Third Quarter 2019 Results Announced by Reading International

Earnings Call Webcast to Discuss 2019 Third Quarter Financial Results to Post to Corporate Website on Thursday, November 14, 2019

CULVER CITY, Calif.–(BUSINESS WIRE)–Reading International, Inc. (NASDAQ: RDI) today announced results for the quarter ended September 30, 2019. Our Company reported Basic Earnings per Share (“EPS”) of $0.04 and $0.05 for the quarter and nine months ended September 30, 2019 respectively, compared to $0.06 and $0.41 in the corresponding prior year periods. At $70.5 million, our Consolidated Revenue for the third quarter of 2019 decreased by 5%, or $3.8 million, compared to the third quarter of 2018. Our revenue decrease was primarily impacted by three factors:

(i) A decrease in cinema attendance due primarily to (a) a weaker slate of film from arthouse/specialty distributors in the U.S., (b) the outperformance during the third quarter of 2018 of Crazy Rich Asians at our Consolidated Theatres in Hawaii and (c) the 2019 closures due to the expiration of leases underlying three of our cinemas in New York City, offset by our acquisition of one cinema in Australia and the opening of one cinema in New Zealand;

(ii) The continuing closure (that began in January 2019) of our Reading Cinema and certain retail areas at Courtenay Central in Wellington, New Zealand as a result of seismic concerns; and

(iii) Adverse foreign exchange impact with a 6.2% decline in the Australian dollar and a 3.0% decline in the New Zealand dollar.

Throughout the quarter, we continued to execute on our strategic priorities of upgrading our cinemas through the addition of recliner seating, converting screens to TITAN LUXE or TITAN XC, improving our Food & Beverage (“F&B”) programs and expanding and improving our proprietary online ticketing programs (generating service fee income). Our solid execution of these strategic priorities mitigated the impact of our attendance decline. Notwithstanding the media coverage about the popularity of streaming, the overall exhibition industry enjoyed a box office increase for the quarter demonstrating the continuing strength and vitality of our industry. Our U.S. cinema circuit is unique in that we are dependent on both strong art and specialty film and commercial movies. Reflecting the content ebbs and flows, in 2019, the arthouse/specialty distributors have delivered a particularly weak film line-up.

During the first nine-months, we entered into or acquired leases for two new cinemas in Australia and one new cinema in New Zealand. Two of these cinemas (representing seven screens) are now operational. The other cinema is anticipated to launch operations during 2020. Subsequent to the end of the quarter, we entered into an additional lease agreement with respect to a cinema under development in Australia. In the U.S., we exercised our option to acquire the ground lessee’s interest in the land and improvements at our Village East Cinema in New York City. The exercise price (payable upon the closing, currently contemplated for the second quarter of 2020) is $5.9 million.

At our Tammany Hall/44 Union Square project in New York City, we installed the last of the glass panels in the iconic dome. While no assurances can be given, we anticipate filing for a core and shell temporary certificate of occupancy for the building by the end of 2019. Lease negotiations continue with our anticipated principal tenant that are expected to account for over 90% of the building, and a variety of retail tenants continue to evaluate the remainder of the space.

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, “During the third quarter, the Reading team delivered impressive results at our Australian cinema and real estate and U.S. Live Theatre divisions, each of which delivered quarterly revenues and cash flow, in their respective functional currency, ranking first or second best for any third quarter. In New Zealand, the continuing closure of Courtenay Central due to seismic issues caused declines in our overall cinema and real estate divisions in that country. And, our U.S. Cinemas were negatively impacted, not only by closures of three NYC theaters due to lease expirations, but also a weaker slate of arthouse/specialty film and film of the type appealing to our Consolidated Theatres audience in Hawaii. Despite challenged attendance and box office result for our U.S. Cinemas, we continued to execute well on our strategic initiatives, including Food & Beverage and online ticketing. Looking forward, we are excited not only about the highly anticipated fourth quarter commercial line up, including Star Wars: The Rise of Skywalker in December, but also specialty films like Little Women by Greta Gerwig, Dark Waters by Todd Haynes and A Hidden Life by Terrence Malick.”

Cotter continued, “We made good progress on our strategic value creation projects, including 44 Union Square in New York City and Courtenay Central in Wellington, New Zealand, each of which will create long term value for our stockholders when the developments are completed. Tammany Hall has turned out to be even more impressive than we had hoped, and the views of Union Square from our iconic glass dome are magnificent. I encourage people to look at the photos posted @44UnionSquare on Instagram.”

Reading International, Inc. also announced today the appointment of Gilbert Avanes as its Executive Vice President, Chief Financial Officer and Treasurer effective November 5, 2019. Since January 2019, Mr. Avanes has held the role of Interim Chief Financial Officer and Treasurer.

“We’re delighted that Gilbert will take on the position of Chief Financial Officer,” said Ellen Cotter. “Gilbert has played a critical role in the growth of Reading since joining in 2007. His strategic financial, planning and analysis expertise, coupled with his deep knowledge of our Company’s assets and their potential, make Gilbert an ideal fit for this position. Margaret and I and the rest of the Board and management team look forward to continue working with Gilbert to continue to capitalize on our growth opportunities ahead.”

Over his 12 years with the Company, Mr. Avanes has held a variety of positions of increasing responsibility on the Company’s finance team, including: Senior Director of Financial Planning and Analysis; Director of Financial Planning and Analysis; Senior Finance Manager; and his current position of Vice President, Financial Planning and Analysis. Prior to joining Reading, Mr. Avanes served in various finance and accounting roles over the course of a decade at Toronto-Dominion Bank Financial Group. Mr. Avanes received his M.B.A. from Laurentian University and a Bachelor of Commerce in Accounting from Ryerson University, Toronto.

The following table summarizes the results for the third quarter and nine months of the year results for 2019 and 2018, respectively:

 

Quarter Ended

Nine Months Ended

 

September 30,

% Change

Favorable/

September 30,

% Change

Favorable/

(Dollars in millions, except EPS)

 

2019

 

 

2018

 

(Unfavorable)

 

2019

 

 

2018

 

(Unfavorable)

Revenue

$

70.5

 

$

74.3

 

(5

)%

$

208.1

 

$

234.4

 

(11

)%

– US

 

37.8

 

 

40.8

 

(7

)%

 

112.7

 

 

124.9

 

(10

)%

– Australia

 

26.7

 

 

26.0

 

3

%

 

78.5

 

 

84.9

 

(8

)%

– New Zealand

 

6.0

 

 

7.5

 

(20

)%

 

16.9

 

 

24.6

 

(31

)%

Operating expense

$

(67.5

)

$

(69.7

)

3

%

$

(200.7

)

$

(215.5

)

7

%

Segment operating income (1)

$

7.5

 

$

9.5

 

(21

)%

$

21.9

 

$

35.9

 

(39

)%

Net income/(loss)(2)

$

0.9

 

$

1.3

 

(31

)%

$

1.2

 

$

9.4

 

(87

)%

EBITDA (1)

$

9.0

 

$

10.4

 

(13

)%

$

25.2

 

$

35.9

 

(30

)%

Adjusted EBITDA (1)

$

9.2

 

$

10.9

 

(16

)%

$

26.0

 

$

39.0

 

(33

)%

Basic EPS (2)

$

0.04

 

$

0.06

 

(33

)%

$

0.05

 

$

0.41

 

(88

)%

(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.

COMPANY HIGHLIGHTS

  • Operating Results: For the quarter ended September 30, 2019, our worldwide revenue was $70.5 million, a decrease of 5%, or $3.8 million, from the same quarter in the prior year. Our operating results were negatively impacted by (i) a decrease in cinema attendance resulting primarily from the U.S. where the third quarter 2019 slate of film proved to be less attractive to movie goers in our specialized markets than that available for the comparable period in 2018, (ii) the continuing closure due to seismic concerns of a majority of the net rentable area of Courtenay Central in Wellington (NZ), including our Reading Cinema at that location, and (iii) the adverse foreign currency exchange impact of the weakening Australian and New Zealand dollars.

Our cinema results were supported by solid execution on our strategic initiatives. Each of our cinema circuits in the U.S., Australia and New Zealand, in their functional currency, set records for the highest third quarter F&B spends per patron (“SPP”).

We continue to improve and expand our self-ticketing capabilities through our global cinema circuit. We achieved a third quarter record for online ticket revenue, beating the third quarter in 2018 by a combined 20% increase over the previous record third quarter. Online sales consisted of 26.4% of our global box office revenue, which is a record and represents an increase of 6-percentage points from the prior year period. Our continued improvements to our websites and apps and improved global online sales infrastructure are enabling us to better serve high sales volumes.

Due to the continued weakening of the Australian and New Zealand currencies, the financial contributions of our cinema circuits in Australia and New Zealand to our overall results of operation have decreased.

  • Capex program: During the third quarter of 2019, we invested $10.0 million in capital improvements, including our continued investment in the redevelopment of 44 Union Square in New York City, as well as the upgrading of certain of our cinemas:

(i) At our Reading Cinemas in West Lakes (Australia), we converted two screens to TITAN LUXE and added a Gold Lounge screen, each with recliner seating;

(ii) At our Reading Cinemas in Harbour Town (Australia), we converted two screens to TITAN LUXE, each with recliner seating; and

(iii) At our Reading Cinemas in Rohnert Park (California), we converted an auditorium to TITAN XC with Dolby ATMOS.

  • Cinema Additions and Pipeline: In early 2019, we purchased a well-established four-screen cinema in Devonport, Tasmania. Also, to mitigate the temporary closure of Reading Cinemas at Courtenay Central, we leased a three-screen cinema space in Lower Hutt, adjacent to Wellington, New Zealand. This cinema, which trades as The Hutt Pop Up by Reading Cinemas, began operations in late June 2019. These additions bring our operating global cinema count to 58 and global screen count to 480, net of the three City Cinemas (Paris, Beekman, and 86th Street) closed during the second and third quarter in the U.S. as a result of lease expirations. But for the lease expirations of these New York City cinemas, we would not have closed these profitable cinemas.

We have five cinemas with 31 screens in the pipeline. We expect our Reading Cinemas in Burwood (Melbourne, VIC) to open in 2019 in time for Star Wars: The Rise of Skywalker. The six-screen cinema will be the first all reclining cinema we have in Melbourne and will feature a TITAN LUXE and an elevated F&B program. Additionally, we have signed four lease agreements for new build cinemas (comprising 25 screens) due to come online over the next two years.

Real estate activities:

  • Re-Development of 44 Union Square (New York, U.S.) During July 2019, we topped out the steel dome capping our redevelopment of historic Tammany Hall at 44 Union Square and the last of the glass was installed last month. We anticipate filing for our core and shell temporary certificate of occupancy in December 2019 and are in final negotiations of a long term lease for approximately 90% of the net rentable area of the building. This lease would be for office use, and the remaining 7,200 square feet of ground floor space (facing onto Union Square) continues to be marketed for retail use by Newmark.
  • Minetta Lane Theatre (New York, U.S.) In April 2019, we negotiated an extension through March 2020 (with an option to extend our licensee for an additional year through March 2021) of our Minetta Lane Theatre license agreement with Audible, Inc., a subsidiary of Amazon. Audible will continue to use our theatre as the location for its production of various plays featuring one or two actors, to be recorded before a live theatre audience, and offered on Audible.com.
  • Village East Cinema (New York, U.S.) In August 2019, we exercised our option to acquire the lessee’s interest in the ground lease and improvements constituting our Village East cinema in the East Village of New York City. The exercise price (payable upon the closing, currently contemplated for the second quarter of next year) is $5.9 million. The acquisition clears the way for our renovation of this cinema, which is currently planned for next year. As the transaction was a related party transaction, the option exercise was reviewed and approved by our Board’s Audit and Conflicts Committee and supported by a third party valuation, which showed substantial value in the option.
  • Courtenay Central Re-Development (Wellington, New Zealand) Located in the heart of Wellington – New Zealand’s capital city, this center is comprised of 161,071 square feet of land situated proximate to the Te Papa Tongarewa Museum (attracting over 1.5 million visitors annually), across the street from the site of Wellington’s newly announced convention center (estimated to open its doors in 2022) and at a major public transit hub. Damage from the 2016 earthquake necessitated demolition of our nine-story parking garage at the site. Further, unrelated seismic issues have caused us to close the existing cinema and significant portions of the retail structure while we re-evaluate the property for redevelopment as an entertainment themed urban center with a major food, beverage and grocery component.

During the quarter, we continued to work through the re-development details of the Courtenay Central building, which we anticipate will feature a variety of uses to complement and build upon the “destination quality” of this location

Wellington continues to be rated as one of the top cities in the world in which to live. Earlier this year, UNESCO named Wellington as a UNESCO Creative City of Film. We continue to believe that the Courtenay Central site is located in one of the most vibrant and growing commercial and entertainment precincts of New Zealand.

SEGMENT RESULTS

The following table summarizes the third quarter and nine months segment operating results for 2019 and 2018, respectively:

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 30,

 

% Change

Favorable/

 

September 30,

 

% Change

Favorable/

(Dollars in thousands)

 

 

2019

 

 

2018

 

(Unfavorable)

 

 

2019

 

 

2018

 

(Unfavorable)

Segment revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cinema

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

 

36,750

 

$

 

40,038

 

(8)

%

 

$

 

109,743

 

$

 

122,437

 

(10)

%

Australia

 

 

24,279

 

 

23,659

 

3

%

 

 

71,318

 

 

77,513

 

(8)

%

New Zealand

 

 

5,704

 

 

6,974

 

(18)

%

 

 

16,040

 

 

23,159

 

(31)

%

Total

 

$

 

66,733

 

$

 

70,671

 

(6)

%

 

$

 

197,101

 

$

 

223,109

 

(12)

%

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

 

1,006

 

$

 

805

 

25

%

 

$

 

2,873

 

$

 

2,410

 

19

%

Australia

 

 

3,905

 

 

3,847

 

2

%

 

 

11,873

 

 

12,305

 

(4)

%

New Zealand

 

 

620

 

 

1,119

 

(45)

%

 

 

1,779

 

 

3,489

 

(49)

%

Total

 

$

 

5,531

 

$

 

5,771

 

(4)

%

 

$

 

16,525

 

$

 

18,204

 

(9)

%

Inter-segment elimination

 

 

(1,808)

 

 

(2,181)

 

17

%

 

 

(5,524)

 

 

(6,918)

 

20

%

Total segment revenue

 

$

 

70,456

 

$

 

74,261

 

(5)

%

 

$

 

208,102

 

$

 

234,395

 

(11)

%

Segment operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cinema

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

 

437

 

$

 

2,310

 

(81)

%

 

$

 

2,772

 

$

 

10,008

 

(72)

%

Australia

 

 

4,671

 

 

4,678

 

%

 

 

12,909

 

 

16,642

 

(22)

%

New Zealand

 

 

913

 

 

1,214

 

(25)

%

 

 

2,250

 

 

4,333

 

(48)

%

Total

 

$

 

6,021

 

$

 

8,202

 

(27)

%

 

$

 

17,931

 

$

 

30,983

 

(42)

%

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

 

212

 

$

 

(154)

 

>100

%

 

$

 

163

 

$

 

(514)

 

>100

%

Australia

 

 

1,405

 

 

980

 

43

%

 

 

4,153

 

 

4,071

 

2

%

New Zealand

 

 

(132)

 

 

434

 

(>100)

%

 

 

(329)

 

 

1,339

 

(>100)

%

Total

 

$

 

1,485

 

$

 

1,260

 

18

%

 

$

 

3,987

 

$

 

4,896

 

(19)

%

Total segment operating income (1)

 

$

 

7,506

 

$

 

9,462

 

(21)

%

 

$

 

21,918

 

$

 

35,879

 

(39)

%

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

Cinema Exhibition

Third Quarter Results:

Cinema segment operating income decreased by $2.2 million, or 27%, to $6.0 million for the quarter ended September 30, 2019, compared to September 30, 2018. The decrease was due to a decline in attendance in all three circuits. 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.

  • Revenue in the U.S. decreased by 8%, or $3.3 million, to $36.8 million, due to a 14% decrease in attendance; offset by a 13% increase in SPP, while ATP remained flat.
  • Australia’s cinema revenue increased by 3%, or $0.6 million, to $24.3 million, primarily due to a 4% increase in SPP and a 3% increase in ATP, offset by a 2% decrease in attendance.
  • New Zealand’s cinema revenue decreased by 18%, or $1.3 million, to $5.7 million, due to a 24% decrease in attendance (principally due to the closure of our Courtenay Central Cinema pending redevelopment), offset by a 13% increase in SPP and a 10% increase in ATP.

The top three grossing films for the third quarter of 2019 were The Lion King, Spider-Man: Far From Home, and Toy Story 4, representing approximately 37% of our worldwide admission revenues for the quarter. The top three grossing films in the third quarter of 2018 for our worldwide cinema circuits were Crazy Rich Asians, Ant-Man and the Wasp, and Mission Impossible – Fallout, which represented approximately 24% of our worldwide admission revenues.

Nine Month Results:

Cinema segment operating income declined 42%, or $13.1 million, to $17.9 million for the nine months ended September 30, 2019 compared to September 30, 2018, primarily driven by a 72% operating income decline in the U.S. market, a decline in attendance worldwide and adverse foreign exchange impacts. However, such attendance decreases were offset to some extent by increases in ATP and SPP:

  • Revenue in the U.S. decreased by 10%, or $12.7 million, to $109.7 million, primarily due to a 16% decrease in attendance (principally due to a film slate that was less appealing to our specialized audiences and the closure of three cinemas due to lease expirations), offset by a 11% increase in SPP and a 2% increase in ATP.
  • Australia’s cinema revenue decreased by 8%, or $6.2 million, to $71.3 million, primarily due to a 7% decrease in attendance and a 3% decrease in SPP, while ATP remained flat.
  • New Zealand cinema revenue decreased by 31%, or $7.1 million, to $16.0 million, primarily due to a 32% decrease in attendance, (significantly due to the closure of our Courtenay Central Cinema pending redevelopment); offset by a 5% increase in ATP and a 4% increase in SPP.

The top three grossing films for the nine months of 2019 were Avengers: Endgame, The Lion King, and Captain Marvel representing approximately 20% of our worldwide admission revenues, compared to the top three grossing films a year ago: Avengers: Infinity War, Black Panther, and Incredibles 2, which represented approximately 18% of our admission revenues for the same period in 2018.

Real Estate

Third Quarter and Nine Month Results:

Real estate segment operating income increased by 18%, or $0.2 million, to $1.5 million for the quarter ended September 30, 2019, compared to the third quarter ended September 30, 2018, primarily due to a decrease in operating expenses in all three circuits, offset by a decrease in revenue in the New Zealand operations, due specifically to the ongoing closure of most of the net rentable area of Courtenay Central. Real estate revenue for the third quarter of 2019, decreased by 4%, or $0.2 million, to $5.5 million compared to the third quarter of 2018, due also to a decrease in revenues from our New Zealand segment related to the closure of a majority of the rentable square footage at Courtenay Central.

For the nine months ended September 30, 2019, the real estate segment operating income decreased by 19%, or $0.9 million, to $4.0 million compared to the nine months ended September 30, 2018 primarily attributable to an operating loss in the New Zealand portfolio of $0.3 million for 2019, compared to an operating gain of $1.3 million for the nine months ended September 30, 2018. Real estate revenue decreased by 9%, or $1.7 million, to $16.5 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 nine months of 2019, compared to same period in 2018.

Our third quarter 2019 Australian real estate segment reported its highest ever third quarter revenues, reflecting improved leasing at our centers in Australia, including Newmarket Village and Auburn Redyard, at $3.9 million.

CONSOLIDATED AND NON-SEGMENT RESULTS

The third quarter and nine month consolidated and non-segment results for 2019 and 2018 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 30,

 

% Change

Favorable/

 

September 30,

 

% Change

Favorable/

(Dollars in thousands)

 

 

2019

 

 

2018

 

(Unfavorable)

 

 

2019

 

 

2018

 

(Unfavorable)

Segment operating income

 

$

 

7,506

 

$

 

9,462

 

(21)

%

 

$

 

21,918

 

$

 

35,879

 

(39)

%

Non-segment income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expense

 

 

(4,493)

 

 

(4,831)

 

7

%

 

 

(14,205)

 

 

(16,717)

 

15

%

Interest expense, net

 

 

(1,871)

 

 

(1,748)

 

(7)

%

 

 

(5,924)

 

 

(5,132)

 

(15)

%

Other

 

 

257

 

 

(142)

 

>100

%

 

 

483

 

 

81

 

>100

%

Total non-segment income and expenses

 

$

 

(6,107)

 

$

 

(6,721)

 

9

%

 

$

 

(19,647)

 

$

 

(21,768)

 

10

%

Income before income taxes

 

 

1,399

 

 

2,741

 

(49)

%

 

 

2,271

 

 

14,111

 

(84)

%

Income tax benefit (expense)

 

 

(547)

 

 

(1,482)

 

63

%

 

 

(1,159)

 

 

(4,618)

 

75

%

Net income/(loss)

 

$

 

852

 

$

 

1,259

 

(32)

%

 

$

 

1,112

 

$

 

9,493

 

(88)

%

Less: net income (loss) attributable to

noncontrolling interests

 

 

(50)

 

 

(38)

 

(32)

%

 

 

(103)

 

 

88

 

(>100)

%

Net income (loss) attributable to

RDI common stockholders

 

$

 

902

 

$

 

1,297

 

(30)

%

 

$

 

1,215

 

$

 

9,405

 

(87)

%

Third Quarter and Nine Month Results

Net income attributable to RDI common stockholders declined by 30%, or $0.4 million, to $0.9 million for the quarter ended September 30, 2019, compared to the same period prior year. Basic EPS for the quarter ended September 30, 2019 decreased by $0.02, to $0.04 from $0.06 in the prior-year quarter, mainly attributable to a significant decrease in revenue from our Cinema business segment.

Net income attributable to RDI common stockholders decreased by 87%, or $8.2 million, to $1.2 million for the nine months ended September 30, 2019, compared to the same period in the prior year. Basic EPS for the first nine months of 2019 decreased by $0.

Contacts

Gilbert Avanes, Chief Financial Officer

Andrzej Matyczynski, Executive Vice President for Global Operations

Reading International, Inc. (213) 235-2240

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