Quarterly report pursuant to Section 13 or 15(d)

Information about Operating Segments

v3.4.0.3
Information about Operating Segments
 3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Information about Operating Segments
Information about Operating Segments

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, but excluding all stock compensation expense. Starz’s chief operating decision maker uses this measure of performance in conjunction with other measures to evaluate its operating segments’ performance and make decisions about allocating resources among its operating segments. Starz believes that 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. The primary material limitations associated with the use of Adjusted OIBDA as compared to GAAP results are (i) it may not be comparable to similarly titled measures used by other companies in Starz’s industry, and (ii) it excludes financial information that some may consider important in evaluating Starz’s performance. Starz compensates for these limitations by providing a reconciliation of Adjusted OIBDA to GAAP results to enable investors to perform their own analysis of Starz’s operating results. 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 (used in) operating activities and other measures of financial performance prepared in accordance with GAAP.

The reconciliation of Adjusted OIBDA to income before income taxes was as follows (in millions):
 
Three Months Ended March 31,
 
2016
 
2015
Consolidated Adjusted OIBDA
$
127.1

 
$
155.5

Stock compensation
(8.3
)
 
(8.3
)
Depreciation and amortization
(4.7
)
 
(4.7
)
Interest expense, net of amounts capitalized
(11.9
)
 
(11.2
)
Other income (expense), net
0.4

 
(2.2
)
Income before income taxes
$
102.6

 
$
129.1



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 had three operating segments, Starz Animation was also reported. As mentioned in Note 1, Starz, LLC sold 100% of its wholly-owned subsidiary Film Roman, which made up 100% of the Starz Animation operating segment, in October 2015. Starz generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

Performance Measures (in millions):
 
Three Months Ended March 31,
 
2016
 
2015
Revenue:
 
 
 
Starz Networks
$
339.9

 
$
334.0

Starz Distribution
92.7

 
109.7

Starz Animation
—

 
7.3

Inter-segment eliminations
(0.7
)
 
(0.3
)
 
$
431.9

 
$
450.7

 
 
 
 
Adjusted OIBDA:
 
 
 
Starz Networks
$
116.8

 
$
129.7

Starz Distribution
10.6

 
26.4

Starz Animation
—

 
(0.6
)
Inter-segment eliminations
(0.3
)
 
—

 
$
127.1

 
$
155.5


Other Information (in millions):
 
Three Months Ended March 31,
 
2016
 
2015
Cash paid for investment in films and television programs:
 
 
 
Starz Networks
$
81.1

 
$
69.1

Starz Distribution
15.1

 
39.6

Starz Animation
—

 
—

Inter-segment eliminations
—

 
—

 
$
96.2

 
$
108.7

 
 
 
 
 
March 31,
2016
 
December 31,
2015
Total assets:
 
 
 
Starz Networks
$
1,499.2

 
$
1,365.9

Starz Distribution
173.9

 
166.8

Starz Animation
—

 
—

Other unallocated assets (primarily cash, deferred taxes and other assets, including income taxes receivable and the commercial lease for Starz’s corporate headquarters facility)
78.3

 
109.7

Inter-segment eliminations
(95.9
)
 
(78.2
)
 
$
1,655.5

 
$
1,564.2