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8-K - 8-K - RealD Inc.a12-13332_18k.htm

Exhibit 99.1

 

 

RealD Inc. Reports Financial Results for Fourth Quarter and Fiscal Year 2012

 

LOS ANGELES (May 31, 2012) - RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its fourth quarter and fiscal year ended March 23, 2012.

 

Fourth Quarter Financial Highlights

 

Revenue

 

·                  Revenue was $50.0 million, a decrease of 14% from $58.5 million in the fourth quarter of fiscal 2011.

·                  Net license revenue was $31.7 million, a decrease of 4% from $33.1 million in the fourth quarter of fiscal 2011.

·                  Net license revenue for the prior-year quarter is net of $2.4 million in motion picture exhibitor stock option expense (a contra revenue item).

·                  Product and other revenue was $18.4 million, a decrease of 28% from $25.4 million in the fourth quarter of fiscal 2011.  These results reflect an $8.1 million decrease in international product revenue that is partially attributable to a growing number of international consumers reusing RealD eyewear purchased at a previous RealD showing.

 

GAAP Results — Profitability Measures and Balance Sheet

 

·                  GAAP net income attributable to common stockholders was $5.5 million, or $0.10 per diluted share, compared to $4.5 million, or $0.08 per diluted share, for the fourth quarter of fiscal 2011.  Results for the fourth quarter of fiscal 2012 include an income tax benefit of $2.1 million, equivalent to approximately $0.04 per diluted share.

·                  Gross margin increased to 54% from 51% in the fourth quarter of fiscal 2011.

·                  The Company’s balance sheet at March 23, 2012 included total cash and cash equivalents of $24.9 million and total debt of $25.0 million.

·                  Subsequent to the end of the fourth quarter of fiscal 2012, RealD entered into a new $125 million credit facility.  As of May 31, 2012, unused borrowing capacity on the new credit facility was approximately $100 million.

 

Non-GAAP Results — Profitability Measures

 

·                  Adjusted EBITDA was $17.8 million, essentially flat compared to $17.8 million in the fourth quarter of fiscal 2011.

·                  Adjusted EBITDA increased to 36% of net revenue from 30% of net revenue in the fourth quarter of fiscal 2011.

·                  Adjusted EBITDA is defined within the section of this press release entitled “Use of Non-GAAP Financial Measures,” which includes a reconciliation to its most comparable GAAP measure, net income (loss).

 

“We delivered solid profitability in the fourth quarter, as healthy growth in domestic license revenue helped to offset the tough comparison we anticipated overseas versus our very strong international results in the fourth quarter of fiscal 2011,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD.

 

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“Importantly, RealD’s summer film slate is off to an excellent start in both domestic and international markets.  The record-setting opening of The Avengers further demonstrates the strong consumer demand for premium presentations in RealD 3D as well as the compelling economics of 3D filmmaking for our studio and exhibitor partners.”

 

Key Metrics and International Revenue Statistics

 

·                  International markets generated 49% of license revenue compared to 64% of gross license revenue in the fourth quarter of fiscal 2011.  The lower percentage from international license revenue reflects the difficult international comparison versus the prior-year quarter when Tangled, Chronicles of Narnia, Tron Legacy, Megamind and Gulliver’s Travels had strong results overseas.  In addition, certain films released in the domestic market during the fourth quarter of fiscal 2012 were scheduled to release in key international countries after the end of the quarter.

·                  As of March 23, 2012, the Company had deployed approximately 20,200 RealD-enabled screens, an increase of 35% from approximately 15,000 screens as of March 25, 2011, and an increase of 500 screens, or 3%, from approximately 19,700 screens as of December 23, 2011.

·                  As of March 23, 2012, the Company had approximately 11,700 domestic screens at approximately 2,600 domestic theater locations and approximately 8,500 international screens at approximately 2,500 international theater locations.

 

$50 Million Stock Repurchase Authorization

 

·                  Subsequent to the end of the fourth quarter of fiscal 2012, the Company announced that its Board of Directors had authorized the repurchase of up to $50 million in RealD’s common stock.

·                  The authorization demonstrates management’s confidence in RealD’s future and its commitment to maximizing shareholder value.

 

Fiscal 2012 Financial Results

 

Revenue

 

·                  Revenue was $246.6 million, essentially flat compared to $246.1 million for fiscal 2011.

·                  Net license revenue was $147.8 million, an increase of 46% from $101.5 million for fiscal 2011.

·                  Net license revenue for fiscal 2011 is net of $36.4 million in motion picture exhibitor stock option expense (a contra revenue item).

·                  Product and other revenue was $98.8 million, a decrease of 32% from $144.6 million for fiscal 2011.

 

GAAP Results — Profitability Measures

 

·                  GAAP net income attributable to common stockholders was $36.9 million, or $0.65 per diluted share, compared to a GAAP net loss attributable to common stockholders of $12.3 million, or $0.29 per share, for fiscal 2011.

·                  Gross margin increased to 52% from 28% for fiscal 2011.

 

Non-GAAP Results — Profitability Measures

 

·                  Adjusted EBITDA was $104.4 million, an increase of 68% from $62.2 million for fiscal 2011.

·                  Adjusted EBITDA increased to 42% of net revenue from 25% of net revenue for fiscal 2011.

 

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3D Theatrical Release Schedule for Fiscal 2013

(As of May 31, 2012 — Domestic)

 

Fiscal Q1 2013

 

Film

 

Domestic Release Date

(ending 6/22/12)

 

Wrath of the Titans

 

3/30/2012

 

 

Titanic (re-release)

 

4/4/2012

 

 

The Pirates! Band of Misfits

 

4/27/2012

 

 

The Avengers

 

5/4/2012

 

 

Men in Black III

 

5/25/2012

 

 

Piranha 3DD

 

6/1/2012

 

 

Madagascar 3: Europe’s Most Wanted

 

6/8/2012

 

 

Prometheus

 

6/8/2012

 

 

Brave

 

6/22/2012

 

 

Abraham Lincoln: Vampire Hunter

 

6/22/2012

 

Fiscal Q2 2013

 

Film

 

Domestic Release Date

(ending 9/21/12)

 

Amazing Spiderman

 

7/3/2012

 

 

Katy Perry: Part of Me 3D

 

7/5/2012

 

 

Ice Age: Continental Drift

 

7/13/2012

 

 

Step Up Revolution

 

7/27/2012

 

 

Nitro Circus: The Movie

 

8/10/2012

 

 

ParaNorman

 

8/17/2012

 

 

Resident Evil: Retribution

 

9/14/2012

 

 

Finding Nemo (re-release)

 

9/14/2012

 

 

Dredd

 

9/21/2012

 

 

Hotel Transylvania

 

9/21/2012

 

Fiscal Q3 2013

 

Film

 

Domestic Release Date

(ending 12/21/12)

 

Frankenweenie

 

10/5/2012

 

 

Silent Hill: Revelation 3D

 

10/26/2012

 

 

Wreck-It Ralph

 

11/2/2012

 

 

Rise of the Guardians

 

11/21/2012

 

 

Life of Pi

 

11/21/2012

 

 

The Hobbit: An Unexpected Journey

 

12/14/2012

 

 

Cirque du Soleil: Worlds Away

 

12/21/2012

 

Fiscal Q4 2013

 

Film

 

Domestic Release Date

(ending 3/22/13)

 

The Great Gatsby

 

12/25/2012

 

 

The Texas Chainsaw Massacre 3D

 

1/4/2013

 

 

Hansel and Gretel: Witch Hunters

 

1/11/2013

 

 

Monsters, Inc. (re-release)

 

1/18/2013

 

 

Battle of the Year: The Dream Team

 

1/25/2013

 

 

47 Ronin

 

2/8/2013

 

 

Escape from Planet Earth

 

2/14/2013

 

 

Oz: The Great and Powerful

 

3/8/2013

 

 

The Croods

 

3/22/2013

 

 

Jack the Giant Killer

 

3/22/2013

 

Sources: Rentrak and imdb.com.

 

Conference Call Information

 

Members of RealD management will host a conference call to discuss the Company’s financial results for the

 

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fourth quarter and fiscal year ended March 23, 2012 beginning at 4:30 pm ET (1:30 pm PT), today, May 31, 2012.  To access the call via telephone, interested parties should dial (877) 941-1427 (U.S.) or (480) 629-9664 (International) ten minutes prior to the start time and use conference ID 4538808.

 

The conference call will also be broadcast live over the Internet, hosted at the Investor Relations section of the Company’s website at www.reald.com.  An archived replay of the call will be available via webcast at www.reald.com or by dialing (877) 870-5176, or (858) 384-5517 for international callers. The conference ID for the telephone replay is 4538808.

 

Cautionary Note on Forward-Looking Statements

 

This press release includes forward-looking information and statements, including but not limited to: statements concerning anticipated future financial and operating performance; RealD’s ability to continue to derive substantial revenue from the licensing of RealD’s 3D technologies for use in the motion picture industry, as well as RealD’s relationships with consumer electronics manufacturers and its ability to generate substantial revenue from the licensing of RealD’s 3D technologies for use in the 3D consumer electronics market; 3D motion picture releases and conversions scheduled for fiscal 2013 ending March 22, 2013, their commercial success and consumer preferences; our ability to increase the number of RealD-enabled screens in domestic and international markets and market share; our ability to supply our solutions to our customers on a timely basis; RealD’s relationships with its exhibitor and studio partners and the business model for 3D eyewear in North America; the progress, timing and amount of expenses associated with RealD’s research and development activities; market and industry trends, including growth in 3D content; RealD’s projected operating results; and competitive pressures in domestic and international markets. These statements are based on our management’s current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our management’s control that could cause actual results to differ materially from the results discussed in the forward-looking statements.  The Company’s Annual Report on Form 10-K for the twelve months ended March 23, 2012 and other documents filed with the SEC include a more detailed discussion of the risks and uncertainties that may cause actual results to differ materially from the results discussed in the forward-looking statements.

 

RealD undertakes no obligation to update publicly the information contained in this press release, or any forward-looking statements, to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

 

Use of Non-GAAP Financial Measures

 

To supplement RealD’s financial statements presented on a GAAP basis, RealD provides Adjusted EBITDA as a supplemental measure of its performance.  The Company defines Adjusted EBITDA as net income (loss), plus net interest expense, income and other taxes, and depreciation and amortization, as further adjusted to eliminate the impact of share based compensation expense, exhibitor option expense and certain other items not considered by RealD management to be indicative of the company’s core operating performance.

 

RealD presents Adjusted EBITDA in reporting its financial results to provide investors with additional tools to evaluate RealD’s operating results in a manner that focuses on what RealD’s management believes to be its ongoing business operations.  RealD’s management does not itself, nor does it suggest that investors

 

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should, consider any such Non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  Adjusted EBITDA is used by management for planning purposes, including: the preparation of internal budgets, forecasts and strategic plans; in analyzing the effectiveness of business strategies; to evaluate potential acquisitions; in making compensation decisions; and in communications with its Board of Directors concerning financial performance. Because not all companies use identical calculations, the Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.  Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments.  Adjusted EBITDA also differs from the amounts calculated under the similarly titled definition in our credit agreement, which is further adjusted to reflect certain other cash and non-cash charges and is used to determine compliance with financial covenants and our ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.

 

About RealD Inc.

 

RealD is a leading global licensor of 3D technologies. RealD’s extensive intellectual property portfolio is used in applications that enable a premium 3D viewing experience in the theater, the home and elsewhere. RealD licenses its RealD Cinema Systems to motion picture exhibitors that show 3D motion pictures and alternative 3D content. RealD also provides its RealD Display, active and passive eyewear, and RealD Format technologies to consumer electronics manufacturers and content producers and distributors to enable the delivery and viewing of 3D content.  RealD’s cutting-edge 3D technologies have been used for applications such as piloting the Mars Rover.

 

RealD was founded in 2003 and has offices in Beverly Hills, California; Boulder, Colorado; London, United Kingdom; Shanghai, China; Hong Kong; and Tokyo, Japan. For more information, please visit our website at www.reald.com.

 

© 2012 RealD Inc.  All Rights Reserved.

 

Investor Contact:

Erik Randerson, CFA

424-702-4317

eranderson@reald.com

 

Media Contact:

Rick Heineman

310-339-9347

rheineman@reald.com

 

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RealD Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three months ended

 

Year ended

 

 

 

March 23,

 

March 25,

 

March 23,

 

March 25,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

License

 

$

31,655

 

$

33,133

 

$

147,801

 

$

101,523

 

Product and other

 

18,392

 

25,381

 

98,827

 

144,613

 

Total revenue

 

50,047

 

58,514

 

246,628

 

246,136

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

License

 

9,480

 

6,334

 

39,801

 

17,994

 

Product and other

 

13,672

 

22,303

 

78,137

 

160,402

 

Total cost of revenue

 

23,152

 

28,637

 

117,938

 

178,396

 

Gross profit

 

26,895

 

29,877

 

128,690

 

67,740

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

3,764

 

4,831

 

16,500

 

15,582

 

Selling and marketing

 

7,423

 

8,888

 

27,682

 

24,139

 

General and administrative

 

12,454

 

10,640

 

42,189

 

35,835

 

Total operating expenses

 

23,641

 

24,359

 

86,371

 

75,556

 

Operating income (loss)

 

3,254

 

5,518

 

42,319

 

(7,816

)

Interest expense

 

(261

)

(46

)

(971

)

(919

)

Other income (loss)

 

625

 

(194

)

782

 

6,182

 

Income (loss) before income taxes

 

3,618

 

5,278

 

42,130

 

(2,553

)

Income tax expense (benefit)

 

(2,065

)

973

 

5,105

 

4,272

 

Net income (loss)

 

5,683

 

4,305

 

37,025

 

(6,825

)

Net (income) loss attributable to noncontrolling interest

 

(147

)

162

 

(156

)

(530

)

Accretion of preferred stock

 

 

 

 

(4,934

)

Net income (loss) attributable to RealD Inc. common stockholders

 

$

5,536

 

$

4,467

 

$

36,869

 

$

(12,289

)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

$

0.09

 

$

0.68

 

$

(0.29

)

Diluted

 

$

0.10

 

$

0.08

 

$

0.65

 

$

(0.29

)

 

 

 

 

 

 

 

 

 

 

Shares used in computing earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

54,587

 

51,426

 

54,352

 

41,933

 

Diluted

 

56,468

 

57,025

 

56,852

 

41,933

 

 

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RealD Inc.

Consolidated Balance Sheets

(In thousands)

 

 

 

March 23,

 

March 25,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

24,894

 

$

16,936

 

Accounts receivable, net

 

59,212

 

50,676

 

Inventories

 

40,577

 

54,971

 

Deferred costs – eyewear

 

932

 

49

 

Deferred income taxes

 

 

1,029

 

Income taxes receivable

 

 

139

 

Prepaid expenses and other current assets

 

2,630

 

1,734

 

Total current assets

 

128,245

 

125,534

 

Property and equipment, net

 

12,713

 

7,889

 

Cinema systems, net

 

141,024

 

122,226

 

Digital projectors, net-held for sale

 

1,078

 

10,475

 

Goodwill

 

10,657

 

10,657

 

Other intangibles, net

 

1,746

 

1,918

 

Deferred income taxes

 

3,049

 

 

Other assets

 

3,663

 

1,448

 

Total assets

 

$

302,175

 

$

280,147

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

22,617

 

$

58,713

 

Accrued expenses and other liabilities

 

28,870

 

40,118

 

Deferred revenue

 

7,201

 

14,176

 

Income taxes payable

 

1,121

 

 

Deferred income taxes

 

3,149

 

 

Current portion of long-term debt

 

 

2,291

 

Total current liabilities

 

62,958

 

115,298

 

Credit facility agreement

 

25,000

 

 

Deferred revenue, net of current portion

 

13,920

 

14,106

 

Other long-term liabilities, customer deposits and virtual print fee liability

 

2,691

 

4,533

 

Long-term debt, net of current portion

 

 

19

 

Deferred tax liability

 

 

1,091

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity (deficit)

 

 

 

 

 

Common stock

 

309,894

 

292,904

 

Accumulated deficit

 

(112,711

)

(149,580

)

Total RealD Inc. stockholders’ equity

 

197,183

 

143,324

 

Noncontrolling interest

 

423

 

1,776

 

Total equity

 

197,606

 

145,100

 

 

 

 

 

 

 

Total liabilities and equity

 

$

302,175

 

$

280,147

 

 

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RealD Inc.

Schedule of Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

 

 

Three months ended

 

Year ended

 

 

 

March 23,

 

March 25,

 

March 23,

 

March 25,

 

(in thousands)

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

5,683

 

$

4,305

 

$

37,025

 

$

(6,825

)

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest expense

 

261

 

46

 

971

 

919

 

Income tax expense

 

(2,065

)

973

 

5,105

 

4,272

 

Depreciation and amortization

 

7,708

 

5,309

 

28,266

 

15,737

 

Other (income) loss (1)

 

(625

)

194

 

(782

)

(6,182

)

Share-based compensation expense (2)

 

4,026

 

2,962

 

15,744

 

8,950

 

Exhibitor option expense (3)

 

 

2,439

 

 

36,447

 

Impairment of assets and intangibles (4)

 

1,245

 

314

 

10,269

 

1,128

 

Sales and use tax (5)

 

1,287

 

1,041

 

6,363

 

6,484

 

Property tax (6)

 

301

 

251

 

1,434

 

1,090

 

Management fee (7)

 

 

 

 

175

 

Adjusted EBITDA

 

$

17,821

 

$

17,834

 

$

104,395

 

$

62,195

 

 


(1)         Includes amortization of debt issue costs, unrealized foreign currency exchange gains and losses and gains from the sale of digital projectors.

(2)         Represents share-based compensation expense of nonstatutory and incentive stock options and restricted stock units to employees, officers and directors.

(3)         Represents stock options granted to some of our motion picture exhibitor licensees. The amounts are recorded as motion picture exhibitor option expense/contra revenue in the consolidated financial statements.

(4)         Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and identifiable intangibles.

(5)         Represents taxes incurred by us for cinema license and product revenue.

(6)         Represents property taxes on RealD Cinema Systems and digital projectors.

(7)         Represents payment of management fees to our Series C mandatorily redeemable convertible preferred stockholder (included in general and administrative expense, which was terminated upon the completion of our initial public offering).

 

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