Annual report pursuant to Section 13 and 15(d)

Other Information

v2.4.0.8
Other Information
 12 Months Ended
Dec. 31, 2013
Other Information [Abstract]  
Other Information
Other Information

Supplemental Disclosure of Cash Flow Information

The following table presents the supplemental disclosure of cash flow information (in thousands):
 
Years ended December 31,
 
2013
 
2012
 
2011
Cash paid for interest, net of amounts capitalized
$
43,387

 
$
11,624

 
$
2,679

Cash paid for income taxes
$
184,432

 
$
161,404

 
$
44,793

Change in deferred tax assets due to sale of noncontrolling interest
$
—

 
$
2,209

 
$
141,135

Retirement of fully depreciated assets
$
—

 
$
55,970

 
$
1,699

Distribution of corporate office building to Old LMC
$
45,668

 
$
—

 
$
—

Capital lease related to Commercial Lease with LPH
$
44,800

 
$
—

 
$
—

Tax attributes related to LMC Spin-Off
$
11,545

 
$
—

 
$
—



Assets Measured at Fair Value

For assets required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

Starz’s assets measured at fair value are as follows (in thousands):

 
 
Fair Value Measurements at December 31, 2013
 
Fair Value Measurements at December 31, 2012
Description
 
Total
 
Quoted prices in active markets for identical assets (Level 1)
 
Significant other observable inputs (Level 2)
 
Significant unobservable inputs (Level 3)
 
Total
 
Quoted prices in active markets for identical assets (Level 1)
 
Significant other observable inputs (Level 2)
 
Significant unobservable inputs (Level 3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents
 
$
—

 
—

 
—

 
—

 
$
662,681

 
662,681

 
—

 
—



Starz, from time to time, invests its cash equivalents in U.S. Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated commercial paper. Such amounts are included in cash and cash equivalents in the consolidated balance sheet.
Allowance for Trade Receivables
The following table presents the changes in the allowance for trade receivables.
Description
 
Balance at
beginning of
period
 
Charged to
costs and
expenses(1)
 
Charged to
other accounts
 
Deductions(2)
 
Balance at
end of
period
Year ended December 31, 2013:
 
 
 
 
 
 
 
 
 
Reserves:
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
266

 
$
769

 
$
—

 
$
6

 
$
1,041

Allowance for sales returns
34,779

 
141,338

 
—

 
(144,350
)
 
31,767

Total   
$
35,045

 
$
142,107

 
$
—

 
$
(144,344
)
 
$
32,808

Year ended December 31, 2012:
 
 
 
 
 
 
 
 
 
Reserves:
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
2,173

 
$
(623
)
 
$
—

 
$
(1,284
)
 
$
266

Allowance for sales returns
36,162

 
83,214

 
—

 
(84,597
)
 
34,779

Total   
$
38,335

 
$
82,591

 
$
—

 
$
(85,881
)
 
$
35,045

Year ended December 31, 2011:
 
 
 
 
 
 
 
 
 
Reserves:
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
3,723

 
$
426

 
$
—

 
$
(1,976
)
 
$
2,173

Allowance for sales returns
26,967

 
101,628

 
—

 
(92,433
)
 
36,162

Total   
$
30,690

 
$
102,054

 
$
—

 
$
(94,409
)
 
$
38,335

(1)
Charges for doubtful accounts are included in selling, general and administrative expense and charges for sales returns are recorded against revenue.
(2)
Actual video returns, uncollectible accounts written off and foreign currency exchange rate changes.
Condensed Financial Information of Registrant

The restricted net assets of Starz exceeds 25% of its consolidated net assets due to the restrictions under the Senior Notes, New Notes and Senior Secured Credit Facilities. As previously noted, Starz is a holding company with no assets or liabilities of its own 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. As such, the condensed financial information is not presented as it is not meaningful.
Net Income Attributable to Common Stockholders

Basic net income per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. For presentation purposes, the basic weighted average number of common shares reflected as outstanding for all periods prior to the LMC Spin-Off (including for the year ended December 31, 2012 and 2011) represents the shares outstanding as of January 14, 2013, excluding unvested outstanding restricted shares as of any applicable date. The diluted weighted average number of common shares reflected as outstanding for the year ended December 31, 2012 and 2011 includes the unvested outstanding restricted shares and any dilutive shares actually held by Starz employees as of December 31, 2012 and 2011, and excludes restricted shares and stock options issued to others in the LMC Spin-Off (which are included, if dilutive, in periods subsequent to the LMC Spin-Off).
The following is a reconciliation between basic and diluted weighted average shares outstanding for the year ended December 31, 2013 and reflected as outstanding for the years ended December 31, 2012 and 2011 (in thousands):
 
2013
 
2012
 
2011
 
 
 
 
 
 
Basic weighted average shares outstanding
115,925

 
119,996

 
119,996

Effect of dilution:
 
 
 
 
 
Stock options
3,792

 
—

 
7

Restricted shares
1,439

 
109

 
98

Diluted weighted average shares outstanding
121,156

 
120,105

 
120,101


For the year ended December 31, 2011, the basic net income per common share from continuing operations was $2.06 and the basic loss per common share from discontinued operations was $0.06. For the year ended December 31, 2011, the diluted net income per common share from continuing operations was $2.06 and the diluted net loss per common share from discontinued operations was $0.06.
For the years ended December 31, 2013, 2012 and 2011, approximately none, 2.9 million, and 3.2 million shares (as adjusted for the LMC Spin-Off), respectively, have been excluded from the diluted weighted average shares outstanding since the shares would have been anti-dilutive.
Goodwill

There were no changes in the carrying amount of goodwill, all of which relates to Starz Networks, during the years ended December 31, 2013 and 2012. As of December 31, 2013, the accumulated impairment loss was $1,722.1 million, of which $1,396.7 million relates to Starz Networks, $322.2 million to Starz Distribution and $3.2 million to Starz Animation.

Advertising and Marketing

Starz’s total advertising costs were $113.5 million, $80.6 million and $109.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. Total marketing costs were $35.0 million, $25.1 million and $23.0 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Foreign Currency Translation

The balances of accumulated foreign currency translation adjustments, net of income taxes, included in the consolidated statements of equity were $(4.3) million and ($4.5) million as of December 31, 2013 and 2012, respectively, and represented the total amount of accumulated other comprehensive loss as of each date.

Major Customers and Suppliers

Two Starz Networks’ distributors accounted for 21% and 13% of Starz’s total revenue for the year ended December 31, 2013. Two Starz Networks’ distributors accounted for 22% and 15% of Starz’s total revenue for the year ended December 31, 2012. Two Starz Networks’ distributors accounted for 21% and 15% of Starz’s total revenue for the year ended December 31, 2011. There were no other distributors or other customers that accounted for more than 10% of revenue in any year. These two distributors accounted for 40% and 42% of trade accounts receivable as of December 31, 2013 and 2012, respectively. Services are provided to these distributors pursuant to affiliation agreements with varying terms.

As discussed in Note 12, Starz has entered into agreements to license theatrically released films for our premium movie networks from studios owned by Sony (through 2021) and Disney (through 2015). Films are available to Starz for exhibition generally 8-13 months after their theatrical release.

In July 2010, Anchor Bay Entertainment outsourced substantially all of its home video distribution services, including DVD manufacturing and distribution to Twentieth Century Fox Home Entertainment LLC. The term of the distribution agreement is from July 1, 2010 through June 30, 2020.

Foreign Operations

Revenue generated outside of the U.S. represented 5%, 5% and 4% of consolidated revenue for each of the years ended December 31, 2013, 2012 and 2011, respectively.  Net long-lived assets outside the U.S. were less than 1% as of December 31, 2013 and 2012, respectively.