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Reading International Announces 3rd Quarter 2008 Results- Revenue from continuing operations for the quarter was up 81.9% over the 2007 quarter, to $56.5 million
LOS ANGELES, Nov. 7 /PRNewswire-FirstCall/ -- Reading International, Inc. announced today results for its quarter and nine months ended September 30, 2008. (Logo: http://www.newscom.com/cgi-bin/prnh/20030403/LATH058LOGO)
Third Quarter 2008 Highlights
Our year-to-year results of operations were principally impacted by the following:
-- the acquisition on February 22, 2008, of 15 cinemas with 181 screens in
Hawaii and California, the "Consolidated Entertainment" acquisition;
-- the recognition of a gain on the sale of our unconsolidated 50%
interest in the cinema at Botany Downs, Auckland, New Zealand;
-- the receipt of litigation and insurance proceeds offset by the
non-recurrence of sale revenues with respect to our Place 57
residential condominium project. All of the condominium units in that
project have now been sold, with the exception of one retail unit; and
-- the decline in the value of the Australian and New Zealand dollars
vis-a-vis the US dollar from $0.8855 and $0.7568, respectively, as of
September 30, 2007 to $0.7904 and $0.6690, respectively, as of
September 30, 2008.
which resulted in:
-- revenue growth of $25.5 million or 81.9% to $56.5 million, compared to
$31.0 million in the 2007 quarter;
-- net loss from continuing operations of $2.1 million in the 2008 quarter
compared to net income from continuing operations of $870,000 in the
2007 quarter; but
-- an EBITDA(1) of $7.7 million in the 2008 quarter compared to $6.6
million in the 2007 quarter, an increase of 17.3%.
Third Quarter 2008 Discussion Revenue from continuing operations increased from $31.1 million in the 2007 quarter to $56.5 million in 2008, an 81.9% increase. Cinema segment revenue increased for the 2008 quarter by $24.9 million or 88.9% compared to the same period in 2007. The increase was primarily a result of $21.1 million of revenue from our newly acquired Consolidated Entertainment cinemas and improved results from our Australia operations including $2.9 million from admissions and $973,000 from concessions and other revenues, offset by lower cinema revenues from our New Zealand operations of $680,000. The top 3 grossing films in our circuit worldwide were "The Dark Night," "Mamma Mia!" and "Hancock," which between them accounted for approximately 32.5% of our cinema box office revenue. Real estate segment revenue increased for the 2008 Quarter by $730,000 or 15.0% compared to the same period in 2007. The increase was primarily related to rental revenues from our newly acquired Consolidated Entertainment cinemas that have ancillary real estate associated with them. As a percent of revenue, cinema/real estate segment operating expense, at 77.9% in the 2008 quarter, was higher than the 71.1% of the 2007 quarter. The primary driver for this was an increase in cinema costs primarily related to higher film rent expense incurred in the United States as the result of the acquisition of the Consolidated Entertainment cinemas. Since Consolidated Entertainment cinemas are commercial houses, their film product is more expensive than the art and specialty film featured at the art cinemas, which made up the bulk of our US cinema assets. Depreciation and amortization increased by $2.2 million or 84.2%, from $2.6 million in the 2007 quarter, to $4.9 million in the 2008 quarter, primarily related to our newly acquired Consolidated Entertainment cinema assets. General and administrative expense increased by $526,000 or 13.6%, from $3.9 million to $4.4 million in the 2008 quarter. This increase was primarily due to additional pension costs in 2008 for our Chief Operating Officer, cost related to the Supplemental Executive Retirement Plan, and legal and professional fees associated principally with our real estate investment activities. Net interest expense increased by $1.7 million or 74.0% for the 2008 quarter compared to last year, primarily related to higher outstanding loan balances during the 2008 quarter compared to the 2007 quarter associated with our current year's acquisitions. Other income decreased by $2.0 million for the 2008 quarter compared to last year. The primary reasons were a $1.0 million impairment charge against our Lake Taupo asset in New Zealand, a $549,000 gain on sale of marketable securities in 2007, not repeated in 2008, and the completion of the sale phase of the residential condominiums in our Place 57 project. During 2007 and 2006, all of the residential condominiums were sold and only the retail condominium is still available for sale. During 2007, the partnership closed on the sale of one condominium during the three months ended September 30, 2007, resulting in gross sales of $3.4 million and equity earnings from unconsolidated joint ventures and entities to us of $201,000. As a result of the above, we reported a net loss of $2.1 million for the 2008 quarter compared to a net income of $870,000 in the 2007 quarter. Our EBITDA(1) at $7.7 million for the 2008 quarter was $1.1 million higher than the 2007 quarter of $6.6 million, driven exclusively by better operating margins (approximately $3.0 million) and offset by the reduction in other income (approximately $2.0 million) as described above. Nine Months 2008 Summary Revenue from continuing operations increased by 69.6% or $60.5 million, to $147.5 million in the nine months of 2008 compared to 2007. This increase was driven by an increase in cinema segment revenue for the 2008 period of $58.9 million or 76.6% compared to the same period in 2007. The 2008 increase was primarily a result of $49.0 million of revenue from our newly acquired Consolidated Entertainment cinemas and improved results from our Australia operations including $6.3 million from admissions and $2.6 million from concessions and other revenues, offset slightly by New Zealand. The top three grossing films in our circuit worldwide, for the nine months of 2008, were "The Dark Night," "Iron Man" and "Indiana Jones and the Kingdom of the Crystal Skull" accounting for 15.3% of our cinema box office revenue. The real estate segment revenue increase of $2.1 million or 14.7% was driven by the same reasons as for the quarter, together with increases in revenues in Australia and New Zealand. As a percent of revenue, cinema/real estate segment operating expense, at 78.5% in the 2008 nine months, was higher than the 71.7% of the 2007 nine months. The primary drivers were the same factors that drove the 2008 quarter, above. Depreciation and amortization increased by $5.9 million to $13.8 million in 2008 from $8.0 million in 2007, driven primarily by our newly acquired Consolidated Entertainment cinema assets, added during the 2008 period. General and administrative expense increased by $2.6 million in the 2008 nine months compared to the 2007 period. As for the quarter, this increase was primarily due to additional pension costs in 2008 for our Chief Operating Officer, cost related to the Supplemental Executive Retirement Plan, and legal and professional fees associated principally with our real estate acquisition and investment activities. Net interest expense increased by $3.9 million for the 2008 nine months compared to last year, primarily related to higher outstanding loan balances during the 2008 period compared to 2007 associated with our current year's acquisitions. Other income was flat for the 2008 nine months compared to last year. Increases to other income were primarily related to insurance proceeds of $910,000, coupled with cumulative year-to-date settlements on our Burstone litigation of $1.2 million and credit card dispute of $385,000. These were offset by the $1.0 million impairment charge against our Lake Taupo asset in New Zealand and the changing sales activity in our investment related to 205-209 East 57th Street Associates, LLC, as described above. During 2007, the partnership closed on the sale of eight condominiums during the nine months ended September 30, 2007, resulting in gross sales of $26.0 million, and equity earnings from unconsolidated joint ventures and entities to us of $1.6 million. During the nine months ended September 30, 2007, upon the fulfillment of our commitment, we recorded the release of a deferred gain on the sale of a discontinued operation of $1.9 million associated with a previously sold property. In 2008 we recorded a gain on sale of unconsolidated entities of $2.5 million from the sale of our 50% interest in the cinema at Botany Downs in Auckland, New Zealand. As a result, we reported a net loss of $2.0 million for the 2008 nine months compared to a net income of $1.9 million in the 2007 nine months. Our EBITDA(1) at $23.9 million for the 2008 nine months was $5.6 million higher than the 2007 nine months of $18.2 million, driven predominantly by better operating margins (approximately $4.6 million), and the gain on sale of an unconsolidated entity ($2.5 million) offset by the non-recurring gain on sale of discontinued operations in the 2007 quarter ($1.9 million). Balance Sheet Our total assets at September 30, 2008 were $392.1 million compared to $346.1 million at December 31, 2007. The currency exchange rates for Australia and New Zealand as of September 30, 2008 were $0.7904 and $0.6690, respectively, and as of December 31, 2007, these rates were $0.8776 and $0.7678, respectively. As a result, currency had a negative effect on the balance sheet at September 30, 2008 compared to December 31, 2007. Our cash position at September 30, 2008 was $25.1 million compared to $20.8 million at December 31, 2007. In addition, we have approximately $4.3 million (AUS$5.5 million) in undrawn funds under our Australian Corporate Credit Facility, $38.0 million (NZ$56.8 million) under our New Zealand Line of Credit, and $5.0 million under our GECC Line of Credit, to meet our anticipated short-term working capital requirements. Our positive working capital at September 30, 2008 was $35.3 million compared to $32.3 million at December 31, 2007. The increase in the September number and the reclassification of the December 2007 number was as a result of the movement of our Auburn, Australia property, to an asset held for sale (see below -- Real Estate Update). Stockholders' equity was $99.3 million at September 30, 2008 compared to $121.4 million at December 31, 2007 due principally to the strengthening of the US dollar compared to the Australian dollar and the New Zealand dollar. Real Estate Update On September 16, 2008, we entered into a sale option agreement to sell our Auburn real estate property and cinema for $28.5 million (AUS$36.0 million). The sale option agreement calls for an initial option payment of $948,000 (AUS$1.2 million), received on the agreement date, and four option installment payments of $316,000 (AUS$400,000), $316,000 (AUS$400,000), $316,000 (AUS$400,000), and $948,000 (AUS$1.2 million) payable over the subsequent 9 months. The option comes to term on November 1, 2009 at which time the balance of $25.6 million (AUS$32.4 million) is due and payable. At any time during the 13-month option, the buyer may decline to move further in the sale process resulting in a forfeiture of all previous option payments. Subsequent Event In October 2008, Prime Media of Australia announced that it is offering stock at ratio of 0.257 shares of Prime Media for each share of Broadcast Production Services (formerly Becker Group). We currently hold 12,768,106 shares of Broadcast Production Services. We are currently evaluating whether or not we will participate in this offering. 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. Our business consists primarily of:
-- the development, ownership and operation of multiplex cinemas in the
United States, Australia and New Zealand; and
-- the development, ownership and operation of retail and commercial real
estate in Australia, New Zealand and the United States.
Reading manages its worldwide cinema business under various different brands:
-- in the United States, under the
o Reading brand,
o Angelika Film Center brand (http://angelikafilmcenter.com/),
o Consolidated Theatres brand (http://www.consolidatedtheatres.com/),
and
o City Cinemas brand;
-- in Australia, under the Reading brand
(http://www.readingcinemas.com.au/); and
-- in New Zealand, under the
o Reading (http://www.readingcinemas.co.nz) and
o Rialto (http://www.rialto.co.nz) brands.
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 view 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:
-- With respect to our cinema operations:
o The number and attractiveness to movie goers of the films released
in future periods;
o The amount of money spent by film distributors to promote their
motion pictures;
o The licensing fees and terms required by film distributors from
motion picture exhibitors in order to exhibit their films;
o The comparative attractiveness of motion pictures as a source of
entertainment and willingness and/or ability of consumers (i) to
spend their dollars on entertainment and (ii) to spend their
entertainment dollars on movies in an outside the home environment;
and
o The extent to which we encounter competition from other cinema
exhibitors, from other sources of outside of the home entertainment,
and from inside the home entertainment options, such as "home
theaters" and competitive film product distribution technology such
as, by way of example, cable, satellite broadcast, DVD and VHS
rentals and sales, and so called "movies on demand;"
-- With respect to our real estate development and operation activities:
o The rental rates and capitalization rates applicable to the markets
in which we operate and the quality of properties that we own;
o The extent to which we can obtain on a timely basis the various land
use approvals and entitlements needed to develop our properties;
o The risks and uncertainties associated with real estate development;
o The availability and cost of labor and materials;
o Competition for development sites and tenants; and
o The extent to which our cinemas can continue to serve as an anchor
tenant which will, in turn, be influenced by the same factors as
will influence generally the results of our cinema operations;
-- With respect to our operations generally as an international company
involved in both the development and operation of cinemas and the
development and operation of real estate; and previously engaged for
many years in the railroad business in the United States:
o Our ongoing access to borrowed funds and capital and the interest
that must be paid on that debt and the returns that must be paid on
such capital;
o The relative values of the currency used in the countries in which
we operate;
o Changes in government regulation, including by way of example, the
costs resulting from the implementation of the requirements of
Sarbanes-Oxley;
o Our labor relations and costs of labor (including future government
requirements with respect to pension liabilities, disability
insurance and health coverage, and vacations and leave);
o Our exposure from time to time to legal claims and to uninsurable
risks such as those related to our historic railroad operations,
including potential environmental claims and health related claims
relating to alleged exposure to asbestos or other substances now or
in the future recognized as being possible causes of cancer or other
health-related problems;
o Changes in future effective tax rates and the results of currently
ongoing and future potential audits by taxing authorities having
jurisdiction over our various companies; and
o Changes in applicable accounting policies and practices.
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, it naturally follows that 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. Finally, please understand that 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-US GAAP financial measures." In such case, a reconciliation of this information to our US GAAP financial statements will be made available in connection with such statements.
For more information, contact:
Andrzej Matyczynski, Chief Financial Officer
Reading International, Inc. (213) 235 2240
(1) The Company defines EBITDA as net income (loss) before net interest
expense, income tax benefit, depreciation, and amortization. EBITDA
is presented solely as a supplemental disclosure as we believe it to
be a relevant and useful measure to compare operating results among
our properties and competitors, as well as a measurement tool for
evaluation of operating personnel. EBITDA is not a measure of
financial performance under the promulgations of generally accepted
accounting principles ("GAAP"). EBITDA should not be considered in
isolation from, or as a substitute for, net loss, operating loss or
cash flows from operations determined in accordance with GAAP.
Finally, EBITDA is not calculated in the same manner by all companies
and accordingly, may not be an appropriate measure for comparing
performance amongst different companies. See the "Supplemental
Data" table attached for a reconciliation of EBITDA to net income
(loss).
Reading International, Inc. and Subsidiaries
Supplemental Data
Reconciliation of EBITDA to Net Income (Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
Statements of Operations September 30, September 30,
2008 2007 2008 2007
Revenue $56,528 $31,077 $147,472 $86,949
Operating expense
Cinema/real estate 44,018 22,085 115,736 62,340
Depreciation and amortization 4,877 2,647 13,829 7,970
General and administrative 4,397 3,871 13,993 11,424
Operating income 3,236 2,474 3,914 5,215
Interest expense, net (3,962) (2,277) (9,832) (5,978)
Other income (739) 1,291 2,850 2,876
Gain on sale of discontinued
operations 178 45 371 1,845
Gain on sale of unconsolidated
entity -- -- 2,450 --
Income tax expense (689) (501) (1,513) (1,443)
Minority interest expense (85) (162) (246) (657)
Net (loss) income $(2,061) $870 $(2,006) $1,858
Basic (loss) earnings per share $(0.09) $0.04 $(0.09) $0.08
Diluted (loss) earnings per share $(0.09) $0.04 $(0.09) $0.08
EBITDA* $7,686 $6,555 $23,851 $18,202
EBITDA* change $1,131 $5,649
* EBITDA presented above is net income adjusted for interest expense (net
of interest income), income tax expense, depreciation and amortization
expense, and an adjustment for discontinued operations (this includes
interest expense and depreciation and amortization for the discontinued
operations).
Reconciliation of EBITDA to the net income is presented below:
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Net (loss) income $(2,061) $870 $(2,006) $1,858
Add: Interest expense, net 3,962 2,277 9,832 5,978
Add: Income tax provision 689 501 1,513 1,443
Add: Depreciation and amortization 4,877 2,647 13,829 7,970
Add: EBITDA adjustment for
discontinued operations 219 260 683 953
EBITDA $7,686 $6,555 $23,851 $18,202
Reading International, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(U.S. dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Revenue
Cinema $52,909 $28,009 $135,693 $76,825
Real estate 3,619 3,068 11,779 10,124
56,528 31,077 147,472 86,949
Operating expense
Cinema 41,765 20,041 109,597 56,878
Real estate 2,253 2,044 6,139 5,462
Depreciation and amortization 4,877 2,647 13,829 7,970
General and administrative 4,397 3,871 13,993 11,424
53,292 28,603 143,558 81,734
Operating income 3,236 2,474 3,914 5,215
Interest income 221 329 829 558
Interest expense (4,183) (2,606) (10,661) (6,536)
Loss on sale of assets -- -- -- (185)
Other income (1,009) 707 2,033 435
Income (loss) before minority
interest expense, discontinued
operations, income tax expense,
and equity earnings of
unconsolidated joint ventures
and entities (1,735) 904 (3,885) (513)
Minority interest expense (85) (162) (246) (657)
Income (loss) before discontinued
operations, income tax expense,
and equity earnings of
unconsolidated joint ventures
and entities (1,820) 742 (4,131) (1,170)
Gain on sale of a discontinued
operation, net of tax -- -- -- 1,912
Income (loss) from discontinued
operations, net of tax 178 45 371 (67)
Income (loss) before income tax
expense and equity earnings of
unconsolidated joint ventures
and entities (1,642) 787 (3,760) 675
Income tax expense (689) (501) (1,513) (1,443)
Income (loss) before equity
earnings of unconsolidated joint
ventures and entities (2,331) 286 (5,273) (768)
Equity earnings of unconsolidated
joint ventures and entities 270 584 817 2,626
Gain on sale of unconsolidated
entity -- -- 2,450 --
Net income (loss) $(2,061) $870 $(2,006) $1,858
Earnings (loss) per common
share - basic and diluted:
Earnings (loss) from continuing
operations $(0.10) $0.04 $(0.11) $0.00
Earnings from discontinued
operations 0.01 0.00 0.02 0.08
Basic and diluted earnings
(loss) per share $(0.09) $0.04 $(0.09) $0.08
Weighted average number of
shares outstanding basic 22,476,904 22,487,943 22,476,514 22,486,395
Weighted average number of
shares outstanding
- dilutive 22,476,904 22,761,270 22,476,514 22,759,723
Reading International, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(U.S. dollars in thousands)
September 30, December 31,
2008 2007
ASSETS
Current Assets:
Cash and cash equivalents $25,119 $20,783
Receivables 7,220 5,670
Inventory 695 654
Investment in marketable securities 4,085 4,533
Restricted cash -- 59
Assets held for sale 22,775 25,942
Prepaid and other current assets 2,334 3,799
Total current assets 62,228 61,440
Land held for sale -- 1,984
Property held for development 7,304 9,289
Property under development 69,387 66,787
Property & equipment, net 179,789 154,011
Investments in unconsolidated joint ventures
and entities 13,603 15,480
Investment in Reading International Trust I 1,547 1,547
Goodwill 23,808 19,100
Intangible assets, net 23,999 8,448
Other assets 10,483 7,985
Total assets $392,148 $346,071
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $11,634 $12,331
Film rent payable 4,326 3,275
Notes payable - current portion 1,533 395
Note payable to related party - current portion -- 5,000
Taxes payable 6,115 4,770
Deferred current revenue 3,130 3,214
Liabilities of assets held for sale -- --
Other current liabilities 202 169
Total current liabilities 26,940 29,154
Notes payable - long-term portion 173,774 111,253
Notes payable to related party - long-term portion 14,000 9,000
Subordinated debt 51,547 51,547
Noncurrent tax liabilities 6,070 5,418
Deferred non-current revenue 609 566
Other liabilities 17,654 14,936
Total liabilities 290,594 221,874
Commitments and contingencies
Minority interest in consolidated affiliates 2,288 2,835
Stockholders' equity:
Class A Nonvoting Common Stock, par value $0.01,
100,000,000 shares authorized, 35,564,339 issued
and 20,987,115 outstanding at September 30, 2008
and at December 31, 2007 216 216
Class B Voting Common Stock, par value $0.01,
20,000,000 shares authorized and 1,495,490 issued
and outstanding at September 30, 2008 and at
December 31, 2007 15 15
Nonvoting Preferred Stock, par value $0.01,
12,000 shares authorized and no outstanding shares -- --
Additional paid-in capital 132,838 131,930
Accumulated deficit (54,676) (52,670)
Treasury shares (4,306) (4,306)
Accumulated other comprehensive income 25,179 46,177
Total stockholders' equity 99,266 121,362
Total liabilities and stockholders' equity $392,148 $346,071
Website: http://www.readingcinemas.com.au/ |
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