• Quarterly Revenue of $74.3 million
represents the highest third quarter on record.
Earnings Call Webcast to Discuss 2018 Third
Quarter Financial Results Scheduled to Post to Corporate Website on
Friday, November 9, 2018
Reading International, Inc. (NASDAQ: RDI) today announced record
revenue for the quarter ended September 30, 2018. Our Company
reported Basic Earnings per Share (“EPS”) of $0.06 and $0.41, for
the quarter and nine months ended September 30, 2018,
respectively. Cinema segment revenues for the three and nine months
of 2018 were particularly strong at $70.7 million and
$223.1 million, compared to $62.1 million and
$196.1 million for the three and nine months of 2017.
Ellen Cotter, Chair, President and Chief Executive Officer,
said, “The third quarter represented another growth period for
Reading as we continued to build on our strong momentum from the
second quarter. Our results were driven by the continued execution
of our strategic plan and we achieved superior operational
execution. Ongoing capital improvements and refurbishments continue
to elevate the guest experience in our cinema business. The strong
film product and successful launch of our first dine-in concept,
‘Spotlight,’ contributed to our results and increased interest in
our enhanced U.S. food and beverage offerings.”
Consolidated revenue for the third quarter of 2018, increased by
12%, or $8.1 million, compared to the third quarter of 2017,
primarily driven by: (i) increases in attendance in our U.S.,
Australian and New Zealand Cinemas, (ii) the U.S. Cinema’s increase
in average ticket price, and (iii) the opening of our new
state-of-the-art eight screen Reading Cinema on December 14,
2017 at Newmarket Village located in a Brisbane suburb in
Australia. These results were achieved notwithstanding a
7.4% decline in the Australian Dollar and an 8.5% decline in
the New Zealand Dollar for the quarter ended September 30,
2018, compared to the quarter ended September 30, 2017.
The following table summarizes the third quarter and first nine
months results of the year 2018 and 2017:
Quarter Ended
Nine Months Ended % Change % Change
September 30, Favorable/ September 30,
Favorable/ (Dollars in millions, except EPS)
2018
2017 (Unfavorable) 2018 2017
(Unfavorable) Revenue
$ 74.3 $ 66.1 12 %
$
234.4 $ 208.0 13 % - US 40.8 28.5 43 % 124.9 105.1 19 % - Australia
26.0 28.0 (7 )% 84.9 80.6 5 % - New Zealand 7.5 9.6 (22 )% 24.6
22.3 10 % Operating expense
$ (69.7 ) $ (62.4 ) 12 %
$ (215.5 ) $ (191.0 ) 13 % Segment operating income (1)
$ 9.5 $ 8.3 14 %
$ 35.9 $ 31.3 15 % Net income(2)
$ 1.3 $ 1.6 (19 )%
$ 9.4 $ 23.7 (60 )% EBITDA (1)
$ 10.4 $ 8.1 28 %
$ 35.9 $ 49.4 (27 )% Adjusted
EBITDA (1)
$ 10.9 $ 8.2 33 %
$ 39.0 $ 41.3 (6 )%
Basic EPS (2)
$ 0.06 $ 0.07 (14 )%
$ 0.41 $ 1.02 (60
)%
(1)
Aggregate segment operating income,
earnings before interest expense (net of interest income), income
tax expense, depreciation and amortization expense (“EBITDA”) and
adjusted EBITDA are non-GAAP financial measures. See the discussion
of non-GAAP financial measures that follows.
(2)
Reflect amounts attributable to
stockholders of Reading International, Inc., i.e. after deduction
of noncontrolling interests.
COMPANY HIGHLIGHTS
- Operating
Results: For the quarter ended September 30, 2018,
we achieved revenue of $74.3 million, up $8.2 million
from the prior year. Our operating results benefited from the
strong performance of our U.S. cinema operations and set a third
quarter record.
- Capex
program: During the third quarter of 2018, we invested
$8.9 million in capital improvements, continuing our
investment in the upgrading of select cinemas and real estate
properties.
- Cinema
activities: During the third quarter of 2018, we saw the
benefit in performance as a result of the completed renovations at
four U.S. theaters: our Reading Cinemas in Murrieta, CA, and
Manville, NJ, and our Consolidated Theatres at Ward Village, HI,
and Pearlridge Mall, HI. We continue to upgrade our food and
beverage (“F&B”) offerings and, as of September 30, 2018,
we have obtained liquor licenses for 25 of our existing cinemas in
the U.S., Australia and New Zealand; currently we have six
applications for liquor licenses in the U.S. Since 2017, we have
converted (or are in the process of conversion), 63 of our 245 U.S.
auditoriums to luxury recliner seating. Our cinema pipeline
includes three new cinemas in Australia that have been approved by
our Board of Directors and which we anticipate bringing on line
between 2019 and 2021. In addition to the above:
- Mililani Town
Center (Hawaii, USA) – During the quarter, we started a
complete “top to bottom” major renovation in phases at our
Consolidated Theatre in Mililani. Upon completion, all of the
14-screen auditoriums will feature luxury recliner seating.
Additionally, a TITAN LUXE screen will be added and an elevated
F&B offering will be completed in phases, with an anticipated
opening during the 2018 holiday season.
- RedYard, Auburn
(Australia) – We have recently completed the upgrade of our
Reading Cinemas at RedYard in Auburn. We converted three screens to
our Premium offer with recliners. In addition, we completed the
upgrade of one screen to a TITAN LUXE with recliners.
We achieved a record third quarter in our
online ticket sales in Australia and the United States led by
“Crazy Rich Asians” and “Ant-Man and the Wasp” exceeding previous
third quarter records by as much as 149% in the U.S. With the
continued improvements of our websites and apps in the U.S. and
improved online sales infrastructure to better serve high sales
volume, we set a third quarter record with online sales consisting
of 20% of our global box office revenue, which is a 25% increase
from our last third quarter.
- Real estate
activities:
- Purchase of Land
in Townsville, Australia – On June 13, 2018, we
acquired a 163,000 square foot (15,150 square meter) parcel of land
at our Cannon Park ETC, in connection with the restructuring of our
relationship with the adjacent land owner. Prior to the
restructuring, this parcel was commonly owned by us and the
adjoining land owner. In the restructuring, the adjoining land
owner conveyed to us its interest in the parcel for AU$1. We
granted the adjoining land owner certain access rights with respect
to that parcel.
- Purchase of
Property in Auburn, Australia – On June 29, 2018, we
purchased a property for $3.5 million (AU$4.5 million) in
Auburn (Sydney area), Australia. The property, which borders our
Redyard ETC in Auburn on three sides to the east, west and south,
consists of an approximately 16,830 square foot building located on
an estimated 20,870 square foot lot, and is subject to a lease to
the Telstra Corporation through September 2022. This will allow us
time to plan for the efficient integration of the property into our
ETC. Including this acquisition, our Redyard ETC represents
approximately 519,992 square feet (48,309 square meters) of land,
with approximately 1,620 feet (498 meters) of uninterrupted
frontage to Parramatta Road, a major Sydney arterial motorway. The
final settlement payment was made in early October 2018.
- Expansion of
Newmarket Village located in an affluent suburb of Brisbane,
Australia – In December 2017, we opened our eight-screen
Reading Cinema with TITAN LUXE, including 10,150 square feet of
additional retail space and 124 additional parking spaces. As of
September 30, 2018, approximately 93% of this new retail space
has been leased.
- Belmont (Perth,
Australia) – For the first nine-months of 2018, we continued
with the re-positioning of the Belmont Common, ETC in Belmont (a
suburb of Perth), which features new F&B offerings and a
Reading Cinema with TITAN XC. During the latter part of the second
quarter of 2018, the Asian inspired Tao Café (with approximately
3,190 square feet) opened joining our existing restaurants, Dome
Café and Tavolo.
- Manukau Land
Rezoning (Auckland, New Zealand) – We own two parcels in Manukau
comprising 64.0 acres zoned for light industrial use and 6.4
acres zoned for heavy industrial use. Now that our zoning
enhancement goal has been achieved, we are reviewing our options
with respect to the value realization opportunities and commercial
exploitation of this asset. We see this property as a future value
realization opportunity. This tract is adjacent to the Auckland
Airport in a growing industrial market which has recently been
expanding toward our property. We are currently working with
adjoining landowners to develop an infrastructure plan for the
approximately 355 acres of rezoned land of which our property is a
significant part.
- Minetta Lane
Theatre (New York, USA) – In February 2018, we entered into
a one-year license agreement with Audible, Inc. a subsidiary of
Amazon, at the Minetta Lane Theatre. We understand that Audible
intends to produce one to two character plays, from which it will
record audio productions available through Audible.
- Redevelopment of
44 Union Square Property (New York, USA) – At the beginning
of January 2016, we ceased our live theatre business at our Union
Square property in New York, terminated all tenant leases and
prepared the property for redevelopment. Accordingly, this property
is no longer treated as an operating property. We anticipate that
the 73,000 square foot redevelopment project in Union Square will
be ready for the commencement of tenant fit-out in the first
quarter of 2019. Retail and office leasing interest to date has
been strong and we are currently in discussions with a number of
quality tenants. This redevelopment will add approximately 23,000
square footage of rentable space to the current square footage of
the building for an approximate total of 73,322 square feet of
rentable space, inclusive of anticipated BOMA (Building Owners and
Managers Association) adjustments and subject to lease negotiations
and the final tenant mix.
- Cinema 1,2,3
Redevelopment (New York, USA) – In June 2017, we entered
into an exclusive dealing and pre-development agreement with our
adjoining neighbors, 260-264 LLC, to jointly develop the
properties, currently home to Cinemas 1,2,3 and Anassa Taverna.
While this agreement has expired, we both (i) remain open to the
common development of these properties given the synergies and
value creation opportunities of the joint development and (ii) have
been and will continue to evaluate alternative opportunities for
the property.
DEFENSE JUDGMENT IN DERIVATIVE
LITIGATION
Since 2015, our Company and our directors (other than Mr. James
J. Cotter, Jr.) have been the target of two purported derivative
actions, one brought by Mr. Cotter, Jr., (the “Cotter, Jr.,
Derivative Action”) and the other brought by a group of outside
stockholders (the “T2 Derivative Action”). These actions are
described in detail in our quarterly report filed on form 10-Q for
the quarter ended September 30, 2018.
The plaintiffs in the T2 Derivative Action, after detailed
discovery, dismissed their claim in mid-2016, noting in a joint
press release with our Company in July of that year that: "We
are pleased with the conclusions reached by our investigations as
Plaintiff Stockholders and now firmly believe that the Reading
Board of Directors has and will continue to protect stockholder
interests and will continue to work to maximize shareholder value
over the long-term. We appreciate the Company's willingness to
engage in open dialogue and are excited about the Company's
prospects. Our questions about the termination of James Cotter,
Jr., and various transactions between Reading and members of the
Cotter family-or entities they control-have been definitively
addressed and put to rest. We are impressed by measures the Reading
Board has made over the past year to further strengthen corporate
governance. We fully support the Reading Board and management team
and their strategy to create stockholder value.”
Mr. Cotter, Jr., determined to continue with his action. The
Nevada District Court in July, 2018, dismissed all of the remaining
claims asserted by Mr. Cotter, Jr., in the Cotter, Jr., Derivative
Action and on October 1, 2018 awarded our Company costs. While
the Nevada District Court’s final cost order has not been issued,
we estimate that such cost judgment, as articulated by the Nevada
District Court from the bench, is in excess of
$1.5 million.
SEGMENT RESULTS
The following table summarizes the third quarter and first nine
months of the year segment operating results for 2018 and 2017:
Quarter Ended
Nine Months Ended % Change % Change
September 30, Favorable/ September 30,
Favorable/ (Dollars in thousands)
2018 2017
(Unfavorable) 2018 2017 (Unfavorable)
Segment revenue
Cinema
United States $ 40,038 $ 32,199 24 % $ 122,437 $ 101,858 20 %
Australia 23,659 22,902 3 % 77,513 73,284 6 % New Zealand
6,974 6,958 — % 23,159
20,921 11 % Total
$ 70,671 $
62,059 14 % $ 223,109
$ 196,063 14
%
Real
estate
United States $ 805 $ 1,179 (32 )% $ 2,410 $ 3,223 (25 )% Australia
3,847 3,823 1 % 12,305 11,312 9 % New Zealand 1,119
1,063 5 % 3,489 3,016 16
% Total
$ 5,771 $ 6,065 (5
)% $ 18,204 $ 17,551 4
% Inter-segment elimination (2,181 ) (2,008 )
(9 )% (6,918 ) (5,575 ) (24 )%
Total segment
revenue $
74,261 $
66,116 12
% $
234,395 $
208,039 13
% Segment operating income
Cinema
United States $ 2,310 $ 693 233 % $ 10,008 $ 4,790 109 % Australia
4,678 4,896 (4 )% 16,642 16,812 (1 )% New Zealand 1,214
1,114 9 % 4,333 3,979
9 % Total
$ 8,202 $ 6,703
22 % $ 30,983 $
25,581 21 %
Real
estate
United States $ (154 ) $ 55 (380 )% $ (514 ) $ 350 (247 )%
Australia 980 1,474 (34 )% 4,071 4,487 (9 )% New Zealand 434
49 786 % 1,339 847
(58 )% Total
$ 1,260 $ 1,578
(20 )% $ 4,896 $
5,684 (14 )% Total segment operating
income (1) $ 9,462 $
8,281 14 %
$ 35,879
$ 31,265 15 %
“nm” – not meaningful for further
analysis
(1)
Aggregate segment operating income is a
non-GAAP financial measure. See the discussion of non-GAAP
financial measures that follows.
Cinema Exhibition
Third Quarter Results:
Cinema segment operating income increased by 22%, or
$1.5 million, to $8.2 million for the quarter ended
September 30, 2018 compared to September 30, 2017,
primarily driven by increased operating income in the U.S. due to
increased attendance, higher average ticket price (“ATP”) and
higher spend per patron (“SPP”).
- Revenue in the United States increased
by 24%, or $7.8 million, due to a 19% increase in attendance,
a 9% increase in ATP and a 1% increase in SPP. These changes are
primarily due to the strong film product coupled with returns
realized from improvements from our continuous capital improvements
at several of our theaters, and the introduction of “Spotlight.”
For the U.S. Cinema segment, the quarter ended September 2018 had
the highest third quarter revenue on record.
- Australia’s cinema revenue increased by
3%, or $0.8 million, primarily due to a 9% increase in attendance,
offset by an 8% decrease in SPP and the unfavorable impact of
foreign currency movements.
- While the attendance of our New Zealand
cinema operations has increased 6% versus the same period in 2017,
our New Zealand revenue remained flat over the prior year due to a
decrease in other income and by the unfavorable impact of foreign
currency movements.
The top three grossing films for the third quarter of 2018 were
“Crazy Rich Asians,” “Ant-Man and the Wasp,” and “Mission
Impossible - Fallout,” representing approximately 24% of Reading’s
worldwide admission revenues for the quarter. The top three
grossing films in the third quarter of 2017 for Reading’s worldwide
cinema circuits were “Spider-Man: Homecoming,” “It,” and “Dunkirk,”
which represented approximately 29% of Reading’s admission revenues
for the third quarter of 2017.
Nine-Month Results:
Cinema segment operating income increased 21%, or
$5.4 million, to $31.0 million for the nine months ended
September 30, 2018 compared to September 30, 2017,
primarily driven by cinema operating income growth of 109%, or
$5.2 million in the U.S. market. In addition, the re-opening
of our Courtenay Central Cinema in Wellington, New Zealand,
contributed to the overall operating income as well as increases in
ATP and SPP across all three countries. Operating income was
adversely impacted by the declining value of the Australian and New
Zealand Dollar compared to the U.S. Dollar.
- Revenue in the United States increased
by 20%, or $20.6 million, due to a 12% increase in attendance,
10% increase in ATP, and a 3% increase in SPP.
- Australia’s cinema revenue increased by
6%, or $4.2 million, primarily due to a 6% increase in ATP, a
3% increase in SPP, and a 2% increase in attendance, offset by the
unfavorable impact of foreign currency movements.
- New Zealand cinema revenue increased by
11%, or $2.2 million, as a result of the 14% increase in
attendance, a 4% increase in SPP, and a 1% increase in ATP,
predominantly due to the re-opening of Courtenay Central, offset by
the business interruption proceeds recognized in 2017 and further
offset by the unfavorable impact of foreign currency
movements.
The top three grossing films for the nine months of 2018 were
“Avengers: Infinity War,” “Black Panther,” and “Incredibles 2,”
representing approximately 18% of Reading’s worldwide admission
revenues, compared to the top three grossing films a year ago:
“Beauty and the Beast,” “Wonder Woman,” and “Guardians of the
Galaxy Vol. 2,” which represented approximately 14% of our
admission revenues for the same period in 2017.
Real Estate
Third Quarter and Nine-Month Results:
Real estate segment operating income decreased by 20%, or
$0.3 million, to $1.3 million for the quarter ended
September 30, 2018 compared to September 30, 2017. For
the nine months ended September 30, 2018, the real estate
segment operating income decreased by 14%, or $0.8 million, to
$4.9 million, compared to the same period in 2017. This was
primarily attributable to our lower Live Theater revenue compared
to prior year when we recorded the settlement payment related to
the STOMP arbitration ($1.1 million), as well as the absence
of the business interruption insurance proceeds, which were
recorded in the second quarter of 2017 in New Zealand. These
decreases were offset by increases in operating revenue from (i)
our Newmarket ETC, which is mainly related to our new tenants, and
(ii) Courtenay Central ETC due to the full year of operations in
2018 compared to only two quarters of operation in 2017.
CONSOLIDATED AND NON-SEGMENT RESULTS
The third quarter and first nine-month consolidated and
non-segment results for 2018 and 2017 are summarized as
follows:
Quarter Ended
Nine Months Ended % Change % Change
September 30, Favorable/ September 30,
Favorable/ (Dollars in thousands)
2018 2017
(Unfavorable) 2018 2017 (Unfavorable)
Segment operating income $ 9,462
$ 8,281 14 % $
35,879 $ 31,264 15
% Non-segment income and expenses:
General and administrative expense
(4,831 ) (4,506 ) (7 )% (16,717 ) (13,931 ) (20 )% Interest
expense, net (1,748 ) (1,663 ) (5 )% (5,132 ) (5,310 ) 3 % Gain on
sale of assets — — n/a — 9,417 100 % Gain on insurance recoveries —
— n/a — 9,217 100 % Other (142 ) 117 nm
81 1,270 94 %
Total non-segment income and
expenses
$ (6,721 ) $ (6,052 )
(11 )%
$ (21,768 ) $
663 3,383
% Income before income taxes
2,741 2,229 23
% 14,111 31,927
56
% Income tax expense (1,482 ) (750 ) (98 )%
(4,618 ) (8,316 ) 44 %
Net income $
1,259 $ 1,479 (15 )
% $
9,493 $ 23,611 (60 )%
Less: net income attributable to
noncontrolling interests
(38 ) (98 ) nm 88 (66 ) nm
Net income attributable to RDI common
stockholders
$ 1,297 $ 1,577
(18 )% $ 9,405 $
23,677 (60 )%
“nm” – not meaningful for further
analysis
Third Quarter and First Nine-Month Net
Results
Net income attributable to RDI common stockholders decreased by
18% or $0.3 million to $1.3 million. Basic EPS for the
quarter ended September 30, 2018 decreased by $(0.01) to $0.06
from the prior-year quarter, mainly attributable to an increase in
income tax expense and general and administrative expenses.
Net income attributable to RDI common stockholders decreased by
60%, or $14.3 million, to $9.4 million for the nine
months ended September 30, 2018 compared to the same period
prior year. Basic EPS for the first nine-months of 2018 decreased
by $0.61 to $0.41 from the prior-year period, mainly attributable
to the one-time gain on Wellington insurance recoveries and Burwood
gain on sale of assets recognized for the nine-months ended
September 30, 2017.
Non-Segment General &
Administrative Expenses
Non-segment general and administrative expense for the quarter
and nine months ended September 30, 2018 compared to the same
period of the prior year increased by 7% or $0.3 million and
20% or $2.8 million, respectively. The quarterly increase
mainly relates to higher payroll and bonus related expenses
(attributable to reversals in 2017 for prior year incentive
compensation accruals not deemed necessary), offset by a reduction
in total legal fees for the quarter ending September 30, 2018
compared to the same period last year. For the nine months ending
September 30, 2018 compared to the same period in 2017, the
increase is related to payroll and legal expenses incurred on the
Derivative Litigation, the Cotter Employment Arbitration and other
Cotter litigation matters and higher compensation costs, due to
headcount and the timing of annual salary increases as well as
timing of recording increases in variable compensation costs.
Litigation
Costs of the Cotter, Jr., Derivative Action, the Cotter, Jr.,
Employment Arbitration and other related Cotter, Jr., litigation
matters for the nine months ended September 30, 2018, ended
were $3.1 million, compared to $1.1 million for the same
period in 2017, as our Company and our directors prepared for trial
in 2018 and prepared motions for summary judgment which were
subsequently granted. For the quarter ended September 2018, there
was a similar increase in legal fees ($505,000 compared to
$82,000) to the same period last year, due principally to costs
associated with taking final depositions and preparing for the
hearing (held in October, 2018) of the Cotter, Jr., Employment
Arbitration, and our motions to recover costs and attorney’s fees
in the derivative action. Going forward, the costs with regard to
the Cotter, Jr., Derivative Action will, at least in the near
term, be limited to the defense of Mr. Cotter, Jr.’s appeal of the
Nevada District Courts’ determinations and the costs of any appeals
that we may bring.
Gain on Sale of Assets
$9.4 million represented our full recognition of the
transaction gain triggered by the installment payment from the
buyer of our Burwood property in Australia, which was recognized in
the second quarter of 2017.
Gain on Insurance
Proceeds
$9.2 million represented the gain recognized in 2017 on the
final insurance settlement proceeds relating to the earthquake
damage to our Courtenay Central parking structure (excluding
business interruption insurance payments).
Income Tax Expense
Income tax expense for the quarter ended September 30,
2018, increased $0.7 million compared to the same quarter
prior year. A large part of the increase in tax expense for the
third quarter 2018 compared to the same quarter of the prior year
is due to increases in the taxes related to recently released IRS
guidance regarding the Global Intangible Low-taxed Income (GILTI).
Income tax expense for the nine months ended September 30, 2018
decreased by $3.7 million compared to the equivalent prior-year
period. The decrease for the nine months ended September 30,
2018 is primarily related to lower pretax income and the reduction
of U.S. statutory corporate tax rate as the result of the Tax Act,
partially offset by higher tax rates overseas and non-taxable
insurance proceeds received in 2017.
OTHER FINANCIAL INFORMATION
Balance Sheet and Liquidity
Total assets increased by $12.3 million, to
$435.7 million at September 30, 2018, compared to
$423.4 million at December 31, 2017. This was primarily
driven by increases in our operating and investment properties
relating to capital enhancements in our existing cinemas and
capital investments relating to major real estate projects,
primarily (i) the redevelopment of our Union Square property in New
York, and (ii) the expansion of our Newmarket Village in Brisbane,
Australia. These were offset by a reduction in our
foreign-operation asset values due to a decrease in the foreign
exchange rates relative to the U.S. dollar. Available cash
resources generated from operations and proceeds received from
borrowings funded these capital investments.
Cash and cash equivalents at September 30, 2018 were
$15.7 million, including approximately $8.5 million in
the U.S., $2.9 million in Australia, and $4.3 million in
New Zealand. We manage our cash, investments and capital structure
so we are able to meet short-term and long-term obligations for our
business, while maintaining financial flexibility and
liquidity.
As part of our operating cycle, we collect cash from (i) our
cinema business when selling tickets and food and beverage items,
and (ii) rental income typically received in advance; we utilize
these collections, to reduce our long-term borrowings and realize
savings on interest charges. We then settle our operating expenses
generally with a lag within traditional trade terms. This cash
management generates a temporary working capital deficit, which is
positive for the Company. We review the maturities of our
borrowings and negotiate for renewals and extensions, as necessary
for liquidity purposes. We believe the cash flow generated from our
operations coupled with our ability to renew and extend our credit
facilities will provide sufficient liquidity in the upcoming
year.
The table below presents the changes in our total available
resources (cash and borrowings), debt-to-equity ratio, working
capital and other relevant information addressing our liquidity for
the nine months ended September 30, 2018 and preceding four
years:
As of and for the
9-Months Ended Year Ended December 31 ($ in
thousands)
9/30/2018 2017 2016 2015
2014 Total Resources (cash and borrowings) Cash and
cash equivalents (unrestricted) $ 15,714 $ 13,668 $ 19,017 $ 19,702
$ 50,248 Unused borrowing facility 101,086 137,231 117,599 70,134
45,700 Restricted for capital projects(1) 43,591 62,280 62,024
10,263 — Unrestricted capacity 57,495 74,951 55,575 59,871 45,700
Total resources at period end 116,800 150,899 136,616 89,836 95,948
Total unrestricted resources at period end 73,209 88,619 74,592
79,573 95,948
Debt-to-Equity Ratio Total contractual
facility $ 268,176 $ 271,732 $ 266,134 $ 207,075 $ 201,318 Total
debt (gross of deferred financing costs) 167,090 134,501 148,535
130,941 164,036 Current 3,175 8,109 567 15,000 38,104 Non-current
163,915 126,392 147,968 115,941 125,932 Total book equity 179,863
181,618 146,890 138,951 133,716 Debt-to-equity ratio 0.93 0.74 1.01
0.94 1.23
Changes in Working Capital Working capital
(deficit) $ (24,626 ) $ (46,971 ) $ 6,655 $ (35,581 ) $ (15,119 )
Current ratio 0.55 0.42 1.10 0.51 0.84
Capital Expenditures
(including acquisitions) $ 50,118 $ 76,708 $ 49,166 $ 53,119 $
14,914
(1)
This relates to the construction
facilities specifically negotiated for: (i) Union Square
redevelopment project, obtained in December 2016, and (ii) New
Zealand construction projects, obtained in May 2015.
Below is a summary of the available credit facilities as of
September 30, 2018:
As of September 30, 2018
Available Restricted Contractual
Capacity Unused for Capital
Unrestricted (Dollars in thousands)
Capacity
Used Capacity Projects Capacity Bank of
America Credit Facility (USA) $ 55,000 $ 34,000 $ 21,000 $ — $
21,000 Bank of America Line of Credit (USA) 5,000 1,500 3,500 —
3,500 Union Square Construction Financing (USA) 57,500 25,852
31,648 31,648 —
NAB Corporate Term Loan (AU) (1)
48,133 38,361 9,772 — 9,772
Westpac Bank Corporate (general/
non-construction) Credit Facility (NZ)
(1)
23,223 — 23,223 — 23,223
Westpac Bank Corporate (construction)
Credit Facility (NZ) (1)
11,943 — 11,943 11,943 —
Total $ 200,799 $ 99,713
$ 101,086 $ 43,591 $
57,495
(1)
The borrowings are denominated in foreign
currency. The contractual capacity and capacity used were
translated into U.S. dollars based on the applicable exchange rates
as of September 30, 2018.
The $43.6 million representing borrowings restricted for
capital projects is composed of the $31.7 million and
$11.9 million unused capacity for the Union Square development
and construction funding for New Zealand operations,
respectively.
Our overall global operating strategy is to conduct business
mostly on a self-funding basis by country (except for funds used to
pay an appropriate share of our U.S. corporate overhead). However,
we may, from time to time, move funds between jurisdictions where
circumstances merit such action as part of our goal to minimize our
cost of capital.
Trust Preferred Securities - On October 11, 2018, Reading
secured a waiver that provides significant additional financial
flexibility through the elimination of financial covenants with
respect to our Trust Preferred Securities through the end of the
term loan in consideration of payments totaling $1.6 million,
consisting of an initial payment of $1.1 million paid on
October 31, 2018, and a contractual obligation to pay $270,000
in October 2021 and $225,000 in October 2025.
Minetta/Orpheum Loan - On October 12, 2018, the Minetta and
Orpheum Theatres loan of $7.5 million has increased to
$8.0 million and the maturity extended to November 1,
2023.
Non-GAAP Financial Measures
This earnings release presents aggregate segment operating
income, and EBITDA, which are important financial measures for the
Company, but are not financial measures defined by U.S. GAAP.
These measures should be reviewed in conjunction with the
relevant U.S. GAAP financial measures and are not presented as
alternative measures of EPS, cash flows or net income as determined
in accordance with US GAAP. Aggregate segment operating income and
EBITDA, as we have calculated them, may not be comparable to
similarly titled measures reported by other companies.
Aggregate segment operating income –
we evaluate the performance of our business segments based on
segment operating income, and management uses aggregate segment
operating income as a measure of the performance of operating
businesses separate from non-operating factors. We believe that
information about aggregate segment operating income assists
investors by allowing them to evaluate changes in the operating
results of the Company’s business separate from non-operational
factors that affect net income, thus providing separate insight
into both operations and the other factors that affect reported
results. Refer to “Consolidated and Non-Segment Results” for a
reconciliation of segment operating income to net income.
EBITDA – we present EBITDA as a
supplemental measure of its performance, which is commonly used in
our industry. We define EBITDA as net income adjusted for interest
expense (net of interest income), income tax expense, depreciation
and amortization expense, and an adjustment of interest expense,
depreciation, and amortization for discontinued operations, if any.
EBITDA is a non-GAAP financial measure commonly used in our
industry and should not be construed as an alternative to net
earnings (loss) as an indicator of operating performance or as an
alternative to cash flow provided by operating activities as a
measure of liquidity (as determined in accordance with U.S. GAAP).
We have included EBITDA in this Earnings Release, as we believe
that it provides management and our investors with additional
information necessary to properly measure our performance and
liquidity, estimate our value and evaluate our ability to service
debt.
Adjusted EBITDA – using the
principles we consistently apply to determine our EBITDA, we
further adjusted the EBITDA for certain items we believe are
appropriate adjustable items, described as follows:
- Legal expenses relating to the
Derivative litigation, the James J. Cotter, Jr. employment
arbitration and other Cotter litigation matters – while we
started to incur expenses in relation to these legal matters in
2015, we believe that the majority of these costs were thrust upon
the Company as it became necessary to defend the Company’s position
in the Derivative litigation and related matters, to resolve Mr.
Cotter, Jr.’s claims relating to his termination, and to protect
our Company’s interests, and that of our stockholders in light of
Mr. Cotter, Jr.’s efforts to effect a change of control of our
Company. For this reason, we believe these costs should also be
treated as non-recurring in nature and accordingly, an adjustable
item for purposes of determining our Adjusted EBITDA.
In cases of property sales, we have not made
adjustments for any gains, in line with our overall business
strategy that at any time, we may decide to dispose of any property
when we believe that an asset has reached the highest value that we
could reasonably achieve without investing substantial additional
sums for land use planning, construction and marketing.
Reconciliation of EBITDA to net income is presented below:
Quarter Ended Nine Months
Ended September 30, September 30, (Dollars in
thousands)
2018 2017 2018 2017 Net
Income $ 1,297 $ 1,577
$ 9,405 $ 23,677 Add: Interest
expense, net 1,748 1,663 5,132 5,310 Add: Income tax expense 1,482
750 4,618 8,316 Add: Depreciation and amortization 5,829 4,137
16,705 12,124
Adjustment for infrequent events and
discontinued operations
— —
— —
EBITDA
$ 10,356 $
8,127 $ 35,860 $
49,427 Adjustments for: Gain on insurance recoveries — — —
(9,217 )
Legal expenses relating to the derivative
ligation, the Cotter employment arbitration and other Cotter
litigation matters
505 82 3,146 1,115
Adjusted
EBITDA $ 10,861 $ 8,209 $
39,006 $ 41,325
Conference Call and Webcast
We plan to post our pre-recorded conference call and audio
webcast on our corporate website on November 9, 2018, that
will feature prepared remarks from Ellen Cotter, Chief Executive
Officer; Dev Ghose, Executive Vice President & Chief Financial
Officer; and Andrzej Matyczynski, Executive Vice President - Global
Operations.
A pre-recorded question and answer session will follow our
formal remarks. Questions and topics for consideration should be
submitted to InvestorRelations@readingrdi.com on
November 8, 2018 by 5:00 p.m. Eastern Standard Time. The audio
webcast can be accessed by visiting http://www.readingrdi.com/about/#earnings-call.
About Reading International,
Inc.
Reading International, Inc. (NASDAQ: RDI) is a leading
entertainment and real estate company, engaging in the development,
ownership and operation of multiplex cinemas and retail and
commercial real estate in the United States, Australia, and New
Zealand.
The family of Reading brands includes cinema brands Reading
Cinemas, Angelika Film Centers, Consolidated Theatres, and City
Cinemas; live theatres operated by Liberty Theatres in the United
States; and signature property developments, including Newmarket
Village, Auburn Red Yard and Cannon Park in Australia, Courtenay
Central in New Zealand and 44 Union Square in New York City.
Additional information about Reading can be obtained from the
Company's website: http://www.readingrdi.com.
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 expectations 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;
- the extent to which we encounter
competition from other cinema exhibitors, from other sources of
outside-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 and DVD rentals and sales, and online
streaming;
- the cost and impact of improvements to
our cinemas, such as improved seating, enhanced food and beverage
offerings and other improvements;
- service disruption during theater
improvements; and
- the extent to and the efficiency with
which we are able to integrate acquisitions of cinema circuits with
our existing operations.
- 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;
- the ability to obtain all permits to
construct improvements;
- the ability to finance
improvements;
- the disruptions from construction;
- the possibility of construction delays,
work stoppage and material shortage;
- competition for development sites and
tenants;
- environmental remediation issues;
- the extent to which our cinemas can
continue to serve as an anchor tenant that will, in turn, be
influenced by the same factors as will influence generally the
results of our cinema operations;
- the ability to negotiate and execute
joint venture opportunities and relationships; and
- certain of our activities are in
geologically active areas, creating a risk of damage and/or
disruption of real estate and/or cinema businesses from
earthquakes.
- 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 ability to renew, extend or
renegotiate our loans that mature in 2018;
- 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;
- expenses, management and Board
distraction and other effects of the litigation efforts mounted by
James Cotter, Jr. against the Company, including his efforts to
cause a sale of voting control of the Company;
- 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;
- our exposure to cyber-security risks,
including misappropriation of customer information or other
breaches of information security;
- 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 factors can be,
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.
In addition to the forward-looking factors set forth above, we
encourage you to review Item 1A. “Risk Factors,” from our Company’s
Annual Report on SEC Form 10-K for the Year Ended December 31,
2017.
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-U.S. GAAP
financial measures.” In such case, a reconciliation of this
information to our U.S. GAAP financial statements will be made
available in connection with such statements.
Reading International, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(Unaudited; U.S. dollars in thousands,
except per share data)
Quarter Ended Nine Months Ended
September 30, September 30, 2018
2017(1)
2018
2017(1)
Revenue Cinema $ 70,671 $ 62,059 $ 223,109 $ 196,062 Real
estate 3,590 4,057 11,286
11,975 Total revenue 74,261
66,116 234,395 208,037
Costs
and expenses Cinema (54,929 ) (49,591 ) (170,183 ) (153,512 )
Real estate (2,475 ) (2,881 ) (7,408 ) (7,258 ) Depreciation and
amortization (5,829 ) (4,137 ) (16,705 ) (12,124 ) General and
administrative (6,489 ) (5,840 ) (21,250 )
(18,131 ) Total costs and expenses (69,722 )
(62,449 ) (215,546 ) (191,025 )
Operating
income 4,539 3,667 18,849 17,012 Interest expense, net (1,748 )
(1,663 ) (5,132 ) (5,310 ) Gain on sale of assets — — — 9,417 Gain
on insurance recoveries — — — 9,217 Other (expense) income
(130 ) 89 (273 ) 937
Income before income tax expense and
equity earnings of unconsolidated joint ventures
2,661 2,093 13,444 31,273 Equity earnings of unconsolidated joint
ventures 80 136 667
654
Income before income taxes 2,741 2,229
14,111 31,927 Income tax expense (1,482 ) (750 )
(4,618 ) (8,316 )
Net income $ 1,259 $ 1,479 $
9,493 $ 23,611 Less: net income attributable to noncontrolling
interests (38 ) (98 ) 88 (66 )
Net income attributable to Reading
International, Inc. common shareholders
$ 1,297 $ 1,577 $ 9,405 $ 23,677
Basic earnings per share attributable to Reading International,
Inc. shareholders $ 0.06 $ 0.07 $ 0.41 $
1.02
Diluted earnings per share attributable to
Reading International, Inc.
shareholders
$ 0.06 $ 0.07 $ 0.41 $ 1.01 Weighted
average number of shares outstanding–basic 23,006,040 22,968,017
22,988,227 23,101,619 Weighted average number of shares
outstanding–diluted 23,197,924 23,212,632
23,185,021 23,346,234
(1)
Certain prior period amounts have been
reclassified to conform to the current period presentation.
Reading International, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited; U.S. dollars in thousands,
except share information)
September 30, December 31,
2018 2017 ASSETS (unaudited)
Current Assets: Cash and cash equivalents $ 15,714 $ 13,668
Receivables 7,306 13,050 Inventory 1,231 1,432 Prepaid and other
current assets 5,393 5,325
Total
current assets 29,644 33,475 Operating property, net 261,139
264,724 Investment and development property, net 80,086 61,254
Investment in unconsolidated joint ventures 5,045 5,304 Goodwill
19,444 20,276 Intangible assets, net 7,484 8,542 Deferred tax
asset, net 25,285 24,746 Other assets 7,530
5,082
Total assets $ 435,657 $ 423,403
LIABILITIES AND STOCKHOLDERS' EQUITY Current
Liabilities: Accounts payable and accrued liabilities $ 26,258
$ 34,359 Film rent payable 6,890 13,511 Debt – current portion
3,175 8,109 Taxes payable – current 1,877 2,938 Deferred current
revenue 6,796 9,850 Other current liabilities 9,274
11,679
Total current liabilities 54,270 80,446
Debt – long-term portion 133,231 94,862 Subordinated debt, net
27,584 27,554 Noncurrent tax liabilities 12,437 12,274 Other
liabilities 28,272 26,649
Total
liabilities 255,794 241,785
Commitments and contingencies Stockholders’ equity:
Class A non-voting common stock, par value
$0.01, 100,000,000 shares authorized, 33,128,463 issued and
21,336,551 outstanding at September 30, 2018 and 33,019,565 issued
and 21,251,291 outstanding at December 31, 2017
232 231
Class B voting common stock, par value
$0.01, 20,000,000 shares authorized and 1,680,590 issued and
outstanding at September 30, 2018 and December 31, 2017
17 17
Nonvoting preferred stock, par value
$0.01, 12,000 shares authorized and no issued or outstanding shares
at September 30, 2018 and December 31, 2017
— — Additional paid-in capital 147,059 145,898 Retained earnings
42,655 33,056 Treasury shares (23,303 ) (22,906 ) Accumulated other
comprehensive income 8,843 20,991
Total Reading International, Inc. stockholders’ equity
175,503 177,287 Noncontrolling interests 4,360
4,331
Total stockholders’ equity 179,863
181,618
Total liabilities and stockholders’
equity $ 435,657 $ 423,403
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181107005291/en/
Reading International, Inc.Dev GhoseExecutive Vice President
& Chief Financial OfficerorAndrzej MatyczynskiExecutive Vice
President for Global Operations(213) 235-2240
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