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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Ascent Capital Group, Inc.a12-6304_18k.htm

Exhibit 99.1

 

 

ASCENT CAPITAL GROUP ANNOUNCES FINANCIAL RESULTS FOR THE QUARTER AND FULL YEAR ENDED DECEMBER 31, 2011

 

Englewood, CO – March 1, 2012 - Ascent Capital Group, Inc (“Ascent” or the “Company”) (Nasdaq: ASCMA) has reported results for the quarter and full year ended December 31, 2011. Ascent is a holding company that owns Monitronics International, Inc. (“Monitronics”), one of the nation’s largest and fastest-growing home security alarm monitoring companies.

 

2011 highlights:

 

·                  Monitronics’ full year 2011 revenue increased 10.9% to $311.9 million, and Monitronics’ full year 2011 recast Adjusted EBITDA(1) increased 11.9% to $217.1 million with a Company recast net loss from continuing operations(1) of $25.6 million

·                  Monitronics surpassed the 700,000 customer mark, finishing 2011 with 700,880 accounts

·                  Ascent completed its transition out of the media services business with the sale of its content distribution business and closure of its systems integration unit

·                  Ascent completed the integration of Monitronics and transitioned all corporate and administrative functions from Los Angeles to Dallas and Denver

·                  Ascent repurchased 269,659 shares of Ascent Series A stock at an average price of $42.60 per share for a total cost of $11.5 million, representing approximately 2% of Ascent’s outstanding Series A shares

 

“During the past year we successfully completed the transformation of Ascent,” said Chief Executive Officer of Ascent, Bill Fitzgerald. “We finalized the sale of our media services business, fully integrated Monitronics into our operations, and transitioned our corporate service activities out of the Los Angeles area.  Most important, the Monitronics business continues to generate the very solid financial performance we expected from it when we acquired the business in December 2010.”

 

“We also continue to evaluate alternatives for refinancing Monitronics’ debt.  Given the consistent and predictable nature of the Monitronics business, coupled with the improving conditions in the credit markets, we expect to complete a refinancing of this debt in the first half of this year.  Additionally, we continue to seek acquisition opportunities of highly leverageable, recurring revenue, subscription-based businesses, however, with a preference to pursue opportunities that are strategic, allowing us to leverage, as well as expand, the Monitronics platform.”

 


(1)  For purposes of this press release, we have recast Adjusted EBITDA and net income (loss) from continuing operations for the fourth quarter and full year 2011 to omit the effects of a one-time $2.6 million reserve taken in connection with an ongoing litigation matter which management views as a non-recurring, non-operating expense.

 



 

Monitronics

 

Headquartered in Dallas, Texas, Monitronics provides monitored business and home security system services to more than 700,000 residential and commercial customers.  Monitronics’ long-term monitoring contracts provide high margin, monthly recurring revenues (“RMR”) that result in predictable and stable cash flow.

 

“The last 18 months have been a period of remarkable change in the alarm monitoring industry,” noted President and Chief Executive Officer of Monitronics, Mike Haislip. “Several businesses were acquired and sold, new investors, including our owners, emerged in the space, and the parent company of one of our largest peers announced a restructuring of its operations. We view these changes as a strong endorsement of the industry and a compelling argument for the continued growth of the space in the future.”

 

Mr. Haislip continued, “In 2011 we remained disciplined in our approach to quality and cost, evidenced by our disciplined approach to account acquisitions and our ongoing strong operating margins. One of the many strengths of our business model is the flexibility it allows us to efficiently deploy our capital resources based on broader market conditions. Going forward, we intend to continue to drive efficiencies in our business model, grow our subscriber base, evaluate business extensions and seek strategic acquisitions as opportunities arise.”

 

Fourth Quarter and Full Year 2011 Results

 

For the fourth quarter ended December 31, 2011, Monitronics reported net revenue of $80.9 million, an increase of 14.2% compared to $70.9 million for the three months ended December 31, 2010. Monitronics recast Adjusted EBITDA for the fourth quarter of 2011 was $55.8 million, an increase of 13.6% compared to $49.1 million of Adjusted EBITDA for the three months ended December 31, 2010. Monitronics recast Adjusted EBITDA as a percentage of revenue was 68.9% for the fourth quarter of 2011, compared to 69.2% which was Monitronics Adjusted EBITDA as a percentage of revenue for the three months ended December 31, 2010.  The Company reported recast net loss from continuing operations for the fourth quarter of 2011 of $8.4 million, compared to a net loss from continuing operations of $14.3 million for the three months ended December 31, 2010.

 

For the full year 2011, Monitronics reported net revenue of $311.9 million, an increase of 10.9% compared to $281.3 million for the calendar year ended December 31, 2010. Monitronics recast Adjusted EBITDA for the full year 2011 was $217.1 million, an increase of 11.9% compared to $194.0 million of Adjusted EBITDA for the calendar year ended December 31, 2010. Monitronics recast Adjusted EBITDA as a percentage of revenue was 69.6% for the full year 2011, compared to 69.0% which was Monitronics Adjusted EBITDA as a percentage of revenue for the calendar year 2010.  The Company reported recast net loss from continuing operations for the full year 2011 of $25.6 million, compared to a net loss from continuing operations of $33.5 million for the calendar year 2010.

 

The increase in fourth quarter and full year 2011 recast Adjusted EBITDA is primarily attributable to revenue growth, and the revenue growth in these periods is due to a 7.1% increase in weighted average subscriber accounts to 688,774 for the twelve months ended December 31, 2011, coupled with increased average revenue per subscriber.

 



 

Attrition Rates and Recurring Monthly Revenue

 

 

 

Twelve months
ended December 31,

 

 

 

2011

 

2010

 

Beginning balance of accounts

 

670,450

 

621,186

 

Accounts purchased

 

114,691

 

126,619

 

Accounts cancelled (a)

 

(76,067

)

(71,501

)

Accounts guaranteed to be refunded by dealer

 

(8,194

)

(5,854

)

Ending balance of accounts

 

700,880

 

670,450

 

Monthly weighted average accounts

 

688,774

 

643,157

 

Attrition rate (a)

 

11.0

%

11.1

%

 

 

 

 

 

 

Average RMR per subscriber at year end

 

$

37.49

 

$

36.29

 

Total year end RMR

 

$

26.3 million

 

$

24.3 million

 

 


(a) Net of canceled accounts that are contractually guaranteed by the dealer

 

For the full year ended December 31, 2011, Monitronics purchased 114,691 subscriber accounts, compared to 126,619 subscriber accounts in the full year ended December 31, 2010. The year-over-year decline in accounts purchased is primarily a result of Monitronics’ disciplined approach to account purchases. Consistent with past practice, Monitronics elected to preserve its capital resources by purchasing accounts at a slower pace during a period of increasing industry multiples.  This was primarily reflected in a lower level of bulk account purchases during the full year 2011.  For the full year 2011, Monitronics attrition rate remained steady at 11.0% compared to 11.1% for the calendar year 2010.

 

Liquidity and Capital Resources

 

At December 31, 2011, on a consolidated basis, Ascent had $183.6 million of cash and cash equivalents, $59.2 million of total restricted cash, and $40.4 million of marketable securities.  Ascent may use a portion of these assets to decrease debt obligations, fund strategic acquisitions or investments or fund stock repurchases.

 

During the year ended December 31, 2011, the Company used cash of $162.7 million to purchase subscriber accounts and $4.2 million to fund capital expenditures.

 

On June 16, 2011, Ascent announced that it received authorization to implement a stock repurchase program in which it may purchase up to $25,000,000 of its Series A common stock.  During the twelve months ended December 31, 2011, Ascent used cash of $11.5 million to fund purchases of 269,659 shares of Series A common stock.  The repurchased shares have been returned to the status of authorized and unissued shares.

 

As of December 31, 2011, Ascent had a total of $963.3 million principal amount of debt, on a consolidated basis, comprised of $838 million principal amount under Monitronics’ securitization facility and $125.3 million principal amount under Monitronics’ senior secured credit facility.

 



 

Forward Looking Statements

 

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, acquisition opportunities, market potential, future financial prospects, the continuation of our stock repurchase plan, and other matters that are not historical facts.  These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of our products or services, competitive issues, continued access to capital on terms acceptable to Ascent, our ability to capitalize on an acquisition opportunity, general market conditions, and changes in law and government regulations. These forward-looking statements speak only as of the date of this press release, and Ascent expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Ascent’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of Ascent, including the most recent Form 10-K and any subsequently filed Form 8-K, for additional information about Ascent and about the risks and uncertainties related to Ascent’s business which may affect the statements made in this press release.

 

About Ascent Capital Group, Inc.

 

Ascent is a holding company and owns 100 percent of its operating subsidiaries, including Monitronics, one of the nation’s largest, fastest-growing home security alarm monitoring companies, headquartered in Dallas, TX, and certain former subsidiaries of Ascent Media Group, LLC.

 

Contact:

 

Erica Bartsch

Sloane & Company

212-446-1875

ebartsch@sloanepr.com

 



 

APPENDIX: Non-GAAP Financial Measures

 

This press release includes a presentation of Monitronics recast Adjusted EBITDA, Monitronics Adjusted EBITDA and Ascent recast net income (loss) from continuing operations, which are non-GAAP financial measures, together with a reconciliation of Monitronics Adjusted EBITDA to Monitronics net income (loss) from continuing operations, as determined under GAAP, and a reconciliation of each of Monitronics recast Adjusted EBITDA and Ascent recast net income (loss) from continuing operations to Ascent net income (loss) from continuing operations, as determined under GAAP.  We define Monitronics Adjusted EBITDA as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization (including amortization of subscriber accounts and dealer network), realized and unrealized gain/(loss) on derivative instruments, non-cash or non-recurring restructuring charges and stock-based and other non-cash long-term incentive compensation. We define Monitronics recast Adjusted EBITDA as Monitronics Adjusted EBITDA plus a one-time reserve taken in the fourth quarter of 2011 in connection with an ongoing litigation matter that management views as a non-recurring, non-operating expense.  Ascent recast net income (loss) from continuing operations is defined as net income (loss) from continuing operations plus the aforementioned litigation reserve.

 

We believe Monitronics Adjusted EBITDA is an important indicator of the operational strength and performance of our business, including our business’ ability to fund its ongoing acquisition of subscriber accounts, to fund its capital expenditures and to service its debt.  In addition, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance.  Monitronics Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate the financial performance of companies in the security alarm monitoring industry and is one of the financial measures, subject to certain adjustments, by which covenants are calculated under the agreements governing Monitronics’ debt obligations.  Monitronics Adjusted EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles, should not be construed as an alternative to net income or loss and is indicative neither of our results of operations nor of cash flows available to fund all of our cash needs.  It is, however, a measurement that we believe is useful to investors in analyzing its operating performance.  Accordingly, Monitronics Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP.  Monitronics Adjusted EBITDA is a non-GAAP financial measure.  As companies often define non-GAAP financial measures differently, Monitronics Adjusted EBITDA as calculated by us should not be compared to any similarly titled measures reported by other companies.  We believe Monitronics recast Adjusted EBITDA and Ascent recast net income (loss) from continuing operations for the periods presented are useful to investors because they permit period to period comparisons of financial results based on core operating performance without giving effect to what management believes to be a non-recurring, non-operating expense.

 

The following table provides a reconciliation of Monitronics recast Adjusted EBITDA to Ascent net income (loss) from continuing operations calculated in accordance with GAAP for the three months, and calendar year, ended December 31, 2011.  The following table further provides a reconciliation of Ascent net income (loss) from continuing operations calculated in accordance with GAAP to Ascent recast net income (loss) from continuing operations for the applicable periods.

 

 

 

Three Months Ended
December 31, 2011

 

Year Ended
December 31, 2011

 

 

 

 

 

 

 

Monitronics Recast Adjusted EBITDA

 

55,770

 

217,085

 

Less: one-time litigation reserve

 

(2,600

)

(2,600

)

Monitronics Adjusted EBITDA

 

53,170

 

214,485

 

Corporate Adjusted EBITDA

 

(3,070

)

(12,052

)

Total Adjusted EBITDA

 

50,100

 

202,433

 

Less:

 

 

 

 

 

 



 

 

 

Three Months Ended
December 31, 2011

 

Year Ended
December 31, 2011

 

Restructuring charges

 

 

(4,258

)

Amortization

 

(41,675

)

(159,619

)

Depreciation

 

(1,229

)

(7,052

)

Stock-based and long-term incentive compensation expense

 

(1,500

)

(4,456

)

Realized and unrealized (gain)/loss on derivative instruments

 

(487

)

(10,601

)

Interest expense (net)

 

(10,272

)

(42,142

)

Provision for income taxes

 

(5,954

)

(2,457

)

Net income (loss) from continuing operations

 

(11,017

)

(28,152

)

Plus: one-time litigation reserve

 

2,600

 

2,600

 

Recast net income (loss) from continuing operations

 

(8,417

)

(25,552

)

 

The following table provides a reconciliation of Monitronics Adjusted EBITDA to Monitronics net income (loss) from continuing operations calculated in accordance with GAAP for the three months, and calendar year, ended December 31, 2010.

 

 

 

Three Months Ended
December 31, 2010

 

Year Ended
December 31, 2010

 

 

 

 

 

 

 

Monitronics Adjusted EBITDA

 

49,083

 

193,997

 

Less:

 

 

 

 

 

Acquisition-related professional expenses(1)

 

13,275

 

13,275

 

Amortization

 

31,980

 

123,046

 

Depreciation

 

1,496

 

6,030

 

Stock-based and long-term incentive compensation expense

 

317

 

548

 

Realized and unrealized (gain)/loss on derivative instruments

 

(3,712

)

34,628

 

Interest Expense

 

6,315

 

20,830

 

Provision for income taxes

 

603

 

2,298

 

Monitronics net income (loss) from continuing operations

 

(1,191

)

(6,658

)

 


(1) Acquisition-related professional expenses include non-recurring professional and legal expenses related to Ascent’s acquisition of Monitronics.

 

Selected financial information for the Company follows.

 



 

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2011 and 2010

Amounts in thousands, except share amounts

 

 

 

2011

 

2010

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

183,558

 

149,857

 

Restricted cash

 

31,196

 

28,915

 

Trade receivables, net

 

10,973

 

11,092

 

Deferred income tax assets, net

 

5,881

 

9,070

 

Investments in marketable securities

 

40,377

 

 

Assets of discontinued operations

 

 

22,990

 

Income taxes receivable

 

308

 

8,798

 

Prepaid and other current assets

 

17,600

 

9,964

 

Total current assets

 

289,893

 

240,686

 

 

 

 

 

 

 

Restricted cash

 

28,000

 

35,000

 

Property and equipment, net

 

74,697

 

78,211

 

Subscriber accounts, net

 

838,441

 

822,811

 

Dealer network, net

 

39,933

 

50,013

 

Goodwill

 

349,227

 

349,227

 

Assets of discontinued operations

 

62

 

62,420

 

Other assets, net

 

5,706

 

6,514

 

Total assets

 

$

1,625,959

 

$

1,644,882

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

3,987

 

7,059

 

Accrued payroll and related liabilities

 

5,149

 

8,510

 

Other accrued liabilities

 

19,000

 

14,366

 

Deferred revenue

 

6,803

 

3,382

 

Purchase holdbacks

 

12,273

 

9,818

 

Current portion of long-term debt

 

60,000

 

20,000

 

Liabilities related to assets of discontinued operations

 

7,101

 

30,771

 

Total current liabilities

 

114,313

 

93,906

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

Long-term debt

 

892,718

 

896,733

 

Derivative financial instruments

 

36,279

 

64,745

 

Deferred income tax liability, net

 

9,793

 

12,798

 

Other liabilities

 

12,529

 

18,282

 

Liabilities related to assets of discontinued operations

 

 

10,678

 

Total liabilities

 

1,065,632

 

1,097,142

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock, $.01 par value. Authorized 5,000,000 shares; no shares issued

 

 

 

Series A common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 13,471,594 and 13,553,251 shares at December 31, 2011 and 2010, respectively

 

135

 

136

 

Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 739,894 and 733,599 shares at December 31, 2011 and 2010, respectively

 

7

 

7

 

Series C common stock, $.01 par value. Authorized 45,000,000 shares; no shares issued

 

 

 

Additional paid-in capital

 

1,461,671

 

1,467,757

 

Accumulated deficit

 

(896,710

)

(917,347

)

Accumulated other comprehensive loss

 

(4,776

)

(2,813

)

Total stockholders’ equity

 

560,327

 

547,740

 

Total liabilities and stockholders’ equity

 

$

1,625,959

 

$

1,644,882

 

 



 

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (loss)

Years ended December 31, 2011, 2010 and 2009

Amounts in thousands, except per share amounts

 

 

 

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Net revenue

 

$

311,898

 

9,129

 

 

Operating expenses:

 

 

 

 

 

 

 

Cost of services

 

40,553

 

1,422

 

 

Selling, general, and administrative, including stock-based and long-term compensation

 

76,845

 

30,314

 

27,451

 

Amortization of subscriber accounts and dealer network

 

159,619

 

5,980

 

 

Depreciation

 

7,052

 

3,067

 

4,259

 

Restructuring charges

 

4,258

 

4,604

 

695

 

Loss (gain) on sale of operating assets, net

 

565

 

(2,768

)

152

 

 

 

288,892

 

42,619

 

32,557

 

Operating Income (loss)

 

23,006

 

(33,490

)

(32,557

)

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

671

 

3,638

 

2,676

 

Interest expense

 

(42,813

)

(2,672

)

(102

)

Realized and unrealized loss on derivative financial instruments

 

(10,601

)

(1,682

)

 

Other income (expense), net

 

4,042

 

975

 

2,899

 

 

 

(48,701

)

259

 

5,473

 

Loss from continuing operations before income taxes

 

(25,695

)

(33,231

)

(27,084

)

Income tax expense from continuing operations

 

(2,457

)

(270

)

(28,721

)

Net loss from continuing operations

 

(28,152

)

(33,501

)

(55,805

)

Discontinued operations:

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

48,836

 

(12,077

)

(6,682

)

Income tax (expense) benefit from discontinued operations

 

(47

)

7,084

 

9,590

 

Income (loss) from discontinued operations, net of income taxes

 

48,789

 

(4,993

)

2,908

 

Net income (loss)

 

$

20,637

 

(38,494

)

(52,897

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(2,950

)

4,026

 

4,693

 

Unrealized holding gain (loss), net of income tax

 

124

 

(1,352

)

1,352

 

Pension liability adjustment

 

863

 

(1,870

)

(1,709

)

Other comprehensive income (loss)

 

(1,963

)

804

 

4,336

 

Comprehensive income (loss)

 

$

18,674

 

$

(37,690

)

(48,561

)

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per share

 

 

 

 

 

 

 

Continuing operations

 

$

(1.98

)

(2.36

)

(3.97

)

Discontinued operations

 

3.43

 

(0.35

)

0.21

 

Net income (loss)

 

$

1.45

 

(2,71

)

(3.76

)

 



 

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2011, 2010 and 2009

Amounts in thousands

 

 

 

2011

 

2010

 

2009

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

20,637

 

(38,494

)

(52,897

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Loss (income) from discontinued operations, net of income tax

 

(48,789

)

4,993

 

(2,908

)

Amortization of subscriber accounts and dealer network

 

159,619

 

5,980

 

 

Depreciation

 

7,052

 

3,067

 

4,259

 

Stock-based compensation

 

4,732

 

3,148

 

2,443

 

Deferred income tax expense

 

181

 

747

 

22,194

 

Unrealized (gain) loss on derivative financial instruments

 

(28,044

)

1,682

 

 

Long term debt amortization

 

16,985

 

780

 

 

Loss (gain) on sale of assets, net

 

565

 

(2,768

)

152

 

Other non-cash activity, net

 

6,428

 

(1,874

)

2,145

 

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Trade receivables

 

(5,365

)

1,806

 

 

Prepaid expenses and other assets

 

225

 

4,368

 

(3,535

)

Payables and other liabilities

 

(4,546

)

12,388

 

(6,695

)

Operating activities from discontinued operations, net

 

1,558

 

54,477

 

70,816

 

Net cash provided by operating activities

 

131,238

 

50,300

 

35,974

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(4,242

)

(139

)

(1,420

)

Purchases of subscriber accounts

 

(162,714

)

(4,214

)

 

Purchases of marketable securities

 

(40,253

)

(41,757

)

(68,126

)

Decrease (increase) in restricted cash

 

4,719

 

(13,318

)

 

Cash paid for acquisitions, net of cash acquired

 

 

(388,401

)

 

Proceeds from sales of marketable securities

 

 

96,685

 

16,309

 

Proceeds from the sale of discontinued operations

 

99,488

 

92,121

 

 

Proceeds from the sale of operating assets

 

 

6,201

 

23

 

Other investing activities, net

 

 

54

 

 

Investing activities from discontinued operations, net

 

(3,196

)

(37,553

)

(31,674

)

Net cash used in investing activities

 

(106,198

)

(290,321

)

(84,888

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from long-term debt

 

78,800

 

110,300

 

 

Payments of long-term debt

 

(59,800

)

(9,000

)

 

Payment of deferred financing costs

 

 

(2,388

)

 

Stock option exercises

 

1,291

 

 

2,121

 

Purchases (and retirement) of common stock

 

(11,488

)

 

 

Other

 

 

2

 

 

Financing activities from discontinued operations, net

 

(142

)

(1,950

)

(1,810

)

Net cash provided by financing activities

 

8,661

 

96,964

 

311

 

Net increase (decrease) in cash and cash equivalents

 

33,701

 

(143,057

)

(48,603

)

Cash and cash equivalents at beginning of year

 

149,857

 

292,914

 

341,517

 

Cash and cash equivalents at end of year

 

$

183,558

 

149,857

 

292,914