Crown Media Holdings Announces Financial Results for First Quarter 2003.Business Editors GREENWOOD Greenwood. 1 City (1990 pop. 26,265), Johnson co., central Ind.; settled 1822, inc. as a city 1960. A residential suburb of Indianapolis, Greenwood is in a retail shopping area. Manufactures include motor vehicle parts and metal products. VILLAGE, Colo.--(BUSINESS WIRE)--May 6, 2003 Crown Media Holdings, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CRWN CRWN Composite Reconfigurable Wireless Network ) today reported its operating results for the three months ended March 31, 2003. Operating Highlights for the Quarter -- Crown Media's net revenue in the first quarter of 2003 increased 6% to $42.0 million, from $39.5 million in the prior year's first quarter. Advertising revenues for the quarter totaled $22.4 million, an increase of 53% from the first quarter of 2002. -- Hallmark hallmark, mark impressed on silverwork or goldwork to signify official approval of the standard of purity of the metal, also called plate mark. The hallmark was introduced by statute in England in 1300 and enforced by the Goldsmiths' Hall, London. Channel subscribers increased 16% to 105.8 million worldwide as of March 31, 2003, from 91.5 million subscribers as of March 31, 2002. The channel ended the quarter with 51.3 million subscribers in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and 54.5 million international subscribers across 122 countries. Subscribers to our domestic channel increased 14%, and subscribers to our international channels increased 17% over the first quarter 2002. -- After five consecutive months of growth from October October: see month. 2002 through March 2003, Hallmark Channel U.S. announced its highest quarter, month and day ever for audience delivery. For the first quarter 2003, Hallmark Channel U.S. increased total day household ratings by 67% and audience delivery by 70% as compared to the first quarter 2002. In March 2003, the channel ranked fourth for total day ratings and audience delivery growth, increasing 67% and 84% respectively over March 2002 among all ad-supported networks (behind CNN CNN or Cable News Network Subsidiary company of Turner Broadcasting Systems. It was created by Ted Turner in 1980 to present 24-hour live news broadcasts, using satellites to transmit reports from news bureaus around the world. , FNC FNC - Federal Networking Council and MSNBC MSNBC Microsoft/National Broadcasting Company ). The network recorded its highest total day performance to date on March 31st, driven by a 9-hour movie marathon and averaging a 1.2 rating. Ratings continue to be strong, with the channel announcing its highest rated telecast ever with a 2.7 rating for the April 7th world premiere Noun 1. world premiere - (music) the first public performance (as of a dramatic or musical work) anywhere in the world performance, public presentation - a dramatic or musical entertainment; "they listened to ten different performances"; "the play ran for 100 of the original movie Love Comes Softly. -- Internationally, the channel continues to achieve record ratings in certain key markets. In Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. , a new locally driven schedule was introduced in March 2003, resulting in a 70% increase in household ratings over January January: see month. and February February: see month. results. Ratings for the Australian Australian pertaining to or originating in Australia. Australian bat lyssavirus disease see Australian bat lyssavirus disease. Australian cattle dog a medium-sized, compact working dog used for control of cattle. channel for March 2003 have increased 160% for total day and 180% for primetime as compared to March 2002, demonstrating growing audience loyalty to the channel as we have expanded our programming of original movies and mini-series with popular Australian dramas. -- Hallmark Channel's focus on the holidays kicked off 2003 in the U.S. with its second highest rated telecast for the February original movie Straight from the Heart, which was also the highest rated movie on all ad-supported cable networks for the night in the channel's key demographic groups. Mother's Day and Father's Day Mother's Day and Father's Day Holidays. In the U.S. a nationwide observance of Mother's Day was suggested by Anna Jarvis of Grafton, W.Va., and in 1908 formal observances were held in churches in Grafton and Philadelphia. promotions have been announced, featuring original movies and two unique cross-platform campaigns offering extensive affiliate and ad sales partnership opportunities. These promotions mark the U.S. channel's most successful affiliate participation to date, reaching more than 24 million cable subscribers. -- The channel continues to refine its programming strategy in the U.S., with the introduction of Disney movies on Friday nights. The newly acquired package of timeless timeless, adj infinite, enduring, endless. Disney films contributed to the first quarter's ratings success, many of which have achieved ratings of more than 0.9 household delivery since they have begun airing in February. The U.S. channel's Saturday Western block continues to be strong, averaging a 0.9 household rating for the first quarter. -- The company completed a tax sharing arrangement with Hallmark Cards in the first quarter, which will allow Hallmark Cards Hallmark Cards, a privately owned American company based in Kansas City, Missouri, is the largest manufacturer of greeting cards in the United States. Approximately 50% of greeting cards sent in the United States every year are manufactured by Hallmark. to benefit from future tax losses which may be generated by Crown Media. As a result, Hallmark Cards has agreed to pay 75% of these benefits to Crown Media in cash on a quarterly basis and the balance when Crown Media becomes a federal taxpayer. The company has received $21.3 million through April 30, 2003, related to this agreement, and expects to receive a total of between $40 and $50 million in 2003. "We are very excited and pleased with the remarkable start we have had in 2003," stated David Evans David Evans may mean:
"Our outlook for the year is strong," continued Mr. Evans Ev·ans , Herbert McLean 1882-1971. American anatomist who isolated four pituitary hormones and discovered vitamin E (1922). , "with steady increases in distribution and continued growth in revenue, we are confident in our ability to achieve EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become break-even this year. The improved liquidity we are already realizing through our new agreement with Hallmark Cards will provide additional support for our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. success." Financial Results Historical financial information is provided in tables at the end of this release. Operating Results Crown Media reported net revenue of $42.0 million for the first quarter of 2003, a 6% increase from $39.5 million for the first quarter of 2002. Subscriber fee revenue in the first quarter decreased 12% to $17.5 million, from $19.8 million in the prior year's quarter, primarily as a result of amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. long-term distribution agreements and amortization of subscriber acquisition fees. Advertising revenue increased 53% to $22.4 million during the quarter, from $14.6 million in the first quarter of 2002, reflecting increased distribution, an enhanced programming schedule, higher ratings for our channels and higher advertising rates, specifically in our domestic market. Licensing fees decreased to $3.5 million during the quarter, from $7.0 million in the prior year's quarter due to timing of film deliveries. We expect our licensing fees to increase in second quarter 2003. For the first quarter of 2003, total cost of services decreased to $47.9 million from $49.7 million during the same quarter of 2002. Within cost of services, programming expenses decreased 1% quarter over quarter to $23.4 million. For the three months ended March 31, 2003, amortization of film assets decreased to $6.8 million from $7.2 million during the same quarter of 2002 due to decreased sales. We also expanded distribution and entered into new or revised agreements in the U.S. in 2002, which resulted in an increase in amortization of subscriber acquisition fees. This expense was $6.0 million in 2003 versus $4.2 million in 2002. Operating costs operating costs npl → gastos mpl operacionales , which include playback Playback could mean:
removal of most of the comb of day-old chickens. See also decombing. and subtitling, transponder A receiver/transmitter on a communications satellite. It receives a microwave signal from earth (uplink), amplifies it and retransmits it back to earth at a different frequency (downlink). A satellite has several transponders. and interstitial In a separate window. See interstitial ad. (World-Wide Web) interstitial - A World-Wide Web page that appears before the expected content page. Interstitials can be used for advertising (intermercial, transition ad) or to confirm that the user is old enough to view the expenses, decreased 21% from $13.2 million to $10.5 million for the first quarter of 2003, primarily as a result of lower salary, benefit, satellite and transponder expenses resulting from our 2002 reorganization. Selling, general and administrative expenses decreased to $14.2 million for the three months ended March 31, 2003, from $16.6 million in the year earlier period. These decreases resulted from a reduction in salary, benefit, consulting and travel expenses. Marketing expenses decreased to $5.4 million for the three months ended March 31, 2003, from $9.8 million in the year earlier period primarily due to lower media buys for our domestic channel during first quarter 2003 as compared to first quarter 2002. The loss before interest, taxes, depreciation, and amortization totaled $10.1 million for the first quarter of 2003, compared to an EBITDA loss of $21.9 million for the same period last year. EBITDA loss is reconciled to net loss and cash used in operating activities in the table at the end of the press release. Cash used in operating activities totaled $48.3 million for the first quarter of 2003 compared to $56.8 million for the same period last year. The net loss for the three month period ended March 31, 2003, totaled $46.7 million, or $0.45 per share, compared to $56.0 million, or $0.54 per share, in the first quarter of 2002. Crown Media's principal sources of funds are cash inflows from operations, cash on hand, available borrowings under a line of credit with HC Crown Corporation, a wholly-owned subsidiary of Hallmark Cards Incorporated, and periodic cash receipts under the new tax sharing agreement with Hallmark Cards, Incorporated. As of March 31, 2003, Crown Media had $20.5 million available under the HC Crown line of credit to support the cash needs of Crown Media's operations. In addition, Crown Media expects that the tax sharing agreement will result in substantial cash receipts in 2003 and later years. We believe that the funds available from the line of credit and the tax sharing arrangement together with cash generated from operations are sufficient to fund our cash needs for the next 12 months. Crown Media would consider pursuing other ways to raise additional cash (which might include equity sales or debt), if needed, but there can be no assurance that such financings would be available. Conference Call and Webcast to be Held May 6 at 11:00 a.m. ET Crown Media Holdings' management will conduct a conference call this morning at 11:00 a.m. Eastern Time to discuss the first quarter 2003 results. Investors and interested parties may listen to the call via a live webcast accessible through the investor relations' section of the Company's web site at www.hallmarkchannel.com. To listen, please register and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. audio software at the site at least 15 minutes prior to the start time. The webcast will be archived on the site, while a telephone replay of the call is available for 7 days beginning at 1:00 p.m. Eastern Time, May 6, at 888-286-8010 or 617-801-6888 (international callers), using reservation number 559908. About Crown Media Holdings Crown Media Holdings, Inc. (NASDAQ: CRWN) owns and operates cable television channels dedicated to high quality, broad appeal, entertainment programming. The Company currently operates and distributes the Hallmark Channel in the U.S. and more than 120 countries. The combined channels have over 105 million subscribers worldwide. Significant investors in Crown Media Holdings include: Hallmark Entertainment Holdings, Inc., a subsidiary of Hallmark Cards, Incorporated, Liberty Media Corp., and J.P. Morgan Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. Partners (BHCA (Busy Hour Call Attempts) The number of times a telephone call is attempted during the busiest hour of the day. See busy hour. ), LP, each through their investments in Hallmark Entertainment Investments Co. which holds a controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail in the Company; as well as VISN VISN Veterans Integrated Service Network VISN Virtual Integrated Sky Network (Loral Orion) VISN Visual Interactive Support Network Management Corp., a for-profit subsidiary of the National Interfaith in·ter·faith adj. Of, relating to, or involving persons of different religious faiths: an interfaith marriage; an interfaith forum. Cable Coalition; and Hughes Electronics Corporation. Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Statements contained in this press release may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and that are based on management's current expectations, estimates and projections. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied in the forward-looking statements. Such risks and uncertainties include: competition for distribution of channels, viewers, advertisers, and the acquisition of programming; fluctuations in the availability of programming; fluctuations in demand for the programming Crown Media airs on its channels; unanticipated events affecting cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses ; and other risks detailed in the Company's filings with the Securities and Exchange Commission, including the Risk Factors stated in the Company's 10-K Report for the year ended December 31, 2002. Crown Media Holdings is not undertaking any obligation to release publicly any updates to any forward looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of this release or to reflect the occurrence of unanticipated events. Use of EBITDA Crown Media evaluates operating performance based on several factors, including EBITDA. Crown Media considers EBITDA an important indicator of the operational strength and performance of its businesses, including the ability to provide cash flows to service debt and fund capital expenditures. We believe it is common practice in our industry for investment bankers Investment Banker A person representing a financial institution that is in the business of raising capital for corporations and municipalities. Notes: An investment banker may not accept deposits or make commercial loans. and other investors to use various multiples of current or projected EBITDA for purposes of estimating current or prospective enterprise value and as one of many measures of performance. Some investment analysts track the relationship of EBITDA to total debt as one measure of financial strength. Our EBITDA calculation eliminates the amount of non-cash depreciation of tangible assets Tangible Asset An asset that has a physical form such as machinery, buildings and land. Notes: This is the opposite of an intangible asset such as a patent or trademark. Whether an asset is tangible or intangible isn't inherently good or bad. , amortization of film assets (but not amortization of program license fees) and amortization of subscriber acquisition fees, interest expense and accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the and income taxes. However, EBITDA should be considered in addition to, not as a substitute for, historical operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. or loss, net loss, cash flow from operations and other measures of financial performance reported in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in the United States. EBITDA differs significantly from cash flows used in operating activities reflected in the consolidated statement of cash flows. Cash flow used in operating activities is net of interest and taxes paid and is a more comprehensive determination of periodic income on a cash basis, exclusive of non-cash items of income and expenses such as depreciation and amortization. In contrast, EBITDA is derived from accrual basis A method of accounting that reflects expenses incurred and income earned for Income Tax purposes for any one year. Taxpayers who use the accrual method must include in their taxable income any money that they have the right to receive as payment for services, once it income and is not reduced for cash invested in working capital. Consequently, EBITDA is not affected by the timing of receivable collections or when accrued expenses Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. are paid. We are not aware of any uniform standards for determining EBITDA and believe presentations of EBITDA may not be calculated consistently by different entities in the same or similar businesses.
Crown Media Holdings, Inc.
Selected First Quarter Financial Information
($ in thousands, except per share data)
Three Months Ended March 31,
2003 2002
---------------- ----------------
Subscriber fees $ 17,470 $ 19,847
Advertising 22,009 13,400
Advertising from Hallmark
Cards 350 1,170
Licensing fees 3,539 6,979
Other 34 13
Amortization of subscriber
acquisition fees (1,444) (1,940)
---------------- ----------------
Net revenues 41,958 39,469
Cost of services:
Affiliate programming 8,737 10,382
Non-affiliate programming 14,706 13,369
Amortization of film assets 6,777 7,248
Amortization of subscriber
acquisition fees 5,996 4,247
Depreciation and amortization 1,185 1,186
Operating costs 10,492 13,225
---------------- ----------------
Total cost of services 47,893 49,657
Selling, general and
administrative expense 14,165 16,567
Marketing expenses 5,439 9,794
Depreciation and amortization 2,423 2,220
---------------- ----------------
Loss from operations $ (27,962) $ (38,769)
================ ================
Net loss $ (46,690) $ (56,010)
================ ================
Net loss per share $ (0.45) $ (0.54)
================ ================
Weighted average shares
outstanding 104,465 104,212
Crown Media Holdings, Inc.
Unaudited Consolidated Balance Sheet Data
(In thousands)
As of March As of December
31, 31,
2003 2002
--------------- --------------
ASSETS:
Cash and cash equivalents $ 7,281 $ 335
Accounts receivable, less allowance
for doubtful accounts 41,099 41,629
Program license fees, net of
accumulated amortization 168,594 147,977
Films assets, net of accumulated
amortization 780,535 786,826
Subscriber acquisition fees, net of
accumulated amortization 133,686 140,265
Property and equipment, net of
accumulated depreciation 33,618 35,612
Goodwill 314,033 314,033
Prepaids and other assets 23,281 25,585
--------------- --------------
Total assets $ 1,502,127 $ 1,492,262
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued
liabilities $ 68,959 $ 90,132
Subscriber acquisition fees payable 38,023 48,554
License fees payable 177,987 158,191
Payables to Hallmark affiliates 106,148 106,680
Notes and interest payable to HC Crown 54,915 5,010
Credit facility and interest payable 320,784 320,871
Convertible debt 49,322 47,916
Derivative liability 1,018 762
Guaranteed preferred beneficial
interest in Crown Media Trust's
debentures 228,638 221,551
Preferred minority interest 25,000 25,000
Stockholders' equity 431,333 467,595
--------------- --------------
Total liabilities and
stockholders' equity $ 1,502,127 $ 1,492,262
=============== ==============
Crown Media Holdings, Inc.
Selected First Quarter Financial Information
($ in thousands)
Three Months Ended March 31,
2003 2002
------------ ------------
Net loss $ (46,690) $ (56,010)
Amortization of film assets 6,777 7,248
Amortization of subscriber acquisition
fees 7,440 6,187
Depreciation and amortization 3,608 3,406
Guaranteed Preferred
Beneficial Interest Expense 11,047 10,602
Interest expense and accretion 7,342 6,090
Income tax provision 339 549
------------ ------------
Earnings before interest, taxes,
depreciation and amortization $ (10,137) $ (21,928)
------------ ------------
Programming, subtitling and dubbing
amortization 24,794 24,211
Provision for allowance for doubtful
account 1,328 570
Stock-based compensation 3 6
Changes in operating assets and
liabilities:
Additions to program license fees (45,115) (44,609)
Additions to subscriber acquisition
fees (860) (2,936)
Decrease in subscriber acquisition fees
payable (10,530) (11,192)
Interest paid (5,243) (4,977)
Income taxes paid (339) (549)
Changes in other operating assets and
liabilities, net of adjustments above (2,244) 4,556
------------ ------------
Cash used in operating activities $ (48,343) $ (56,848)
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