Starz Reports First Quarter 2013 Financial Results

              Starz Reports First Quarter 2013 Financial Results

PR Newswire

ENGLEWOOD, Colo., May 9, 2013

ENGLEWOOD, Colo., May 9, 2013 /PRNewswire/ --Starz (NASDAQ: STRZA, STRZB)
today reported first quarter 2013 results. Highlights include ^(1):

  oIncreased STARZ subscriptions by 7% and ENCORE subscriptions by 4% to 21.6
    million and 35.1 million respectively

       o56.7 million combined subscriptions; leads U.S. premium television
         category

  oPremiered "Da Vinci's Demons" to record original programming opening
    weekend viewership; renewed for second season
  oConcluded "Spartacus" series to season high viewership; global hit series
    averaged approximately 6 million viewers per episode in the United States
  oGreenlit New STARZ Original series "Fortitude" in co-production
    partnership with BSkyB's Sky Atlantic for air in 2014
  oLaunched Android and new device support with new app store access for
    STARZ/ENCORE/MOVIEPLEX PLAY services with Barnes & Noble and Google
  oSecured home video distribution agreement at Anchor Bay with AMC Networks
    for original programming from AMC, IFC and Sundance Channel

(Logo: http://photos.prnewswire.com/prnh/20080522/LATH063LOGO-b)

Chris Albrecht, Starz Chief Executive Officer said, "Starz delivered solid
operational performance in the first quarter with record subscriber totals at
STARZ and ENCORE. We continue to execute our strategy to grow the STARZ
Original series programming portfolio with quality dramatic series. Coupled
with the conclusion of "Spartacus" which aired on the same night, Starz had
the biggest weekend viewing for an original series in the company's history
and we are happy to have renewed 'Da Vinci's Demons' for a second season. In
addition, anticipation is building for 'Magic City,' 'The White Queen,' 'Black
Sails,' and the recently greenlit 'Fortitude' which we will co-produce with
BSkyB's Sky Atlantic. We are confident that over time our approach to
original programming will deliver strong shareholder value."

"Our TV Everywhere efforts continued to accelerate, with this week's launch of
new device support for PLAY on Android and other new platforms. This is an
important part of cementing our relationship with viewers, adding value for
our distribution partners and growing our business in the near and long-term."

Revenue decreased 1% to $399 million for the first quarter primarily
attributable to Starz Networks as a result of the non-renewal of the Netflix
agreement and the renewal of affiliation agreements with two distributors in
the fourth quarter of 2012 on less favorable financial terms than the prior
affiliation agreements (such agreements provide for annual contractual
increases). Starz Animation also contributed to the decrease in revenue due
to fewer projects in production at the company's Film Roman studio. These
decreases in revenue were partially offset by an increase in revenue for Starz
Distribution driven by the strong performance of the company's original series
"Spartacus" and various titles from The Weinstein Company LLC ("TWC") and a
decrease in inter-segment eliminations.

Adjusted OIBDA ^ (2) decreased 8% to $117 million for the first quarter. In
addition to the decrease in revenue mentioned above, Adjusted OIBDA was
impacted by higher sales of lower margin titles by Starz Distribution and a
decrease in inter-segment eliminations as a result of fewer exhibitions of
Overture Films' titles on Starz Networks.

Operating income decreased 13% to $105 million for the first quarter. The
decrease was due to the decrease in Adjusted OIBDA discussed above combined
with an increase in stock compensation expense.

Cash paid for investments in films and television programs decreased 7% to $58
million for the first quarter. The decrease was primarily due to timing of
payments for certain TWC titles partially offset by increased investment in
original programming. The company plans to make additional investments in
original programming in the future.

Share Repurchases

From February 1, 2013 through April 30, 2013, 940,400 shares of Series A
common stock (NASDAQ: STRZA) were purchased at an average cost per share of
$21.51 for total cash consideration of $20.2 million. Starz has approximately
$378.7 million remaining under its current repurchase authorization.

FOOTNOTES
    Starz CEO, Christopher Albrecht, will discuss these highlights and other
(1) matters during the Starz earnings conference call which will begin at
    12:00 p.m. (ET) on May 9, 2013. For information regarding how to access
    the call, please see "Important Notice" later in this document.
(2) For a definition of Adjusted OIBDA and applicable reconciliation see
    Non-GAAP Financial Measures and Schedule 1 below.

NOTES

  oUnless otherwise noted, the foregoing discussion compares financial
    information for the three months ended March 31, 2013 to the same period
    in 2012.
  oIn January 2013, Starz (formerly known as Liberty Media Corporation ("Old
    LMC")) completed the spin off (the "LMC Spin-Off") of its wholly-owned
    subsidiary Liberty Media Corporation (formerly known as Liberty Spinco,
    Inc. ("Liberty Media")) in a tax-free manner through the distribution, by
    means of a dividend, of shares of Liberty Media's common stock to holders
    of Old LMC common stock. In this distribution, each holder of a share of
    Old LMC common stock received one share of the corresponding series of
    Liberty Media common stock. Following the LMC Spin-Off, Starz retained
    the businesses of its wholly-owned subsidiary, Starz, LLC, and all other
    businesses, assets and liabilities of Old LMC are included in Liberty
    Media. Unless the context otherwise requires, Old LMC is used when events
    or circumstances being described occurred prior to the LMC Spin-Off and
    Starz is used when events or circumstances being described occurred
    following the LMC Spin-Off.
  oIn accordance with GAAP, Liberty Media was determined to be the accounting
    successor to Old LMC for financial reporting purposes following the LMC
    Spin-Off due to the relative significance of Liberty Media to Starz (which
    is the legal spinnor) and the continued involvement of Old LMC's senior
    management with Liberty Media following the LMC Spin-Off. Accordingly,
    the historical financial statements of Old LMC prior to the LMC Spin-Off
    will continue to be the historical financial statements of Liberty Media
    and Starz's historical financial information will be deemed to be the
    financial information of Starz, LLC. The financial statements of Starz
    reflect Starz, LLC on a historical cost basis. Starz, LLC is the only
    directly owned subsidiary of Starz which in turn owns either directly or
    indirectly various operating subsidiaries. Starz is a holding company
    with no assets or liabilities of its own, other than offsetting tax
    receivables and payables, or operations other than those of Starz, LLC.
    Accordingly, the financial position, results of operations, comprehensive
    income and cash flows of Starz and Starz, LLC are identical for periods
    prior to the LMC Spin-Off.
  oIn connection with the LMC Spin-Off, Starz, LLC distributed $1.8 billion
    in cash to Old LMC which was funded by a combination of cash on hand and
    $550.0 million of borrowings under Starz, LLC's senior secured revolving
    credit facility. The $1.8 billion was paid as follows: $100.0 million on
    July9, 2012, $250.0 million on August17, 2012, $50.0 million on
    September4, 2012, $200.0 million on November16, 2012 and $1.2 billion on
    January 10, 2013. Such distributed cash was contributed to Liberty Media
    prior to the LMC Spin-Off. Additionally, in connection with the LMC
    Spin-Off, Starz, LLC distributed its Englewood, Colorado corporate office
    building and related building improvements to Old LMC (and Old LMC
    transferred such building and related improvements to Liberty Property
    Holdings, Inc. ("LPH"), a subsidiary of Liberty Media) and then leased
    back the use of such facilities from LPH. Following the LMC Spin-Off,
    Liberty Media and Starz operate independently, and neither have any stock
    ownership, beneficial or otherwise, in the other.

SUPPLEMENTAL INFORMATION
As a supplement to Starz's consolidated statements of operations, to be
included in its Form 10-Q, the following is a presentation of quarterly
financial information and operating metrics for the periods indicated.

Please see definition of Adjusted OIBDA below and a discussion of why
management believes the presentation of Adjusted OIBDA provides useful
information for investors. Schedule 1 to this press release provides a
reconciliation of Adjusted OIBDA to operating income for the same periods, as
determined under generally accepted accounting principles ("GAAP").

QUARTERLY SUMMARY
(amounts in millions)       1Q12     2Q12     3Q12    4Q12       1Q13
Revenue                     $ 405.0 $ 402.5 $ 401.0 $  422.2 $  399.3
Adjusted OIBDA              $ 126.8 $ 108.5 $ 108.1 $  101.4 $  116.5
Operating income            $ 120.0 $ 100.3 $ 99.5  $   85.6 $  104.9
Subscription units – STARZ  20.1     20.7     20.8    21.2       21.6
Subscription units – ENCORE 33.6     34.2     34.3    34.8       35.1





CASH AND DEBT
The following presentation is provided to separately identify cash and debt
information.
(amounts in millions)            12/31/2012              3/31/2013
Cash                             $     749.8        $       17.9
Debt:
Bank facility                    $        5.0     $     235.0
5% senior notes                  500.0                   678.4
Transponder capital lease        34.8                    33.8
Building capital lease           -                       44.7
Total debt             $     539.8        $     991.9

Starz cash decreased $732 million and debt increased $452 million primarily as
a result of the cash distribution to Old LMC and the capital lease resulting
from the distribution of Starz, LLC's corporate office building to Old LMC in
connection with the LMC Spin-Off.

NON-GAAP FINANCIAL MEASURES

This press release includes a presentation of Adjusted OIBDA, which is a
non-GAAP financial measure, together with a reconciliation to operating
income, as determined under GAAP. We define Adjusted OIBDA as: revenue less
programming costs, production and acquisition costs, home video cost of sales,
operating expenses, and selling, general and administrative expenses. Our
chief operating decision maker uses this measure of performance in conjunction
with other measures to evaluate our operating segment's performance and make
decisions about allocating resources among our operating segments. We believe
that Adjusted OIBDA is an important indicator of the operational strength and
performance of our operating segments, including each operating segment's
ability to assist in servicing our debt and to fund investments in films and
television programs. In addition, this measure allows management to view
operating results and perform analytical comparisons and benchmarking between
operating segments and identify strategies to improve performance. This
measure of performance excludes stock compensation and depreciation and
amortization that are included in the measurement of operating income pursuant
to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but
not as a substitute for, operating income, income before income taxes, net
income, net cash provided by operating activities and other measures of
financial performance prepared in accordance with GAAP. Please see Schedule 1
below for applicable reconciliation.

SCHEDULE 1

The following table provides a reconciliation of Adjusted OIBDA for Starz to
its operating income calculated in accordance with GAAP for the three months
ended March 31, 2012, June 30, 2012, September 30, 2012, December 31, 2012 and
March 31, 2013, respectively.



QUARTERLY SUMMARY
(amounts in millions)         1Q12     2Q12     3Q12    4Q12     1Q13
Adjusted OIBDA                $ 126.8 $ 108.5 $ 108.1 $ 101.4 $ 116.5
Stock compensation            (2.6)    (3.6)    (3.6)   (10.2)   (7.2)
Depreciation and amortization (4.2)    (4.6)    (5.0)   (5.6)    (4.4)
Operating income              $ 120.0 $ 100.3 $ 99.5  $ 85.6  $ 104.9







Starz
Consolidated Balance Sheets
(Amounts in thousands, except share and per share amounts)
(Unaudited)
                                             March31, 2013  December31, 2012
Assets
Current assets:
Cash and cash equivalents                    $  17,874       $   749,774
Restricted cash                              9,824           —
Trade accounts receivable, net of allowances 258,208         241,415
of $30,198 and $35,045
Program rights, net                          371,247         340,005
Deferred income taxes                        4,846           990
Other current assets                         48,134          44,727
Total current assets                         710,133         1,376,911
Program rights                               364,887         338,684
Investment in films and television programs, 169,148         181,673
net
Property and equipment, net of accumulated   92,363          96,280
depreciation of $96,421 and $110,882
Deferred income taxes                        3,129           12,222
Goodwill                                     131,760         131,760
Other assets, net                            40,881          38,520
Total assets                                 $  1,512,301    $   2,176,050
Liabilities and Equity
Current liabilities:
Current portion of debt                      $  4,718        $   4,134
Trade accounts payable                       4,546           6,162
Accrued liabilities                          335,502         256,062
Due to affiliate                             —               39,519
Deferred revenue                             43,406          24,574
Total current liabilities                    388,172         330,451
Debt                                         987,177         535,671
Other liabilities                            7,664           7,784
Total liabilities                            1,383,013       873,906
Stockholders' equity:
Preferred stock, $.01 par value. Authorized —               —
50,000,000 shares; no shares issued
Series A Liberty Capital common stock, $.01
par value. Authorized 2,000,000,000 shares;
issued and outstanding 111,903,059 and       1,119           —
111,722,828 shares at March 31, 2013 and the
LMC Spin-Off, respectively
Series B Liberty Capital common stock, $.01
par value. Authorized 75,000,000 shares;    99              —
issued and outstanding 9,882,238 shares at
March 31, 2013 and the LMC Spin-Off
Additional paid-in capital                   576,873         —
Accumulated other comprehensive loss, net of (4,397)         —
taxes
Accumulated deficit                          (434,977)       —
Member's interest                            —               1,311,951
Total stockholders' equity                   138,717         1,311,951
Noncontrolling interests in subsidiaries     (9,429)         (9,807)
Total equity                                 129,288         1,302,144
Commitments and contingencies
Total liabilities and equity                 $  1,512,301    $   2,176,050







Starz
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
(Unaudited)
                                                  Three Months Ended March 31,
                                                  2013            2012
Revenue:
Programming networks and other services           $   349,488     $  367,251
Home video net sales                              49,829          37,713
Total revenue                                     399,317         404,964
Costs and expenses:
Programming costs (including amortization)        145,971         160,949
Production and acquisition costs (including       39,790          36,076
amortization)
Home video cost of sales                          15,121          10,560
Operating expenses                                12,685          13,422
Selling, general and administrative               69,220          57,117
Stock compensation                                7,254           2,582
Depreciation and amortization                     4,416           4,255
Total costs and expenses                          294,457         284,961
Operating income                                  104,860         120,003
Other income (expense):
Interest expense, net of amounts capitalized      (10,228)        (4,881)
Other income (expense), net                       (1,485)         4,265
Income before income taxes                        93,147          119,387
Income tax expense                                (34,944)        (40,192)
Net income                                       58,203          79,195
Net income attributable to noncontrolling         (338)           (1,413)
interests
Net income attributable to stockholders           $   57,865      $  77,782
Basic net income per common share                 $   0.48        $  0.65
Diluted net income per common share               $   0.47        $  0.65
Weighted average number of common shares
outstanding:
Basic                                             119,924         119,996
Diluted                                           124,306         120,091







Starz
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
                                                  Three Months Ended March 31,
                                                  2013             2012
Operating activities:
Net income                                        $    58,203      $ 79,195
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization                     4,416            4,255
Amortization of program rights                    135,506          150,347
Program rights payments                           (109,225)        (153,109)
Amortization of investment in films and           27,399           29,132
television programs
Investment in films and television programs       (58,010)         (62,638)
Stock compensation                                7,254            2,582
Payments of long term incentive plan              (2,360)          (27,478)
Deferred income taxes                             17,868           9,561
Other non-cash items                              (2,555)          (10,273)
Changes in assets and liabilities:
Current and other assets                          (27,804)         438
Due to affiliate                                  (39,519)         (23,941)
Payables and other liabilities                    55,580           (21,777)
Net cash provided by (used in) operating          66,753           (23,706)
activities
Investing activities – purchases of property and  (663)            (506)
equipment
Financing activities:
Borrowings of debt                                923,500          —
Payments of debt                                  (516,121)        (1,011)
Debt issuance costs                               (2,139)          (381)
Distributions to Old LMC                          (1,200,000)      —
Repurchases of common stock                       (2,868)          —
Minimum withholding of taxes related to stock     (747)            —
compensation
Excess tax benefit from stock compensation        419              —
Settlement of derivative instruments              —                3
Net cash used in financing activities             (797,956)        (1,389)
Effect of exchange rate changes on cash and cash  (34)             89
equivalents
Net decrease in cash and cash equivalents         (731,900)        (25,512)
Cash and cash equivalents:
Beginning of period                               749,774          1,099,887
End of period                                     $    17,874      $ 1,074,375

IMPORTANT NOTICE

  oStarz (NASDAQ: STRZA, STRZB) CEO, Chris Albrecht will discuss Starz's
    financial performance, and may discuss future opportunities in a
    conference call which will begin at 12:00 p.m. (ET) on May 9, 2013. The
    call can be accessed by dialing (888) 389-5987 or (719) 325-2168 at least
    10 minutes prior to the start time. Replays of the conference call can be
    accessed through 6:00 p.m. (ET) on May 16, 2013, by dialing (888) 203-1112
    or (719) 457-0820 plus the pass code 5933244#. The call will also be
    broadcast live via the Internet and archived on our website. To access
    the webcast go to http://ir.starz.com/events.cfm. Links to this press
    release will also be available on the Starz website.
  oThis press release includes certain forward-looking statements within the
    meaning of the Private Securities Litigation Reform Act of 1995, including
    statements about business strategies, market potential, future financial
    prospects, new service and product launches including original content
    programming, new distribution platforms for our programming, the
    continuation of our stock repurchase plans and other matters that are not
    historical facts. These forward-looking statements involve many risks and
    uncertainties that could cause actual results to differ materially from
    those expressed or implied by such statements, including, without
    limitation, possible changes in market acceptance of new products or
    services, competitive issues, regulatory matters affecting our businesses,
    continued access to capital on terms acceptable to Starz and changes in
    law and market conditions conducive to stock repurchases. These
    forward-looking statements speak only as of the date of this press
    release, and Starz expressly disclaims any obligation or undertaking to
    disseminate any updates or revisions to any forward-looking statement
    contained herein to reflect any change in Starz's expectations with regard
    thereto or any change in events, conditions or circumstances on which any
    such statement is based. Please refer to the publicly filed documents of
    Starz, including the most recent Forms 10-K and 10-Q, for additional
    information about Starz and about the risks and uncertainties related to
    Starz's business which may affect the statements made in this press
    release.

About Starz
Starz (NASDAQ: STRZA, STRZB) is a leading integrated global media and
entertainment company with operating units that provide premium subscription
video programming on domestic U.S. pay television channels (Starz Networks),
global content distribution (Starz Distribution) and animated television and
movie production (Starz Animation), www.starz.com.

Starz Networks is a leading provider of premium subscription video programming
through the flagship STARZ^® and ENCORE^® pay TV networks which showcase
premium original programming and movies to U.S. multichannel video
distributors, including cable operators, satellite television providers, and
telecommunications companies. As of March 31, 2013, STARZ and ENCORE serve a
combined 56.7 million subscribers, including 21.6 million at STARZ, and 35.1
million at ENCORE, making them the largest pair of premium flagship channels
in the U.S. STARZ^® and ENCORE^®, along with Starz Networks' third network
MOVIEPLEX^®, air over 1,000 movies monthly across 17 linear networks,
complemented by On Demand and authenticated online offerings through STARZ
PLAY, ENCORE PLAY, and MOVIEPLEX PLAY. Starz Distribution develops, produces
and acquires entertainment content, distributing it to consumers globally on
DVD, digital formats and traditional television. Starz Distribution's home
video, digital media and worldwide distribution business units distribute
original programming content produced by Starz, as well as entertainment
content for itself and third parties. Starz Animation produces animated TV
and movie content for studios, networks, distributors and audiences worldwide.



Contacts:
Courtnee Ulrich          Theano Apostolou
Investor Relations         Corporate Communications
(720) 875-5420         (424) 204-4052
courtnee.ulrich@starz.com theano@starz.com



SOURCE Starz

Website: http://www.starz.com
 
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