Earnings Call Webcast to Discuss 2020 First Quarter Financial Results and COVID-19 Updates

Scheduled to Post to Corporate Website on Monday, June 29, 2020

CULVER CITY, Calif.--(BUSINESS WIRE)--Reading International, Inc. (NASDAQ: RDI), an internationally diversified cinema and real estate company with operations and assets in the United States, Australia, and New Zealand, today announced results for the first quarter ended March 31, 2020. The Company’s financial results for the first quarter ended March 31, 2020 were materially impacted by the temporary closure in March 2020 of its 60 global cinemas and three live theatres as a result of the COVID-19 pandemic.

“As the COVID-19 pandemic evolved, and our cinemas, the primary revenue driver of our Company, temporarily closed, we took a number of early and decisive actions to reduce our cash burn and increase our liquidity to preserve the significant value in our Company,” said Ellen M. Cotter, President and Chief Executive Officer of Reading International, Inc. “The events surrounding the COVID-19 pandemic underscored the benefits of our geographically diversified, two-prong cinema and real estate strategy. We are grateful to have now re-opened all of our cinemas in New Zealand that were in operation prior to the COVID-19 shutdown and the majority of our Australian cinemas. We expect that the remainder of our Australian cinemas will open in the beginning of July 2020, and, with the recent confirmation by Warner Bros. that Christopher Nolan’s Tenet will open on July 31, 2020, we anticipate re-opening our U.S. cinemas in July 2020, assuming state and local governmental authority clearance and subject to applicable operating conditions.”

Ms. Cotter continued, “Throughout the quarter, we continued to advance certain real estate projects ‘from home,’ including leasing up spaces and renewing existing leases at our Australian centers. We are pleased that almost 90% of our 78 third-party tenants in our Australian centers had re-commenced trading with government enforced restrictions as of May 31, 2020, and on May 27, 2020, we executed a lease to a single tenant, WWP Inc., for the second floor of our Culver City, CA headquarters office building. In addition, in New Zealand, working with our adjoining landowner, we have been granted certain resource consents related to the infrastructure work needed to unlock development rights for our industrial properties in Manukau near the Auckland Airport.”

The following table summarizes the first quarter results for 2020 and 2019, respectively:

COMPANY OVERVIEW

• Operating Results – Cinema and Real Estate

For the first quarter ended March 31, 2020, our worldwide revenue was $49.2 million, a 20% decrease from the same quarter in 2019. The temporary closures of our 60 global cinemas and three live theatres due to compliance with governmental directives was the primary driver of the $12.3 million decrease in revenue. The following factors also contributed to the year-over-year decline:

• The leases underlying our historically profitable Paris Theatre, Beekman Theatre, and our managed East 86^th Street Theatre in New York City expired during the second and third quarters of 2019 and could not be renewed on commercially reasonable terms;
• The temporary closure of our Consolidated Theatre at the Kahala Mall in Hawaii for a top-to-bottom renovation in December 2019 and ongoing during the first quarter 2020; and
• Our global revenues (cinema and real estate) were negatively impacted by adverse foreign currency exchange rates due to the weakening of the Australian and New Zealand dollars against the U.S. dollar. The Australian and New Zealand dollars declined against the U.S. dollar by 7.7% and 6.8% respectively, measured as of March 31, 2020.

Our revenue decreases were offset to some extent by (i) the December 2019 opening of our new state-of-the-art Reading Cinema with TITAN LUXE at the Burwood Brickworks shopping center in a suburb of Melbourne, Australia and (ii) our December 2019 acquisition of the iconic State Cinema in Tasmania, Australia which features 10 screens, a roof top cinema and bar, a large café, and a bookstore.

Despite the impact of COVID-19, our cinema results for each of our cinema circuits in the U.S., Australia, and New Zealand, in their functional currency, set records for the highest first quarter Food & Beverage (“F&B”) spend per patron (“SPP”). In the U.S., our strategic emphasis on F&B resulted in our SPP outperforming certain publicly traded competitors.

Reflecting the strength of our online selling capabilities, our Australian cinema circuit, on a functional currency basis, achieved (i) a first quarter record for online ticket revenue, beating the same period in 2019 by 8%, and (ii) an increase of 2% of our net online convenience fee revenue compared to the same period in 2019. Further, expanding our online capabilities, we anticipate launching limited F&B ordering online for our cinema circuits in the U.S., Australia, and New Zealand during the third quarter of 2020.

As of March 31, 2020, our Australian property shopping center portfolio consists of 78 third-party tenants and four Reading Cinemas at Newmarket Village, Auburn Redyard, Cannon Park, and The Belmont Common. Reflecting the strength of our real estate operations, both the revenues and property level cash flow for the first quarter of 2020 of the Australian property division (on a functional currency basis) set first quarter record highs. During the first quarter 2020, we continued leasing activity at Newmarket Village, Auburn Redyard, and Cannon Park completing three new leases and two lease renewals. While the COVID-19 pandemic impacted the operations of certain tenants at our Australian centers, due to the Australian government’s proactive approach to reducing the spread of COVID-19, as of today, occupancy across our Australian centers is over 97%.

The COVID-19 pandemic has also impacted New Zealand, temporarily suspending trading for many retailers; at our Courtenay Central center in Wellington, although most of the center is closed due to seismic concerns, due to the New Zealand government’s proactive approach to suppressing the spread of COVID-19, two of our three strong tenants have now resumed trading along Courtenay Place, a well-known restaurant and entertainment street.

Our three live theatres, two in New York City and one in Chicago, have remained closed to the public since mid-March 2020 due to the COVID-19 pandemic. With the current social distancing requirements, we do not expect the producers occupying our live theatres in New York City to resume public performances until later in 2020 or early 2021. However, we anticipate public re-activation of the various stages at the Royal George Theatre in Chicago some time during the fourth quarter of 2020.

• Cinema Additions and Pipeline

Prior to the COVID-19 pandemic, our 2020 business strategy included plans to upgrade various cinemas in the U.S., Australia, and New Zealand. We have deferred most upgrades into later periods and will strategically evaluate when and how to allocate our capital resources based on the status of the COVID-19 pandemic in various markets, how certain cinemas react to the ramp up of re-opening, and our overall evaluation of the Company’s liquidity.

We currently have four cinemas under agreements to lease in Australia. The COVID-19 pandemic will delay the anticipated launch dates for some of these projects.

• Global Real Estate Development Activities

The COVID-19 pandemic has also impacted the timing of our real estate development plans. However, during the pandemic, we nevertheless achieved certain milestones that will enhance the long-term value of our real estate portfolio.

Sepulveda Office Building (Culver City, U.S.) – On May 27, 2020, we leased on a multi-year basis the entire second floor of our headquarter building in Culver City, California (approximately 11,000 rentable square feet) to WWP (wwpinc.com), a global company with over 35 years of experience providing the cosmetics and personal care industries with a range of packaging needs. Clients of WWP include the Estée Lauder Companies, L’Oréal, LVMH, and Mary Kay. On the date of the lease, possession of the space was turned over to WWP, which is responsible for building out its space. On a straight-line basis, rent will commence during the second quarter of 2020, and we anticipate receiving rental income during the fourth quarter of 2020.

Manukau/Wiri Land Rezoning (Auckland, New Zealand) – During the first quarter of 2020, we progressed infrastructure plans related to our 64.0-acre property, which we successfully re-zoned from agricultural to light industrial uses, and to the remaining 6.4-acre property, zoned for heavy industrial use, each located in the highly sought after industrial market of Manukau/Wiri close to the Auckland Airport.

In June 2020, the Auckland Council granted to us and the adjoining landowner, subject to certain conditions, certain consents required to construct certain infrastructure needed to take advantage of the new light industrial zoning.

Notwithstanding that the Auckland Airport recently announced that the COVID-19 pandemic may lead to an indefinite suspension of certain expansion plans, including the “Park and Ride” facility near our property, we continue to view the industrial property sector as being one of the most resilient in the current economic climate. We believe that the work completed to date has contributed to the overall value of our land in Manukau/Wiri.

44 Union Square (New York City, U.S.) – Historically known as Tammany Hall, this building with approximately 73,113 square feet of net rentable area overlooks Manhattan’s Union Square. During the COVID-19 pandemic, New York City shut down non-essential construction and business, including construction work at our site. However, the construction of the improvements necessary to obtain a core and shell temporary certificate of occupancy were substantially completed prior to the shutdown. We anticipate that the site will re-open to construction later this month, and that the core and shell temporary certificate of occupancy will be in place before the end of the summer.

While the Real Estate Board of New York prohibited leasing activity during the COVID-19 shutdown, our leasing team is ramping up their leasing efforts again. This building, with its first in the city dome, brings the future to New York’s fabled past and was awarded in 2017 the AIA QUAD Design Honor Award, and the Architizer A+ Awards, Typology Winner, Commercial Award. It is one of a very limited number of “brandable” sites available for immediate lease in New York City. We believe 44 Union Square will be attractive to potential tenants interested in both (i) operating in New York City and (ii) seeking to have greater control over the size and design of their spaces in a post-COVID-19 environment. As a practical matter, the building has now reached a state of completion where the premises can be delivered immediately upon the execution of leases.

Courtenay Central Redevelopment (Wellington, New Zealand) – Located in the heart of Wellington – New Zealand’s capital city – our Courtenay Central property covers 161,071 square feet of land situated proximate to (i) the Te Papa Tongarewa Museum (attracting over 1.5 million visitors annually), and (ii) across the street from the site of the future Wellington Convention and Exhibition Centre (wcec.co.nz), the capital’s first premium conference and exhibition space, which is due to be completed in 2022. Despite the COVID-19 pandemic, construction for this major public project has resumed and plans include the creation of a public concourse linking through to Wakefield Street, across the street from our Courtenay Central project.

As previously reported, damage from the 2016 Kaikoura earthquake necessitated demolition of our nine-story parking garage at the site, and unrelated seismic issues caused us to close major portions of the existing cinema and retail structure in early 2019. Prior to the COVID-19 pandemic, the real estate team had developed a comprehensive plan featuring a variety of uses to compliment and build upon the “destination quality” of the Courtenay Central location. As the COVID-19 pandemic lock down in New Zealand has ended, our real estate team is re-engaging with the consultants and city representatives to review feasible redevelopment plans.

SEGMENT RESULTS

The following table summarizes the first quarter segment operating results for 2020 and 2019, respectively:

Cinema Exhibition

First Quarter Results:

Due to the COVID-19 pandemic, our first quarter 2020 cinema segment operating income declined significantly by $5.2 million, to a loss of $2.7 million when compared to the same period in 2019. This decrease is primarily due to (i) the increased press reports in February 2020 and March 2020 about COVID-19, (ii) reduced seating occupancy as a result of social distancing measures, and (iii) the temporary closure of our cinemas, which all led to a significant attendance drop in March 2020. However, such attendance decreases were offset to some extent by increases in Average Ticket Price (“ATP”) and SPP:

• Revenue in the U.S. decreased by 27%, or $8.7 million, to $23.3 million, primarily due to a 32% decrease in attendance; offset by a 7% increase in SPP and a 2% increase in ATP.
• Australia’s cinema revenue decreased by 9%, or $1.9 million, to $19.6 million, primarily due to a 14% decrease in attendance; offset by an 8% increase in SPP and a 4% increase in ATP.
• New Zealand’s cinema revenue decreased by 24%, or $1.1 million, to $3.4 million, primarily due to a 25% decrease in attendance; offset by a 1% increase in ATP, while SPP stayed relatively flat.

Despite the challenges presented by the COVID-19 pandemic, on a functional currency basis, the SPP of our U.S., Australian and New Zealand cinema divisions for the first quarter of 2020 each reached a record high for any first quarter.

Real Estate

First Quarter Results:

For the first quarter ended March 31, 2020, our real estate segment operating income decreased by 84%, or $1.0 million, to $0.2 million compared to the same period in 2019 primarily due to the temporary closure of certain of our Live Theatres and the impact of unfavorable foreign currency movements in both Australia and New Zealand. Real estate revenue decreased by 15%, or $0.8 million, to $4.6 million, compared to the same period in 2019.

CONSOLIDATED AND NON-SEGMENT RESULTS

The first quarter consolidated and non-segment results for 2020 and 2019 are summarized as follows:

First Quarter Net Results

Net loss attributable to RDI common stockholders increased by $3.8 million, to $5.9 million for the first quarter ended March 31, 2020, compared to the same period in 2019. Basic Loss per Share (“LPS”) for the first three months of 2020 increased by $0.18, to $0.27 from $0.09 in the prior year period, mainly attributed to a significant decrease in revenue from both our Cinema and Real Estate business segments largely due to the impact of the COVID-19 pandemic.

Non-Segment General & Administrative Expenses

As a result of General & Administrative staff reductions occurring in late 2019, COVID-19 related expense reductions and a decrease in legal fees, our first quarter 2020 non-segment general and administrative expense decreased by 13%, or $0.7 million, to $4.4 million.

Income Tax Benefit

As a result of the CARES Act, during the first quarter of 2020, the Company realized a tax benefit equal to $3.6 million which related to a 2019 net operating loss carryback to the 2015 and 2016 tax years, when the federal tax rate was 35%. This $3.6 million tax benefit, offset by a change in valuation allowance, drove an approximately $2.0 million increase in the first quarter of 2020 compared to the first quarter of 2019.

OTHER FINANCIAL INFORMATION

Balance Sheet and Liquidity

During the first quarter of 2020, we drew down all the unrestricted borrowing capacity available under our various credit facilities to ensure future liquidity given the COVID-19 pandemic. As a result, our total outstanding borrowings were $263.0 million at March 31, 2020. At March 31, 2020, our cash and cash equivalents were $54.9 million, which included approximately $26.1 million in the U.S., $15.1 million in Australia, and $13.7 million in New Zealand.

Approximately two weeks prior to the COVID-19 government mandated shutdowns, we had completed amending and extending various financing arrangements. On March 6, 2020, we (i) entered into an amendment for our $55.0 million credit facility with Bank of America, which supports our U.S. Cinema operation, extending the maturity date to March 6, 2023 and implementing an interest rate of 2.5% - 3.0% dependent on certain financial ratios plus a variable rate and (ii) extended the term of our $5.0 million line of credit with Bank of America to March 6, 2023. Additionally, on March 13, 2020, Sutton Hill Properties LLC, a 75% subsidiary of Reading, increased its term loan with Valley National Bank to $25.0 million from $20.0 million, with an interest rate based on (i) the two-year U.S. Treasury Rate plus 2.5% or (ii) 4.25%, whichever is greater. The current interest rate used for the Valley National Loan is 4.25%.

As of March 31, 2020, we have received bank covenant waivers from Bank of America for the first quarter of 2020, and from National Australia Bank (“NAB”) for the second and third quarters of 2020. We did not require any other covenant waivers for the first quarter of 2020.

Due to the continuing uncertainties relating to the effects of COVID-19, it is uncertain whether we will continue to meet our covenant requirements for the 12 months beginning March 31, 2020. We anticipate continuing to receive covenant waivers from the relevant lenders, although these waivers are not in our control and no assurances can be given that we will receive such waivers. We are required by U.S. GAAP to classify the Bank of America and NAB debt as current liabilities.

At March 31, 2020, we had Total Assets, based on book values, of $677.7 million, which was an increase of $2.7 million compared to $675.0 million at December 31, 2019. This increase was primarily driven by the increase in cash and cash equivalents, which was countered by the impact of declining foreign exchange rates in the Australian and New Zealand dollars by 7.7% and 6.8%, respectively.

OTHER INFORMATION

Corporate Matters

On March 10, 2020, our Board of Directors approved the extension of the Stock Repurchase Program and restored the authorization to $26.0 million to purchase Class A shares, expiring March 10, 2022

During the first quarter of 2020, we invested $0.7 million to repurchase 75,157 shares of Class A Non-Voting Common Stock. The Stock Repurchase Program allows us to repurchase our Class A Non-Voting Common Stock from time to time in accordance with the requirements of the Securities and Exchange Commission on the open market, in block trades and in privately negotiated transactions, depending on market conditions and other factors.

Due to the COVID-19 pandemic and its impact on our overall liquidity, for the foreseeable future our stock repurchase program will likely take a lower capital allocation priority.

Our Compensation and Stock Options Committee, during the first quarter, determined to pay out no cash bonuses, with respect to 2019, to any Reading senior executives, including our CEO.

WORKING CAPITAL AND LIQUIDITY

The table below presents the changes in our working capital position and other relevant information addressing our liquidity as of and for the three months ended March 31, 2020 and the preceding four years:

Contacts

Gilbert Avanes, Executive Vice President, Chief Financial Officer and Treasurer

Andrzej Matyczynski, Executive Vice President for Global Operations

Reading International, Inc. (213) 235-2240

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