Quarterly Report (10-q)

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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 June 30, 2020


☐			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 and posted 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 and post 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 July 24, 2020:


Class A Common Stock par value $0.01 per share			40,557,330
Class B Common Stock par value $0.01 per share			11,484,408

AMC NETWORKS INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Stockholders' Equity			4
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			46
Item 4. Controls and Procedures			47
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			48
Item 1A. Risk Factors			48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			49
Item 6. Exhibits			49
SIGNATURES			50

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	June 30, 2020		December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	889,887	$	816,170
Accounts receivable, trade (less allowance for doubtful accounts of $9,440 and $5,733)	796,834		857,143
Current portion of program rights, net	17,354		426,624
Prepaid expenses and other current assets	189,683		230,360
Total current assets	1,893,758		2,330,297
Property and equipment, net of accumulated depreciation of $235,687 and $347,302	259,783		283,752
Program rights, net	1,370,500		1,038,060
Intangible assets, net	425,233		524,531
Goodwill	665,890		701,980
Deferred tax asset, net	55,792		51,545
Operating lease right-of-use asset	154,676		170,056
Other assets	480,324		496,465
Total assets	$	5,305,956	$	5,596,686
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	89,971	$	94,306
Accrued liabilities	245,281		251,214
Current portion of program rights obligations	286,143		304,692
Deferred revenue	58,871		63,921
Current portion of long-term debt	81,000		56,250
Current portion of lease obligations	33,179		33,959
Total current liabilities	794,445		804,342
Program rights obligations	222,631		239,813
Long-term debt	2,807,890		3,039,979
Lease obligations	214,334		211,047
Deferred tax liability, net	150,046		136,911
Other liabilities	133,933		163,638
Total liabilities	4,323,279		4,595,730
Commitments and contingencies
Redeemable noncontrolling interests	307,532		309,451
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 64,348 and 63,886 shares issued and 40,557 and 44,078 shares outstanding, respectively	643		639
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	308,288		286,491
Accumulated earnings	1,691,100		1,609,428
Treasury stock, at cost (23,790 and 19,808 shares Class A Common Stock, respectively)	(1,166,119)		(1,063,181)
Accumulated other comprehensive loss	(182,111)		(167,711)
Total AMC Networks stockholders' equity	651,916		665,781
Non-redeemable noncontrolling interests	23,229		25,724
Total stockholders' equity	675,145		691,505
Total liabilities and stockholders' equity	$	5,305,956	$	5,596,686

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues, net	$	646,291	$	772,299	$	1,380,666	$	1,556,520
Operating expenses:
Technical and operating (excluding depreciation and amortization)	282,503		385,623		626,563		725,771
Selling, general and administrative	155,163		173,364		339,812		345,876
Depreciation and amortization	25,905		25,893		52,635		49,949
Impairment charges	130,411		—		130,411		—
Restructuring and other related charges	3,507		17,162		9,473		19,804
Total operating expenses	597,489		602,042		1,158,894		1,141,400
Operating income	48,802		170,257		221,772		415,120
Other income (expense):
Interest expense	(34,301)		(39,716)		(71,865)		(79,361)
Interest income	3,727		4,745		8,282		8,945
Loss on extinguishment of debt	—		—		(2,908)		—
Miscellaneous, net	8,713		(2,697)		(21,226)		(15,482)
Total other (expense) income	(21,861)		(37,668)		(87,717)		(85,898)
Income from operations before income taxes	26,941		132,589		134,055		329,222
Income tax (expense) benefit	(9,707)		1,396		(43,295)		(45,080)
Net income including noncontrolling interests	17,234		133,985		90,760		284,142
Net income attributable to noncontrolling interests	(2,273)		(5,242)		(7,132)		(12,002)
Net income attributable to AMC Networks' stockholders	$	14,961	$	128,743	$	83,628	$	272,140

Net income per share attributable to AMC Networks' stockholders:
Basic	$	0.29	$	2.28	$	1.55	$	4.81
Diluted	$	0.28	$	2.25	$	1.54	$	4.73

Weighted average common shares:
Basic	52,311		56,590		53,894		56,589
Diluted	52,797		57,335		54,429		57,529

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income including noncontrolling interests	$	17,234	$	133,985	$	90,760	$	284,142
Other comprehensive income (loss):
Foreign currency translation adjustment	14,190		553		(14,092)		(5,210)
Unrealized gain (loss) on interest rate swaps	341		(1,625)		(1,656)		(2,263)
Other comprehensive income (loss), before income taxes	14,531		(1,072)		(15,748)		(7,473)
Income tax (expense) benefit	(79)		374		386		523
Other comprehensive income (loss), net of income taxes	14,452		(698)		(15,362)		(6,950)
Comprehensive income	31,686		133,287		75,398		277,192
Comprehensive income attributable to noncontrolling interests	(2,472)		(5,033)		(6,170)		(11,831)
Comprehensive income attributable to AMC Networks' stockholders	$	29,214	$	128,254	$	69,228	$	265,361

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, March 31, 2020	$	643	$	115	$	282,153	$	1,676,139	$	(1,149,138)	$	(196,364)	$	613,548	$	23,848	$	637,396
Net income attributable to AMC Networks’ stockholders	—		—		—		14,961		—		—		14,961		—		14,961
Net loss attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		(818)		(818)


Settlement of treasury stock	—		—		10,988		—		—		—		10,988		—		10,988
Other comprehensive income	—		—		—		—		—		14,253		14,253		199		14,452
Share-based compensation expense	—		—		15,235		—		—		—		15,235		—		15,235


Treasury stock acquired	—		—		—		—		(16,981)		—		(16,981)		—		(16,981)
Restricted stock units converted to shares	—		—		(88)		—		—		—		(88)		—		(88)
Balance, June 30, 2020	$	643	$	115	$	308,288	$	1,691,100	$	(1,166,119)	$	(182,111)	$	651,916	$	23,229	$	675,145


	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	—		—		—		83,628		—		—		83,628		—		83,628
Net loss attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		(1,085)		(1,085)
Adoption of ASU 2016-13, credit losses	—		—		—		(1,956)		—		—		(1,956)		—		(1,956)
Distributions to noncontrolling member	—		—		—		—		—		—		—		(448)		(448)

Other comprehensive loss	—		—		—		—		—		(14,400)		(14,400)		(962)		(15,362)
Share-based compensation expense	—		—		30,747		—		—		—		30,747		—		30,747


Treasury stock acquired	—		—		—		—		(102,938)		—		(102,938)		—		(102,938)
Restricted stock units converted to shares	4		—		(8,950)		—		—		—		(8,946)		—		(8,946)
Balance, June 30, 2020	$	643	$	115	$	308,288	$	1,691,100	$	(1,166,119)	$	(182,111)	$	651,916	$	23,229	$	675,145

See accompanying notes to 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, March 31, 2019	$	634	$	115	$	242,322	$	1,372,339	$	(993,574)	$	(166,446)	$	455,390	$	29,147	$	484,537
Net income attributable to AMC Networks’ stockholders	—		—		—		128,743		—		—		128,743		—		128,743
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		128		128
Distributions to noncontrolling member	—		—		—		—		—		—		—		(2,374)		(2,374)


Treasury stock not yet settled	—		—		(832)		—		—		—		(832)		—		(832)

Other comprehensive loss	—		—		—		—		—		(698)		(698)		(208)		(906)

Share-based compensation expense	—		—		16,725		—		—		—		16,725		—		16,725
Treasury stock acquired	—		—		—		—		(57,448)		—		(57,448)		—		(57,448)
Restricted stock units converted to shares	5		—		(65)		—		—		—		(60)		—		(60)
Balance, June 30, 2019	$	639	$	115	$	258,150	$	1,501,082	$	(1,051,022)	$	(167,144)	$	541,820	$	26,693	$	568,513


	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, 2018	$	633	$	115	$	239,767	$	1,228,942	$	(992,583)	$	(160,194)	$	316,680	$	28,528	$	345,208
Net income attributable to AMC Networks’ stockholders	—		—		—		272,140		—		—		272,140		—		272,140
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		1,070		1,070
Distributions to noncontrolling member	—		—		—		—		—		—		—		(2,735)		(2,735)


Treasury stock not yet settled	—		—		(832)		—		—		—		(832)		—		(832)
Other comprehensive loss	—		—		—		—		—		(6,950)		(6,950)		(170)		(7,120)
Share-based compensation expense	—		—		36,624		—		—		—		36,624		—		36,624
Proceeds from the exercise of stock options	—		—		4,630		—		—		—		4,630		—		4,630
Treasury stock acquired	—		—		986		—		(58,439)		—		(57,453)		—		(57,453)
Restricted stock units converted to shares	6		—		(23,025)		—		—		—		(23,019)		—		(23,019)
Balance, June 30, 2019	$	639	$	115	$	258,150	$	1,501,082	$	(1,051,022)	$	(167,144)	$	541,820	$	26,693	$	568,513

See accompanying notes to consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income including noncontrolling interests	$	90,760	$	284,142
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	52,635		49,949
Impairment charges	130,411		—
Share-based compensation expense related to equity classified awards	30,747		36,624
Non-cash restructuring and other related charges	6,126		14,026
Amortization and write-off of program rights	415,255		468,987
Amortization of deferred carriage fees	13,749		7,761
Unrealized foreign currency transaction loss (gain)	13,941		(647)
Amortization of deferred financing costs and discounts on indebtedness	4,088		3,947
Loss on extinguishment of debt	2,908		—
Bad debt expense	1,744		2,937
Deferred income taxes	10,437		(40,065)
Write-down of non-marketable equity securities and note receivable	20,000		17,741
Other, net	(15,943)		(2,057)
Changes in assets and liabilities:
Accounts receivable, trade (including amounts due from related parties, net)	55,365		(9,011)
Prepaid expenses and other assets	45,953		(40,017)
Program rights and obligations, net	(387,027)		(443,519)
Income taxes payable	256		8,948
Deferred revenue	(5,086)		1,107
Deferred carriage fees, net	(15,995)		(13,597)
Accounts payable, accrued liabilities and other liabilities	(45,412)		(58,319)
Net cash provided by operating activities	424,912		288,937
Cash flows from investing activities:
Capital expenditures	(22,172)		(49,463)
Return of capital from investees	924		5,908
Acquisition of investment securities	(1,250)		—
Principal payment received on loan to investee	2,500		—
Proceeds from sale of investments	10,000		—
Net cash used in investing activities	(9,998)		(43,555)
Cash flows from financing activities:
Proceeds from the issuance of long-term debt	6,000		—
Principal payments on long-term debt	(218,750)		(2,717)
Deemed repurchases of restricted stock units	(8,946)		(23,019)
Purchase of treasury stock	(102,938)		(58,440)
Proceeds from stock option exercises	—		4,630
Principal payments on finance lease obligations	(1,575)		(2,590)
Distributions to noncontrolling interests	(10,607)		(10,129)
Net cash used in financing activities	(336,816)		(92,265)
Net increase in cash and cash equivalents	78,098		153,117
Effect of exchange rate changes on cash and cash equivalents	(4,381)		(1,661)
Cash and cash equivalents at beginning of period	816,170		554,886
Cash and cash equivalents at end of period	$	889,887	$	706,342

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") own and operate entertainment businesses and assets. The Company is comprised of two operating segments:

•National Networks: Includes activities of our five national programming networks, AMC Studios operations and AMC Broadcasting & Technology. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC and SundanceTV and also include our AMC Premiere service. Our AMC Studios operations produces original programming for our programming networks and also licenses such program rights worldwide. 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; AMC Networks SVOD, consisting of our targeted subscription streaming services (Acorn TV, Shudder, Sundance Now, UMC) and other subscription video on demand ("SVOD") initiatives; Levity, our production services and comedy venues business; and IFC Films, our independent film distribution 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, 2019 contained in the Company's Annual Report on Form 10-K ("2019 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, 2020.

Risks and Uncertainties

In March 2020, the World Health Organization characterized the novel coronavirus ("COVID-19") a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy.

The impact of COVID-19 and measures to prevent its spread are affecting our businesses in a number of ways. Beginning in mid-March, the Company experienced adverse advertising sales impacts, suspended content production, which has led to delays in the creation and availability of substantially all of its programming, and the temporary closure of its comedy venues. Operationally, nearly all Company employees are working remotely, and the Company has restricted business travel. If significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions or other restrictions in connection with the COVID-19 pandemic, the impact of the pandemic on our businesses could be exacerbated.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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 a vaccine, 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

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, 2020, the Company adopted Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, which changed the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking "expected loss" model that would generally result in the earlier recognition of allowances for losses. The Company adopted the standard using the modified retrospective approach and recorded a decrease to opening retained earnings of $2.0 million, after taxes, for the cumulative-effect of the adoption.

Effective January 1, 2020, the Company adopted FASB ASU No. 2018-13, Fair Value Measurement (Topic 820). The standard changed the disclosure requirements related to transfers between Level I and II assets, as well as several aspects surrounding the valuation process and unrealized gains and losses related to Level III assets. The adoption of the standard did not have any effect on the Company's consolidated financial statements.

Effective January 1, 2020, the Company adopted FASB ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The standard amended prior guidance to align the accounting for costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs associated with developing or obtaining internal-use software. Capitalized implementation costs must be expensed over the term of the hosting arrangement and presented in the same line item in the income statement as the fees associated with the hosting element (service) of the arrangement. The adoption of the standard did not have a material effect on the Company's consolidated financial statements.

Effective January 1, 2020, the Company adopted FASB ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials. The standard aligns the accounting for production costs of episodic television series with the accounting for production costs of films. In addition, the standard modifies certain aspects of the capitalization, impairment, presentation and disclosure requirements in Accounting Standards Codification (“ASC”) 926-20 and the impairment, presentation and disclosure requirements in ASC 920-350. The Company adopted the standard on a prospective basis. See Note 5 for further information.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 - Income Taxes. These changes are effective for the first quarter of 2021, with early adoption permitted. The Company is currently evaluating the impact the adoption will have on its consolidated financial statements.

Note 2. Revenue Recognition

Transaction Price Allocated to Future Performance Obligations

As of June 30, 2020, 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.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Contract Balances from Contracts with Customers

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


(In thousands)	June 30, 2020		December 31, 2019
Balances from contracts with customers:
Accounts receivable (including long-term, included in Other assets)	$	1,056,628	$	1,121,834
Contract assets, short-term (included in Other current assets)	5,011		7,283
Contract assets, long-term (included in Other assets)	2,547		9,964
Contract liabilities (Deferred revenue)	58,871		63,921

Revenue recognized for the six months ended June 30, 2020 relating to the contract liability at December 31, 2019 was $28.5 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 June 30,						Six Months Ended June 30,
		2020		2019		2020		2019
Basic weighted average common shares outstanding	52,311		56,590		53,894		56,589
Effect of dilution:
Stock options	—		15		—		24
Restricted stock units	486		730		535		916
Diluted weighted average common shares outstanding	52,797		57,335		54,429		57,529

Approximately 1.2 million and 1.5 million restricted stock units outstanding as of June 30, 2020 and June 30, 2019, respectively, have been excluded from diluted weighted average common shares outstanding since a performance condition for these awards was not met in each of the respective periods. As of June 30, 2020 and June 30, 2019, 0.7 million and 0.3 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 six months ended June 30, 2020, the Company repurchased 4.0 million shares of its Class A Common Stock at an average purchase price of approximately $25.85 per share. As of June 30, 2020, the Company has $385.9 million of authorization remaining for repurchase under the Stock Repurchase Program.

Note 4. Restructuring and Other Related Charges

Restructuring and other related charges of $3.5 million and $9.5 million for the three and six months ended June 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.

Restructuring and other related charges of $17.2 million and $19.8 million for the three and six months ended June 30, 2019, respectively, primarily related to the direct to consumer re-organization as well as severance and other personnel related costs incurred at AMCNI associated with the termination of distribution in certain territories.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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


(In thousands)	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020				2019
National Networks	$	1,214		$	274		$	2,723			$	576
International & Other	2,293			16,888			6,750				19,923
Inter-segment eliminations	—			—			—				(695)
Total restructuring and other related charges	$	3,507		$	17,162		$	9,473			$	19,804

The following table summarizes the accrued restructuring costs:


(In thousands)	Severance and employee-related costs		Other exit costs		Total
December 31, 2019	$	27,407	$	221	$	27,628
Charges	5,157		4,316		9,473
Cash payments	(22,181)		(191)		(22,372)
Non-cash adjustments	(1,810)		(4,316)		(6,126)
Currency translation	1		(1)		—
Balance, June 30, 2020	$	8,574	$	29	$	8,603

Accrued restructuring costs of $8.6 million are included in accrued liabilities in the condensed consolidated balance sheet at June 30, 2020.

Note 5. Program Rights

Effective January 1, 2020, the Company adopted FASB ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials. The new guidance impacts the Company as follows:

•Allows for the classification of acquired/licensed program rights as long-term assets. Previously, the Company reported a portion of these rights in current assets. Advances for live programming rights made prior to the live event and acquired/licensed program rights with license terms of less than one year continue to be reported in current assets.

•Aligns the capitalization of production costs for episodic television programs with the capitalization of production costs for theatrical content. Previously, theatrical content production costs could be fully capitalized while episodic television production costs were generally limited to the amount of contracted revenues.

•Introduces the concept of “predominant monetization strategy” to classify capitalized program rights for purposes of amortization and impairment as follows:

◦Individual program rights - programming value is predominantly derived from third-party revenues that are directly attributable to the specific film or television title (e.g., theatrical revenues, significant in-show advertising on the Company’s programming networks or specific content licensing revenues).

◦Group program rights - programming value is predominantly derived from third-party revenues that are not directly attributable to a specific film or television title (e.g., library of program rights for purpose of the Company’s programming networks or subscription revenue for direct-to-consumer SVOD targeted streaming services).

The determination of the predominant monetization strategy is made at commencement of production and is based on the means by which we derive third-party revenues from use of the programming. The classification of program rights as individual or group only changes if there is a significant change to the title’s monetization strategy relative to its initial assessment.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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


	As of June 30, 2020
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	324,669	$	39,631	$	364,300
In-production and in-development	132,161		12,254		144,415
Total owned original program rights, net	$	456,830	$	51,885	$	508,715

Licensed program rights, net:
Licensed film and acquired series	$	11,817	$	595,252	$	607,069
Licensed originals	229,345		—		229,345
Advances and content versioning costs	—		42,725		42,725
Total licensed program rights, net	241,162		637,977		879,139
Program rights, net	$	697,992	$	689,862	$	1,387,854

Current portion of program rights, net					$	17,354
Program rights, net (long-term)					1,370,500
					$	1,387,854

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


	Three Months Ended June 30,										Six Months Ended June 30,
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights	$	62,229	$	9,458	$	71,687	$	161,271	$	15,977	$	177,248
Licensed program rights	19,910		99,678		119,588		41,262		196,745		238,007
Program rights amortization	$	82,139	$	109,136	$	191,275	$	202,533	$	212,722	$	415,255

Rights to programming, including feature films and episodic series, acquired under license agreements are stated at the lower of unamortized cost or fair value. Such licensed rights along with the related obligations are recorded at the contract value when a license agreement is executed, unless there is uncertainty with respect to either cost, acceptability or availability. If such uncertainty exists, those rights and obligations are recorded at the earlier of when the uncertainty is resolved or the license period begins. Costs are amortized to technical and operating expense on a straight-line or accelerated basis, based on the expected exploitation strategy of the rights, over a period not to exceed the respective license periods.

Owned original programming costs, including estimated participation and residual costs, qualifying for capitalization as program rights are amortized to technical and operating expense over their estimated useful lives, commencing upon the first airing, based on attributable revenue for airings to date as a percentage of total projected attributable revenue, or ultimate revenue (individual-film-forecast-computation method). Projected attributable revenue is based on previously generated revenues for similar content in established markets, primarily consisting of distribution and advertising revenues, and projected program usage. Projected program usage is based on the Company's current expectation of future exhibitions taking into

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

account historical usage of similar content. Projected attributable revenue can change based upon programming market acceptance, levels of distribution and advertising revenue and decisions regarding planned program usage. These calculations require management to make assumptions and to apply judgment regarding revenue and planned usage. Accordingly, the Company periodically reviews revenue estimates and planned usage and revises its assumptions if necessary, which could impact the timing of amortization expense or result in a write-down to fair value. Any capitalized development costs for programs that the Company determines will not be produced are written off.

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. Program rights write-offs, included in technical and operating expense, were $7.9 million and $12.1 million for the three and six months ended June 30, 2020, respectively, and $10.3 million and $13.6 million for the three and six months ended June 30, 2019, respectively.

Note 6. Investments

The Company holds several investments and loans in non-consolidated entities which are included in Other assets in the condensed consolidated balance sheet. Equity method investments were $68.2 million at June 30, 2020 and $69.1 million at December 31, 2019.

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. In April 2020, one of our investments with a cost of $25.0 million, previously classified as a non-marketable equity security, became a publicly traded company. Accordingly, the investment is classified within marketable equity securities as of June 30, 2020. Investments in marketable equity securities were $43.3 million at June 30, 2020 and $4.4 million at December 31, 2019. For the three and six months ended June 30, 2020, unrealized gains on marketable equity securities were $15.0 million and $14.0 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 $16.8 million at June 30, 2020 and $61.8 million at December 31, 2019. For the six months ended June 30, 2020 and June 30, 2019, the Company recognized impairment charges of $20.0 million and $17.7 million, respectively, related to the write-down of certain non-marketable equity securities and a note receivable, included in miscellaneous, net in the condensed consolidated statements of income.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 7. Goodwill and Other Intangible Assets

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


(In thousands)	National Networks		International and Other		Total
December 31, 2019	$	237,103	$	464,877	$	701,980
Impairment charge	—		(25,062)		(25,062)
Amortization of "second component" goodwill	(664)		—		(664)
Foreign currency translation	—		(10,364)		(10,364)
June 30, 2020	$	236,439	$	429,451	$	665,890

As of June 30, 2020 and December 31, 2019, accumulated impairment charges in the International and Other segment totaled $123.1 million and $98.0 million, respectively.

The reduction of $0.7 million in the carrying amount of goodwill for National Networks 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 Company performs its annual goodwill impairment test as of December 1 each year. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require an interim impairment test. As a result of the continuing 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. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of its reporting units. Further, the Company assessed the current forecasts (including significant assumptions about revenue growth rates, long-term growth rates and enterprise specific discount rates) and the amount of excess fair value over carrying value for each of its reporting units in the 2019 impairment test. In connection with the preparation of the second quarter financial information, the Company determined that a triggering event had occurred with respect to its AMCNI reporting unit, which required an interim impairment test to be performed as of June 30, 2020. As such, the Company performed a quantitative assessment for its AMCNI reporting unit. The fair value was determined using a combination of an income approach, using a discounted cash flow (DCF) model, and a market comparables approach. The DCF model includes significant assumptions about revenue growth rates, long-term growth rates and enterprise specific discount rates. Additionally, the market comparables approach is determined using guideline company financial multiples. Given the uncertainty in determining assumptions underlying the DCF approach, actual results may differ from those used in the valuations.

Based on the valuations performed, in response to current and expected trends across the International television broadcasting markets, the fair value of the Company's AMCNI reporting unit declined below its carrying amount. As a result, in June 2020, the Company recognized an impairment charge of $25.1 million related to the AMCNI reporting unit, included in impairment charges in the condensed consolidated income statement.

No impairment charge was required for any of the Company's other reporting units.

The determination of fair value of the Company's AMCNI reporting unit represents a Level 3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs. Changes in significant judgments and estimates could significantly impact the concluded fair value of the reporting unit or the valuation of intangible assets. Changes to assumptions that would decrease the fair value of the reporting unit would result in corresponding increases to the impairment of goodwill at the reporting unit.

We are unable to predict how long the COVID-19 pandemic conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on our business. If these estimates or related assumptions change in the future, we may be required to record additional impairment charges related to goodwill.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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


(In thousands)	June 30, 2020
			Gross			Accumulated Amortization			Net		Estimated Useful Lives
Amortizable intangible assets:
Affiliate and customer relationships	$	611,324		$	(306,696)		$	304,628		6 to 25 years
Advertiser relationships	46,282			(23,924)			22,358			11 years
Trade names	110,918			(32,778)			78,140			3 to 20 years
Other amortizable intangible assets	2,799			(2,592)			207			5 to 15 years
Total amortizable intangible assets	771,323			(365,990)			405,333
Indefinite-lived intangible assets:
Trademarks	19,900			—			19,900
Total intangible assets	$	791,223		$	(365,990)		$	425,233
(In thousands)	December 31, 2019
			Gross			Accumulated Amortization			Net
Amortizable intangible assets:
Affiliate and customer relationships	$	616,197		$	(232,193)		$	384,004
Advertiser relationships	46,282			(21,820)			24,462
Trade names	113,075			(17,997)			95,078
Other amortizable intangible assets	2,798			(1,711)			1,087
Total amortizable intangible assets	778,352			(273,721)			504,631
Indefinite-lived intangible assets:
Trademarks	19,900			—			19,900
Total intangible assets	$	798,252		$	(273,721)		$	524,531

Aggregate amortization expense for amortizable intangible assets for the six months ended June 30, 2020 and 2019 was $23.1 million and $22.3 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,
2020	$	41,779
2021	37,567
2022	37,394
2023	37,288
2024	37,220

Impairment Test of Long-Lived Assets

In June 2020, given the continuing and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact, the Company revised its outlook for the AMCNI business, resulting in lower expected future cash flows. As a result, the Company determined that sufficient indicators of potential impairment of long-lived assets existed and the Company performed a recoverability test of the long-lived asset groups within the AMCNI business. Based on the recoverability tests performed, the Company determined that certain long-lived assets were not recoverable and recognized an impairment charge of $105.3 million related primarily to certain identifiable intangible assets, as well as property and equipment, and operating lease right-of-use assets, which is included in impairment charges in the condensed consolidated statement of income.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 8. Accrued Liabilities

Accrued liabilities consist of the following:


(In thousands)	June 30, 2020		December 31, 2019
Employee related costs	$	72,114	$	89,753
Participations and residuals	91,620		70,682
Interest	29,340		29,767
Other accrued expenses	52,207		61,012
Total accrued liabilities	$	245,281	$	251,214

Note 9. Long-term Debt

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


(In thousands)	June 30, 2020		December 31, 2019
Senior Secured Credit Facility: ^(a)
Term Loan A Facility	$	712,500	$	731,250
Senior Notes:
4.75% Notes due August 2025	800,000		800,000
5.00% Notes due April 2024	1,000,000		1,000,000
4.75% Notes due December 2022	400,000		600,000
Other debt ^(b)	6,000		—
Total long-term debt	2,918,500		3,131,250
Unamortized discount	(20,696)		(24,351)
Unamortized deferred financing costs	(8,914)		(10,670)
Long-term debt, net	2,888,890		3,096,229
Current portion of long-term debt	81,000		56,250
Noncurrent portion of long-term debt	$	2,807,890	$	3,039,979

(a)The Company's $500 million revolving credit facility remains undrawn at June 30, 2020. 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 $7.0 million, which bear interest at the greater of 3.5% or the prime rate plus 1% and mature on August 25, 2020. As of June 30, 2020, there was $6.0 million of outstanding borrowings on the credit facilities.

4.75% Notes due December 2022

In March 2020, the Company redeemed $200 million principal amount of the outstanding $600 million principal amount of its 4.75% Notes due 2022. In connection with the redemption, the Company incurred a loss on extinguishment of debt for the six months ended June 30, 2020 of $2.9 million representing the redemption premium and the write-off of a portion of the unamortized discount and deferred financing costs.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 10. Leases

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


(In thousands)	Balance Sheet Location	June 30, 2020		December 31, 2019
Assets
Operating	Operating lease right-of-use asset	$	154,676	$	170,056
Finance	Property and equipment, net	13,728		15,713
Total lease assets		$	168,404	$	185,769
Liabilities
Current:
Operating	Current portion of lease obligations	$	29,780	$	30,171
Finance	Current portion of lease obligations	3,399		3,788
		$	33,179	33,959
Noncurrent:
Operating	Lease obligations	$	185,201	193,570
Finance	Lease obligations	29,133		17,477
		214,334		211,047

Total lease liabilities		$	247,513	$	245,006

For the six months ended June 30, 2020, impairment charges were recorded related to certain operating lease right-of-use assets at the AMCNI business. See Note 7 for additional details regarding the impairment test of long-lived assets.

Note 11. 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.

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

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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 June 30, 2020 and December 31, 2019:


(In thousands)	Level I		Level II		Level III		Total
At June 30, 2020:
Assets
Cash equivalents	$	350,294	$	—	$	—	$	350,294
Marketable securities	43,309		—		—		43,309


Foreign currency derivatives	—		1,955		—		1,955

Liabilities
Interest rate swap contracts	$	—	$	3,622	$	—	$	3,622
Foreign currency derivatives	—		2,876		—		2,876


At December 31, 2019:
Assets
Cash equivalents	$	191,214	$	—	$	—	$	191,214
Marketable securities	4,448		—		—		4,448


Foreign currency derivatives	—		1,884		—		1,884

Liabilities
Interest rate swap contracts	$	—	$	1,966	$	—	$	1,966
Foreign currency derivatives	—		1,888		—		1,888

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 June 30, 2020 and December 31, 2019, 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.

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)	June 30, 2020
			Carrying Amount			Estimated Fair Value
Debt instruments:
Term loan A facility	$	706,099		$	694,688
4.75% Notes due August 2025	789,173			784,000
5.00% Notes due April 2024	989,817			987,500
4.75% Notes due December 2022	397,801			400,000
Other debt	6,000			6,000
	$	2,888,890		$	2,872,188

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	December 31, 2019
			Carrying Amount			Estimated Fair Value
Debt instruments:
Term loan A facility	$	723,560		$	724,303
4.75% Notes due August 2025	788,247			803,000
5.00% Notes due April 2024	988,609			1,020,000
4.75% Notes due December 2022	595,813			605,250

	$	3,096,229		$	3,152,553

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 12. 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 June 30, 2020, 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.

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	June 30, 2020		December 31, 2019
Derivatives designated as hedging instruments:


Liabilities:
Interest rate swap contracts	Accrued liabilities	$	3,622	$	1,966
Derivatives not designated as hedging instruments:
Assets:
Foreign currency derivatives	Prepaid expenses and other current assets	$	1,145	$	891
Foreign currency derivatives	Other assets	810		993


Liabilities:


Foreign currency derivatives	Accrued liabilities	$	893	$	687
Foreign currency derivatives	Other liabilities	1,983		1,202

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

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 June 30,										Three Months Ended June 30,
			2020			2019				2020			2019
Derivatives in cash flow hedging relationships:
Interest rate swap contracts	$	(176)		$	(1,274)		Interest expense	$	517		$	23


(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
			Six Months Ended June 30,										Six Months Ended June 30,
			2020			2019				2020			2019
Derivatives in cash flow hedging relationships:
Interest rate swap contracts	$	(2,410)		$	(1,925)		Interest expense	$	754		$	35

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 June 30,									Six Months Ended June 30,
				2020			2019			2020			2019

Foreign currency derivatives	Miscellaneous, net	$	(1,126)		$	(411)		$	(718)		$	46

Note 13. Income Taxes

For the three and six months ended June 30, 2020, income tax expense was $9.7 million and $43.3 million, respectively, representing an effective tax rate of 36% and 32%, respectively, as compared to the federal statutory rate of 21%. For the three and six months ended June 30, 2020, the effective tax rate differs from the federal statutory rate due primarily to tax expense from foreign operations of $5.5 million and $9.4 million, state and local income tax expense of $2.6 million and $5.7 million and tax expense of $2.9 million and $5.6 million resulting from an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, partially offset by a tax benefit of $5.2 million and $8.7 million relating to uncertain tax positions (including accrued interest) and tax benefit of $1.4 million and $2.9 million related to a foreign-derived intangible income deduction, respectively. 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.

For the three and six months ended June 30, 2019, income tax benefit was $1.4 million and income tax expense was $45.1 million, respectively, representing a negative effective tax rate of 1% and an effective tax rate of 14%, respectively, as compared to the federal statutory rate of 21%. For the three and six months ended June 30, 2019, the effective tax rate differs from the federal statutory rate due primarily to a tax benefit of $25.0 million resulting from a decrease in valuation allowances for foreign tax assets, and a tax benefit of $7.2 million and $5.6 million relating to uncertain tax positions (including accrued interest), partially offset by state and local income tax expense of $4.1 million and $7.3 million, respectively. The decrease in the valuation allowance is primarily due to the expected utilization of foreign net operating loss carryforwards resulting from the planned implementation of certain tax planning strategies. The tax benefit relating to uncertain tax positions is primarily due to an audit settlement and the filing of state income tax returns under a voluntary disclosure agreement.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

At June 30, 2020, the Company had foreign tax credit carry forwards of approximately $32.2 million, expiring on various dates from 2022 through 2030. These carryforwards have been reduced by a valuation allowance of $30.6 million as it is more likely than not that these carry forwards will not be realized. For the six months ended June 30, 2020, $0.7 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 14. Commitments and Contingencies

Commitments

As of June 30, 2020, the Company's contractual obligations not reflected on the Company's condensed consolidated balance sheet decreased $104.0 million, as compared to December 31, 2019, to $829.9 million. The decrease primarily relates to payments for program rights and marketing commitments.

Legal Matters

On December 17, 2013, Frank Darabont ("Darabont"), Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (together, the "2013 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. The 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 August 19, 2015, Plaintiffs filed their First Amended Complaint (the "Amended Complaint"), in which they retracted their claims for wrongful termination and failure to apply production tax credits in calculating Plaintiffs' contingent compensation. Plaintiffs also added a claim that Darabont is entitled to a larger share, on a percentage basis, of contingent compensation than he is currently being accorded. On September 26, 2016, Plaintiffs filed their note of issue and certificate of readiness for trial, which included a claim for damages of no less than $280 million. The parties each filed motions for summary judgment. Oral arguments of the summary judgment motions took place on September 15, 2017. On April 19, 2018, the Court granted the Company’s motion for leave to submit supplemental summary judgment briefing. A hearing on the supplemental summary judgment submissions was held on June 13, 2018. On December 10, 2018, the Court denied Plaintiffs' motion for partial summary judgment and granted in part Defendants' motion for summary judgment, dismissing four of Plaintiffs' causes of action. The Company believes that the remaining claims are without merit, denies the allegations and continues to defend the case vigorously. 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.

On January 18, 2018, the 2013 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. The claims in the action allegedly arise from Plaintiffs' audit of their participation statements covering the accounting period from inception of The Walking Dead through September 30, 2014. Plaintiffs seek no less than $20 million in damages on claims for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief. The Company filed an Answer to the Complaint on April 16, 2018. On August 30, 2018, Plaintiff's filed an Amended Complaint, and on September 19, 2018, the Company answered. The parties have agreed to consolidate this action for a joint trial with the action Plaintiffs filed in the New York Supreme Court on December 17, 2013. Following the conclusion of discovery, the Company filed a motion for summary judgment seeking the dismissal of the second action, which was denied on April 13, 2020. Due to the continued impact of the Coronavirus pandemic on the New York State courts, the joint trial, originally scheduled to begin on June 1, 2020, has been further delayed and is currently scheduled to begin on April 26, 2021. The Company believes that the asserted claims are without merit, denies the allegations and will defend the case vigorously. 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.

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 covenant of good faith and fair dealing, inducing breach of contract, and liability for violation of Cal. Bus. & Prof. Code § 17200. On August 15, 2017, two of the California Plaintiffs, Gale Anne Hurd and David Alpert (and their associated loan-out companies), along with Charles Eglee and his loan-out company, United Bongo Drum, Inc., filed a complaint in New York Supreme Court alleging nearly identical claims as the California Action (the "New York Action"). Hurd, Alpert, and Eglee filed the New York Action in connection with their contract claims involving The Walking Dead because their agreements contained exclusive New York jurisdiction provisions. On October 23, 2017, the parties stipulated to discontinuing the New York Action

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

without prejudice and consolidating all of the claims in the California Action. The California Plaintiffs seek compensatory and punitive damages and restitution. The Company filed an Answer on April 30, 2018 and believes that the asserted claims are without merit and will vigorously defend against them. On August 8, 2019, the judge in the California Action ordered a trial to resolve certain issues of contract interpretation only. The trial commenced on February 10, 2020 and concluded on March 10, 2020 after eight days of trial. On July 22, 2020, the judge in the California Action issued a Statement of Decision finding in the Company's favor on all seven matters of contract interpretation before the court in this first phase trial. 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 15. Equity Plans

In June 2020, AMC Networks granted 54,535 restricted stock units ("RSUs") under the 2011 Stock Plan for Non-Employee Directors to non-employee directors that vested on the date of grant.

In March 2020, AMC Networks granted 1,171,956 RSUs to certain executive officers and employees under the AMC Networks Inc. 2016 Employee Stock Plan. The RSUs vest ratably over a three-year period and the vesting criteria for 380,142 RSUs include the achievement of certain performance targets by the Company.

During the six months ended June 30, 2020, 477,764 RSUs and 325,836 PRSUs of AMC Networks Class A Common Stock previously issued to employees of the Company vested. On the vesting date, 199,377 RSUs and 142,882 PRSUs were surrendered to the Company to cover the required statutory tax withholding obligations and 278,387 RSU and 182,954 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 $8.9 million, which has been reflected as a financing activity in the condensed consolidated statement of cash flows for the six months ended June 30, 2020.

Share-based compensation expense included in selling, general and administrative expense was $15.2 million and $30.7 million for the three and six months ended June 30, 2020, respectively, and $16.7 million and $36.6 million the for three and six months ended June 30, 2019, respectively.

As of June 30, 2020, there was $59.7 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.

Note 16. Redeemable Noncontrolling Interests

The following table summarizes activity related to redeemable noncontrolling interest for the six months ended June 30, 2020.


(In thousands)	Six Months Ended June 30, 2020
December 31, 2019	$	309,451
Net earnings	8,217
Distributions	(10,159)
Other	23
June 30, 2020	$	307,532

Note 17. 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 June 30, 2020 and 2019, respectively, and $2.4 million and $2.4 million for the six months ended June 30, 2020 and 2019, respectively. Amounts charged to the Company, included in selling, general and administrative expenses, pursuant to transactions with its related parties amounted to $0.1 million and $0.3 million for the three months ended June 30, 2020 and 2019, respectively, and $0.1 million and $0.8 million for the six months ended June 30, 2020 and 2019, respectively.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 18. Cash Flows

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


(In thousands)	Six Months Ended June 30,
			2020			2019
Non-Cash Investing and Financing Activities:
Treasury stock not yet settled	$	—		$	832
Finance lease additions	14,266			—
Capital expenditures incurred but not yet paid	1,906			1,731
Supplemental Data:
Cash interest paid	68,129			76,664
Income taxes paid, net	29,723			77,985

Note 19. Segment Information

The Company classifies its operations into two operating segments: National Networks and International and Other. These operating segments represent strategic business units that are managed separately.

The Company generally allocates all corporate overhead costs within operating expenses to the Company's two operating segments based upon their proportionate estimated usage of services, including 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) as well as sales support functions and creative and production services.

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 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.


(In thousands)	Three Months Ended June 30, 2020
			National Networks			International and Other			Inter-segment eliminations			Consolidated
Revenues, net
Advertising	$	187,434		$	14,810		$	—		$	202,244
Distribution	308,416			146,170			(10,539)			444,047
Consolidated revenues, net	$	495,850		$	160,980		$	(10,539)		$	646,291
Operating income (loss)	$	187,532		$	(138,973)		$	243		$	48,802
Share-based compensation expense	12,366			2,869			—			15,235
Depreciation and amortization	8,822			17,083			—			25,905
Impairment charges	—			130,411			—			130,411
Restructuring and other related charges	1,214			2,293			—			3,507
Majority-owned equity investees AOI	—			1,418			—			1,418
Adjusted operating income	$	209,934		$	15,101		$	243		$	225,278

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	Three Months Ended June 30, 2019
			National Networks			International and Other			Inter-segment eliminations			Consolidated
Revenues, net
Advertising	$	219,490		$	23,535		$	(49)		242,976
Distribution	385,249			155,991			(11,917)			529,323
Consolidated revenues, net	$	604,739		$	179,526		$	(11,966)		$	772,299
Operating income (loss)	$	214,198		$	(27,284)		$	(16,657)		170,257
Share-based compensation expense	13,821			2,904			—			16,725
Depreciation and amortization	8,179			17,714			—			25,893
Restructuring and other related charges	274			16,888			—			17,162

Majority-owned equity investees AOI	—			1,608			—			1,608
Adjusted operating income	$	236,472		$	11,830		$	(16,657)		$	231,645


(In thousands)	Six Months Ended June 30, 2020
			National Networks			International and Other			Inter-segment eliminations			Consolidated
Revenues, net
Advertising	$	400,660		$	34,174		$	(1)		$	434,833
Distribution	662,129			297,299			(13,595)			945,833
Consolidated revenues, net	$	1,062,789		$	331,473		$	(13,596)		$	1,380,666
Operating income (loss)	$	382,756		$	(158,424)		$	(2,560)		$	221,772
Share-based compensation expense	24,832			5,915			—			30,747
Depreciation and amortization	17,211			35,424			—			52,635
Impairment charges	—			130,411			—			130,411
Restructuring and other related charges	2,723			6,750			—			9,473
Majority-owned equity investees AOI	—			2,694			—			2,694
Adjusted operating income	$	427,522		$	22,770		$	(2,560)		$	447,732


(In thousands)	Six Months Ended June 30, 2019
			National Networks			International and Other			Inter-segment eliminations			Consolidated
Revenues, net
Advertising	$	458,579		$	44,741		$	(51)		$	503,269
Distribution	762,279			305,874			(14,902)			1,053,251
Consolidated revenues, net	$	1,220,858		$	350,615		$	(14,953)		$	1,556,520
Operating income (loss)	$	465,702		$	(41,031)		$	(9,551)		$	415,120
Share-based compensation expense	30,090			6,534			—			36,624
Depreciation and amortization	16,791			33,158			—			49,949
Restructuring and other related charges	576			19,923			(695)			19,804
Majority-owned equity investees AOI	—			3,188			—			3,188

Adjusted operating income	$	513,159		$	21,772		$	(10,246)		$	524,685

Inter-segment eliminations are primarily licensing revenues recognized between the National Networks and International and Other segments as well as revenues recognized by AMC Networks Broadcasting & Technology for transmission revenues recognized from the International and Other operating segment.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
Inter-segment revenues
National Networks	$	(8,111)		$	(10,260)		$	(10,180)		$	(11,650)
International and Other	(2,428)			(1,706)			(3,416)			(3,303)
	$	(10,539)		$	(11,966)		$	(13,596)		$	(14,953)

The table below summarizes revenues based on customer location:


(In thousands)	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
Revenues
United States	$	523,395		$	605,114		$	1,148,388		$	1,267,578
Europe	91,836			111,983			164,315			191,417
Other	31,060			55,202			67,963			97,525
	$	646,291		$	772,299		$	1,380,666		$	1,556,520

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


(In thousands)	June 30, 2020		December 31, 2019
Property and equipment, net
United States	$	246,786	$	244,175
Europe	12,911		25,925
Other	86		13,652
	$	259,783	$	283,752

For the six months ended June 30, 2020, impairment charges were recorded related to certain property and equipment in Europe and Other. See Note 7 for additional details regarding the impairment test of long-lived assets.

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 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 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 and programming industries;

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

•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 independent film distribution businesses;

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

•changes in consumer demand for our comedy venues;

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

•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, including the impact of the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018;

•the impact of new and proposed federal, state and international laws and regulations relating to data protection, privacy and security, including the E.U. General Data Protection Regulation;

•the impact of Brexit, particularly in the event of the U.K.'s departure from the E.U. without an agreement on terms;

•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 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 2019 Annual Report on Form 10-K (the "2019 Form 10-K"), as filed with the Securities and Exchange Commission ("SEC") and under 1A, "Risk Factors" in this Quarterly Report on Form 10-Q.

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 2019 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 six months ended June 30, 2020 compared to the three and six months ended June 30, 2019. Our discussion is presented on both a consolidated and operating segment basis. Our two operating segments are: (i) National Networks and (ii) International and Other.

Liquidity and Capital Resources. This section provides a discussion of our financial condition as of June 30, 2020, as well as an analysis of our cash flows for the six months ended June 30, 2020 and 2019. 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 June 30, 2020 as compared to December 31, 2019.

Critical Accounting Policies and Estimates. This section provides an update, if any, to our significant accounting policies or critical accounting estimates since December 31, 2019.

Business Overview

We manage our business through the following two operating segments:

•National Networks: Includes activities of our five national programming networks, AMC Studios operations and AMC Broadcasting & Technology. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV and also include our AMC Premiere service. Our AMC Studios operation produces original programming for our programming networks and also licenses such programming worldwide. AMC Networks Broadcasting & Technology is our technical services business, which primarily services most of the national programming networks.

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 June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
Revenues, net
National Networks	$	495,850		$	604,739		$	1,062,789		$	1,220,858
International and Other	160,980			179,526			331,473			350,615
Inter-segment eliminations	(10,539)			(11,966)			(13,596)			(14,953)
Consolidated revenues, net	$	646,291		$	772,299		$	1,380,666		$	1,556,520
Operating income (loss)
National Networks	$	187,532		$	214,198		$	382,756		$	465,702
International and Other	(138,973)			(27,284)			(158,424)			(41,031)
Inter-segment eliminations	243			(16,657)			(2,560)			(9,551)
Consolidated operating income	$	48,802		$	170,257		$	221,772		$	415,120
AOI
National Networks	$	209,934		$	236,472		$	427,522		$	513,159
International and Other	15,101			11,830			22,770			21,772
Inter-segment eliminations	243			(16,657)			(2,560)			(10,246)
Consolidated AOI	$	225,278		$	231,645		$	447,732		$	524,685

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 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 June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
Operating income	$	48,802		$	170,257		$	221,772		$	415,120
Share-based compensation expense	15,235			16,725			30,747			36,624
Depreciation and amortization	25,905			25,893			52,635			49,949
Restructuring and other related charges	3,507			17,162			9,473			19,804
Impairment charges	130,411			—			130,411			—
Majority-owned equity investees AOI	1,418			1,608			2,694			3,188
AOI	$	225,278		$	231,645		$	447,732		$	524,685

Impact of COVID-19 on Our Business

The impact of COVID-19 and measures to prevent its spread are affecting our businesses in a number of ways. Beginning in mid-March, we have experienced adverse advertising sales impacts, suspended content production, which has led to delays in the creation and availability of substantially all of our programming, and the temporary closure of our comedy venues. Operationally, nearly all of our employees are working remotely, and we have restricted business travel. If significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions or other restrictions in connection with the COVID-19 pandemic, the impact of the pandemic on our businesses could be exacerbated.

The Company has evaluated and continues to evaluate the potential impact of the COVID-19 pandemic on its consolidated financial statements, including the impairment of goodwill (see Note 7) and indefinite-lived intangible assets and the fair value and collectibility of receivables. The COVID-19 pandemic has had a material impact on the Company's operations since mid-March 2020. 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 a vaccine, 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.

National Networks

In our National Networks segment, we earn revenue principally from the distribution of our programming and the sale of advertising. Distribution revenue primarily includes subscription fees paid by distributors to carry our programming networks 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 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 networks, but are generally based upon the number of each distributor's subscribers who receive our programming, referred to as viewing subscribers. 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.

On August 5, 2020, the Company filed a program carriage complaint with the Federal Communications Commission (the "FCC") alleging that, in connection with the negotiation of a new affiliation agreement between AT&T and the Company, AT&T has been engaging in discriminatory conduct that violates Section 616 of the Communications Act of 1934, as amended, and the FCC’s program carriage rules.

Programming expense, included in technical and operating expense, represents the largest expense of the National Networks 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.

To an increasing extent, the success of our business depends on original programming, both scripted and unscripted, across all of our networks. In recent years, we have introduced a number of scripted original series. These 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. Program rights write-offs, included in technical and operating expense, were $7.5 million and $13.4 million for the six months ended June 30, 2020 and June 30, 2019, respectively.

International and Other

Our International and Other segment primarily includes the operations of AMCNI, AMC Networks SVOD, Levity, and IFC Films.

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 from; (i) production services from Levity, (ii) our subscription streaming services Acorn TV, Shudder, Sundance Now and UMC (Urban Movie Channel) from our AMC Networks SVOD business, (iii) the distribution of content of IFC Films and RLJE, and (iv) Levity's operation of comedy venues (all of which are temporarily closed as a result of the COVID-19 pandemic). For the six months ended June 30, 2020, distribution revenues represented 90% 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 or subscription-based streaming services and production services revenue generated from Levity. 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, and a monthly fee paid by consumers for our subscription-based streaming services. 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 as well as from our owned subscription streaming services available in the United States, Canada, Latin America, parts of Europe, India, Australia and New Zealand.

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.

We view our investments in international expansion and our various developing on-line content distribution initiatives as important long-term strategies. We may experience an adverse impact to the International and Other segment's operating results and cash flows in periods of increased investment by the Company in these aforementioned initiatives.

Corporate Expenses

We allocate corporate overhead within operating expenses to each segment based upon its proportionate estimated usage of services. 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 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 networks 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 June 30, 2020 Compared to Three Months Ended June 30, 2019

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


	Three Months Ended June 30,
	2020						2019
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	646,291	100.0	%	$	772,299	100.0	%	$	(126,008)	(16.3)	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	282,503		43.7		385,623		49.9		(103,120)		(26.7)
Selling, general and administrative	155,163		24.0		173,364		22.4		(18,201)		(10.5)
Depreciation and amortization	25,905		4.0		25,893		3.4		12		—
Impairment charges	130,411		20.2		—		—		130,411		n/m
Restructuring and other related charges	3,507		0.5		17,162		2.2		(13,655)		(79.6)
Total operating expenses	597,489		92.4		602,042		78.0		(4,553)		(0.8)
Operating income	48,802		7.6		170,257		22.0		(121,455)		(71.3)
Other income (expense):
Interest expense, net	(30,574)		(4.7)		(34,971)		(4.5)		4,397		(12.6)

Miscellaneous, net	8,713		1.3		(2,697)		(0.3)		11,410		(423.1)
Total other income (expense)	(21,861)		(3.4)		(37,668)		(4.9)		15,807		(42.0)
Net income from operations before income taxes	26,941		4.2		132,589		17.2		(105,648)		(79.7)
Income tax expense	(9,707)		(1.5)		1,396		0.2		(11,103)		(795.3)
Net income including noncontrolling interests	17,234		2.7		133,985		17.3		(116,751)		(87.1)
Net income attributable to noncontrolling interests	(2,273)		(0.4)		(5,242)		(0.7)		2,969		(56.6)	%
Net income attributable to AMC Networks' stockholders	$	14,961	2.3	%	$	128,743	16.7	%	$	(113,782)	(88.4)	%

National Networks Segment Results

The following table sets forth our National Networks segment results for the periods indicated.


	Three Months Ended June 30,
	2020						2019
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	495,850	100.0	%	$	604,739	100.0	%	$	(108,889)	(18.0)	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	203,074		41.0		269,147		44.5		(66,073)		(24.5)
Selling, general and administrative	95,208		19.2		112,941		18.7		(17,733)		(15.7)
Depreciation and amortization	8,822		1.8		8,179		1.4		643		7.9
Restructuring and other related charges	1,214		0.2		274		—		940		n/m
Operating income	$	187,532	37.8	%	$	214,198	35.4	%	$	(26,666)	(12.4)	%
Share-based compensation expense	12,366		2.5		13,821		2.3		(1,455)		(10.5)
Depreciation and amortization	8,822		1.8		8,179		1.4		643		7.9
Restructuring and other related charges	1,214		0.2		274		—		$	940	n/m
AOI	$	209,934	42.3	%	$	236,472	39.1	%	$	(26,538)	(11.2)	%

International and Other Segment Results

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


	Three Months Ended June 30,
	2020						2019
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	160,980	100.0	%	$	179,526	100.0	%	$	(18,546)	(10.3)	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	90,198		56.0		111,722		62.2		(21,524)		(19.3)
Selling, general and administrative	59,968		37.3		60,486		33.7		(518)		(0.9)
Depreciation and amortization	17,083		10.6		17,714		9.9		(631)		(3.6)
Impairment charges	130,411		81.0		—		—		130,411		n/m
Restructuring and other related charges	2,293		1.4		16,888		9.4		(14,595)		(86.4)
Operating loss	$	(138,973)	(86.3)	%	$	(27,284)	(15.2)	%	$	(111,689)	n/m
Share-based compensation expense	2,869		1.8		2,904		1.6		(35)		(1.2)
Depreciation and amortization	17,083		10.6		17,714		9.9		(631)		(3.6)
Impairment charges	130,411		81.0		—		—		130,411		n/m
Restructuring and other related charges	2,293		1.4		16,888		9.4		(14,595)		(86.4)
Majority-owned equity investees AOI	1,418		0.9		1,608		0.9		(190)		(11.8)
AOI	$	15,101	9.4	%	$	11,830	6.6	%	$	3,271	27.7	%

Revenues, net

Revenues, net decreased $126.0 million to $646.3 million for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. The net change by segment was as follows:


	Three Months Ended June 30,
(In thousands)	2020		% of total		2019		% of total		$ change		% change
National Networks	$	495,850	76.7	%	$	604,739	78.3	%	$	(108,889)	(18.0)	%
International and Other	160,980		24.9		179,526		23.2		(18,546)		(10.3)
Inter-segment eliminations	(10,539)		(1.6)		(11,966)		(1.5)		1,427		(11.9)
Consolidated revenues, net	$	646,291	100.0	%	$	772,299	100.0	%	$	(126,008)	(16.3)	%

National Networks

The decrease in National Networks revenues, net was attributable to the following:


	Three Months Ended June 30,
(In thousands)	2020		% of total		2019		% of total		$ change		% change
Advertising	$	187,434	37.8	%	$	219,490	36.3	%	$	(32,056)	(14.6)	%
Distribution	308,416		62.2		385,249		63.7		(76,833)		(19.9)
	$	495,850	100.0	%	$	604,739	100.0	%	$	(108,889)	(18.0)	%

•The decrease of $32.1 million in advertising revenues was primarily attributable to the timing of our original programming and the impact of the COVID-19 pandemic, both of which resulted in lower pricing across all of our networks. Most of our advertising revenues vary based on the timing of our original programming series and the popularity of our programming as measured by Nielsen. Due to these factors, we expect advertising revenues to vary from quarter to quarter.

•Distribution revenues decreased $76.8 million due to a decrease of $28.3 million in subscription revenues as compared to the prior comparable period due to lower subscribers. Content licensing revenues decreased $48.5 million due to a decrease in the number of original programs we distributed. Distribution revenues may vary based on the impact of renewals of affiliation agreements and content licensing revenues vary based on the timing of availability of our programming to distributors. Because of these factors, we expect distribution revenues to vary from quarter to quarter.

International and Other

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


	Three Months Ended June 30,
(In thousands)	2020		% of total		2019		% of total		$ change		% change
Advertising	$	14,810	9.2	%	$	23,535	13.1	%	$	(8,725)	(37.1)	%
Distribution	146,170		90.8		155,991		86.9		(9,821)		(6.3)
	$	160,980	100.0	%	$	179,526	100.0	%	$	(18,546)	(10.3)	%

Advertising revenues decreased $7.7 million at AMCNI, excluding the impact of foreign currency fluctuations, primarily related to lower demand resulting from the impact of the COVID-19 pandemic. Foreign currency translation had an unfavorable impact to advertising revenues of $1.0 million. Distribution revenues decreased $25.6 million at Levity, due to the impact of the COVID-19 pandemic on its operations, which resulted in a temporary halt in production activities and closure of comedy venues. The decrease in distribution revenues was partially offset by an increase of $21.9 million related to an increase in subscription revenues at AMC Networks SVOD targeted streaming services. In addition, distribution revenues decreased $3.5 million at IFC Films and $2.1 million at AMCNI, excluding the impact of foreign currency fluctuations. Foreign currency translation had an unfavorable impact to distribution revenues of $2.7 million.

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) decreased $103.1 million to $282.5 million for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. The net change by segment was as follows:


	Three Months Ended June 30,
(In thousands)	2020			2019			$ change		% change
National Networks	$	203,074		$	269,147		$	(66,073)	(24.5)	%
International and Other	90,198			111,722			(21,524)		(19.3)	%
Inter-segment eliminations	(10,769)			4,754			(15,523)		n/m
Total	$	282,503		$	385,623		$	(103,120)	(26.7)	%
Percentage of revenues, net	43.7		%	49.9		%

National Networks

The decrease in technical and operating expense of $66.1 million was due to a decrease in program amortization of $64.8 million primarily attributable to the mix of original programming as compared to the prior comparable period, which was impacted by the production stoppages resulting from the COVID-19 pandemic. In addition, other direct programming costs decreased $1.3 million. Program rights amortization expense includes write-offs of $7.5 million and $10.1 million for the three months ended June 30, 2020 and June 30, 2019, respectively. Program 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 due to 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 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 decreased $17.0 million related to Levity, $6.1 million at AMCNI and $2.6 million at IFC Films. The decrease at Levity was due to the impact of the COVID-19 pandemic on its operations, which resulted in a temporary halt in production activities and closure of comedy venues. These decreases were partially offset by an increase of $4.4 million at AMC Networks SVOD targeted streaming services. Foreign currency translation had a favorable impact to the change in technical and operating expense of $2.3 million.

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 decreased $18.2 million to $155.2 million for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019. The net change by segment was as follows:


	Three Months Ended June 30,
(In thousands)	2020			2019			$ change		% change
National Networks	$	95,208		$	112,941		$	(17,733)	(15.7)	%
International and Other	59,968			60,486			(518)		(0.9)
Inter-segment eliminations	(13)			(63)			50		(79.4)
Total	$	155,163		$	173,364		$	(18,201)	(10.5)	%
Percentage of revenues, net	24.0		%	22.4		%

National Networks

Selling, general and administrative expense decreased $17.7 million principally due to a decrease in advertising and marketing expenses of $15.8 million related to the mix of original programming, which was impacted by the COVID-19 pandemic.

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 promotion and marketing of original programming series and subscriber retention marketing efforts.

International and Other

Selling, general and administrative expense decreased $0.5 million. Decreases in selling, general and administrative expense included $5.5 million at AMCNI primarily related to advertising and marketing expenses, and $5.8 million at Levity primarily related to the impact of the COVID-19 pandemic. These decreases were partially offset by an increase of $13.0 million at AMC Networks SVOD targeted streaming services primarily related to advertising and marketing expenses. Foreign currency translation had a favorable impact to the change in selling, general and administrative expense of $1.3 million.

Depreciation and amortization

Depreciation and amortization expense was $25.9 million for both the three months ended June 30, 2020 and June 30, 2019. The net change by segment was as follows:


	Three Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
National Networks	$	8,822	$	8,179	$	643	7.9	%
International and Other	17,083		17,714		(631)		(3.6)
	$	25,905	$	25,893	$	12	—	%

Impairment charges

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 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 $3.5 million for the three months ended June 30, 2020 primarily consisted of charges at AMCNI of $2.3 million related to costs associated with termination of distribution in certain territories and charges of $1.2 million related to severance associated with previously announced restructuring activities.

Restructuring expense of $17.2 million for the three months ended June 30, 2019 primarily related to the direct to consumer re-organization and consisted of severance and other personnel related costs of $1.3 million and programming write-offs of $13.0 million related to a change in programming strategy, as well as $2.9 million related to severance associated with previously announced restructuring activities.

Operating Income


	Three Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
National Networks	$	187,532	$	214,198	$	(26,666)	(12.4)	%
International and Other	(138,973)		(27,284)		(111,689)		n/m
Inter-segment Eliminations	243		(16,657)		16,900		n/m
	$	48,802	$	170,257	$	(121,455)	(71.3)	%

The decrease in operating income at the National Networks segment was primarily attributable to a decrease in revenue of $108.9 million, partially offset by a decrease in technical and operating expense of $66.1 million and a decrease in selling, general and administrative expense of $17.7 million.

The increase in operating losses at the International and Other segment was primarily attributable to the impairment charges of $130.4 million and a decrease in revenues of $18.5 million, partially offset by a decrease in technical and operating expense of $21.5 and a decrease in restructuring and other related charges of $14.6 million.

AOI

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


	Three Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
Operating income	$	48,802	$	170,257	$	(121,455)	(71.3)	%
Share-based compensation expense	15,235		16,725		(1,490)		(8.9)
Depreciation and amortization	25,905		25,893		12		—
Impairment charges	130,411		—		130,411		n/m
Restructuring and other related charges	3,507		17,162		(13,655)		(79.6)
Majority-owned equity investees AOI	1,418		1,608		(190)		(11.8)
AOI	$	225,278	$	231,645	$	(6,367)	(2.7)	%

AOI decreased $6.4 million for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. The net change by segment was as follows:


	Three Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
National Networks	$	209,934	$	236,472	$	(26,538)	(11.2)	%
International and Other	15,101		11,830		3,271		27.7
Inter-segment eliminations	243		(16,657)		16,900		n/m
AOI	$	225,278	$	231,645	$	(6,367)	(2.7)	%

AOI decreased at the National Networks segment principally due to a decrease in operating income.

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 $4.4 million is primarily due to lower average outstanding balances.

Miscellaneous, net

Miscellaneous, net was income of $8.7 million for the three months ended June 30, 2020 as compared to expense of $2.7 million for the three months ended June 30, 2019. The increase in miscellaneous, net income of $11.4 million was primarily related to an unrealized gain of $14.9 million from certain marketable equity securities, partially offset by unfavorable variance of $2.8 million in the foreign currency remeasurement of monetary assets and liabilities (principally intercompany loans) that are denominated in currencies other than the underlying functional currency of the applicable entity.

Income tax expense

For the three months ended June 30, 2020, income tax expense was $9.7 million representing an effective tax rate of 36%. The effective tax rate differs from the federal statutory rate of 21% due primarily to tax expense from foreign operations of $5.5 million, state and local income tax expense of $2.6 million and tax expense of $2.9 million resulting from an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, partially offset by a tax benefit of $5.2 million relating to uncertain tax positions (including accrued interest) and tax benefit of $1.4 million related to a foreign-derived intangible income deduction. The tax benefit relating to uncertain tax positions is primarily due to an audit settlement and the filing of state income tax returns under a voluntary disclosure agreement.

For the three months ended June 30, 2019, income tax benefit was $1.4 million representing a negative effective tax rate of 1%. The effective tax rate differs from the federal statutory rate of 21% due primarily to a tax benefit of $25.0 million resulting from a decrease in valuation allowances for foreign tax assets, and a tax benefit of $7.2 million relating to uncertain tax positions (including accrued interest), partially offset by state and local income tax expense of $4.1 million. The decrease in the valuation allowance is primarily due to the expected utilization of foreign net operating loss carryforwards resulting from the planned implementation of certain tax planning strategies. The tax benefit relating to uncertain tax positions is primarily due to an audit settlement and the filing of state income tax returns under a voluntary disclosure agreement.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

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


	Six Months Ended June 30,
	2020						2019
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	1,380,666	100.0	%	$	1,556,520	100.0	%	$	(175,854)	(11.3)	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	626,563		45.4		725,771		46.6		(99,208)		(13.7)
Selling, general and administrative	339,812		24.6		345,876		22.2		(6,064)		(1.8)
Depreciation and amortization	52,635		3.8		49,949		3.2		2,686		5.4
Impairment charges	130,411		9.4		—		—		130,411		n/m
Restructuring and other related charges	9,473		0.7		19,804		1.3		(10,331)		(52.2)
Total operating expenses	1,158,894		83.9		1,141,400		73.3		17,494		1.5
Operating income	221,772		16.1		415,120		26.7		(193,348)		(46.6)
Other income (expense):
Interest expense, net	(63,583)		(4.6)		(70,416)		(4.5)		6,833		(9.7)
Loss on extinguishment of debt	(2,908)		(0.2)		—		—		(2,908)		n/m
Miscellaneous, net	(21,226)		(1.5)		(15,482)		(1.0)		(5,744)		37.1
Total other income (expense)	(87,717)		(6.4)		(85,898)		(5.5)		(1,819)		2.1
Net income from operations before income taxes	134,055		9.7		329,222		21.2		(195,167)		(59.3)
Income tax expense	(43,295)		(3.1)		(45,080)		(2.9)		1,785		(4.0)
Net income including noncontrolling interests	90,760		6.6		284,142		18.3		(193,382)		(68.1)
Net income attributable to noncontrolling interests	(7,132)		(0.5)		(12,002)		(0.8)		4,870		(40.6)
Net income attributable to AMC Networks' stockholders	$	83,628	6.1	%	$	272,140	17.5	%	$	(188,512)	(69.3)	%

National Networks Segment Results

The following table sets forth our National Networks segment results for the periods indicated.


	Six Months Ended June 30,
	2020						2019
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	1,062,789	100.0	%	$	1,220,858	100.0	%	$	(158,069)	(12.9)	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	440,745		41.5		510,407		41.8		(69,662)		(13.6)
Selling, general and administrative	219,354		20.6		227,382		18.6		(8,028)		(3.5)
Depreciation and amortization	17,211		1.6		16,791		1.4		420		2.5
Restructuring and other related charges	2,723		0.3		576		—		2,147		n/m
Operating income	$	382,756	36.0	%	$	465,702	38.1	%	$	(82,946)	(17.8)	%
Share-based compensation expense	24,832		2.3		30,090		2.5		(5,258)		(17.5)
Depreciation and amortization	17,211		1.6		16,791		1.4		420		2.5
Restructuring and other related charges	2,723		0.3		576		—		2,147		n/m
AOI	$	427,522	40.2	%	$	513,159	42.0	%	$	(85,637)	(16.7)	%

International and Other Segment Results

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


	Six Months Ended June 30,
	2020						2019
(In thousands)	Amount		% of Revenues, net		Amount		% of Revenues, net		$ change		% change
Revenues, net	$	331,473	100.0	%	$	350,615	100.0	%	$	(19,142)	(5.5)	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	196,826		59.4		219,994		62.7		(23,168)		(10.5)
Selling, general and administrative	120,486		36.3		118,571		33.8		1,915		1.6
Depreciation and amortization	35,424		10.7		33,158		9.5		2,266		6.8
Impairment charges	130,411		39.3		—		—		130,411		n/m
Restructuring and other related charges	6,750		2.0		19,923		5.7		(13,173)		(66.1)
Operating loss	$	(158,424)	(47.8)	%	$	(41,031)	(11.7)	%	$	(117,393)	n/m
Share-based compensation expense	5,915		1.8		6,534		1.9		(619)		(9.5)
Depreciation and amortization	35,424		10.7		33,158		9.5		2,266		6.8
Impairment charges	130,411		39.3		—		—		130,411		n/m
Restructuring and other related charges	6,750		2.0		19,923		5.7		(13,173)		(66.1)
Majority-owned equity investees AOI	2,694		0.8		3,188		0.9		(494)		(15.5)
AOI	$	22,770	6.9	%	$	21,772	6.2	%	$	998	4.6	%

Revenues, net

Revenues, net decreased $175.9 million to $1,380.7 million for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. The net change by segment was as follows:


	Six Months Ended June 30,
(In thousands)	2020		% of total		2019		% of total		$ change		% change
National Networks	$	1,062,789	77.1	%	$	1,220,858	78.4	%	$	(158,069)	(12.9)	%
International and Other	331,473		24.0		350,615		22.5		(19,142)		(5.5)
Inter-segment eliminations	(13,596)		(1.0)		(14,953)		(1.0)		1,357		(9.1)
Consolidated revenues, net	$	1,380,666	100.1	%	$	1,556,520	99.9	%	$	(175,854)	(11.3)	%

National Networks

The decrease in National Networks revenues, net was attributable to the following:


	Six Months Ended June 30,
(In thousands)	2020		% of total		2019		% of total		$ change		% change
Advertising	$	400,660	37.7	%	$	458,579	37.6	%	$	(57,919)	(12.6)	%
Distribution	662,129		62.3		762,279		62.4		(100,150)		(13.1)
	$	1,062,789	100.0	%	$	1,220,858	100.0	%	$	(158,069)	(12.9)	%

•The decrease of $57.9 million in advertising revenues was primarily attributable to the timing of our original programming and the impact of the COVID-19 pandemic, both of which resulted in lower pricing across all of our networks. Most of our advertising revenues vary based on the timing of our original programming series and the popularity of our programming as measured by Nielsen. Due to these factors, we expect advertising revenues to vary from quarter to quarter.

•Distribution revenues decreased $100.2 million due to a decrease of $49.9 million in subscription revenues as compared to the prior comparable period due to lower subscribers. Content licensing revenues decreased $50.3 million due to a decrease in the number of original programs we distributed. Subscription revenues may vary based on the impact of renewals of affiliation agreements and content licensing revenues vary based on the timing of availability of our programming to distributors. Because of these factors, we expect distribution revenues to vary from quarter to quarter.

International and Other

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


	Six Months Ended June 30,
(In thousands)	2020		% of total		2019		% of total		$ change		% change
Advertising	$	34,174	10.3	%	$	44,741	12.8	%	$	(10,567)	(23.6)	%
Distribution	297,299		89.7		305,874		87.2		(8,575)		(2.8)
	$	331,473	100.0	%	$	350,615	100.0	%	$	(19,142)	(5.5)	%

Advertising revenues decreased $9.0 million at AMCNI, excluding the impact of foreign currency fluctuations, primarily related to lower demand resulting from the impact of the COVID-19 pandemic. Foreign currency translation had an unfavorable impact to advertising revenues of $1.6 million. Distribution revenues decreased $27.3 million at Levity, due to the impact of the COVID-19 pandemic on its operations, which resulted in a temporary halt in production activities and closure of comedy venues. The decrease in distribution revenues was offset by an increase of $31.4 million related to an increase in subscription revenues at AMC Networks SVOD targeted streaming services. In addition, distribution revenues decreased $6.1 million at IFC Films and $4.3 million at AMCNI, excluding the impact of foreign currency fluctuations. Foreign currency translation had an unfavorable impact to distribution revenues of $4.8 million.

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) decreased $99.2 million to $626.6 million for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. The net change by segment was as follows:


	Six Months Ended June 30,
(In thousands)	2020			2019			$ change		% change
National Networks	$	440,745		$	510,407		$	(69,662)	(13.6)	%
International and Other	196,826			219,994			(23,168)		(10.5)
Inter-segment eliminations	(11,008)			(4,630)			(6,378)		137.8
Total	$	626,563		$	725,771		$	(99,208)	(13.7)	%
Percentage of revenues, net	45.4		%	46.6		%

National Networks

The decrease in technical and operating expense of $69.7 million was due to a decrease in program amortization of $67.1 million primarily attributable to the mix of original programming as compared to the prior comparable period, which was impacted by the production stoppages resulting from the COVID-19 pandemic. In addition, other direct programming costs decreased $2.6 million. Program rights amortization expense includes write-offs of $7.5 million for the six months ended June 30, 2020 as compared to program rights write-offs of $13.4 million for the six months ended June 30, 2019. Programming write-offs are based on management's periodic assessment of programming usefulness.

International and Other

Technical and operating expense decreased $15.9 million related to Levity, $6.6 million at AMCNI and $4.7 million at IFC Films. The decrease at Levity is due to the impact of the COVID-19 pandemic on its operations, which resulted in a temporary halt in production activities and closure of comedy venues. These decreases were partially offset by an increase of $6.4 million at AMC Networks SVOD targeted streaming services. Foreign currency translation had a favorable impact to the change in technical and operating expense of $4.1 million.

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 decreased $6.1 million to $339.8 million for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019. The net change by segment was as follows:


	Six Months Ended June 30,
(In thousands)	2020			2019			$ change		% change
National Networks	$	219,354		$	227,382		$	(8,028)	(3.5)	%
International and Other	120,486			118,571			1,915		1.6
Inter-segment eliminations	(28)			(77)			49		(63.6)
Total	$	339,812		$	345,876		$	(6,064)	(1.8)	%
Percentage of revenues, net	24.6		%	22.2		%

National Networks

Selling, general and administrative expense decreased $8.0 million principally due to a decrease in advertising and marketing expenses of $12.8 million related to the mix of original programming, which was impacted by the COVID-19 pandemic, partially offset by an increase in legal fees.

International and Other

Selling, general and administrative expense increased $1.9 million. The increase in selling, general and administrative expense related to $17.3 million at AMC Networks SVOD targeted streaming services primarily related to advertising and marketing expenses, which was partially offset by decreases of $6.6 million at AMCNI primarily related to advertising and

marketing expenses, and $6.3 million at Levity primarily related to the impact of the COVID-19 pandemic. Foreign currency translation had a favorable impact to the change in selling, general and administrative expense of $2.3 million.

Depreciation and amortization

Depreciation and amortization expense increased $2.7 million to $52.6 million for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019. The net change by segment was as follows:


	Six Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
National Networks	$	17,211	$	16,791	$	420	2.5	%
International and Other	35,424		33,158		2,266		6.8
	$	52,635	$	49,949	$	2,686	5.4	%

The increase in depreciation and amortization expense in the National Networks segment was primarily due to depreciation of equipment at our AMC Networks Broadcasting and Technology facilities. The increase in depreciation and amortization expense in the International and Other segment was primarily due to an increase in depreciation expense related to leasehold additions.

Impairment charges

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 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 $105.1 million primarily related to certain identifiable intangible assets, as well as property and equipment, and operating lease right-of-use assets. The Company then performed a goodwill impairment test and determined that the carrying value of the AMCNI reporting unit exceeded its fair value, resulting in an impairment charge of $25.1 million.

Restructuring and other related charges

Restructuring and other related charges of $9.5 million for the six months ended June 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 $3.3 million related to severance associated with previously announced restructuring activities.

Restructuring expense of $19.8 million for the six months ended June 30, 2019 primarily related to the direct to consumer re-organization and consisted of severance and other personnel related costs of $1.3 million and programming write-offs of $13.0 million related to a change in programming strategy, as well as $5.5 million related to severance associated with previously announced restructuring activities.

Operating Income


	Six Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
National Networks	$	382,756	$	465,702	$	(82,946)	(17.8)	%
International and Other	(158,424)		(41,031)		(117,393)		n/m
Inter-segment Eliminations	(2,560)		(9,551)		6,991		n/m
	$	221,772	$	415,120	$	(193,348)	(46.6)	%

The decrease in operating income at the National Networks segment was primarily attributable to a decrease in revenue of $158.1 million and an increase in restructuring and other related charges of $2.1 million, partially offset by a decrease in technical and operating expense of $69.7 million and a decrease in selling, general and administrative expense of $8.0 million.

The increase in operating losses at the International and Other segment was primarily attributable to the impairment charges of $130.4 million and a decrease in revenues of $19.1 million, partially offset by a decrease in technical and operating expense of $23.2 million and a decrease in restructuring and other related charges of $13.2 million.

AOI

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


	Six Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
Operating income	$	221,772	$	415,120	$	(193,348)	(46.6)	%
Share-based compensation expense	30,747		36,624		(5,877)		(16.0)
Depreciation and amortization	52,635		49,949		2,686		5.4
Impairment charges	130,411		—		130,411		n/m
Restructuring and other related charges	9,473		19,804		(10,331)		(52.2)
Majority-owned equity investees AOI	2,694		3,188		(494)		(15.5)
AOI	$	447,732	$	524,685	$	(76,953)	(14.7)	%

AOI decreased $77.0 million for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. The net change by segment was as follows:


	Six Months Ended June 30,
(In thousands)	2020		2019		$ change		% change
National Networks	$	427,522	$	513,159	$	(85,637)	(16.7)	%
International and Other	22,770		21,772		998		4.6
Inter-segment eliminations	(2,560)		(10,246)		7,686		n/m
AOI	$	447,732	$	524,685	$	(76,953)	(14.7)	%

AOI decreased at the National Networks segment principally due to a decrease in operating income.

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 $6.8 million is primarily due to lower average outstanding balances.

Loss on extinguishment of debt

In March 2020, we redeemed $200 million principal amount of the outstanding $600 million principal amount of our 4.75% Notes due 2022. The loss on extinguishment of debt for the six months ended June 30, 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 expense, net of $5.7 million for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 was primarily due to an unfavorable variance of $18.1 million in the foreign currency remeasurement of monetary assets and liabilities (principally intercompany loans) that are denominated in currencies other than the underlying functional currency of the applicable entity, partially offset by an unrealized gain of $13.6 million from certain marketable equity securities.

Income tax expense

For the six months ended June 30, 2020, income tax expense was $43.3 million representing an effective tax rate of 32%. The effective tax rate differs from the federal statutory rate of 21% due primarily to tax expense from foreign operations of $9.4 million, state and local income tax expense of $5.7 million and tax expense of $5.6 million resulting from an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, partially offset by a tax benefit of $8.7 million relating to uncertain tax positions (including accrued interest) and tax benefit of $2.9 million related to a foreign-derived intangible income deduction. 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.

For the six months ended June 30, 2019, income tax expense was $45.1 million representing an effective tax rate of 14%. The effective tax rate differs from the federal statutory rate of 21% due primarily to a tax benefit of $25.0 million resulting from a decrease in valuation allowances for foreign tax assets, and a tax benefit of $5.6 million relating to uncertain tax positions (including accrued interest), partially offset by state and local income tax expense of $7.3 million. The decrease in the valuation allowance is primarily due to the expected utilization of foreign net operating loss carryforwards resulting from the planned

implementation of certain tax planning strategies. The tax benefit relating to uncertain tax positions is primarily due to an audit settlement and the filing of state income tax returns under a voluntary disclosure agreement.

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 other sources of capital such as the public bond markets.

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 three months ended June 30, 2020, the Company repurchased 0.7 million shares of its Class A common stock at an average purchase price of approximately $24.68 per share. As of June 30, 2020, the Company has $385.9 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. In March 2020, we redeemed $200 million principal amount of the outstanding $600 million principal amount of our 4.75% Notes due 2022.

As of June 30, 2020, our consolidated cash and cash equivalents balance includes approximately $173.0 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 2019 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 June 30, 2020. 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 June 30, 2020.

Cash Flow Discussion

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


(In thousands)	Six Months Ended June 30,
			2020			2019
Cash provided by operating activities	$	424,912		$	288,937
Cash used in investing activities	(9,998)			(43,555)
Cash used in financing activities	(336,816)			(92,265)
Net increase in cash and cash equivalents	78,098			153,117

Operating Activities

Net cash provided by operating activities amounted to $424.9 million for the six months ended June 30, 2020 as compared to $288.9 million for the six months ended June 30, 2019. Net cash provided by operating activities for the six months ended June 30, 2020 primarily resulted from $776.9 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 $387.0 million, a decrease in accounts payable, accrued expenses and other liabilities of $45.4 million primarily related to lower employee related liabilities and an increase in deferred carriage fees payable of $16.0 million. In addition, net cash provided by operating activities increased as a result of a decrease in accounts receivable of $55.4 million and a decrease in prepaid expense and other assets of $46.0 million primarily related to a decrease in long-term receivables. Changes in all other assets and liabilities resulted in a decrease of $4.8 million.

Net cash provided by operating activities amounted to $288.9 million for the six months ended June 30, 2019. Net cash provided by operating activities for the six months ended June 30, 2019 primarily resulted from $843.3 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 $443.5 million, an increase in prepaid expense and other assets of $40.0 million primarily related to an increase in long-term receivables and a decrease in accounts payable, accrued expenses and other liabilities of $58.3 million primarily related to lower employee related liabilities. Changes in all other assets and liabilities resulted in a decrease of $12.6 million.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2020 and 2019 was $10.0 million and $43.6 million, respectively. For the six months ended June 30, 2020, cash used in investing activities included capital expenditures of $22.2 million, partially offset by partial proceeds received from the sale of an investment of $10.0 million and principal payments received from a loan to an investee of $2.5 million. For the six months ended June 30, 2019, cash used in investing activities included capital expenditures of $49.5 million, partially offset by a return of capital from investees of $5.9 million.

Financing Activities

Net cash used in financing activities amounted to $336.8 million for the six months ended June 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 $212.8 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 $10.6 million, and payments on finance leases of $1.6 million.

Net cash used in financing activities amounted to $92.3 million for the six months ended June 30, 2019 and primarily consisted of purchases of our common stock of $58.4 million, taxes paid in lieu of shares issued for equity-based compensation of $23.0 million, distributions to noncontrolling interests of $10.1 million, and principal payments on debt and finance leases of $5.3 million, partially offset by proceeds from stock option exercises of $4.6 million.

Contractual Obligations

As of June 30, 2020, our contractual obligations not reflected on the condensed consolidated balance sheet decreased $104.0 million, as compared to December 31, 2019, to $829.9 million. The decrease primarily relates to payments for program rights and marketing commitments.

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 June 30, 2020 includes $400.0 million of 4.75% Notes due December 2022, $1.0 billion of 5.00% Notes due April 2024 and $800.0 million of 4.75% Notes due August 2025 (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)	Six Months Ended June 30, 2020
			Parent Company			Guarantor Subsidiaries
Revenues	$	—		$	974,389
Operating expenses	—			658,100
Operating income	—			316,289
Income before income taxes	118,767			196,708
Net income	$	79,454		$	192,292


Balance Sheet	June 30, 2020						December 31, 2019
(In thousands)	Parent Company		Guarantor Subsidiaries		Parent Company		Guarantor Subsidiaries
Assets
Amounts due from subsidiaries	$	5	$	88,238	$	1,760	$	100,485
Current assets	18,920		1,387,925		28,768		1,590,932
Non-current assets	3,853,059		3,136,906		4,050,648		3,044,865

Liabilities and equity:
Amounts due to subsidiaries	24,167		1,319		—		—
Current liabilities	141,596		461,157		100,081		470,027
Non-current liabilities	3,082,641		352,655		3,315,314		361,324

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 2 to the Company's Consolidated Financial Statements included in our 2019 Form 10-K. Other than the adoption of ASU 2019-02 described in Note 5 to the accompanying condensed consolidated financial statements of the Company included herein, there have been no significant changes in our significant accounting policies since December 31, 2019.

We discuss our critical accounting estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the same 2019 Form 10-K. There have been no significant changes in our critical accounting estimates since December 31, 2019.

The Company performs its annual goodwill impairment test as of December 1 each year. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require an interim impairment test. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of its reporting units. Further, the Company assessed the current forecasts (including significant assumptions about revenue growth rates, long-term growth rates and enterprise specific discount rates) and the amount of excess fair value over carrying value for each of its reporting units in the 2019 impairment test. In connection with the preparation of the second quarter financial information, the Company determined that a triggering event had occurred with respect to its AMCNI reporting unit, which required an interim impairment test to be performed as of June 30, 2020. As such, the Company performed a quantitative assessment for its AMCNI reporting unit. The fair value was determined using a combination of an income approach, using a discounted cash flow (DCF) model, and a market comparables approach. The DCF model includes significant assumptions about revenue growth rates, long-term growth rates and enterprise specific discount rates. Additionally, the market comparables approach is determined using guideline company financial multiples. Given the uncertainty in determining assumptions underlying the DCF approach, actual results may differ from those used in the valuations.

No impairment charge was required for any of the Company's other reporting units.

As we are unable to predict how long the COVID-19 pandemic conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on our business. If these estimates or related assumptions change in the future, we may be required to record additional impairment charges related to goodwill.

Recently Issued Accounting Pronouncements

See Note 1 to the accompanying Condensed Consolidated Financial Statements of the Company for a discussion of recently issued accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Fair Value of Debt

Based on the level of interest rates prevailing at June 30, 2020, the carrying value of our fixed rate debt of $2.18 billion was more than its fair value of $2.17 billion by approximately $5.3 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 June 30, 2020 would increase the estimated fair value of our fixed rate debt by approximately $71.8 million to approximately $2.24 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 June 30, 2020, we had $2.9 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 June 30, 2020, we had interest rate swap contracts outstanding with notional amounts aggregating $100 million. The aggregate fair value of interest rate swap contracts at June 30, 2020 was a net liability of $3.6 million. As a result of these transactions, the interest rate paid on approximately 79% of our debt (excluding finance leases) as of June 30, 2020 is effectively fixed (76% 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 June 30, 2020 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 $6.8 million loss and $16.4 million loss net, for the three and six months ended June 30, 2020, respectively, 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 June 30, 2020, 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 June 30, 2020, 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.

Since our 2019 Form 10-K, there have been no material developments in legal proceedings in which we are involved. See Note 14, Commitments and Contingencies to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors disclosed under the caption “Risk Factors” in our 2019 Form 10-K, as well as the following additional risk factor.

General Risks

The COVID-19 pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our operations and business

The impact of COVID-19 and measures to prevent its spread are affecting our businesses in a number of ways. To date, we have experienced adverse advertising sales impacts, suspended content production, which has led to delays in the creation and availability of some of our television programming, and the temporary closure of our comedy venues.

Operationally, nearly all of our employees are working remotely, and we have restricted business travel. If significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions or other restrictions in connection with the COVID-19 pandemic, the impact of the pandemic on our businesses could be exacerbated. In addition, the remote work environment has placed additional strain on our resources and the effects of the COVID-19 pandemic will heighten the other risks described in the section entitled “Risk Factors” in our 2019 Form 10-K, including evolving cybersecurity risks, which could result in the disclosure, theft or destruction of confidential information, disruption of our programming, damage to our brands and reputation, legal exposure and financial losses.

The Company has evaluated and continues to evaluate the potential impact of the COVID-19 pandemic on its consolidated financial statements, including the impairment of goodwill (see Note 7) and indefinite-lived intangible assets and the fair value and collectibility of receivables. The COVID-19 pandemic has had a material impact on the Company's operations since mid-March 2020. 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 a vaccine, and global economic conditions. The COVID-19 pandemic may also affect our business, operations or financial condition in a manner that is not presently known to us or that we currently do not consider to present significant risks. In addition, the COVID-19 pandemic may also exacerbate other risks described in Item 1A, "Risk Factors" in our 2019 Form 10-K.

Table of Contents

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.

Set forth below is information concerning acquisitions of AMC Networks Class A Common Stock by the Company during the three months ended June 30, 2020.


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2020 to April 30, 2020	688,100	$	24.68	688,100	$	385,873,963
May 1, 2020 to May 31, 2020	—	$	—	—	$	385,873,963
June 1, 2020 to June 30, 2020	—	$	—	—	$	385,873,963
Total	688,100	$	24.68	688,100

Item 6. Exhibits.

(a)Index to Exhibits.


10.1			AMC Networks Inc. Amended and Restated 2016 Employee Stock Plan

10.2			AMC Networks Inc. Amended and Restated 2011 Stock Plan For Non-Employee Directors

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.