Market Overview

Reading International Announces Third Quarter 2017 Results

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Earnings Call Webcast to discuss 2017 Third Quarter Financial Results
scheduled to post on Corporate Website on Thursday, November
9, 2017

Reading International, Inc. (NASDAQ:RDI) today announced results for
the third quarter and nine months ended September 30, 2017. Basic
Earnings per Share ("EPS") were $0.07 and $1.02 for the quarter and nine
months ended September 30, 2017, respectively, compared with $0.17 and
$0.39 for the prior year's periods. Our nine-month results were
positively impacted by the (i) recognition of a gain on sale of our
Burwood property in Australia and (ii) receipt of insurance proceeds
relating to our Courtenay Central entertainment themed center ("ETC") in
Wellington, New Zealand.

Consolidated revenues for the third quarter of 2017 decreased by 7% (or
$5.2 million) from a year ago mainly due to lower admissions and food &
beverage ("F&B") revenues, partially offset by higher real estate
revenues. The quarter's weaker film slate compared to the prior year
period's strong industry box office negatively impacted global cinema
revenues. Our real estate segment posted increased revenues due to (i)
additional settlement proceeds relating to STOMP currently playing at
our Orpheum Theatre in New York, and (ii) new tenancies in our
Australian real estate operations.

Consolidated revenues for the first nine months of 2017 increased by 2%
($4.9 million) due to the following:

  • higher admissions and increased food & beverage ("F&B") revenues in
    our Australian cinemas, offset by lower performance of our U.S. and
    New Zealand cinemas;
  • the receipt of business interruption insurance proceeds of our
    Courtenay Central ETC in Wellington, New Zealand relating to the
    closure of that facility from November 2016 to March 2017, offset by
    lost revenues during Q1 2017; and,
  • settlement proceeds relating to STOMP.

The following table summarizes the third quarter and first nine-month
results for 2017 and 2016:

 
  Quarter Ended   Nine Months Ended
    % Change     % Change
September 30, September 30, Favorable/ September 30, September 30, Favorable/
(Dollars in millions, except EPS) 2017 2016 (Unfavorable) 2017 2016 (Unfavorable)
Revenue $ 66.1 $ 71.3 (7 )% $ 208.0 $ 203.0 2 %
- US 33.3 34.9 (5 )% 105.1 103.7 1 %
- Australia 25.4 27.8 (9 )% 80.6 75.4 7 %
- New Zealand 7.4 8.6 (14 )% 22.3 23.9 (7 )%
Segment operating income (1) $ 8.3 $ 11.5 (28 )% $ 31.2 $ 32.4 (4 )%
Net income(2) $ 1.6 $ 3.9 (60 )% $ 23.6 $ 9.1 > 100%
EBITDA (1) $ 8.1 $ 10.9 (26 )% $ 49.3 $ 30.2 63 %
Adjusted EBITDA (1) $ 8.2 $ 10.9 (25 )% $ 41.2 $ 30.2 36 %
Basic EPS (2) $ 0.07 $ 0.17 (60 )% $ 1.02 $ 0.39 > 100%
 

(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.

 

Our EPS for the quarter and nine months ended September 30, 2017
decreased by $0.10 and increased by $0.63, respectively, as detailed in
the table below:

 
  Quarter-Ended   Nine-Month Ended
September 30, 2017 September 30, 2017
After-tax   After-tax  
(Dollars in thousands, except EPS) Effect EPS Effect EPS
Decrease in segment operating income $ (2,198 ) $ (0.10 ) $ (799 ) $ (0.03 )
Impact of significant events for the period
Gain on sale of assets -- -- 6,300 0.27
Gain on insurance recoveries -- -- 8,684 0.38
Foreign currency gain on short-term advances -- -- 566 0.02
Other changes in non-segment items   (101 )   (0.00 )   (186 )   (0.01 )
Increase (Decrease) in Net Income $ (2,299 ) $ (0.10 ) $ 14,565   $ 0.63  
 

"During the third quarter, our global cinema business was challenged by
the weaker film slate compared to the strong box office in the prior
year period. We exited the quarter with positive momentum in our cinema
business and are confident the segment will recover with the highly
anticipated film slate for the winter holiday season," said Ellen
Cotter, Chair, President and Chief Executive Officer. "Our real estate
segment generated solid results and we made progress on a number of
development projects during the quarter. Looking forward, we believe
that Reading is well-positioned to drive long-term stockholder value as
we continue developing our real estate portfolio and executing our
global cinema strategy to elevate the guest experience."

COMPANY HIGHLIGHTS

  • Operating Results:
    • Revenues for the third quarter of 2017 were $66.1 million compared
      with $71.3 million in the third quarter of 2016. Both the
      commercial and specialty box office were down considerably against
      the prior year. While the film slate in the first two months of
      the third quarter was disappointing, September 2017, which is
      typically the weakest month of the year, showed a return to
      strength with the film "It" being a standout. Our US and Australia
      box office revenues performed well relative to the industry. We
      expect the global cinema business in the fourth quarter of 2017 to
      recover with such heralded films, such as Thor: Ragnarok, Justice
      League and Star Wars: The Last Jedi.
  • Cinema activities:
    • In June 2017, we entered into an agreement to lease a 5-screen
      Reading Cinema located in the City of Traralgon in Victoria,
      Australia. The Traralgon Central Business District site is being
      redeveloped to include additional dining, bar, hotel and cinema
      facilities. That cinema is anticipated to open in the fourth
      quarter of 2019.
  • Real estate activities:
    • Union Square Redevelopment (New York,
      U.S.)
      – construction is currently proceeding on time
      and on budget. We anticipate the re-developed property will be
      ready for retail fit-out during the third quarter of 2018. Retail
      and office leasing interest to date has been strong and we are
      currently in discussions with quality tenants. For the nine months
      ended September 30, 2017, we have invested $13.4 million in new
      capital expenditures, bringing our total investment in the project
      to $28.1 million (including direct costs incurred in obtaining the
      Union Square construction financing).
    • Cinema 1,2,3 Redevelopment (New York,
      U.S.)
      in June 2017, we entered into an
      exclusive dealing and pre-development agreement with our adjoining
      neighbors, 260-264 LLC, to jointly develop the properties,
      currently home to Cinemas 1,2,3 and Anassa Taverna. Under the
      terms of the agreement, Reading and 260-264 LLC will work together
      on a comprehensive mixed-use plan to co-develop the properties
      located on 3rd Avenue, between 59th Street and 60th Streets, in
      New York City. The parties have completed an initial feasibility
      study, analyzing various retail, entertainment and residential
      uses for the site and are working on the terms of a final
      agreement for the development of the combined property.
    • Newmarket Expansion (Brisbane, Australia)
      – in the third quarter of 2016, we commenced the construction on
      our expansion project at Newmarket Village, with a projected
      opening in December 2017. This expansion project includes the
      addition of an eight-screen Reading Cinemas with a Titan LUXE
      screen, approximately 10,170 square feet of additional F&B retail
      space, and a further 124 parking spaces. We have entered into
      heads of agreement to lease all of this new space. We have
      invested $14.5 million in capital expenditures during the first
      nine months of 2017, bringing our total investment in the project
      to $17.0 million.
    • Courtenay Central
      Redesign/Expansion/Temporary closure and related insurance
      settlement
      (Wellington, New Zealand)
      – we
      received a final insurance settlement of $20.0 million from our
      Insurer in May 2017, effectively taking us to the $25.0 million
      earthquake coverage sub-limit. While no assurances can be given,
      we are currently investigating the possibility of further recovery
      under other insurance policies which may be available to us.
      During the second quarter ended June 30, 2017, we recognized a
      total gain of $10.7 million (NZ$14.8 million), $1.5 million
      (NZ$2.1 million) of which represented recovery on our lost
      business profits during the period of closure (November 2016 to
      March 2017) under our business interruption policy. While the
      earthquake has slowed the redevelopment activities in progress at
      that location, the demolition of the parking structure has opened
      additional expansion opportunities for our Courtenay Central ETC.
    • Settlement of Burwood Property
      apportioned sale (Melbourne Suburban, Victoria, Australia)

      – Frasers, the buyer of our Burwood Property, completed the sale
      of 6.0 acres of the total 50.6 acre undeveloped parcel to a third
      party in June 2017. As a result, we collected an amount equal to
      $16.5 million (AU$21.8 million) representing 90% of the net sales
      price of that parcel sale and we recorded the full gain on our
      original sale transaction of $9.4 million (AU$12.5 million) during
      the second quarter of 2017. The remaining receivable of $28.8
      million (AU$36.7 million) is due on or before December 31, 2017.
  • Corporate Matters
    • The 2017 Annual Stockholders' Meeting of the Company is scheduled
      for tomorrow, November 7, 2017.
    • On March 2, 2017, our Board of Directors authorized Management to
      repurchase up to $25,000,000 of our Class A Common Stock.

SEGMENT RESULTS

The following table summarizes the third quarter and first nine months
segment operating results for 2017 and 2016:

 
  Quarter Ended   Nine Months Ended
    % Change     % Change
September 30, September 30, Favorable/ September 30, September 30, Favorable/
(Dollars in thousands) 2017 2016 (Unfavorable) 2017 2016 (Unfavorable)
Segment revenue

Cinema

United States $ 32,199 $ 34,201 (6 )% $ 101,858 $ 101,275 1 %
Australia 22,902 25,551 (10 )% 73,284 68,968 6 %
New Zealand   6,958     8,073   (14 )%   20,920     22,336   (6 )%
Total $ 62,059   $ 67,825   (9 )% $ 196,062   $ 192,579   2 %

Real estate

United States $ 1,179 $ 731 61 % $ 3,223 $ 2,423 33 %
Australia 3,794 3,480 9 % 11,228 10,111 11 %
New Zealand   1,063     1,179   (10 )%   3,016     3,427   (12 )%
Total $ 6,036 $ 5,390 12 % $ 17,467 $ 15,961 9 %
Inter-segment elimination   (2,008 )   (1,900 ) (6 )%   (5,575 )   (5,518 ) (1 )%
Total segment revenue $ 66,087   $ 71,315   (7 )% $ 207,954   $ 203,022   2 %
Segment operating income

Cinema

United States $ 693 $ 2,041 (66 )% $ 4,790 $ 7,063 (32 )%
Australia 4,896 5,931 (17 )% 16,812 14,838 13 %
New Zealand   1,114     1,754   (36 )%   3,979     4,635   (14 )%
Total $ 6,703   $ 9,726   (31 )% $ 25,581   $ 26,536   (4 )%

Real estate

United States $ 55 $ 122 (55 )% $ 350 $ 299 17 %
Australia 1,445 1,203 20 % 4,403 4,176 5 %
New Zealand   49     430   (89 )%   847     1,369   (38 )%
Total $ 1,549   $ 1,755   (12 )% $ 5,600   $ 5,844   (4 )%
Total segment operating income (1) $ 8,252   $ 11,481   (28 )% $ 31,181   $ 32,380   (4 )%
 

(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 31%, or $3.0 million, to
$6.7 million for the quarter ended September 30, 2017 compared to
September 30, 2016, primarily driven by lower admissions and food &
beverage ("F&B") revenues across our three geographic markets, in line
with global cinema industry performance. Refer below for the revenue
highlights by country:

  • The quarter revenue in the United States decreased by 6%, or $2.0
    million, due to a 12% decrease in attendance and a slight increase in
    average ticket prices ("ATP").
  • Australia's cinema revenue decreased by 10%, or $2.6 million,
    primarily due to a 14% decrease in attendance and slight decrease in
    ATP.
  • In New Zealand, our cinema revenue decreased by 14%, or $1.1 million,
    as a result of the 14% decrease in attendance and decrease in ATP.

The top three grossing films for the third quarter 2017 were
"Spider-Man: Homecoming," "It," and "Dunkirk" representing approximately
29% of Reading's worldwide admission revenues for the quarter. The top
three grossing films in the third quarter of 2016 for Reading's
worldwide cinema circuits were "Suicide Squad," "The Secret Life of
Pets," and "Finding Dory," which represented approximately 25% of
Reading's admission revenues for the third quarter of 2016.

Nine-Month Results:

Cinema segment operating income decreased by 4%, or $955,000, to $25.6
million for the nine months ended September 30, 2017 compared to
September 30, 2016, primarily driven by lower admissions and F&B
revenues for our US and New Zealand operations. The higher operating
performance of our Australia cinemas and the favorable foreign currency
movements of our foreign operations helped to offset these negative
trends. Refer below for the revenue highlights by country:

  • The revenue in the United States remained flat with a minimal increase
    of 1%, or $583,000, due to the offsetting impact of a 5% decrease in
    attendance and a 4% increase in ATP.
  • Australia's cinema revenue increased by 6%, or $4.3 million, primarily
    due to a 7% increase in attendance, offset by a decrease in ATP.
  • In New Zealand, cinema revenue decreased by 6%, or $1.4 million,
    mainly due to 10% reduction in attendance and a modest decrease in ATP
    and the impact of the temporary closure of Courtenay Central Cinemas
    during the 1st Quarter of 2017 (which re-opened in late
    March 2017). These were offset, in part, by the business interruption
    insurance proceeds recognized in the 2nd Quarter of 2017.

The top three grossing films for the first nine months of 2017 were
"Beauty and the Beast," "Wonder Woman," and "Guardians of the Galaxy
Vol. 2" representing approximately 14% of Reading's worldwide admission
revenues, compared to the top three grossing films a year ago: "Finding
Dory," "Deadpool," and "Suicide Squad," which represented approximately
13% of our admission revenues for the same period in 2016.

Real Estate

Third Quarter Results:

Real estate segment operating income decreased by 12%, or $206,000, to
$1.5 million for the quarter ended September 30, 2017 compared to
September 30, 2016, primarily attributable to (i) operating expenses on
our Corporate Headquarters in Los Angeles, and (ii) increase in general
& administrative ("G&A") expenses due to an expansion of our in-house
real estate team in Australia and New Zealand. These were offset by (i)
the STOMP settlement proceeds received ($468,000) as part of a legal
settlement and (ii) increases in property rental income relating to new
tenancies in our Australian operations. We would expect our Real Estate
segment operating income to benefit from incremental rental income once
we lease the remaining 50% unoccupied space of our LA Headquarters
Building to third parties.

Nine-Month Results:

Real estate segment operating income decreased slightly by 4%, or
$244,000, to $5.6 million for the nine months ended September 30, 2017
compared to September 30, 2016, primarily attributable to the offsetting
effects of the following:

  • increases in our operating and G&A expenses relating to our Corporate
    Headquarters in Los Angeles and expansion of our real estate
    activities in Australia and New Zealand, offset by:
  • gain on business interruption insurance recoveries claim for the
    Courtenay Central ETC recognized during the 2nd quarter of
    2017 ($688,000, but reduced by lost profits from having Courtenay
    Central ETC closed during the 1st Quarter of 2017); and,
  • the STOMP settlement as part of the legal settlement ($1.1 million)
    recorded within Live Theatre's other operating revenues.

CONSOLIDATED AND NON-SEGMENT RESULTS

The third quarter and first nine-month consolidated and non-segment
results for 2017 and 2016 are summarized as follows:

 
  Quarter Ended   Nine Months Ended
    % Change     % Change
September 30, September 30, Favorable/ September 30, September 30, Favorable/
(Dollars in thousands) 2017 2016 (Unfavorable) 2017 2016 (Unfavorable)
Segment operating income $ 8,252   $ 11,481   (28 )% $ 31,181   $ 32,380   (4 )%
Non-segment income and expenses:
General and administrative expense (4,506 ) (4,769 ) 6 % (13,931 ) (14,693 ) 5 %
Interest expense, net (1,663 ) (1,553 ) (7 )% (5,310 ) (5,190 ) (2 )%
Gain on sale of assets -- -- n/a 9,417 393 > 100%
Gain on insurance recoveries -- -- n/a 9,217 -- 100 %
Others   117     86   nm   1,270     398   > 100%
Total non-segment income and expenses $ (6,052 ) $ (6,236 ) 3 % $ 663   $ (19,092 ) > 100%
Income before income taxes 2,200 5,245 (58 )% 31,844 13,288 > 100%
Income tax expense   (742 )   (1,328 ) 44 %   (8,291 )   (4,222 ) (96 )%
Net income $ 1,458 $ 3,917 (63 )% $ 23,553 $ 9,066 > 100%
Less: net income (loss) attributable to noncontrolling interests   (98 )   62   nm   (66 )   12   nm
Net income attributable to RDI common stockholders $ 1,556   $ 3,855   (60 )% $ 23,619   $ 9,054   > 100%
 

Third Quarter and First Nine-Month Net
Results

Net income attributable to RDI common stockholders for the quarter ended
September 30, 2017 decreased by 60%, or $2.3 million, to $1.6 million
and EPS decreased by $0.10 to $0.07 from the prior-year quarter, in line
with the global cinema business performance, offset by increased
operating income from our real estate operations. Conversely, net income
attributable to RDI common stockholders for the first nine months of the
year increased by $14.6 million to $23.6 million and EPS increased by
$0.63 to $1.02 from the prior-year period due principally to the
following one-off real estate transactions during the second quarter:
(i) recognition of gain from the sale of our Burwood Property and (ii)
receipt of insurance proceeds with respect to losses sustained by us in
the Wellington earthquake.

Non-Segment General & Administrative Expenses

General and administrative expense for the quarter and nine months ended
September 30, 2017 compared to the same period of the prior year
decreased by 6% ($263,000) and 5% ($762,000), respectively. This
decrease mainly relates to (i) non-recurrence of professional expenses
paid in 2016 in connection with the 2015 year-end audit relating to
prior years' income tax matters, and (ii) reduction in variable
compensation costs (attributable to reversals of prior year incentive
compensation accruals not deemed necessary). These favorable changes
were offset by higher legal expenses with respect to the Derivative
Litigation, the Cotter Employment Arbitration and other Cotter
litigation matters during the quarter and nine months ended September
30, 2017 which totaled $82,000 and $1.1 million, respectively. In 2016,
expense related to the defense of the Derivative Litigation was
substantially reimbursed from the Company's Directors' and Officers'
("D&O") Insurance Program.

Gain on Sale of Assets

The $9.4 million capital gain recognized during the 2nd quarter of 2017
was pertaining to our full recognition of the transaction gain triggered
by the additional payment from Frasers, the buyer of our Burwood
property in Australia. During the 1st quarter of 2016, we also
recognized a gain of $393,000 (NZ$585,000) relating to our Taupo
property in New Zealand.

Gain on Insurance Recoveries

During the 2nd quarter of 2017, we recognized $9.2 million gain because
of the final insurance settlement relating to the earthquake damage on
our Courtenay Central parking structure (excluding business interruption
insurance recoveries).

Income Tax Expense

Income tax expense for the quarter and nine months ended September 30,
2017 decreased by $586,000 and increased by $4.1 million, respectively,
compared to the equivalent prior-year period. The differences are
primarily due to changes in pre-tax income, foreign tax rate
differential, changes in valuation allowance, and non-taxable income
from insurance proceeds.

OTHER FINANCIAL INFORMATION

Balance Sheet and Liquidity

Total assets increased by $12.3 million, to $418.1 million at September
30, 2017, compared to $405.8 million at December 31, 2016, primarily
driven by increases in our operating and investing properties relating
to capital enhancements in our existing cinemas and expenditures
relating to major real estate projects, primarily (i) redevelopment of
our Union Square property in New York, and (ii) expansion project in our
Newmarket property in Brisbane, Australia. These capital expenditures
were funded by available cash resources and credit facilities.

Cash and cash equivalents at September 30, 2017 were $8.9 million,
including $5.5 million in the U.S., $2.3 million in Australia, and $1.1
million in New Zealand. We manage our cash, investments and capital
structure so we are able to meet short-term and long-term obligations
for our business, while maintaining financial flexibility and liquidity.

As part of our operating cycle, we utilize cash collected from (i) our
cinema business when selling tickets and food and beverage items, and
(ii) rental income typically received in advance, to reduce our long
term borrowings and realize savings on interest charges. We then settle
our operating expenses generally with a lag within traditional trade
terms. This generates a temporary working capital deficit. We review the
maturities of our borrowings and negotiate for renewals and extensions,
as necessary for liquidity purposes. We believe the cash flow generated
from our operations coupled with the proceeds on property sales and our
ability to renew loans when due will provide sufficient liquidity in the
upcoming year.

The table below shows the changes in our working capital position and
other relevant information addressing our liquidity as of and for the
nine months ended September 30, 2017 and the preceding four years:

 
 

As of and for

 

the 9-Months

Ended Year Ended December 31
($ in thousands) 9/30/2017 2016   2015   2014   2013
Total Resources (cash and borrowings)
Cash and cash equivalents (unrestricted) $ 8,896 $ 19,017 $ 19,702 $ 50,248 $ 37,696
Unused borrowing facility 121,405 117,599 70,134 45,700 19,400
Restricted for capital projects(1) 62,505 62,024 10,263 -- --
Unrestricted capacity 58,900 55,575 59,871 45,700 19,400
Total resources at period end 130,301 136,616 89,836 95,948 57,096
Total unrestricted resources at period end 67,796 74,592 79,573 95,948 57,096
Debt-to-Equity Ratio
Total contractual facility $ 272,717 $ 266,134 $ 207,075 $ 201,318 $ 187,860
Total debt (gross of deferred financing costs) 151,312 148,535 130,941 164,036 168,460
Current 8,084 567 15,000 38,104 75,538
Non-current 143,228 147,968 115,941 125,932 92,922
Total book equity 174,795 146,615 138,951 133,716 123,531
Debt-to-equity ratio 0.87 1.01 0.94 1.23 1.36
Changes in Working Capital
Working capital (deficit) $ (6,377 ) $ 6,655 $ (35,581 ) $ (15,119 ) $ (75,067 )
Current ratio 0.89 1.10 0.51 0.84 0.43
Capital Expenditures (including acquisitions) $ 44,531 $ 49,166 $ 53,119 $ 14,914 $ 20,082
 

(1)

 

This relates to the construction facilities specifically
negotiated for: (i) Union Square redevelopment project, obtained
in December 2016, and (ii) New Zealand construction projects,
obtained in May 2015.

 

Below is a summary of the available credit facilities as of September
30, 2017:

 
  As of September 30, 2017
Contractual   Capacity   Unused   Restricted for   Unrestricted
(Dollars in thousands) Capacity Used Capacity Capital Projects Capacity
Bank of America Credit Facility (USA) $ 55,000 $ 40,500 $ 14,500 $ -- $ 14,500
Bank of America Line of Credit (USA) 5,000 - 5,000 -- 5,000
Union Square Construction Financing (USA) 57,500 8,000 49,500 49,500 -
NAB Corporate Term Loan (AU) (1) 52,136 38,024 14,112 -- 14,112
Westpac Corporate Credit Facility (NZ) (1)   38,293   -   38,293   13,005   25,288
Total $ 207,929 $ 86,524 $ 121,405 $ 62,505 $ 58,900
 

(1)

 

The borrowings are denominated in foreign currency. The
contractual capacity and capacity used were translated into U.S.
dollars based on the applicable exchange rates as of September 30,
2017.

 

The $62.5 million representing borrowings restricted for capital
projects is composed of the $49.5 million and $13.0 million (NZ$18.0
million) unused capacity for the Union Square development and
construction funding for New Zealand operations, respectively. The
Minetta & Orpheum Theatres Loan will become due within one year.
Currently, we are negotiating with our lender to renew this borrowing on
a long-term basis.

Our overall global operating strategy is to conduct business mostly on a
self-funding basis (except for funds used to pay an appropriate share of
our U.S. corporate overhead). However, we may decide to move funds
between jurisdictions where circumstances merit such action. For
example, we took advantage of lower interest rates in Australia to fund
a partial repayment of intercompany loans to in turn finance a portion
of the costs of constructing our Union Square redevelopment project
rather than more expensive mezzanine debt (which will yield overall
notional all-in interest savings of approximately 10.0%).

Non-GAAP Financial Measures

This earnings release presents aggregate segment operating income, and
EBITDA, which are important financial measures for the Company, but are
not financial measures defined by U.S. GAAP.

These measures should be reviewed in conjunction with the relevant U.S.
GAAP financial measures and are not presented as alternative measures of
EPS, cash flows or net income as determined in accordance with US GAAP.
Aggregate segment operating income and EBITDA as we have calculated them
may not be comparable to similarly titled measures reported by other
companies.

Aggregate segment operating income – we evaluate the
performance of our business segments based on segment operating income,
and management uses aggregate segment operating income as a measure of
the performance of operating businesses separate from non-operating
factors. We believe that information about aggregate segment operating
income assists investors by allowing them to evaluate changes in the
operating results of the Company's portfolio of business separate from
non-operational factors that affect net income, thus providing separate
insight into both operations and the other factors that affect reported
results. Refer to "Consolidated and Non-Segment Results" for a
reconciliation of segment operating income to net income.

EBITDA – we present EBITDA as a supplemental measure of
its performance, which is commonly used in our industry. We define
EBITDA as net income adjusted for interest expense (net of interest
income), income tax expense, depreciation and amortization expense, and
an adjustment of interest expense, depreciation, and amortization for
discontinued operations, if any. EBITDA is a non-GAAP financial measure
commonly used in our industry and should not be construed as an
alternative to net earnings (loss) as an indicator of operating
performance or as an alternative to cash flow provided by operating
activities as a measure of liquidity (as determined in accordance with
U.S. GAAP). We have included EBITDA in this Earnings Release as we
believe that it provides management and our investors with additional
information necessary to properly measure our performance and liquidity,
estimate our value and evaluate our ability to service debt.

Adjusted EBITDA – using the principles we
consistently apply to determine our EBITDA, we further adjusted the
EBITDA for certain items we believe are appropriate adjustable item,
described as follows:

  • Gain on insurance recoveries – this refers to the excess of
    insurance proceeds over our damaged property's book value and related
    demolition costs. We excluded the portion allocated to the recoupment
    of lost business income. We have considered this to be an appropriate
    adjustment for purposes of determining Adjusted EBITDA in accordance
    with the 2-year SEC requirement for determining an item as
    non-recurring, infrequent or unusual in nature.
  • Legal expenses relating to the Derivative litigation, the James J.
    Cotter, Jr. employment arbitration and other Cotter litigation matters
     –
    while we started to incur expenses in relation to these legal matters
    in 2015, we believe that the majority of these costs were thrust upon
    the Company as it became necessary to defend the Company's position in
    the derivative litigation and related matters and to resolve Mr.
    Cotter, Jr.'s claims relating to his termination. For this reason,
    these costs should also be treated as non-recurring in nature and
    accordingly, an adjustable item for purposes of determining our
    Adjusted EBITDA.

We have not made adjustments for any gains relating to property sales,
including our realized gain on the Burwood property, in line with our
overall business strategy that at any time, we may decide to dispose of
any property when we believe that an asset has reached the highest value
that we could reasonably achieve without investing substantial
additional sums for land use planning, construction and marketing.

Reconciliation of EBITDA to net income is presented below:

 
  Quarter Ended   Nine Months Ended
September 30   September 30, September 30   September 30
(Dollars in thousands) 2017 2016 2017   2016
Net Income $ 1,556 $ 3,855 $ 23,619 $ 9,054
Add: Interest expense, net 1,663 1,553 5,310 5,190
Add: Income tax expense 742 1,328 8,291 4,222
Add: Depreciation and amortization   4,137   4,131   12,124     11,766
EBITDA $ 8,098 $ 10,867 $ 49,344 $ 30,232
Adjustments for:
Gain on insurance recoveries -- -- (9,217 ) --
Legal expenses relating to the derivative ligation, the Cotter
employment arbitration and other Cotter litigation matters
  82   --   1,115     --
Adjusted EBITDA $ 8,180 $ 10,867 $ 41,242   $ 30,232
 

Conference Call and Webcast

We plan to post our pre-recorded conference call and audio webcast on
our corporate website on Thursday, November 9, 2017, that will feature
prepared remarks from Ellen Cotter, President & Chief Executive Officer;
Dev Ghose, Executive Vice President & Chief Financial Officer; and
Andrzej Matyczynski, Executive Vice President - Global Operations.

A pre-recorded question and answer session will follow our formal
remarks. Questions and topics for consideration should be submitted to InvestorRelations@readingrdi.com
by 5:00 p.m. EST on Tuesday, November 7, 2017. The audio webcast can be
accessed by visiting http://www.readingrdi.com/Presentations.

About Reading International, Inc.

Reading International Inc. (NASDAQ:RDI) is a leading entertainment and
real estate company, engaging in the development, ownership and
operation of multiplex cinemas and retail and commercial real estate in
the United States, Australia, and New Zealand.

The family of Reading brands includes cinema brands Reading Cinemas,
Angelika Film Centers, Consolidated Theatres, and City Cinemas; live
theaters operated by Liberty Theatres in the United States; and
signature property developments, including Newmarket Village, Auburn Red
Yard and Cannon Park in Australia, Courtenay Central in New Zealand and
44 Union Square in New York City.

Additional information about Reading can be obtained from the Company's
website: http://www.readingrdi.com.

Forward-Looking Statements

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 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;
    • the extent to which we encounter competition from other cinema
      exhibitors, from other sources of outside-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 and DVD
      rentals and sales, and online streaming;
    • the cost and impact of improvements to our cinemas, such as
      improve seating, enhanced food and beverage offerings and other
      improvements;
    • disruptions from theater improvements; and
    • the extent to and the efficiency with which we are able to
      integrate acquisitions of cinema circuits with our existing
      operations.
  • 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 risks and uncertainties associated with real estate
      development;
    • the availability and cost of labor and materials;
    • the ability to obtain all permits to construct improvements;
    • the ability to finance improvements;
    • the disruptions from construction;
    • the possibility of construction delays, work stoppage and material
      shortage;
    • competition for development sites and tenants;
    • environmental remediation issues;
    • the extent to which our cinemas can continue to serve as an anchor
      tenant that will, in turn, be influenced by the same factors as
      will influence generally the results of our cinema operations;
    • the ability to negotiate and execute joint venture opportunities
      and relationships; and
    • certain of our activities are in geologically active areas,
      creating a risk of damage and/or disruption of real estate and/or
      cinema businesses from earthquakes.
  • 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;
    • expenses, management and Board distraction and other effects of
      the litigation efforts mounted by James Cotter, Jr. against the
      Company, including his efforts to cause a sale of voting control
      of the Company;
    • 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, 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, 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.

 
Reading International, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations

(Unaudited; U.S. dollars in thousands, except per share data)

 
  Quarter Ended   Nine Months Ended
September 30,   September 30, September 30,   September 30,
    2017  

2016(1)

  2017  

2016(1)

Revenue
Cinema $ 62,059 $ 67,825 $ 196,062 $ 192,579
Real estate     4,028       3,490       11,892       10,443  
Total revenue     66,087       71,315       207,954       203,022  
Costs and expenses
Cinema (49,591 ) (52,103 ) (153,512 ) (148,864 )
Real estate (2,881 ) (2,296 ) (7,258 ) (6,628 )
Depreciation and amortization (4,137 ) (4,131 ) (12,124 ) (11,766 )
General and administrative     (5,840 )     (6,175 )     (18,131 )     (18,372 )
Total costs and expenses     (62,449 )     (64,705 )     (191,025 )     (185,630 )
Operating income 3,638 6,610 16,929 17,392
Interest expense, net (1,663 ) (1,553 ) (5,310 ) (5,190 )
Gain on sale of assets -- -- 9,417 393
Gain on insurance recoveries -- -- 9,217 --
Other income (expense)     89       (12 )     937       (115 )
Income before income tax expense and equity earnings of
unconsolidated joint ventures
2,064 5,045 31,190 12,480
Equity earnings of unconsolidated joint ventures     136       200       654       808  
Income before income taxes 2,200 5,245 31,844 13,288
Income tax expense     (742 )     (1,328 )     (8,291 )     (4,222 )
Net income $ 1,458 $ 3,917 $ 23,553 $ 9,066
Less: net income (loss) attributable to noncontrolling interests     (98 )     62       (66 )     12  
Net income attributable to Reading International, Inc. common
shareholders
  $ 1,556     $ 3,855     $ 23,619     $ 9,054  
Basic earnings per share attributable to Reading International,
Inc. shareholders
  $ 0.07     $ 0.17     $ 1.02     $ 0.39  
Diluted earnings per share attributable to Reading International,
Inc. shareholders
  $ 0.07     $ 0.16     $ 1.01     $ 0.38  
Weighted average number of shares outstanding–basic 22,968,017 23,334,892 23,101,619 23,334,892
Weighted average number of shares outstanding–diluted     23,212,632       23,532,796       23,346,234       23,532,796  
 
 
Reading International, Inc. and Subsidiaries
Consolidated Balance Sheets

(Unaudited; U.S. dollars in thousands, except share information)

 
  September 30,   December 31,
    2017  

2016(1)

ASSETS
Current Assets:
Cash and cash equivalents $ 8,896 $ 19,017
Receivables 36,191 8,772
Inventory 1,169 1,391
Prepaid and other current assets 4,329 5,787
Land held for sale     --       37,674  
Total current assets 50,585 72,641
Operating property, net 225,631 211,886
Investment and development property, net 73,751 43,687
Investment in unconsolidated joint ventures 5,339 5,071
Goodwill 20,438 19,828
Intangible assets, net 8,909 10,037
Deferred tax asset, net 28,907 28,667
Other assets     4,501       13,949  
Total assets   $ 418,061     $ 405,766  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 21,030 $ 26,479
Film rent payable 6,390 10,528
Debt – current portion 8,084 567
Taxes payable – current 2,163 3,523
Deferred current revenue 7,635 10,758
Other current liabilities     11,660       14,131  
Total current liabilities 56,962 65,986
Debt – long-term portion 111,939 115,707
Subordinated debt, net 27,501 27,340
Noncurrent tax liabilities 20,808 19,953
Other liabilities     26,056       30,165  
Total liabilities     243,266       259,151  

Commitments and contingencies

Stockholders' equity:

Class A non-voting common stock, par value $0.01, 100,000,000
shares authorized, 32,946,569 issued and 21,184,863 outstanding at
September 30, 2017, and 32,856,267 issued and 21,497,717
outstanding at December 31, 2016

231 230

Class B voting common stock, par value $0.01, 20,000,000 shares
authorized and 1,680,590 issued and outstanding at September 30,
2017 and December 31, 2016

17 17

Nonvoting preferred stock, par value $0.01, 12,000 shares
authorized and no issued or outstanding shares at September 30,
2017 and December 31, 2016

-- --
Additional paid-in capital 145,504 144,569
Retained earnings 25,298 1,680
Treasury shares (22,849 ) (16,374 )
Accumulated other comprehensive income     22,399       12,075  
Total Reading International, Inc. stockholders' equity 170,600 142,197
Noncontrolling interests     4,195       4,418  
Total stockholders' equity     174,795       146,615  
Total liabilities and stockholders' equity   $ 418,061     $ 405,766  
 

1

 

Certain prior period amounts have been reclassified to conform
to the current period presentation.

 

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