10-Q
RLJ ENTERTAINMENT, INC. filed this Form 10-Q on 11/09/2017
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The following table includes the reconciliation of our consolidated U.S. GAAP net loss to our consolidated Adjusted EBITDA:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(In thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net loss

 

$

(2,716

)

 

$

(3,960

)

 

$

(9,943

)

 

$

(17,609

)

Interest expense

 

 

2,288

 

 

 

2,222

 

 

 

6,326

 

 

 

6,617

 

Provision for income tax

 

 

372

 

 

 

151

 

 

 

848

 

 

 

192

 

Depreciation and amortization

 

 

974

 

 

 

831

 

 

 

2,751

 

 

 

2,100

 

Basis-difference amortization in equity earnings of

   affiliate

 

 

117

 

 

 

117

 

 

 

342

 

 

 

373

 

Change in fair value of stock warrants and other

   derivatives

 

 

264

 

 

 

1,222

 

 

 

3,647

 

 

 

3,406

 

Stock-based compensation

 

 

696

 

 

 

277

 

 

 

1,208

 

 

 

887

 

Restructuring

 

 

200

 

 

 

 

 

 

8

 

 

 

 

Loss from discontinued operations

 

 

 

 

 

917

 

 

 

 

 

 

3,169

 

Foreign currency exchange gain on intercompany

   accounts

 

 

(165

)

 

 

76

 

 

 

(640

)

 

 

900

 

Non-cash royalty expense

 

 

881

 

 

 

963

 

 

 

2,397

 

 

 

2,001

 

Adjusted EBITDA

 

$

2,911

 

 

$

2,816

 

 

$

6,944

 

 

$

2,036

 

 

During 2016, we changed how we are computing our Adjusted EBITDA. Previously, we were adding back content amortization and royalty expense and deducting cash invested in content to arrive at an Adjusted EBITDA. We have now aligned our adjusted EBITDA definition to our peers in our industry and to the amended definition in our credit agreement.  The revised Adjusted EBITDA adds back our non-cash royalty expense, which consists of step-up amortization and impairments on content that was acquired as of the Business Combination.

For the three- and nine-month periods ended September 30, 2017, our Adjusted EBITDA improved by $0.1 million and $4.9 million, respectively, compared to the same periods last year. The increase reflects our improved operating results from continuing operations after adjusting for the above non-cash expenses. The improved performance primarily results from the growth of our Digital Channels segment which is becoming a larger portion of our business and is contributing a higher profit margin. Adjusted EBITDA also improved due to the improved performance of our investment in ACL during the nine months ended September 30, 2017 as compared to the same period in 2016. The restructuring adjustment for the nine months ended September 30, 2017, primarily includes our net gain on extinguishment of debt, certain non-recurring transaction costs totaling $0.3 million and a legal settlement of $0.2 million during the third quarter.

BALANCE SHEET ANALYSIS

Assets

Total assets at September 30, 2017 and December 31, 2016, were $144.4 million and $136.0 million, respectively. The increase of $8.4 million in assets is primarily attributed to increases in investments in content of $14.6 million and equity investment in ACL of $3.4 million offset by decreases in accounts receivable of $6.3 million, other intangible assets of $1.2 million and cash of $1.2 million. The decrease in cash is primarily due to increased investments in content and increased royalty payments offset by the expansion of our debt, which generated about $9.3 million of cash, and cash dividends received from ACL of $1.2 million. Our equity investment in ACL increased due to improved operating performance and the strengthening Pound. Our accounts receivable decreased because of the seasonal nature of our Wholesale Distribution segment business and follows the decline in Wholesale Distribution segment revenues.

A summary of assets by segment is as follows:

 

 

 

September 30,

 

 

December 31,

 

(In thousands)

 

2017

 

 

2016

 

Digital Channels

 

$

7,806

 

 

$

5,941

 

IP Licensing

 

 

21,717

 

 

 

18,648

 

Wholesale Distribution

 

 

107,068

 

 

 

102,748

 

Corporate

 

 

7,813

 

 

 

8,643

 

 

 

$

144,404

 

 

$

135,980

 

33


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