AMC Networks 10Q 2021 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2021


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

For the transition period from to

Commission File Number: 1-35106

AMC Networks Inc.

(Exact name of registrant as specified in its charter)


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

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

(212) 324-8500

(Registrant's telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

AMCX

The

NASDAQ

Stock Market LLC

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

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

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


Large accelerated filer	þ	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	☐

		Emerging growth company	☐

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

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

The number of shares of common stock outstanding as of October 29, 2021:


Class A Common Stock par value $0.01 per share			30,767,784
Class B Common Stock par value $0.01 per share			11,484,408

AMC NETWORKS INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	September 30, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	870,967	$	888,526
Accounts receivable, trade (less allowance for doubtful accounts of $8,732 and $11,234)	771,546		813,587
Current portion of program rights, net	18,005		13,480
Prepaid expenses and other current assets	208,181		223,173
Total current assets	1,868,699		1,938,766
Property and equipment, net of accumulated depreciation of $284,351 and $261,082	218,699		256,045
Program rights, net	1,700,175		1,269,131
Intangible assets, net	391,778		410,672
Goodwill	689,639		686,407
Deferred tax asset, net	12,202		25,046
Operating lease right-of-use asset	133,044		146,522
Other assets	481,229		513,749
Total assets	$	5,495,465	$	5,246,338
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	123,556	$	120,530
Accrued liabilities	269,079		320,005
Current portion of program rights obligations	297,118		259,449
Deferred revenue	81,848		71,048
Current portion of long-term debt	26,813		75,000
Current portion of lease obligations	37,383		32,435
Total current liabilities	835,797		878,467
Program rights obligations	226,941		182,511
Long-term debt	2,811,249		2,774,307
Lease obligations	159,998		194,324
Deferred tax liability, net	157,536		132,009
Other liabilities	123,898		125,970
Total liabilities	4,315,419		4,287,588
Commitments and contingencies	0		0
Redeemable noncontrolling interests	291,447		315,649
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 65,349 and 64,568 shares issued and 30,756 and 29,975 shares outstanding, respectively	653		646
Class B Common Stock, $0.01 par value, 90,000 shares authorized, 11,484 shares issued and outstanding	115		115
Preferred stock, $0.01 par value, 45,000 shares authorized; none issued	—		—
Paid-in capital	340,033		323,425
Accumulated earnings	2,081,008		1,847,451
Treasury stock, at cost (34,593 and 34,593 shares Class A Common Stock, respectively)	(1,419,882)		(1,419,882)
Accumulated other comprehensive loss	(164,899)		(134,950)
Total AMC Networks stockholders' equity	837,028		616,805
Non-redeemable noncontrolling interests	51,571		26,296
Total stockholders' equity	888,599		643,101
Total liabilities and stockholders' equity	$	5,495,465	$	5,246,338

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues, net	$	810,766	$	654,015	$	2,273,899	$	2,034,681
Operating expenses:
Technical and operating (excluding depreciation and amortization)	378,264		333,816		997,677		960,379
Selling, general and administrative	220,011		148,769		610,164		488,581
Depreciation and amortization	23,411		27,547		71,261		80,182
Impairment and other charges	—		—		158,973		130,411
Restructuring and other related charges	754		4,406		9,534		13,879
Total operating expenses	622,440		514,538		1,847,609		1,673,432
Operating income	188,326		139,477		426,290		361,249
Other income (expense):
Interest expense	(31,413)		(33,418)		(97,674)		(105,283)
Interest income	2,264		2,994		7,614		11,276
Loss on extinguishment of debt	—		—		(22,074)		(2,908)
Miscellaneous, net	54		11,138		19,634		(10,088)
Total other expense	(29,095)		(19,286)		(92,500)		(107,003)
Income from operations before income taxes	159,231		120,191		333,790		254,246
Income tax expense	(40,744)		(52,195)		(77,980)		(95,490)
Net income including noncontrolling interests	118,487		67,996		255,810		158,756
Net income attributable to noncontrolling interests	(7,836)		(6,356)		(22,253)		(13,488)
Net income attributable to AMC Networks' stockholders	$	110,651	$	61,640	$	233,557	$	145,268

Net income per share attributable to AMC Networks' stockholders:
Basic	$	2.60	$	1.18	$	5.52	$	2.72
Diluted	$	2.55	$	1.17	$	5.39	$	2.69

Weighted average common shares:
Basic	42,506		52,346		42,308		53,374
Diluted	43,440		52,904		43,332		53,917

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income including noncontrolling interests	$	118,487	$	67,996	$	255,810	$	158,756
Other comprehensive income (loss):
Foreign currency translation adjustment	(17,933)		21,475		(32,282)		7,383
Unrealized gain (loss) on interest rate swaps	620		615		1,828		(1,041)
Other comprehensive income (loss), before income taxes	(17,313)		22,090		(30,454)		6,342
Income tax (expense) benefit	(146)		(144)		(430)		242
Other comprehensive income (loss), net of income taxes	(17,459)		21,946		(30,884)		6,584
Comprehensive income	101,028		89,942		224,926		165,340
Comprehensive income attributable to noncontrolling interests	(7,109)		(6,648)		(21,318)		(12,818)
Comprehensive income attributable to AMC Networks' stockholders	$	93,919	$	83,294	$	203,608	$	152,522

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, June 30, 2021	$	653	$	115	$	330,593	$	1,970,357	$	(1,419,882)	$	(148,167)	$	733,669	$	49,873	$	783,542
Net income attributable to AMC Networks’ stockholders	—		—		—		110,651		—		—		110,651		—		110,651
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		2,856		2,856


Distribution to noncontrolling member	—		—		—		—		—		—		—		(431)		(431)

Other comprehensive income	—		—		—		—		—		(16,732)		(16,732)		(727)		(17,459)
Share-based compensation expense	—		—		9,455		—		—		—		9,455		—		9,455



Net share issuances under employee stock plans	—		—		(15)		—		—		—		(15)		—		(15)
Balance, September 30, 2021	$	653	$	115	$	340,033	$	2,081,008	$	(1,419,882)	$	(164,899)	$	837,028	$	51,571	$	888,599


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, June 30, 2020	$	643	$	115	$	308,288	$	1,691,100	$	(1,166,119)	$	(182,111)	$	651,916	$	23,229	$	675,145
Net income attributable to AMC Networks’ stockholders	—		—		—		61,640		—		—		61,640		—		61,640
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		1,785		1,785
Distributions to noncontrolling member	—		—		—		—		—		—		—		(563)		(563)




Other comprehensive income	—		—		—		—		—		21,654		21,654		292		21,946

Share-based compensation expense	—		—		12,393		—		—		—		12,393		—		12,393


Balance, September 30, 2020	$	643	$	115	$	320,681	$	1,752,740	$	(1,166,119)	$	(160,457)	$	747,603	$	24,743	$	772,346

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
















Balance, December 31, 2020	$	646	$	115	$	323,425	$	1,847,451	$	(1,419,882)	$	(134,950)	$	616,805	$	26,296	$	643,101
Net income attributable to AMC Networks’ stockholders	—		—		—		233,557		—		—		233,557		—		233,557
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		7,134		7,134
Transfer from redeemable noncontrolling interests	—		—		—		—		—		—		—		18,367		18,367
Contribution from noncontrolling member	—		—		—		—		—		—		—		709		709


Other comprehensive income (loss)	—		—		—		—		—		(29,949)		(29,949)		(935)		(30,884)
Share-based compensation expense	—		—		39,163		—		—		—		39,163		—		39,163

Proceeds from the exercise of stock options	—		—		12,100		—		—		—		12,100		—		12,100

Net share issuances under employee stock plans	7		—		(34,655)		—		—		—		(34,648)		—		(34,648)
Balance, September 30, 2021	$	653	$	115	$	340,033	$	2,081,008	$	(1,419,882)	$	(164,899)	$	837,028	$	51,571	$	888,599


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, December 31, 2019	$	639	$	115	$	286,491	$	1,609,428	$	(1,063,181)	$	(167,711)	$	665,781	$	25,724	$	691,505
Net income attributable to AMC Networks’ stockholders	—		—		—		145,268		—		—		145,268		—		145,268
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		700		700
Distributions to noncontrolling member	—		—		—		—		—		—		—		(1,011)		(1,011)

Adoption of ASU 2016-13, credit losses	—		—		—		(1,956)				—		(1,956)		—		(1,956)

Other comprehensive income (loss)	—		—		—		—		—		7,254		7,254		(670)		6,584
Share-based compensation expense	—		—		43,141		—		—		—		43,141		—		43,141

Treasury stock acquired	—		—		—		—		(102,938)		—		(102,938)		—		(102,938)
Net share issuances under employee stock plans	4		—		(8,951)		—		—		—		(8,947)		—		(8,947)
Balance, September 30, 2020	$	643	$	115	$	320,681	$	1,752,740	$	(1,166,119)	$	(160,457)	$	747,603	$	24,743	$	772,346

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)/(unaudited)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income including noncontrolling interests	$	255,810	$	158,756
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	71,261		80,182
Impairment and other charges	16,055		130,411
Share-based compensation expense related to equity classified awards	39,163		43,141
Non-cash restructuring and other related charges	4,329		6,126
Amortization and write-off of program rights	601,640		622,204
Amortization of deferred carriage fees	16,138		21,088
Unrealized foreign currency transaction (gain) loss	(10,025)		9,242
Amortization of deferred financing costs and discounts on indebtedness	5,820		6,039
Loss on extinguishment of debt	22,074		2,908
Bad debt expense	4,900		340
Deferred income taxes	31,765		12,403
Gain on investments	(4,554)		—
Write-down of non-marketable equity securities and note receivable	—		5,103
Other, net	(3,429)		(10,696)
Changes in assets and liabilities:
Accounts receivable, trade (including amounts due from related parties, net)	38,514		92,328
Prepaid expenses and other assets	(62,799)		79,098
Program rights and obligations, net	(967,172)		(565,267)
Income taxes payable	(5,235)		17,265
Deferred revenue	6,837		(2,234)
Deferred carriage fees, net	(29,207)		(15,057)
Accounts payable, accrued liabilities and other liabilities	12,099		(49,293)
Net cash provided by operating activities	43,984		644,087
Cash flows from investing activities:
Capital expenditures	(29,969)		(34,990)
Return of capital from investees	—		924
Payments for acquisition of a business, net of cash acquired	(19,072)		—
Acquisition of investment securities	(28,397)		(4,111)
Cash paid on distribution of business	(7,052)		—
Principal payment received on loan to investee	20,000		3,750
Proceeds from sale of investments	95,370		10,000
Net cash provided by (used in) investing activities	30,880		(24,427)
Cash flows from financing activities:
Proceeds from the issuance of long-term debt	986,000		6,000
Principal payments on long-term debt	(1,015,000)		(242,500)
Deemed repurchases of restricted stock units	(34,648)		(8,947)
Purchase of treasury stock	—		(102,938)
Proceeds from stock option exercises	12,100		—
Principal payments on finance lease obligations	(2,866)		(2,404)
Contributions from noncontrolling interests	2,701		—
Distributions to noncontrolling interests	(14,906)		(13,955)
Net cash used in financing activities	(66,619)		(364,744)
Net increase in cash and cash equivalents	8,245		254,916
Effect of exchange rate changes on cash and cash equivalents	(25,804)		774
Cash and cash equivalents at beginning of period	888,526		816,170
Cash and cash equivalents at end of period	$	870,967	$	1,071,860

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Description of Business and Basis of Presentation

Description of Business

AMC Networks Inc. ("AMC Networks") and its subsidiaries (collectively referred to as the "Company," "we," "us," or "our") own and operate entertainment businesses and assets.

Segment Reporting Changes

In the first quarter of 2021, the Company changed its presentation of operating segments, reflecting a reorganized operating structure focused on a multi-platform distribution approach to content monetization. The Company's 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 will no longer be allocated to the operating segments. Operating segment information for the prior periods has been recast to reflect these changes. The new reporting structure consists of the following 2 operating segments:

•Domestic Operations: Includes activities of our 5 national programming networks, our streaming services, AMC Studios operation, IFC Films and AMC Broadcasting & Technology. 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, and ALLBLK), AMC+ and other streaming initiatives. Our AMC Studios operation produces original programming for our programming networks and also licenses such programming worldwide. IFC Films is our film distribution business and AMC Networks Broadcasting & Technology is our technical services business, which 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 relating to the spin-off of the Levity comedy venues business.

Basis of Presentation

Principles of Consolidation

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

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

Unaudited Interim Financial Statements

These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 2020 contained in the Company's Annual Report on Form 10-K ("2020 Form 10-K") filed with the SEC. The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, such financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented.

The results of operations for interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2021.

Risks and Uncertainties

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 availability, 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.

Use of Estimates

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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

Recently Adopted Accounting Standards

Effective January 1, 2021, the Company adopted Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 - Income Taxes. The adoption of the standard did not have a material effect on its consolidated financial statements.

Note 2. Revenue Recognition

Transaction Price Allocated to Future Performance Obligations

As of September 30, 2021, other than contracts for which the Company has applied the practical expedients, the aggregate amount of transaction price allocated to future performance obligations was not material to our consolidated revenues.

Contract Balances from Contracts with Customers

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


(In thousands)	September 30, 2021		December 31, 2020
Balances from contracts with customers:
Accounts receivable (including long-term, included in Other assets)	$	1,039,981	$	1,081,070
Contract assets, short-term (included in Other current assets)	7,837		9,830
Contract assets, long-term (included in Other assets)	942		942
Contract liabilities (Deferred revenue)	81,848		71,048

Revenue recognized for the nine months ended September 30, 2021 relating to the contract liability at December 31, 2020 was $24.4 million.

Note 3. Net Income per Share

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


(In thousands)	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Basic weighted average common shares outstanding	42,506	52,346	42,308	53,374
Effect of dilution:
Stock options	—	—	4	—
Restricted stock units	934	558	1,020	543
Diluted weighted average common shares outstanding	43,440	52,904	43,332	53,917

Approximately 0.5 million and 1.1 million restricted stock units outstanding as of September 30, 2021 and September 30, 2020, respectively, have been excluded from diluted weighted average common shares outstanding since a performance condition for these awards had not been met in each of the respective periods. As of September 30, 2021 and September 30, 2020, 0.3 million and 0.7 million, respectively, of restricted stock units and stock options have been excluded from diluted weighted average common shares outstanding, as their impact would have been anti-dilutive.

Stock Repurchase Program

The Company's Board of Directors 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. For the nine months ended September 30, 2021, the Company did not repurchase any shares of its Class A Common Stock. As of September 30, 2021, the Company had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 4. 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 during the second quarter of 2021, 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 the Company's obligations, principally related to leases. As a result of this divestiture, the Company recognized a loss on the disposal of $16.1 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.

In June 2020, as a result of the impact of the COVID-19 pandemic, the Company qualitatively assessed whether it was more likely than not that goodwill and long-lived assets were impaired as of June 30, 2020. Based on our projections and updated forecasts, the Company 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 $105.3 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.

Note 5. Restructuring and Other Related Charges

Restructuring and other related charges of $0.8 million and $9.5 million for the three and nine months ended September 30, 2021, respectively, consisted of (i) $0.8 million and $5.2 million at AMCNI related to severance costs and the termination of distribution in certain international territories for the three and nine months ended September 30, 2021, respectively, and (ii) $4.3 million of severance costs associated with the restructuring plan announced in November 2020 for the nine months ended September 30, 2021.

Restructuring and other related charges of $4.4 million and $13.9 million for the three and nine months ended September 30, 2020, respectively, related to restructuring costs associated with termination of distribution in certain territories as well as severance and other personnel related costs associated with previously announced restructuring activities.

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


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Domestic Operations	$	(135)	$	4,452	$	2,508	$	7,138
International & Other	800		—		5,273		6,239
Corporate / Inter-segment eliminations	89		(46)		1,753		502
Total restructuring and other related charges	$	754	$	4,406	$	9,534	$	13,879

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The following table summarizes the accrued restructuring costs:


(In thousands)	Severance and employee-related costs		Other exit costs		Total
December 31, 2020	$	25,571	$	31	$	25,602
Charges	5,077		4,457		9,534
Cash payments	(29,496)		(128)		(29,624)
Non-cash adjustments	—		(4,329)		(4,329)
Other	64		(2)		62

Balance, September 30, 2021	$	1,216	$	29	$	1,245

Accrued restructuring costs of $1.2 million are included in accrued liabilities in the condensed consolidated balance sheet at September 30, 2021.

Note 6. Program Rights

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


	September 30, 2021
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	324,136	$	31,900	$	356,036
In-production and in-development	363,001		9,317		372,318
Total owned original program rights, net	$	687,137	$	41,217	$	728,354

Licensed program rights, net:
Licensed film and acquired series	$	11,609	$	603,018	$	614,627
Licensed originals	208,867		—		208,867
Advances and content versioning costs	—		166,332		166,332
Total licensed program rights, net	220,476		769,350		989,826
Program rights, net	$	907,613	$	810,567	$	1,718,180

Current portion of program rights, net					$	18,005
Program rights, net (long-term)					1,700,175
					$	1,718,180

Amortization, including write-offs, of owned and licensed program rights is as follows:


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights	$	112,620	$	12,912	$	125,532	$	197,447	$	25,049	$	222,496
Licensed program rights	19,579		123,181		142,760		65,464		313,680		379,144
Program rights amortization	$	132,199	$	136,093	$	268,292	$	262,911	$	338,729	$	601,640

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights	$	74,597	$	11,854	$	86,451	$	235,868	$	27,831	$	263,699
Licensed program rights	20,479		100,019		120,498		61,741		296,764		358,505
Program rights amortization	$	95,076	$	111,873	$	206,949	$	297,609	$	324,595	$	622,204

The Company periodically reviews the programming usefulness of its licensed and owned original program rights based on several factors, including expected future revenue generation from airings on the Company's networks 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 useful life is updated, which generally results in a write-off of the unamortized cost to technical and operating expense in the consolidated statements of income. There were no significant program rights write-offs included in technical and operating expense for the three and nine months ended September 30, 2021. Program rights write-offs included in technical and operating expense were $24.8 million and $36.9 million for the three and nine months ended September 30, 2020, respectively.

Note 7. Investments

The Company holds several investments in and loans to non-consolidated entities which are included in Other assets in the condensed consolidated balance sheet. Equity method investments were $90.8 million at September 30, 2021 and $69.5 million at December 31, 2020. In February 2021, the Company invested $27.4 million for an interest in a Toronto-based production company and studio, which is accounted for as an equity method investment. In June 2021, the Company paid $23.8 million to acquire the remaining 50% interest in an equity method investment in which it previously owned a 50% interest. In connection with the acquisition, the Company recorded a gain of $12.3 million, included in miscellaneous, net in the condensed consolidated income statement related to the step-up to fair value of its previously held interest.

Marketable Equity Securities

The Company classifies publicly traded investments with readily determinable fair values that are not accounted for under the equity method as marketable equity securities. Marketable equity securities are recorded at cost and adjusted to fair value at each reporting period. The changes in fair value between measurement dates are recorded in miscellaneous, net in the condensed consolidated statement of income. Investments in marketable equity securities were $8.2 million at September 30, 2021 and $62.4 million at December 31, 2020. In January 2021, the Company sold the remaining portion of one of its marketable securities with a carrying value of $51.0 million as of December 31, 2020, resulting in a realized loss of $5.4 million. There were $0.8 million and $3.2 million unrealized losses on marketable equity securities for the three and nine months ended September 30, 2021, respectively, included in miscellaneous, net in the condensed consolidated statement of income. For the three and nine months ended September 30, 2020, unrealized gains and losses on marketable equity securities were a loss of $3.7 million and a gain of $10.3 million, respectively, included in miscellaneous, net in the condensed consolidated statement of income.

Non-marketable Equity Securities

The Company classifies investments without readily determinable fair values that are not accounted for under the equity method as non-marketable equity securities. The accounting guidance requires non-marketable equity securities to be recorded at cost and adjusted to fair value at each reporting period. However, the guidance allows for a measurement alternative, which is to record the investments at cost, less impairment, if any, and subsequently adjust for observable price changes of identical or similar investments of the same issuer. The Company applies this measurement alternative to its non-marketable equity securities. When an observable event occurs, the Company estimates the fair values of its non-marketable equity securities based on Level 2 inputs that are derived from observable price changes of similar securities adjusted for insignificant differences in rights and obligations. The changes in value are recorded in miscellaneous, net in the condensed consolidated statement of income.

Investments in non-marketable equity securities were $36.9 million at September 30, 2021 and $35.8 million at December 31, 2020. For the nine months ended September 30, 2020, the Company recognized impairment charges of $20.0 million related to the write-down of certain non-marketable equity securities, included in miscellaneous, net in the condensed consolidated statements of income. Additionally, in September 2020, an observable price change occurred with respect to one of the Company's non-marketable equity securities, resulting in an unrealized gain of $14.9 million, included in miscellaneous, net in the condensed consolidated statement of income.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 8. Goodwill and Other Intangible Assets

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


(In thousands)	Domestic Operations		International and Other		Total
December 31, 2020	$	333,502	$	352,905	$	686,407
Goodwill written off related to spin-off of a business unit	—		(476)		(476)
Additions	—		11,901		11,901
Amortization of "second component" goodwill	(1,008)		—		(1,008)
Foreign currency translation	—		(7,185)		(7,185)
September 30, 2021	$	332,494	$	357,145	$	689,639

As of September 30, 2021 and December 31, 2020, accumulated impairment charges in the International and Other segment totaled $123.1 million.

The reduction of $1.0 million in the carrying amount of goodwill for Domestic Operations is due to the realization of a tax benefit for the amortization of "second component" goodwill at SundanceTV. Second component goodwill is the amount of tax deductible goodwill in excess of goodwill for financial reporting purposes. In accordance with the authoritative guidance at the time of the SundanceTV acquisition, the tax benefits associated with this excess are applied to first reduce the amount of goodwill, and then other intangible assets for financial reporting purposes, if and when such tax benefits are realized in the Company's tax returns.

The addition of $11.9 million in the carrying amount of goodwill in International and Other relates to the acquisition of the remaining 50% interest in an equity method investment in which the Company previously owned a 50% interest. The allocation of goodwill is preliminary and is based on current estimates and currently available information, and is subject to revision based final allocations of the purchase price to the identifiable assets and liabilities acquired.

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


(In thousands)	September 30, 2021
	Gross		Accumulated Amortization		Net		Estimated Useful Lives
Amortizable intangible assets:
Affiliate and customer relationships	$	640,319	$	(348,061)	$	292,258	6 to 25 years
Advertiser relationships	46,282		(29,183)		17,099		11 years
Trade names and other amortizable intangible assets	103,844		(41,323)		62,521		3 to 20 years

Total amortizable intangible assets	790,445		(418,567)		371,878
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	810,345	$	(418,567)	$	391,778

(In thousands)	December 31, 2020
	Gross		Accumulated Amortization		Net
Amortizable intangible assets:
Affiliate and customer relationships	$	624,699	$	(330,350)	$	294,349
Advertiser relationships	46,282		(26,028)		20,254
Trade names and other amortizable intangible assets	116,526		(40,357)		76,169

Total amortizable intangible assets	787,507		(396,735)		390,772
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	807,407	$	(396,735)	$	410,672

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Aggregate amortization expense for amortizable intangible assets for the nine months ended September 30, 2021 and 2020 was $29.1 million and $32.6 million, respectively. Estimated aggregate amortization expense for intangible assets subject to amortization for each of the following five years is:


(In thousands)
Years Ending December 31,
2021	$	39,378
2022	40,703
2023	40,618
2024	40,549
2025	38,763

Note 9. Accrued Liabilities

Accrued liabilities consist of the following:


(In thousands)	September 30, 2021		December 31, 2020
Employee related costs	98,591		$	98,661
Participations and residuals	110,990		106,785
Interest	21,845		29,345

Other accrued expenses	37,653		85,214
Total accrued liabilities	$	269,079	$	320,005

Note 10. Long-term Debt

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


(In thousands)	September 30, 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	—		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		—
Other debt (b)	1,500		—
Total long-term debt	2,876,500		2,875,000
Unamortized discount	(24,249)		(18,337)
Unamortized deferred financing costs	(14,189)		(7,356)
Long-term debt, net	2,838,062		2,849,307
Current portion of long-term debt	26,813		75,000
Noncurrent portion of long-term debt	$	2,811,249	$	2,774,307

(a)The Company's $500 million revolving credit facility remains undrawn at September 30, 2021. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company.

(b)A majority owned subsidiary of the Company has credit facilities totaling $4.5 million, which bear interest at the greater of 3.5% or the prime rate plus 1% and mature on July 21, 2022. As of September 30, 2021, there was $1.5 million of outstanding borrowings under the credit facilities.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Amendment to Amended and Restated Credit Agreement

On February 8, 2021, AMC Networks entered into Amendment No. 1 (“Amendment No. 1”) to the Second Amended and Restated Credit Agreement, dated as of July 28, 2017 (as amended by Amendment No. 1, the "Credit Agreement"), among AMC Networks and its subsidiary, AMC Network Entertainment LLC, as the Initial Borrowers, certain of AMC Networks' subsidiaries, as restricted subsidiaries, JPMorgan Chase Bank, N.A., as Administrative Agent, Collateral Agent and L/C Issuer, Bank of America, as an L/C Issuer, and the lenders party thereto. 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.

Senior Notes

On February 8, 2021, AMC Networks issued, and certain of AMC Networks’ subsidiaries (hereinafter, the “Guarantors”) guaranteed, $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. 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. In connection with the redemptions, the Company incurred a loss on extinguishment of debt for the quarter ended March 31, 2021 of $22.1 million representing the 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.

Note 11. Leases

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


(In thousands)	Balance Sheet Location	September 30, 2021		December 31, 2020
Assets
Operating	Operating lease right-of-use asset	$	133,044	$	146,522
Finance	Property and equipment, net	12,355		13,179
Total lease assets		$	145,399	$	159,701
Liabilities
Current:
Operating	Current portion of lease obligations	$	33,771	$	28,813
Finance	Current portion of lease obligations	3,612		3,622
		$	37,383	$	32,435
Noncurrent:
Operating	Lease obligations	$	135,381	166,452
Finance	Lease obligations	24,617		27,872
		159,998		$	194,324

Total lease liabilities		$	197,381	$	226,759

Note 12. Fair Value Measurement

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

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

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

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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

The following table presents for each of these hierarchy levels, the Company's financial assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020:


(In thousands)	Level I		Level II		Level III		Total
At September 30, 2021:
Assets

Marketable securities	8,190		—		—		8,190


Foreign currency derivatives	—		300		—		300

Liabilities
Interest rate swap contracts	$	—	$	575	$	—	$	575
Foreign currency derivatives	—		3,491		—		3,491


At December 31, 2020:
Assets
Cash equivalents	$	107,494	$	—	$	—	$	107,494
Marketable securities	62,442		—		—		62,442


Foreign currency derivatives	—		667		—		667

Liabilities
Interest rate swap contracts	$	—	$	2,403	$	—	$	2,403
Foreign currency derivatives	—		3,515		—		3,515

The Company's cash equivalents and marketable securities are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.

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

At September 30, 2021 and December 31, 2020, the Company did not have any assets or liabilities measured at fair value on a recurring basis that would be considered Level III.

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

Credit Facility Debt and Senior Notes

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

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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


(In thousands)	September 30, 2021
	Carrying Amount		Estimated Fair Value
Debt instruments:
Term loan A facility	$	663,912	$	669,938
5.00% Notes due April 2024	397,448		406,000
4.75% Notes due August 2025	791,597		820,000
4.25% Notes due February 2029	983,605		991,800
Other debt	1,500		1,500
	$	2,838,062	$	2,889,238


(In thousands)	December 31, 2020
	Carrying Amount		Estimated Fair Value
Debt instruments:
Term loan A facility	$	669,878	$	665,719
4.75% Notes due December 2022	398,230		400,500
5.00% Notes due April 2024	991,074		1,015,000
4.75% Notes due August 2025	790,125		826,160

	$	2,849,307	$	2,907,379

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

Note 13. Derivative Financial Instruments

Interest Rate Risk

To manage interest rate risk, the Company enters into interest rate swap contracts to adjust the amount of total debt that is subject to variable interest rates.

As of September 30, 2021, the Company had interest rate swap contracts outstanding with notional amounts aggregating $100.0 million that are designated as hedging instruments. The Company's outstanding interest rate swap contracts mature in December 2021.

Foreign Currency Exchange Rate Risk

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

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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


(In thousands)	Balance Sheet Location	September 30, 2021		December 31, 2020
Derivatives designated as hedging instruments:


Liabilities:
Interest rate swap contracts	Accrued liabilities	$	575	$	2,403
Derivatives not designated as hedging instruments:
Assets:
Foreign currency derivatives	Prepaid expenses and other current assets	$	190	$	300
Foreign currency derivatives	Other assets	110		367


Liabilities:


Foreign currency derivatives	Accrued liabilities	$	1,335	$	1,084
Foreign currency derivatives	Other liabilities	2,157		2,431

The amounts of gains and losses related to the Company's derivative financial instruments designated as hedging instruments are as follows:


(In thousands)	Gain or (Loss) on Derivatives Recognized in OCI				Location of Gain or (Loss) in Earnings	Gain or (Loss) Reclassified from Accumulated OCI into Earnings
	Three Months Ended September 30,					Three Months Ended September 30,
	2021		2020			2021		2020
Derivatives in cash flow hedging relationships:
Interest rate swap contracts	$	(10)	$	9	Interest expense	$	630	$	606


(In thousands)	Gain or (Loss) on Derivatives Recognized in OCI				Location of Gain or (Loss) in Earnings	Gain or (Loss) Reclassified from Accumulated OCI into Earnings
	Nine Months Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021		2020
Derivatives in cash flow hedging relationships:
Interest rate swap contracts	$	(27)	$	(2,401)	Interest expense	$	1,855	$	1,360

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


(In thousands)	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020

Foreign currency derivatives	Miscellaneous, net	$	(1,072)	$	(1,300)	$	(1,167)	$	(2,018)

Note 14. Income Taxes

For the three and nine months ended September 30, 2021, income tax expense was $40.7 million and $78.0 million,

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

respectively, representing an effective tax rate of 26% and 23%, respectively, as compared to the federal statutory rate of 21%. For the three and nine months ended September 30, 2021, the effective tax rate differs from the federal statutory rate due primarily to state and local income tax expense, tax expense related to non-deductible compensation and tax expense for an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, partially offset by a discrete tax benefit for excess tax benefits related to stock compensation and a tax benefit from foreign operations.

For the three and nine months ended September 30, 2020, income tax expense was $52.2 million and $95.5 million, respectively, representing an effective tax rate of 43% and 38%, respectively, as compared to the federal statutory rate of 21%. For the three and nine months ended September 30, 2020, the effective tax rate differs from the federal statutory rate due primarily to tax expense from an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, tax expense from foreign operations, state and local income tax expense, tax expense related to non-deductible compensation and tax expense and tax benefit relating to uncertain tax positions (including accrued interest), respectively. The tax benefit relating to uncertain tax positions for the nine months ended September 30, 2020 is primarily due to audit settlements and the filing of state income tax returns under voluntary disclosure agreements. The increase in valuation allowance is primarily due to a change in judgement about the realizability of foreign net operating losses and other deferred tax assets. Management considers the scheduled reversal of deferred tax liabilities (including the effect in available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.

At September 30, 2021, the Company had foreign tax credit carry forwards of approximately $35.9 million, expiring on various dates from 2022 through 2031. These carryforwards have been reduced by a valuation allowance of $35.9 million as it is more likely than not that these carry forwards will not be realized. For the nine months ended September 30, 2021, $1.0 million relating to amortization of tax deductible second component goodwill was realized as a reduction in tax liability (as determined on a 'with-and-without' approach).

Note 15. Commitments and Contingencies

Commitments

As of September 30, 2021, the Company's contractual obligations not reflected on the Company's condensed consolidated balance sheet increased $31.1 million, as compared to December 31, 2020, to $1,043.0 million. The increase primarily relates to additional commitments for program rights.

Legal Matters

On December 17, 2013, Frank Darabont ("Darabont"), Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (together, the "Plaintiffs"), filed a complaint in New York Supreme Court in connection with Darabont's rendering services as a writer, director and producer of the television series entitled The Walking Dead and the agreement between the parties related thereto. Plaintiffs asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, for an accounting and for declaratory relief.

On January 18, 2018, Plaintiffs filed a second action in New York Supreme Court in connection with Darabont’s services on The Walking Dead television series and agreements between the parties related thereto. Plaintiffs asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief. The two actions were consolidated for a joint trial, which was scheduled to begin on April 4, 2022.

On July 16, 2021, the parties entered into a settlement agreement (the “Settlement Agreement”) to resolve the consolidated actions. The Settlement Agreement provides for a cash payment of $200 million (the “Settlement Payment”) to 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 took a charge of approximately $143 million in the quarter ended June 30, 2021 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 approximately $57 million of ordinary course accrued participations. The Settlement Agreement also includes customary provisions included in such agreements, including providing for mutual releases, covenants not to sue, waivers, confidentiality, non-disparagement and indemnification for third party claims. On July 21, 2021, the Plaintiffs filed a stipulation to discontinue the consolidated actions, with prejudice.

On August 14, 2017, Robert Kirkman, Robert Kirkman, LLC, Glen Mazzara, 44 Strong Productions, Inc., David Alpert, Circle of Confusion Productions, LLC, New Circle of Confusion Productions, Inc., Gale Anne Hurd, and Valhalla Entertainment, Inc. f/k/a Valhalla Motion Pictures, Inc. (together, the "California Plaintiffs") filed a complaint in California Superior Court in connection with California Plaintiffs’ rendering of services as writers and producers of the television series entitled The Walking Dead, as well as Fear the Walking Dead and/or Talking Dead, and the agreements between the parties related thereto (the "California Action"). The California Plaintiffs asserted that the Company has been improperly underpaying the California Plaintiffs under their contracts with the Company and they assert claims for breach of contract, breach of the

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

covenant of good faith and fair dealing, inducing breach of contract, and liability for violation of Cal. Bus. & Prof. Code § 17200. The California Plaintiffs seek compensatory and punitive damages and restitution. On August 8, 2019, the judge in the California Action ordered a trial to resolve certain issues of contract interpretation only. Following eight days of trial in February and March 2020, on July 22, 2020, the judge issued a Statement of Decision finding in the Company's favor on all 7 matters of contract interpretation before the court in this first phase trial. On January 20, 2021, the California Plaintiffs filed a second amended complaint, eliminating 8 named defendants and their claims under Cal. Bus. & Prof. Code § 17200. On May 5, 2021, the California Plaintiffs filed a third amended complaint, repleading in part their claims for alleged breach of the covenant of good faith and fair dealing, inducing breach of contract, and certain breach of contract claims. On June 2, 2021, the Company filed a demurrer and motion to strike seeking to dismiss the claim for breach of the implied covenant of good faith and fair dealing and certain tort and breach of contract claims asserted in the third amended complaint. On July 27, 2021 the court granted in part and denied in part the Company's motion. On June 9, 2021, the judge in the California Action set a tentative trial date of November 1, 2021 with regard to claims not addressed in the first phase trial. On September 14, 2021, the judge vacated the November 1, 2021 trial date and set a new trial date of May 9, 2022. The parties have resumed discovery in preparation for the May 9, 2022 trial. The Company believes that the remaining asserted claims are without merit and will vigorously defend against them. At this time, no determination can be made as to the ultimate outcome of this litigation or the potential liability, if any, on the part of the Company.

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

Note 16. Equity Plans

In September 2021, AMC Networks granted 102,145 restricted stock units ("RSUs") under the AMC Networks Inc. Amended and Restated 2016 Employee Stock Plan to its interim chief executive officer. The RSUs vest over a one-year period and the vesting criteria include the achievement of certain performance targets by the Company.

In June 2021, AMC Networks granted 29,916 RSUs under the 2011 Stock Plan for Non-Employee Directors to non-employee directors that vested on the date of grant.

In March 2021, AMC Networks granted 535,278 RSUs to certain executive officers and employees under the AMC Networks Inc. Amended and Restated 2016 Employee Stock Plan. The RSUs vest ratably over a three-year period and the vesting criteria for 178,764 RSUs include the achievement of certain performance targets by the Company.

During the nine months ended September 30, 2021, 617,051 RSUs and 368,296 performance restricted stock units (PRSUs) of AMC Networks Class A Common Stock previously issued to employees of the Company vested. On the vesting date, 263,671 RSUs and 168,712 PRSUs were surrendered to the Company to cover the required statutory tax withholding obligations and 353,380 RSU and 199,584 PRSU new shares of AMC Networks Class A Common Stock were issued. The units surrendered to satisfy the employees' statutory minimum tax withholding obligations for the applicable income and other employment tax had an aggregate value of $34.6 million, which has been reflected as a financing activity in the condensed consolidated statement of cash flows for the nine months ended September 30, 2021.

Share-based compensation expense included in selling, general and administrative expense was $9.5 million and $39.2 million for the three and nine months ended September 30, 2021, respectively and $12.4 million and $43.1 million for the three and nine months ended September 30, 2020, respectively.

As of September 30, 2021, there was $39.1 million of total unrecognized share-based compensation cost related to outstanding unvested share-based awards. The unrecognized compensation cost is expected to be recognized over a weighted-average remaining period of approximately 1.8 years.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 17. Redeemable Noncontrolling Interests

The following table summarizes activity related to redeemable noncontrolling interest for the nine months ended September 30, 2021.


(In thousands)	Nine Months Ended September 30, 2021
December 31, 2020	$	315,649
Net earnings	15,119
Distributions	(12,914)
Distribution related to spin-off transaction	(8,040)
Transfer to noncontrolling interest	(18,367)
September 30, 2021	$	291,447

In connection with the spin-off of the live comedy venue and talent management businesses of Levity Entertainment Group, LLC (see Note 4), $8.0 million of redeemable noncontrolling interests was distributed to the noncontrolling partners. In addition, as part of the transaction, the preexisting put rights of the noncontrolling interest holders were terminated. Accordingly, the remaining $18.4 million of noncontrolling interests was transferred from Redeemable noncontrolling interests to Noncontrolling interests in the condensed consolidated balance sheet.

Note 18. Related Party Transactions

The Company and its related parties routinely enter into transactions with each other in the ordinary course of business. Revenues, net from related parties amounted to $1.2 million and $1.2 million for the three months ended September 30, 2021 and 2020, respectively, and $3.7 million and $3.6 million for the nine months ended September 30, 2021 and 2020, respectively. Amounts charged to the Company, included in selling, general and administrative expenses, pursuant to transactions with its related parties amounted to $0.5 million and $0.5 million for the three months ended September 30, 2021 and 2020, respectively, and $1.5 and $0.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Note 19. Cash Flows

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


(In thousands)	Nine Months Ended September 30,
	2021		2020
Non-Cash Investing and Financing Activities:

Finance lease additions	$	—	$	14,260
Capital expenditures incurred but not yet paid	1,471		2,105
Supplemental Data:
Cash interest paid	99,890		91,940
Income taxes paid, net	48,941		60,355

Note 20. Segment Information

The Company classifies its operations into 2 operating segments: Domestic Operations and International and Other. These operating segments represent strategic business units that are managed separately.

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

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	Three Months Ended September 30, 2021
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Advertising	$	199,982	$	25,354	$	—	$	225,336
Distribution and other	482,764		104,586		(1,920)		585,430
Consolidated revenues, net	$	682,746	$	129,940	$	(1,920)	$	810,766
Operating income (loss)	$	213,299	$	15,564	$	(40,537)	$	188,326
Share-based compensation expense	4,174		545		4,736		9,455
Depreciation and amortization	11,589		5,200		6,622		23,411

Restructuring and other related charges	(135)		800		89		754
Cloud computing amortization	—		—		596		596
Majority-owned equity investees AOI	2,149		—		—		2,149
Adjusted operating income (loss)	$	231,076	$	22,109	$	(28,494)	$	224,691


(In thousands)	Three Months Ended September 30, 2020
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Advertising	$	164,178	$	18,924	$	—	183,102
Distribution and other	382,687		92,474		(4,248)		470,913
Consolidated revenues, net	$	546,865	$	111,398	$	(4,248)	$	654,015
Operating income (loss)	$	179,259	$	3,061	$	(42,843)	139,477
Share-based compensation expense	4,437		919		7,038		12,394
Depreciation and amortization	15,799		4,937		6,811		27,547
Restructuring and other related charges	4,452		—		(46)		4,406

Majority-owned equity investees AOI	1,667		—		—		1,667
Adjusted operating income (loss)	$	205,614	$	8,917	$	(29,040)	$	185,491


(In thousands)	Nine Months Ended September 30, 2021
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Advertising	$	611,406	$	72,892	$	—	$	684,298
Distribution and other	1,284,324		316,492		(11,215)		1,589,601
Consolidated revenues, net	$	1,895,730	$	389,384	$	(11,215)	$	2,273,899
Operating income (loss)	$	517,874	$	32,365	$	(123,949)	$	426,290
Share-based compensation expense	17,105		2,689		19,369		39,163
Depreciation and amortization	36,678		14,477		20,106		71,261
Impairment and other charges	143,000		15,973		—		158,973
Restructuring and other related charges	2,508		5,273		1,753		9,534
Cloud computing amortization	—		—		1,502		1,502
Majority-owned equity investees AOI	6,584		—		—		6,584
Adjusted operating income (loss)	$	723,749	$	70,777	$	(81,219)	$	713,307

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	Nine Months Ended September 30, 2020
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Advertising	$	564,838	$	53,097	$	—	$	617,935
Distribution and other	1,156,852		273,811		(13,917)		1,416,746
Consolidated revenues, net	$	1,721,690	$	326,908	$	(13,917)	$	2,034,681
Operating income (loss)	$	621,446	$	(118,140)	$	(142,057)	$	361,249
Share-based compensation expense	12,005		2,437		28,699		43,141
Depreciation and amortization	38,050		21,396		20,736		80,182
Restructuring and other related charges	7,138		6,239		502		13,879
Impairment charges	—		130,411		—		130,411
Majority-owned equity investees AOI	4,361		—		—		4,361
Adjusted operating income (loss)	$	683,000	$	42,343	$	(92,120)	$	633,223

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).

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


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Inter-segment revenues
Domestic Operations	$	(1,641)	$	(3,988)	$	(8,567)	$	(11,545)
International and Other	(279)		(260)		(2,648)		(2,372)
	$	(1,920)	$	(4,248)	$	(11,215)	$	(13,917)

The table below summarizes revenues based on customer location:


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
United States	$	655,427	$	497,677	$	1,844,901	$	1,646,065
Europe	93,869		110,448		295,460		274,763
Other	61,470		45,890		133,538		113,853
	$	810,766	$	654,015	$	2,273,899	$	2,034,681

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


(In thousands)	September 30, 2021		December 31, 2020
Property and equipment, net
United States	$	203,635	$	239,387
Europe	14,392		15,938
Other	672		720
	$	218,699	$	256,045

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

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

•the level of our revenues;

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

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

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

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

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

•the impact of COVID-19 on the economy and our business, including the measures taken by governmental authorities to address the pandemic, which may precipitate or exacerbate other risks and/or uncertainties;

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

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

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

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

•economic and business conditions and industry trends in the countries in which we operate;

•fluctuations in currency exchange rates and interest rates;

•changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.S. or in the countries in which we operate;

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

•our substantial debt and high leverage;

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

•the level of our expenses;

•the level of our capital expenditures;

•future acquisitions and dispositions of assets;

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

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

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

•the outcome of litigation and other proceedings;

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

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

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

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

•the factors described under Item 1A, "Risk Factors" in our 2020 Annual Report on Form 10-K (the "2020 Form 10-K"), as filed with the Securities and Exchange Commission ("SEC").

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

Introduction

Management's discussion and analysis, or MD&A, of our results of operations and financial condition is provided as a supplement to, and should be read in conjunction with, the unaudited condensed consolidated financial statements and notes thereto included elsewhere herein and our 2020 Form 10-K to enhance the understanding of our financial condition, changes in financial condition and results of our operations. Unless the context otherwise requires, all references to "we," "us," "our," "AMC Networks" or the "Company" refer to AMC Networks Inc., together with its subsidiaries. MD&A is organized as follows:

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

Consolidated Results of Operations. This section provides an analysis of our results of operations for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020. Our discussion is presented on both a consolidated and operating segment basis. Our two operating 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 September 30, 2021, as well as an analysis of our cash flows for the nine months ended September 30, 2021 and 2020. The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations that existed at September 30, 2021 as compared to December 31, 2020.

Critical Accounting Policies and Estimates. This section provides an update, if any, to our significant accounting policies or critical accounting estimates since December 31, 2020.

Business Overview

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 will no longer be allocated to the operating segments. Operating segment information for the prior period has been recast to reflect these changes. The new reporting structure consists of the following two operating segments:

•Domestic Operations: Includes activities of our five national programming networks, our streaming services, AMC Studios operation, IFC Films and AMC Broadcasting & Technology. 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, and ALLBLK), AMC+ and other streaming initiatives. Our AMC Studios operation produces original programming for our programming networks and also licenses such programming worldwide. IFC Films is our film distribution business and AMC Networks Broadcasting & Technology is our technical services business, which 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 unaudited condensed consolidated financial statements for additional information relating to the spin-off of the Levity comedy venues business.

Financial Results Overview

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


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues, net
Domestic Operations	$	682,746	$	546,865	$	1,895,730	$	1,721,690
International and Other	129,940		111,398		389,384		326,908
Inter-segment Eliminations	(1,920)		(4,248)		(11,215)		(13,917)
Consolidated revenues, net	$	810,766	$	654,015	$	2,273,899	$	2,034,681
Operating income (loss)
Domestic Operations	$	213,299	$	179,259	$	517,874	$	621,446
International and Other	15,564		3,061		32,365		(118,140)
Corporate / Inter-segment Eliminations	(40,537)		(42,843)		(123,949)		(142,057)
Consolidated operating income	$	188,326	$	139,477	$	426,290	$	361,249
AOI
Domestic Operations	$	231,076	$	205,614	$	723,749	$	683,000
International and Other	22,109		8,917		70,777		42,343
Corporate / Inter-segment Eliminations	(28,494)		(29,040)		(81,219)		(92,120)
Consolidated AOI	$	224,691	$	185,491	$	713,307	$	633,223

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 depreciation and amortization, cloud computing amortization, share-based compensation expense or benefit, impairment and other charges (including gains or losses on sales or dispositions of businesses), restructuring and other related charges and including the Company’s proportionate share of adjusted operating income (loss) from majority-owned equity method investees. 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 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 consolidated operating income to AOI for the periods indicated:


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating income	$	188,326	$	139,477	$	426,290	$	361,249
Share-based compensation expense	9,455		12,394		39,163		43,141
Depreciation and amortization	23,411		27,547		71,261		80,182
Restructuring and other related charges	754		4,406		9,534		13,879
Impairment and other charges	—		—		158,973		130,411
Cloud computing amortization	596		—		1,502		—
Majority-owned equity investees AOI	2,149		1,667		6,584		4,361
AOI	$	224,691	$	185,491	$	713,307	$	633,223

Domestic Operations

In our Domestic Operations segment, we earn revenue principally from: (i) the distribution of our programming, through our programming networks and owned subscription streaming services, (ii) the sale of advertising, and (iii) the licensing of our original programming to distributors, including the distribution of programming of IFC Films. Distribution revenue primarily includes subscription fees paid by distributors to carry our programming networks and streaming 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.

Programming expense, included in technical and operating expense, represents 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 expense 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 across all of our networks. 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 these costs are amortized based on the individual-film-forecast-computation method.

Most original series require us to make up-front investments, which are often significant amounts. 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 expense.

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 nine months ended September 30, 2021, distribution revenues represented 81% 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 expense, program operating costs and production costs incurred to produce content for third parties are included in technical and operating expense, and represent the largest expense of the International and Other segment. Programming expense primarily consist 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 expense.

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

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, 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.

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 a significant interest in such entity. The noncontrolling owner's interest in the operating results of majority-owned or controlled subsidiaries are reflected in net income attributable to noncontrolling interests in our consolidated statements of operations.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

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


	Three Months Ended September 30,
	2021				2020
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	810,766	100.0	%	$	654,015	100.0	%	$	156,751	24.0	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	378,264		46.7		333,816		51.0		44,448		13.3
Selling, general and administrative	220,011		27.1		148,769		22.7		71,242		47.9
Depreciation and amortization	23,411		2.9		27,547		4.2		(4,136)		(15.0)

Restructuring and other related charges	754		0.1		4,406		0.7		(3,652)		(82.9)
Total operating expenses	622,440		76.8		514,538		78.7		107,902		21.0
Operating income	188,326		23.2		139,477		21.3		48,849		35.0
Other income (expense):
Interest expense, net	(29,149)		(3.6)		(30,424)		(4.7)		1,275		(4.2)

Miscellaneous, net	54		—		11,138		1.7		(11,084)		(99.5)
Total other income (expense)	(29,095)		(3.6)		(19,286)		(2.9)		(9,809)		50.9
Net income from operations before income taxes	159,231		19.6		120,191		18.4		39,040		32.5
Income tax expense	(40,744)		(5.0)		(52,195)		(8.0)		11,451		(21.9)
Net income including noncontrolling interests	118,487		14.6		67,996		10.4		50,491		74.3
Net income attributable to noncontrolling interests	(7,836)		(1.0)		(6,356)		(1.0)		(1,480)		23.3
Net income attributable to AMC Networks' stockholders	$	110,651	13.6	%	$	61,640	9.4	%	$	49,011	79.5	%

Domestic Operations Segment Results

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


	Three Months Ended September 30,
	2021				2020
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	682,746	100.0	%	$	546,865	100.0	%	$	135,881	24.8	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	303,868		44.5		260,330		47.6		43,538		16.7
Selling, general and administrative	154,125		22.6		87,025		15.9		67,100		77.1
Depreciation and amortization	11,589		1.7		15,799		2.9		(4,210)		(26.6)

Restructuring and other related charges	(135)		—		4,452		0.8		(4,587)		(103.0)
Operating income	$	213,299	31.2	%	$	179,259	32.8	%	$	34,040	19.0
Share-based compensation expense	4,174		0.6		4,437		0.8		(263)		(5.9)
Depreciation and amortization	11,589		1.7		15,799		2.9		(4,210)		(26.6)

Restructuring and other related charges	(135)		—		4,452		0.8	%	(4,587)		(103.0)
Majority-owned equity investees AOI	2,149		0.3		1,667		0.3	%	482		28.9
AOI	$	231,076	33.8	%	$	205,614	37.6	%	$	25,462	12.4	%

International and Other Segment Results

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


	Three Months Ended September 30,
	2021				2020
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	129,940	100.0	%	$	111,398	100.0	%	$	18,542	16.6	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	77,333		59.5		77,356		69.4		(23)		—
Selling, general and administrative	31,043		23.9		26,044		23.4		4,999		19.2
Depreciation and amortization	5,200		4.0		4,937		4.4		263		5.3

Restructuring and other related charges	800		0.6		—		—		800		n/m
Operating income	$	15,564	12.0	%	$	3,061	2.7	%	$	12,503	408.5
Share-based compensation expense	545		0.4		919		0.8		(374)		(40.7)
Depreciation and amortization	5,200		4.0		4,937		4.4		263		5.3

Restructuring and other related charges	800		0.6		—		—		800		n/m

AOI	$	22,109	17.0	%	$	8,917	8.0	%	$	13,192	147.9	%

Revenues, net

Revenues, net increased $156.8 million to $810.8 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The net change by segment was as follows:


	Three Months Ended September 30,
(In thousands)	2021		% of total		2020		% of total		$ change		% change
Domestic Operations	$	682,746	84.2	%	$	546,865	83.6	%	$	135,881	24.8	%
International and Other	129,940		16.0		111,398		17.0		18,542		16.6
Inter-segment eliminations	(1,920)		(0.2)		(4,248)		(0.6)		2,328		(54.8)
Consolidated revenues, net	$	810,766	100.0	%	$	654,015	100.0	%	$	156,751	24.0	%

Domestic Operations

The increase in Domestic Operations revenues, net was attributable to the following:


	Three Months Ended September 30,
(In thousands)	2021		% of total		2020		% of total		$ change		% change
Advertising	$	199,982	29.3	%	$	164,178	30.0	%	$	35,804	21.8	%
Distribution and other	482,764		70.7		382,687		70.0		100,077		26.2
	$	682,746	100.0	%	$	546,865	100.0	%	$	135,881	24.8	%

•The increase of $35.8 million in advertising revenues was primarily attributable to higher pricing and ad-supported streaming growth, and an increase in the number of episodes of our original programming, partially offset by lower ratings. Most of our advertising revenues vary based on the number and 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.

•The increase of $100.1 million in distribution and other revenues related to increases in both content licensing revenues and streaming services revenues, partially offset by a decrease in affiliate revenues. Content licensing revenues increased 60% due to a higher number of distributed original programs as compared to the prior comparable period as a result of earlier COVID-19 pandemic production delays. Subscription revenues increased 14% driven by an 83% increase in streaming services revenues attributable to subscriber growth. Subscription revenues vary based on the impact of renewals of affiliation agreements and streaming service subscription trends, 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.

International and Other

The increase in International and Other revenues, net was attributable to the following:


	Three Months Ended September 30,
(In thousands)	2021		% of total		2020		% of total		$ change		% change
Advertising	$	25,354	19.5	%	$	18,924	17.0	%	$	6,430	34.0	%
Distribution and other	104,586		80.5		92,474		83.0		12,112		13.1
	$	129,940	100.0	%	$	111,398	100.0	%	$	18,542	16.6	%

The increase in advertising revenues is primarily related to higher pricing, better ratings and the favorable impact of foreign currency translation. The increase in distribution revenues related to the resumption of production activities at 25/7 Media and increased distribution at AMCNI, as well as the favorable impact of foreign currency translation.

Technical and operating expense (excluding depreciation and amortization)

The components of technical and operating expense primarily include the amortization and impairments or 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 operating costs, such as origination, transmission, uplinking and encryption.

Technical and operating expense (excluding depreciation and amortization) increased $44.4 million to $378.3 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The net change by segment was as follows:


	Three Months Ended September 30,
(In thousands)	2021			2020			$ change		% change
Domestic Operations	$	303,868		$	260,330		$	43,538	16.7	%
International and Other	77,333			77,356			(23)		—
Inter-segment eliminations	(2,937)			(3,870)			933		(24.1)
Total	$	378,264		$	333,816		$	44,448	13.3	%
Percentage of revenues, net	46.7		%	51.0		%

Domestic Operations

The increase in technical and operating expense of $43.5 million was due to an increase in program rights amortization attributable to an increase in the number of episodes of original programming as compared to the prior comparable period. There were no significant program write-offs for three months ended September 30, 2021. There was $19.7 million of program write-offs for three months ended September 30, 2020. 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.

International and Other

Technical and operating expense was flat with an increase at 25/7 Media related to the resumption of production activities offset by a decrease in program rights write-offs at AMCNI as compared to the prior comparable period.

Selling, general and administrative expense

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

Selling, general and administrative expense increased $71.2 million to $220.0 million for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020. The net change by segment was as follows:


	Three Months Ended September 30,
(In thousands)	2021			2020			$ change		% change
Domestic Operations	$	154,125		$	87,025		$	67,100	77.1	%
International and Other	31,043			26,044			4,999		19.2
Corporate / Inter-segment eliminations	34,843			35,700			(857)		(2.4)
Total	$	220,011		$	148,769		$	71,242	47.9	%
Percentage of revenues, net	27.1		%	22.7		%

Domestic Operations

Selling, general and administrative expense increased $67.1 million principally due to subscriber acquisition expenses related to our streaming services and higher advertising expenses.

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

International and Other

Selling, general and administrative expense increased $5.0 million, primarily related to increased selling expenses, including commissions at AMCNI.

Corporate / Inter-segment eliminations

The decrease in corporate charges is due primarily to lower administrative costs and stock-based compensation expense.

Depreciation and amortization

Depreciation and amortization expense decreased $4.1 million to $23.4 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The net change by segment was as follows:


	Three Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Domestic Operations	$	11,589	$	15,799	$	(4,210)	(26.6)	%
International and Other	5,200		4,937		263		5.3
Corporate / Inter-segment Eliminations	6,622		6,811		(189)		(2.8)
	$	23,411	$	27,547	$	(4,136)	(15.0)	%

The decrease in depreciation and amortization expense in the Domestic Operations segment was primarily due to lower depreciation of equipment at our AMC Networks Broadcasting and Technology facilities.

Restructuring and other related charges

Restructuring and other related charges of $0.8 million for the three months ended September 30, 2021 are associated with severance costs at AMCNI.

Restructuring and other related charges of $4.4 million for the three months ended September 30, 2020 primarily related to severance associated with previously announced restructuring activities.

Operating Income (Loss)


	Three Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Domestic Operations	$	213,299	$	179,259	$	34,040	19.0	%
International and Other	15,564		3,061		12,503		408.5
Corporate / Inter-segment Eliminations	(40,537)		(42,843)		2,306		(5.4)
	$	188,326	$	139,477	$	48,849	35.0	%

The increase in operating income at the Domestic Operations segment was primarily attributable to an increase in revenue of $135.9 million partially offset by increases in selling, general and administrative expense of $67.1 million and technical and operating expense of $43.5 million.

The increase in operating income at the International and Other segment was primarily attributable to an increase in revenues of $18.5 million, partially offset by an increases selling, general and administrative expense of $5.0 million.

AOI

The following is a reconciliation of our consolidated operating income to AOI:


	Three Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Operating income	$	188,326	$	139,477	$	48,849	35.0	%
Share-based compensation expense	9,455		12,394		(2,939)		(23.7)
Depreciation and amortization	23,411		27,547		(4,136)		(15.0)

Restructuring and other related charges	754		4,406		(3,652)		(82.9)
Majority-owned equity investees AOI	2,149		1,667		482		28.9
Cloud computing amortization	596		—		596		n/m
AOI	$	224,691	$	185,491	$	39,200	21.1	%

AOI increased $39.2 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The net change by segment was as follows:


	Three Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Domestic Operations	$	231,076	$	205,614	$	25,462	12.4	%
International and Other	22,109		8,917		13,192		147.9
Corporate / Inter-segment Eliminations	(28,494)		(29,040)		546		(1.9)
AOI	$	224,691	$	185,491	$	39,200	21.1	%

The increases in AOI at the Domestic Operations and the International and Other segments were primarily due to the increase in revenues, partially offset by higher technical and operating expenses and higher selling, general, and administrative expenses.

As a result of the factors discussed above impacting the variability in revenues and operating expenses, we expect AOI to vary from quarter to quarter.

Interest expense, net

The decrease in interest expense, net of $1.3 million is primarily due to lower average interest rates on our outstanding senior notes.

Miscellaneous, net

Miscellaneous, net was income of $0.1 million for the three months ended September 30, 2021 as compared to income of $11.1 million for the three months ended September 30, 2020. The decrease in miscellaneous, net income of $11.1 million was primarily related to an unfavorable variance in the foreign currency remeasurement of monetary assets and liabilities (principally intercompany loans) that are denominated in currencies other than the underlying functional currency of the applicable entity and lower gains from marketable equity securities and investments.

Income tax expense

For the three months ended September 30, 2021, income tax expense was $40.7 million representing an effective tax rate of 26%. The effective tax rate differs from the federal statutory rate of 21% primarily due to state and local income tax expense, tax expense related to non-deductible compensation and tax expense for an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, partially offset by a discrete tax benefit for excess tax benefits related to stock compensation and a tax benefit from foreign operations.

For the three months ended September 30, 2020, income tax expense was $52.2 million representing an effective tax rate of 43%. The effective tax rate differs from the federal statutory rate of 21% primarily due to tax expense resulting from an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, tax expense from foreign operations, state and local income tax expense, tax expense related to non-deductible compensation and tax expense relating to uncertain tax positions (including accrued interest). The increase in valuation allowance is primarily due to a change in judgement about the realizability of foreign net operating losses and other deferred tax assets. Management considers the scheduled reversal of deferred tax liabilities (including the effect in available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

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


	Nine Months Ended September 30,
	2021				2020
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	2,273,899	100.0	%	$	2,034,681	100.0	%	$	239,218	11.8	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	997,677		43.9		960,379		47.2		37,298		3.9
Selling, general and administrative	610,164		26.8		488,581		24.0		121,583		24.9
Depreciation and amortization	71,261		3.1		80,182		3.9		(8,921)		(11.1)
Impairment and other charges	158,973		7.0		130,411		6.4		28,562		21.9
Restructuring and other related charges	9,534		0.4		13,879		0.7		(4,345)		(31.3)
Total operating expenses	1,847,609		81.3		1,673,432		82.2		174,177		10.4
Operating income	426,290		18.7		361,249		17.8		65,041		18.0
Other income (expense):
Interest expense, net	(90,060)		(4.0)		(94,007)		(4.6)		3,947		(4.2)
Loss on extinguishment of debt	(22,074)		(1.0)		(2,908)		(0.1)		(19,166)		n/m
Miscellaneous, net	19,634		0.9		(10,088)		(0.5)		29,722		(294.6)
Total other income (expense)	(92,500)		(4.1)		(107,003)		(5.3)		14,503		(13.6)
Net income from operations before income taxes	333,790		14.7		254,246		12.5		79,544		31.3
Income tax expense	(77,980)		(3.4)		(95,490)		(4.7)		17,510		(18.3)
Net income including noncontrolling interests	255,810		11.2		158,756		7.8		97,054		61.1
Net income attributable to noncontrolling interests	(22,253)		(1.0)		(13,488)		(0.7)		(8,765)		65.0
Net income attributable to AMC Networks' stockholders	$	233,557	10.3	%	$	145,268	7.1	%	$	88,289	60.8	%

Domestic Operations Segment Results

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


	Nine Months Ended September 30,
	2021				2020
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	1,895,730	100.0	%	$	1,721,690	100.0	%	$	174,040	10.1	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	784,228		41.4		759,013		44.1		25,215		3.3
Selling, general and administrative	411,442		21.7		296,043		17.2		115,399		39.0
Depreciation and amortization	36,678		1.9		38,050		2.2		(1,372)		(3.6)
Impairment and other charges	143,000		7.5		—		—		143,000		n/m
Restructuring and other related charges	2,508		0.1		7,138		0.4		(4,630)		(64.9)
Operating income	$	517,874	27.3	%	$	621,446	36.1	%	$	(103,572)	(16.7)	%
Share-based compensation expense	17,105		0.9		12,005		0.7		5,100		42.5
Depreciation and amortization	36,678		1.9		38,050		2.2		(1,372)		(3.6)
Impairment and other charges	143,000		7.5		—		—		143,000		n/m
Restructuring and other related charges	2,508		0.1		7,138		0.4		(4,630)		(64.9)
Majority-owned equity investees AOI	6,584		0.3		4,361		0.3		2,223		51.0
AOI	$	723,749	38.2	%	$	683,000	39.7	%	$	40,749	6.0	%

International and Other Segment Results

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


	Nine Months Ended September 30,
	2021				2020
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	389,384	100.0	%	$	326,908	100.0	%	$	62,476	19.1	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	227,437		58.4		211,682		64.8		15,755		7.4
Selling, general and administrative	93,859		24.1		75,320		23.0		18,539		24.6
Depreciation and amortization	14,477		3.7		21,396		6.5		(6,919)		(32.3)
Impairment charges	15,973		4.1		130,411		39.9		(114,438)		(87.8)
Restructuring and other related charges	5,273		1.4		6,239		1.9		(966)		(15.5)
Operating loss	$	32,365	8.3	%	$	(118,140)	(36.1)	%	$	150,505	(127.4)
Share-based compensation expense	2,689		0.7		2,437		0.7		252		10.3
Depreciation and amortization	14,477		3.7		21,396		6.5		(6,919)		(32.3)
Impairment and other charges	15,973		4.1		130,411		39.9		(114,438)		(87.8)
Restructuring and other related charges	5,273		1.4		6,239		1.9		(966)		(15.5)

AOI	$	70,777	18.2	%	$	42,343	13.0	%	$	28,434	67.2	%

Revenues, net

Revenues, net increased $239.2 million to $2,273.9 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The net change by segment was as follows:


	Nine Months Ended September 30,
(In thousands)	2021		% of total		2020		% of total		$ change		% change
Domestic Operations	$	1,895,730	83.4	%	$	1,721,690	84.6	%	$	174,040	10.1	%
International and Other	389,384		17.1		326,908		16.1		62,476		19.1
Inter-segment Eliminations	(11,215)		(0.5)		(13,917)		(0.7)		2,702		(19.4)
Consolidated revenues, net	$	2,273,899	100.0	%	$	2,034,681	100.0	%	$	239,218	11.8	%

Domestic Operations

The increase in Domestic Operations revenues, net was attributable to the following:


	Nine Months Ended September 30,
(In thousands)	2021		% of total		2020		% of total		$ change		% change
Advertising	$	611,406	32.3	%	$	564,838	32.8	%	$	46,568	8.2	%
Distribution and other	1,284,324		67.7		1,156,852		67.2		127,472		11.0
	$	1,895,730	100.0	%	$	1,721,690	100.0	%	$	174,040	10.1	%

•The increase of $46.6 million in advertising revenues was primarily attributable to higher pricing and ad-supported streaming growth, partially offset by a reduction in the number of episodes of our original programming and lower ratings. Most of our advertising revenues vary based on the number and 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.

•The increase of $127.5 million in distribution and other revenues was primarily related to a 17% increase in subscription revenues driven by an increase in subscribers to our streaming services as well as the current year beneficial impact of a distribution agreement renewal. Excluding the current year beneficial impact, subscription revenues increased 14%. The increase in subscription revenues was partially offset by a 5% decrease in content licensing revenues related to the number of distributed original programs as compared to the prior comparable period. Subscription revenues vary based on the impact of renewals of affiliation agreements and streaming service subscription trends, 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.

International and Other

The increase in International and Other revenues, net was attributable to the following:


	Nine Months Ended September 30,
(In thousands)	2021		% of total		2020		% of total		$ change		% change
Advertising	$	72,892	18.7	%	$	53,097	16.2	%	$	19,795	37.3	%
Distribution and other	316,492		81.3		273,811		83.8		42,681		15.6
	$	389,384	100.0	%	$	326,908	100.0	%	$	62,476	19.1	%

The increase in advertising revenues is primarily related to higher pricing and an increase in ratings, as well as the favorable impact of foreign currency translation. The increase in distribution revenues related to the resumption of production activities at 25/7 Media and the favorable impact of foreign currency fluctuations at AMCNI.

Technical and operating expense (excluding depreciation and amortization)

The components of technical and operating expense 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 expense (excluding depreciation and amortization) increased $37.3 million to $997.7 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The net change by segment was as follows:


	Nine Months Ended September 30,
(In thousands)	2021			2020			$ change		% change
Domestic Operations	$	784,228		$	759,013		$	25,215	3.3	%
International and Other	227,437			211,682			15,755		7.4
Inter-segment Eliminations	(13,988)			(10,316)			(3,672)		35.6
Total	$	997,677		$	960,379		$	37,298	3.9	%
Percentage of revenues, net	43.9		%	47.2		%

Domestic Operations

The increase in technical and operating expense of $25.2 million was due to an increase in other direct program costs, partially offset by a decrease in program amortization primarily attributable to the mix of original programming as compared to the prior comparable period. There were no significant program write-offs for the nine months ended September 30, 2021. There was $31.6 million of program write-offs for nine months ended September 30, 2020. Programming write-offs are based on management's periodic assessment of programming usefulness.

International and Other

The increase in technical and operating expense of $15.8 million was primarily due to an increase at 25/7 Media related to the resumption of production activities.

Selling, general and administrative expense

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

Selling, general and administrative expense increased $121.6 million to $610.2 million for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020. The net change by segment was as follows:


	Nine Months Ended September 30,
(In thousands)	2021			2020			$ change		% change
Domestic Operations	$	411,442		$	296,043		$	115,399	39.0	%
International and Other	93,859			75,320			18,539		24.6
Corporate / Inter-segment Eliminations	104,863			117,218			(12,355)		(10.5)
Total	$	610,164		$	488,581		$	121,583	24.9	%
Percentage of revenues, net	26.8		%	24.0		%

Domestic Operations

Selling, general and administrative expense increased $115.4 million principally due to higher advertising and subscriber acquisition expenses related to our streaming services.

International and Other

Selling, general and administrative expense increased $18.5 million primarily related to increased selling expenses, including commissions at AMCNI, partially offset by a decrease in administrative expense at 25/7 Media related to the temporary closure of comedy venues (until the spin-off in March 2021) as a result of the COVID-19 pandemic.

Corporate / Inter-segment eliminations

The decrease in corporate charges is due primarily to lower stock-based compensation expense and lower administrative costs.

Depreciation and amortization

Depreciation and amortization expense decreased $8.9 million to $71.3 million for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020. The net change by segment was as follows:


	Nine Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Domestic Operations	$	36,678	$	38,050	$	(1,372)	(3.6)	%
International and Other	14,477		21,396		(6,919)		(32.3)
Corporate / Inter-segment Eliminations	20,106		20,736		(630)		(3.0)
	$	71,261	$	80,182	$	(8,921)	(11.1)	%

The decrease in depreciation and amortization expense in the International and Other segment was primarily 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 our obligations, principally related to leases. As a result of this divestiture, the Company recognized a loss on the disposal of $16.1 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.

In June 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 as of June 30, 2020. 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 $105.3 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.

Restructuring and other related charges

Restructuring and other related charges of $9.5 million for the nine months ended September 30, 2021 consisted of $4.3 million of severance costs associated with the restructuring plan announced in November 2020 and $5.2 million at AMCNI related to severance costs and the termination of distribution in certain international territories.

Restructuring and other related charges of $13.9 million for the nine months ended September 30, 2020 primarily consisted of charges at AMCNI of $6.2 million related to costs associated with termination of distribution in certain territories and charges of $7.6 million related to severance associated with previously announced restructuring activities.

Operating Income (Loss)


	Nine Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Domestic Operations	$	517,874	$	621,446	$	(103,572)	(16.7)	%
International and Other	32,365		(118,140)		150,505		(127.4)
Corporate / Inter-segment Eliminations	(123,949)		(142,057)		18,108		(12.7)
	$	426,290	$	361,249	$	65,041	18.0	%

The decrease in operating income at the Domestic Operations segment was primarily attributable to the $143.0 million charge taken in connection with the Settlement Agreement discussed above, as well as increases in selling, general and administrative expense of $115.4 million and technical and operating expense of $25.2 million, partially offset by an increase in revenue of $174.0 million.

The increase in operating income at the International and Other segment was primarily attributable to a decreases in impairment and other charges of $114.4 million, as well as an increase in revenues of $62.5 million, partially offset by increases in technical and operating expense of $15.8 million, and selling, general and administrative expense of $18.5 million.

AOI

The following is a reconciliation of our consolidated operating income to AOI:


	Nine Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Operating income	$	426,290	$	361,249	$	65,041	18.0	%
Share-based compensation expense	39,163		43,141		(3,978)		(9.2)
Depreciation and amortization	71,261		80,182		(8,921)		(11.1)
Impairment and other charges	158,973		130,411		28,562		21.9
Restructuring and other related charges	9,534		13,879		(4,345)		(31.3)
Majority-owned equity investees AOI	6,584		4,361		2,223		51.0
Cloud computing amortization	1,502		—		1,502		n/m
AOI	$	713,307	$	633,223	$	80,084	12.6	%

AOI increased $80.1 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The net change by segment was as follows:


	Nine Months Ended September 30,
(In thousands)	2021		2020		$ change		% change
Domestic Operations	$	723,749	$	683,000	$	40,749	6.0	%
International and Other	70,777		42,343		28,434		67.2
Corporate / Inter-segment Eliminations	(81,219)		(92,120)		10,901		(11.8)
AOI	$	713,307	$	633,223	$	80,084	12.6	%

The increase in AOI at the Domestic Operations segment and the International and Other segment was primarily due to the increase in revenues partially offset by higher selling, general, and administrative expenses and higher technical and operating expenses.

As a result of the factors discussed above impacting the variability in revenues and operating expenses, we expect AOI to vary from quarter to quarter.

Interest expense, net

The decrease in interest expense, net of $3.9 million is primarily due to lower average interest rates on our outstanding senior notes.

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 quarter ended March 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 outstanding $600 million principal amount of our 4.75% Notes due December 2022. The loss on extinguishment of debt for the nine months ended March 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 increase in miscellaneous income, net of $29.7 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 was primarily related to a 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, as well as a net gain associated with various investments compared to the prior year.

Income tax expense

For the nine months ended September 30, 2021, income tax expense was $78.0 million representing an effective tax rate of 23%. The effective tax rate differs from the federal statutory rate of 21% primarily due to state and local income tax expense, tax expense related to non-deductible compensation and tax expense for an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, partially offset by a discrete tax benefit for excess tax benefits related to stock compensation and a tax benefit from foreign operations.

For the nine months ended September 30, 2020, income tax expense was $95.5 million representing an effective tax rate of 38%. The effective tax rate differs from the federal statutory rate of 21% primarily due to tax expense resulting from an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, tax expense from foreign operations, state and local income tax expense, tax expense related to non-deductible compensation, partially offset by a tax benefit relating to uncertain tax positions (including accrued interest). The tax benefit relating to uncertain tax positions is primarily due to audit settlements and the filing of state income tax returns under voluntary disclosure agreements. The increase in valuation allowance is primarily due to a change in judgement about the realizability of foreign net operating losses and other deferred tax assets. Management considers the scheduled reversal of deferred tax liabilities (including the effect in available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.

Liquidity and Capital Resources

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 February 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 December 2022 and (ii) $600 million principal amount of the Company’s 5.00% senior notes due April 2024 on February 26, 2021 (the "Redemption Date"). The 4.75% senior notes due December 2022 were redeemed at a redemption price of 100.000% of the principal amount of such notes and the 5.00% senior notes due April 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 our outstanding shares of common stock (the "Stock Repurchase Program"). The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. For the nine months ended September 30, 2021, we did not repurchase any of our Class A common stock. As of September 30, 2021, we had $135.3 million of authorization remaining 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 September 30, 2021, our consolidated cash and cash equivalents balance includes approximately $273.0 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.

Our level of debt could have important consequences on our business including, but not limited to, increasing our vulnerability to general adverse economic and industry conditions, limiting the availability of our cash flow to fund future programming investments, capital expenditures, working capital, business activities and other general corporate requirements and limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate. For information relating to our outstanding debt obligations, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Debt Financing Agreements" of our 2020 Form 10-K.

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

The revolving credit facility was not drawn upon at September 30, 2021. The total undrawn revolver commitment is available to be drawn for our general corporate purposes.

AMC Networks was in compliance with all of its debt covenants as of September 30, 2021.

Cash Flow Discussion

The following table is a summary of cash flows provided by (used in) operating, investing and financing activities for the nine months ended September 30,:


(In thousands)	Nine Months Ended September 30,
	2021		2020
Cash provided by operating activities	$	43,984	$	644,087
Cash provided by (used in) investing activities	30,880		(24,427)
Cash used in financing activities	(66,619)		(364,744)
Net increase in cash and cash equivalents	$	8,245	$	254,916

Operating Activities

Net cash provided by operating activities amounted to $44.0 million for the nine months ended September 30, 2021 as compared to $644.1 million for the nine months ended September 30, 2020. Net cash provided by operating activities for the nine months ended September 30, 2021 primarily resulted from $1,050.9 million of net income before amortization of program rights, depreciation and amortization, and other non-cash items, as well as a decrease in accounts receivable of $38.5 million and an increase in accounts payable of $12.1 million, which were partially offset by payments for program rights of $967.2 million, an increase in deferred carriage fees of $29.2 million, and an increase in prepaid expense and other assets of $62.8 million. Changes in all other assets and liabilities resulted in an increase of $1.7 million.

Net cash provided by operating activities amounted to $644.1 million for the nine months ended September 30, 2020 as

compared to $400.4 million for the nine months ended September 30, 2019. Net cash provided by operating activities for the nine months ended September 30, 2020 primarily resulted from $1,087.2 million of net income before amortization of program rights, depreciation and amortization, and other non-cash items, which was partially offset by payments for program rights of $565.3 million, a decrease in accounts payable, accrued expenses and other liabilities of $49.3 million primarily related to lower employee related liabilities and an increase in deferred carriage fees payable of $15.1 million. In addition, net cash provided by operating activities increased as a result of a decrease in accounts receivable of $92.3 million, a decrease in prepaid expense and other assets of $79.1 million primarily related to a decrease in long-term receivables and an increase of $17.3 million in income taxes payable. Changes in all other assets and liabilities resulted in a decrease of $2.2 million.

Investing Activities

Net cash provided by (used in) investing activities for the nine months ended September 30, 2021 and 2020 was $30.9 million and $(24.4) million, respectively. For the nine months ended September 30, 2021, cash provided by investing activities included proceeds received from the sale of an investment of $95.4 million and the collection of a loan for $20.0 million, partially offset by the acquisition of equity securities of $28.4 million, payments for the acquisition of a business of $19.1 million, and capital expenditures of $30.0 million. All other changes in investing activities resulted in an decrease of $7.0 million. For the nine months ended September 30, 2020, cash used in investing activities included capital expenditures of $35.0 million, partially offset by partial proceeds received from the sale of an investment of $10.0 million. All other changes in investing activities resulted in an increase of $0.6 million.

Financing Activities

Net cash used in financing activities amounted to $66.6 million for the nine months ended September 30, 2021 and 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 $29.0 million, taxes paid in lieu of shares issued for equity-based compensation of $34.6 million, distributions to noncontrolling interests of $14.9 million, and payments on finance leases of $2.9 million, partially offset by proceeds from the exercise of stock options of $12.1 million and contributions from noncontrolling interests of $2.7 million.

Net cash used in financing activities amounted to $364.7 million for the nine months ended September 30, 2020 and primarily consisted of principal payments, net of proceeds, on long-term debt (including the redemption of $200 million of 4.75% Notes due 2022), of $236.5 million, purchases of our common stock of $102.9 million, taxes paid in lieu of shares issued for equity-based compensation of $8.9 million, distributions to noncontrolling interests of $14.0 million, and payments on finance leases of $2.4 million.

Contractual Obligations

As of September 30, 2021, our contractual obligations not reflected on the condensed consolidated balance sheet increased $31.1 million, as compared to December 31, 2020, to $1,043.0 million. The increase primarily relates to additional commitments for program rights.

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 September 30, 2021 included $400 million of 5.00% Notes due April 2024, $800.0 million of 4.75% Notes due August 2025, and $1.0 billion of 4.25% Notes due February 2029 (collectively, the “notes”). The notes were issued by AMC Networks and are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of AMC Networks’ existing and future domestic restricted subsidiaries, subject to certain exceptions (each, a “Guarantor Subsidiary,” and collectively, the “Guarantor Subsidiaries”). The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law. A guarantee of the notes by a Guarantor Subsidiary is subject to release in the following circumstances: (i) any sale or other disposition of all of the capital stock of a Guarantor Subsidiary to a person that is not (either before or after giving effect to such transaction) a restricted subsidiary, in compliance with the terms of the applicable indenture; (ii) the designation of a restricted subsidiary as an “Unrestricted Subsidiary” under the applicable indenture; or (iii) the release or discharge of the guarantee (including the guarantee under the AMC Networks’ credit agreement) which resulted in the creation of the note guarantee (provided that such Guarantor Subsidiary does not have any preferred stock outstanding at such time that is not held by AMC Networks or another Guarantor Subsidiary).

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

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

Summarized Financial Information


Income Statement
(In thousands)	Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	Parent Company		Guarantor Subsidiaries		Parent Company		Guarantor Subsidiaries
Revenues	$	—	$	1,572,327	$	—	$	1,403,731
Operating expenses	—		1,211,830		—		976,117
Operating income	$	—	$	360,497	$	—	$	427,614
Income before income taxes	$	297,357	$	422,489	$	228,499	$	341,365
Net income	233,556		415,950		145,268		334,838


Balance Sheet	September 30, 2021				December 31, 2020
(In thousands)	Parent Company		Guarantor Subsidiaries		Parent Company		Guarantor Subsidiaries
Assets
Amounts due from subsidiaries	$	—	$	—	$	25,749	$	74,649
Current assets	7,412		1,151,051		35,424		1,291,630
Non-current assets	3,974,545		3,593,220		3,729,996		3,151,581

Liabilities and equity:
Amounts due to subsidiaries	$	1,126	$	6,679	$	—	$	27,091
Current liabilities	65,191		563,435		124,886		545,105
Non-current liabilities	3,079,738		330,247		3,023,726		300,449

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 2 to the Company's Consolidated Financial Statements included in our 2020 Form 10-K. There have been no significant changes in our significant accounting policies since December 31, 2020.

We discuss our critical accounting estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our 2020 Form 10-K. There have been no significant changes in our critical accounting estimates since December 31, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Fair Value of Debt

Based on the level of interest rates prevailing at September 30, 2021, the carrying value of our fixed rate debt of $2.17 billion was less than its fair value of $2.22 billion by approximately $45.2 million. The fair value of these financial instruments is estimated based on reference to quoted market prices for these or comparable securities. A hypothetical 100 basis point decrease in interest rates prevailing at September 30, 2021 would increase the estimated fair value of our fixed rate debt by approximately $73.6 million to approximately $2.29 billion.

Managing our Interest Rate Risk

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

As of September 30, 2021, we had $2.8 billion of debt outstanding (excluding finance leases), of which $0.7 billion is outstanding under our loan facility and is subject to variable interest rates (before consideration of the interest rate swaps contracts described below).

As of September 30, 2021, we had interest rate swap contracts outstanding with notional amounts aggregating $100 million. The aggregate fair value of interest rate swap contracts at September 30, 2021 was a net liability of $0.6 million. As a result of these transactions, the interest rate paid on approximately 80% of our debt (excluding finance leases) as of September 30, 2021 is effectively fixed (77% being fixed rate obligations and 3% effectively fixed through utilization of these interest rate swap contracts).

A hypothetical 100 basis point increase in interest rates prevailing at September 30, 2021 would not have a material impact on our annual interest expense.

Managing our Foreign Currency Exchange Rate Risk

We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our subsidiaries' respective functional currencies (non-functional currency risk), such as affiliation agreements, programming contracts, certain trade receivables and accounts payable (including intercompany amounts) that are denominated in a currency other than the applicable functional currency. Changes in exchange rates with respect to amounts recorded in our consolidated balance sheets related to these items will result in unrealized (based upon period-end exchange rates) or realized foreign currency transaction gains and losses upon settlement of the transactions. Moreover, to the extent that our revenue, costs and expenses are denominated in currencies other than our respective functional currencies, we will experience fluctuations in our revenue, costs and expenses solely as a result of changes in foreign currency exchange rates. The Company recognized a $0.4 million loss for the three months ended September 30, 2021 and a $6.1 million gain for the nine months ended September 30, 2021 related to foreign currency transactions. Such amounts are included in miscellaneous, net in the condensed consolidated statement of income.

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

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

a negative impact on our comprehensive income (loss) and equity with respect to our holdings solely as a result of changes in foreign currency exchange rates.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation as of September 30, 2021, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

During the three months ended September 30, 2021, there were no changes in the Company's internal control over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 15, Commitments and Contingencies to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of our legal proceedings.

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

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

For the nine months ended September 30, 2021, the Company did not repurchase any of its Class A common stock. As of September 30, 2021, the Company had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

Item 6. Exhibits.

(a)Index to Exhibits.


10.1			Amendment , dated August 23, 2021, to Amended and Restated Employment Agreement, dated December 11, 2020, by and between AMC Networks Inc. and Joshua W. Sapan

10.2			Employment Agreement, dated August 23, 2021, by and between AMC Networks Inc. and Matthew Blank

10.3			Employment Agreement, dated August 24, 2021, by and between AMC Networks Inc. and Michael J. Sherin III

10.4			Separation Agreement, dated September 28, 2021, by and between AMC Networks Inc. and Edward A. Carroll

22			Guarantor Subsidiaries of the Registrant

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

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

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

101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema Document.

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF			XBRL Taxonomy Extension Definition Linkbase.

101.LAB			XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

SIGNATURES

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

AMC Networks Inc.

Date:

November 5, 2021

By:

/s/ Christina Spade

Christina Spade

Executive Vice President and Chief Financial Officer

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AMC Networks (AMCX) 10-Q2021 Q3 Quarterly report

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