Loss) Recognized in Earnings on Derivatives
 
 
Three Months Ended March 31,
 
 
2017
 
2016
Derivatives not designated as hedging relationships:
 
 
 
 
 
Interest rate swap contracts
Interest expense
 
$
2

 
$
(181
)
Foreign currency derivatives
Miscellaneous, net
 
(267
)
 
52

Other derivatives
Miscellaneous, net
 
11,117

 

Total
 
 
$
10,852

 
$
(129
)
Note 9. Income Taxes
For the three months ended March 31, 2017 , income tax expense was $73.1 million , representing an effective tax rate of 34% . The effective tax rate differs from the federal statutory rate of 35% due primarily to the tax benefit from domestic production activities deduction of $5.9 million , tax benefit from foreign subsidiary earnings indefinitely reinvested outside the U.S. of $4.1

13

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

million , state income tax expense of $3.4 million and tax expense of $2.3 million for an increase in valuation allowances for foreign taxes.
For the three months ended March 31, 2016 , income tax expense was $58.5 million , representing an effective tax rate of 33% . The effective tax rate differs from the federal statutory rate of  35%  due primarily to the tax benefit from domestic production activities deduction of  $5.3 million , tax benefit from foreign subsidiary earnings indefinitely reinvested outside the U.S. of  $3.5 million , state income tax expense of  $3.2 million and tax expense of  $2.0 million  for an increase in valuation allowances for foreign taxes.
At March 31, 2017 , the Company had foreign tax credit carry forwards of approximately $37 million , expiring on various dates from 2017 through 2027. For the three months ended March 31, 2017 , $0.4 million relating to amortization of tax deductible second component goodwill was realized as a reduction in tax liability (as determined on a ‘with-and-without’ approach).
Note 10 . Commitments and Contingencies
Commitments
As of March 31, 2017 , the Company’s contractual obligations not reflected on the Company’s condensed consolidated balance sheet increased $35.1 million to $1.4 billion . The increase relates primarily to payment guarantees to a production service company for certain production related costs
Legal Matters
On December 17, 2013, Frank Darabont (“Darabont”), Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (together, “Plaintiffs”), filed a complaint in New York Supreme Court in connection with Darabont’s rendering services as a writer, director and producer of the television series entitled The Walking Dead and the agreement between the parties related thereto. The Plaintiffs asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, for an accounting and for declaratory relief. On August 19, 2015, Plaintiffs filed their First Amended Complaint (the “Amended Complaint”), in which they retracted their claims for wrongful termination and failure to apply production tax credits in calculating Plaintiffs’ contingent compensation. Plaintiffs also added a claim that Darabont is entitled to a larger share, on a percentage basis, of contingent compensation than he is currently being accorded. On September 26, 2016, Plaintiffs filed their note of issue and certificate of readiness for trial, which included a claim for damages of $280 million or more and indicated that the parties have completed fact and expert discovery. The parties each filed motions for summary judgment. The Court set June 9, 2017 as the date for oral argument of the summary judgment motions. The Company has opposed the claims in the Complaint, the Amended Complaint and all subsequent complaints. The Company believes that the asserted claims are without merit, denies the allegations and continues to defend the case vigorously. At this time, no determination can be made as to the ultimate outcome of this litigation or the potential liability, if any, on the part of the Company.
The Company is party to various lawsuits and claims in the ordinary course of business, including the matter described above. Although the outcome of these matters cannot be predicted with certainty and while the impact of these matters on the Company’s results of operations in any particular subsequent reporting period could be material, management does not believe that the resolution of these matters will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.
Note 11. Equity Plans
On March 9, 2017, AMC Networks granted 578,901 restricted stock units (“RSUs”) and 458,962 performance restricted stock units (“PRSUs”) to certain executive officers and employees under the AMC Networks Inc. 2016 Employee Stock Plan. The RSUs vest ratably over a three -year period and the vesting criteria for 175,299 RSUs include the achievement of certain performance targets by the Company. The PRSUs vest on the third anniversary of the grant date.
The target number of PRSUs granted represents the right to receive a corresponding number of shares, subject to adjustment based on the performance of the Company against target performance criteria for a three -year period. The number of shares issuable at the end of the applicable measurement period ranges from 0% to 200% of the target PRSU award.
During the three months ended March 31, 2017 , 505,935 RSUs of AMC Networks Class A Common Stock previously issued to employees of the Company vested. On the vesting date, 218,641 RSUs were surrendered to the Company to cover the required statutory tax withholding obligations and 287,294 new shares of AMC Networks Class A Common Stock were issued in respect of the remaining RSUs. The units surrendered to satisfy the employees’ statutory minimum tax withholding obligations for the applicable income and other employment tax had an aggregate value of $12.8 million , which has been reflected as a financing activity in the condensed consolidated statement of cash flows for the  three months ended  March 31, 2017 .

14

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

Share-based compensation expense included in selling, general and administrative expense, for the three months ended March 31, 2017 and March 31, 2016 was $12.5 million and $8.2 million , respectively.
As of March 31, 2017 , there was $126.2 million of total unrecognized share-based compensation cost related to outstanding unvested share-based awards. The unrecognized compensation cost is expected to be recognized over a weighted-average remaining period of approximately 2.8 years.
Note 12. Redeemable Noncontrolling Interests
The following table summarizes activity related to redeemable noncontrolling interest for the three months ended March 31, 2017 .
(In thousands)
Three Months Ended March 31, 2017
December 31, 2016
$
219,331

Net earnings
5,564

Distributions
(9,897
)
March 31, 2017
$
214,998

Note 13. Related Party Transactions
Members of the Dolan Family, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, including trusts for the benefit of the Dolan Family, collectively beneficially own all of the AMC Networks outstanding Class B Common Stock and own approximately 2% of the AMC Networks’ outstanding Class A Common Stock. Such shares of the AMC Networks Class A Common Stock and Class B Common Stock, collectively, represent approximately 68% of the aggregate voting power of AMC Networks’ outstanding common stock. Members of the Dolan Family are also the controlling stockholders of The Madison Square Garden Company (“MSG”) and MSG Networks Inc. (“MSG Networks”). Prior to June 21, 2016, members of the Dolan Family were also the controlling stockholders of Cablevision Systems Corporation (“Cablevision”).
On June 21, 2016, Cablevision was acquired by a subsidiary of Altice N.V. and a change in control occurred which resulted in members of the Dolan Family no longer being controlling stockholders of the surviving company, Altice USA. Accordingly, Altice USA is not a related party of AMC Networks.
The Company and its related parties routinely enter into transactions with each other in the ordinary course of business. Revenues, net from related parties amounted to $1.6 million and $6.7 million for the three months ended March 31, 2017 and 2016 , respectively. Amounts charged to the Company, included in selling, general and administrative expenses, pursuant to transactions with its related parties amounted to $0.6 million and $1.1 million for the three months ended March 31, 2017 and 2016 , respectively.
On June 16, 2016, AMC Networks entered into an arrangement with the Dolan Family Office, LLC (“DFO”), MSG and MSG Networks providing for the sharing of certain expenses associated with executive office space which will be available to Charles F. Dolan (the Executive Chairman and a director of the Company and a director of MSG and MSG Networks), James L. Dolan (the Executive Chairman and a director of MSG and MSG Networks and a director of the Company), and the DFO which is controlled by Charles F. Dolan. The Company’s share of office expenses is not material.
Note 14. Cash Flows
The Company’s non-cash investing and financing activities and other supplemental data are as follows:
(In thousands)
Three Months Ended March 31,
2017
 
2016
Non-Cash Investing and Financing Activities:
 
 
 
Increase in capital lease obligations

 
10,983

Treasury stock not yet settled
5,988

 

Capital expenditures incurred but not yet paid
3,362

 
2,722

Supplemental Data:
 
 
 
Cash interest paid
8,605

 
46,436

Income taxes paid, net
7,498

 
5,600


15

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

Note 15. Accumulated Other Comprehensive Loss
The following table details the components of accumulated other comprehensive loss:
(In thousands)
Three Months Ended March 31, 2017
Currency Translation Adjustment
 
Gains (Losses) on Cash Flow Hedges
 
Gains (Losses) on Available for Sale Investments
 
Accumulated Other Comprehensive Income (Loss)
Beginning balance
$
(194,189
)
 
$
391

 
$

 
$
(193,798
)
Other comprehensive income before reclassifications
9,864

 
321

 
4,021

 
14,206

Amounts reclassified from accumulated other comprehensive loss

 
(2
)
 

 
(2
)
Net current-period other comprehensive income, before income taxes
9,864

 
319

 
4,021

 
14,204

Income tax expense

 
(117
)
 
(1,480
)
 
(1,597
)
Net current-period other comprehensive income, net of income taxes
9,864

 
202

 
2,541

 
12,607

Ending balance
$
(184,325
)
 
$
593

 
$
2,541

 
$
(181,191
)
(In thousands)
Three Months Ended March 31, 2016
Currency Translation Adjustment
 
Gains (Losses) on Cash Flow Hedges
 
Gains (Losses) on Available for Sale Investments
 
Accumulated Other Comprehensive Income (Loss)
Beginning balance
$
(136,434
)
 
$
377

 
$

 
$
(136,057
)
Other comprehensive income (loss) before reclassifications
15,385

 
(1,741
)
 

 
13,644

Amounts reclassified from accumulated other comprehensive loss

 
163

 

 
163

Net current-period other comprehensive income (loss), before income taxes
15,385

 
(1,578
)
 

 
13,807

Income tax (expense) benefit
(2,477
)
 
578

 

 
(1,899
)
Net current-period other comprehensive income (loss), net of income taxes
12,908

 
(1,000
)
 

 
11,908

Ending balance
$
(123,526
)
 
$
(623
)
 
$

 
$
(124,149
)
Amounts reclassified to net earnings for gains and losses on cash flow hedges designated as hedging instruments are included in interest expense in the condensed consolidated statements of income.
Note 16. Segment Information
The Company classifies its operations into two operating segments: National Networks and International and Other. These operating segments represent strategic business units that are managed separately.
The Company generally allocates all corporate overhead costs within operating expenses to the Company’s two operating segments based upon their proportionate estimated usage of services, including such costs as executive salaries and benefits, costs of maintaining corporate headquarters, facilities and common support functions (such as human resources, legal, finance, strategic planning and information technology) as well as sales support functions and creative and production services.
The Company evaluates segment performance based on several factors, of which the primary financial measure is operating segment adjusted operating income (“AOI”), a non-GAAP measure, defined as operating income (loss) before depreciation and amortization, share-based compensation expense or benefit, impairment charges, and restructuring expense or credit. The Company has presented the components that reconcile adjusted operating income to operating income, an accepted GAAP measure, and other information as to the continuing operations of the Company’s operating segments below.

16

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

(In thousands)
Three Months Ended March 31, 2017
National
Networks
 
International
and Other
 
Inter-segment
eliminations
 
Consolidated
Revenues, net
 
 
 
 
 
 
 
Advertising
$
247,542

 
$
20,070

 
$

 
$
267,612

Distribution
367,605

 
86,727

 
(1,755
)
 
452,577

Consolidated revenues, net
$
615,147

 
$
106,797

 
$
(1,755
)
 
$
720,189

Operating income (loss)
$
249,607

 
$
(19,217
)
 
$
1,281

 
$
231,671

Share-based compensation expense
9,908

 
2,556

 

 
12,464

Restructuring expense
54

 
2,650

 

 
2,704

Depreciation and amortization
8,404

 
15,089

 

 
23,493

Adjusted operating income
$
267,973

 
$
1,078

 
$
1,281

 
$
270,332

Capital expenditures
$
5,135

 
$
15,071

 
$

 
$
20,206

(In thousands)
Three Months Ended March 31, 2016
National
Networks
 
International
and Other
 
Inter-segment
eliminations
 
Consolidated
Revenues, net
 
 
 
 
 
 
 
Advertising
$
263,852

 
$
22,825

 
$

 
$
286,677

Distribution
334,783

 
86,223

 
(1,104
)
 
419,902

Consolidated revenues, net
$
598,635

 
$
109,048

 
$
(1,104
)
 
$
706,579

Operating income (loss)
$
266,732

 
$
(8,436
)
 
$
511

 
$
258,807

Share-based compensation expense
6,221

 
1,944

 

 
8,165

Restructuring expense (credit)
30

 
(65
)
 

 
(35
)
Depreciation and amortization
7,969

 
11,663

 

 
19,632

Adjusted operating income
$
280,952

 
$
5,106

 
$
511

 
$
286,569

Capital expenditures
$
1,980

 
$
10,407

 
$

 
$
12,387

Inter-segment eliminations are primarily licensing revenues recognized between the National Networks and International and Other segments as well as revenues recognized by AMC Networks Broadcasting & Technology for transmission revenues recognized from the International and Other operating segment.
(In thousands)
Three Months Ended March 31,
2017
 
2016
Inter-segment revenues
 
 
 
National Networks
$
(1,724
)
 
$
(944
)
International and Other
(31
)
 
(160
)
 
$
(1,755
)
 
$
(1,104
)
The table below summarizes revenues based on customer location:
(In thousands)
Three Months Ended March 31,
2017
 
2016
Revenues
 
 
 
United States
$
600,055

 
$
574,334

Europe
78,675

 
93,962

Other
41,459

 
38,283

 
$
720,189

 
$
706,579


17

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

The table below summarizes property and equipment based on asset location:
(In thousands)
March 31, 2017
 
December 31, 2016
Property and equipment, net
 
 
 
United States
$
108,890

 
$
104,939

Europe
39,342

 
39,976

Other
20,991

 
21,721

 
$
169,223

 
$
166,636

Note 17. Condensed Consolidating Financial Statements
Debt of AMC Networks includes $600 million of 4.75% senior notes due December 2022 and $1 billion of 5.00% senior notes due April 2024. All outstanding senior notes issued by AMC Networks are guaranteed on a senior unsecured basis by certain of its existing and future domestic restricted subsidiaries (the “Guarantor Subsidiaries”). All Guarantor Subsidiaries are owned 100% by AMC Networks. The outstanding notes are fully and unconditionally guaranteed by the Guarantor Subsidiaries on a joint and several basis.
Set forth below are condensed consolidating financial statements presenting the financial position, results of operations, comprehensive income, and cash flows of (i) the Parent Company, (ii) the Guarantor Subsidiaries on a combined basis (as such guarantees are joint and several), (iii) the direct and indirect non-guarantor subsidiaries of the Parent Company (the “Non-Guarantor Subsidiaries”) on a combined basis and (iv) reclassifications and eliminations necessary to arrive at the information for the Company on a consolidated basis.
Basis of Presentation
 In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) the Parent Company’s interests in the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, and (ii) the Guarantor Subsidiaries’ interests in the Non-Guarantor Subsidiaries, even though all such subsidiaries meet the requirements to be consolidated under GAAP. All intercompany balances and transactions between the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries have been eliminated, as shown in the column “Eliminations.”
 The accounting basis in all subsidiaries, including goodwill and identified intangible assets, have been allocated to the applicable subsidiaries.

18

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

Condensed Consolidating Balance Sheet
March 31, 2017
(In thousands)
 Parent Company
 
 Guarantor Subsidiaries
 
 Non- Guarantor Subsidiaries
 
 Eliminations
 
 Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
523

 
$
262,256

 
$
140,869

 
$

 
$
403,648

 Accounts receivable, trade (less allowance for doubtful accounts)

 
559,982

 
156,922

 

 
716,904

Amounts due from related parties, net

 
536

 

 

 
536

Current portion of program rights, net

 
322,957

 
138,048

 

 
461,005

Prepaid expenses, other current assets and intercompany receivable
16

 
177,967

 
16,450

 
(122,539
)
 
71,894

Total current assets
539

 
1,323,698

 
452,289

 
(122,539
)
 
1,653,987

Property and equipment, net of accumulated depreciation

 
108,318

 
60,905

 

 
169,223

Investment in affiliates
3,120,330

 
805,401

 

 
(3,925,731
)
 

Program rights, net

 
913,013

 
164,345

 

 
1,077,358

Long-term intercompany notes receivable

 
431,140

 
678

 
(431,818
)
 

Deferred carriage fees, net

 
39,336

 
1,067

 

 
40,403

Intangible assets, net

 
177,861

 
300,899

 

 
478,760

Goodwill

 
68,518

 
593,558

 

 
662,076

Deferred tax asset, net

 

 
8,906

 

 
8,906

Other assets
1,790

 
133,612

 
243,939

 

 
379,341

Total assets
$
3,122,659

 
$
4,000,897

 
$
1,826,586

 
$
(4,480,088
)
 
$
4,470,054

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
135

 
$
55,547

 
$
41,795

 
$

 
$
97,477

Accrued liabilities and intercompany payable
143,519

 
125,579

 
153,641

 
(122,539
)
 
300,200

Current portion of program rights obligations

 
205,501

 
70,582

 

 
276,083

Deferred revenue

 
35,935

 
10,967

 

 
46,902

Current portion of long-term debt
240,500

 

 

 

 
240,500

Current portion of capital lease obligations

 
2,713

 
1,736

 

 
4,449

Total current liabilities
384,154

 
425,275

 
278,721

 
(122,539
)
 
965,611

Program rights obligations

 
366,515

 
31,480

 

 
397,995

Long-term debt, net
2,525,544

 

 

 

 
2,525,544

Capital lease obligations

 
5,949

 
28,212

 

 
34,161

Deferred tax liability, net
153,594

 

 
(2,445
)
 

 
151,149

Other liabilities and intercompany notes payable
27,915

 
82,828

 
442,355

 
(431,818
)
 
121,280

Total liabilities
3,091,207

 
880,567

 
778,323

 
(554,357
)
 
4,195,740

Commitments and contingencies

 

 

 

 

Redeemable noncontrolling interests

 

 
214,998

 

 
214,998

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
AMC Networks stockholders’ equity
31,452

 
3,120,330

 
805,401

 
(3,925,731
)
 
31,452

Non-redeemable noncontrolling interests

 

 
27,864

 

 
27,864

Total stockholders’ equity
31,452

 
3,120,330

 
833,265

 
(3,925,731
)
 
59,316

Total liabilities and stockholders’ equity
$
3,122,659

 
$
4,000,897

 
$
1,826,586

 
$
(4,480,088
)
 
$
4,470,054



19

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)

Condensed Consolidating Balance Sheet
December 31, 2016
(In thousands)
 Parent Company
 
 Guarantor Subsidiaries
 
 Non- Guarantor Subsidiaries
 
 Eliminations
 
 Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
565

 
320,950

 
159,874

 

 
481,389

 Accounts receivable, trade (less allowance for doubtful accounts)

 
537,751

 
162,904

 

 
700,655

Amounts due from related parties, net

 
508

 

 

 
508

Current portion of program rights, net

 
307,050

 
134,080

 

 
441,130

Prepaid expenses, other current assets and intercompany receivable
948

 
151,175

 
15,961

 
(95,423
)
 
72,661

Total current assets
1,513

 
1,317,434

 
472,819

 
(95,423
)
 
1,696,343

Property and equipment, net of accumulated depreciation

 
104,272

 
62,364

 

 
166,636

Investment in affiliates
3,029,922

 
784,024

 

 
(3,813,946
)
 

Program rights, net

 
947,657

 
160,929

 

 
1,108,586

Long-term intercompany notes receivable

 
432,099

 
817

 
(432,916
)
 

Deferred carriage fees, net

 
42,656

 
1,230

 

 
43,886

Intangible assets, net

 
180,297

 
305,512

 

 
485,809

Goodwill

 
69,154

 
588,554

 

 
657,708

Deferred tax asset, net

 

 
8,598

 

 
8,598

Other assets
1,471

 
116,608

 
194,950

 

 
313,029

Total assets
3,032,906

 
3,994,201

 
1,795,773

 
(4,342,285
)
 
4,480,595

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable

 
40,033

 
48,644

 

 
88,677

Accrued liabilities and intercompany payable
71,680

 
182,667

 
125,505

 
(95,423
)
 
284,429

Current portion of program rights obligations

 
226,474

 
74,371

 

 
300,845

Deferred revenue

 
42,782

 
10,861

 

 
53,643

Current portion of long-term debt
222,000

 

 

 

 
222,000

Current portion of capital lease obligations

 
2,645

 
1,939

 

 
4,584

Total current liabilities
293,680

 
494,601

 
261,320

 
(95,423
)
 
954,178

Program rights obligations

 
365,262

 
32,913

 

 
398,175

Long-term debt, net
2,597,263

 

 

 

 
2,597,263

Capital lease obligations

 
6,647

 
28,635

 

 
35,282

Deferred tax liability, net
145,364

 

 
427

 

 
145,791

Other liabilities and intercompany notes payable
26,681

 
97,769

 
440,685

 
(432,916
)
 
132,219

Total liabilities
3,062,988

 
964,279

 
763,980

 
(528,339
)
 
4,262,908

Commitments and contingencies
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests

 

 
219,331

 

 
219,331

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
AMC Networks stockholders’ (deficiency) equity
(30,082
)
 
3,029,922

 
784,024

 
(3,813,946
)
 
(30,082
)
Non-redeemable noncontrolling interests
̵