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 9, 2019



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))

 

Securities registered pursuant to Section 12(b) of the Act:



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 August 9, 2019, Reading International, Inc. issued a press release announcing information regarding its results of operations and financial condition for the quarter ended June 30, 2019.  



The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.



Item 9.01 Financial Statements and Exhibits.

(d) 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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Second Quarter 2019 Results Announced by Reading International



Earnings Call Webcast to Discuss 2019 Second Quarter Financial Results

to Post to Corporate Website on Tuesday, August 13, 2019



Culver City, California - (BUSINESS WIRE) August 9, 2019: Reading International, Inc. (NASDAQ: RDI) today announced results for the quarter ended June 30, 2019.  Our Company reported Basic Earnings per Share (“EPS”) of $0.10 and $0.01 for the quarter and six months ended June 30, 2019, respectively, compared to $0.22 and $0.35 in the corresponding prior periods.  These results were principally driven by a 10% decrease in revenue in both the Cinema and Real Estate business segments combined,  offset to some extent by an 18% reduction in general and administrative expenses.



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



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



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



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



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









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The following table summarizes the second quarter and f

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











COMPANY HIGHLIGHTS





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





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



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





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



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Real estate activities:

























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SEGMENT RESULTS



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







Cinema Exhibition



Second Quarter Results:

Cinema segment operating income decreased by $3.2 million, or 26%, to $9.3 million for the quarter ended June 30, 2019, compared to June 30, 2018,  primarily driven by a decrease in operating income in all three circuits.  The decrease was due to a significant decline in attendance.  However, such attendance decreases were offset by increases in average ticket price (“ATP”) and SPP (each in functional currency) in our U.S., Australia and New Zealand circuits.







 

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

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Six Month Results:

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









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





Real Estate



Second Quarter and Six Month Results:

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



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

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CONSOLIDATED AND NON-SEGMENT RESULTS



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







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



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



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



Non-Segment General & Administrative Expenses



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



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

 

Income Tax Expense



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



OTHER FINANCIAL INFORMATION

Balance Sheet and Liquidity



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



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Cash and cash equivalents at June 30, 2019 were $8.5 million, including approximately $5.6 million in the U.S., $1.9 million in Australia, and $1.0 million in New Zealand. We manage our cash, investments and capital structure so we are able to meet short-term and long-term obligations for our business, while maintaining financial flexibility and liquidity.



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



OTHER INFORMATION

Stock Repurchase Program

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



Trust Litigation

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



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



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



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



Ellen Cotter and Margaret Cotter have advised the Company that while they oppose any sale of the Voting Stock as being inconsistent with the intentions of Mr. Cotter, Sr., as set out in the Trust Document, if there is such a sale, they intend to be the buyers and to retain control of the Company in the Cotter Family.    They have further advised the Issuer that as the

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Estate is not yet closed, it is uncertain that any shares of Voting Stock will be transferred to the Voting Trust in the near term.



The California Superior Court has advised the Trustees that it intends to consider the Trustees petitions to appoint a new judge on August 16, 2019.  No hearing date has been set for the Guardian Ad Litem’s petitions to retain a valuation expert or to split the trust or for the Trustee’s petition to disqualify the Guardian Ad Litem.  If the Court agrees with the Trustees petition to appoint a new judge, then it is unlikely that he will take any further action in this matter.  The Trustees have further advised that, if the Court does not grant their motion to appoint a new judge, they will take an immediate writ to the California Court of Appeals, challenging that decision.



We are advised that the Estate of James J. Cotter, Sr., has entered into an agreement with the Internal Revenue Service to pay its estate taxes over the next ten years.   That agreement has been collateralized through the grant of a security interest in certain Class A Common Stock currently owned by the Living Trust.   It is anticipated that it may be necessary from time to time for the Estate or the Living Trust to sell Class A Common Stock to pay that debt.  Also, we are advised that Margaret Cotter is the Trustee of an operational trust established by her father for the benefit of her children which is funded entirely with Class A Common Stock and, accordingly, that it will be necessary for that trust to, from time to time, sell shares of Class A Common Stock for her children’s educational, medical and other expenses. 







The table below presents the changes in our working capital position and other relevant information addressing our liquidity as of and for the six months ended June 30, 2019 and the preceding four years:









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Below is a summary of the available credit facilities as of June 30, 2019:  





The $18.9 million representing borrowings restricted for capital projects is wholly composed of the $18.9 million of unused capacity for the Union Square development and construction.



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







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 U.S. 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 use EBITDA in the evaluation of our Company’s performance since we believe that EBITDA provides a useful measure of financial performance and value. We believe this principally for the following reasons:



We believe that EBITDA is an accepted industry-wide comparative measure of financial performance.  It is, in our experience, a measure commonly adopted by analysts and financial commentators who report upon the cinema exhibition and real estate industries, and it is also a measure used by financial institutions in underwriting the creditworthiness of companies in these industries. Accordingly, our management monitors this calculation as a method of judging our performance against our peers, market expectations and our creditworthiness. It is widely accepted that analysts, financial commentators and persons active in the cinema exhibition and real estate industries typically value enterprises engaged in these businesses at various multiples of EBITDA. Accordingly, we find EBITDA valuable as an indicator of the underlying value of our businesses. We expect that investors may use EBITDA to judge our ability to generate cash, as a basis of comparison to other companies engaged in the cinema exhibition and real estate businesses and as a basis to value our company against such other companies.



EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States of America and it should not be considered in isolation or construed as a substitute for net income or other operations data or cash flow data prepared in accordance with generally accepted accounting principles in the United States for purposes of analyzing our profitability. The exclusion of various components, such as interest, taxes,

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depreciation and  amortization, limits the usefulness of these measures when assessing our financial performance, as  not all funds depicted by EBITDA are available for management’s discretionary use. For example, a substantial portion of such funds may be subject to contractual restrictions and functional requirements to service debt, to fund necessary capital expenditures and to meet other commitments from time to time.



EBIT and EBITDA also fail to take into account the cost of interest and taxes. Interest is clearly a real cost that for us is paid periodically as accrued. Taxes may or may not be a current cash item but are nevertheless real costs that, in most situations, must eventually be paid. A company that realizes taxable earnings in high tax jurisdictions may, ultimately, be less valuable than a company that realizes the same amount of taxable earnings in a low tax jurisdiction. EBITDA fails to take into account the cost of depreciation and amortization and the fact that assets will eventually wear out and have to be replaced.



Adjusted EBITDA – using the principles we consistently apply to determine our EBIDTA, we further adjusted the EBIDTA for certain items we believe to be external to our business and not reflective of our costs of doing business or results of operation.  Specifically, we have adjusted for (i) gains on insurance recoveries, (ii) legal expenses relating to extraordinary litigation, (iii) adjustments for gains/losses relating to property sales, and (iv) any other items that can be considered non-recurring in accordance with the 2-year SEC requirement for determining an item is non-recurring, infrequent or unusual in nature.





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 August 13, 2019, that will feature prepared remarks from Ellen Cotter, Chief Executive Officer; Gilbert Avanes, Interim 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 August 12, 2019 by 5:00 p.m. Eastern Standard Time. The audio webcast can be accessed by visiting http://www.readingrdi.com/about/#earnings-call.



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 theatres operated by Liberty Theatres in the United States; and signature property developments, including Newmarket Village, Auburn Redyard, 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, 2018, as well as the risk factors set forth in any other filings made under the Securities Act of 1934, as amended, including any of our Quarterly Report of Form 10-Q .  



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:

Gilbert Avanes, Interim 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

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















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