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Basis Of Presentation
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9 Months Ended |
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Sep. 30, 2013
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis Of Presentation |
Basis of Presentation
The accompanying condensed consolidated financial statements of 鶹app (formerly named 鶹app Spinco,Inc.) ("鶹app" or the "Company" unless the context otherwise requires) represent a combination of the historical financial information of (1) certain video programming and other media related assets and businesses previously attributed to the Starz tracking stock group and the Capital tracking stock group of 鶹app Interactive Corporation ("鶹app Interactive" and formerly named 鶹app) further described in note 3 and (2) 鶹app and its consolidated subsidiaries for the period following the date of the Split-Off (defined below). See discussion below pertaining to the Spin-Off (defined below). The Split-Off and Spin-Off have been accounted for at historical cost due to the pro rata nature of the distributions.
In September 2011, 鶹app Interactive completed the split-off of its former wholly-owned subsidiary (then known as 鶹app) ("the Split-Off"), which at the time of the Split-Off held all of the businesses, assets and liabilities attributed to 鶹app Interactive's Capital and Starz tracking stock groups. In January 2013, this entity (now named Starz) spun-off (the “Spin-Off”) the Company its then-former wholly owned subsidiary, 鶹app, which, at the time of the Spin-Off, held all of the businesses, assets and liabilities of Starz not associated with Starz, LLC (with the exception of the Starz, LLC office building). The transaction was effected as a pro-rata dividend of shares of 鶹app to the stockholders of Starz. Due to the relative significance of 鶹app to Starz (the legal spinnor) and senior management's continued involvement with 鶹app following the Spin-Off, 鶹app is being treated as the "accounting successor" to Starz for financial reporting purposes, notwithstanding the legal form of the Spin-Off previously described. Therefore, the historical financial statements of the company formerly known as 鶹app continue to be the historical financial statements of 鶹app, and Starz, LLC is presented as discontinued operations. Therefore, for purposes of these condensed consolidated financial statements, 鶹app is treated as the spinnor for purposes of discussion and as a practical matter for describing all the historical information contained herein.
Following the Split-Off and Spin-Off, 鶹app, 鶹app Interactive and Starz operate as separate publicly traded companies, none of which has any stock ownership, beneficial or otherwise, in the other. In connection with the Split-Off and Spin-Off, 鶹app entered into certain agreements with 鶹app Interactive and Starz, respectively, in order to govern ongoing relationships between the companies and to provide for an orderly transition. These agreements include Reorganization Agreements, Services Agreements, Facilities Sharing Agreements, a Lease Agreement (in the case of the Spin-Off only) and Tax Sharing Agreements. The Reorganization, Services and Facilities Sharing Agreements entered into with 鶹app Interactive were assigned from Starz to 鶹app in connection with the Spin-Off.
The Reorganization Agreements provide for, among other things, provisions governing the relationships between 鶹app and each of 鶹app Interactive and Starz following the Split-Off and Spin-Off, respectively, including certain cross-indemnities. Pursuant to the Services Agreements, 鶹app provides 鶹app Interactive and Starz with general and administrative services including legal, tax, accounting, treasury and investor relations support. 鶹app Interactive and Starz reimburse 鶹app for direct, out-of-pocket expenses incurred by 鶹app in providing these services and for 鶹app Interactive's and Starz's respective allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to each respective company. Under the Facilities Sharing Agreements, 鶹app shares office space and related amenities at its corporate headquarters with 鶹app Interactive and Starz. Under these various agreements approximately $6 million and $4 million of these allocated expenses were reimbursed to 鶹app during the three months ended September 30, 2013 and 2012, respectively, and approximately $15 million and $7 million of these allocated expenses were reimbursed to 鶹app during the nine months ended September 30, 2013 and 2012, respectively. Under the Lease Agreement, Starz leases its corporate headquarters from 鶹app. The Lease Agreement with Starz for their corporate headquarters requires a payment of approximately $3 million annually, subject to certain increases based on the Consumer Price Index.
In connection with the Spin-Off, 鶹app and Starz entered into a Tax Sharing Agreement which provides for the allocation and indemnification of tax liabilities and benefits between 鶹app and Starz and other agreements related to tax matters. Among other things, pursuant to the Tax Sharing Agreement, 鶹app has agreed to indemnify Starz, subject to certain exceptions, for taxes and tax-related losses resulting from the Spin-Off and the Split-Off, except to the extent such taxes or losses result from (i) the breach of certain restrictive covenants made by Starz or (ii) Section 355(e) of the Code applying to the Spin-Off or the Split-Off as a result of the Spin-Off or Split-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire a 50-percent or greater interest in the stock of Starz. With respect to the Split-Off, the IRS has examined the transaction, and during 2012, the IRS and 鶹app Interactive entered into a Closing Agreement which provides that the Split-Off qualified for tax-free treatment to 鶹app Interactive and Starz. In April 2013, the IRS completed its review of the Spin-Off and notified the parties that it agreed with the nontaxable characterization of the transaction.
鶹app, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the media, communications and entertainment industries primarily in North America.
The accompanying (a) condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form10-Q and Article10 of RegulationS-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Certain amounts included in the accompanying financial statements for 2012 have been reclassified and adjusted to conform to the 2013 financial statement presentation. During the current period we changed the presentation of Net sales (purchases) of short term investments and other marketable securities to present gross amounts in the consolidated statement of cash flows, in order to conform to GAAP requirements. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in 鶹app's Annual Report on Form10-K for the year ended December31, 2012.
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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i)fair value measurement, (ii)accounting for income taxes, (iii)assessments of other-than-temporary declines in fair value of its investments and (iv)the expected depreciable lives of satellites and spacecraft control facilities to be its most significant estimates.
鶹app holds investments that are accounted for using the equity method. 鶹app does not control the decision making process or business management practices of these affiliates. Accordingly, 鶹app relies on management of these affiliates to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, 鶹app relies on audit reports that are provided by the affiliates' independent auditors on the financial statements of such affiliates. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliates that would have a material effect on 鶹app's condensed consolidated financial statements.
On October 3, 2013, 鶹app closed a transaction in which a subsidiary of Comcast, Inc. exchanged approximately 6.3 million shares of 鶹app's Series A common stock for a newly created subsidiary of 鶹app which held 鶹app's wholly owned subsidiary Leisure Arts, Inc., approximately $417 million in cash and 鶹app's rights in and to a revenue sharing agreement relating to the carriage of CNBC ("CNBC Agreement"). The carrying value of Leisure Arts, Inc. and the CNBC Agreement was not significant. Therefore, the Company expects to record a significant gain in the fourth quarter based on the difference between the carrying value of the assets and businesses deconsolidated, at the time of exchange, and the fair value of the 鶹app Series A common stock received. The Company expects any gain recorded on the exchange transaction will be excluded from taxable income.
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