Article Top Ad
Reading Time: 15 minutes

Earnings Call Webcast to Discuss 2019 Second Quarter Financial Results to Post to Corporate Website on Tuesday, August 13, 2019

CULVER CITY, Calif.–(BUSINESS WIRE)–Reading International, Inc. (NASDAQ: RDI) today announced results for the quarter ended June 30, 2019. Our Company reported Basic Earnings per Share (“EPS”) of $0.10 and $0.01 for the quarter and six months ended June 30, 2019, respectively, compared to $0.22 and $0.35 in the corresponding prior periods. These results were principally driven by a 10% decrease in revenue in both the Cinema and Real Estate business segments combined, offset to some extent by an 18% reduction in general and administrative expenses.

Consolidated revenue for the second quarter of 2019 decreased by 10%, or $8.2 million, to $76.1 million compared to the second quarter of 2018. Three factors contributed to this reduction in revenue compared to the second quarter of 2018: (i) a significantly softer film slate from both the major studios and specialty distributors compared to the record breaking slate of 2018, (ii) a 7.5% decline in the Australian dollar and a 6.0% decline in the New Zealand dollar; and (iii) the temporary continuing closure of our Reading Cinema and certain retail areas at Courtenay Central in Wellington, New Zealand in January 2019 due to seismic concerns.

In addition, during the quarter, we made progress on the planning of our re-development projects at Courtenay Central in Wellington, New Zealand and Cannon Park in Townsville, Australia. We also continued to work with various public and private stakeholders on the infrastructure work for our 70.4 acre industrial site in the Manukau/Wiri area of Auckland, New Zealand.

Ellen Cotter, Chair, President and Chief Executive Officer said, “We anticipated that the record-setting box office in the second quarter of 2018 would be hard to repeat. Despite a relatively softer box office in the second quarter of 2019, the blockbuster success of films like Avengers: Endgame and Aladdin reassure us that global audiences will support quality films. We were pleased with the market performance of certain theaters that benefited from our renovation strategy during the quarter, and expect that our cinema investment in recliner seating, TITAN LUXE screens, F&B and lobby upgrades will continue to pay off through the end of the year as we expect a more robust box office with highly anticipated titles like Star Wars: Episode IX, Frozen 2, Joker and Downton Abbey.”

“And, we were pleased that the 44 Union Square project is nearing completion, and believe this will unlock the long term value in this iconic, one-time theatre property in New York City,” added Cotter.

Under our Stock Repurchase Program, during June and July 2019, the Company repurchased 207,766 shares of Class A Common Stock at an average price of $13.19 per share.

The following table summarizes the second quarter and first half-of-the-year results for 2019 and 2018:

 

 

Quarter Ended

 

Six Months Ended

 

 

June 30,

 

% Change

Favorable/

 

June 30,

 

% Change

Favorable/

(Dollars in millions, except EPS)

 

2019

 

2018

 

(Unfavorable)

 

2019

 

2018

 

(Unfavorable)

Revenue

 

$

76.1

 

 

$

84.2

 

 

(10

)%

 

$

137.6

 

 

$

160.1

 

 

(14

)%

– US

 

 

41.8

 

 

 

47.0

 

 

(11

)%

 

 

74.8

 

 

 

84.0

 

 

(11

)%

– Australia

 

 

28.1

 

 

 

29.1

 

 

(3

)%

 

 

51.9

 

 

 

58.9

 

 

(12

)%

– New Zealand

 

 

6.2

 

 

 

8.1

 

 

(23

)%

 

 

10.9

 

 

 

17.2

 

 

(37

)%

Operating expense

 

$

(70.3

)

 

$

(75.6

)

 

7

%

 

$

(133.1

)

 

$

(145.8

)

 

9

%

Segment operating income (1)

 

$

10.6

 

 

$

14.4

 

 

(26

)%

 

$

14.4

 

 

$

26.4

 

 

(45

)%

Net income/(loss)(2)

 

$

2.4

 

 

$

5.0

 

 

(52

)%

 

$

0.3

 

 

$

8.1

 

 

(96

)%

EBITDA (1)

 

$

11.8

 

 

$

14.4

 

 

(18

)%

 

$

16.1

 

 

$

25.5

 

 

(37

)%

Adjusted EBITDA (1)

 

$

12.0

 

 

$

15.6

 

 

(23

)%

 

$

16.7

 

 

$

28.1

 

 

(41

)%

Basic EPS (2)

 

$

0.10

 

 

$

0.22

 

 

(55

)%

 

$

0.01

 

 

$

0.35

 

 

(97

)%

(1)

Aggregate segment operating income, earnings before interest expense (net of interest income), income tax expense, depreciation and amortization expense (“EBITDA”) and adjusted EBITDA are non-GAAP financial measures. See the discussion of non-GAAP financial measures that follows.

(2)

Reflect amounts attributable to stockholders of Reading International, Inc., i.e. after deduction of noncontrolling interests.

COMPANY HIGHLIGHTS

  • Operating Results: For the quarter ended June 30, 2019, we had worldwide revenue of $76.1 million, a decrease of 10%, or $8.2 million, from the same quarter in the prior year. Our operating results were negatively impacted by (i) a decrease in cinema attendance due to a significantly softer film slate from both the major studios and the specialty distribution companies in the U.S., (ii) the continuing closure of a majority of the net rentable area of Courtenay Central in Wellington (NZ), including our Reading Cinema at that location, due to seismic concerns, and (iii) the weakening foreign currency exchange rates.

    All three cinema circuits in the U.S., Australia and New Zealand, in their functional currency, set record high second quarter Food & Beverage (“F&B”) spends per patron (“SPP”), reflecting the continued improvement in our global F&B program.

  • Capex program: During the second quarter of 2019, we invested $11.2 million in capital improvements, including our continued investment in the redevelopment of 44 Union Square in NYC, as well as the upgrading of certain of our cinemas: (i) Reading Cinemas in Australia at Harbour Town, Maitland and Waurn Ponds, (ii) Reading Cinemas at The Palms in New Zealand, and (iii) Consolidated Theatres in Mililani, Hawaii. Also, to mitigate the temporary closure of Reading Cinemas at Courtenay Central, we leased a three screen cinema space in Lower Hutt, adjacent to Wellington, New Zealand. This cinema, which will trade as The Hutt Pop Up by Reading Cinemas, began operations in late June 2019.

    We converted four screens at our Reading Cinemas at Maitland and Waurn Ponds in Australia and The Palms in New Zealand to TITAN LUXE and/or PREMIUM during the second quarter of 2019.

    And, during June 2019, our Consolidated Theatres in Mililani, Hawaii, launched a full F&B program with a new chef-driven, locally inspired menu that also features beer, wine and spirits. The lobby was also upgraded with artwork from Kamea Hadar, a local street artist from Honolulu. During the second quarter 2019, we also worked with our landlord at the Kahala Mall in Honolulu to complete plans for a full “top-to-bottom” renovation at that Consolidated Theatres that will include conversion to recliner seating and an F&B upgrade.

  • Cinema Additions and Pipeline: In early 2019, we purchased a well-established four-screen cinema in Devonport, Tasmania. And, as described above, during the second quarter, we worked to complete a lease for The Hutt Pop Up by Reading Cinemas, a three screen cinema in Wellington, New Zealand, which opened in late June 2019.

    These additions bring our global cinema count to 60 and global screen count to 483. Also, we currently have signed lease agreements for four new cinemas in Australia representing an additional 25 screens, which we anticipate opening between now and 2021.

  • Building new revenue sources: We continue to focus on the development of our self-ticketing capabilities. We achieved a second quarter record for U.S. online revenue, beating the prior year second quarter record by 22%. Online sales consisted of 31% of our global box office revenue, which is a second quarter record and represents a 14% increase from the prior year period. Our continued improvements to our websites and apps in the U.S. and improved global online sales infrastructure are enabling us to better serve high sales volume.

Real estate activities:

  • Redevelopment of 44 Union Square (New York, U.S.) During July 2019, we topped out the steel dome capping our redevelopment of historic Tammany Hall at 44 Union Square. We anticipate that the project will be ready for the commencement of tenant fit-out in the near future, and are in final negotiations of a long term lease for approximately 90% of the net rentable area of the building. This lease would be for office use, and the remaining 7,200 square feet of ground floor space (facing onto Union Square) continue to be marketed for retail use by our exclusive broker, Newmark.
  • Minetta Lane Theatre (New York, U.S.) In April, we negotiated an extension through March 2020 (with an option to extend by our licensee for an additional year through March 2021) of our Minetta Lane Theatre license agreement with Audible, Inc., a subsidiary of Amazon. Audible will continue to use our theatre as the location for its production of various plays featuring one or two actors, to be recorded before a live theatre audience, and offered on Audible.com.
  • Courtenay Central Re-Development in Wellington, New Zealand – Located in the heart of Wellington – New Zealand’s capital city – this center is comprised of 161,071 square feet of land situated proximate to the Te Papa Tongarewa Museum (attracting over 1.5 million visitors annually), across the street from the site of Wellington’s newly announced convention center (estimated to open its doors in 2022) and at a major public transit hub. Damage from the 2016 earthquake necessitated demolition of our nine-story parking garage at the site. Further, unrelated seismic issues have caused us to temporarily close the existing cinema and significant portions of the retail structure while we reevaluate the property for redevelopment as an entertainment themed urban center with a major food and grocery component. Wellington continues to be rated as one of the top cities in the world in which to live, and we continue to believe that the Courtenay Central site is located in one of the most vibrant and growing commercial and entertainment precincts of Wellington. We are currently working on a comprehensive plan for the redevelopment of this property featuring a variety of uses to complement and build upon the “destination quality” of this location.

SEGMENT RESULTS

The following table summarizes the second quarter and first half-of-the-year segment operating results for 2019 and 2018:

 

 

 

 

 

 

 

 

 

 

Quarter Ended

Six Months Ended

 

June 30,

% Change

Favorable/

June 30,

% Change

Favorable/

(Dollars in thousands)

2019

2018

(Unfavorable)

2019

2018

(Unfavorable)

Segment revenue

 

 

 

 

 

 

 

 

Cinema

 

 

 

 

 

 

 

 

United States

$

40,961

 

$

44,413

 

(8

) %

$

72,993

 

$

82,400

 

(11

) %

Australia

 

25,599

 

 

27,137

 

(6

) %

 

47,039

 

 

53,854

 

(13

) %

New Zealand

 

5,823

 

 

8,633

 

(33

) %

 

10,336

 

 

16,184

 

(36

) %

Total

$

72,383

 

$

80,183

 

(10

) %

$

130,368

 

$

152,438

 

(14

) %

Real estate

 

 

 

 

 

 

 

 

United States

$

880

 

$

952

 

(8

) %

$

1,868

 

$

1,605

 

16

%

Australia

 

4,052

 

 

4,302

 

(6

) %

 

7,967

 

 

8,456

 

(6

) %

New Zealand

 

632

 

 

1,171

 

(46

) %

 

1,159

 

 

2,371

 

(51

) %

Total

$

5,564

 

$

6,425

 

(13

) %

$

10,994

 

$

12,432

 

(12

) %

Inter-segment elimination

 

(1,851

)

 

(2,346

)

21

%

 

(3,716

)

 

(4,737

)

22

%

Total segment revenue

$

76,096

 

$

84,262

 

(10

) %

$

137,646

 

$

160,133

 

(14

) %

Segment operating income

 

 

 

 

 

 

 

 

Cinema

 

 

 

 

 

 

 

 

United States

$

3,100

 

$

4,698

 

(34

) %

$

2,338

 

$

7,699

 

(70

) %

Australia

 

5,138

 

 

6,048

 

(15

) %

 

8,239

 

 

11,965

 

(31

) %

New Zealand

 

1,031

 

 

1,748

 

(41

) %

 

1,335

 

 

3,115

 

(57

) %

Total

$

9,269

 

$

12,494

 

(26

) %

$

11,912

 

$

22,779

 

(48

) %

Real estate

 

 

 

 

 

 

 

 

United States

$

(73

)

$

(66

)

(11

) %

$

(47

)

$

(360

)

87

%

Australia

 

1,442

 

 

1,573

 

(8

) %

 

2,746

 

 

3,088

 

(11

) %

New Zealand

 

(24

)

 

447

 

(>100

) %

 

(197

)

 

906

 

(>100

) %

Total

$

1,345

 

$

1,954

 

(31

) %

$

2,502

 

$

3,634

 

(31

) %

Total segment operating income (1)

$

10,614

 

$

14,448

 

(27

) %

$

14,414

 

$

26,413

 

(45

) %

(1)

Aggregate segment operating income is a non-GAAP financial measure. See the discussion of non-GAAP financial measures that follows.

Cinema Exhibition

Second Quarter Results:

Cinema segment operating income decreased by $3.2 million, or 26%, to $9.3 million for the quarter ended June 30, 2019, compared to June 30, 2018, primarily driven by a decrease in operating income in all three circuits. The decrease was due to a significant decline in attendance. However, such attendance 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 U.S. decreased by 8%, or $3.5 million, to $41.0 million, due to a 13% decrease in attendance.
  • Australia’s cinema revenue decreased by 6%, or $1.5 million, to $25.6 million primarily due to a 5% decrease in attendance.
  • New Zealand’s cinema revenue decreased by 33%, or $2.8 million, to $5.8 million versus the same period in 2018 due to a 34% decrease in attendance, driven not only by a weaker film slate, but also by the temporary closure of the Reading Cinemas at Courtenay Central due to seismic concerns.

The top three grossing films for the second quarter of 2019 were Avengers: Endgame, Aladdin, and Toy Story 4, representing approximately 40% of our worldwide admission revenues for the quarter. The top three grossing films in the second quarter of 2018 for our worldwide cinema circuits were Avengers: Infinity War, Deadpool 2 and Incredibles 2, which represented approximately 36% of our worldwide admission revenues.

Six Month Results:

Cinema segment operating income declined 48%, or $10.9 million, to $11.9 million for the six months ended June 30, 2019 compared to June 30, 2018, primarily driven by a 70% operating income decline in the U.S. market. The decrease was due to a significant decline in attendance worldwide (principally due to a softer movie slate). However, such attendance decreases were offset by increases in ATP and SPP (in functional currency) in each of the U.S., Australia and New Zealand circuits:

  • Revenue in the United States decreased by 11%, or $9.4 million, to $73.0 million primarily due to a 17% decrease in attendance.
  • Australia’s cinema revenue decreased by 13%, or $6.8 million, to $47.0 million, primarily due to a 10% decrease in attendance.
  • New Zealand cinema revenue decreased by 36%, or $5.8 million, to $10.3 million, primarily due to a 36% decrease in attendance, resulting from a weaker film slate, and the temporary closure of our Reading Cinemas at Courtenay Central due to seismic concerns.

The top three grossing films for the first half of 2019 were Avengers: Endgame, Captain Marvel, and Aladdin representing approximately 26% of our worldwide admission revenues, compared to the top three grossing films a year ago: Avengers: Infinity War, Black Panther, and Deadpool 2, which represented approximately 22% of our admission revenues for the same period in 2018.

Real Estate

Second Quarter and Six Month Results:

Real estate segment operating income decreased by 31%, or $0.6 million, to $1.3 million for the quarter ended June 30, 2019, compared to June 30, 2018. Real estate revenue for the second quarter of 2019, decreased by 13%, or $0.9 million, to $5.6 million compared to the second quarter of 2018. This was primarily driven by a decrease in property rental income in New Zealand.

For the six months ended June 30, 2019, the real estate segment operating income decreased by 31%, or $1.1 million, to $2.5 million compared to the six months ended June 30, 2018. Real estate revenue decreased by 12%, or $1.4 million, to $11.0 million, compared to the same period in 2018. This was primarily attributable to the partial closure due to seismic concerns of a majority of the net rentable area of Courtenay Central during the first six months of 2019, compared to same period in 2018 (which had two full quarters of operations).

CONSOLIDATED AND NON-SEGMENT RESULTS

The second quarter and first half-of-the-year consolidated and non-segment results for 2019 and 2018 are summarized as follows:

 

 

 

 

 

 

 

 

Quarter Ended

Six Months Ended

 

June 30,

% Change

Favorable/

June 30,

% Change

Favorable/

(Dollars in thousands)

2019

2018

(Unfavorable)

2019

2018

(Unfavorable)

Segment operating income

$

10,614

 

$

14,448

 

(27

) %

$

14,414

 

$

26,413

 

(45

) %

Non-segment income and expenses:

 

 

 

 

 

 

General and administrative expense

 

(4,670

)

 

(5,730

)

18

%

 

(9,710

)

 

(11,886

)

18

%

Interest expense, net

 

(2,204

)

 

(1,790

)

(23

) %

 

(4,055

)

 

(3,384

)

(20

) %

Other

 

271

 

 

166

 

63

 

 

223

 

 

224

 

%

Total non-segment income and expenses

$

(6,603

)

$

(7,354

)

10

%

$

(13,542

)

$

(15,046

)

10

%

Income before income taxes

 

4,011

 

 

7,094

 

(43

) %

 

872

 

 

11,367

 

(92

) %

Income tax benefit (expense)

 

(1,654

)

 

(1,965

)

16

%

 

(612

)

 

(3,135

)

80

%

Net income/(loss)

$

2,357

 

$

5,129

 

(54

) %

$

260

 

$

8,232

 

(97

) %

Less: net income (loss) attributable to

noncontrolling interests

 

(37

)

 

102

 

(>100

)

 

(53

)

 

124

 

(>100

)

Net income (loss) attributable to

RDI common stockholders

$

2,394

 

$

5,027

 

(52

) %

$

313

 

$

8,108

 

(96

) %

Second Quarter and First Half-of-the-Year Net Results

Net income attributable to RDI common stockholders declined by 52%, or $2.6 million, to $2.4 million for the quarter ended June 30, 2019, compared to the same period prior year. Basic EPS for the quarter ended June 30, 2019 decreased by $0.12 to $0.10 from $0.22 the prior-year quarter, mainly attributable to a significant decrease in revenue from both our Cinema and Real Estate business segments.

Net income attributable to RDI common stockholders decreased by 96%, or $7.8 million, to $0.3 million for the six months ended June 30, 2019, compared to the same period in the prior year. Basic EPS for the first half of 2019 decreased by $0.34, to $0.01 from $0.35 from the prior-year period.

Non-Segment General & Administrative Expenses

Non-segment general and administrative expense for the quarter ended June 30, 2019 compared to the same period in the prior year decreased by 18%, or $1.1 million, to $4.7 million. The quarterly decrease mainly relates to lower legal expenses.

Non-segment general and administrative expense for the six months ended June 30, 2019, decreased by 18%, or $2.2 million, to $9.7 million, compared to the six month period ending June 30, 2018, mainly related to lower legal expenses.

Income Tax Expense

Income tax expense for the quarter and six months ended June 30, 2019, decreased by $0.3 million and $2.5 million, respectively, compared to the equivalent prior-year period. The change between 2019 and 2018 is primarily related to lower pretax income in the first half of 2019.

OTHER FINANCIAL INFORMATION

Balance Sheet and Liquidity

Total assets increased by $233.8 million, to $672.8 million at June 30, 2019, compared to $439.0 million at December 31, 2018. This was primarily driven by the implementation of the lease accounting standard effective January 1, 2019, which also resulted in a similar increase in our liabilities. Additionally, assets increased due to the capital investments relating to major real estate projects, primarily the redevelopment of 44 Union Square in New York, and to cinema improvements in (i) the U.S. at our Consolidated Theatres in Mililani (Hawaii), (ii) New Zealand at the Reading Cinemas at The Palms, and (iii) Australia at the Reading Cinemas at Maitland, Waurn Ponds and Harbour Town.

Cash and cash equivalents at June 30, 2019 were $8.5 million, including approximately $5.6 million in the U.S., $1.9 million in Australia, and $1.0 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.

As part of our operating cycle, we utilize cash collected from (i) our cinema business when selling tickets and F&B items, and (ii) rental income typically received in advance, to reduce our long-term borrowings and realize savings on interest charges. We then settle our operating expenses generally with a lag within traditional trade terms. This generates a temporary working capital deficit. We review the maturities of our borrowings and negotiate for renewals and extensions, as necessary for liquidity purposes. We believe the cash flow generated from our operations coupled with our ability to renew and extend our credit facilities will provide sufficient liquidity in the upcoming year.

OTHER INFORMATION

Stock Repurchase Program

As of June 30, 2019, $13.5 million remained available under our Stock Repurchase Program. During the six months ended June 30, 2019 we have spent $2.6 million on repurchasing our Class A Common Stock. The Stock Repurchase Program allows Reading to repurchase its Class A Common Stock from time to time in accordance with the requirements of the Securities and Exchange Commission on the open market, in block trades and in privately negotiated transactions, depending on market conditions and other factors.

Trust Litigation

In a matter potentially impacting the control of our company, but to which our Company is not a party (In re: James J. Cotter Living Trust dated August 1, 2000 (Case No. BP159755) (the “Trust Case”)), the California Court of Appeals on April 15, 2019, struck down the California Trial Court’s order appointing a trustee ad litem to solicit offers for the purchase of a controlling interest in our Company. The basis for that disposition was the Appeals Court’s determination that Mr. James J. Cotter, Jr. lacks standing to seek the appointment of such a trustee ad litem. The Appeals Court noted that Mr. Cotter, Jr. is neither a trustee of nor a beneficiary of the trust established to hold such controlling interest (the “Voting Trust”) and accordingly, determined that he lacked any standing to bring before the trial court matters relating to the internal affairs of that trust, such as the appointment of a trustee ad litem. The Court of Appeals also noted, in an observation not material to the specific grounds on which the California Trial Court’s order was struck down, but nevertheless likely to be given weight by the court below, that “the plain language [of the Trust Document] appears to show that the settlor [Mr. Cotter, Sr.] instructed the Trustee [Margaret Cotter] not to diversify [i.e. not to sell the voting shares held by the Voting Trust].” The Trust Document directs the Trustee of the Voting Trust that this voting stock is “to be retained for as long as possible.”

The Guardian Ad Litem, appointed by the court to protect the interests of Mr. Cotter Sr.’s grandchildren, has stated his view that, notwithstanding the above referenced direction to retain the Voting Stock as long as possible and the Court of Appeals statement regarding that direction, diversification of the assets of the Voting Trust would be in the best interests of the grandchildren.

The Guardian Ad Litem has petitioned to split the Voting Trust into two separate trusts and to diversify that portion of any Voting Stock allocated to any separate trust set up for the children of Mr. Cotter, Jr. and for authority to retain a valuation expert. The Guardian Ad Litem has no authority to in any way deal with the Voting Stock to be vested in the Voting Trust. This authority remains vested with Margaret Cotter as the Sole Trustee of the Voting Trust and, until the Voting Stock is transferred into the Voting Trust, in Ellen Cotter and Margaret Cotter as the Co-Executors of the Estate of James J. Cotter, Sr. and the Co-Trustees of the Living Trust.

Ellen Cotter and Margaret Cotter, as Trustees of the James J. Cotter, Sr. Living Trust and Margaret Cotter as Trustee of the Voting Trust oppose the Guardian Ad Litem’s petitions. They have also filed to have a new judge appointed to hear the Trust Litigation and are seeking the removal of the Guardian Ad Litem on various grounds including conflict of interest.

Ellen Cotter and Margaret Cotter have advised the Company that while they oppose any sale of the Voting Stock as being inconsistent with the intentions of Mr. Cotter, Sr., as set out in the Trust Document, if there is such a sale, they intend to be the buyers and to retain control of the Company in the Cotter Family. They have further advised the Issuer that as the Estate is not yet closed, it is uncertain that any shares of Voting Stock will be transferred to the Voting Trust in the near term.

Contacts

Gilbert Avanes, Interim Chief Financial Officer

Andrzej Matyczynski, Executive Vice President for Global Operations

Reading International, Inc. (213) 235-2240

Read full story here