READING INTERNATIONAL INC annual report, FY2022

Reading International, Inc. — Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2022; filed March 31, 2023. The filing also provides fourth-quarter comparisons. Reading operates cinema exhibition and real estate businesses in the United States, Australia, and New Zealand, with 62 cinemas and 505 screens at year-end.

Business Context and Reporting Period

  • Cinema revenue is generated primarily from admissions, food and beverage, advertising, and other ancillary activities.
  • Real estate activities include retail and commercial properties, live theatres, cinema-owned properties, and development assets.
  • All cinemas were open during 2022 except the Courtenay Central cinema in Wellington, New Zealand, which remains closed because of seismic and redevelopment issues.
  • 2022 was the first post-pandemic year without mandated cinema closures or operating restrictions, although attendance remained below 2019 levels.

Financial Performance and Key Metrics

Metric20222021Change
Total revenue$203.1 million$139.1 millionUp 46%
Cinema revenue$191.3 million$126.8 millionUp 51%
Real estate revenue$11.8 million$12.2 millionDown 4%
Operating loss$28.5 million$41.8 millionImproved $13.3 million
Net loss attributable to RDI$36.2 millionNet income of $31.9 millionUnfavorable by $68.1 million
Basic loss per share$1.64Basic EPS of $1.46Turned to loss
Net cash used in operating activities$26.4 million$13.5 millionOutflow increased $12.9 million
Capital expenditures$9.8 million$14.4 millionDown $4.6 million
  • Cinema segment operating loss improved to $11.7 million from $18.6 million, supported by stronger film releases and more operating days. The segment remained unprofitable.
  • Real estate segment operating income was $0.5 million versus a $5.4 million loss, reflecting improved tenant performance, lower vacancy, renewed intercompany rent, and full-year operation of the live theatres.
  • Fourth-quarter revenue was $48.4 million, down from $50.0 million in the prior-year quarter based on the reported cinema and real estate segment figures. Fourth-quarter cinema operating loss was $5.8 million versus operating income of $2.0 million in the prior-year quarter, primarily because the prior year benefited from Spider-Man: No Way Home and 2022 incurred higher rent, labor, utility, and food costs.
  • 2022 total revenue remained approximately 27% below the 2019 pre-pandemic level of $276.8 million.

Liquidity, Debt, and Balance Sheet

  • Cash and cash equivalents declined to $29.9 million from $83.3 million; restricted cash was $5.0 million.
  • Gross debt declined to $215.6 million from $236.9 million, but total book equity declined to $63.3 million from $105.1 million. The debt-to-equity ratio increased to 3.41 from 2.26.
  • Working capital deficit was $74.2 million, compared with $6.7 million in 2021. The current ratio was 0.39.
  • The company had no unrestricted unused corporate borrowing capacity at December 31, 2022; $12.0 million of borrowing capacity was restricted for the 44 Union Square project.
  • Approximately $177.7 million of debt was expected to mature within 24 months of year-end, and contractual debt maturities totaled approximately $215.6 million, including $38.7 million in 2023 and $140.9 million in 2024.
  • Operating lease liabilities totaled $224.0 million, and rent deferrals associated with the pandemic were approximately $9.4 million.
  • Operating, investing, and financing activities used $26.4 million, $9.5 million, and $16.6 million of cash, respectively. The company reported a $53.6 million decrease in cash and restricted cash during 2022.

Material Changes Versus the Prior Comparable Period

  • Revenue recovered substantially as cinemas reopened and film releases improved, but increased operating costs prevented the cinema segment from reaching profitability.
  • Net income in 2021 benefited from approximately $92.3 million of gains on strategic real estate sales and related items; no comparable asset monetization gains occurred in 2022.
  • 2022 interest expense increased to $14.4 million from $13.7 million, reflecting higher borrowing costs and debt structure changes.
  • The company recorded a $1.5 million impairment charge against certain cinema assets in 2022.
  • Foreign-currency translation reduced comprehensive income, with a $7.5 million unfavorable translation adjustment reported for 2022.
  • Property rental income improved, including rent from Petco at 44 Union Square, but the company lost income from the previously sold Auburn property.

Guidance, Outlook, Risks, and Unusual Items

  • Management expects a stronger 2023 film slate to support higher attendance and box-office revenue, citing anticipated releases including Marvel titles, Indiana Jones, Mission: Impossible, Barbie, Oppenheimer, and others. This is not formal quantitative guidance.
  • The company plans to add two Australian cinemas totaling 13 screens by the end of 2023 and recently assumed operation of a six-screen cinema in Armadale, Australia.
  • Management expects limited real estate investment in 2023, primarily pre-development planning costs, while retaining asset sales as a potential liquidity source.
  • The 10-K states that management’s plans alleviate substantial doubt regarding going-concern status, but this conclusion depends on refinancing, improved operating performance, and potential additional asset monetizations. Management identified $47.2 million of debt due within 12 months of issuance of the filing.
  • Subsequent to year-end, the Bank of America facility was extended to September 4, 2024, and the Cinemas 1,2,3 loan was extended to July 3, 2023.
  • Key risks include weak or delayed film releases, streaming and premium video competition, labor and utility inflation, lease and rent-deferral obligations, refinancing risk, rising interest rates, foreign-currency exposure, seismic and other natural-disaster risks, tenant demand, and limited liquidity.
  • STOMP ended its nearly 30-year run at the Orpheum Theatre on January 8, 2023; a replacement production was expected to open in 2023. Audible’s Minetta Lane Theatre license extends through March 15, 2024.
  • The company remains controlled by Margaret Cotter, who reported beneficial ownership of approximately 69% of the outstanding Class B voting stock and can substantially influence board composition and stockholder matters.

Important Facts for Investors to Verify

  • Progress and terms of refinancing for the 2023 and 2024 maturities, including the Valley National, Santander, and Westpac facilities.
  • Actual cinema attendance, admissions revenue, food-and-beverage spend, and segment margins as the film slate normalizes.
  • Whether operating cash flow turns positive and whether additional real estate sales are required to fund operations or debt repayment.
  • Repayment of the approximately $9.4 million of deferred occupancy costs and the effect of lease escalations on cinema-level cash flow.
  • Leasing progress at the remaining space at 44 Union Square and the timing, cost, and financing of the Courtenay Central redevelopment.
  • Potential impairment of cinema, leasehold, goodwill, or real estate assets if recovery forecasts are not achieved.
  • Settlement and payment timing for the $4.0 million California wage-and-hour matter, subject to court approval of the modified payment schedule.