Delaware | 77-0620426 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
100 N. Crescent Drive, Suite 200 Beverly Hills, CA | 90210 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | o | Accelerated filer | ý | |||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o |
Page | ||
Number | ||
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, net | 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, $0.0001 par value, 200,000 shares authorized; 51,207 and 50,434 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively | 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 |
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 |
Three months ended December 31 | Nine months ended December 31 | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net loss | $ | (4,282 | ) | $ | (11,290 | ) | $ | (4,874 | ) | $ | (6,112 | ) | |||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Foreign currency translation gains (loss) | 56 | 1,339 | (167 | ) | 1,810 | ||||||||||
Other comprehensive income (loss), net of tax | 56 | 1,339 | (167 | ) | 1,810 | ||||||||||
Comprehensive loss | $ | (4,226 | ) | $ | (9,951 | ) | $ | (5,041 | ) | $ | (4,302 | ) |
Nine months ended December 31 | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (4,874 | ) | $ | (6,112 | ) | |
Adjustments to reconcile net loss to net cash provided by 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: | 0 | 0 | |||||
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 equivalents | (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 |
• | licensing revenue terms applied to the timing and number of motion picture exhibitor consumer admissions; |
• | domestic eyewear product revenue terms applied to when the usage occurs and the amount of usage; |
• | deferred costs of domestic eyewear product shipments; |
• | effects of allowances that are capitalized on the balance sheet and amortized to the applicable line item on the statement of operations as expense or contra revenue and earned customer incentives when customers do not timely report the activity that result in earned allowances and incentives; |
• | customer contract terms and their effects on revenue and balance sheet items; |
• | fair market values of multiple deliverable components relating to sales of product, services and intellectual property; |
• | impairment testing of goodwill, intangible assets and tangible assets, including determination of relevant reporting units and long-lived asset groups; |
• | useful lives of intangible assets and tangible assets; |
• | timing and amount recognized for performance-based compensation, including bonus, executive salary and executive restricted stock units, based on projections of the Company's performance achievement; |
• | the impact of potential future tax consequences of events that have been recognized in the Company’s financial statements; |
• | valuation of accruals and allowances; |
• | contingency assessments; and |
• | assumptions used in the determination of the fair value of equity-based awards for stock-based compensation. |
Three months ended December 31 | Nine months ended December 31 | ||||||||||||||
(in thousands, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Numerator: | |||||||||||||||
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 | ) | |||
Denominator: | |||||||||||||||
Weighted-average common shares outstanding (basic) | 51,474 | 49,771 | 51,183 | 49,935 | |||||||||||
Effect of dilutive securities | — | — | — | — | |||||||||||
Weighted-average common shares outstanding (diluted) | 51,474 | 49,771 | 51,183 | 49,935 | |||||||||||
Loss per common share: | |||||||||||||||
Basic | $ | (0.08 | ) | $ | (0.23 | ) | $ | (0.10 | ) | $ | (0.12 | ) | |||
Diluted | $ | (0.08 | ) | $ | (0.23 | ) | $ | (0.10 | ) | $ | (0.12 | ) |
Three months ended December 31 | Nine months ended December 31 | ||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||
Options, employee stock purchase plan, restricted stock units and performance stock units | 8,833 | 10,944 | 8,912 | 9,678 |
(in thousands) | December 31, 2015 | March 31, 2015 | |||||
RealD Cinema Systems | $ | 213,937 | $ | 208,056 | |||
Leasehold improvements | 15,575 | 16,974 | |||||
Machinery and equipment | 5,948 | 5,791 | |||||
Furniture and fixtures | 1,253 | 1,238 | |||||
Computer equipment and software | 10,957 | 10,581 | |||||
Construction in process | 341 | 565 | |||||
Total | $ | 248,011 | $ | 243,205 | |||
Less accumulated depreciation | (162,019 | ) | (140,363 | ) | |||
Cinema Systems and Property & Equipment, net | $ | 85,992 | $ | 102,842 |
December 31, 2015 | March 31, 2015 | ||||||||||||||
(in thousands) | Gross amount | Accumulated amortization | Gross amount | Accumulated amortization | |||||||||||
Acquired developed technologies | $ | 9,324 | $ | 5,485 | $ | 9,324 | $ | 4,507 | |||||||
Goodwill | 10,657 | — | 10,657 | — | |||||||||||
Total | $ | 19,981 | $ | 5,485 | $ | 19,981 | $ | 4,507 |
Remainder of fiscal year 2016 | $ | 325 | |
Fiscal year 2017 | 1,300 | ||
Fiscal year 2018 | 1,287 | ||
Fiscal year 2019 | 306 | ||
Fiscal year 2020 | 129 | ||
Thereafter | 492 | ||
Total | $ | 3,839 |
• | Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access; |
• | Level 2 - Valuations for which all significant inputs are observable, either directly or indirectly, other than level 1 inputs; |
• | Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
(in thousands) | ||||||||||||||||
Fair value measurement as of December 31, 2015: | Quoted prices in active markets for identical assets
(Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
Assets: | ||||||||||||||||
Derivatives: | ||||||||||||||||
Foreign currency forward contracts | $ | — | $ | 11 | $ | — | $ | 11 | ||||||||
Total assets | $ | — | $ | 11 | $ | — | $ | 11 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives: | ||||||||||||||||
Foreign currency forward contracts | $ | — | $ | — | $ | — | $ | — | ||||||||
Total liabilities | $ | — | $ | — | $ | — | $ | — |
Three months ended December 31 | |||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||
(in thousands) | Personnel | Leasehold | Total | Personnel | Leasehold | Total | |||||||||||||||||
Cost of revenue | $ | — | $ | — | $ | — | $ | 1 | $ | 132 | $ | 133 | |||||||||||
Research and development | 20 | — | 20 | 115 | — | 115 | |||||||||||||||||
Selling and marketing | 2 | — | 2 | 59 | — | 59 | |||||||||||||||||
General and administrative | — | 595 | 595 | 2 | — | 2 | |||||||||||||||||
Total | $ | 22 | $ | 595 | $ | 617 | $ | 177 | $ | 132 | $ | 309 |
Nine months ended December 31 | |||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||
(in thousands) | Personnel | Leasehold | Total | Personnel | Leasehold | Total | |||||||||||||||||
Cost of revenue | $ | 3 | $ | 7 | $ | 10 | $ | 25 | $ | 505 | $ | 530 | |||||||||||
Research and development | 39 | — | 39 | 115 | — | 115 | |||||||||||||||||
Selling and marketing | 137 | 22 | 159 | 75 | — | 75 | |||||||||||||||||
General and administrative | — | 595 | 595 | 192 | — | 192 | |||||||||||||||||
Total | $ | 179 | $ | 624 | $ | 803 | $ | 407 | $ | 505 | $ | 912 |
Payments excluding non-cash impairment | |||||||||||
(in thousands) | Personnel | Leasehold | Total | ||||||||
Cost reduction plan liabilities as of March 31, 2015 | $ | 1,249 | $ | 265 | $ | 1,514 | |||||
Charges | 179 | 624 | 803 | ||||||||
(Payments) | (735 | ) | (775 | ) | (1,510 | ) | |||||
Cost reduction plan liabilities as of December 31, 2015 | $ | 693 | $ | 114 | $ | 807 |
• | a revolving credit facility (including a letter of credit sub-facility) in a maximum amount not to exceed $50 million, or the Revolving Facility, which matures on June 26, 2017. In addition, RealD may request up to an additional $25 million of commitments under the Revolving Facility (such that the maximum amount of all commitments under the Revolving Facility may not exceed $75 million), subject to the satisfaction of certain financial and other conditions and subject to obtaining such commitments; and |
• | a delayed draw term loan facility in a maximum amount not to exceed $50 million, or the Term Loan Facility, which matures on June 26, 2018. During the first quarter of fiscal year 2015 and fiscal year 2016, the Company borrowed $37.3 million and the remaining $12.7 million, respectively, under the Term Loan Facility. |
December 31, 2015 | March 31, 2015 | ||||||
(in thousands) | |||||||
Current portion of Credit Agreement | $ | 10,635 | $ | 7,460 | |||
Credit Agreement, net of current portion | 24,723 | 22,380 | |||||
Total Credit Agreement | $ | 35,358 | $ | 29,840 |
Fiscal year 2016 | $ | 2,659 | |
Fiscal year 2017 | 10,635 | ||
Fiscal year 2018 | 10,635 | ||
Fiscal year 2019 | 11,429 | ||
Total | $ | 35,358 |
Three months ended December 31 | Nine months ended December 31 | ||||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Cost of revenue | $ | 266 | $ | 317 | $ | 771 | $ | 932 | |||||||
Research and development | 511 | 797 | 1,598 | 2,473 | |||||||||||
Selling and marketing | 829 | 599 | 2,978 | 2,228 | |||||||||||
General and administrative | 1,480 | 1,569 | 5,080 | 5,882 | |||||||||||
Total | $ | 3,086 | $ | 3,282 | $ | 10,427 | $ | 11,515 |
(in thousands) | RealD Inc. stockholders’ equity | Noncontrolling interest | Total equity | ||||||||
Balance, March 31, 2015 | $ | 146,846 | $ | (503 | ) | $ | 146,343 | ||||
Share-based compensation | 10,427 | — | 10,427 | ||||||||
Exercise of stock options | 1,245 | — | 1,245 | ||||||||
Purchase and distribution of stock under employee stock purchase plan | 562 | — | 562 | ||||||||
Repurchase of statutory withholdings of stock issued for restricted stock units | (1,773 | ) | — | (1,773 | ) | ||||||
Comprehensive loss: | |||||||||||
Other comprehensive loss, net of tax | (167 | ) | — | (167 | ) | ||||||
Net loss | (4,874 | ) | — | (4,874 | ) | ||||||
Total comprehensive loss | (5,041 | ) | — | (5,041 | ) | ||||||
Balance, December 31, 2015 | $ | 152,266 | $ | (503 | ) | $ | 151,763 |
• | Sales and marketing expenses are primarily recorded directly to each reportable segment based on identified customer segment. |
• | R&D expenses are mapped directly in all cases where the value of the expenses only accrues to that reportable segment group. |
• | General and administrative expenses are generally not allocated. Certain corporate-level occupancy activity is allocated to each reportable segments per head-count, including costs of depreciation , utilities and other common area expenses at the Company's headquarters and R&D facility. |
Three months ended December 31 | |||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||
(in thousands) | Cinema | Consumer | Total | Cinema | Consumer | Total | |||||||||||||||||
Revenue | $ | 50,373 | $ | — | $ | 50,373 | $ | 32,571 | $ | — | $ | 32,571 | |||||||||||
Gross profit | 26,963 | — | 26,963 | 14,963 | — | 14,963 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 2,628 | 1,479 | 4,107 | 4,582 | — | 4,582 | |||||||||||||||||
Sales and marketing | 4,148 | 355 | 4,503 | 4,382 | — | 4,382 | |||||||||||||||||
General and administrative | 17,036 | 23 | 17,059 | 12,654 | — | 12,654 | |||||||||||||||||
Total operating expenses | 23,812 | 1,857 | 25,669 | 21,618 | — | 21,618 | |||||||||||||||||
Total operating income (loss) | $ | 3,151 | $ | (1,857 | ) | $ | 1,294 | $ | (6,655 | ) | $ | — | $ | (6,655 | ) |
Nine months ended December 31 | |||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||
(in thousands) | Cinema | Consumer | Total | Cinema | Consumer | Total | |||||||||||||||||
Revenue | $ | 142,394 | $ | — | $ | 142,394 | $ | 135,558 | $ | — | $ | 135,558 | |||||||||||
Gross profit | 75,828 | — | 75,828 | 70,536 | — | 70,536 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 8,789 | 1,789 | 10,578 | 14,692 | — | 14,692 | |||||||||||||||||
Sales and marketing | 14,102 | 503 | 14,605 | 15,493 | — | 15,493 | |||||||||||||||||
General and administrative | 45,391 | 23 | 45,414 | 35,804 | — | 35,804 | |||||||||||||||||
Total operating expenses | 68,282 | 2,315 | 70,597 | 65,989 | — | 65,989 | |||||||||||||||||
Total operating income (loss) | $ | 7,546 | $ | (2,315 | ) | $ | 5,231 | $ | 4,547 | $ | — | $ | 4,547 |
Three months ended December 31 | Nine months ended December 31 | |||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | ||||||||||
Domestic (United States and Canada) | $ | 26,470 | $ | 12,341 | $ | 72,265 | $ | 59,413 | ||||||
China | 4,650 | 4,413 | 16,350 | 13,683 | ||||||||||
Rest of world | 19,253 | 15,817 | 53,779 | 62,462 | ||||||||||
Total revenues | $ | 50,373 | $ | 32,571 | $ | 142,394 | $ | 135,558 |
(in thousands) | December 31, 2015 | March 31, 2015 | |||||
Domestic (United States and Canada) | $ | 67,014 | $ | 87,134 | |||
China | 11,022 | 10,185 | |||||
Rest of world | 7,956 | 5,523 | |||||
Total long-lived tangible assets | $ | 85,992 | $ | 102,842 |
• | RealD box office. Estimated domestic box office on RealD-enabled screens represents the estimated 3D box office generated on RealD-enabled domestic screens, and estimated international box office on RealD-enabled screens represents the estimated 3D box office generated on RealD-enabled international screens. 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. |
• | Number of 3D motion pictures. Total 3D motion pictures are the number of 3D motion pictures released domestically in North America during the relevant period. |
• | Number of screens. We refer to motion picture theater screens in the United States or Canada enabled with our RealD Cinema Systems as "domestic screens", motion picture theater screens in China enabled with our RealD Cinema Systems as "China screens" and motion picture theater screens outside the United States, Canada and China enabled with our RealD Cinema Systems as "rest of world screens" or "ROW screens". |
• | Number of locations. We refer to motion picture exhibition complexes in the United States or Canada enabled with our RealD Cinema Systems as "domestic locations", motion picture exhibition complexes in China as "China locations" and motion picture exhibition complexes outside the United States, Canada and China as "rest of world locations" or "ROW locations". |
• | Adjusted EBITDA. We use Adjusted EBITDA as a supplemental measure 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 2014 Credit Agreement. We do not consider the preceding adjustments to be indicative of our core operating performance. We consider our core operating performance to be that which can be affected by our managers in any particular period through their management of the resources that affect our underlying revenue and profit generating operations for that period. However, Adjusted EBITDA is not a recognized measurement under U.S. GAAP and should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. For a reconciliation of Adjusted EBITDA to U.S. GAAP net income (loss) and for further discussion regarding Adjusted EBITDA, see "Non-U.S. GAAP discussion". |
• | Free cash flow. We use free cash flow as a supplemental measure of our performance in liquidity. We define free cash flow as total cash provided by (used in) operating activities less cash used in purchases of property and equipment and cash used in purchases of cinema systems and related components. However, free cash flow is not a recognized measurement under U.S. GAAP, should not be used in a manner that inappropriately implies that the measure represents the residual cash flow available for discretionary expenditures, and should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. For a reconciliation of and further discussion regarding free cash flow, see "Non-U.S. GAAP discussion". |
Three months ended December 31 | Nine months ended December 31 | ||||||||||||||
(approximate numbers, in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Estimated box office on RealD screens (generated during the period) | |||||||||||||||
Estimated box office on RealD domestic screens | $ | 386 | $ | 157 | $ | 1,067 | $ | 818 | |||||||
Estimated box office on RealD international screens | 367 | 181 | 1,027 | 925 | |||||||||||
Total estimated box office on RealD screens | $ | 753 | $ | 338 | $ | 2,094 | $ | 1,743 | |||||||
Three months ended December 31 | Nine months ended December 31 | ||||||||||||||
(approximate numbers) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Number of 3D motion pictures (released domestically during period) | 9 | 5 | 22 | 24 |
December 31, 2015 | December 31, 2014 | ||||
Number of RealD enabled screens (at period end) | |||||
Total domestic RealD enabled screens | 13,800 | 13,600 | |||
Total China RealD-enabled screens | 2,500 | 2,000 | |||
Total rest of world RealD-enabled screens | 11,500 | 10,900 | |||
Total RealD enabled screens | 27,800 | 26,500 | |||
Number of locations with RealD enabled screens (at period end) | |||||
Total domestic locations with RealD-enabled screens | 3,000 | 3,000 | |||
Total China locations with RealD-enabled screens | 350 | 300 | |||
Total rest of world locations with RealD-enabled screens | 3,000 | 2,800 | |||
Total locations with RealD enabled screens | 6,350 | 6,100 |
Three months ended December 31 | Nine months ended December 31 | ||||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Consolidated statements of operations data: | |||||||||||||||
Revenue | $ | 50,373 | $ | 32,571 | $ | 142,394 | $ | 135,558 | |||||||
Cost of revenue | 23,410 | 17,608 | 66,566 | 65,022 | |||||||||||
Gross margin | 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 | ) | |||
Other data: | |||||||||||||||
Adjusted EBITDA (1) | $ | 19,645 | $ | 8,122 | $ | 51,395 | $ | 49,633 |
Three months ended December 31 | |||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||
(in thousands) | Personnel | Leasehold | Total | Personnel | Leasehold | Total | |||||||||||||||||
Cost of revenue | $ | — | $ | — | $ | — | $ | 1 | $ | 132 | $ | 133 | |||||||||||
Research and development | 20 | — | 20 | 115 | — | 115 | |||||||||||||||||
Selling and marketing | 2 | — | 2 | 59 | — | 59 | |||||||||||||||||
General and administrative | — | 595 | 595 | 2 | — | 2 | |||||||||||||||||
Total | $ | 22 | $ | 595 | $ | 617 | $ | 177 | $ | 132 | $ | 309 |
Nine months ended December 31 | |||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||
(in thousands) | Personnel | Leasehold | Total | Personnel | Leasehold | Total | |||||||||||||||||
Cost of revenue | $ | 3 | $ | 7 | $ | 10 | $ | 25 | $ | 505 | $ | 530 | |||||||||||
Research and development | 39 | — | 39 | 115 | — | 115 | |||||||||||||||||
Selling and marketing | 137 | 22 | 159 | 75 | — | 75 | |||||||||||||||||
General and administrative | — | 595 | 595 | 192 | — | 192 | |||||||||||||||||
Total | $ | 179 | $ | 624 | $ | 803 | $ | 407 | $ | 505 | $ | 912 |
Payments excluding non-cash impairment | |||||||||||
(in thousands) | Personnel | Leasehold | Total | ||||||||
Cost reduction plan liabilities as of March 31, 2015 | $ | 1,249 | $ | 265 | $ | 1,514 | |||||
Charges | 179 | 624 | 803 | ||||||||
(Payments) | (735 | ) | (775 | ) | (1,510 | ) | |||||
Cost reduction plan liabilities as of December 31, 2015 | $ | 693 | $ | 114 | $ | 807 |
Three months ended December 31 | ||||||||||||||||||||
(in thousands) | 2015 | 2014 | Amount | Percentage | ||||||||||||||||
Revenue: | Amount | % of Total | Amount | % of Total | change | change | ||||||||||||||
License revenue | ||||||||||||||||||||
Domestic | $ | 11,963 | 24 | % | $ | 5,944 | 18 | % | $ | 6,019 | 101 | % | ||||||||
China | 4,436 | 9 | % | 4,142 | 13 | % | 294 | 7 | % | |||||||||||
Rest of World | 13,344 | 26 | % | 10,872 | 33 | % | 2,472 | 23 | % | |||||||||||
International | $ | 17,780 | 35 | % | $ | 15,014 | 46 | % | $ | 2,766 | 18 | % | ||||||||
Total license revenue | $ | 29,743 | 59 | % | $ | 20,958 | 64 | % | $ | 8,785 | 42 | % | ||||||||
Product and other revenue | ||||||||||||||||||||
Domestic | $ | 14,507 | 29 | % | $ | 6,397 | 20 | % | $ | 8,110 | 127 | % | ||||||||
China | 214 | — | % | 271 | 1 | % | (57 | ) | (21 | )% | ||||||||||
Rest of World | 5,909 | 12 | % | 4,945 | 15 | % | 964 | 19 | % | |||||||||||
International | $ | 6,123 | 12 | % | $ | 5,216 | 16 | % | $ | 907 | 17 | % | ||||||||
Total product and other revenue | $ | 20,630 | 41 | % | $ | 11,613 | 36 | % | $ | 9,017 | 78 | % | ||||||||
Total revenue | $ | 50,373 | 100 | % | $ | 32,571 | 100 | % | $ | 17,802 | 55 | % |
Three months ended December 31 | ||||||||||||||||||||
(in thousands) | 2015 | 2014 | Amount | Percentage | ||||||||||||||||
Total Revenue | Amount | % of Total | Amount | % of Total | change | change | ||||||||||||||
Domestic | $ | 26,470 | 53 | % | $ | 12,341 | 38 | % | $ | 14,129 | 114 | % | ||||||||
China | 4,650 | 10 | % | 4,413 | 14 | % | 237 | 5 | % | |||||||||||
Rest of World | 19,253 | 38 | % | 15,817 | 49 | % | 3,436 | 22 | % | |||||||||||
International | $ | 23,903 | 47 | % | $ | 20,230 | 62 | % | $ | 3,673 | 18 | % | ||||||||
Total revenue | $ | 50,373 | 100 | % | $ | 32,571 | 100 | % | $ | 17,802 | 55 | % |
Three months ended December 31 | ||||||||||||||||||||
2015 | 2014 | Amount change | Percentage change | |||||||||||||||||
(in thousands) | Amount | % of Revenue | Amount | % of Revenue | ||||||||||||||||
Revenue: | ||||||||||||||||||||
License revenue | $ | 29,743 | 59 | % | $ | 20,958 | 64 | % | $ | 8,785 | 42 | % | ||||||||
Product and other | 20,630 | 41 | % | 11,613 | 36 | % | 9,017 | 78 | % | |||||||||||
Total revenue | $ | 50,373 | 100 | % | $ | 32,571 | 100 | % | $ | 17,802 | 55 | % | ||||||||
Cost of revenue: | ||||||||||||||||||||
License | $ | 10,656 | 36 | % | $ | 11,487 | 55 | % | $ | (831 | ) | (7 | )% | |||||||
Product and other | 12,754 | 62 | % | 6,121 | 53 | % | 6,633 | 108 | % | |||||||||||
Total cost of revenue | $ | 23,410 | 46 | % | $ | 17,608 | 54 | % | $ | 5,802 | 33 | % | ||||||||
Gross profit: | ||||||||||||||||||||
License | $ | 19,087 | 64 | % | $ | 9,471 | 45 | % | $ | 9,616 | 102 | % | ||||||||
Product and other | 7,876 | 38 | % | 5,492 | 47 | % | 2,384 | 43 | % | |||||||||||
Total gross profit | $ | 26,963 | 54 | % | $ | 14,963 | 46 | % | $ | 12,000 | 80 | % |
Three months ended December 31 | ||||||||||||||
(in thousands) | 2015 | 2014 | Amount change | Percentage change | ||||||||||
Research and development | $ | 4,107 | $ | 4,582 | $ | (475 | ) | (10 | )% | |||||
Selling and marketing | 4,503 | 4,382 | 121 | 3 | % | |||||||||
General and administrative | 17,059 | 12,654 | 4,405 | 35 | % | |||||||||
Total operating expenses | $ | 25,669 | $ | 21,618 | $ | 4,051 | 19 | % |
Nine months ended December 31 | ||||||||||||||||||||
(in thousands) | 2015 | 2014 | ||||||||||||||||||
Revenue: | Amount | % of Total | Amount | % of Total | Amount change | Percentage change | ||||||||||||||
License revenue | ||||||||||||||||||||
Domestic | $ | 36,362 | 26 | % | $ | 29,789 | 22 | % | $ | 6,573 | 22 | % | ||||||||
China | 15,617 | 11 | % | 12,947 | 10 | % | 2,670 | 21 | % | |||||||||||
Rest of World | 40,052 | 28 | % | 46,225 | 34 | % | (6,173 | ) | (13 | )% | ||||||||||
International | $ | 55,669 | 39 | % | $ | 59,172 | 44 | % | $ | (3,503 | ) | (6 | )% | |||||||
Total license revenue | $ | 92,031 | 65 | % | $ | 88,961 | 66 | % | $ | 3,070 | 3 | % | ||||||||
Product and other revenue | ||||||||||||||||||||
Domestic | $ | 35,903 | 25 | % | $ | 29,624 | 22 | % | $ | 6,279 | 21 | % | ||||||||
China | 733 | 1 | % | 736 | 1 | % | (3 | ) | — | % | ||||||||||
Rest of World | 13,727 | 10 | % | 16,237 | 12 | % | (2,510 | ) | (15 | )% | ||||||||||
International | $ | 14,460 | 10 | % | $ | 16,973 | 13 | % | $ | (2,513 | ) | (15 | )% | |||||||
Total product and other revenue | $ | 50,363 | 35 | % | $ | 46,597 | 34 | % | $ | 3,766 | 8 | % | ||||||||
Total revenue | $ | 142,394 | 100 | % | $ | 135,558 | 100 | % | $ | 6,836 | 5 | % |
Nine months ended December 31 | ||||||||||||||||||||
(in thousands) | 2015 | 2014 | Amount | Percentage | ||||||||||||||||
Total Revenue | Amount | % of Total | Amount | % of Total | change | change | ||||||||||||||
Domestic | $ | 72,265 | 51 | % | $ | 59,413 | 44 | % | $ | 12,852 | 22 | % | ||||||||
China | 16,350 | 11 | % | 13,683 | 10 | % | 2,667 | 19 | % | |||||||||||
Rest of World | 53,779 | 38 | % | 62,462 | 46 | % | (8,683 | ) | (14 | )% | ||||||||||
International | $ | 70,129 | 49 | % | $ | 76,145 | 56 | % | $ | (6,016 | ) | (8 | )% | |||||||
Total revenue | $ | 142,394 | 100 | % | $ | 135,558 | 100 | % | $ | 6,836 | 5 | % |
Nine months ended December 31 | ||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||
(in thousands) | Amount | % of Revenue | Amount | % of Revenue | Amount change | Amount change | ||||||||||||||
Revenue: | ||||||||||||||||||||
License revenue | $ | 92,031 | 65 | % | $ | 88,961 | 66 | % | $ | 3,070 | 3 | % | ||||||||
Product and other | 50,363 | 35 | % | 46,597 | 34 | % | 3,766 | 8 | % | |||||||||||
Total revenue | $ | 142,394 | 100 | % | $ | 135,558 | 100 | % | $ | 6,836 | 5 | % | ||||||||
Cost of revenue: | ||||||||||||||||||||
License | $ | 30,917 | 34 | % | $ | 33,612 | 38 | % | $ | (2,695 | ) | (8 | )% | |||||||
Product and other | 35,649 | 71 | % | 31,410 | 67 | % | 4,239 | 13 | % | |||||||||||
Total cost of revenue | $ | 66,566 | 47 | % | $ | 65,022 | 48 | % | $ | 1,544 | 2 | % | ||||||||
Gross profit: | ||||||||||||||||||||
License | $ | 61,114 | 66 | % | $ | 55,349 | 62 | % | $ | 5,765 | 10 | % | ||||||||
Product and other | 14,714 | 29 | % | 15,187 | 33 | % | (473 | ) | (3 | )% | ||||||||||
Total gross profit | $ | 75,828 | 53 | % | $ | 70,536 | 52 | % | $ | 5,292 | 8 | % |
Nine months ended December 31 | ||||||||||||||
(in thousands) | 2015 | 2014 | Amount change | Percentage change | ||||||||||
Research and development | $ | 10,578 | $ | 14,692 | $ | (4,114 | ) | (28 | )% | |||||
Selling and marketing | 14,605 | 15,493 | (888 | ) | (6 | )% | ||||||||
General and administrative | 45,414 | 35,804 | 9,610 | 27 | % | |||||||||
Total operating expenses | $ | 70,597 | $ | 65,989 | $ | 4,608 | 7 | % |
Three months ended December 31 | Nine months ended December 31 | Fiscal year ended March 31 | |||||||||||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
Cost of revenue - License | $ | — | $ | 26 | $ | — | $ | 112 | $ | 371 | $ | 71 | |||||||||||
Cost of revenue - Product and Other | — | 22 | — | 46 | 109 | 4 | |||||||||||||||||
Research and development | — | 329 | — | 704 | 1,583 | 527 | |||||||||||||||||
Selling and marketing | 92 | 289 | 276 | 619 | 1,793 | 744 | |||||||||||||||||
General and administrative | 156 | 526 | (184 | ) | 1,071 | 2,218 | 1,154 | ||||||||||||||||
Total performance bonus expense | $ | 248 | $ | 1,192 | $ | 92 | $ | 2,552 | $ | 6,074 | $ | 2,500 |
Three months ended December 31 | Nine months ended December 31 | Fiscal year ended March 31 | |||||||||||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
Cost of revenue | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
Research and development | — | (133 | ) | — | — | 192 | — | ||||||||||||||||
Selling and marketing | 156 | (64 | ) | 516 | — | 142 | — | ||||||||||||||||
General and administrative | 464 | (800 | ) | 1,538 | — | 1,152 | — | ||||||||||||||||
Total PSU expenses | $ | 620 | $ | (997 | ) | $ | 2,054 | $ | — | $ | 1,486 | $ | — | ||||||||||
Total license revenue | $ | 29,743 | $ | 20,958 | $ | 92,031 | $ | 88,961 | $ | 109,317 | $ | 132,512 | |||||||||||
PSU expense as a percentage of license revenue | 2.1 | % | (4.8 | )% | 2.2 | % | — | % | 1.4 | % | — | % |
Nine months ended December 31 | |||||||
(in thousands) | 2015 | 2014 | |||||
Operating activities | $ | 27,856 | $ | 40,093 | |||
Investing activities | (10,973 | ) | (16,579 | ) | |||
Financing activities | $ | 5,552 | $ | (3,357 | ) |
• | the Revolving Facility in a maximum amount not to exceed $50 million , which matures on June 26, 2017. In addition, we may request up to an additional $25 million of commitments under the Revolving Facility (such that the maximum amount of all commitments under the Revolving Facility may not exceed $75 million), subject to the satisfaction of certain financial and other conditions and subject to obtaining such commitments; and |
• | the Term Loan Facility in a maximum amount not to exceed $50 million, which matures on June 26, 2018. During the first quarter of fiscal year 2015, we borrowed $37.3 million under the Term Loan Facility and during the first quarter of fiscal year 2016, we borrowed the remaining $12.7 million under the Term Loan Facility. |
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, net (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) | 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, restricted stock units and performance stock units, and employee stock purchase plan to 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 comprising the non-U.S. GAAP category "restructuring charges, severance costs and reserves" as defined in our 2014 Credit Agreement (also see the "Cost Reduction Plans" caption above). |
(5) | Expenses under our 2014 Credit Agreement for the non-U.S. GAAP category "non-recurring costs and expenses". In the three and nine months ended December 31, 2015, these expenses represent advisory and professional service fees related to our strategic alternatives process and other costs, 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 the entirety of this "Non-U.S. GAAP discussion". |
• | Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; |
• | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; |
• | non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; |
• | Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and |
• | other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Nine months ended December 31 | |||||||
(in thousands) | 2015 | 2014 | |||||
Operating activities | $ | 27,856 | $ | 40,093 | |||
Investing activities | (10,973 | ) | (16,579 | ) | |||
Financing activities | $ | 5,552 | $ | (3,357 | ) |
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 |
• | licensing revenue terms applied to the timing and number of motion picture exhibitor consumer admissions; |
• | domestic eyewear product revenue terms applied to when the usage occurs and the amount of usage; |
• | deferred costs of domestic eyewear product shipments; |
• | effects of allowances that are capitalized on the balance sheet and amortized to the applicable line item on the statement of operations as expense or contra revenue and earned customer incentives when customers do not timely report the activity that result in earned allowances and incentives; |
• | customer contract terms and their effects on revenue and balance sheet items; |
• | fair market values of multiple deliverable components relating to sales of product, services and intellectual property; |
• | impairment testing of goodwill, intangible assets and tangible assets, including determination of relevant reporting units and long-lived asset groups; |
• | useful lives of intangible assets and tangible assets; |
• | timing and amount recognized for performance-based compensation, including bonus, executive salary and executive restricted stock units, based on projections of the Company's performance achievement; |
• | the impact of potential future tax consequences of events that have been recognized in the Company’s financial statements; |
• | valuation of accruals and allowances; |
• | contingency assessments; and |
• | assumptions used in the determination of the fair value of equity-based awards for stock-based compensation. |
Three months ended December 31 | Nine months ended December 31 | ||||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Share-based compensation | |||||||||||||||
Cost of revenue | $ | 266 | $ | 317 | $ | 771 | $ | 932 | |||||||
Research and development | 511 | 797 | 1,598 | 2,473 | |||||||||||
Selling and marketing | 829 | 599 | 2,978 | 2,228 | |||||||||||
General and administrative | 1,480 | 1,569 | 5,080 | 5,882 | |||||||||||
Total | $ | 3,086 | $ | 3,282 | $ | 10,427 | $ | 11,515 |
• | hire more finance and accounting personnel with technical accounting expertise to increase bandwidth for review by accounting management; |
• | commence a comprehensive risk assessment process to assess risks and identify, design, implement and re-evaluate our control activities to address the risks identified, including implementation of monitoring controls related to the design and operating effectiveness of control activities; |
• | review customer contracts to identify, document and monitor customer-specific terms in order to ensure that the financial statements reflect, on a timely basis, the accounting consequences of such provisions, and implement processes to capture information from our sales and finance departments in order to make reasonable estimates of accruals; |
• | establish procedures to reconcile, validate and review intercompany balances on a cumulative basis, and in a timely manner; |
• | evaluate our training programs and develop additional training programs to ensure proper training of our finance and accounting personnel world-wide; |
• | strengthen our policies and procedures and determine guidelines for documentation of controls throughout our domestic and international locations for consistency of design and operations; and |
• | upgrade our manual systems to automated and enhance existing automated systems. |
• | if the Merger is not completed, and no other party is willing and able to acquire us at a price of $11.00 per share or higher, on terms acceptable to us, the share price of our common stock is likely to decline; |
• | we have incurred, and will continue to incur, significant expenses for professional services related to the Merger, for which we will have received little or no benefit if the Merger is not completed. Many of these fees and costs will be payable even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger; |
• | failure to complete the Merger may result in negative publicity and/or give a negative impression of the Company among our customers or in the investment community or business community generally; and |
• | if the Merger Agreement is terminated under certain circumstances, we may be required to pay Purchaser and Merger Sub a termination fee of $24 million and reimburse the expenses of Purchaser and Merger Sub up to an amount of $6 million. |
• | third parties may determine to delay or defer decisions with regard to our products or services or terminate and/or attempt to renegotiate their relationships with us as a result of the Merger, whether pursuant to the terms of their existing agreements with us or otherwise; |
• | the diversion of significant management and employee time and resources towards the completion of the Merger and the unavoidable disruption to our relationships with employees, customers and other business partners may detract from our ability to grow revenues and minimize cost; |
• | impairment of our ability to attract and retain key personnel because of the uncertainty of The Merger; and |
• | we may be unable to respond effectively to competitive pressures, industry developments and future opportunities. |
• | the timing of when a 3D motion picture is released which tends to be based on specific consumer entertainment dynamics, which results in seasonal patterns, with the largest number of motion pictures being released in summer and early winter; |
• | the attendance at 3D versions of motion picture releases; |
• | the rate of installations of new RealD Cinema Systems, which we expect to decrease with the passage of time; |
• | the timing of capital expenditures and expenses, including depreciation expense of our RealD Cinema Systems deployed at a motion picture exhibitor’s premises (we expect capital expenditures to decrease, and depreciation expense to increase, as our RealD Cinema Systems business matures), digital projector depreciation expenses, RealD eyewear costs (including shipping, handling and recycling costs), field service and support costs, and occupancy costs, which may increase significantly, even in quarters when we do not experience a similar growth in revenue; |
• | the timing and accuracy of license fee reports which often include positive or negative corrective or retroactive license fees that cover extended periods of time; |
• | rates of growth in installation of our RealD Cinema Systems overseas, especially in China, Russia and other emerging economies; |
• | varying types of performance compensation; |
• | management of our expenses as we continue to focus on our core strategy, conduct a strategic process and implement our Cost Reduction Plans; and |
• | competitive and pricing pressures that vary from market-to-market and place-to-place. |
• | competitive and pricing pressures that vary from market-to-market and place-to-place; |
• | fluctuating foreign exchange rates and systems; |
• | laws and policies affecting trade, investment and taxes, including laws and policies relating to customs, duties, the repatriation of funds and withholding taxes and changes in these laws and our compliance with the foregoing; |
• | changes in local regulatory requirements, including restrictions on content; |
• | differing cultural tastes and attitudes; |
• | differing degrees of protection for intellectual property; |
• | the need to adapt our business model to local requirements; |
• | difficulties in staffing and managing foreign and geographically dispersed operations; |
• | imposition of differing labor laws and standards; |
• | the instability of foreign economies and governments; and |
• | political instability, natural disaster, war or acts of terrorism. |
• | our quarterly or annual earnings or those of our competitors; |
• | the public's reaction to press releases or other public announcements by us or third parties, including our filings with the SEC; |
• | changes in earnings estimates or recommendations by research analysts who track our common stock or the stock of our competitors; |
• | investor perceptions or the investment opportunity associated with our common stock relative to other investment; |
• | new laws or regulations or new interpretations of laws or regulations applicable to our business; |
• | changes in accounting standards, policies, guidance, interpretations or principles; |
• | changes in general conditions in the domestic and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events; |
• | litigation involving our Company or investigations or audits by regulators into the operations of our Company or our competitors; |
• | strategic action by our competitors; and |
• | sales of common stock by our directors, executive officers and significant stockholders. |
• | delaying, deferring or preventing a change in corporate control; |
• | impeding a merger, consolidation, takeover or other business combination involving us; or |
• | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. |
• | authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt; |
• | provide for a classified board of directors (three classes) where only one-third of our board of directors is up for re-election at the annual stockholders meeting each year; |
• | provide that stockholders may only remove directors for cause; |
• | provide that stockholders may only remove directors prior to the expiration of their term upon a supermajority vote of at least 80% of our outstanding common stock; |
• | provide that any vacancy on our board of directors, including a vacancy resulting from an increase in the size of the board, may only be filled by the affirmative vote of a majority of our directors then in office, even if less than a quorum; |
• | provide that a special meeting of stockholders may only be called by our board of directors or by our chief executive officer; |
• | provide that action by written consent of the stockholders may be taken only if the board of directors first approves such action; provided that, notwithstanding the foregoing, we will hold an annual meeting of stockholders in accordance with NYSE rules, for so long as our shares are listed on NYSE, and as otherwise required by the bylaws; |
• | provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and |
• | establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. |
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File No. | Exhibit | Filing Date | Filed Herewith | ||||||
2.1 | Agreement and Plan of Merger, dated as of November 8, 2015, by and among Rhombus Cinema Holdings, LLC, Rhombus Merger Sub., Inc. and the registrant. | 8-K | 001-34818 | 2.1 | November 9, 2015 | |||||||
3.1 | Amended and Restated Certificate of Incorporation as filed with the Secretary of State of the State of Delaware on July 15, 2010. | 10-Q | 001-34818 | 3.1 | July 29, 2011 | |||||||
3.2 | Amended and Restated Bylaws as amended and restated on November 8, 2015 | 8-K | 001-34818 | 3.1 | November 9, 2015 | |||||||
4.1 | Specimen of common stock certificate. | S-1/A | 333-165988 | 4.1 | May 26, 2010 | |||||||
31.1 | Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
31.2 | Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
RealD Inc. | ||
By: | /s/ Andrew A. Skarupa | |
Andrew A. Skarupa | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
(1) | I have reviewed this Quarterly Report on Form 10-Q of RealD Inc.; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael V. Lewis | ||
Michael V. Lewis | ||
Chief Executive Officer and | ||
Chairman of the Board of Directors (Principal Executive Officer) |
(1) | I have reviewed this Quarterly Report on Form 10-Q of RealD Inc.; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Andrew A. Skarupa | ||
Andrew A. Skarupa | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Michael V. Lewis | |
Michael V. Lewis | |
Chief Executive Officer and | |
Chairman of the Board of Directors | |
(Principal Executive Officer) | |
February 1, 2016 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Andrew A. Skarupa | |
Andrew A. Skarupa | |
Chief Financial Officer | |
(Principal Financial Officer) | |
February 1, 2016 |
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Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Jan. 25, 2016 |
|
Document and Entity Information | ||
Entity Registrant Name | RealD Inc. | |
Entity Central Index Key | 0001327471 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2015 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus (Q1,Q2,Q3,FY) | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 51,261,148 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2015 |
Mar. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, share issued | 51,207,000 | 50,434,000 |
Common stock, shares outstanding | 51,207,000 | 50,434,000 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 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 | 0 | 0 | 0 | 0 |
Net loss attributable to RealD Inc. common stockholders | $ (4,282) | $ (11,290) | $ (4,874) | $ (6,112) |
Loss per common share: | ||||
Basic (in dollars per share) | $ (0.08) | $ (0.23) | $ (0.10) | $ (0.12) |
Diluted (in dollars per share) | $ (0.08) | $ (0.23) | $ (0.10) | $ (0.12) |
Shares used in computing loss per common share: | ||||
Basic (in shares) | 51,474 | 49,771 | 51,183 | 49,935 |
Diluted (shares) | 51,474 | 49,771 | 51,183 | 49,935 |
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Net Income (Loss) Available to Common Stockholders, Basic | $ (4,282) | $ (11,290) | $ (4,874) | $ (6,112) |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation gains (loss) | 56 | 1,339 | (167) | 1,810 |
Other comprehensive income (loss), net of tax | 56 | 1,339 | (167) | 1,810 |
Comprehensive loss | $ (4,226) | $ (9,951) | $ (5,041) | $ (4,302) |
Business and basis of presentation |
9 Months Ended |
---|---|
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and basis of presentation | Business and basis of presentation RealD Inc. is a leading global licensor of 3D and other visual technologies. Except where specifically noted or the context otherwise requires, the use of terms such as the "Company" or "RealD" in this Quarterly Report on Form 10-Q for the quarter ended December 31, 2015 refers to RealD Inc. and its subsidiaries. The accompanying unaudited condensed consolidated financial statements as of December 31, 2015 and for the three months and nine months ended December 31, 2015 have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, regarding interim financial reporting and include all adjustments (consisting of only normal recurring adjustments, unless otherwise indicated), necessary for a fair presentation of the Company’s condensed consolidated financial statements. Accordingly, certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet as of March 31, 2015 was derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP. Interim results are not necessarily indicative of results for any subsequent quarter, the full fiscal year or any future periods. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended March 31, 2015. The condensed consolidated financial statements include the accounts of RealD, its wholly owned subsidiaries and its majority owned subsidiaries. RealD does not have any interests in variable interest entities. For consolidated subsidiaries that are not wholly owned but are majority owned, the subsidiaries’ assets, liabilities, and operating results are included in their entirety in the accompanying condensed consolidated financial statements. The noncontrolling interests in those assets, liabilities, and operations are reflected as non-controlling interest in the condensed consolidated balance sheets under equity and condensed consolidated statements of operations. All significant intercompany balances and transactions have been eliminated in consolidation. |
Summary of significant accounting policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of significant accounting policies | Summary of significant accounting policies Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and applicable disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. The most significant estimates made by management in the preparation of the financial statements relate to the following:
Earnings (loss) per share of common stock Basic earnings (loss) per share of common stock is computed by dividing the net income (loss) attributable to RealD's common stockholders for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is computed by dividing income attributable to the Company’s common stockholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares that may be purchased under the Company’s employee stock purchase plan and unvested restricted stock units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share of common stock by application of the treasury stock method. The calculation of the basic and diluted loss per share of common stock for the three and nine months ended December 31, 2015 and December 31, 2014 was as follows:
The weighted-average number of anti-dilutive shares excluded from the calculation of diluted earnings (loss) per share of common stock for the three and nine months ended December 31, 2015 and December 31, 2014 was as follows:
Accounts receivable, net Accounts receivable, net, consists of trade receivables, value-added tax, or VAT, receivables, other receivables and allowance for doubtful accounts and customer credits. The Company provides credit to its customers, who are primarily in the movie production and exhibition businesses. The Company provides for the estimated accounts receivable that will not be collected. These estimates are based on an analysis of historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customers’ payment terms and their economic condition. Collection of accounts receivable may be affected by changes in economic or other industry conditions and may, accordingly, impact the Company’s overall credit risk. Estimated accounts receivable that will not be collected is expensed as bad debt expense as part of the Company's general and administrative costs. Credits to the Company's customers are netted against their corresponding revenues. The allowance for doubtful accounts and customer credits totaled $5.3 million and $5.9 million as of December 31, 2015 and March 31, 2015, respectively. Inventories and deferred costs-eyewear Inventories and deferred costs-eyewear mostly include RealD eyewear and are substantially all finished goods. Inventories and deferred costs-eyewear are valued at the lower of cost (first-in, first-out method) or market value. At each balance sheet date, the Company evaluates ending inventories and deferred costs-eyewear for lower cost and market value. The Company also evaluates inventories for excess quantities and obsolescence. These evaluations include analyses of expected future average selling prices, projections of future demand and technology changes. In order to state inventories at the lower of cost or market, RealD maintains reserves against such inventories. If the Company’s analyses indicate that market is lower than cost, a write-down of inventories is recorded in cost of revenue in the period the loss is identified. As of December 31, 2015, the inventory reserve as a result of the Company's realizable value analyses was insignificant. As of March 31, 2015, the inventory reserve as a result of the Company’s net realizable value analyses was $0.1 million. Domestically, the Company provides RealD eyewear free of charge to motion picture exhibitors and then receives a fee from the motion picture studios for the usage of RealD eyewear by the motion picture exhibitors’ consumers. Eyewear shipped from inventory is deferred on the shipment date and then amortized to cost of product revenue according to assumptions related to eyewear usage by consumers. Internationally, the motion picture exhibitors prepay the Company for RealD eyewear ordered. Inventory shipped is recognized to cost of product revenue according to transfer of title. Globally, the Company may provide limited amount of RealD eyewear to motion picture studios for marketing purposes. Inventory shipped for marketing purposes is recognized to sales and marketing expense. Impairment of long-lived assets The Company reviews long-lived assets, such as property and equipment, cinema systems, digital projectors and intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors or circumstances that could indicate the occurrence of such events include current period operating or cash flow losses combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing operating or cash flow losses, or incurring costs in excess of amounts originally expected to acquire or construct an asset. If the long-term asset group carrying value is not recoverable by its estimated future cash flows (its fair value), an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. For the three months ended December 31, 2015 and December 31, 2014, impairment charges for all impaired cinema systems equipped with RealD 3D technology, or RealD Cinema Systems, charged to cost of revenue totaled $0.3 million and $1.3 million, respectively. For the nine months ended December 31, 2015 and December 31, 2014, impairment charges for all impaired RealD Cinema Systems charged to cost of revenue totaled $1.1 million and $2.7 million, respectively. During the fiscal quarter ended December 31, 2015, the Company terminated a portion of its operation space in Boulder, Colorado, which resulted in impairment charges for all associated leasehold improvements. Charges to cost of revenue totaled $1.1 million for both the three months and nine months ended December 31, 2015. There were no such charges for both the three months and nine months ended December 31, 2014. Revenue recognition The Company derives substantially all of its revenue from the license of RealD Cinema Systems and the product sale or use of RealD eyewear. RealD evaluates revenue recognition for transactions using the criteria set forth by the Financial Accounting Standard Board, or FASB, Accounting Standards Codification, or ASC, Topic 840, Leases, and ASC Topic 605, Revenue Recognition. The revenue recognition guidance states that revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. The Company records revenue net of estimated allowances. The Company assesses revenue arrangements to determine whether multiple deliverables of its products, services and technology exist. For deliverables in multiple-element arrangements, the guidance below is applied for separability and allocation. A multiple-deliverable arrangement is separated into more than one unit of accounting if the following criteria are met: •The delivered item(s) has value to the client on a stand-alone basis; and •If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the company. If these criteria are not met, the arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each deliverable and there is a relative selling price for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. The following revenue policies are then applied to each unit of accounting, as applicable. License revenue from RealD Cinema Systems License revenue, net of lease incentives and other allowances, from RealD Cinema Systems, is accounted for as an operating lease. License revenue from RealD Cinema Systems is primarily derived under per-admission, percentage of box office, periodic fixed fee, or per-motion picture basis with motion picture exhibitors. Amounts received up front, less estimated lease incentives, are deferred and recognized over the lease term using the straight-line method. Additional lease payments that are contingent upon future events outside the Company’s control, including those related to admission and usage, are recognized as revenues when the contingency is resolved and the Company has no more obligations to its customers specific to the contingent payment received. Certain of the Company’s license revenue from leasing RealD Cinema Systems is earned upon admission by the motion picture exhibitor’s consumers. The Company’s licensees, however, do not report and pay for such license revenue until after the admission has occurred, which may be received subsequent to the Company’s fiscal period end. The Company estimates and records domestic licensing revenue related to motion picture exhibitor consumer admissions in the quarter in which the admission occurs, but only when reasonable estimates of such amounts can be made. The Company records its international licensing revenue based on actual amounts reported by motion picture exhibitors. The Company determines that there is persuasive evidence of an arrangement upon the execution of a license agreement or upon the receipt of a licensee’s admissions report. Revenue is deemed fixed or determinable upon receipt of a licensee’s admissions report or evidence of a RealD box office showing by the licensee. The Company determines collectability based on an evaluation of the licensee’s recent payment history and evaluation of the respective customer’s credit-standing. In December 2015, the Company received corrected reporting from one of its customers indicating an over-reporting to the Company of admissions between calendar years 2009 and 2015, which suggested an over recognition of license revenue of $1.3 million in total across the related periods. The Company reduced its current fiscal period license revenue by $1.3 million while it continues to finalize this matter with its customer. If the customer had not over-reported admissions to the Company during that timeframe, the Company does not believe that the historical financial statement results (adjusted on a pro-forma basis) would be materially different from those reported in its previously filed interim or annual Financial Reports. Product and other revenue The Company recognizes product revenue, net of allowances, when title and risk of loss have passed and when there is persuasive evidence of an arrangement, the payment is fixed or determinable, and collectability of payment is reasonably assured. In the United States and Canada, certain of the Company’s product revenue from the usage of RealD eyewear is earned upon admission and usage by the motion picture exhibitor’s consumers. The Company’s customers, however, do not report admission or usage information until after the admission and usage has occurred, and such information may be received subsequent to the Company’s fiscal period end. Accordingly, the Company estimates and records such product revenue in the quarter in which the admission and usage occurs, but only when reasonable estimates of such amounts can be made. Internationally, the motion picture exhibitors prepays for the RealD eyewear, which is deferred upon receipt of cash and earned upon shipping and transfer of title of the products. There are no estimates made in relation to international sales. The Company recognizes other revenue, including service revenue, when the consideration is earned and realized or realizable. Ongoing service revenue is recognized on a straight-line basis over the longer of the contractual term or the expected period during which the specified services will be rendered. Comprehensive income (loss) Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). The only component of other comprehensive income or loss is unrealized foreign currency translation gains (losses). There were no reclassifications out of accumulated other comprehensive income during the three and nine months ended December 31, 2015 and December 31, 2014. Cost of revenue Cost of license revenue Major components of cost of license revenue include depreciation for RealD Cinema systems, impairment for RealD Cinema systems, salaries and benefits and shipping and handling costs in relation to transportation of RealD Cinema systems. Cost of product and other revenue Major components of cost of product and other revenue include cost for RealD eyewear, shipping and handling costs in relation to transportation of RealD eyewear, recycling costs for RealD eyewear and salaries and benefits. Shipping and handling costs Amounts billed to customers for shipping and handling costs are included in both cost of license revenue and cost of product and other revenue. RealD’s shipping and handling costs consists primarily of packaging and transportation charges and are recorded in cost of revenue. Shipping and handling costs recognized in cost of revenue were $1.9 million and $1.0 million for the three months ended December 31, 2015 and December 31, 2014, respectively. Shipping and handling costs recognized in cost of revenue were $6.9 million and $5.2 million for the nine months ended December 31, 2015 and December 31, 2014, respectively. Research and development Research and development, or R&D, costs are expensed as incurred. Major components of R&D expense include salaries and benefits, depreciation for R&D assets, materials and supplies inclusive of prototypes, non-recurring engineering, payments to third parties for R&D, facilities and equipment that can only be used for a particular project and overhead allocations of various administrative and facilities costs related to R&D. Selling and marketing Selling and marketing, or S&M, costs are expensed as incurred. Major components of S&M expense include salaries and benefits, various marketing and promotional events related expenses and overhead allocations of various administrative and facilities costs related to S&M. General and administrative costs General and administrative costs principally consist of personnel costs related to our executive, legal, finance and human resources staff, professional fees including legal, financial advisory and accounting costs, occupancy costs, public company costs and bad debt expenses. Additionally, general and administrative costs include sales, use, goods and services tax, VAT and similar taxes, collectively, referred to as the Transaction Taxes, as well as property taxes. For the Company's U.S. and some of its international cinema license and product revenue, the Company absorbs the majority of the Transaction Taxes. The Transaction Taxes recognized in general and administrative costs were $1.3 million and $0.9 million for the three months ended December 31, 2015 and December 31, 2014, respectively. The Transaction Taxes recognized in general and administrative costs were $4.3 million and $3.1 million for the nine months ended December 31, 2015 and December 31, 2014, respectively. Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)". The new Topic 606 does not apply to lease contracts within the scope of Topic 840 "Leases". •The primary objective of ASU 2014-09 is to provide guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. This ASU will supersede the revenue recognition requirements in Topic 605 "Revenue Recognition" and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Revenue recognition is anticipated to entail more judgment and more estimating than under the current guidance. •ASU 2014-09 will be implemented retrospectively with the Company choosing to either restate prior periods or recognize the cumulative effect. The Company is evaluating the impact of the new guidance on the Company’s financial statements and has not yet selected a transition approach to implement this standard. •ASU 2014-09 was originally effective for the Company starting April 1, 2017 with early adoption not permitted. In August 2015, FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date". ASU 2015-14 defers the effective date by one year but allows early adoption at the original effective date. The Company has decided to adopt 2014-09 on the new effective date of April 1, 2018 (the first quarter of fiscal year 2019). In February 2015, FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis". The objective of 2015-02 is to modify the consolidation requirements of Topic 810 to ensure that reporting entities do not consolidate other legal entities in situations where deconsolidation actually more accurately represents operational and economic results. Among other changes, the amendments to ASC 810 include lessening the relevance on fees paid to a decision-maker or service provider and the related party tiebreaker test. The amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years beginning after December 15, 2015. This ASU may be adopted using a full retrospective approach or a modified retrospective approach by recording a cumulative effect adjustment to equity as of the beginning of the fiscal year of adoption. ASU 2015-02 will be effective for the Company beginning in fiscal 2017. The guidance is not expected to have a material impact on the consolidated financial statements. In April 2015, FASB issued ASU 2015-03, "Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs", which changes the presentation of debt issuance costs in financial statements. Under the ASU 2015-03, such costs are presented in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and early adoption is allowed for all entities for financial statements that have not been previously issued. The guidance is to be applied retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). ASU 2015-03 will be effective for the Company beginning in fiscal 2017. The Company elected not to early adopt. The guidance is not expected to have a material impact on the consolidated financial statements. In July 2015, FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory", which amended U.S. GAAP guidance issued to simplify the measurement of inventory for all entities. The amendments apply to all inventory that is measured using first-in, first-out or average cost. The guidance requires an entity to measure inventory at the lower of cost and net realizable value. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted as of the beginning of an interim or annual reporting period. ASU 2015-11 will be effective for the Company beginning in fiscal 2018. The Company elected not to early adopt ASU 2015-11. The guidance is not expected to have a material impact on the consolidated financial statements. In August 2015, FASB issued ASU 2015-15, "Interest - Imputation of Interest", which amended U.S. GAAP guidance issued for the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. The amendments clarified the SEC staff's approval to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This pronouncement was effective starting on August 5, 2015. The Company has adopted the guidance and there is no material impact on its consolidated financial statements. In September 2015, FASB issued ASU 2015-16, "Business Combinations (Topic 805) Simplifying the Accounting for Measurement-Period Adjustments", which eliminates the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which the amount of the adjustment is determined. In addition, the portion of the amount recorded in current- period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date should be presented separately on the face of the income statement or disclosed in the notes. The guidance is effective April 1, 2016 with early adoption permitted. The Company has early adopted the guidance and there is no material impact on the consolidated financial statements. In November 2015, FASB issued ASU 2015-17, "Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes", which eliminates the current requirement for an entity to separate deferred income tax liabilities and assets into current and non-current amounts in a classified balance sheet. Instead, the ASU requires deferred tax liabilities, deferred tax assets and valuation allowances be classified as non-current in a classified balance sheet. ASU 2015-17 will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. Additionally, this guidance may be applied either prospectively or retrospectively to all periods presented. The Company elected not to early adopt ASU 2015-17 and is evaluating the effect of the adoption of this ASU to its consolidated financial statements. In January 2016, FASB issued ASU 2016-01, "Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)", which requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). This guidance also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Additionally, ASU 2016-01 eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company elected not to early adopt ASU 2015-11. The guidance is not expected to have a material impact on the consolidated financial statements. |
Cinema Systems and Property & Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cinema Systems and Property & Equipment | Cinema Systems and Property & Equipment Tangible fixed assets consist of the following:
Depreciation expense amounted to $8.6 million and $9.6 million for the three months ended December 31, 2015 and December 31, 2014, respectively. Depreciation expense amounted to $26.7 million and $29.0 million for the nine months ended December 31, 2015 and December 31, 2014, respectively. |
Goodwill and intangible assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and other intangibles, net | Goodwill and other intangibles, net Goodwill and other intangibles, net, consist of the following at:
Amortization expense amounted to $0.3 million for both the three months ended December 31, 2015 and December 31, 2014. Amortization expense amounted to $1.0 million for both the nine months ended December 31, 2015 and December 31, 2014. At December 31, 2015, the remaining amortization expense is estimated to be as follows (in thousands):
Intangibles are deemed to have finite lives and consist of acquired developed technologies (which are primarily patents) and are amortized over their estimated useful lives of 5 to 19 years (with a weighted average remaining amortization period of 3.9 years) using the straight-line method. |
Fair value measurement |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurement | Fair value measurement The Company's derivative instruments are recorded at fair value in other current assets and other current liabilities in the condensed consolidated balance sheets. The Company's policy is to offset fair values on the balance sheet if a foreign currency master netting arrangement exists. Gains or losses related to the foreign currency forward contracts are reported as a component of other income or loss on the Company's condensed consolidated statements of operations. For all periods presented, none of the Company's derivative instruments were designated as hedging instruments. The Company does not use foreign currency option or foreign exchange forward contracts for speculative or trading purposes. To estimate the fair value of the derivative instruments, the Company uses valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows:
The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement. The Company purchases foreign currency forward contracts, generally with maturities of twelve months or less, to reduce the volatility of cash flows primarily related to forcasted payments and expenses denominated in certain foreign currencies. As of December 31, 2015, RealD had outstanding forward contracts based on the Euro with notional amounts totaling $2.4 million. The fair value measurement of the derivative instruments was as follows:
As of March 31, 2015, the carrying amount of the Company's foreign currency forward contracts was $0.4 million. For the three and nine months ended December 31, 2015, the net realized and unrealized loss related to the foreign currency forward contracts was $8 thousand and $0.4 million, respectively and classified as other loss. For the three and nine months ended December 31, 2014, the net realized and unrealized gain related to the foreign currency forward contracts was $0.2 million and $0.3 million and classified as other income. The Company monitors its positions with, and the credit quality of, the financial institutions that are counterparties to its financial instruments and does not currently anticipate nonperformance by the counterparties. |
Cost Reduction Plans |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost Reduction Plans | Cost Reduction Plans Over the past several quarters, the Company announced plans to reduce the overall costs of its global operations, collectively referred to as the Cost Reduction Plans, The Cost Reduction Plans were primarily a response to the anticipated impact on the Company’s financial results and operations caused by changes in the 3D box office performance of certain motion pictures due to perceived changes in consumer preference and the fact that the Company’s 3D cinema business is maturing in many markets like the United States in which the Company expected equipment installations to continue to slow. As part of the Cost Reduction Plans, the Company reduced its staff, rescoped and made changes to certain R&D projects, reduced certain non-personnel related general and administrative expenses and streamlined certain manufacturing operations. The Company further focused the expansion of its global cinema platform on emerging growth markets and higher performing motion picture exhibitors. The Company accounts for the Cost Reduction Plans in accordance with the Accounting Standards Codification (ASC), including ASC 420, "Exit or Disposal Cost Obligations", ASC 712, "Compensation-Nonretirement Postemployment Benefits", ASC 840, "Leases" and ASC 360, Property, Plant and Equipment (Impairment or Disposal of Long-Lived Assets)". As a result of the Cost Reduction Plans, including workforce reduction and the commencement of the relocation of manufacturing, the Company incurred termination and other charges totaling approximately $6.1 million through March 31, 2015. Charges of $0.8 million have been incurred in the nine months ended December 31, 2015. Both the charges incurred during the three and nine months ended December 31, 2015 included a lease termination charge of $1.2 million and partially offset by decreases in overall rent expenses of $0.6 million both relating to us terminating a portion of the operation facility in Boulder, Colorado. Therefore, the total charges resulting from the Cost Reduction Plans were $6.9 million through December 31, 2015. The following table summarizes the charges resulting from the implementation of the Cost Reduction Plans during the three and nine months ended December 31, 2015 and December 31, 2014:
The following table summarizes the activity resulting from the implementation of the Cost Reduction Plans within accrued expenses and other liabilities:
There is no guarantee that any net cost reduction will actually be achieved as a result of the Cost Reduction Plans. Additionally, the Company leases facility space for its headquarters in Beverly Hills, California and its operation and R&D facility in Boulder, Colorado that includes approximately $4.8 million and $4.7 million, respectively, in leasehold improvements and other items classified as fixed assets (see Note 3 "Cinema Systems and Property & Equipment"). If the Company were to vacate any of this facility space, these fixed assets could become subject to an impairment assessment and contract termination costs or sublease loss could be incurred. During the fiscal quarter ended December 31, 2015, the Company terminated a portion of its operation space in Boulder, Colorado, which resulted in impairment charges for all associated leasehold improvements. Charges to cost of revenue totaled $1.1 million for both the three and nine months ended December 31, 2015. |
Borrowings |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | Borrowings 2014 Credit Agreement On June 26, 2014, RealD entered into the Amended and Restated Credit Agreement, or the 2014 Credit Agreement, by and among the Company, as borrower, City National Bank, or City National, as administrative agent and letter of credit issuer, the other agents from time to time party thereto and the lenders from time to time party thereto, or the Lenders. The 2014 Credit Agreement amended and restated in its entirety that certain Credit Agreement, dated as of April 19, 2012, by and among the Company, City National and the agents and lenders from time to time party thereto, which had been most recently amended on October 16, 2013, or the 2012 Credit Agreement. Pursuant to the 2014 Credit Agreement, the Lenders thereunder will make available to RealD:
Debt issuance costs related to the completion of the 2014 Credit Agreement totaled $0.9 million and were added to the $0.3 million deferred charge remaining on the 2012 Credit Agreement. All these issuance costs are being amortized over the contractual life of the Revolving Facility and recorded as interest expense. The obligations under the 2014 Credit Agreement are fully and unconditionally guaranteed by the Company's subsidiaries, ColorLink Inc., a Delaware corporation, or ColorLink, Stereographics Corporation, a California corporation, or Stereographics, and RealD DDMG Acquisition, LLC, a Delaware limited liability company, or RealD DDMG, and together with the Company, ColorLink and Stereographics, collectively referred to as the Loan Parties. The obligations under the 2014 Credit Agreement are secured by a first priority security interest in substantially all of the Loan Parties' tangible and intangible assets. As of December 31, 2015, $50 million was available under the Revolving Facility and none was available under the Term Loan Facility after taking into account our borrowings under the Term Loan Facility during the first quarter of fiscal year 2015 and 2016 in the amount of $37.3 million and $12.7 million, respectively. As a result, as of December 31, 2015, the Company had $50 million of availability under the 2014 Credit Agreement. As of December 31, 2015, there was no balance outstanding under the Revolving Facility. The outstanding balance of $35.4 million at December 31, 2015 under the Term Loan Facility is to be repaid in 9 quarterly installments of $2.7 million through March 31, 2018 and the remaining $11.4 million principal on June 26, 2018. The current and non-current portions of the 2014 Credit Agreement due as of December 31, 2015 and March 31, 2015 were as follows:
At December 31, 2015, the Company's future minimum 2014 Credit Agreement obligations were as follows:
Under the 2014 Credit Agreement, RealD's business is subject to certain limitations, including limitations on the Company's ability to incur additional debt, make certain investments or acquisitions, enter into certain merger and consolidation transactions, or sell its assets other than in the ordinary course of business. The Company is also required to maintain compliance with certain financial covenants, including a minimum fixed charge coverage ratio and a maximum leverage ratio. As of December 31, 2015, RealD was in compliance with all financial covenants in the 2014 Credit Agreement. If the Company fails to comply with any of the covenants or if any other event of default should occur, the Lenders could elect to prevent the Company from borrowing and declare the indebtedness to be immediately due and payable. The 2014 Credit Agreement contains customary events of default applicable to the Company and/or its subsidiaries, including, among other things the occurrence of any change of control. If one or more events of default occurs and continues beyond any applicable cure period, City National may, with the consent of the Lenders holding a majority of the loans and commitments under the facilities, or will, at the request of such Lenders, terminate the commitments of the Lenders to make further loans and declare all of the obligations of the Loan Parties under the 2014 Credit Agreement to be immediately due and payable. Loans outstanding under the 2014 Credit Agreement bear interest at the Company's option at either the euro currency rate plus a margin ranging from 2.25% to 2.75% per year or the base rate (the highest of (i) the federal funds rate plus 0.50%, (ii) City National's prime rate or (iii) the euro currency rate for a one month interest period on such day plus 1.00%) plus a margin ranging from 1.25% to 1.75% per year. The applicable margin for loans varies depending on the Company's leverage ratio. Under the 2014 Credit Agreement, the Company is charged a commitment fee on the unused portions of the Revolving Facility and Term Loan Facility. The fee for the unused Revolving Facility varies between 0.250% and 0.375% per year depending on the percentage of the Revolving Facility in use. The fee for the unused Term Loan Facility was 0.375% of the unused commitment. Additionally, the Company is charged a letter of credit fee between 2.25% to 2.75%, depending on the Company's leverage ratio, per year, with respect to the amount of each performance letter of credit issued under the 2014 Credit Agreement. The Company also pays customary fronting fees and other fees and expenses in connection with the issuance of letters of credit under the 2014 Credit Agreement. There were no letters of credit outstanding at December 31, 2015 or March 31, 2015. As of December 31, 2015, there were $35.4 million in borrowings outstanding under the 2014 Credit Agreement which bore 2.75% weighted average interest. As of March 31, 2015, there were $29.8 million in borrowings outstanding under the 2014 Credit Agreement, which bore 2.44% weighted average interest. Interest expense related to the Company's borrowings was $0.4 million for both the three months ended December 31, 2015 and the three months ended December 31, 2014. Interest expense related to the Company's borrowings was $1.2 million and $1.3 million for the nine months ended December 31, 2015 and the nine months ended December 31, 2014, respectively. If the Merger is completed, the Company will use part of the proceeds contemplated by the Merger Agreement to repay the outstanding principal balance and any accrued and unpaid interest under the 2014 Credit Agreement upon the closing of the Merger, to comply with requirements of certain Purchaser debt financing commitments obtained for the transactions contemplated by the Merger Agreement. |
Commitments and contingencies |
9 Months Ended |
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Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies Indemnities and commitments During the ordinary course of business, the Company makes certain indemnities and commitments under which it may be required to make payments in relation to certain transactions. These indemnities include indemnities of certain customers and licensees of our technologies, and indemnities to the Company’s directors and officers to the maximum extent permitted under the laws of the State of Delaware. The duration of these indemnities and commitments varies, and in certain cases, is indefinite. The majority of these indemnities and commitments do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities and commitments in the accompanying condensed consolidated balance sheets. The Company does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is reasonably probable and estimable. The Company has entered into contracts with certain of its vendors. Future obligations under such contracts totaled $15.7 million at December 31, 2015 and include revolving 90-day supply commitments. Many of the contracts contain cancellation penalty provisions requiring payment of up to 20% of the unused contract. Contingencies and assessments The Company is subject to various contingencies and assessments arising in the course of its business, some of which relate to litigation, claims, professional services, customer credits and rebates, system upgrades and maintenances, property taxes, sales and use taxes and tax assessments for goods and services. The Company considers the likelihood of the loss or the incurrence of a liability, as well as the Company’s ability to reasonably estimate the amount of loss in determining loss contingencies and assessments. An estimated loss contingency or assessment is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information available to us to determine whether such accruals are necessary or the amounts accrued should be adjusted. Based on the information presently available, including discussion with counsel and other consultants, management believes that resolution of these matters will not have a material adverse effect on the Company’s business, consolidated results of operations, financial condition or cash flows. On November 8, 2015, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with Rhombus Cinema Holdings, LLC, a Delaware limited liability company, or Purchaser, and Rhombus Merger Sub, Inc., or Merger Sub. Pursuant to the Merger Agreement, and upon the terms and conditions set forth therein, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation. As a result, the Company will become a wholly owned subsidiary of Purchaser. Purchaser and Merger Sub are affiliates of Rizvi Traverse Management, LLC. This transaction is referred to herein as the Merger. On November 8, 2015, the Company incurred a $1.5 million expense for advisory services. As of December 31, 2015, we incurred a total $5.8 million expense for legal, advisory and other professional services in connection with the Merger. Upon the close of the Merger (see Note 1 "Business and Basis of Presentation"), which is expected in the fourth quarter of the Company's fiscal year ending on March 31, 2016, or shortly thereafter, the Company will incur a transaction fee to its financial adviser equivalent to 1.25% of the total consideration received or to be received for the sale, issuance or exchange of the Company's securities. If the transaction is terminated under certain circumstances, the Company may be required to pay a termination fee of $24 million to Purchaser and Merger Sub and reimburse the expenses of Purchaser and Merger Sub up to an amount of $6 million. If Purchaser terminates the transaction under certain circumstances, Purchaser may be required to pay a termination fee to the Company and the Company would be required to pay 20% of such termination fee to its financial adviser. |
Share-based compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | Share-based compensation The Company accounts for share-based payment awards granted to employees and directors by recording compensation expense based on estimated fair values. The Company estimates the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statements of operations. Share-based awards are attributed to expense using the straight-line method over the vesting period. The Company determines the value of each option award that contains a market condition using a Monte Carlo Simulation valuation model, while all other option awards are valued using the Black-Scholes valuation model as permitted under ASC 718, Compensation — Stock Compensation. The assumptions used in calculating the fair value of share-based payment awards represent the Company's best estimates. The Company's estimates of the fair values of stock options granted and the resulting amounts of share-based compensation recognized may be impacted by certain variables including stock price volatility, employee stock option exercise behaviors, additional stock option modifications, estimates of forfeitures, and the related income tax impact. Share-based compensation expense for all share-based arrangements for the three and nine months ended December 31, 2015 and December 31, 2014 was as follows:
Stock options granted generally vest over a four-year period, with 25% of the shares vesting after one year and monthly vesting thereafter. The options generally expire ten years from the date of grant. For the nine months ended December 31, 2015, the Company granted 0.1 million stock options at a weighted average grant date fair value of $6.56 per share. For the three months ended December 31, 2015 and December 31, 2014, share-based compensation expense related to stock options and the Company's employee stock purchase plan was $0.6 million and $1.9 million, respectively. For the nine months ended December 31, 2015 and December 31, 2014, share-based compensation expense related to stock options and the Company's employee stock purchase plan was $3.1 million and $5.9 million, respectively. Certain of the Company's management-level employees receive performance stock options, which gives the recipient the right to receive common stock that is contingent upon achievement of specified pre-established performance goals over the performance period, which is generally three years subject to the recipient's continued service with the Company. The performance goals for the performance stock options are based on the measurement of the Company's total stockholder return, on a percentile basis, compared to a comparable group of companies. Depending on the outcome of the performance goals, the recipient may ultimately earn performance stock options equal to or less than the number of performance stock options granted. For the three months ended December 31, 2015 and December 31, 2014, share based compensation expense related to performance stock options was $0.2 million and $0.2 million, respectively. For the nine months ended December 31, 2015 and December 31, 2014, share based compensation expense related to performance stock options was $0.5 million and $0.5 million, respectively. Certain of the Company's management-level employees also receive performance stock units, which gives the recipient the right to receive common stock that is contingent upon achievement of specific pre-established performance goals over the performance period, which is generally two years subject to the recipient's continued service with the Company. The performance goals are based on achieving certain levels of total licensing revenue over the performance period. Depending on the outcome of the performance goals, the recipient may ultimately earn performance stock units between 0% and 200% of the number of performance stock units granted. For the nine months ended December 31, 2015, the Company granted 0.3 million performance stock units at a weighted average granted date fair value of $12.63 per performance stock unit. For the three months ended December 31, 2015 and December 31, 2014, share-based compensation expense related to performance stock units was $0.6 million and $17 thousand, respectively. For the nine months ended December 31, 2015 and December 31, 2014, share-based compensation expense related to performance stock units was $2.1 million and $1.0 million, respectively. Certain of the Company's employees, including certain management level employees, receive time-based restricted stock units. These restricted stock units vest over one to three years based upon a recipient's continued service with the Company. For the nine months ended December 31, 2015, the Company granted 0.5 million restricted stock units at a weighted average grant date fair value of $12.63 per restricted stock unit. For the three months ended December 31, 2015 and December 31, 2014, share-based compensation expense related to restricted stock units was $1.7 million and $1.5 million, respectively. For the nine months ended December 31, 2015 and December 31, 2014, share-based compensation expense related to restricted stock units was $4.7 million and $4.1 million, respectively. |
Income taxes |
9 Months Ended |
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Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes The Company's income tax for the three months ended December 31, 2015 and December 31, 2014 was $4.5 million and $1.2 million, respectively. The Company's income tax expense for the nine months ended December 31, 2015 and December 31, 2014 was $6.7 million and $5.1 million, respectively. The increases in income tax expense are primarily due to the mixture of income generated by the Company in foreign jurisdictions with differing withholding and income tax rates. Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period unless the Company is unable to estimate its annual effective tax rate with reasonable accuracy. The Company has used a discrete effective tax rate method to calculate taxes for the fiscal three and nine month periods ended December 31, 2015. The Company determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate, the method of applying an estimate of the annual effective tax rate for the full year to the year to date “ordinary” income would not provide a reliable estimate for the fiscal three and nine month periods ended December 31, 2015. The Company has net operating losses that may potentially be offset against future domestic earnings. The Company files federal income tax returns and also files income tax returns in various state and foreign jurisdictions. Due to the net operating loss carryforwards, the Company's United States federal and state returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception. During the quarter ended September 30, 2015, the Company changed its indefinite reinvestment position with respect to earnings generated in its Chinese subsidiary. The Company intends to repatriate substantially all of its earnings from this subsidiary in the future. During fiscal 2016, the Company intends to repatriate approximately $16.4 million of earnings from China to the United States. The Company has recorded the US income tax and foreign withholding taxes related to the excess of the financial reporting basis over the tax basis of its investment in its China subsidiary. The Company continues to assert that all earnings and profits for its remaining foreign subsidiaries are indefinitely reinvested. Accordingly, the Company has not recorded U.S. income or foreign withholding taxes with respect to the excess of the financial reporting basis over the tax basis in its investment in these foreign subsidiaries. As of December 31, 2015, the Company has determined, based on the weight of the available evidence, both positive and negative, to provide for a valuation allowance against substantially all of the net deferred tax assets. The current deferred tax assets not reserved for by the valuation allowance are those in foreign jurisdictions or amounts that may be carried back in future years. If there is a change in circumstances that causes a change in judgment about the realizability of the deferred tax assets, the Company will adjust all or a portion of the applicable valuation allowance in the period when such change occurs. |
Equity |
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Equity | Equity A summary of the changes in total equity for the nine months ended December 31, 2015 was as follows:
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Related-party transactions |
9 Months Ended |
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Dec. 31, 2015 | |
Related Party Transactions [Abstract] | |
Related-party transactions | Related-party transactions On December 23, 2015, the Compensation Committee of the board of directors of the Company approved the acceleration of a portion of the annual cash bonus of Vivian W. Yang, Executive Vice President and General Counsel of the Company. The amount of the accelerated portion of the bonus is equal to $0.2 million, which represents 50% of Ms. Yang’s annual target bonus for fiscal year 2016. The bonus was paid in December 2015. |
Segment and geographic information (Notes) |
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Segment and geographic information | Segment and geographic information For financial reporting purposes, the Company historically had one reportable segment, which consisted of three operating segments with similar economic characteristics: cinema, 3D consumer electronics and 3D professional, collectively referred to as Cinema. On August 17, 2015, the Company entered into a contract with a computer technology company to develop and commercialize the Company's intelligent backlight technology, or IBT. The Company dedicated a group of employees and resources to support and fulfill our obligations under this agreement. Therefore, the Company created its fourth operating segment, referred to as Consumer. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. In the operation of the business, the Company's management team, including the Company’s Chief Executive Officer (who is also the Company's chief operating decision maker) reviews certain financial information, including segmented internal profit and loss statements. The reportable segments are described as follows: Cinema Cinema consists of three operating segments: cinema, 3D consumer electronics and 3D professional. The Company's product portfolio is primarily used in applications that enable a premium 3D viewing experience across these operating segments. The Company currently generates substantially all of its revenue from the license of its RealD Cinema Systems and the sale of its eyewear, which together enable a digital cinema projector to show 3D motion pictures. Consumer Consumer is its own operating segment. This segment is established to support the Company's agreement with a computer technology company to develop and commercialize the Company's IBT technology. The contractual obligations and operating objectives for the contract are different from the Company's existing theatrical 3D viewing business. The Company received $7.5 million for upfront nonrefundable and nonrecoupable license fees which are currently classified under Deferred Revenue, net of current portion, for the fiscal period ended December 31, 2015. Revenue, cost of sales and operating expenses are generally directly attributed to the reportable segments. Operating expenses are attributed to each reportable segment as follows:
Segment information As the Company started to have two reportable segments in the second quarter of fiscal 2016, costs related to IBT were not tracked separately prior to executing the Consumer contract in the second quarter of fiscal year 2016. Therefore, it is impracticable to report historical IBT costs and restate prior segment reporting. Segment revenue, gross profit, operating expenses and operating income (loss) for the three and nine months ended December 31, 2015 and December 31, 2014 were as follows:
Geographic information Revenue by geographic region, as determined based on the location of our customers or the anticipated destination of use was as follows:
Long-lived tangible assets, net of accumulated depreciation, by geographic region were as follows:
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Subsequent event |
9 Months Ended |
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Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent event | Subsequent event Filing Definitive Proxy Statement On January 15, 2016, the Company filed a Definitive Proxy Statement on Schedule 14A, together with a Schedule 13E-3, as amended, with the Securities Exchange Commission, to notify its stockholders that a special meeting of stockholders will be held on February 24, 2016 to consider and vote upon, among other things, the proposal to approve the Merger Agreement. Stockholder litigation The following complaint was filed on January 25, 2016 in the Superior Court of the State of California challenging the Merger: Robert Garfield v. RealD Inc. et al. (Case No. BC 608309). The action is a putative class action filed on behalf of the public stockholders of the Company and names as defendants the Company, its directors, its investment bank and employees thereof and the entities that were formed for effectuating the transaction. The complaint generally alleges that the individual defendants breached their fiduciary duties in connection with their consideration and approval of the Merger, and that the investment bank and entity defendants aided and abetted those breaches. The plaintiff seeks, among other relief, declaratory and injunctive relief enjoining the Merger. The outcome of this lawsuit is uncertain and cannot be predicted with any certainty. An adverse judgment for monetary damages could have a material adverse effect on the operations and liquidity of the Company. A preliminary injunction could delay or jeopardize the completion of the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the Merger. The Company believes that the claims asserted against it are without merit. |
Summary of significant accounting policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and applicable disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. The most significant estimates made by management in the preparation of the financial statements relate to the following:
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Earnings (loss) per share of common stock | Earnings (loss) per share of common stock Basic earnings (loss) per share of common stock is computed by dividing the net income (loss) attributable to RealD's common stockholders for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is computed by dividing income attributable to the Company’s common stockholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares that may be purchased under the Company’s employee stock purchase plan and unvested restricted stock units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share of common stock by application of the treasury stock method. |
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Accounts receivable, net | Accounts receivable, net Accounts receivable, net, consists of trade receivables, value-added tax, or VAT, receivables, other receivables and allowance for doubtful accounts and customer credits. The Company provides credit to its customers, who are primarily in the movie production and exhibition businesses. The Company provides for the estimated accounts receivable that will not be collected. These estimates are based on an analysis of historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customers’ payment terms and their economic condition. Collection of accounts receivable may be affected by changes in economic or other industry conditions and may, accordingly, impact the Company’s overall credit risk. Estimated accounts receivable that will not be collected is expensed as bad debt expense as part of the Company's general and administrative costs. Credits to the Company's customers are netted against their corresponding revenues. The allowance for doubtful accounts and customer credits totaled $5.3 million and $5.9 million as of December 31, 2015 and March 31, 2015, respectively. |
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Inventories and deferred costs-eyewear | Inventories and deferred costs-eyewear Inventories and deferred costs-eyewear mostly include RealD eyewear and are substantially all finished goods. Inventories and deferred costs-eyewear are valued at the lower of cost (first-in, first-out method) or market value. At each balance sheet date, the Company evaluates ending inventories and deferred costs-eyewear for lower cost and market value. The Company also evaluates inventories for excess quantities and obsolescence. These evaluations include analyses of expected future average selling prices, projections of future demand and technology changes. In order to state inventories at the lower of cost or market, RealD maintains reserves against such inventories. If the Company’s analyses indicate that market is lower than cost, a write-down of inventories is recorded in cost of revenue in the period the loss is identified. As of December 31, 2015, the inventory reserve as a result of the Company's realizable value analyses was insignificant. As of March 31, 2015, the inventory reserve as a result of the Company’s net realizable value analyses was $0.1 million. Domestically, the Company provides RealD eyewear free of charge to motion picture exhibitors and then receives a fee from the motion picture studios for the usage of RealD eyewear by the motion picture exhibitors’ consumers. Eyewear shipped from inventory is deferred on the shipment date and then amortized to cost of product revenue according to assumptions related to eyewear usage by consumers. Internationally, the motion picture exhibitors prepay the Company for RealD eyewear ordered. Inventory shipped is recognized to cost of product revenue according to transfer of title. Globally, the Company may provide limited amount of RealD eyewear to motion picture studios for marketing purposes. Inventory shipped for marketing purposes is recognized to sales and marketing expense. |
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Impairment of long-lived assets | Impairment of long-lived assets The Company reviews long-lived assets, such as property and equipment, cinema systems, digital projectors and intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors or circumstances that could indicate the occurrence of such events include current period operating or cash flow losses combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing operating or cash flow losses, or incurring costs in excess of amounts originally expected to acquire or construct an asset. If the long-term asset group carrying value is not recoverable by its estimated future cash flows (its fair value), an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. For the three months ended December 31, 2015 and December 31, 2014, impairment charges for all impaired cinema systems equipped with RealD 3D technology, or RealD Cinema Systems, charged to cost of revenue totaled $0.3 million and $1.3 million, respectively. For the nine months ended December 31, 2015 and December 31, 2014, impairment charges for all impaired RealD Cinema Systems charged to cost of revenue totaled $1.1 million and $2.7 million, respectively. During the fiscal quarter ended December 31, 2015, the Company terminated a portion of its operation space in Boulder, Colorado, which resulted in impairment charges for all associated leasehold improvements. Charges to cost of revenue totaled $1.1 million for both the three months and nine months ended December 31, 2015. There were no such charges for both the three months and nine months ended December 31, 2014. |
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Revenue recognition | Revenue recognition The Company derives substantially all of its revenue from the license of RealD Cinema Systems and the product sale or use of RealD eyewear. RealD evaluates revenue recognition for transactions using the criteria set forth by the Financial Accounting Standard Board, or FASB, Accounting Standards Codification, or ASC, Topic 840, Leases, and ASC Topic 605, Revenue Recognition. The revenue recognition guidance states that revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. The Company records revenue net of estimated allowances. The Company assesses revenue arrangements to determine whether multiple deliverables of its products, services and technology exist. For deliverables in multiple-element arrangements, the guidance below is applied for separability and allocation. A multiple-deliverable arrangement is separated into more than one unit of accounting if the following criteria are met: •The delivered item(s) has value to the client on a stand-alone basis; and •If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the company. If these criteria are not met, the arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each deliverable and there is a relative selling price for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. The following revenue policies are then applied to each unit of accounting, as applicable. License revenue from RealD Cinema Systems License revenue, net of lease incentives and other allowances, from RealD Cinema Systems, is accounted for as an operating lease. License revenue from RealD Cinema Systems is primarily derived under per-admission, percentage of box office, periodic fixed fee, or per-motion picture basis with motion picture exhibitors. Amounts received up front, less estimated lease incentives, are deferred and recognized over the lease term using the straight-line method. Additional lease payments that are contingent upon future events outside the Company’s control, including those related to admission and usage, are recognized as revenues when the contingency is resolved and the Company has no more obligations to its customers specific to the contingent payment received. Certain of the Company’s license revenue from leasing RealD Cinema Systems is earned upon admission by the motion picture exhibitor’s consumers. The Company’s licensees, however, do not report and pay for such license revenue until after the admission has occurred, which may be received subsequent to the Company’s fiscal period end. The Company estimates and records domestic licensing revenue related to motion picture exhibitor consumer admissions in the quarter in which the admission occurs, but only when reasonable estimates of such amounts can be made. The Company records its international licensing revenue based on actual amounts reported by motion picture exhibitors. The Company determines that there is persuasive evidence of an arrangement upon the execution of a license agreement or upon the receipt of a licensee’s admissions report. Revenue is deemed fixed or determinable upon receipt of a licensee’s admissions report or evidence of a RealD box office showing by the licensee. The Company determines collectability based on an evaluation of the licensee’s recent payment history and evaluation of the respective customer’s credit-standing. In December 2015, the Company received corrected reporting from one of its customers indicating an over-reporting to the Company of admissions between calendar years 2009 and 2015, which suggested an over recognition of license revenue of $1.3 million in total across the related periods. The Company reduced its current fiscal period license revenue by $1.3 million while it continues to finalize this matter with its customer. If the customer had not over-reported admissions to the Company during that timeframe, the Company does not believe that the historical financial statement results (adjusted on a pro-forma basis) would be materially different from those reported in its previously filed interim or annual Financial Reports. Product and other revenue The Company recognizes product revenue, net of allowances, when title and risk of loss have passed and when there is persuasive evidence of an arrangement, the payment is fixed or determinable, and collectability of payment is reasonably assured. In the United States and Canada, certain of the Company’s product revenue from the usage of RealD eyewear is earned upon admission and usage by the motion picture exhibitor’s consumers. The Company’s customers, however, do not report admission or usage information until after the admission and usage has occurred, and such information may be received subsequent to the Company’s fiscal period end. Accordingly, the Company estimates and records such product revenue in the quarter in which the admission and usage occurs, but only when reasonable estimates of such amounts can be made. Internationally, the motion picture exhibitors prepays for the RealD eyewear, which is deferred upon receipt of cash and earned upon shipping and transfer of title of the products. There are no estimates made in relation to international sales. The Company recognizes other revenue, including service revenue, when the consideration is earned and realized or realizable. Ongoing service revenue is recognized on a straight-line basis over the longer of the contractual term or the expected period during which the specified services will be rendered. |
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Comprehensive income (loss) | Comprehensive income (loss) Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). The only component of other comprehensive income or loss is unrealized foreign currency translation gains (losses). There were no reclassifications out of accumulated other comprehensive income during the three and nine months ended December 31, 2015 and December 31, 2014. |
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Cost of Sales, Policy [Policy Text Block] | Cost of revenue Cost of license revenue Major components of cost of license revenue include depreciation for RealD Cinema systems, impairment for RealD Cinema systems, salaries and benefits and shipping and handling costs in relation to transportation of RealD Cinema systems. Cost of product and other revenue Major components of cost of product and other revenue include cost for RealD eyewear, shipping and handling costs in relation to transportation of RealD eyewear, recycling costs for RealD eyewear and salaries and benefits. |
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Shipping and handling costs | Shipping and handling costs Amounts billed to customers for shipping and handling costs are included in both cost of license revenue and cost of product and other revenue. RealD’s shipping and handling costs consists primarily of packaging and transportation charges and are recorded in cost of revenue. Shipping and handling costs recognized in cost of revenue were $1.9 million and $1.0 million for the three months ended December 31, 2015 and December 31, 2014, respectively. Shipping and handling costs recognized in cost of revenue were $6.9 million and $5.2 million for the nine months ended December 31, 2015 and December 31, 2014, respectively. |
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Research and development | Research and development Research and development, or R&D, costs are expensed as incurred. Major components of R&D expense include salaries and benefits, depreciation for R&D assets, materials and supplies inclusive of prototypes, non-recurring engineering, payments to third parties for R&D, facilities and equipment that can only be used for a particular project and overhead allocations of various administrative and facilities costs related to R&D. |
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Selling and Marketing Expense | Selling and marketing Selling and marketing, or S&M, costs are expensed as incurred. Major components of S&M expense include salaries and benefits, various marketing and promotional events related expenses and overhead allocations of various administrative and facilities costs related to S&M. |
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General and administrative costs | General and administrative costs General and administrative costs principally consist of personnel costs related to our executive, legal, finance and human resources staff, professional fees including legal, financial advisory and accounting costs, occupancy costs, public company costs and bad debt expenses. Additionally, general and administrative costs include sales, use, goods and services tax, VAT and similar taxes, collectively, referred to as the Transaction Taxes, as well as property taxes. For the Company's U.S. and some of its international cinema license and product revenue, the Company absorbs the majority of the Transaction Taxes. The Transaction Taxes recognized in general and administrative costs were $1.3 million and $0.9 million for the three months ended December 31, 2015 and December 31, 2014, respectively. The Transaction Taxes recognized in general and administrative costs were $4.3 million and $3.1 million for the nine months ended December 31, 2015 and December 31, 2014, respectively. |
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Recent accounting pronouncements | Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)". The new Topic 606 does not apply to lease contracts within the scope of Topic 840 "Leases". •The primary objective of ASU 2014-09 is to provide guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. This ASU will supersede the revenue recognition requirements in Topic 605 "Revenue Recognition" and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Revenue recognition is anticipated to entail more judgment and more estimating than under the current guidance. •ASU 2014-09 will be implemented retrospectively with the Company choosing to either restate prior periods or recognize the cumulative effect. The Company is evaluating the impact of the new guidance on the Company’s financial statements and has not yet selected a transition approach to implement this standard. •ASU 2014-09 was originally effective for the Company starting April 1, 2017 with early adoption not permitted. In August 2015, FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date". ASU 2015-14 defers the effective date by one year but allows early adoption at the original effective date. The Company has decided to adopt 2014-09 on the new effective date of April 1, 2018 (the first quarter of fiscal year 2019). In February 2015, FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis". The objective of 2015-02 is to modify the consolidation requirements of Topic 810 to ensure that reporting entities do not consolidate other legal entities in situations where deconsolidation actually more accurately represents operational and economic results. Among other changes, the amendments to ASC 810 include lessening the relevance on fees paid to a decision-maker or service provider and the related party tiebreaker test. The amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years beginning after December 15, 2015. This ASU may be adopted using a full retrospective approach or a modified retrospective approach by recording a cumulative effect adjustment to equity as of the beginning of the fiscal year of adoption. ASU 2015-02 will be effective for the Company beginning in fiscal 2017. The guidance is not expected to have a material impact on the consolidated financial statements. In April 2015, FASB issued ASU 2015-03, "Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs", which changes the presentation of debt issuance costs in financial statements. Under the ASU 2015-03, such costs are presented in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and early adoption is allowed for all entities for financial statements that have not been previously issued. The guidance is to be applied retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). ASU 2015-03 will be effective for the Company beginning in fiscal 2017. The Company elected not to early adopt. The guidance is not expected to have a material impact on the consolidated financial statements. In July 2015, FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory", which amended U.S. GAAP guidance issued to simplify the measurement of inventory for all entities. The amendments apply to all inventory that is measured using first-in, first-out or average cost. The guidance requires an entity to measure inventory at the lower of cost and net realizable value. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted as of the beginning of an interim or annual reporting period. ASU 2015-11 will be effective for the Company beginning in fiscal 2018. The Company elected not to early adopt ASU 2015-11. The guidance is not expected to have a material impact on the consolidated financial statements. In August 2015, FASB issued ASU 2015-15, "Interest - Imputation of Interest", which amended U.S. GAAP guidance issued for the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. The amendments clarified the SEC staff's approval to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This pronouncement was effective starting on August 5, 2015. The Company has adopted the guidance and there is no material impact on its consolidated financial statements. In September 2015, FASB issued ASU 2015-16, "Business Combinations (Topic 805) Simplifying the Accounting for Measurement-Period Adjustments", which eliminates the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which the amount of the adjustment is determined. In addition, the portion of the amount recorded in current- period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date should be presented separately on the face of the income statement or disclosed in the notes. The guidance is effective April 1, 2016 with early adoption permitted. The Company has early adopted the guidance and there is no material impact on the consolidated financial statements. In November 2015, FASB issued ASU 2015-17, "Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes", which eliminates the current requirement for an entity to separate deferred income tax liabilities and assets into current and non-current amounts in a classified balance sheet. Instead, the ASU requires deferred tax liabilities, deferred tax assets and valuation allowances be classified as non-current in a classified balance sheet. ASU 2015-17 will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. Additionally, this guidance may be applied either prospectively or retrospectively to all periods presented. The Company elected not to early adopt ASU 2015-17 and is evaluating the effect of the adoption of this ASU to its consolidated financial statements. In January 2016, FASB issued ASU 2016-01, "Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)", which requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). This guidance also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Additionally, ASU 2016-01 eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company elected not to early adopt ASU 2015-11. The guidance is not expected to have a material impact on the consolidated financial statements. |
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Derivatives | The Company's derivative instruments are recorded at fair value in other current assets and other current liabilities in the condensed consolidated balance sheets. The Company's policy is to offset fair values on the balance sheet if a foreign currency master netting arrangement exists. Gains or losses related to the foreign currency forward contracts are reported as a component of other income or loss on the Company's condensed consolidated statements of operations. For all periods presented, none of the Company's derivative instruments were designated as hedging instruments. The Company does not use foreign currency option or foreign exchange forward contracts for speculative or trading purposes. |
Summary of significant accounting policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Calculation of the Basic and Diluted Loss Per Share of Common Stock | The calculation of the basic and diluted loss per share of common stock for the three and nine months ended December 31, 2015 and December 31, 2014 was as follows:
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Schedule of Weighted-Average Number of Anti-Dilutive Shares Excluded From the Calculation of Diluted Loss Per Common Share | The weighted-average number of anti-dilutive shares excluded from the calculation of diluted earnings (loss) per share of common stock for the three and nine months ended December 31, 2015 and December 31, 2014 was as follows:
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Cinema Systems and Property & Equipment (Tables) |
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Schedule of Property and Equipment of RealD Cinema Systems and Digital Projectors | Tangible fixed assets consist of the following:
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Goodwill and intangible assets (Tables) |
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Schedule of Intangible Assets and Goodwill | Goodwill and other intangibles, net, consist of the following at:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | At December 31, 2015, the remaining amortization expense is estimated to be as follows (in thousands):
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Fair value measurement (Tables) |
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Schedule of Fair Value of the Derivative Instruments | The fair value measurement of the derivative instruments was as follows:
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Cost Reduction Plans (Tables) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Charges Resulting from Implementation of the Cost Reduction Plan | The following table summarizes the charges resulting from the implementation of the Cost Reduction Plans during the three and nine months ended December 31, 2015 and December 31, 2014:
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Summary of Currently Estimated Charges Resulting from the Cost Reduction Plan Implementation | The following table summarizes the activity resulting from the implementation of the Cost Reduction Plans within accrued expenses and other liabilities:
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Borrowings (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the Current and Non-Current Portions of the Credit Agreement | The current and non-current portions of the 2014 Credit Agreement due as of December 31, 2015 and March 31, 2015 were as follows:
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Schedule of Future Minimum Credit Agreement Obligations | At December 31, 2015, the Company's future minimum 2014 Credit Agreement obligations were as follows:
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Share-based compensation (Tables) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of share-based compensation expense for all share-based arrangements | Share-based compensation expense for all share-based arrangements for the three and nine months ended December 31, 2015 and December 31, 2014 was as follows:
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Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the changes in total equity | A summary of the changes in total equity for the nine months ended December 31, 2015 was as follows:
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Segment and geographic information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Segment information As the Company started to have two reportable segments in the second quarter of fiscal 2016, costs related to IBT were not tracked separately prior to executing the Consumer contract in the second quarter of fiscal year 2016. Therefore, it is impracticable to report historical IBT costs and restate prior segment reporting. Segment revenue, gross profit, operating expenses and operating income (loss) for the three and nine months ended December 31, 2015 and December 31, 2014 were as follows:
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Schedule of Revenues from External Customers by Geographical Areas | Geographic information Revenue by geographic region, as determined based on the location of our customers or the anticipated destination of use was as follows:
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Schedule of Long Lived Assets by Geographical Areas | Long-lived tangible assets, net of accumulated depreciation, by geographic region were as follows:
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Business and basis of presentation (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Nov. 08, 2015 |
Dec. 31, 2015 |
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Business Combination, Acquisition Related Costs | $ 5.8 | |
Purchaser and Merger Sub [Member] | ||
Business Combination, Liability for Advisory Fees | $ 1.5 | |
Business Combination, Contractual Termination, Fee | 24.0 | |
Business Combination, Contractual Termination, Maximum Reimbursement of Expenses | $ 6.0 |
Summary of significant accounting policies (Accounts Receivable) (Details) - USD ($) $ in Millions |
Dec. 31, 2015 |
Mar. 31, 2015 |
---|---|---|
Accounting Policies [Abstract] | ||
Allowance for doubtful accounts, current | $ 5.3 | $ 5.9 |
Summary of significant accounting policies (Inventories and Deferred Costs-Eyewear) (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Mar. 31, 2015 |
---|---|---|
Accounting Policies [Abstract] | ||
Inventory reserve | $ 0 | $ 100 |
Summary of significant accounting policies (Impairment of Long-Lived Assets) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Accounting Policies [Abstract] | ||||
Impairment charges | $ 0.3 | $ 1.3 | $ 1.1 | $ 2.7 |
Impaired Long-Lived Assets Held and Used [Line Items] | $ 1.1 |
Summary of significant accounting policies (Shipping and Handling Costs) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Accounting Policies [Abstract] | ||||
Shipping and handling costs | $ 1.9 | $ 1.0 | $ 6.9 | $ 5.2 |
Summary of significant accounting policies (General and administrative costs) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Accounting Policies [Abstract] | ||||
Taxes, Other | $ 1.3 | $ 0.9 | $ 4.3 | $ 3.1 |
Summary of significant accounting policies (Comprehensive income (loss)) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Mar. 31, 2015 |
|
Accounting Policies [Abstract] | |||||
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | $ 0 | $ 0 | $ 0 | $ 0 | |
Inventory Valuation Reserves | $ 0 | $ 0 | $ 100,000 |
Summary of significant accounting policies Cost of revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Accounting Policies [Abstract] | ||||
License Costs | $ 10,656 | $ 11,487 | $ 30,917 | $ 33,612 |
Product and Other Cost of Goods Sold | $ 12,754 | $ 6,121 | $ 35,649 | $ 31,410 |
Summary of significant accounting policies Revenue (Details) - Over-Reporting of License Revenue - USD ($) $ in Millions |
9 Months Ended | 96 Months Ended |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2015 |
|
Quantifying Misstatement in Current Year Financial Statements [Line Items] | ||
Estimated over recognition of license revenue | $ 1.3 | |
Licenses Revenue | ||
Quantifying Misstatement in Current Year Financial Statements [Line Items] | ||
Reduction in license revenue | $ 1.3 |
Cinema Systems and Property & Equipment (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 8.6 | $ 9.6 | $ 26.7 | $ 29.0 |
Goodwill and intangible assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2015 |
Mar. 31, 2015 |
|
Amortization of Intangible Assets | $ 300 | $ 1,000 | |
Finite-Lived Intangible Assets, Gross | 9,324 | 9,324 | $ 9,324 |
Finite-Lived Intangible Assets, Accumulated Amortization | 5,485 | 5,485 | 4,507 |
Goodwill | 10,657 | 10,657 | 10,657 |
Intangible Assets Gross Including Goodwill | $ 19,981 | $ 19,981 | $ 19,981 |
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years 11 months 10 days | ||
Minimum [Member] | |||
Finite-Lived Intangible Asset, Useful Life | 5 years | ||
Maximum [Member] | |||
Finite-Lived Intangible Asset, Useful Life | 19 years |
Goodwill and intangible assets Amortization expense (Details) - Minimum [Member] $ in Thousands |
Dec. 31, 2015
USD ($)
|
---|---|
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months | $ 325 |
Finite-Lived Intangible Assets, Amortization Expense, Year Two | 1,300 |
Finite-Lived Intangible Assets, Amortization Expense, Year Three | 1,287 |
Finite-Lived Intangible Assets, Amortization Expense, Year Four | 306 |
Finite-Lived Intangible Assets, Amortization Expense, Year Five | 129 |
Finite-Lived Intangible Assets, Amortization Expense, after Year Five | 492 |
Finite-Lived Intangible Assets, Net | $ 3,839 |
Cost Reduction Plans (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Mar. 31, 2015 |
|
2014 Cost Reduction Plan | |||||
Total | $ 248,011 | $ 248,011 | $ 243,205 | ||
Cost reduction plan total charges incurred to date | 6,900 | 6,900 | $ 6,100 | ||
Impairment of long-lived assets and related purchase commitments | 2,213 | $ 2,736 | |||
Restructuring charges | $ 617 | $ 309 | $ 803 | $ 912 |
Borrowings (Current and Non-current Portions of the Credit Agreement) (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Mar. 31, 2015 |
---|---|---|
Calculation of the current and non-current portion of the Credit Agreement | ||
Current portion of Credit Agreement | $ 10,635 | $ 7,460 |
Credit Agreement, net of current portion | 24,723 | $ 22,380 |
Total Credit Agreement | $ 35,358 |
Borrowings (2014 Credit Agreement Obligations) (Details) $ in Thousands |
Dec. 31, 2015
USD ($)
|
---|---|
Future minimum Credit Agreement obligations | |
Fiscal year 2016 | $ 2,659 |
Fiscal year 2017 | 10,635 |
Fiscal year 2018 | 10,635 |
Fiscal year 2019 | 11,429 |
Total Credit Agreement | $ 35,358 |
Commitments and contingencies (Narrative) (Details) - Purchase Commitment $ in Millions |
9 Months Ended |
---|---|
Dec. 31, 2015
USD ($)
| |
Indemnities and commitments | |
Revolving supply commitments (in days) | 90 days |
Future obligations | $ 15.7 |
Maximum | |
Indemnities and commitments | |
Payment required under the cancellation penalty provisions as a percentage of the unused contract | 20.00% |
Commitments and contingencies Other contingencies (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Nov. 08, 2015 |
Dec. 31, 2015 |
|
Other Commitments [Line Items] | ||
Business Combination, Acquisition Related Costs | $ 5.8 | |
Purchaser and Merger Sub [Member] | ||
Other Commitments [Line Items] | ||
Business Combination, Liability for Advisory Fees | $ 1.5 | |
Business Combination, Contractual Termination, Fee | 24.0 | |
Business Combination, Contractual Termination, Maximum Reimbursement of Expenses | $ 6.0 |
Share-based compensation (Share-based Compensation Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Share-based compensation | ||||
Share-based compensation expense | $ 3,086 | $ 3,282 | $ 10,427 | $ 11,515 |
Cost of revenue | ||||
Share-based compensation | ||||
Share-based compensation expense | 266 | 317 | 771 | 932 |
Research and development | ||||
Share-based compensation | ||||
Share-based compensation expense | 511 | 797 | 1,598 | 2,473 |
Selling and marketing | ||||
Share-based compensation | ||||
Share-based compensation expense | 829 | 599 | 2,978 | 2,228 |
General and administrative | ||||
Share-based compensation | ||||
Share-based compensation expense | $ 1,480 | $ 1,569 | $ 5,080 | $ 5,882 |
Income taxes Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 4,492 | $ 1,154 | $ 6,670 | $ 5,117 |
Foreign Earnings Repatriated | $ 16,400 |
Related-party transactions (Details) $ in Millions |
Dec. 23, 2015
USD ($)
|
---|---|
Executive Vice President [Member] | |
Related Party Transaction [Line Items] | |
Related Party Transaction, Expenses from Transactions with Related Party | $ 0.2 |
Segment and geographic information Tangible Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Mar. 31, 2015 |
---|---|---|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets | $ 85,992 | $ 102,842 |
Domestic Segment [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets | 67,014 | 87,134 |
CHINA | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets | 11,022 | 10,185 |
Rest Of The World [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets | $ 7,956 | $ 5,523 |
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