Reading International, Inc. (NASDAQ: RDI) announced today the
results for its quarter ended March 31, 2013.
First Quarter 2013 Discussion
Revenue from operations decreased from $62.4 million in the 2012
Quarter to $59.6 million in the same Quarter in 2013, a $2.9
million or a 4.6% decrease.
Cinema segment revenue decreased by $2.6 million or 4.6%
primarily due to a decrease in the U.S. and Australian box office
admissions of 299,000 related to the quality of film product in
2013 compared to the same period in 2012. This decrease in revenue
was offset in part by a 50,000 increase in our New Zealand box
office admissions resulting in an increase in revenue of $689,000
primarily related to the reopening of an earthquake damaged New
Zealand multiplex in early January 2012. Both the Australian and
New Zealand results were affected by changes in the value of the
Australian and New Zealand dollars compared to the U.S. dollar.
The top three grossing films for the 2013 Quarter in our
worldwide cinema circuit were “Silver Linings Playbook” “Oz Great
and Powerful” and “Hobbit: An Unexpected Journey.” These three
films accounted for approximately 18.0% of our cinema box office
revenue. The comparative top three grossing films for the 2012
Quarter were “The Artist,” “The Hunger Games,” and “Sherlock
Holmes: Game of Shadows,” which accounted for approximately 15.4%
of our cinema box office revenue.
Our real estate segment revenue decreased for the 2013 Quarter
by $232,000 compared to the same period in 2012 primarily related
to a decrease in rental income from our live theatre venues in the
U.S. Similar to our cinema revenue, both the Australian and New
Zealand real estate revenue results were also affected by changes
in the value of the Australian and New Zealand dollars compared to
the U.S. dollar in the 2013 period compared to the same period in
2012.
As a percentage of revenue, operating expense was 81.8% of
revenue in the 2013 Quarter compared to 78.6% in the 2012 Quarter,
primarily related to our revenues decreasing while rent and labor
costs remained fixed. Operating expense also increased by $129,000
as a result of the net cost of our digital projection lease in the
U.S.
Depreciation expense decreased for the 2013 Quarter by $114,000
or 2.8% compared to the same period in 2012 due to Australian and
New Zealand cinema assets coming to the end of their depreciable
lives.
For our statement of operations, the Australian quarterly
average exchange rates decreased by 1.6% and the New Zealand
quarterly average exchange rates increased by 1.9% since the 2012
Quarter both of which had an impact on the individual components of
our income statement.
Driven by the above factors, our operating income for the 2013
Quarter decreased by $2.3 million to an operating income of $2.5
million compared to an operating income of $4.8 million in the same
quarter last year.
Net interest expense decreased by $1.1 million for the 2013
Quarter compared to the 2012 Quarter. The decrease in interest
expense was primarily due to a larger decrease in the fair value of
our interest rate swap liabilities in 2013 than that noted for the
same period in 2012 and to a decrease in interest rates
specifically from our Trust Preferred Securities whose interest
rate changed from a fixed rate of 9.22% to a variable rate of
3-month LIBOR plus 4.00% effective May 1, 2012.
For the 2013 Quarter, we recorded $356,000 of other income which
consisted primarily of $347,000 in income from unconsolidated
entities. For the 2012 Quarter, we recorded $368,000 of other
income which consisted primarily of $413,000 in equity earnings
from unconsolidated entities and a gain on sale of marketable
securities; offset by, a litigation loss associated with one of our
former cinema leases.
For the 2013 Quarter, our income tax expense decreased by
$736,000 compared to the 2012 Quarter primarily associated with
changes to the estimate of the likelihood of realizing our deferred
tax assets in our Reading Australia operations.
Net (income) loss attributable to noncontrolling interests
changed from an income of $130,000 for the 2012 Quarter to a loss
of $4,000 for the 2013 Quarter primarily related to a decrease in
the net income from the associated cinemas.
As a result of the above, we reported a net loss of $668,000 for
the 2013 Quarter compared to a net loss of $239,000 in the 2012
Quarter.
Our EBITDA(1) at $6.9 million for the 2013
Quarter was $2.5 million or 26.3% lower than the EBITDA(1) for
the 2012 Quarter of $9.3 million, driven primarily by the $2.9
million decrease in operating revenues noted above. There were no
significant adjustments to EBITDA(1) in either the 2013 Quarter or
the 2012 Quarter.
Balance Sheet and Liquidity
Our total assets at March 31, 2013 were $427.4 million compared
to $428.6 million at December 31, 2012. The currency exchange rates
for Australia and New Zealand as of March 31, 2013 were $1.0409 and
$0.8360, respectively, and as of December 31, 2012, these rates
were $1.0393 and $0.8267, respectively. As a result, currency had a
positive effect on the balance sheet at March 31, 2013 when
compared to December 31, 2012.
On March 20, 2013, pursuant to the loan agreement, we extended
the term of our US Cinema 1, 2, 3 Term Loan by one year to June 28,
2014 for a renewal fee of $150,000.
As our Liberty Theater Term Loan was due to mature on April 1,
2013, the March 31, 2013 outstanding balance of this debt of $6.4
million is classified as current on our balance sheet. On March 25,
2013, we borrowed an additional $5.0 million on our Bank of America
Revolver. On April 1, 2013, we used a portion of the revolver
proceeds to partially repay the Liberty Theater Term Loan and we
received a forbearance letter from the bank extending the remaining
loan’s term date to June 1, 2013 in exchange for a forbearance
payment of $20,000. We intend to refinance the remaining balance
with similar financing.
Our cash position at March 31, 2013 was $50.8 million. Of the
$50.8 million, $27.7 million was in Australia, $16.3 million was in
the U.S., and $6.8 million was in New Zealand. As part of our main
credit facilities in Australia, New Zealand, and the U.S., we are
subject to certain debt covenants which limit the transfer or use
of cash outside of the various regional subsidiaries in which the
cash is held. As such, at March 31, 2013, we had approximately
$15.0 million of cash worldwide that was not restricted by loan
covenants.
At March 31, 2013, we had undrawn funds of $10.4 million
(AUS$10.0 million) available under our NAB line of credit in
Australia, $10.0 million (NZ$12.0 million) available under our New
Zealand Corporate Credit facility, and $3.0 million available under
our Bank of America revolving loan credit facility in the U.S.
Accordingly, we believe that we have sufficient borrowing capacity
under our various credit facilities, together with our $50.8
million cash balance, to meet our anticipated short-term working
capital requirements.
Our working capital at March 31, 2013 was a negative $16.1
million compared to a negative $21.4 million at December 31, 2012.
This decrease in negative working capital resulted primarily from
having more cash on hand as a result of current period long-term
borrowings.
Stockholders’ equity was $129.7 million at March 31, 2013
compared to $131.0 million at December 31, 2012, primarily related
distributions to noncontrolling interests.
Subsequent Events
US Liberty Theaters Term Loans
On March 25, 2013, we borrowed an additional $5.0 million on our
Bank of America Revolver. On April 1, 2013, we used $2.3 million of
the revolver proceeds to partially repay the Liberty Theater Term
Loan and we received a forbearance letter from the bank extending
the loan’s term date to June 1, 2013 in exchange for a forbearance
payment of $20,000. We intend to refinance the remaining balance
with similar financing.
Courtenay Central Shopping Center Expansion
On February 7, 2013, we entered into an agreement with General
Distributors Limited, a subsidiary of the publicly listed
Australian company Woolworths Limited (ASX: WOW), providing for the
construction of a Countdown branded supermarket in our Courtenay
Central Shopping Center in Wellington, New Zealand. The Board
approval conditions to that agreement were satisfied on April 10,
2013. The agreement contemplates the construction of an
approximately 42,000 square foot expansion to be leased to General
Distributors Limited and an approximately 10,000 square foot
reconfiguring of the existing shopping center. The lease to General
Distributors Limited is for an initial term of 20 years, and
provides for an initial rent currently projected at approximately
$1.4 million (NZ$1.7 million) per annum. The obligations of the
parties are subject to a number of conditions, including obtaining
various land use approvals and the finalization of plans and
construction cost estimates.
About Reading International, Inc.
Reading International (http://www.readingrdi.com) is in the
business of owning and operating cinemas and developing, owning and
operating real estate assets. Our business consists primarily
of:
- the development, ownership and
operation of multiplex cinemas in the United States, Australia and
New Zealand; and
- the development, ownership, and
operation of retail and commercial real estate in Australia, New
Zealand, and the United States, including entertainment-themed
retail centers (“ETRC”) in Australia and New Zealand and live
theater assets in Manhattan and Chicago in the United
States.Reading manages its worldwide cinema business under various
different brands:
- in the United States, under the
- Reading brand
(http://www.readingcinemasus.com),
- Angelika Film Center brand
(http://www.angelikafilmcenter.com),
- Consolidated Theatres brand
(http://www.consolidatedtheatres.com),
- City Cinemas brand
(http://www.citycinemas.com),
- Beekman Theatre brand
(http://www.beekmantheatre.com),
- The Paris Theatre brand
(http://www.theparistheatre.com), and
- Liberty Theatres brand
(http://libertytheatresusa.com/);
- in Australia, under the Reading brand
(http://www.readingcinemas.com.au); and
- in New Zealand, under the
- Reading
(http://www.readingcinemas.co.nz) and
- Rialto (http://www.rialto.co.nz)
brands.
Forward-Looking Statements
Our statements in this press release contain a variety of
forward-looking statements as defined by the Securities Litigation
Reform Act of 1995. Forward-looking statements reflect only our
expectations regarding future events and operating performance and
necessarily speak only as of the date the information was prepared.
No guarantees can be given that our expectation will in fact be
realized, in whole or in part. You can recognize these statements
by our use of words such as, by way of example, “may,” “will,”
“expect,” “believe,” and “anticipate” or other similar
terminology.
These forward-looking statements reflect our expectation after
having considered a variety of risks and uncertainties. However,
they are necessarily the product of internal discussion and do not
necessarily completely reflect the views of individual members of
our Board of Directors or of our management team. Individual Board
members and individual members of our management team may have
different views as to the risks and uncertainties involved, and may
have different views as to future events or our operating
performance.
Among the factors that could cause actual results to differ
materially from those expressed in or underlying our
forward-looking statements are the following:
- With respect to our cinema operations:
- The number and attractiveness to movie
goers of the films released in future periods;
- The amount of money spent by film
distributors to promote their motion pictures;
- The licensing fees and terms required
by film distributors from motion picture exhibitors in order to
exhibit their films;
- The comparative attractiveness of
motion pictures as a source of entertainment and willingness and/or
ability of consumers (i) to spend their dollars on entertainment
and (ii) to spend their entertainment dollars on movies in an
outside the home environment; and
- The extent to which we encounter
competition from other cinema exhibitors, from other sources of
outside of the home entertainment, and from inside the home
entertainment options, such as “home theaters” and competitive film
product distribution technology such as, by way of example, cable,
satellite broadcast, DVD rentals and sales, and so called “movies
on demand;”
- With respect to our real estate
development and operation activities:
- The rental rates and capitalization
rates applicable to the markets in which we operate and the quality
of properties that we own;
- The extent to which we can obtain on a
timely basis the various land use approvals and entitlements needed
to develop our properties;
- the risks and uncertainties associated
with real estate development;
- The availability and cost of labor and
materials;
- Competition for development sites and
tenants; and
- The extent to which our cinemas can
continue to serve as an anchor tenant which will, in turn, be
influenced by the same factors as will influence generally the
results of our cinema operations;
- With respect to our operations
generally as an international company involved in both the
development and operation of cinemas and the development and
operation of real estate; and previously engaged for many years in
the railroad business in the United States:
- Our ongoing access to borrowed funds
and capital and the interest that must be paid on that debt and the
returns that must be paid on such capital;
- The relative values of the currency
used in the countries in which we operate;
- Changes in government regulation,
including by way of example, the costs resulting from the
implementation of the requirements of Sarbanes-Oxley;
- Our labor relations and costs of labor
(including future government requirements with respect to pension
liabilities, disability insurance and health coverage, and
vacations and leave);
- Our exposure from time to time to legal
claims and to uninsurable risks such as those related to our
historic railroad operations, including potential environmental
claims and health related claims relating to alleged exposure to
asbestos or other substances now or in the future recognized as
being possible causes of cancer or other health-related
problems;
- Changes in future effective tax rates
and the results of currently ongoing and future potential audits by
taxing authorities having jurisdiction over our various companies;
and
- Changes in applicable accounting
policies and practices.
The above list is not necessarily exhaustive, as business is by
definition unpredictable and risky, and subject to influence by
numerous factors outside of our control such as changes in
government regulation or policy, competition, interest rates,
supply, technological innovation, changes in consumer taste and
fancy, weather, and the extent to which consumers in our markets
have the economic wherewithal to spend money on beyond-the-home
entertainment.
Given the variety and unpredictability of the factors that will
ultimately influence our businesses and our results of operation,
no guarantees can be given that any of our forward-looking
statements will ultimately prove to be correct. Actual results will
undoubtedly vary and there is no guarantee as to how our securities
will perform either when considered in isolation or when compared
to other securities or investment opportunities.
Finally, we undertake no obligation to publicly update or to
revise any of our forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be
required under applicable law. Accordingly, you should always note
the date to which our forward-looking statements speak.
Additionally, certain of the presentations included in this
press release may contain “pro forma” information or “non-US GAAP
financial measures.” In such case, a reconciliation of this
information to our US GAAP financial statements will be made
available in connection with such statements.
(1) The Company defines EBITDA as net income (loss) before net
interest expense, income tax benefit, depreciation, and
amortization. The company defines adjusted EBITDA as EBITDA
adjusted for unusual or infrequent events or items that are of a
non-cash nature. EBITDA and adjusted EBITDA are presented solely as
supplemental disclosures as we believe they are relevant and useful
measures to compare operating results among our properties and
competitors, as well as measurement tools for the evaluation of
operating personnel. EBITDA and adjusted EBITDA are not measures of
financial performance under the promulgations of generally accepted
accounting principles (“GAAP”). EBITDA and adjusted EBITDA should
not be considered in isolation from, or as substitutes for, net
loss, operating loss or cash flows from operations determined in
accordance with GAAP. Finally, EBITDA and adjusted EBITDA are not
calculated in the same manner by all companies and accordingly, may
not be appropriate measures for comparing performance among
different companies. See the “Supplemental Data” table attached for
a reconciliation of EBITDA to net income (loss).
Reading International, Inc. and
Subsidiaries
Supplemental Data
Reconciliation of EBITDA* to Net
Loss
(dollars in thousands, except per share
amounts)
Three Months Ended March 31,
2013 2012 Revenue $ 59,567 $
62,431 Operating expense Cinema/real estate 48,704 49,077
Depreciation and amortization 3,990 4,104 General and
administrative 4,339 4,420 Operating income
2,534 4,830 Interest expense, net (2,673 ) (3,759 ) Other
income 356 368 Income tax expense (889 ) (1,625 ) Income from
discontinued operations -- 77 Noncontrolling interest income
(expense) 4 (130 ) Net loss (668 ) (239 ) Basic loss
per share $ (0.03 ) $ (0.01 ) Diluted loss per share $ (0.03 ) $
(0.01 ) EBITDA* $ 6,884 $ 9,342 EBITDA*
change
($2,458)
*EBITDA presented above is net loss
adjusted for interest expense (net of interest income), income tax
expense, depreciation and amortization expense, and an adjustment
for discontinued operations (this includes interest expense and
depreciation and amortization for the discontinued operations).
Reconciliation of EBITDA* to the net loss
is presented below:
Three Months Ended March 31,
2013 2012 Net loss $ (668
) $ (239 ) Add: Interest expense, net 2,673 3,759 Add: Income tax
expense 889 1,625 Add: Depreciation and amortization 3,990 4,104
Adjustment for discontinued operations -- 93
EBITDA* $ 6,884 $ 9,342
Reading International, Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations
(U.S. dollars in thousands, except per
share amounts)
Three Months Ended March 31,
2013 2012 Operating
revenue Cinema $ 54,770 $ 57,402 Real estate 4,797
5,029 Total operating revenue 59,567
62,431
Operating expense Cinema
46,035 46,333 Real estate 2,669 2,744 Depreciation and amortization
3,990 4,104 General and administrative 4,339
4,420 Total operating expense 57,033
57,601
Operating income 2,534 4,830
Interest income 49 201 Interest expense (2,722 ) (3,960 ) Net loss
on sale of assets (7 ) -- Other income (expense) 16
(45 )
Income (loss) before income tax expense and equity
earnings of unconsolidated joint ventures and entities (130 )
1,026 Income tax expense (889 ) (1,625 )
Loss
before equity earnings of unconsolidated joint ventures and
entities (1,019 ) (599 ) Equity earnings of unconsolidated
joint ventures and entities 347 413
Loss before discontinued operations (672 ) (186 ) Income
from discontinued operations, net of tax -- 77
Net loss $ (672 ) $ (109 ) Net (income) loss
attributable to noncontrolling interests 4
(130 )
Net loss attributable to Reading International, Inc.
common shareholders $ (668 ) $ (239 )
Basic loss per
common share attributable to Reading International, Inc.
shareholders: Loss from continuing operations $ (0.03 ) $ (0.01
) Earnings from discontinued operations, net 0.00
0.00
Basic loss per share attributable to Reading
International, Inc. shareholders $ (0.03 ) $ (0.01 )
Diluted loss per common share attributable to Reading
International, Inc. shareholders: Loss from continuing
operations $ (0.03 ) $ (0.01 ) Earnings from discontinued
operations, net 0.00 0.00
Diluted
loss per share attributable to Reading International, Inc.
shareholders $ (0.03 ) $ (0.01 )
Weighted average number of
shares outstanding–basic 23,263,010 22,710,713
Weighted
average number of shares outstanding–diluted 23,263,010
22,710,713
Reading International, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(U.S. dollars in thousands)
March 31, 2013
December 31, 2012
ASSETS Current Assets: Cash and cash equivalents $
50,778 $ 38,531 Time deposits -- 8,000 Receivables 8,279 8,514
Inventory 848 918 Investment in marketable securities 55 55
Restricted cash 806 2,465 Deferred tax asset 3,751 3,659 Prepaid
and other current assets 4,014 3,576
Total current assets 68,531 65,718 Operating
property, net 201,151 202,778 Investment and development property,
net 95,303 94,922 Investment in unconsolidated joint ventures and
entities 7,800 7,715 Investment in Reading International Trust I
838 838 Goodwill 23,017 22,898 Intangible assets, net 15,093 15,661
Deferred tax asset, net 8,709 8,989 Other assets 6,925
9,069
Total assets $ 427,367
$ 428,588
LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities: Accounts
payable and accrued liabilities $ 16,808 $ 18,909 Film rent payable
6,879 6,657 Notes payable – current portion 21,943 19,714 Notes
payable to related party – current portion 9,000 9,000 Taxes
payable 13,237 15,234 Deferred current revenue 10,648 11,587 Other
current liabilities 6,106 6,032
Total current liabilities 84,621 87,133 Notes payable
– long-term portion 142,428 139,970 Subordinated debt 27,913 27,913
Noncurrent tax liabilities 9,549 8,859 Other liabilities
33,153 33,759
Total liabilities
297,664 297,634
Commitments
and contingencies (Note 13) Stockholders’ equity: Class
A non-voting common stock, par value $0.01, 100,000,000 shares
authorized, 32,169,835 issued and 21,805,665 outstanding at March
31, 2013 and 31,951,945 issued and 21,587,775 outstanding at
December 31, 2012 223 223 Class B voting common stock, par value
$0.01, 20,000,000 shares authorized and 1,495,490 issued and
outstanding at March 31, 2013 and at December 31, 2012 15 15
Nonvoting preferred stock, par value $0.01, 12,000 shares
authorized and no issued or outstanding shares at March 31, 2013
and December 31, 2012 -- -- Additional paid-in capital 136,811
136,754 Accumulated deficit (67,661 ) (66,993 ) Treasury shares
(4,512 ) (4,512 ) Accumulated other comprehensive income
62,544 61,369
Total Reading
International, Inc. stockholders’ equity 127,420 126,856
Noncontrolling interests 2,283 4,098
Total stockholders’ equity 129,703
130,954
Total liabilities and stockholders’
equity $ 427,367 $ 428,588
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