Quarterly report pursuant to Section 13 or 15(d)

Information about Operating Segments

v2.4.0.8
Information about Operating Segments
 9 Months Ended
Sep. 30, 2013
Segment Reporting [Abstract]  
Information about Operating Segments
Information about Operating Segments

Starz is primarily engaged in video programming and development, production, acquisition and distribution of entertainment content. Starz evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as Adjusted OIBDA. Adjusted OIBDA is defined as: revenue less programming costs, production and acquisition costs, home video cost of sales, operating expenses and selling, general and administrative expenses. Starz’s chief operating decision maker uses this measure of performance in conjunction with other measures to evaluate the operating segments’ performance and make decisions about allocating resources among the operating segments. Starz believes Adjusted OIBDA is an important indicator of the operational strength and performance of its operating segments, including each operating segment’s ability to assist Starz in servicing its 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. Starz generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

Starz’s reportable segments are strategic business units that offer different services. They are managed separately because each segment requires different technologies, content delivery methods and marketing strategies. Starz identifies its reportable segments as those operating segments that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets. Starz Networks and Starz Distribution have been identified as reportable segments; however, as Starz has three operating segments, Starz Animation is also reported.

Performance Measures (in thousands):

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Revenue:
 
 
 
 
 
 
 
Starz Networks
$
319,857

 
$
317,892

 
$
975,643

 
$
960,994

Starz Distribution
117,592

 
75,015

 
365,708

 
223,646

Starz Animation
8,704

 
10,130

 
22,820

 
31,567

Inter-segment eliminations
(100
)
 
(2,067
)
 
(1,380
)
 
(7,711
)
Total Revenue
$
446,053

 
$
400,970

 
$
1,362,791

 
$
1,208,496

 
 
 
 
 
 
 
 
Adjusted OIBDA:
 
 
 
 
 
 
 
Starz Networks
$
106,521

 
$
111,535

 
$
337,359

 
$
326,292

Starz Distribution
7,405

 
(3,687
)
 
24,528

 
14,829

Starz Animation
(496
)
 
(354
)
 
(1,835
)
 
(507)

Inter-segment eliminations
289

 
647

 
(296
)
 
2,843

Total Adjusted OIBDA
$
113,719

 
$
108,141

 
$
359,756

 
$
343,457








Other Information (in thousands):

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Cash paid for investment in films and television programs:
 
 
 
 
 
 
 
Starz Networks
$
45,498

 
$
47,420

 
$
102,187

 
$
106,005

Starz Distribution
64,630

 
18,446

 
115,287

 
88,983

Starz Animation
—

 
—

 
—

 
—

Inter-segment eliminations
—

 
—

 
—

 
—

Total cash paid for investment in films and television programs
$
110,128

 
$
65,866

 
$
217,474

 
$
194,988

 
 
 
 
 
 
 
 
 
September 30,
2013
 
December 31,
2012
 
 
 
 
Total assets:
 
 
 
 
 
 
 
Starz Networks
$
1,270,816

 
$
2,066,961

 
 
 
 
Starz Distribution
196,349

 
118,134

 
 
 
 
Starz Animation
1,907

 
3,225

 
 
 
 
Other unallocated assets (primarily cash, deferred taxes and other assets, including the Commercial Lease with LPH)
81,069

 
33,850

 
 
 
 
Inter-segment eliminations
(56,836
)
 
(46,120
)
 
 
 
 
Total assets
$
1,493,305

 
$
2,176,050

 
 
 
 


The following table provides a reconciliation of Adjusted OIBDA to income before income taxes (in thousands):

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Consolidated Adjusted OIBDA
$
113,719

 
$
108,141

 
$
359,756

 
$
343,457

Stock compensation
(8,815
)
 
(3,653
)
 
(25,127
)
 
(9,888
)
Depreciation and amortization
(4,148
)
 
(4,980
)
 
(12,917
)
 
(13,787
)
Interest expense, net of amounts capitalized
(11,655
)
 
(9,475
)
 
(33,214
)
 
(18,805
)
Other income (expense), net
195

 
(487
)
 
(1,798
)
 
3,680

Income before income taxes
$
89,296

 
$
89,546

 
$
286,700

 
$
304,657