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, 2020



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, 2020, 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, 2019, 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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Reading International Reports

2019 Fourth Quarter and Full Year Results 

And COVID-19 Updates





Earnings Call Webcast to Discuss 2019 Fourth Quarter and Full Year Financial Results

Scheduled to Post to Corporate Website on Wednesday, March 18, 2020 





Culver City, California - (BUSINESS WIRE) – Reading International, Inc. (NASDAQ: RDI), an internationally diversified cinema and real estate company with operations and assets in the United States (the “U.S.”), Australia and New Zealand, today announced results for the fourth quarter and full year ended December 31, 2019.  



“First and foremost, I want to acknowledge the unprecedented situation with COVID-19, or coronavirus, and the uncertainty it is bringing to our communities and daily lives.  For now, we are continuing to operate our movie theaters in the U.S., Australia and New Zealand.  We have communicated the changes to our operations and business that we have adapted to address the COVID-19 situation.  As we monitor this evolving situation, we will continue to take guidance from governmental authorities and act accordingly, including temporarily closing our movie theatres,” said President and Chief Executive Officer, Ellen Cotter.



“Today, with respect to our real estate operations, our Australian centers (Newmarket Village, Auburn Redyard, Cannon Park and The Belmont Common) remain open for business.  Certain centers, including Newmarket Village, anchored by a Coles Supermarket, are providing a necessary outlet for food and supplies.  The producers of shows at our Minetta Lane Theatre in New York City and Royal George Theatre in Chicago have suspended performances for the next few weeks.  Effective as of today, the producers of STOMP at the Orpheum Theatre in New York City will suspend performances until further notice.  Though the COVID-19 situation will present us with various short term challenges in the U.S., Australia and New Zealand, we remain optimistic and committed to the long-term opportunities in the cinema business and our strong asset base, which reflects an interesting and diverse real estate portfolio,”  continued Ms. Cotter. 



Consolidated Revenues for the year ended December 31, 2019 were $276.8 million compared to $308.9 million in 2018. Our Consolidated Revenues are principally derived from our cinema operations, and on a book value basis, at December 31, 2019,  54% of our assets were invested in cinemas, and the other, approximately 44%, were invested in real estate. Approximately 53% of these assets were located in the U.S. with the remainder in Australia and New Zealand. As of December 31, 2019, the geographic distribution of our Consolidated Revenues were 55% in the U.S. and 45% in Australia and New Zealand, collectively.  



Our real estate development and the rental or licensing of retail, commercial and live theatre assets comprise of approximately 22,188,000 square feet of land and approximately 844,000 square feet of net rentable area. Manukau/Wiri (recently rezoned from agricultural to industrial use) is essentially carried at its agricultural use value. During 2019, we invested $22.7 million in building and upgrading our real estate assets and $22.9 million in acquiring, fitting out, and upgrading our cinema assets. Over the past three years ended December 31, 2019, our capital expenditures totaled $45.7 million, $54.7 million, and $77.1 million, respectively.



We secured two major loans amidst a volatile time in the stock market which further demonstrates our institutional lenders continuing confidence in our long-term business plan. On March 6, 2020, we extended both our $55.0 million credit facility with the Bank of America and Bank of Hawaii and our $5.0 million line with Bank of America to March 6, 2023.  On March 13, 2020, we refinanced our credit facility with Valley National Bank increasing the loan amount from $20.0 million to $25.0 million and extending the maturity date to April 1, 2022, with two six-month options to extend

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through April 1, 2023. Our outstanding institutional indebtedness at December 31, 2019 was $209.2 million and at the present time that indebtedness has an average term of 47 months.



Stock Repurchase Program







Fourth Quarter and Full Year 2019 Summary



Consolidated Revenues for the fourth quarter ended December 31, 2019 were $68.9 million compared to $74.9 million for the fourth quarter of 2018. Consolidated Revenues for the year ended December 31, 2019 were $276.8 million compared to $308.9 million in 2018.









Cinema Operations Summary











Real Estate Operations Summary:









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The following table summarizes the fourth quarter and full year results for 2019 and 2018:  









FOURTH QUARTER AND FULL YEAR 2019 SEGMENT RESULTS



The following table summarizes the fourth quarter and full year segment operating results for 2019 and 2018:









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Cinema Exhibition



Fourth Quarter Results:

For the quarter ended December 31, 2019, Cinema Exhibition segment operating income decreased by  $2.6 million, or 32%, to $5.6 million when compared to December 31, 2018, due to a weaker film slate in 2019 compared to 2018, resulting in lower than anticipated admissions and F&B revenues in all three circuits. The decrease was further impacted by the continuing temporary closure of Reading Cinemas at Courtenay Central in Wellington, New Zealand and the closure of our historically profitable 86th Street Theatre, Paris Theatre and Beekman Theatre due to lease expirations.  However, such 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:





Full Year Results:

Cinema Exhibition segment operating income decreased by 40%, or $15.5 million, to $23.3 million for the full year ended December 31, 2019 compared to December 31, 2018 primarily driven by a decrease in admissions revenue in the U.S. by 13%, or $12.9 million as a result of a weaker specialty film product in 2019, further impacted by the continuing temporary closure of Reading Cinemas at Courtenay Central in Wellington, New Zealand. This decrease is partially offset by a (i) savings in operating expenses in all three jurisdictions, mainly due to the decrease in associated film rent and, to a lesser extent, the cost of F&B and (ii) increases in F&B revenues per cap.  





Real Estate



Fourth Quarter Results:

Real Estate segment operating income decreased by 25%, or $0.4 million, to $1.2 million for the fourth quarter of 2019 compared to the fourth quarter of 2018,  primarily due to (i) the ongoing closure of most of the net rentable area of Courtenay Central in New Zealand, (ii) a decrease in Live Theatre rental and ancillary income in the U.S., and (iii) the weakening Australian and New Zealand dollars. This decrease was offset by a decrease in operating expense in Australia and New Zealand.



Full Year Results:

Real Estate segment operating income decreased by 20%, or $1.3 million, to $5.1 million for the full year 2019 compared to the full year 2018,  primarily due to a decrease in revenue in the New Zealand operations, specifically the ongoing closure of most of the net rentable area of Courtenay Central and further impacted by the weakening Australian and New Zealand dollars. This decrease was partially offset by an increase in rental and ancillary income in our Live Theatre business unit.





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CONSOLIDATED AND NON-SEGMENT RESULTS



The fourth quarter and full year consolidated and non-segment results for 2019 and 2018 are summarized as follows:









Fourth Quarter and Full Year Net Results



Net income attributable to RDI common stockholders for the quarter ended December 31, 2019 decreased by $32.4 million, to a loss of $27.5 million, and EPS decreased by $1.46 per share to a Loss per Share (“LPS”) of $1.25 from the prior-year quarter EPS of $0.21. Net income attributable to RDI common stockholders for the full year decreased by $40.5 million, to a loss of $26.4 million and EPS decreased by $1.78 per share to a LPS of $1.17 from the prior-year period EPS of $0.61, due to (i) a  $25.5 million increase in income tax expense to $28.8 million, mainly due to the recording of a valuation allowance on U.S. deferred tax assets in the fourth quarter of 2019, partially offset by the lower pretax income in 2019, (ii) a $15.5 million decrease in Cinema Exhibition segment operating income due to a weaker film slate in 2019 compared to 2018, resulting in lower than anticipated admissions and food and beverage revenues, offset to some extent by an increase in F&B revenues per cap, (iii) a $1.3 million decrease in the Real Estate segment operating income, due principally to the temporary closure of most of the net rentable area of Courtenay Central due to seismic concerns, (iv) a $1.1 million increase in interest expense attributable to increased borrowings in Australia for the acquisitions of CMax Cinema in Devonport and State Cinema in Hobart, and the capital expenditures related to Burwood, and (v) the negative effects of the declining foreign exchange rates in the Australian and New Zealand dollars, offset by a $2.4 million decreased in general and administrative expenses.



Non-Segment General and Administrative Expenses



Our non-segment general and administrative expense for the quarter ended December 31, 2019 compared to the same period in the prior year increased by 3%, or $0.2 million, to $4.7 million. Non-segment general and administrative expense for the year ended December 31, 2019, decreased by 11%, or $2.4 million, to $18.9 million, when compared to December 31, 2018,  primarily related to lower legal expenses.



Income Tax Expense



Income tax expense increased by $25.5 million, to $28.8 million, compared to 2018, mainly due to the recording of a non-recurring valuation allowance on U.S. deferred tax assets in the fourth quarter of 2019, partially offset by lower pretax income in 2019.



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OTHER FINANCIAL INFORMATION

Balance Sheet and Liquidity



Primarily driven by the implementation of the lease accounting standard effective January 1, 2019, (i) total assets increased by $235.8 million, to $675.0 million at December 31, 2019, compared to $439.2 million at December 31, 2018 and (ii) total liabilities increased by $276.1 million to $535.4 million. 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. including Mililani, Kahala, and Rohnert Park, (ii) Chirnside Park, Dandenong, Harbour Town, Maitland, Waurn Ponds, West Lakes, and Rhodes in Australia, and (iii) The Palms in New Zealand.



Cash and cash equivalents at December 31, 2019 were $12.1 million, including $7.8 million in the U.S., $2.3 million in Australia, and $2.0 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.



OTHER INFORMATION



Certain Potential Cotter Family Stock Sales



We are advised that the Estate of James J. Cotter, Sr. (the “Estate”), has entered into an agreement with the Internal Revenue Service to pay its estate taxes over the next ten years, collateralized by certain Class A Non-Voting Common Stock currently owned by The James J. Cotter Living Trust (the "Living Trust"). The Living Trust has sold Class A Non-Voting Common Stock under a 10b5-1 trading plans in recent periods, as permitted in our Supplemental Insider Trading Policy and reflected on filings made on Form 4. It is anticipated that it will be necessary from, time to time, for the Estate or the Living Trust to continue to sell Class A Non-Voting Common Stock to pay that debt.



Similarly, 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 Non-Voting Common Stock. In her capacity as trustee of this trust, Margaret Cotter has advised the Company that it will be necessary for that trust to, from time to time, sell shares of Class A Non-Voting Common Stock for her children’s educational, medical, and other expenses.



Ellen Cotter and Margaret Cotter have advised that as a consequence of the litigation relating to matters concerning the estate of their father (James J. Cotter, Sr.) and the Living Trust and the Voting Trust established by their father, they have personally incurred and continue to personally incur significant legal costs and expenses. As set forth on their filings on Form 4, since December 31, 2019, Ellen Cotter has sold 25,000 shares of Class A Non-Voting Common Stock and Margaret Cotter has sold 25,000 shares of Class A Non-Voting Common Stock.  These shares were repurchased pursuant to the Company’s stock repurchase program, in transactions reviewed and approved by our Audit and Conflicts Committee.   We are advised that the sales made by Ellen Cotter and Margaret Cotter have not been made due to any concerns on their part about the Company, its business or prospects, rather these sales were made principally to meet financial needs resulting from such litigation and other disputes with their brother, James J. Cotter, Jr. We are further advised that Ellen Cotter and Margaret Cotter will likely need to continue to sell their personal Class A Non-Voting Common Stock holdings to fund the future costs related to such litigation and disputes.   



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WORKING CAPITAL AND LIQUIDITY



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, 2019 and the preceding four years:









Below is a summary of the available credit facilities as of December 31, 2019:  









The $14.0 million representing borrowings restricted for capital projects is composed of the $14.0 million unused capacity for the 44 Union Square development.



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 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, 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 two-year SEC requirement for determining an item is non-recurring, infrequent or unusual in nature.

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The reconciliation of EBITDA and adjusted 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 18, 2020, that will feature prepared remarks from Ellen Cotter, President & Chief Executive Officer; Gilbert Avanes, Executive Vice President, Chief Financial Officer and Treasurer; 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 March 17, 2020 by 5:00 p.m. Eastern Standard Time. The audio webcast can be accessed by visiting http://www.readingrdi.com/Presentations.

About Reading International, Inc.



Reading International Inc. (NASDAQ: RDI) an internationally diversified cinema and real estate company 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, City Cinemas, and State Cinema; 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, “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, 2019, 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 Reports on Form 10-Q.

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



For more information, contact:

Reading International, Inc.

Gilbert Avanes, Executive Vice President, Chief Financial Officer and Treasurer

Andrzej Matyczynski, Executive Vice President for Global Operations

(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)







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Reading International, Inc. and Subsidiaries

Consolidated Balance Sheets

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







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