Nevada

1-8625

95-3885184

(State or Other Jurisdiction
of Incorporation)

(Commission
File Number)

(IRS Employer
Identification No.)



6100 Center Drive, Suite 900, Los Angeles, California

90045

(Address of Principal Executive Offices)

(Zip Code)

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.3 



READING INTERNATIONAL, INC.



Date: November 8, 2016

By:

/s/ Devasis Ghose



Name:

Devasis Ghose



Title:

Chief Financial Officer





Quarter Ended

Nine Months Ended



% Change

% Change

(Dollars in millions, except EPS)

September 30,
2016

September 30,
2015

Favorable/
(Unfavorable)

September 30,
2016

September 30,
2015

Favorable/
(Unfavorable)

Revenue

$

$

%

$

$

%

    - US

%

%

    - Australia

%

%

    - New Zealand

%

%

Segment operating income (1)

$

$

%

$

$

%

Net income(2)

$

               3.9

%

$

                  9.1

$

%

Basic EPS (2)

$

              0.17

$

%

$

                0.39

$

%

EBITDA (1)

$

$

%

$

$

%

·

Operating Results.  Revenues for the third quarter of 2016 represented a  record for any third quarter and the second highest quarterly level in the history of the Company.  Additionally, segment operating income increased by 83%  compared to the third quarter in 2015.

·

Settlement of STOMP Arbitration.     In April 2016, we received a Final Award of $2.3 million in our arbitration with The STOMP Company Limited Partnership (“Stomp”), the producer of the show STOMP.  In September 2016, we entered into a Payment Agreement with Stomp designed to allow the Company to recover the entire Final Award (plus interest at 4%), while at the same time allowing the show, STOMP, to continue playing at our Orpheum Theater. 

·

Withdrawal of Derivative Lawsuit.  In  July 2016, all stockholder plaintiffs in the consolidated derivative cases other than James J. Cotter, Jr. (the “Independent Plaintiff Stockholders”)  entered into a settlement agreement with the Company and all of the Company’s directors (other than James J. Cotter, Jr.) and withdrew their claims.  The settlement was approved by the District Court of the State of Nevada for Clark County and judgment dismissing with prejudice the claims of the Independent Plaintiff Stockholders was entered on October 20, 2016.  Under the judgment, each party is to bear its own legal fees. In the joint press release issued by the Company and the Independent Plaintiff Stockholders on July 13, 2016, representatives of the Independent Plaintiff Stockholders stated as follows:  "We are pleased with the conclusions reached by our investigations as Plaintiff Stockholders and now firmly believe that the Reading Board of Directors has and will continue to protect stockholder interests and will continue to work to maximize shareholder value over the long term.  We appreciate the Company's willingness to engage in open dialogue and are excited about the Company's prospects. Our questions about the termination of James Cotter, Jr., and various transactions between Reading and members of the Cotter family-or entities they control-have been definitively addressed and put to rest. We are impressed by measures the Reading Board has made over the past year to further strengthen corporate governance.  We fully support the Reading Board and management team and their strategy to create stockholder value.” 

·

Cinema activities

§

On October 21, 2016, we opened Olino by Consolidated Theatres, our ninth theatre in Hawaii and the first to break ground in the state since 2001.  Olino features luxurious amenities, including electric recliner seats, expansive wall-to-wall screens and pristine digital projection by Barco, the leader in digital cinema technology, and an elevated, locally inspired food and beverage menu.  

The theatre also features a TITAN LUXE, a premium auditorium with immersive sound by Dolby ATMOS.

§

On January 31, 2016, following the run of “Star Wars: The Force Awakens”,  we surrendered our Gaslamp cinema in San Diego, California.  We acquired this cinema in 2008 as part of the acquisition of a package of 15 locations from Pacific Theatres.  The cinema was not profitable at that time and the purchase price for this group of assets reflected the losses generated by the  cinema and the likelihood that such losses would continue into the future.

·

Real estate activities

§

In August 2016, the Auckland City Council re-zoned 64.0 acres of our 70.4 acre property in Manukau from agricultural to light industrial use.  The remaining 6.4 acres were already zoned for heavy industrial use.  Light industrial use includes certain manufacturing, production, logistic, transportation, warehouse and wholesale distribution activities and, on an ancillary basis, certain office, retail and educational uses.  Now that our zoning enhancement goals have been achieved, we are considering our options with respect to the value realization opportunities and commercial exploitation of this asset.

§

Frasers Property Australia, the buyer of our Burwood Property, has informed us that it is under contract to sell a portion of this property and a potential prepayment of $16.7 million (AU$21.8 million) is expected during the fourth quarter of 2016. 

§

On April 11, 2016, we purchased a 24,000 square foot Class B office building with 72 parking spaces located at 5995 Sepulveda Boulevard in Culver City, California for $11,150,000.  We intend to use approximately 50% of the leasable area for our corporate headquarters and lease the remainder to unaffiliated third party tenants.  In recent years, Culver City has developed as a center of entertainment and high-tech activity in Los Angeles County.  Upon completion of the move and after leasing excess space at the property, we anticipate that the move will reduce our headquarters’ occupancy cost by approximately $350,000 per annum. 

§

On March 31, 2016, we closed the second of the two definitive sale agreements of our Taupo property in New Zealand, for which we received the remaining sales price of $831,000 (NZ$1.2 million).

§

We continue to make progress on the supermarket development project at our Courtenay Central entertainment themed-center in Wellington, New Zealand with the planned addition of an approximately 36,000 square foot supermarket and approximately 4,000 square feet of general retail space.  The agreement to lease the supermarket has been signed, all parties have approved construction budgets for the supermarket and a design build construction agreement has been entered into.   The project remains in the design phase, as our Tenant has advised us that they have decided to revisit their initial designs with the intent to upgrade the supermarket into a  “premium” offering.   Under the Agreement to Lease, our Tenant is responsible for any increase in our costs resulting from these design changes and any resultant delays.  We now expect the supermarket development project to be completed during 2018 due to the delayed commencement of construction and occupancy to accommodate the tenant’s upgraded offering. 

§

Our Union Square property located in Manhattan, New York continues to proceed as scheduled and we continue to anticipate the re-developed property will be ready for occupancy by the second quarter of 2018.  Management believes that retail leasing interest to date has been strong.  This redevelopment will add approximately 23,000 square footage of rentable space to the current square footage of the building for an approximate total of 73,322 square feet of rentable space, inclusive of anticipated BOMA adjustments and subject to lease negotiations and the final tenant mix. Approvals have been granted by the Landmarks Preservation Commission and the Board of Standard and Appeals to develop the property entirely for retail and commercial uses.  Edifice Real Estate Partners, LLC has been retained to assist in the supervision and administration of the project as well as real estate brokerage Newmark Grubb Knight Frank to serve as our exclusive marketing agent.  We retained an affiliate of CNY Construction LLC to provide pre-construction management services.  We received demolition and building approval of numerous permit applications by the New York City Department of Buildings in July 2016, including the Alt-1 permit associated with the overall renovation of the structure.  We have finished abatement and

have begun internal demolition activities at the site.  In addition, we have obtained commitments for $57.5 million of construction financing and anticipate closing during the fourth quarter of 2016. 

§

We also completed a refinancing on our Cinemas 1,2,3 property in Manhattan to refinance current indebtedness (including paying of a $3.0 million loan to Reading International) and to provide approximately $2.0 million in working capital to fund pre-development work. Our discussions with the owners of the neighboring 2,600 square foot property at the corner of 3rd Avenue and 60th Street are ongoing, focusing on the redevelopment of the combined property (121,000 square feet of FAR and 140,000 square feet of gross buildable area) as an entertainment and hotel property.







Quarter Ended

Nine Months Ended



% Change

% Change

(Dollars in thousands)

September 30,
2016

September 30,
2015

Favorable/
(Unfavorable)

September 30,
2016

September 30,
2015

Favorable/
(Unfavorable)

Segment revenue

  Cinema

     United States

$

$

%

$

$

%

     Australia

%

%

     New Zealand

%

%

       Total

$

$

%

$

$

%

  Real estate

     United States

$

$

%

$

$

%

     Australia

%

%

     New Zealand

%

%

       Total

$

$

%

$

$

 -

%

  Inter-segment elimination

%

%

Total segment revenue

$

$

%

$

$

%

Segment operating income (loss)

  Cinema

     United States

$

$

%

$

$

%

     Australia

%

%

     New Zealand

%

%

       Total

$

$

%

$

$

%

  Real estate

     United States

$

$

%

$

$

%

     Australia

 -

%

%

     New Zealand

%

%

       Total

$

$

%

$

$

%

Total segment operating income (1)

$

$

%

$

$

%

·

In  the United States, third quarter revenue increased by 11%, or $3.3 million, primarily driven by higher attendance (including the impact of the re-branding of our Carmel Mountain theatre in San Diego, CA to Angelika Film Center in October 2015) and an increase in average ticket prices.   In addition, the quarter reflects the closure of the Gaslamp cinema in San Diego in the first quarter of 2016.  Food & Beverage revenues (“F&B”) increased by 13% during third quarter compared to the

same period in 2015.  F&B revenue stream within the cinema business contributed the highest gross margin for the U.S, in the range of 82-83%.  Our Q3 2016 F&B Spend per Person of $4.39 increased by 9.1% compared to the same period in 2015.

·

Australia cinema revenue, stated in U.S. dollars, increased by 38%, or $7.0 million, primarily due to significant increase in attendance and the favorable impact from stronger foreign exchange average rate movements. 

·

New Zealand cinema revenue, stated in U.S. dollars, increased significantly by 64%, or $3.1 million, mainly due to higher attendance and the opening of our LynnMall cinema in November 2015, in addition to favorable impact from foreign exchange average rates.        

·

Revenue in the United States during the first nine months of 2016 increased by 6%, or $5.7 million, to $101.3 million driven by higher average ticket prices while maintaining last year’s level of admissions.  Food & Beverage revenues (“F&B”) increased by 10% for the nine months ended September 30, 2016.  F&B revenue stream within the cinema business contributed the highest gross margin for the U.S, in the range of 82-83%.  Our F&B Spend per Person for the nine months ended September 30, 2016 of $4.43 increased by 10.5% compared to the same period in 2015.

·

Australia cinema revenue, stated in U.S. dollars, increased by 3%, or $1.8 million, to $69.0 million primarily due to higher attendance, offset by the unfavorable impact from foreign exchange average rate movements and a  reduction in average ticket prices. 

·

New Zealand cinema revenue, stated in U.S. dollars, increased by 28%, or $4.9 million, to $22.3 million mainly due to higher attendance and the opening of our LynnMall cinema in November 2015, partially offset by the unfavorable impact from foreign exchange average rate movements.  The New Zealand exhibition market benefited from the most successful local film release of all time, “Hunt for the Wilderpeople”.   

·

In the U.S., property rental income decreased by 36% (or $1.4 million) due to the termination of tenancies at the Company’s Union Square property in New York and the termination of our live theater activities at that location, which is currently being re-developed,

·

In Australia, property rental income increased by 20% (or $1.7 million) due to the purchase of Cannon Park in December 2015, offset by the unfavorable average FX rate movements on Foreign Operations.

·

In New Zealand, property rental income decreased slightly by 7% (or $265,000) due to the 2015 sale of our Taupo property, in addition to the unfavorable average FX rate movements on Foreign Operations.





Quarter Ended

Nine Months Ended



% Change

% Change

(Dollars in thousands)

September 30,
2016

September 30,
2015

Favorable/
(Unfavorable)

September 30,
2016

September 30,
2015

Favorable/
(Unfavorable)

Segment operating income

$

$

%

$

$

%

Non-segment income and expenses:



  General and administrative expense

%

%



  Interest expense, net

%

%



  Gain on sale of assets

--

--

--

%

%



  Others

nm

nm

Total non-segment income and expenses

$

$

nm

$

$

nm

Income before income taxes

%

%



Income tax expense

%

%

Net income

$

$

%

$

$

%



Net (income)/loss attributable to noncontrolling interests

nm

nm

Net income attributable to RDI common stockholders

$

$

%

$

$

%





As of September 30, 2016

(Dollars in thousands)

Contractual Capacity

Capacity Used

Unused Capacity

Bank of America Credit Facility (USA)

$

$

$

Bank of America Line of Credit (USA)

NAB Corporate Term Loan (AU) (1)

Westpac Corporate Credit Facility (NZ) (1)



Total

$

$

$





Quarter Ended

Nine Months Ended



September 30

September 30

September 30

September 30

(Dollars in thousands)

2016

2015

2016

2015

Net Income

$

$

$

           9,054

$

Add: Interest expense, net

             5,190

Add: Income tax expense

           4,222

Add: Depreciation and amortization

          11,766

EBITDA

$

$

$

          30,232

$

·

the development, ownership, and operation of multiplex cinemas in the United States, Australia and New Zealand; and

·

the development, ownership, and operation of retail and commercial real estate in Australia, New Zealand, and the United States, including entertainment-themed centers (“ETC”) in Australia and New Zealand and live theater assets in Manhattan and Chicago in the United States.

·

in the United States, under the

o

Reading Cinema brand (http://www.readingcinemasus.com);

o

Angelika Film Center brand (http://www.angelikafilmcenter.com);

o

Consolidated Theatres brand (http://www.consolidatedtheatres.com);

o

City Cinemas brand (http://www.citycinemas.com);

o

Beekman Theatre brand (http://www.beekmantheatre.com);

o

The Paris Theatre brand (http://www.theparistheatre.com);

o

Liberty Theatres brand (http://libertytheatresusa.com); and

o

Village East Cinema brand (http://villageeastcinema.com)

·

in Australia, under the

o

Reading Cinema brand (http://www.readingcinemas.com.au);  

o

Newmarket brand (http://readingnewmarket.com.au);  and

o

Red Yard brand (http://www.redyard.com.au)

·

in New Zealand, under the

o

Reading Cinema brand (http://www.readingcinemas.co.nz);

o

Rialto brand (http://www.rialto.co.nz);

o

Reading Properties brand (http://readingproperties.co.nz);

o

Courtenay Central brand (http://www.readingcourtenay.co.nz); and

o

Steer n’ Beer restaurant brand (http://steernbeer.co.nz).

·

With respect to our cinema operations:

o

The number and attractiveness to movie goers of the films released in future periods;

o

The amount of money spent by film distributors to promote their motion pictures;

o

The licensing fees and terms required by film distributors from motion picture exhibitors in order to exhibit their films;

o

The comparative attractiveness of motion pictures as a source of entertainment and willingness and/or ability of consumers (i) to spend their dollars on entertainment and (ii) to spend their entertainment dollars on movies in an outside the home environment; and

o

The extent to which we encounter competition from other cinema exhibitors, from other sources of outside of the home entertainment, and from inside the home entertainment options, such as “home theaters” and competitive film product distribution technology such as, by way of example, cable, satellite broadcast, DVD rentals and sales, and online streaming.

·

With respect to our real estate development and operation activities:

o

The rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own;

o

The extent to which we can obtain on a timely basis the various land use approvals and entitlements needed to develop our properties;

o

the risks and uncertainties associated with real estate development;

o

The availability and cost of labor and materials;

o

Competition for development sites and tenants;

o

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; and

o

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:

o

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;

o

The relative values of the currency used in the countries in which we operate;

o

Changes in government regulation, including by way of example, the costs resulting from the implementation of the requirements of Sarbanes-Oxley;

o

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);

o

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;

o

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

o

Changes in applicable accounting policies and practices.







Quarter Ended

Nine Months Ended



September 30,

September 30,

September 30,

September 30,



2016

2015

2016

2015



Operating revenue

Cinema

$

$

$

$

Real estate

Total operating revenue

Operating expense

Cinema

Real estate

Depreciation and amortization

General and administrative

Total operating expense

Operating income

Interest income

Interest expense

Net gain on sale of assets

--

--

Other expense

Income before income tax expense and equity earnings of unconsolidated joint ventures and entities

Equity earnings of unconsolidated joint ventures and entities

Income before income taxes

Income tax expense

Net income

$

$

$

$

Net (income) loss attributable to noncontrolling interests

Net income attributable to Reading International, Inc. common stockholders

$

$

$

$

Basic earnings per share attributable to Reading International, Inc. stockholders

$

$

$

$

Diluted earnings  per share attributable to Reading International, Inc. stockholders

$

$

$

$

Weighted average number of shares outstanding – basic

Weighted average number of shares outstanding – diluted









September 30,

December 31,



2016

2015(1)

ASSETS

(Unaudited)

Current Assets:

Cash and cash equivalents

$

$

Receivables

Inventory

Investment in marketable securities

Restricted cash

Prepaid and other current assets

Land held for sale – current

--

Total current assets

Operating property, net

Land held for sale – non-current

Investment and development property, net

Investment in unconsolidated joint ventures and entities

Investment in Reading International Trust I

Goodwill

Intangible assets, net

Deferred tax asset, net

Other assets

Total assets

$

$

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable and accrued liabilities

$

$

Film rent payable

Debt – current, net

Taxes payable – current

Deferred current revenue

Other current liabilities

Total current liabilities

Debt – long-term, net

Subordinated debt, net

Noncurrent tax liabilities

Other liabilities

Total liabilities

Commitments and contingencies (Note 13)

Stockholders’ equity:

Class A non-voting common stock, par value $0.01, 100,000,000 shares authorized,

 32,831,113 issued and 21,654,302 outstanding at September 30, 2016 and December 31, 2015

Class B voting common stock, par value $0.01, 20,000,000 shares authorized and

  1,680,590 issued and outstanding at September 30, 2016 and December 31, 2015

Nonvoting preferred stock, par value $0.01, 12,000 shares authorized and no issued

  or outstanding shares at September 30, 2016 and December 31, 2015

--

--

Additional paid-in capital

Accumulated deficit

Treasury shares

Accumulated other comprehensive income

Total Reading International, Inc. stockholders’ equity

Noncontrolling interests

Total stockholders’ equity

Total liabilities and stockholders’ equity

$

$