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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 March 31, 2020
or
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 April 24, 2020:
Class A Common Stock par value $0.01 per share 40,556,233
Class B Common Stock par value $0.01 per share 11,484,408




AMC NETWORKS INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
 




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)

March 31, 2020 December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents $ 704,129    $ 816,170   
Accounts receivable, trade (less allowance for doubtful accounts of $8,610 and $5,733)
826,022    857,143   
Current portion of program rights, net 17,059    426,624   
Prepaid expenses and other current assets 195,191    230,360   
Total current assets 1,742,401    2,330,297   
Property and equipment, net of accumulated depreciation of $352,655 and $347,302
289,519    283,752   
Program rights, net 1,381,950    1,038,060   
Intangible assets, net 507,136    524,531   
Goodwill 686,835    701,980   
Deferred tax asset, net 50,813    51,545   
Operating lease right-of-use asset 168,503    170,056   
Other assets 489,265    496,465   
Total assets $ 5,316,422    $ 5,596,686   
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 104,126    $ 94,306   
Accrued liabilities 239,584    251,214   
Current portion of program rights obligations 283,239    304,692   
Deferred revenue 73,334    63,921   
Current portion of long-term debt 70,625    56,250   
Current portion of lease obligations 33,857    33,959   
Total current liabilities 804,765    804,342   
Program rights obligations 210,173    239,813   
Long-term debt 2,824,470    3,039,979   
Lease obligations 219,709    211,047   
Deferred tax liability, net 151,033    136,911   
Other liabilities 156,909    163,638   
Total liabilities 4,367,059    4,595,730   
Commitments and contingencies
Redeemable noncontrolling interests 311,967    309,451   
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 64,347 and 63,886 shares issued and 41,244 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 282,153    286,491   
Accumulated earnings 1,676,139    1,609,428   
Treasury stock, at cost (23,102 and 19,808 shares Class A Common Stock, respectively)
(1,149,138)   (1,063,181)  
Accumulated other comprehensive loss (196,364)   (167,711)  
Total AMC Networks stockholders' equity 613,548    665,781   
Non-redeemable noncontrolling interests 23,848    25,724   
Total stockholders' equity 637,396    691,505   
Total liabilities and stockholders' equity $ 5,316,422    $ 5,596,686   
See accompanying notes to condensed consolidated financial statements.
1


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

Three Months Ended March 31,
  2020 2019
Revenues, net
$ 734,375    $ 784,221   
Operating expenses:
Technical and operating (excluding depreciation and amortization)
344,060    340,148   
Selling, general and administrative
184,649    172,512   
Depreciation and amortization 26,730    24,056   
Restructuring and other related charges 5,966    2,642   
Total operating expenses 561,405    539,358   
Operating income 172,970    244,863   
Other income (expense):
Interest expense (37,564)   (39,645)  
Interest income 4,555    4,200   
Loss on extinguishment of debt (2,908)   —   
Miscellaneous, net (29,939)   (12,785)  
Total other (expense) income (65,856)   (48,230)  
Income from operations before income taxes 107,114    196,633   
Income tax expense (33,588)   (46,476)  
Net income including noncontrolling interests 73,526    150,157   
Net income attributable to noncontrolling interests (4,859)   (6,760)  
Net income attributable to AMC Networks' stockholders $ 68,667    $ 143,397   
Net income per share attributable to AMC Networks' stockholders:
Basic $ 1.24    $ 2.53   
Diluted $ 1.22    $ 2.48   
Weighted average common shares:
Basic 55,477    56,588   
Diluted 56,061    57,725   
See accompanying notes to condensed consolidated financial statements.
2


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
Three Months Ended March 31,
  2020 2019
Net income including noncontrolling interests $ 73,526    $ 150,157   
Other comprehensive income (loss):
Foreign currency translation adjustment (27,121)   (5,762)  
Unrealized loss on interest rate swaps (1,997)   (639)  
Other comprehensive loss, before income taxes (29,118)   (6,401)  
Income tax benefit 465    149   
Other comprehensive loss, net of income taxes (28,653)   (6,252)  
Comprehensive income 44,873    143,905   
Comprehensive income attributable to noncontrolling interests
(3,698)   (6,722)  
Comprehensive income attributable to AMC Networks' stockholders
$ 41,175    $ 137,183   
See accompanying notes to condensed consolidated financial statements.
3


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
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 —    —    —    68,667    —    —    68,667    —    68,667   
Net loss attributable to non-redeemable noncontrolling interests —    —    —    —    —    —    —    (267)   (267)  
Adoption of ASU 2016-13, credit losses —    —    —    (1,956)   —    —    (1,956)   —    (1,956)  
Distributions to noncontrolling member —    —    —    —    —    —    —    (448)   (448)  
Treasury stock not yet settled —    —    (10,988)   —    —    —    (10,988)   —    (10,988)  
Other comprehensive loss —    —    —    —    —    (28,653)   (28,653)   (1,161)   (29,814)  
Share-based compensation expense —    —    15,512    —    —    —    15,512    —    15,512   
Treasury stock acquired —    —    —    —    (85,957)   —    (85,957)   —    (85,957)  
Restricted stock units converted to shares   —    (8,862)   —    —    —    (8,858)   —    (8,858)  
Balance, March 31, 2020 $ 643    $ 115    $ 282,153    $ 1,676,139    $ (1,149,138)   $ (196,364)   $ 613,548    $ 23,848    $ 637,396   


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
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 —    —    —    143,397    —    —    143,397    —    143,397   
Net income attributable to non-redeemable noncontrolling interests —    —    —    —    —    —    —    942    942   
Distributions to noncontrolling member —    —    —    —    —    —    —    (361)   (361)  
Settlement of treasury stock —    —    985    —    —    —    985    —    985   
Other comprehensive income —    —    —    —    —    (6,252)   (6,252)   38    (6,214)  
Proceeds from the exercise of stock options —    —    4,630    —    —    —    4,630    —    4,630   
Share-based compensation expense —    —    19,899    —    —    —    19,899    —    19,899   
Treasury stock acquired —    —    —    —    (991)   —    (991)   —    (991)  
Restricted stock units converted to shares   —    (22,959)   —    —    —    (22,958)   —    (22,958)  
Balance, March 31, 2019 $ 634    $ 115    $ 242,322    $ 1,372,339    $ (993,574)   $ (166,446)   $ 455,390    $ 29,147    $ 484,537   

See accompanying notes to consolidated financial statements.
4


AMC NETWORKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March 31,
2020 2019
Cash flows from operating activities:
Net income including noncontrolling interests $ 73,526    $ 150,157   
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 26,730    24,056   
Share-based compensation expense related to equity classified awards 15,512    19,899   
Non-cash restructuring and other related charges 3,928    1,171   
Amortization and write-off of program rights 223,982    205,275   
Amortization of deferred carriage fees 6,783    2,710   
Unrealized foreign currency transaction loss (gain) 7,848    (4,501)  
Amortization of deferred financing costs and discounts on indebtedness 1,918    1,954   
Loss on extinguishment of debt 2,908    —   
Bad debt expense 1,211    2,353   
Deferred income taxes 15,900    (8,858)  
Write-down of non-marketable equity securities and note receivable 20,000    17,741   
Other, net 1,044    1,142   
Changes in assets and liabilities:
Accounts receivable, trade (including amounts due from related parties, net) 27,178    (1,429)  
Prepaid expenses and other assets 17,532    (26,233)  
Program rights and obligations, net (221,627)   (190,651)  
Income taxes payable 369    40,114   
Deferred revenue 9,522    (4,200)  
Deferred carriage fees, net (15,484)   (422)  
Accounts payable, accrued liabilities and other liabilities (20,372)   (58,591)  
Net cash provided by operating activities 198,408    171,687   
Cash flows from investing activities:
Capital expenditures (12,916)   (22,053)  
Return of capital from investees —    3,908   
Principal payment received on loan to investee 1,250    —   
Proceeds from sale of investments 10,000    —   
Net cash used in investing activities (1,666)   (18,145)  
Cash flows from financing activities:
Proceeds from the issuance of long-term debt 5,000    2,521   
Principal payments on long-term debt (209,375)   (3,238)  
Deemed repurchases of restricted stock units (8,858)   (22,959)  
Purchase of treasury stock (85,957)   (991)  
Proceeds from stock option exercises —    4,630   
Principal payments on finance lease obligations (781)   (1,309)  
Distributions to noncontrolling interests (3,081)   (5,629)  
Net cash used in financing activities (303,052)   (26,975)  
Net increase (decrease) in cash and cash equivalents from operations (106,310)   126,567   
Effect of exchange rate changes on cash and cash equivalents (5,731)   2,229   
Cash and cash equivalents at beginning of period 816,170    554,886   
Cash and cash equivalents at end of period $ 704,129    $ 683,682   

See accompanying notes to condensed consolidated financial statements.
5

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, and UMC; 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 and suspended content production, which has led to delays in the creation and availability of some of its television programming. 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.
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 and indefinite-lived intangible assets and the fair value and collectibility of receivables. The ultimate impact of the COVID-19 pandemic, including the extent of any adverse impact on our business, results of operations and financial condition, 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, and global economic conditions. Although the effect of the pandemic may not be fully reflected in the Company’s business until future periods, the Company believes that the adverse impact of the COVID-19 pandemic will be material to its results of operations. The Company does not expect the
6

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
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 (the “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 March 31, 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.
Contract Balances from Contracts with Customers
7

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.
(In thousands) March 31, 2020 December 31, 2019
Balances from contracts with customers:
     Accounts receivable (including long-term, included in Other assets) $ 1,109,949    $ 1,121,834   
     Contract assets, short-term (included in Other current assets) 7,303    7,283   
     Contract assets, long-term (included in Other assets) 2,877    9,964   
     Contract liabilities (Deferred revenue) 73,334    63,921   
Revenue recognized for the three months ended March 31, 2020 relating to the contract liability at December 31, 2019 was $11.7 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 March 31,
2020 2019
Basic weighted average common shares outstanding 55,477    56,588   
Effect of dilution:
Stock options —    33   
Restricted stock units 584    1,104   
Diluted weighted average common shares outstanding 56,061    57,725   
Approximately 1.3 million and 1.5 million restricted stock units outstanding as of March 31, 2020 and March 31, 2019 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 March 31, 2020, there were 0.4 million restricted stock units that would have been anti-dilutive to the diluted weighted average common shares outstanding.
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 three months ended March 31, 2020, the Company repurchased 3.3 million shares of its Class A Common Stock at an average purchase price of approximately $26.09 per share. As of March 31, 2020, the Company has $402.9 million of authorization remaining for repurchase under the Stock Repurchase Program.
Note 4. Restructuring and Other Related Charges
Restructuring and other related charges of $6.0 million for the three months ended March 31, 2020 related to restructuring costs associated with termination of distribution in certain territories as well as severance and other personnel related costs associated with previously announced restructuring activities.
The following table summarizes the restructuring and other related charges recognized by operating segment:
(In thousands) Three Months Ended March 31,
2020 2019
National Networks $ 1,509    $ 303   
International & Other 4,457    3,035   
Inter-segment eliminations —    (696)  
Total restructuring and other related charges $ 5,966    $ 2,642   

The following table summarizes the accrued restructuring costs:
8

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
(In thousands) Severance and employee-related costs Other exit costs Total
December 31, 2019 $ 27,407    $ 221    $ 27,628   
Charges 3,081    2,885    5,966   
Cash payments (16,402)   (100)   (16,502)  
Non-cash adjustments (1,251)   (2,894)   (4,145)  
Currency translation —    —    —   
Balance, March 31, 2020 $ 12,835    $ 112    $ 12,947   
Accrued restructuring costs of $12.9 million are included in accrued liabilities in the consolidated balance sheet at March 31, 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.
9

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 March 31, 2020
 Predominantly Monetized Individually  Predominantly Monetized as a Group  Total
Owned original program rights, net:
Completed $ 230,459    $ —    $ 230,459   
In-production and in-development 198,347    —    198,347   
Total owned original program rights, net $ 428,806    $ —    $ 428,806   
Licensed program rights, net:
Licensed film and acquired series $ 9,462    $ 605,314    $ 614,776   
Licensed originals 289,242    —    289,242   
Advances and content versioning costs —    66,185    66,185   
Total licensed program rights, net 298,704    671,499    970,203   
Program rights, net $ 727,510    $ 671,499    $ 1,399,009   
Current portion of program rights, net 17,059   
Program rights, net (long-term) 1,381,950   
$ 1,399,009   
Amortization of owned and licensed program rights is as follows:
Three months ended March 31, 2020
Predominantly Monetized Individually Predominantly Monetized as a Group Total
Owned original program rights $ 105,561    $ —    $ 105,561   
Licensed program rights 21,352    97,069    118,421   
Program rights amortization $ 126,913    $ 97,069    $ 223,982   

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 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.
10

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
The Company periodically reviews the programming usefulness of its licensed and owned original program rights based on several factors, including expected future revenue generation from airings on the Company's networks and other exploitation opportunities, ratings, type and quality of program material, standards and practices, and fitness for exhibition through various forms of distribution. If it is determined that film or other program rights have limited, or no, future programming usefulness, the useful life is updated, which generally results in a write-off of the unamortized cost to technical and operating expense in the consolidated statements of income. There were no program rights write-offs for the three months ended March 31, 2020. Program rights write-offs, included in technical and operating expense, were $3.3 million for the three months ended March 31, 2019.
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 $66.7 million at March 31, 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 realized and unrealized gains (losses) on equity securities, included in Miscellaneous, net in the condensed consolidated statement of income. Investments in marketable equity securities were $3.3 million at March 31, 2020 and $4.4 million at December 31, 2019.
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 realized and unrealized gains (losses) on equity securities, included in Miscellaneous, net in the condensed consolidated statement of income.
Investments in non-marketable equity securities were $41.8 million at March 31, 2020 and $61.8 million at December 31, 2019. For the three months ended March 31, 2020 and March 31, 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 statement of income.
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   
Amortization of "second component" goodwill (332)   (332)  
Foreign currency translation (14,813)   (14,813)  
March 31, 2020 $ 236,771    $ 450,064    $ 686,835   
The reduction of $0.3 million in the carrying amount of goodwill for the 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. 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
11

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
(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. The Company determined that a triggering event has not occurred which would require an interim impairment test to be performed. However, 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 impairment charges related to goodwill.
The following tables summarize information relating to the Company's identifiable intangible assets:
(In thousands) March 31, 2020
Gross Accumulated Amortization Net Estimated Useful Lives
Amortizable intangible assets:
Affiliate and customer relationships $ 608,758    $ (237,333)   $ 371,425   
6 to 25 years
Advertiser relationships 46,282    (22,872)   23,410   
11 years
Trade names 110,343    (18,589)   91,754   
3 to 20 years
Other amortizable intangible assets 2,798    (2,151)   647   
5 to 15 years
Total amortizable intangible assets 768,181    (280,945)   487,236   
Indefinite-lived intangible assets:
Trademarks 19,900    —    19,900   
Total intangible assets $ 788,081    $ (280,945)   $ 507,136   
(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 three months ended March 31, 2020 and 2019 was $12.1 million and $10.3 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 $ 45,895   
2021 46,130   
2022 45,631   
2023 45,523   
2024 45,455   



12

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) March 31, 2020 December 31, 2019
Employee related costs $ 53,000    $ 89,753   
Participations and residuals 79,512    70,682   
Interest 37,096    29,767   
Other accrued expenses 69,976    61,012   
Total accrued liabilities $ 239,584    $ 251,214   

Note 9. Long-term Debt
The Company's long-term debt consists of the following:
(In thousands) March 31, 2020 December 31, 2019
Senior Secured Credit Facility: (a)
Term Loan A Facility $ 721,875    $ 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)
5,000    —   
Total long-term debt 2,926,875    3,131,250   
Unamortized discount (22,058)   (24,351)  
Unamortized deferred financing costs (9,722)   (10,670)  
Long-term debt, net 2,895,095    3,096,229   
Current portion of long-term debt 70,625    56,250   
Noncurrent portion of long-term debt $ 2,824,470    $ 3,039,979   
(a)The Company's $500 million revolving credit facility remains undrawn at March 31, 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 and mature on August 25, 2020. As of March 31, 2020, there was $5.0 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 three months ended March 31, 2020 of $2.9 million representing the redemption premium and the write-off of a portion of the unamortized discount and deferred financing costs.


13

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 consolidated balance sheets as follows:
(In thousands) Balance Sheet 
Location
March 31, 2020 December 31, 2019
Assets
Operating Operating lease right-of-use asset $ 168,503    $ 170,056   
Finance Property and equipment, net 27,853    15,713   
Total lease assets 196,356    $ 185,769   
Liabilities
Current:
Operating Current portion of lease obligations 30,546    $ 30,171   
Finance Current portion of lease obligations 3,311    3,788   
33,857    33,959   
Noncurrent:
Operating Lease obligations 189,873    193,570   
Finance Lease obligations 29,836    17,477   
219,709    211,047   
Total lease liabilities $ 253,566    $ 245,006   

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.
14

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 March 31, 2020 and December 31, 2019:
(In thousands) Level I Level II Level III Total
At March 31, 2020:
Assets
Cash equivalents $ 256,983    $ —    $ —    $ 256,983   
Marketable securities 3,273    —    —    3,273   
Foreign currency derivatives —    3,366    —    3,366   
Liabilities
Interest rate swap contracts $ —    $ 3,963    $ —    $ 3,963   
Foreign currency derivatives —    3,018    —    3,018   
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 March 31, 2020, the Company does 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. These nonrecurring valuations primarily include the valuation of affiliate and customer relationships intangible assets, advertiser relationship 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) March 31, 2020
Carrying
Amount
Estimated
Fair Value
Debt instruments:
Term loan A facility $ 714,999    $ 683,977   
4.75% Notes due August 2025
788,707    778,000   
5.00% Notes due April 2024
989,205    975,000   
4.75% Notes due December 2022
397,184    387,880   
Other debt 5,000    5,000   
$ 2,895,095    $ 2,829,857   
15

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 March 31, 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 not designated as hedging instruments included in the condensed consolidated balance sheets are as follows:
(In thousands) Balance Sheet 
Location
March 31, 2020 December 31, 2019
Derivatives designated as hedging instruments:
Liabilities:
Interest rate swap contracts Accrued liabilities $ 3,963    $ 1,966   
Derivatives not designated as hedging instruments:
Assets:
Foreign currency derivatives Prepaid expenses and other current assets $ 1,701    $ 891   
Foreign currency derivatives Other assets 1,665    993   
Liabilities:
Foreign currency derivatives Accrued liabilities $ 886    $ 687   
Foreign currency derivatives Other liabilities 2,132    1,202   
16

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 March 31, Three Months Ended March 31,
2020 2019   2020 2019
Derivatives in cash flow hedging relationships:
Interest rate swap contracts $ (2,234)   $ (651)   Interest expense $ 237    $ 12   

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 March 31,
  2020 2019
Foreign currency derivatives Miscellaneous, net 408    457   
Total $ 408    $ 457   

Note 13. Income Taxes
For the three months ended March 31, 2020, income tax expense was $33.6 million, representing an effective tax rate of 31%. The effective tax rate differs from the federal statutory rate of 21% due primarily to tax expense of $4.6 million for excess tax deficiencies related to stock compensation, tax expense from foreign operations of $4.0 million, state income tax expense of $3.0 million and $2.7 million for an increase in valuation allowances for foreign taxes and U.S. foreign tax credits, partially offset by tax benefit of $2.8 million relating to uncertain tax positions (including accrued interest) due to an audit settlement.
For the three months ended March 31, 2019, income tax expense was $46.5 million, representing an effective tax rate of 24%. The effective tax rate differs from the federal statutory rate of 21% due primarily to state income tax expense of $3.2 million.
At March 31, 2020, the Company had foreign tax credit carry forwards of approximately $30.3 million, expiring on various dates from 2022 through 2030. These carryforwards have been reduced by a valuation allowance of $28.9 million as it is more likely than not that these carry forwards will not be realized. For the three months ended March 31, 2020, $0.3 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 March 31, 2020, the Company's contractual obligations not reflected on the Company's condensed consolidated balance sheet decreased $74.8 million, as compared to December 31, 2019, to $859.1 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
17

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
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. Although the joint trial was previously scheduled to begin on June 1, 2020, due to delays resulting from the closure of the NY State courts because of the Coronavirus pandemic, the trial is currently scheduled to begin on November 2, 2020. 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 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. Following post-trial briefing, a decision in this first phase trial is expected in or around June 2020, depending on the re-opening of the California state courts. 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 March 2020, AMC Networks granted 1,171,956 restricted stock units ("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 three months ended March 31, 2020, 475,114 RSUs and 325,836 PRSUs of AMC Networks Class A Common Stock previously issued to employees of the Company vested. On the vesting date, 197,824 RSUs and 142,882 PRSUs were surrendered to the Company to cover the required statutory tax withholding obligations and 277,290 RSU and 182,954 PRSU
18

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
were converted to shares of AMC Networks Class A Common Stock. 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 three months ended March 31, 2020.
Share-based compensation expense included in selling, general and administrative expense, for the three months ended March 31, 2020 and March 31, 2019 was $15.5 million and $19.9 million, respectively.
As of March 31, 2020, there was $71.2 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 2.0 years.
Note 16. Redeemable Noncontrolling Interests
The following table summarizes activity related to redeemable noncontrolling interest for the three months ended March 31, 2020.
(In thousands) Three Months Ended March 31, 2020
December 31, 2019 $ 309,451   
Net earnings 5,126   
Distributions (2,633)  
Other 23   
March 31, 2020 $ 311,967   

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 March 31, 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 $0.7 million for the three months ended March 31, 2020 and 2019, respectively.
Note 18. Cash Flows
The Company's non-cash investing and financing activities and other supplemental data are as follows:
(In thousands) Three Months Ended March 31,
2020 2019
Non-Cash Investing and Financing Activities:
Treasury stock not yet settled 10,988    $ —   
Capital lease additions 14,271    —   
Capital expenditures incurred but not yet paid 2,501    2,216   
Supplemental Data:
Cash interest paid 27,873    28,235   
Income taxes paid, net 4,069    6,426   

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
19

AMC NETWORKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
(loss) before depreciation and amortization, cloud computing amortization, share-based compensation expense or benefit, impairment and related 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 March 31, 2020
National
Networks
International
and Other
Inter-segment
eliminations
Consolidated
Revenues, net
Advertising $ 213,226    $ 19,365    $ —    $ 232,591   
Distribution 353,713    151,129    (3,058)   501,784   
Consolidated revenues, net $ 566,939    $ 170,494    $ (3,058)   $ 734,375   
Operating income (loss) $ 195,224    $ (19,450)   $ (2,804)   $ 172,970   
Share-based compensation expense 12,465    3,047    —    15,512   
Depreciation and amortization 8,389    18,341    —    26,730   
Restructuring and other related charges 1,509    4,457