Earnings Call Webcast to Discuss 2017 Fourth
Quarter and Full Year Financial ResultsScheduled to Post to
Corporate Website on Tuesday, March 20, 2018
Reading International, Inc. (NASDAQ: RDI) today announced
results for the fourth quarter and full year ended December 31,
2017. The Company reported Basic Earnings per Share (“EPS”) of
$0.32 and $1.35 for the fourth quarter and full year ended December
31, 2017, respectively, compared with $0.01 and $0.40 for the prior
year’s periods. Revenue, EBITDA, Net Income and Basic EPS for the
full year 2017 represented all-time records for the Company. Our
full year results were positively impacted by certain non-recurring
items (specifically, the recognition of a gain on the sale of our
land holdings in Burwood, Australia, and the receipt of certain
insurance proceeds to compensate for earthquake related damages
sustained by our Courtenay Central entertainment themed center
(“ETC”) in Wellington, New Zealand), offset by certain
non-recurring professional and litigation expenses.
Ellen Cotter, Chair, President and Chief Executive Officer,
said, “We made important progress executing our three-year business
strategy during the year and we are pleased to deliver strong
fourth quarter and record 2017 results. During the year, we
strategically upgraded select cinemas, constructed a new
state-of-the-art cinema in Australia, redeveloped existing
income-producing properties, and added approximately 15,875 square
feet of non-cinema net rentable area to our existing ETCs. We
accomplished these objectives utilizing the proceeds from the sale
of non-core assets while strengthening our balance sheet to reduce
debt.”
Consolidated revenue for the fourth quarter of 2017, which was
the highest fourth quarter revenue on record, increased by 6% (or
$4.2 million) compared to the fourth quarter of 2016 mainly due to
higher box office and food & beverage (“F&B”) revenue in
Australia and New Zealand, and higher real estate revenue in the
U.S. Our real estate segment posted increased revenues principally
due to (i) the recognition in 2017 of non-recurring settlement
proceeds from our 2016 arbitration against STOMP, and (ii) the
receipt of Courtenay Central ETC rentals for the full fourth
quarter which, due to the closure of that center as a result of the
Wellington earthquake, were not received in 2016. Our revenues from
our cinema operations were also negatively impacted by our
strategic cinema closures, which allowed us to accelerate our
cinema renovation program which, we believe, will lead to stronger
results in future periods as our renovated cinemas come on
line.
Consolidated revenue for the full year of 2017 increased by 3%
($9.2 million) due to the following: higher admissions and
increased F&B revenue in our Australian cinemas, and settlement
proceeds relating to STOMP, offset by lower admissions in our U.S.
and New Zealand cinemas due in part to industry-wide box office
softening in 2017, the cinema closure resulting from the Wellington
earthquake and our U.S. cinema renovation program.
The following table summarizes the fourth quarter and full year
results for 2017 and 2016:
% Change
Quarter Ended Year Ended Favorable /
(Unfavorable) (Dollars in millions, except EPS)
December 31,
2017
December 31,
2016
December 31,
2017
December 31,
2016
Q4 2017 vs.
Q4 2016
2017 vs. 2016
Revenue $ 71.7 $ 67.5 $ 279.7 $ 270.5 6 % 3 % - US 38.7 39.4 143.8
143.1 (2 ) % - % - Australia 25.6 22.1 106.2 97.5 16 % 9 % - New
Zealand 7.4 6.0 29.7 29.9 23 % (1 ) % Segment operating income(1) $
9.8 $ 10.0 $ 41.0 $ 42.4 (2 ) % (3 ) % Net income(2) $ 7.5 $ 0.3 $
31.0 $ 9.4 nm % 230 % EBITDA(1) $ 8.1 $ 5.7 $ 57.5 $ 35.9 42 % 60 %
Adjusted EBITDA(1) $ 11.0 $ 8.4 $ 52.2 $ 41.0 31 % 27 % Basic
EPS(2) $ 0.32 $ 0.01 $ 1.35 $ 0.40 nm % 238 %
“nm” – not meaningful for further analysis
(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.
2017 COMPANY HIGHLIGHTS
- Operating
Results: We achieved the following record results for
2017:
- Revenue of $279.7 million, up $ 9.2
million from the prior year;
- EBITDA of $57.5 million compared to
$35.9 million in 2016;
- Net income of $31.0 million compared to
$9.4 million in 2016; and
- Basic EPS of $1.35 per share compared
to $0.40 per share in 2016.
- Capex
program: During 2017, we invested $76.7 million in
capital improvements to our cinemas (which included the
construction of a new state-of-the-art cinema in Australia) and
real estate properties.
- Cinema
activities: During 2017, we installed luxury recliners
in 43 auditoriums in the U.S. and converted four auditoriums to
TITAN LUXE/TITAN XC. In the U.S., we have increased the number of
sites that offer beer, wine or spirits to 12 cinemas. At our
Reading Cinemas in Murrieta, CA, our renovations include
modifications to six of the auditoriums to accommodate our first
dine-in concept. This dine-in concept branded “Spotlight” will
launch in the first quarter of 2018. In addition, we renovated
and/or improved six of our cinemas in Australia and New Zealand and
opened a new Reading Cinema at our Newmarket Village ETC. We
executed agreements for the lease of two new Reading Cinemas in
Australia.
- Real estate
activities:
- Union Square
Redevelopment (New York, U.S.) – Construction is now more
than 50% complete on this re-development project. We anticipate
that the project will be ready for tenant fit-out in the third
quarter of this year. Retail and office leasing interest is strong,
and we are in discussions with a variety of quality tenants,
including potential full building users. During 2017, we invested
$17.8 million in new capital, bringing our total investment in the
project to $32.5 million (net of our $11.2 million book basis in
the property on December 31, 2015). Our construction costs remain
within budget parameters.
- Cinema 1,2,3
Redevelopment (New York, U.S.) – In June 2017, we entered
into an exclusive dealing and pre-development agreement with the
contiguous landowners to jointly develop our properties located on
3rd Avenue, between 59th Street and 60th Street in New York City,
currently home to Cinemas 1,2,3 and Anassa Taverna. The parties
have completed an initial feasibility study, analyzing various
retail, entertainment and residential uses for the site, and we are
working on the terms of a final agreement with our neighbor for the
joint-development of the combined property.
- Newmarket Village
Expansion (Brisbane, Australia) – In December 2017, we
completed our Newmarket Village expansion and opened a new eight
screen Reading Cinema with both a TITAN LUXE and a Gold Lounge
offer and delivered approximately 10,150 square feet of new F&B
retail space along with a further 124 parking spaces. In 2017, we
invested $26.1 million in capital improvements, bringing our total
investment in the project to $27.9 million (calculated net of our
book investment in that property prior to commencement of the
expansion project).
- Courtenay Central
Redesign/Expansion/Temporary closure and related insurance
settlement (Wellington, New Zealand) – In May 2017, we
received our final insurance settlement of $20.0 million, taking us
to the $25.0 million earthquake coverage sub-limit. While no
assurances can be given, we are currently investigating the
possibility of further recovery under other insurance policies. As
a result of these insurance settlements, during the second quarter
ended June 30, 2017, we recognized a gain of $10.7 million (NZ$14.8
million), $1.5 million (NZ$2.1 million) of which represented
recovery on our lost business profits during the period of closure
(November 2016 to March 2017). While the earthquake has slowed our
redevelopment activities, the demolition of the parking structure
has opened additional expansion opportunities for our Courtenay
Central ETC, which we are currently evaluating.
- Completion of
Sale of Burwood Property (Melbourne, Victoria, Australia) –
We completed the sale of our Burwood Property, receiving payments
of $16.6 million (AU$21.8 million) in June and $28.1 million
(AU$36.6 million) in December 2017. We recorded the full gain on
our original sale transaction of $9.4 million (AU$12.5 million)
during the second quarter of 2017.
FOURTH QUARTER AND FULL YEAR 2017
SEGMENT RESULTS
The following table summarizes the fourth quarter and full year
segment operating results for 2017 and 2016:
Quarter Ended
Year Ended %
Change %
Change (Dollars in thousands)
December 31,2017
December 31,
2016
Favorable /
(Unfavorable)
December 31,2017 December 31,
2016
Favorable /
(Unfavorable)
Segment revenue
Cinema
United States $ 37,220 $ 38,545 (3 ) % $ 139,078 $ 139,820 (1 ) %
Australia 23,322 20,085 16 % 96,606 89,053 8 % New Zealand
6,860 5,713 20 % 27,780
28,049 (1 ) % Total
$ 67,402 $
64,343 5 % $ 263,464 $
256,922 3 %
Real
estate
United States $ 1,516 $ 848 79 % $ 4,739 $ 3,271 45 % Australia
3,717 3,223 15 % 14,945 13,334 12 % New Zealand 1,144
883 30 % 4,160 4,310 (3 )
% Total
$ 6,377 $ 4,954 29
% $ 23,844 $ 20,915 14
% Inter-segment elimination (1,999 ) (1,846 )
(8 ) % (7,574 ) (7,364 ) (3 ) %
Total segment
revenue $
71,780 $
67,451 6
% $
279,734 $
270,473 3
% Segment operating income (loss)
Cinema
United States $ 2,417 $ 5,288 (54 ) % $ 7,207 $ 12,351 (42 ) %
Australia 4,546 3,263 39 % 21,358 18,101 18 % New Zealand
426 411 4 % 4,405 5,046
(13 ) % Total
$ 7,389 $ 8,962
(18 ) % $ 32,970 $
35,498 (7 ) %
Real
estate
United States $ 846 $ 391 116 % $ 1,196 $ 690 73 % Australia 1,076
1,076 -- % 5,479 5,252 4 % New Zealand 489
(382 ) 228 % 1,336 987 35 % Total
$ 2,411 $ 1,085 122 %
$ 8,011 $ 6,929 16 %
Total segment operating
income(1)
$ 9,800 $ 10,047
(2 ) % $ 40,981 $
42,427 (3 ) %
(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:
Cinema segment operating income decreased by 18%, or $1.6
million, to $7.4 million for the quarter ended December 31, 2017
compared to December 31, 2016. This decrease came from the U.S. and
was driven by lower attendance resulting in lower admission and
F&B revenues, primarily resulting from four of our stronger
cinemas being closed for significant renovation that included the
installation of recliner seats (in 43 screens) and conversion to
TITAN LUXE (four auditoriums) during the fourth quarter. Occupancy
costs were also up in the U.S. due to increased rental expense at
certain sites. This was partially offset by an increase in
admissions and F&B revenue in Australia and New Zealand. During
the fourth quarter:
- Revenue in the United States decreased
by 3%, or $1.3 million, due to a 7% decrease in attendance offset
by a slight increase in average ticket prices (“ATP”);
- Revenue in Australia increased by 16%,
or $3.2 million, primarily due to a 9% increase in attendance and
slight increase in ATP; and
- Revenue in New Zealand increased by
20%, or $1.1 million, as a result of a 19% increase in attendance
(due in principal part to the Q1 2017 re-opening of our Courtenay
Central cinema) and a slight decrease in ATP.
The top three grossing films for the fourth quarter 2017 were
“Star Wars: The Last Jedi,” “Thor: Ragnarok,” and “Justice League,”
representing approximately 32% of Reading’s worldwide admission
revenues for the quarter. The top three grossing films in the
fourth quarter of 2016 for Reading’s worldwide cinema circuits were
“Rogue One A Star Wars Story,” “Fantastic Beasts,” and “Moana,”
which represented approximately 28% of Reading’s admission revenues
for the fourth quarter of 2016.
Full Year Results:
Cinema segment operating income decreased by 7%, or $2.5
million, to $33.0 million for the full year ended December 31, 2017
compared to December 31, 2016, primarily driven by lower admissions
due to weaker film product and cinema closures for significant
renovations, partially offset by improved F&B revenues for our
U.S. and New Zealand operations. Higher revenues from our Australia
cinemas and favorable foreign currency movements in our foreign
operations helped to offset lower revenues in the U.S. for
2017:
- Revenue in the United States remained
flat with a minimal decrease of 1%, or $742,000, due to the
offsetting impact of a 6% decrease in attendance and a 5% increase
in ATP.
- Revenue in Australia increased by 8%,
or $7.6 million, primarily due to a 7% increase in attendance,
offset by a decrease in ATP; and
- Revenue in New Zealand decreased by 1%,
or $69,000, mainly due to the temporary closure of our Courtenay
Central ETC (which re-opened in late March 2017).
The top three grossing films for the full year of 2017 were
“Beauty and the Beast,” “Star Wars: The Last Jedi,” and “Wonder
Woman,” representing approximately 11% of our worldwide admission
revenues, compared to the top three grossing films a year ago:
“Finding Dory,” “Deadpool,” and “Suicide Squad,” which represented
approximately 10% of our admission revenues for the same period in
2016.
Real Estate
Fourth Quarter Results:
Real estate segment operating income increased by 122%, or $1.3
million, to $2.4 million for the fourth quarter of 2017 compared to
the fourth quarter of 2016, primarily attributable to (i) the
non-recurring STOMP settlement proceeds, and (ii) the receipt of
property rentals for a full fourth quarter at Courtenay Central,
which due to the Wellington earthquake were not received in 2016.
These were offset by (i) increased operating expenses due to a
reclassification of our Headquarters building as a rental asset,
and (ii) an increase in General & Administrative (G&A)
expenses due to an expansion of our in-house real estate team in
Australia and New Zealand.
Full Year Results:
Real estate segment operating income increased by 16%, or $1.1
million, to $8.0 million for the full year 2017 compared to the
full year 2016, primarily attributable to the offsetting effects
of:
- The non-recurring STOMP settlement of
which $1.8 million was recorded as operating revenues in 2017;
and
- The non-recurring gain on business
interruption insurance recoveries claim for the Courtenay Central
ETC recognized during the 2nd quarter of 2017 ($688,000, but
reduced by lost profits from having Courtenay Central ETC closed
during the 1st Quarter of 2017), offset by
- Increases in our operating expenses
relating to the inclusion of our Corporate Headquarters in Culver
City as a rental property (such amounts being previously accounted
for as corporate G&A expense) and expansion of our real estate
activities in Australia and New Zealand.
CONSOLIDATED AND NON-SEGMENT RESULTS
The fourth quarter and full year consolidated and non-segment
results for 2017 and 2016 are summarized as follows:
Quarter Ended Year Ended
% Change % Change (Dollars in thousands)
December
31,2017 December 31,2016
Favorable /
(Unfavorable)
December 31,2017 December 31,2016
Favorable /
(Unfavorable)
Segment operating income $ 9,800 $ 10,047 (2 ) % $ 40,981 $
42,427 (3 ) % Non-segment income and expenses: General and
administrative expense (6,016 ) (7,028 ) 14 % (19,947 ) (21,721 ) 8
% Interest expense, net (884 ) (1,592 ) 44 % (6,194 ) (6,782 ) 9 %
Casualty loss -- (1,421 ) 100 % 9,217 (1,421 ) nm % Gain on sale of
assets (57 ) -- -- % 9,360 393 nm % Equity earnings of
unconsolidated joint ventures 161 191 (16 ) % 815 999 (18 ) % Other
(501 ) (48 ) nm % 115 (458 ) 125
% Total non-segment income and expenses $ (7,297 ) $ (9,898 ) 26 %
$ (6,634 ) $ (28,990 ) 77 % Income before income taxes 2,503 149 nm
% 34,347 13,437 156 % Income tax benefit (expense) 4,954
202 nm % (3,337 ) (4,020 ) 17 %
Net income $ 7,457 $ 351 nm % $ 31,010 $ 9,417 229 % Net
(income)/loss attributable to noncontrolling interests (77 )
(2 ) nm % (11 ) (14 ) (21 ) %
Net income
attributable to RDI common stockholders $ 7,380
$ 349 nm % $
30,999 $ 9,403 230
%
“nm” – not meaningful for further analysis
Fourth Quarter and Full Year Net
Results
Net income attributable to RDI common stockholders for the
quarter ended December 31, 2017 increased by $7.0 million to $7.4
million, and EPS increased by $0.31 to $0.32 from the prior-year
quarter. Net income attributable to RDI common stockholders for the
full year increased by $21.6 million to $31.0 million, and EPS
increased by $0.95 to $1.35 from the prior-year period due
principally to the following one-off real estate transactions
during the second quarter: (i) recognition of gain from the sale of
our Burwood Property, and (ii) receipt of non-recurring insurance
proceeds with respect to losses sustained by us in the Wellington
earthquake. We were also assisted by the increase in Real Estate
segment income by the receipt of non-recurring STOMP settlement
proceeds.
Non-Segment General &
Administrative Expenses
G&A expense for the quarter and full year ended December 31,
2017 compared to the same period of the prior year decreased by 14%
($1.0 million) and 8% ($1.8 million), respectively. This decrease
primarily relates to a reduction in (i) professional services
expenses primarily relating to non-recurring items incurred in
2016, including additional expenses incurred in connection with the
2015 year-end audit ($960,000) and (ii) expenses incurred in
connection with the change in status of certain executives
($400,000), a reduction in 2017 legal fees, and a reduction in
occupancy costs due to the reclassification of our new Corporate
Headquarters to an income producing asset. These were offset by
additional costs incurred in our Australian and New Zealand
corporate offices due to additional staff costs and the effects of
foreign exchange movements.
Gain on Sale of Assets
The non-recurring $9.4 million capital gain recognized during
the 2nd quarter of 2017 pertained to our full recognition of the
transaction gain triggered by the additional payment from the buyer
of our Burwood property in Australia. During the 1st quarter of
2016, we recognized a gain of $393,000 (NZ$585,000) relating to the
final sale of our Taupo property in New Zealand.
Gain on Insurance
Recoveries
During the 2nd quarter of 2017, we recognized a non-recurring
$9.2 million gain from the final insurance settlement relating to
the earthquake damage on our Courtenay Central parking structure
(excluding business interruption insurance recoveries).
Income Tax Expense
Income tax benefit increased by $4.8 million for the quarter and
income tax expense decreased by $683,000 for the full year ended
December 31, 2017 compared to the equivalent prior-year period. The
differences for the year were primarily due to benefits recognized
as the result of the dissolution of a non-operating overseas
subsidiary, partially offset by higher taxes on increased pre-tax
income and the provisional unfavorable effect of the tax reform
bill enacted in December 2017.
OTHER FINANCIAL INFORMATION
Balance Sheet and Liquidity
Total assets increased by $17.2 million, to $423.0 million at
December 31, 2017, compared to $405.8 million at December 31, 2016,
primarily driven by increases in our operating and investing
properties relating to capital enhancements in our existing cinemas
and capital expenditures relating to major real estate projects,
primarily (i) the redevelopment of our Union Square property in New
York, and (ii) the expansion of our Newmarket property in Brisbane,
Australia. Available cash resources generated from operations and
the proceeds received from the disposal of our Burwood property
funded these capital expenditures.
Cash and cash equivalents at December 31, 2017 were $13.7
million, including $9.1 million in the U.S., $2.9 million in
Australia, and $1.7 million in New Zealand. We manage our cash,
investments and capital structure so we are able to meet short-term
and long-term obligations for our business, while maintaining
financial flexibility and liquidity.
As part of our operating cycle, we utilize cash collected from
(i) our cinema business when selling tickets and food and beverage
items, and (ii) rental income typically received in advance, to
first reduce our long- term borrowings and realize savings on
interest charges. We then settle our operating expenses generally
with a lag within traditional trade terms. This generates a
temporary working capital deficit. We review the maturities of our
borrowings and negotiate for renewals and extensions, as necessary
for liquidity purposes. We believe the cash flow generated from our
operations coupled with the proceeds on property sales and our
ability to renew loans when due will provide sufficient liquidity
in the upcoming year.
The table below shows the changes in our working capital
position and other relevant information addressing our liquidity as
of and for the full year ended December 31, 2017 and the preceding
four years:
($ in thousands)
2017
2016
2015(2)
2014(2)
2013(3)
Net Cash from Operating Activities $ 23,851 $ 30,188 $
28,574 $ 28,343 $ 25,183
Total Resources (cash and
borrowings) Cash and cash equivalents (unrestricted) $ 13,668 $
19,017 $ 19,702 $ 50,248 $ 37,696 Unused borrowing facility 137,231
117,599 70,134 45,700 19,400 Restricted for capital projects(1)
62,280 62,024 10,263 -- -- Unrestricted capacity 74,951 55,575
59,871 45,700 19,400 Total resources at 12/31 150,899 136,616
89,836 95,948 57,096 Total unrestricted resources at 12/31 88,619
74,592 79,573 95,948 57,096
Debt-to-Equity Ratio Total
contractual facility $ 271,732 $ 266,134 $ 207,075 $ 201,318 $
187,860 Total debt (gross of deferred financing costs) 134,501
148,535 130,941 164,036 168,460 Current 8,109 567 15,000 38,104
75,538 Non-current 126,392 147,968 115,941 125,932 92,922 Total
book equity 181,241 146,615 138,951 133,716 123,531 Debt-to-equity
ratio 0.74 1.01 0.94 1.23 1.36
Changes in Working Capital
Working capital (deficit)(4) $ (46,971 ) $ 6,655 $ (35,581 ) $
(15,119 ) $ (75,067 ) Current ratio 0.42 1.10 0.51 0.84 0.43
Capital Expenditures (including acquisitions) $ 76,708 $
49,166 $ 53,119 $ 14,914 $ 20,082
(1)
This relates to the construction
facilities specifically negotiated for: (i) Union Square
redevelopment project, obtained in December 2016, and (ii) New
Zealand construction projects, obtained in May 2015.
(2)
Certain 2015 balances included the
restatement impact as a result of a change in accounting principle
(see Notes to Consolidated Financial Statements – Note 2 – Summary
of Significant Accounting Policies – Accounting Changes of our Form
10-K). No changes made, except for the Stockholders’ Equity balance
as of 12/31/2014, as we were not required to present the
restatement numbers as of December 31, 2014 for the Balance
Sheet.
(3)
Year 2013 is not covered by the
restatement as a result of a change in accounting principle.
(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, 2017:
As of December 31,
2017 (Dollars in thousands)
Contractual
Capacity
Capacity Used
Unused Capacity
Restricted for
Capital Projects
Unrestricted
Capacity
Bank of America Credit Facility (USA) $ 55,000 $ 31,000 $ 24,000 $
-- $ 24,000 Bank of America Line of Credit (USA) 5,000 -- 5,000 --
5,000 Union Square Construction Financing (USA) 57,500 8,000 49,500
49,500 --
NAB Corporate Term Loan (AU)(1)
51,970 30,869 21,101 -- 21,101
Westpac Corporate Credit Facility
(NZ)(1)
37,630 -- 37,630 12,780 24,850
$ 207,100 $ 69,869 $
137,231 $ 62,280 $ 74,951
(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, 2017.
The $62.3 million representing borrowings restricted for capital
projects is composed of the $49.5 million and $12.8 million
(NZ$18.0 million) unused capacity for the Union Square development
and Westpac construction funding for New Zealand operations,
respectively. The Minetta & Orpheum Theatres Loan will become
due within one year. Currently, we are negotiating with our lender
to renew this borrowing on a long-term basis.
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 present EBITDA as a
supplemental measure of its performance, which is commonly used in
our industry. We define EBITDA as net income adjusted for interest
expense (net of interest income), income tax expense, depreciation
and amortization expense, and an adjustment of interest expense,
depreciation, and amortization for discontinued operations, if any.
EBITDA is a non-GAAP financial measure commonly used in our
industry and should not be construed as an alternative to net
earnings (loss) as an indicator of operating performance or as an
alternative to cash flow provided by operating activities as a
measure of liquidity (as determined in accordance with U.S. GAAP).
We have included EBITDA in this Earnings Release as we believe that
it provides management and our investors with additional
information necessary to properly measure our performance and
liquidity, estimate our value and evaluate our ability to service
debt.
Adjusted EBITDA – using the
principles we consistently apply to determine our EBITDA, we
further adjusted the EBITDA for certain items we believe are
appropriate adjustable items, described as follows:
- Gain on insurance recoveries – this
refers to the excess of insurance proceeds over our damaged
property’s book value and related demolition costs. We excluded the
portion allocated to the recoupment of lost business income. We
have considered this to be an appropriate adjustment for purposes
of determining Adjusted EBITDA in accordance with the 2-year SEC
requirement for determining an item as non-recurring, infrequent or
unusual in nature.
- Legal expenses relating to the
Derivative litigation, the James J. Cotter, Jr. employment
arbitration and other Cotter litigation matters – while we
started to incur expenses in relation to these legal matters in
2015, we believe that the majority of these costs were thrust upon
the Company as it became necessary to defend the Company’s position
in the Derivative litigation and related matters, to resolve Mr.
Cotter, Jr.’s claims relating to his termination, and to protect
our Company’s interests, and that of our shareholders in light of
Mr. Cotter, Jr.’s efforts to effect a change of control of our
Company. For this reason, these costs should also be treated as
non-recurring in nature and accordingly, an adjustable item for
purposes of determining our Adjusted EBITDA.
We have not made adjustments for any gains
relating to property sales, including our realized gain on the
Burwood property, in line with our overall business strategy that
at any time, we may decide to dispose of any property when we
believe that an asset has reached the highest value that we could
reasonably achieve without investing substantial additional sums
for land use planning, construction and marketing.
The reconciliation of EBITDA to net income is presented
below:
Quarter Ended
Year Ended (Dollars in thousands)
December 31, 2017
December 31, 2016 December 31,
2017 December 31, 2016 Net
income $ 7,380 $ 349 $
30,999 $ 9,403 Adjustments for: Interest
expense, net 884 1,592 6,194 6,782 Income tax (benefit) expense
(4,954 ) (202 ) 3,337 4,020 Depreciation and amortization
4,818 3,923 16,942 15,689
EBITDA $ 8,128 $ 5,662 $
57,472 $ 35,894 Adjustments for: Casualty loss
(gain) -- 1,421 -- 1,421 Insurance recovery -- -- (9,217 ) -- Legal
expenses relating to the Derivative litigation, the James J.
Cotter, Jr. employment arbitration and other Cotter litigation
matters 2,843 1,333 3,958
3,651
Adjusted EBITDA $ 10,971
$ 8,416 $ 52,213 $
40,966
Conference Call and Webcast
We plan to post our pre-recorded conference call and audio
webcast on our corporate website on March 20, 2018, that will
feature prepared remarks from Ellen Cotter, President & Chief
Executive Officer; Dev Ghose, Executive Vice President & Chief
Financial Officer; and Andrzej Matyczynski, Executive Vice
President – Global Operations.
A pre-recorded question and answer session will follow our
formal remarks. Questions and topics for consideration should be
submitted to InvestorRelations@readingrdi.com on March 19, 2018 by
9:00 a.m. Pacific Time. The audio webcast can be accessed by
visiting http://www.readingrdi.com/Presentations.
About Reading International,
Inc.
Reading International Inc. (NASDAQ: RDI) is a leading
entertainment and real estate company, engaging in the development,
ownership and operation of multiplex cinemas and retail and
commercial real estate in the United States, Australia, and New
Zealand.
The family of Reading brands includes cinema brands Reading
Cinemas, Angelika Film Centers, Consolidated Theatres, and City
Cinemas; live theaters operated by Liberty Theatres in the United
States; and signature property developments, including Newmarket
Village, Auburn Red Yard and Cannon Park in Australia, Courtenay
Central in New Zealand and 44 Union Square in New York City.
Additional information about Reading can be obtained from the
Company's website: http://www.readingrdi.com.
Forward-Looking
Statements
Our statements in this press release contain a variety of
forward-looking statements as defined by the Securities Litigation
Reform Act of 1995. Forward-looking statements reflect only our
expectations regarding future events and operating performance and
necessarily speak only as of the date the information was prepared.
No guarantees can be given that our expectation will in fact be
realized, in whole or in part. You can recognize these statements
by our use of words such as, by way of example, “may,” “will,”
“expect,” “believe,” and “anticipate” or other similar
terminology.
These forward-looking statements reflect our expectation after
having considered a variety of risks and uncertainties. However,
they are necessarily the product of internal discussion and do not
necessarily completely reflect the views of individual members of
our Board of Directors or of our management team. Individual Board
members and individual members of our management team may have
different views as to the risks and uncertainties involved, and may
have different views as to future events or our operating
performance.
Among the factors that could cause actual results to differ
materially from those expressed in or underlying our
forward-looking statements are the following:
- with respect to our cinema operations:
- the number and attractiveness to movie
goers of the films released in future periods;
- the amount of money spent by film
distributors to promote their motion pictures;
- the licensing fees and terms required
by film distributors from motion picture exhibitors in order to
exhibit their films;
- the comparative attractiveness of
motion pictures as a source of entertainment and willingness and/or
ability of consumers (i) to spend their dollars on entertainment
and (ii) to spend their entertainment dollars on movies in an
outside the home environment;
- the extent to which we encounter
competition from other cinema exhibitors, from other sources of
outside-the-home entertainment, and from inside-the-home
entertainment options, such as “home theaters” and competitive film
product distribution technology such as, by way of example, cable,
satellite broadcast and DVD rentals and sales, and online
streaming;
- the cost and impact of improvements to
our cinemas, such as improve seating, enhanced food and beverage
offerings and other improvements;
- service disruption during theater
improvements; and
- the extent to and the efficiency with
which we are able to integrate acquisitions of cinema circuits with
our existing operations.
- with respect to our real estate
development and operation activities:
- the rental rates and capitalization
rates applicable to the markets in which we operate and the quality
of properties that we own;
- the extent to which we can obtain on a
timely basis the various land use approvals and entitlements needed
to develop our properties;
- the risks and uncertainties associated
with real estate development;
- the availability and cost of labor and
materials;
- the ability to obtain all permits to
construct improvements;
- the ability to finance
improvements;
- the disruptions from construction;
- the possibility of construction delays,
work stoppage and material shortage;
- competition for development sites and
tenants;
- environmental remediation issues;
- the extent to which our cinemas can
continue to serve as an anchor tenant that will, in turn, be
influenced by the same factors as will influence generally the
results of our cinema operations;
- the ability to negotiate and execute
joint venture opportunities and relationships; and
- certain of our activities are in
geologically active areas, creating a risk of damage and/or
disruption of real estate and/or cinema businesses from
earthquakes.
- with respect to our operations
generally as an international company involved in both the
development and operation of cinemas and the development and
operation of real estate; and previously engaged for many years in
the railroad business in the United States:
- our ongoing access to borrowed funds
and capital and the interest that must be paid on that debt and the
returns that must be paid on such capital;
- expenses, management and Board
distraction and other effects of the litigation efforts mounted by
James Cotter, Jr. against the Company, including his efforts to
cause a sale of voting control of the Company;
- the relative values of the currency
used in the countries in which we operate;
- changes in government regulation,
including by way of example, the costs resulting from the
implementation of the requirements of Sarbanes-Oxley;
- our labor relations and costs of labor
(including future government requirements with respect to pension
liabilities, disability insurance and health coverage, and
vacations and leave);
- our exposure from time to time to legal
claims and to uninsurable risks such as those related to our
historic railroad operations, including potential environmental
claims and health-related claims relating to alleged exposure to
asbestos or other substances now or in the future recognized as
being possible causes of cancer or other health related
problems;
- our exposure to cyber-security risks,
including misappropriation of customer information or other
breaches of information security;
- changes in future effective tax rates
and the results of currently ongoing and future potential audits by
taxing authorities having jurisdiction over our various companies;
and
- changes in applicable accounting
policies and practices.
The above list is not necessarily exhaustive, as business is by
definition unpredictable and risky, and subject to influence by
numerous factors outside of our control, such as changes in
government regulation or policy, competition, interest rates,
supply, technological innovation, changes in consumer taste and
fancy, weather, and the extent to which consumers in our markets
have the economic wherewithal to spend money on beyond-the-home
entertainment.
Given the variety and unpredictability of the factors that will
ultimately influence our businesses and our results of operation,
no guarantees can be given that any of our forward-looking
statements will ultimately prove to be correct. Actual results will
undoubtedly vary and there is no guarantee as to how our securities
will perform, either when considered in isolation or when compared
to other securities or investment opportunities.
In addition to the forward-looking factors set forth above, we
encourage you to review Item 1A. “Risk Factors,” from our Company’s
Annual Report on SEC Form 10-K for the Year Ended December 31,
2017.
Finally, we undertake no obligation to publicly update or to
revise any of our forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be
required under applicable law. Accordingly, you should always note
the date to which our forward-looking statements speak.
Additionally, certain of the presentations included in this
press release may contain “pro forma” information or “non-U.S. GAAP
financial measures.” In such case, a reconciliation of this
information to our U.S. GAAP financial statements will be made
available in connection with such statements.
Reading International, Inc. and
Subsidiaries
Unaudited Consolidated Statements of
Operations
(Unaudited; U.S. dollars in thousands,
except shares and per share data)
Quarter Ended
Full Year Ended
December 31, December 31, December 31,
December 31, 2017
2016(1)
2017
2016(1)
Revenue Cinema $ 67,402 $ 64,343 $ 263,464 $ 256,922 Real
estate 4,378
3,108 16,270
13,551
Total
revenue 71,780
67,451
279,734
270,473 Costs and expenses Cinema (53,935 )
(49,659 ) (207,447 ) (198,523 ) Real estate (2,179 ) (2,416 )
(9,437 ) (9,044 ) Depreciation and amortization (4,818 ) (3,923 )
(16,942 ) (15,689 ) General and administrative
(7,216 ) (8,534 )
(25,347 ) (26,906 )
Total costs and expenses
(68,148 ) (64,532
) (259,173 )
(250,162 ) Operating
income 3,632 2,919 20,561 20,311
Interest expense, net (884 ) (1,592 ) (6,194 ) (6,782 ) Gain on
sale of assets (57 ) -- 9,360 393 Gain on insurance recoveries --
(1,421 ) 9,217 (1,421 ) Other income (expense)
(349 ) 52
588 (63 )
Income before income tax expense and equity earnings of
unconsolidated joint ventures 2,342 (42 )
33,532 12,438 Equity earnings of unconsolidated joint
ventures 161
191 815
999
Income before income
taxes 2,503 149 34,347 13,437
Income tax benefit (expense) 4,954
202
(3,337 ) (4,020 )
Net
income $ 7,457 $ 351 $
31,010 $ 9,417 Less: net income (loss)
attributable to noncontrolling interests
77 2
11 14
Net income attributable to Reading International, Inc. common
shareholders $ 7,380
$ 349
$ 30,999 $
9,403 Basic earnings per share attributable to
Reading International, Inc. shareholders
$ 0.32 $
0.01 $ 1.35
$ 0.40 Diluted
earnings per share attributable to Reading International, Inc.
shareholders $ 0.32
$ 0.01
$ 1.33 $
0.40 Weighted average number of shares
outstanding–basic 22,870,544 23,282,581 23,041,190 23,320,048
Weighted average number of shares outstanding–diluted
23,077,322
23,483,690 23,247,969
23,521,157
(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, December 31,
2017
2016(1)
ASSETS Current Assets: Cash and cash equivalents $
13,668 $ 19,017 Receivables 13,050 8,772 Inventories 1,432 1,391
Prepaid and other current assets 5,325 5,787 Land held for sale
--
37,674
Total Current Assets 33,475 72,641 Operating properties, net
264,724 211,886 Investment and development properties, net 61,254
43,687 Investment in unconsolidated joint ventures 5,304 5,071
Goodwill 20,276 19,828 Intangible assets, net 8,542 10,037 Deferred
tax assets, net 24,908 28,667 Other assets
4,543
13,949
Total
Assets
$ 423,026
$ 405,766 LIABILITIES AND STOCKHOLDERS'
EQUITY Current Liabilities: Accounts payable and accrued
liabilities $ 34,359 $ 26,479 Film rent payable 13,511 10,528 Debt
– current portion 8,109 567 Taxes payable 2,938 3,523 Deferred
current revenue 9,850 10,758 Other current liabilities
11,679
14,131
Total Current Liabilities 80,446 65,986 Debt – long-term
portion 94,862 115,707 Subordinated debt 27,554 27,340 Noncurrent
tax liabilities 12,274 19,953 Other liabilities
26,649
30,165
Total
Liabilities
$ 241,785 $
259,151
Commitments and Contingencies
Stockholders’ Equity:
Class A non-voting common shares, par
value $0.01, 100,000,000 shares authorized, 33,019,565 issued and
21,251,291 outstanding at December 31, 2017 and 32,856,267 issued
and 21,497,717 outstanding at December 31, 2016
$ 231 $ 230
Class B voting common shares, par value
$0.01, 20,000,000 shares authorized and 1,680,590 issued and
outstanding at December 31, 2017 and 2016
17 17 Nonvoting preferred shares, par value $0.01, 12,000 shares
authorized and no issued or outstanding shares at December 31, 2017
and 2016 -- -- Additional paid-in capital 145,898 144,569 Retained
earnings 32,679 1,680 Treasury shares, at cost (22,906 ) (16,374 )
Accumulated other comprehensive income
20,991
12,075
Total Reading
International, Inc. ("RDI") Stockholders’ Equity 176,910
142,197 Noncontrolling Interests
4,331
4,418
Total Stockholders’ Equity
$ 181,241
$ 146,615
Total
Liabilities and Stockholders’ Equity
$ 423,026
$ 405,766
(1)
Certain prior period amounts have been
reclassified to conform to the current period presentation.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180316005192/en/
Reading International, Inc.Dev Ghose, Executive Vice President
& Chief Financial OfficerAndrzej Matyczynski, Executive Vice
President for Global Operations(213) 235-2240
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