Form 8-K RealD Inc. For: Feb 01

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 1, 2016

 

 

RealD Inc.

(Exact name of registrant as specified in its charter)

 

 

 

(310) 385-4000

(Registrant’s telephone number, including area code)

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o         Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o         Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o         Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o         Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02.                Results of Operations and Financial Condition

 

On February 1, 2016, RealD Inc. (the “Company”) issued a press release reporting its financial results for the third quarter of fiscal year 2016.  The press release is attached to this Current Report on Form 8-K as Exhibit 99.1.

 

The information contained in this report and the attached press release is “furnished” but not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

Item 9.01.             Financial Statements and Exhibits.

 

(d)                   Exhibits

 

 

Exhibit Number		Description
99.1		Announcement, dated February 1, 2016, entitled “RealD Inc. Reports Third Quarter Fiscal Year 2016 Financial Results.”

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	RealD Inc.
Dated: February 1, 2016	By:	/s/ Vivian Yang
	Name:	Vivian Yang
	Title:	Executive Vice President, General Counsel and Secretary

 

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Exhibit 99.1

 

 

RealD Inc. Reports Third Quarter Fiscal Year 2016 Financial Results

 

LOS ANGELES (February 1, 2016) - Global visual technology company RealD Inc. (NYSE: RLD) today announced financial results for its third quarter of fiscal 2016 ended December 31, 2015.

 

Third Quarter Fiscal 2016 Financial Highlights

 

·                  Total revenue was $50.4 million, comprised of license revenue of $29.7 million and product and other revenue of $20.7 million. For the third quarter of fiscal 2015, total revenue was $32.6 million, comprised of license revenue of $21.0 million and product and other revenue of $11.6 million.

 

·                  China license revenue represented 15% of total worldwide license revenue, down from 20% for the third fiscal quarter of 2015.

 

·                  GAAP net loss attributable to common stockholders was $4.3 million, or $0.08 per diluted share, compared to GAAP net loss attributable to common stockholders of $11.3 million, or $0.23 per diluted share, for the third quarter of fiscal 2015.

 

·                  Adjusted EBITDA was $19.6 million, compared to $8.1 million in the third quarter of fiscal 2015.

 

·                  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-Months Fiscal 2016 Financial Highlights

 

·                  Total revenue was $142.4 million, comprised of license revenue of $92.0 million and product and other revenue of $50.4 million. For the nine months ended December 31, 2014, total revenue was $135.6 million, comprised of license revenue of $89.0 million and product and other revenue of 46.6 million.

 

·                  China license revenue represented 17% of total worldwide license revenue, up from 15% for the nine months ended December 31, 2014.

 

·                  GAAP net loss attributable to common stockholders was $4.9 million, or $0.10 per diluted share, compared to GAAP net loss attributable to common stockholders of $6.1 million, or $0.12 per diluted share, for the nine months ended December 31, 2014.

 

·                  Adjusted EBITDA was $51.4 million, compared to $49.6 million for nine months ended December 31, 2014.

 

·                  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).

 

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Cash Flows and Balance Sheet Highlights

 

·                  For the nine months ended December 31, 2015, cash inflow from operating activities was $27.9 million and total capital expenditures were $11.0 million, resulting in positive free cash flow of $16.9 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.

 

·                  As of December 31, 2015, cash and cash equivalents were $81.5 million and total debt was $35.4 million.

 

·                  Net cash inflow from operating activities of $27.9 million during the nine months ended December 31, 2015 included an upfront license fee of $7.5 million per RealD’s agreement with a computer technology company to develop and commercialize its intelligent backlight technology.

 

Key Metrics

 

·                  Estimated box office generated on RealD-enabled screens(1) in the third quarter of fiscal 2016 was $753 million ($386 million domestic, $367 million international).  In the third quarter of fiscal 2015, estimated box office generated on RealD-enabled screens was $338 million ($157 million domestic, $181 million international).

 

·                  Total RealD license revenue as a percent of total estimated box office generated on RealD-enabled screens excluding China, was 3.9% in the quarter, compared to 6.2% in the third quarter of fiscal 2015.

 

·                  Nine 3D films were released in the third quarter of fiscal 2016, compared to five 3D films in the third quarter of fiscal 2015.  These figures reflect the number of 3D films released domestically during the periods.

 

·                  International markets generated 60% of license revenue and 30% of product and other revenue in the third quarter of fiscal 2016.

 

·                  In the third quarter of fiscal 2016, worldwide 3D percentages were 39% (38% domestic, 40% international). In the third quarter of fiscal 2015, worldwide 3D percentages were 38% (32% domestic, 42% international).

 

·                  In the first nine months of fiscal 2016, worldwide 3D percentages were 38% (35% domestic, 40% international). In the first nine months of fiscal 2015, worldwide 3D percentages were 40% (34% domestic, 44% international).

 

·                  As of December 31, 2015, RealD had deployed approximately 27,800 RealD-enabled screens, an increase of 5% from approximately 26,500 screens as of December 31, 2014, and an increase of 1,100 screens (200 domestic, 900 international), or 4%, from approximately 26,700 screens as of March 31, 2015.

 

·                  As of December 31, 2015, RealD had approximately 13,800 domestic screens at approximately 3,000 domestic theater locations and approximately 14,000 international screens at approximately 3,350 international theater locations.

 

(1)         RealD’s estimates of box office on RealD-enabled screens rely on box office tracking data. Estimated international box office encompasses the 19 foreign countries where tracking data is available.  The 19 foreign countries do not include China and represent approximately 80% of RealD’s international license revenue

 

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The following table shows the major domestically produced 3D motion pictures released or scheduled for release on domestic and/or international 3D-enabled screens for the last quarter of fiscal year 2016 ending March 31, 2016 and the entire fiscal year 2017 ending March 31, 2017.

 

(As of February 1, 2016 — Domestic)

 

 

Sources: Rentrak and imdb.com.

 

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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; statements regarding the extent and timing of future licensing, products and services; and 3D motion picture releases and conversions scheduled for fiscal year 2016 ending March 31, 2016 and fiscal year 2017 ending March 31, 2017.

 

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.  RealD’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015 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 our financial statements presented on a GAAP basis, we provide Adjusted EBITDA and free cash flow as supplemental measures of our performance.  We define Adjusted EBITDA as net income (loss) plus expenses for interest, income taxes, depreciation, amortization, impairment and stock-based compensation plus net foreign exchange loss (gain) plus expenses comprising the non-U.S. GAAP categories “restructuring charges, severance costs and reserves” and “non- recurring expenses” as defined in our Credit Agreement.  We define free cash flow as total cash provided (used) by operating activities less cash used in purchases of property and equipment and cash used in purchases of cinema systems and related components.

 

We present Adjusted EBITDA in reporting our financial results to provide investors with additional tools to evaluate our operating results in a manner that focuses on what our management believes to be our ongoing business operations. We present 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. Management does not itself, nor does it suggest that investors should, consider any such non-U.S. 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, our 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.

 

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About RealD Inc.

 

RealD is a leading global licensor of 3D and other visual technologies.  RealD is the world’s most widely used 3D technology and our extensive intellectual property portfolio is used in applications and products that enable a premium viewing experience in the theater, the home and elsewhere.

 

RealD was founded in 2003 and has offices in Beverly Hills; Boulder; London; Moscow; Shanghai; Hong Kong; and Tokyo.  For more information, please visit our website at www.reald.com.

 

© 2016 RealD Inc.  All Rights Reserved.

 

Investor Contact:

Andrew Greenebaum / Laura Bainbridge

310-829-5400

[email protected]

 

Media Contact:

Will Hammond

424-702-4758

[email protected]

 

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RealD Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

 

		Three months ended December 31						Nine months ended December 31
		2015			2014			2015			2014
Revenue:
License		$	29,743		$	20,958		$	92,031		$	88,961
Product and other		20,630			11,613			50,363			46,597
Total revenue		50,373			32,571			142,394			135,558
Cost of revenue:
License		10,656			11,487			30,917			33,612
Product and other		12,754			6,121			35,649			31,410
Total cost of revenue		23,410			17,608			66,566			65,022
Gross profit		26,963			14,963			75,828			70,536
Operating expenses:
Research and development		4,107			4,582			10,578			14,692
Selling and marketing		4,503			4,382			14,605			15,493
General and administrative		17,059			12,654			45,414			35,804
Total operating expenses		25,669			21,618			70,597			65,989
Operating income (loss)		1,294			(6,655		)	5,231			4,547
Interest expense, net		(425		)	(393		)	(1,195		)	(1,278		)
Other loss, net		(659		)	(3,088		)	(2,240		)	(4,264		)
Income (loss) before income taxes		210			(10,136		)	1,796			(995		)
Income tax expense		4,492			1,154			6,670			5,117
Net loss		(4,282		)	(11,290		)	(4,874		)	(6,112		)
Net income attributable to noncontrolling interest		—			—			—			—
Net loss attributable to RealD Inc. common stockholders		$	(4,282	)	$	(11,290	)	$	(4,874	)	$	(6,112	)
Loss per common share:
Basic		$	(0.08	)	$	(0.23	)	$	(0.10	)	$	(0.12	)
Diluted		$	(0.08	)	$	(0.23	)	$	(0.10	)	$	(0.12	)
Shares used in computing loss per common share:
Basic		51,474			49,771			51,183			49,935
Diluted		51,474			49,771			51,183			49,935

 

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RealD Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

		December 31, 2015			March 31, 2015
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	81,471		$	60,333
Accounts receivable, net		48,902			26,748
Inventories		8,199			8,305
Deferred costs — eyewear		316			80
Prepaid expenses and other current assets		4,465			4,770
Total current assets		143,353			100,236
Property and equipment, net		16,363			20,599
Cinema systems, net		69,629			82,243
Goodwill		10,657			10,657
Other intangibles, net		3,839			4,817
Deferred income taxes		1,662			2,461
Other assets		8,452			8,631
Total assets		$	253,955		$	229,644
Liabilities and equity
Current liabilities:
Accounts payable		$	13,717		$	9,652
Accrued expenses and other liabilities		29,183			26,640
Deferred revenue		6,662			5,009
Income taxes payable		1,090			1,619
Deferred income taxes		1,784			2,583
Current portion of Credit Agreement		10,635			7,460
Total current liabilities		63,071			52,963
Credit Agreement, net of current portion		24,723			22,380
Deferred revenue, net of current portion		11,025			3,931
Other long-term liabilities		3,373			4,027
Total liabilities		102,192			83,301
Commitments and contingencies
Equity (deficit)
Common stock		383,923			371,689
Accumulated deficit		(233,450		)	(226,803		)
Accumulated other comprehensive income		1,793			1,960
Total RealD Inc. stockholders’ equity		152,266			146,846
Noncontrolling interest		(503		)	(503		)
Total equity		151,763			146,343
Total liabilities and equity		$	253,955		$	229,644

 

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RealD Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

		Nine months ended December 31
		2015			2014
Cash flows from operating activities
Net loss		$	(4,874	)	$	(6,112	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		27,721			29,925
Deferred income tax		—			1
Non-cash interest expense		276			203
Non-cash stock compensation		10,427			11,515
Non-cash bad debt expense		(122		)	646
Loss on disposal of property and equipment		—			154
Impairment of long-lived assets and related purchase commitments		2,213			2,736
Changes in operating assets and liabilities:
Accounts receivable		(22,032		)	13,916
Inventories		106			2,269
Prepaid expenses and other current assets		(818		)	117
Deferred costs - eyewear		(236		)	(42		)
Other assets		(97		)	(3,286		)
Accounts payable		4,065			(7,137		)
Accrued expenses and other liabilities		2,540			2,347
Other long-term liabilities		(654		)	(783		)
Income taxes receivable/payable		594			(1,152		)
Deferred revenue		8,747			(5,224		)
Net cash provided by operating activities		27,856			40,093
Cash flows from investing activities
Purchases of property and equipment		(871		)	(4,032		)
Purchases of cinema systems and related components		(10,102		)	(12,626		)
Proceeds from sale of property and equipment		—			79
Net cash used in investing activities		(10,973		)	(16,579		)
Cash flows from financing activities
Proceeds from Credit Agreement		12,700			37,300
Repayments on Credit Agreement		(7,182		)	(41,845		)
Payments of debt issuance costs		—			(895		)
Proceeds from exercise of stock options		1,245			2,782
Proceeds from employee stock purchase plan		562			291
Repurchase of statutory withholdings of stock issued for restricted stock units		(1,773		)	(990		)
Net cash provided by (used in) financing activities		5,552			(3,357		)
Effect of currency exchange rate changes on cash and cash equivalent		(1,297		)	2,793
Net increase in cash and cash equivalents		21,138			22,950
Cash and cash equivalents, beginning of period		60,333			28,800
Cash and cash equivalents, end of period		$	81,471		$	51,750

 

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RealD Inc.

Schedule of Non-GAAP Reconciliations (Unaudited)

(In thousands)

 

Reconciliation of Adjusted EBITDA to Net Income (Loss)

 

		Three months ended December 31						Nine months ended December 31
(in thousands)		2015			2014			2015			2014
Net loss		$	(4,282	)	$	(11,290	)	$	(4,874	)	$	(6,112	)
Add (deduct):
Interest expense, net		425			393			1,195			1,278
Income tax expense		4,492			1,154			6,670			5,117
Depreciation and amortization		8,934			9,920			27,721			29,925
Other loss (1)		659			3,088			2,240			4,264
Share-based compensation expense (2)		3,086			3,282			10,427			11,515
Impairment of assets and intangibles (3)		1,402			1,268			2,213			2,736
Cost reduction plan (4)		617			307			803			910
Non-recurring expenses (5)		4,312			—			5,000			—
Adjusted EBITDA (6)		$	19,645		$	8,122		$	51,395		$	49,633

 

(1)                     Consists of gains and losses from foreign currency exchange and foreign currency forward contracts.

(2)                     Represents share-based compensation expense of nonstatutory and incentive stock options, restricted stock units and performance stock units, and employee stock purchase plan to employees, non-employees, officers and directors.

(3)                     Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and related purchase commitments and identifiable intangibles.

(4)                     Expenses under our Credit Agreement for the non-U.S. GAAP category “restructuring charges, severance costs and reserves.”

(5)                     Expenses under our Credit Agreement for the non-U.S. GAAP category “non-recurring costs and expenses”, which is limited to $5.0 million per fiscal year.

(6)                     Adjusted EBITDA is not a recognized measurement under U.S. GAAP. For a definition of Adjusted EBITDA and reconciliation to net income (loss), the comparable U.S. GAAP item, see “Use of Non-U.S. GAAP Financial Measures”.

 

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

 

		Nine months ended December 31
(in thousands)		2015			2014
Net cash provided by operating activities		$	27,856		$	40,093
Purchases of property and equipment		(871		)	(4,032		)
Purchases of cinema systems and related components		(10,102		)	(12,626		)
Total free cash flow		$	16,883		$	23,435

 

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