Reading International Q3 2012 earnings release
Reading International (NASDAQ-RDI) recently reported its Sept Q3 2012 results. While we are still waiting for the more detailed 10-Q for the period to be filed, our summary of salient points identified so far is below.
Sept Q3 2012 10-Q: not yet filed - URL TBD
summary of salient points:
• Reading Int’l Q3, 2012 Revenues down y/y from stronger 2011, while YTD 2012 Revenues remain up vs 2011. Total Q3 revenues declined 3.9% from prior year, led by a 4.2% y/y revenue decline in Reading’s larger Cinema segment, “offset” by flat revenues in its smaller Real Estate segment. Cinema segment revenue declines were primarily the result of y/y decreases in Australia and New Zealand currency rates and Australia attendance and average ticket price declines, offset by improvements in New Zealand and US cinema revenues. Overall Q3 industry box office in Reading’s US, Australia and New Zealand markets were down y/y with the US industry box office declining 6.7% - far greater than Reading’s decline. The reopening of a major New Zealand multiplex closed from prior year earthquake damage contributed to that market’s gain despite y/y currency headwinds. Real Estate segment revenues enjoyed growth in Australia offset by declines in New Zealand rental income and US live theater revenues as well as y/y Australian and New Zealand currency weakness.
• Q3 Operating Income (EBIT) and adjusted Operating EBITDA (Op Income + Dptn/Amort) down from prior year. Reading’s quarterly operating cash flow was lower than prior year from y/y declines in both its Cinema and Real estate segments that more than offset reduced y/y corporate overhead expenses. Cinema Segment margins declines vs prior year, were impacted from negative operating leverage in theaters and non-recurring opening expenses for its new Angelika Film Center Mosaic in the DC suburbs. Real Estate cash flow was down vs. prior year from higher expenses on development properties that do not yet generate revenues and some non-recurring legal costs.
• Q3 2012 Net Interest expense substantially lower than than 2011. Q3 2012 Net Interest expense was down 44% or $3.1MM from prior year. This substantial decline was the result of a sizable 475 bps interest rate reduction on Reading’s $27.9MM of Trust Preferred Securities, whose interest rate now floats quarterly at 3-month LIBOR plus 4.00%. Also contributing to the net interest expense decline was a lower mark-to-market adjustment on interest rate swaps vs. prior year.
• Q3’s Net Income of $0.4MM was higher than prior year as the substantial decrease in net interest expense more than offset Q3’s decline in operating income.
• Global box office releases scheduled for Q4 2012 contain several well known ‘franchise’ blockbusters and a number of 3D movies, include Argo, Les Miserables, The Hobbit: An Unexpected Journey, the Great Gatsby, Django Unchained, Lincoln, the next installments in the James Bond series and the Twilight series, Breaking Dawn Part 2.
• Reading’s Book Value of $5.61/share is an increase of 7% over prior year and up 3.3% vs. last quarter. We believe Reading’s book value still greatly understates the current fair market value of Reading’s Australian, New Zealand, New York and Chicago real estate, much of which has appreciated in value over more than a decade of ownership, from population growth, up-zoning, and in some instances, development into rent-generating parcels. At December 31, 2011, Reading had $95.1MM in tax NOL’s ($45.9MM and $15.8 MM of Australian and New Zealand tax NOL’s, without any expiration date, respectively, and $33.4MM of US NOL’s not expiring until at least 2025.)
• Reading finished the September quarter with substantial liquidity. At September 30, 2012, Reading had cash and marketable securities of $33MM plus a combined $25.3MM of undrawn availability on its several lines of credit. Additionally, Reading has several unencumbered parcels and an effective shelf registration for up to $100MM of securities to enable Reading to act quickly to finance growth transactions. Reading’s 9/30/12 debt, net of the above-mentioned cash is $169.3MM, $5.7MM lower than prior year, as a result of strong LTM cash flow generation.