Reading International(RDIB) - 2022 Q4 - Annual Report

PART I Item 1 – Our Business Reading International operates diversified cinema and real estate segments across the U.S., Australia, and New Zealand, recovering from pandemic impacts through strategic asset sales and operational improvements - The company operates through two primary segments: Theatrical Motion Picture Exhibition (62 cinemas) and Real Estate (development and rental of retail, commercial, and live theatre assets)[19] - The COVID-19 pandemic materially impacted the cinema business, leading to temporary closures and a halt in revenues; the company monetized five non-core assets to manage liquidity[17] Revenue Trend (2019-2022) | Year | Total Revenue (in millions) | | :--- | :--- | | 2022 | $203.1 | | 2021 | $139.1 | | 2020 | $77.9 | | 2019 (Pre-pandemic) | $276.8 | - In response to pandemic-related cash flow issues, the company monetized non-core real estate assets, generating net proceeds of $139.4 million in 2021, used to pay down debt and cover operating expenses[27][28] Debt and Cash Position (2021-2022) | Metric | Dec 31, 2022 (in millions) | Dec 31, 2021 (in millions) | | :--- | :--- | :--- | | Cash and Cash Equivalents | $29.9 | $83.3 | | Net Bank Debt | $215.6 | $236.9 | - As of December 31, 2022, the company operates 62 cinemas with 505 screens across the U.S., Australia, and New Zealand, with 52 locations leased and 10 owned[43] 2022 Cinema Revenue Breakdown | Revenue Source | Percentage of 2022 Cinema Revenue | | :--- | :--- | | Box Office Receipts | 58% | | Food & Beverage (F&B) Sales | 34% | | Screen Advertising & Other | 8% | - The company's real estate portfolio includes two live theatres in Manhattan, the 44 Union Square property, and several Entertainment-Themed Centers (ETCs) in Australia and New Zealand[41] Asset Distribution by Book Value (Dec 31, 2022) | Category | Percentage of Assets | | :--- | :--- | | By Segment | | | Cinema Exhibition | 46% | | Real Estate | 42% | | By Country | | | United States | 58% | | Australia | 34% | | New Zealand | 8% | Item 1A – Risk Factors The company faces significant business risks primarily in its cinema and real estate operations, including pandemic vulnerability, intense competition, digital economy impacts, and substantial debt maturities - The cinema business is highly vulnerable to pandemics like COVID-19, leading to closures, reduced capacity, and direct impacts on revenue[115] - The company faces significant competition from in-home and mobile entertainment sources, pressuring film distributors to shorten or eliminate exclusive theatrical release windows[117] - Competition from larger exhibitors like AMC, Regal, and Cinemark, who control over 57% of the North American market, may adversely impact the company's access to top-grossing films[55][120] - The real estate business is at risk from the growth of e-commerce and the trend of remote work, potentially reducing the company's ability to lease properties at historical rent levels[128] - The company is subject to foreign currency risk as a substantial portion of its revenue and obligations are denominated in Australian and New Zealand dollars, and it does not hedge this currency risk[143] - The company has substantial short- to medium-term debt and typically operates with negative working capital, a common characteristic in the cinema industry[147][149] - Margaret Cotter beneficially owns 69% of the outstanding Class B voting stock, giving her unilateral power over board elections and stockholder votes[156][157] - Due to its ownership structure, the company is a "Controlled Company" under NASDAQ regulations and has opted out of certain corporate governance rules[162] Item 1B – Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[164] Item 2 – Properties The company owns approximately 728,000 square feet of income-producing properties and leases 2,067,000 square feet of cinema space across its U.S., Australia, and New Zealand operations Owned Operating Property Summary (as of Dec 31, 2022) | Property Type | Square Feet (Improvements) | Net Book Value (in thousands) | | :--- | :--- | :--- | | United States | | | | 44 Union Square | 73,000 | $99,614 | | Culver City Office | 25,000 | $11,896 | | Cinemas 1,2,3 | 24,000 | $24,163 | | Australia | | | | Newmarket Village | 144,000 | $40,471 | | Cannon Park | 133,000 | $19,219 | | New Zealand | | | | Courtenay Central | 114,000 | $8,254 | | Total | ~728,000 | $228,761 | Leased Entertainment Properties (as of Dec 31, 2022) | Region | Aggregate Square Footage | | :--- | :--- | | United States | 942,000 | | Australia | 901,000 | | New Zealand | 224,000 | | Total | 2,067,000 | - The company holds an investment and development property at Courtenay Central, Wellington, New Zealand, with a net book value of $8.8 million, which is planned for redevelopment[172] Item 3 – Legal Proceedings The company is involved in legal proceedings, notably a $4.0 million California employment litigation settlement pending approval and a resolved New Zealand lease arbitration with no settlement paid - The company has agreed to settle overlapping wage and hour claims related to its California cinema operations for $4.0 million, with final court approval scheduled for April 18, 2023[473] - An arbitration claim concerning a 2013 Agreement to Lease in New Zealand was resolved in August 2022, with the agreement terminated and no settlement amounts paid by either party[474] Item 4 – Mine Safety Disclosures This item is not applicable to the company - Not Applicable[178] PART II Item 5 – Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A and B common stock trade on NASDAQ, with no history or current plans for cash dividends, and underperformed in 2022 due to pandemic impacts and unfavorable currency rates - The company's Class A Non-voting (RDI) and Class B Voting (RDIB) common stock are traded on the NASDAQ[180] - The company has never declared a cash dividend on its common stock and has no current plans to do so[180] - The company's stock underperformed in 2022 compared to the market due to the COVID-19 pandemic's aftermath, delayed movie releases, and a weakening foreign currency exchange rate[183] Item 6 – Selected Financial Data This item is no longer required as the company has adopted amendments to Regulation S-K that eliminate this disclosure requirement - Part II, Item 6 is no longer required as the Company has adopted certain provisions within the amendments to Regulation S-K that eliminate Item 6[185] Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") In 2022, the company reported a net loss of $36.2 million, primarily due to the absence of a $92.3 million asset sale gain from 2021, while cinema and real estate operating performance improved - The company's operations began to return to normal in 2022 as health restrictions loosened and studio film releases improved, though cinema attendance remains below pre-pandemic levels[192] Consolidated Results (2022 vs. 2021) | Metric (in millions) | 2022 | 2021 | | :--- | :--- | :--- | | Net Income (Loss) attributable to RDI | $(36.2) | $31.9 | | Gain on Sale of Assets | $(0.1) | $92.2 | | Cinema Operating Income (Loss) | $(11.7) | $(18.6) | | Real Estate Operating Income (Loss) | $0.5 | $(5.4) | - The decrease in net income for 2022 was primarily due to the one-time $92.3 million gain on asset sales in 2021, which was part of a strategic monetization to address liquidity needs during the pandemic[224] Cinema Segment Revenue by Country (2022 vs. 2021) | Country (in millions) | 2022 Revenue | 2021 Revenue | % Change | | :--- | :--- | :--- | :--- | | United States | $97.1 | $59.9 | 62% | | Australia | $79.9 | $55.3 | 44% | | New Zealand | $14.3 | $11.6 | 24% | | Total | $191.3 | $126.8 | 51% | - Real estate segment operating income improved by $5.9 million in 2022, driven by increased intercompany rent, reduced vacancy, and full-year operation of New York live theatres[241] Liquidity and Capital Resources Summary | Metric (in millions) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $29.9 | $83.3 | | Total debt (gross) | $215.6 | $236.9 | | Working capital (deficit) | $(74.2) | $(6.7) | | Net cash used in operating activities | $(26.4) | $(13.5) | - The company has significant debt maturities in the coming years, with $38.0 million due in 2023 and $140.3 million due in 2024[264] Item 7A – Quantitative and Qualitative Disclosure about Market Risk The company's primary market risks are foreign currency exchange rate fluctuations and interest rate changes, with significant foreign currency exposure and a 1% interest rate change impacting 2022 interest expense by approximately $2.2 million - As of December 31, 2022, approximately 34% of the company's assets were denominated in Australian dollars and 8% in New Zealand dollars, exposing the company to foreign currency translation risk[285] - The company manages currency exposure through natural hedges, such as borrowing in local currencies, but does not currently plan to hedge its foreign currency exposure with derivatives[272][289] - A hypothetical 1% change in short-term interest rates would have resulted in a $2.2 million change in the company's 2022 interest expense, indicating exposure to interest rate risk[293] - Approximately $177.7 million of the company's current borrowings will mature over the next 24 months, posing a refinancing risk as they are unlikely to be refinanced at current interest rates[274] Item 8 – Financial Statements and Supplementary Data The consolidated financial statements for 2022 show total assets decreased to $587.1 million and a net loss of $36.7 million, primarily due to the absence of significant 2021 asset sale gains Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets | $47,512 | $100,306 | | Total Assets | $587,055 | $687,702 | | Total Current Liabilities | $121,664 | $106,979 | | Total Liabilities | $523,776 | $582,642 | | Total Stockholders' Equity | $63,279 | $105,060 | Consolidated Statement of Operations Data (for year ended Dec 31) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenues | $203,115 | $139,060 | $77,862 | | Operating Income (Loss) | $(28,483) | $(41,793) | $(61,313) | | Gain (Loss) on Sale of Assets | $(54) | $92,219 | $(1) | | Net Income (Loss) | $(36,660) | $34,814 | $(65,857) | Consolidated Statement of Cash Flows Data (for year ended Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(26,351) | $(13,498) | | Net cash provided by (used in) investing activities | $(9,486) | $129,610 | | Net cash provided by (used in) financing activities | $(16,557) | $(50,280) | | Net (decrease) increase in cash | $(53,592) | $61,737 | - In 2021, the company completed several major real estate monetizations, including the sale of its Auburn/Redyard ETC for $69.6 million, Manukau land for $56.1 million, and Coachella land for $11.0 million, significantly boosting cash and gains[395][396][398] - As of December 31, 2022, the company had total debt of $215.6 million, with significant maturities including a $22.5 million loan due July 3, 2023, and a $26.8 million facility maturing March 1, 2024 (both subsequently extended)[383][433][441] Item 9 – Change in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[519] Item 9A – Controls and Procedures Management concluded the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[521] - There were no changes in internal control over financial reporting during the fourth quarter that have materially affected, or are reasonably likely to materially affect, these controls[522] PART III Items 10, 11, 12, 13 and 14 Information for Part III, covering directors, executive compensation, and related matters, is incorporated by reference from the company's 2023 Proxy Statement - Information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference from the company's definitive Proxy Statement for its 2023 Annual Meeting of Stockholders[527] PART IV Item 15 – Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, with many incorporated by reference from previous filings - This section contains the list of financial statements, schedules, and exhibits filed with the annual report[530]