# AMC Global Media Inc. (AMCX) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from AMC Global Media Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1514991/000151499122000007/amcx-20211231.htm
Accession: 0001514991-22-000007
Filing date: 2022-02-16
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/AMCX/
All MD&A years: /company/AMCX/mda/
Next year: /company/AMCX/mda/fy2022/ (FY 2022)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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 accompanying consolidated financial statements and related notes. Our MD&A is provided to enhance the understanding of our financial condition, changes in financial condition and results of our operations and 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 years ended December 31, 2021, 2020 and 2019. 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 December 31, 2021 as well as an analysis of our cash flows for the years ended December 31, 2021, 2020 and 2019. The discussion of our financial condition and liquidity also includes a summary of our primary sources of liquidity.

Critical Accounting Policies and Estimates. This section provides a discussion of our accounting policies considered to be important to an understanding of our financial condition and results of operations, and which require significant judgment and estimates on the part of management in their application.

Business Overview

Financial Highlights    

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

(1) Adjusted Operating Income (Loss), is a non-GAAP financial measures. See the "Non-GAAP Financial Measures" section on page 47 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.

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Segment Reporting Changes

In the first quarter of 2021, we changed our presentation of operating segments, reflecting a reorganized operating structure focused on a multi-platform distribution approach to content monetization. Our streaming services and IFC Films, previously included in the International and Other segment, are now included within Domestic Operations (formerly referred to as the National Networks segment). In addition, certain corporate overhead costs are no longer allocated to the operating segments. Operating segment information for the prior years has been recast to reflect these changes. The new reporting structure consists of 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 streaming services, our AMC Studios operation and IFC Films. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. Our 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.

•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 (formerly Levity), our production services business. See Note 4 to the consolidated financial statements for additional information relating to the spin-off of the Levity comedy venues business.

Domestic Operations

In our Domestic Operations segment, we earn revenue principally from: (i) the distribution of our programming through our programming services, (ii) the sale of advertising, and (iii) the licensing of our original programming to distributors, including the distribution of programming of IFC Films. Distribution revenue primarily includes subscription fees paid by distributors to carry our programming services, and content licensing revenue from the licensing of original programming for digital, foreign and home video distribution. 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 specific 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 paid on a monthly basis. Content licensing revenue from the licensing of original programming for digital and foreign distribution 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. If these guaranteed viewer ratings are not met, we are generally required to provide additional advertising units to the advertiser at no charge. For these types of arrangements, a portion of the related revenue is deferred if the guaranteed ratings are not met and is subsequently recognized either when we provide the required additional advertising time or the guarantee obligation contractually expires. Most of our advertising revenues vary based upon the popularity of our programming as measured by Nielsen. Our national programming networks have advertisers representing companies in a broad range of sectors, including the automotive, restaurants/food, health, and telecommunications industries.

Changes in revenue are primarily derived from changes in the contractual subscription rates charged for our services; the number of subscribers; the prices and number of advertising spots on our networks; and the availability, amount and timing of licensing fees earned from the distribution of our original programming. Our revenues may increase over time through contractual rate increases stipulated in our affiliation agreements. In negotiating for additional subscribers or extended carriage, we have agreed, in some instances, to make upfront payments to a distributor which we record as deferred carriage fees and are amortized as a reduction to revenue over the period of the related affiliation agreement. We also may help fund the distributors' efforts to market our networks. We believe that these transactions generate a positive return on investment over the contract period. We seek to increase our advertising revenues by increasing the rates we charge for such advertising, which is directly related to the overall distribution of our programming, penetration of our services on various digital platforms such as Advertising Video-on-Demand ("AVOD") services and the popularity (including within desirable demographic groups) of our services as measured by Nielsen.

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Our principal goal is to increase our revenues by increasing distribution and penetration of our services, and increasing our ratings. To do this, we must continue to contract for and produce high-quality, attractive programming. As competition for programming increases and alternative distribution technologies continue to emerge and develop in the industry, costs for content acquisition and original programming may increase. There is a concentration of subscribers in the hands of a few distributors, which could create disparate bargaining power between the largest distributors and us by giving those distributors greater leverage in negotiating the price and other terms of affiliation agreements. We also seek to increase our content licensing revenues by expanding the opportunities for licensing our programming through digital distribution platforms, foreign distribution and home video services. Content licensing revenues in each quarter may vary based on the timing of availability of our programming to distributors.

Programming expenses, included in technical and operating expenses, represent the largest expense of the Domestic Operations segment and primarily consists of amortization and write-offs of programming 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. 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. We will continue to increase our investment in programming services. There may be significant changes in the level of our technical and operating expenses due to the amortization of content acquisition and/or original programming costs and/or the impact of management's periodic assessment of programming usefulness. Such costs will also fluctuate with the level of revenues derived from owned original programming in each period as program rights that are monetized individually are amortized based on the individual-film-forecast-computation method, while program rights that are monetized as a group are amortized based on projected usage, typically resulting in an accelerated amortization pattern.

Most original series require us to make up-front investments, which are often significant amounts. Not all of our programming efforts are commercially successful, which could result in a write-off of program rights. If it is determined that programming rights have limited, or no, future programming usefulness based on actual demand or market conditions, a write-off of the unamortized cost is recorded in technical and operating expenses. Program rights write-offs of $11.1 million, $97.5 million and $38.6 million were recorded for the years ended December 31, 2021, 2020 and 2019, respectively (see further discussion below).

See "Critical Accounting Policies and Estimates" for a discussion of the amortization and write-off of program rights.

International and Other

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

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 year ended December 31, 2021, distribution revenues represented 79% of the revenues of the International and Other segment. Distribution revenue primarily includes subscription fees paid by distributors or consumers 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. 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. Distribution revenues are derived from the distribution of our programming networks primarily in Europe and to a lesser extent, Latin America.

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 consists of amortization of acquired content, costs of dubbing and sub-titling of programs, production costs, participation and residual 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. Not all of our programming efforts are commercially successful, which could result in a write-off of program rights. If it is determined that programming rights have limited, or no, future programming usefulness based on actual demand or market conditions, a write-off of the unamortized cost is recorded in technical and operating expenses.

Similar to our Domestic Operations businesses, the most significant business challenges we expect to encounter in our International and Other businesses include programming competition (from both foreign and domestic programmers), limited channel capacity on distributors' platforms, the number of subscribers on those platforms and economic pressures on

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subscription fees. Other significant business challenges unique to our international operations include increased programming costs for international rights and translation (i.e. dubbing and subtitling), a lack of availability of international rights for a portion of our domestic programming content, increased distribution costs for cable, satellite or fiber feeds, a limited physical presence in certain territories, and our exposure to foreign currency exchange rate risk. See also the risk factors described under Item 1A, "Risk Factors - We face risks from doing business internationally." in this Annual Report.

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 COVID-19 on Our Business

The Company continues to monitor the ongoing impact of the COVID-19 pandemic on all aspects of its business. The Company cannot reasonably predict the ultimate impact of the COVID-19 pandemic, including the extent of any adverse impact on our business, results of operations and financial condition, which will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, the acceptance, safety and efficacy of vaccines, and global economic conditions. The Company does not expect the COVID-19 pandemic and its related economic impact to affect its liquidity position or its ongoing ability to meet the covenants in its debt instruments.

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.

Capital and credit market disruptions, as well as other events such as the COVID-19 pandemic, 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 from our distributors. Events such as these may adversely impact our results of operations, cash flows and financial position.

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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 operations 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) loss attributable to noncontrolling interests in our consolidated statements of operations.

Years Ended December 31, 2021, 2020 and 2019

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

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[[/GREPCENT_TABLE]]

Revenues

2021 vs. 2020

Subscription revenues increased in our Domestic Operations segment by 15.1% primarily due to an increase in streaming revenues, and in our International and Other segment by 4.5% primarily due to the favorable impact of foreign currency fluctuations at AMCNI.

Content licensing and other revenues decreased in our Domestic Operations segment by 3.9% primarily related to the number of distributed original programs as compared to the prior comparable period. Content licensing and other revenues increased in our International and Other segment by 11.5% primarily due to the resumption of production activities at 25/7 Media, which were previously delayed due to the COVID-19 pandemic.

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Subscription revenues may vary based on the impact of renewals of affiliation agreements and content licensing revenues vary based on the timing of availability of our programming to distributors. Because of these factors, we expect distribution revenues to vary from quarter to quarter.

Advertising revenues increased in our Domestic Operations segment and our International and Other segment by 5.4% and 42.1%, respectively, primarily due to higher pricing.

Most of our advertising revenues vary based on the timing of our original programming series and the popularity of our programming as measured by Nielsen. Due to these factors, we expect advertising revenues to vary from quarter to quarter.

2020 vs. 2019

Subscription revenues increased in our Domestic Operations segment by 0.8% primarily due to an increase in subscribers to our streaming services, which was offset by a decrease in subscribers to our programming networks. Subscription revenues decreased in our International and Other segment by 4.8% primarily at AMCNI due to the impacts of the COVID 19 pandemic.

Content licensing and other revenues decreased in our Domestic Operations segment by 16.8% primarily due to reduction in the number of original programs we distributed related to production delays, and in our International and Other segment by 25.3% primarily at 25/7 Media due to the impact of the COVID-19 pandemic on its operations.

Advertising revenues decreased in our Domestic Operations segment and our International and Other segment by 11.4% and 17.1%, respectively, primarily due to lower ratings and a reduction in the number of episodes of our original programming primarily related to the impact of the COVID-19 pandemic.

Technical and operating expenses (excluding depreciation and amortization)

The components of technical and operating expenses primarily include the amortization and write-offs 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) for 2021 compared to 2020 increased in our Domestic Operations segment by 1.8% primarily due to an increase in other direct program costs, and in our International and Other segment by 0.8% primarily due to an increase at 25/7 Media related to the resumption of production activities.

Technical and operating expenses (excluding depreciation and amortization) for 2020 compared to 2019 decreased in our Domestic Operations segment by 5.8% primarily due to a decrease in program rights amortization and in our International and Other segment by 9.5% primarily at 25/7 Media, due to the impact of the COVID-19 pandemic on its operations.

Program rights amortization expense includes write-offs of $12.8 million, $108.3 million and $40.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. Programming write-offs are based on management's periodic assessment of programming usefulness.

There may be significant changes in the level of our technical and operating expenses from quarter to quarter and year to year due to original programming costs and/or content acquisition costs and/or the impact of management's periodic assessment of programming usefulness. Such costs will also fluctuate with the level of revenues derived from owned original programming in each period as these costs are amortized based on the film-forecast-computation method. As additional competition for programming increases and alternate distribution technologies continue to develop in the industry, 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) for 2021 compared to 2020 increased in our Domestic Operations segment by 39.7% primarily due to higher advertising and subscriber acquisition expenses, and in our International and other segment by 20.4% primarily due increased selling expenses, including commissions at AMCNI, partially offset by a decrease of 9.2% in corporate due to lower stock-based compensation expenses.

Selling, general and administrative expenses (including share-based compensation expenses) for 2020 compared to 2019 increased in our Domestic Operations segment by 8.0% primarily due to increased advertising and subscriber acquisition expenses and decreased in our International and other segment by 19.6% primarily at 25/7 Media primarily due to the impact of the COVID-19 pandemic. Corporate selling, general and administrative expenses increased by 16.4% primarily related to higher administrative costs.

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Depreciation and amortization expenses

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

Depreciation and amortization for 2021 compared to 2020 decreased primarily in the International and Other segment due to the lower carrying values of long-lived assets resulting from the impairment charge recognized in June 2020.

Depreciation and amortization for 2020 compared to 2019 increased primarily in our Domestic Operations segment due to depreciation of equipment at our AMC Networks Broadcasting and Technology facilities, which was partially offset in our International and Other segment from lower depreciation and amortization expenses due to the lower carrying values of long-lived assets resulting from the impairment charge recognized in June 2020.

Impairment and other charges

On July 16, 2021, the Company entered into a settlement agreement (the “Settlement Agreement”) with Frank Darabont, Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (together, the "Plaintiffs") in actions brought in connection with Frank Darabont’s rendering services as a writer, director and producer of the television series entitled The Walking Dead. The consolidated cases were initially brought in 2013 and 2018 and the trial of the consolidated cases was scheduled to commence on April 4, 2022. The Settlement Agreement provides for a cash payment of $200 million (the “Settlement Payment”) to the Plaintiffs and future revenue sharing related to certain future streaming exhibition of The Walking Dead and Fear The Walking Dead. With regard to the Settlement Payment, the Company recorded a charge of $143.0 million, included in Impairment and other charges, in consideration for the extinguishment of Plaintiffs’ rights to any compensation in connection with The Walking Dead and any related programs and the dismissal of the actions with prejudice, which amount is net of $57.0 million of ordinary course accrued participations.

In March 2021, the Company completed a spin-off of the live comedy venue and talent management businesses ("LiveCo") of Levity Entertainment Group, LLC. In connection with the transaction, the Company effectively exchanged all of its rights and interests in LiveCo for the release of its obligations, principally related to leases. As a result of this divestiture, the Company recognized a loss on the disposal of $16.6 million reflecting the net assets transferred (consisting of property and equipment, lease right-of-use assets and intangibles, partially offset by lease and other obligations), which is included in Impairment and other charges. The Company retained its interest in the production services business of Levity Entertainment Group, LLC, which was renamed 25/7 Media Holdings LLC following the spin-off.

During 2020, as a result of the continuing impact of the COVID-19 pandemic, we qualitatively assessed whether it was more likely than not that goodwill and long-lived assets were impaired. Based on our then current projections and updated forecasts, we determined that sufficient indicators of potential impairment of long-lived assets existed and, in connection with the preparation of the Company's second quarter financial information, the Company performed a recoverability test of certain long-lived asset groups within the AMCNI reporting unit. This resulted in an impairment charge of $97.1 million primarily related to certain identifiable intangible assets, as well as property and equipment, and operating lease right-of-use assets. The Company then performed a goodwill impairment test and determined that the carrying value of the AMCNI reporting unit exceeded its fair value, resulting in an impairment charge of $25.1 million.

In December 2019, in connection with the preparation of our fourth quarter financial information, we performed our annual goodwill impairment test and concluded that the estimated fair value of our AMCNI reporting unit declined to less than its carrying amount. The decrease in the estimated fair value was in response to current and expected trends across the International television broadcasting markets, as well as a decrease in the financial multiples used to estimate the fair value using the market approach. As a result, we recognized an impairment charge of $98.0 million in 2019, reflecting a partial write-down of the goodwill associated with the AMCNI reporting unit. Additionally, during 2019, in connection with the dispositions of certain businesses, AMCNI recognized impairment charges of $8.6 million.

Restructuring and other related charges

For 2021, restructuring and other related charges consisted of (i) $6.1 million at AMCNI related to severance costs and the termination of distribution in certain international territories and (ii) $4.3 million of severance costs associated with the restructuring plan announced in November 2020.

In November 2020, management commenced a restructuring plan (the “2020 Plan”) designed to streamline the Company’s operations through a reduction of its domestic workforce. The 2020 Plan was intended to improve the organizational design of the Company through the elimination of certain roles and centralization of certain functional areas of the Company. In connection with the 2020 Plan, the Company incurred severance costs of $21.2 million. Additionally during 2020, the Company incurred restructuring charges of $13.9 million related to costs associated with the termination of distribution in certain territories, as well as severance and other personnel related costs associated with previously disclosed restructuring activities.

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Restructuring and other related charges of $40.9 million for 2019 primarily related to the management re-organization commenced in September 2019. In connection with this re-organization, a number of roles were eliminated to improve the effectiveness of management while reducing the cost structure of the Company. As a result, we incurred restructuring charges of $26.0 million. In addition, charges associated with the our streaming services re-organization consisted of severance and other personnel related costs of $1.9 million and programming write-offs of $13.0 million related to a change in programming strategy.

Operating income

The increase in operating income for 2021 compared to 2020 was primarily attributable to an increase in revenues of $262.7 million partially offset by increases in selling, general and administrative expenses of $182.9 million and in technical and operating expenses of $30.5 million.

The decrease in operating income for 2020 compared to 2019 was primarily attributable to a decrease in revenues of $245.4 million and an increase in selling, general and administrative expense of $29.4 million, partially offset by a decrease in technical and operating expense of $105.4 million.

Interest expense, net

The increase in interest expense, net for 2021 compared to 2020 was primarily due to lower interest income, partially offset by lower average interest rates on our outstanding senior notes and credit facility.

The decrease in interest expense, net for 2020 compared to 2019 was primarily due to lower interest rates on our credit facility and lower average outstanding long-term debt balances.

Loss on extinguishment of debt

In February 2021, we redeemed (i) the remaining $400 million principal amount of our 4.75% senior notes due December 2022 and (ii) $600 million principal amount of our 5.00% senior notes due April 2024. In connection with the redemptions, we incurred a loss on extinguishment of debt for the year ended December 31, 2021 of $22.1 million representing a redemption premium on the 5.00% senior notes due 2024, and the write-off of a portion of the unamortized discount and deferred financing costs related to both issuances.

In March 2020, we redeemed $200 million principal amount of the then-outstanding $600 million principal amount of our 4.75% Notes due December 2022. The loss on extinguishment of debt for the year ended December 31, 2020 of $2.9 million represents the redemption premium, the write-off of a portion of the unamortized discount and deferred financing costs.

Miscellaneous, net

The decrease in miscellaneous, net of $46.0 million in 2021 compared to 2020 was primarily related to a decrease of $64.1 million in net realized and unrealized gains from certain marketable equity securities, partially offset by a $16.1 million favorable 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.

The increase in miscellaneous, net of $77.2 million in 2020 compared to 2019 was primarily related to an increase in net realized and unrealized gains of $92.0 million from certain marketable equity securities, partially offset by an unfavorable variance of $15.0 million 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.

Income tax expense

Income tax expense was $94.4 million for 2021, representing an effective tax rate of 25%. The effective tax rate differs from the federal statutory rate of 21% due primarily to state and local income tax expense of $11.7 million, tax expense of $9.6 million resulting from a net increase in valuation allowances for foreign deferred tax assets, tax expense of $8.3 million related to non-deductible compensation expense, partially offset by $5.5 million of tax benefit related to nontaxable income attributable to noncontrolling interests and tax benefit of $4.7 million for excess tax benefits related to share-based compensation.

Income tax expense was $145.4 million for 2020, representing an effective tax rate of 36%. The effective tax rate differs from the federal statutory rate of 21% due primarily to tax expense of $41.7 million resulting from a net increase in valuation allowances for foreign deferred tax assets; state and local income tax expense of $14.7 million, tax expense of $8.4 million for excess tax deficiencies related to share-based compensation and tax expense from foreign operations of $6.8 million partially offset by tax benefit of $5.3 million relating to uncertain tax positions (including accrued interest).

43

Income tax expense was $78.5 million for 2019, representing an effective tax rate of 16%. The effective tax rate differs from the federal statutory rate of 21% due primarily to tax benefit of $21.0 million resulting from a net decrease in valuation allowances for foreign deferred tax assets, tax benefit of $11.5 million from a deferred tax adjustment to record the impact of an investment tax credit under the deferral method of accounting, partially offset by state and local income tax expense of $12.2 million and $9.0 of tax expense from foreign operations.

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.

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","Change"],["(In thousands)","2021","","2020","","2019","","2021 vs. 2020","","2020 vs. 2019"],["Revenues, net:"],["Subscription","$","1,318,732","","","$","1,145,970","","","$","1,137,358","","","15.1","%","","0.8","%"],["Content licensing and other","416,898","","","433,954","","","521,639","","","(3.9)","%","","(16.8)","%"],["Distribution and other","1,735,630","","","1,579,924","","","1,658,997","","","9.9","%","","(4.8)","%"],["Advertising","844,986","","","801,477","","","904,253","","","5.4","%","","(11.4)","%"],["Total revenues, net","2,580,616","","","2,381,401","","","2,563,250","","","8.4","%","","(7.1)","%"],["Technical and operating (excluding depreciation and amortization)","(1,150,564)","","","(1,130,166)","","","(1,199,159)","","","1.8","%","","(5.8)","%"],["Selling, general and administrative(1)","(596,559)","","","(432,239)","","","(383,725)","","","38.0","%","","12.6","%"],["Majority owned equity investees AOI","11,948","","","8,958","","","5,965","","","33.4","%","","50.2","%"],["Segment adjusted operating income","$","845,441","","","$","827,954","","","$","986,331","","","2.1","%","","(16.1)","%"],["(1) Selling, general and administrative excludes share-based compensation expenses"]]
[[/GREPCENT_TABLE]]

Revenues

2021 vs. 2020

Subscription revenues increased primarily related to a 99.7% increase in streaming revenues driven by an increase in subscribers to our streaming services, partially offset by a low single-digit decline in affiliate revenue.

Subscription revenues include revenues related to the Company's streaming services of approximately $370.8 million, $185.6 million and $95.9 million for 2021, 2020 and 2019, respectively. Aggregate paid subscribers to our streaming services were 9.04 million, 6.1 million and 2.4 million at December 31, 2021, 2020 and 2019, respectively.

Content licensing and other revenues decreased primarily related to the number of distributed original programs as compared to the prior comparable period.

Advertising revenues increased primarily attributable to higher pricing and ad-supported streaming growth, partially offset by lower ratings.

2020 vs. 2019

Subscription revenues increased primarily due to an increase in subscribers to our streaming services, which was mostly offset by a decrease in subscribers to our programming networks.

Content licensing and other revenues decreased due to reduction in the number of original programs we distributed related to production delays.

Advertising revenues decreased primarily attributable to lower ratings and a reduction in the number of episodes of our original programming primarily related to the impact of the COVID-19 pandemic.

44

The following table presents certain subscriber information for our domestic programming networks at December 31, 2021, 2020 and 2019:

[[GREPCENT_TABLE]]
[["","Estimated Domestic Subscribers (1)"],["","December 31, 2021","","December 31, 2020","December 31, 2019"],["Domestic Programming Networks:"],["AMC","78,300","","","83,600","","85,100"],["WE tv","75,500","","","77,600","","78,200"],["BBC AMERICA","73,000","","","76,100","","77,000"],["IFC","68,000","","","70,700","","71,400"],["SundanceTV","65,900","","","66,100","","66,800"],["(1) Estimated U.S. subscribers as measured by Nielsen."]]
[[/GREPCENT_TABLE]]

Technical and operating expenses (excluding depreciation and amortization)

Technical and operating expenses (excluding depreciation and amortization) for 2021 compared to 2020 increased primarily due to an increase in other direct program costs, partially offset by a decrease in program rights amortization primarily attributable to the mix of original programming as compared to the prior comparable period.

Technical and operating expenses (excluding depreciation and amortization) for 2020 compared to 2019 decreased primarily due to a decrease in program rights amortization primarily attributable to a decrease in the amount of original programming for our programming networks as compared to the prior comparable period, which was impacted by the production delays resulting from the COVID-19 pandemic. This decrease was partially offset by increased program rights amortization related to our streaming services. In addition, other direct programming costs decreased.

Program rights amortization expense includes write-offs of $11.1 million, $97.5 million and $38.6 million for 2021, 2020 and 2019, respectively. Programming write-offs are based on management's periodic assessment of programming usefulness.

Selling, general and administrative expenses

Selling, general and administrative expenses (excluding share-based compensation expenses) for 2021 compared to 2020 increased primarily due to higher advertising and subscriber acquisition expenses related to our streaming services partially offset by a decrease in advertising and marketing expenses related to the mix of original programming at our networks.

Selling, general and administrative expenses (excluding share-based compensation expenses) for 2020 compared to 2019 increased principally due to increased advertising and subscriber acquisition expenses for our streaming services partially offset by a decrease in advertising and marketing expenses related to the mix of original programming at our networks, which was impacted by the COVID-19 pandemic. Additionally, general and administrative costs were lower across substantially all expense categories.

Segment adjusted operating income

The increase in segment adjusted operating income for 2021 compared to 2020 was primarily attributable to an increase in revenues of $199.2 million, partially offset by increases in selling, general and administrative expenses of $164.3 million and in technical and operating expenses of $20.4 million.

The decrease in segment adjusted operating income for 2020 compared to 2019 was primarily attributable to a decrease in revenues of $181.8 million, an increase in selling, general and administrative expenses of $48.5 million, partially offset by a decrease in technical and operating expenses of $69.0 million.

45

International and Other

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

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","Change"],["(In thousands)","2021","","2020","","2019","","2021 vs. 2020","","2020 vs. 2019"],["Revenues, net:"],["Subscription","$","249,844","","","$","239,145","","","$","251,184","","","4.5","%","","(4.8)","%"],["Content licensing and other","155,805","","","139,746","","","187,073","","","11.5","%","","(25.3)","%"],["Distribution and other","405,649","","","378,891","","","438,257","","","7.1","%","","(13.5)","%"],["Advertising","105,668","","","74,339","","","89,659","","","42.1","%","","(17.1)","%"],["Total revenues, net","511,317","","","453,230","","","527,916","","","12.8","%","","(14.1)","%"],["Technical and operating (excluding depreciation and amortization)","(303,045)","","","(300,681)","","","(332,241)","","","0.8","%","","(9.5)","%"],["Selling, general and administrative(1)","(124,978)","","","(103,824)","","","(128,339)","","","20.4","%","","(19.1)","%"],["Segment adjusted operating income","$","83,294","","","$","48,725","","","$","67,336","","","70.9","%","","(27.6)","%"],["(1) Selling, general and administrative excludes share-based compensation expenses"]]
[[/GREPCENT_TABLE]]

Revenues

2021 vs. 2020

Subscription revenues increased primarily due to the favorable impact of foreign currency fluctuations at AMCNI.

Content licensing and other revenues increased primarily due to the resumption of production activities at 25/7 Media, which were previously delayed due to the COVID-19 pandemic.

Advertising revenues increased primarily related to higher pricing and an increase in ratings, as well as the favorable impact of foreign currency translation.

2020 vs. 2019

Subscription revenues decreased primarily due to the impacts of the COVID 19 pandemic.

Content licensing and other revenues decreased primarily at 25/7 Media, due to the impact of the COVID-19 pandemic on its operations, which resulted in the temporary closure of the comedy venues (which were spun off in March 2021).

Advertising revenues decreased primarily related to pricing and lower demand resulting from the impact of the COVID-19 pandemic.

Technical and operating expenses (excluding depreciation and amortization)

Technical and operating expenses (excluding depreciation and amortization) for 2021 compared to 2020 increased primarily due to an increase at 25/7 Media related to the resumption of production activities, partially offset by lower program rights amortization at AMCNI.

Technical and operating expenses (excluding depreciation and amortization) for 2020 compared to 2019 decreased primarily at 25/7 Media due to the impact of the COVID-19 pandemic on its operations, which resulted in production stoppages and temporary closure of comedy venues.

Program rights amortization expense includes write-offs of $1.7 million, $10.8 million and $2.3 million for 2021, 2020 and 2019, respectively. Programming write-offs are based on management's periodic assessment of programming usefulness.

Selling, general and administrative expenses

Selling, general and administrative expenses for 2021 compared to 2020 increased primarily related to increased selling expenses, including commissions at AMCNI, partially offset by a decrease in administrative expenses at 25/7 Media related to the spin off of the comedy venues in March 2021.

Selling, general and administrative expenses for the 2020 compared to 2019 decreased mainly at 25/7 Media primarily due to the impact of the COVID-19 pandemic, as well as at AMCNI.

46

Segment adjusted operating income

The increase in segment adjusted operating income for 2021 compared to 2020 was primarily attributable to an increase in revenues of $58.1 million, partially offset by increases in selling, general and administrative expenses of $21.2 million.

The decrease in segment adjusted operating income for 2020 compared to 2019 was primarily attributable to a decrease in revenue of 74.7 million, partially offset by lower technical and operating expense of $31.6 million, and lower selling, general and administrative expense of $24.5 million.

Corporate / Inter-segment Eliminations

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

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","Change"],["(In thousands)","2021","","2020","","2019","","2021 vs. 2020","","2020 vs. 2019"],["Revenues, net","(14,325)","","","(19,675)","","","(30,845)","","","(27.2)","%","","(36.2)","%"],["Technical and operating (excluding depreciation and amortization)","21,526","","","29,256","","","24,415","","","(26.4)","%","","19.8","%"],["Selling, general and administrative(1)","(119,866)","","","(119,649)","","","(103,247)","","","0.2","%","","15.9","%"],["Segment adjusted operating income","$","(112,665)","","","$","(110,068)","","","$","(109,677)","","","2.4","%","","0.4","%"],["(1) Selling, general and administrative excludes share-based compensation expenses and cloud computing amortization"]]
[[/GREPCENT_TABLE]]

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 (excluding depreciation and amortization)

Technical and operating 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 for 2021 compared to 2020 increased primarily due to higher employee related costs, offset by lower administrative costs.

Selling, general and administrative expenses for 2020 compared to 2019 increased primarily related to higher administrative costs.

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 measures 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

47

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:

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2021"],["(In thousands)","Domestic Operations","","International and Other","","Corporate / Inter-segment Eliminations","","Consolidated"],["Operating income (loss)","$","617,875","","","$","37,167","","","$","(165,120)","","","$","489,922"],["Share-based compensation expenses","22,077","","","3,627","","","22,221","","","47,925"],["Depreciation and amortization","48,025","","","19,807","","","26,049","","","93,881"],["Impairment and other charges","143,000","","","16,610","","","\u2014","","","159,610"],["Restructuring and other related charges","2,516","","","6,083","","","1,779","","","10,378"],["Cloud computing amortization","\u2014","","","\u2014","","","2,406","","","2,406"],["Majority owned equity investees AOI","11,948","","","\u2014","","","\u2014","","","11,948"],["Adjusted operating income (loss)","$","845,441","","","$","83,294","","","$","(112,665)","","","$","816,070"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2020"],["(In thousands)","Domestic Operations","","International and Other","","Corporate / Inter-segment Eliminations","","Consolidated"],["Operating income (loss)","$","734,871","","","$","(109,365)","","","$","(182,862)","","","$","442,644"],["Share-based compensation expenses","10,605","","","2,988","","","39,315","","","52,908"],["Depreciation and amortization","50,574","","","26,465","","","27,567","","","104,606"],["Impairment and other charges","\u2014","","","122,227","","","\u2014","","","122,227"],["Restructuring and other related charges","22,946","","","6,410","","","5,712","","","35,068"],["Cloud computing amortization","\u2014","","","\u2014","","","200","","","200"],["Majority owned equity investees AOI","8,958","","","\u2014","","","\u2014","","","8,958"],["Adjusted operating income (loss)","$","827,954","","","$","48,725","","","$","(110,068)","","","$","766,611"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2019"],["(In thousands)","Domestic Operations","","International and Other","","Corporate / Inter-segment Eliminations","","Consolidated"],["Operating income (loss)","$","884,054","","","$","(83,948)","","","$","(174,829)","","","$","625,277"],["Share-based compensation expenses","26,153","","","4,545","","","33,435","","","64,133"],["Depreciation and amortization","41,299","","","34,983","","","24,816","","","101,098"],["Impairment and other charges","\u2014","","","106,603","","","\u2014","","","106,603"],["Restructuring and other related charges","28,860","","","5,153","","","6,901","","","40,914"],["Cloud computing amortization","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Majority owned equity investees AOI","5,965","","","\u2014","","","\u2014","","","5,965"],["Adjusted operating income (loss)","$","986,331","","","$","67,336","","","$","(109,677)","","","$","943,990"]]
[[/GREPCENT_TABLE]]

48

Liquidity and Capital Resources

Overview

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

Sources of cash primarily include cash flow from operations, amounts available under our revolving credit facility and access to capital 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.

On February 8, 2021, the Company issued $1.0 billion in aggregate principal amount of 4.25% senior notes due 2029 (the “4.25% Notes due 2029”) and received net proceeds of $982.3 million, after deducting underwriting discounts and commissions and expenses. The Company used such proceeds to redeem (i) the remaining $400 million principal amount of the Company’s 4.75% senior notes due 2022 and (ii) $600 million principal amount of the Company’s 5.00% senior notes due 2024 on February 26, 2021 (the "Redemption Date"). The 4.75% senior notes due 2022 were redeemed at a redemption price of 100.000% of the principal amount of such notes and the 5.00% senior notes due 2024 were redeemed at a redemption price of 102.500% of the principal amount of such notes, in each case, plus accrued and unpaid interest to, but excluding, the Redemption Date.

On February 8, 2021, the Company entered into Amendment No. 1 (“Amendment No. 1”) to its existing credit agreement (the "Credit Agreement"). Amendment No. 1 extends the maturity dates of the $675 million term loan A facility and $500 million revolving credit facility under the Credit Agreement to February 8, 2026, and makes certain other amendments to the covenants and other provisions of the Credit Agreement.

Our 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 Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. The Company did not repurchase any shares of its Class A common stock during 2021. As of December 31, 2021, the Company had $135.3 million available for repurchase under the Stock Repurchase Program.

Our principal uses of cash include the acquisition and production of programming, investments and acquisitions, repurchases of outstanding debt and common stock, debt service, and payments for income taxes. Although impacted by the COVID-19 pandemic, we continue to increase our investment in original programming, the funding of which generally occurs six to nine months in advance of a program's airing.

As of December 31, 2021, our consolidated cash and cash equivalents balance of $892.2 million includes approximately $255.0 million held by foreign subsidiaries. Most or all of the earnings of our foreign subsidiaries will continue to be permanently reinvested in foreign operations and we do not expect to incur any significant, additional taxes related to such amounts, nor have any been provided for in the current period.

We believe that a combination of cash-on-hand, cash generated from operating activities and availability under our revolving credit facility 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 at maturity the entirety of the then outstanding balances of our debt. As a result, we will then be dependent upon our ability to access the capital and credit markets in order to repay or refinance the outstanding balances of our indebtedness. Failure to raise significant amounts of funding to repay these obligations at maturity 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. See Item 1A, "Risk Factors – Risks Related to Our Debt" in this Annual Report.

49

Cash Flow Discussion

The following table is a summary of cash flows provided by (used in) operations for the periods indicated:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["(In thousands)","2021","","2020","","2019"],["Cash provided by operating activities","$","143,474","","","$","748,736","","","$","483,748"],["Cash used in investing activities","(26,582)","","","(35,163)","","","(89,707)"],["Cash used in financing activities","(84,103)","","","(647,998)","","","(131,126)"],["Net increase in cash and cash equivalents","$","32,789","","","$","65,575","","","$","262,915"]]
[[/GREPCENT_TABLE]]

Operating Activities

Net cash provided by operating activities for 2021, 2020 and 2019 amounted to $143.5 million, $748.7 million, and $483.7 million, respectively. In 2021, net cash provided by operating activities resulted primarily from $1.4 billion of net income before amortization of program rights, depreciation and amortization, share-based compensation and other non-cash items, a decrease in prepaid expenses and other assets of $183.9 million, and an increase in accounts payable, accrued liabilities and other liabilities of $129.4 million. Partially offsetting these increases were payments for program rights of $1,297.8 million. Changes in all other assets and liabilities during the year resulted in a decrease in cash of $70.2 million.

In 2020, net cash provided by operating activities resulted primarily from $1.5 billion of net income before amortization of program rights, depreciation and amortization, share-based compensation and other non-cash items, a decrease in accounts receivable, trade of $63.3 million due to the timing of cash receipts, a decrease in prepaid expenses and other assets of $64.1 million, and an increase in accounts payable, accrued liabilities and other liabilities of $16.0 million. Partially offsetting these increases were payments for program rights of $850.0 million. Changes in all other assets and liabilities during the year resulted in an increase in cash of $5.1 million.

In 2019, net cash provided by operating activities resulted from $1.7 billion of net income before amortization of program rights, depreciation and amortization, share-based compensation and other non-cash items, which was partially offset by payments for program rights of $969.9 million, an increase in prepaid expenses and other assets of $142.3 million primarily related to an increase in production tax credits and taxes receivable, an increase in accounts receivable, trade of $43.3 million due to the timing of cash receipts, and a decrease in accounts payable, accrued liabilities and other liabilities of $28.4 million primarily as a result of lower employee related liabilities. Changes in all other assets and liabilities during the year resulted in a decrease in cash of $5.1 million.

Investing Activities

Net cash used in investing activities for 2021, 2020 and 2019 was $26.6 million, $35.2 million and $89.7 million, respectively. In 2021, net cash used in investing activities was primarily related to the acquisition of investments of $30.3 million, payments for the acquisition of a business of $62.1 million, and capital expenditures of $42.6 million, partially offset by proceeds from the sales of investments of $95.4 million and the collection of a loan for $20.0 million. All other changes in investing activities resulted in an decrease of $7.0 million.

In 2020, net cash used in investing activities was primarily related to capital expenditures of $46.6 million, partially offset by proceeds from the sales of investments of $10.0 million.

In 2019, net cash used in investing activities was primarily related to capital expenditures of $91.6 million, primarily related to leasehold improvements, and the purchase of investments of $3.5 million, partially offset by a return of capital from investees of $5.4 million.

Financing Activities

Net cash used in financing activities 2021, 2020 and 2019 was $84.1 million, $648.0 million, and $131.1 million, respectively. In 2021, financing activities primarily consisted of principal payments, net of proceeds, on long-term debt (including the redemption of $400 million of 4.75% Notes due December 2022 and $600 million of 5.00% Notes due April 2024) of $30.5 million, taxes paid in lieu of shares issued for equity-based compensation of $32.9 million, and distributions to noncontrolling interests of $29.4 million and payments on finance leases of $3.8 million, partially offset by proceeds from the exercise of stock options of $12.1 million and contributions from noncontrolling interests of $2.7 million.

In 2020, financing activities primarily consisted of purchases of Class A Common Stock of $356.7 million under our Stock Repurchase Program, principal payments on long-term debt of $262.3 million, taxes paid in lieu of shares issued for equity-based compensation of $16.0 million, and distributions to noncontrolling members of $15.8 million.

50

In 2019, financing activities primarily consisted of purchases of Class A Common Stock of $70.6 million under our Stock Repurchase Program, principal payments on long-term debt of $23.0 million, taxes paid in lieu of shares issued for equity-based compensation of $23.0 million, and distributions to noncontrolling members of $15.6 million.

Debt Financing Agreements

The Company's principal amount of long-term debt consists of:

[[GREPCENT_TABLE]]
[["(In thousands)","December 31, 2021","","December 31, 2020"],["Senior Secured Credit Facility:(a)"],["Term Loan A Facility","$","675,000","","","$","675,000"],["Senior Notes:"],["4.75% Notes due December 2022","\u2014","","","400,000"],["5.00% Notes due April 2024","400,000","","","1,000,000"],["4.75% Notes due August 2025","800,000","","","800,000"],["4.25% Notes due February 2029","1,000,000","","","\u2014"],["Principal amount of debt","$","2,875,000","","","$","2,875,000"]]
[[/GREPCENT_TABLE]]

(a)     The Company's $500 million revolving credit facility remains undrawn at December 31, 2021. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company.

On February 8, 2021, we issued $1.0 billion aggregate principal amount of 4.25% senior notes due February 15, 2029 (the “4.25% Notes due 2029”) in a registered public offering and received net proceeds of $982.3 million, after deducting underwriting discounts and commissions and expenses. We used such proceeds to redeem (i) the remaining $400 million principal amount of our 4.75% senior notes due 2022 and (ii) $600 million principal amount of our 5.00% senior notes due 2024 on February 26, 2021 (the "Redemption Date"). The 4.75% senior notes due 2022 were redeemed at a redemption price of 100.000% of the principal amount of such notes and the 5.00% senior notes due 2024 were redeemed at a redemption price of 102.500% of the principal amount of such notes, in each case, plus accrued and unpaid interest to, but excluding, the Redemption Date. In connection with the redemptions, we incurred a loss on extinguishment of debt for the year ended December 31, 2021 of $22.1 million representing the redemption premium and the write-off of a portion of the unamortized discount and deferred financing costs.

In March 2020 we redeemed $200 million principal amount of the outstanding $600 million principal amount of our 4.75% Notes due 2022. In connection with the redemption, we incurred a loss on extinguishment of debt for the year ended December 31, 2020 of $2.9 million representing the redemption premium and the write-off of a portion of the unamortized discount and deferred financing costs.

Additional information regarding our outstanding indebtedness and the significant terms and provisions of our Senior Secured Credit Facility and our Senior Notes is discussed in Note 11 to the accompanying consolidated financial statements included in this Annual Report on Form 10-K and is incorporated herein by reference.

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 December 31, 2021 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

51

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

[[GREPCENT_TABLE]]
[["Income Statement"],["(In thousands)","Year Ended December 31, 2021","","Year Ended December 31, 2020"],["Parent Company","","Guarantor Subsidiaries","","Parent Company","","Guarantor Subsidiaries"],["Revenues","$","\u2014","","","$","2,137,263","","","$","\u2014","","","$","1,947,893"],["Operating expenses","\u2014","","","1,713,682","","","\u2014","","","1,441,889"],["Operating income","$","\u2014","","","$","423,581","","","$","\u2014","","","$","506,004"],["Income before income taxes","$","314,283","","","$","472,985","","","$","337,810","","","$","486,092"],["Net income","$","250,596","","","$","463,637","","","239,979","","","476,881"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Balance Sheet","December 31, 2021","","December 31, 2020"],["(In thousands)","Parent Company","","Guarantor Subsidiaries","","Parent Company","","Guarantor Subsidiaries"],["Assets"],["Amounts due from subsidiaries","$","\u2014","","","$","\u2014","","","$","25,749","","","$","74,649"],["Current assets","9,991","","","1,242,724","","","35,424","","","1,291,630"],["Non-current assets","4,010,028","","","3,633,383","","","3,729.996","","","3,151,581"],["Liabilities and equity:"],["Amounts due to subsidiaries","$","12,797","","","$","5,324","","","$","\u2014","","","$","27,091"],["Current liabilities","100,969","","","671,041","","","124,886","","","545,105"],["Non-current liabilities","3,067,962","","","331,860","","","3,023,726","","","300,449"]]
[[/GREPCENT_TABLE]]

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements, we are required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These estimates and assumptions can be subjective and complex and, consequently, actual results could differ materially from our estimates and assumptions. We base our estimates on historical experience, known or expected trends and other assumptions that we believe are reasonable under the circumstances.

We believe the following critical accounting policies comprise the more significant judgments and estimates used in the preparation of our consolidated financial statements:

Program Rights

Licensed rights to programming, including feature films and episodic series, are stated at the lower of amortized cost or fair value. Such licensed rights along with the related obligations are recorded at the contract value when a license agreement is executed, unless there is uncertainty with respect to either cost, acceptability or availability. If such uncertainty exists, those rights and obligations are recorded at the earlier of when the uncertainty is resolved or when the license period begins. Costs are amortized to technical and operating expense on a straight-line or accelerated basis, based on the expected exploitation strategy of the rights, over a period not to exceed the respective license periods. We periodically review the remaining useful lives of our licensed program rights based on several factors, including expected future revenue generation from airings on our networks

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and other exploitation opportunities, ratings, type and quality of program material, standards and practices and fitness for exhibition through various forms of distribution. If it is determined that film or other program rights have limited, or no, future programming usefulness, the remaining useful life of such rights is adjusted accordingly, which may result in the accelerated amortization or write-off of such costs to technical and operating expense.

Owned original programming costs, including estimated participation and residual costs qualifying for capitalization, are recorded as program rights on the consolidated balance sheet. Program rights that are predominantly monetized individually are amortized to technical and operating expense over their estimated useful lives, commencing upon the first airing, based on attributable revenue for airings to date as a percentage of total projected attributable revenue ("ultimate revenue") under the individual-film-forecast-computation method. Program rights that are monetized as a group are amortized based on projected usage, typically resulting in an accelerated amortization pattern. We base our estimates of ultimate revenue primarily on distribution and advertising revenues historically generated from similar content in comparable markets, and projected program usage. Projected program usage is based on our current expectation of future exhibitions. We periodically review ultimate revenue estimates and projected program usage and revise our assumptions if necessary, which could either accelerate or delay the timing of amortization expense or result in a write-down of unamortized costs to fair value. For example, a program's strong performance could result in increased usage and increased attributable revenues in a particular period, resulting in accelerated amortization of costs in that period. Poor ratings may result in the reduction of attributable revenue from planned usage or the abandonment of a program, which would require a write-off of any unamortized costs. Actual attributable revenue and exhibitions may vary from our projections due to factors such as market acceptance, levels of distribution and advertising revenue, resulting in changes to our decisions regarding planned program usage. A failure to adjust for a downward change in estimates of ultimate revenue could result in the understatement of program rights amortization expense for the period. Any capitalized development costs for programs that we determine will not be produced are also written off. Historically, other than instances of write-offs associated with our decisions to abandon programming, actual ultimate revenue amounts have not significantly differed from our estimates of ultimate revenue.

Program rights write-offs of $12.8 million, $108.3 million and $40.9 million were recorded for the years ended December 31, 2021, 2020 and 2019, respectively.

Useful Lives of Affiliate Intangible Assets

The carrying amount of our intangible assets as of December 31, 2021 is $399.4 million, of which $294.9 million is comprised of affiliate relationships acquired in business combinations. Useful lives of affiliate relationships (ranging from 6 to 25 years) are initially determined based upon weighted average remaining terms of agreements in place with major distributors when purchase accounting is applied, plus an assumption for expected renewals. We periodically update our assumption for expected renewals based on recent experience and known or expected trends. We have historically been successful in renewing our major affiliation agreements and expect to renew such agreements in the future. However, if renewal trends deteriorate in the future (e.g., failure to renew, or renewals with significantly shorter terms), we may revise the remaining useful lives of affiliate intangible assets, resulting in higher amortization expenses in future periods. In June 2020, we recognized impairment charges associated with certain intangible assets. See Note 9 to the accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details.

Goodwill

Goodwill is not amortized, but instead is tested for impairment at the reporting unit level annually as of December 1, or more frequently upon the occurrence of certain events or substantive changes in circumstances. The annual goodwill impairment test allows for the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined, on the basis of qualitative factors, that the fair value of a reporting unit is, more likely than not, less than its carrying value, the quantitative impairment test is required. In accordance with Accounting Standards Update 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, the Company recognizes goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill.

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

[[GREPCENT_TABLE]]
[["(In thousands)","December 31, 2021"],["Domestic Operations","$","353,470"],["International and Other","355,874"],["","$","709,344"]]
[[/GREPCENT_TABLE]]

Based on our annual and interim impairment tests for goodwill during 2021 and 2020, we recognized no impairment charges for the year ended December 31, 2021 and $25.1 million for the year ended December 31, 2020. See Note 9 to the

53

accompanying consolidated financial statements included in this Annual Report on Form 10-K for additional details.

Recently Issued Accounting Pronouncements

The information regarding recently issued accounting pronouncements is discussed in Note 2 to the accompanying consolidated financial statements included in this Annual Report on Form 10-K and is incorporated herein by reference.