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Crown Media Holdings Announces Operating Results for First Quarter of 2008

Thursday 08. May 2008 - Crown Media Holdings Announces Operating Results for First Quarter of 2008STUDIO CITY, Calif.CA-CROWN-MEDIA-HOLDINGS

Crown Media Holdings, Inc. (NASDAQ:CRWN) today reported its operating results for the quarter ended March 31, 2008.

Operating Highlights for the Quarter

Revenue growth.

Crown Media’s net revenue in the first quarter of 2008 increased 32% to $70.6 million, from $53.6 million in the prior year’s first quarter. The Company experienced an increase of 23% in advertising revenues to $56.4 million and an 85% increase in subscriber fee revenues to $13.9 million.
Continued subscriber increase. Hallmark Channel subscribers increased 11% by approximately 8.0 million to 84.2 million as of March 31, 2008, from 76.2 million subscribers as of March 31, 2007.
Successful renewal of distribution agreements. During the first quarter of 2008, the Company reported renewing its distribution agreements with Time Warner and DIRECTV. Subsequent to the end of the quarter, Crown Media announced the renewal of its distribution agreement with Cablevision.
Record ratings. For the first quarter of 2008, Hallmark Channel delivered its highest rated first quarter, and its second-highest quarter for household delivery in the network’s history. The channel maintained its position as a top-ten rated cable channel, ranking seventh in Prime Time with a 1.2 household rating and tenth in Total Day with a 0.7 household rating among all 73 ad-supported cable networks according to Nielsen.
Popular original programming. The Company’s ratings success in the first quarter was fueled in part by the popularity of the Company’s original programming. During the first quarter, Hallmark Channel premiered seven original movies which averaged a record-high household rating of 2.3 as compared to an average household rating of 2.0 for all of the original movie premieres in 2007.
‘The first quarter of 2008 was an operating success as well as a financial success,’ noted Henry Schleiff, President and CEO of Crown Media. ‘We have now completed the renewals of all of our major distribution agreements on favorable terms which are reflected in the growth of our subscriber license fees. Our programming continues to earn record ratings, which we are increasingly monetizing, as our advertisers recognize the value of the Hallmark brand and the appeal of our programming to the baby-boomer audience, which is growing in size and buying power.’

‘Last month we entered a new chapter in our history with the launch of the high definition version of Hallmark Movie Channel. Continued programming success, realization of more favorable subscriber license fees, and a strong advertising market should have a positive impact on results for 2008.’

Financial Results

Historical financial information is provided in tables at the end of this release.

Operating Results

Crown Media reported revenue of $70.6 million for the first quarter of 2008, a 32% increase from $53.6 million for the first quarter of 2007. Subscriber fee revenue increased 85% to $13.9 million, from $7.5 million in the prior year’s quarter as a result of higher net effective rates on average, primarily due to a decrease in subscriber acquisition fees applied against revenue and contractual rate increases in renewed distribution agreements. The number of paying subscribers has also increased as a result of previously amended distribution agreements. Advertising revenue increased 23% to $56.4 million during the quarter, from $46.0 million in the first quarter of 2007, reflecting the growth in subscribers and an increase in advertising rates.

For the first quarter of 2008, cost of services decreased 23% to $38.9 million from $50.8 million during the same quarter of 2007. Within cost of services, programming expenses decreased 11% quarter over quarter to $35.4 million, following the December 31, 2007, expiration of our programming agreement with NICC, offset in part by the Company’s licensing Hallmark Hall of Fame movies under an agreement, which was entered into during 2008 and covers a 10-year exhibition window.

Subscriber acquisition fee amortization expense was $0 in the first quarter of 2008 versus $7.8 million in the same period of 2007. Subscriber acquisition fee amortization expense decreased 100% as all of the expense was netted against revenue during the three months ended March 31, 2008. Other cost of services and amortization of our capital lease increased 7% from $3.2 million to $3.5 million for the first quarter of 2008, primarily due to miscellaneous incremental increases.

Selling, general and administrative expenses decreased to $13.5 million for the quarter ended March 31, 2008, from $14.2 million in the year earlier period primarily due to an $806,000 decrease in compensation expense related to our share-based obligations. Marketing expenses of $6.4 million for the quarter ended March 31, 2008, increased from $4.2 million for the quarter ended March 31, 2007. The Company held two marketing promotions for movies in the first quarter of 2008 as compared to one promotion in the first quarter of 2007.

Adjusted EBITDA was $14.5 million for the first quarter of 2008 compared to an Adjusted EBITDA loss of $5.1 million for the same period last year. Cash provided by continuing operating activities totaled $306,000 for the first quarter of 2008 compared to cash used in continuing operating activities of $12.8 million for the same period last year. The net loss for the quarter ended March 31, 2008, totaled $14.7 million, or $0.14 per share, compared to $40.2 million, or $0.38 per share, in the first quarter of 2007.