Market Overview

Record Second Quarter 2018 Results Announced by Reading International

Share:
  • Achieves All-Time Record Quarterly Revenue of $84.2 million
  • Second Quarter Operating Income of $8.6 million, Represents Second
    Highest Quarter on Record

Earnings Call Webcast to Discuss 2018 Second Quarter Financial
Results Scheduled to Post to Corporate Website on Monday, August 13, 2018

Reading International, Inc. (NASDAQ:RDI) today announced record revenue
results for the quarter ended June 30, 2018, while Operating Income was
the second highest recorded for any quarter in the company's history.
Our Company reported Basic Earnings per Share ("EPS") of $0.22 and
$0.35, for the quarter and six months ended June 30, 2018, respectively.

Ellen Cotter, Chair, President and Chief Executive Officer, said, "The
second quarter represented another record period for Reading as we
continued to build on our strong momentum from the first quarter. Our
results were driven by the continued execution of our three-year plan
and we achieved superior operational execution. Ongoing capital
improvements and refurbishments to elevate the guest experience in our
cinema business are having the desired impact. The strong film product
and successful launch of our first dine-in concept, "Spotlight,"
contributed to our results and increased interest in our enhanced U.S.
food and beverage offerings."

Consolidated revenue for the second quarter of 2018, increased by 16%,
or $11.8 million, compared to the second quarter of 2017, primarily
driven by: (i) the U.S. Cinema's significant increase in attendance and
total spend per patron, (ii) the opening of our new state-of-the-art
eight screen Reading Cinema on December 14, 2017 in Newmarket,
Australia, and (iii) increases in average ticket prices ("ATP") in our
U.S., Australian and New Zealand Cinemas.

The following table summarizes the second quarter and first
half-of-the-year results for 2018 and 2017:

 
    Quarter Ended             Six Months Ended
    % Change     % Change
(Dollars in millions, except EPS) June 30,

2018

June 30,

2017

Favorable/
(Unfavorable)
June 30,

2018

June 30,

2017

Favorable/
(Unfavorable)
Revenue $ 84.2 $ 72.4 16 % $ 160.0 $ 141.9   13 %
- US 47.0 34.8 35 % 83.9 71.7 17 %
- Australia 29.1 28.0 4 % 58.9 55.2 7 %
- New Zealand 8.1 9.6 (16 ) % 17.2 15.0 15 %
Segment operating income (1) $ 14.4 $ 12.5 15 % $ 26.3 $ 22.9 15 %
Net income(2) $ 5.0 $ 19.0 (74 ) % $ 8.0 $ 22.1 (64 ) %
EBITDA (1) $ 14.4 $ 30.7 (53 ) % $ 25.4 $ 41.2 (38 ) %
Adjusted EBITDA (1) $ 15.5 $ 21.9 (29 ) % $ 28.1 $ 33.1 (15 ) %
Basic EPS (2) $ 0.22 $ 0.82 (73 ) % $ 0.35 $ 0.95 (63 ) %
 

(1)Aggregate segment operating income,
earnings before interest expense (net of interest income), income
tax expense, depreciation and amortization expense ("EBITDA") and
adjusted EBITDA are non-GAAP financial measures. See the
discussion of non-GAAP financial measures that follows
.

(2)Reflect amounts attributable to
stockholders of Reading International, Inc., i.e. after deduction
of noncontrolling interests.

 

COMPANY HIGHLIGHTS

  • Operating Results: For
    the quarter ended June 30, 2018, we achieved revenue of $84.2 million,
    up $11.8 million from the prior year. Our operating results benefited
    from the strong performance of our US cinema operations.
  • Capex program: During
    the second quarter of 2018, we invested $18.0 million in capital
    improvements to our cinemas, continuing our investment in the
    upgrading of select cinemas and real estate properties.
  • Cinema activities: During
    the second quarter of 2018, we saw the benefit in performance as a
    result of the completed renovations at four U.S. theaters: Cal Oaks,
    Manville, Pearlridge, and Ward. We continue to upgrade our food and
    beverage ("F&B") offerings and, as of June 30, 2018, we have obtained
    liquor licenses for 26 of our existing cinemas in the U.S., Australia
    and New Zealand. Our cinema pipeline includes three new cinemas in
    Australia that have been approved by our Board of Directors and which
    we anticipate bringing on line in 2019/2020.

We achieved a record second quarter in our online ticket sales in all
three countries where we operate, led by "Avengers – Infinity War"
and "Deadpool 2" exceeding previous first quarter records by as
much as 144% in the U.S. With the continued improvements of our websites
and apps in the U.S. and improved online sales infrastructure to better
serve high sales volume, "Avengers – Infinity War" set daily and
weekly online record ticket sales in all countries.

Real estate activities:

  • Purchase of Land at Cannon Park, Australia
    – On June 13, 2018, we acquired a 163,000 square foot (15,150 square
    meter) parcel at our Cannon Park ETC, in connection with the
    restructuring of our relationship with the adjacent land owner. Prior
    to the restructuring, this parcel was commonly owned by us and the
    adjoining land owner. In the restructuring, the adjoining land owner
    conveyed to us its interest in the parcel for AU$1. We granted the
    adjoining land owner certain access rights.
  • Purchase of Property in Auburn, Australia
    On June 29, 2018, we purchased a property for $3.5 million (AU$
    4.5 million) in Auburn (Sydney area), Australia. The property which
    borders our Redyard ETC in Auburn on three sides to the east, west and
    south and consists of an approximately 16,830 square foot building
    located on an estimated 20,870 square foot lot, is subject to a lease
    to Telstra Corporation through September 2022. This will allow us time
    to plan for the efficient integration into our ETC. Including this
    acquisition, our Redyard ETC represents approximately 519,992 square
    feet (48,309 square meters) of land, with approximately 1,620 feet
    (498 meters) of uninterrupted frontage to Parramatta Road, a major
    Sydney arterial motorway.
  • Expansion Project for our Newmarket Shopping
    Center at an affluent suburb of Brisbane, Australia
    – In
    December 2017 we opened our eight-screen Reading Cinema with TITAN
    LUXE, including 10,150 square feet of additional retail space and 124
    additional parking spaces. As of June 30, 2018, approximately 93% of
    this new retail space has been leased.
  • Belmont (Perth, Australia) – In
    the first half of 2018, we continued with the re-positioning of our
    ETC in Belmont (a suburb of Perth), which features new F&B offerings
    and a Reading Cinema with TITAN LUXE. During the latter part of the
    second quarter of 2018, the Asian inspired Tao Café (with
    approximately 3,190 square feet) opened joining our existing
    restaurants, Dome Café and Tavolo.
  • Manukau Land Rezoning (Auckland, New Zealand)
    – We own two parcels in Manukau comprising 64.0 acres zoned for light
    industrial use and 6.4 acres zoned for heavy industrial use. Now that
    our zoning enhancement goal is achieved, we are reviewing our options
    with respect to the value realization opportunities and commercial
    exploitation of this asset. We see this property as a future value
    realization opportunity. This tract is adjacent to the Auckland
    Airport which has recently been expanding toward our property. We are
    currently working with adjoining landowners to develop an
    infrastructure plan for the approximately 355 acres of rezoned land of
    which our property is a significant part.
  • Minetta Lane (New York, USA) – In
    February 2018, we entered into a one-year license agreement with
    Audible, Inc. a subsidiary of Amazon, at the Minetta Lane Theatre. We
    understand that Audible intends to produce one to two character plays,
    from which it will record audio productions available through Audible.
  • Redevelopment of 44 Union Square Property
    (New York, USA)
    – At the beginning of January 2016, we
    ceased our live theatre business at our Union Square property in New
    York, terminated all tenant leases and prepared the property for
    redevelopment. Accordingly, this property is no longer treated as an
    operating property. We anticipate that the 73,000 square foot
    redevelopment project in Union Square will be ready for the
    commencement of tenant fit-out in the first quarter of 2019. Retail
    and office leasing interest to date has been strong and we are
    currently in discussions with a number of quality tenants. This
    redevelopment will add approximately 23,000 square footage of rentable
    space to the current square footage of the building for an approximate
    total of 73,322 square feet of rentable space, inclusive of
    anticipated BOMA (Building Owners and Managers Association)
    adjustments and subject to lease negotiations and the final tenant mix.
  • Cinema 1,2,3 Redevelopment (New York, USA)
    – 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. While this agreement has expired, we both (i) remain
    open to the common development of these properties given the synergies
    and value creation opportunities of the joint development and (ii)
    have been and will continue to evaluate alternative opportunities for
    the property.

Corporate Matters

  • Our 2018 Annual Stockholders Meeting of the Company is scheduled to be
    held on November 7, 2018, and the record date for stockholders
    entitled to vote is September 17, 2018.

SEGMENT RESULTS

The following table summarizes the second quarter and first
half-of-the-year segment operating results for 2018 and 2017:

 
      Quarter Ended           Six Months Ended
    % Change     % Change
(Dollars in thousands) June 30,
2018
June 30,
2017
Favorable/
(Unfavorable)
June 30,
2018
June 30,
2017
Favorable/
(Unfavorable)
Segment revenue      
Cinema
United States $ 44,413 $ 33,425 33 % $ 82,400 $ 69,661 18 %
Australia 27,137 25,425 7 % 53,854 50,381 7 %
New Zealand   8,633     8,594     -   %   16,184     13,962     16   %
Total $ 80,183   $ 67,444     19   % $ 152,438   $ 134,004     14   %
Real estate
United States $ 952 $ 1,457 (35 ) % $ 1,605 $ 2,044 (21 ) %
Australia 4,262 3,848 11 % 8,366 7,434 13 %
New Zealand   1,171     1,628     (28 ) %   2,371     1,953     21   %
Total $ 6,385 $ 6,933 (8 ) % $ 12,342 $ 11,431 8 %
Inter-segment elimination   (2,346 )   (1,963 )   (20 ) %   (4,737 )   (3,567 )   (33 ) %
Total segment revenue $ 84,222   $ 72,414     16   % $ 160,043   $ 141,868     13   %
Segment operating income
Cinema
United States $ 4,698 $ 1,591 195 % $ 7,699 $ 4,099 88 %
Australia 6,048 5,970 1 % 11,965 11,915 - %
New Zealand   1,748     2,227     (22 ) %   3,115     2,865     9   %
Total $ 12,494   $ 9,788     28   % $ 22,779   $ 18,879     21   %
Real estate
United States $ (66 ) $ 266 (125 ) % $ (360 ) $ 297 (221 ) %
Australia 1,533 1,549 (1 ) % 2,998 2,957 1 %
New Zealand   447     941     (52 ) %   906     796     (14 ) %
Total $ 1,914   $ 2,756     (31 ) % $ 3,544   $ 4,050     (12 ) %
Total segment operating income (1) $ 14,408   $ 12,544     15   % $ 26,323   $ 22,929     15   %
   

"nm" – not meaningful for further analysis

 

(1)

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

 

Cinema Exhibition
Second
Quarter Results:

Cinema segment operating income increased
by 28%, or $2.7 million, to $12.5 million for the quarter ended June 30,
2018 compared to June 30, 2017, primarily driven by increased operating
income in the U.S. due to higher average ticket price ("ATP"), higher
spend per patron ("SPP"), and increased attendance.

  • Revenue in the United States increased by 33%, or $11.0 million, due
    to a 11% increase in ATP, a 5% increase in SPP, and a 22% increase in
    attendance. These changes are primarily due to improvements resulting
    from our continuous capital improvements at several of our theaters,
    the introduction of "Spotlight", as well as strong film product for
    the quarter.
  • Australia's cinema revenue increased by 7%, or $1.7 million, primarily
    due to an 8% increase in ATP, an 8% increase in SPP, offset by a 1%
    decrease in attendance.
  • While the attendance and SPP of our New Zealand cinema operations have
    increased versus the same period in 2017, our New Zealand revenue
    remained flat over the prior year quarter primarily because the 2016
    quarter included business interruption insurance related to the
    Wellington earthquake.

The top three grossing films for the second quarter of 2018 were "Avengers:
Infinity War
", "Deadpool 2", and "Incredibles 2"
representing approximately 36% of Reading's worldwide admission revenues
for the quarter. The top three grossing films in the second quarter of
2017 for Reading's worldwide cinema circuits were "Guardians of the
Galaxy Vol. 2
", "Wonder Woman", and "The Fate of the
Furious
" , which represented approximately 32% of Reading's
admission revenues for the second quarter of 2017.

Six-Month Results:
Cinema segment operating income
increased 21%, or $3.9 million, to $22.8 million for the six months
ended June 30, 2018 compared to June 30, 2017, primarily driven by an
88% operating income growth in the U.S. market. In addition, the
re-opening of our Courtenay Central Cinema in Wellington, New Zealand
contributed to the overall operating income as well as increases in
higher ticket price ("ATP") and higher spend per patron ("SPP") across
all three countries.

  • Revenue in the United States increased by 18%, or $12.7 million,
    primarily driven by increases in ATP, SPP, and attendance.
  • Australia's cinema revenue increased by 7%, or $3.5 million, primarily
    due to an 8% increase in ATP, a 7% increase in SPP, offset by a 1%
    decrease in attendance.
  • New Zealand cinema revenue increased by 16%, or $2.2 million, as a
    result of the 17% increase in attendance, a 9% increase in SPP, and a
    3% increase in ATP.

The top three grossing films for the first half of 2018 were "Avengers:
Infinity War
", "Black Panther", and "Deadpool 2"
representing approximately 22% of Reading's worldwide admission
revenues, compared to the top three grossing films a year ago: "Beauty
and the Beast
", "Guardians of the Galaxy Vol. 2", and "Wonder
Woman
", which represented approximately 19% of our admission
revenues for the same period in 2017.

Real Estate

Second Quarter and Six-Month Results:
Real estate
segment operating income decreased by 31%, or $0.8 million, to
$1.9 million for the quarter ended June 30, 2018 compared to June 30,
2017. For the six months ended June 30, 2018, the real estate segment
operating income decreased by 12%, or $0.5 million, to $3.5 million,
compared to the same period in 2017. This was primarily attributable to
a decrease in Live Theater revenue compared to prior year which was due
to the settlement payment related to the STOMP arbitration, as well as
the impact of business interruption insurance recorded in the second
quarter of 2017 in New Zealand. The overall decrease was offset by the
increased operating revenue from our Courtenay Central ETC due to the
full year of operations in 2018 compared to only one quarter of
operation in 2017.

CONSOLIDATED AND NON-SEGMENT RESULTS

The second quarter and first half-of-the-year consolidated and
non-segment results for 2018 and 2017 are summarized as follows:

 
  Quarter Ended             Six Months Ended
    % Change     % Change
(Dollars in thousands) June 30,
2018
June 30,
2017
Favorable/
(Unfavorable)
June 30,
2018
June 30,
2017
Favorable/
(Unfavorable)
Segment operating income $ 14,408   $ 12,544     15 % $ 26,323   $ 22,930     15 %
Non-segment income and expenses:
General and administrative expense (5,730 ) (4,674 ) (23 ) % (11,886 ) (9,425 ) (26 ) %
Interest expense, net (1,790 ) (1,787 ) - % (3,384 ) (3,647 ) 7 %
Gain on sale of assets -- 9,417 n/a - 9,417 %
Gain on insurance recoveries -- 9,217 n/a - 9,217 %
Other   166     181   nm   224     1,152   81 %
Total non-segment income and expenses $ (7,354 ) $ 12,354   160 % $ (15,046 ) $ 6,714   324 %
Income before income taxes 7,054 24,898 (72 ) % 11,277 29,644 62 %
Income tax expense   (1,953 )   (5,846 ) 67 %   (3,108 )   (7,549 ) 59 %
Net income $ 5,101 $ 19,052 (73 ) % $ 8,169 $ 22,095 (63 ) %
Less: net income attributable to noncontrolling interests   102     20   nm   124     32   nm
Net income attributable to RDI common stockholders $ 4,999   $ 19,032   (74 ) % $ 8,045   $ 22,063   (64 ) %

"nm" – not meaningful for further analysis

Second Quarter and First Half-of-the-Year
Net Results

Net income attributable to RDI common
stockholders decreased by 74%, or $14.0 million, to $5.0 million for the
quarter ended June 30, 2018 compared to the same period prior year. The
decrease in net income attributable to RDI common stockholders is due to
a one-time gain on insurance recoveries of $9.2 million and a
$9.4 million gain on sale of assets that were recognized for the quarter
ended June 30, 2017 offset by increased operating income. Additionally,
there was an increase in non-segment G&A expenses in 2018. Basic EPS for
the quarter ended June 30, 2018 decreased by $0.60 to $0.22 from the
prior-year quarter.

Net income attributable to RDI common stockholders decreased by 64%, or
$14.0 million, to $8.0 million for the six months ended June 30, 2018
compared to the same period prior year. Basic EPS for the first half of
2018 decreased by $0.60 to $0.35 from the prior-year period, mainly
attributable to the one-time gain on insurance recoveries and gain on
asset sale recognized for the six-months ended June 30, 2017.

Non-Segment General & Administrative Expenses
Non-segment
general and administrative expense for the quarter and six months ended
June 30, 2018 compared to the same period of the prior year increased by
23%, or $1.1 million, and 26%, or $2.5 million, respectively. This
increase mainly relates to higher legal expenses incurred on the
Derivative Litigation, the Cotter Employment Arbitration, other Cotter
litigation matters (discussed further below), and higher compensation
costs, due to headcount and the timing of annual salary increases as
well as the timing of recording increases in variable compensation costs.

Litigation
Legal fees
associated with the Cotter Derivative Litigation totaled $1.2 million
and $2.6 million for the three and six months ended June 30, 2018. On
June 18, 2018, the Nevada District Court dismissed in summary judgment
the last of Jim Cotter, Jr's derivative claims without trial.
Accordingly, the trial scheduled for July 9, 2018, has been vacated and
the matter moved to appeal. It is anticipated that the dismissal will
result in a material decrease in non-segment legal expenses for the
remainder of the year.

Gain on Sale of Assets
$9.4 million
represented our full recognition of the transaction gain triggered by
the additional payment from the buyer of our Burwood property in
Australia, and was recognized in the second quarter of 2017.

Gain on Insurance Proceeds
$9.2 million
represented the gain recognized in 2017 on the final insurance
settlement proceeds relating to the earthquake damage to our Courtenay
Central parking structure (excluding business interruption insurance
payments).

Income Tax Expense
Income
tax expense for the quarter and six months ended June 30, 2018 decreased
by $3.9 million and $4.4 million, respectively, compared to the
equivalent prior-year period. The change between 2018 and 2017 is
primarily related to lower pretax income, the reduction of U.S.
statutory corporate tax rate as the result of the Tax Act, foreign tax
credit, partially offset by higher tax rates overseas versus the US and
non-taxable insurance proceeds received in 2017.

OTHER FINANCIAL INFORMATION

Balance Sheet and Liquidity

Total assets increased by $12.7 million, to $435.7 million at June 30,
2018, compared to $423.0 million at December 31, 2017. This was
primarily driven by increases in our operating and investment properties
relating to capital enhancements in our existing cinemas and capital
investments relating to major real estate projects, primarily (i) the
redevelopment of our Union Square property in New York, and (ii) the
expansion of our Newmarket property in Brisbane, Australia. These were
offset by a reduction in our foreign-operation asset values due to a
decrease in the foreign exchange rates relative to the U.S. dollar.
Available cash resources generated from operations and proceeds received
from borrowings funded these capital investments.

Cash and cash equivalents at June 30, 2018 were $12.7 million, including
approximately $6.2 million in the U.S., $3.0 million in Australia, and
$3.5 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 collect cash from (i) our cinema
business when selling tickets and food and beverage items, and (ii)
rental income typically received in advance; we utilize these
collections, 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 cash management generates a
temporary working capital deficit, which is positive for the company. 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 our ability to renew and
extend our credit facilities will provide sufficient liquidity in the
upcoming year.

The table below presents the changes in our total available resources
(cash and borrowings), debt-to-equity ratio, working capital and other
relevant information addressing our liquidity for the six months ended
June 30, 2018 and preceding four years:

 
    As of and for the 6-Months Ended   Year Ended December 31
($ in thousands) 6/30/2018 2017     2016   2015     2014  
Total Resources (cash and borrowings)
Cash and cash equivalents (unrestricted) $ 12,742 $ 13,668 $ 19,017 $ 19,702 $ 50,248
Unused borrowing facility 108,983 137,231 117,599 70,134 45,700
Restricted for capital projects(1) 49,803 62,280 62,024 10,263 --
Unrestricted capacity 59,180 74,951 55,575 59,871 45,700
Total resources at period end 121,725 150,899 136,616 89,836 95,948
Total unrestricted resources at period end 71,922 88,619 74,592 79,573 95,948
Debt-to-Equity Ratio
Total contractual facility $ 270,746 $ 271,732 $ 266,134 $ 207,075 $ 201,318
Total debt (gross of deferred financing costs) 161,763 134,501 148,535 130,941 164,036
Current 10,747 8,109 567 15,000 38,104
Non-current 151,016 126,392 147,968 115,941 125,932
Total book equity 181,168 181,241 146,615 138,951 133,716
Debt-to-equity ratio 0.89 0.74 1.01 0.94 1.23
Changes in Working Capital
Working capital (deficit) $ (36,191 ) $ (46,971 ) $ 6,655 $ (35,581 ) $ (15,119 )
Current ratio 0.46 0.42 1.10 0.51 0.84

Capital Expenditures (including acquisitions)

$ 41,180 $ 76,708 $ 49,166 $ 53,119 $ 14,914
 

(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 June 30,
2018:

 
                        As of June 30, 2018
(Dollars in thousands) Contractual Capacity   Capacity Used   Unused Capacity  

Restricted for Capital
Projects

  Unrestricted Capacity
Bank of America Credit Facility (USA) $ 55,000 $ 31,000 $ 24,000 $ -- $ 24,000
Bank of America Line of Credit (USA) 5,000 -- 5,000 -- 5,000
Union Square Construction Financing (USA) 57,500 19,888 37,612 37,612 --
NAB Corporate Term Loan (AU) (1) 49,203 42,729 6,474 -- 6,474
Westpac Bank Corporate (general/non-construction) Credit Facility
(NZ) (1)
23,706 -- 23,706 -- 23,706
Westpac Bank Corporate (construction) Credit Facility (NZ) (1)   12,191   --   12,191   12,191   --
Total $ 202,600 $ 93,617 $ 108,983 $ 49,803 $ 59,180
 

(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 June 30, 2018.

 

The $49.8 million representing borrowings restricted for capital
projects is composed of the $37.6 million and $12.2 million
(NZ$18.0 million) unused capacity for the Union Square development and
construction funding for New Zealand operations, respectively. Our
Minetta and Orpheum Theatres Loan will become due November 1, 2018.
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 by country (except for funds used to pay an
appropriate share of our U.S. corporate overhead). However, we may, from
time to time, move funds between jurisdictions where circumstances merit
such action as part of our goal to minimize our cost of capital.

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 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 items,
described as follows:

  • 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, to resolve Mr. Cotter,
    Jr.'s claims relating to his termination, and to protect our Company's
    interests, and that of our shareholders in light of Mr. Cotter, Jr.'s
    efforts to effect a change of control of our Company. For this reason,
    we believe these costs should also be treated as non-recurring in
    nature and accordingly, an adjustable item for purposes of determining
    our Adjusted EBITDA.

In cases of property sales, we have not made adjustments for any gains,
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             Six Months Ended
June 30   June 30 June 30   June 30
(Dollars in thousands) 2018 2017   2018 2017  
Net Income $ 4,999 $ 19,032 $ 8,045 $ 22,063
Add: Interest expense, net 1,790 1,787 3,384 3,647
Add: Income tax expense 1,953 5,846 3,108 7,549
Add: Depreciation and amortization   5,626   4,054     10,877   7,987  
EBITDA $ 14,368 $ 30,719 $ 25,414 $ 41,246
Adjustments for:
Gain on insurance recoveries -- (9,217 ) -- (9,217 )
Legal expenses relating to the derivative ligation, the Cotter
employment arbitration and other Cotter litigation matters
  1,163   387     2,641   1,032  
Adjusted EBITDA $ 15,531 $ 21,889   $ 28,055 $ 33,061  
 

Conference Call and Webcast

We plan to post our pre-recorded conference call and audio webcast on
our corporate website on August 13, 2018, 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
on August 10, 2018 by 5:00 p.m. Eastern Standard Time. The audio webcast
can be accessed by visiting http://www.readingrdi.com/about/#earnings-call.

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
theatres 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 expectations 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
      improved seating, enhanced food and beverage offerings and other
      improvements;
    • service disruption during 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 ability to renew, extend or renegotiate our loans that mature
      in 2018;
    • 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;
    • our exposure to cyber-security risks, including misappropriation
      of customer information or other breaches of information security;
    • 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 factors can be, 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.

In addition to the forward-looking factors set forth above, we
encourage you to review Item 1A. "Risk Factors," from our Company's
Annual Report on SEC Form 10-K for the Year Ended December 31, 2017.

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   Six Months Ended
June 30, June 30, June 30, June 30,
       

2018

 

2017(1)

    2018  

2017(1)

Revenue
Cinema $ 80,183 $ 67,443 $ 152,438 $ 134,003
Real estate       4,039     4,970       7,605     7,864  
Total revenue       84,222     72,413       160,043     141,867  
Costs and expenses
Cinema (60,306 ) (52,139 ) (115,254 ) (103,921 )
Real estate (2,551 ) (2,342 ) (4,935 ) (4,377 )
Depreciation and amortization (5,626 ) (4,054 ) (10,877 ) (7,987 )
General and administrative       (7,165 )   (6,118 )     (14,761 )   (12,291 )
Total costs and expenses       (75,648 )   (64,653 )     (145,827 )   (128,576 )
Operating income 8,574 7,760 14,216 13,291
Interest expense, net (1,790 ) (1,787 ) (3,384 ) (3,647 )
Gain on sale of assets -- 9,417 -- 9,417
Gain on insurance recoveries -- 9,217 -- 9,217
Other (expense) income       (61 )   27       (143 )   848  
Income before income tax expense and equity earnings of
unconsolidated joint ventures
6,723 24,634 10,689 29,126
Equity earnings of unconsolidated joint ventures       331     264       588     518  
Income before income taxes 7,054 24,898 11,277 29,644
Income tax expense       (1,953 )   (5,846 )     (3,108 )   (7,549 )
Net income $ 5,101 $ 19,052 $ 8,169 $ 22,095
Less: net income attributable to noncontrolling interests       102     20       124     32  
Net income attributable to Reading International, Inc. common
shareholders
    $ 4,999   $ 19,032     $ 8,045   $ 22,063  
Basic earnings per share attributable to Reading International,
Inc. shareholders
    $ 0.22   $ 0.82     $ 0.35   $ 0.95  
Diluted earnings per share attributable to Reading International,
Inc. shareholders
    $ 0.22   $ 0.81     $ 0.35   $ 0.94  
Weighted average number of shares outstanding–basic 22,933,589 23,148,995 22,979,436 23,168,703
Weighted average number of shares outstanding–diluted       23,147,373     23,396,143       23,193,220     23,415,851  
 
1 Certain prior period amounts have been reclassified to
conform to the current period presentation.
 

Reading International, Inc. and Subsidiaries
Consolidated
Balance Sheets

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

 
    June 30, December 31,
      2018 2017
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 12,742 $ 13,668
Receivables 8,371 13,050
Inventory 1,418 1,432
Prepaid and other current assets       7,916     5,325  
Total current assets 30,447 33,475
Operating property, net 265,586 264,724
Investment and development property, net 74,042 61,254
Investment in unconsolidated joint ventures 5,112 5,304
Goodwill 19,686 20,276
Intangible assets, net 7,805 8,542
Deferred tax asset, net 25,776 24,908
Other assets       7,258     4,543  
Total assets     $ 435,712   $ 423,026  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 24,051 $ 34,359
Film rent payable 10,774 13,511
Debt – current portion 10,747 8,109
Taxes payable – current 4,383 2,938
Deferred current revenue 7,341 9,850
Other current liabilities       9,342     11,679  
Total current liabilities 66,638 80,446
Debt – long-term portion 119,946 94,862
Subordinated debt, net 27,574 27,554
Noncurrent tax liabilities 12,040 12,274
Other liabilities       28,346     26,649  
Total liabilities       254,544     241,785  
Commitments and contingencies
Stockholders' equity:
Class A non-voting common stock, par value $0.01, 100,000,000 shares
authorized,
33,101,614 issued and 21,309,702 outstanding at June 30, 2018, and

33,019,565 issued and 21,251,291 outstanding at December 31, 2017

232 231
Class B voting common stock, par value $0.01, 20,000,000 shares
authorized and
1,680,590 issued and outstanding at June 30, 20 18 and December 31,
2017
17 17
Nonvoting preferred stock, par value $0.01, 12,000 shares authorized
and no issued
or outstanding shares at June 30, 2018 and December 31, 2017 -- --
Additional paid-in capital 146,567 145,898
Retained earnings 40,918 32,679
Treasury shares (23,303 ) (22,906 )
Accumulated other comprehensive income       12,332     20,991  
Total Reading International, Inc. stockholders' equity 176,763 176,910
Noncontrolling interests       4,405     4,331  
Total stockholders' equity       181,168     181,241  
Total liabilities and stockholders' equity     $ 435,712   $ 423,026  
 

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