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 Entertainmentmay 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

?