10-Q
RLJ ENTERTAINMENT, INC. filed this Form 10-Q on 11/09/2017
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RLJ Entertainment, Inc.

 

Notes To Consolidated Financial Statements

(Unaudited)

 

NOTE 2. SEGMENT INFORMATION

In accordance with the requirements of ASC 280 “Segment Reporting,” selected financial information regarding our reportable business segments, Digital Channels, IP Licensing and Wholesale Distribution, is presented below. Our reportable segments are determined based on the distinct nature of their operation. Each segment is a strategic business unit that is managed separately and either exploits our content over a different business model (subscription based vs. transactional) or acquires content differently. Our Digital Channels segment consists of our proprietary digital streaming channels. Our IP Licensing segment includes intellectual property (or content) owned or created by us that is sublicensed for exploitation worldwide. The IP Licensing segment also includes our investment in ACL. Our Wholesale Distribution segment consists of the acquisition, enhancement and worldwide exploitation through our wholesale partners of exclusive content in various formats, including DVD, Blu-ray, digital, broadcast (including cable and satellite), VOD, streaming video, downloading and sublicensing. Our Wholesale Distribution segment also includes our U.K. mail-order catalog and ecommerce businesses.

Management currently evaluates segment performance based primarily on revenues and operating income (loss), including earnings from ACL. Operating costs and expenses exclude costs related to depreciation and amortization. Operating costs and expenses attributable to our Corporate segment include only those expenses incurred by us at the parent corporate level, which are not allocated to our reporting segments and include costs associated with RLJE’s corporate functions such as finance and accounting, human resources, legal and information technology departments. Interest expense, change in the fair value of stock warrants and other derivatives, other income (expense) and provision for income taxes are evaluated by management on a consolidated basis and are not allocated to our reportable segments.

The segment results exclude our discontinued operations. During 2016, we reclassified our U.K. mail-order catalog and ecommerce businesses into our Wholesale Distribution segment. As a result, for the three months ended September 30, 2016, we reclassified revenues of $0.4 million and operating costs and expenses of $0.4 million. For the nine months ended September 30, 2016, we reclassified revenues of $1.3 million, operating costs and expenses of $1.6 million and depreciation and amortization of $36,000.

The tables below summarize the segment contribution for the three months ended September 30, 2017 and 2016.

 

 

 

Three Months Ended September 30, 2017

 

(In thousands)

 

Digital

Channels

 

 

IP Licensing

 

 

Wholesale

Distribution

 

 

Corporate

 

 

Total

 

Revenues

 

$

6,954

 

 

$

41

 

 

$

13,905

 

 

$

 

 

$

20,900

 

Operating costs and expenses

 

 

(5,263

)

 

 

(113

)

 

 

(12,904

)

 

 

(3,330

)

 

 

(21,610

)

Depreciation and amortization

 

 

(272

)

 

 

(33

)

 

 

(495

)

 

 

(174

)

 

 

(974

)

Share in ACL earnings

 

 

 

 

 

1,723

 

 

 

 

 

 

 

 

 

1,723

 

Segment contribution income (loss)

 

$

1,419

 

 

$

1,618

 

 

$

506

 

 

$

(3,504

)

 

$

39

 

 

 

 

Three Months Ended September 30, 2016

 

(In thousands)

 

Digital

Channels

 

 

IP Licensing

 

 

Wholesale

Distribution

 

 

Corporate

 

 

Total

 

Revenues

 

$

4,384

 

 

$

17

 

 

$

13,950

 

 

$

 

 

$

18,351

 

Operating costs and expenses

 

 

(2,406

)

 

 

11

 

 

 

(13,076

)

 

 

(2,445

)

 

 

(17,916

)

Depreciation and amortization

 

 

(174

)

 

 

(33

)

 

 

(506

)

 

 

(118

)

 

 

(831

)

Share in ACL earnings

 

 

 

 

 

990

 

 

 

 

 

 

 

 

 

990

 

Segment contribution income (loss)

 

$

1,804

 

 

$

985

 

 

$

368

 

 

$

(2,563

)

 

$

594

 

 

14


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