Edgar Filing: ROYAL GOLD INC

rgld_Current_Folio_10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13357

Royal Gold, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		84-0835164
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation)		Identification No.)

1660 Wynkoop Street, Suite 1000
Denver, Colorado		80202
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (303) 573-1660

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 65,455,293 shares of the Company’s common stock, par value $0.01 per share, outstanding as of February 1, 2018.

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INDEX

		PAGE

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive (Loss) Income	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	30

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosure	31

Item 5.	Other Information	31

Item 6.	Exhibits	31

SIGNATURES		32

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ITEM 1. FINANCIAL STATEMENTS

ROYAL GOLD, INC.

Consolidated Balance Sheets

(Unaudited, in thousands except share data)


	December 31, 2017		June 30, 2017
ASSETS
Cash and equivalents	$	98,132	$	85,847
Royalty receivables		29,285		26,886
Income tax receivable		27,366		22,169
Stream inventory		7,359		7,883
Prepaid expenses and other		3,337		822
Total current assets		165,479		143,607
Stream and royalty interests, net (Note 2)		2,810,616		2,892,256
Other assets		53,305		58,202
Total assets	$	3,029,400	$	3,094,065
LIABILITIES
Accounts payable	$	2,251	$	3,908
Dividends payable		16,363		15,682
Income tax payable		15,097		5,651
Foreign withholding taxes payable		3,451		3,425
Other current liabilities		4,413		5,617
Total current liabilities		41,575		34,283
Debt (Note 3)		493,486		586,170
Deferred tax liabilities		147,548		121,330
Uncertain tax positions		30,187		25,627
Other long-term liabilities		16,787		6,391
Total liabilities		729,583		773,801
Commitments and contingencies (Note 10)
EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued		—		—
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,307,285 and 65,179,527 shares outstanding, respectively		653		652
Additional paid-in capital		2,186,648		2,185,796
Accumulated other comprehensive income		687		879
Accumulated earnings		69,842		88,050
Total Royal Gold stockholders’ equity		2,257,830		2,275,377
Non-controlling interests		41,987		44,887
Total equity		2,299,817		2,320,264
Total liabilities and equity	$	3,029,400	$	3,094,065

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited, in thousands except share data)


	For The Three Months Ended				For The Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2017		2016		2017		2016
Revenue	$	114,348	$	106,961	$	226,824	$	224,909

Costs and expenses
Cost of sales		19,863		22,502		40,282		45,163
General and administrative		9,555		7,538		16,455		18,045
Production taxes		602		445		1,145		942
Exploration costs		1,358		2,476		4,561		5,764
Depreciation, depletion and amortization		42,008		39,519		81,701		79,621
Total costs and expenses		73,386		72,480		144,144		149,535

Operating income		40,962		34,481		82,680		75,374

Interest and other income		645		7,488		1,634		9,045
Interest and other expense		(9,034)		(9,823)		(17,651)		(18,128)
Income before income taxes		32,573		32,146		66,663		66,291

Income tax expense		(48,360)		(5,044)		(55,904)		(12,232)
Net (loss) income		(15,787)		27,102		10,759		54,059
Net loss attributable to non-controlling interests		1,022		960		3,105		3,791
Net (loss) income attributable to Royal Gold common stockholders	$	(14,765)	$	28,062	$	13,864	$	57,850

Net (loss) income	$	(15,787)	$	27,102	$	10,759	$	54,059
Adjustments to comprehensive (loss) income, net of tax
Unrealized change in market value of available-for-sale securities		(390)		822		(193)		822
Comprehensive (loss) income		(16,177)		27,924		10,566		54,881
Comprehensive loss attributable to non-controlling interests		1,022		960		3,105		3,791
Comprehensive (loss) income attributable to Royal Gold stockholders	$	(15,155)	$	28,884	$	13,671	$	58,672

Net (loss) income per share available to Royal Gold common stockholders:
Basic (loss) earnings per share	$	(0.23)	$	0.43	$	0.21	$	0.89
Basic weighted average shares outstanding		65,306,766		65,149,518		65,271,131		65,133,102
Diluted (loss) earnings per share	$	(0.23)	$	0.43	$	0.21	$	0.88
Diluted weighted average shares outstanding		65,306,766		65,253,209		65,460,430		65,264,137
Cash dividends declared per common share	$	0.25	$	0.24	$	0.49	$	0.47

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	For The Six Months Ended
	December 31,		December 31,
	2017		2016
Cash flows from operating activities:
Net income	$	10,759	$	54,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		81,701		79,621
Amortization of debt discount and issuance costs		7,413		6,751
Non-cash employee stock compensation expense		4,395		6,443
Deferred tax expense (benefit)		28,958		(3,211)
Other		(158)		(4,638)
Changes in assets and liabilities:
Royalty receivables		(2,399)		(7,135)
Stream inventory		524		(689)
Income tax receivable		(5,197)		(52)
Prepaid expenses and other assets		(328)		(835)
Accounts payable		(1,658)		(1,832)
Income tax payable		9,445		(12,120)
Foreign withholding taxes payable		26		1,636
Uncertain tax positions		4,560		6,052
Other liabilities		9,193		822
Net cash provided by operating activities	$	147,234	$	124,872

Cash flows from investing activities:
Acquisition of stream and royalty interests		—		(192,818)
Other		(94)		1,774
Net cash used in investing activities	$	(94)	$	(191,044)

Cash flows from financing activities:
Borrowings from revolving credit facility		—		70,000
Repayment of revolving credit facility		(100,000)		—
Net payments from issuance of common stock		(3,541)		(2,320)
Common stock dividends		(31,391)		(30,035)
Purchase of additional royalty interest from non-controlling interest		—		(1,438)
Other		77		(2,680)
Net cash (used in) provided by financing activities	$	(134,855)	$	33,527
Net increase (decrease) in cash and equivalents		12,285		(32,645)
Cash and equivalents at beginning of period		85,847		116,633
Cash and equivalents at end of period	$	98,132	$	83,988

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED AND RECENTLY ADOPTED ACCOUNTING STANDARDS

Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiring and managing precious metals streams, royalties and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine at a price determined for the life of the transaction by the purchase agreement. Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any.

Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this Form 10-Q. Operating results for the three and six months ended December 31, 2017, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2018. These interim unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017 filed with the Securities and Exchange Commission on August 10, 2017 (“Fiscal 2017 10-K”).

Certain amounts in the prior period financial statements have been reclassified for comparative purposes to conform with the presentation in the current period financial statements. Reclassified amounts were not material to the financial statements.

Recently Issued and Adopted Accounting Standards

Recently Issued

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) guidance for the recognition of revenue from contracts with customers. This ASU superseded virtually all of the existing revenue recognition guidance under U.S. GAAP. The core principle of the five step model is that an entity will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Entities can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. The standard is effective for the Company’s fiscal year beginning July 1, 2018. Early adoption is permitted.

We plan to implement the new ASU revenue recognition guidance as of July 1, 2018, using the modified retrospective method with the cumulative effect, if any, of initial adoption to be recognized in Accumulated earnings at the date of initial application. We are in the initial stages of our evaluation of the impact of the new standard on our accounting policies, processes, and financial reporting. Based on the evaluation performed to-date, we expect to identify similar performance obligations as compared with deliverables and separate units of account previously identified. We will continue to assess the impact of adopting this ASU throughout the remainder of fiscal year 2018.

Recently Adopted

In March 2016, the FASB issued ASU guidance related to stock-based compensation. The new guidance simplifies the accounting for stock-based compensation transactions, including income tax consequences, statement of cash flows presentation, estimating forfeitures when calculating compensation expense, and classification of awards as either equity or liabilities.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The new standard requires all excess tax benefits and tax deficiencies to be recognized as income tax benefit (expense) in the income statement. The new guidance also requires presentation of excess tax benefits as an operating activity on the statement of cash flows rather than a financing activity and requires presentation of cash paid to a tax authority when shares are withheld to satisfy the employer’s statutory income tax withholding obligation as a financing activity. The new guidance also provides for an election to account for forfeitures of stock-based compensation.

The Company adopted the ASU guidance effective July 1, 2017. With respect to the forfeiture election, the Company will continue its current practice of estimating forfeitures when calculating compensation expense. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related disclosures.

2. STREAM AND ROYALTY INTERESTS, NET

The following tables summarize the Company’s stream and royalty interests, net as of December 31, 2017 and June 30, 2017.


As of December 31, 2017 (Amounts in thousands):	Cost		Accumulated Depletion		Net
Production stage stream interests:
Mount Milligan	$	790,635	$	(129,652)	$	660,983
Pueblo Viejo		610,404		(93,202)		517,202
Andacollo		388,182		(51,328)		336,854
Wassa and Prestea		146,475		(34,446)		112,029
Rainy River		175,727		(581)		175,146
Total production stage stream interests		2,111,423		(309,209)		1,802,214
Production stage royalty interests:
Voisey's Bay		205,724		(85,671)		120,053
Peñasquito		99,172		(36,730)		62,442
Holt		34,612		(20,490)		14,122
Cortez		20,878		(11,094)		9,784
Other		483,795		(350,690)		133,105
Total production stage royalty interests		844,181		(504,675)		339,506
Total production stage stream and royalty interests		2,955,604		(813,884)		2,141,720

Development stage stream interests:
Other		12,031		—		12,031

Development stage royalty interests:
Pascua-Lama		380,657		—		380,657
Cortez		59,803		—		59,803
Other		63,811		—		63,811
Total development stage royalty interests		504,271		—		504,271
Total development stage stream and royalty interests		516,302		—		516,302
Total exploration stage royalty interests		152,594		—		152,594
Total stream and royalty interests	$	3,624,500	$	(813,884)	$	2,810,616

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)


As of June 30, 2017 (Amounts in thousands):	Cost		Accumulated Depletion		Net
Production stage stream interests:
Mount Milligan	$	790,635	$	(114,327)	$	676,308
Pueblo Viejo		610,404		(67,149)		543,255
Andacollo		388,182		(39,404)		348,778
Wassa and Prestea		146,475		(22,715)		123,760
Total production stage stream interests		1,935,696		(243,595)		1,692,101
Production stage royalty interests:
Voisey's Bay		205,724		(85,671)		120,053
Peñasquito		99,172		(34,713)		64,459
Holt		34,612		(19,669)		14,943
Cortez		20,873		(10,633)		10,240
Other		483,643		(337,958)		145,685
Total production stage royalty interests		844,024		(488,644)		355,380
Total production stage stream and royalty interests		2,779,720		(732,239)		2,047,481
Development stage stream interests:
Rainy River		175,727		—		175,727
Other		12,031		—		12,031
Total development stage stream interests		187,758		—		187,758
Development stage royalty interests:
Pascua-Lama		380,657		—		380,657
Cortez		59,803		—		59,803
Other		63,811		—		63,811
Total development stage royalty interests		504,271		—		504,271
Total development stage stream and royalty interests		692,029		—		692,029
Total exploration stage royalty interests		152,746		—		152,746
Total stream and royalty interests	$	3,624,495	$	(732,239)	$	2,892,256

3. DEBT

The Company’s non-current debt as of December 31, 2017 and June 30, 2017 consists of the following:


	As of December 31, 2017								As of June 30, 2017
	Principal		Unamortized Discount		Debt Issuance Costs		Total		Principal		Unamortized Discount		Debt Issuance Costs		Total
		(Amounts in thousands)								(Amounts in thousands)
Convertible notes due 2019	$	370,000	$	(19,110)	$	(1,986)	$	348,904	$	370,000	$	(25,251)	$	(2,646)	$	342,103
Revolving credit facility		150,000		—		(5,418)		144,582		250,000		—		(5,933)		244,067
Total debt	$	520,000	$	(19,110)	$	(7,404)	$	493,486	$	620,000	$	(25,251)	$	(8,579)	$	586,170

Convertible Senior Notes Due 2019

In June 2012, the Company completed an offering of $370 million aggregate principal amount of 2.875% convertible senior notes due 2019 (“2019 Notes”). The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is required to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year, beginning December 15, 2012. The 2019 Notes mature on June 15, 2019. Interest expense recognized on the 2019 Notes for the three and six months ended December 31, 2017, was $6.1 million and $12.1 million, respectively, compared to $5.9 million and $11.7 million, respectively, for the three and six months ended December 31, 2016, and included the contractual coupon interest, the accretion of the debt discount and amortization of the debt issuance costs.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Revolving credit facility

The Company maintains a $1 billion revolving credit facility. As of December 31, 2017, the Company had $150 million outstanding and $850 million available under the revolving credit facility with an interest rate on borrowings of LIBOR plus 1.75% for an all-in rate of 3.24%. During the three and six months ended December 31, 2017, the Company repaid $50 million, respectively, of the outstanding borrowings under the revolving credit facility. Royal Gold may repay borrowings under the revolving credit facility at any time without premium or penalty. Interest expense recognized on the revolving credit facility for the three and six months ended December 31, 2017 was $1.8 million and $3.6 million, respectively, and $2.3 million and $4.3 million for the three and six months ended December 31, 2016, and included interest on the outstanding borrowings and the amortization of the debt issuance costs.

As discussed in Note 5 to the notes to consolidated financial statements in the Company’s Fiscal 2017 10-K, the Company has financial covenants associated with its revolving credit facility. As of December 31, 2017, the Company was in compliance with each financial covenant.

4. REVENUE

Revenue is comprised of the following:


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2017		2016		2017		2016
		(Amounts in thousands)				(Amounts in thousands)
Stream interests	$	79,287	$	74,007	$	158,049	$	159,511
Royalty interests		35,061		32,954		68,775		65,398
Total revenue	$	114,348	$	106,961	$	226,824	$	224,909

5. STOCK-BASED COMPENSATION

The Company recognized stock-based compensation expense as follows:


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2017		2016		2017		2016
		(Amounts in thousands)				(Amounts in thousands)
Stock options	$	79	$	95	$	170	$	203
Stock appreciation rights		486		454		974		922
Restricted stock		888		829		2,314		2,203
Performance stock		568		921		937		3,115
Total stock-based compensation expense	$	2,021	$	2,299	$	4,395	$	6,443

Stock-based compensation expense is included within General and administrative expense in the consolidated statements of operations and comprehensive (loss) income.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

During the three and six months ended December 31, 2017, the Company granted the following stock-based compensation awards:


	Three Months Ended		Six Months Ended
	December 31,	December 31,	December 31,	December 31,
	2017	2016	2017	2016
	(Number of shares)		(Number of shares)
Stock options	-	-	6,858	7,200
Stock appreciation rights	-	-	71,262	63,340
Restricted stock	-	-	50,380	44,890
Performance stock	-	-	34,010	29,830
Total equity awards granted	-	-	162,510	145,260

As of December 31, 2017, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:


	Unrecognized		Weighted-
	compensation		average vesting
	expense		period (years)
Stock options	$	397		1.8
Stock appreciation rights		3,189		2.1
Restricted stock		6,939		3.2
Performance stock		2,424		2.0

6. EARNINGS PER SHARE (“EPS”)

Basic earnings per common share were computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Company’s unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. The Company’s unexercised stock options, unexercised SSARs and unvested performance stock do not contain rights to dividends. Under the two-class method, the earnings used to determine basic (loss) earnings per common share are reduced by an amount allocated to participating securities. Use of the two-class method has an immaterial impact on the calculation of basic and diluted (loss) earnings per common share.

The following tables summarize the effects of dilutive securities on diluted EPS for the period:


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2017		2016		2017		2016
		(in thousands, except per share data)				(in thousands, except per share data)
Net (loss) income available to Royal Gold common stockholders	$	(14,765)	$	28,062	$	13,864	$	57,850
Weighted-average shares for basic EPS		65,306,766		65,149,518		65,271,131		65,133,102
Effect of other dilutive securities		-		103,691		189,299		131,035
Weighted-average shares for diluted EPS		65,306,766		65,253,209		65,460,430		65,264,137
Basic (loss) earnings per share	$	(0.23)	$	0.43	$	0.21	$	0.89
Diluted (loss) earnings per share	$	(0.23)	$	0.43	$	0.21	$	0.88

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The calculation of weighted average shares includes all of our outstanding common stock. The Company intends to settle the principal amount of the 2019 Notes in cash. As a result, there will be no impact to diluted earnings per share unless the share price of the Company’s common stock exceeds the conversion price of $102.79.

7. INCOME TAXES


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2017		2016		2017		2016
	(Amounts in thousands, except rate)				(Amounts in thousands, except rate)
Income tax expense	$	(48,360)	$	(5,044)	$	(55,904)	$	(12,232)
Effective tax rate		148.5%		15.7%		83.9%		18.5%

The increase in the effective tax rate for the three and six months ended December 31, 2017 is primarily attributable to the effects of recent U.S. tax legislation, as discussed below, and the effects of a non-cash functional currency election ($15.9 million expense) to file certain Canadian income tax returns in U.S. dollars. Prior to the functional currency election, certain deferred tax liabilities were measured on the difference between adjusted Canadian dollar acquisition cost and Canadian dollar tax basis. These deferred tax liabilities were then marked-to market every quarter, for income tax expense (benefit) purposes, to account for changes in the Canadian dollar to U.S. dollar exchange rate. Post-election, the applicable deferred tax liabilities will be measured on the difference between U.S. GAAP value and U.S. dollar tax basis, and eliminating volatility in the effective tax rate caused by this mark-to-market adjustment.

On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act (the “Act”), was enacted and is effective for tax years including January 1, 2018. Certain other aspects of the Act are not effective for fiscal June 30 companies until July 1, 2018.

The Act, among other things, reduced the U.S. corporate income tax rate to 21% starting January 1, 2018. As the Company is a fiscal year tax payer, we applied a blended U.S. federal income tax rate of approximately 28.1% for the fiscal year ending June 30, 2018. The blended percentage was calculated on a pro-rata percentage of the number of days before and after January 1, 2018. The Company’s U.S. federal corporate income tax rate will be 21% for the fiscal year commencing on July 1, 2018 and all future years.

ASC 740, Income Taxes, requires recognition of the effects of tax law changes in the period of enactment. As a result, the Company recorded a net charge (expense) of $26.4 million during the three months ended December 31, 2017. This amount, which is included in Income tax expense on our consolidated statements of operations and comprehensive (loss) income, consists of three components: (i) a $11.5 million charge relating to the one-time mandatory tax on the net accumulated post-1986 untaxed earnings and profits of the Company’s foreign subsidiaries, which we will elect to pay over an eight-year period, (ii) a $2.3 million benefit resulting from the re-measurement of the Company’s net deferred tax assets and liabilities, and (iii) a $17.2 million charge related to re-measurement of the U.S. income tax impacts resulting from foreign uncertain tax positions.

The net $26.4 million charge represents what the Company believes is a reasonable estimate of the impact of the Act. As the net charge is based on currently available information and interpretations, which are continuing to evolve, all amounts should be considered provisional. The Company will continue to analyze additional information and guidance related to the Act as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. The final impacts may differ from the recorded amounts as of December 31, 2017 and the Company will continue to refine such amounts within the measurement period provided by Staff Accounting Bulletin No. 118. The Company expects to complete its analysis no later than the second quarter of fiscal year 2019.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

8. SEGMENT INFORMATION

The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table:


	As of December 31, 2017						As of June 30, 2017
	Stream interest		Royalty interest		Total stream and royalty interests, net		Stream interest		Royalty interest		Total stream and royalty interests, net
Canada	$	836,129	$	218,683	$	1,054,812	$	852,035	$	221,618	$	1,073,653
Dominican Republic		517,203		—		517,203		543,256		—		543,256
Chile		336,854		453,369		790,223		348,778		453,369		802,147
Africa