LOS ANGELES, March 31 /PRNewswire-FirstCall/ -- Reading International, Inc. (AMEX:RDI) announced today results for its year and fourth quarter ended December 31, 2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030403/LATH058LOGO) Twelve Month 2007 Highlights
Consistent with our business philosophy to be opportunistic in our cinema acquisitions and to focus on modern stadium design mainstream cinemas, we have:
-- On October 8, 2007, entered into agreements to acquire leasehold
interests in 15 cinemas located in the United States, containing
181 screens and with annual revenue of approximately $78.0 million.
The aggregate purchase price of the cinemas and related assets was
$69.3 million. This acquisition closed on February 22, 2008;
-- On June 28, 2007, we purchased the building associated with our Cinemas
1, 2 & 3 for $100,000 from Sutton Hill Capital ("SHC"). Our option to
purchase that building has been previously disclosed, and was granted
to us by SHC at the time that we acquired the underlying ground lease
from SHC on June 1, 2005. The Cinemas 1, 2 & 3 is located on 3rd
Avenue between 59th and 60th Streets in New York, New York.
-- On February 8, 2007, for a purchase price of $493,000 we purchased the
tenant's interest in the ground lease underlying the building lease for
one of our domestic cinemas.
and with respect to the expansion of the real estate side of our business:
-- On July 27, 2007, we purchased a 64.0 acre parcel of undeveloped
agricultural real estate for approximately $9.3 million
(NZ$12.1 million). We intend to rezone the property from its current
agricultural use to commercial use, and thereafter to redevelop the
property in accordance with its new zoning. No assurances can be given
that such rezoning will be achieved, or if achieved, that it will occur
in the near term.
-- On June 29, 2007, we acquired a commercial property for $5.9 million
(NZ$7.6 million), rented to an unrelated third party, to be held for
current income and long-term appreciation.
-- On February 14, 2007, we acquired a 1.0 acre parcel of commercial real
estate for approximately $4.9 million (NZ$6.9 million). The property
is currently improved with a motel, but we anticipate that this use
will be discontinued as we renovate the property and sell the units as
condominiums. A portion of this property includes unimproved land that
we do not intend to develop.
-- Through December 31, 2007 we completed the sale of all 67 residential
units comprising our Place 57 residential condominium tower in
Manhattan, in which we own a 25% interest. This leaves only the
remaining retail unit unsold.
which resulted in:
-- revenue growth of 12.4% to $119.2 million, compared to $106.1 million
in 2006;
-- operating income of $5.1 million, compared to $2.4 million in 2006;
-- recognition of an additional $1.3 million in earnings in 2007 (making
$9.6 million in total) from our 25% interest in the Place 57
development. Our total investment in this project was $3.0 million;
-- net loss for the 2007 year of $2.1 million compared to net income of
$3.9 million in 2006. The net change in income being predominantly
driven by the reduction in earnings from Place 57 in 2007 compared to
2006 as the majority of the project sales were in 2006; and
-- EBITDA (1) of $20.0 million in 2007 compared to $25.9 million in 2006,
the reduction again being due to Place 57.
Fourth Quarter 2007 Discussion
Revenue from continuing operations decreased from $29.3 million in Q4 2006 to $28.5 million in 2007, a 2.6% decrease or $767,000. The cinema revenue decrease of $2.0 million was predominantly in the U.S. ($1.0 million lower than last year) and New Zealand ($1.2 million lower than last year). This reflected a poor product mix in the 2007 quarter, which included "The Bee Movie," "Rush Hour 3," "National Treasure: Book of Secrets" and "The Golden Compass." This compared to a stronger 2006 quarter product offering of "Borat," "The Departed," "Casino Royale" and "The Queen." The increase in real estate revenue was across the geographies and resulted in a $1.2 million increase, to $4.7 million in 2007.
Operating expense at 73.2% was higher than the 2006 quarter 68.7%, driven by higher than anticipated cinema costs in the 2007 quarter.
Depreciation and amortization decreased by $261,000 or 8.0%, from $3.3 million in the 2006 quarter to $3.0 million in the 2007 quarter, primarily in Australia as a result of cinema assets reaching the end of their depreciable lives.
General and administrative expense increased by $1.2 million or 33.1%, from $3.5 million to $4.7 million in the 2007 quarter. This increase was primarily due to increased salary expense related to our Chief Operating Officer, appointed in February of this year; legal and professional fees associated principally with our real estate acquisition and investment activities; and to our Supplemental Executive Retirement Plan, adopted in March 2007.
Net interest expense increased by $647,000 or 41.8% for the 2007 quarter compared to last year, primarily related to higher outstanding loan balances during the 2007 quarter compared to the 2006 quarter.
Other income decreased by $2.4 million for the 2007 quarter compared to last year. This decrease in other income was primarily related to our Place 57 project. There were no units closed in the 2007 quarter compared to 12 in the 2006 quarter as the project has now sold all of its apartment units. The lone retail unit has not yet been sold.
As a result of the above, we reported a net loss of $4.0 million for the 2007 quarter compared to a net income of $1.1 million in the 2006 quarter.
Our EBITDA (1) at $1.8 million for the 2007 quarter was $5.2 million lower than the 2006 quarter of $7.0 million, predominantly driven by lower operating margins, higher general and administrative expense and the reduction in Place 57 profit.
Twelve Month 2007 Summary
-- Revenue from continuing operations increased by 12.4% or $13.1 million,
to $119.2 million in the twelve months of 2007 compared to 2006. This
increase was driven by strong circuit showings of "Shrek The Third,"
"Harry Potter & the Order of the Phoenix," "The Simpson Movie" and "The
Pirates of the Caribbean: At World's End." While the U.S. cinema
revenue was flat to 2006, the Australian cinema revenue increased by
$7.6 million and the New Zealand revenue by $1.9 million. The real
estate revenue increase of $3.7 million came predominantly from
Australia where a full year's rent from the Newmarket ETRC retail
component drove the increase.
-- Operating expense for the full year was managed in line with revenue
growth and compared favorably at 72.2% in 2007 to the 73.0% in 2006.
-- Depreciation and amortization decreased by $1.3 million to
$11.9 million in 2007 from $13.2 million in 2006, driven primarily by
several Australian cinema assets reaching the end of their depreciable
lives.
-- General and administrative expense increased by $3.1 million to
$16.1 million in 2007 from $13.0 million in the 2006 period. The 2007
increase was primarily related to increased corporate compensation
expense related to the granting of 70,000 fully vested options to our
directors coupled with an increase in director fees; to compensation
for our Chief Operating Officer, appointed in February 2007; legal and
professional fees associated principally with our real estate
acquisition and investment activities; and to our Supplemental
Executive Retirement Plan, adopted in March 2007.
-- Interest expense increased by $1.6 million to $8.2 million in 2007 from
$6.6 in 2006, due to increased borrowings and higher interest rates.
-- Other income decreased by $5.5 million to $2.0 million in 2007 from
$7.5 million in 2006, primarily due to $8.3 million of Place 57
earnings in 2006 reduced to $1.3 million in 2007 as the project was
completed.
-- During 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.
-- During 2006 we recorded a gain of $3.4 million on the sale of our 50%
share of the cinemas at Whangaparaoa, Takapuna and Mission Bay, New
Zealand formerly part of the Berkeley Cinemas Group joint venture.
As a result, we reported a net loss of $2.1 million for the 2007 twelve months compared to a net income of $3.9 million in the 2006 twelve months.
Our reported EBITDA (1) at $20.0 million for the twelve months of 2007 was $5.9 million lower than the $25.9 million in the 2006 twelve months. However, adjusting 2007 for:
-- the release of the deferred gain on sale of $1.9 million;
-- Place 57 earnings of $1.3 million;
-- the SHC Cinemas 123 option mark-to-market of $950,000; and
-- $391,000 of expensed director stock option costs,
our adjusted EBITDA (1) for 2007 was $18.1 million. Adjusting 2006 for:
-- the gain on the joint venture sale of $3.4 million;
-- Place 57 earnings of $8.3 million;
-- the SHC Cinemas 123 option mark-to-market of $1.6 million;
-- and the potential credit card claims of $1.2 million,
our adjusted EBITDA (1) for 2006 was $17.0 million. The result is that our adjusted EBITDA (1) from continuing operations in the 2007 twelve months was still $1.1 million higher than the 2006 twelve months.
Balance Sheet
Our total assets at December 31, 2007 were $346.1 million compared to $289.2 million at December 31, 2006. The currency exchange rates for Australia and New Zealand as of December 31, 2007 were $0.8776 and $0.7678, respectively, and as of December 31, 2006, these rates were $0.7884 and $0.7046, respectively. As a result, currency had a positive effect on the balance sheet at December 31, 2007 compared to December 31, 2006.
Our cash position at December 31, 2007 was $20.8 million compared to $11.0 million at December 31, 2006.
In October 2007, we negotiated an increase of our total borrowing limit of the Australia Corporate Credit Facility from $87.8 million (AUS$100.0 million) to $96.5 million (AUS$110.0 million). At December 31, 2007, we had drawn a total of $85.8 million (AUS$97.7 million) against this facility and issued lease guarantees as the lessee of $3.2 million (AUS$4.0 million) leaving an available, undrawn balance of $7.2 million (AUS$8.3 million).
On June 29, 2007, we finalized the renegotiation of our New Zealand Corporate Credit Facility as a $46.4 million (NZ$60.0 million) line of credit. During February 2007, we paid off our term debt of this facility of $34.4 million (NZ$50.0 million) as a use of the proceeds from our new subordinated notes described below. At December 31, 2007 we had drawn only $2.5 million (NZ$3.2 million) against this line of credit, leaving an available undrawn balance of $43.9 million (NZ$56.8 million).
On June 28, 2007, Sutton Hill Properties, LLC ("SHP"), one of our consolidated subsidiaries, entered into a $15.0 million loan that is secured by SHP's interest in the Cinemas 1, 2, & 3 land and building. SHP is owned 75% by Reading and 25% by Sutton Hill Capital, LLC ("SHC"), a joint venture indirectly wholly owned by Mr. James J. Cotter, our Chairman and Chief Executive Officer, and Mr. Michael Forman.
On February 5, 2007, we issued $51.5 million in 20-year fully subordinated notes to a trust which we control, and which in turn issued $51.5 million in securities. The placement generated $49.9 million in net proceeds, which were used principally to make our investment in the common trust securities of $1.5 million, to retire all of our bank indebtedness in New Zealand of $34.4 million (NZ$50.0 million) and to retire a portion of our bank indebtedness in Australia of $5.8 million (AUS$7.4 million).
Accordingly, we believe that we have sufficient borrowing capacity under our New Zealand and Australian corporate facilities, to meet our anticipated short-term working capital requirements.
Our working capital at December 31, 2007 was $6.3 million compared to a negative working capital of $7.0 million at December 31, 2006. 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 high-level, favorable response to 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 $121.4 million at December 31, 2007 compared to $107.7 at December 31, 2006.
Subsequent Events
Consolidated Cinemas. On October 8, 2007, we entered into agreements to acquire leasehold interests in 15 cinemas then owned by Pacific Theatres Exhibition Corp. and its' affiliates. The cinemas, which are located in the United States, contain 181 screens with annual revenue of approximately $78.0 million. The aggregate purchase price of the cinemas and related assets is $69.3 million. This acquisition closed on February 22, 2008.
Taringa Properties. Since the close of 2007, we have acquired or entered into agreements to acquire approximately 50,000 square feet of property in Taringa, Australia, comprising four contiguous properties, which we intend to develop. The aggregate purchase price of these properties is $11.3 million (AUS$12.9 million), of which $1.7 million (AUS$2.0 million) relates to the three properties that have been acquired and $9.6 million (AUS$10.9 million) relates to the one property that is still under contract which is subject to certain rezoning conditions.
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/),
-- City Cinemas brand (http://citycinemas.moviefone.com/), and
-- Consolidated brand (http://www.consolidatedtheatres.com/);
--in Australia, under the Reading brand
(http://www.readingcinemas.com.au/);
--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 views as to the risks and uncertainties involved, and may have different views as to future events or our operating performance.
Among the factors that could cause actual results to differ materially from those expressed in or underlying our forward-looking statements are the following:
-- With respect to our cinema operations:
-- The number and attractiveness to moviegoers 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-U.S. GAAP financial measures." In such case, a reconciliation of this information to our U.S. 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
[TABLES FOLLOW]
Reading International, Inc. and Subsidiaries
Supplemental Data
Reconciliation of EBITDA to Net Income (Loss) (Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
Statements of Operations 2007 2006 2007 2006
Revenue $28,562 $29,329 $119,235 $106,125
Operating expense
Cinema/real estate 20,903 20,148 86,080 77,507
Depreciation and amortization 2,988 3,249 11,921 13,212
General and administrative 4,660 3,502 16,085 12,991
Operating income 11 2,430 5,149 2,415
Interest (expense), net (2,195) (1,548) (8,163) (6,608)
Other income (expense) (836) 1,557 2,040 7,549
Gain on disposal of business
operations -- -- 1,912 --
Gain on sale of unconsolidated
entity -- -- -- 3,442
Income tax (expense) (595) (1,048) (2,038) (2,270)
Minority interest (expense) (346) (247) (1,003) (672)
Net income (loss) $(3,961) $1,144 $(2,103) $3,856
Basic earnings (loss) per share $(0.17) $0.05 $(0.09) $0.17
Diluted earnings (loss) per
share $(0.17) $0.05 $(0.09) $0.17
EBITDA (1) $1,817 $6,989 $20,019 $25,946
EBITDA (1) change -5,172 -5,927
(1) 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 income (loss) is presented below:
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Net income (loss) $(3,961) $1,144 $(2,103) $3,856
Add: Interest expense, net 2,195 1,548 8,163 6,608
Add: Income tax provision 595 1,048 2,038 2,270
Add: Depreciation and amortization 2,988 3,249 11,921 13,212
Adjustment for discontinued
operations -- -- -- --
EBITDA $1,817 $6,989 $20,019 $25,946
Reading International, Inc. and Subsidiaries
Consolidated Statements of Operations for the Three Years Ended
December 31, 2007
(U.S. dollars in thousands, except per share amounts)
Year Ended December 31,
2007 2006 2005
Operating revenue
Cinema $103,467 $94,048 $86,760
Real estate 15,768 12,077 11,345
Total operating revenue 119,235 106,125 98,105
Operating expense
Cinema 77,756 70,142 67,487
Real estate 8,324 7,365 7,359
Depreciation and amortization 11,921 13,212 12,384
General and administrative 16,085 12,991 17,247
Total operating expense 114,086 103,710 104,477
Operating income (loss) 5,149 2,415 (6,372)
Non-operating income (expense)
Interest income 798 308 209
Interest expense (8,961) (6,916) (4,682)
Net loss on sale of assets (185) (45) (32)
Other income (expense) (320) (1,953) 51
Loss before minority interest,
discontinued operations, income tax
expense and equity earnings of
unconsolidated joint ventures and
entities (3,519) (6,191) (10,826)
Minority interest (1,003) (672) (579)
Loss from continuing operations (4,522) (6,863) (11,405)
Discontinued operations:
Gain on disposal of business
operations 1,912 -- 13,610
Loss from discontinued operations,
net of tax -- -- (1,379)
Income (loss) before income tax expense
and equity earnings of unconsolidated
joint ventures and entities (2,610) (6,863) 826
Income tax expense (2,038) (2,270) (1,209)
Loss before equity earnings of
unconsolidated joint ventures and
entities (4,648) (9,133) (383)
Equity earnings of unconsolidated joint
ventures and entities 2,545 9,547 1,372
Gain on sale of unconsolidated joint
venture -- 3,442 --
Net income (loss) $(2,103) $3,856 $989
Earnings (loss) per common share - basic:
Earnings (loss) from continuing
operations $(0.18) $0.17 $(0.51)
Earnings from discontinued operations,
net 0.09 -- 0.55
Basic earnings (loss) per share $(0.09) $0.17 $0.04
Weighted average number of shares
outstanding - basic 22,478,145 22,425,941 22,249,967
Earnings (loss) per common share
- diluted:
Earnings (loss) from continuing
operations $(0.18) $0.17 $(0.51)
Earnings from discontinued operations,
net 0.09 -- 0.55
Diluted earnings (loss) per share $(0.09) $0.17 $0.04
Weighted average number of shares
outstanding - diluted 22,478,145 22,674,818 22,249,967
Reading International, Inc. and Subsidiaries
Consolidated Balance Sheets as of December 31, 2007 and 2006
(U.S. dollars in thousands)
December 31,
2007 2006
ASSETS
Current Assets:
Cash and cash equivalents $20,782 $11,008
Receivables 5,671 6,612
Inventory 654 606
Investment in marketable securities 4,533 8,436
Restricted cash 59 1,040
Prepaid and other current assets 3,800 2,589
Total current assets 35,499 30,291
Land held for sale 1,984 --
Property held for development 11,068 1,598
Property under development 66,787 38,876
Property & equipment, net 178,174 170,667
Investment in unconsolidated joint ventures
and entities 15,480 19,067
Investment in Reading International Trust I 1,547 --
Goodwill 19,100 17,919
Intangible assets, net 8,448 7,954
Other assets 7,984 2,859
Total assets $346,071 $289,231
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $12,331 $13,539
Film rent payable 3,275 4,642
Notes payable - current portion 395 2,237
Note payable to related party - current portion 5,000 5,000
Taxes payable 4,770 9,128
Deferred current revenue 3,214 2,565
Other current liabilities 169 177
Total current liabilities 29,154 37,288
Notes payable - long-term portion 111,253 113,975
Notes payable to related party - long-term
portion 9,000 9,000
Subordinated debt 51,547 --
Noncurrent tax liabilities 5,418 --
Deferred non-current revenue 566 528
Other liabilities 14,936 18,178
Total liabilities 221,874 178,969
Commitments and contingencies
Minority interest in consolidated affiliates 2,835 2,603
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 December 31, 2007 and 35,558,089 issued
and 20,980,865 outstanding at December 31,
2006 216 216
Class B Voting Common Stock, par value $0.01,
20,000,000 shares authorized and 1,495,490
issued and outstanding at December 31, 2007
and at December 31, 2006 15 15
Nonvoting Preferred Stock, par value $0.01,
12,000 shares authorized and no outstanding
shares at December 31, 2007 and 2006 -- --
Additional paid-in capital 131,930 128,399
Accumulated deficit (52,670) (50,058)
Treasury shares (4,306) (4,306)
Accumulated other comprehensive income 46,177 33,393
Total stockholders' equity 121,362 107,659
Total liabilities and stockholders'
equity $346,071 $289,231
Source: Reading International, Inc.
