AMC Networks Inc. (AMCX) Misses Q4 EPS Views; Updates on DISH Agreement

February 26, 2013 8:33 AM EST
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AMC Networks Inc. (NASDAQ: AMCX) reported Q4 EPS of $0.21, $0.44 worse than the analyst estimate of $0.65. Revenue for the quarter came in at $366.71 million versus the consensus estimate of $370.03 million.

As previously disclosed, on May 20, 2012, DISH Network, LLC (Nasdaq: DISH) terminated carriage of Sundance Channel and on July 1, 2012 DISH Network terminated carriage of AMC, IFC, and WE tv. We believe the termination was directly related to litigation between DISH Network and VOOM HD. On October 21, 2012, DISH Network and the Company entered into a settlement agreement resolving the litigation. Simultaneously with the execution of the settlement agreement, DISH Network entered into a long-term affiliation agreement with the Company that provided for the resumption of carriage of AMC, IFC, Sundance Channel and WE tv by no later than November 1, 2012. The temporary carriage termination had a material impact to AOCF and operating income for the three months and twelve months ended December 31, 2012.

Based on the Company's fair value assessment of the affiliation agreement, the affiliate fees payable by DISH Network to the Company from the effective date of the affiliation agreement of October 21, 2012 through December 31, 2013 are below fair value by approximately $31 million and the affiliate fees payable by DISH Network over the remaining terms of the affiliation agreement represent fair value. As a result, the Company recorded the $31 million excess of the fair value of the affiliation agreement over the contractual affiliation fees as deferred revenue on October 21, 2012, of which approximately $5 million was recognized as revenue during 2012 as the programming services were provided. The remaining $26 million is included in deferred revenue in the December 31, 2012 consolidated balance sheet and will be recognized ratably over 2013 as the programming services are provided.

In connection with the VOOM HD settlement agreement, DISH Network paid $700 million to an account for the benefit of Cablevision Systems Corporation ("Cablevision") and the Company. Pending a determination of the allocation of the settlement proceeds, $350 million of the cash proceeds was distributed to each of Cablevision and the Company. Accordingly, the portion disbursed to the Company is included in cash and cash equivalents in the consolidated balance sheet at December 31, 2012. The final amount to be allocated to the Company is yet to be determined and may be significantly less than $350 million.

For earnings history and earnings-related data on AMC Networks Inc. (AMCX) click here.

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