UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported):  August 8, 2014

 

Reading International, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Registrant's telephone number, including area code:  (213) 235-2240

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

 

 

 

 

Item 2.02.  Results of Operations and Financial Condition

 

On August 8, 2014, Reading International, Inc. issued a press release announcing information regarding its results of operations and financial condition for the quarter ended June 30, 2014, a copy of which is attached as Exhibit 99.1.

 

 

 

Item 9.01.  Financial Statements and Exhibits.

 

99.1Press release issued by Reading International, Inc. pertaining to its results of operations and financial condition for the quarter ended June 30, 2014, the resignation of James J. Cotter, Sr. as Chairman and Chief Executive Officer and Director of Reading International, Inc. and the election of his successors.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

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INDEX TO EXHIBITS

 

 2nd Qtr. 2014 Results, Resignation of James J. Cotter, Sr. as Chairman and CEO and election of his successors.

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Reading International Announces

2nd Quarter 2014 Results,

Resignation of James J. Cotter, Sr. as

Chairman and CEO, and

The Election of his Successors

 

 

Los Angeles, California, - (BUSINESS WIRE) –August 6, 2014 – Reading International, Inc. (NASDAQ: RDI) announced today results for its quarter and six months ended June 30, 2014, the resignation of James J. Cotter, Sr. as its Chairman and Chief Executive Officer, the election of Ellen Marie Cotter as Chairman, Margaret Cotter as Vice Chairman, and James J. Cotter, Jr. as Chief Executive Officer.  

Resignation of James J. Cotter, Sr. and Election of His Successors

On August 7, 2014, James J. Cotter, Sr. advised the Company that, due to health reasons, he was resigning, effective immediately, as our Company’s Chairman and Chief Executive Officer and as a director.  The Board of Directors has elected James J. Cotter, Jr., to serve as our new Chief Executive Officer,    Ellen Marie Cotter to serve as our new Chairman, and Margaret Cotter to serve as our new Vice Chairman.   Mr. James J. Cotter, Jr. will continue to serve as our President and as a director, but has resigned his position as Vice Chairman.

Ellen Cotter, Margaret Cotter and James J. Cotter, Jr. have advised us that they consider their family’s holdings in our Company to be a long term family asset, and that they intend to continue the Company in the direction established by their father, James J. Cotter, Sr. --- as a motion picture exhibition and real estate company.   

Ellen Cotter is currently the head of our Domestic Cinema Operations.  She joined our Company in 1998 and has been a director since 2013.    James J. Cotter, Jr. is currently the President of our Company, having first joined our Board of Directors in 2002, been elected Vice Chairman in 2007, and been appointed President 2013.   Margaret Cotter has been the head of our live theater operations since 2000 and a director since 2002.  She is also significantly involved in the oversight and planned development of our Cinemas 1,2&3 and Union Square properties. 

We are advised by Ellen Cotter, James J. Cotter, Jr. and Margaret Cotter, that they intend to recommend to the Board of Directors that, going forward, the position of Chairman be rotated among them, depending upon their respective availabilities and workloads.

Mr. Andrzej Matyczynski has agreed to extend his current September 1, 2014 retirement date for three months, until December 1, 2014.  During this period, he will serve as our Chief Financial Officer until a successor has been retained.  Thereafter, he will assist in the transitioning of this office. 

 

2014 Highlights 

 

Second Quarter 2014 Discussion

Revenue from operations increased from $69.6 million in the 2013 Quarter to $69.9 million in the same Quarter in 2014, an increase of $300,000 or 0.4%. 

Our cinema segment revenue increased by $1.2 million or 1.8% in the 2014 Quarter compared to the same period in 2013.  This increase from prior year is primarily related to a strong showing in New Zealand. 

The top three grossing films for the 2014 Quarter in our worldwide cinema circuit were “X Men Days of Future Past”, “Captain America: The Winter Soldier,” and “Maleficent.”  These three films accounted for approximately 21.1% of our cinema box office revenue.  The top three grossing films for the 2013 Quarter in our worldwide cinema circuit were “Iron Man 3,” “Croods,” and “Star Trek Into Darkness.”    These three films accounted for approximately 36.0% of our 2013 Quarter cinema box office revenue. 

Our real estate segment revenue for the 2014 quarter decreased by $1.1 million or 16.2% in the 2014 Quarter due to a loss of revenue in New Zealand of approximately $487,000 from the shutdown of Courtenay Central Car Park resulting from an earthquake in Wellington in July 2013, and the termination of the Hoyts lease at our Dunedin property.  In addition, live theater income decreased for 2014 Quarter due to a decrease in live theater productions showing in our venues compared to the same period in 2013.

As a percent of revenue, operating expense was 74.6% of revenue in the 2014 Quarter compared to 77.3% in the 2013 Quarter due primarily to improved efficiencies.     

Depreciation expense increased for the 2014 Quarter by $215,000 or 5.9% compared to the same period in 2013 due to additions of assets.

General and administrative expense increased by $965,000 for the 2014 Quarter compared to the 2013 Quarter. The increase in general and administrative expense during the 2014 Quarter was related to an increase in the corporate general and administrative expense in the US, as a result of increases in

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corporate pension costs.

The Australian quarterly average exchange rate to U.S dollar declined to 0.9328 for the 2014 Quarter from 0.9913 for the 2013 Quarter a decrease of 5.90%. The New Zealand quarterly average exchange rate to U.S dollar climbed to 0.8611 for the 2014 Quarter from 0.8211 for the 2013 Quarter, an increase of 4.90%. Both had an impact on the individual components of our income statement.

Driven by the above factors, our operating income for the 2014 Quarter increased by $733,000 to an operating income of $8.5 million compared to an operating income of $7.8 million in the 2013 Quarter.

For the 2014 Quarter, in other income, we recorded $619,000 in insurance proceeds for Courtenay Central Car Park business interruption related to damages from the July 2013 earthquake in Wellington, New Zealand.

For the 2014 Quarter, our income tax expense increased by $342,000 compared to the 2013 Quarter.  The change was primarily associated with changes in tax provisions, linked to the recognition for tax purposes only, of the sale of our Burwood property.

As a result of the above, we reported a net income of $4.8 million for the 2014 Quarter compared to a net income of $4.1 million in the 2013 Quarter driven by the aforementioned increase in operating income.

Our EBITDA(1) at $13.3 million for the 2014 Quarter was $1.4 million or 11.5% higher than the EBITDA(1) for the 2013 Quarter of $11.9 million.    There were no significant adjustments to EBITDA(1) in either the 2014 Quarter or the 2013 Quarter.

Six Months 2014 Summary

Revenue from operations decreased from $129.2 million in the 2013 Six Months to $128.0 million in the 2014 Six Months, a  $1.2 million or a 1.0% decrease, driven by reduced revenue from our real estate segment (see below).    

Cinema segment revenue  was basically flat in the 2014 Six Months in comparison to the 2013 Six Months.  As mentioned above we outperformed the industry overall in terms of box office revenues for the 2014 Six Months compared to prior year. 

The top three grossing films for the 2014 Six Months in our worldwide cinema circuit were “The Lego Movie,” “X-Men: Days of Future Past,” and “Captain America: The Winter Soldier.”  These three films accounted for approximately 12.6% of our 2014 Six Months cinema box office revenue.  The top three grossing films for the 2013 Six  Months were “Iron Man 3,” “Silver Linings Playbook,” and “Oz Great and Powerful;.”  These three films accounted for approximately  16.3% of our 2013 Six Months cinema box office revenue. 

Our real estate segment revenue decreased by $1.2 million or 9.1% during the 2014 Six Months compared to the 2013 Six Months.  The decrease in real estate revenue was related to a $253,000 decrease in live theater revenue and to an estimated loss of revenue of $960,000 due to the closure of our Courtenay Central Car Parking structure in Wellington New Zealand as well as the termination of the Hoyts lease at our Dunedin property. 

As a percent of revenues, operating expense was 77.3% of revenue in the 2014 Six Months compared to 79.4% in the 2013 Six Months due to improved operating efficiencies. 

General and administrative expense increased by $1.5 million for the 2014 Six Months compared to the 2013 Six Months.  The increase in general and administrative expense was due to the same reasons noted in the quarterly results.

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The Australian average exchange rate to U.S. dollar declined to 0.9261 for the 2014 Six Months from 1.0149 for the 2013 Six Months, a decrease of 8.75%. The New Zealand average exchange rate to U.S. dollar increased to 0.8491 for the 2014 Six Months from 0.8279 for the 2013 Six Months, an increase of 2.56%.  Both had an impact on the individual components of our income statement. 

Driven by the above factors, our operating income for the Six Months of 2013 increased by $800,000 to $11.1 million compared to $10.3 million in the same period last year.

Other income for the 2014 Six Months increased by $1.1 million primarily due to Courtenay Central Car Park insurance proceeds of $1.2 million.

The 2014 Six Months income tax expense was $3.4 million compared to $2.4 million for the 2013 Six Months.  The year over year change was due to the improved pre-tax income for the 2014 Six Months compared to the 2013 Six Months plus the inclusion of the tax effect of the gain on the Burwood property sale.

As a result of the above, we reported a net income of $4.5 million for the 2014 Six Months compared to a net income of $3.5 million for the 2013 Six Months. 

Our EBITDA(1) at $20.8 million for the 2014 Six Months was $2.0 million or 10.5% higher than the EBITDA(1) for the 2013 Six Months of $18.8 million.  There were no adjustments to EBITDA(1) in either the 2014 or the 2013 Six Months.

 

Balance Sheet and Liquidity

Our total assets at June 30, 2014 were $401.8 million compared to $386.8 million at December 31, 2013.  The currency exchange rates for Australia and New Zealand as of June 30, 2014 were $0.9427 and $0.8755, respectively, and as of December 31, 2013, these rates were $0.8929 and $0.8229, respectively. 

On June 27, 2014, we refinanced our existing three-tiered credit facility with NAB.  It is comprised of (1) the Bank Bill Discount Facility with a facility limit of AUS$61.2 million, an interest rate of 2.35% above the BBSY, and amortizing at AUS$2.0 million per year;  (2) the Bill Discount Facility – Revolving with a facility limit of AUS$10.0 million and an interest rate of 1.50% above the BBSY on any undrawn portion. Currently we have not drawn any of this revolver; and (3) the Bank Guarantee Facility with a facility limit of AUS$5.0 million.  All three have an expiry date of June 30, 2019. 

On June 26, 2014, our controlled subsidiary Sutton Hill Properties, LLC, entered into an agreement with Santander Bank, N.A, refinancing the current loan on the property and providing an additional $6.0 million for the acquisition of rights to add additional density to any redevelopment of the property (“air rights”). We replaced an existing term loan of $15.0 million, which was scheduled to mature on the following day.  The new loan has a 2-year term, amortizing at full term interest only, commencing June 27, 2014.  The loan is collateralized by our Cinemas 1,2,3 property (including any air rights that we may acquire).  The loan has an interest rate of 3.50% over the 30-day Libor.

Our cash position at June 30, 2014 was $42.6 million.  Of the $42.6 million, $20.1 million was in Australia, $12.8 million was in the U.S., and $9.7 million was in New Zealand.  As part of our main credit facilities in Australia, New Zealand and the U.S., we are subject to certain debt covenants, which limit the transfer or use of cash outside of the various regional subsidiaries in which the cash is held.  As such, at June 30, 2014 we have approximately $11.7 million of cash worldwide that is not restricted by loan covenants.

At June 30, 2014, we had undrawn funds of $9.4 million (AUS$10.0 million) available under our new NAB line of credit in Australia; $10.5 million (NZ$12.0 million) available under our New Zealand Corporate Credit facility; and $5.0 million available under our Bank of America loan revolver and line of credit in the U.S.  Accordingly, we believe that we have sufficient borrowing capacity under our various credit facilities, together with our $42.6 million cash balance, to meet our anticipated short-term working

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capital requirements.

Our working capital at June 30, 2014 was a negative $9.6 million compared to a negative $71.8 million at December 31, 2013.  This decrease in negative working capital resulted primarily from our Australian NAB Corporate Term Loan and our U.S. Cinemas 1, 2, 3 Term Loan moving from current borrowings to long term borrowings, as discussed above. 

Stockholders’ equity was $135.6 million at June 30, 2014 compared to $121.7 million at December 31, 2013,  an increase primarily related to an increase in the accumulated comprehensive income account,  as a result of foreign exchange gains due to exchange rates fluctuations for Australia and New Zealand.

(1)The Company defines EBITDA as net income (loss) before net interest expense, income tax benefit, depreciation, and amortization.  The company defines adjusted EBITDA as EBITDA adjusted for unusual or infrequent events or items that are of a non-cash nature.  EBITDA and adjusted EBITDA are presented solely as supplemental disclosures as we believe they are relevant and useful measures to compare operating results among our properties and competitors, as well as measurement tools for the evaluation of operating personnel.  EBITDA and adjusted EBITDA are not measures of financial performance under the promulgations of generally accepted accounting principles (“GAAP”).  EBITDA and adjusted EBITDA should not be considered in isolation from, or as substitutes for, net loss, operating loss or cash flows from operations determined in accordance with GAAP.  Finally, EBITDA and adjusted EBITDA are not calculated in the same manner by all companies and accordingly, may not be appropriate measures for comparing performance among different companies.  See the “Supplemental Data” table attached for a reconciliation of EBITDA to net income (loss).

 

About Reading International, Inc.

Reading International (http://www.readingrdi.com) is in the business of owning and operating cinemas and developing, owning and operating real estate assets.  Our business consists primarily of:

Reading manages its worldwide cinema business under various different brands:

 

 

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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:

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.

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-US GAAP financial measures.”  In such case, a reconciliation of this information to our US GAAP financial statements will be made available in connection with such statements.

For more information, contact:

Andrzej Matyczynski, Chief Financial Officer

Reading International, Inc.  (213) 235-2240

 

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Reading International, Inc. and Subsidiaries

Supplemental Data

Reconciliation of EBITDA to Net Income

(dollars in thousands, except per share amounts)

 

*EBITDA presented above is net income adjusted for interest expense (net of interest income), income tax expense, depreciation and amortization expense, and an adjustment for discontinued operations (this includes interest expense and depreciation and amortization for the discontinued operations).

Reconciliation of EBITDA to the net income is presented below:

 

 

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Reading International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(U.S. dollars in thousands, except per share amounts)

 

 

 

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Reading International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(U.S. dollars in thousands)

 

 

 

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