Earnings Call Webcast to Discuss 2020 Second Quarter Financial Results and COVID-19 Updates Scheduled to Post to Corporate Website on Wednesday, August 12, 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 second quarter and six months ended June 30, 2020. Reflecting the ongoing impact of the COVID-19 crisis in the jurisdictions in which we operate, the Company’s financial results have been adversely impacted by the temporary closure in March 2020 of our 60 global cinemas and three live theatres in the U.S. While the COVID-19 pandemic impacted our real estate business in Australia and New Zealand to a lesser degree than our cinema business, many of our tenants in our Australian and New Zealand centers suffered revenue reductions due to the COVID-19 government-imposed restrictions, which resulted in the Company, in some cases, granting rental relief.

“Our diversified business plan has served us well in this pandemic,” said Ellen M. Cotter, President and Chief Executive Officer of Reading International, Inc. “We’re pleased to have advanced our biggest future-value opportunity projects – 44 Union Square, Courtenay Central, and our industrial land in Manukau – despite the ongoing challenges presented by COVID-19 and general and administrative reductions. We are also encouraged by the demand shown in certain theaters in Australia and New Zealand since they re-opened, particularly given the strict seating restrictions imposed in Australia and the lack of new movies being released from the major studios. We anticipate announcing a cinema re-opening date for select U.S. cinemas given the recent announcement by Warner Bros that Christopher Nolan’s Tenet is scheduled to be released on September 3, 2020 in U.S. cinema markets governmentally permitted to open.”

Ms. Cotter continued, “In addition, we are continuing to execute a series of proactive steps designed to preserve cash and enhance Reading’s liquidity as we navigate through the current environment. While the near-term operating environment will remain challenging and the path for the full re-opening of our operations in certain jurisdictions we serve remains unclear, we believe the long-term fundamentals of the cinema business and our real estate assets remain intact. I’d like to thank the women and men of Reading around the world who have developed comprehensive health and safety protocols to protect our guests, communities and employees, and those who have helped safely welcome back our cinema guests in Australia and New Zealand.”

Late in the second quarter of 2020, we began re-opening all of our cinemas in New Zealand and most of our cinemas in Australia. As of today, (i) all our cinemas in New Zealand are operating without social distancing requirements (other than our cinema at Courtenay Central) and (ii) all our cinemas in Australia are opened with social distancing restrictions in place, except for those in the State of Victoria, which are closed under government order. Due to a second wave of the coronavirus, as of August 5, 2020, the local government in the State of Victoria required all cinemas, including seven Reading Cinemas that operate in that state, to close through September 15, 2020.

With respect to our real estate operations in Australia and New Zealand, as of June 30, 2020, despite the fact that over 96% of our third-party tenants had resumed operations, we will be providing certain tenants rental relief through the third quarter of 2020.

The following table summarizes the quarter and six months ended results for June 30, 2020 and 2019, respectively:

COMPANY OVERVIEW

• Operating Results – Cinema and Real Estate

For the second quarter ended June 30, 2020, our worldwide revenue decreased by 96%, or $72.6 million, to $3.4 million from the same period in 2019, and for the six months ended June 30, 2020, our worldwide revenue decreased by 62%, or $84.8 million to $52.7 million from the same period in 2019. The decrease in revenue was as a result of the temporary closure of our 60 global cinema and three live theaters due to the COVID-19 pandemic. These closings were partially mitigated by the re-opening of most of our Australian cinemas and all of our New Zealand theaters in June 2020. And, although most of our centers in Australia remained open through the COVID-19 pandemic, we found it appropriate to grant rent relief to certain of our tenants.

The following factors also contributed to the year-over-year decline:

Our revenue decreases were offset to some extent by (i) 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 and (ii) 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.

As of June 30, 2020, our Australian property portfolio consisted of 80 third-party leased tenants and four Reading Cinemas at Newmarket Village, Auburn Redyard, Cannon Park, and The Belmont Common. During the second quarter 2020, we continued leasing activity at Newmarket Village, Auburn Redyard, and Cannon Park completing three new leases and three lease renewals. At our Courtenay Central center in Wellington, although most of the center is closed due to seismic concerns, two of our three principal third-party tenants have now resumed trading along Courtenay Place, a well-known restaurant and entertainment street. We also completed one lease renewal at Courtenay Central during the quarter.

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 early 2021. However, we anticipate the public re-activation of certain stages, which have production budgets that will permit operating at reduced seating capacity, at the Royal George Theatre in Chicago, during the fourth quarter of 2020.

• Cinema Additions and Pipeline

Due to the COVID-19 pandemic, we have deferred most of our cinema upgrades into later periods and will strategically evaluate when and how to allocate our capital resources based on (i) the status of the pandemic in various markets, (ii) how certain cinemas react to the ramp up of re-opening, and (iii) our overall evaluation of the Company’s liquidity.

In Australia, we previously announced the construction of four new Reading Cinemas pursuant to Agreements to Lease: (i) Altona, VIC, (ii) Traralgon, VIC, (iii) Jindalee, QLD, and (iv) South City Square in Brisbane, QLD. We have an agreement-in-principle with our Altona landlord in the State of Victoria to extend that cinema fit-out handover date. Based on our agreement, the potential opening date of that new cinema will likely be delayed until early 2021. With respect to our Traralgon cinema in the State of Victoria, the landlord has been delayed in turning over the space for cinema fit-out and discussions about the tenancy and scheduling are ongoing. We do not anticipate that the cinema in Traralgon will open in 2020.

The current handover dates expected for the two new cinemas in Queensland are later in fourth quarter 2020 or during 2021. We will continue to evaluate the timing of these fit-out obligations in light of our capital needs in the future.

• 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 the following milestones during the second quarter that will enhance the long-term value of our real estate portfolio.

Sepulveda Office Building (Culver City, U.S.) – As previously announced, 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 usable 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. 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 commenced effective May 27, 2020. The “free rent” period expires effective October 1, 2020.

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. On July 1, 2020, the site re-opened for construction activities, and we anticipate that the core and shell temporary certificate of occupancy will be in place by the end of August 2020, as only the completion of certain fireproofing remains to be completed.

Manukau/Wiri Land Rezoning (Auckland, New Zealand) – We continued to progress the infrastructure plans for our 64.0-acre property, which we previously 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.

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, pre-COVID) 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 2023. 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, which is 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 complement and build upon the “destination quality” of the Courtenay Central location. Notwithstanding the COVID-19 pandemic, our real estate team is continuing to work with our consultants, potential tenants, and city representatives to advance our redevelopment plans for this property. 

SEGMENT RESULTS

The following table summarizes our segment operating results for the quarter and six months ended June 30, 2020 and 2019, respectively:

Cinema Exhibition

Second Quarter Results:

Due to the COVID-19 pandemic, our cinema segment operating income for the second quarter 2020 decreased by $26.4 million, to a loss of $17.3 million when compared to the same period in 2019. This significant decrease is due to the temporary closure of our cinemas due to the COVID-19 pandemic, partially mitigated by (i) the re-opening of most of our Australian and all of our New Zealand cinemas in June of 2020, (ii) the absence of internal rent revenue from our fee-interest cinemas due to the COVID-19 shutdowns, and (iii) the rent abatements received from a number of our landlords.

Below are the changes in our cinema revenue by market:

• U.S. cinema revenue decreased by 99%, or $40.4 million, to $0.5 million, due to a 100% decrease in attendance. These decreases were due to the ongoing temporary closures of our U.S. cinemas as a result of the COVID-19 pandemic, and the temporary closure of our Consolidated Theatre at the Kahala Mall in Honolulu since December of 2019 for renovations.
• Australia’s cinema revenue decreased by 98%, or $25.1 million, to $0.5 million, due to a 99% decrease in attendance. These decreases were due to the ongoing temporary closures of our cinemas in Australia as a result of the COVID-19 pandemic partially mitigated by the re-opening of most of our cinemas in Australia in June of 2020. These results were further impacted by the decline in value of the Australian dollar and a lack of new major studio tentpole releases upon re-opening.
• New Zealand’s cinema revenue decreased by 96%, or $5.6 million, to $0.2 million, due to a 96% decrease in attendance. These decreases were due to the ongoing temporary closures of our cinemas in New Zealand as a result of the COVID-19 pandemic partially mitigated by the re-opening of our cinemas in New Zealand in June of 2020, excluding Courtenay Central. These results were further impacted by the decline in value of the New Zealand dollar and a lack of new major studio releases upon re-opening.

Six Months Results:

Our cinema segment operating income for the six months ended June 30, 2020 declined significantly by $31.7 million, to a loss of $19.9 million when compared to the same period in 2019. This decrease is attributable to (i) reduced seating occupancy as a result of social distancing measures adopted pre-closure and (ii) the temporary closure of our cinemas, which both led to a significant attendance drop since March 2020, partially mitigated by the re-opening of most of our Australia and New Zealand theaters in June 2020. Below are the changes in our cinema revenue by market:

• Revenue in the U.S. decreased by 67%, or $49.1 million, to $23.8 million, primarily due to a 70% decrease in attendance. These decreases were significantly due to the social distancing measures put in place and the ongoing temporary closures since late March 2020 of our U.S. cinemas as a result of the COVID-19 pandemic, the temporary closure of our Consolidated Theatre at the Kahala Mall in Honolulu since December of 2019 for renovations, and the closures of our 86^th Street, Paris, and Beekman cinemas since mid-2019.
• Australia’s cinema revenue decreased by 57%, or $27.0 million, to $20.1 million, primarily due to a 59% decrease in attendance. These decreases were significantly due to the ongoing temporary closures of our cinemas in Australia as a result of the COVID-19 pandemic partially mitigated by the re-opening of most of our cinemas in Australia in June of 2020. These results were further impacted by the decline in value of the Australian dollar.
• New Zealand’s cinema revenue decreased by 65%, or $6.7 million, to $3.7 million, primarily due to a 65% decrease in attendance. These decreases were significantly due to the temporary closures of our cinemas in New Zealand as a result of the COVID-19 pandemic partially mitigated by the re-opening of our cinemas in New Zealand in June of 2020, excluding Courtenay Central, which remains closed due to seismic concerns. These results were further impacted by the decline in value of the New Zealand dollar.

We continued to accrue and expense monthly rent, during the second quarter of 2020, despite negotiating rent abatement and deferral arrangements with our landlords. We were able to achieve deferral agreements and some abatements from April through July of 2020 with terms of repayment varying, but most repayments starting in 2021. These arrangements will help to preserve our liquidity for the remainder of 2020. Although these negotiations with our landlords are completed on a location-by-location basis, and while no assurances can be given on any future abatement or deferral agreements, we may be able to negotiate additional occupancy relief if there is a delay in the timing of our theatre re-openings.

Real Estate

Second Quarter Results:

For the second quarter ended June 30, 2020, our real estate segment operating income decreased by $2.2 million, to a loss of $0.8 million compared to the same period in 2019 due to (i) occupancy relief granted by the Company to third party tenants in Australia and New Zealand who suffered revenue reductions due to COVID-19 related trading restrictions, (ii) the cessation of intercompany rents in our centers where a Reading Cinemas is a tenant, and (iii) the temporary closures of our U.S. live theatres to public performances due to COVID-19 restrictions. This overall decline was further impacted by the unfavorable foreign currency movements in both Australia and New Zealand, partially offset by payments from portions of license fees of our Live Theatre agreements and by a decrease in operating expense. Real estate revenue decreased by 59%, or $3.3 million, to $2.3 million, compared to the same period in 2019. Operating expense for the quarter ended June 30, 2020 decreased as all capital costs and many operating expenses were significantly reduced, and various projects and maintenance works were postponed. Further, in Australia, various State Revenue Offices (SRO) implemented support measures for commercial landlords whereby land tax relief was provided by way of a percentage of land tax waiver.

Six Months Results:

For the six months ended June 30, 2020, our real estate segment operating income decreased by $3.1 million, to a loss of $0.6 million compared to the same period in 2019. This decrease is attributable to the temporary closures of our U.S. Live Theatres because of the COVID-19 pandemic. This decline was partially offset by decreases in operating expenses in the U.S. Live Theatres, Australia, and New Zealand. In addition to that, a weakening foreign currency exchange rate also contributed to the decline in operating income. Real estate revenue decreased by 37%, or $4.1 million, to $6.9 million, compared to the same period in 2019.

Further, referring to our Australian real estate revenue, a federal government Code of Conduct was prepared as a guiding reference for landlords and tenants to assist rental negotiations with regard to abatements. In addition, state governments have enacted laws to legislate rental relief for eligible tenants, and while the Code of Conduct is often reflected, in part, in this legislation, the states have also decided to draft the legislation at their discretion. Consistent in the various legislation is a rent relief element with reference to tenancy sales volumes, especially in situations of enforced closure.

CONSOLIDATED AND NON-SEGMENT RESULTS

The consolidated and non-segment results for the quarter and six months ended June 30, 2020 and 2019, respectively, are summarized as follows:

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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