Earnings Call Webcast to Discuss 2019 Fourth
Quarter and Full Year Financial Results Scheduled to Post to
Corporate Website on Wednesday, March 18, 2020
Reading International, Inc. (NASDAQ: RDI), an internationally
diversified cinema and real estate company with operations and
assets in the United States (the “U.S.”), Australia and New
Zealand, today announced results for the fourth quarter and full
year ended December 31, 2019.
“First and foremost, I want to acknowledge the unprecedented
situation with COVID-19, or coronavirus, and the uncertainty it is
bringing to our communities and daily lives. For now, we are
continuing to operate our movie theaters in the U.S., Australia and
New Zealand. We have communicated the changes to our operations and
business that we have adapted to address the COVID-19 situation. As
we monitor this evolving situation, we will continue to take
guidance from governmental authorities and act accordingly,
including temporarily closing our movie theaters,” said President
and Chief Executive Officer, Ellen Cotter.
“Today, with respect to our real estate operations, our
Australian centers (Newmarket Village, Auburn Redyard, Cannon Park
and The Belmont Common) remain open for business. Certain centers,
including Newmarket Village, anchored by a Coles Supermarket, are
providing a necessary outlet for food and supplies. The producers
of shows at our Minetta Lane Theatre in New York City and Royal
George Theatre in Chicago have suspended performances for the next
few weeks. Effective as of today, the producers of STOMP at the
Orpheum Theatre in New York City will suspend performances until
further notice. Though the COVID-19 situation will present us with
various short term challenges in the U.S., Australia and New
Zealand, we remain optimistic and committed to the long-term
opportunities in the cinema business and our strong asset base,
which reflects an interesting and diverse real estate portfolio,”
continued Ms. Cotter.
Consolidated Revenues for the year ended December 31, 2019 were
$276.8 million compared to $308.9 million in 2018. Our Consolidated
Revenues are principally derived from our cinema operations, and on
a book value basis, at December 31, 2019, 54% of our assets were
invested in cinemas, and the other, approximately 44%, were
invested in real estate. Approximately 53% of these assets were
located in the U.S. with the remainder in Australia and New
Zealand. As of December 31, 2019, the geographic distribution of
our Consolidated Revenues were 55% in the U.S. and 45% in Australia
and New Zealand, collectively.
Our real estate development and the rental or licensing of
retail, commercial and live theatre assets comprise of
approximately 22,188,000 square feet of land and approximately
844,000 square feet of net rentable area. Manukau/Wiri (recently
rezoned from agricultural to industrial use) is essentially carried
at its agricultural use value. During 2019, we invested $22.7
million in building and upgrading our real estate assets and $22.9
million in acquiring, fitting out, and upgrading our cinema assets.
Over the past three years ended December 31, 2019, our capital
expenditures totaled $45.7 million, $54.7 million, and $77.1
million, respectively.
We secured two major loans amidst a volatile time in the stock
market which further demonstrates our institutional lenders
continuing confidence in our long-term business plan. On March 6,
2020, we extended both our $55.0 million credit facility with the
Bank of America and Bank of Hawaii and our $5.0 million line with
Bank of America to March 6, 2023. On March 13, 2020, we refinanced
our credit facility with Valley National Bank increasing the loan
amount from $20.0 million to $25.0 million and extending the
maturity date to April 1, 2022, with two six-month options to
extend through April 1, 2023. Our outstanding institutional
indebtedness at December 31, 2019 was $209.2 million and at the
present time that indebtedness has an average term of 47
months.
Stock Repurchase Program
- On March 10, 2020, our Board of Directors authorized a $25.0
million increase for our Stock Repurchase Program and extended the
program until March 2, 2022. At the present time we have
approximately $26.0 million available under this program. During
the fourth quarter of 2019, we returned $3.2 million to
stockholders through the repurchase of 302,038 shares of our Class
A Common Stock, at an average price per share of $10.56. For the
full year ended December 31, 2019, we returned $14.5 million to
stockholders through the repurchase of 1.2 million shares of our
Class A Common Stock, at an average price per share of $12.52 per
share.
- The increased authorization under our Stock Repurchase Program
will allow Reading to repurchase its Class A Non-Voting 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. All purchases are subject to
the availability of shares at prices that are acceptable to
Reading, and accordingly, no assurances can be given as to the
timing or number of shares that may ultimately be acquired pursuant
to this authorization. The Board’s authorization is for a two-year
period, expiring March 2, 2022, or earlier should the full
repurchase authorization be expended. The repurchase program does
not obligate the Company to acquire any specific number of shares
and may be suspended or terminated at any time.
Fourth Quarter and Full Year 2019
Summary
Consolidated Revenues for the fourth quarter ended December 31,
2019 were $68.9 million compared to $74.9 million for the fourth
quarter of 2018. Consolidated Revenues for the year ended December
31, 2019 were $276.8 million compared to $308.9 million in
2018.
- EBITDA for the fourth quarter ended December 31, 2019 was $8.1
million compared to $13.4 million for the fourth quarter of 2018.
EBITDA for the full year ended December 31, 2019 was $33.1 million
compared to $46.4 million for the prior year.
- A non-recurring increase in income tax expense of $29.0
million, mainly due to the establishment of a $27.2 million
valuation allowance on U.S. deferred tax assets in the fourth
quarter of 2019, was the primary driver for the decrease in net
income attributable to RDI common stockholders for the quarter
ended December 31, 2019 to a loss of $27.5 million. Similarly, for
the year ended December 31, 2019, net income attributable to RDI
common stockholders decreased to a loss of $26.4 million compared
to $14.0 million in the previous year. The net loss described is
not a cash loss but was rather due the accounting requirements
related to the establishment of the above-referenced fourth quarter
$27.2 million tax valuation allowance.
- A 7.0% decline in the Australian dollar and a 4.9% decline in
the New Zealand dollar compared to the U.S. dollar for the year
ended December 31, 2019 also impacted our overall results. As of
December 31, 2019, 37% of our Consolidated Revenues were generated
in Australia and 8% of our Total Revenues were generated in New
Zealand.
Cinema Operations Summary
- Our fourth quarter and full year 2019 results for our global
cinema division were adversely impacted by (i) a weaker slate of
conventional film product in the U.S., Australia and New Zealand
compared to 2018, (ii) a significantly weaker slate from the
specialty studios in the U.S. compared to 2018, which
disproportionally impacted our specialty theatres in the U.S.,
(iii) the expiration of the leases underlying our profitable
operations at the 86th Street Theatre, Paris Theatre, and Beekman
Theatre in New York City, and (iv) the 2019 ongoing temporary
closure, due to seismic concerns, of our Reading Cinemas at
Courtenay Central, which was historically one of the top grossing
cinemas in our global cinema division.
- We have been creating more engaging cinema experiences at our
venues to compete with streaming and other platforms. One of our
strategic priorities over recent periods has been the elevation of
our food and beverage (“F&B”) menus. We saw success in 2019, as
each of our cinema divisions achieved record results in Spend per
Patron (“SPP”), on a functional currency basis, for the fourth
quarter and year ended December 31, 2019. In the U.S., at $5.52,
our F&B SPP for the year ended December 31, 2019 exceeded the
reported SPPs of major U.S. publicly reporting exhibitors.
- Additionally, for the fourth quarter and year ended December
31, 2019 with $1.3 million and $5.0 million, respectively, we
generated record revenues from online service fee revenue from the
sale of movie tickets from our global websites and apps.
- In 2019, we added four theaters, totaling 23 screens, to our
circuits in Australia and New Zealand. By the end of 2022, we
anticipate adding an additional four theaters, totaling 25 screens,
to our Australian cinema circuit pursuant to agreements currently
in place.
Real Estate Operations Summary:
- While the fourth quarter ended December 31, 2019 delivered
lower revenue and operating income compared to the prior period in
2018, the revenue and operating income for the U.S., Real Estate
Division for the full year ended December 31, 2019 delivered record
results supported by one of the strongest operational years in the
last decade from our Live Theatre division when adjusted for legal
fees related to the STOMP litigation.
- Our U.S. Real Estate division has substantially completed
construction of our 44 Union Square development project, the former
Tammany Hall located prominently at the northeast corner of Union
Square Park in New York City. We expanded the usable square footage
of the historic building to 73,113 square feet. The building is now
in the lease-up phase and we are working with our retail and office
leasing teams to show the completed property to a variety of
potential tenants. A virtual tour of the property is available at
44unionsquare.com. Additionally, we have extended our financing
with Bank of the Ozarks ($36.0 million drawn at December 31, 2019)
through December 29, 2020. As the first building topped by a glass
dome in New York City with a fabled past, our project was awarded
in 2017 the AIA QUAD Design Honor Award, and the Architizer A+
Awards, Typology Winner, Commercial Award. In March 2015, the
design was unanimously approved by the New York City Landmarks
Preservation Commission (“LPC”). LPC commissioners offered praises
such as “This is a gift to the city,” “masterful,” and “calls
attention to a cultural icon on the square.” It is one of a very
few number of sites in New York City providing major tenant(s) with
a “brandable” site at a location known to the entire City.
- In 2019, most of our Courtenay Central center in Wellington,
New Zealand was closed due to seismic concerns. The Company has
been exploring plans to re-create a vibrant gathering place for
both Wellingtonians and tourists at Courtenay Central. Our current
plans are focused on a complete upgrade of the Reading Cinemas,
coupled with a 100% NBS (New Building Standard) seismic upgrade of
the venue and the retail re-activation of the ground floor having
approximately 40,600 square feet of net rentable space. We are
currently considering a variety of uses for this space, including
retail, food, beverage, and grocery components. Wellington
continues to be rated as one of the top cities in the world in
which to live, and we continue to believe that the Courtenay
Central site is located in one of the most vibrant and growing
commercial and entertainment precincts of Wellington. In 2019,
UNESCO named Wellington as a UNESCO Creative City of Film.
- With 78 tenants across our centers (Newmarket Village (a suburb
of Brisbane, QLD), Cannon Park (Townsville, (QLD)), Auburn Redyard
(a suburb of Sydney (NSW)) and The Belmont Common (a suburb of
Perth (WA)), our Australian real estate division reported record
revenues and operating income for the fourth quarter and year ended
December 31, 2019, on a functional currency basis.
The following table summarizes the fourth quarter and full year
results for 2019 and 2018:
Quarter Ended
Year Ended
December 31,
% Change Favorable/
December 31,
% Change Favorable/
(Dollars in millions, except EPS)
2019
2018
(Unfavorable)
2019
2018
(Unfavorable)
Revenue
$
68.9
$
74.8
(8)
%
$
276.8
$
308.9
(10)
%
- US
39.0
40.7
(4)
%
151.5
165.3
(8)
%
- Australia
24.5
26.8
(9)
%
103.0
111.7
(8)
%
- New Zealand
5.4
7.3
(26)
%
22.3
31.9
(30)
%
Segment operating income (loss)(1)
$
6.8
$
9.7
(31)
%
$
28.5
$
45.3
(37)
%
Net income(loss)(2)
$
(27.5)
$
4.9
(>100)
%
$
(26.4)
$
14.0
(>100)
%
EBITDA(1)
$
8.1
$
13.4
(40)
%
$
33.1
$
46.4
(29)
%
Adjusted EBITDA(1)
$
8.3
$
14.1
(41)
%
$
34.0
$
50.3
(32)
%
Basic earnings (loss) per share(2)
$
(1.25)
$
0.21
(>100)
%
$
(1.17)
$
0.61
(>100)
%
(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.
FOURTH QUARTER AND FULL YEAR 2019 SEGMENT
RESULTS
The following table summarizes the fourth quarter and full year
segment operating results for 2019 and 2018:
Quarter Ended
Year Ended
December 31,
% Change Favorable/
December 31,
% Change Favorable/
(Dollars in thousands)
2019
2018
(Unfavorable)
2019
2018
(Unfavorable)
Segment revenue
Cinema
United States
$
38,126
$
39,699
(4)
%
$
147,653
$
161,796
(9)
%
Australia
22,190
24,483
(9)
%
93,508
101,996
(8)
%
New Zealand
4,988
6,772
(26)
%
21,028
29,931
(30)
%
Total
$
65,304
$
70,954
(8)
%
$
262,189
$
293,723
(11)
%
Real
estate
United States
$
975
$
1,071
(9)
%
$
3,848
$
3,480
11
%
Australia
3,783
3,817
(1)
%
15,656
16,122
(3)
%
New Zealand
622
1,143
(46)
%
2,401
4,633
(48)
%
Total
$
5,380
$
6,031
(11)
%
$
21,905
$
24,235
(10)
%
Inter-segment elimination
(1,802)
(2,108)
15
%
(7,326)
(9,027)
19
%
Total segment revenue
$
68,882
$
74,877
(8)
%
$
276,768
$
308,931
(10)
%
Segment operating income (loss)
Cinema
United States
$
1,901
$
2,560
(26)
%
$
4,457
$
12,229
(64)
%
Australia
3,065
4,653
(34)
%
15,974
21,295
(25)
%
New Zealand
648
1,010
(36)
%
2,898
5,343
(46)
%
Total
$
5,614
$
8,223
(32)
%
$
23,329
$
38,867
(40)
%
Real
estate
United States
$
(99)
$
151
(>100)
%
$
64
$
(362)
>100
%
Australia
1,296
932
39
%
5,449
5,002
9
%
New Zealand
(43)
458
(>100)
%
(372)
1,798
(>100)
%
Total
$
1,154
$
1,541
(25)
%
$
5,141
$
6,438
(20)
%
Total segment operating income
(loss)(1)
$
6,768
$
9,764
(31)
%
$
28,470
$
45,305
(37)
%
(1)
Aggregate segment operating income is a non-GAAP financial
measure. See the discussion of non-GAAP financial measures that
follows.
Cinema Exhibition
Fourth Quarter Results:
For the quarter ended December 31, 2019, Cinema Exhibition
segment operating income decreased by $2.6 million, or 32%, to $5.6
million when compared to December 31, 2018, due to a weaker film
slate in 2019 compared to 2018, resulting in lower than anticipated
admissions and F&B revenues in all three circuits. The decrease
was further impacted by the continuing temporary closure of Reading
Cinemas at Courtenay Central in Wellington, New Zealand and the
closure of our historically profitable 86th Street Theatre, Paris
Theatre and Beekman Theatre due to lease expirations. However, such
decreases were offset by increases in Average Ticket Price (“ATP”)
and SPP (each in functional currency) in our U.S., Australia, and
New Zealand circuits:
- Revenue in the United States decreased by 4%, or $1.6 million,
due to a 9% decrease in attendance, offset by an 8% increase in SPP
and a 2% increase ATP;
- Revenue in Australia decreased by 9% or $2.3 million, primarily
due to a 12% decrease in attendance, offset by a 6% increase in SPP
and a 3% increase in ATP; and
- Revenue in New Zealand decreased by 26%, or $1.8 million, due
to a 30% decrease in attendance, offset by a 4% increase in SPP and
a 4% increase in ATP.
Full Year Results:
Cinema Exhibition segment operating income decreased by 40%, or
$15.5 million, to $23.3 million for the full year ended December
31, 2019 compared to December 31, 2018 primarily driven by a
decrease in admissions revenue in the U.S. by 13%, or $12.9 million
as a result of a weaker specialty film product in 2019, further
impacted by the continuing temporary closure of Reading Cinemas at
Courtenay Central in Wellington, New Zealand. This decrease is
partially offset by a (i) savings in operating expenses in all
three jurisdictions, mainly due to the decrease in associated film
rent and, to a lesser extent, the cost of F&B and (ii)
increases in F&B revenues per cap.
- Cinema revenue in the United States decreased by 9%, or $14.1
million, primarily driven by a 14% decrease in attendance, offset
by an 11% increase in SPP and a 2% increase in ATP;
- Cinema revenue in Australia decreased by 8%, or $8.5 million,
primarily due to a 9% decrease in attendance and a 1% decrease in
SPP, offset by a slight favorable increase in ATP. Of this
decrease, 7 percentage points were attributable to declines in the
value of the Australian dollar; and
- Cinema revenue in New Zealand decreased by 30%, or $8.9
million, mainly due to a 32% decrease in attendance, due mainly to
the continuing temporary closure of our Reading Cinemas at
Courtenay Central countered by a 5% increase in ATP and a 4%
increase in SPP. Of this decrease, 4 percentage points were
attributable to declines in the value of the New Zealand
dollar.
Real Estate
Fourth Quarter Results:
Real Estate segment operating income decreased by 25%, or $0.4
million, to $1.2 million for the fourth quarter of 2019 compared to
the fourth quarter of 2018, primarily due to (i) the ongoing
closure of most of the net rentable area of Courtenay Central in
New Zealand, (ii) a decrease in Live Theatre rental and ancillary
income in the U.S., and (iii) the weakening Australian and New
Zealand dollars. This decrease was offset by a decrease in
operating expense in Australia and New Zealand.
Full Year Results:
Real Estate segment operating income decreased by 20%, or $1.3
million, to $5.1 million for the full year 2019 compared to the
full year 2018, primarily due to a decrease in revenue in the New
Zealand operations, specifically the ongoing closure of most of the
net rentable area of Courtenay Central and further impacted by the
weakening Australian and New Zealand dollars. This decrease was
partially offset by an increase in rental and ancillary income in
our Live Theatre business unit.
CONSOLIDATED AND NON-SEGMENT RESULTS
The fourth quarter and full year consolidated and non-segment
results for 2019 and 2018 are summarized as follows:
Quarter Ended
Year Ended
December 31,
% Change Favorable/
December 31,
% Change Favorable/
(Dollars in thousands)
2019
2018
(Unfavorable)
2019
2018
(Unfavorable)
Segment operating income (loss)
$
6,768
$
9,764
(31)
%
$
28,470
$
45,305
(37)
%
Non-segment income and expenses:
General and administrative expense
(4,728)
(4,571)
(3)
%
(18,933)
(21,288)
11
%
Interest expense, net
(1,980)
(1,705)
(16)
%
(7,904)
(6,837)
(16)
%
Gain (loss) on sale of assets
(1)
(41)
98
%
(2)
(41)
95
%
Equity earnings of unconsolidated joint
ventures
211
307
(31)
%
792
974
(19)
%
Other
9
(64)
>100
%
(89)
(650)
86
%
Total non-segment income and expenses
$
(6,489)
$
(6,074)
(7)
%
$
(26,136)
$
(27,842)
6
%
Income (loss) before income taxes
279
3,690
(92)
%
2,334
17,463
(87)
%
Income tax benefit (expense)
(27,736)
1,234
(>100)
%
(28,837)
(3,297)
(>100)
%
Net income (loss)
$
(27,457)
$
4,924
(>100)
%
$
(26,503)
$
14,166
(>100)
%
Net income (loss) attributable to
noncontrolling interests
(29)
(44)
34
%
74
(132)
>100
%
Net income (loss) attributable to RDI
common stockholders
$
(27,486)
$
4,880
(>100)
%
$
(26,429)
$
14,034
(>100)
%
Fourth Quarter and Full Year Net
Results
Net income attributable to RDI common stockholders for the
quarter ended December 31, 2019 decreased by $32.4 million, to a
loss of $27.5 million, and EPS decreased by $1.46 per share to a
Loss per Share (“LPS”) of $1.25 from the prior-year quarter EPS of
$0.21. Net income attributable to RDI common stockholders for the
full year decreased by $40.5 million, to a loss of $26.4 million
and EPS decreased by $1.78 per share to a LPS of $1.17 from the
prior-year period EPS of $0.61, due to (i) a $25.5 million increase
in income tax expense to $28.8 million, mainly due to the recording
of a valuation allowance on U.S. deferred tax assets in the fourth
quarter of 2019, partially offset by the lower pretax income in
2019, (ii) a $15.5 million decrease in Cinema Exhibition segment
operating income due to a weaker film slate in 2019 compared to
2018, resulting in lower than anticipated admissions and food and
beverage revenues, offset to some extent by an increase in F&B
revenues per cap, (iii) a $1.3 million decrease in the Real Estate
segment operating income, due principally to the temporary closure
of most of the net rentable area of Courtenay Central due to
seismic concerns, (iv) a $1.1 million increase in interest expense
attributable to increased borrowings in Australia for the
acquisitions of CMax Cinema in Devonport and State Cinema in
Hobart, and the capital expenditures related to Burwood, and (v)
the negative effects of the declining foreign exchange rates in the
Australian and New Zealand dollars, offset by a $2.4 million
decreased in general and administrative expenses.
Non-Segment General and Administrative
Expenses
Our non-segment general and administrative expense for the
quarter ended December 31, 2019 compared to the same period in the
prior year increased by 3%, or $0.2 million, to $4.7 million.
Non-segment general and administrative expense for the year ended
December 31, 2019, decreased by 11%, or $2.4 million, to $18.9
million, when compared to December 31, 2018, primarily related to
lower legal expenses.
Income Tax Expense
Income tax expense increased by $25.5 million, to $28.8 million,
compared to 2018, mainly due to the recording of a non-recurring
valuation allowance on U.S. deferred tax assets in the fourth
quarter of 2019, partially offset by lower pretax income in
2019.
OTHER FINANCIAL INFORMATION
Balance Sheet and Liquidity
Primarily driven by the implementation of the lease accounting
standard effective January 1, 2019, (i) total assets increased by
$235.8 million, to $675.0 million at December 31, 2019, compared to
$439.2 million at December 31, 2018 and (ii) total liabilities
increased by $276.1 million to $535.4 million. Additionally, assets
increased due to the capital investments relating to major real
estate projects, primarily the redevelopment of 44 Union Square in
New York, and to cinema improvements in (i) the U.S. including
Mililani, Kahala, and Rohnert Park, (ii) Chirnside Park, Dandenong,
Harbour Town, Maitland, Waurn Ponds, West Lakes, and Rhodes in
Australia, and (iii) The Palms in New Zealand.
Cash and cash equivalents at December 31, 2019 were $12.1
million, including $7.8 million in the U.S., $2.3 million in
Australia, and $2.0 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.
OTHER INFORMATION
Certain Potential Cotter Family Stock
Sales
We are advised that the Estate of James J. Cotter, Sr. (the
“Estate”), has entered into an
agreement with the Internal Revenue Service to pay its estate taxes
over the next ten years, collateralized by certain Class A
Non-Voting Common Stock currently owned by The James J. Cotter
Living Trust (the "Living Trust"). The
Living Trust has sold Class A Non-Voting Common Stock under a
10b5-1 trading plans in recent periods, as permitted in our
Supplemental Insider Trading Policy and reflected on filings made
on Form 4. It is anticipated that it will be necessary from, time
to time, for the Estate or the Living Trust to continue to sell
Class A Non-Voting Common Stock to pay that debt.
Similarly, we are advised that Margaret Cotter is the Trustee of
an operational trust established by her father for the benefit of
her children, which is funded entirely with Class A Non-Voting
Common Stock. In her capacity as trustee of this trust, Margaret
Cotter has advised the Company that it will be necessary for that
trust to, from time to time, sell shares of Class A Non-Voting
Common Stock for her children’s educational, medical, and other
expenses.
Ellen Cotter and Margaret Cotter have advised that as a
consequence of the litigation relating to matters concerning the
estate of their father (James J. Cotter, Sr.) and the Living Trust
and the Voting Trust established by their father, they have
personally incurred and continue to personally incur significant
legal costs and expenses. As set forth on their filings on Form 4,
since December 31, 2019, Ellen Cotter has sold 25,000 shares of
Class A Non-Voting Common Stock and Margaret Cotter has sold 25,000
shares of Class A Non-Voting Common Stock. These shares were
repurchased pursuant to the Company’s stock repurchase program, in
transactions reviewed and approved by our Audit and Conflicts
Committee. We are advised that the sales made by Ellen Cotter and
Margaret Cotter have not been made due to any concerns on their
part about the Company, its business or prospects, rather these
sales were made principally to meet financial needs resulting from
such litigation and other disputes with their brother, James J.
Cotter, Jr. We are further advised that Ellen Cotter and Margaret
Cotter will likely need to continue to sell their personal Class A
Non-Voting Common Stock holdings to fund the future costs related
to such litigation and disputes.
WORKING CAPITAL AND LIQUIDITY
The table below shows the changes in our working capital
position and other relevant information addressing our liquidity as
of and for the full year ended December 31, 2019 and the preceding
four years:
($ in thousands)
2019
2018(3)
2017(2)(3)
2016(2)
2015(2)
Net Cash from Operating
Activities
$
24,607
$
32,644
$
23,851
$
30,188
$
28,574
Total Resources (cash and
borrowings)
Cash and cash equivalents
(unrestricted)
$
12,135
$
13,127
$
13,668
$
19,017
$
19,702
Unused borrowing facility
73,920
85,886
137,231
117,599
70,134
Restricted for capital projects(1)
13,952
30,318
62,280
62,024
10,263
Unrestricted capacity
59,968
55,568
74,951
55,575
59,871
Total resources at 12/31
86,055
99,013
150,899
136,616
89,836
Total unrestricted resources at 12/31
72,103
68,695
88,619
74,592
79,573
Debt-to-Equity Ratio
Total contractual facility
$
283,138
$
252,929
$
271,732
$
266,134
$
207,075
Total debt (gross of deferred financing
costs)
209,218
167,043
134,501
148,535
130,941
Current
37,380
30,393
8,109
567
15,000
Non-current
171,838
136,650
126,392
147,968
115,941
Total book equity
139,616
179,979
181,382
146,890
138,951
Debt-to-equity ratio
1.50
0.93
0.74
1.01
0.94
Changes in Working Capital
Working capital (deficit)(4)
$
(84,138)
$
(56,047)
$
(47,294)
$
6,655
$
(35,581)
Current ratio
0.24
0.35
0.41
1.10
0.51
Capital Expenditures (including
acquisitions)
$
47,722
$
56,827
$
76,708
$
49,166
$
53,119
(1)
This relates to the construction
facilities specifically negotiated for: (i) 44 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 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). 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).
(3)
See Note 2 – Summary of Significant
Accounting Policies – Prior Period Financial Statements Correction
of Immaterial Errors of the 2019 10-K for the prior period
adjustments for accounting for accrued sales tax deemed not
material.
(4)
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
December 31, 2019:
As of December 31,
2019
(Dollars in thousands)
Contractual Capacity
Capacity Used
Unused Capacity
Restricted for Capital
Projects
Unrestricted Capacity
Bank of America Credit Facility (USA)
$
55,000
$
33,500
$
21,500
$
—
$
21,500
Bank of America Line of Credit (USA)
5,000
—
5,000
—
5,000
Union Square Construction Financing
(USA)
50,000
36,048
13,952
13,952
—
NAB Corporate Term Loan (AU)(1)
84,360
65,731
18,629
—
18,629
Westpac Corporate Credit Facility
(NZ)(1)
21,584
6,745
14,839
—
14,839
$
215,944
$
142,024
$
73,920
$
13,952
$
59,968
(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 December 31, 2019.
The $14.0 million representing borrowings restricted for capital
projects is composed of the $14.0 million unused capacity for the
44 Union Square development.
Our overall global operating strategy is to conduct business
mostly on a self-funding basis (except for funds used to pay an
appropriate share of our U.S. corporate overhead). However, we may
decide to move funds between jurisdictions where circumstances
merit such action as part of our goal to minimize our cost of
capital.
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 two-year SEC requirement for
determining an item is non-recurring, infrequent or unusual in
nature.
The reconciliation of EBITDA and adjusted EBITDA to net income
is presented below:
Quarter Ended
Year Ended
December 31,
December 31,
(Dollars in thousands)
2019
2018
2019
2018
Net income (loss)
$
(27,486)
$
4,880
$
(26,429)
$
14,034
Adjustments for:
Interest expense, net
1,980
1,705
7,904
6,837
Income tax (benefit) expense
27,736
1,230
28,837
3,298
Depreciation and amortization
5,877
5,570
22,747
22,275
EBITDA
$
8,107
$
13,385
$
33,059
$
46,444
Adjustments for:
(Gain) Loss on Sale of Assets
(2)
(41)
(2)
(41)
Legal expenses relating to the Derivative
litigation, the James J. Cotter, Jr. employment arbitration and
other Cotter litigation matters
185
746
967
3,892
Adjusted EBITDA
$
8,290
$
14,090
$
34,024
$
50,295
Conference Call and Webcast
We plan to post our pre-recorded conference call and audio
webcast on our corporate website on March 18, 2020, that will
feature prepared remarks from Ellen Cotter, President & 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 by March 17, 2020 by
5:00 p.m. Eastern Standard Time. The audio webcast can be accessed
by visiting http://www.readingrdi.com/Presentations.
About Reading International,
Inc.
Reading International Inc. (NASDAQ: RDI) an internationally
diversified cinema and real estate company 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, City
Cinemas, and State Cinema; live theatres operated by Liberty
Theatres in the United States; and signature property developments,
including Newmarket Village, Auburn Redyard, 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, “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 impact of the currently expanding outbreak of the COVID-19,
or coronavirus;
- the disruptions or reductions in the utilization of
entertainment, hospitality and travel venues, as well as in our
operations, due to pandemics, epidemics, widespread health
emergencies, or outbreaks of infectious diseases such as the
coronavirus;
- the number and attractiveness to moviegoers of the films
released in future periods, and potential changes in release dates
for motion pictures;
- the amount of money spent by film distributors to promote their
motion pictures;
- the licensing fees and terms required by film distributors from
motion picture exhibitors in order to exhibit their films;
- the comparative attractiveness of motion pictures as a source
of entertainment and willingness and/or ability of consumers (i) to
spend their dollars on entertainment and (ii) to spend their
entertainment dollars on movies in an outside-the-home
environment;
- the extent to which we encounter competition from other cinema
exhibitors, from other sources of outside-the-home entertainment,
and from inside-the-home entertainment options, such as “home
theaters” and competitive film product distribution technology,
such as, cable, satellite broadcast and Blu-ray/DVD rentals and
sales, and so called “movies on demand”;
- the impact of certain competitors’ subscription or advance pay
programs;
- the cost and impact of improvements to our cinemas, such as
improved seating, enhanced food and beverage offerings and other
improvements;
- disruptions during theater improvements;
- the extent to, and the efficiency with, which we are able to
integrate acquisitions of cinema circuits with our existing
operations;
- in the U.S., the impact of any termination of the so called
“Paramount Decree;” and
- the risk of damage and/or disruption of cinema businesses from
earthquakes as certain of our operations are in geologically active
areas.
- 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 ability to negotiate and execute lease agreements with
material tenants;
- 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
- the risk of damage and/or disruption of real estate businesses
from earthquakes as certain of our operations are in geologically
active areas.
- with respect to our operations generally as an international
company involved in both the development and operation of cinemas
and the development and operation of real estate and previously
engaged for many years in the railroad business in the United
States:
- our ability to renew, extend or renegotiate our loans that
mature in 2020;
- our ability to grow our Company and provide value to our
stockholders;
- 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;
- the impact that any discontinuance, modification or other
reform of London Inter-Bank Offered Rate (LIBOR), or the
establishment of alternative reference rates, may have on our
LIBOR-based debt instruments;
- 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 minimum wages, shift
scheduling, the use of consultants, 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, and class
actions and private attorney general wage and hour based
claims;
- our exposure to cybersecurity risks, including misappropriation
of customer information or other breaches of information
security;
- the impact of major outbreaks of contagious diseases;
- 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, 2019, 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.
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-GAAP
financial measures.” In such case, a reconciliation of this
information to our 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 shares and per share data)
Quarter Ended
Full Year Ended
December 31,
December 31,
2019
2018(1)
2019
2018(1)
Revenue
Cinema
$
65,304
$
70,955
$
262,189
$
293,723
Real estate
3,578
3,922
14,579
15,208
Total revenue
68,882
74,877
276,768
308,931
Costs and expenses
Cinema
(51,777)
(55,608)
(210,050)
(225,791)
Real estate
(2,345)
(2,496)
(9,453)
(9,904)
Depreciation and amortization
(5,877)
(5,570)
(22,747)
(22,275)
General and administrative
(6,969)
(6,087)
(25,395)
(27,337)
Total costs and expenses
(66,968)
(69,761)
(267,645)
(285,307)
Operating income (loss)
1,914
5,116
9,123
23,624
Interest expense, net
(1,980)
(1,705)
(7,904)
(6,837)
Gain (loss) on sale of assets
(1)
(41)
(2)
(41)
Other income (expense)
135
17
325
(256)
Income (loss) before income tax expense
and equity earnings of unconsolidated joint ventures
68
3,387
1,542
16,490
Equity earnings of unconsolidated joint
ventures
211
307
792
974
Income (loss) before income
taxes
279
3,694
2,334
17,464
Income tax benefit (expense)
(27,736)
1,230
(28,837)
(3,298)
Net income (loss)
$
(27,457)
$
4,924
$
(26,503)
$
14,166
Less: net income (loss) attributable to
noncontrolling interests
29
44
(74)
132
Net income (loss) attributable to
Reading International, Inc. common shareholders
$
(27,486)
$
4,880
$
(26,429)
$
14,034
Basic earnings (loss) per share
attributable to Reading International, Inc. shareholders
$
(1.25)
$
0.21
$
(1.17)
$
0.61
Diluted earnings (loss) per share
attributable to Reading International, Inc. shareholders
$
(1.25)
$
0.21
$
(1.17)
$
0.60
Weighted average number of shares
outstanding–basic
22,031,607
22,991,277
22,631,754
22,991,277
Weighted average number of shares
outstanding–diluted
22,162,245
23,208,991
22,784,122
23,208,991
(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)
December 31,
2019
2018
ASSETS
Current Assets:
Cash and cash equivalents
$
12,135
$
13,127
Receivables
7,085
8,045
Inventories
1,674
1,419
Prepaid and other current assets
6,105
7,667
Total Current Assets
26,999
30,258
Operating properties, net
258,138
257,667
Operating lease right-of-use assets
229,879
—
Investment and development properties,
net
114,024
86,804
Investment in unconsolidated joint
ventures
5,069
5,121
Goodwill
26,448
19,445
Intangible assets, net
4,320
7,369
Deferred tax assets, net
3,444
26,444
Other assets
6,668
6,129
Total Assets
$
674,989
$
439,237
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
29,436
$
26,931
Film rent payable
8,716
8,661
Debt – current portion
36,736
30,393
Subordinated debt - current portion
644
—
Derivative financial instruments - current
portion
109
41
Taxes payable
140
1,710
Deferred current revenue
11,324
9,264
Operating lease liabilities - current
portion
20,379
—
Other current liabilities
3,653
9,305
Total Current Liabilities
111,137
86,305
Debt – long-term portion
140,602
106,286
Derivative financial instruments -
non-current portion
233
145
Subordinated debt
29,030
26,061
Noncurrent tax liabilities
12,353
11,530
Operating lease liabilities - non-current
portion
223,164
—
Other liabilities
18,854
28,931
Total Liabilities
$
535,373
$
259,258
Commitments and Contingencies
Stockholders’ Equity:
Class A non-voting common shares, par
value $0.01, 100,000,000 shares authorized,
—
—
32,963,489 issued and 20,102,535
outstanding at December 31, 2019 and 33,112,337
issued and 21,194,748 outstanding at
December 31, 2018
$
231
$
232
Class B voting common shares, par value
$0.01, 20,000,000 shares authorized and
1,680,590 issued and outstanding at
December 31, 2019 and 2018
17
17
Nonvoting preferred shares, par value
$0.01, 12,000 shares authorized and no issued
—
—
or outstanding shares at December 31, 2019
and 2018
—
—
Additional paid-in capital
148,602
147,452
Retained earnings
20,647
47,048
Treasury shares, at cost
(39,737)
(25,222)
Accumulated other comprehensive income
5,589
6,115
Total Reading International, Inc.
("RDI") Stockholders’ Equity
135,349
175,642
Noncontrolling Interests
4,267
4,337
Total Stockholders’ Equity
$
139,616
$
179,979
Total Liabilities and Stockholders’
Equity
$
674,989
$
439,237
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200316005588/en/
Reading International, Inc. Gilbert Avanes, Executive Vice
President, Chief Financial Officer and Treasurer Andrzej
Matyczynski, Executive Vice President for Global Operations (213)
235-2240
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