RealD Inc. Reports Fourth Quarter and Fiscal Year 2013 Financial Results Business Wire LOS ANGELES -- June 6, 2013 RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its fourth quarter and fiscal year ended March 31, 2013. “RealD delivered strong free cash flow for our fourth quarter and fiscal year ended March 31, 2013, despite the slight year-over-year decline in license revenue,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD. “We also continue to advance our international expansion initiatives, highlighted by the recent opening of our first office in Latin America. Additionally, RealD’s largest exhibitor customer in Latin America, Cinepolis, entered into an expanded agreement to equip at least 400 additional auditoriums with RealD 3D technology across the Cinepolis circuit in Latin America, the United States and India within the next 12 months.” Fourth Quarter Fiscal 2013 Financial Highlights *Total revenue was $45.4 million, comprised of license revenue of $31.3 million and product and other revenue of $14.2 million, for the fourth quarter of fiscal 2013. For the fourth quarter of fiscal 2012, total revenue was $50.0 million, comprised of license revenue of $31.7 million and product and other revenue of $18.4 million. *GAAP net loss attributable to common stockholders was $4.3 million, or $0.09 per share, compared to GAAP net income attributable to common stockholders of $5.5 million, or $0.10 per diluted share, for the fourth quarter of fiscal 2012. The fourth quarter of fiscal 2012 included a tax benefit of $2.1 million. *Adjusted EBITDA was $13.9 million, compared to $17.8 million in the fourth 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). Full Year Fiscal 2013 Financial Highlights *Total revenue was $215.6 million, comprised of license revenue of $137.8 million and product and other revenue of $77.8 million, for the year ended March 31, 2013. For the year ended March 23, 2012, total revenue was $246.6 million, comprised of license revenue of $147.8 million and product and other revenue of $98.8 million. *GAAP net loss attributable to common stockholders was $9.7 million, or $0.20 per share, compared to GAAP net income of $36.9 million, or $0.65 per diluted share, for the year ended March 23, 2012. *Adjusted EBITDA was $63.3 million, compared to $104.4 million for the year ended March 23, 2012. Cash Flows, Stock Repurchases and Balance Sheet Highlights *For the year ended March 31, 2013, cash flows from operating activities were $79.7 million and total capital expenditures were $34.3 million, resulting in free cash flow of $45.4 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 fourth quarter of fiscal 2013, RealD repurchased approximately 1,106,000 shares of common stock for $12.7 million, representing an average cost of $11.47 per share. *Since the inception of the stock repurchase program in April 2012 through March 31, 2013, RealD has repurchased approximately 5,928,000 shares of common stock at an average cost of $10.20 per share. As of March 31, 2013, $14.6 million remained available under the $75 million stock repurchase authorization. *As of March 31, 2013, cash and cash equivalents were $31.0 million and total debt was $47.5 million. The increase of $12.5 million in total debt from December 31, 2012 primarily funded stock repurchases during the quarter. Key Metrics *Estimated box office generated on RealD-enabled screens^(1) for the fourth quarter of fiscal 2013 was $614 million ($268 million domestic, $346 million international). In the fourth quarter of fiscal 2012, estimated box office generated on RealD-enabled screens was $589 million ($337 million domestic, $252 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 fourth quarter of fiscal 2012. *Seven 3D films were released in the fourth quarter of fiscal 2013, compared to eight 3D films in the fourth quarter of fiscal 2012. These figures reflect the number of 3D films released domestically during the periods. *International markets generated 61% of license revenue and 29% of product and other revenue in the fourth quarter of fiscal 2013. *As of March 31, 2013, RealD had deployed approximately 22,700 RealD-enabled screens, an increase of 12% from approximately 20,200 screens as of March 23, 2012, and an increase of 500 screens (200 domestic, 300 international), or 2%, from approximately 22,200 screens as of December 31, 2012. *As of March 31, 2013, RealD had approximately 12,800 domestic screens at approximately 2,800 domestic theater locations and approximately 9,900 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 international screens. RealD’s estimates of box office (1) 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. Previously Announced Plan to Change Definition of Adjusted EBITDA, a Non-GAAP Measure, Beginning in FY 2014 As previously announced, 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 RealD’s expanded credit facility. As a result, for future reporting periods, RealD no longer intends to add back sales and use tax and property tax to calculate Adjusted EBITDA for financial reporting purposes. 3D Theatrical Release Schedule for Fiscal 2014 (As of June 6, 2013 – Domestic) Fiscal Q1 2014 Film Domestic Release Date (ending 6/30/13) Jurassic Park (re-release) 4/5/2013 Iron Man 3 5/3/2013 The Great Gatsby 5/10/2013 Star Trek Into Darkness 5/16/2013 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 7/17/2013 R.I.P.D. 7/19/2013 The Wolverine 7/26/2013 The Smurfs 2 7/31/2013 Percy Jackson: Sea of Monsters 8/7/2013 Planes 8/9/2013 One Direction: This Is Us 8/30/2013 Battle of the Year: The Dream 9/13/2013 Team Cloudy With a Chance of 9/27/2013 Meatballs 2 Fiscal Q3 2014 Film Domestic Release Date (ending 12/31/13) Sin City: A Dame to Die For 10/4/2013 Gravity 10/4/2013 Metallica: Through the Never 10/4/2013 The Seventh Son 10/18/2013 Free Birds 11/1/2013 Thor: The Dark World 11/8/2013 Frozen 11/27/2013 Postman Pat: The Movie - You 11/27/2013 Know You're the One The Hobbit: The Desolation of 12/13/2013 Smaug Walking With Dinosaurs 12/20/2013 47 Ronin 12/25/2013 Fiscal Q4 2014 Film Domestic Release Date (ending 3/31/14) The Nut Job 1/17/2014 I, Frankenstein 1/24/2014 The Lego Movie 2/7/2014 Pompeii 2/28/2014 Mr. Peabody and Sherman 3/7/2014 300: Rise of an Empire 3/7/2014 Sources: Rentrak and imdb.com. Conference Call Information Members of RealD’s management will host a conference call to discuss RealD’s financial results for the fourth quarter of fiscal 2013, beginning at 4:30 pm ET (1:30 pm PT), today, June 6, 2013. To access the call via telephone, interested parties should dial (855) 769-4820 (U.S.) or (407) 374-0083 (International) ten minutes prior to the start time and use conference ID 73037700. The conference call will also be broadcast live over the Internet, hosted at the Investor Relations section of RealD’s website at www.reald.com. An archived replay of the call will be available via webcast at www.reald.com or by dialing (855) 859-2056, or (404) 537-3406 for international callers. The conference ID for the telephone replay is 73037700. 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; our expectations regarding demand and acceptance for our technologies; 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 ability to generate revenue from the licensing of RealD’s 3D technologies for use in 3D-enabled display devices; 3D motion picture releases and conversions scheduled for fiscal 2014 ending March 31, 2014 and beyond, their commercial success and consumer preferences, that, in recent periods, have trended in favor of 2D over 3D in some motion pictures in domestic markets; our ability to increase our revenues and the number of RealD-enabled screens in domestic and international markets and our 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, which may increase in future periods; market and industry trends, including growth in 3D content; our plans, strategies and expected opportunities; the deployment of and demand for our products and products incorporating our technologies; RealD’s projected operating results; and competitive pressures in domestic and international cinema markets impacting license and product revenues. 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. RealD’s Annual Report on Form 10-K for the twelve months ended March 23, 2012, RealD’s Quarterly Report on Form 10-Q for the third fiscal quarter ended December 31, 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. RealD 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 RealD’s core operating performance. RealD 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, RealD’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 RealD’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, content producers and distributors to enable the delivery and viewing of 3D content on a variety of visual displays and devices. RealD was founded in 2003 and has offices in Beverly Hills, California; Boulder, Colorado; London, United Kingdom; Moscow, Russia; Shanghai, China; Hong Kong; Tokyo, Japan; and Rio de Janeiro, Brazil. 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 Year ended March 31, March 23, March 31, March 23, 2013 2012 2013 2012 Revenue: License $ 31,253 $ 31,655 $ 137,752 $ 147,801 Product and 14,196 18,392 77,800 98,827 other Total revenue 45,449 50,047 215,552 246,628 Cost of revenue: License 12,424 9,480 47,243 39,801 Product and 12,751 13,672 78,117 78,137 other Total cost of 25,175 23,152 125,360 117,938 revenue Gross profit 20,274 26,895 90,192 128,690 Operating expenses: Research and 4,588 3,764 19,454 16,500 development Selling and 6,394 7,423 25,266 27,682 marketing General and 12,033 12,454 47,830 42,189 administrative Total operating 23,015 23,641 92,550 86,371 expenses Operating income (2,741 ) 3,254 (2,358 ) 42,319 (loss) Interest expense (456 ) (261 ) (1,483 ) (971 ) Other income (425 ) 625 (982 ) 782 (loss) Income (loss) before income (3,622 ) 3,618 (4,823 ) 42,130 taxes Income tax expense 822 (2,065 ) 5,064 5,105 (benefit) Net income (4,444 ) 5,683 (9,887 ) 37,025 (loss) Net (income) loss attributable to 108 (147 ) 197 (156 ) noncontrolling interest Net income (loss) attributable to $ (4,336 ) $ 5,536 $ (9,690 ) $ 36,869 RealD Inc. common stockholders Earnings (loss) per common share: Basic $ (0.09 ) $ 0.10 $ (0.20 ) $ 0.68 Diluted $ (0.09 ) $ 0.10 $ (0.20 ) $ 0.65 Shares used in computing earnings per common share: Basic 49,792 54,587 52,345 54,352 Diluted 49,792 56,468 52,345 56,852 RealD Inc. Consolidated Balance Sheets (In thousands) (unaudited) March 31, March 23, 2013 2012 Assets Current assets: Cash and cash equivalents $ 31,020 $ 24,894 Accounts receivable, net 45,472 59,212 Inventories 15,430 40,577 Deferred costs – eyewear 538 932 Prepaid expenses and other current 3,973 2,630 assets Total current assets 96,433 128,245 Property and equipment, net 25,002 12,713 Cinema systems, net 125,379 141,024 Digital projectors, net-held for 728 1,078 sale Goodwill 10,657 10,657 Other intangibles, net 7,417 1,746 Deferred income taxes 3,001 3,049 Other assets 5,031 3,663 Total assets $ 273,648 $ 302,175 Liabilities and equity Current liabilities: Accounts payable $ 22,737 $ 22,617 Accrued expenses and other 25,013 28,870 liabilities Deferred revenue 9,916 7,201 Income taxes payable 603 1,121 Deferred income taxes 2,860 3,149 Current portion of long-term debt 1,042 – Total current liabilities 62,171 62,958 Credit facility agreement 46,458 25,000 Deferred revenue, net of current 10,392 13,920 portion Other long-term liabilities, customer deposits and virtual print 5,438 2,691 fee liability Commitments and contingencies Equity (deficit) Common stock 332,694 309,894 Accumulated deficit (182,846 ) (112,711 ) 115 – Total RealD Inc. stockholders’ 149,963 197,183 equity Noncontrolling interest (774 ) 423 Total equity 149,189 197,606 Total liabilities and equity $ 273,648 $ 302,175 RealD Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Year ended March 31, March 23, 2013 2012 Cash flows from operating activities Net income (loss) $ (9,887 ) $ 37,025 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 33,131 28,266 Deferred income tax (241 ) 38 Non-cash interest expense 483 151 Non-cash stock compensation 18,474 15,744 Gain on sale of digital projectors – (1,742 ) Loss on disposal of property and 44 452 equipment Impairment of long-lived assets 8,679 10,269 Changes in operating assets and liabilities: Accounts receivable 11,266 (6,062 ) Inventories 25,147 14,394 Prepaid expenses and other current (954 ) (896 ) assets Deferred costs - eyewear 394 (883 ) Other assets (590 ) (1,528 ) Accounts payable 125 (36,916 ) Accrued expenses and other liabilities (7,790 ) (11,399 ) Other long-term liabilities, customer deposits and virtual print fee 2,747 1,989 liability Income taxes receivable/payable (518 ) 1,260 Deferred revenue (813 ) (7,161 ) Net cash provided by operating 79,697 43,001 activities Cash flows from investing activities Purchases of property and equipment (16,169 ) (8,760 ) Purchases of cinema systems and (18,121 ) (52,708 ) related components Purchases of intangible assets (6,084 ) – Proceeds from sale of digital 2,474 3,999 projectors Net cash used in investing activities (37,900 ) (57,469 ) Cash flows from financing activities Noncontrolling interest distribution (1,000 ) (1,509 ) Payments of debt issuance costs (1,167 ) – Repayments of long-term debt – (2,311 ) Proceeds from credit facility 60,000 30,000 Repayments on credit facility (37,500 ) (5,000 ) Proceeds from exercise of stock 3,516 972 options Proceeds from issuance of common stock pursuant to employee stock purchase 810 – plan Proceeds from exercise of warrants – 271 Proceeds from exercise of motion – 3 picture exhibitor options Repurchase of common stock (60,445 ) – Net cash provided (used) by financing (35,786 ) 22,426 activities Effect of currency exchange rate 115 – changes on cash and cash equivalents Net increase in cash and cash 6,126 7,958 equivalents Cash and cash equivalents, beginning 24,894 16,936 of year Cash and cash equivalents, end of year $ 31,020 $ 24,894 Supplemental disclosures of cash flow information Cash payments for income taxes $ 1,967 $ 1,060 Cash payments for interest expense 1,000 820 Sale of digital projectors in accounts $ - $ 2,474 receivable RealD Inc. Schedule of Non-GAAP Reconciliations (In thousands) (Unaudited) Reconciliation of Net Income (Loss) to Adjusted EBITDA Three months ended Year ended March 31, March 23, March 31, March 23, 2013 2012 2013 2012 Net income (loss) $ (4,444 ) $ 5,683 $ (9,887 ) $ 37,025 Add (deduct): Interest expense, 456 261 1,483 971 net Income tax 822 (2,065 ) 5,064 5,105 expense (benefit) Depreciation and 9,001 7,708 33,131 28,266 amortization Other (income) 425 (625 ) 982 (782 ) loss^(1) Share-based compensation 4,509 4,026 18,474 15,744 expense^(2) Impairment of assets and 2,098 1,245 8,679 10,269 intangibles^(3) Sales and use 780 1,287 3,950 6,363 tax^(4) Property tax^(5) 256 301 1,447 1,434 Adjusted EBITDA $ 13,903 $ 17,821 $ 63,323 $ 104,395 (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 assets, (3) 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. RealD Inc. Schedule of Non-GAAP Reconciliations (In thousands) (Unaudited) Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Year ended March 31, March 23, 2013 2012 Net cash provided by operating $ 79,697 $ 43,001 activities Purchases of property and equipment (16,169 ) (8,760 ) Purchases of cinema systems and (18,121 ) (52,708 ) related components Free cash flow $ 45,407 $ (18,467 ) Contact: RealD Inc. 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RealD Inc. Reports Fourth Quarter and Fiscal Year 2013 Financial Results
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