10-Q
RLJ ENTERTAINMENT, INC. filed this Form 10-Q on 11/09/2017
Entire Document
 << Previous Page | Next Page >>

RLJ Entertainment, Inc.

 

Notes To Consolidated Financial Statements

(Unaudited)

 

As of September 30, 2017, the net Wholesale Distribution payables due to SPHE were $2.2 million, which is included in accounts payable and accrued liabilities. As of December 31, 2016, the net Wholesale Distribution receivables with SPHE were $4.3 million, which is included in accounts receivable.

 

 

NOTE 5. INVENTORIES

Inventories are summarized as follows:

 

 

 

September 30,

 

 

December 31,

 

(In thousands)

 

2017

 

 

2016

 

Packaged discs

 

$

4,745

 

 

$

5,601

 

Packaging materials

 

 

440

 

 

 

452

 

Other merchandise

 

 

183

 

 

 

162

 

Inventories, net

 

$

5,368

 

 

$

6,215

 

 

For each reporting period, we review the value of inventories on hand to estimate the recoverability through future sales. Values in excess of anticipated future sales are booked as obsolescence reserve. Our obsolescence reserve was $9.9 million as of September 30, 2017 and $10.0 million as of December 31, 2016. We reduce our inventories with adjustments for lower of cost or market valuation, shrinkage, excess quantities and obsolescence. During the nine months ended September 30, 2017 and 2016, we recorded impairment charges of $1.0 million and $1.8 million, respectively. During the three months ended September 30, 2017 and 2016, we recorded impairment charges of $0.5 million and $0.6 million, respectively. These charges are included in cost of sales as manufacturing and fulfillment cost.

 

 

NOTE 6. INVESTMENTS IN CONTENT

 

 

 

September 30,

 

 

December 31,

 

(In thousands)

 

2017

 

 

2016

 

Released

 

$

65,292

 

 

$

48,593

 

Completed, not released

 

 

5,365

 

 

 

8,453

 

In-production

 

 

4,657

 

 

 

3,691

 

Investments in content, net

 

$

75,314

 

 

$

60,737

 

 

Investments in content are stated at the lower of unamortized cost or estimated fair value. The valuation of investments in content is reviewed on a title-by-title basis when an event or change in circumstances indicates that the fair value of content is less than its unamortized cost. For the three months ended September 30, 2017 and 2016, impairment charges were $0.5 million and $0.3 million, respectively. For the nine months ended September 30, 2017 and 2016, impairment charges were $1.1 million and $2.1 million, respectively. These charges are included in cost of sales as part of content amortization and royalties.

In determining the fair value of content for impairments (Note 10, Fair Value Measurements), we employ a discounted cash flow (or DCF) methodology. Key inputs employed in the DCF methodology include estimates of ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on a market participant's weighted average cost of capital plus a risk premium representing the risk associated with producing a particular type of content.

 

 

17


 << Previous Page | Next Page >>