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):  March 16, 2018



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 March 16, 2018, Reading International, Inc. issued a press release announcing information regarding its results of operations and financial condition for the year and quarter ended December 31, 2017, a copy of which is attached as Exhibit 99.1.





Item 9.01  Financial Statements and Exhibits.







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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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Record 2017 and Fourth Quarter Results Announced by Reading International



Earnings Call Webcast to Discuss 2017 Fourth Quarter and Full Year Financial Results

Scheduled to Post to Corporate Website on

Tuesday, March 20, 2018 





Culver City, California - (BUSINESS WIRE) March 16, 2018 – Reading International, Inc. (NASDAQ: RDI) today announced results for the fourth quarter and full year ended December 31, 2017.  The Company reported Basic Earnings per Share (“EPS”) of $0.32 and $1.35 for the fourth quarter and full year ended December 31, 2017, respectively, compared with $0.01 and $0.40 for the prior year’s periods.  Revenue, EBITDA, Net Income and Basic EPS for the full year 2017 represented all-time records for the Company. Our full year results were positively impacted by certain non-recurring items (specifically, the recognition of a gain on the sale of our land holdings in Burwood, Australia, and the receipt of certain insurance proceeds to compensate for earthquake related damages sustained by our Courtenay Central entertainment themed center (“ETC”) in Wellington, New Zealand), offset by certain non-recurring professional and litigation expenses.



Ellen Cotter, Chair, President and Chief Executive Officer, said, “We made important progress executing our three-year business strategy during the year and we are pleased to deliver strong fourth quarter and record 2017 results.  During the year, we strategically upgraded select cinemas, constructed a new state-of-the-art cinema in Australia, redeveloped existing income-producing properties, and added approximately 15,875 square feet of non-cinema net rentable area to our existing ETCs. We accomplished these objectives utilizing the proceeds from the sale of non-core assets while strengthening our balance sheet to reduce debt.”



Consolidated revenue for the fourth quarter of 2017, which was the highest fourth quarter revenue on record, increased by 6% (or $4.2 million) compared to the fourth quarter of 2016 mainly due to higher box office and food & beverage (“F&B”) revenue in Australia and New Zealand, and higher real estate revenue in the U.S. Our real estate segment posted increased revenues principally due to (i) the recognition in 2017 of non-recurring settlement proceeds from our 2016 arbitration against STOMP, and (ii) the receipt of Courtenay Central ETC rentals for the full fourth quarter which, due to the closure of that center as a result of the Wellington earthquake, were not received in 2016.   Our revenues from our cinema operations were also negatively impacted by our strategic cinema closures, which allowed us to accelerate our cinema renovation program which, we believe, will lead to stronger results in future periods as our renovated cinemas come on line.



Consolidated revenue for the full year of 2017 increased by 3% ($9.2 million) due to the following: higher admissions and increased F&B revenue in our Australian cinemas, and settlement proceeds relating to STOMP, offset by lower admissions in our U.S. and New Zealand cinemas due in part to industry-wide box office softening in 2017, the cinema closure resulting from the Wellington earthquake and our US cinema renovation program.

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The following table summarizes the fourth quarter and full year results for 2017 and 2016:





“nm” – not meaningful for further analysis

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

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





2017 COMPANY HIGHLIGHTS











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FOURTH QUARTER AND FULL YEAR 2017 SEGMENT RESULTS



The following table summarizes the fourth quarter and full year segment operating results for 2017 and 2016:



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



Cinema Exhibition



Fourth Quarter Results:

Cinema segment operating income decreased by 18%, or $1.6 million, to $7.4 million for the quarter ended December 31, 2017 compared to December 31, 2016.  This decrease came from the U.S. and was driven by lower attendance resulting in lower admission and F&B revenues, primarily resulting from  four of our stronger cinemas being closed for significant renovation that included the installation of recliner seats (in 43 screens) and conversion to TITAN LUXE (four auditoriums) during the fourth quarter..  Occupancy costs were also up in the U.S. due to increased rental expense at certain sites. This was partially offset by an increase in admissions and F&B revenue in Australia and New Zealand. During the fourth quarter:





The top three grossing films for the fourth quarter 2017 were “Star Wars: The Last Jedi”, “Thor: Ragnorok”, and “Justice League” representing approximately 32% of Reading’s worldwide admission revenues for the quarter.  The top three grossing films in the fourth quarter of 2016 for Reading’s worldwide cinema circuits were “Rogue One A Star Wars Story”, “Fantastic Beasts”, and “Moana”, which represented approximately 28% of Reading’s admission revenues for the fourth quarter of 2016.

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Full Year Results:

Cinema segment operating income decreased by 7%, or $2.5 million, to $33.0 million for the full year ended December 31, 2017 compared to December 31, 2016 primarily driven by lower admissions due to weaker film product and cinema closures for significant renovations, partially offset by improved F&B revenues for our US and New Zealand operations.  Higher revenues from our Australia cinemas and favorable foreign currency movements in our foreign operations helped to offset lower revenues in the U.S. For 2017:





The top three grossing films for the full year of 2017 were “Beauty and the Beast”, “Star Wars: The Last Jedi” and “Wonder Woman” representing approximately 11% of our worldwide admission revenues, compared to the top three grossing films a year ago: “Finding Dory”, “Deadpool”, and “Suicide Squad”, which represented approximately 10% of our admission revenues for the same period in 2016.



Real Estate



Fourth Quarter Results:

Real estate segment operating income increased by 122%, or $1.3 million, to $2.4 million for the fourth quarter of 2017 compared to the fourth quarter of 2016, primarily attributable to (i) the non-recurring STOMP settlement proceeds and (ii) the  receipt of property rentals for a full fourth quarter at Courtenay Central, which due to the Wellington earthquake were not received in 2016. These were offset by (i) increased operating expenses due to a reclassification of our Headquarters building as a rental asset, and (ii) increase in General & Administrative (G&A) expenses due to an expansion of our in-house real estate team in Australia and New Zealand. 



Full Year Results:



Real estate segment operating income increased by 16%, or $1.1 million, to $8.0 million for the full year 2017 compared to the full year 2016, primarily attributable to the offsetting effects of:



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CONSOLIDATED AND NON-SEGMENT RESULTS



The fourth quarter and full year consolidated and non-segment results for 2017 and 2016 are summarized as follows: 



“nm” – not meaningful for further analysis



Fourth Quarter and Full Year Net Results

Net income attributable to RDI common stockholders for the quarter ended December 31, 2017 increased by $7.0 million, to $7.4 million and EPS increased by $0.31 to $0.32 from the prior-year quarter. Net income attributable to RDI common stockholders for the full year increased by $21.6 million to $31.0 million and  EPS increased by $0.95 to $1.35 from the prior-year period due principally to the following one-off real estate transactions during the second quarter: (i) recognition of gain from the sale of our Burwood Property, and (ii) receipt of non-recurring insurance proceeds with respect to losses sustained by us in the Wellington earthquake.  We were also assisted by the increase in Real Estate segment income by the receipt of non-recurring STOMP settlement proceeds. 



Non-Segment General & Administrative Expenses

G&A expense for the quarter and full year ended December 31, 2017 compared to the same period of the prior year decreased by 14% ($1.0 million) and 8% ($1.8 million), respectively. This decrease primarily relates to a reduction in (i) professional services expenses primarily relating to non-recurring  items incurred in 2016 including additional expenses incurred in connection with the 2015 year-end audit ($960,000)) and (ii) expenses incurred in connection with the change in status of certain executives ($400,000),  a reduction in 2017 legal fees, and a reduction in occupancy costs due to the reclassification of our new Corporate Headquarters to an income producing asset. These were offset by additional costs incurred in our Australian and New Zealand corporate offices due to additional staff costs and the effects of foreign exchange movements. 



Gain on Sale of Assets

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

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Gain on Insurance Recoveries

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



Income Tax Expense

Income tax benefit increased by $4.8 million for the quarter and income tax expense decreased by $683,000 for the full year ended December 31, 2017 compared to the equivalent prior-year period. The differences for the year were primarily due to benefits recognized as the result of the dissolution of a non-operating overseas subsidiary, partially offset by higher taxes on increased pre-tax income and the provisional unfavorable effect of the tax reform bill enacted in December 2017.



OTHER FINANCIAL INFORMATION



Balance Sheet and Liquidity



Total assets increased by $17.2 million, to $423.0 million at December 31, 2017, compared to $405.8 million at December 31, 2016, primarily driven by increases in our operating and investing properties relating to capital enhancements in our existing cinemas and capital expenditures relating to major real estate projects, primarily (i) the redevelopment of our Union Square property in New York, and (ii) the expansion of our Newmarket property in Brisbane, Australia.  Available cash resources generated from operations and the proceeds received from the disposal of our Burwood property funded these capital expenditures.



Cash and cash equivalents at December 31, 2017 were $13.7 million, including $9.1 million in the U.S., $2.9 million in Australia, and $1.7 million in New Zealand.  We manage our cash, investments and capital structure so we are able to meet short-term and long-term obligations for our business, while maintaining financial flexibility and liquidity.



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

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The table below shows the changes in our working capital position and other relevant information addressing our liquidity as of and for the full year ended December 31 2017 and the preceding four years:







(1) This relates to the construction facilities specifically negotiated for: (i) Union Square redevelopment project, obtained in December 2016, and (ii) New Zealand construction projects, obtained in May 2015.

(2)  Certain 2015 balances included the restatement impact as a result of a change in accounting principle (see Notes to Consolidated Financial Statements--Note 2 – Summary of Significant Accounting Policies – Accounting Changes of our Form 10-K). No changes made, except for the Stockholders’ Equity balance as of 12/31/2014, as we were not required to present the restatement numbers as of December 31, 2014 for the Balance Sheet.

(3)  Year 2013 is not covered by the restatement as a result of a change in accounting principle.

(4)  Typically our working capital (deficit) is negative as we receive revenue from our cinema business ahead of the time that we have to pay our associated liabilities. We use the money we receive to pay down our borrowings in the first instance.



Below is a summary of the available credit facilities as of December 31, 2017:





(1) The borrowings are denominated in foreign currency.  The contractual capacity and capacity used were translated into U.S. dollars based on the applicable exchange rates as of December 31, 2017.



The $62.3 million representing borrowings restricted for capital projects is composed of the $49.5 million and $12.8 million (NZ$18.0 million) unused capacity for the Union Square development and Westpac construction funding for New Zealand operations, respectively.  The Minetta & Orpheum Theatres Loan will become due within one year.  Currently, we are negotiating with our lender to renew this borrowing on a long-term basis.



Our overall global operating strategy is to conduct business mostly on a self-funding basis (except for funds used to pay an appropriate share of our U.S. corporate overhead).  However, we may decide to move funds between jurisdictions where circumstances merit such action as part of our goal to minimize our cost of capital.

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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 business separate from non-operational factors that affect net income, thus providing separate insight into both operations and the other factors that affect reported results. Refer to “Consolidated and Non-Segment Results” for a reconciliation of segment operating income to net income.



EBITDA – we present EBITDA as a supplemental measure of its performance, which is commonly used in our industry.  We define EBITDA as net income adjusted for interest expense (net of interest income), income tax expense, depreciation and amortization expense, and an adjustment of interest expense, depreciation, and amortization for discontinued operations, if any. EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net earnings (loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with U.S. GAAP).  We have included EBITDA in this Earnings Release as we believe that it provides management and our investors with additional information necessary to properly measure our performance and liquidity, estimate our value and evaluate our ability to service debt.



Adjusted EBITDA – using the principles we consistently apply to determine our EBITDA, we further adjusted the EBITDA for certain items we believe are appropriate adjustable items, described as follows:





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We have not made adjustments for any gains relating to property sales, including our realized gain on the Burwood property, in line with our overall business strategy that at any time, we may decide to dispose of any property when we believe that an asset has reached the highest value that we could reasonably achieve without investing substantial additional sums for land use planning, construction and marketing.



The reconciliation of EBITDA to net income is presented below:



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Conference Call and Webcast



We plan to post our pre-recorded conference call and audio webcast on our corporate website on March 20, 2018, that will feature prepared remarks from Ellen Cotter, President & Chief Executive Officer; Dev Ghose, Executive Vice President & Chief Financial Officer; and Andrzej Matyczynski, Executive Vice President - Global Operations.



A pre-recorded question and answer session will follow our formal remarks. Questions and topics for consideration should be submitted to InvestorRelations@readingrdi.com on March 19, 2018 by 9:00 a.m. Pacific Time. The audio webcast can be accessed by visiting http://www.readingrdi.com/Presentations.

About Reading International, Inc.



Reading International Inc. (NASDAQ: RDI) is a leading entertainment and real estate company, engaging in the development, ownership and operation of multiplex cinemas and retail and commercial real estate in the United States, Australia, and New Zealand.



The family of Reading brands includes cinema brands Reading Cinemas, Angelika Film Centers, Consolidated Theatres, and City Cinemas; live theaters operated by Liberty Theatres in the United States; and signature property developments, including Newmarket Village, Auburn Red Yard and Cannon Park in Australia, Courtenay Central in New Zealand and 44 Union Square in New York City.



Additional information about Reading can be obtained from the Company's website: http://www.readingrdi.com.



Forward-Looking Statements

Our statements in this press release contain a variety of forward-looking statements as defined by the Securities Litigation Reform Act of 1995.  Forward-looking statements reflect only our expectations regarding future events and operating performance and necessarily speak only as of the date the information was prepared.  No guarantees can be given that our expectation will in fact be realized, in whole or in part.  You can recognize these statements by our use of words such as, by way of example, “may,” “will,” “expect,” “believe,” and “anticipate” or other similar terminology.



These forward-looking statements reflect our expectation after having considered a variety of risks and uncertainties.  However, they are necessarily the product of internal discussion and do not necessarily completely reflect the views of individual members of our Board of Directors or of our management team.  Individual Board members and individual members of our management team may have different views as to the risks and uncertainties involved, and may have different views as to future events or our operating performance.



Among the factors that could cause actual results to differ materially from those expressed in or underlying our forward-looking statements are the following:



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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.



In addition to the forward-looking factors set forth above, we encourage you to review Item 1A. “Risk Factors,” from our Company’s Annual Report on SEC Form 10-K for the Year Ended December 31, 2017.



Finally, we undertake no obligation to publicly update or to revise any of our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.  Accordingly, you should always note the date to which our forward-looking statements speak.

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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 shares and per share data)

















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

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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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