Reading International, Inc. (NASDAQ: RDI) (“Reading” or our
“Company”), an internationally diversified cinema and real estate
company with operations and assets in the United States, Australia,
and New Zealand, today announced its results for the First Quarter
ended March 31, 2024.
First Quarter 2024 Summary
Results
During the First Quarter 2024, the disrupted
movie release schedule caused by the 2023 Hollywood Strikes
continued to negatively impact our financial results. Despite these
revenue setbacks, our global operations teams managed our cinema
expenses to reduce our overall First Quarter 2024 operating loss.
As our cinema business endured these temporary challenges, to
support our overall global operations over the last six months we
monetized two real estate assets – our Maitland property in NSW
(Australia) and our office building in Culver City, California.
Despite the loss of revenues and income from these two property
assets, our First Quarter 2024 real estate business delivered the
second highest first quarter revenues and operating income since
the first quarter of 2019, which demonstrates the strength of our
real estate assets, operations and management teams.
- Total Revenues decreased slightly
by 2% (or $0.8 million) to $45.1 million compared to $45.8 million
in Q1 2023.
- Operating Loss improved by 4% (or
$0.3 million) to a loss of $7.5 million compared to a Q1 2023
operating loss of $7.9 million.
- Adjusted EBITDA loss of $4 million
increased by 40% from a negative $2.8 million in Q1 2023.
- Basic loss per share weakened by
18% (or $0.09) to a loss of $0.59 compared to a loss of $0.50 for
Q1 2023.
- Net loss attributable to Reading
increased by 19% to a loss of $13.2 million compared to a loss of
$11.1 million, primarily driven by increased interest expense and a
loss on the sale of our Culver City office building which closed in
February 2024.
The Australian dollar average exchange rates
weakened against the U.S. dollar by 3.9%, compared to Q1 2023,
while the New Zealand dollar average exchange rates weakened by
2.8% against the U.S. dollar compared to Q1 2023. The exchange rate
fluctuation contributed to our loss for the period, and negatively
impacted on our overall financial results.
President and Chief Executive Officer, Ellen
Cotter said, “We're encouraged by the resilience of our Company to
weather the recent hurdles. The 2023 Hollywood Strikes caused
delays in major studio releases leading to a dip in cinema revenues
during the First Quarter of 2024. However, we reduced our operating
loss reflecting enhanced operational efficiency. We believe that as
the effects of the 2023 Hollywood Strikes fade, a movie release
schedule that is fuller and more compelling will boost cinema
revenues through the next three quarters of 2024 and into 2025. The
remainder of the 2024 film schedule is robust, featuring highly
anticipated releases such as Inside Out 2, Deadpool &
Wolverine, Joker: Folie à Deux, Wicked, and Gladiator 2. The
outlook for 2025 is equally promising, with Disney planning nearly
twice as many releases compared to 2024, benefiting from the
studio's renewed emphasis on creativity and original storytelling.
In addition, 2025 will see James Cameron's Avatar 3, Tom Cruise in
Mission: Impossible 8, a new Jurassic World film from Universal,
and James Gunn's Superman from DC Studios for Warner Bros. These
upcoming blockbusters are expected to energize the box office and
keep moviegoers engaged.”
Ms. Cotter continued “As our global cinema
business continues its recovery from both the pandemic and the 2023
Hollywood Strikes, we need to raise additional liquidity to support
our operations through 2024 and reduce our overall debt structure,
so we’ll again turn to our real estate portfolio. In the last six
months, we have generated $11.3 million in net sales proceeds from
the sale of our Maitland property (NSW) and our Culver City office
building. To ensure our Company’s long-term sustainability, we have
identified additional properties to monetize. As of today, we are
marketing for sale our Cannon Park property assets in Townsville
(AU), in addition to certain international fee properties on which
Reading Cinemas are located. In each case, we will pursue a lease
back of our Reading Cinema. In addition, our 26.6-acre industrial
site in Williamsport, Pennsylvania is held for sale.
“Our real estate operations continue to deliver
solid results. Our First Quarter 2024 Australian Real Estate
division achieved the highest quarterly operating income since Q2
2018. And, we delivered improved quarterly operating results in our
Live Theatre division and in April 2024, we executed (i) a two-year
extension of our license agreement with AO Media, LLC, an affiliate
of Audible, at the Minetta Lane Theatre and (ii) a license
agreement for an open-ended run of The Big Gay Jamboree being
produced by, among others, LuckyChap Entertainment, Margot Robbie’s
production company also behind Barbie. The Big Gay Jamboree starts
performances at the Orpheum in mid-September 2024.”
Key Points
Cinema Business
- At $41.3 million, our Q1 2024
global cinema revenue slightly decreased by 2% compared to Q1 2023.
At $4.2 million, our Q1 2024 cinema operating loss decreased by
$0.4 million, or 10%, compared to an operating loss of $4.6 million
during Q1 2023.
- Despite a 5.1% downturn in the
North American Box Office, our U.S. Cinema business exceeded
industry performance by 670 basis points and augmented our U.S.
market share by 5 basis points, despite closing three theaters.
This result is attributed to the exceptional performance of our
arthouses headlined by films such as Zone of Interest, American
Fiction, All of Us Strangers, Problemista and Perfect Days.
Notably, the Angelika in New York distinguished itself as North
America’s top-performing theater for Zone of Interest, All of Us
Strangers, Problemista and Perfect Days.
- Our revenues were further enhanced
by the opening of two new state-of-the-art theaters in Australia,
each featuring recliners and elevated F&B: (i) an eight-screen
Angelika boutique cinema at South City Square, Brisbane QLD and
(ii) a five-screen Reading Cinemas with TITAN LUXE in Busselton,
Western Australia.
- Over the last twelve months to
improve the long-term profitability of our U.S. Cinema circuit, we
closed (i) two Consolidated Theatres in Hawaii in the third quarter
of 2023 and (ii) a 16 screen Reading Cinema in California in the
fourth quarter of 2023.
- We have one additional Reading
Cinema in the pipeline in Australia located in Noosa
(Queensland).
Real Estate Business
- Real estate segment revenue for Q1
2024 decreased by $0.1 million (or 3%) to $4.9 million, compared to
$5.1 million in Q1 2023. Real estate segment operating income for
Q1 2024 decreased by $0.1 million (or 12%) to $0.9 million compared
to a real estate segment operating income of $1.0 million in Q1
2023.
- The changes between the first
quarter of 2024 and the first quarter of 2023 were partially
attributable to the monetizations of our Culver City office
building and our Maitland property (NSW).
Balance Sheet and Liquidity
- As of March 31, 2024, our cash and
cash equivalents were $7.5 million.
- As of March 31, 2024, we had total gross debt of $195.7
million, which represents a $14.6 million reduction in debt since
December 31, 2023, when our gross debt was $210.3 million.
- As of March 31, 2024, our assets
had a total book value of $494.9 million as compared to a book
value of $533.1 million as of December 31, 2023.
- To continue supporting our overall
liquidity, during the first quarter we monetized our office
building at 5995 Sepulveda Blvd. Culver City, California for $10.0
million. Also, in the fourth quarter of 2023, we monetized our
underperforming Maitland Australia (NSW) property for AU$2.8
million and leased back the 4-screen Reading Cinema on a short-term
basis, both of which positively impacted cash but contributed to
this quarter’s weakening in Real Estate Revenues. Despite
generating a loss of $1.1 million from the sale, our decision to
monetize our Culver City office building was influenced by the fact
that, given the availability on favorable terms of office space
elsewhere in Los Angeles and our reduced space needs in California,
we believe that a relocation of this office space could save us
approximately $1.5million in expense between now and the end of
2025.
- Through Q1 2024, we worked closely
with our other lenders to amend our existing debt facilities and
extend upcoming maturity dates.
- On January 26, 2024, we extended
the maturity date of the loan secured by our Off-Broadway theatres
in NYC to June 1, 2024.
- On February 23, 2024, we repaid the
$8.35 million loan on our Culver City office building following the
sale of the asset.
- On March 27, 2024, we amended the
Bank of America/Bank of Hawaii loan by extending the maturity to
August 18, 2025 and reducing certain principal repayment
amounts.
- On April 4, 2024, with respect to
our loan from National Australia Bank, we extended the maturity
date to July 31, 2026, and negotiated a Bridge Facility of A$20
million due March 31, 2025 (to be prepaid upon the sale of certain
assets).
- Most recently, on April 23, 2024,
we closed the 1-year extension option on our 44 Union Square loan
to extend the maturity date to May 6, 2025. We have one remaining
one year option.
Conference Call and Webcast
We plan to post our pre-recorded conference call
and audio webcast on our corporate website on Friday, May 17, 2024,
which will feature prepared remarks from Ellen Cotter, President
and Chief Executive Officer; Gilbert Avanes, Executive Vice
President, Chief Financial Officer and Treasurer; 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 16,
2024 by 5:00 p.m. Eastern Time. The audio webcast can be accessed
by visiting
https://investor.readingrdi.com/financial-information/quarterly-results.
About Reading International,
Inc.
Reading International, Inc. (NASDAQ: RDI), an
internationally diversified cinema and real estate company
operating through various domestic and international subsidiaries,
is a leading entertainment and real estate company, engaging in the
development, ownership, and operation of cinemas and retail and
commercial real estate in the United States, Australia, and New
Zealand.
Reading’s cinema subsidiaries operate under
multiple cinema brands: Reading Cinemas, Angelika Film Centers,
Consolidated Theatres, and the State Cinema by Angelika. Its live
theatres are owned and operated by its Liberty Theaters subsidiary,
under the Orpheum and Minetta Lane names. Its signature property
developments are maintained in special purpose entities and
operated under the names Newmarket Village, Cannon Park, and The
Belmont Common in Australia, Courtenay Central in New Zealand, and
44 Union Square in New York City.
Additional information about Reading can be
obtained from our Company's website: http://www.readingrdi.com.
Cautionary Note Regarding Forward-Looking
Statements
This earnings release contains a variety of
forward-looking statements as defined by the Securities Litigation
Reform Act of 1995, including those related to our expected
operated results; our belief regarding our business structure and
diversification strategy; our belief regarding the quality, the
quantity and the appeal of upcoming movie releases in the remainder
of 2024 and 2025 and our revenue expectations relating to such
movie releases; our expectations regarding our monetization of our
fee interests under our cinemas; our beliefs regarding the upcoming
movie slates, the refocus of film distributors and its impact on
our business; and our expectations of our liquidity and capital
requirements and the allocation of funds. You can recognize these
statements by our use of words, such as “may,” “will,” “expect,”
“believe,” and “anticipate” or other similar terminology.
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.
Forward-looking statements made by us in this
earnings release are based only on information currently available
to us and speak only as of the date on which they are made. 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.
Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Therefore, you should not rely on
any of these forward-looking statements. Important factors that
could cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, those factors discussed throughout Part I,
Item 1A – Risk Factors – and Part II Item 7 – Management's
Discussion and Analysis of Financial Condition and Results of
Operations – of our Annual Report on Form 10-K for the most
recently ended fiscal year, as well as the risk factors set forth
in any other filings made under the Securities Act of 1934, as
amended, including any of our Quarterly Reports on Form 10-Q, for
more information.
Reading International, Inc. and
SubsidiariesUnaudited Consolidated Statements of
Operations(Unaudited; U.S. dollars in thousands, except
per share data)
|
|
Three Months Ended |
|
|
March 31, |
|
|
2024 |
|
|
2023 |
|
Revenue |
|
|
|
|
|
|
Cinema |
|
$ |
41,271 |
|
|
$ |
41,987 |
|
Real
estate |
|
|
3,781 |
|
|
|
3,820 |
|
Total revenue |
|
|
45,052 |
|
|
|
45,807 |
|
Costs and expenses |
|
|
|
|
|
|
Cinema |
|
|
(40,720 |
) |
|
|
(41,654 |
) |
Real estate |
|
|
(2,235 |
) |
|
|
(2,215 |
) |
Depreciation and
amortization |
|
|
(4,205 |
) |
|
|
(4,639 |
) |
General and
administrative |
|
|
(5,423 |
) |
|
|
(5,179 |
) |
Total costs and expenses |
|
|
(52,583 |
) |
|
|
(53,687 |
) |
Operating income (loss) |
|
|
(7,531 |
) |
|
|
(7,880 |
) |
Interest expense, net |
|
|
(5,286 |
) |
|
|
(4,117 |
) |
Gain (loss) on sale of
assets |
|
|
(1,125 |
) |
|
|
— |
|
Other
income (expense) |
|
|
341 |
|
|
|
174 |
|
Income (loss) before income tax expense and equity earnings
of unconsolidated joint ventures |
|
|
(13,601 |
) |
|
|
(11,823 |
) |
Equity
earnings of unconsolidated joint ventures |
|
|
(25 |
) |
|
|
19 |
|
Income (loss) before income taxes |
|
|
(13,626 |
) |
|
|
(11,804 |
) |
Income
tax benefit (expense) |
|
|
223 |
|
|
|
480 |
|
Net income (loss) |
|
$ |
(13,403 |
) |
|
$ |
(11,324 |
) |
Less:
net income (loss) attributable to noncontrolling interests |
|
|
(175 |
) |
|
|
(213 |
) |
Net income (loss) attributable to Reading International,
Inc. |
|
$ |
(13,228 |
) |
|
$ |
(11,111 |
) |
Basic earnings (loss) per share |
|
$ |
(0.59 |
) |
|
$ |
(0.50 |
) |
Diluted earnings (loss) per share |
|
$ |
(0.59 |
) |
|
$ |
(0.50 |
) |
Weighted average number of shares outstanding–basic |
|
|
22,348,994 |
|
|
|
22,114,927 |
|
Weighted average number of shares outstanding–diluted |
|
|
22,348,994 |
|
|
|
22,114,927 |
|
|
|
|
|
|
|
|
|
|
Reading International, Inc. and
SubsidiariesConsolidated Balance
Sheets(U.S. dollars in thousands, except share
information)
|
|
March 31, |
|
December 31, |
|
|
2024 |
|
|
2023 |
|
ASSETS |
|
(unaudited) |
|
|
|
Current
Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
7,501 |
|
|
$ |
12,906 |
|
Restricted cash |
|
|
831 |
|
|
|
2,535 |
|
Receivables |
|
|
7,104 |
|
|
|
7,561 |
|
Inventories |
|
|
1,318 |
|
|
|
1,648 |
|
Prepaid and other current
assets |
|
|
3,069 |
|
|
|
2,881 |
|
Land
and property held for sale |
|
|
460 |
|
|
|
11,179 |
|
Total current assets |
|
|
20,283 |
|
|
|
38,710 |
|
Operating property, net |
|
|
253,809 |
|
|
|
262,417 |
|
Operating lease right-of-use
assets |
|
|
172,201 |
|
|
|
181,542 |
|
Investment and development
property, net |
|
|
8,353 |
|
|
|
8,789 |
|
Investment in unconsolidated
joint ventures |
|
|
4,539 |
|
|
|
4,756 |
|
Goodwill |
|
|
24,671 |
|
|
|
25,535 |
|
Intangible assets, net |
|
|
1,944 |
|
|
|
2,038 |
|
Deferred tax asset, net |
|
|
112 |
|
|
|
299 |
|
Other
assets |
|
|
8,948 |
|
|
|
8,965 |
|
Total assets |
|
$ |
494,860 |
|
|
$ |
533,051 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
|
$ |
47,826 |
|
|
$ |
43,828 |
|
Film rent payable |
|
|
5,481 |
|
|
|
6,038 |
|
Debt - current portion |
|
|
41,464 |
|
|
|
34,484 |
|
Subordinated debt - current
portion |
|
|
393 |
|
|
|
586 |
|
Taxes payable - current |
|
|
1,025 |
|
|
|
1,376 |
|
Deferred revenue |
|
|
9,893 |
|
|
|
10,993 |
|
Operating lease liabilities -
current portion |
|
|
22,198 |
|
|
|
23,047 |
|
Other
current liabilities |
|
|
6,569 |
|
|
|
6,731 |
|
Total current liabilities |
|
|
134,849 |
|
|
|
127,083 |
|
Debt - long-term portion |
|
|
125,459 |
|
|
|
146,605 |
|
Subordinated debt, net |
|
|
27,228 |
|
|
|
27,172 |
|
Noncurrent tax
liabilities |
|
|
6,234 |
|
|
|
6,586 |
|
Operating lease liabilities -
non-current portion |
|
|
171,793 |
|
|
|
180,898 |
|
Other
liabilities |
|
|
11,569 |
|
|
|
11,711 |
|
Total liabilities |
|
$ |
477,132 |
|
|
$ |
500,055 |
|
Commitments and contingencies (Note 15) |
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
Class A non-voting common
shares, par value $0.01, 100,000,000 shares authorized, |
|
|
|
|
|
|
33,611,296 issued and 20,675,185 outstanding at March 31, 2024
and |
|
|
|
|
|
|
33,602,627 issued and 20,666,516 outstanding at December 31,
2023 |
|
|
237 |
|
|
|
237 |
|
Class B voting common shares,
par value $0.01, 20,000,000 shares authorized and |
|
|
|
|
|
|
1,680,590 issued and outstanding at March 31, 2024 and December 31,
2023 |
|
|
17 |
|
|
|
17 |
|
Nonvoting preferred shares,
par value $0.01, 12,000 shares authorized and no issued |
|
|
|
|
|
|
or outstanding shares at March 31, 2024 and December 31, 2023 |
|
|
— |
|
|
|
— |
|
Additional paid-in
capital |
|
|
156,078 |
|
|
|
155,402 |
|
Retained
earnings/(deficits) |
|
|
(92,717 |
) |
|
|
(79,489 |
) |
Treasury shares |
|
|
(40,407 |
) |
|
|
(40,407 |
) |
Accumulated other comprehensive income |
|
|
(5,211 |
) |
|
|
(2,673 |
) |
Total Reading International, Inc. stockholders’
equity |
|
|
17,997 |
|
|
|
33,087 |
|
Noncontrolling interests |
|
|
(269 |
) |
|
|
(91 |
) |
Total stockholders’ equity |
|
|
17,728 |
|
|
|
32,996 |
|
Total liabilities and stockholders’ equity |
|
$ |
494,860 |
|
|
$ |
533,051 |
|
|
|
|
|
|
|
|
|
|
Reading International, Inc. and
SubsidiariesSegment Results(Unaudited;
U.S. dollars in thousands)
|
|
Three Months Ended |
|
|
March 31, |
|
% ChangeFavorable/ |
(Dollars in thousands) |
|
2024 |
|
|
2023 |
|
|
(Unfavorable) |
Segment revenue |
|
|
|
|
|
|
|
|
|
Cinema |
|
|
|
|
|
|
|
|
|
United States |
|
$ |
21,308 |
|
|
$ |
21,811 |
|
|
(2 |
) |
% |
Australia |
|
|
17,322 |
|
|
|
17,212 |
|
|
1 |
|
% |
New Zealand |
|
|
2,641 |
|
|
|
2,964 |
|
|
(11 |
) |
% |
Total |
|
$ |
41,271 |
|
|
$ |
41,987 |
|
|
(2 |
) |
% |
Real estate |
|
|
|
|
|
|
|
|
|
United States |
|
$ |
1,485 |
|
|
$ |
1,554 |
|
|
(4 |
) |
% |
Australia |
|
|
3,083 |
|
|
|
3,137 |
|
|
(2 |
) |
% |
New Zealand |
|
|
365 |
|
|
|
374 |
|
|
(2 |
) |
% |
Total |
|
$ |
4,933 |
|
|
$ |
5,065 |
|
|
(3 |
) |
% |
Inter-segment elimination |
|
|
(1,152 |
) |
|
|
(1,245 |
) |
|
7 |
|
% |
Total segment
revenue |
|
$ |
45,052 |
|
|
$ |
45,807 |
|
|
(2 |
) |
% |
Segment operating
income (loss) |
|
|
|
|
|
|
|
|
|
Cinema |
|
|
|
|
|
|
|
|
|
United States |
|
$ |
(3,436 |
) |
|
$ |
(4,326 |
) |
|
21 |
|
% |
Australia |
|
|
(498 |
) |
|
|
(125 |
) |
|
(>100 |
) |
% |
New Zealand |
|
|
(231 |
) |
|
|
(161 |
) |
|
(43 |
) |
% |
Total |
|
$ |
(4,165 |
) |
|
$ |
(4,612 |
) |
|
10 |
|
% |
Real estate |
|
|
|
|
|
|
|
|
|
United States |
|
$ |
(367 |
) |
|
$ |
(217 |
) |
|
(69 |
) |
% |
Australia |
|
|
1,458 |
|
|
|
1,413 |
|
|
3 |
|
% |
New Zealand |
|
|
(201 |
) |
|
|
(190 |
) |
|
(6 |
) |
% |
Total |
|
$ |
890 |
|
|
$ |
1,006 |
|
|
(12 |
) |
% |
Total segment
operating income (loss)(1) |
|
$ |
(3,275 |
) |
|
$ |
(3,606 |
) |
|
9 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Total segment operating
income is a non-GAAP financial measure. See the discussion of
non-GAAP financial measures that follows.
Reading International, Inc. and
SubsidiariesReconciliation of EBITDA and Adjusted
EBITDA to Net Income (Loss)(Unaudited; U.S. dollars in
thousands)
|
|
Three Months Ended |
|
|
March 31, |
(Dollars in thousands) |
|
2024 |
|
|
2023 |
|
Net Income (loss) attributable to Reading International, Inc. |
|
$ |
(13,228 |
) |
|
$ |
(11,111 |
) |
Add: Interest expense, net |
|
|
5,286 |
|
|
|
4,117 |
|
Add: Income tax expense (benefit) |
|
|
(223 |
) |
|
|
(480 |
) |
Add: Depreciation and amortization |
|
|
4,205 |
|
|
|
4,639 |
|
Adjustment for infrequent events anddiscontinued operations |
|
|
— |
|
|
|
— |
|
EBITDA |
|
$ |
(3,960 |
) |
|
$ |
(2,835 |
) |
Adjustments for: |
|
|
|
|
|
|
None |
|
|
— |
|
|
|
— |
|
Adjusted
EBITDA |
|
$ |
(3,960 |
) |
|
$ |
(2,835 |
) |
|
|
|
|
|
|
|
|
|
Reading International, Inc. and
SubsidiariesReconciliation of Total Segment
Operating Income (Loss) to Income (Loss) before Income
Taxes(Unaudited; U.S. dollars in thousands)
|
|
Three Months Ended |
|
|
March 31, |
(Dollars in thousands) |
|
2024 |
|
|
2023 |
|
Segment operating income (loss) |
|
$ |
(3,275 |
) |
|
$ |
(3,606 |
) |
Unallocated corporate
expense |
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
(102 |
) |
|
|
(179 |
) |
General and administrative expense |
|
|
(4,154 |
) |
|
|
(4,095 |
) |
Interest expense, net |
|
|
(5,286 |
) |
|
|
(4,117 |
) |
Equity earnings of
unconsolidated joint ventures |
|
|
(25 |
) |
|
|
19 |
|
Gain (loss) on sale of
assets |
|
|
(1,125 |
) |
|
|
— |
|
Other income (expense) |
|
|
341 |
|
|
|
174 |
|
Income (loss) before
income tax expense |
|
$ |
(13,626 |
) |
|
$ |
(11,804 |
) |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
This Earnings Release presents total segment
operating income (loss), EBITDA, and Adjusted EBITDA, which are
important financial measures for our 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 earnings (loss) per share,
cash flows or net income (loss) as determined in accordance with
U.S. GAAP. Total segment operating income (loss) and EBITDA, as we
have calculated them, may not be comparable to similarly titled
measures reported by other companies.
Total segment
operating income (loss) – We evaluate the performance of
our business segments based on segment operating income (loss), and
management uses total segment operating income (loss) as a measure
of the performance of operating businesses separate from
non-operating factors. We believe that information about total
segment operating income (loss) assists investors by allowing them
to evaluate changes in the operating results of our Company’s
business separate from non-operational factors that affect net
income (loss), thus providing separate insight into both operations
and the other factors that affect reported results.
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 (loss) 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.
EBITDA also fails 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 EBITDA, we further adjusted the EBITDA for certain
items we believe to be external to our core business and not
reflective of our costs of doing business or results of operation.
Specifically, we have adjusted for (i) legal expenses relating to
extraordinary litigation, and (ii) any other items that can be
considered non-recurring in accordance with the two-year SEC
requirement for determining an item is non-recurring, infrequent or
unusual in nature.
For more information, contact:
Gilbert Avanes – EVP, CFO, and Treasurer
Andrzej Matyczynski – EVP Global Operations
(213) 235-2240
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