RealD Inc. Reports Fourth Quarter and Fiscal Year 2013 Financial Results

  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.
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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