AMC Net Income Up In Fourth Quarter

UPDATED: Ad revenues rise 14.7%

By Jon Lafayette -- Broadcasting & Cable, 3/15/2012 8:56:19 AM

UPDATED: 11:00 a.m. ET

AMC Networks reported higher profits in the fourth quarter with a healthy gain in advertising revenues.

Net income was $29.4 million, or 40 cents a share, compared to $19.3 million or 28 cents a share, a year ago. Those earnings were below analyst expectations mainly because AMC took an $18 million write off on the cancelled series Rubicon. 

A year ago in the fourth quarter, the company had a $10.5 million loss from discontinued operations. Net income from continuing operations was down slightly as higher interest expenses outpace increase in operating income. Without the charge for Rubicon, cash flow would have been up 25% in the quarter, the company said.

Revenues rose 13.6% to $339 million.

"2011 was a landmark year for AMC Networks. We completed our successful spin-off from Cablevision and achieved strong financial results, delivering double digit growth in net revenues, AOCF and operating income for the full year," Josh Sapan, president and CEO, said in a statement.

Sapan pointed to the company's award-winning original programming, its digital distribution deals and international expansion. "As we look at the year ahead, we are well positioned to continue this momentum and will maintain our focus on creating value for shareholders, advertisers and distribution partners," he said.

Adjusted cash flow at AMC's national networks, which include AMC, WE tv, IFC and Sundance Channel, fell 2.6% in the fourth quarter to $101.1 million. Cash flow was impacted by the Rubicon write-down.

On the company's earnings call with analysts, Sapan said that even after the show was canceled, "we though the show might have value in replay and other distribution platforms. As we evaluate that, it did not have vitality."

Revenue rose 12% to $305.4 million. Advertising revenues were up 14.7%, paced by gains at AMC. Sapan said that the company was seeing demand particularly for original programming during the beginning of the first quarter. Because AMC will be airing more original series in the first quarter than it did in the first quarter a year ago, "I think we'll see strengthening" of ad revenue on a sequential basis.

Affiliate and other revenue rose 10%. The revenue includes the company's digital distribution deal with Netflix. Sapan noted that AMC's Mad Men has been a popular show on Netflix. He said that could create a positive impact on ratings for the new season of Mad Men, starting March 25, as viewers who hadn't watched before on cable are now interested in seeing new episodes.

For 2011, net income was $126.4 million, or $1.79 per share, up from $80.1 million, or $1.71 per share, in 2010. Revenue rose 10.8% to $1.19 billion from $1.08 billion.

In a research note, analyst David Joyce of , Miller Tabak & Co., noted that AMC Networks exceeded expectations for revenue, but that the $18 million write off cause the company to miss target for cash flow and net income.

"While we expect AMC shares to pullback a bit with this miss, we are still looking for the stock to reach $49 in the next year, as positive signs include the 4Q11 revenue beat and the 1Q12 and 2Q12 strong programming (The Walking Dead, Mad Men) on AMC that should help support continued ad revenue growth," Joyce said.