Company Quick10K Filing
Quick10K
Reading
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-01-29 Control, Officers, Other Events, Exhibits
8-K 2018-11-13 Earnings, Shareholder Vote, Regulation FD, Other Events, Exhibits
8-K 2018-08-10 Earnings, Other Events, Exhibits
8-K 2018-06-21 Other Events, Exhibits
8-K 2018-05-11 Earnings, Exhibits
8-K 2018-02-23 Other Events, Exhibits
MDSO Medidata Solutions 0
PZN Pzena Investment Management 0
UFS Domtar 0
BABY Natus Medical 0
CGIX Cancer Genetics 0
ALRT ALR Technologies 0
ADOM Adomani 0
BJRI BJS Restaurants 0
AGM Federal Agricultural Mortgage 0
ENTB Entest Group 0
RDI 2018-09-30
Part 1 – Financial Information
Item 1 - Financial Statements
Note 1 – Description of Business and Segment Reporting
Note 2 – Summary of Significant Accounting Policies
Note 3 – Operations in Foreign Currency
Note 4 – Earnings per Share
Note 5 – Property and Equipment
Note 6 – Investments in Unconsolidated Joint Ventures
Note 7 – Goodwill and Intangible Assets
Note 8 – Prepaid and Other Assets
Note 9 – Income Taxes
Note 10 – Debt
Note 11 – Other Liabilities
Note 12 – Accumulated Other Comprehensive Income
Note 13 – Commitments and Contingencies
Note 14 – Non-Controlling Interests
Note 15 – Stock-Based Compensation and Stock Repurchases
Note 16 – Derivative Instruments
Note 17 – Fair Value Measurements
Note 18 – Subsequent Events
Item 2 – Management’S Discussions and Analysis (“MD&A”) of Financial Condition and Results of Operations
Item 3 – Quantitative and Qualitative Disclosure About Market Risk
Item 4 – Controls and Procedures
Part II – Other Information
Item 1 – Legal Proceedings
Item 1A – Risk Factors
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 – Defaults Upon Senior Securities
Item 5 – Other Information
Item 6 – Exhibits
EX-31.1 rdi-20180930xex31_1.htm
EX-31.2 rdi-20180930xex31_2.htm
EX-32 rdi-20180930xex32.htm

Reading Earnings 2018-09-30

RDI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 rdi-20180930x10q.htm 10-Q 2018 Q3_Taxonomy2017

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

_____________________________________________________

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  September 30, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________



Commission file number 1-8625

C:\Users\matthew.elmshauser\Pictures\Reading International logo.jpg

READING INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

95-3885184

(IRS Employer Identification No.)

5995 Sepulveda Boulevard, Suite 300

Culver City, CA

(Address of principal executive offices)

 

90230

(Zip Code)

Registrant’s telephone number, including area code: (213) 235-2240



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer   Accelerated filer   Non-accelerated filer   Smaller reporting company Emerging growth company 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of November 6, 2018 there were 21,336,551 shares of Class A Nonvoting Common Stock, $0.01 par value per share and 1,680,590 shares of Class B Voting Common Stock, $0.01 par value per share outstanding.

 

 

1


 

READING INTERNATIONAL, INC. AND SUBSIDIARIES



TABLE OF CONTENTS







 



Page

PART I - Financial Information

Item 1 – Financial Statements

Consolidated Balance Sheets (Unaudited)

Consolidated Statements of Income (Unaudited)

Consolidated Statements of Comprehensive Income (Unaudited)

Consolidated Statements of Cash Flows (Unaudited)

Notes to Consolidated Financial Statements (Unaudited)

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

30 

Item 3 – Quantitative and Qualitative Disclosure about Market Risk

47 

Item 4 – Controls and Procedures

48 

PART II – Other Information

49 

Item 1 – Legal Proceedings

49 

Item 1A – Risk Factors

49 

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

49 

Item 3 – Defaults Upon Senior Securities

49 

Item 5 – Other Information

50 

Item 6 – Exhibits

50 

SIGNATURES

51 

Certifications

 

 

 

2


 

PART 1 – FINANCIAL INFORMATION

Item 1 - Financial Statements



READING INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; U.S. dollars in thousands, except share information)





 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,



 

2018

 

2017

ASSETS

 

(unaudited)

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,714 

 

$

13,668 

Receivables

 

 

7,306 

 

 

13,050 

Inventory

 

 

1,231 

 

 

1,432 

Prepaid and other current assets

 

 

5,393 

 

 

5,325 

Total current assets

 

 

29,644 

 

 

33,475 

Operating property, net

 

 

261,139 

 

 

264,724 

Investment and development property, net

 

 

80,086 

 

 

61,254 

Investment in unconsolidated joint ventures

 

 

5,045 

 

 

5,304 

Goodwill

 

 

19,444 

 

 

20,276 

Intangible assets, net

 

 

7,484 

 

 

8,542 

Deferred tax asset, net

 

 

25,285 

 

 

24,746 

Other assets

 

 

7,530 

 

 

5,082 

Total assets

 

$

435,657 

 

$

423,403 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

26,258 

 

$

34,359 

Film rent payable

 

 

6,890 

 

 

13,511 

Debt – current portion

 

 

3,175 

 

 

8,109 

Taxes payable – current

 

 

1,877 

 

 

2,938 

Deferred current revenue

 

 

6,796 

 

 

9,850 

Other current liabilities

 

 

9,274 

 

 

11,679 

Total current liabilities

 

 

54,270 

 

 

80,446 

Debt – long-term portion

 

 

133,231 

 

 

94,862 

Subordinated debt, net

 

 

27,584 

 

 

27,554 

Noncurrent tax liabilities

 

 

12,437 

 

 

12,274 

Other liabilities

 

 

28,272 

 

 

26,649 

Total liabilities

 

 

255,794 

 

 

241,785 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Class A non-voting common stock, par value $0.01,  100,000,000 shares authorized,

 

 

 

 

 

 

33,128,463 issued and 21,336,551 outstanding at September 30, 2018 and

33,019,565 issued and 21,251,291 outstanding at December 31, 2017

 

 

232 

 

 

231 

Class B voting common stock, par value $0.01,  20,000,000 shares authorized and

 

 

 

 

 

 

1,680,590 issued and outstanding at September 30, 2018 and December 31, 2017

 

 

17 

 

 

17 

Nonvoting preferred stock, par value $0.01,  12,000 shares authorized and no issued 

 

 

 

 

 

 

or outstanding shares at September 30, 2018 and December 31, 2017

 

 

 —

 

 

 —

Additional paid-in capital

 

 

147,059 

 

 

145,898 

Retained earnings

 

 

42,655 

 

 

33,056 

Treasury shares

 

 

(23,303)

 

 

(22,906)

Accumulated other comprehensive income

 

 

8,843 

 

 

20,991 

Total Reading International, Inc. stockholders’ equity

 

 

175,503 

 

 

177,287 

Noncontrolling interests

 

 

4,360 

 

 

4,331 

Total stockholders’ equity

 

 

179,863 

 

 

181,618 

Total liabilities and stockholders’ equity

 

$

435,657 

 

$

423,403 



See accompanying Notes to the Unaudited Consolidated Financial Statements.

 

3


 

READING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; U.S. dollars in thousands, except per share data)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Quarter Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2018

 

2017

 

2018

 

2017

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Cinema

 

$

70,671 

 

$

62,059 

 

$

223,109 

 

$

196,062 

Real estate

 

 

3,590 

 

 

4,057 

 

 

11,286 

 

 

11,975 

Total revenue

 

 

74,261 

 

 

66,116 

 

 

234,395 

 

 

208,037 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cinema

 

 

(54,929)

 

 

(49,591)

 

 

(170,183)

 

 

(153,512)

Real estate

 

 

(2,475)

 

 

(2,881)

 

 

(7,408)

 

 

(7,258)

Depreciation and amortization

 

 

(5,829)

 

 

(4,137)

 

 

(16,705)

 

 

(12,124)

General and administrative

 

 

(6,489)

 

 

(5,840)

 

 

(21,250)

 

 

(18,131)

Total costs and expenses

 

 

(69,722)

 

 

(62,449)

 

 

(215,546)

 

 

(191,025)

Operating income

 

 

4,539 

 

 

3,667 

 

 

18,849 

 

 

17,012 

Interest expense, net

 

 

(1,748)

 

 

(1,663)

 

 

(5,132)

 

 

(5,310)

Gain on sale of assets

 

 

 —

 

 

 —

 

 

 —

 

 

9,417 

Gain on insurance recoveries

 

 

 —

 

 

 —

 

 

 —

 

 

9,217 

Other (expense) income

 

 

(130)

 

 

89 

 

 

(273)

 

 

937 

Income before income tax expense and equity earnings of unconsolidated joint ventures

 

 

2,661 

 

 

2,093 

 

 

13,444 

 

 

31,273 

Equity earnings of unconsolidated joint ventures

 

 

80 

 

 

136 

 

 

667 

 

 

654 

Income before income taxes

 

 

2,741 

 

 

2,229 

 

 

14,111 

 

 

31,927 

Income tax expense

 

 

(1,482)

 

 

(750)

 

 

(4,618)

 

 

(8,316)

Net income

 

$

1,259 

 

$

1,479 

 

$

9,493 

 

$

23,611 

Less: net income attributable to noncontrolling interests

 

 

(38)

 

 

(98)

 

 

88 

 

 

(66)

Net income attributable to Reading International, Inc. common shareholders

 

$

1,297 

 

$

1,577 

 

$

9,405 

 

$

23,677 

Basic earnings per share attributable to Reading International, Inc. shareholders

 

$

0.06 

 

$

0.07 

 

$

0.41 

 

$

1.02 

Diluted earnings  per share attributable to Reading International, Inc. shareholders

 

$

0.06 

 

$

0.07 

 

$

0.41 

 

$

1.01 

Weighted average number of shares outstanding–basic

 

 

23,006,040 

 

 

22,968,017 

 

 

22,988,227 

 

 

23,101,619 

Weighted average number of shares outstanding–diluted

 

 

23,197,924 

 

 

23,212,632 

 

 

23,185,021 

 

 

23,346,234 



See accompanying Notes to the Unaudited Consolidated Financial Statements. 

 

4


 

READING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; U.S. dollars in thousands)





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Quarter Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2018

 

2017

 

2018

 

2017

Net income

 

$

1,259 

 

$

1,479 

 

$

9,493 

 

$

23,611 

Foreign currency translation (loss) gain

 

 

(3,547)

 

 

1,791 

 

 

(12,318)

 

 

10,192 

Other

 

 

53 

 

 

51 

 

 

155 

 

 

151 

Comprehensive income

 

 

(2,235)

 

 

3,321 

 

 

(2,670)

 

 

33,954 

Less: net income attributable to noncontrolling interests

 

 

(38)

 

 

(98)

 

 

88 

 

 

(66)

Less: comprehensive (loss) income attributable to noncontrolling interests

 

 

(5)

 

 

33 

 

 

(15)

 

 

20 

Comprehensive (loss) income attributable to Reading International, Inc.

 

$

(2,192)

 

$

3,386 

 

$

(2,743)

 

$

34,000 



See accompanying Notes to the Unaudited Consolidated Financial Statements

 

5


 

READING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; U.S. dollars in thousands)







 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2018

 

2017

Operating Activities

 

 

 

 

 

 

Net income

 

$

9,493 

 

$

23,611 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Equity earnings of unconsolidated joint ventures

 

 

(667)

 

 

(654)

Distributions of earnings from unconsolidated joint ventures

 

 

532 

 

 

636 

Gain recognized on foreign currency transactions

 

 

 —

 

 

(910)

Gain on sale of assets

 

 

 —

 

 

(9,417)

Gain on insurance recoveries

 

 

 —

 

 

(9,217)

Change in net deferred tax assets

 

 

(888)

 

 

152 

Depreciation and amortization

 

 

16,705 

 

 

12,124 

Other amortization

 

 

 

 

1,840 

Stock based compensation expense

 

 

1,066 

 

 

730 

Net changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

4,492 

 

 

1,593 

Prepaid and other assets

 

 

(545)

 

 

1,662 

Payments for accrued pension

 

 

(2,655)

 

 

 —

Accounts payable and accrued expenses

 

 

411 

 

 

(5,701)

Film rent payable

 

 

(6,366)

 

 

(4,347)

Taxes payable

 

 

(877)

 

 

(1,695)

Deferred revenue and other liabilities

 

 

(1,636)

 

 

(1,652)

Net cash provided by operating activities

 

 

19,072 

 

 

8,755 

Investing Activities

 

 

 

 

 

 

Demolition costs of operating property

 

 

 —

 

 

(3,510)

Insurance recoveries relating to property damage and demolition costs

 

 

 —

 

 

18,415 

Purchases of and additions to operating and investment properties

 

 

(50,118)

 

 

(44,531)

Change in restricted cash

 

 

(1,556)

 

 

36 

Distributions of investment in unconsolidated joint ventures

 

 

 —

 

 

125 

Disposal of investment in unconsolidated joint ventures

 

 

 —

 

 

(337)

Proceeds from sale of assets

 

 

 —

 

 

16,606 

Net cash (used in) investing activities

 

 

(51,674)

 

 

(13,196)

Financing Activities

 

 

 

 

 

 

Repayment of long-term borrowings

 

 

(29,546)

 

 

(46,629)

Proceeds from borrowings

 

 

65,213 

 

 

47,706 

Repurchase of Class A Nonvoting Common Stock

 

 

(397)

 

 

(6,475)

Proceeds from the exercise of stock options

 

 

340 

 

 

207 

Noncontrolling interest contributions

 

 

75 

 

 

63 

Noncontrolling interest distributions

 

 

(117)

 

 

(240)

Net cash provided by / (used in) financing activities

 

 

35,568 

 

 

(5,368)

Effect of exchange rate changes on cash and cash equivalents

 

 

(920)

 

 

(312)

Net decrease in cash and cash equivalents

 

 

2,046 

 

 

(10,121)

Cash and cash equivalents at January 1

 

 

13,668 

 

 

19,017 

Cash and cash equivalents at September 30

 

$

15,714 

 

$

8,896 

Supplemental Disclosures

 

 

 

 

 

 

Interest paid

 

$

5,762 

 

$

4,489 

Income taxes paid

 

 

6,365 

 

 

7,371 

Non-Cash Transactions

 

 

 

 

 

 

Additions to operating and investing properties through accrued expenses

 

 

2,911 

 

 

 —



See accompanying Notes to the Unaudited Consolidated Financial Statements. 

 

6


 

READING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 

Note 1 – Description of Business and Segment Reporting

 

The Company

Reading International, Inc., a Nevada corporation (“RDI” and collectively with our consolidated subsidiaries and corporate predecessors, the “Company”, “Reading” and “we”, “us”, or “our”), was incorporated in 1999.  Our businesses consist primarily of:

·

the operation, development and ownership of multiplex cinemas in the United States, Australia, and New Zealand; and,

·

the development, ownership, operation and/or rental of retail, commercial and live venue real estate assets in Australia, New Zealand, and the United States.



Business Segments

Reported below are the operating segments of the Company for which separate financial information is available and evaluated regularly by the Chief Executive Officer, the chief operating decision-maker of the Company.  As part of our real estate activities, we hold undeveloped land in urban and suburban centers in Australia, New Zealand and the United States.



The table below summarizes the results of operations for each of our business segments for the quarter and nine months ended September 30, 2018 and 2017, respectively.  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.









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Quarter Ended

 

Nine Months Ended



 

September 30,

 

September 30,

(Dollars in thousands)

 

2018

 

2017

 

2018

 

2017

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

  Cinema exhibition

 

$

70,671 

 

$

62,059 

 

$

223,109 

 

$

196,062 

  Real estate

 

 

5,771 

 

 

6,065 

 

 

18,204 

 

 

17,550 

  Inter-segment elimination

 

 

(2,181)

 

 

(2,008)

 

 

(6,918)

 

 

(5,575)



 

$

74,261 

 

$

66,116 

 

$

234,395 

 

$

208,037 

Segment operating income:

 

 

 

 

 

 

 

 

 

 

 

 

  Cinema exhibition

 

$

8,202 

 

$

6,703 

 

$

30,983 

 

$

25,581 

  Real estate

 

 

1,260 

 

 

1,578 

 

 

4,896 

 

 

5,683 



 

$

9,462 

 

$

8,281 

 

$

35,879 

 

$

31,264 



A reconciliation of segment operating income to income before income taxes is as follows:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Quarter Ended

 

Nine Months Ended



 

September 30,

 

September 30,

(Dollars in thousands)

 

2018

 

2017

 

2018

 

2017

Segment operating income

 

$

9,462 

 

$

8,281 

 

$

35,879 

 

$

31,264 

Unallocated corporate expense

 

 

 

 

 

 

 

 

 

 

 

 

    Depreciation and amortization expense

 

 

(92)

 

 

(108)

 

 

(313)

 

 

(321)

    General and administrative expense

 

 

(4,831)

 

 

(4,506)

 

 

(16,717)

 

 

(13,931)

    Interest expense, net

 

 

(1,748)

 

 

(1,663)

 

 

(5,132)

 

 

(5,310)

Equity earnings of unconsolidated joint ventures

 

 

80 

 

 

136 

 

 

667 

 

 

654 

Gain on sale of assets

 

 

 —

 

 

 —

 

 

 —

 

 

9,417 

Gain on insurance recoveries

 

 

 —

 

 

 —

 

 

 —

 

 

9,217 

Other income (expense)

 

 

(130)

 

 

89 

 

 

(273)

 

 

937 

Income before income tax expense

 

$

2,741 

 

$

2,229 

 

$

14,111 

 

$

31,927 

 

Note 2 – Summary of Significant Accounting Policies



Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries as well as majority-owned subsidiaries that the Company controls, and should be read in conjunction with the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2017 (“2017 Form 10-K”).  All significant intercompany balances and transactions have been eliminated on consolidation.  These consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting with the instructions

 

7


 

for Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”).  As such, they do not include all information and footnotes required by U.S. GAAP for complete financial statements. We believe that we have included all normal and recurring adjustments necessary for a fair presentation of the results for the interim period.



Operating results for the quarter and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.



Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Significant estimates include (i) projections we make regarding the recoverability and impairment of our assets (including goodwill and intangibles), (ii) valuations of our derivative instruments, (iii) recoverability of our deferred tax assets, (iv) estimation of breakage and redemption experience rates, which drive how we recognize breakage on our gift card and gift certificates, and revenue from our customer loyalty program, and (v) allocation of insurance proceeds to various recoverable components. Actual results may differ from those estimates.



Recently Adopted and Issued Accounting Pronouncements



Adopted:



1)

ASU 2014-09 Revenue from Contracts with Customers: On January 1, 2018, we adopted the new accounting standard ASC 606 Revenue from Contracts with Customers using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new standard to be immaterial to our net income and cash flows from operations on an ongoing basis.



Our cinema and food and beverage revenue continues to be recognized upon sale and completion of the provision of the movie or performance, or delivery of food and beverage items. Where necessary, revenue is deferred until these obligations are discharged. Property rentals continue to be recognized on a straight line basis, and live theatre license fees continue to be based on a percentage of weekly ticket sales. Under the new standard, rewards owed to and points accrued by members of our customer loyalty programs are held as deferred revenue. Revenue from unredeemed gift cards and certificates (known as “breakage” in our industry) is recognized in proportion to the pattern of rights exercised by the customer, when the Company expects that it is probable that a significant revenue reversal would not occur for any estimated breakage amounts.



The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09 Revenue from Contracts with Customers were as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Balance at
December 31,
2017

 

Adjustments
due to ASU
2014-09

 

Balance at
January 1,
2018

Assets

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

$

24,746 

 

$

(161)

 

$

24,585 

Liabilities

 

 

 

 

 

 

 

 

 

Deferred current revenue

 

$

9,850 

 

$

(355)

 

$

9,495 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

Retained earnings

 

$

33,056 

 

$

194 

 

$

33,250 



In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated income statement and balance sheet was as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Quarter Ended September 30, 2018

 

Nine months Ended September 30, 2018

(Dollars in thousands)

 

As Reported,

September 30, 2018

 

Balances
Without
Adoption of
ASC 606

 

Effect of
change
Higher /
(Lower)

 

As Reported,

September 30, 2018

 

Balances
Without
Adoption of
ASC 606

 

Effect of
change
Higher /
(Lower)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cinema

 

$

70,671 

 

$

71,185 

 

$

(514)

 

$

223,109 

 

$

223,372 

 

$

(263)

Income tax expense

 

 

(1,482)

 

 

(1,637)

 

 

(155)

 

 

(4,618)

 

 

(4,704)

 

 

(86)

Net income

 

$

1,297 

 

$

1,656 

 

$

(359)

 

$

9,405 

 

$

9,582 

 

$

(177)





 

8


 



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

As Reported,

September 30, 2018

 

Balances
Without
Adoption of
ASC 606

 

Effect of
change
Higher /
(Lower)

Assets

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

$

25,285 

 

$

25,199 

 

$

86 

Liabilities

 

 

 

 

 

 

 

 

 

Deferred current revenue

 

$

6,796 

 

$

6,533 

 

$

263 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

Retained earnings

 

$

42,655 

 

$

42,832 

 

$

(177)



Refer to Note 1: - Description of the Business and Segment Reporting for a disaggregation of our revenue sources.



Cinema Segment



Sales of cinema tickets and food and beverage (“F&B”) revenue: recognized when sold and collected, either in cash or by credit card at our theatre locations and through our online selling channels. Sales of bulk or advanced tickets are deferred and recognized as revenue when the ticket is used to gain admission to a particular movie.



Gift Card/Certificate Programs: We run gift card and gift certificate programs in all three countries. Revenue from these programs is deferred and recognized when redeemed. From January 1, 2018, we recognize revenue on unredeemed cards and certificates using the proportional method, whereby breakage revenue is recognized in proportion to the pattern of rights exercised by the customer when the Company expects that it is probable that a significant revenue reversal would not occur for any estimated breakage amounts. This is based on a breakage ‘experience rate’ which is determined by historical redemption data. 



Loyalty revenue: We run a customer loyalty program in every country. From January 1, 2018, a component of revenue from members of our loyalty programs relating to the earning of loyalty rewards is deferred until such a time as members redeem rewards, or until we believe the likelihood of redemption by the member is remote. Deferral is based on the progress made toward the next reward, the fair value of that reward, and the likelihood of redemption, determined by historical redemption data.



Advertising revenue: recognized based on contractual arrangements or relevant admissions information, as appropriate, when the related performance obligation is satisfied.



Real Estate



Live Theatre License Fees: We have real property interest in and license theatre space to third parties for the presentation of theatrical productions. Revenue is recognized in accordance with the license agreement, and is typically recorded on a weekly basis after the performance of a show has occurred.



Property Rentals:  We contractually retain substantially all of the risks and benefits of ownership of our real estate properties and therefore, we account for our tenant leases as operating leases.  Accordingly, rental revenue is recognized on a straight-line basis over the lease term. 

 

9


 

2)

On January 1, 2018, the Company adopted ASU 2016-18, Statement of Cash Flows, Topic 230: Restricted Cash, a consensus of the FASB Emerging Issues Task Force. This standard requires that amounts generally described as restricted cash and cash equivalents should be combined with unrestricted cash and cash equivalents when reconciling the beginning and end of period balances on the statement of cash flows. Adoption of this standard has no material effect on our consolidated statement of cash flows.



3)

On January 1, 2018, the Company adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). The standard applies to eight (8) specific cash flow classification issues, reducing the current and potential future diversity in the presentation of certain cash flows. Adoption of this standard has no material effect on our consolidated statement of cash flows.



4)

On January 1, 2018, the Company adopted ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.  This standard (i) requires that an employer disaggregate the service cost component from the other components of net benefit cost, and (ii) specifies how to present the service cost component and the other components of net benefit cost in the income statement and (iii) allows only the service cost component of net benefit cost to be eligible for capitalization.  Adoption of this standard has no material impact on our consolidated financial statements.



5)

On January 1, 2018, the Company adopted ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.  This ASU provides that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the asset is not a “business”, thus reducing the number of transactions that need further evaluation for business combination.   The standard has no material impact on our current consolidated financial statements, and we do not expect it to be applicable to our consolidated financial statements in the near term unless we enter into a definitive business acquisition transaction.



6)

On January 1, 2017, the Company adopted ASU 2016-09,  Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  This standard, which became effective for fiscal years beginning after December 15, 2016, provides for the simplification of several aspects of the accounting for share-based payment transactions, including (i) accounting for tax benefits in excess of compensation cost and tax deficiencies, (ii) accounting for forfeitures, and (iii) classification on the statement of cash flows. The only significant impact of the adoption of this standard to the Company is the immediate recognition of excess tax benefits (or “windfalls”) and tax deficiencies (or “shortfalls”) in the consolidated statement of income.  Previously, (i) tax windfalls were recorded in additional paid-in capital (“APIC”) in the consolidated statement of stockholders’ equity and (ii) tax shortfalls were recorded in APIC to the extent of previous windfalls and then to the consolidated statement of income. 



Issued:



v

ASUs Effective 2019 and Beyond

·

New Lease Accounting Model  (ASU 2016-02, Leases: Topic 842)



This standard, which becomes effective for the Company on January 1, 2019, establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.  Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  A modified retrospective transition approach is required for lessees with capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.  While we are still evaluating the impact of our pending adoption of this new standard on our consolidated financial statements, we expect that upon adoption we will recognize ROU assets and lease liabilities and that the amounts could be material since a majority of our operating cinemas are leased.  We have developed an implementation plan. Significant implementation matters that we are addressing include (i) assessment of lease population, (ii) determination of appropriate discount rate to use and (iii) assessment of renewal options to include in the initial lease term. While the Company is continuing to assess the effect of adoption, the Company currently believes the most significant changes relate to the recognition of new ROU assets and lease liabilities on its balance sheet for cinemas currently subject to operating leases.

·

Goodwill Impairment Simplification  (ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment)



Issued by FASB in January 2017, this standard removes the second step of the two-step impairment test for measuring goodwill and is to be applied on a prospective basis only. The new standard is effective for the Company on January 1, 2020, including interim periods within the year of adoption.  Early adoption is permitted for interim or annual goodwill impairment

 

10


 

tests performed on testing dates after January 1, 2017.  It is not anticipated that adoption of this standard will have any material impact on our consolidated financial statements.



Prior period financial statement correction of immaterial errors



During the third quarter of 2018, we identified immaterial errors related to the accounting for straight line rent receivable from tenants in our real estate operations dating back to 2015. These errors resulted in an understatement of real estate revenue.



We assessed the materiality of these errors on our financial statements for prior periods in accordance with the SEC Staff Accounting Bulletin (SAB) No. 99, Materiality, codified in Accounting Standards Codification (ASC) 250, Presentation of Financial Statements, and concluded that they were not material to any prior annual or interim periods. However, the aggregate amount of $440k related to the prior period immaterial errors through June 30, 2018, would have been material to the quarterly accounts with our current Consolidated Statements of Income. Consequently, in accordance with ASC 250 (specifically SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we have corrected these errors for all prior periods presented by revising the consolidated financial statements and other financial information included herein.



The following is a summary of the previously issued financial statement line items for all periods and statements included in this report.



Consolidated Statements of Income:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Quarter Ended September 30, 2017

 

Nine Months Ended September 30, 2017

(Dollars in thousands)

 

As Reported

 

Adjustment

 

As Revised

 

As Reported

 

Adjustment

 

As Revised

Real estate revenue

 

$

4,028 

 

 

29 

 

 

4,057 

 

$

11,892 

 

 

83 

 

 

11,975 

Total revenue

 

 

66,087 

 

 

29 

 

 

66,116 

 

 

207,954 

 

 

83 

 

 

208,037 

Operating income

 

 

3,638 

 

 

29 

 

 

3,667 

 

 

16,929 

 

 

83 

 

 

17,012 

Income before income taxes

 

 

2,200 

 

 

29 

 

 

2,229 

 

 

31,844 

 

 

83 

 

 

31,927 

Income tax expense

 

 

(742)

 

 

(8)

 

 

(750)

 

 

(8,291)

 

 

(25)

 

 

(8,316)

Net income

 

 

1,458 

 

 

21 

 

 

1,479 

 

 

23,553 

 

 

58 

 

 

23,611 

Net income attributable to Reading International, Inc. common shareholders

 

 

1,556 

 

 

21 

 

 

1,577 

 

 

23,619 

 

 

58 

 

 

23,677 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.07 

 

 

(0.00)

 

 

0.07 

 

$

1.02 

 

 

0.00 

 

 

1.02 

Diluted earnings per share

 

 

0.07 

 

 

(0.00)

 

 

0.07 

 

 

1.01 

 

 

0.00 

 

 

1.01 



Consolidated Balance Sheets:











 

 

 

 

 

 

 

 

 



 

Summary of Equity

(Dollars in thousands)

 

As Reported

 

Adjustment

 

As Revised

Equity at January 1, 2017

 

$

146,615 

 

 

275 

 

 

146,890 

Net income

 

 

23,553 

 

 

58 

 

 

23,611 

Equity at September 30, 2017

 

 

174,795 

 

 

333 

 

 

175,128 







 

 

 

 

 

 

 

 

 



 

As at December 31, 2017

(Dollars in thousands)

 

As Reported

 

Adjustment

 

As Revised

Deferred tax assets

 

$

24,908 

 

 

(162)

 

 

24,746 

Other assets

 

 

4,543 

 

 

539 

 

 

5,082 

Total assets

 

 

423,026 

 

 

377 

 

 

423,403 



 

 

 

 

 

 

 

 

 

Retained earnings

 

$

32,679 

 

 

377 

 

 

33,056 

Total stockholders' equity

 

 

181,241 

 

 

377 

 

 

181,618 





 

11


 

Consolidated Statements of Cash Flows:







 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2017

(Dollars in thousands)

 

As Reported

 

Adjustment

 

As Revised

Net income

 

$

23,553 

 

 

58 

 

 

23,611 

Change in net deferred tax assets

 

 

127 

 

 

25 

 

 

152 

Prepaid and other assets

 

 

1,745 

 

 

(83)

 

 

1,662 

Net cash provided by operating activities

 

 

8,755 

 

 

 —

 

 

8,755 

 

Note 3 – Operations in Foreign Currency



We have significant assets in Australia and New Zealand. Historically, we have conducted our Australian and New Zealand operations (collectively “foreign operations”) on a self-funding basis where we use cash flows generated by our foreign operations to pay for the expense of foreign operations.  Our Australian and New Zealand assets and liabilities are translated from their functional currencies of Australian dollar (“AU$”) and New Zealand dollar (“NZ$”), respectively, to the U.S. dollar based on the exchange rate as of September 30, 2018. The carrying value of the assets and liabilities of our foreign operations fluctuates as a result of changes in the exchange rates between the functional currencies of the foreign operations and the U.S. dollar. The translation adjustments are accumulated in the Accumulated Other Comprehensive Income in the Consolidated Balance Sheets.



Due to the natural-hedge nature of our funding policy, we have not historically used derivative financial instruments to hedge against the risk of foreign currency exposure.  However, in certain circumstances, we move funds between jurisdictions where circumstances encouraged us to do so from an overall economic standpoint. Going forward, particularly in light of recent tax law changes, we intend to take a more global view of our financial resources, and to be more flexible in making use of resources from one jurisdiction in other jurisdictions.



As of December 31, 2016, we determined that certain historically long-term intercompany loans from our parent company (Reading International, Inc.), to our Australian subsidiary were short-term in nature. Subsequently, on September 1, 2017, we determined that the remaining AU$21.1 million intercompany loans originally classified as long-term should be considered as short-term as well. We recognized a foreign exchange gain on these intercompany advances based on the relative strengthening of the Australian dollar to the U.S. dollar in the amount of $825,000 for the nine months ended September 30, 2017 in our Consolidated Statements of Income. These loans were paid in full on December 21, 2017.



Presented in the table below are the currency exchange rates for Australia and New Zealand:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



Foreign Currency / USD



As of and
for the
quarter
ended

 

As of and
for the
nine months ended

 

As of and
for the
twelve months
ended

 

As of and
for the
quarter
ended

 

As of and
for the
nine months ended



September 30, 2018

 

December 31, 2017

 

September 30, 2017

Spot Rate

 

 

 

 

 

 

 

 

 

Australian Dollar

0.7238

 

0.7815

 

0.7840

New Zealand Dollar

0.6635

 

0.7100

 

0.7225

Average Rate

 

 

 

 

 

 

 

 

 

Australian Dollar

0.7311

 

0.7580

 

0.7670

 

0.7899

 

0.7664

New Zealand Dollar

0.6685

 

0.7002

 

0.7111

 

0.7307

 

0.7159

 

Note 4 – Earnings Per Share



Basic earnings per share (“EPS”) is calculated by dividing the net income attributable to the Company’s common stockholders by the weighted average number of common shares outstanding during the period.  Diluted EPS is calculated by dividing the net income attributable to the Company’s common stockholders by the weighted average number of common and common equivalent shares outstanding during the period and is calculated using the treasury stock method for equity-based compensation awards



 

12


 

The following table sets forth the computation of basic and diluted EPS and a reconciliation of the weighted average number of common and common equivalent shares outstanding:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Quarter Ended

 

Nine Months Ended



 

September 30,

 

September 30,

(Dollars in thousands, except share data)

 

2018

 

2017

 

2018

 

2017

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to RDI common stockholders

 

$

1,297 

 

$

1,577 

 

$

9,405 

 

$

23,677 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common stock – basic

 

 

23,006,040 

 

 

22,968,017 

 

 

22,988,227 

 

 

23,101,619 

Weighted average dilutive impact of awards

 

 

191,884 

 

 

244,615 

 

 

196,794 

 

 

244,615 

Weighted average number of common stock – diluted

 

 

23,197,924 

 

 

23,212,632 

 

 

23,185,021 

 

 

23,346,234 

Basic EPS attributable to RDI common stockholders

 

$

0.06 

 

$

0.07 

 

$

0.41 

 

$

1.02 

Diluted EPS attributable to RDI common stockholders

 

$

0.06 

 

$

0.07 

 

$

0.41 

 

$

1.01 

Awards excluded from diluted EPS

 

 

276,681 

 

 

149,841 

 

 

126,840 

 

 

149,841 



Our weighted average number of common stock - basic decreased during the three and nine months ended September 30, 2018, primarily as a result of the repurchase of shares of Class A Non-Voting Common Stock pursuant to our current stock repurchase program offset by the issuance of shares due to the exercise of share options and vesting of restricted stock units.

 

Note 5 – Property and Equipment



Operating Property, net



As of September 30, 2018 and December 31, 2017, property associated with our operating activities is summarized as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,

(Dollars in thousands)

 

2018

 

2017

Land

 

$

76,472 

 

$

76,457 

Building and improvements

 

 

152,054 

 

 

153,232 

Leasehold improvements

 

 

55,277 

 

 

48,481 

Fixtures and equipment

 

 

163,433 

 

 

145,033 

Construction-in-progress

 

 

5,351 

 

 

26,000 

Total cost

 

 

452,587 

 

 

449,203 

Less: accumulated depreciation

 

 

(191,448)

 

 

(184,479)

Operating property, net

 

$

261,139 

 

$

264,724 



Depreciation expense for operating property was $5.4 million and $15.6 million for the quarter and nine months ended September 30, 2018 and $4.0 million and $11.8 million for the quarter and nine months ended September 30, 2017, respectively.



Investment and Development Property, net



As of September 30, 2018 and December 31, 2017, our investment and development property is summarized below:





 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,

(Dollars in thousands)

 

2018

 

2017

Land

 

$

23,961 

 

$

25,025 

Building

 

 

1,900 

 

 

1,900 

Construction-in-progress (including capitalized interest)

 

 

54,225 

 

 

34,329 

Investment and development property

 

$

80,086 

 

$

61,254 



 

13


 

Construction-in-Progress – Operating and Investing Properties



Construction-in-Progress balances are included in both our operating and development properties. The balances of our major projects along with the movements for the nine months ended September 30, 2018 are shown below:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Balance,
December 31,
2017

 

Additions during the period(1)

 

Completed
during the
period

 

Foreign
currency
translation

 

Balance,
September 30,
2018

Union Square development

 

$

29,223 

 

$

20,268 

 

$

 —

 

$

 —

 

$

49,491 

Newmarket Property development

 

 

370 

 

 

561 

 

 

(636)

 

 

(51)

 

 

244 

Courtenay Central development

 

 

4,676 

 

 

101 

 

 

 —

 

 

(309)

 

 

4,468 

Cinema developments and improvements

 

 

19,015 

 

 

11,441 

 

 

(26,705)

 

 

(95)

 

 

3,656 

Other real estate projects

 

 

7,045 

 

 

3,564 

 

 

(8,508)

 

 

(384)

 

 

1,717 

Total

 

$

60,329 

 

$

35,935 

 

$

(35,849)

 

$

(839)

 

$

59,576 



(1)

Includes capitalized interest of $720,000 and $2.1 million for the quarter and nine months ended September 30, 2018, respectively.



Real Estate Transactions



Sale of Land in Burwood, Australia

On December 14, 2017, we received $28.1 million (AU$36.6 million) representing the final payment with respect to the $50.6 million (AU$65.0 million) sale price of our property in Burwood, Victoria, Australia.  Previously, partial payments of $16.6 million (AU$21.8 million) and $5.9 million (AU$6.5 million) were received on June 19, 2017 and May 23, 2014.



Purchase of Land in Townsville, Australia

On June 13, 2018, we acquired a 163,000 square foot (