- Reported EBITDA(1) of $14.5 million for the 2005 Quarter
LOS ANGELES, Aug. 9 /PRNewswire-FirstCall/ -- Reading International, Inc. (AMEX:RDI) announced today a milestone quarter ended June 30, 2005, in which we advanced the geographic focus of our operations, in line with our stated business plan, by disposing of our Puerto Rico cinema assets and by exchanging our Glendale, California office building for the land interest underlying our Cinemas 1, 2 & 3 in Manhattan.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030403/LATH058LOGO) Second Quarter 2005 Highlights * Sale of our Puerto Rico circuit for $2.3 million plus assumed
liabilities, generating a gain on sale of $1.6 million.
* Sale of our Glendale California office building, our last remaining
domestic property that had no entertainment component, for
$21.0 million, resulting in a gain of $12.0 million.
* Completion of the purchase of the underlying fee interest in one of
our Manhattan cinemas, for a total purchase price of $12.2 million.
* Revenue from continuing operations at $24.9 million increased 24.2%
compared to Q2 2004, notwithstanding a decline in gross revenues
per screen.
* Reported EBITDA(1) at $14.5 million, includes $13.6 million of gain on
sale of the Puerto Rico circuit and the Glendale office building. Excluding this gain our EBITDA(1) was $0.9 million compared to
$3.3 million in Q2 2004.
Second Quarter 2005 Discussion
In line with our stated objective to dispose of, or put to alternative use, some or all of our interests in various operating assets, in order to maximize the values of such assets, we completed in the quarter, the following: * The sale of our Puerto Rico circuit as of June 8, 2005 consisting of
six leasehold cinemas with 48 screens for $2.3 million plus assumed
liabilities. This sale generated a gain of $1.6 million for the
quarter and represents the culmination of four years effort. Our
Puerto Rico circuit had underperformed for a number of years
principally due to competition from the dominant exhibitor in that
market who currently controls in excess of 80% of that market. While
we have brought an anti-trust action against that competitor, we
believe that the prospects for Puerto Rico are far less attractive
than opportunities currently available to us in Australia and New
Zealand, and have accordingly, chosen to focus our overseas operations
in these markets. As a result of the lack of any major blockbuster
film in Puerto Rico and the generally poor product available for show
during Q2 2005, and the loss of 3 weeks trading due to the sale, the
EBITDA(1) from the circuit was approximately $1.4 million lower than
in Q2 2004.
* The sale on May 17, 2005 of our last remaining non-entertainment
domestic property, other than land, our Glendale California office
building, for $21.0 million. This sale generated a gain of $12.0
million. All the cash proceeds from the sale, approximately $10.3
million, were used in the purchase for $12.2 million of the Cinemas 1,
2 & 3 land and of the landlord's interest in the ground lease,
encumbering the land, as part of a tax deferred exchange under Section
1031 of the Internal Revenue Code. The sale of the Glendale building
on May 17, 2005 resulted in a negative effect on the EBITDA(1) for Q2
2005 as compared to the same quarter in 2004, of approximately
$251,000.
Revenue from continuing operations (all financial information in the attached pages relating to the sold assets, is included under separate headings marked "held for sale" or "discontinued operation", this includes prior year data which has been restated) increased from $20.0 million in Q2 2004 to $24.9 million in 2005, a 24.2% increase. This increase was despite a continuing industry-wide lackluster film release schedule, in the cinema exhibition aspects of our operations and despite declining average per screen revenues in Australia and New Zealand. Top grossing films for Q2 2005 were led by "Star Wars: Episode III: Return of the Sith", followed by "Mr. and Mrs. Smith" and "Madagascar". The late-year 2004 acquisitions in Australia and New Zealand continue to add to the cinema revenue, which was up by approximately $2.0 million in each of the countries. Real estate revenue in the US was up $286,000 for the quarter from last year, primarily from our live theater rentals. In New Zealand also, the late-year real estate acquisitions made in conjunction with the purchase of the "Movieland" cinemas, are the primary drivers of the real estate revenue growth of $537,000. There was only marginal help from currency from year-to-year.
As a percent of revenue, operating expense, at 79.3% in the 2005 quarter was slightly worse than the 77.9% in Q2 2004. The primary driver for this was a drop in per screen revenues, due to, in our view, lackluster product mix and the ongoing effects of the integration of the acquisitions resulted in a higher cost/revenue mix. Our cinema admissions decline in Australia and New Zealand have been in line with results generally in the cinema exhibition industry in those markets.
Depreciation and amortization was up $355,000 or 13.4%, from $2.7 million to $3.0 million for the 2005 quarter. This increase reflects the 2004 acquisitions of the "Anderson" and "Movieland" circuits.
General and administrative expense grew $635,000 or 18.2%, from $3.5 million to $4.1 million in the 2005 quarter. This increase was primarily due to the higher legal expenditures with respect to the prosecution of our continuing anti-trust litigation in the US.
The other significant drivers that effected the 2005 quarter compared to the 2004 quarter were: * In the 2004 quarter, a gain on realized currency transactions was the
primary driver for the $1.6 million "other income," as compared to
"other income" of $745,000 in the 2005 quarter, a reduction
of $817,000.
* In the 2005 quarter, income from discontinued operations of $12.9
million compared to $441,000 in the 2004 quarter, was almost totally
made up of the gain on sale of the assets discussed above of $13.6
million.
As a result of the above, we reported a net income of $10.5 million for the 2005 quarter compared to a loss of $584,000 in the 2004 quarter. Our reported EBITDA(1) at $14.5 million for the 2005 quarter was $11.2 million higher than the 2004 quarter. Adjusting for the $13.6 million gain on sale of assets, our EBITDA(1) was $914,000 compared to $3.3 million in the 2004 quarter. This shortfall of $2.4 million is reconciled as follows: In Millions
Total shortfall $(2.4)
Puerto Rico trading shortage $1.4
Glendale office building rental shortage $0.3
Legal cost increase $0.6
Realized currency transaction gain shortage $0.8 Increase in EBITDA(1) attributed to continuing
operations $0.7 First Half 2005 Summary * Revenue from continuing operations increased by 25.8% or $10.4
million, to $50.4 million in the first half 2005 compared to 2004,
while the operating expense percentage remained constant at
approximately 77% in both periods.
* Depreciation and amortization increased by $744,000 to $6.2 million in
2005, driven primarily by the late-year cinema acquisitions in 2004.
* General and administrative expense grew $1.0 million to $7.9 million
in the 2005 period. This increase is predominantly due to the
increase in legal expense in connection with the prosecution of our
continuing anti-trust litigation in the US.
* Interest expense increased by $490,000 to $1.6 million in 2005, due to
higher borrowings and higher interest rates.
* Other income decreased by $1.9 million to $879,000 in 2005, primarily
due to realized currency transaction gains in 2004, not repeated
in 2005.
* Income from discontinued operations at $12.2 million in 2005 was
driven by the above discussed gain on sale of $13.6 million.
As a result we reported a net income of $8.1 million for the 2005 half year compared to a loss of $1.9 million in the 2004 half year. Our reported EBITDA(1) at $16.9 million for the half year 2005 was $10.9 million higher than the 2004 half year. Adjusting for the $13.6 million gain on sale of assets, our EBITDA(1) was $3.2 million compared to $6.0 million in the 2004 half year. This shortfall of $2.8 million is reconciled as follows: In Millions
Total shortfall $(2.8)
Puerto Rico trading shortage $1.7
Glendale trading shortage $0.3
Legal cost increase $1.0
Realized currency transaction gain shortage $1.9 Increase in EBITDA(1) attributed to continuing
operations $2.1 Balance Sheet
Total assets at June 30, 2005 were $236.8 million compared to $230.2 million at December 31, 2004. The currency exchange rates for Australia and New Zealand as of June 30, 2005 were $0.7618 and $0.6959, respectively, and as of December 31, 2004, these rates were $0.7709 and $0.7125 respectively. As a result, currency had a slight negative effect on the balance sheet at June 30, 2005 compared to December 31, 2004.
Cash and cash equivalents were only slightly down by $198,000 at $12.1 million compared to $12.3 million at December 31, 2004. The decrease in cash was primarily driven by: * $10.3 million related to the sale of our Glendale office building;
* $2.3 million related to the sale of our Puerto Rico cinema operation;
and
* $15.3 million of new borrowings; offset by
* $13.5 million of capital expenditures related to the on-going
construction work on our Newmarket shopping center development;
* $1.0 million related to the purchase of property and equipment in the
U.S. and New Zealand;
* $1.7 million used to support our Puerto Rico operation prior to its
sale;
* $963,000 attributed to our additional investment in the 205-209 East
57th Street Associates, LLC, the developer of Place 57 in Manhattan;
and
* $11.5 million paid for the acquisition of the land underlying the
Cinemas 1, 2, 3 in New York.
In addition, we have sufficient borrowing capacity under our new corporate facility from our Australian bank, to recoup substantially all of the working capital that we have invested in our 2004 Australian acquisitions, if we so choose. At the present time we have approximately $12.0 million in undrawn funds under our Australian Corporate Credit Facility and are in discussions with our bankers to raise that by a further $9.7 million for an aggregate of $21.7 million.
As a result of the above, our negative working capital has been reduced to $5.0 million compared to $6.8 million at December 31, 2004. Negative working capital is typical in the cinema industry, due to the lag time between the collection of box office and concession receipts and the payment of film distributors and vendors.
The resulting stockholders' equity was $108.8 million at June 30, 2004 compared to $102.0 at December 31, 2004.
Real Estate Update 205-209 East 57th Street Associates, LLC. During the first quarter of 2005, we increased our investment by $963,000 to $3.3 million in the 205-209 East 57th Street Associates, LLC ("57th Street Associates"). The increase in investment was done to maintain our 25% equity ownership in the joint venture, in light of certain higher than initially budgeted construction costs. Construction is currently anticipated to be complete by mid-2006, and condominium units in the project are currently being offered for sale. The managing member of 57th Street Associates reports that it now has under contract 58 out of 67 units, at an average selling price of $1,296 per square foot an increase of $196 per square foot from the project's budget. We currently anticipate that construction will be completed and the sale of individual condominium units closed, during the second quarter of 2006.
Subsequent Events Stock Issuance Upon Exercise of Employees Stock Options. On July 11, 2005, we issued 925,000 shares of Class A Non-Voting Common Stock at an exercise price of $3.80 per share to Mr. James J. Cotter, our Chairman of the Board and Chief Executive Officer, in connection with options issued to him in July 2002 under our stock based compensation plan. Mr. Cotter paid the exercise price by surrendering 486,842 shares of Class A Non-Voting Common Stock, resulting in a net increase in the number of shares of Class A Non- Voting Common Stock outstanding of 438,158 shares.
Cinemas 1, 2 & 3 Ground Lease. On August 3, 2005, our Board's Audit and Conflicts Committee, comprised entirely of outside independent directors, approved management's proposal to acquire from Sutton Hill Capital LLC ("SHC") for $9.0 million, its tenant's interest in the ground lease estate that is currently sandwiched between (i) our fee ownership of the underlying land and (ii) our current possessory interest as the tenant in the building and improvements constituting the Cinemas 1, 2 & 3 in Manhattan. We are advised that the transactional documentation has been substantially approved by SHC, and it is currently anticipated that we should be able to close the transaction before the end of August. The Cinemas 1, 2 & 3 are located on 3rd Avenue between 59th and 60th Streets. Closing is subject to finalization of the necessary transactional documentation. Accordingly, no assurances can be given at this time that the above referenced transaction will ultimately close on the terms described above, or at all.
About Reading International, Inc.
Reading International is in the business of owning and operating cinemas and developing, owning and operating real estate assets. Our business consists primarily of: * the development, ownership and operation of multiplex cinemas in the
United States, Australia and New Zealand; and
* the development, ownership and operation of retail and commercial real
estate in Australia, New Zealand and the United States, including
entertainment-themed retail centers ("ETRC") in Australia and New
Zealand and live theater assets in Manhattan and Chicago in the
United States.
Reading manages its worldwide cinema business under various different brands: * in the United States, under the
- Reading brand,
- Angelika Film Center brand (http://angelikafilmcenter.com/), and
- City Cinemas brand (http://citycinemas.moviefone.com/);
* in Australia, under the Reading brand
(http://www.readingcinemas.com.au/); and
* in New Zealand, under the
- Reading (http://www.readingcinemas.co.nz/) and
- Berkeley Cinemas (http://www.berkeleycinemas.co.nz/) brands.
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 view as to the risks and uncertainties involved, and may have different views as to future events or our operating performance.
Among the factors that could cause actual results to differ materially from those expressed in or underlying our forward-looking statements are the following: * With respect to our cinema operations: - The number and attractiveness to movie goers of the films released
in future periods; - The amount of money spent by film distributors to promote their
motion pictures; - The licensing fees and terms required by film distributors from
motion picture exhibitors in order to exhibit their films; - The comparative attractiveness of motion pictures as a source of
entertainment and willingness and/or ability of consumers (i) to
spend their dollars on entertainment and (ii) to spend their
entertainment dollars on movies in an outside the home environment;
and - The extent to which we encounter competition from other cinema
exhibitors, from other sources of outside of the home entertainment,
and from inside the home entertainment options, such as "home
theaters" and competitive film product distribution technology such
as, by way of example, cable, satellite broadcast, DVD and VHS
rentals and sales, and so called "movies on demand;" * With respect to our real estate development and operation activities: - The rental rates and capitalization rates applicable to the markets
in which we operate and the quality of properties that we own; - The extent to which we can obtain on a timely basis the various land
use approvals and entitlements needed to develop our properties; - The availability and cost of labor and materials; - Competition for development sites and tenants; and - The extent to which our cinemas can continue to serve as an anchor
tenant which will, in turn, be influenced by the same factors as
will influence generally the results of our cinema operations; * With respect to our operations generally as an international company
involved in both the development and operation of cinemas and the
development and operation of real estate; and previously engaged for
many years in the railroad business in the United States: - Our ongoing access to borrowed funds and capital and the interest
that must be paid on that debt and the returns that must be paid on
such capital; - The relative values of the currency used in the countries in which
we operate; - Changes in government regulation, including by way of example, the
costs resulting from the implementation of the requirements of
Sarbanes Oxley; - Our labor relations and costs of labor (including future government
requirements with respect to pension liabilities, disability
insurance and health coverage, and vacations and leave); - Our exposure from time to time to legal claims and to uninsurable
risks such as those related to our historic railroad operations,
including potential environmental claims and health related claims
relating to alleged exposure to asbestos or other substances now or
in the future recognized as being possible causes of cancer or other
health related problems; - Changes in future effective tax rates and the results of currently
ongoing and future potential audits by taxing authorities having
jurisdiction over our various companies; and - Changes in applicable accounting policies and practices.
The above list is not necessarily exhaustive, as business is by definition unpredictable and risky, and subject to influence by numerous factors outside of our control such as changes in government regulation or policy, competition, interest rates, supply, technological innovation, changes in consumer taste and fancy, weather, and the extent to which consumers in our markets have the economic wherewithal to spend money on beyond-the-home entertainment.
Given the variety and unpredictability of the factors that will ultimately influence our businesses and our results of operation, it naturally follows that no guarantees can be given that any of our forward-looking statements will ultimately prove to be correct. Actual results will undoubtedly vary and there is no guarantee as to how our securities will perform either when considered in isolation or when compared to other securities or investment opportunities.
Finally, please understand that we undertake no obligation to publicly update or to revise any of our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. Accordingly, you should always note the date to which our forward-looking statements speak.
Additionally, certain of the presentations included in this press release may contain "pro forma" information or "non-US GAAP financial measures." In such case, a reconciliation of this information to our US GAAP financial statements will be made available in connection with such statements.
(1) The Company defines EBITDA as net income (loss) before net interest
expense, income tax benefit, depreciation, and amortization. EBITDA
is presented solely as a supplemental disclosure as management
believes it to be a relevant and useful measure to compare operating
results among its properties and competitors, as well as a
measurement tool for evaluation of operating personnel. EBITDA is
not a measure of financial performance under the promulgations of
generally accepted accounting principles ("GAAP"). EBITDA should not
be considered in isolation from, or as a substitute for, net loss,
operating loss or cash flows from operations determined in accordance
with GAAP. Finally, EBITDA is not calculated in the same manner by
all companies and accordingly, may not be an appropriate measure for
comparing performance amongst different companies. See the
"Supplemental Data" table attached for a reconciliation of EBITDA to
net income (loss).
For more information, contact: Andrzej Matyczynski, Chief Financial Officer
Reading International, Inc. (213) 235 2240 Reading International, Inc. and Subsidiaries
Supplemental Data
Reconciliation of EBITDA to Net Loss (Unaudited)
(dollars in thousands, except per share amounts) Three Months Ended Six Months Ended
Statements of Operations June 30, June 30,
2005 2004 2005 2004 Revenue $24,853 $20,015 $50,377 $40,031
Operating expense
Cinema/real estate 19,697 15,597 38,899 30,848
Depreciation and
amortization 3,003 2,648 6,166 5,422
General and
administrative 4,132 3,497 7,879 6,895 Operating loss (1,979) (1,727) (2,567) (3,134) Interest expense, net 708 601 1,574 1,084
Other income 745 1,562 879 2,755
Income from discontinued
operations 12,943 441 12,231 71
Income tax expense 220 134 453 435
Minority interest expense 281 125 419 110 Net income (loss) $10,500 $(584) $8,097 $(1,937) Basic earnings (loss)
per share $0.48 $0.03 $0.37 $(0.09)
Diluted earnings (loss)
per share $0.48 $(0.03) $0.37 $(0.09) EBITDA* 14,520 3,277 16,858 5,961 EBITDA* change 11,243 10,897 * EBITDA presented above is net loss adjusted for interest expense (net
of interest income), income tax expense, depreciation and amortization
expense, and an adjustment for discontinued operations (this includes
interest expense and depreciation and amortization for the
discontinued operations).
Reconciliation of EBITDA to the net loss is presented below:
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004 Net income (loss) $10,500 $(584) $8,097 $(1,937)
Add: Interest expense, net 708 601 1,574 1,084
Add: Income tax provision 220 134 453 435
Add: Depreciation and
amortization 3,003 2,648 6,166 5,422
Adjustment for discontinued
operations 89 478 568 957 EBITDA $14,520 $3,277 $16,858 $5,961 Reading International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except per share amounts) Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenue
Cinema $20,983 $16,969 $42,899 $34,014
Real estate 3,870 3,046 7,478 6,017
24,853 20,015 50,377 40,031
Operating expense
Cinema 17,642 13,819 35,235 27,515
Real estate 2,055 1,778 3,664 3,333
Depreciation and amortization 3,003 2,648 6,166 5,422
General and administrative 4,132 3,497 7,879 6,895
26,832 21,742 52,944 43,165 Operating loss (1,979) (1,727) (2,567) (3,134) Non-operating income (expense)
Interest income 36 259 109 594
Interest expense (744) (860) (1,683) (1,678)
(Loss) gain on Sale of Assets (3) 127 (3) 127
Other income 562 897 292 1,564 Loss before minority interest,
income from discontinued
operations, income tax expense,
and equity earnings of
unconsolidated investments (2,128) (1,304) (3,852) (2,527)
Minority interest expense 281 125 419 110 Loss from continuing operations (2,409) (1,429) (4,271) (2,637)
Discontinued operations:
Gain on disposal of business
operations 13,610 -- 13,610 --
(Loss) income from
discontinued operations (667) 441 (1,379) 71 Income (loss) before income tax
expense and equity earnings of
unconsolidated investments 10,534 (988) 7,960 (2,566)
Income tax expense 220 134 453 435
Income (loss) before equity
earnings from unconsolidated
investments 10,314 (1,122) 7,507 (3,001)
Equity earnings of
unconsolidated investments 186 538 590 1,064
Net income (loss) $10,500 $(584) $8,097 $(1,937)
Earning (loss) per common
share - basic:
Loss from continuing
operations $(0.11) $(0.05) $(0.19) $0.00
Income (loss) from
discontinued
operations, net 0.59 0.02 0.56 (0.09)
Basic earnings (loss)
per share $0.48 $(0.03) $0.37 $(0.09)
Weighted average number of
shares outstanding - basic 1,988,031 21,899,290 21,988,031 21,899,290 Earning (loss) per common
share - diluted:
Loss from continuing
operations $(0.11) $(0.05) $(0.19) $0.00
Income (loss) from
discontinued operations,
net 0.59 0.02 0.56 (0.09)
Diluted earnings (loss) per
share $0.48 $(0.03) $0.37 $(0.09)
Weighted average number of
shares
outstanding - diluted 21,988,031 21,899,290 21,988,031 21,899,290 Reading International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands) June 30, December 31,
2005 2004
ASSETS
Cash and cash equivalents $12,094 $12,292
Receivables 5,354 7,162
Inventory 498 720
Investment in marketable securities, at cost 29 29
Restricted cash 8 815
Assets held for sale -- 10,931
Prepaid and other current assets 3,881 2,181
Total current assets 21,864 34,130 Property & equipment, net 149,969 131,672
Property held for development 28,168 27,346
Investment in unconsolidated joint ventures 8,327 7,352
Capitalized leasing costs, net 17 20
Goodwill 13,648 13,816
Intangible assets, net 11,544 11,957
Other assets 3,307 3,933 Total assets $236,844 $230,226 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities
Accounts payable and accrued liabilities $12,255 $12,335
Film rent payable 4,502 3,508
Notes payable - current portion 1,088 401
Income taxes payable 7,046 6,714
Deferred current revenue 2,012 2,177
Liabilities related to assets held for sale -- 15,210
Other current liabilities 10 599
Total current liabilities 26,913 40,944 Notes payable - long-term portion 85,714 72,664
Deferred non-current revenue 543 522
Other liabilities 11,197 10,615 Total liabilities 124,367 124,745 Commitments and contingencies -- -- Minority interest in consolidated
subsidiaries 3,664 3,470 Stockholders' equity
Class A Nonvoting Common Stock, par value
$0.01, 100,000,000 shares authorized,
34,524,983 issued and 20,533,550 outstanding
at June 30, 2005 and 34,444,167 issued and
20,452,733 outstanding at December 31, 2004 205 205
Class B Voting Common Stock, par value $0.01,
20,000,000 shares authorized, 2,148,745
issued and 1,495,490 outstanding at
June 30, 2005 and 2,198,761 shares issued
and 1,545,506 outstanding at December 31, 2004 15 15
Nonvoting Preferred Stock, par value $0.01,
12,000 shares authorized -- --
Additional paid-in capital 124,536 124,307
Accumulated deficit (46,805) (54,902)
Accumulated other comprehensive income 30,862 32,386 Total stockholders' equity 108,813 102,011 Total liabilities and stockholders' equity $236,844 $230,226
http://www.newscom.com/cgi-bin/prnh/20030403/LATH058LOGO http://photoarchive.ap.org/ DATASOURCE: Reading International, Inc.
CONTACT: Andrzej Matyczynski, Chief Financial Officer of Reading International, Inc., +1-213-235-2240 Web site: http://www.readingcinemas.com.au/ http://angelikafilmcenter.com/ http://citycinemas.moviefone.com/ http://www.readingcinemas.co.nz/ http://www.berkeleycinemas.co.nz/
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