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RealD Inc. Reports Financial Results For Second Quarter Of Fiscal 2013

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.

© 2012 RealD Inc. All Rights Reserved.

RealD Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

   
Three months ended Six months ended
September 21,   September 23, September 21,   September 23,
2012 2011 2012 2011
 
Revenue:
License $ 34,976 $ 51,981 $ 76,165 $ 87,692
Product and other 20,010 36,014 46,999 59,863
Total revenue 54,986 87,995 123,164 147,555
Cost of revenue:
License 14,283 14,703 24,296 21,119
Product and other 23,049 30,770 49,869 48,595
Total cost of revenue 37,332 45,473 74,165 69,714
Gross profit 17,654 42,522 48,999 77,841
Operating expenses:
Research and development 4,592 3,755 9,490 8,400
Selling and marketing 5,924 6,466 12,819 13,695
General and administrative 12,189 9,792 23,451 18,222
Total operating expenses 22,705 20,013 45,760 40,317
Operating income (loss) (5,051) 22,509 3,239 37,524
Interest expense, net (288) (272) (601) (483)
Other income (loss) (21) 1,099 (374) 949
Income (loss) before income taxes (5,360) 23,336 2,264 37,990
Income tax expense (benefit) (1,129) 4,159 3,548 9,411
Net income (loss) (4,231) 19,177 (1,284) 28,579
Net (income) loss attributable to
noncontrolling interest 58 (272) 90 (79)
Net income (loss) attributable to RealD Inc.
common stockholders $ (4,173) $ 18,905 $ (1,194) $ 28,500
 
Earnings (loss) per common share:
Basic $ (0.08) $ 0.35 $ (0.02) $ 0.53
Diluted $ (0.08) $ 0.33 $ (0.02) $ 0.50
 
Shares used in computing earnings (loss) per common share:
Basic 53,915 54,343 54,314 54,151
Diluted 53,915 56,788 54,314 57,287
 

RealD Inc.

Consolidated Balance Sheets

(In thousands)

 

 

September 21, March 23,
  2012     2012  
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 25,238 $ 24,894
Accounts receivable, net 50,195 59,212
Inventories 14,850 40,577
Deferred costs – eyewear 558 932
Prepaid expenses and other current assets   3,696     2,630  
Total current assets 94,537 128,245
Property and equipment, net 16,696 12,713
Cinema systems, net 131,691 141,024
Digital projectors, net-held for sale 1,002 1,078
Goodwill 10,657 10,657
Other intangibles, net 1,662 1,746
Deferred income taxes 3,049 3,049
Other assets   6,038     3,663  
Total assets $ 265,332   $ 302,175  
 
Liabilities and equity
Current liabilities:
Accounts payable $ 15,343 $ 22,617
Accrued expenses and other liabilities 29,154 28,870
Deferred revenue 8,924 7,201
Income taxes payable 1,570 1,121
Deferred income taxes   3,093     3,149  
Total current liabilities 58,084 62,958
Credit facility agreement 12,500 25,000
Deferred revenue, net of current portion 12,485 13,920
Other long-term liabilities, customer deposits and virtual print fee liability 2,999 2,691
 
Commitments and contingencies
 
Equity (deficit)
Common stock 320,071 309,894
Accumulated deficit   (140,140 )   (112,711 )
Total RealD Inc. stockholders’ equity 179,931 197,183
Noncontrolling interest   (667 )   423  
Total equity   179,264     197,606  
 
Total liabilities and equity $ 265,332   $ 302,175  
 

RealD Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Six months ended
September 21, September 23,
2012 2011
Cash flows from operating activities
Net income (loss) $ (1,284) $ 28,579
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 15,936 13,152
Deferred income tax (56) (180)
Non-cash interest expense 157 133
Non-cash stock compensation 9,094 7,632
Gain on sale of digital projectors (1,156)
Loss on disposal of property and equipment 44
Impairment of long-lived assets and related purchase commitments 5,901 7,828
Changes in operating assets and liabilities:
Accounts receivable 6,541 (3,086)
Inventories 25,720 (725)
Prepaid expenses and other current assets (676) 150
Deferred costs - eyewear 374 (162)
Other assets (1,598) (1,822)
Accounts payable (7,256) (17,818)
Accrued expenses and other liabilities (3,323) (12,772)
Other long-term liabilities, customer deposits and virtual print fee liability 308 1,223
Income taxes receivable/payable 449 7,030
Deferred revenue 288 136
Net cash provided by operating activities 50,619 28,142
 
Cash flows from investing activities
Purchases of property and equipment (6,266) (1,993)
Purchases of cinema systems and related components (6,664) (38,011)
Proceeds from sale of digital projectors 2,474 3,999
Net cash used in investing activities (10,456) (36,005)
 
Cash flows from financing activities
Repayments of long-term debt (2,311)
Proceeds from credit facility 25,000 30,000
Repayments on credit facility (37,500) (5,000)
Payments of debt issuance costs (1,167)
Proceeds from exercise of stock options 782 479
Proceeds from employee stock purchase plan 301
Proceeds from exercise of warrants 271
Proceeds from exercise of motion picture exhibitor options 3
Purchases of treasury stock (26,235)
Distributions to noncontrolling interests (1,000)
Net cash (used) provided by financing activities (39,819) 23,442
Net increase in cash and cash equivalents 344 15,579
Cash and cash equivalents, beginning of period 24,894 16,936
Cash and cash equivalents, end of period $ 25,238 $ 32,515

RealD Inc.

Schedule of Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

Reconciliation of Net Income (Loss) to Adjusted EBITDA

   
Three months ended Six months ended
September 21,   September 23, September 21,   September 23,
(in thousands) 2012 2011 2012 2011
 
Net income (loss) $ (4,231) $ 19,177 $ (1,284) $ 28,579
Add (deduct):
Interest expense, net 288 272 601 483
Income tax expense (benefit) (1,129) 4,159 3,548 9,411
Depreciation and amortization 8,086 7,054 15,936 13,152
Other (income) loss (1) 21 (1,099) 374 (949)
Share-based compensation expense (2) 4,812 4,733 9,094 7,632
Impairment of assets and intangibles (3) 4,327 7,710 5,901 7,828
Sales and use tax (4) 1,309 2,017 2,162 3,507
Property tax (5) 291 330 611 766
Adjusted EBITDA $ 13,774 $ 44,353 $ 36,943 $ 70,409

(1) Includes gains and losses from foreign currency exchange and foreign currency forward contracts.(2) Represents share-based compensation expense of nonstatutory and incentive stock options and restricted stock units to employees, officers and directors.(3) Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and identifiable intangibles.(4) Represents taxes incurred by us for cinema license and product revenue.(5) Represents property taxes on RealD Cinema Systems and digital projectors.

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

 
Six months ended
September 21,   September 23,
2012 2011
(in thousands)
Net cash provided by operating activities $ 50,619 $ 28,142
Purchases of property and equipment (6,266) (1,993)
Purchases of cinema systems and related components (6,664) (38,011)
Free cash flow $ 37,689 $ (11,862)
 




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