Annual report pursuant to Section 13 and 15(d)

Basis of Presentation and Summary of Significant Accounting Policies (Tables)

v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
Schedule of Accounts Receivable
(in thousands):

 
December 31,
 
2016
 
2015
Accounts receivable, gross
$
130,583

 
$
102,089

Less: Allowance for doubtful accounts
(10,091
)
 
(8,640
)
Accounts receivable, net
$
120,492

 
$
93,449


Movements in the balance for bad debt reserve and sales allowance for the years ended December 31, 2016, 2015, and 2014, are as follows (in thousands):

 
2016
 
2015
 
2014
Beginning balance
$
8,640

 
$
7,468

 
$
1,929

Additions charged to statements of operations
2,624

 
1,172

 
5,539

Less: Bad debt write offs
(1,173
)
 

 

Ending balance
$
10,091

 
$
8,640

 
$
7,468

Fair Value Measurements, Recurring and Nonrecurring
The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2016, and 2015, respectively (in thousands, except as presented in footnotes to the tables):

 
December 31, 2016
 
Quotes Prices in Active Markets
(Level 1)
 
 Significant Other Observable Inputs
(Level 2)
 
 Significant Other Unobservable Inputs
(Level 3)
Liabilities:
 
 
 
 
 
 
 
Earn-out liability (1)
$
1,987

 
$

 
$

 
$
1,987

Liability warrants (2)
433

 

 

 
433

Contingently issuable shares (3)
4,545

 

 

 
4,545

Total
$
6,965

 
$

 
$

 
$
6,965


 
December 31, 2015
 
Quotes Prices in Active Markets
(Level 1)
 
 Significant Other Observable Inputs
(Level 2)
 
 Significant Other Unobservable Inputs
(Level 3)
Liabilities:
 
 
 
 
 
 
 
Earn-out liability (1)
$
9,652

 
$

 
$

 
$
9,652

Liability warrants (2)
24,076

 
24,076

 

 

Total
$
33,728

 
$
24,076

 
$

 
$
9,652


(1)
Represents aggregate earn-out liabilities for the Company’s acquisitions of WOI, RMG, navAero and masFlight assumed in business combinations for the year ended December 31, 2015.

(2)
Includes 6,173,228 Public SPAC Warrants at December 31, 2016 and 2015.

(3)
In connection with the Sound-Recording Settlements, the Company is obligated to issue to UMG up to 0.5 million shares of its common stock when and if he closing price of the Company's common stock exceeds $10.00 per share and 0.4 million shares of common stock when and if the closing price of the Company’s common stock exceeds $12.00 per share. Based on conditions of the award, such contingently issuable shares are classified as liabilities and are remeasured to fair value each reporting period.
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
The following tables present the fair value roll-forward reconciliation of Level 1 and 3 assets and liabilities measured at fair value for the years ended December 31, 2016 and 2015, respectively (in thousands):

 
Liability Warrants (Level 1)
 
Liability Warrants (Level 3)
 
Contingently Issuable Shares
(Level 3)
 
Earn-Out Liabilities (Level 3)
Balance, December 31, 2015
$
24,076

 
$

 
$

 
$
9,652

Fair value of contingently issuable shares associated with Sound-Recording Settlement

 

 
6,417

 

Payments of earn-out liability

 

 

 
(4,127
)
Transfer-in

 
6,235

 

 

Transfer-out
(6,235
)
 

 

 

Change in value
(17,841
)
 
(5,802
)
 
(1,872
)
 
(3,538
)
Balance, December 31, 2016
$

 
$
433

 
$
4,545

 
$
1,987


 
Earn-Out Liabilities (Level 3)
Balance, December 31, 2014
$
1,710

Fair value of earn-out liability assumed in 2015 acquisitions
9,652

Payments of earn-out liability
(1,519
)
Non-cash adjustment to 2014 earn-out liability
(191
)
Balance, December 31, 2015
$
9,652



The valuation methodology used to estimate the fair value of the financial instruments in the tables above is summarized as follows:

Earn-Out Liability. The earn-out liabilities are estimated using the income approach. Based on the respective purchase agreements, management estimated the present value of best case, base case, and worst case scenarios. The sum of the discounted weighted average probabilities was used to arrive at the fair value of the earn-out liability. The current and non-current portions of the earn-out liabilities are included in Accounts payable and accrued liabilities and Other non-current liabilities, respectively, on the Consolidated Balance Sheets. The change in value of these earn-out liabilities is included in General and administrative in the Consolidated Statements of Operations.

Contingently Issuable Shares. The liabilities for these contingently issuable shares are included in Accounts payable and accrued liabilities on the December 31, 2016 Consolidated Balance Sheet. The fair values of these contingently issuable shares were determined using a quantitative put option method. The change in the fair value of the contingently issuable shares are included in Change in fair value of derivatives in the December 31, 2016 Consolidated Statement of Operations.

The following table presents information about significant unobservable inputs related to Level 3 financial liabilities as of December 31, 2016.

 
Liability Warrants
 
Contingently Issuable Shares
Assumed liquidation company share price
N/A

 
$
10.00

 
$
12.00

Common stock price at December 31, 2016
$
6.46

 
$
6.46

 
$
6.46

Exercise price
$
11.50

 
N/A

 
N/A

Estimated term (in years)
1.09

 
4.54

 
6.44

Expected stock volatility
34.0
%
 
46.0
%
 
46.0
%
Risk free rate
0.9
%
 
N/A

 
N/A

Dividend yield
%
 
%
 
%
Implied discount for lack of marketability (1)
%
 
20.5
%
 
23.5
%


(1)
A discount for lack of marketability was applied to the resulting values as the shares, when issued, may not initially be registered with the SEC.

Fair Value, by Balance Sheet Grouping
The following table shows the carrying amounts of the Company’s long-term debt in the consolidated financial statements (in thousands):

 
December 31, 2016
 
December 31, 2015
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Senior secured term loan facility, due July 2021
$
256,004

 
$
260,020

 
$

 
$

Senior secured revolving credit facility, due July 2020
53,891

 
52,932

 

 

Senior secured term loan facility, due July 2022
88,082

 
88,780

 

 

2.75% convertible senior notes, due February 2035 (1)
69,024

 
67,444

 
68,335

 
78,557

Other debts
3,299

 
3,299

 
2,819

 
2,819



(1)
The fair value of the convertible senior notes is exclusive of the conversion feature, which was originally valued for reporting purposes at $13.0 million, and is included in Additional paid-in capital in the Consolidated Balance Sheets (see Note 13. Common Stock, Stock-Based Awards and Warrants).
Schedule of Effect of Reclassification of Unamortized Debt Issuance Costs
The table below shows the effect of the reclassifications of unamortized debt issuance costs associated with the convertible senior notes and also capital lease obligation in the Company’s previously reported Consolidated Balance Sheet as of December 31, 2015 (in thousands):

 
As Reported
 
Reclassifications
 
As Reclassified
 
December 31, 2015
 
Capital Lease Obligation
 
Unamortized Debt Issuance Costs
 
December 31, 2015
Other non-current assets
$
13,702

 
$

 
$
(1,678
)
 
$
12,024

Long-term debt
71,493

 
284

 
(1,678
)
 
70,099