Crown Media Holdings Announces Operating Results for Fourth Quarter of 2007.STUDIO CITY, Calif. -- 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 quarter and year ended December 31, 2007. Operating Highlights for the Quarter * Revenue growth. Crown Media's net revenue in the fourth quarter of 2007 increased 19% to $69.6 million, from $58.4 million in the prior year's fourth quarter. The Company experienced an increase of 21% in advertising revenues to $63.0 million and a 3% increase in subscriber fee revenues to $6.4 million. For the full year, Crown Media's total net revenue increased 17% to $234.4 million from $201.2 million in the prior year. Substantial growth was experienced in advertising revenues, which increased 18% to $206.2 million, and in subscriber fees which increased 12% to $27.8 million. * Continued subscriber increase. 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 12% by approximately 9.3 million to 83.9 million as of December 31, 2007, from 74.6 million subscribers as of December 31, 2006. * Successful renewal of distribution agreements. During the fourth quarter, the Company announced the successful renewal of its distribution agreement with Comcast Corporation. Earlier in the year, Crown Media completed the renewal of its distribution agreements with Echostar and NCTC NCTC National Conservation Training Center NCTC National Counterterrorism Center (9/11 Commission Report) NCTC National Cable Television Cooperative NCTC National Collection of Type Cultures (UK laboratory) , and since the end of 2007, the Company reported renewing its distribution agreements with Time Warner and DIRECTV. As a result, over the past twelve months, the Company has entered into renewed multi-year distribution agreements on favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms with its distribution partners covering 71 million of its 84 million subscribers. * Record ratings. For the fourth quarter of 2007, Hallmark Channel delivered its highest rated quarter, month, week, and day in our network history. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Nielsen, in December Hallmark Channel ranked 8th among all 69 ad-supported networks for Prime Time with a 1.2 household rating, marking the 19th straight month as a top-ten channel in Prime Time. * Popular holiday programming. The Company's rating success in the fourth quarter was fueled in part by the popularity of the Company's original holiday-themed programming. According to Nielsen, this marked the second year that Hallmark Channel was the number one destination for holiday weekends. For three straight weeks our holiday original premieres on Saturday night were the number one ranked Prime Time programs of the day among all 69 ad-supported cable networks. A Grandpa for Christmas delivered a 3.2 household rating, followed by All I Want For Christmas, delivering a 3.1 household rating, and The Note, with Genie Francis Genie Francis (born Eugenie Ann Francis on May 26, 1962 in Englewood, New Jersey, USA) is an actress who plays the role of Laura Spencer on the ABC daytime drama General Hospital, whom she played from 1976 to 2006 at various times. , earning a 3.4 household rating. "We have had a truly remarkable year," noted Henry Schleiff, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Crown Media. "We delivered strong ratings culminating in a record-breaking December, we have continued to expand our distribution at a rapid pace with 84 million subscribers to-date, and advertisers' recognition of the value of our brand and the quality of our programming has given us another year of double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" growth in advertising revenues. Most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , over the past twelve months we have completed the renewal of the vast majority of our distribution agreements on fair and reasonable terms, which will contribute to the generation of operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for 2008 and beyond. "Hallmark Channel brand and quality will be extended next month with the launch of our Hallmark Movie Channel in high definition - home of the greatest family movies of all-time. As we look ahead to the remainder of 2008, our focus will be on expanded distribution of Hallmark Movie Channel, which I believe represents a tremendous growth opportunity for the future, continued growth in distribution and advertising for Hallmark Channel, and financial success for Crown Media." Financial Results Historical financial information is provided in tables at the end of this release. On December 15, 2006, the Company completed the sale of its film assets. Operating Results Crown Media reported revenue of $69.6 million for the fourth quarter of 2006, a 19% increase from $58.4 million for the fourth quarter of 2006. Subscriber fee revenue increased 3% to $6.4 million, from $6.2 million in the prior year's quarter as a result of higher net effective rates on average, primarily due to a decrease in subscriber acquisition fees applied against revenue, and an increase in the number of subscribers. Advertising revenue increased 21% to $63.0 million during the quarter, from $52.0 million in the fourth quarter of 2006, reflecting the growth in subscribers and an increase in advertising rates, offset in part by lower than expected ratings. Crown Media reported revenue of $234.4 million for the year ended December 31, 2007, a 17% increase from $201.2 million for the prior year. Subscriber fee revenue increased 12% to $27.8 million, from $24.9 million in the prior year's period. Advertising revenue increased 18% to $206.2 million from $174.2 million in the prior year. Licensing fees for our film library decreased to $0 from $1.8 million in the prior year, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the sale of our film assets in December 2006. Sublicense sub·li·cense n. A license giving rights of production or marketing of products or services to a person or company that is not the primary holder of such rights. tr.v. fees and other revenue increased to $378,000 in 2007 from $305,000 in 2006. For the fourth quarter of 2007, cost of services decreased 3% to $51.5 million from $53.1 million during the same quarter of 2006. Within cost of services, programming expenses decreased 19% quarter over quarter to $39.9 million, primarily due to $16.4 million of NICC See NIC. program license fees which were written-down to their estimated net realizable values Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. during 2006, offset in part by expensing certain affiliate programming after one airing and continued increases in the market cost of program licenses. For the quarter ended December 31, 2006, amortization of film assets was a negative $7.0 million as compared to $0 during the same quarter of 2007 primarily due to the decrease in licensing fees from our film library discussed above and the reduction of our residual and participation assets related to the sale of our film library in December 2006. Subscriber acquisition fee expense was $8.3 million in the fourth quarter of 2007 versus $7.8 million in the same period of 2006. The Company amortizes these costs over the remaining life of the distribution agreement. Other cost of services and amortization of our capital lease increased 22% from $2.7 million to $3.3 million for the fourth quarter of 2007, primarily due to a $586,000 increase in bad debt expense. Selling, general and administrative expenses increased to $21.6 million for the quarter ended December 31, 2007, from $11.3 million in the year earlier period primarily due to a $3.9 million increase in bonus expense and a $7.4 million increase in legal expense (relating to the January 2, 2008, NICC Modification and Termination Agreement). Marketing expenses of $7.9 million for the quarter ended December 31, 2007, increased from $7.2 million for the quarter ended December 31, 2006. For the year ended December 31, 2007, cost of services decreased 54% to $202.5 million from $436.2 million during the prior year. Within cost of services, programming expenses increased 8% period over period to $164.4 million. For 2006, impairments of film assets of $225.8 million were recorded. For the year ended December 31, 2006, amortization of film assets was $14.7 million, as compared to a negative expense of $5.3 million for the year ended December 31, 2007, related to a change in estimate of our residual and participation liability. Selling, general and administrative expenses increased to $61.4 million for the year ended December 31, 2007, from $43.8 million in the year earlier due to a $7.8 million increase and a $1.4 million increase in compensation expense related to the obligations of restricted stock units Restricted stock units Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested. and stock appreciation rights, respectively, a $1.7 million increase in commissions expense, a $6.4 million increase in legal expense, a $2.5 million increase in bonus expense, a $962,000 increase in research expense and other miscellaneous increases, offset in part by a $1.2 million decrease in depreciation and amortization expense primarily related to assets becoming fully depreciated Fully depreciated An asset that has already been charged with the maximum amount of depreciation allowed by the IRS for accounting purposes. fully depreciated Of or relating to a fixed asset that has been depreciated to a book value of zero. and a $3.7 million decrease in severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when expense. Marketing expenses increased to $19.7 million for the year ended December 31, 2007, from $16.0 million in the year earlier. In 2007 the Company had five marketing promotions per year as compared to four marketing promotions in 2006 due to management's cost savings efforts. Adjusted 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 was a loss of $830,000 for the fourth quarter of 2007 compared to an Adjusted EBITDA loss of $9.7 million for the same period last year. Cash provided by continuing operating activities totaled $15.3 million for the fourth quarter of 2007 compared to cash used in continuing operating activities of $12.6 million for the same period last year. The net loss for the quarter ended December 31, 2007, totaled $37.3 million, or $0.37 per share, compared to $30.0 million, or $0.29 per share, in the fourth quarter of 2006. Adjusted EBITDA was a loss of $11.3 million for the year ended December 31, 2007 compared to an Adjusted EBITDA loss of $16.5 million for the same period last year. Cash provided by continuing operating activities totaled $12.6 million for the year ended December 31, 2007, compared to cash used in continuing operating activities of $34.1 million for the same period last year. The net loss for the year ended December 31, 2007, totaled $159.0 million, or $1.53 per share, compared to $389.0 million, or $3.71 per share, in the prior year period. Conference Call and Webcast to be Held Wednesday, March 12(th) at 11:00 a.m. ET Crown Media Holdings' management will conduct a conference call today at 11:00 a.m. Eastern Time to discuss the results of the fourth quarter and full year of 2007. 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, or by dialing (800) 688-0796 (Domestic) or (617) 614-4070 (International) and requesting the "Fourth Quarter Earnings for Crown Media" call. For those listeners accessing the call through the Company's website, please register and download 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, March 12th, at 888-286-8010 or 617-801-6888 (international callers), using reservation number 93357113. 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 Hallmark Channel in the U.S. to approximately 84 million subscribers. The program service is distributed through 5,450 cable systems and communities as well as direct-to-home satellite services across the country. Hallmark Channel consistently ranks among the top ten ad-supported cable networks in Total Day and Prime Time household ratings and is the nation's leading network in providing quality family programming. Crown Media also operates a second 24-hour linear channel, Hallmark Movie Channel, and will launch Hallmark Movie Channel HD in April 2008. Significant investors in Crown Media Holdings include: Hallmark Entertainment Holdings, Inc., a subsidiary of 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. , Incorporated, Liberty Media Corp., and J.P. Morgan 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.; 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 The DIRECTV Group, Inc. 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; Crown Media's ability to address its liquidity needs; Crown Media's incurrence of losses; and Crown Media's substantial indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. affecting its financial condition and results; 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, 2007. Crown Media Holdings is not undertaking any obligation to release publicly any updates to any forward looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Use of Adjusted EBITDA Crown Media evaluates operating performance based on several factors, including Adjusted EBITDA. Our calculation of Adjusted EBITDA adds back to net loss impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of film assets, other non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) and other items mentioned below. The Company no longer has an EBITDA covenant in its bank credit agreement. Our measure of Adjusted EBITDA differs from the normal definition of EBITDA (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income. Consequently, management views Adjusted EBITDA as a critical measure of our operating performance to meet our debt covenants and monitors this measure closely. We disclose Adjusted EBITDA so that our investors can have some of the same information available to our management to evaluate their investment in our Company. We also believe that an Adjusted EBITDA provides an indication of the Company's ability to generate cash flows from operating activities since our non-cash expenses are excluded from our calculation of Adjusted EBITDA. A significant portion of the Company's cost structure related to the amortization of film assets and subscriber acquisition costs, which are significant non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. . The Adjusted EBITDA calculation allows the Company to assess how much is available to pay debt service and gives a further indication of how much remains to fund discretionary expenditures such as the acquisition of programming or additional subscriber base. However, Adjusted 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 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 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 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. . Adjusted EBITDA differs significantly from cash flows from operating activities reflected in the consolidated statement of cash flows. Cash flow from 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, amortization, loss from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and impairment of film assets. In contrast, Adjusted 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, Adjusted 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 or our Adjusted EBITDA and believe that our calculation of Adjusted EBITDA is probably calculated differently than presentations of EBITDA by other entities because our calculation was based upon the definition in a bank credit agreement. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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