RealD Inc. Reports Financial Results for Third Quarter of Fiscal 2013
RealD Inc. Reports Financial Results for Third Quarter of Fiscal 2013
Business Wire
LOS ANGELES -- February 6, 2013
RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today
announced financial results for its third quarter of fiscal 2013 ended
December 31, 2012.
“2D films generated an outsized share of global box office receipts during our
third fiscal quarter, which limited our financial results for the quarter,”
said Michael V. Lewis, Chairman and Chief Executive Officer of RealD.
“Importantly, our continuing focus on growth initiatives in international
markets recently led to two major exhibitor contracts in Russia, one of the
highest grossing countries for 3D box office receipts. We announced today that
Russian exhibitors Karo Film and Kinomax will equip up to a combined 300 RealD
systems across their circuits, providing the industry’s brightest 3D
presentation to their moviegoing customers.
“Our repurchase of 2.3 million shares of common stock during the quarter and
the recent expansion of our stock repurchase program underscore our confidence
in RealD’s future growth opportunities,” Lewis added.
Third Quarter Fiscal 2013 Financial Highlights
Financial results for the third quarter of fiscal 2013 benefited from RealD’s
previously announced change in quarterly reporting periods, which added 10
extra days to the quarter ended December 31, 2012 when compared to the third
quarter of fiscal 2012 ended December 23, 2011.
* Total revenue was $46.9 million, comprised of license revenue of $30.3
million and product and other revenue of $16.6 million. For the third
quarter of fiscal 2012, total revenue was $49.0 million, comprised of
license revenue of $28.5 million and product and other revenue of $20.6
million.
* GAAP net loss attributable to common stockholders was $4.2 million, or
$0.08 per share, compared to GAAP net income attributable to common
stockholders of $2.8 million, or $0.05 per diluted share, for the third
quarter of fiscal 2012. The third quarter of fiscal 2012 included a tax
benefit of $2.2 million.
* Adjusted EBITDA was $12.5 million, compared to $16.2 million in the third
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 (loss).
Nine-Month Fiscal 2013 Financial Highlights
* Total revenue was $170.1 million, comprised of license revenue of $106.5
million and product and other revenue of $63.6 million. For the nine
months ended December 23, 2011, total revenue was $196.6 million,
comprised of license revenue of $116.1 million and product and other
revenue of $80.4 million.
* GAAP net loss attributable to common stockholders was $5.4 million, or
$0.10 per share, compared to GAAP net income of $31.3 million, or $0.55
per diluted share, for the nine months ended December 23, 2011.
* Adjusted EBITDA was $49.4 million, compared to $86.6 million for the nine
months ended December 23, 2011.
Cash Flows, Stock Repurchases and Balance Sheet Highlights
* For the nine months ended December 31, 2012, cash flows from operating
activities were $63.0 million and total capital expenditures were $24.4
million, resulting in free cash flow of $38.5 million.
* Free cash flow 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 cash provided by
operating activities.
* During the quarter, the Company repurchased approximately 2,262,000 shares
of common stock for $21.5 million, representing an average cost of $9.52
per share.
* Since the inception of the stock repurchase program in April 2012 through
December 31, 2012, the Company has repurchased approximately 4,822,000
shares of common stock. As of December 31, 2012, $27.2 million remained
available under the $75 million stock repurchase authorization.
* Cash and cash equivalents were $27.7 million and total debt was $35.0
million as of December 31, 2012. The increase of $22.5 million in total
debt from September 21, 2012 primarily funded stock repurchases during the
quarter.
Key Metrics
* Estimated box office generated on RealD-enabled screens^(1) for the third
quarter of fiscal 2013 was $643 million ($299 million domestic, $344
million international). In the third quarter of fiscal 2012, estimated box
office generated on RealD-enabled screens was $532 million ($256 million
domestic, $276 million international).
* The percentage of RealD box office generated from animation and family
genre films (which have lower average ticket prices) decreased compared to
the third quarter of fiscal 2012, when animation and family films
dominated the holiday film slate.
* Nine 3D films were released in the third quarter of fiscal 2013 compared
to eight 3D films in the third quarter of fiscal 2012.
* International markets generated 59% of license revenue and 34% of product
and other revenue in the third quarter of fiscal 2013.
* As of December 31, 2012, the Company had deployed approximately 22,200
RealD-enabled screens, an increase of 13% from approximately 19,700
screens as of December 23, 2011, and an increase of 700 screens (300
domestic, 400 international), or 3%, from approximately 21,500 screens as
of September 21, 2012.
* As of December 31, 2012, the Company had approximately 12,600 domestic
screens at approximately 2,800 domestic theater locations and
approximately 9,600 international screens at approximately 2,700
international theater locations.
Estimated domestic box office on RealD-enabled screens
represents the estimated 3D box office generated on
RealD-enabled domestic screens. Estimated international box
office on RealD-enabled international screens is the
estimated 3D box office generated on RealD-enabled
(1) international screens. RealD’s estimates of box office on
RealD-enabled screens rely on box office tracking data.
International box office reflects RealD’s estimates of
international box office generated on RealD-enabled screens
in 20 foreign countries where box office tracking is
available. RealD estimates these countries represent
approximately 85% of RealD’s international license revenues.
Planned Changes to Definition of Adjusted EBITDA, a Non-GAAP Measure
Beginning in the first quarter of fiscal 2014 that ends on June 30, 2013,
RealD intends to modify its definition of Adjusted EBITDA for financial
reporting purposes to align with the Adjusted EBITDA definition under the
expanded credit facility entered into on April 19, 2012. The Adjusted EBITDA
definition under RealD’s credit facility does not add back sales and use tax
and property tax as part of the calculation. Beginning in fiscal 2014, RealD
will no longer add back sales and use tax and property tax to calculate
Adjusted EBITDA for financial reporting purposes.
3D Theatrical Release Schedule for Fourth Quarter of Fiscal 2013 and First
Three Quarters of Fiscal 2014
(As of February 6, 2013 – Domestic)
Fiscal Q4 2013 Film Domestic Release
Date
(ending 3/31/13) The Texas Chainsaw 1/4/2013
Massacre 3D
Hansel and Gretel: Witch 1/25/2013
Hunters
Escape from Planet Earth 2/14/2013
Jack the Giant Slayer 3/1/2013
Oz: The Great and 3/8/2013
Powerful
The Croods 3/22/2013
GI Joe: Retaliation 3/28/2013
Fiscal Q1 2014 Film Domestic Release
Date
(ending 6/30/13) Jurassic Park 4/5/2013
(re-release)
Iron Man 3 5/3/2013
The Great Gatsby 5/10/2013
Star Trek into Darkness 5/17/2013
EPIC 5/24/2013
Man of Steel 6/14/2013
World War Z 6/21/2013
Monsters University 6/21/2013
Fiscal Q2 2014 Film Domestic Release
Date
(ending 9/30/13) Despicable Me 2 7/3/2013
Pacific Rim 7/12/2013
Turbo 7/19/2013
The Wolverine 7/26/2013
The Smurfs 2 7/31/2013
300: Rise of an Empire 8/2/2013
Metallica: Through the 8/9/2013
Never
Percy Jackson: Sea of 8/16/2013
Monsters
One Direction Concert 8/30/2013
Movie
Battle of the Year: The 9/13/2013
Dream Team
Cloudy With a Chance of 9/27/2013
Meatballs 2
Fiscal Q3 2014 Film Domestic Release
Date
(ending Sin City: A Dame to Die 10/4/2013
12/31/13) For
Gravity 10/4/2013
The Seventh Son 10/18/2013
Thor: The Dark World 11/8/2013
Frozen 11/27/2013
Postman Pat: The
Movie--You Know You Are 11/27/2013
The One
The Hobbit 2: The 12/13/2013
Desolation of Smaug
Walking With Dinosaurs 12/20/2013
47 Ronin 12/25/2013
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 third quarter of fiscal 2013, beginning at
4:30 pm ET (1:30 pm PT), today, February 6, 2013. To access the call via
telephone, interested parties should dial 877-407-0789 (U.S.) or 201-689-8562.
(International) ten minutes prior to the start time and use conference ID
408060.
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 408060.
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
the fourth quarter of fiscal 2013 ending March 31, 2013 and the first, second
and third quarters of fiscal 2014 ending March 31, 2014, 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 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, the Company’s Quarterly Report on Form 10-Q for the second fiscal
quarter ended September 21, 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 and free cash flow as supplemental measures 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. The Company defines free cash flow as net cash provided
by operating activities less total capital expenditures in a given period
(e.g., purchases of cinema systems and property and equipment on a combined
basis).
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 presents free cash flow to provide investors a
metric for our capacity to generate cash from our operating and investing
activities to sustain our operating activities. 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 and free cash
flow are 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 and free
cash flow 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 the Company’s 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; Tokyo,
Japan; and Moscow, Russia. For more information, please visit our website at
www.reald.com.
© 2013 RealD Inc. All Rights Reserved.
RealD Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three months ended Nine months ended
December December December December
31, 23, 31, 23,
2012 2011 2012 2011
Revenue:
License $ 30,334 $ 28,454 $ 106,499 $ 116,146
Product and 16,605 20,572 63,604 80,435
other
Total revenue 46,939 49,026 170,103 196,581
Cost of
revenue:
License 10,523 9,202 34,819 30,321
Product and 15,497 15,870 65,366 64,465
other
Total cost of 26,020 25,072 100,185 94,786
revenue
Gross profit 20,919 23,954 69,918 101,795
Operating
expenses:
Research and 5,376 4,336 14,866 12,736
development
Selling and 6,053 6,564 18,872 20,259
marketing
General and 12,346 11,513 35,797 29,735
administrative
Total
operating 23,775 22,413 69,535 62,730
expenses
Operating (2,856 ) 1,541 383 39,065
income (loss)
Interest (426 ) (227 ) (1,027 ) (710 )
expense, net
Other income (183 ) (792 ) (557 ) 157
(loss)
Income (loss)
before income (3,465 ) 522 (1,201 ) 38,512
taxes
Income tax
expense 694 (2,241 ) 4,242 7,170
(benefit)
Net income (4,159 ) 2,763 (5,443 ) 31,342
(loss)
Net (income)
loss
attributable (1 ) 70 89 (9 )
to
noncontrolling
interest
Net income
(loss)
attributable $ (4,160 ) $ 2,833 $ (5,354 ) $ 31,333
to RealD Inc.
common
stockholders
Earnings
(loss) per
common share:
Basic $ (0.08 ) $ 0.05 $ (0.10 ) $ 0.58
Diluted $ (0.08 ) $ 0.05 $ (0.10 ) $ 0.55
Shares used in
computing
earnings
(loss) per
common share:
Basic 51,062 54,524 53,157 54,274
Diluted 51,062 56,385 53,157 56,985
RealD Inc.
Consolidated Balance Sheets
(In thousands)
December 31, March 23,
2012 2012
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 27,667 $ 24,894
Accounts receivable, net 50,375 59,212
Inventories 14,105 40,577
Deferred costs – eyewear 351 932
Prepaid expenses and other 5,392 2,630
current assets
Total current assets 97,890 128,245
Property and equipment, 21,183 12,713
net
Cinema systems, net 129,954 141,024
Digital projectors, 971 1,078
net-held for sale
Goodwill 10,657 10,657
Other intangibles, net 1,620 1,746
Deferred income taxes 3,049 3,049
Other assets 5,101 3,663
Total assets $ 270,425 $ 302,175
Liabilities and equity
Current liabilities:
Accounts payable $ 17,046 $ 22,617
Accrued expenses and other 30,570 28,870
liabilities
Deferred revenue 9,218 7,201
Income taxes payable 945 1,121
Deferred income taxes 3,100 3,149
Total current liabilities 60,879 62,958
Credit facility agreement 35,000 25,000
Deferred revenue, net of 11,038 13,920
current portion
Other long-term
liabilities, customer 4,458 2,691
deposits and virtual print
fee liability
Commitments and
contingencies
Equity (deficit)
Common stock 325,540 309,894
Accumulated deficit (165,824 ) (112,711 )
Total RealD Inc. 159,716 197,183
stockholders’ equity
Noncontrolling interest (666 ) 423
Total equity 159,050 197,606
Total liabilities and $ 270,425 $ 302,175
equity
RealD Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended
December 31, December 23,
2012 2011
Cash flows from operating
activities
Net income (loss) $ (5,443 ) $ 31,342
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation and 24,130 20,558
amortization
Deferred income tax (49 ) (179 )
Non-cash interest expense 342 133
Non-cash stock 13,965 11,718
compensation
Gain on sale of digital – (1,156 )
projectors
Loss on disposal of 44 434
property and equipment
Impairment of long-lived
assets and related 6,581 9,024
purchase commitments
Changes in operating
assets and liabilities:
Accounts receivable 6,361 6,661
Inventories 26,465 8,951
Prepaid expenses and other (2,372 ) (306 )
current assets
Deferred costs - eyewear 581 (524 )
Other assets (661 ) (3,458 )
Accounts payable (5,595 ) (32,904 )
Accrued expenses and other (2,092 ) (12,794 )
liabilities
Other long-term
liabilities, customer 1,767 1,700
deposits and virtual print
fee liability
Income taxes (176 ) 4,024
receivable/payable
Deferred revenue (865 ) (6,269 )
Net cash provided by 62,983 36,955
operating activities
Cash flows from investing
activities
Purchases of property and (11,665 ) (5,545 )
equipment
Purchases of cinema
systems and related (12,774 ) (46,656 )
components
Proceeds from sale of 2,474 3,999
digital projectors
Net cash used in investing (21,965 ) (48,202 )
activities
Cash flows from financing
activities
Repayments of long-term – (2,311 )
debt
Proceeds from credit 47,500 30,000
facility
Repayments on credit (37,500 ) (5,000 )
facility
Payments of debt issuance (1,167 ) –
costs
Proceeds from exercise of 1,070 528
stock options
Proceeds from employee 611 –
stock purchase plan
Proceeds from exercise of – 271
warrants
Proceeds from exercise of
motion picture exhibitor – 3
options
Purchases of treasury (47,759 ) –
stock
Distributions to (1,000 ) –
noncontrolling interests
Net cash (used) provided (38,245 ) 23,491
by financing activities
Net increase in cash and 2,773 12,244
cash equivalents
Cash and cash equivalents, 24,894 16,936
beginning of period
Cash and cash equivalents, $ 27,667 $ 29,180
end of period
RealD Inc.
Schedule of Non-GAAP Reconciliations
(In thousands)
(Unaudited)
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Three months ended Nine months ended
December December December December
31, 23, 31, 23,
(in thousands) 2012 2011 2012 2011
Net income $ (4,159 ) $ 2,763 $ (5,443 ) $ 31,342
(loss)
Add (deduct):
Interest 426 227 1,027 710
expense, net
Income tax
expense 694 (2,241 ) 4,242 7,170
(benefit)
Depreciation
and 8,194 7,406 24,130 20,558
amortization
Other (income) 183 792 557 (157 )
loss^(1)
Share-based
compensation 4,871 4,086 13,965 11,718
expense^(2)
Impairment of
assets and 680 1,196 6,581 9,024
intangibles^(3)
Sales and use 1,008 1,569 3,170 5,076
tax^(4)
Property 580 367 1,191 1,133
tax^(5)
Adjusted EBITDA $ 12,477 $ 16,165 $ 49,420 $ 86,574
(1) Includes gains and losses from foreign currency exchange and
foreign currency forward contracts.
Represents share-based compensation expense of nonstatutory and
(2) incentive stock options and restricted stock units and employee
stock purchase plan to employees, officers and directors.
Represents impairment of long-lived assets, such as fixed
(3) assets, theatrical equipment and related purchase commitments
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.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Nine months ended
December 31, December 23,
2012 2011
(in thousands)
Net cash provided by $ 62,983 $ 36,955
operating activities
Purchases of property and (11,665 ) (5,545 )
equipment
Purchases of cinema
systems and related (12,774 ) (46,656 )
components
Free cash flow $ 38,544 $ (15,246 )
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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