10-Q
RLJ ENTERTAINMENT, INC. filed this Form 10-Q on 11/09/2017
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Liabilities and Equity

The increase in our liabilities and equity of $8.4 million to $144.4 million is primarily due to an $8.6 million increase in our debt balance.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

A summary of our cash flow activity is as follows:

 

 

 

Nine Months Ended September 30,

 

(In thousands)

 

2017

 

 

2016

 

Net cash (used in) provided by operating activities

 

$

(9,522

)

 

$

249

 

Net cash used in investing activities

 

 

(1,199

)

 

 

(1,006

)

Net cash provided by (used in) financing activities

 

 

9,090

 

 

 

(2,100

)

Effect of exchange rate changes on cash

 

 

384

 

 

 

(199

)

Net decrease in cash

 

 

(1,247

)

 

 

(3,056

)

Cash at beginning of period

 

 

7,834

 

 

 

4,530

 

Cash at end of period

 

$

6,587

 

 

$

1,474

 

 

At September 30, 2017 and December 31, 2016, our cash and cash equivalents was $6.6 million and $7.8 million, respectively. During the nine months ended September 30, 2017, our cash position was impacted by the following:

 

We used cash for operating activities of $9.5 million compared to us generating cash from operating activities of $0.2 million for the first nine months of last year. We used more cash for operating activities in 2017 due to increasing our investments in content to expand our program library and to reducing our royalty liabilities. We continue to have significant short-term vendor debts, that are past due and which we are in the process of paying off by making increased cash payments or modifying payment terms in the short term. Bringing our vendor trade payables current continues to constrain our liquidity.

 

Our quarterly results are typically affected by: (a) the timing and release dates of key productions, (b) the seasonality of our Wholesale Distribution business which is 32% to 35% weighted to the fourth quarter and (c) the increased investment in content during the first half of the year, yet investments at times may be impacted by liquidity constraints.

 

Our reported cash flow activities include the impacts of our discontinued operations. During the nine months ended September 30, 2016, our discontinued operations required a net use of cash from operating activities of $3.8 million.

 

During the first nine months of 2017, we received $9.1 million from financing activities compared to using $2.1 million for the same period last year. During 2017, we increased our senior debt by $18.0 million and used $8.6 million to repay our subordinated debt. Last year our net cash used in financing activities consisted of normal debt servicing payments. Under our current senior loan, we have no required debt servicing payments until 2020.

Growth of our Digital Channels segment has the potential impact of improving our liquidity. We continue to realize significant growth in our Digital Channels segment. Our Digital Channels segment revenues increased 75.1% to $19.4 million during the nine months ended September 30, 2017 as compared to the same period in 2016. After cost of sales and operating expenses, our Digital Channels segment contributed $6.3 million of income from continuing operations during the nine months ended September 30, 2017 compared to $4.1 million last year. Our expectation is that our digital channels will continue to grow, although there is no assurance that this will occur.

In October 2016, we refinanced our senior debt. In January 2017, to repay our subordinated notes payable, we amended our senior debt and borrowed an additional $8.0 million. In June 2017, we expanded our senior debt and borrowed an additional $10.0 million. The proceeds received are available for working capital purposes, including the acquisition of content In addition to providing us liquidity, the amended senior loan facility helps us address our liquidity constraints going forward in three ways: (1) it eliminates cash interest payments, which were 12% prior to October 14, 2016 and 4% through March 31, 2017, (2) there are no required principal payments until 2020, and (3) the financial covenants have been reset to less restrictive levels that provide us the necessary flexibility to invest in our operations.

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