Reading International (RDI), a US, Australian and New Zealand cinema and real estate owner and operator, reported Q4 and year end 2009 results Friday morning.
Our summary of salient points is below. We will analyze Reading’s 2009 10-K when it is filed in the near future.
The Q4 and year end 2009 results full press release may be found here.
- Reading’s operating results for both Q4 and the full year exhibited continued strong growth in both Revenues and cash flow. Revenues grew (Q4 +30.1%, 2009 full year +10.1%) to record quarterly and annual levels, spurred by substantial growth in apparently all of Reading’s US, Australia and New Zealand cinema markets. While the results for Q4 enjoyed some benefit from y/y currency gains, in local currency, Reading’s Australia and New Zealand cinema revenues enjoyed strong growth, up 17.9% in Australia and 36.6% in New Zealand for Q4, again besting US industry box office trends. Global box office releases for early 2010 (summer in Aus/NZ) will include the bulk of record-breaking revenues from Avatar, which opened in late Q4. Also Q1 yr/yr currency impacts should provide a tailwind.
- 2009’s operating results and foreign currency improvement have increased Reading’s book value/share from 2008 year end level by more than 55% to around $5/share. We believe this book value still greatly understates the current fair value of Reading’s Australian, New Zealand, New York and Chicago real estate, held for more than a decade that has since been upzoned and, in some cases, already developed into rent-generating parcels. Thus, we feel true book value is well more than $5/share.
- From the shares outstanding detail listed on the balance sheet, it appears that Reading bought back shares during Q4. While Reading’s board last publicly authorized a stock repurchase in May 2004, when Reading’s stock price was above $8/share, this is the first execution of a stock buyback by Reading that we can recall.
- Reading maintains substantial liquidity and an interest in accretive acquisitions of cash-generating assets. Dec 31, 2009 cash and marketable securities balances were $28.1MM (up $5MM from Q309) and Reading has a combined $26.8MM of undrawn credit availability on its Australian and New Zealand Credit facilities. The company has filed of a universal shelf registration statement for up to $100MM of debt and warrants for debt, “units”, and other securities to enable Reading to act quickly to structure and finance growth transactions.
Other items of note :
- An additional repurchase of 62,375 shares in the current Q1 through today at an average cost of $4/share - “due to a perceived low price” on its Class A (O-RDI) shares.
- $6.9MM of debt in current liabilities, due on March 31, 2010, is expected to be refinanced by that date with a new 5-year term loan. Reading also is in discussions with a related party to pay down a portion of $14MM of debt, now also in current liabilities, and roll the remainder of the debt into 2013.
- One of the contingent purchase price reduction items in Reading’s original purchase agreement for Consolidated Cinemas (181 screens in Hawaii and California), appears to have been triggered in Q1, reducing Reading’s debt by another $4.2MM. If this note reduction is indeed of the enumerated purchase price reductions, then Reading will not only have its debt (AND goodwill and intangibles associated with the 2008 purchase) reduced by $4.2MM, but it will also be refunded interest it paid on this debt, retroactive to the original 2008 purchase date.
- Reading has entered into a lease for an 8-screen art cinema (presumably their Angelika Brand) to be built as part of the Mosaic District development in the Virginia suburbs of Washington, DC. More information on this exciting mixed use project, opening in 2011-12, can be found at here and here.
- In light of recent zoning developments impacting Reading’s Auburn (Sydney, Aus.) property, Reading has determined to retain it for development. We previously distributed an update on the planned $60MM Costco development across from from Reading’s Auburn parcel. This Costco development is part of the same Parramatta Road Retail Precinct that includes Reading’s property. Costco requires favorable upzoning of the entire Precinct to proceed with its plans. The Auburn Council continues to move forward on the overall upzoning of the Parramatta Road Retail Precinct. A link to the current upzoning proposal can be found here.
Disclosure: Author holds long positions in RDI and RDI.B