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8-K - 8-K - RealD Inc.a12-17074_18k.htm

Exhibit 99.1

 

 

RealD Inc. Reports Financial Results for First Quarter of Fiscal 2013

 

LOS ANGELES (July 30, 2012) - RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its first quarter of fiscal 2013 ended June 22, 2012.

 

First Quarter Financial Highlights

 

Revenue

 

·                  Revenue was $68.2 million, an increase of 14% from $59.6 million in the first quarter of fiscal 2012.

·                  Net license revenue was $41.2 million, an increase of 15% from $35.7 million in the first quarter of fiscal 2012.

·                  Product and other revenue was $27.0 million, an increase of 13% from $23.8 million in the first quarter of fiscal 2012.

 

GAAP Net Income Results

 

·                  GAAP net income attributable to common stockholders was $3.0 million, or $0.05 per diluted share, compared to $9.6 million, or $0.17 per diluted share, for the first quarter of fiscal 2012.

·                  The year-over-year decrease in GAAP net income was largely attributable to a $5.9 million decline in “Product and Other” gross profits that resulted from a significantly reduced mix of recycled 3D eyewear shipped to RealD-equipped theaters during the first quarter of fiscal 2013.

·                  A higher effective tax rate of 61% in the first quarter of fiscal 2013 also contributed to the year-over-year decline in GAAP net income and net income per diluted share.

 

Non-GAAP Results

 

·                  Adjusted EBITDA was $23.2 million, a decrease of 11% compared to $26.1 million in the first quarter of fiscal 2012.  The decrease was largely attributable to a decrease in “Product and Other” gross profits from 3D eyewear.

·                  Adjusted EBITDA decreased to 34% of net revenue from 44% of net revenue in the first quarter of fiscal 2012.

·                  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.

 

Balance Sheet, Cash Flows and Stock Repurchases

 

·                  As of June 22, 2012, the Company’s balance sheet included total cash and cash equivalents of $45.5 million, an increase of $20.6 million from March 23, 2012.  Total debt as of June 22, 2012 remained unchanged at $25.0 million.

·                  Cash flows from operating activities were $27.8 million and total capital expenditures were $7.8 million, resulting in free cash flow of $20.0 million.

·                  The Company defines free cash flow, a Non-GAAP measure, as cash flows from operating activities less total capital expenditures in a given period.  Total capital expenditures include purchases of cinema systems and related components as well as purchases of property and equipment.

·                  The Company repurchased 133,987 common shares during the quarter for $1.6 million, resulting in an average cost of $11.84 per share repurchased.

 

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“The first quarter marked a solid increase in license revenue year-over-year, highlighting the continued strength of our premium cinema format on a global basis,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD.  “However, our bottom-line comparison versus the prior-year quarter was impacted by a $5.9 million decline in our product gross profits that resulted from a significantly reduced mix of recycled eyewear shipped to RealD-equipped theaters during the quarter.  Nonetheless, during the quarter our business generated $20 million in free cash flow, consistent with our expectation that RealD will generate strong cash flows during fiscal 2013 as our spending on capital expenditures moderates.”

 

Key Metrics and International Revenue Statistics

 

·                  International markets generated 56% of license revenue compared to 58% of license revenue in the first quarter of fiscal 2012.

·                  As of June 22, 2012, the Company had deployed approximately 20,700 RealD-enabled screens, an increase of 18% from approximately 17,500 screens as of June 24, 2011, and an increase of 500 screens, or 2%, from approximately 20,200 screens as of March 23, 2012.

·                  As of June 22, 2012, the Company had approximately 12,000 domestic screens at approximately 2,700 domestic theater locations and approximately 8,700 international screens at approximately 2,500 international theater locations.

 

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3D Theatrical Release Schedule for Fiscal 2013

(As of July 30, 2012 — Domestic)

 

Fiscal Q1 2013

 

Film

 

Domestic Release Date

(ended 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

 

8/8/2012

 

 

ParaNorman

 

8/17/2012

 

 

Resident Evil: Retribution

 

9/14/2012

 

 

Finding Nemo (re-release)

 

9/14/2012

 

 

Dredd

 

9/21/2012

 

Fiscal Q3 2013

 

Film

 

Domestic Release Date

(ending 12/21/12)

 

Hotel Transylvania

 

9/28/2012

 

 

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

 

 

Monsters, Inc. (re-release)

 

12/19/2012

 

 

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

 

 

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.

 

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Conference Call Information

 

Members of RealD management will host a conference call to discuss the Company’s financial results for the first fiscal quarter ended June 22, 2012 beginning at 4:30 pm ET (1:30 pm PT), today, July 30, 2012.  To access the call via telephone, interested parties should dial (877) 941-4774 (U.S.) or (480) 629-9760 (International) ten minutes prior to the start time and use conference ID 4550803.

 

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 4550803.

 

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.

 

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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 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 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

 

 

 

June 22,
2012

 

June 24,
2011

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

License

 

$

41,189

 

$

35,711

 

Product and other

 

26,989

 

23,849

 

Total revenue

 

68,178

 

59,560

 

Cost of revenue:

 

 

 

 

 

License

 

10,013

 

6,416

 

Product and other

 

26,820

 

17,825

 

Total cost of revenue

 

36,833

 

24,241

 

Gross profit

 

31,345

 

35,319

 

Operating expenses:

 

 

 

 

 

Research and development

 

4,898

 

4,645

 

Selling and marketing

 

6,895

 

7,229

 

General and administrative

 

11,262

 

8,430

 

Total operating expenses

 

23,055

 

20,304

 

Operating income

 

8,290

 

15,015

 

Interest expense, net

 

(313

)

(211

)

Other loss

 

(353

)

(150

)

Income before income taxes

 

7,624

 

14,654

 

Income tax expense

 

4,677

 

5,252

 

Net income

 

2,947

 

9,402

 

Net loss attributable to noncontrolling interest

 

32

 

193

 

Net income attributable to RealD Inc. common stockholders

 

$

2,979

 

$

9,595

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

Basic

 

$

0.05

 

$

0.18

 

Diluted

 

$

0.05

 

$

0.17

 

 

 

 

 

 

 

Shares used in computing earnings per common share:

 

 

 

 

 

Basic

 

54,676

 

53,955

 

Diluted

 

56,643

 

57,781

 

 

6



 

RealD Inc.

Consolidated Balance Sheets

(In thousands)

 

 

 

June 22,
2012

 

March 23,
2012

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

45,525

 

$

24,894

 

Accounts receivable, net

 

58,734

 

59,212

 

Inventories

 

22,012

 

40,577

 

Deferred costs — eyewear

 

1,280

 

932

 

Prepaid expenses and other current assets

 

2,846

 

2,630

 

Total current assets

 

130,397

 

128,245

 

Property and equipment, net

 

14,543

 

12,713

 

Cinema systems, net

 

137,648

 

141,024

 

Digital projectors, net-held for sale

 

1,035

 

1,078

 

Goodwill

 

10,657

 

10,657

 

Other intangibles, net

 

1,704

 

1,746

 

Deferred income taxes

 

3,049

 

3,049

 

Other assets

 

5,505

 

3,663

 

Total assets

 

$

304,538

 

$

302,175

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

17,507

 

$

22,617

 

Accrued expenses and other liabilities

 

25,010

 

28,870

 

Deferred revenue

 

9,258

 

7,201

 

Income taxes payable

 

4,254

 

1,121

 

Deferred income taxes

 

3,094

 

3,149

 

Total current liabilities

 

59,123

 

62,958

 

Credit facility agreement

 

25,000

 

25,000

 

Deferred revenue, net of current portion

 

13,428

 

13,920

 

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

 

2,871

 

2,691

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity (deficit)

 

 

 

 

 

Common stock

 

315,043

 

309,894

 

Accumulated deficit

 

(109,732

)

(112,711

)

Treasury stock, at cost

 

(1,586

)

 

Total RealD Inc. stockholders’ equity

 

203,725

 

197,183

 

Noncontrolling interest

 

391

 

423

 

Total equity

 

204,116

 

197,606

 

 

 

 

 

 

 

Total liabilities and equity

 

$

304,538

 

$

302,175

 

 

7



 

RealD Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three months ended

 

 

 

June 22,
2012

 

June 24,
2011

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

2,947

 

$

9,402

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

7,850

 

6,098

 

Deferred income tax

 

(55

)

(178

)

Non-cash interest expense

 

104

 

133

 

Non-cash stock compensation

 

4,282

 

2,899

 

Impairment of long-lived assets

 

1,574

 

118

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(1,996

)

361

 

Inventories

 

18,565

 

(6,398

)

Prepaid expenses and other current assets

 

173

 

774

 

Deferred costs - eyewear

 

(348

)

(2,186

)

Other assets

 

(1,064

)

(1,965

)

Accounts payable

 

(5,114

)

(6,165

)

Accrued expenses and other liabilities

 

(3,964

)

(9,285

)

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

 

180

 

1,195

 

Income taxes receivable/payable

 

3,133

 

4,202

 

Deferred revenue

 

1,565

 

2,921

 

Net cash provided by operating activities

 

27,832

 

1,926

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of property and equipment

 

(2,745

)

(684

)

Purchases of cinema systems and related components

 

(5,044

)

(24,180

)

Proceeds from sale of digital projectors

 

2,474

 

 

Net cash used in investing activities

 

(5,315

)

(24,864

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Repayments of long-term debt

 

 

(594

)

Proceeds from credit agreement - revolving credit facility

 

 

30,000

 

Repayments on credit agreement - revolving credit facility

 

(25,000

)

(5,000

)

Proceeds from credit agreement - term loan facility

 

25,000

 

 

Payments of debt issuance costs

 

(1,167

)

 

Proceeds from exercise of stock options

 

565

 

395

 

Proceeds from employee stock purchase plan

 

302

 

 

Proceeds from exercise of warrants

 

 

90

 

Proceeds from exercise of motion picture exhibitor options

 

 

3

 

Purchases of treasury stock

 

(1,586

)

 

Net cash (used) provided by financing activities

 

(1,886

)

24,894

 

Net increase in cash and cash equivalents

 

20,631

 

1,956

 

Cash and cash equivalents, beginning of year

 

24,894

 

16,936

 

Cash and cash equivalents, end of year

 

$

45,525

 

$

18,892

 

 

8



 

RealD Inc.

Schedule of Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

Reconciliation of Net Income to Adjusted EBITDA

 

 

 

Three months ended

 

 

 

June 22,

 

June 24,

 

(in thousands)

 

2012

 

2011

 

 

 

 

 

 

 

Net income

 

$

2,947

 

$

9,402

 

Add (deduct):

 

 

 

 

 

Interest expense, net

 

313

 

211

 

Income tax expense

 

4,677

 

5,252

 

Depreciation and amortization

 

7,850

 

6,098

 

Other loss (1)

 

353

 

150

 

Share-based compensation expense (2)

 

4,282

 

2,899

 

Impairment of assets and intangibles (3)

 

1,574

 

118

 

Sales and use tax (4)

 

853

 

1,490

 

Property tax (5)

 

320

 

436

 

Adjusted EBITDA

 

$

23,169

 

$

26,056

 

 


(1)        Includes gains and losses from foreign currency exchange and foreign currency forward contracts.

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

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

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

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

 

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