| Fair Value, by Balance Sheet Grouping |
The following table shows the carrying amounts and the fair values of our long-term debt in the condensed consolidated financial statements at June 30, 2018 and December 31, 2017, respectively (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
December 31, 2017 |
|
Carrying Amount |
|
Fair Value |
|
Carrying Amount |
|
Fair Value |
Senior secured term loan facility, due January 2023 (+)(1)
|
484,375 |
|
|
491,641 |
|
|
490,625 |
|
|
486,945 |
|
Senior secured revolving credit facility, due January 2022 (+)(2)
|
— |
|
|
— |
|
|
78,000 |
|
|
78,000 |
|
2.75% convertible senior notes due 2035 (1) (3)
|
82,500 |
|
|
60,380 |
|
|
82,500 |
|
|
43,313 |
|
Second Lien Notes, due June 2023(4) (5)
|
150,000 |
|
|
132,948 |
|
|
— |
|
|
— |
|
Other debt (6)
|
5,183 |
|
|
5,183 |
|
|
9,075 |
|
|
9,075 |
|
Unamortized bond discounts and issue costs |
(68,936 |
) |
|
— |
|
|
(41,136 |
) |
|
— |
|
|
653,122 |
|
|
690,152 |
|
|
619,064 |
|
|
617,333 |
|
(+) This facility is a component of the 2017 Credit Agreement.
|
|
(1) |
The estimated fair value is classified as Level 2 financial instrument and was determined based on the quoted prices of the instrument in a similar over-the-counter market. |
|
|
(2) |
The estimated fair value is considered to approximate carrying value given the short-term maturity and is classified as Level 3 financial instruments. In the second quarter of 2018, we used a portion of the proceeds of the issuance of our Second Lien Notes to repay the then outstanding $78 million principal balance on our revolving credit facility. We expect to draw on the revolving credit facility from time to time to fund our working capital needs and for other general corporate purposes.
|
|
|
(3) |
The fair value of the 2.75% convertible senior notes due 2035 is exclusive of the conversion feature therein, which was originally allocated for reporting purposes at $13.0 million, and is included in the condensed consolidated balance sheets within “Additional paid-in capital” (see Note 11. Common Stock, Stock-Based Awards and Warrants). The principal amount outstanding of the 2.75% convertible senior notes due 2035 was $82.5 million as of June 30, 2018, and the carrying amounts in the foregoing table reflect this outstanding principal amount net of debt issuance costs and discount associated with the equity component.
|
|
|
(4) |
The principal amount outstanding of the Second Lien Notes, due 2023 as set forth in the foregoing table was $150.0 million as of June 30, 2018, and is not the carrying amount of the indebtedness (i.e. outstanding principal amount net of debt issuance costs and discount associated with the equity component). The value allocated to the attached penny warrants and market warrants for financial reporting purposes was $14.9 million and $9.3 million, respectively. These qualify for classification in stockholders’ equity and are included in the condensed consolidated balance sheets within “Additional paid-in capital” (see Note 8. Financing Arrangements).
|
|
|
(5) |
The fair value of the Second Lien Notes was determined based on a Black-Derman-Toy interest rate Lattice model. The key inputs of the valuation model contain certain Level 3 inputs. |
|
|
(6) |
The estimated fair value is considered to approximate carrying value given the short-term maturity and is classified as Level 3 financial instruments. |
|
| Schedule of Impact of New Accounting Pronouncements |
The following table presents the effect of the adoption of ASU 2014-09 on our consolidated balance sheet as of June 30, 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
Without ASC 606 Adoption |
|
Effect of change Increase/ (Decrease) |
|
As Reported |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
37,403 |
|
|
— |
|
|
$ |
37,403 |
|
Restricted cash |
5,390 |
|
|
— |
|
|
5,390 |
|
Accounts receivable, net |
105,054 |
|
|
(1,639 |
) |
|
103,415 |
|
Inventories |
32,719 |
|
|
— |
|
|
32,719 |
|
Prepaid expenses |
16,949 |
|
|
— |
|
|
16,949 |
|
Other current assets |
21,482 |
|
|
— |
|
|
21,482 |
|
TOTAL CURRENT ASSETS |
218,997 |
|
|
(1,639 |
) |
|
217,358 |
|
Content library |
8,101 |
|
|
— |
|
|
8,101 |
|
Property, plant and equipment |
190,716 |
|
|
— |
|
|
190,716 |
|
Goodwill |
159,610 |
|
|
— |
|
|
159,610 |
|
Intangible assets, net |
101,659 |
|
|
— |
|
|
101,659 |
|
Equity method investments |
135,430 |
|
|
— |
|
|
135,430 |
|
Other non-current assets |
8,284 |
|
|
3,319 |
|
|
11,603 |
|
TOTAL ASSETS |
$ |
822,797 |
|
|
1,680 |
|
|
$ |
824,477 |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
189,851 |
|
|
(1,620 |
) |
|
$ |
188,231 |
|
Deferred revenue |
8,347 |
|
|
125 |
|
|
8,472 |
|
Current portion of long-term debt |
19,595 |
|
|
— |
|
|
19,595 |
|
Other current liabilities |
9,661 |
|
|
— |
|
|
9,661 |
|
TOTAL CURRENT LIABILITIES |
227,454 |
|
|
(1,495 |
) |
|
225,959 |
|
Deferred revenue, non-current |
1,089 |
|
|
— |
|
|
1,089 |
|
Long-term debt |
633,527 |
|
|
— |
|
|
633,527 |
|
Deferred tax liabilities |
8,590 |
|
|
— |
|
|
8,590 |
|
Other non-current liabilities |
34,455 |
|
|
— |
|
|
34,455 |
|
TOTAL LIABILITIES |
905,115 |
|
|
(1,495 |
) |
|
903,620 |
|
|
|
|
|
|
|
Preferred stock |
— |
|
|
— |
|
|
— |
|
Common stock |
10 |
|
|
— |
|
|
10 |
|
Treasury stock |
(30,659 |
) |
|
— |
|
|
(30,659 |
) |
Additional paid-in capital |
809,369 |
|
|
— |
|
|
809,369 |
|
Subscriptions receivable |
(591 |
) |
|
— |
|
|
(591 |
) |
Prior year accumulated deficit |
(773,791 |
) |
|
933 |
|
|
(772,858 |
) |
Current year retained deficit |
(86,435 |
) |
|
2,242 |
|
|
(84,193 |
) |
Accumulated other comprehensive loss |
(221 |
) |
|
— |
|
|
(221 |
) |
TOTAL STOCKHOLDERS' DEFICIT |
(82,318 |
) |
|
3,175 |
|
|
(79,143 |
) |
TOTAL LIABILTIES & STOCKHOLDERS' DEFICIT |
$ |
822,797 |
|
|
1,680 |
|
|
$ |
824,477 |
|
The following table presents the effect of the adoption of ASU 2014-09 on our condensed consolidated statements of operations for the three months ended June 30, 2018 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018 |
|
Without ASC 606 Adoption |
|
Effect of change Increase/ (Decrease) |
|
As Reported |
Revenue: |
|
|
|
|
|
Licensing and services |
$ |
156,123 |
|
|
305 |
|
|
$ |
156,428 |
|
Equipment |
9,534 |
|
|
— |
|
|
9,534 |
|
Total revenue |
165,657 |
|
|
305 |
|
|
165,962 |
|
Cost of Sales |
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
Licensing and services |
122,720 |
|
|
(416 |
) |
|
122,304 |
|
Equipment |
4,405 |
|
|
22 |
|
|
4,427 |
|
Total cost of sales |
127,125 |
|
|
(394 |
) |
|
126,731 |
|
Gross Margin |
38,532 |
|
|
699 |
|
|
39,231 |
|
Operating expenses: |
|
|
|
|
|
Sales and marketing |
10,840 |
|
|
37 |
|
|
10,877 |
|
Product development |
11,494 |
|
|
(1,622 |
) |
|
9,872 |
|
General and administrative |
29,799 |
|
|
— |
|
|
29,799 |
|
Provision for legal settlements |
(141 |
) |
|
— |
|
|
(141 |
) |
Amortization of intangible assets |
10,357 |
|
|
— |
|
|
10,357 |
|
Total operating expenses |
62,349 |
|
|
(1,585 |
) |
|
60,764 |
|
Loss from operations |
(23,817 |
) |
|
2,284 |
|
|
(21,533 |
) |
Other income (expense): |
|
|
|
|
|
|
Interest expense, net |
(19,755 |
) |
|
— |
|
|
(19,755 |
) |
Income from equity method investments |
428 |
|
|
— |
|
|
428 |
|
Change in fair value of derivatives |
(655 |
) |
|
— |
|
|
(655 |
) |
Other expense, net |
(673 |
) |
|
— |
|
|
(673 |
) |
Loss before income taxes |
(44,472 |
) |
|
2,284 |
|
|
(42,188 |
) |
Income tax expense |
3,722 |
|
|
— |
|
|
3,722 |
|
Net loss |
$ |
(48,194 |
) |
|
2,284 |
|
|
$ |
(45,910 |
) |
|
|
|
|
|
|
Net loss per share – basic and diluted |
(0.53 |
) |
|
|
|
(0.50 |
) |
Weighted average shares outstanding – basic and diluted |
$ |
91,057 |
|
|
|
|
$ |
91,057 |
|
The following table presents the effect of the adoption of ASU 2014-09 on our condensed consolidated statements of operations for the six months ended June 30, 2018 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018 |
|
Without ASC 606 Adoption |
|
Effect of change Increase/ (Decrease) |
|
As Reported |
Revenue: |
|
|
|
|
|
Licensing and services |
$ |
303,306 |
|
|
(352 |
) |
|
$ |
302,954 |
|
Equipment |
19,505 |
|
|
— |
|
|
19,505 |
|
Total revenue |
322,811 |
|
|
(352 |
) |
|
322,459 |
|
Cost of Sales |
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
Licensing and services |
235,653 |
|
|
(858 |
) |
|
234,795 |
|
Equipment |
10,371 |
|
|
44 |
|
|
10,415 |
|
Total cost of sales |
246,024 |
|
|
(814 |
) |
|
245,210 |
|
Gross Margin |
76,787 |
|
|
462 |
|
|
77,249 |
|
Operating expenses: |
|
|
|
|
|
|
Sales and marketing |
20,477 |
|
|
15 |
|
|
20,492 |
|
Product development |
20,001 |
|
|
(1,795 |
) |
|
18,206 |
|
General and administrative |
68,235 |
|
|
— |
|
|
68,235 |
|
Provision for legal settlements |
375 |
|
|
— |
|
|
375 |
|
Amortization of intangible assets |
20,920 |
|
|
— |
|
|
20,920 |
|
Total operating expenses |
130,008 |
|
|
(1,780 |
) |
|
128,228 |
|
Loss from operations |
(53,221 |
) |
|
2,242 |
|
|
(50,979 |
) |
Other income (expense): |
|
|
|
|
|
|
Interest expense, net |
(35,352 |
) |
|
— |
|
|
(35,352 |
) |
Income from equity method investments |
1,589 |
|
|
— |
|
|
1,589 |
|
Change in fair value of derivatives |
(91 |
) |
|
— |
|
|
(91 |
) |
Other expense, net |
(347 |
) |
|
— |
|
|
(347 |
) |
Loss before income taxes |
(87,422 |
) |
|
2,242 |
|
|
(85,180 |
) |
Income tax benefit |
(987 |
) |
|
— |
|
|
(987 |
) |
Net loss |
$ |
(86,435 |
) |
|
2,242 |
|
|
$ |
(84,193 |
) |
|
|
|
|
|
|
Net loss per share – basic and diluted |
$ |
(0.95 |
) |
|
|
|
$ |
(0.93 |
) |
Weighted average shares outstanding – basic and diluted |
90,925 |
|
|
|
|
90,925 |
|
|