|RLJ ENTERTAINMENT, INC. filed this Form 10-Q on 11/09/2017|
|<< Previous Page | Next Page >>|
recognition of expense. Changes in fair value are primarily driven by changes in our common stock price and its volatility. For the three months ended September 30, 2017 and 2016, we recognized expense of $0.3 million and $1.2 million, respectively, due to changes in the fair value of our stock warrants and other derivative liabilities. For the nine months ended September 30, 2017 and 2016, we recognized expense of $3.6 million and $3.4 million, respectively, due to changes in the fair value of our stock warrants and other derivative liabilities.
Other Income (Expense)
Other income (expense) primarily consists of foreign currency gains and losses resulting from advances and loans by our U.S. subsidiaries to our foreign subsidiaries that have not yet been repaid. Our foreign currency gains and losses are primarily impacted by changes in the exchange rate of the Pound relative to the U.S. dollar. As the Pound strengthens relative to the U.S. dollar, we recognize other income; and as the Pound weakens relative to the U.S. dollar, we recognize other expense. During the three months ended September 30, 2017, we recognized foreign currency gains of $0.2 million compared to foreign currency losses of $0.1 million during the same period in 2016. During the nine months ended September 30, 2017, we recognized foreign currency gains of $0.6 million compared to foreign currency losses of $0.9 million during the same period in 2016.
We have fully reserved our net U.S. deferred tax assets, and such tax assets may be available to reduce future income taxes payable should we have U.S. taxable income in the future. To the extent such deferred tax assets relate to net operating losses (or NOL) carryforwards, the ability to use our NOL carryforwards against future earnings will be subject to applicable carryforward periods and limitations subsequent to a change in ownership.
We recorded income tax expense of $0.4 million and $0.2 million for the three-month periods ended September 30, 2017 and 2016, respectively. We recorded income tax expense of $0.8 million and $0.2 million for the nine-month periods ended September 30, 2017 and 2016, respectively. Our tax provision in 2017 primarily relates to our U.K. operations. We provide income tax provisions on our U.K. earnings, which includes our share of ACL earnings, at an effective tax rate of approximately 20%. During 2016, our income tax provision was provided primarily during the third quarter based on the pre-tax earnings of our U.K. operations.
Loss from Discontinued Operations, Net of Income Taxes
Our loss from discontinued operations is attributable to the wind down of our U.S. catalog/ecommerce business which occurred during 2016 and was effectively complete as of September 30, 2016. For the three and nine months ended September 30, 2016, our losses were $0.9 million and $3.2 million, respectively.
Management defines Adjusted EBITDA as earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, severance costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.
Management believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material non-cash items that allows investors to analyze the operating performance of the business using the same metric management uses. The exclusion of non-cash items better reflects our ability to make investments in the business and meet obligations. Presentation of Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. Management uses this measure to assess operating results and performance of our business, perform analytical comparisons, identify strategies to improve performance and allocate resources to our business segments. While management considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with U.S. GAAP. Not all companies calculate Adjusted EBITDA in the same manner and the measure, as presented, may not be comparable to similarly-titled measures presented by other companies.
|<< Previous Page | Next Page >>|