Annual report pursuant to Section 13 and 15(d)

Other Information

v2.4.1.9
Other Information
 12 Months Ended
Dec. 31, 2014
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 millions):
 
Years ended December 31,
 
2014
 
2013
 
2012
Cash paid for interest, net of amounts capitalized
$
44.0

 
$
43.4

 
$
11.6

Cash paid for income taxes
$
107.9

 
$
184.4

 
$
161.4

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

 
$
—

 
$
2.2

Retirement of fully depreciated assets
$
—

 
$
—

 
$
56.0

Distribution of corporate office building to Old LMC
$
—

 
$
45.7

 
$
—

Capital lease related to lease with LPH
$
—

 
$
44.8

 
$
—

Tax attributes related to LMC Spin-Off
$
—

 
$
11.5

 
$
—



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, 2014:
 
 
 
 
 
 
 
 
 
Reserves:
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
1.1

 
$
3.4

 
$
—

 
$
(3.4
)
 
$
1.1

Allowance for sales returns
31.7

 
126.5

 
—

 
(117.4
)
 
40.8

Total
$
32.8

 
$
129.9

 
$
—

 
$
(120.8
)
 
$
41.9

Year ended December 31, 2013:
 
 
 
 
 
 
 
 
 
Reserves:
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
0.3

 
$
0.8

 
$
—

 
$
—

 
$
1.1

Allowance for sales returns
34.7

 
141.4

 
—

 
(144.4
)
 
31.7

Total
$
35.0

 
$
142.2

 
$
—

 
$
(144.4
)
 
$
32.8

Year ended December 31, 2012:
 
 
 
 
 
 
 
 
 
Reserves:
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
2.2

 
$
(0.6
)
 
$
—

 
$
(1.3
)
 
$
0.3

Allowance for sales returns
36.1

 
83.2

 
—

 
(84.6
)
 
34.7

Total
$
38.3

 
$
82.6

 
$
—

 
$
(85.9
)
 
$
35.0

(1)
Charges for doubtful accounts are included in selling, general and administrative expense and charges for sales returns are recorded against revenue.
(2)
Actual home 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 restrictions under the Credit Agreement and Senior Notes. 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 the year ended December 31, 2012, which was prior to the LMC Spin-Off, 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 includes the unvested outstanding restricted shares and any dilutive shares actually held by Starz employees as of December 31, 2012, 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 years ended December 31, 2014 and 2013 and reflected as outstanding for the year ended December 31, 2012 (in millions):
 
2014
 
2013
 
2012
 
 
 
 
 
 
Basic weighted average shares outstanding
105.5

 
115.9

 
120.0

Effect of dilution:
 
 
 
 
 
Stock options
5.3

 
3.8

 
—

Restricted shares
0.7

 
1.4

 
0.1

Diluted weighted average shares outstanding
111.5

 
121.1

 
120.1


For the years ended December 31, 2014, 2013 and 2012, approximately 1.4 million, none, and 2.9 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.
Investment in Equity Affiliate

During the year ended December 31, 2014, Starz invested $19.1 million for an approximate 40% interest in Playco Holdings Limited (“Playco”). Playco is a newly formed holding company that will offer a STARZ-branded online subscription video-on-demand service in select emerging market countries beginning in 2015. Playco is accounted for using the equity method of accounting.

Goodwill

There were no changes in the carrying amount of goodwill, all of which relates to Starz Networks, during the years ended December 31, 2014 and 2013. As of December 31, 2014, 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 $110.4 million, $113.5 million and $80.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. Total marketing costs were $33.9 million, $35.0 million and $25.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Major Customers and Suppliers

Two Starz Networks’ distributors accounted for 22% and 14% of Starz’s total revenue for the year ended December 31, 2014. 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. 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% of trade accounts receivable as of both December 31, 2014 and 2013. Services are provided to these distributors pursuant to affiliation agreements with varying terms.

As discussed in Note 11, Starz has entered into agreements to license theatrically released films 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.

Anchor Bay Entertainment outsources substantially all of its home video distribution services, including DVD manufacturing and distribution to Twentieth Century Fox Home Entertainment LLC. The agreement expires on June 30, 2020.

Foreign Operations

Revenue generated outside of the U.S. represented 4%, 5% and 5% of consolidated revenue for each of the years ended December 31, 2014, 2013 and 2012, respectively.  Net long-lived assets outside the U.S. were less than 1% of consolidated net long-lived assets as of December 31, 2014 and 2013, respectively.