UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 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): February 21, 2008
READING
INTERNATIONAL, INC.
(Exact
Name of Registrant as Specified in its Charter)
Nevada
(State
or
Other Jurisdiction of Incorporation)
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1-8625
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95-3885184
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(Commission
File Number)
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(I.R.S. Employer
Identification No.)
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500
Citadel Drive
Suite
300
Commerce,
California
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90040
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(213)
235-2240
(Registrant’s
Telephone Number, Including Area Code)
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 (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425).
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12).
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b)).
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c)).
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Item 1.01 Entry
Into a Material Definitive Agreement
The
information in Item 2.01, below, of this report is incorporated herein by
reference.
Item
2.01 Completion
of Acquisition or Disposition of Assets
Completion
of Acquisition of Theater Assets
On
February 22, 2008, Reading International, Inc. (“we,” “us,” “our” or “Reading”)
completed the previously announced acquisition of fifteen motion picture
exhibition theaters and theater-related assets from Pacific Theatres Exhibition
Corp. and its affiliates, Consolidated Amusement Theatres, Inc. and Kenmore
Rohnert, LLC (collectively, the “Sellers”). The theaters and assets
are located in California and Hawaii. We acquired the theaters and
other assets through Consolidated Amusement Theatres, Inc. and its direct parent
corporation, Consolidated Amusements Holdings, which are indirect wholly, owned
subsidiaries formed by us for this purpose.
The
acquired assets consist primarily of leasehold interests in the fourteen of
the
theaters, a management agreement with the Sellers under which we will manage
one
other theater, and furniture, fixtures, equipment and miscellaneous inventory
at
the theaters. The theaters contain a total of 181 screens, which
compares to 286 total screens owned or operated by us immediately prior to
the
acquisition. The leasehold interests have current terms
ranging from approximately 2 to 12 years, subject in some cases to renewal
options in our favor. The management agreement relating to the
managed theater is for a term of approximately 4 years and entitles us to a
management fee equal to the cash flow of the
theater. These cinemas produced approximately $80.0 million of gross
revenues for the year ended December 31, 2007.
The
aggregate purchase price of the acquired assets was approximately $69.3 million,
which is subject to certain closing adjustments. The purchase price
also is subject to reduction based upon post-closing matters relating to the
possible opening of competing theater projects in the vicinity of certain
acquired theaters, possible capital improvements by us to the acquired theaters,
and a final determination of theater-level cash flows of the acquired theaters
for the twelve months ended December 27, 2007.
The
purchase price of the acquired assets was completely financed by a combination
of financing arranged by General Electric Capital Corporation and $21.0 million
of financing provided by the Sellers described below in this
report. The current effective weighted interest rate of this
financing is approximately 7.0%. In connection with the
completion of the acquisition, the Sellers returned to us our $2.0 million
deposit, plus interest, as called for in the asset purchase agreements relating
to the acquisition.
The
foregoing is a summary only of the terms and provisions of the
acquisition. Copies of the material agreements relating to the
acquisition will be filed as part of our Annual Report on Form 10-K for the
year
ended December 31, 2007.
GE
Credit Agreement
In
connection with the acquisition described above, on February 21, 2008,
Consolidated Amusement Theatres, Inc., as borrower (“Borrower”), and
Consolidated Amusement Holdings (“Holdings”) entered into a Credit Agreement
with General Electric Capital Corporation (“GE”) as lender and administrative
agent, and GE Capital Markets, Inc. as lead arranger, which provides Borrower
with a senior secured credit facility of up to $55.0 million in the aggregate,
including a revolving credit facility of up to $5.0 million and a $1.0 million
sub-limit for letters of credit (the “Credit
Facility”). The initial borrowings under the Credit Facility were
used to finance, in part, our acquisition of the theaters and other assets
described above. We may borrow additional amounts under the Credit
Facility for other acquisitions as permitted under the Credit Facility (and
to
pay any related transaction expenses), and for ordinary working capital and
general corporate needs of Borrower, subject to the terms of the Credit
Facility. The Credit Facility expires on February 21, 2013 and is
secured by substantially all the assets of Borrower and Holdings.
Borrowings
under the Credit Facility bear interest at a rate equal to either (i) the Index
Rate (defined as the higher of the Wall Street Journal prime rate and the
federal funds rate plus 50 basis points), or (ii) LIBOR (as defined in the
Credit Facility), at the election of Borrower, plus, in each case, a margin
determined by reference to Borrower's Leverage Ratio (as defined in the Credit
Facility) that ranges between prime rate plus 2.00% and prime rate plus 2.75%,
and between LIBOR plus 3.25% and LIBOR plus 4.00%, respectively.
Borrowings
under the Credit Facility may be prepaid at any time without penalty, subject
to
certain minimums and payment of any LIBOR funding breakage costs. Borrower
will
be required to pay an unused commitment fee equal to 0.50% per annum on the
actual daily unused portion of the revolving loan facility, payable quarterly
in
arrears. Outstanding letters of credit under the Credit Facility are subject
to
a fee of the applicable LIBOR rate in effect per annum on the face amount of
such letters of credit, payable quarterly in arrears. Borrower will be required
to pay standard fees with respect to the issuance, negotiation and amendment
of
letters of credit issued under the letter of credit facility.
The
Credit Facility contains other customary terms and conditions, including
representations and warranties, affirmative and negative covenants, events
of
default and indemnity provisions. Such covenants, among other things,
limit Borrower's ability to incur indebtedness, incur liens or other
encumbrances, make capital expenditures, enter into mergers, consolidations
and
asset sales, engage in transactions with affiliates, pay dividends or other
distributions and change the nature of the business conducted by
Borrower.
The
Credit Agreement contains financial covenants requiring Borrower to maintain
minimum fixed charge and interest coverage ratios and not to exceed specified
maximum leverage ratios. The compliance levels for the maximum
leverage and minimum interest coverage covenants become stricter over the term
of the Credit Facility.
The
Credit Facility provides for customary events of default, including payment
defaults, covenant defaults, cross-defaults to certain other indebtedness,
certain bankruptcy events, judgment defaults, invalidity of any loan documents
or liens created under the Credit Agreement, change of control of Borrower,
termination of certain theater leases and material inaccuracies in
representations and warranties.
Reading
Guaranty
Reading
has entered into a guaranty of Borrower's obligations under the Credit Facility,
dated February 21, 2008 (the "Guaranty"). The Guaranty will, subject
to certain exceptions, terminate automatically when Borrower and its
subsidiaries on a consolidated basis achieve a leverage ratio on the last day
of
any fiscal quarter and for the 12-month period then ended of less than or equal
to 2.75:1.00.
The
foregoing is a summary only of the Credit Agreement and the Guaranty, copies
of
which will be filed as exhibits to our Annual Report on Form 10-K for the
year ended December 31, 2007.
Seller
Financing
The
$21.0
million of acquisition financing provided by the Sellers is evidenced by a
five-year promissory note of Reading Consolidated Holdings, Inc., our wholly
owned subsidiary (“RCHI”), maturing on February 21, 2013. The promissory
note bears interest (i) as to $8.0 million of principal at the annual rates
of 7.5% for the first three years of the term of the note and 8.50% thereafter
and (ii) as to $13.0 million of principal at the annual rates of 6.50%
through July 31, 2009 and 8.50% thereafter. Accrued interest on
the promissory note will be due and payable on February 21, 2011 and
thereafter on the last day of each calendar quarter, commencing on June 30,
2011. The entire principal amount of the promissory note will be due
and payable upon maturity, subject to our right to prepay the promissory note
at
any time without penalty and to the requirement that we make mandatory
prepayments equal to a portion of free cash flow generated by the acquired
theaters. The outstanding balance of the promissory note will be
subject to reduction, retroactive to the closing date of acquisition, as the
means of effecting any reduction in the purchase price of the acquired assets
as
referred to above.
The
$21.0
million loan under the RCHI promissory note is recourse only to RCHI and its
assets, which include the acquired assets and our Manville Theater, Dallas
Angelika Theater and related assets that we contributed to RCHI in connection
with the acquisition and financing.
In
connection with the completion of the acquisition, the Sellers also agreed
to
provide us, at our request, up to two additional loans of $1.5 million each
on
or before July 31, 2008 and July 31, 2009, respectively. If extended,
such loans will bear interest at the annual rate of 8.50%, compounded annually,
and will be due and payable, in full, on February 21, 2011, subject to our
right to prepay the loans without premium or penalty. The $3.0
million of additional loans, if extended by the Sellers at our request, will
be
general obligations of Reading.
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Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a
Registrant
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The
information in Item 2.01, above, regarding the financing incurred by us in
connection with the completion of the reported acquisition is incorporated
herein by reference.
Item
7.01 Regulation
FD Disclosure
A
copy of
our press release issued on February 22, 2008 regarding the completion of
the acquisition and related transactions is attached hereto as Exhibit
99.1. The information in this Item 7.01 and Exhibit 99.1 shall not be
deemed “filed” for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), nor shall such information be deemed
incorporated by reference into any filing under the Securities Act of 1933,
as
amended, or the Exchange Act.
Item
9.01 Financial Statements and Exhibits
(a) Financial
Statements of Business Acquired.
The
financial statements of the business we acquired as described in Item 2.01,
above, will be filed for the periods specified in Rule 3-05(b) of
Regulation S-X within 71 days after the filing of this report.
(b) Pro
Forma Financial Information.
We
also
will furnish within 71 days after the filing of this report the pro forma
financial information required under Article 11 of Regulation S-X in
connection with the business acquired by us.
(d) Exhibits.
There
is
filed as part of this report the exhibit listed on the accompanying Index to
Exhibits, which information is incorporated herein by reference.
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, thereunto
duly authorized.
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READING
INTERNATIONAL, INC.
By: /s/
Andrzej
Matyczynski
Andrzej
Matyczynski
Chief
Financial Officer
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Dated: February
27, 2008
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EXHIBIT
INDEX
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Exhibit
No.
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Description
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99.1
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Reading
International, Inc. Press Release dated February 22,
2008.
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Reading
International Concludes Purchase of Hawaii and California
Cinemas
LOS
ANGELES, California – February 22, 2008– Reading International, Inc.
(AMEX: RDI and RDIB) announced today that it completed the acquisition of 15
leasehold cinema complexes and related assets through its newly formed
subsidiary, Consolidated Amusement Theatres, Inc. (“Consolidated”). The cinemas
comprise 181 screens and generate revenues of approximately $80 million
annually. Nine of the complexes (98 screens) are located in Hawaii
and represented nearly 70% of the Hawaiian box office receipts reported in
2007. The other six complexes (83 screens) are
located in California, and consist of a 16-screen complex in Bakersfield, a
16-screen complex in Sonoma County, and four locations in San
Diego. The San Diego cinemas represent the third largest market share
in the area at approximately 12%. RDI also acquired in the
transaction the Consolidated Amusement trade name, recognized in the Hawaiian
Islands for some 75 years. The acquisition was structured as a purchase of
14
locations and a management agreement for one location.
The
purchase price of the cinemas and other assets was $69.3 million, and was
financed primarily by a $50 million term loan and a $5 million revolving line
of
credit provided by institutional lenders. While the term financing is
initially guaranteed by RDI, the guarantee will expire once the debt-to-cash
flow ratio falls below a certain threshold. Based on management’s
estimates this should occur in about 18 to 24 months, upon the debt being
reduced to approximately $38 million, by applying most of the theaters’ net cash
flow during that same timeframe to paying down the
financing. An additional $21 million of financing was provided
under a term loan from an affiliate of the sellers. Recourse under
the seller financing is limited to Consolidated and its assets. In
addition to the acquired assets, RDI has contributed to Consolidated two of
RDI’s domestic theaters located in New Jersey and Dallas. An
affiliate of the sellers also has agreed to provide up to $3 million of
additional term loans to RDI at its request.
Management
believes that the purchase price paid for these assets, compares favorably
to
other recent publicly reported cinema acquisitions, and is grateful for having
been invited onto the short list of prospective buyers for these
theaters.
The
sellers of the cinema assets are Pacific Theatres Exhibition Corp., and its
affiliates (“Pacific”). An affiliate of Pacific is a shareholder in
RDI. Mr. Cotter, RDI’s Chairman and Chief Executive Officer, was an
executive and a director of Pacific for over thirty years.
The
management team knows these markets and assets extremely well, and believes
the
price and financing terms will allow the company to achieve an attractive return
on this investment for its shareholders.
Management
further believes that this transaction is a good opportunity to expand upon
its
current base of US cinemas, into desirable markets but with limited capital
exposure. The Company has plans to immediately invest in renovating
the Kapolei Theater in Hawaii and the Carmel Mountain Theater in San Diego,
acquired in the transaction.
About
Reading International, Inc.
Reading
International (http://www.readingrdi.com) is in the business of owning
and operating cinemas and developing, owning and operating real estate
assets. RDI’s business consists primarily of:
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the
development, ownership and operation of multiplex cinemas in the
United
States, Australia and New Zealand;
and
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the
development, ownership and operation of retail and commercial real
estate
in Australia, New Zealand and the United States, including
entertainment-themed retail centers (“ETRC”) in Australia and New Zealand
and live theater assets in Manhattan and Chicago in the United
States.
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Forward-Looking
Statements
This
press release contains certain statements that are “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E
of the Securities Exchange Act of 1934. Such statements are qualified
by the inherent risks and uncertainties surrounding future expectations
generally and also may materially differ from actual future experience involving
any one or more of such statements. Such risks and uncertainties
include the possibility that the actual market share of the acquired cinemas
and
anticipated reduction in the acquisition financing will differ from these
forward-looking statements, as well the risks and uncertainties set forth from
time to time in RDI’s filings with the Securities and Exchange
Commission. The inclusion of a forward-looking statement in this
press release should not be regarded as a representation by RDI that its
objectives will be achieved. RDI undertakes no obligation to publicly
update forward-looking statements, whether as a result of new information,
future events, or otherwise.
Contact
Information:
Reading
International, Inc.
Andrzej
Matyczynski
Telephone:
(213) 235-2240