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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] | 听 |
| Basis Of Presentation |
Basis of Presentation
The accompanying condensed consolidated financial statements of 午夜寻花 (formerly named 午夜寻花 Spinco,听Inc.) ("午夜寻花" 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 午夜寻花 Interactive Corporation ("午夜寻花 Interactive" and formerly named 午夜寻花) further described in note 3 and (2) 午夜寻花 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, 午夜寻花 Interactive completed the split-off of its former wholly-owned subsidiary (then known as 午夜寻花) ("the Split-Off"), which at the time of the Split-Off held all of the businesses, assets and liabilities attributed to 午夜寻花 Interactive's Capital and Starz tracking stock groups. In January 2013, this entity (now named Starz) spun-off (the 鈥淪pin-Off鈥) the Company its then-former wholly owned subsidiary, 午夜寻花, 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 午夜寻花 to the stockholders of Starz. Due to the relative significance of 午夜寻花 to Starz (the legal spinnor) and senior management's continued involvement with 午夜寻花 following the Spin-Off, 午夜寻花 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 午夜寻花 continue to be the historical financial statements of 午夜寻花, and Starz, LLC is presented as discontinued operations. Therefore, for purposes of these condensed consolidated financial statements, 午夜寻花 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, 午夜寻花, 午夜寻花 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, 午夜寻花 entered into certain agreements with 午夜寻花 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 午夜寻花 Interactive were assigned from Starz to 午夜寻花 in connection with the Spin-Off.
The Reorganization Agreements provide for, among other things, provisions governing the relationships between 午夜寻花 and each of 午夜寻花 Interactive and Starz following the Split-Off and Spin-Off, respectively, including certain cross-indemnities. Pursuant to the Services Agreements, 午夜寻花 provides 午夜寻花 Interactive and Starz with general and administrative services including legal, tax, accounting, treasury and investor relations support. 午夜寻花 Interactive and Starz reimburse 午夜寻花 for direct, out-of-pocket expenses incurred by 午夜寻花 in providing these services and for 午夜寻花 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, 午夜寻花 shares office space and related amenities at its corporate headquarters with 午夜寻花 Interactive and Starz. Under these various agreements approximately $6 million and $4 million of these allocated expenses were reimbursed to 午夜寻花 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 午夜寻花 during the nine months ended September 30, 2013 and 2012, respectively. Under the Lease Agreement, Starz leases its corporate headquarters from 午夜寻花. 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, 午夜寻花 and Starz entered into a Tax Sharing Agreement which provides for the allocation and indemnification of tax liabilities and benefits between 午夜寻花 and Starz and other agreements related to tax matters. Among other things, pursuant to the Tax Sharing Agreement, 午夜寻花 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 午夜寻花 Interactive entered into a Closing Agreement which provides that the Split-Off qualified for tax-free treatment to 午夜寻花 Interactive and Starz.听听 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.
午夜寻花, 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 Form听10-Q and Article听10 of Regulation听S-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 午夜寻花's Annual Report on Form听10-K for the year ended December听31, 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)听fair value measurement, (ii)听accounting for income taxes, (iii)听assessments of other-than-temporary declines in fair value of its investments and (iv)听the expected depreciable lives of satellites and spacecraft control facilities to be its most significant estimates.
午夜寻花 holds investments that are accounted for using the equity method. 午夜寻花 does not control the decision making process or business management practices of these affiliates. Accordingly, 午夜寻花 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, 午夜寻花 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 午夜寻花's condensed consolidated financial statements.
On October 3, 2013, 午夜寻花 closed a transaction in which a subsidiary of Comcast, Inc. exchanged approximately 6.3 million shares of 午夜寻花's Series A common stock for a newly created subsidiary of 午夜寻花 which held 午夜寻花's wholly owned subsidiary Leisure Arts, Inc., approximately $417 million in cash and 午夜寻花'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 午夜寻花 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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