Reading International AMEX RDI Earnings revenue results
Reading International Announces 2nd Quarter 2006 Results
Reading logo. Reading International, Inc. is a cinema and live theater
exhibition company, with an emphasis on ownership of the underlying commercial
real estate assets.
LOS ANGELES, CA UNITED STATES 06/06/2004
- Revenue From Continuing Operations Was Up 12.5% Over the 2005 Quarter, to
$28.0 Million
LOS ANGELES, Aug. 9 -- Reading International,
Inc. (Amex: RDI) announced today results for its quarter and six months
ended June 30, 2006.
Second Quarter 2006 Summary
Our quarter to quarter results of operations were principally impacted
by the following:
- The sale effective June 8, 2005 of our Puerto Rican cinema operations;
- The sale effective May 17, 2005 of our Glendale, California office
building, our only commercial domestic property with no entertainment
component;
- The acquisition on June 1, 2005 and September 19, 2005 of the various
real property interests underlying our leasehold interest in our
Cinemas 1, 2 & 3 cinema;
- The opening in the fourth quarter of 2005 and the occupancy of the
majority of tenancies during first quarter of 2006 of our Newmarket
Shopping Center, an approximately 100,000 square foot retail center in
a suburb of Brisbane, Australia;
- The opening on October 20, 2005, and the acquisition effective
February 23, 2006, of cinemas in a suburb of Adelaide, Australia and
Queenstown, New Zealand, respectively;
- The acquisition, effective April 01, 2006 of the remaining 50% share
that we did not already own of the Palms cinema located in
Christchurch, New Zealand;
- The reduction in the value of the Australian and New Zealand dollars
vis-a-vis the US dollar from $0.7618 and $0.6959, respectively, as of
June 30, 2005 to $0.7423 and $0.6105, respectively, as of
June 30, 2006;
- Revenue from continuing operations, despite negative currency effects,
grew by 12.5% to $28.0 million compared to the 2005 quarter of
$24.9 million;
- Net loss was $234,000 for the three months ending June 30, 2006
compared to a net income of $10.5 million (including a one time gain on
disposal of business operations of $13.6 million) for the same period
in 2005; and
- Reported EBITDA (1) at $5.0 million for the 2006 quarter was down
65.5% from the $14.5 million (including the aforementioned a one time
gain on disposal of business operations of $13.6 million) in the
2005 quarter.
Second Quarter 2006 Discussion
Revenue from continuing operations increased from $24.9 million in the
2005 quarter to $28.0 million in 2006, a 12.5% increase despite overall
negative currency effects. The cinema revenue increase of $3.0 million was
across our geographical spectrum with Australia $1.5 million higher than
last year, New Zealand $1.0 million higher than last year and the US
$517,000 higher. The top 3 grossing films in our circuit worldwide were
"Ice Age 2: The Meltdown", "The Da Vinci Code" and "X-Men: The Last Stand"
which between them accounted for approximately 26% of our cinema box office
revenue. Our real estate revenue was slightly higher than last year with
Australia showing good rental stream growth, $389,000 higher than last year
(predominantly attributable to Newmarket), offset by the US, which was down
by approximately $219,000 due primarily to decreases in our live theater
income from the 2005 quarter.
As a percent of revenue, operating expense, at 74.9% in the 2006
quarter was basically flat with the first quarter 2006, but significantly
better than the 79.3% of the 2005 quarter. The primary driver for the
better performance in 2006 versus 2005, was the lackluster 2005 product
offering, which resulted in shorter play times and higher cost ratios.
Depreciation and amortization expense increased by $334,000 or 11.1%,
from $3.0 million to $3.3 million in the 2006 quarter, predominantly due to
additional Australian depreciation as a result of the opening of the
Newmarket shopping center, located in Brisbane, in late December 2005 and
the Elizabeth cinema, located in Adelaide, which opened in October 2005.
General and administrative expense decreased by $1.0 million or 25.6%,
from $4.1 million to $3.1 million in the 2006 quarter. This change was
primarily due to a decrease in our legal expenses specifically relating to
our US anti-trust litigation and our purchase of the Cinemas 1, 2, 3 which
decreased the amount of rent paid to related parties.
The other significant drivers that affected the 2006 quarter compared
to the 2005 quarter were:
- the increase in net interest expense. Net interest expense increased
by $803,000 primarily related to a higher outstanding loan balance in
Australia and due to the effective completion of construction of our
Newmarket Shopping Centre in December 2005 (at which point we ceased to
capitalize interest expense on our $24.2 million construction loan),
offset by a decrease in interest expense adjustment in the 2006 quarter
related to the mark-to-market adjustment of our interest rate swaps
compared to the adjustment for the same period in 2005;
- the increase in other income. Other income increased by $463,000
primarily due to the recognition of $918,000 of profit on the closing
of the sales of 11 out of 67 units of our Place 57 development in New
York, in which we have a 25% interest; offset by $275,000 of a
mark-to-market charge relating to the Sutton Hill Capital LLC option
(SHC Option) to acquire a 25% non-managing membership interest in the
limited liability company in which we hold our fee interest in our
Cinemas 1, 2 & 3 property; and
- the effect of income from discontinued operations. In the 2005 quarter
we recognized a gain on the sale of assets of $13.6 million, which was
not repeated in the 2006 quarter.
As a result of the above, we reported a net loss of $234,000 for the
2006 quarter compared to a net income of $10.5 million in the 2005 quarter.
Our EBITDA(1) at $5.0 million for the 2006 quarter was $9.5 million
lower than the 2005 quarter of $14.5 million, predominantly driven by the
gain on the sale of assets in the 2005 quarter of $13.6 million. Allowing
for this asset sale in 2005, the 2006 quarter EBITDA (1) from continuing
operations, of $5.0 million is $4.1 million or 445.1% higher then that of
the 2005 quarter.
First Half 2006 Summary
- Revenue from continuing operations increased by 7.0% or $3.5 million,
to $53.9 million in the first half 2006 compared to 2005, while the
operating expense percentage decreased to 75.2% in 2006 compared to
77.2% in the 2005 half-year. The primary driver for this was the
lackluster film product in the 2005 quarter as described above in the
quarter discussion.
- The top 5 grossing films in our circuit worldwide for the 2006
half-year were: "Ice Age 2: The Meltdown", "The Da Vinci Code", "The
Chronicles of Narnia: The Lion, the Witch and the Wardrobe", "X-Men:
The Last Stand" and "Cars", which between them accounted for
approximately 20% of our cinema box office revenue.
- Depreciation and amortization increased by $411,000 to $6.6 million in
2006, driven primarily by the Australian shopping center and cinema
additions.
- General and administrative expense declined by $1.4 million to
$6.5 million in the 2006 period. This decrease was due to the decrease
in rent and legal expenses.
- Interest expense increased by $1.7 million to $3.3 million in 2006, due
to the cessation of interest capitalization on the Newmarket project
partially offset by interest rate swap mark-to-market fluctuations.
- Other income decreased by $359,000 to $520,000 in 2006, primarily due
to the profit recognition on Place 57, offset by the mark-to-market of
the SHC Option.
- Income from discontinued operations at $12.2 million in 2005 was driven
by the above discussed gain on sale of $13.6 million.
As a result we reported a net loss of $3.4 million for the 2006 half
year compared to a net income of $8.1 million in the 2005 half year.
Our reported EBITDA(1) at $7.2 million for the half year 2006 was $9.7
million lower than the $16.9 million of the 2005 half year. Adjusting for
the $13.6 million gain on sale of assets in the 2005 half-year, our
EBITDA(1) from continuing operations in the 2006 half-year was $3.9 million
or 120.2% higher than the 2005 half-year.
Balance Sheet
Our total assets at June 30, 2006 were $254.0 million and remained
basically flat with December 31, 2005. The currency exchange rates for
Australia and New Zealand as of June 30, 2006 were $0.7423 and $0.6105,
respectively, and as of December 31, 2005, these rates were $0.7342 and
$0.6845, respectively. As a result, currency had an overall negative impact
on the balance sheet at June 30, 2006 compared to December 31, 2005.
Our cash position at June 30, 2006 was $6.1 million compared to $8.5
million at December 31, 2005. The majority of the $2.4 million change
related to cash invested of $1.8 million in Malulani Investments, Ltd. to
acquire an 18.4% interest in a private real estate company with holdings
principally in California, Texas, and Hawaii.
At the present time we have approximately $8.5 million in undrawn funds
under our Australian Corporate Credit Facility. Accordingly, we believe
that we have sufficient borrowing capacity under our corporate facility
from our Australian bank, to meet our anticipated short-term working
capital requirements. Our negative working capital at $14.5 million
compares to $14.3 million at December 31, 2005. Negative working capital is
typical in the cinema industry, due to the lag time between the collection
of box office and concession receipts and the payment of film distributors
and vendors.
Requiring estimated funding of approximately $500.0 million, our
development in Burwood, Australia will clearly not be funded from normal
working capital even in a phased approach. We have approached several
financing sources who have already given a favorable response to the
prospect of this funding. However, we continue to investigate all options
available to us including debt financing, equity financing, and joint
venture partnering to achieve the optimal financing structure for this most
significant development.
Stockholders' equity was $94.4 million at June 30, 2006 compared to
$99.4 million at December 31, 2005.
Real Estate Update
205-209 East 57th Street Associates, LLC -- We currently have a $4.1
million investment in 205-209 East 57th Street Associates, LLC ("57th
Street Associates"). Construction is virtually complete and includes the
lobby and amenity areas. The managing member of 57th Street Associates
reports that it now has under contract 63 out of 67 units, representing 94%
of total units, at an average selling price of $1,341 per square foot an
increase of $241 per square foot (21.9%) from the project's budget. Of
these 63 contracts, 11 units closed during the June quarter. As reported
above, in the June quarter we recognized our share of the profit on the
closure of 11 out of the 63 sold units ($918,000 to date), the remaining 4
units being out-to-contract. We currently anticipate that the remainder of
the units under contract will be closed before the end of the year. The
unit sales currently being closed relate to the units on the lower stories
of the property, and may reflect less profit than the more expensive upper
units.
Newmarket Shopping Centre -- On November 28, 2005, we opened the
initial retail elements of our Newmarket ETRC, an approximately 100,000
square foot retail facility situated on an approximately 177,500 square
foot parcel in Newmarket, a suburb of Brisbane. The remaining tenants
took-up their occupancy during the first quarter of 2006. We are currently
in the planning phase relating to stage two of this entertainment themed
retail centre (or "ETRC") which is to include a 6 screen cinema complex.
The design for the anticipated 33,067 square foot cinema component is
currently before the Newmarket City Council for approval.
Subsequent Events
Berkeley Cinemas
On May 23, 2006, our Joint Venture Partner exercised his option to
offer to acquire our interest in the remaining Berkeley Joint Venture
cinemas, at an aggregate purchase price of $7.3 million (NZ$11.9 million)
plus the assumption of debt of $3.0 million (NZ$5.0 million). The exercise
of this option has triggered our right to buy out our Joint Venture Partner
at the same price. On July 27, 2006, we gave notice to our Joint Venture
Partner that we do not intend to exercise our right to acquire the cinemas
at Whangaparaoa, Takapuna and Mission Bay, and accordingly, we currently
anticipate that we will sell our interest in those cinemas to our Joint
Venture Partner for $4.4 million (NZ$7.2 million) in cash and the
assumption of $1.5 million (NZ$2.5 million) in debt. We are currently still
considering whether to exercise our right to acquire our Joint Venture
partner's interest in the Botany Downs cinema. If we exercise that right,
the cost to acquire the 50% interest that we do not already own in that
cinema would be $2.9 million (NZ$4.7 million) plus the assumption of debt
estimated to be approximately $1.5 million (NZ$2.5 million) as of the
closing date.
Moonee Ponds
On June 21, 2006, we signed an agreement to purchase two tracks of land
of 0.4 acres adjacent to our Moonee Ponds property for $2.4 million
(AUS$3.3 million). As a partial fulfillment of this contract, on July 7,
2006, we made a $245,000 (AUS$330,000) deposit for these properties and we
anticipate closing on these purchases during the month of September 2006.
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, including
entertainment-themed retail centers ("ETRC") in Australia and New
Zealand and live theater assets in Manhattan and Chicago in the United
States.
Reading manages its worldwide cinema business under various different
brands:
- in the United States, under the
- Reading brand,
- Angelika Film Center brand (http://angelikafilmcenter.com/), and
- City Cinemas brand (http://citycinemas.moviefone.com/);
- in Australia, under the Reading brand
(http://www.readingcinemas.com.au/); and
- in New Zealand, under the
- Reading (http://www.readingcinemas.co.nz),
- Rialto (http://www.rialto.co.nz), and
- Berkeley Cinemas (http://www.berkeleycinemas.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:
- The number and attractiveness to movie goers of the films released
in future periods;
- The amount of money spent by film distributors to promote their
motion pictures;
- The licensing fees and terms required by film distributors from
motion picture exhibitors in order to exhibit their films;
- 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
- 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:
- The rental rates and capitalization rates applicable to the markets
in which we operate and the quality of properties that we own;
- The extent to which we can obtain on a timely basis the various land
use approvals and entitlements needed to develop our properties;
- The availability and cost of labor and materials;
- Competition for development sites and tenants; and
- 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:
- 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;
- The relative values of the currency used in the countries in which
we operate;
- Changes in government regulation, including by way of example, the
costs resulting from the implementation of the requirements of
Sarbanes-Oxley;
- 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);
- 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;
- 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
- 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.
(1) The Company defines EBITDA as net income (loss) before net interest
expense, income taxes, 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).
For more information, contact:
Andrzej Matyczynski, Chief Financial Officer
Reading International, Inc. (213) 235 2240
[TABLES FOLLOW]
Reading International, Inc. and Subsidiaries
Supplemental Data
Reconciliation of EBITDA to Net Loss (Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
Statements of Operations June 30, June 30,
2006 2005 2006 2005
Revenue $27,961 $24,853 $53,898 $50,377
Operating expense
Cinema/real estate 20,943 19,697 40,532 38,899
Depreciation and
amortization 3,337 3,003 6,577 6,166
General and
administrative 3,076 4,132 6,441 7,879
Operating income
(loss) 605 (1,979) 348 (2,567)
Interest expense, net (1,511) (708) (3,295) (1,574)
Other income 1,208 745 520 879
Income from discontinued
operations -- 12,943 -- 12,231
Income tax expense (344) (220) (681) (453)
Minority interest expense (192) (281) (272) (419)
Net income (loss) $(234) $10,500 $(3,380) $8,097
Basic earnings (loss) per
share $(0.01) $0.48 $(0.15) $0.37
Diluted earnings (loss)
per share $(0.01) $0.48 $(0.15) $0.37
EBITDA* 4,958 14,520 7,173 16,858
EBITDA* change (9,562) (9,685)
* EBITDA presented above is net loss 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 loss is presented below:
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net income (loss) $(234) $10,500 $(3,380) $8,097
Add: Interest expense, net 1,511 708 3,295 1,574
Add: Income tax provision
(benefit) 344 220 681 453
Add: Depreciation and
amortization 3,337 3,003 6,577 6,166
Add: EBITDA adjustment for
discontinued operations -- 89 -- 568
EBITDA $4,958 $14,520 $7,173 $16,858
Reading International, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(U.S. dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenue
Cinema $23,954 $20,983 $46,463 $42,899
Real estate 4,007 3,870 7,435 7,478
27,961 24,853 53,898 50,377
Operating expense
Cinema 19,187 17,642 37,064 35,235
Real estate 1,756 2,055 3,468 3,664
Depreciation and
amortization 3,337 3,003 6,577 6,166
General and administrative 3,076 4,132 6,441 7,879
27,356 26,832 53,550 52,944
Operating income (loss) 605 (1,979) 348 (2,567)
Non-operating income (expense)
Interest income 26 36 87 109
Interest expense (1,537) (744) (3,382) (1,683)
Other income (loss) 1 559 (1,154) 289
Loss before minority interest
expense, discontinued
operations, income tax
expense, and equity earnings
of unconsolidated entities (905) (2,128) (4,101) (3,852)
Minority interest expense 192 281 272 419
Loss from continuing
operations (1,097) (2,409) (4,373) (4,271)
Discontinued operations:
Gain on disposal of business
operations -- 13,610 -- 13,610
Loss from discontinued
operations -- (667) -- (1,379)
Income (loss) before income
tax expense and equity
earnings of unconsolidated
entities (1,097) 10,534 (4,373) 7,960
Income tax expense 344 220 681 453
Income (loss) before equity
earnings of unconsolidated
entities (1,441) 10,314 (5,054) 7,507
Equity earnings of
unconsolidated entities 1,207 186 1,674 590
Net income (loss) $(234) $10,500 $(3,380) $8,097
Earnings (loss) per common
share - basic:
Loss from continuing
operations $(0.01) $(0.11) $(0.15) $(0.19)
Income (loss) from
discontinued operations,
net 0.00 0.59 0.00 0.56
Basic earnings (loss) per
share $(0.01) $0.48 $(0.15) $0.37
Weighted average number of
shares outstanding
- basic 22,413,995 21,988,031 22,431,834 21,988,031
Earnings (loss) per common
share - diluted:
Loss from continuing
operations $(0.01) $(0.11) $(0.15) $(0.19)
Income (loss) from
discontinued operations,
net 0.00 0.59 0.00 0.56
Diluted earnings (loss) per
share $(0.01) $0.48 $(0.15) $0.37
Weighted average number of
shares outstanding
- diluted 22,413,995 21,988,031 22,431,834 21,988,031
Reading International, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(U.S. dollars in thousands)
June 30, December 31,
2006 2005
ASSETS
Current Assets:
Cash and cash equivalents $6,115 $8,548
Receivables 4,682 5,272
Inventory 422 468
Investment in marketable securities 628 401
Prepaid and other current assets 2,119 996
Total current assets 13,966 15,685
Property held for development 6,965 6,889
Property under development 24,347 23,069
Property & equipment, net 164,709 167,389
Investment in unconsolidated entities 16,406 14,025
Capitalized leasing costs 12 15
Goodwill 17,216 14,653
Intangible assets, net 8,333 8,788
Other assets 2,085 2,544
Total assets $254,039 $253,057
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $12,031 $13,538
Film rent payable 4,307 4,580
Notes payable - current portion 2,302 1,776
Income taxes payable 7,941 7,504
Deferred current revenue 1,679 2,319
Other current liabilities 193 250
Total current liabilities 28,453 29,967
Notes payable - long-term portion 96,955 93,544
Notes payable to related parties 14,000 14,000
Deferred non-current revenue 542 554
Other liabilities 17,847 12,509
Total liabilities 157,797 150,574
Commitments and contingencies -- --
Minority interest in consolidated affiliates 1,860 3,079
Stockholders' equity:
Class A Nonvoting Common Stock, par value $0.01,
100,000,000 shares authorized, 35,495,729 issued
and 20,918,505 outstanding at June 30, 2006 and
35,468,733 issued and 20,990,458 outstanding at
December 31, 2005 215 215
Class B Voting Common Stock, par value $0.01,
20,000,000 shares authorized and 1,495,490 issued
and outstanding at June 30, 2006 and
December 31, 2005 15 15
Nonvoting Preferred Stock, par value $0.01,
12,000 shares authorized and no outstanding shares -- --
Additional paid-in capital 128,160 128,028
Accumulated deficit (57,294) (53,914)
Treasury shares (4,307) (3,515)
Accumulated other comprehensive income 27,593 28,575
Total stockholders' equity 94,382 99,404
Total liabilities and stockholders' equity $254,039 $253,057
