DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2014 |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION [Abstract] | ' |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | ' |
NOTE 1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
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Description of Business |
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RLJ Entertainment, Inc. (or RLJE) is a company with a direct presence in North America, the United Kingdom and Australia and sublicense and distribution relationships covering Europe, Asia and Latin America. RLJE was incorporated in Nevada in April 2012. On October 3, 2012, we completed the business combination of RLJE, Image Entertainment, Inc. (or Image) and Acorn Media Group, Inc. (or Acorn Media), which is referred to herein as the “Business Combination.” Acorn Media includes its subsidiaries RLJE International Ltd (or RLJE U.K.), RLJ Entertainment Australia Pty Ltd. (or RLJE Australia) and RLJ Entertainment Ltd (or RLJE Ltd). In February 2012, Acorn Media acquired a 64% ownership of Agatha Christie Limited (or ACL). References to Image include its wholly-owned subsidiary Image/Madacy Home Entertainment, LLC. “We,” “our” or “us” refers to RLJE and its consolidated subsidiaries, unless otherwise noted. Our principal executive offices are located in Silver Spring, Maryland, with additional U.S. locations in Woodland Hills, California, and Stillwater, Minnesota, and international locations in London, England and Sydney, Australia. |
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We acquire content rights in various categories including: British episodic mystery and drama, urban programming, and full-length independent motion pictures. Through long-term exclusive agreements, we license rights to third-party programs. We also develop, produce, and own original programming through our wholly-owned subsidiary, RLJE Ltd, and our majority-owned subsidiary, ACL, in addition to fitness titles through our Acacia brand. Our owned content includes Foyle’s War made-for-TV films, multiple fitness/wellness titles, and through our 64% ownership of ACL, the works of Agatha Christie. |
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We exploit our products through a multi-channel strategy encompassing (1) the licensing of original drama and mystery content managed and developed through our wholly-owned subsidiary, RLJE Ltd, and our majority-owned subsidiary, ACL, (IP Licensing segment) as well as our fitness offerings; (2) wholesale exploitation through partners covering broadcast/cable, digital, online, and brick and mortar outlets (Wholesale segment); and (3) direct relations with consumers via proprietary e-commerce, catalog, and subscription-based video on demand (or SVOD) channels (Direct-to-Consumer segment). |
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Our wholesale partners are broadcast, digital outlets and major retailers in the U.S., Canada, United Kingdom (or U.K.) and Australia, including, among others, DirectTV, Showtime, BET, PBS, Netflix, Amazon, Hulu, Walmart, Target, Costco, Barnes & Noble, HMV and iTunes. |
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Our Direct-to-Consumer segment includes the sale of video content and complementary merchandise directly to consumers through proprietary e-commerce websites and catalogs and our proprietary SVOD channels, AcornTV and Acacia TV, which was launched in January 2014. In June 2014, we launched our urban content SVOD channel. We also plan to develop other audience-based, premium SVOD channels. |
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Our management views the operations of RLJE based on these three distinctive reporting segments: (1) IP Licensing; (2) Wholesale; and (3) Direct-to-Consumer. Operations and net assets that are not associated with any of these stated segments are reported as “Corporate” when disclosing and discussing segment information. The IP Licensing segment includes intellectual property (or IP) rights that we own or create and then sublicense for exploitation worldwide. Our Wholesale and Direct-to-Consumer segments consist of the acquisition, content enhancement and worldwide exploitation of exclusive content in various formats, including broadcast (including cable and satellite), DVD, Blu-ray, digital, video-on-demand (or VOD), SVOD, downloading and sublicensing. The Wholesale segment exploits content through third-party vendors such as DirectTV, Showtime, BET, Netflix, Amazon, Walmart, Best Buy, Target and Costco, while the Direct-to-Consumer segment exploits the same content and complementary merchandise directly to consumers through our proprietary e-commerce websites, mail-order catalogs and digital streaming channels. |
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During the first quarter of 2014, we changed the names of a few of our subsidiaries. A summary of the name changes are as follows: |
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Former Subsidiary Name | New Subsidiary Name |
Acorn Productions Limited (or APL) | RLJ Entertainment Ltd (or RLJE Ltd) |
Acorn Productions (UK) Limited | Acorn Productions Ltd |
Acorn Media UK Limited (or Acorn UK) | RLJE International Ltd (or RLJE U.K.) |
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Basis of Presentation |
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Unaudited Interim Financial Statements |
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The financial information presented in the accompanying unaudited interim consolidated financial statements as of June 30, 2014 and for the three and six months ended June 30, 2014 and 2013 has been prepared in accordance with accounting principles generally accepted in the United States (or U.S. GAAP) and with the Securities and Exchange Commission’s (or SEC) instructions for interim financial reporting instructions for the Form 10-Q (or Form 10-Q) and Article 10 of Regulation S-X of the Securities Exchange Commission. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete audited financial statements. |
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In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Due to the seasonal nature of our business in which a disproportionate amount of sales occur in the fourth quarter, and other factors, including our content release schedule, interim results are not necessarily indicative of the results that may be expected for the entire fiscal year. The accompanying unaudited financial information should, therefore, be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K filed on March 19, 2014 (or the 2013 Form 10-K). Our significant accounting policies are included in our 2013 Form 10-K within Note 2, Summary of Significant Accounting Policies of our audited consolidated financial statements. As of June 30, 2014, no material changes to our significant accounting policies disclosed in our 2013 Form 10-K have been made. |
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Accounting and Reporting Pronouncements Adopted |
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Since the filing of our 2013 Form 10-K, there were no new accounting pronouncements adopted. A summary of the accounting pronouncement issued but, not required to be adopted for the preparation of our current financial statements is as follows: |
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On May 28, 2014, the Financial Accounting Standards Board issued accounting standard update (or ASU) No. 2014-09, Revenue from Contracts with Customers (or ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for RLJE on January 1, 2017. Early application is not permitted. The standard permits the use of one of three transition methods. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We are also assessing the transition methods available to implement this new accounting standard. This update could impact the timing and amounts of revenue recognized within our consolidated financial statements. |
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Earnings Per Share Presentation |
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During the first quarter of 2014, we changed our presentation of our earnings per share (or EPS) by excluding our restricted common stock from the calculation, and as a result, we removed our two-class method presentation of EPS per Accounting Standards Codification (or ASC) 260, Earnings Per Share. This change was determined because our restricted common stock is not obligated to fund our reported net losses. We also removed 898,438 founder shares from unrestricted common stock for the periods ended June 30, 2013, as these shares could be forfeited in future periods (see Note 8, Equity). For the three and six month periods ended June 30, 2013, the unrestricted weighted average shares outstanding was reduced by 898,438 founder shares and the loss per share for unrestricted common stock increased to $(1.36) per share from $(1.27) per share for the three months ended June 30, 2013 and $(1.65) per share from $(1.53) per share for the six months ended June 30, 2013. We have assessed this change in presentation for materiality and determined this change is not material to our consolidated financial statements. |
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Reclassifications |
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Some balances within our consolidated financial statements have been reclassified to conform to the current presentation. We reclassified certain expenses which had been reported in previous periods within our Wholesale segment to Corporate. Also, beginning in 2014, we began reporting depreciation and amortization as a separate line item within our segment tables. |
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