RLJ Entertainment Reports Financial Results for the First Quarter Ended March 31, 2013

RLJ Entertainment Reports Financial Results for the First Quarter Ended March 31, 2013

SILVER SPRING, Md.--(BUSINESS WIRE)-- RLJ Entertainment Inc., (NAS: RLJE) , today reported results for the first quarter ended March 31, 2013. RLJ Entertainment is a leading creator, owner and distributor of media content across digital, broadcast and physical platforms, which leverages its branding expertise, access to content and direct to consumer skills to optimize the value of its programs for distinct audiences. RLJ Entertainment was formed in October 2012 through the business combination of RLJ Acquisition, Inc., Image Entertainment, Inc. and Acorn Media Group, Inc.

RLJ Entertainment is focused on driving growth through the development of interest-based lifestyle entertainment services for targeted audiences in niche genres including British drama and mystery, stand-up comedy, fitness, faith and urban by using new technologies to deliver that content to consumers.


Robert L. Johnson, Chairman of RLJ Entertainment stated, "I am pleased with the direction of the business to date. We continue to work diligently to integrate two very compelling entertainment businesses and to establish a solid video entertainment platform and distribution strategy. Our recently announced partnership with YouTube marks the beginning of our goal to become a major player in producing targeted digital entertainment to audiences that are underserved by existing outlets. We believe that this strategy will lead to strong returns for investors over time."

Miguel Penella, Chief Executive Officer of RLJ Entertainment, commented, "Our financial performance in the first quarter was in-line with expectations and we believe we are on track to deliver on our stated growth objectives. Our results were moderately impacted by a smaller slate of films released in the first quarter of 2013 compared to the same period last year as well as the planned amortization of production costs associated with the U.K. broadcast release of Foyle's War 8. However, our current pipeline of feature films remains strong, releases are expected to accelerate in the latter half of the year, and full ownership of unique intellectual property rights for content is a significant component of our long-term growth strategy."

First Quarter 2013 Results

The Company is presenting financial information for the first quarter 2013 and pro forma financial information for first quarter 2012 due to the closing of the business combination among RLJ Entertainment, Image Entertainment and Acorn Media on October 3, 2012.

For the first quarter ended March 31, 2013, RLJ Entertainment reported net revenue of $40.3 million compared to pro forma net revenue of $41.4 million for the three months ended March 31, 2012. Pro forma revenues include the revenues of Image Entertainment and Acorn Media as if each were acquired as of January 1, 2012. Revenue results for the first quarter were primarily attributable to lower revenues at Image Entertainment which were due to a smaller slate of film releases in Q1 2013 versus Q1 2012 and partially offset by the revenues recognized from the release of Foyle's War 8, an RLJ Entertainment original production.

Net loss for the first quarter ended March 31, 2013 totaled $3.6 million compared to a pro forma net loss of $2.1 million for the three months ended March 31, 2012. The increase in loss was primarily attributable to unrealized, noncash, foreign currency translation losses on intercompany loans ($1.4 million) and higher severance costs ($0.6 million).

EBITDA totaled $2.1 million for the first quarter ended March 31, 2013. EBITDA results for the first quarter were driven by increased broadcast revenues related to the initial release of Foyle's War 8, an RLJ Entertainment original production, as well as cost savings tied to Acorn's U.S. manufacturing and distribution activities in the quarter. For the first quarter ended March 31, 2013, Adjusted EBITDA, including integration savings, totaled $5.6 million and includes approximately $1.2 million in savings from actions taken during the first quarter or actions to be taken after March 31, 2013. Adjusted EBITDA, not including integration savings, was approximately $4.4 million.

About RLJ Entertainment - RLJ Entertainment, Inc. (NAS: RLJE) is a premier independent licensee and distributor of entertainment content and programming in North America, the United Kingdom and Australia with over 5,300 exclusive titles. RLJE is a leader in numerous genres via its owned and distributed brands such as Acorn (British TV), Image (stand-up comedy, feature films), One Village (urban), Acacia (fitness), Slingshot (faith), Athena (educational), Criterion (art films) and Madacy (gift sets). These titles are distributed in multiple formats including DVD, Blu-Ray, digital download, digital streaming, broadcast television (including satellite and cable), theatrical and non-theatrical.

Via its majority-owned subsidiary Agatha Christie Limited ("ACL"), RLJE manages the intellectual property and publishing rights to some of the greatest works of mystery fiction, including stories of the iconic sleuths Miss Marple and Poirot. And through its direct-to-consumer business, RLJE has direct contacts and billing relationships with millions of consumers.

RLJE leverages its management experience to acquire, distribute, and monetize existing and original content for its many distribution channels, including its nascent branded digital subscription channels, and engages distinct audiences with programming that appeals directly to their unique viewing interests. RLJE has proprietary e-commerce web sites for the Acorn and Acacia brands, and owns the recently launched Acorn TV digital subscription service.

Forward Looking Statements

This press release may include "forward looking statements" within the meaning of the "safe harbor" provisions of the United Stated Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "anticipate", "believe", "expect", "estimate", "plan", "outlook", and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Investors are cautioned that such forward looking statements with respect to revenues, earnings, EBITDA, performance, strategies, prospects and other aspects of the business of RLJ Entertainment is based on current expectations that are subject to risks and uncertainties.

A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward looking statements. These factors include, but are not limited to: (1) RLJ Entertainment's ability to integrate the businesses of Image Entertainment, Inc. and Acorn Media Group, Inc.; (2) the inability of RLJ Entertainment to fully realize the anticipated benefits of the business combination with Image Entertainment, Inc. and Acorn Media Group, Inc. or such benefits taking longer to realize than expected; (3) the ability of RLJ Entertainment's officers and directors to generate a number of potential investment opportunities; (4) RLJ Entertainment's ability to maintain relationships with customers, employees, suppliers and lessors; (5) the loss of key personnel; (6) delays in the release of new titles or other content; (7) the effects of disruptions in RLJ Entertainment's supply chain; (8) the limited liquidity and trading of RLJ Entertainment's public securities; (9) RLJ Entertainment's financial performance, including the ability of RLJ Entertainment to achieve revenue growth and EBITDA margins or realize synergies; (10) the possibility that RLJ Entertainment may be adversely affected by other economic, business, and/or competitive factors; (11) the need for additional capital and the availability of financing; (12) technological changes; (13) pricing and availability of products and services; (14) demand for RLJ Entertainment's products and services; (15) the ability to leverage and monetize content; and (16) other risks and uncertainties indicated from time to time in filings with the SEC by RLJ Entertainment.

Readers are referred to the most recent reports filed with the SEC by RLJ Entertainment. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

 

RLJ ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2013 and December 31, 2012

 
 

ASSETS

 
      Successor
(In thousands) March 31, 2013     December 31, 2012
Current assets:
Cash and cash equivalents $ 2,353 $ 4,739

Accounts receivable, net of reserve for returns, allowances and

provision for doubtful accounts totaling $5,336 as of
March 31, 2013 and $11,435 as of December 31, 2012

31,442 24,611
Inventories, net 21,742 23,029
Investment in film and television programs 86,988 89,797
Property, equipment and improvements, net 1,341 1,800
Equity investment in ACL 22,691 25,449
Other intangible assets 22,643 23,883
Goodwill 47,382 47,382
Prepaid expenses and other assets   2,067   1,938
Total assets $ 238,649 $ 242,628
 
 

RLJ ENTERTAINMENT, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS, Continued
(unaudited)
March 31, 2013 and December 31, 2012

 
 

LIABILITIES AND STOCKHOLDERS' EQUITY

 
      Successor
(In thousands, except share data) March 31, 2013    

December 31,
2012

 
Accounts payable and accrued liabilities $ 24,752 $ 30,590
Accrued royalties and distribution fees 33,097 32,658
Deferred revenue 4,535 4,339
Revolving credit facility 14,151 7,551
Senior term notes, less debt discount 50,488 51,225
Subordinated notes payable and other debt 23,277 23,547
Deferred tax liability 350 350
Stock warrant liability   4,120     4,324
Total liabilities   154,770     154,584
Commitments and contingencies
Stockholders' equity:

Common stock, $0.001 par value, 250 million shares authorized,
13,377,546 shares issued and outstanding at March 31, 2013 and
December 31, 2012, respectively

13 13
Additional paid-in capital 86,207 86,133
Retained earnings (deficit) (1,815 ) 1,743
Accumulated other comprehensive gain (loss)   (526 )   155
Net stockholders' equity   83,879     88,044
Total liabilities and stockholders' equity $ 238,649   $ 242,628
 
 

RLJ ENTERTAINMENT, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

For the Three Months Ended March 31, 2013 and 2012

 
 
      Successor     Predecessor
(In thousands, except per share data) 2013 2012
NET REVENUES $ 40,306 $ 19,585
COST OF SALES   27,736     10,065  

Gross profit

  12,570     9,520  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling expenses 6,047 3,563
General and administrative expenses 7,101 3,314
Transaction costs       1,664  
Total selling, general and administrative expenses   13,148     8,541  
INCOME (LOSS) FROM OPERATIONS (578 ) 979
OTHER INCOME (EXPENSE):
Interest in ACL's net income 649 24
Interest expense, net (2,126 ) (157 )
Other income (expense)   (1,077 )   183  
Total other income (expense)   (2,554 )   50  
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (3,132 ) 1,029
PROVISION FOR INCOME TAXES   426     187  
NET INCOME (LOSS) (3,558 ) 842
Less net income attributable to non-controlling interests       (91 )
NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ (3,558 ) $ 751  
NET INCOME (LOSS) PER COMMON SHARE:
UNRESTRICTED COMMON STOCK:
Basic $ (0.27 ) $ 0.73  
Diluted $ (0.27 ) $ 0.73  
RESTRICTED COMMON STOCK:
Basic $ (0.27 ) $  
Diluted $ (0.27 ) $  
 
 

RLJ ENTERTAINMENT, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)

For the Three Months Ended March 31, 2013 and 2012

 
 
      Successor     Predecessor
(In thousands) 2013 2012
NET INCOME (LOSS):
Net income (loss) $ (3,558 ) $ 842
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation gain (loss)   (681 )   201  

TOTAL COMPREHENSIVE INCOME (LOSS)

  (4,239 )   1,043  

LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS:

Share of net income (91 )
Share of foreign currency translation loss       2  
Comprehensive income attributable to noncontrolling interest       (89 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON
SHAREHOLDERS

$ (4,239 ) $ 954  
 
 

RLJ ENTERTAINMENT, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

For the Three Months Ended March 31, 2013 and 2012

 
 
Successor     Predecessor
(In thousands) 2013 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,558 ) $ 842
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Interest in ACL net income (649 ) (24 )
Amortization of film and television programs 7,179 766
Depreciation and other amortization 140 108
Noncash interest expense 584
Amortization of intangible assets 1,287 23
Provision for doubtful accounts 16 308
Provision for lower of cost or market inventory 264
Noncash foreign currency exchange loss (gain) 1,361 (164 )

Accelerated amortization and fair value write-down of
advance royalty and distribution fees

608 430
Change in fair values of stock warrant liability (204 )
Stock-based compensation expense 74 91
Changes in assets and liabilities associated with operating activities:
Accounts receivable (7,155 ) 5,409
Inventories 955 489
Investment in film and television programs (6,016 ) 417
Prepaid expenses and other assets (206 ) (482 )
Accounts payable, accrued royalties, fees and liabilities (4,743 ) (6,749 )
Deferred revenue   196      
Net cash provided by (used in) operating activities   (9,867 )   1,464  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (23 ) (234 )
Acquisition of ACL (21,871 )
Dividends received from ACL   1,811     1,006 ?

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