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):  November 6, 2017



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:



☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).



Emerging growth company  ☐



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐









 

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Item 2.02  Results of Operations and Financial Condition.

On November 6, 2017, Reading International, Inc. (“the Company”) issued a press release announcing information regarding its results of operations and financial condition for the quarter and nine months ended September 30, 2017, a copy of which is furnished herewith as Exhibit 99.1.  



Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.



At the 2017 Annual Meeting of Stockholders of the Company (the "2017 Annual Meeting") held on November 7, 2017, the Company's stockholders, upon recommendation of the Board of Directors, approved an amendment to the Company's 2010 Stock Incentive Plan to increase the number of shares of common stock issuable under our 2010 Stock Incentive Plan by an additional 947,460 shares.  The effect of the increase is to restore the amount of shares of Class A Common Stock available under the 2010 Stock Incentive Plan from the 302,540 shares available as of September 30, 2017, back up to its original reserve of 1,250,000 shares.



Item 5.03  Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.



Pursuant to a stockholder motion approved at the 2017 Annual Meeting, the Company's stockholders approved an amendment to Article II, Section 2 of the Company's Bylaws to set the number of directors at nine effective immediately following the completion of the 2017 Annual Meeting, after which the number of directors may be increased or decreased by the Board of Directors to not less than one, nor more than ten directors.



The foregoing summary is qualified in its entirety by reference to the Form of Amendment to the Bylaws, which is furnished herewith as Exhibit 99.2 in this Form 8-K.



Item 5.07  Submission of Matters to a Vote of Security Holders.



On November 7, 2017, the stockholders considered five proposals, four of which (Proposals 1 to 4) were included in our 2017 Proxy Statement, and one of which (Proposal 5) was made by stockholder motion at the meeting.  The proposals voted upon and the results of the vote were as follows:

 

Proposal 1:  To elect nine Directors to serve until the Company’s 2018 Annual Meeting and thereafter until their successors are duly elected and qualified.    By virtue of actions taken at the 2017 Annual Meeting, the stockholders approved an increase in the size of the Board of Directors from eight to nine directors before voting was completed on this Proposal (see Item 5.03 above and Proposal 5 below).





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Proposal 2: To approve, on a non-binding, advisory basis, the executive compensation of our named executive officers.





Proposal 3: To recommend, by non-binding, advisory vote, the frequency of votes on executive compensation.





Based on these results and consistent with the Board of Director's recommendation, the Company has determined that it will hold an advisory vote on executive compensation on an annual basis until the next vote on the frequency of such advisory votes occurs.  The next vote on the frequency of advisory votes on executive compensation is required to occur no later than the Company's 2023 annual meeting of stockholders.



Proposal 4:  To approve an amendment to increase the number of shares of issuable under our 2010 Stock Incentive Plan by an additional 947,460 shares.



Proposal 5:  Amend Article II, Section 2 of Company’s Bylaws to set the number the number of directors at nine effective immediately upon the completion of the 2017 Annual Meeting.





Item 7.01  Regulation FD Disclosure.

On November 7, 2017, the Company showed a slide presentation at its 2017 Annual Meeting, a copy of which is furnish herewith as Exhibit 99.3.     The same presentation was made available on the same day on the Investor Relations page of our corporate website, www.readingrdi.com.  



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 and nine months ended September 30, 2017.

99.2Form of Amendment to the Bylaws.

99.3Slide presentation at the 2017 Annual Meeting.

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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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Reading International Announces

Third Quarter 2017 Results 



Earnings Call Webcast to discuss 2017 Third Quarter Financial Results

scheduled to post on Corporate Website on Thursday, 

November 9, 2017 



Los Angeles, California - (BUSINESS WIRE) November 6, 2017 – Reading International, Inc. (NASDAQ: RDI) today announced results for the third quarter and nine months ended September 30, 2017.  Basic Earnings per Share (“EPS”) were $0.07 and $1.02 for the quarter and nine months ended September 30, 2017, respectively, compared with $0.17 and $0.39 for the prior year’s periods.  Our nine-month results were positively impacted by the (i) recognition of a gain on sale of our Burwood property in Australia and (ii) receipt of insurance proceeds relating to our Courtenay Central entertainment themed center (“ETC”) in Wellington, New Zealand.



Consolidated revenues for the third quarter of 2017 decreased by 7%  (or $5.2 million) from a year ago mainly due to lower admissions and food & beverage (“F&B”) revenues, partially offset by higher real estate revenues.  The quarter’s weaker film slate compared to the prior year period’s strong industry box office negatively impacted global cinema revenues.    Our real estate segment posted increased revenues due to (i) additional settlement proceeds relating to STOMP currently playing at our Orpheum Theatre in New York, and (ii) new tenancies in our Australian real estate operations.



Consolidated revenues for the first nine months of 2017 increased by 2% ($4.9 million) due to the following:



The following table summarizes the third quarter and first nine-month results for 2017 and 2016:



(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.

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Our EPS for the quarter and nine months ended September 30, 2017 decreased by $0.10 and increased by $0.63, respectively, as detailed in the table below:







“During the third quarter, our global cinema business was challenged by the weaker film slate compared to the strong box office in the prior year period. We exited the quarter with positive momentum in our cinema business and are confident the segment will recover with the highly anticipated film slate for the winter holiday season,” said Ellen Cotter, Chair, President and Chief Executive Officer. “Our real estate segment generated solid results and we made progress on a number of development projects during the quarter. Looking forward, we believe that Reading is well-positioned to drive long-term stockholder value as we continue developing our real estate portfolio and executing our global cinema strategy to elevate the guest experience.”

COMPANY HIGHLIGHTS

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SEGMENT RESULTS

The following table summarizes the third quarter and first nine months segment operating results for 2017 and 2016:





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



Cinema Exhibition

Third Quarter Results:

Cinema segment operating income decreased by 31%, or $3.0  million, to $6.7 million for the quarter ended September 30, 2017 compared to September 30, 2016, primarily driven by lower admissions and food & beverage (“F&B”) revenues across our three geographic markets, in line with global cinema industry performance.   Refer below for the revenue highlights by country:



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The top three grossing films for the third quarter 2017 were “Spider-Man: Homecoming”, “It”, and “Dunkirk” representing approximately 29% of Reading’s worldwide admission revenues for the quarter.   The top three grossing films in the third quarter of 2016 for Reading’s worldwide cinema circuits were “Suicide Squad”, “The Secret Life of Pets”, and “Finding Dory”, which represented approximately 25% of Reading’s admission revenues for the third quarter of 2016.

Nine-Month Results:

Cinema segment operating income decreased by 4%, or $955,000, to $25.6 million for the nine months ended September 30, 2017 compared to September 30, 2016, primarily driven by lower admissions and F&B revenues for our US and New Zealand operations.  The higher operating performance of our Australia cinemas and the favorable foreign currency movements of our foreign operations helped to offset these negative trends.    Refer below for the revenue highlights by country:



The top three grossing films for the first nine months of 2017 were “Beauty and the Beast”, “Wonder Woman”, and “Guardians of the Galaxy Vol. 2” representing approximately 14% of Reading’s worldwide admission revenues, compared to the top three grossing films a year ago: “Finding Dory”, “Deadpool”, and “Suicide Squad”, which represented approximately 13% of our admission revenues for the same period in 2016.

Real Estate

Third Quarter Results:

Real estate segment operating income decreased by 12%, or $206,000, to $1.5 million for the quarter ended September 30, 2017 compared to September 30, 2016, primarily attributable to (i) operating expenses on our Corporate Headquarters in Los Angeles, and (ii) increase in general & administrative (“G&A”) expenses due to an expansion of our in-house real estate team in Australia and New Zealand.  These were offset by (i) the STOMP settlement proceeds received ($468,000) as part of a legal settlement and (ii) increases in property rental income relating to new tenancies in our Australian operations.   We would expect our Real Estate segment operating income to benefit once we lease the remaining 50% unoccupied space of our LA Headquarters Building to third parties.

Nine-Month Results:

Real estate segment operating income decreased slightly by 4%, or $244,000, to $5.6 million for the nine months ended September 30, 2017 compared to September 30, 2016, primarily attributable to the offsetting effects of the following:



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CONSOLIDATED AND NON-SEGMENT RESULTS

The third quarter and first nine-month consolidated and non-segment results for 2017 and 2016 are summarized as follows: 





Third Quarter and First Nine-Month Net Results

Net income attributable to RDI common stockholders for the quarter ended September 30, 2017 decreased by 60%, or $2.3 million, to $1.6 million and EPS decreased by $0.10 to $0.07 from the prior-year quarter, in line with the global cinema business performance, offset by increased operating income from our real estate operations.  Conversely, net income attributable to RDI common stockholders for the first nine months of the year increased by $14.6 million to $23.6 million and    EPS increased by $0.63 to $1.02 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 insurance proceeds with respect to losses sustained by us in the Wellington earthquake.  

Non-Segment General & Administrative Expenses

General and administrative expense for the quarter and nine months ended September 30, 2017 compared to the same period of the prior year decreased by 6% ($263,000) and 5% ($762,000), respectively. This decrease mainly relates to (i)  non-recurrence of professional expenses paid in 2016 in connection with the 2015 year-end audit relating to prior years’ income tax matters, and (ii) reduction in variable compensation costs (attributable to reversals of prior year incentive compensation accruals not deemed necessary).  These favorable changes were offset by higher legal expenses with respect to the Derivative Litigation, the Cotter Employment Arbitration and other Cotter litigation matters during the quarter and nine months ended September 30, 2017 which totaled $82,000 and $1.1 million, respectively.  In 2016, expense related to the defense of the Derivative Litigation was substantially reimbursed from the Company’s Directors’ and Officers’ (“D&O”) Insurance Program.

Gain on Sale of Assets

The $9.4 million capital gain recognized during the 2nd quarter of 2017 was pertaining to our full recognition of the transaction gain triggered by the additional payment from Frasers, the buyer of our Burwood property in Australia. During the 1st quarter of 2016, we also recognized a gain of $393,000 (NZ$585,000) relating to our Taupo property in New Zealand.

Gain on Insurance Recoveries

During the 2nd quarter of 2017, we recognized $9.2 million gain because of the final insurance settlement relating to the earthquake damage on our Courtenay Central parking structure (excluding business interruption insurance recoveries).



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Income Tax Expense

Income tax expense for the quarter and nine months ended September 30, 2017 decreased by $586,000 and increased by $4.1 million, respectively, compared to the equivalent prior-year period.  The differences are primarily due to changes in pre-tax income, foreign tax rate differential,  changes in valuation allowance, and non-taxable income from insurance proceeds.

OTHER FINANCIAL INFORMATION

Balance Sheet and Liquidity

Total assets increased by $12.3 million, to $418.1 million at September 30, 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 expenditures relating to major real estate projects, primarily (i) redevelopment of our Union Square property in New York, and (ii) expansion project in our Newmarket property in Brisbane, Australia.  These capital expenditures were funded by available cash resources and credit facilities. 

Cash and cash equivalents at September 30, 2017  were  $8.9 million, including $5.5 million in the U.S., $2.3 million in Australia, and $1.1 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 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 nine months ended September 30, 2017 and the preceding four years:





(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.



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Below is a summary of the available credit facilities as of September 30, 2017: 





(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 September 30, 2017.

The $62.5 million representing borrowings restricted for capital projects is composed of the $49.5 million and $13.0 million (NZ$18.0 million) unused capacity for the Union Square development and 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.  For example, we took advantage of lower interest rates in Australia to fund a partial repayment of intercompany loans to in turn finance a portion of the costs of constructing our Union Square redevelopment project rather than more expensive mezzanine debt (which will yield overall notional all-in interest savings of approximately 10.0%).

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 US 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 portfolio of 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

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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 item, described as follows:

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.

Reconciliation of EBITDA to net income is presented below:





Conference Call and Webcast

We plan to post our pre-recorded conference call and audio webcast on our corporate website on Thursday, November 9, 2017, 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 by 5:00 pm EST  on Tuesday,  November 7, 2017. The audio webcast can be accessed by visiting http://www.readingrdi.com/Presentations.





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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:

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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-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.

For more information, contact:

Dev Ghose, Executive Vice President & Chief Financial Officer

Andrzej Matyczynski, Executive Vice President for Global Operations

Reading International, Inc.  (213) 235-2240

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Reading International, Inc. and Subsidiaries

Unaudited Consolidated Statements of Operations

(Unaudited; U.S. dollars in thousands, except per share data)





















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Reading International, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited; U.S. dollars in thousands, except share information)







1 Certain prior period amounts have been reclassified to conform to the current period presentation.



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