AMC Earnings Hurt By Debt Refinancing

U.S. networks report 11% rise in cash flow
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AMC Networks said it had a strong first quarter but its net income fell because of costs incurred in refinancing debt.

Cash flow at its U.S. networks was up by double digits.

First-quarter net income fell to $113 million, or $155 per share, from $121 million, or $166 per share. Net income included a $48 million charge connected to refinancing debt. Excluding the charge, net income would have been up 20% per share.

Revenues rose 5.7% to $707 million. There was a smaller-than-usual gain in ad revenue, but it was largert than Wall Street exepected, so AMC shares went up.

“AMC Networks is continuing to build on the momentum and strength of 2015 with a strong start to 2016,” said CEO Josh Sapan. “Our performance continues to be driven by the strength of our brands and the popularity of our original programming, particularly The Walking Dead, Better Call Saul and Fear the Walking Dead, with viewers and advertisers. With the refinancing of our debt on favorable terms and the authorization of a $500 million share repurchase program, our Company remains focused on creating and delivering value for shareholders.”

Cash flow at AMC’s national networks, including AMC, WE tv, IFC, SundanceTV and BBC America, was up 10.9% to $281 million.

Revenues for the national networks were up 6.4%. Distribution revenue was up 10.7%,

Ad revenue was up just 1.3% to $264 million following several quarter of double digit growth.

 The company said ad revenue growth was strong at WE, Sundance, BBC American and IFC, but was down at AMC because of the timing of when original programming aired on the network compared to a year ago. AMC’s ad revenues rise when its hit show The Walking Dead airs, then fall when it is between seasons.

Wall Street had expected ad sales to be even weaker, so the stock got a shot in the arm from the earnings report and was up 6% in afternoon trading Thursday.

“We had expected Q1 to disappoint, but Q2 to positively surprise. Expectations will be re-set today,” said Todd Juenger, analyst at Sanford C. Bernstein.

“In fact, 2016 is extraordinarily lumpy, based on timing of original programming. Q2 is huge, Q3 is medium, and Q4 is small (not a great curve shape, generally, for investors – of course investors don't like back-end loaded plans either. A hard group to satisfy),” Juenger.

“Speaking of hard to satisfy, investors remain concerned about the durability of AMC’s Walking Dead franchise.

Walking Dead, the elephant in the room, is almost certainly going to simultaneously be for years to comeboth: a) one of the largest shows on all TV; b) in double-digit decline. A lot like American Idol. That's abig weight to carry, and a lot of eyeballs to replace,” Juenger noted.

Cash flow was down 10% to $5 million at AMC’s International networks.