AMC Networks Inc. - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 1-35106

AMC Networks Inc.

(Exact name of registrant as specified in its charter)


Delaware		27-5403694
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11 Penn Plaza,
New York,	NY	10001
(Address of principal executive offices)		(Zip Code)

(212) 324-8500

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

AMCX

The

NASDAQ

Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company (as defined in Exchange Act Rule 12b-2).


Large accelerated filer	þ	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of shares of common stock outstanding as of May 2, 2023:


Class A Common Stock par value $0.01 per share			32,019,659
Class B Common Stock par value $0.01 per share			11,484,408

AMC NETWORKS INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Stockholders' Equity			4
Condensed Consolidated Statements of Cash Flows			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36

Item 6. Exhibits			36
SIGNATURES			37

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	March 31, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	763,932	$	930,002
Accounts receivable, trade (less allowance for doubtful accounts of $8,481 and $8,725)	702,681		722,185
Current portion of program rights, net	10,765		10,807
Prepaid expenses and other current assets	229,357		286,875
Total current assets	1,706,735		1,949,869
Property and equipment, net of accumulated depreciation of $361,215 and $344,906	195,817		202,034
Program rights, net	1,869,182		1,762,939
Intangible assets, net	345,286		354,676
Goodwill	647,293		643,419
Deferred tax assets, net	14,197		13,618
Operating lease right-of-use assets	101,811		108,229
Other assets	582,917		599,052
Total assets	$	5,463,238	$	5,633,836
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	106,740	$	172,009
Accrued liabilities	401,206		419,065
Current portion of program rights obligations	325,091		374,115
Deferred revenue	70,785		134,883
Current portion of long-term debt	42,188		33,750
Current portion of lease obligations	35,667		36,411
Total current liabilities	981,677		1,170,233
Program rights obligations	169,553		200,869
Long-term debt, net	2,763,767		2,778,703
Lease obligations	116,380		124,799
Deferred tax liabilities, net	106,907		112,642
Other liabilities	105,993		139,108
Total liabilities	4,244,277		4,526,354
Commitments and contingencies
Redeemable noncontrolling interests	249,919		253,669
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 66,550 and 66,118 shares issued and 31,957 and 31,525 shares outstanding, respectively	665		661
Class B Common Stock, $0.01 par value, 90,000 shares authorized, 11,484 shares issued and outstanding	115		115
Preferred stock, $0.01 par value, 45,000 shares authorized; none issued	—		—
Paid-in capital	360,117		360,251
Accumulated earnings	2,209,251		2,105,641
Treasury stock, at cost (34,593 and 34,593 shares Class A Common Stock, respectively)	(1,419,882)		(1,419,882)
Accumulated other comprehensive loss	(228,470)		(239,798)
Total AMC Networks stockholders' equity	921,796		806,988
Non-redeemable noncontrolling interests	47,246		46,825
Total stockholders' equity	969,042		853,813
Total liabilities and stockholders' equity	$	5,463,238	$	5,633,836

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended March 31,
		2023		2022
Revenues, net		$	717,447	$	712,157
Operating expenses:
Technical and operating (excluding depreciation and amortization)		326,729		284,237
Selling, general and administrative		185,606		230,653
Depreciation and amortization		25,875		22,590

Restructuring and other related charges		5,933		—
Total operating expenses		544,143		537,480
Operating income		173,304		174,677
Other income (expense):
Interest expense		(37,617)		(30,797)
Interest income		7,916		2,460

Miscellaneous, net		4,589		5,828
Total other expense		(25,112)		(22,509)
Income from operations before income taxes		148,192		152,168
Income tax expense		(36,899)		(41,634)
Net income including noncontrolling interests		111,293		110,534
Net income attributable to noncontrolling interests		(7,683)		(6,346)
Net income attributable to AMC Networks' stockholders		$	103,610	$	104,188

Net income per share attributable to AMC Networks' stockholders:
Basic		$	2.37	$	2.44
Diluted		$	2.36	$	2.38

Weighted average common shares:
Basic		43,628		42,780
Diluted		43,837		43,715

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended March 31,
		2023		2022
Net income including noncontrolling interests		$	111,293	$	110,534
Other comprehensive income (loss):
Foreign currency translation adjustment		11,818		(18,593)




Comprehensive income		123,111		91,941
Comprehensive income attributable to noncontrolling interests		(8,173)		(5,515)
Comprehensive income attributable to AMC Networks' stockholders		$	114,938	$	86,426

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, December 31, 2022	$	661	$	115	$	360,251	$	2,105,641	$	(1,419,882)	$	(239,798)	$	806,988	$	46,825	$	853,813
Net income attributable to AMC Networks’ stockholders	—		—		—		103,610		—		—		103,610		—		103,610
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		1,413		1,413


Distribution to noncontrolling member	—		—		—		—		—		—		—		(1,482)		(1,482)

Other comprehensive income	—		—		—		—		—		11,328		11,328		490		11,818
Share-based compensation expenses	—		—		5,882		—		—		—		5,882		—		5,882



Net share issuances under employee stock plans	4		—		(6,016)		—		—		—		(6,012)		—		(6,012)
Balance, March 31, 2023	$	665	$	115	$	360,117	$	2,209,251	$	(1,419,882)	$	(228,470)	$	921,796	$	47,246	$	969,042


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, December 31, 2021	$	655	$	115	$	347,971	$	2,098,047	$	(1,419,882)	$	(175,818)	$	851,088	$	51,584	$	902,672
Net income attributable to AMC Networks’ stockholders	—		—		—		104,188		—		—		104,188		—		104,188
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		2,439		2,439


Distributions to noncontrolling member	—		—		—		—		—		—		—		(1,565)		(1,565)




Other comprehensive loss	—		—		—		—		—		(17,762)		(17,762)		(831)		(18,593)

Share-based compensation expenses	—		—		8,129		—		—		—		8,129		—		8,129

Net share issuances under employee stock plans	5		—		(20,297)		—		—		—		(20,292)		—		(20,292)
Balance, March 31, 2022	$	660	$	115	$	335,803	$	2,202,235	$	(1,419,882)	$	(193,580)	$	925,351	$	51,627	$	976,978

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) / (unaudited)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income including noncontrolling interests	$	111,293	$	110,534
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	25,875		22,590

Share-based compensation expenses related to equity classified awards	5,645		8,129

Amortization of program rights	187,073		192,852
Amortization of deferred carriage fees	5,100		8,657
Unrealized foreign currency transaction loss	1,626		1,073
Amortization of deferred financing costs and discounts on indebtedness	1,938		1,898

Bad debt expense	363		820
Deferred income taxes	(6,269)		21,430
Gain on investments	—		(4,293)

Other, net	(260)		(2,447)
Changes in assets and liabilities:
Accounts receivable, trade	15,893		37,510
Prepaid expenses and other assets	78,442		(1,910)
Program rights and obligations, net	(370,304)		(340,300)
Income taxes payable	1,084		8,039
Deferred revenue	(64,702)		6,715
Deferred carriage fees, net	(2,410)		(9,934)
Accounts payable, accrued liabilities and other liabilities	(122,906)		(84,918)
Net cash used in operating activities	(132,519)		(23,555)
Cash flows from investing activities:
Capital expenditures	(11,498)		(11,528)
Return of capital from investees	—		1,771





Proceeds from sale of investments	4,493		—
Net cash used in investing activities	(7,005)		(9,757)
Cash flows from financing activities:

Principal payments on long-term debt	(8,438)		(8,438)
Deemed repurchases of restricted stock units	(6,012)		(20,292)

Principal payments on finance lease obligations	(1,015)		(716)

Distributions to noncontrolling interests	(11,502)		(1,565)
Purchase of noncontrolling interests	(1,343)		—
Net cash used in financing activities	(28,310)		(31,011)
Net decrease in cash and cash equivalents from operations	(167,834)		(64,323)
Effect of exchange rate changes on cash and cash equivalents	1,764		(6,272)
Cash and cash equivalents at beginning of period	930,002		892,221
Cash and cash equivalents at end of period	$	763,932	$	821,626

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Description of Business and Basis of Presentation

Description of Business

AMC Networks Inc. ("AMC Networks") and its subsidiaries (collectively referred to as the "Company," "we," "us," or "our") own and operate entertainment businesses and assets. The Company is comprised of two operating segments:

•Domestic Operations: Includes our programming services and AMC Broadcasting & Technology. Our programming services consist of our five national programming networks, our global streaming services, our AMC Studios operation and IFC Films. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. Our global streaming services consist of our targeted subscription streaming services (Acorn TV, Shudder, Sundance Now, ALLBLK, and HIDIVE), AMC+ and other streaming initiatives. Our AMC Studios operation produces original programming for our programming networks and also licenses such programming worldwide, and IFC Films is our film distribution business. AMC Networks Broadcasting & Technology, our technical services business, primarily services most of the national programming networks.

•International and Other: Includes AMC Networks International ("AMCNI"), our international programming businesses consisting of a portfolio of channels around the world, and 25/7 Media, our production services business.

Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the accounts of AMC Networks and its subsidiaries in which a controlling financial interest is maintained or variable interest entities ("VIEs") in which the Company has determined it is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

Investments in business entities in which the Company lacks control but does have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method of accounting.

Unaudited Interim Financial Statements

These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 2022 contained in the Company's Annual Report on Form 10-K ("2022 Form 10-K") filed with the SEC. The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, such financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented.

The results of operations for interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates and judgments inherent in the preparation of the consolidated financial statements include the useful lives and methodologies used to amortize and assess recoverability of program rights, the estimated useful lives of intangible assets and the valuation and recoverability of goodwill and intangible assets.

Note 2. Revenue Recognition

Transaction Price Allocated to Future Performance Obligations

As of March 31, 2023, other than contracts for which the Company has applied the practical expedients, the aggregate amount of transaction price allocated to future performance obligations was not material to our consolidated revenues.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Contract Balances from Contracts with Customers

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.


(In thousands)	March 31, 2023		December 31, 2022
Balances from contracts with customers:
Accounts receivable (including long-term receivables within Other assets)	$	882,396	$	1,003,505
Contract assets, short-term (included in Prepaid expenses and other current assets)	6,882		48,594

Contract liabilities, short-term (Deferred revenue)	70,785		134,883
Contract liabilities, long-term (Deferred revenue included in Other liabilities)	88		683

Revenue recognized for the three months ended March 31, 2023 and 2022 relating to the contract liability at December 31, 2022 and 2021 was $82.6 million and $29.4 million, respectively.

Note 3. Net Income per Share

The following is a reconciliation between basic and diluted weighted average common shares outstanding:


(In thousands)	Three Months Ended March 31,
		2023	2022
Basic weighted average common shares outstanding		43,628	42,780
Effect of dilution:

Restricted stock units		209	935
Diluted weighted average common shares outstanding		43,837	43,715

As of March 31, 2023 and March 31, 2022, 0.8 million and 0.2 million, respectively, of restricted stock units have been excluded from diluted weighted average common shares outstanding, as their impact would have been anti-dilutive.

Stock Repurchase Program

The Company's Board of Directors previously authorized a program to repurchase up to $1.5 billion of its outstanding shares of common stock (the "Stock Repurchase Program"). The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. For the three months ended March 31, 2023 and 2022, the Company did not repurchase any shares of its Class A Common Stock. As of March 31, 2023, the Company had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

Note 4. Restructuring and Other Related Charges

On November 28, 2022, the Company commenced a restructuring plan (the “Plan”) designed to achieve significant cost reductions in light of “cord cutting” and the related impacts being felt across the media industry as well as the broader economic outlook. The Plan encompasses initiatives that include, among other things, strategic programming assessments and organizational restructuring costs. The Plan is intended to improve the organizational design of the Company through the elimination of certain roles and centralization of certain functional areas of the Company. The programming assessments pertain to a broad mix of owned and licensed content, including legacy television series and films that will no longer be in active rotation on the Company’s linear or streaming platforms. As a result of the Plan, the Company recorded restructuring and other related charges of $5.9 million for the three months ended March 31, 2023 consisting primarily of severance and other personnel costs.

There were no restructuring and other related charges for the three months ended March 31, 2022.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The following table summarizes the restructuring and other related charges recognized by operating segment:



(In thousands)	Three Months Ended March 31, 2023
Domestic Operations	$	818
International and Other	1,385
Corporate / Inter-segment eliminations	3,730
Total restructuring and other related charges	$	5,933

The following table summarizes the accrued restructuring and other related costs:


(In thousands)	Severance and Employee-Related Costs		Content Impairments and Other Exit Costs		Total
Balance at December 31, 2022	$	37,150	$	74,724	$	111,874
Charges (credits)	6,206		(273)		5,933

Cash payments	(15,934)		(40,952)		(56,886)

Other	20		527		547
Balance at March 31, 2023	$	27,442	$	34,026	$	61,468

Accrued restructuring and other related costs of $58.7 million and $2.8 million are included in Accrued liabilities and Other liabilities, respectively, in the consolidated balance sheet at March 31, 2023. Accrued restructuring and other related costs of $108.0 million and $3.9 million are included in Accrued liabilities and Other liabilities, respectively, in the consolidated balance sheet at December 31, 2022.

Note 5. Program Rights

Total capitalized produced and licensed content by predominant monetization strategy is as follows:


	March 31, 2023
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	217,577	$	369,878	$	587,455
In-production and in-development	62,655		362,921		425,576
Total owned original program rights, net	$	280,232	$	732,799	$	1,013,031

Licensed program rights, net:
Licensed film and acquired series	$	2,084	$	611,963	$	614,047
Licensed originals	5,807		167,274		173,081
Advances and content versioning costs	—		79,788		79,788
Total licensed program rights, net	7,891		859,025		866,916
Program rights, net	$	288,123	$	1,591,824	$	1,879,947

Current portion of program rights, net					$	10,765
Program rights, net (long-term)					1,869,182
					$	1,879,947

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


	December 31, 2022
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	215,496	$	322,248	$	537,744
In-production and in-development	45,098		294,086		339,184
Total owned original program rights, net	$	260,594	$	616,334	$	876,928

Licensed program rights, net:
Licensed film and acquired series	$	3,092	$	642,768	$	645,860
Licensed originals	5,373		171,418		176,791
Advances and content versioning costs	—		74,167		74,167
Total licensed program rights, net	8,465		888,353		896,818
Program rights, net	$	269,059	$	1,504,687	$	1,773,746

Current portion of program rights, net					$	10,807
Program rights, net (long-term)					1,762,939
					$	1,773,746

Amortization of owned and licensed program rights, included in Technical and operating expenses in the condensed consolidated statements of income, is as follows:


	Three Months Ended March 31, 2023
(In thousands)		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights		$	21,303	$	44,936	$	66,239
Licensed program rights		1,664		119,170		120,834
Program rights amortization		$	22,967	$	164,106	$	187,073


	Three Months Ended March 31, 2022
(In thousands)		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights		$	49,840	$	16,935	$	66,775
Licensed program rights		7,608		118,469		126,077
Program rights amortization		$	57,448	$	135,404	$	192,852

For programming rights predominantly monetized individually or as a group, the Company periodically reviews the programming usefulness of licensed and owned original program rights based on several factors, including expected future revenue generation from airings on the Company's networks and streaming services and other exploitation opportunities, ratings, type and quality of program material, standards and practices, and fitness for exhibition through various forms of distribution. If events or changes in circumstances indicate that the fair value of a film predominantly monetized individually or a film group is less than its unamortized cost, the Company will write off the excess to technical and operating expenses in the consolidated statements of income. Program rights with no future programming usefulness are substantively abandoned resulting in the write-off of remaining unamortized cost. There were no significant program rights write-offs included in technical and operating expenses for the three months ended March 31, 2023 or 2022.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

In the normal course of business, the Company may qualify for tax incentives through eligible investments in productions. Receivables related to tax incentives earned on production spend were $155.2 million and $143.1 million as of March 31, 2023 and December 31, 2022, respectively, recorded in Prepaid expenses and other current assets, and $119.4 million and $104.5 million as of March 31, 2023 and December 31, 2022, respectively, recorded in Other assets.

Note 6. Investments

The Company holds several investments in and loans to non-consolidated entities which are included in Other assets in the condensed consolidated balance sheet.

Equity Method Investments

Equity method investments were $80.5 million and $79.6 million at March 31, 2023 and December 31, 2022, respectively.

Marketable Equity Securities

The Company classifies publicly traded investments with readily determinable fair values that are not accounted for under the equity method as marketable equity securities. Marketable equity securities are recorded at cost and adjusted to fair value at each reporting period. The changes in fair value between measurement dates are recorded in miscellaneous, net in the condensed consolidated statements of income.

There were no investments in marketable equity securities at March 31, 2023 or December 31, 2022.

There were no realized or unrealized gains or losses on marketable equity securities for the three months ended March 31, 2023. There were $4.3 million of unrealized gains on marketable equity securities for the three months ended March 31, 2022 included in miscellaneous, net in the condensed consolidated statements of income.

Non-marketable Equity Securities

The Company classifies investments without readily determinable fair values that are not accounted for under the equity method as non-marketable equity securities.

Investments in non-marketable equity securities were $41.5 million and $42.7 million at March 31, 2023 and December 31, 2022, respectively. The changes in value as a result of observable price changes, if any, are recorded in miscellaneous, net in the condensed consolidated statement of income. The Company recognized an impairment charge of $1.2 million on an investment for the three months ended March 31, 2023, which was included in miscellaneous, net in the consolidated statements of income.

Note 7. Goodwill and Other Intangible Assets

The carrying amount of goodwill, by operating segment is as follows:


(In thousands)	Domestic Operations		International and Other		Total
December 31, 2022	$	349,292	$	294,127	$	643,419


Amortization of "second component" goodwill	(336)		—		(336)
Foreign currency translation	—		4,210		4,210
March 31, 2023	$	348,956	$	298,337	$	647,293

As of March 31, 2023 and December 31, 2022, accumulated impairment charges in the International and Other segment totaled $163.8 million.

The reduction of $0.3 million in the carrying amount of goodwill for Domestic Operations is due to the realization of a tax benefit for the amortization of "second component" goodwill at SundanceTV. Second component goodwill is the amount of tax deductible goodwill in excess of goodwill for financial reporting purposes. In accordance with the authoritative guidance at the time of the SundanceTV acquisition, the tax benefits associated with this excess are applied to first reduce the amount of goodwill, and then other intangible assets for financial reporting purposes, if and when such tax benefits are realized in the Company's tax returns.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The following tables summarize information relating to the Company's identifiable intangible assets:


(In thousands)	March 31, 2023
	Gross		Accumulated Amortization		Net		Estimated Useful Lives
Amortizable intangible assets:
Affiliate and customer relationships	$	637,114	$	(383,494)	$	253,620	6 to 25 years
Advertiser relationships	46,282		(35,495)		10,787		11 years
Trade names and other amortizable intangible assets	106,164		(45,185)		60,979		3 to 20 years

Total amortizable intangible assets	789,560		(464,174)		325,386
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	809,460	$	(464,174)	$	345,286

(In thousands)	December 31, 2022
	Gross		Accumulated Amortization		Net
Amortizable intangible assets:
Affiliate and customer relationships	$	634,000	$	(373,240)	$	260,760
Advertiser relationships	46,282		(34,443)		11,839
Trade names and other amortizable intangible assets	105,338		(43,161)		62,177

Total amortizable intangible assets	785,620		(450,844)		334,776
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	805,520	$	(450,844)	$	354,676

Aggregate amortization expense for amortizable intangible assets for the three months ended March 31, 2023 and 2022 was $10.4 million and $10.6 million, respectively. Estimated aggregate amortization expense for intangible assets subject to amortization for each of the following five years is:


(In thousands)
Years Ending December 31,
2023	$	41,648
2024	41,587
2025	39,849
2026	35,485
2027	30,775

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 8. Accrued Liabilities

Accrued liabilities consist of the following:


(In thousands)	March 31, 2023		December 31, 2022
Employee related costs	$	108,760	$	97,362
Participations and residuals	140,315		138,384
Interest	21,879		37,105
Restructuring and other related charges	58,729		107,998
Other accrued expenses	71,523		38,216
Total accrued liabilities	$	401,206	$	419,065

Note 9. Long-term Debt

The Company's long-term debt consists of the following:


(In thousands)	March 31, 2023		December 31, 2022
Senior Secured Credit Facility: (a)
Term Loan A Facility	$	632,813	$	641,250
Senior Notes:

5.00% Notes due April 2024	400,000		400,000
4.75% Notes due August 2025	800,000		800,000
4.25% Notes due February 2029	1,000,000		1,000,000

Total long-term debt	2,832,813		2,841,250
Unamortized discount	(17,588)		(18,718)
Unamortized deferred financing costs	(9,270)		(10,079)
Long-term debt, net	2,805,955		2,812,453
Current portion of long-term debt	42,188		33,750
Noncurrent portion of long-term debt	$	2,763,767	$	2,778,703

(a)The Company's revolving credit facility remains undrawn at March 31, 2023. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company.

During the three months ended March 31, 2023, the Company repaid a total of $8.4 million of the principal amount of the Term Loan A Facility in accordance with the terms of the agreement.

In April 2023, the Company entered into Amendment No. 2 ("Amendment No. 2") to the Second Amended and Restated Credit Agreement (the "Credit Agreement"). Amendment No. 2 (i) reduced the aggregate principal amount of the revolving loan commitments under the Credit Agreement from $500 million to $400 million, (ii) replaced the interest rate based on London Interbank Offered Rate with an interest rate based on the Secured Overnight Financing Rate, (iii) increased the Company's ability to incur additional debt in the future to provide additional flexibility for future financings, including increasing the amount of the incremental debt basket to the greater of $1.2 billion and the amount that would not cause the senior secured leverage ratio to exceed 3.00 to 1.00 on a pro forma basis and (iv) made certain other modifications to the Credit Agreement.

Other Debt

During the first quarter of 2023, a majority owned subsidiary of the Company extended its credit facility totaling $4.5 million to July 21, 2023. The facility bears interest at the greater of 3.5% or the prime rate plus 1%. There were no outstanding borrowings under the credit facility as of March 31, 2023.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 10. Leases

The following table summarizes the leases included in the condensed consolidated balance sheets as follows:


(In thousands)	Balance Sheet Location	March 31, 2023		December 31, 2022
Assets
Operating	Operating lease right-of-use assets	$	101,811	$	108,229
Finance	Property and equipment, net	10,708		10,982
Total lease assets		$	112,519	$	119,211
Liabilities
Current:
Operating	Current portion of lease obligations	$	31,584	$	32,207
Finance	Current portion of lease obligations	4,083		4,204
		$	35,667	$	36,411
Noncurrent:
Operating	Lease obligations	$	98,190	$	105,768
Finance	Lease obligations	18,190		19,031
		$	116,380	$	124,799

Total lease liabilities		$	152,047	$	161,210

Note 11. Fair Value Measurement

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

•Level I - Quoted prices for identical instruments in active markets.

•Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level III - Instruments whose significant value drivers are unobservable.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The following table presents for each of these hierarchy levels, the Company's financial assets and liabilities that are measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022:


(In thousands)	Level I		Level II		Level III		Total
At March 31, 2023:
Assets




Foreign currency derivatives	$	—	$	3,954	$	—	$	3,954

Liabilities

Foreign currency derivatives	—		6,930		—		6,930


At December 31, 2022:
Assets
Cash equivalents	$	80,000	$	—	$	—	$	80,000



Foreign currency derivatives	—		536		—		536

Liabilities

Foreign currency derivatives	—		8,965		—		8,965

The Company's cash equivalents (comprised of money market mutual funds) are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.

The Company's foreign currency derivatives are classified within Level II of the fair value hierarchy as their fair values are determined based on a market approach valuation technique that uses readily observable market parameters and the consideration of counterparty risk.

At March 31, 2023 and December 31, 2022, the Company did not have any material assets or liabilities measured at fair value on a recurring basis that would be considered Level III.

Fair value measurements are also used in nonrecurring valuations performed in connection with acquisition accounting and impairment testing. These nonrecurring valuations primarily include the valuation of program rights, goodwill, intangible assets and property and equipment. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level III of the fair value hierarchy.

Credit Facility Debt and Senior Notes

The fair values of each of the Company's debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities.

The carrying values and estimated fair values of the Company's financial instruments, excluding those that are carried at fair value in the condensed consolidated balance sheets, are summarized as follows:


(In thousands)	March 31, 2023
	Carrying Amount		Estimated Fair Value
Debt instruments:
Term loan A facility	$	625,700	$	598,008
5.00% Notes due April 2024	398,939		393,176
4.75% Notes due August 2025	794,701		707,208
4.25% Notes due February 2029	986,615		612,940

	$	2,805,955	$	2,311,332

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	December 31, 2022
	Carrying Amount		Estimated Fair Value
Debt instruments:
Term loan A facility	$	633,486	$	615,600
5.00% Notes due April 2024	398,687		375,348
4.75% Notes due August 2025	794,171		607,000
4.25% Notes due February 2029	986,109		620,818

	$	2,812,453	$	2,218,766

Fair value estimates related to the Company's debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Note 12. Derivative Financial Instruments

Foreign Currency Exchange Rate Risk

We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than one of our subsidiaries' respective functional currencies (non-functional currency risk), such as affiliation agreements, programming contracts, certain accounts payable and trade receivables (including intercompany amounts) that are denominated in a currency other than the applicable functional currency.

The fair values of the Company's derivative financial instruments included in the condensed consolidated balance sheets are as follows:


(In thousands)	Balance Sheet Location	March 31, 2023		December 31, 2022





Derivatives not designated as hedging instruments:
Assets:
Foreign currency derivatives	Prepaid expenses and other current assets	$	216	$	141
Foreign currency derivatives	Other assets	3,738		395


Liabilities:


Foreign currency derivatives	Accrued liabilities	$	3,301	$	3,663
Foreign currency derivatives	Current portion of program rights obligations	195		82
Foreign currency derivatives	Other liabilities	3,434		5,220

The amounts of gains and losses related to the Company's derivative financial instruments not designated as hedging instruments are as follows:


(In thousands)	Location of Gain or (Loss) Recognized in Earnings on Derivatives		Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		Three Months Ended March 31,
			2023		2022

Foreign currency derivatives	Miscellaneous, net		$	4,905	$	(227)

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 13. Income Taxes

For the three months ended March 31, 2023, income tax expense was $36.9 million, representing an effective tax rate of 25%, as compared to the federal statutory rate of 21%. The effective rate differs from the federal statutory rate due primarily to state and local income tax expense and tax expense for shortfalls related to share-based compensation.

For the three months ended March 31, 2022, income tax expense was $41.6 million, representing an effective tax rate of 27%, as compared to the federal statutory rate of 21%. The effective tax rate differs from the federal statutory rate due primarily to state and local income tax expense, tax expense related to non-deductible compensation and tax expense for an increase in the valuation allowance for foreign taxes.

At March 31, 2023, the Company had foreign tax credit carry forwards of approximately $50.2 million, expiring on various dates from 2024 through 2033. These carryforwards have been reduced by a valuation allowance of $50.2 million as it is more likely than not that these carry forwards will not be realized. For the three months ended March 31, 2023, $0.3 million relating to amortization of tax deductible second component goodwill was realized as a reduction in tax liability (as determined on a 'with-and-without' approach).

As of March 31, 2023, approximately $344.5 million of our consolidated cash and cash equivalents was held by foreign subsidiaries. Of this amount, approximately $225.0 million is expected to be repatriated to the United States with the remaining amount continuing to be reinvested in foreign operations. Tax expense related to the expected repatriation amount has been accrued in the current period and the Company does not expect to incur any significant, additional taxes related to the remaining balance.

Note 14. Commitments and Contingencies

Commitments

As of March 31, 2023, the Company's contractual obligations not reflected on the Company's condensed consolidated balance sheet increased $27.2 million, as compared to December 31, 2022, to $939.4 million. The increase is primarily driven by the renewal of a third-party service contract.

Legal Matters

On August 14, 2017, Robert Kirkman, Robert Kirkman, LLC, Glen Mazzara, 44 Strong Productions, Inc., David Alpert, Circle of Confusion Productions, LLC, New Circle of Confusion Productions, Inc., Gale Anne Hurd, and Valhalla Entertainment, Inc. f/k/a Valhalla Motion Pictures, Inc. (together, the "Plaintiffs") filed a complaint in California Superior Court in connection with Plaintiffs’ rendering of services as writers and producers of the television series entitled The Walking Dead, as well as Fear the Walking Dead and/or Talking Dead, and the agreements between the parties related thereto (the "Walking Dead Litigation"). The Plaintiffs asserted that the Company had been improperly underpaying the Plaintiffs under their contracts with the Company and they asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, inducing breach of contract, and liability for violation of Cal. Bus. & Prof. Code § 17200. The Plaintiffs sought compensatory and punitive damages and restitution. On August 8, 2019, the judge in the Walking Dead Litigation ordered a trial to resolve certain issues of contract interpretation only. Following eight days of trial in February and March 2020, on July 22, 2020, the judge issued a Statement of Decision finding in the Company's favor on all seven matters of contract interpretation before the court in this first phase trial. On January 20, 2021, the Plaintiffs filed a second amended complaint, eliminating eight named defendants and their claims under Cal. Bus. & Prof. Code § 17200. On May 5, 2021, the Plaintiffs filed a third amended complaint, repleading in part their claims for alleged breach of the implied covenant of good faith and fair dealing, inducing breach of contract, and certain breach of contract claims. On June 2, 2021, the Company filed a demurrer and motion to strike seeking to dismiss the claim for breach of the implied covenant of good faith and fair dealing and certain tort and breach of contract claims asserted in the third amended complaint. On July 27, 2021, the court granted in part and denied in part the Company's motion. On January 12, 2022, the Company filed a motion for summary adjudication of many of the remaining claims. On April 6, 2022, the court granted the Company’s summary adjudication motion in part, dismissing the Plaintiffs’ claims for breach of the implied covenant of good faith and fair dealing and inducing breach of contract. In December 2022, the parties entered into an agreement to resolve through confidential binding arbitration the remaining claims in the litigation (consisting mainly of ordinary course profit participation audit claims), which had been scheduled for a February 2023 jury trial. The arbitration is expected to commence on October 16, 2023. As a result, on January 9, 2023, the Plaintiffs filed with the court a notice of dismissal of the remaining claims, and on January 19, 2023, the court formally dismissed the case. On January, 26, 2023, the Plaintiffs filed a notice of appeal of the court’s post-trial, demurrer, and summary adjudication decisions. The Company believes the two remaining claims in the case for breach of contract, which will now be

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

resolved through confidential binding arbitration, are without merit and is continuing to defend against them. At this time, no determination can be made as to the ultimate outcome of this litigation or the potential liability, if any, on the part of the Company.

On November 14, 2022, the Plaintiffs filed a separate complaint in California Superior Court (the “MFN Litigation”) in connection with the Company’s July 16, 2021 settlement agreement with Frank Darabont (“Darabont”), Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (the “Darabont Parties”), which resolved litigations the Darabont Parties had brought in connection with Darabont's rendering services as a writer, director and producer of the television series entitled The Walking Dead and the agreement between the parties related thereto (the “Darabont Settlement”). Plaintiffs assert claims for breach of contract, alleging that the Company breached the most favored nations (“MFN”) provisions of Plaintiffs’ contracts with the Company by failing to pay them additional contingent compensation as a result of the Darabont Settlement (the “MFN Litigation”). Plaintiffs claim in the MFN Litigation that they are entitled to actual and compensatory damages in excess of $200 million. The Plaintiffs also bring a cause of action to enjoin an arbitration the Company commenced in May 2022 concerning the same dispute. On December 15, 2022, the Company removed the MFN Litigation to the United States District Court for the Central District of California. On January 13, 2023, the Company filed a motion to dismiss the MFN Litigation and informed the court that the Company had withdrawn the arbitration Plaintiffs sought to enjoin. The motion is fully briefed and awaiting decision. The court has scheduled a trial date of September 17, 2024. The Company believes that the asserted claims are without merit and will vigorously defend against them if they are not dismissed. At this time, no determination can be made as to the ultimate outcome of this litigation or the potential liability, if any, on the part of the Company.

The Company is party to various lawsuits and claims in the ordinary course of business, including the matters described above, as well as other lawsuits and claims relating to employment, intellectual property, and privacy and data protection matters. Although the outcome of these matters cannot be predicted with certainty and while the impact of these matters on the Company's results of operations in any particular subsequent reporting period could be material, management does not believe that the resolution of these matters will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.

Note 15. Equity Plans

In February 2023, AMC Networks granted 297,325 restricted stock units ("RSUs") under the AMC Networks Inc. Amended and Restated 2016 Employee Stock Plan to its chief executive officer. The RSUs vest ratably over a three-year period.

During the three months ended March 31, 2023, 748,181 RSUs of AMC Networks Class A Common Stock previously issued to employees of the Company vested. On the vesting date, 315,874 RSUs were surrendered to the Company to cover the required statutory tax withholding obligations and 432,307 shares of AMC Networks Class A Common Stock were issued. Units are surrendered to satisfy the employees' statutory minimum tax withholding obligations for the applicable income and other employment tax. The units surrendered during the three months ended March 31, 2023 had an aggregate value of $6.0 million, which has been reflected as a financing activity in the condensed consolidated statement of cash flows for the three months ended March 31, 2023.

The Company recorded share-based compensation expenses of $5.9 million (including $0.3 million recorded as part of Restructuring and other related charges) and $8.1 million for the three months ended March 31, 2023 and 2022, respectively. Share-based compensation expenses are recognized in the consolidated statements of income as part of selling, general and administrative expenses.

As of March 31, 2023, there was $17.6 million of total unrecognized share-based compensation cost related to outstanding unvested share-based awards. The unrecognized compensation cost is expected to be recognized over a weighted average remaining period of approximately 2.2 years.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 16. Noncontrolling Interests

Redeemable Noncontrolling Interests

The following table summarizes activity related to redeemable noncontrolling interest for the three months ended March 31, 2023 and 2022:


(In thousands)	Three Months Ended March 31, 2023
December 31, 2022	$	253,669
Net earnings	6,270
Distributions	(10,020)


March 31, 2023	$	249,919


(In thousands)	Three Months Ended March 31, 2022
December 31, 2021	$	283,849
Net earnings	3,907



March 31, 2022	$	287,756

Note 17. Related Party Transactions

The Company and its related parties enter into transactions with each other in the ordinary course of business. Revenues, net from related parties amounted to $1.3 million and $1.3 million for the three months ended March 31, 2023 and 2022, respectively. Amounts charged to the Company, included in selling, general and administrative expenses, pursuant to transactions with its related parties amounted to $3.3 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

As disclosed in Note 20 of the Company’s 2022 Annual Report on Form 10-K, from time to time the Company enters into arrangements with 605, LLC. James L. Dolan, the Non-Executive Chairman and a director of the Company, and his spouse, Kristin A. Dolan, the Chief Executive Officer of the Company, own 50% of 605, LLC. Kristin A. Dolan is also the Non-executive Chairman and founder of 605, LLC, and served as its Chief Executive Officer from its inception in 2016 until February 2023. 605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries pursuant to a Master Services Agreement dated February 8, 2019 (the “Master Services Agreement").

On August 1, 2022, the Audit Committee authorized the Company to enter into a Statement of Work for Strategic Analytic Services (the “Statement of Work”) with 605, LLC under the Master Services Agreement. The fees payable to 605, LLC by the Company for these services are $10.5 million payable in five installments. The initial term of the Statement of Work ran from August 1, 2022 to December 31, 2022. The term was automatically extended to June 30, 2023 per the terms of the agreement.

Under the Statement of Work, 605, LLC is engaged in a strategic, research, market, business and financial assessment of the Company and its business, partnering with the Company’s management team. 605, LLC utilizes their expertise, including assessment of extensive real-time business intelligence and consumer research, to enable potential further acceleration of the Company’s long-term growth and value creation. Among the analytic services provided by 605, LLC are situation analysis, customer experience, data utilization, addressing the market, content strategy and overview, sales strategy, pricing analysis, customer profiles, content (by offering), marketing strategy and financial analysis.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 18. Cash Flows

The Company's non-cash investing and financing activities and other supplemental data are as follows:


(In thousands)	Three Months Ended March 31,
	2023		2022
Non-Cash Investing and Financing Activities:


Operating lease additions	$	—	$	1,862
Capital expenditures incurred but not yet paid	5,606		5,284

Supplemental Data:
Cash interest paid	50,791		44,073
Income taxes paid, net	6,507		5,588

Note 19. Segment Information

The Company classifies its operations into two operating segments: Domestic Operations and International and Other. These operating segments represent strategic business units that are managed separately.

The Company evaluates segment performance based on several factors, of which the primary financial measure is operating segment adjusted operating income ("AOI"). The Company defines AOI as operating income (loss) before depreciation and amortization, cloud computing amortization, share-based compensation expenses or benefit, impairment and other charges (including gains or losses on sales or dispositions of businesses), restructuring and other related charges and including the Company’s proportionate share of adjusted operating income (loss) from majority-owned equity method investees. The Company has presented the components that reconcile adjusted operating income to operating income, and other information as to the continuing operations of the Company's operating segments below.


(In thousands)	Three Months Ended March 31, 2023
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Subscription	$	347,530	$	56,690	$	—	$	404,220
Content licensing and other	103,263		32,860		(2,479)		133,644
Distribution and other	450,793		89,550		(2,479)		537,864
Advertising	161,061		18,522		—		179,583
Consolidated revenues, net	$	611,854	$	108,072	$	(2,479)	$	717,447
Operating income (loss)	$	199,488	$	14,142	$	(40,326)	$	173,304
Share-based compensation expenses	4,447		839		359		5,645
Depreciation and amortization	11,854		4,771		9,250		25,875

Restructuring and other related charges	818		1,385		3,730		5,933
Cloud computing amortization	5		—		2,225		2,230
Majority-owned equity investees AOI	2,776		—		—		2,776
Adjusted operating income (loss)	$	219,388	$	21,137	$	(24,762)	$	215,763

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	Three Months Ended March 31, 2022
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Subscription	$	343,748	$	60,412	$	—	$	404,160
Content licensing and other	61,254		27,054		(3,237)		85,071
Distribution and other	405,002		87,466		(3,237)		489,231
Advertising	200,541		22,385		—		222,926
Consolidated revenues, net	$	605,543	$	109,851	$	(3,237)	$	712,157
Operating income (loss)	$	198,522	$	17,355	$	(41,200)	$	174,677
Share-based compensation expenses	3,673		754		3,702		8,129
Depreciation and amortization	12,136		4,903		5,551		22,590


Cloud computing amortization	7		—		900		907
Majority-owned equity investees AOI	4,881		—		—		4,881
Adjusted operating income (loss)	$	219,219	$	23,012	$	(31,047)	$	211,184

Subscription revenues in the Domestic Operations segment include revenues related to the Company's streaming services of $140.9 million and $109.6 million for the three months ended March 31, 2023 and 2022, respectively.

Corporate overhead costs not allocated to the segments include costs such as executive salaries and benefits and costs of maintaining corporate headquarters, facilities and common support functions (such as human resources, legal, finance, strategic planning and information technology).

Inter-segment eliminations are primarily licensing revenues recognized between the Domestic Operations and International and Other segments.


(In thousands)	Three Months Ended March 31,
		2023		2022
Inter-segment revenues
Domestic Operations		$	(2,214)	$	(3,002)
International and Other		(265)		(235)
		$	(2,479)	$	(3,237)

The table below summarizes revenues based on customer location:


(In thousands)	Three Months Ended March 31,
		2023		2022
Revenues
United States		$	606,228	$	591,208
Europe		73,767		82,925
Other		37,452		38,024
		$	717,447	$	712,157

One customer within the Domestic Operations segment accounted for approximately 13% of consolidated revenues, net for the three months ended March 31, 2023. For the three months ended March 31, 2022, no customer accounted for 10% or more of consolidated revenues, net.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The table below summarizes property and equipment based on asset location:


(In thousands)	March 31, 2023		December 31, 2022
Property and equipment, net
United States	$	182,124	$	187,833
Europe	12,184		12,520
Other	1,509		1,681
	$	195,817	$	202,034

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. In this Management's Discussion and Analysis of Financial Condition and Results of Operations there are statements concerning our future operating results and future financial performance. Words such as "expects," "anticipates," "believes," "estimates," "may," "will," "should," "could," "potential," "continue," "intends," "plans" and similar words and terms used in the discussion of future operating results and future financial performance identify forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:

•the level of our revenues;

•market demand, including changes in viewer consumption patterns, for our programming networks, our subscription streaming services, our programming, and our production services;

•demand for advertising inventory and our ability to deliver guaranteed viewer ratings;

•the highly competitive nature of the cable, telecommunications, streaming and programming industries;

•the cost of, and our ability to obtain or produce, desirable content for our programming services, other forms of distribution, including digital and licensing in international markets, as well as our film distribution businesses;

•market demand for our owned original programming and our film content;

•the loss of any of our key personnel and artistic talent;

•the security of our program rights and other electronic data;

•our ability to maintain and renew distribution or affiliation agreements with distributors;

•our ability to successfully launch our streaming services in countries outside of the United States;

•economic and business conditions and industry trends in the countries in which we operate, including increases in inflation rates and recession risk;

•fluctuations in currency exchange rates and interest rates;

•changes in domestic and foreign laws or regulations under which we operate;

•changes in laws or treaties relating to taxation, or the interpretation thereof, in the United States or in the countries in which we operate;

•the impact of existing and proposed federal, state and international laws and regulations relating to data protection, privacy and security, including the European Union's General Data Protection Regulation ("GDPR");

•our substantial debt and high leverage;

•reduced access to, or inability to access, capital or credit markets, or significant increases in costs to borrow;

•the level of our expenses;

•our ability to achieve the expected benefits of our restructuring plan;

•future acquisitions and dispositions of assets;

•our ability to successfully acquire new businesses and, if acquired, to integrate, and implement our plan with respect to businesses we acquire;

•problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;

•uncertainties regarding the financial results of equity method investees, issuers of our investments in marketable equity securities and non-marketable equity securities and changes in the nature of key strategic relationships with partners and joint ventures;

•the outcome of litigation and other proceedings;

•whether pending uncompleted transactions, if any, are completed on the terms and at the times set forth (if at all);

•other risks and uncertainties inherent in our programming and streaming businesses;

•financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;

•the impact of pandemics or other health emergencies on the economy and our business;

•events that are outside our control, such as political unrest in international markets, terrorist attacks, natural disasters and other similar events; and

•the factors described under Item 1A, "Risk Factors" in our 2022 Annual Report on Form 10-K (the "2022 Form 10-K"), as filed with the Securities and Exchange Commission ("SEC").

We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.

Introduction

Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is a supplement to and should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere herein and our 2022 Form 10-K to enhance the understanding of our financial condition, changes in financial condition and results of our operations. Unless the context otherwise requires, all references to "we," "us," "our," "AMC Networks" or the "Company" refer to AMC Networks Inc., together with its subsidiaries. The MD&A is organized as follows:

Business Overview. This section provides a general description of our business and our operating segments, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.

Consolidated Results of Operations. This section provides an analysis of our results of operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Our discussion is presented on both a consolidated and segment basis. Our two segments are: (i) Domestic Operations and (ii) International and Other.

Liquidity and Capital Resources. This section provides a discussion of our financial condition as of March 31, 2023, as well as an analysis of our cash flows for the three months ended March 31, 2023 and 2022. The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations that existed at March 31, 2023 as compared to December 31, 2022.

Critical Accounting Policies and Estimates. This section provides an update, if any, to our significant accounting policies or critical accounting estimates since December 31, 2022.

Business Overview

Financial Highlights

The tables presented below set forth our consolidated revenues, net, operating income (loss) and adjusted operating income (loss) ("AOI")1, for the periods indicated.


(In thousands)	Three Months Ended March 31,
		2023		2022
Revenues, net
Domestic Operations		$	611,854	$	605,543
International and Other		108,072		109,851
Inter-segment Eliminations		(2,479)		(3,237)
		$	717,447	$	712,157
Operating Income (Loss)
Domestic Operations		$	199,488	$	198,522
International and Other		14,142		17,355
Corporate / Inter-segment Eliminations		(40,326)		(41,200)
		$	173,304	$	174,677
Adjusted Operating Income (Loss)
Domestic Operations		$	219,388	$	219,219
International and Other		21,137		23,012
Corporate / Inter-segment Eliminations		(24,762)		(31,047)
		$	215,763	$	211,184

1 Adjusted Operating Income (Loss), is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section on page 30 for additional information, including our definition and our use of this non-GAAP financial measure, and for a reconciliation to its most comparable GAAP financial measure.

Segment Reporting

We manage our business through the following two operating segments:

•Domestic Operations: Includes our programming services and AMC Broadcasting & Technology. Our programming services consist of our five national programming networks, our global streaming services, our AMC Studios operation and IFC Films. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. Our global streaming services consist of our targeted subscription streaming services (Acorn TV, Shudder, Sundance Now, ALLBLK, and HIDIVE), AMC+ and other streaming initiatives. Our AMC Studios operation produces original programming for our programming services and also licenses such programming worldwide, and IFC Films is our film distribution business. AMC Networks Broadcasting & Technology, our technical services business, primarily services most of the national programming networks.

Domestic Operations

In our Domestic Operations segment, we earn revenue principally from: (i) the distribution of our programming through our programming networks and streaming services, (ii) the sale of advertising, and (iii) the licensing of our original programming to distributors, including the distribution of programming of IFC Films. Subscription revenue includes fees paid by distributors and consumers for our programming networks and streaming services. Subscription fees paid by distributors represent the largest component of distribution revenue. Our subscription fee revenues for our programming networks are based on a per subscriber fee, and, to a lesser extent, fixed fees under multi-year contracts, commonly referred to as "affiliation agreements," which generally provide for annual rate increases. The subscription fee revenues we earn vary from period to period, distributor to distributor and also vary among our programming services, but are generally based upon the number of each distributor's subscribers who receive our programming, referred to as viewing subscribers. Subscription fees for our streaming services are typically based on a per subscriber fee and are generally paid by distributors and consumers on a monthly basis. Content licensing revenue is earned from the licensing of original programming for digital, foreign and home video distribution and is recognized upon availability or distribution by the licensee.

Under affiliation agreements with our distributors, we have the right to sell a specified amount of national advertising time on our programming networks. Our advertising revenues are more variable than subscription fee revenues because the majority of our advertising is sold on a short-term basis, not under long-term contracts. Our arrangements with advertisers provide for a set number of advertising units to air over a specific period of time at a negotiated price per unit. Additionally, in these advertising sales arrangements, our programming networks generally guarantee specified viewer ratings for their programming.

Programming expenses, included in technical and operating expenses, represent the largest expenses of the Domestic Operations segment and primarily consists of amortization of program rights, such as those for original programming, feature films and licensed series, as well as participation and residual costs. The other components of technical and operating expenses primarily include distribution and production related costs and program operating costs including cost of delivery, such as origination, transmission, uplinking and encryption.

The success of our business depends on original programming, both scripted and unscripted, across all of our programming services. These original series generally result in higher ratings for our networks and higher viewership on our streaming services. Among other things, higher audience ratings drive increased revenues through higher advertising revenues. The timing of exhibition and distribution of original programming varies from period to period, which results in greater variability in our revenues, earnings and cash flows from operating activities. There may be significant changes in the level of our technical and operating expenses due to the level of our content investment spend and the related amortization of content acquisition and/or original programming costs. Program rights that are predominantly monetized as a group are amortized based on projected usage, typically resulting in an accelerated amortization pattern and, to a lesser extent, program rights that are predominantly monetized individually are amortized based on the individual-film-forecast-computation method.

Most original series require us to make up-front investments, which are often significant amounts. Our programming efforts are not always commercially successful, which could result in a write-off of program rights. If events or changes in circumstances indicate that the fair value of program rights predominantly monetized individually or a film group is less than its unamortized cost, the Company will write off the excess to technical and operating expenses in the consolidated statements of income. Program rights with no future programming usefulness are substantively abandoned resulting in the write-off of remaining unamortized cost.

International and Other

Our International and Other segment primarily includes the operations of AMCNI and 25/7 Media.

In our International and Other segment, we earn revenue principally from the international distribution of programming and, to a lesser extent, the sale of advertising from our AMCNI programming networks. We also earn revenue through production services from 25/7 Media. For the three months ended March 31, 2023, distribution revenues represented 83% of the revenues of the International and Other segment. Distribution revenue primarily includes subscription fees paid by distributors to carry our programming networks and production services revenue generated from 25/7 Media. Our subscription revenues are generally based on either a per-subscriber fee or a fixed contractual annual fee, under multi-year affiliation agreements, which may provide for annual rate increases. Subscription revenues are derived from the distribution of our programming networks primarily in Europe, and to a lesser extent, Latin America. Our production services revenues are based on master production agreements whereby a third-party engages us to produce content on its behalf. Production services revenues are recognized based on the percentage of cost incurred to total estimated cost of the contract.

Programming expenses, program operating costs and production costs incurred to produce content for third parties are included in technical and operating expenses, and represent the largest expense of the International and Other segment. Programming expenses primarily consist of amortization of acquired content, costs of dubbing and sub-titling of programs, and production costs. Program operating costs include costs such as origination, transmission, uplinking and encryption of our linear AMCNI channels as well as content hosting and delivery costs at our various on-line content distribution initiatives. Our programming efforts are not all commercially successful, which could result in a write-off of program rights. If events or changes in circumstances indicate that the fair value of program rights predominantly monetized individually or a film group is less than its unamortized cost, the Company will write off the excess to technical and operating expenses in the consolidated statements of income. Program rights with no future programming usefulness are substantively abandoned resulting in the write-off of remaining unamortized cost.

Corporate / Inter-segment Eliminations

Corporate operations primarily consist of executive management and administrative support services, such as executive salaries and benefits costs, costs of maintaining corporate headquarters, facilities and common support functions (such as human resources, legal, finance, strategic planning and information technology). The segment financial information set forth below, including the discussion related to individual line items, does not reflect inter-segment eliminations unless specifically indicated.

Impact of Economic Conditions

Our future performance is dependent, to a large extent, on general economic conditions including the impact of direct competition, our ability to manage our businesses effectively, and our relative strength and leverage in the marketplace, both with suppliers and customers. Additionally, changes in macroeconomic facts and circumstances, particularly high inflation and the rise in interest rates, may adversely impact our results of operations, cash flows and financial position or our ability to refinance our indebtedness on terms favorable to us, or at all.

Capital and credit market disruptions, as well as other events such as pandemics or other health emergencies, inflation, international conflict and recession, could cause economic downturns, which may lead to lower demand for our products, such as lower demand for television advertising and a decrease in the number of subscribers receiving our programming services. Events such as these may adversely impact our results of operations, cash flows and financial position.

Consolidated Results of Operations

The amounts presented and discussed below represent 100% of each operating segment's revenues, net and expenses. Where we have management control of an entity, we consolidate 100% of such entity in our consolidated statements of income notwithstanding that a third-party owns an interest, which may be significant, in such entity. The noncontrolling owner's interest in the operating results of consolidated subsidiaries are reflected in net income attributable to noncontrolling interests in our consolidated statements of income.

Three Months Ended March 31, 2023 and 2022

The following table sets forth our consolidated results of operations for the periods indicated.


	Three Months Ended March 31,
(In thousands)		2023		2022		Change
Revenues, net:
Subscription		$	404,220	$	404,160	—	%
Content licensing and other		133,644		85,071		57.1	%
Distribution and other		537,864		489,231		9.9	%
Advertising		179,583		222,926		(19.4)	%
Total revenues, net		717,447		712,157		0.7	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)		326,729		284,237		14.9	%
Selling, general and administrative		185,606		230,653		(19.5)	%
Depreciation and amortization		25,875		22,590		14.5	%

Restructuring and other related charges		5,933		—		n/m
Total operating expenses		544,143		537,480		1.2	%
Operating income		173,304		174,677		(0.8)	%
Other income (expense):
Interest expense, net		(29,701)		(28,337)		4.8	%

Miscellaneous, net		4,589		5,828		(21.3)	%
Total other expense		(25,112)		(22,509)		11.6	%
Income from operations before income taxes		148,192		152,168		(2.6)	%
Income tax expense		(36,899)		(41,634)		(11.4)	%
Net income including noncontrolling interests		111,293		110,534		0.7	%
Net income attributable to noncontrolling interests		(7,683)		(6,346)		21.1	%
Net income attributable to AMC Networks' stockholders		$	103,610	$	104,188	(0.6)	%

Revenues

Subscription revenues increased 1.1% in our Domestic Operations segment primarily due to an increase in streaming revenues, partially offset by a decline in affiliate revenue. Subscription revenues decreased 6.2% in our International and Other segment primarily due to the unfavorable impact of foreign currency translation at AMCNI.

Subscription revenues vary based on the impact of renewals of affiliation agreements and the number of subscribers to our services.

Content licensing and other revenues increased 68.6% in our Domestic Operations segment primarily due to the timing and availability of deliveries in the quarter, including $56.1 million for the delivery of the remaining episodes of an AMC Studios produced series to a third party, partially offset by fewer episodes of The Walking Dead delivered following the series finale. Content licensing and other revenues increased 21.5% in our International and Other segment due to the timing and nature of productions at 25/7 Media.

Content licensing revenues vary based on the timing of availability of our programming to distributors.

Advertising revenues decreased 19.7% in our Domestic Operations segment primarily due to linear ratings declines, softness in the advertising market and fewer original programming episodes within the quarter, partially offset by digital and advanced advertising revenue growth. Advertising revenues decreased 17.3% in our International and Other segment, primarily due to the impact of the wind-down of two channels in 2022 and marketplace declines in the U.K.

Advertising revenues vary based on the timing of our original programming series and the popularity of our programming as measured by Nielsen.

Technical and operating expenses (excluding depreciation and amortization)

The components of technical and operating expenses primarily include the amortization of program rights, such as those for original programming, feature films and licensed series, participation and residual costs, distribution and production related costs and program delivery costs, such as transmission, encryption, hosting, and formatting.

Technical and operating expenses (excluding depreciation and amortization) increased 17.9% in our Domestic Operations segment primarily due to costs associated with the delivery of the remaining episodes of an AMC Studios produced series to a third party. Technical and operating expenses (excluding depreciation and amortization) increased 1.5% in our International and Other segment primarily due to the timing and nature of productions at 25/7 Media, partially offset by the favorable impact of foreign currency translation at AMCNI.

There may be significant changes in the level of our technical and operating expenses due to original programming costs and/or content acquisition costs. As competition for programming increases, costs for content acquisition and original programming may increase.

Selling, general and administrative expenses

The components of selling, general and administrative expenses primarily include sales, marketing and advertising expenses, administrative costs and costs of non-production facilities.

Selling, general and administrative expenses (including share-based compensation expenses) decreased 21.6% in our Domestic Operations segment primarily due to lower marketing and subscriber acquisition expenses related to our streaming services, and decreased 2.5% in our International and Other segment primarily due to the favorable impact of foreign currency translation, partially offset by higher advertising and marketing costs.

There may be significant changes in the level of our selling, general and administrative expenses due to the timing of promotions and marketing of original programming series.

Depreciation and amortization

Depreciation and amortization expenses include depreciation of fixed assets and amortization of finite-lived intangible assets.

Depreciation and amortization expense increased due to higher depreciation of equipment in Corporate.

Restructuring and other related charges

For the three months ended March 31, 2023, restructuring and other related charges of $5.9 million consisted primarily of severance and other employee-related costs, with $0.8 million related to Domestic Operations, $1.4 million related to AMCNI and $3.7 million related to Corporate.

There were no restructuring and other related charges for the three months ended March 31, 2022.

Operating income

The decrease in operating income was primarily attributable to increases in technical and operating expenses, restructuring and other related charges, and depreciation and amortization of $42.5 million, $5.9 million and $3.3 million, respectively, partially offset by a decrease in selling, general and administrative expenses of $45.0 million and an increase in revenues of $5.3 million.

Interest expense, net

The increase in interest expense, net was primarily due to higher interest rates on our Term Loan A Facility, partially offset by higher interest income generated from our money market mutual fund accounts and bank deposits.

Miscellaneous, net

The decrease in miscellaneous, net was primarily related to $4.3 million of lower net gains on marketable securities, $0.6 million of lower net earnings of equity method investees, and a $0.5 million unfavorable variance in the foreign currency remeasurement of monetary assets and liabilities (principally intercompany loans) that are denominated in currencies other than the underlying functional currency of the applicable entity as compared to the three months ended March 31, 2022, as well as a $1.2 million impairment charge related to an investment in 2023. These decreases were partially offset by $5.5 million of higher net gains on derivative financial instruments for the three months ended March 31, 2023.

Income tax expense

For the three months ended March 31, 2023, income tax expense was $36.9 million, representing an effective tax rate of 25%. The effective tax rate differs from the federal statutory rate of 21% primarily due to state and local income tax expense and tax expense for shortfalls related to share-based compensation.

For the three months ended March 31, 2022, income tax expense was $41.6 million, representing an effective tax rate of 27%. The effective tax rate differs from the federal statutory rate of 21% primarily due to state and local income tax expense, tax expense related to non-deductible compensation and tax expense for an increase in the valuation allowance for foreign taxes.

Segment Results of Operations

Our segment operating results are presented based on how we assess operating performance and internally report financial information. We use segment adjusted operating income as the measure of profit or loss for our operating segments. See Non-GAAP Financial Measures section below for our definition of Adjusted Operating Income and a reconciliation from Operating Income to Adjusted Operating Income on a segment and consolidated basis.

Domestic Operations

The following table sets forth our Domestic Operations segment results for the periods indicated.


	Three Months Ended March 31,
(In thousands)		2023		2022		Change
Revenues, net:
Subscription		$	347,530	$	343,748	1.1	%
Content licensing and other		103,263		61,254		68.6
Distribution and other		450,793		405,002		11.3
Advertising		161,061		200,541		(19.7)
Total revenues, net		611,854		605,543		1.0
Technical and operating expenses (excluding depreciation and amortization)(a)		269,010		228,107		17.9
Selling, general and administrative expenses(b)		126,232		163,098		(22.6)
Majority-owned equity investees AOI		2,776		4,881		(43.1)
Segment adjusted operating income		$	219,388	$	219,219	0.1	%
(a) Technical and operating expenses exclude cloud computing amortization
(b) Selling, general and administrative expenses exclude share-based compensation expenses

Revenues

Subscription revenues increased primarily due to a 28.6% increase in streaming revenues driven by year-over-year streaming subscriber growth and 2022 price increases, partially offset by an 11.7% decline in affiliate revenue. Affiliate revenue decreased due to basic subscriber declines and a 3% impact of a strategic non-renewal that occurred at the end of 2022, partially offset by contractual rate increases. Subscription revenues include revenues related to the Company's streaming services of $140.9 million and $109.6 million for the three months ended March 31, 2023 and 2022, respectively. Aggregate paid subscribers2 to our streaming services increased 22% to 11.5 million at March 31, 2023 compared to March 31, 2022.

Content licensing and other revenues increased primarily due to the timing and availability of deliveries in the quarter, including $56.1 million for the delivery of the remaining episodes of an AMC Studios produced series to a third party, partially offset by fewer episodes of The Walking Dead delivered following the series finale.

Advertising revenues decreased due to linear ratings declines, softness in the advertising market and fewer original programming episodes within the quarter, partially offset by digital and advanced advertising revenue growth.

Technical and operating expenses (excluding depreciation and amortization)

Technical and operating expenses (excluding depreciation and amortization) increased primarily due to costs associated with the delivery of the remaining episodes of an AMC Studios produced series to a third party.

2 A paid subscription is defined as a subscription to a direct-to-consumer service or a subscription received through distributor arrangements, in which we receive a fee for the distribution of our streaming services, and includes an estimate of subscribers converting to paying status in the subsequent period based on historical conversion percentages.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased due to lower marketing and subscriber acquisition expenses related to our streaming services.

Segment adjusted operating income

The increase in segment adjusted operating income was primarily attributable to a decrease in selling, general and administrative expenses of $36.9 million and an increase in revenues, net of $6.3 million, partially offset by an increase in technical and operating expenses of $40.9 million.

International and Other

The following table sets forth our International and Other segment results for the periods indicated.


	Three Months Ended March 31,
(In thousands)		2023		2022		Change
Revenues, net:
Subscription		$	56,690	$	60,412	(6.2)	%
Content licensing and other		32,860		27,054		21.5
Distribution and other		89,550		87,466		2.4
Advertising		18,522		22,385		(17.3)
Total revenues, net		108,072		109,851		(1.6)
Technical and operating expenses (excluding depreciation and amortization)		60,561		59,695		1.5
Selling, general and administrative expenses(a)		26,374		27,144		(2.8)

Segment adjusted operating income		$	21,137	$	23,012	(8.1)	%
(a) Selling, general and administrative expenses exclude share-based compensation expenses

Revenues

Subscription revenues decreased primarily due to the unfavorable impact of foreign currency translation at AMCNI.

Content licensing and other revenues increased due to the timing and nature of productions at 25/7 Media.

Advertising revenues decreased primarily due to the impact of the wind-down of two channels in 2022 and marketplace declines in the U.K.

Technical and operating expenses (excluding depreciation and amortization)

Technical and operating expenses (excluding depreciation and amortization) increased due to the timing and nature of productions at 25/7 Media, partially offset by the favorable impact of foreign currency translation at AMCNI.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased primarily due to the favorable impact of foreign currency translation at AMCNI, partially offset by higher advertising and marketing costs.

Segment adjusted operating income

The decrease in segment adjusted operating income was primarily attributable to a decrease in revenues, net of $1.8 million, and an increase in technical and operating expenses of $0.9 million, partially offset by a decrease in selling, general and administrative expenses of $0.8 million.

Corporate and Inter-segment Elimination

The following table sets forth our Corporate and Inter-segment Eliminations segment results for the periods indicated.


	Three Months Ended March 31,
(In thousands)		2023		2022		Change





Revenues, net:		$	(2,479)	$	(3,237)	(23.4)	%
Technical and operating expenses (excluding depreciation and amortization)(a)		(2,906)		(3,572)		(18.6)
Selling, general and administrative expenses(b)		25,189		31,382		(19.7)

Segment adjusted operating income		$	(24,762)	$	(31,047)	(20.2)	%
(a) Technical and operating expenses exclude cloud computing amortization
(b) Selling, general and administrative expenses exclude share-based compensation expenses and cloud computing amortization

Revenues, net

Revenue eliminations are primarily related to inter-segment licensing revenues recognized between the Domestic Operations and International and Other segments.

Technical and operating expenses (excluding depreciation and amortization)

Technical and operating expense eliminations are primarily related to inter-segment programming amortization recognized between the Domestic Operations and International and Other segments.

Selling, general and administrative expenses

Corporate overhead costs not allocated to the segments include such costs as executive salaries and benefits, costs of maintaining corporate headquarters, facilities and common support functions (such as human resources, legal, finance, strategic planning and information technology).

Selling, general and administrative expenses decreased primarily due to lower employee related costs, including lower long-term incentive compensation.

Non-GAAP Financial Measures

We evaluate segment performance based on several factors, of which the primary financial measure is operating segment AOI. We define AOI, which is a financial measure that is not calculated in accordance with generally accepted accounting principles ("GAAP"), as operating income (loss) before share-based compensation expenses or benefit, depreciation and amortization, impairment and other charges (including gains or losses on sales or dispositions of businesses), restructuring and other related charges, cloud computing amortization and including the Company’s proportionate share of adjusted operating income (loss) from majority-owned equity method investees. From time to time, we may exclude the impact of certain events, gains, losses or other charges (such as significant legal settlements) from AOI that affect our operating performance.

We believe that AOI is an appropriate measure for evaluating the operating performance on both an operating segment and consolidated basis. AOI and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in the industry.

Internally, we use revenues, net and AOI as the most important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. AOI should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities and other measures of performance and/or liquidity presented in accordance with GAAP. Since AOI is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

The following is a reconciliation of operating income (loss) to AOI for the periods indicated:


	Three Months Ended March 31, 2023
(In thousands)	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Operating income (loss)	$	199,488	$	14,142	$	(40,326)	$	173,304
Share-based compensation expenses	4,447		839		359		5,645
Depreciation and amortization	11,854		4,771		9,250		25,875
Restructuring and other related charges	818		1,385		3,730		5,933

Cloud computing amortization	5		—		2,225		2,230
Majority owned equity investees AOI	2,776		—		—		2,776
Adjusted operating income (loss)	$	219,388	$	21,137	$	(24,762)	$	215,763


	Three Months Ended March 31, 2022
(In thousands)	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Operating income (loss)	$	198,522	$	17,355	$	(41,200)	$	174,677
Share-based compensation expenses	3,673		754		3,702		8,129
Depreciation and amortization	12,136		4,903		5,551		22,590


Cloud computing amortization	7		—		900		907
Majority owned equity investees AOI	4,881		—		—		4,881
Adjusted operating income (loss)	$	219,219	$	23,012	$	(31,047)	$	211,184

Liquidity and Capital Resources

Our operations typically generate positive net cash flow from operating activities. However, each of our programming businesses has substantial programming acquisition and production expenditure requirements.

Our primary source of cash typically includes cash flow from operations. Sources of cash also include amounts available under our revolving credit facility and, subject to market conditions, access to capital and credit markets. Although we currently believe that amounts available under our revolving credit facility will be available when and if needed, we can provide no assurance that access to such funds will not be impacted by adverse conditions in the financial markets. The obligations of the financial institutions under our revolving credit facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others. As a public company, we may have access to capital and credit markets, although adverse conditions in the financial markets have in the past impacted, and are expected in the future to impact, access to those markets.

Our Board of Directors previously authorized a program to repurchase up to $1.5 billion of our outstanding shares of common stock (the "Stock Repurchase Program"). The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. For the three months ended March 31, 2023, we did not repurchase any of our Class A common stock. As of March 31, 2023, we had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

Our principal uses of cash include the production, acquisition and promotion of programming, technology investments, debt service and payments for income taxes. We continue to invest in original programming, the funding of which generally occurs six to nine months in advance of a program's airing.

As of March 31, 2023, our consolidated cash and cash equivalents balance of $763.9 million includes approximately $344.5 million held by foreign subsidiaries. Of this amount, approximately $225.0 million is expected to be repatriated to the United States with the remaining amount continuing to be reinvested in foreign operations. Tax expense related to the expected repatriation amount has been accrued in the current period and we do not expect to incur any significant, additional taxes related to the remaining balance.

We believe that a combination of cash-on-hand, cash generated from operating activities, availability under our revolving credit facility, borrowings under additional financing facilities and, when we have access to capital and credit markets, proceeds

from the sale of new debt, will provide sufficient liquidity to service the principal and interest payments on our indebtedness, along with our other funding and investment requirements over the next twelve months and over the longer term. However, we do not expect to generate sufficient cash from operations to repay the then outstanding balances of our debt at the applicable maturity dates. As a result, we will be dependent upon our ability to access the capital and credit markets in order to repay, refinance, repurchase through privately negotiated transactions, open market repurchases, tender offers or otherwise or redeem the outstanding balances of our indebtedness. Given the maturity dates of our 5.00% senior notes due 2024 and our 4.75% senior notes due 2025, we may access the capital or credit markets in the near term to refinance those senior notes through privately negotiated transactions, open market repurchases, tender offers or redemptions.

Failure to raise significant amounts of funding to repay our outstanding debt obligations at their respective maturity dates would adversely affect our business. In such a circumstance, we would need to take other actions including selling assets, seeking strategic investments from third parties or reducing other discretionary uses of cash. For information relating to our outstanding debt obligations, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Debt Financing Agreements" of our 2022 Form 10-K.

In addition, economic or market disruptions could lead to lower demand for our services, such as loss of subscribers and lower levels of advertising. These events would adversely impact our results of operations, cash flows and financial position.

The revolving credit facility was not drawn upon at March 31, 2023. The total undrawn revolver commitment is available to be drawn for our general corporate purposes.

AMC Networks was in compliance with all of its debt covenants as of March 31, 2023.

Cash Flow Discussion

The following table is a summary of cash flows provided by (used in) operating, investing and financing activities for the periods indicated:


(In thousands)	Three Months Ended March 31,
	2023		2022
Cash used in operating activities	$	(132,519)	$	(23,555)
Cash used in investing activities	(7,005)		(9,757)
Cash used in financing activities	(28,310)		(31,011)
Net decrease in cash and cash equivalents from operations	$	(167,834)	$	(64,323)

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2023 and 2022 amounted to $132.5 million and $23.6 million, respectively.

For the three months ended March 31, 2023, net cash used in operating activities primarily resulted from payments for program rights of $370.3 million and restructuring initiatives of $56.9 million, partially offset by $332.4 million of net income before amortization of program rights, depreciation and amortization, and other non-cash items. Changes in all other assets and liabilities during the quarter resulted in a net cash outflow of $37.7 million.

For the three months ended March 31, 2022, net cash used in operating activities primarily resulted from payments for program rights of $340.3 million, partially offset by $361.2 million of net income before amortization of program rights, depreciation and amortization, and other non-cash items. Changes in all other assets and liabilities during the quarter resulted in an additional net cash outflow of $44.5 million.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2023 and 2022 amounted to $7.0 million and $9.8 million, respectively.

For the three months ended March 31, 2023, net cash used in investing activities consisted of capital expenditures of

$11.5 million, partially offset by proceeds from the sale of investments of $4.5 million.

For the three months ended March 31, 2022, net cash used in investing activities consisted of capital expenditures of $11.5 million, partially offset by a return of capital from investees of $1.7 million.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2023 and 2022 amounted to $28.3 million and $31.0 million, respectively.

For the three months ended March 31, 2023, net cash used in financing activities primarily consisted of distributions to noncontrolling interests of $11.5 million, principal payments on the Term Loan A Facility of $8.4 million, and taxes paid in lieu of shares issued for equity-based compensation of $6.0 million.

For the three months ended March 31, 2022, net cash used in financing activities consisted of taxes paid in lieu of shares issued for equity-based compensation of $20.3 million, principal payments on the Term Loan A Facility of $8.4 million, distributions to noncontrolling interests of $1.6 million, and payments on finance leases of $0.7 million.

Contractual Obligations

As of March 31, 2023, our contractual obligations not reflected on the condensed consolidated balance sheet increased $27.2 million, as compared to December 31, 2022, to $939.4 million. The increase is primarily driven by the renewal of a third-party service contract.

Supplemental Guarantor Financial Information

The following is a description of the terms and conditions of the guarantees with respect to the outstanding notes for which AMC Networks is the issuer.

Note Guarantees

Debt of AMC Networks as of March 31, 2023 included $400.0 million of 5.00% Notes due April 2024, $800.0 million of 4.75% Notes due August 2025 and $1.0 billion of 4.25% Notes due February 2029 (collectively, the “notes”). The notes were issued by AMC Networks and are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of AMC Networks’ existing and future domestic restricted subsidiaries, subject to certain exceptions (each, a “Guarantor Subsidiary,” and collectively, the “Guarantor Subsidiaries”). The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law. A guarantee of the notes by a Guarantor Subsidiary is subject to release in the following circumstances: (i) any sale or other disposition of all of the capital stock of a Guarantor Subsidiary to a person that is not (either before or after giving effect to such transaction) a restricted subsidiary, in compliance with the terms of the applicable indenture; (ii) the designation of a restricted subsidiary as an “Unrestricted Subsidiary” under the applicable indenture; or (iii) the release or discharge of the guarantee (including the guarantee under the AMC Networks’ credit agreement) which resulted in the creation of the note guarantee (provided that such Guarantor Subsidiary does not have any preferred stock outstanding at such time that is not held by AMC Networks or another Guarantor Subsidiary).

Foreign subsidiaries of AMC Networks do not and will not guarantee the notes.

The following tables present the summarized financial information specified in Rule 1-02(bb)(1) of Regulation S-X for AMC Networks and each Guarantor Subsidiary. The summarized financial information has been prepared in accordance with Rule 13-01 of Regulation S-X.

Summarized Financial Information


Income Statement
(In thousands)	Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
	Parent Company		Guarantor Subsidiaries		Parent Company		Guarantor Subsidiaries
Revenues	$	—	$	524,867	$	—	$	515,603
Operating expenses	—		377,264		—		362,605
Operating income	$	—	$	147,603	$	—	$	152,998
Income before income taxes	$	135,480	$	175,035	$	141,667	$	174,080
Net income	103,610		172,608		104,188		171,903


Balance Sheet	March 31, 2023				December 31, 2022
(In thousands)	Parent Company		Guarantor Subsidiaries		Parent Company		Guarantor Subsidiaries
Assets
Amounts due from subsidiaries	$	—	$	69,888	$	—	$	79,020
Current assets	9,724		1,023,077		44,045		1,258,759
Non-current assets	3,995,793		3,843,407		3,893,205		3,706,858

Liabilities and equity:
Amounts due to subsidiaries	$	55,833	$	7,017	$	68,682	$	6,783
Current liabilities	138,001		722,718		157,658		872,109
Non-current liabilities	2,945,722		273,503		2,972,602		330,467

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 2 to the Company's Consolidated Financial Statements included in our 2022 Form 10-K. There have been no significant changes in our significant accounting policies since December 31, 2022.

We discuss our critical accounting estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our 2022 Form 10-K. There have been no significant changes in our critical accounting estimates since December 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Fair Value of Debt

Based on the level of interest rates prevailing at March 31, 2023, the carrying value of our fixed rate debt of $2.18 billion was more than its fair value of $1.71 billion by approximately $466.9 million. The fair value of these financial instruments is estimated based on reference to quoted market prices for these or comparable securities. A hypothetical 100 basis point decrease in interest rates prevailing at March 31, 2023 would increase the estimated fair value of our fixed rate debt by approximately $48.0 million to approximately $1.76 billion.

Managing our Interest Rate Risk

To manage interest rate risk, we enter into interest rate swap contracts from time to time to adjust the amount of total debt that is subject to variable interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to limit the exposure against the risk of rising rates. We do not enter into interest rate swap contracts for speculative or trading purposes and we only enter into interest rate swap contracts with financial institutions that we believe are credit worthy counterparties. We monitor the financial institutions that are counterparties to our interest rate swap contracts and to the extent possible diversify

our swap contracts among various counterparties to mitigate exposure to any single financial institution. For the three months ended March 31, 2023, we did not have any interest rate swap contracts outstanding.

As of March 31, 2023, we had $2.8 billion of debt outstanding (excluding finance leases), of which $632.8 million is outstanding under our loan facility and is subject to variable interest rates. A hypothetical 100 basis point increase in interest rates prevailing at March 31, 2023 would increase our annual interest expense by approximately $6.3 million. The interest rate paid on approximately 78% of our debt (excluding finance leases) as of March 31, 2023 is fixed.

Managing our Foreign Currency Exchange Rate Risk

We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our subsidiaries' respective functional currencies (non-functional currency risk), such as affiliation agreements, programming contracts, certain trade receivables and accounts payable (including intercompany amounts) that are denominated in a currency other than the applicable functional currency. Changes in exchange rates with respect to amounts recorded in our consolidated balance sheets related to these items will result in unrealized (based upon period-end exchange rates) or realized foreign currency transaction gains and losses upon settlement of the transactions. Moreover, to the extent that our revenue, costs and expenses are denominated in currencies other than our respective functional currencies, we will experience fluctuations in our revenue, costs and expenses solely as a result of changes in foreign currency exchange rates. The Company recognized a $0.6 million loss for the three months ended March 31, 2023, and a $0.1 million loss for the three months ended March 31, 2022, related to foreign currency transactions. Such amounts are included in miscellaneous, net in the condensed consolidated statements of income.

To manage foreign currency exchange rate risk, we enter into foreign currency contracts from time to time with financial institutions to limit our exposure to fluctuations in foreign currency exchange rates. We do not enter into foreign currency contracts for speculative or trading purposes.

We also are exposed to fluctuations of the U.S. dollar (our reporting currency) against the currencies of our operating subsidiaries when their respective financial statements are translated into U.S. dollars for inclusion in our condensed consolidated financial statements. Cumulative translation adjustments are recorded in accumulated other comprehensive income (loss) as a separate component of equity. Any increase (decrease) in the value of the U.S. dollar against any foreign currency that is the functional currency of one of our operating subsidiaries will cause us to experience unrealized foreign currency translation losses (gains) with respect to amounts already invested in such foreign currencies. Accordingly, we may experience a negative impact on our comprehensive income (loss) and equity with respect to our holdings solely as a result of changes in foreign currency exchange rates.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation as of March 31, 2023, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2023, there were no changes in the Company's internal control over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 14, Commitments and Contingencies to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of our legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company's Board of Directors has authorized a program to repurchase up to $1.5 billion of its outstanding shares of common stock (the "Stock Repurchase Program"). The authorization of up to $500 million was announced on March 7, 2016, an additional authorization of $500 million was announced on June 7, 2017, and an additional authorization of $500 million was announced on June 13, 2018. The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time.

For the three months ended March 31, 2023, the Company did not repurchase any of its Class A common stock. As of March 31, 2023, the Company had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

Item 6. Exhibits.

(a)Index to Exhibits.


10.1			Employment Agreement, dated February 15, 2023, by and between AMC Networks Inc. and Kristin Dolan

22			Guarantor Subsidiaries of the Registrant

31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMC Networks Inc.

Date:

May 9, 2023

By:

/s/ Patrick O'Connell

Patrick O'Connell

Executive Vice President and Chief Financial Officer

Date:

May 9, 2023

By:

/s/ Michael J. Sherin III

Michael J. Sherin III

Executive Vice President and Chief Accounting Officer