Reading International Reports First Quarter 2024 Results
Reading International (NASDAQ: RDI) reported its Q1 2024 results, revealing a 2% revenue drop to $45.1 million, operating loss improvement to $7.5 million, but a net loss increase to $13.2 million. The 2023 Hollywood Strikes disrupted cinema revenues, although cinema expenses were reduced, and two real estate assets were monetized to support operations. The real estate division still delivered strong first quarter results. Adjusted EBITDA loss rose to $4 million. Exchange rate fluctuations also impacted the results. A robust upcoming film schedule is expected to boost future cinema revenues. The company plans further real estate sales to enhance liquidity.
- Operating loss improved by 4% to $7.5 million.
- Real estate business delivered the second highest first quarter revenues and operating income since Q1 2019.
- Total debt reduced by $14.6 million to $195.7 million as of March 31, 2024.
- US cinema business exceeded industry performance by 670 basis points despite a 5.1% downturn in the North American Box Office.
- Opened two new state-of-the-art theaters in Australia.
- Signed a two-year extension of the license agreement with AO Media for the Minetta Lane Theatre.
- Total revenues decreased by 2% to $45.1 million.
- Adjusted EBITDA loss increased by 40% to $4 million.
- Basic loss per share weakened by 18% to $0.59.
- Net loss attributable to Reading increased by 19% to $13.2 million.
- Exchange rate fluctuations negatively impacted overall financial results.
- Real estate segment revenue decreased by 3% to $4.9 million.
- Real estate segment operating income decreased by 12% to $0.9 million.
- Loss on the sale of the Culver City office building impacted net loss.
- Need to raise additional liquidity and reduce overall debt structure.
Insights
The first quarter of 2024 for Reading International displayed mixed results. Total revenues slightly dipped by
On the balance sheet side, the total gross debt stood at
From an investor perspective, the improved operational efficiency and debt management are positives, but the increased net loss and significant Adjusted EBITDA loss are concerning. Investors should keep an eye on the company’s future efforts to boost cinema revenues and further reduce debt.
Reading International’s cinema segment faced headwinds due to the delayed movie releases from the 2023 Hollywood strikes. However, their ability to slightly increase their US market share and outperform industry performance by 670 basis points despite a
Looking forward, the 2024 and 2025 film schedules look promising, with highly anticipated releases that could significantly boost cinema revenue. This optimistic outlook could provide a substantial turnaround if film releases proceed without further disruptions. The addition of new state-of-the-art theaters in Australia, featuring premium amenities, is also a strategic move to attract more moviegoers and enhance revenue streams.
In the real estate segment, the slight decrease in revenue and operating income due to the monetization of assets is offset by the solid performance of their Australian Real Estate division, which achieved its highest quarterly operating income since 2018. The company’s strategy to sell underperforming assets while maintaining operational efficiency through lease-backs is a prudent move to bolster liquidity and focus on high-performing assets.
Overall, these strategic moves and market performance indicate a cautiously optimistic outlook for the company, albeit with some risks related to liquidity and debt management.
The economic environment, particularly currency fluctuations, has negatively impacted Reading International’s financial results. The weakening of the Australian and New Zealand dollars against the US dollar by
The company’s monetization of real estate assets to improve liquidity is a strategic approach. However, it also highlights the underlying challenges in generating sufficient cash flows from core operations. The current strategy of marketing additional properties for sale, while pursuing lease-back arrangements, may provide short-term liquidity but also involves long-term risks if the core cinema operations do not recover as anticipated.
From a macroeconomic perspective, the company’s efforts to amend and extend debt facilities are important to manage cash flow and avoid liquidity crunches. The ability to renegotiate and extend loan maturities reflects positively on the company's relationships with lenders and its proactive approach to managing financial obligations.
Investors should remain cautious, closely monitor economic indicators and watch for any signs of improvement in cinema revenues as the movie release schedules stabilize.
Earnings Call Webcast to Discuss First Quarter Financial Results
Scheduled to Post to Corporate Website on Friday, May 17, 2024
NEW YORK, May 15, 2024 (GLOBE NEWSWIRE) -- Reading International, Inc. (NASDAQ: RDI) (“Reading” or our “Company”), an internationally diversified cinema and real estate company with operations and assets in the United States, Australia, and New Zealand, today announced its results for the First Quarter ended March 31, 2024.
First Quarter 2024 Summary Results
During the First Quarter 2024, the disrupted movie release schedule caused by the 2023 Hollywood Strikes continued to negatively impact our financial results. Despite these revenue setbacks, our global operations teams managed our cinema expenses to reduce our overall First Quarter 2024 operating loss. As our cinema business endured these temporary challenges, to support our overall global operations over the last six months we monetized two real estate assets – our Maitland property in NSW (Australia) and our office building in Culver City, California. Despite the loss of revenues and income from these two property assets, our First Quarter 2024 real estate business delivered the second highest first quarter revenues and operating income since the first quarter of 2019, which demonstrates the strength of our real estate assets, operations and management teams.
- Total Revenues decreased slightly by
2% (or$0.8 million ) to$45.1 million compared to$45.8 million in Q1 2023. - Operating Loss improved by
4% (or$0.3 million ) to a loss of$7.5 million compared to a Q1 2023 operating loss of$7.9 million . - Adjusted EBITDA loss of
$4 million increased by40% from a negative$2.8 million in Q1 2023. - Basic loss per share weakened by
18% (or$0.09) t o a loss of$0.59 compared to a loss of$0.50 for Q1 2023. - Net loss attributable to Reading increased by
19% to a loss of$13.2 million compared to a loss of$11.1 million , primarily driven by increased interest expense and a loss on the sale of our Culver City office building which closed in February 2024.
The Australian dollar average exchange rates weakened against the U.S. dollar by
President and Chief Executive Officer, Ellen Cotter said, “We're encouraged by the resilience of our Company to weather the recent hurdles. The 2023 Hollywood Strikes caused delays in major studio releases leading to a dip in cinema revenues during the First Quarter of 2024. However, we reduced our operating loss reflecting enhanced operational efficiency. We believe that as the effects of the 2023 Hollywood Strikes fade, a movie release schedule that is fuller and more compelling will boost cinema revenues through the next three quarters of 2024 and into 2025. The remainder of the 2024 film schedule is robust, featuring highly anticipated releases such as Inside Out 2, Deadpool & Wolverine, Joker: Folie à Deux, Wicked, and Gladiator 2. The outlook for 2025 is equally promising, with Disney planning nearly twice as many releases compared to 2024, benefiting from the studio's renewed emphasis on creativity and original storytelling. In addition, 2025 will see James Cameron's Avatar 3, Tom Cruise in Mission: Impossible 8, a new Jurassic World film from Universal, and James Gunn's Superman from DC Studios for Warner Bros. These upcoming blockbusters are expected to energize the box office and keep moviegoers engaged.”
Ms. Cotter continued “As our global cinema business continues its recovery from both the pandemic and the 2023 Hollywood Strikes, we need to raise additional liquidity to support our operations through 2024 and reduce our overall debt structure, so we’ll again turn to our real estate portfolio. In the last six months, we have generated
“Our real estate operations continue to deliver solid results. Our First Quarter 2024 Australian Real Estate division achieved the highest quarterly operating income since Q2 2018. And, we delivered improved quarterly operating results in our Live Theatre division and in April 2024, we executed (i) a two-year extension of our license agreement with AO Media, LLC, an affiliate of Audible, at the Minetta Lane Theatre and (ii) a license agreement for an open-ended run of The Big Gay Jamboree being produced by, among others, LuckyChap Entertainment, Margot Robbie’s production company also behind Barbie. The Big Gay Jamboree starts performances at the Orpheum in mid-September 2024.”
Key Points
Cinema Business
- At
$41.3 million , our Q1 2024 global cinema revenue slightly decreased by2% compared to Q1 2023. At$4.2 million , our Q1 2024 cinema operating loss decreased by$0.4 million , or10% , compared to an operating loss of$4.6 million during Q1 2023. - Despite a
5.1% downturn in the North American Box Office, our U.S. Cinema business exceeded industry performance by 670 basis points and augmented our U.S. market share by 5 basis points, despite closing three theaters. This result is attributed to the exceptional performance of our arthouses headlined by films such as Zone of Interest, American Fiction, All of Us Strangers, Problemista and Perfect Days. Notably, the Angelika in New York distinguished itself as North America’s top-performing theater for Zone of Interest, All of Us Strangers, Problemista and Perfect Days. - Our revenues were further enhanced by the opening of two new state-of-the-art theaters in Australia, each featuring recliners and elevated F&B: (i) an eight-screen Angelika boutique cinema at South City Square, Brisbane QLD and (ii) a five-screen Reading Cinemas with TITAN LUXE in Busselton, Western Australia.
- Over the last twelve months to improve the long-term profitability of our U.S. Cinema circuit, we closed (i) two Consolidated Theatres in Hawaii in the third quarter of 2023 and (ii) a 16 screen Reading Cinema in California in the fourth quarter of 2023.
- We have one additional Reading Cinema in the pipeline in Australia located in Noosa (Queensland).
Real Estate Business
- Real estate segment revenue for Q1 2024 decreased by
$0.1 million (or3% ) to$4.9 million , compared to$5.1 million in Q1 2023. Real estate segment operating income for Q1 2024 decreased by$0.1 million (or12% ) to$0.9 million compared to a real estate segment operating income of$1.0 million in Q1 2023. - The changes between the first quarter of 2024 and the first quarter of 2023 were partially attributable to the monetizations of our Culver City office building and our Maitland property (NSW).
Balance Sheet and Liquidity
- As of March 31, 2024, our cash and cash equivalents were
$7.5 million . - As of March 31, 2024, we had total gross debt of
$195.7 million , which represents a$14.6 million reduction in debt since December 31, 2023, when our gross debt was$210.3 million . - As of March 31, 2024, our assets had a total book value of
$494.9 million as compared to a book value of$533.1 million as of December 31, 2023.
- To continue supporting our overall liquidity, during the first quarter we monetized our office building at 5995 Sepulveda Blvd. Culver City, California for
$10.0 million . Also, in the fourth quarter of 2023, we monetized our underperforming Maitland Australia (NSW) property for AU$2.8 million and leased back the 4-screen Reading Cinema on a short-term basis, both of which positively impacted cash but contributed to this quarter’s weakening in Real Estate Revenues. Despite generating a loss of$1.1 million from the sale, our decision to monetize our Culver City office building was influenced by the fact that, given the availability on favorable terms of office space elsewhere in Los Angeles and our reduced space needs in California, we believe that a relocation of this office space could save us approximately$1.5million in expense between now and the end of 2025. - Through Q1 2024, we worked closely with our other lenders to amend our existing debt facilities and extend upcoming maturity dates.
- On January 26, 2024, we extended the maturity date of the loan secured by our Off-Broadway theatres in NYC to June 1, 2024.
- On February 23, 2024, we repaid the
$8.35 million loan on our Culver City office building following the sale of the asset. - On March 27, 2024, we amended the Bank of America/Bank of Hawaii loan by extending the maturity to August 18, 2025 and reducing certain principal repayment amounts.
- On April 4, 2024, with respect to our loan from National Australia Bank, we extended the maturity date to July 31, 2026, and negotiated a Bridge Facility of A
$20 million due March 31, 2025 (to be prepaid upon the sale of certain assets). - Most recently, on April 23, 2024, we closed the 1-year extension option on our 44 Union Square loan to extend the maturity date to May 6, 2025. We have one remaining one year option.
Conference Call and Webcast
We plan to post our pre-recorded conference call and audio webcast on our corporate website on Friday, May 17, 2024, which will feature prepared remarks from Ellen Cotter, President and Chief Executive Officer; Gilbert Avanes, Executive Vice President, Chief Financial Officer and Treasurer; and Andrzej Matyczynski, Executive Vice President - Global Operations.
A pre-recorded question and answer session will follow our formal remarks. Questions and topics for consideration should be submitted to InvestorRelations@readingrdi.com on May 16, 2024 by 5:00 p.m. Eastern Time. The audio webcast can be accessed by visiting https://investor.readingrdi.com/financial-information/quarterly-results.
About Reading International, Inc.
Reading International, Inc. (NASDAQ: RDI), an internationally diversified cinema and real estate company operating through various domestic and international subsidiaries, is a leading entertainment and real estate company, engaging in the development, ownership, and operation of cinemas and retail and commercial real estate in the United States, Australia, and New Zealand.
Reading’s cinema subsidiaries operate under multiple cinema brands: Reading Cinemas, Angelika Film Centers, Consolidated Theatres, and the State Cinema by Angelika. Its live theatres are owned and operated by its Liberty Theaters subsidiary, under the Orpheum and Minetta Lane names. Its signature property developments are maintained in special purpose entities and operated under the names Newmarket Village, Cannon Park, and The Belmont Common in Australia, Courtenay Central in New Zealand, and 44 Union Square in New York City.
Additional information about Reading can be obtained from our Company's website: http://www.readingrdi.com.
Cautionary Note Regarding Forward-Looking Statements
This earnings release contains a variety of forward-looking statements as defined by the Securities Litigation Reform Act of 1995, including those related to our expected operated results; our belief regarding our business structure and diversification strategy; our belief regarding the quality, the quantity and the appeal of upcoming movie releases in the remainder of 2024 and 2025 and our revenue expectations relating to such movie releases; our expectations regarding our monetization of our fee interests under our cinemas; our beliefs regarding the upcoming movie slates, the refocus of film distributors and its impact on our business; and our expectations of our liquidity and capital requirements and the allocation of funds. You can recognize these statements by our use of words, such as “may,” “will,” “expect,” “believe,” and “anticipate” or other similar terminology.
Given the variety and unpredictability of the factors that will ultimately influence our businesses and our results of operation, no guarantees can be given that any of our forward-looking statements will ultimately prove to be correct. Actual results will undoubtedly vary and there is no guarantee as to how our securities will perform either when considered in isolation or when compared to other securities or investment opportunities.
Forward-looking statements made by us in this earnings release are based only on information currently available to us and speak only as of the date on which they are made. We undertake no obligation to publicly update or to revise any of our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. Accordingly, you should always note the date to which our forward-looking statements speak.
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those factors discussed throughout Part I, Item 1A – Risk Factors – and Part II Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations – of our Annual Report on Form 10-K for the most recently ended fiscal year, as well as the risk factors set forth in any other filings made under the Securities Act of 1934, as amended, including any of our Quarterly Reports on Form 10-Q, for more information.
Reading International, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(Unaudited; U.S. dollars in thousands, except per share data)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | ||||||||
| Cinema | $ | 41,271 | $ | 41,987 | ||||
| Real estate | 3,781 | 3,820 | ||||||
| Total revenue | 45,052 | 45,807 | ||||||
| Costs and expenses | ||||||||
| Cinema | (40,720 | ) | (41,654 | ) | ||||
| Real estate | (2,235 | ) | (2,215 | ) | ||||
| Depreciation and amortization | (4,205 | ) | (4,639 | ) | ||||
| General and administrative | (5,423 | ) | (5,179 | ) | ||||
| Total costs and expenses | (52,583 | ) | (53,687 | ) | ||||
| Operating income (loss) | (7,531 | ) | (7,880 | ) | ||||
| Interest expense, net | (5,286 | ) | (4,117 | ) | ||||
| Gain (loss) on sale of assets | (1,125 | ) | — | |||||
| Other income (expense) | 341 | 174 | ||||||
| Income (loss) before income tax expense and equity earnings of unconsolidated joint ventures | (13,601 | ) | (11,823 | ) | ||||
| Equity earnings of unconsolidated joint ventures | (25 | ) | 19 | |||||
| Income (loss) before income taxes | (13,626 | ) | (11,804 | ) | ||||
| Income tax benefit (expense) | 223 | 480 | ||||||
| Net income (loss) | $ | (13,403 | ) | $ | (11,324 | ) | ||
| Less: net income (loss) attributable to noncontrolling interests | (175 | ) | (213 | ) | ||||
| Net income (loss) attributable to Reading International, Inc. | $ | (13,228 | ) | $ | (11,111 | ) | ||
| Basic earnings (loss) per share | $ | (0.59 | ) | $ | (0.50 | ) | ||
| Diluted earnings (loss) per share | $ | (0.59 | ) | $ | (0.50 | ) | ||
| Weighted average number of shares outstanding–basic | 22,348,994 | 22,114,927 | ||||||
| Weighted average number of shares outstanding–diluted | 22,348,994 | 22,114,927 | ||||||
Reading International, Inc. and Subsidiaries
Consolidated Balance Sheets
(U.S. dollars in thousands, except share information)
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | (unaudited) | |||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 7,501 | $ | 12,906 | ||||
| Restricted cash | 831 | 2,535 | ||||||
| Receivables | 7,104 | 7,561 | ||||||
| Inventories | 1,318 | 1,648 | ||||||
| Prepaid and other current assets | 3,069 | 2,881 | ||||||
| Land and property held for sale | 460 | 11,179 | ||||||
| Total current assets | 20,283 | 38,710 | ||||||
| Operating property, net | 253,809 | 262,417 | ||||||
| Operating lease right-of-use assets | 172,201 | 181,542 | ||||||
| Investment and development property, net | 8,353 | 8,789 | ||||||
| Investment in unconsolidated joint ventures | 4,539 | 4,756 | ||||||
| Goodwill | 24,671 | 25,535 | ||||||
| Intangible assets, net | 1,944 | 2,038 | ||||||
| Deferred tax asset, net | 112 | 299 | ||||||
| Other assets | 8,948 | 8,965 | ||||||
| Total assets | $ | 494,860 | $ | 533,051 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 47,826 | $ | 43,828 | ||||
| Film rent payable | 5,481 | 6,038 | ||||||
| Debt - current portion | 41,464 | 34,484 | ||||||
| Subordinated debt - current portion | 393 | 586 | ||||||
| Taxes payable - current | 1,025 | 1,376 | ||||||
| Deferred revenue | 9,893 | 10,993 | ||||||
| Operating lease liabilities - current portion | 22,198 | 23,047 | ||||||
| Other current liabilities | 6,569 | 6,731 | ||||||
| Total current liabilities | 134,849 | 127,083 | ||||||
| Debt - long-term portion | 125,459 | 146,605 | ||||||
| Subordinated debt, net | 27,228 | 27,172 | ||||||
| Noncurrent tax liabilities | 6,234 | 6,586 | ||||||
| Operating lease liabilities - non-current portion | 171,793 | 180,898 | ||||||
| Other liabilities | 11,569 | 11,711 | ||||||
| Total liabilities | $ | 477,132 | $ | 500,055 | ||||
| Commitments and contingencies (Note 15) | ||||||||
| Stockholders’ equity: | ||||||||
| Class A non-voting common shares, par value | ||||||||
| 33,611,296 issued and 20,675,185 outstanding at March 31, 2024 and | ||||||||
| 33,602,627 issued and 20,666,516 outstanding at December 31, 2023 | 237 | 237 | ||||||
| Class B voting common shares, par value | ||||||||
| 1,680,590 issued and outstanding at March 31, 2024 and December 31, 2023 | 17 | 17 | ||||||
| Nonvoting preferred shares, par value | ||||||||
| or outstanding shares at March 31, 2024 and December 31, 2023 | — | — | ||||||
| Additional paid-in capital | 156,078 | 155,402 | ||||||
| Retained earnings/(deficits) | (92,717 | ) | (79,489 | ) | ||||
| Treasury shares | (40,407 | ) | (40,407 | ) | ||||
| Accumulated other comprehensive income | (5,211 | ) | (2,673 | ) | ||||
| Total Reading International, Inc. stockholders’ equity | 17,997 | 33,087 | ||||||
| Noncontrolling interests | (269 | ) | (91 | ) | ||||
| Total stockholders’ equity | 17,728 | 32,996 | ||||||
| Total liabilities and stockholders’ equity | $ | 494,860 | $ | 533,051 | ||||
Reading International, Inc. and Subsidiaries
Segment Results
(Unaudited; U.S. dollars in thousands)
| Three Months Ended | ||||||||||||
| March 31, | % Change Favorable/ | |||||||||||
| (Dollars in thousands) | 2024 | 2023 | (Unfavorable) | |||||||||
| Segment revenue | ||||||||||||
| Cinema | ||||||||||||
| United States | $ | 21,308 | $ | 21,811 | (2 | ) | % | |||||
| Australia | 17,322 | 17,212 | 1 | % | ||||||||
| New Zealand | 2,641 | 2,964 | (11 | ) | % | |||||||
| Total | $ | 41,271 | $ | 41,987 | (2 | ) | % | |||||
| Real estate | ||||||||||||
| United States | $ | 1,485 | $ | 1,554 | (4 | ) | % | |||||
| Australia | 3,083 | 3,137 | (2 | ) | % | |||||||
| New Zealand | 365 | 374 | (2 | ) | % | |||||||
| Total | $ | 4,933 | $ | 5,065 | (3 | ) | % | |||||
| Inter-segment elimination | (1,152 | ) | (1,245 | ) | 7 | % | ||||||
| Total segment revenue | $ | 45,052 | $ | 45,807 | (2 | ) | % | |||||
| Segment operating income (loss) | ||||||||||||
| Cinema | ||||||||||||
| United States | $ | (3,436 | ) | $ | (4,326 | ) | 21 | % | ||||
| Australia | (498 | ) | (125 | ) | (>100 | ) | % | |||||
| New Zealand | (231 | ) | (161 | ) | (43 | ) | % | |||||
| Total | $ | (4,165 | ) | $ | (4,612 | ) | 10 | % | ||||
| Real estate | ||||||||||||
| United States | $ | (367 | ) | $ | (217 | ) | (69 | ) | % | |||
| Australia | 1,458 | 1,413 | 3 | % | ||||||||
| New Zealand | (201 | ) | (190 | ) | (6 | ) | % | |||||
| Total | $ | 890 | $ | 1,006 | (12 | ) | % | |||||
| Total segment operating income (loss)(1) | $ | (3,275 | ) | $ | (3,606 | ) | 9 | % | ||||
(1) Total segment operating income is a non-GAAP financial measure. See the discussion of non-GAAP financial measures that follows.
Reading International, Inc. and Subsidiaries
Reconciliation of EBITDA and Adjusted EBITDA to Net Income (Loss)
(Unaudited; U.S. dollars in thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (Dollars in thousands) | 2024 | 2023 | ||||||
| Net Income (loss) attributable to Reading International, Inc. | $ | (13,228 | ) | $ | (11,111 | ) | ||
| Add: Interest expense, net | 5,286 | 4,117 | ||||||
| Add: Income tax expense (benefit) | (223 | ) | (480 | ) | ||||
| Add: Depreciation and amortization | 4,205 | 4,639 | ||||||
| Adjustment for infrequent events and discontinued operations | — | — | ||||||
| EBITDA | $ | (3,960 | ) | $ | (2,835 | ) | ||
| Adjustments for: | ||||||||
| None | — | — | ||||||
| Adjusted EBITDA | $ | (3,960 | ) | $ | (2,835 | ) | ||
Reading International, Inc. and Subsidiaries
Reconciliation of Total Segment Operating Income (Loss) to Income (Loss) before Income Taxes
(Unaudited; U.S. dollars in thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (Dollars in thousands) | 2024 | 2023 | ||||||
| Segment operating income (loss) | $ | (3,275 | ) | $ | (3,606 | ) | ||
| Unallocated corporate expense | ||||||||
| Depreciation and amortization expense | (102 | ) | (179 | ) | ||||
| General and administrative expense | (4,154 | ) | (4,095 | ) | ||||
| Interest expense, net | (5,286 | ) | (4,117 | ) | ||||
| Equity earnings of unconsolidated joint ventures | (25 | ) | 19 | |||||
| Gain (loss) on sale of assets | (1,125 | ) | — | |||||
| Other income (expense) | 341 | 174 | ||||||
| Income (loss) before income tax expense | $ | (13,626 | ) | $ | (11,804 | ) | ||
Non-GAAP Financial Measures
This Earnings Release presents total segment operating income (loss), EBITDA, and Adjusted EBITDA, which are important financial measures for our Company, but are not financial measures defined by U.S. GAAP.
These measures should be reviewed in conjunction with the relevant U.S. GAAP financial measures and are not presented as alternative measures of earnings (loss) per share, cash flows or net income (loss) as determined in accordance with U.S. GAAP. Total segment operating income (loss) and EBITDA, as we have calculated them, may not be comparable to similarly titled measures reported by other companies.
Total segment operating income (loss) – We evaluate the performance of our business segments based on segment operating income (loss), and management uses total segment operating income (loss) as a measure of the performance of operating businesses separate from non-operating factors. We believe that information about total segment operating income (loss) assists investors by allowing them to evaluate changes in the operating results of our Company’s business separate from non-operational factors that affect net income (loss), thus providing separate insight into both operations and the other factors that affect reported results.
EBITDA – We use EBITDA in the evaluation of our Company’s performance since we believe that EBITDA provides a useful measure of financial performance and value. We believe this principally for the following reasons:
We believe that EBITDA is an accepted industry-wide comparative measure of financial performance. It is, in our experience, a measure commonly adopted by analysts and financial commentators who report upon the cinema exhibition and real estate industries, and it is also a measure used by financial institutions in underwriting the creditworthiness of companies in these industries. Accordingly, our management monitors this calculation as a method of judging our performance against our peers, market expectations, and our creditworthiness. It is widely accepted that analysts, financial commentators, and persons active in the cinema exhibition and real estate industries typically value enterprises engaged in these businesses at various multiples of EBITDA. Accordingly, we find EBITDA valuable as an indicator of the underlying value of our businesses. We expect that investors may use EBITDA to judge our ability to generate cash, as a basis of comparison to other companies engaged in the cinema exhibition and real estate businesses and as a basis to value our company against such other companies.
EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States of America and it should not be considered in isolation or construed as a substitute for net income (loss) or other operations data or cash flow data prepared in accordance with generally accepted accounting principles in the United States for purposes of analyzing our profitability. The exclusion of various components, such as interest, taxes, depreciation, and amortization, limits the usefulness of these measures when assessing our financial performance, as not all funds depicted by EBITDA are available for management’s discretionary use. For example, a substantial portion of such funds may be subject to contractual restrictions and functional requirements to service debt, to fund necessary capital expenditures, and to meet other commitments from time to time.
EBITDA also fails to take into account the cost of interest and taxes. Interest is clearly a real cost that for us is paid periodically as accrued. Taxes may or may not be a current cash item but are nevertheless real costs that, in most situations, must eventually be paid. A company that realizes taxable earnings in high tax jurisdictions may, ultimately, be less valuable than a company that realizes the same amount of taxable earnings in a low tax jurisdiction. EBITDA fails to take into account the cost of depreciation and amortization and the fact that assets will eventually wear out and have to be replaced.
Adjusted EBITDA – using the principles we consistently apply to determine our EBITDA, we further adjusted the EBITDA for certain items we believe to be external to our core business and not reflective of our costs of doing business or results of operation. Specifically, we have adjusted for (i) legal expenses relating to extraordinary litigation, and (ii) any other items that can be considered non-recurring in accordance with the two-year SEC requirement for determining an item is non-recurring, infrequent or unusual in nature.
FAQ
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