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| RDI > SEC Filings for RDI > Form 10-Q on 9-Aug-2012 | All Recent SEC Filings |
9-Aug-2012
Quarterly Report
We are an internationally diversified company principally focused on the development, ownership, and operation of entertainment and real property assets in the United States, Australia, and New Zealand. Currently, we operate in two business segments:
· cinema exhibition, through our 56 multiplex cinemas; and
· real estate, including real estate development and the rental of retail, commercial and live theater assets.
We believe that these two business segments can complement one another, as we can use the comparatively consistent cash flows generated by our cinema operations to fund the front-end cash demands of our real estate development business.
We manage our worldwide cinema exhibition businesses under various different brands:
· in the US, under the Reading, Angelika Film Center, Consolidated Amusements, and City Cinemas brands;
· in Australia, under the Reading brand; and
· in New Zealand, under the Reading and Rialto brands.
We continue to consider opportunities to expand our cinema operations, while at the same time continuing to cull those cinema assets which are underperforming or have unacceptable risk profiles on a go forward basis.
Although we have curtailed our real estate development activities, we remain opportunistic in our acquisitions of both cinema and real estate assets. Our business plan going forward is to continue the build-out of our existing development properties and to seek out additional, profitable real estate development opportunities while continuing to use and judiciously expand our presence in the cinema exhibition business by identifying, developing, and acquiring cinema properties when and where appropriate. In addition, we will continue to investigate potential synergistic acquisitions that may not readily fall into either of our two currently identified segments.
On January 10, 2012, Shadow View Land and Farming, LLC, a limited liability company owned by our Company, acquired a 202-acre property, zoned for the development of up to 843 single-family residential units, located in the City of Coachella, California. The property was acquired at a foreclosure auction for $5.5 million. The property was acquired as a long-term investment in developable land. Half of the funds used to acquire the land were provided by James J. Cotter, our Chairman, Chief Executive Officer and controlling shareholder. Upon the approval of our Conflicts Committee, these funds were converted on January 18, 2012 into a 50% interest. The limited liability company is administratively managed by our Company.
We continue to consider the potential sale of certain of our real estate assets. As part of this business strategy, on February 21, 2012, we sold the three properties in the Taringa area of Brisbane, Australia of approximately 1.1 acres for $1.9 million (AUS$1.8 million). Also, we continue to consider various methods to monetize all or at least the residential portion of our Burwood development site even though it cannot be classified as a property held for sale pursuant to FASB ASC 360-10-45. Additionally, we are currently reevaluating our options for the Cinemas 1, 2, 3 property with an intent to potentially redevelop rather than sell the property.
Results of Operations
At June 30, 2012, we owned and operated 51 cinemas with 429 screens, had
interests in certain unconsolidated joint ventures and entities that own an
additional 3 cinemas with 29 screens and managed 2 cinemas with 9 screens. In
real estate during the period, we (i) owned and operated four Entertainment
Themed Retail Centers ("ETRCs") that we developed in Australia and New Zealand,
(ii) owned the fee interests in four developed commercial properties in
Manhattan and Chicago improved with live theaters comprising seven stages and
ancillary retail and commercial space, (iii) owned the fee interests underlying
one of our Manhattan cinemas, (iv) held for development an additional seven
parcels aggregating approximately 129 acres located principally in urbanized
areas of Australia and New Zealand, and (v) owned 50% of a 202-acre property,
zoned for the development of up to 843 single-family residential units in
Coachella, California.
Operating expense includes costs associated with the day-to-day operations of the cinemas and the management of rental properties, including our live theater assets. Our year-to-year results of operations were impacted by the fluctuation in the value of the Australian and New Zealand dollars vis-à-vis the US dollar resulting in an increase in results of operations for our foreign operations for 2012 compared to 2011.
The tables below summarize the results of operations for each of our principal business segments for the three ("2012 Quarter") and six ("2012 Six Months") months ended June 30, 2012 and the three ("2011 Quarter") and six ("2011 Six Months") months ended June 30, 2012, respectively (dollars in thousands):
Cinema Intersegment
Three Months Ended June 30, 2012 Exhibition Real Estate Eliminations Total
Revenue $ 57,988 $ 7,038 $ (1,882 ) $ 63,144
Operating expense 48,347 2,645 (1,882 ) 49,110
Depreciation & amortization 2,733 1,177 -- 3,910
General & administrative expense 782 146 -- 928
Segment operating income $ 6,126 $ 3,070 $ -- $ 9,196
Cinema Intersegment
Three Months Ended June 30, 2011 Exhibition Real Estate Eliminations Total
Revenue $ 62,236 $ 6,604 $ (1,667 ) $ 67,173
Operating expense 49,901 2,594 (1,667 ) 50,828
Depreciation & amortization 3,000 1,285 -- 4,285
General & administrative expense 669 207 -- 876
Segment operating income $ 8,666 $ 2,518 $ -- $ 11,184
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Reconciliation to net income attributable to Reading 2012 2011
International, Inc. shareholders: Quarter Quarter
Total segment operating income $ 9,196 $ 11,184
Non-segment:
Depreciation and amortization expense 97 7
General and administrative expense 3,398 3,880
Operating income 5,701 7,297
Interest expense, net (5,683 ) (5,406 )
Other income 68 91
Loss on sale of assets (2 ) (68 )
Income tax benefit (expense) (259 ) 13,774
Equity earnings of unconsolidated joint ventures and
entities 399 269
Income from discontinued operations -- 1,656
Net income $ 224 $ 17,613
Net (income) loss attributable to noncontrolling interests 15 (181 )
Net income attributable to Reading International, Inc.
common shareholders $ 239 $ 17,432
Cinema Intersegment
Six Months Ended June 30, 2012 Exhibition Real Estate Eliminations Total
Revenue $ 115,390 $ 14,171 $ (3,765 ) $ 125,796
Operating expense 96,563 5,441 (3,765 ) 98,239
Depreciation & amortization 5,563 2,405 -- 7,968
General & administrative expense 1,484 325 -- 1,809
Segment operating income $ 11,780 $ 6,000 $ -- $ 17,780
Cinema Intersegment
Six Months Ended June 30, 2011 Exhibition Real Estate Eliminations Total
Revenue $ 111,710 $ 13,040 $ (3,334 ) $ 121,416
Operating expense 93,043 5,026 (3,334 ) 94,735
Depreciation & amortization 5,904 2,507 -- 8,411
General & administrative expense 1,280 394 -- 1,674
Segment operating income $ 11,483 $ 5,113 $ -- $ 16,596
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Reconciliation to net income (loss) attributable to Reading 2012 Six 2011 Six International, Inc. shareholders: Months Months Total segment operating income $ 17,780 $ 16,596 Non-segment: Depreciation and amortization expense 236 10 General and administrative expense 6,937 7,316 Operating income 10,607 9,270 Interest expense, net (9,443 ) (9,337 ) Other income 23 74 Loss on sale of assets (2 ) (68 ) Income tax benefit (expense) (1,884 ) 13,138 Equity earnings of unconsolidated joint ventures and entities 812 633 Income from discontinued operations -- 1,656 Net income $ 113 $ 15,366 Net income attributable to noncontrolling interests (116 ) (414 ) Net income (loss) attributable to Reading International, Inc. common shareholders $ (3 ) $ 14,952 |
Cinema Exhibition Segment
Included in the cinema exhibition segment above is revenue and expense from the operations of 51 cinema complexes with 429 screens during the 2012 Quarter and 51 cinema complexes with 416 screens during the 2011 Quarter and management fee income from 2 cinemas with 9 screens in both years. These results reflect the purchase of our CalOaks Cinema in Murrieta, California cinema with 17 screens in August 2011, the sale of our Elsternwick cinema in Australia with 5 screens in April 2011, and the closing of our Hastings, New Zealand cinema with 4 screens in January 2012. The following tables detail our cinema exhibition segment operating results for the three months ended June 30, 2012 and 2011, respectively (dollars in thousands):
Three Months Ended June 30, 2012 United States Australia New Zealand Total Admissions revenue $ 19,138 $ 17,258 $ 3,501 $ 39,897 Concessions revenue 8,136 5,938 1,082 15,156 Advertising and other revenues 1,300 1,381 254 2,935 Total revenues 28,574 24,577 4,837 57,988 Cinema costs 23,431 18,447 3,728 45,606 Concession costs 1,281 1,189 271 2,741 Total operating expense 24,712 19,636 3,999 48,347 Depreciation and amortization 1,648 843 242 2,733 General & administrative expense 607 175 -- 782 Segment operating income $ 1,607 $ 3,923 $ 596 $ 6,126 |
Three Months Ended June 30, 2011 United States Australia New Zealand Total Admissions revenue $ 20,419 $ 19,985 $ 3,274 $ 43,678 Concessions revenue 7,988 6,434 904 15,326 Advertising and other revenues 1,428 1,629 175 3,232 Total revenues 29,835 28,048 4,353 62,236 Cinema costs 23,490 20,149 3,370 47,009 Concession costs 1,278 1,381 233 2,892 Total operating expense 24,768 21,530 3,603 49,901 Depreciation and amortization 1,606 1,096 298 3,000 General & administrative expense 539 130 -- 669 Segment operating income $ 2,922 $ 5,292 $ 452 $ 8,666 |
· Cinema revenue decreased for the 2012 Quarter by $4.2 million or 6.8% compared to the same period in 2011. The 2012 Quarter decrease was primarily due to a decrease in U.S. and Australian box office attendance of 173,000 and a decrease in the average price per ticket of $0.27 and $0.42, respectively, related to the available film product in 2012 compared to the same period in 2011. This was exacerbated by the temporary closure of our Townsville cinema in Australia due to the renovation of the cinema during the quarter. This resulted in a decrease in box office revenue of $4.0 million and a decrease in concessions and other revenue of $724,000. The decrease in U.S. revenue was partially offset by new revenue from our CalOaks cinema which was acquired in August 2011. Our New Zealand admissions increased by 68,000 resulting in an increase in box office revenue of $227,000 and an increase in concessions and other revenue of $257,000 primarily as a result of the reopening of our Palms cinema in early January 2012. Both the Australian and New Zealand results were affected by a decrease in the value of the Australian and New Zealand dollars compared to the U.S. dollar (see below).
· Operating expense decreased for the 2012 Quarter by $1.6 million or 3.1% compared to the same period in 2011. This decrease followed the decreased revenues noted above associated with the overall decrease in box office admissions assisted by a decrease in the value of the Australian and New Zealand dollars compared to the U.S. dollar (see below). Overall, our operating expense as a percent of gross revenue increased from 80.2% to 83.4% primarily relating to the decrease in admissions which increased our labor per admit costs and from our fixed property rent costs relative to the aforementioned decrease in revenue.
· Depreciation expense decreased for the 2012 Quarter by $267,000 or 8.9% compared to the same period in 2011 due to certain Australian cinema assets coming to the end of their depreciable lives in 2011.
· General and administrative costs increased for the 2012 Quarter by $113,000 or 16.9% compared to the same period in 2011 due to an increase in payroll and travel related costs for our U.S. and Australian cinema circuits.
· For our statement of operations, the Australian and New Zealand quarterly average exchange rates decreased by 4.9% and 1.1%, respectively, since the 2011 Quarter, which had an impact on the individual components of our income statement.
· Because of the above, and driven by the decreased revenue, the cinema exhibition segment income decreased for the 2012 Quarter by $2.5 million or 29.3% compared to the same period in 2011.
The following tables detail our cinema exhibition segment operating results for the six months ended June 30, 2012 and 2011, respectively (dollars in thousands):
Six Months Ended June 30, 2012 United States Australia New Zealand Total Admissions revenue $ 38,662 $ 34,676 $ 6,664 $ 80,002 Concessions revenue 15,784 11,910 1,958 29,652 Advertising and other revenues 2,548 2,767 421 5,736 Total revenues 56,994 49,353 9,043 115,390 Cinema costs 46,653 37,251 7,258 91,162 Concession costs 2,524 2,389 488 5,401 Total operating expense 49,177 39,640 7,746 96,563 Depreciation and amortization 3,298 1,768 497 5,563 General & administrative expense 1,124 360 -- 1,484 Segment operating income $ 3,395 $ 7,585 $ 800 $ 11,780 Six Months Ended June 30, 2011 United States Australia New Zealand Total Admissions revenue $ 35,766 $ 36,804 $ 6,265 $ 78,835 Concessions revenue 13,782 11,620 1,645 27,047 Advertising and other revenues 2,523 2,971 334 5,828 Total revenues 52,071 51,395 8,244 111,710 Cinema costs 43,570 37,731 6,660 87,961 Concession costs 2,166 2,509 407 5,082 Total operating expense 45,736 40,240 7,067 93,043 Depreciation and amortization 3,227 2,104 573 5,904 General & administrative expense 1,007 273 -- 1,280 Segment operating income $ 2,101 $ 8,778 $ 604 $ 11,483 |
· Cinema revenue increased for the 2012 Six Months by $3.7 million or 3.3% compared to the same period in 2011. The 2012 Six Months increase was primarily due to an increase in U.S. and New Zealand box office attendance of 442,000 and 62,000, respectively. The uplift in box office admissions in the U.S. was primarily from the improved film product noted in the first quarter of 2012 and from the acquisition of our CalOaks cinema in August 2011 while the increase in New Zealand was primarily as a result of the reopening of our Palms cinema in early January 2012. These changes resulted in an increase in box office revenue of $3.3 million and an increase in concessions and other revenue of $2.4 million. Our New Zealand revenue was also impacted by an increase in the value of the New Zealand dollar compared to the U.S. dollar (see below) for the 2012 Six Months compared to the same period in 2011. Our Australian cinema revenue decreased by $2.0 million primarily relating to a 64,000 decrease in admissions coupled with a $0.44 decrease in the average ticket price per admission. This was exacerbated by the temporary closure of our Townsville cinema in Australia due to the renovation of the cinema during the quarter. As noted below, there was only a nominal change in the Australian dollar compared to the U.S. dollar for the comparable periods.
· Operating expense increased for the 2012 Six Months by $3.5 million or 3.8% compared to the same period in 2011. This increase followed the increased revenues noted above primarily relating to the improved film product in the first quarter of 2012 compared to 2011. The operating expense was also impacted by the increase in the value of the New Zealand dollar compared to the U.S. dollar (see below). Overall, our operating expense as a percent of gross revenue remained relatively stable at 83.7% compared to 83.3%.
· Depreciation expense decreased for the 2012 Six Months by $341,000 or 5.8% compared to the same period in 2011 due to certain Australian cinema assets coming to the end of their depreciable lives in 2011.
· General and administrative costs increased for the 2012 Six Months by $204,000 or 15.9% compared to the same period in 2011 due to an increase in payroll and travel related costs for our U.S. and Australian cinema circuits.
· For our statement of operations, the Australian average exchange rates decreased by 0.1% the 2012 Six Months while the New Zealand average exchange rates increased 3.4% for the 2012 Six Months compared to the 2011 Six Months, which had an impact on the individual components of our income statement.
· Because of the above, and driven by the increased revenue, the cinema exhibition segment income increased for the 2012 Six Months by $297,000 or 2.6% compared to the same period in 2011.
Real Estate Segment The following tables detail our real estate segment operating results for the three months ended June 30, 2012 and 2011, respectively (dollars in thousands): Three Months Ended June 30, 2012 United States Australia New Zealand Total Live theater rental and ancillary income $ 977 $ -- $ -- $ 977 Property rental income 410 3,779 1,872 6,061 Total revenues 1,387 3,779 1,872 7,038 Live theater costs 523 -- -- 523 Property rental cost 181 1,417 524 2,122 Total operating expense 704 1,417 524 2,645 Depreciation and amortization 76 781 320 1,177 General & administrative expense 15 118 13 146 Segment operating income $ 592 $ 1,463 $ 1,015 $ 3,070 |
Three Months Ended June 30, 2011 United States Australia New Zealand Total Live theater rental and ancillary income $ 698 $ -- $ -- $ 698 Property rental income 437 3,621 1,848 5,906 Total revenues 1,135 3,621 1,848 6,604 Live theater costs 453 -- -- 453 Property rental cost 88 1,563 490 2,141 Total operating expense 541 1,563 490 2,594 Depreciation and amortization 82 826 377 1,285 General & administrative expense 20 171 16 207 Segment operating income $ 492 $ 1,061 $ 965 $ 2,518 |
· Real estate revenue increased for the 2012 Quarter by $434,000 or 6.6% compared to the same period in 2011 primarily related to an increase in our live theater revenue of $279,000 coupled with higher rents and occupancy associated with our Australian and New Zealand retail properties in 2012 compared to the same period in 2011. Both the Australian and New Zealand results were also affected by a decrease in the value of the Australian and New Zealand dollars compared to the U.S. dollar (see below).
· Operating expense for the real estate segment increased for the 2012 Quarter by $51,000 or 2.0% compared to the same period in 2011. This increase resulted from higher property tax costs for our U.S. operating properties and from legal costs incurred in 2012 associated with our old railroad properties; offset in part by, a decrease in the value of the Australian and New Zealand dollars compared to the U.S. dollar (see below).
· Depreciation expense decreased for the 2012 Quarter by $108,000 or 8.4% compared to the same period in 2011 primarily due to certain Australian and New Zealand assets coming to the end of their depreciable lives in 2011.
· General and administrative costs decreased for the 2012 Quarter by $61,000 or 29.5% compared to the same period in 2011 due to a decrease in costs associated with certain development properties.
· For our statement of operations, the Australian and New Zealand quarterly average exchange rates decreased by 4.9% and 1.1%, respectively, since the 2011 Quarter, which had an impact on the individual components of our income statement.
· As a result of the above, real estate segment income increased for the 2012 Quarter by $552,000 or 21.9% compared to the same period in 2011.
The following tables detail our real estate segment operating results for the six months ended June 30, 2012 and 2011, respectively (dollars in thousands):
Six Months Ended June 30, 2012 United States Australia New Zealand Total Live theater rental and ancillary income $ 1,877 $ -- $ -- $ 1,877 . . . |
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