Reading International, Inc. — 2024 First-Quarter Form 10-Q
Business context and reporting period
Reading International, Inc. operates cinemas and real estate assets in the United States, Australia, and New Zealand. The company operated 61 cinemas with 491 screens at March 31, 2024. This unaudited report covers the three months ended March 31, 2024, compared with the three months ended March 31, 2023.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $45.1 million | $45.8 million | Down 2% |
| Cinema revenue | $41.3 million | $42.0 million | Down 2% |
| Real estate revenue | $4.9 million | $5.1 million | Down 3% |
| Operating loss | $7.5 million | $7.9 million | Improved $0.3 million |
| Net loss | $13.4 million | $11.3 million | Worsened $2.1 million |
| Net loss attributable to RDI | $13.2 million | $11.1 million | Worsened 19% |
| Basic and diluted loss per share | $0.59 | $0.50 | Worsened $0.09 |
| Cash flow from operations | $(2.8) million | $(11.6) million | Improved $8.8 million |
| Capital expenditures | $1.9 million | $1.5 million | Increased $0.4 million |
Cinema segment operating loss improved to $4.2 million from $4.6 million, principally because of lower U.S. operating expenses following cinema closures. Real estate segment operating income declined to $0.9 million from $1.0 million, primarily due to lost rental income following the sales of the Culver City office building and the Maitland property.
Interest expense increased to $5.3 million from $4.1 million. The company recorded a $1.1 million loss on the February 2024 sale of its Culver City office building. No impairment charges were recorded during the quarter.
Balance sheet, debt, and liquidity
- Cash and cash equivalents were $7.5 million at March 31, 2024, compared with $12.9 million at December 31, 2023. Cash plus restricted cash was $8.3 million.
- Total borrowings, net of deferred financing costs, were $194.5 million, compared with $208.8 million at December 31, 2023. Gross debt was $195.7 million.
- Debt due within 12 months was approximately $41.9 million. The company reported a working-capital deficit of $114.6 million and a current ratio of 0.15.
- Total stockholders’ equity declined to $17.7 million from $33.0 million, primarily reflecting the quarterly net loss and foreign-currency translation losses.
- Operating lease liabilities totaled $194.0 million, in addition to recorded borrowings.
- The debt-to-equity ratio increased to 11.04 from 6.37 at year-end 2023.
Cash and restricted cash declined by $7.1 million during the quarter. Investing cash flow was positive $7.6 million, including proceeds from the Culver City sale, while financing cash flow was negative $11.2 million due primarily to debt repayments.
Material changes versus the prior comparable period
- Revenue declined modestly as lower U.S. food and beverage and advertising revenue and weaker New Zealand admissions offset relatively stable Australian performance.
- Cinema operating performance improved despite lower revenue, supported by cost reductions and the closure of underperforming locations.
- Net loss worsened because of higher interest expense and the Culver City asset-sale loss.
- Foreign-currency translation produced a $2.6 million loss in other comprehensive income, reflecting weaker Australian and New Zealand currencies against the U.S. dollar.
- The company sold its Culver City office building for $10.0 million, used $8.4 million of proceeds to repay the related mortgage, and freed approximately $1.2 million of cash for operations.
- The Bank of America facility was amended in March 2024, extending its maturity to August 18, 2025, requiring a principal paydown, eliminating the minimum liquidity covenant, and reducing scheduled amortization.
- After quarter-end, the Union Square loan was extended to May 6, 2025, and the NAB facility was extended to July 31, 2026, with an additional AU$20 million bridge loan maturing March 31, 2025.
Outlook, management commentary, and risks
Management expects the cinema industry to improve during the second half of 2024 and in 2025 as film volume and quality recover from the effects of the 2023 Hollywood strikes. Management cited titles including Inside Out 2, Deadpool & Wolverine, Wicked, and Gladiator 2 as potential drivers of attendance. The company is also pursuing higher food and beverage sales, liquor licensing, automation, cost reductions, and selective cinema closures.
Management concluded that its plans alleviate substantial doubt about going concern, but that conclusion depends on refinancing debt, improving cinema revenue and earnings, and monetizing assets. The company is in discussions regarding the Santander, Cinemas 1,2,3, and Westpac facilities and expects to pursue additional asset sales if forecasts or refinancing plans are insufficient.
Key risks include weak cinema attendance, delayed or inadequate film releases, streaming competition, inflation and labor costs, rent deferrals and escalations, high interest rates, foreign-currency volatility, covenant compliance, refinancing availability, and the need to monetize real estate. The company also faces leasing and redevelopment uncertainty at 44 Union Square and Courtenay Central. Management reported no material changes to previously disclosed litigation and no material off-balance-sheet arrangements.
Important facts investors should verify
- Whether the company can refinance or otherwise resolve approximately $41.9 million of debt maturities within 12 months.
- The terms and conditions of the post-quarter-end Union Square and NAB amendments, including bridge-loan repayment and asset-sale requirements.
- Actual cinema attendance, admissions pricing, food and beverage spend, and film-release trends in the second half of 2024.
- Progress and realized proceeds from proposed monetizations, including Cannon Park, Williamsport, and other real estate assets.
- Whether operating cash flow becomes sustainably positive without relying on asset sales or additional borrowings.
- The sensitivity of interest expense to rates; management estimates that a 1% change in short-term rates would affect quarterly interest expense by approximately $0.5 million.
- Potential impairment or going-concern effects if operating forecasts, refinancing expectations, or asset monetization plans are not achieved.