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

  RealD Inc. Reports Financial Results for Fourth Quarter and Fiscal Year 2012  Business Wire  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. “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.   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 fourth quarter and fiscal year ended March 23, 2012 beginning at 4:30 p.m. ET (1:30 p.m. 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 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.   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              23,152       28,637         117,938       178,396 revenue Gross profit               26,895       29,877         128,690       67,740 Operating expenses: Research and               3,764        4,831          16,500        15,582 development Selling and                7,423        8,888          27,682        24,139 marketing General and               12,454    10,640     42,189     35,835   administrative Total operating           23,641    24,359     86,371     75,556   expenses Operating income           3,254        5,518          42,319        (7,816  ) (loss) Interest expense           (261   )     (46    )       (971    )     (919    ) Other income              625       (194   )    782        6,182    (loss) Income (loss) before income              3,618        5,278          42,130        (2,553  ) taxes Income tax expense        (2,065 )   973        5,105      4,272    (benefit) Net income (loss)          5,683        4,305          37,025        (6,825  ) Net (income) loss attributable to            (147   )     162            (156    )     (530    ) noncontrolling interest Accretion of              -         -          -          (4,934  ) preferred stock Net income (loss) attributable to          $ 5,536    $ 4,467     $ 36,869    $ (12,289 ) RealD Inc. common stockholders                                                                     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    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            2,691              4,533 deposits and virtual print fee liability 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      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             7,708         5,309        28,266        15,737 amortization Other (income) loss (1)      (625   )      194          (782    )     (6,182 ) Share-based compensation     4,026         2,962        15,744        8,950 expense (2) Exhibitor option expense     -             2,439        -             36,447 (3) Impairment of assets and     1,245         314          10,269        1,128 intangibles (4) 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 SeriesC mandatorily redeemable convertible preferred stockholder (included in general and administrative expense, which was terminated upon the completion of our initial public offering).  Contact:  RealD Inc. Investor Contact: Erik Randerson, CFA, 424-702-4317 eranderson@reald.com or Media Contact: Rick Heineman, 310-339-9347 rheineman@reald.com  
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