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
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $203.1 million | $139.1 million | Up 46% |
| Cinema revenue | $191.3 million | $126.8 million | Up 51% |
| Real estate revenue | $11.8 million | $12.2 million | Down 4% |
| Operating loss | $28.5 million | $41.8 million | Improved $13.3 million |
| Net loss attributable to RDI | $36.2 million | Net income of $31.9 million | Unfavorable by $68.1 million |
| Basic loss per share | $1.64 | Basic EPS of $1.46 | Turned to loss |
| Net cash used in operating activities | $26.4 million | $13.5 million | Outflow increased $12.9 million |
| Capital expenditures | $9.8 million | $14.4 million | Down $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.