Earnings Call Webcast to Discuss 2019 First
Quarter Financial Results Scheduled to Post to Corporate Website on
Tuesday, May 14, 2019
Reading International, Inc. (NASDAQ: RDI) today announced
results for the first quarter ended March 31, 2019. Our
Company reported Basic Earnings (Loss) per Share (“EPS”) of
$(0.09), for the quarter ended March 31, 2019 compared to an
EPS of $0.13 for the same period in the prior year, which was
primarily driven by a weaker film slate in the first quarter
compared to the same period last year. The success of films such as
“Black Panther,” “Jumanji: Welcome to the Jungle,” and “The
Greatest Showman” during the first quarter of 2018 was not repeated
by the films offered in the first quarter of 2019. Cinema segment
revenues for the first three months of 2019 decreased by 20%, or
$14.3 million, to $58.0 million, compared to
$72.3 million for the first three months of 2018. We believe
that our cinema results for the quarter were similarly impacted as
those of our competitors.
On the real estate front, our signature U.S. redevelopment
project – the historic Tammany Hall at 44 Union Square in Manhattan
nears completion. While no assurances can be given, we are in lease
negotiations with a credit tenant with respect to approximately 90%
of the net rentable area of the project. The prospective tenant has
begun preparation of drawings for the fit-out of the space and we
have reached an agreement in principle with respect to the key
economic points. Drafts of the lease have been exchanged. We
anticipate that the project will be ready for the commencement of
tenant improvement work this quarter.
Ellen Cotter, Chair, President and Chief Executive Officer,
said, “We anticipated that when compared to the first quarter of
2018 the Black Panther box office would be tough to match. However,
the recent blockbuster success of Avengers: Endgame again
re-affirms our confidence in the cinema industry and we look
forward to that box office momentum continuing through 2019.
“Also, we are pleased with the progress we have made on our 44
Union Square project – the historic Tammany Hall in New York City
and believe this signature project, when completed, will unlock the
long term value in this one-time theatre property.”
Consolidated revenue for the first quarter of 2019 decreased by
19%, or $14.3 million, to $61.6 million compared to the first
quarter of 2018, primarily due to a decreased attendance resulting
from the weaker film slate. These results were additionally
negatively impacted by a 9.4% decline in the Australian dollar
and a 6.3% decline in the New Zealand dollar for the quarter ended
March 31, 2019, compared to the quarter ended March 31,
2018. Our New Zealand results were also negatively impacted by the
closure, due to seismic concerns, of our Courtenay Central cinema
in Wellington, which has historically been our top performer in New
Zealand.
The following table summarizes the first quarter results for
2019 and 2018:
Three Months Ended March
31, % ChangeFavorable/
(Dollars in millions, except EPS)
2019
2018 (Unfavorable) Revenue
$
61.6 $ 75.9 (19 ) % - US
33.1 38.7 (14
) % - Australia
23.8 29.1 (18 ) % - New Zealand
4.7
8.1 (42 ) % Operating expense
$ (62.9 ) $
(70.2 ) (10 ) % Segment operating income (1)
$ 3.8 $
12.0 (68 ) %
Net income/(loss) (2)
$ (2.1 ) $ 3.1 (168 ) % EBITDA (1)
$
4.3 $ 11.1 (61 ) % Adjusted EBITDA (1)
$ 4.8 $
12.5 (62 ) % Basic EPS (2)
$ (0.09 ) $ 0.13
(169 ) %
(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 March 31, 2019, we
had worldwide revenue of $61.6 million, down
$14.3 million from the prior year. Our operating results were
negatively impacted by (i) a weaker film slate worldwide, (ii) a
weaker film slate from the specialty distribution companies in the
U.S., and (iii) the closure of a majority of the net rentable area
of Courtenay Central, including our Reading Cinema at that
location, due to seismic concerns.
- Capex
program: During the first quarter of 2019, we invested
$11.4 million in capital improvements, including our continued
investment in the redevelopment of Tammany Hall, the upgrading of
our multiplex cinemas (Harbour Town in Australia and Mililani in
the U.S.) and the lease acquisition of an existing cinema in
Devonport, Tasmania.
- Cinema
Additions and Pipeline: In early 2019, we purchased a
well-established four-screen cinema in Devonport, Tasmania. This
lease acquisition brings our global cinema count to 60 and our
global screen count to 484. In addition, we currently have signed
lease agreements for four new cinemas in Australia representing an
additional 25 screens, which we anticipate opening between 2019 and
2021.
- Building new
revenue sources: We continue to focus on the development
of our self-ticketing capabilities. We achieved a first quarter
record for U.S. online revenue, beating the prior year first
quarter record by 14%. Online sales consisted of 25% of our global
box office revenue, which is a first quarter record and represents
an 18% increase from the prior year period. Our continued
improvements to our websites and apps in the U.S. and improved
global online sales infrastructure are enabling us to better serve
high sales volume.
Real estate activities:
- 44 Union Square
Redevelopment (New York, U.S.) – Our signature U.S.
redevelopment project – the historic Tammany Hall at 44 Union
Square in Manhattan – is nearing completion. While no assurances
can be given, we are in negotiations on a lease with a credit
tenant for approximately 90% of the net rentable area of the
project. We anticipate that our project will be ready for the
commencement of tenant improvement work this quarter.
- Minetta Lane
Theatre (New York, U.S.) – In April, we negotiated an
extension through March 2020 (with an option to extend for an
additional year through March 2021) of our Minetta Lane Theatre
license agreement with Audible, Inc., a subsidiary of Amazon.
Audible will continue to use our theatre as the location for its
production of various plays featuring one or two actors, to be
recorded before a live theatre audience, and offered on
Audible.com.
- Courtenay Central
Redesign/Expansion (Wellington, New Zealand) – Located in
the heart of Wellington – New Zealand’s capital city – this center
is comprised of 161,071 square feet of land situated proximate to
the Te Papa Tongarewa Museum (attracting more than 1.5 million
visitors annually), across the street from the site of Wellington’s
newly announced convention center (estimated to open in 2022) and
at a major public transit hub. Damage from the 2016 earthquake
necessitated demolition of our nine-story parking garage at the
site. Further, unrelated seismic issues have caused us to close
portions of the existing cinema and retail structure while we
reevaluate the property for redevelopment as an entertainment
themed urban center with a major food and grocery
component. Wellington continues to be rated as one of the top
cities in the world in which to live, and we continue to believe
that Courtenay Central is located in one of the most vibrant and
growing commercial and entertainment precincts of New Zealand.
SEGMENT RESULTS
The following table summarizes the first quarter segment
operating results for 2019 and 2018:
Three Months Ended March
31, % ChangeFavorable/
(Dollars in thousands)
2019 2018
(Unfavorable) Segment revenue
Cinema
United States $ 32,033 $ 37,987 (16 ) % Australia 21,441 26,717 (20
) % New Zealand 4,512
7,551 (40 ) % Total
$
57,986 $ 72,255
(20 )
%
Real
estate
United States $ 988 $ 655 51 % Australia 3,916 4,154 (6 ) % New
Zealand 527 1,199
(56 ) % Total
$ 5,431 $ 6,008
(10 ) % Inter-segment elimination
(1,866 ) (2,391 ) 22 %
Total segment revenue $
61,551 $
75,872 (19 ) %
Segment operating income
Cinema
United States $ (765 ) $ 3,000 (125 ) % Australia 3,102 5,916 (48 )
% New Zealand 305
1,369 (78 ) % Total
$ 2,643
$ 10,285 (74
) %
Real
estate
United States $ 27 $ (293 ) 109 % Australia 1,305 1,515 (14 ) % New
Zealand (174 ) 459
(138 ) %
Total
$ 1,158 $
1,681 (31 ) % Total segment
operating income (1) $ 3,801
$ 11,966 (68
) %
“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.
Consolidated and Non-Segment Results:
1st Quarter Net
Results
Compared to the quarter ended March 31, 2018, cinema segment
operating income decreased by 74%, or $7.6 million, to $2.6
million for the quarter ended March 31, 2019, primarily driven
by a decrease in operating income in U.S., Australia, and New
Zealand. The decrease was due to a decrease in cinema attendance
worldwide (principally due to a weaker film slate), and
fluctuations in average ticket price (“ATP”) and spend per patron
(“SPP”) as outlined below:
- Revenue in the U.S. decreased by 16%,
or $6.0 million, to $32.0 million, due to a 22% decrease in
attendance, offset partially by a 12% increase in SPP and a 4%
increase in ATP.
- Australia’s cinema revenue decreased by
20%, or $5.3 million, to $21.4 million primarily due to a 15%
decrease in attendance, a 4% decrease in ATP, and a decrease of 9%
in SPP.
- New Zealand’s cinema revenue decreased
by 40%, or $3.0 million versus the same period in 2018. Attendance
decreased by 40%, while ATP and SPP percentages remained relatively
flat compared to the same period in the prior year. Not only did
the weaker film slate from the major studios impact our results,
but our New Zealand cinema revenues were also adversely impacted by
the January 2019 closure of our Courtenay Central cinema in
Wellington due to seismic concerns.
The top three grossing films for the first quarter of 2019 were
“Captain Marvel,” “Aquaman,” and “How to Train Your Dragon: The
Hidden World,” representing approximately 29% of Reading’s
worldwide admission revenues for the quarter. The top three
grossing films in the first quarter of 2018 for Reading’s worldwide
cinema circuits were “Black Panther,” “Jumanji: Welcome to the
Jungle,” and “The Greatest Showman,” which represented
approximately 32% of Reading’s worldwide admission revenues for the
quarter.
Real Estate
Segment Operating Income and Revenues:
Real estate segment operating income decreased by 31%, or $0.5
million, to $1.2 million for the quarter ended March 31, 2019
compared to March 31, 2018. For the quarter ended
March 31, 2019, the real estate segment revenue decreased by
10%, or $0.6 million, to $5.4 million, compared to the same
period in 2018. This was primarily attributable to the closure due
to seismic concerns of a majority of the net rentable area of our
Courtenay Central ETC during the first quarter of 2019, compared to
same period in 2018, which had a full quarter of operations, offset
by an increase in revenue at our Live Theatres.
CONSOLIDATED AND NON-SEGMENT RESULTS
The first quarter consolidated and non-segment results for 2019
and 2018 are summarized as follows:
Three Months Ended
March 31, %
ChangeFavorable/ (Dollars in thousands)
2019
2018 (Unfavorable)
Segment operating income $ 3,801
$ 11,966 (68 ) %
Non-segment income and expenses: General and administrative expense
(5,041 ) (6,156 ) 18 % Interest expense, net (1,852 ) (1,594 ) (16
) % Other (47 ) 58 181 %
Total non-segment
income and expenses $ (6,940 ) $
(7,692 ) 10
% Income before income
taxes (3,139 ) 4,274 173
% Income
tax benefit (expense) 1,042 (1,170 ) 189 %
Net income/(loss) $ (2,097 ) $
3,104 (168 ) %
Less: net income (loss) attributable to
noncontrolling interests
(16 ) 22 nm
Net income (loss) attributable
toRDI common stockholders
$ (2,081 )
$ 3,082
(168 ) %
“nm” – not meaningful for further
analysis
First Quarter Net
Results
Net income attributable to RDI common stockholders was down $5.2
million to a loss of $(2.1) million for the first quarter
March 31, 2019, compared to the same period prior year. Basic
EPS for the quarter ended March 31, 2019 decreased by $0.22 to
a loss per share of $(0.09) from the prior-year quarter, mainly
attributable to a significant decrease in revenue from both our
Cinema and Real Estate business segments.
Non-Segment General &
Administrative Expenses
Non-segment general and administrative expense for the quarter
ended March 31, 2019 compared to the same period of the prior
year decreased by 18%, or $1.1 million, to $5.0 million. The
quarterly decrease mainly relates to lower legal expenses for the
quarter ending March 31, 2019 of $1.0 million compared to the
same period last year.
Income Tax Expense
Income tax expense for the quarter ended March 31, 2019,
decreased 189%, or $2.2 million, compared to the equivalent prior
year period. The change between 2019 and 2018 is primarily related
to the pretax loss in 2019.
OTHER FINANCIAL INFORMATION
Balance Sheet and Liquidity
Total assets increased by $235.5 million, to
$674.5 million at March 31, 2019, compared to
$439.0 million at December 31, 2018. This was primarily
driven by the implementation of the lease accounting standards
effective January 1, 2019, which also resulted in a similar
increase in our liabilities. Additionally, assets increased due to
the capital investments relating to major real estate projects,
primarily (i) the redevelopment of our Union Square property in New
York, and (ii) improvements at our Mililani and Harbour Town
cinemas. These were partially 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.
Cash and cash equivalents at March 31, 2019 were
$12.6 million, including approximately $8.8 million in
the U.S., $3.2 million in Australia, and $0.7 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 utilize cash collected from
(i) our cinema business when selling tickets and F&B items, and
(ii) rental income typically received in advance, 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 generates a temporary working capital
deficit. 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.
OTHER INFORMATION
Our Stock Repurchase Program that expired on March 2, 2019, has
been extended by our Board of Directors through March 2, 2021.
$16.2 million remains available under that extended program. This
will allow Reading to repurchase its Class A Common Stock from time
to time in accordance with the requirements of the Securities and
Exchange Commission on the open market, in block trades and in
privately negotiated transactions, depending on market conditions
and other factors.
On March 14, 2019, our Board of Directors approved the Company’s
three-year Strategic Plan to focus across the U.S., Australia, and
New Zealand on the upgrading of our existing cinemas to add luxury
recliner seating, TITAN branded auditoriums and enhanced F&B
options, the development in appropriate markets of new cinema
opportunities, and the continued development and/or redevelopment
of our current real estate assets.
After considering the approval of the Strategic Plan, our Board
concluded that the interests of our Company and our stockholders
would be best served by the continued pursuit of our Strategic Plan
as an independent company and that it had no interest in
considering any sale process at this time. Accordingly, we have
advised Patton Vision that our Board does not have any present
interest in engaging in discussions regarding their unsolicited
indication of interest in the sale of our Company. Our controlling
stockholders are in agreement with this approach.
In a matter potentially impacting the control of our company,
but to which our company is not a party (In re: James J. Cotter
Living Trust dated August 1, 2000 (Case No. BP159755) (the “Trust
Case”)), the California Court of Appeals on April 15, 2019, struck
down the California Trial Court’s order appointing a trustee ad
litem to solicit offers for the purchase of a controlling interest
in our Company. The basis for that disposition was the Appeals
Court’s determination that Mr. James J. Cotter, Jr., lacks standing
to seek the appointment of such a trustee ad litem. The Appeals
Court noted that Mr. Cotter, Jr., is neither a trustee of nor a
beneficiary of the trust established to hold such controlling
interest (the “Voting Trust”) and accordingly, determined that he
lacked any standing to bring before the trial court matters
relating to the internal affairs of that trust, such as the
appointment of a trustee ad litem. The Court of Appeals also noted,
in an observation not material to the specific grounds on which the
California Trial Court’s order was struck down, but nevertheless
likely to be given weight by the court below, that “the plain
language [of the Trust Document] appears to show that the settlor
[Mr. Cotter, Sr.] instructed the Trustee [Margaret Cotter] not to
diversify [i.e. not to sell the voting shares held by the Voting
Trust].” The Trust Document directs the Trustee of the Voting Trust
that this voting stock is “to be retained for as long as
possible.”
Ms. Margaret Cotter has advised the Board that she does not
intend to sell the controlling interest in our Company at this
time, and that it is her current intention that the Voting Trust
hold such controlling interest as provided in the Trust Document
“as long as possible.”
We are informed that the Court of Appeal’s Order becomes final
30 days after issuance.
The table below presents the changes in our working capital
position and other relevant information addressing our liquidity as
of and for the three months ended March 31, 2019 and preceding
four years:
As of andfor
the3-MonthsEnded
Year Ended December 31
($ in thousands)
3/31/2019 2018
2017 2016
2015( (2))
Total Resources (cash and borrowings) Cash and cash
equivalents (unrestricted) $ 12,648 $ 13,127 $ 13,668 $ 19,017 $
19,702 Unused borrowing facility 107,111 85,886 137,231 117,599
70,134 Restricted for capital projects (1) 23,566 30,318 62,280
62,024 10,263 Unrestricted capacity 83,545 55,568 74,951 55,575
59,871 Total resources at period end 119,759 99,013 150,899 136,616
89,836 Total unrestricted resources at period end 96,193 68,695
88,619 74,592 79,573
Debt-to-Equity Ratio Total contractual
facility $ 290,879 $ 252,929 $ 271,732 $ 266,134 $ 207,075 Total
debt (gross of deferred financing costs) 184,099 167,043 134,501
148,535 130,941 Current 40,077 30,393 8,109 567 15,000 Non-current
143,691 136,650 126,392 147,968 115,941 Finance lease liabilities
331 — — — — Total book equity(2) 179,946 180,547 181,618 146,890
138,951 Debt-to-equity ratio 1.02 0.93 0.74 1.01 0.94
Changes in
Working Capital Working capital (deficit) (3) $ (77,236 ) $
(55,270 ) $ (46,971 ) $ 6,655 $ (35,581 ) Current ratio 0.28 0.35
0.42 1.10 0.51
Capital Expenditures (including acquisitions)
$ 11,476 $ 56,827 $ 76,708 $ 49,166 $ 53,119
(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. The New
Zealand construction loan expired December 31, 2018. (2)
Certain 2015 balances included the
restatement impact as a result of a change in accounting principle
(see Note 2 – Summary of Significant Accounting Policies –
Accounting Changes). Certain 2017 and 2016 balances included the
restatement impact as a result of a prior period financial
statement correction of immaterial errors (see Note 2 – Summary of
Significant Accounting Policies – Prior Period Financial Statement
Correction of Immaterial Errors).
(3) Typically our working capital (deficit) is negative as we
receive revenue from our cinema business ahead of the time that we
have to pay our associated liabilities. We use the money we receive
to pay down our borrowings in the first instance.
Below is a summary of the available credit facilities as of
March 31, 2019:
As of March 31, 2019 (Dollars in
thousands)
AvailableContractualCapacity
CapacityUsed
UnusedCapacity
Restrictedfor CapitalProjects
UnrestrictedCapacity Bank of America Credit
Facility (USA) $ 55,000 $ 30,000 $ 25,000 $ — $ 25,000 Bank of
America Line of Credit (USA) 5,000 3,500 1,500 — 1,500 Union Square
Construction Financing (USA) 57,500 33,934 23,566 23,566 — NAB
Corporate Term Loan (AU) (1) 85,248 40,138 45,110 — 45,110 Westpac
Bank Corporate (NZ) (1) 21,824 9,889 11,935
— 11,935
Total $ 224,572
$ 117,461 $ 107,111 $
23,566 $ 83,545
(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 March 31, 2019.
The $23.6 million representing borrowings restricted for capital
projects is wholly composed of the $23.6 million of unused
capacity for the Union Square development and construction.
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 was 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 U.S. 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 use EBITDA in the
evaluation of our Company’s performance since we believe that
EBITDA provides a useful measure of financial performance and
value. We believe this principally for the following reasons:
We believe that EBITDA is an accepted
industry-wide comparative measure of financial performance. It is,
in our experience, a measure commonly adopted by analysts and
financial commentators who report upon the cinema exhibition and
real estate industries, and it is also a measure used by financial
institutions in underwriting the creditworthiness of companies in
these industries. Accordingly, our management monitors this
calculation as a method of judging our performance against our
peers, market expectations and our creditworthiness. It is widely
accepted that analysts, financial commentators and persons active
in the cinema exhibition and real estate industries typically value
enterprises engaged in these businesses at various multiples of
EBITDA. Accordingly, we find EBITDA valuable as an indicator of the
underlying value of our businesses. We expect that investors may
use EBITDA to judge our ability to generate cash, as a basis of
comparison to other companies engaged in the cinema exhibition and
real estate businesses and as a basis to value our company against
such other companies.
EBITDA is not a measurement of financial
performance under generally accepted accounting principles in the
United States of America and it should not be considered in
isolation or construed as a substitute for net income or other
operations data or cash flow data prepared in accordance with
generally accepted accounting principles in the United States for
purposes of analyzing our profitability. The exclusion of various
components, such as interest, taxes, depreciation and amortization,
limits the usefulness of these measures when assessing our
financial performance, as not all funds depicted by EBITDA are
available for management’s discretionary use. For example, a
substantial portion of such funds may be subject to contractual
restrictions and functional requirements to service debt, to fund
necessary capital expenditures and to meet other commitments from
time to time.
EBIT and EBITDA also fail to take into
account the cost of interest and taxes. Interest is clearly a real
cost that for us is paid periodically as accrued. Taxes may or may
not be a current cash item but are nevertheless real costs that, in
most situations, must eventually be paid. A company that realizes
taxable earnings in high tax jurisdictions may, ultimately, be less
valuable than a company that realizes the same amount of taxable
earnings in a low tax jurisdiction. EBITDA fails to take into
account the cost of depreciation and amortization and the fact that
assets will eventually wear out and have to be replaced.
Adjusted EBITDA – using the
principles we consistently apply to determine our EBIDTA, we
further adjusted the EBIDTA for certain items we believe to be
external to our business and not reflective of our costs of doing
business or results of operation. Specifically, we have adjusted
for (i) gains on insurance recoveries, (ii) legal expenses relating
to extraordinary litigation, (iii) adjustments for gains/losses
relating to property sales, and (iv) any other items that can be
considered non-recurring in accordance with the 2-year SEC
requirement for determining an item is non-recurring, infrequent or
unusual in nature.
Reconciliation of EBITDA to net income is presented below:
Three
Months Ended March 31, (Dollars in thousands)
2019 2018 Net
Income/(loss)
$ (2,081 ) $ 3,082 Add: Interest expense, net
1,852 1,594 Add: Income tax expense (1,042 ) 1,170 Add:
Depreciation and amortization 5,594 5,250
EBITDA $ 4,323 $
11,096 Adjustments
for: Legal expenses relating to the derivative ligation, the Cotter
employment arbitration and other Cotter litigation matters
427 1,448
Adjusted EBITDA $
4,750 $ 12,544
Conference Call and
Webcast
We plan to post our pre-recorded conference call and audio
webcast on our corporate website on May 14, 2019, that will feature
prepared remarks from Ellen Cotter, Chief Executive Officer;
Gilbert Avanes, Interim 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 May 13, 2019
by 5:00p.m. Eastern Daylight 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 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
moviegoers 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 and
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 Blu-ray/DVD rentals and sales, and so
called “movies on demand”;
- the cost and impact of improvements to
our cinemas, such as improve seating, enhanced food and beverage
offerings and other improvements;
- disruptions 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 increased depreciation and
amortization expense as construction projects transition to leased
real property;
- 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 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 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.
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,
2018.
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)
Three Months Ended March 31,
2019
2018 (1)
Revenue Cinema $ 57,986 $ 72,255 Real estate 3,565
3,617 Total revenue 61,551
75,872
Costs and expenses Cinema (48,329 )
(54,948 ) Real estate (2,445 ) (2,384 ) Depreciation and
amortization (5,594 ) (5,250 ) General and administrative
(6,484 ) (7,597 ) Total costs and expenses (62,852 )
(70,179 )
Operating income (1,301 ) 5,693 Interest
expense, net (1,852 ) (1,594 ) Other income (expense) (20 )
(82 )
Income (loss) before income tax expense
and equity earnings of unconsolidated joint ventures
(3,173 ) 4,017 Equity earnings of unconsolidated joint ventures
34 257
Income (loss) before income
taxes (3,139 ) 4,274 Income tax benefit (expense) 1,042
(1,170 )
Net income (loss) $ (2,097 ) $ 3,104
Less: net income attributable to noncontrolling interests
(16 ) 22
Net income (loss) attributable to
Reading International, Inc. common shareholders
$ (2,081 ) $ 3,082
Basic earnings (loss) per share
attributable to Reading International, Inc. shareholders $
(0.09 ) $ 0.13
Diluted earnings (loss) per share
attributable to Reading International, Inc. shareholders
$ (0.09 ) $ 0.13 Weighted average number of shares
outstanding–basic 22,920,486 22,967,237 Weighted average number of
shares outstanding–diluted 23,124,106
23,132,989
(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)
March 31, December 31, 2019
2018 ASSETS (unaudited) Current Assets:
Cash and cash equivalents $ 12,648 $ 13,127 Receivables 7,094 8,045
Inventory 1,165 1,419 Prepaid and other current assets 9,642
7,667
Total current assets 30,549
30,258 Operating property, net 257,402 257,667 Operating lease
right-of-use assets 229,266 — Investment and development property,
net 95,156 86,804 Investment in unconsolidated joint ventures 4,958
5,121 Goodwill 20,836 19,445 Intangible assets, net 3,694 7,369
Deferred tax asset, net 26,483 26,235 Other assets 6,199
6,129
Total assets $ 674,543 $
439,028
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities: Accounts payable and accrued
liabilities $ 23,492 $ 26,154 Film rent payable 6,559 8,661 Debt -
current portion 40,077 30,393 Derivative financial instruments -
current portion 52 41 Taxes payable - current 571 1,710 Deferred
current revenue 7,712 9,264 Operating lease liabilities - current
portion 19,797 — Other current liabilities 9,525
9,305
Total current liabilities 107,785 85,528
Debt - long-term portion 113,816 106,286 Derivative financial
instruments - non-current portion 203 145 Subordinated debt, net
26,116 26,061 Noncurrent tax liabilities 11,737 11,530 Operating
lease liabilities - non-current portion 222,594 — Other liabilities
12,346 28,931
Total liabilities
494,597 258,481
Commitments and
contingencies Stockholders’ equity:
Class A non-voting common stock, par value
$0.01, 100,000,000 shares authorized, 33,172,823 issued and
21,249,935 outstanding at March 31, 2019 and 33,112,337 issued and
21,194,748 outstanding at December 31, 2018
233 232
Class B voting common stock, par value
$0.01, 20,000,000 shares authorized and 1,680,590 issued and
outstanding at March 31, 2019 and December 31, 2018
17 17
Nonvoting preferred stock, par value
$0.01, 12,000 shares authorized and no issued or outstanding shares
at March 31, 2019 and December 31, 2018
— — Additional paid-in capital 147,472 147,452 Retained earnings
45,563 47,616 Treasury shares (25,231 ) (25,222 ) Accumulated other
comprehensive income 7,625 6,115
Total Reading International, Inc. stockholders’ equity
175,679 176,210 Noncontrolling interests 4,267
4,337
Total stockholders’ equity 179,946
180,547
Total liabilities and stockholders’
equity $ 674,543 $ 439,028
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190510005109/en/
Gilbert Avanes, Interim Chief Financial OfficerAndrzej
Matyczynski, Executive Vice President for Global OperationsReading
International, Inc.(213) 235-2240
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