READING INTERNATIONAL, INC. 
The MD&A should be read in conjunction with our consolidated financial statements and related notes in this Report.
General COVID-19 Pandemic Overview & Updates
The cinema exhibition industry has endured significant challenges over the past couple of years. During this time, our Company has
been tested in various ways, including: (i) the COVID-19 pandemic forcing us to temporarily close our cinemas worldwide, (ii) the emergence of COVID-19 variants prolonging our recovery and putting a strain on our liquidity needs, (iii) increasing relevance of streaming services creating more competition, and (iv) significant portions of the populations avoiding public spaces. Despite these challenges, our Company continues to persevere. Attendances for the quarter and nine months are up compared to the same time periods 2021. Comparing to the same time period in 2019, our business is starting to slowly climb back up to pre-pandemic levels. Our real estate tenants, with the exception of one completing fitout works, are all open and paying rent. The pandemic has been a testament to the durability of our two-pronged, diversified international business strategy and has increased our faith in the future longevity of our Company. Naturally, the future is not foreseeable and there is always the risk that new COVID-19 strains or other issues may emerge. However, with a majority of the population vaccinated against COVID-19, it is safe to be cautiously optimistic. We are envisioning a return to the time where our cinema revenues can support our real estate acquisition and development activities.
Recent Box Office Improvements
The cinema exhibition industry typically experiences a slowdown in terms of blockbuster releases during the third quarter of the year. This is a typical seasonal occurrence year after year, due to unwillingness among production houses to release their blockbuster films outside of peak seasons. However, during the third quarter of 2022, the highest grossing films Thor: Love and Thunder, Minions, the Rise of Gru, Top Gun: Maverick, Bullet Train and Elvis significantly surpassed the top film releases during the same time period of the prior year. Although the overall third quarter of 2022 experienced a weaker film slate than in the prior quarter of this year, recent box office numbers, and patrons' increasing willingness to return to big screen venues, reinforce a rebounding cinema industry and an improved quality of film product from the studios. Looking towards the fourth quarter of 2022, we expect the release of films such as Black Panther: Wakanda Forever, Avatar 2: Way of the Water, andStrange World to drive improved admissions and cinema revenues.
All of our cinemas were open during the current reporting period (excluding those temporarily closed unrelated to the pandemic related government closures).
We continue to experience challenges, similar to our competitors and those in the hospitality and food and beverage service industries, with labor shortages, cost increases and uncertainties. Also, our dependance on blockbuster films has adversely affected the film rent paid to distributors. Operating costs, fueled by inflation, continue to increase as well. However, our Company continues to overcome and adapt to the existing challenges.
Real Estate Developments
Inthe United States , during the first quarter of 2022, we completed a long-term lease of those floors, representing approximately 42 percent of the leasable area in the building, to a national retailer. We have now completed the landlord's work for our lower level, ground floor and second floor of our44 Union Square property inManhattan and turned them over to the tenant for the construction of its tenant improvements. CBRE has been engaged as our exclusive broker for the remainder of the space and while no assurances can be given, we are pleased that they have presented to us in recent months proposals from qualified prospects looking to lease the remainder of the building InAustralia and New Zealand , all of our tenants remained open and trading with the exception of one tenant completing fit out works as of the date of this report. We have one active retail tenant in Courtenay Central, which continues to be closed due to seismic concerns, and one digital signage tenant located on an exterior surface parking lot. ? 29
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BUSINESS OVERVIEW
We are an internationally diversified company principally focused on the
development, ownership, and operation of entertainment and real estate assets in
?Cinema exhibition, through our 63 cinemas.
?Real estate, including real estate development and the rental of retail, commercial, and live theatre assets.
We believe these two business segments complement and support one another. Prior to COVID-19, we used cash flows generated by our cinema operations to fund the front-end cash demands of our real estate development business. As a result of COVID-19, we relied more upon income from our real estate assets, and tapped the imbedded value in those assets, to support our Company through the COVID-19 crisis. As COVID-19 impacts decrease, government restrictions ease, quality film product, and patrons return to our cinemas, we believe we are able to once again rely on the cash flows generated by our cinema portfolio. We are steadfast in our belief that this two-pronged, diversified international business strategy will keep carrying our Company through these difficult times as we continue to navigate the uncertainty and challenges posed by the global COVID-19 pandemic, including the emergence of new variants.
Key Performance Indicators
A key performance indicator utilized by management is
One of our strategic priorities has been and continues to be upgrading the food
and beverage menu at a number of our global cinemas. We use SPP as a measure of
our performance as compared to the performance of our competitors, as well as a
measure of the performance of our food and beverage operations. While
ultimately, the profitability of our food and beverage operations depends on a
variety of factors, including labor cost and cost of goods sold, we think that
this calculation is important to show how well we are doing on a top line basis.
Due to factors discussed in our Cautionary Statement Regarding Forward-Looking
Statements that continue to adversely impact cinema attendances, we do not
currently believe that a discussion of Reading's key performance indicators will
serve as a useful metric for stockholders. However, we intend to resume
providing a discussion of our key performance indicators in future filings.
?
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Cinema Exhibition Overview
We operate our worldwide cinema exhibition businesses through various subsidiaries under various brands:
?in the
?in
?in
Shown in the following table are the number of locations and screens in our
cinema circuit in each country, by state/territory/region, our cinema brands,
and our interest in the underlying assets as of
Interest in
Asset
State / ?Underlying the
Territory / Location Screen Cinema
Country Region Count(3) Count Leased Owned Operating Brands
United States Hawaii 9 98 9 Consolidated Theatres
Reading Cinemas,
California 7 88 7 Angelika Film Center
New York 3 16 2 1 Angelika Film Center
Texas 2 13 2 Angelika Film Center
New Jersey 1 12 1 Reading Cinemas
Virginia 1 8 1 Angelika Film Center
Washington,
D.C. 1 3 1 Angelika Film Center
U.S. Total 24 238 23 1
Australia Victoria 9 62 9 Reading Cinemas
New South
Wales 6 44 5 1 Reading Cinemas
Reading Cinemas, Event
Queensland 6 56 3 3 Cinemas(1)
Western
Australia 2 16 1 1 Reading Cinemas
South
Australia 2 15 2 Reading Cinemas
Reading Cinemas, State
Tasmania 2 14 2 Cinema by Angelika
Australia
Total 27 207 22 5
New Zealand Wellington 3 18 2 1 Reading Cinemas
Reading Cinemas, Rialto
Otago 3 15 2 1 Cinemas(2)
Reading Cinemas, Rialto
Auckland 2 15 2 Cinemas(2)
Canterbury 1 8 1 Reading Cinemas
Southland 1 5 1 0 Reading Cinemas
Bay of Plenty 1 5 0 1 Reading Cinemas
Hawke's
Bay 1 4 0 1 Reading Cinemas
New Zealand
Total 12 70 8 4
GRAND TOTAL 63 515 53 10
(1)Our Company has a 33.3% unincorporated joint venture interest in a 16-screen
cinema located in Mt. Gravatt, Queensland managed by Event Cinemas.
(2)Our Company is a 50% joint venture partner in two New Zealand Rialto Cinemas,
with a total of 13 screens. We are responsible for the booking of these cinemas
and our joint venture partner, Event Cinemas, manages their day-to-day
operations.
(3)Our total location counts as of September 30, 2022 reflects all operating
cinemas, plus (i) the Reading Cinemas at Courtenay Central in New Zealand which
remains closed while we address certain seismic issues and (ii) one Consolidated
Theatre in Hawaii was closed as of September 30, 2022 , due to a legal dispute
with the landlord. Note that as of October 5, 2022 , the Company terminated the
lease in this one Consolidated Theatre location and completed a de-fit of the
cinema premises as of November 9, 2022 . The financial results of this
Consolidated Theatre location are not material to the revenues or income of the
U.S. cinema circuit.
Our cinema revenues consist primarily of cinema ticket sales, F&B sales, screen
advertising, gift card purchases, cinema rentals, and online convenience fee
revenue generated by the sale of our cinema tickets through our websites and
mobile apps. Cinema operating expenses consist of the costs directly
attributable to the operation of the cinemas, including (i) film rent expense,
(ii) operating costs, such as employment costs and utilities, and (iii)
occupancy costs. Cinema revenues and certain expenses fluctuate with the
availability of quality first run films and the number of weeks such first run
films stay in the market. For a breakdown of our current cinema assets that we
own and/or manage, please refer to Part I, Item 1 - Our Business of our 2021
Form 10-K. We now present a discussion of recent material developments.
Cinema Additions and Pipeline
The latest additions to our cinema portfolio as of
?Traralgon,
?Millers Junction,Victoria, Australia : OnJune 16, 2021 , we opened a new state-of-the-art six screen Reading Cinemas at the expandedMillers Junction Village featuring two TITAN LUXE auditoriums with DOLBY ATMOS immersive sound, luxury recliner seating in all auditoriums, and an enhanced F&B offering. 31
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The landlord for
Cinema Upgrades
As of
Location Screen
?Count(6) ?Count
Screen Format
Digital (all cinemas in our cinema circuit) 63 515
IMAX 1 1
TITAN XC and LUXE 26 32
Dine-in Service
Gold Lounge (AU/NZ)(1) 10 26
Premium (AU/NZ)(2) 15 40
Spotlight (U.S.)(3) 1 6
Upgraded Food & Beverage menu (
39 n/a
(1)Gold Lounge : This is our "First Class Full Dine-in Service" in our Australian
and New Zealand cinemas, which includes an upgraded F&B menu (with alcoholic
beverages), luxury recliner seating features (intimate 25-50 seat cinemas) and
waiter service.
(2)Premium Service: This is our "Business Class Dine-in Service" in our
Australian and New Zealand cinemas, which typically includes upgraded F&B menu
(some with alcoholic beverages) and may include luxury recliner seating features
(less intimate 80-seat cinemas), but no waiter service.
(3)Spotlight Service: Our first dine-in cinema concept in the U.S. at Reading
Cinemas in Murrieta, California . Six of our 17 auditoriums at this cinema
feature waiter service before the movie begins with a full F&B menu, luxury
recliner seating, and laser focus on customer service. Our Spotlight service has
been temporarily suspended since the initial COVID-19 shutdown.
(4)Upgraded Food & Beverage Menu: Features an elevated F&B menu including a menu
of locally inspired and freshly prepared items that go beyond traditional
concessions, which we have worked with former Food Network executives to create.
The elevated menu also includes beer, wine and/or spirits at most of our
locations.
(5)Liquor Licenses: Licenses are applicable at each cinema location, rather than
each cinema auditorium. As of September 30, 2022 , we have pending applications
for additional liquor licenses for six cinemas in the U.S , two in Australia , and
one in New Zealand .
(6)The above reflects information as of September 30, 2022 . On October 05, 2022 ,
the Company terminated the lease at one Consolidated Theatre in Hawaii .
As of
Recent Enhancements:
?Kapolei renovation: OnMarch 3, 2022 , we reopened ourConsolidated Theatre inKapolei , inWestern Oahu, Hawaii with eight screens featuring recliner seating and a renovation of the lobby areas.
As of
?Invercargill renovation: OnJuly 24, 2022 , we closed our Reading Cinemas in Invercargill,New Zealand for renovation. In conjunction with the development of a new shopping center being, we renovated our Reading Cinemas to improve the lobby, add facilities for an elevated F&B offer, convert one screen to electric recliner seats, and integrate the cinema foyer into the new state-of-art shopping center. The Company expects the renovated Reading Cinema to re-open before the end of 2022 in conjunction with the launch of the shopping center. We continue to enhance our proprietary online ticketing and F&B capabilities, improve our contactless experiences, and develop our social media platforms. Our goal is to enhance the convenience and safety of our offerings while promoting guest affinity with our brands. During the third quarter of 2022, we expanded our F&B offering to include on-line in-seat ordering in all of ourGold Lounge cinemas at our Reading Cinemas inAustralia and New Zealand . 32
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Cinema Closures
No cinemas are currently closed due to COVID-19 or its variants. As of the date of this Report, two cinemas inNew Zealand are closed due to reasons unrelated to the pandemic, and oneConsolidated Theatre inHawaii has been closed due to a lease termination as described above.
Real Estate Overview
Through our various subsidiaries, we engage in the real estate business through the development, ownership, rental or licensing to third parties of retail, commercial, and live theatre assets. Our real estate business creates long-term value for our stockholders through the continuous improvement and development of our investment and operating properties, including our ETCs. As ofSeptember 30, 2022 , we own the fee interests in both of our live theatres inManhattan and in 10 of our cinemas (as presented in the table under Cinema Exhibition Overview). In addition, we: ?own our44 Union Square property inManhattan comprised of retail and office space which is currently in the lease-up phase. The lower level, ground floor, and second floor of the building are now fully leased to a national retailer. The landlord's work has been completed for that space, and has been turned over to the tenant for the construction of tenant improvements. ?own and operate four ETCs known asNewmarket Village (in a suburb ofBrisbane ), The Belmont Common (in a suburb ofPerth ), andCannon Park (in Townsville) inAustralia , and Courtenay Central (inWellington ) inNew Zealand ; ?own and operate our administrative office building inCulver City ; ?own and operate our administrative office building inSouth Melbourne, Australia ; ?own and operate the fee interests in two developed commercial properties inManhattan improved with live theatres comprised of two stages; ?own a 75% managing member interest in a limited liability company which in turn owns the fee interest in and improvements constituting our Cinemas 1,2,3 located inManhattan ; ?own 197-acres principally inPennsylvania from our legacy railroad business, including theReading Viaduct in downtownPhiladelphia ; and ?exercised our option to purchase the improvements and ground lease comprising our cinema, Village East by Angelika cinema, and headquarters building at189 Second Avenue inManhattan .
For a breakdown of our real estate assets, made current by our discussion below, please refer to Part I, Item 1 - Our Business of our 2021 Form 10-K. We now present a discussion of recent material developments. ?
Value-creating Opportunities
The implementation of most of our Company's real estate development plans have been delayed due to COVID-19 and the need to conserve capital. However, we intend to continue to emphasize the prudent development of our real estate assets as we emerge from the pandemic.
?44 Union Square Redevelopment (New York, N.Y. ) - Initially, during the COVID-19 pandemic,New York City shut down non-essential construction and businesses, including construction work at our site. The shutdown has since been lifted. OnAugust 31, 2020 , we received a temporary certificate of occupancy for the core and shell of the building, which has been continuously renewed. OnJanuary 27, 2022 , we entered into a long-term lease with a national retailer for the lower level, ground floor and second floor of the building. We have completed the landlord work with respect to these premises and turned them over to the tenant for the construction of tenant improvements. We have retained CBRE as our leasing agent for the remaining floors of the building. Our leasing team continues to pursue potential tenants to fill the remainder of the space, although no assurances can be given that we will be able to lease the space on acceptable terms in the near term. At the present time, we are in discussions with potential tenants each of whom has indicated an interest in renting all of the remaining space in our building. This building, hailed as a dramatic pièce de résistance with its first in the city, over 800-piece glass dome, brings the future toNew York's fabled past and was awarded in 2020 the ENR New York's Best Projects awards for Renovation/Restoration and for Safety. InJuly 2021 ,44 Union Square /Tammany Hall was a jury and popular choice winner in the Architecture and Collaboration concept category of the Architizer A+ Awards, the world's largest awards program for architecture and building products. 33 -------------------------------------------------------------------------------- ?Minetta Lane Theatre (New York, N.Y. ) - Prior to COVID-19, our theatre was used by Audible, to present plays featuring a limited cast of one or two characters and special live performance engagements on the Audible streaming service. Due to COVID-19, no shows were presented betweenMarch 2020 andOctober 8, 2021 , the date on which public performances resumed. In late 2019, we completed an initial feasibility study for the potential redevelopment of this asset. We will refocus our efforts on this project at a later date. In the interim, Audible extended their annual license through the first quarter of 2024. ?Cinemas 1,2,3 Redevelopment (New York, N.Y. ) - Active redevelopment work related to this location has been suspended, until we are able to develop a better understanding of the ongoing effects of COVID-19 on our Cinemas 123 asset and its surrounding market. In the interim, we have determined to continue to operate this location as a cinema for at least the near term.
?Courtenay Central Redevelopment (Wellington ) - Located in the heart ofWellington -New Zealand's capital city - our Courtenay Central property covers, on a consolidated basis through various subsidiaries, 161,000 square feet of land situated proximate to (i) theTe Papa Tongarewa Museum (attracting over 1.5 million visitors annually, pre-COVID), and (ii) across the street from Takina, the site of the futureWellington Convention and Exhibition Centre (wcec.co.nz), the capital's first premium conference and exhibition space, which is due to be completed in 2023. Despite the COVID-19 pandemic, construction for this major public project has resumed and plans include the creation of a public concourse linking through toWakefield Street , which is across the street from our Courtenay Central project. As previously reported, damage from the 2016 Kaikoura earthquake necessitated demolition of our nine-story parking garage at the site, and unrelated seismic issues caused us to close major portions of the existing cinema and retail structure in early 2019. Prior to the COVID-19 pandemic, the real estate team had developed a comprehensive plan featuring a variety of uses to complement and build upon the "destination quality" of the Courtenay Central location. Notwithstanding the COVID-19 pandemic, our real estate team is continuing to work with our consultants, tenants, potential tenants, and city representatives to advance our redevelopment plans for this property. Given the uncertainty surrounding the COVID-19 pandemic, we have no fixed time frame for the commencement of the redevelopment of this property. In August, our Company settled the outstanding arbitration withGeneral Distributors Limited over an agreement to lease related to the construction of a supermarket and the provision of car parking on our properties inWellington , NZ. The parties agreed that this agreement to lease has been terminated, with each party bearing their own costs. We consider this settlement to be a positive development, as we now have the necessary flexibility to control a strategic masterplan of ourWellington property assets.
Corporate Matters
Refer to Part I - Financial Information, Item 1 - Notes to Consolidated Financial Statements-- Note 16 - Stock-Based Compensation and Stock Repurchases for details regarding our stock repurchase program and Board, Executive and Employee stock-based remuneration programs.
?
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Please refer to our 2021 Form 10-K for more details on our cinema and real estate segments.
RESULTS OF OPERATIONS
The table below summarizes the results of operations for each of our principal business segments along with the non-segment information for the quarter and nine months endedSeptember 30, 2022 , andSeptember 30, 2021 , respectively: Quarter Ended % Change Nine Months Ended % Change September 30, September 30, Fav/
2022 2021 ?(Unfav) 2022 2021 ?(Unfav)
SEGMENT RESULTS
Revenue
Cinema exhibition$ 48,359 28,751 68 %$ 147,476 $ 79,580 85 % Real estate 4,070 3,177 28 % 12,265 9,948 23 %
Inter-segment
elimination (1,232) (125) (>100) % (3,833) (386) (>100) % Total revenue 51,197 31,803 61 % 155,908 89,142 75 %
Operating expense
Cinema exhibition (46,541) (29,362)
(59) % (138,412) (82,871) (67) %
Real estate (2,352) (2,683) 12 % (6,715) (7,902) 15 %
Inter-segment
elimination 1,232 125 >100 % 3,833 386 >100 % Total operating expense (47,661) (31,920)
(49) % (141,294) (90,387) (56) %
Depreciation and amortization Cinema exhibition (3,161) (3,555) 11 % (10,057) (10,801) 7 % Real estate (1,591) (1,705) 7 % (4,920) (5,293) 7 %
Total depreciation and
amortization (4,752) (5,260) 10 % (14,977) (16,094) 7 %
General and
administrative expense
Cinema exhibition (794) (891) 11 % (3,360) (6,588) 49 % Real estate (272) (274) 1 % (755) (660) (14) % Total general and administrative expense (1,066) (1,165) 8 % (4,115) (7,248) 43 %
Impairment expense
Cinema exhibition - - - % (1,549) - (>100) % Total impairment expense - - - % (1,549) - (>100) %
Segment operating income
Cinema exhibition (2,137) (5,057) 58 % (5,902) (20,680) 71 % Real estate (145) (1,485) 90 % (125) (3,907) 97 %
Total segment operating
income (loss)$ (2,282) $ (6,542) 65 %$ (6,027) $ (24,587) 75 % NON-SEGMENT RESULTS Depreciation and amortization expense (258) (300) 14 % (804) (917) 12 % General and administrative expense (4,190) (4,109) (2) % (13,249) (11,957) (11) % Interest expense, net (3,694) (3,068) (20) % (10,242) (10,437) 2 %
Equity earnings of
unconsolidated joint
ventures 61 (75) >100 % 233 158 47 %
Gain (loss) on sale of
assets (59) 2,559 (>100) % (59) 92,345 (>100) % Other income (expense) 5,455 440 >100 % 8,445 2,236 >100 % Income before income taxes (4,967) (11,095) 55 % (21,703) 46,841 (>100) % Income tax benefit (expense) (332) 895 (>100) % (1,492) (12,380) 88 % Net income (loss) (5,299) (10,200) 48 % (23,195) 34,461 (>100) %
Less: net income (loss)
attributable to
noncontrolling interests (122) (105) (16) % (228) 2,889 (>100) % Net income (loss) attributable to Reading International, Inc.$ (5,177) $ (10,095) 49 %$ (22,967) $ 31,572 (>100) % Basic earnings (loss) per share$ (0.23) $ (0.46) 50 %$ (1.04) $ 1.45 (>100) %
Consolidated and Non-Segment Results:
Third Quarter and Nine Months Net Results
Revenue
Revenue for the quarter endedSeptember 30, 2022 , increased by$19.4 million , to$51.2 million , when compared to the same period in the prior year. Revenue for the nine months endedSeptember 30, 2022 , increased by$66.8 million , to$155.9 million , when compared to the same period in the prior year. These increases were attributable to a stronger film slate, the latest additions to our cinema portfolio (Miller Junction,Victoria, Australia opened onJune 16, 2021 and Traralgon,Victoria, Australia opened onDecember 15, 2021 ), as well as substantially all of our cinemas operating during the first nine months of 2022, compared to the same period in 2021, when a portion of our cinemas were closed due to local government mandates for part of the reporting period. 35
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Segment Operating Income/(Loss)
Our total segment operating loss for the quarter ended
Our total segment operating loss for the nine months endedSeptember 30, 2022 , decreased by$18.6 million , from a loss of$24.6 million to a loss of$6.0 million , primarily due to easing COVID-19 government restrictions and cinema closures and better film content available during the first nine months of 2022. This decrease was partially offset by a loss of third-party property income from ourAuburn /Redyard ETC, which was monetized inJune 2021 , an increase in occupancy costs related to the monetization of our Invercargill property inAugust 2021 , and an impairment charge of$1.5 million against certain cinema assets. During the third quarter 2022, both theAustralia and New Zealand dollars devalued againstU.S dollar. The averageAustralia dollar exchange rate against theU.S. dollar for the three months in Q3 2022 decreased 7.0% compared to the same period in 2021. The averageNew Zealand dollar exchange rate against theU.S. dollar for the three months in Q3 2022 decreased 12.5% compared to the same period in 2021. The devaluation of theAustralia and New Zealand currencies negatively impacts segment operating income and positively impacts segment operating loss inU.S. dollar terms.
Net Income/(Loss)
Our net loss attributable toReading International, Inc. for the quarter endedSeptember 30, 2022 , decreased by$4.9 million , from$10.1 million loss to a loss of$5.2 million when compared to the same period in the prior year. For the nine months endedSeptember 30, 2022 , the net income attributable toReading International, Inc. decreased by$54.5 million , from an income of$31.6 million to a loss of$23.0 million , when compared to the same period in the prior year. These changes are largely due to the prior period profits generated from our asset monetizations that did not reoccur for the quarter and nine months endedSeptember 30, 2022 , partially offset by our increased cinema revenue and foreign exchange gains made on subsidiary companies holding foreign currency and intercompany loans.
Income Tax Expense
Income tax expense for the three months endedSeptember 30, 2022 , increased by$1.2 million compared to the equivalent prior-year period. The change between 2022 and 2021 is primarily related to an increase in valuation allowance, partially offset by a decrease in in GILTI tax in 2022. Income tax expense for the nine months endedSeptember 30, 2022 , decreased by$10.9 million compared to the equivalent prior-year period. The change between 2022 and 2021 is primarily related to a decrease in pretax income as well as changes in GILTI tax, valuation allowance, and unrecognized tax benefits in 2022. ? 36
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Business Segment Results
Cinema Exhibition
The following table details our cinema exhibition segment operating results for the quarter and nine months endedSeptember 30, 2022 , andSeptember 30, 2021 , respectively: % Change Quarter Ended Nine Months Ended Fav/(Unfav) September 30, September 30, September 30, September 30, Quarter Nine Months (Dollars in thousands) 2022 % of Revenue 2021 % of Revenue 2022 % of Revenue 2021 % of Revenue ?Ended Ended REVENUE United States Admissions revenue$ 13,588 28% $ 9,278 32%$ 39,815 27%$ 18,327 23% 46 % >100 % Food & beverage revenue 8,671 18% 6,011 21% 25,436 17% 11,883 15% 44 % >100 % Advertising and other revenue 2,417 5% 1,674 6% 7,281 5% 3,648 5% 44 % 100 %$ 24,676 51%$ 16,963 59%$ 72,532 49%$ 33,858 43% 45 % >100 % Australia Admissions revenue$ 12,404 26% $ 5,520 19%$ 39,125 27%$ 22,880 29% >100 % 71 % Food & beverage revenue 6,486 13% 3,178 11% 21,007 14% 12,063 15% >100 % 74 % Advertising and other revenue 1,124 2% 658 2% 3,665 2% 2,677 3% 71 % 37 %$ 20,014 41% $ 9,356 33%$ 63,797 43%$ 37,620 47% >100 % 70 % New Zealand Admissions revenue $ 2,287 5% $ 1,489 5% $ 6,919 5% $ 5,108 6% 54 % 35 % Food & beverage revenue 1,191 2% 793 3% 3,646 2% 2,539 3% 50 % 44 % Advertising and other revenue 192 0% 149 1% 582 0% 455 1% 29 % 28 % $ 3,670 8% $ 2,431 8%$ 11,147 8% $ 8,102 10% 51 % 38 % Total revenue$ 48,360 100%$ 28,750 100%$ 147,476 100%$ 79,580 100% 68 % 85 %
OPERATING EXPENSE
United States Film rent and advertising cost$ (7,602) 16%$ (4,953) 17%$ (22,430) 15%$ (9,181) 12% (53) % (>100) % Food & beverage cost (2,352) 5% (1,433) 5% (6,552) 4% (2,844) 4% (64) % (>100) % Occupancy expense (6,117) 13% (4,225) 15% (18,447) 13% (16,375) 21% (45) % (13) % Other operating expense (10,489) 22% (7,278) 25% (28,403) 19% (15,915) 20% (44) % (78) %$ (26,560) 55%$ (17,889) 62%$ (75,832) 51%$ (44,315) 56% (48) % (71) % Australia Film rent and advertising cost$ (5,642) 12%$ (2,267) 8%$ (17,827) 12%$ (9,448) 12% (>100) % (89) % Food & beverage cost (1,287) 3% (728) 3% (4,252) 3% (2,673) 3% (77) % (59) % Occupancy expense (4,215) 9% (2,665) 9% (13,265) 9% (7,504) 9% (58) % (77) % Other operating expense (5,625) 12% (3,557) 12% (17,344) 12% (12,085) 15% (58) % (44) %$ (16,769) 35%$ (9,217) 32%$ (52,688) 36%$ (31,710) 40% (82) % (66) % New Zealand Film rent and advertising cost$ (1,013) 2% $ (646) 2%$ (3,086) 2%$ (2,187) 3% (57) % (41) % Food & beverage cost (228) 0% (162) 1% (699) 0% (511) 1% (41) % (37) % Occupancy expense (768) 2% (601) 2% (2,383) 2% (1,376) 2% (28) % (73) % Other operating expense (1,203) 2% (845) 3% (3,724) 3% (2,772) 3% (42) % (34) %$ (3,212) 7%$ (2,254) 8%$ (9,892) 7%$ (6,846) 9% (43) % (44) % Total operating expense$ (46,541) 96%$ (29,360) 102%$ (138,412) 94%$ (82,871) 104% (59) % (67) % DEPRECIATION, AMORTIZATION, IMPAIRMENT AND GENERAL AND ADMINISTRATIVE EXPENSE United States Depreciation and amortization$ (1,696) 4%$ (1,790) 6%$ (5,373) 4%$ (5,439) 7% 5 % 1 % Impairment of long-lived assets - 0% - 0% (1,549) 1% - 0% (>100) % (>100) % General and administrative expense (408) 1% (558) 2% (2,121) 1% (5,687) 7% 27 % 63 %$ (2,104) 4%$ (2,348) 8%$ (9,043) 6%$ (11,126) 14% 10 % 19 % Australia Depreciation and amortization$ (1,281) 3%$ (1,488) 5%$ (4,034) 3%$ (4,443) 6% 14 % 9 % General and administrative expense (387) 1% (333) 1% (1,239) 1% (901) 1% (16) % (38) %$ (1,668) 3%$ (1,821) 6%$ (5,273) 4%$ (5,344) 7% 8 % 1 % New Zealand Depreciation and amortization $ (184) 0% $ (277) 1% $ (650) 0% $ (919) 1% 34 % 29 % General and administrative expense - 0% - 0% - 0% - 0% - % - % $ (184) 0% $ (277) 1% $ (650) 0% $ (919) 1% 34 % 29 % Total depreciation, amortization, general and administrative expense$ (3,956) 8%$ (4,446) 15%$ (14,966) 10%$ (17,389) 22% 11 % 14 %
OPERATING INCOME (LOSS) - CINEMA
United States$ (3,988) (8)%$ (3,274) (11)%$ (12,343) (8)%$ (21,583) (27)% (22) % 43 % Australia 1,577 3% (1,682) (6)% 5,836 4% 566 1% >100 % >100 % New Zealand 274 1% (100) (0)% 605 0% 337 0% >100 % 80 % Total Cinema operating income (loss)$ (2,137) (4)%$ (5,056) (18)%$ (5,902) (4)%$ (20,680) (26)% 58 % 71 %
Third Quarter and Nine Months Results
Revenue
For the quarter endedSeptember 30, 2022 , cinema revenue increased by$19.6 million , to$48.4 million compared to the same period in the prior year. This increase is primarily driven by a higher quality and quantity of film product, such as Thor: Love and Thunder, Minions, the Rise of Gru, Top Gun: Maverick, Bullet Train and Elvis, along with the easing of government COVID-19 restrictions and improved willingness from patrons to return to the in-person experience of the big screen. For the nine months endedSeptember 30, 2022 , cinema revenue increased by$67.9 million , to$147.5 million compared to the same period in the prior year. This increase is primarily driven by better film product and more patrons present in our cinemas due to COVID-19 closures and restrictions being lifted from the previous year. 37
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These favorable results were further enhanced by the opening of our new
state-of-the-art cinemas in Millers Junction and Traralgon,
Cinema Segment Operating Income/(Loss)
Cinema segment operating loss for the quarter endedSeptember 30, 2022 , decreased by$2.9 million , from a loss of$5.1 million to a loss of$2.1 million when compared to the same period in the prior year. Cinema segment operating loss for the nine months endedSeptember 30, 2022 , decreased by$14.8 million , to a loss of$5.9 million when compared to the same period in the prior year, due to fewer government COVID-19 restrictions and a higher quantity and quality of tentpole films released during the first nine months of 2022, partially offset by increased occupancy costs as a result of internal rents being abated in 2021, third-party rents resuming in 2022 and film rent percentage increase as of result of our dependance on the blockbuster movies shown in 2022.
Operating expense
Operating expense for the quarter endedSeptember 30, 2022 , increased by$17.2 million , to$46.5 million , compared to the same quarter in the prior year. Operating expense for the nine months endedSeptember 30, 2022 , increased by$55.5 million , to$138.4 million , compared to the same period in the prior year. These increases are due to increased film rent, labor, and utility costs related to higher admissions, and increased occupancy expenses related to cinema rents that were abated in 2021. The operating expense was further increased by the opening of our new state-of-the-art cinemas in Millers Junction and Traralgon,Australia in June and December of 2021, respectively,
Depreciation, amortization, impairment, general and administrative expense
Depreciation, amortization, impairment and general and administrative expense for the nine months endedSeptember 30, 2022 , decreased by$2.4 million , to$15.0 million , compared to the same period in the prior year. This decrease in general and administrative expense is attributable to the costs of the 2021 settlement of certainCalifornia employment wage and hour claims of$4 million , partially offset by an impairment charge of$1.5 million against certain cinema assets. ? 38
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Real Estate
The following table details our real estate segment operating results for the quarter and nine months endedSeptember 30, 2022 andSeptember 30, 2021 , respectively: Quarter Ended Nine Months Ended Fav/(Unfav) Nine September 30, % of September 30, % of September 30, % of September 30, % of Months (Dollars in thousands) 2022 ?Revenue 2021 ?Revenue 2022 ?Revenue 2021 ?Revenue Quarter Ended Ended REVENUE Live theatre rental and United States ancillary income $ 384 9% $ 379 12% $ 1,343 11% $ 782 8% 1 % 72 % Property rental income 143 4% 177 6% 445 4% 447 4% (19) % - % 527 13% 556 18% 1,788 15% 1,229 12% (5) % 45 % Australia Property rental income 3,154 77% 2,391 75% 9,336 76% 8,000 80% 32 % 17 % New Zealand Property rental income 390 10% 230 7% 1,141 9% 718 7% 70 % 59 % Total revenue $ 4,071 100% $ 3,177 100%$ 12,265 100% $ 9,947 100% 28 % 23 % OPERATING EXPENSE United States Live theatre cost $ (160) 4% $ (197) 6% $ (531) 4% $ (374) 4% 19 % (42) % Property cost (330) 8% (361) 11% (894) 7% (1,007) 10% 9 % 11 % Occupancy expense (240) 6% (506) 16% (750) 6% (1,376) 14% 53 % 45 % (730) 18% (1,064) 33% (2,175) 18% (2,757) 28% 31 % 21 % Australia Property cost (588) 14% (594) 19% (1,596) 13% (2,041) 21% 1 % 22 % Occupancy expense (500) 12% (527) 17% (1,541) 13% (1,703) 17% 5 % 10 % (1,088) 27% (1,121) 35% (3,137) 26% (3,744) 38% 3 % 16 % New Zealand Property cost (420) 10% (387) 12% (1,085) 9% (1,068) 11% (9) % (2) % Occupancy expense (116) 3% (110) 3% (318) 3% (333) 3% (5) % 5 % (536) 13% (497) 16% (1,403) 11% (1,401) 14% (8) % - % Total operating expense $
(2,354) 58%
(7,902) 79% 12 % 15 %
DEPRECIATION, AMORTIZATION, GENERAL AND ADMINISTRATIVE
EXPENSE
United States Depreciation and amortization $ (745) 18% $ (739) 23% $ (2,243) 18% $ (2,237) 22% (1) % - %
General and administrative
expense (211) 5% (192) 6% (643) 5% (495) 5% (10) % (30) %
(956) 23% (931) 29% (2,886) 24% (2,732) 27% (3) % (6) %
Australia Depreciation and amortization $ (655) 16% $ (724) 23% $ (2,042) 17% $ (2,310) 23% 10 % 12 %
General and administrative
expense (60) 1% (82) 3% (112) 1% (164) 2% 27 % 32 %
(715) 18% (806) 25% (2,154) 18% (2,474) 25% 11 % 13 %
New Zealand Depreciation and amortization (191) 5% (242) 8% (635) 5% (747) 8% 21 % 15 %
General and administrative
expense - 0% - 0% - 0% - 0% - % - %
(191) 5% (242) 8% (635) 5% (747) 8% 21 % 15 %Total depreciation, amortization, general and
administrative expense $
(1,862) 46%
(5,953) 60% 6 % 5 %
OPERATING INCOME (LOSS) - REAL ESTATE
United States$ (1,159) (28)%$ (1,439) (45)%$ (3,273) (27)%$ (4,260) (43)% 19 % 23 % Australia 1,351 33% 464 15% 4,045 33% 1,782 18% >100 % >100 % New Zealand (337) (8)% (509) (16)% (897) (7)% (1,430) (14)% 34 % 37 % Total real estate operating income (loss) $
(145) (4)%
(3,908) (39)% 90 % 97 %
Third Quarter and Nine Months Results
Revenue
Real estate revenue for the quarter endedSeptember 30, 2022 , increased by$0.9 million to$4.1 million , compared to the same period in the prior year. Real estate revenue for the nine months endedSeptember 30, 2022 , increased by$2.3 million to$12.3 million , compared to the same period in the prior year. These increases were due to rental revenue generated from ourU.S. Live Theatre business unit and an increase in internal rental income inAustralia and New Zealand that was abated during 2021.
Real Estate Segment Income/(Loss)
Real estate segment operating loss for the quarter endedSeptember 30, 2022 , decreased by$1.3 million , to a loss of$0.1 million , compared to the same period in the prior year. Real estate segment operating loss for the nine months endedSeptember 30, 2022 , decreased by$3.8 million to a loss of$0.1 million , compared to the same period in the prior year. These changes are attributable to our rental revenue generated from ourU.S. Live Theatre business unit and rental income from our Australian andNew Zealand properties that was abated in 2021. 39
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Operating Expense
Operating expense for the quarter endedSeptember 30, 2022 , decreased by$0.3 million , to$2.4 million . The asset monetization of ourAuburn /Redyard ETC and Invercargill properties in 2021 contributed to decreases in operating expenses compared to the prior year periods. Operating expense for the nine months endedSeptember 30, 2022 , decreased by$1.2 million , to$6.7 million . The asset monetization of ourCoachella and Manukau landholdings,Auburn /Redyard ETC, and Invercargill property contributed to decreases in operating expenses compared to the prior year periods.
LIQUIDITY AND CAPITAL RESOURCES
Our Financing Strategy
Prior to the interruption to our revenues caused by the COVID-19 pandemic, we had used cash generated from operations and other excess cash to the extent not needed to fund capital investments contemplated by our business plan, to pay down our loans and credit facilities. This provided us with availability under our loan facilities for future use and thereby, reduced interest charges. On a periodic basis, we have reviewed the maturities of our borrowing arrangements and negotiated renewals and extensions where necessary. Our bank loans with Bank of America, NAB, and Westpac require that our Company comply with certain covenants. Furthermore, our Company's use of these loan funds is limited due to limitations on the expatriation of funds fromAustralia and New Zealand tothe United States . We believe that our lenders understand that the current situation, relating to the COVID-19 pandemic, is not of our making, that we are doing everything that can reasonably be done, and that, generally speaking, our relationship with our lenders is good. Our Company remains focused on the various economic factors affecting us as the markets in which we operate emerge from the worst effects of the COVID-19 pandemic, including financial, economic, competitive, regulatory, and other factors, many of which are beyond our control. If our Company is unable to generate sufficient cash flow in the upcoming months or if its cash needs exceed our Company's borrowing capacity under its available facilities, we could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling additional assets, or restructuring debt. For more information about our borrowings, please refer to Part I - Financial Information, Item 1 - Notes to Consolidated Financial Statements-- Note 11 - Borrowings. ? 40
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The changes in cash and cash equivalents for the nine months ended
Nine Months Ended
September 30,
(Dollars in thousands) 2022 2021 % Change
Net cash provided by (used in) operating
activities $ (26,114) $ (17,760) (47) %
Net cash provided by (used in) investing
activities (6,419) 133,654 (>100) %
Net cash provided by (used in) financing
activities (7,946) (40,954) 81 %
Effect of exchange rate on cash and restricted
cash (2,242) (4,732) 53 %
Increase (decrease) in cash and cash
equivalents and restricted cash $ (42,721) $ 70,208 (>100) %
Operating activities
Cash used in operating activities for the nine months ended September 30, 2022 ,
increased by $8.4 million , to $26.1 million . This was driven by a $39.4 million
increase in net changes in operating assets and liabilities primarily resulting
from taxes payable and accounts payable, offset by a $31.1 million decrease
mainly attributed to improved cinema operating performance compared to the prior
year period.
Investing activities
Cash used in investing activities during the nine months ended September 30,
2022 , was $6.4 million . There was no repeat of the monetization of certain
assets in the nine months to September 30, 2021 , which led to the raising of
$133.7 million of cash from investing activities in this period.
Financing activities
Cash used in financing activities for the nine months endedSeptember 30, 2022 , decreased by$33.0 million , to$8.0 million due to prior year debt repayments discussed in Part 1 - Financial Information, Item 1 - Notes to Consolidated Financial Statements-- Note 11 - Borrowings. The table below presents the changes in our total available resources (cash and borrowings), debt-to-equity ratio, working capital, and other relevant information addressing our liquidity for the third quarter endedSeptember 30, 2022 , and preceding four years: As of and for the 9-Months Ended Year Ended December 31 September ($ in thousands) 30, 2022 2021 2020 2019 2018(1) Total Resources (cash and borrowings) Cash and cash equivalents (unrestricted)$ 39,628 $ 83,251 $ 26,826 $ 12,135 $ 13,127 Unused borrowing facility 12,000 12,000 15,490 73,920 85,886 Restricted for capital projects 12,000 12,000 9,377 13,952 30,318 Unrestricted capacity - - 6,113 59,968 55,568 Total resources at period end 51,628 95,251 42,316 86,055 99,013 Total unrestricted resources at period end 39,628 83,251 32,939 72,103 68,695 Debt-to-Equity Ratio Total contractual facility$ 231,396 $ 248,948 $ 300,449 $ 283,138 $ 252,929 Total debt (gross of deferred financing costs) 219,396 236,948 284,959 209,218 167,043 Current 57,945 12,060 42,299 37,380 30,393 Non-current 161,451 224,888 242,660 171,838 136,650 Finance lease liabilities 36 68 209 - - Total book equity 69,234 105,060 81,173 139,616 179,979 Debt-to-equity ratio 3.17 2.26 3.51 1.50 0.93 Changes in Working Capital Working capital (deficit)(2)$ (80,217) $ (6,673) $ (64,140) $ (84,138) $ (56,047) Current ratio 0.42 0.94 0.47 0.24 0.35 Capital Expenditures (including acquisitions)$ 6,387 $ 14,428 $ 16,759
(1)Please refer to Part II - Notes to Consolidated Financial Statements-- Note 2 - Summary of Significant Accounting Policies - Prior Period Financial Statements Correction of Immaterial Errors of the 2021 Form 10-K for the prior period adjustments for accounting for accrued sales tax deemed not material. (2)Our working capital is reported as a deficit, as we receive revenue from our cinema business ahead of the time that we have to pay our associated liabilities. We use the money we receive to pay down our borrowings in the first instance.
As of
We manage our cash, investments, and capital structure to meet the short-term
and long-term obligations of our business, while maintaining financial
flexibility and liquidity. We forecast, analyze, and monitor our cash flows to
enable investment and financing
41
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within the overall constraints of our financial strategy. In the past, we used
cash generated from operations and other excess cash to the extent not needed
for any capital expenditures, to pay down our loans and credit facilities
providing us some flexibility on our available loan facilities for future use
and thereby, reducing interest charges. Following these drawdowns, as of June
30, 2020 , our global debt was $275.9 million . Since then, we have reduced our
debt to $219.4 million as of September 30, 2022 .
CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES
The following table provides information with respect to the maturities and
scheduled principal repayments of our recorded contractual obligations and
certain of our commitments and contingencies, either recorded or off-balance
sheet, as of
(Dollars in thousands) 2022 2023 2024 2025 2026 Thereafter Total Debt(1)$ 3,264 $ 127,495 $ 51,095 $ 300 $ 315 $ 7,500 $ 189,969 Operating leases, including imputed interest 7,932 32,915 31,544 29,579 27,702 159,221 288,893 Finance leases, including imputed interest 9 28 - - - - 37 Subordinated debt(1) 181 747 586 - - 27,913 29,427 Pension liability 171 684 684 684 684 1,034 3,941 Estimated interest on debt (2) 4,028 12,202 3,763 2,245 2,231 967 25,436 Village East purchase option(3) - 5,900 - -
- - 5,900 Total$ 15,585 $ 179,971 $ 87,672 $ 32,808 $ 30,932 $ 196,635 $ 543,603 (1)Information is presented gross of deferred financing costs. (2)Estimated interest on debt is based on the anticipated loan balances for future periods and current applicable interest rates. (3)Represents the lease liability of the option associated with the ground lease purchase of the Village East Cinema, which onNovember 4, 2022 , we modified to settle on or beforeJuly 1, 2024 .
Litigation
We are currently involved in certain legal proceedings and, as required, have accrued estimates of probable and estimable losses for the resolution of these claims. Please refer to Part I, Item 3 - Legal Proceedings in our 2021 Form 10-K for more information. There have been no material changes to our litigation since our 2021 Form 10-K, except as set forth in Notes to Consolidated Financial Statements-- Note 14 - Commitments and Contingencies included herein in Part I - Financial Information, Item 1 - Financial Statements on this Quarterly Report on Form 10-Q. This note sets out our litigation accounting policies.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements or obligations (including contingent obligations) that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in the financial condition, revenue or expense, results of operations, liquidity, capital expenditures or capital resources. CRITICAL ACCOUNTING POLICIES We believe that the application of the following accounting policies requires significant judgments and estimates in the preparation of our Consolidated Financial Statements and hence, are critical to our business operations and the understanding of our financial results: (i) Impairment of Long-lived Assets (other thanGoodwill and Intangible Assets with indefinite lives) - we evaluate our long-lived assets and finite-lived intangible assets using historical and projected data of cash flows as our primary indicator of potential impairment and we take into consideration the seasonality of our business. If the sum of the estimated, undiscounted future cash flows is less than the carrying amount of the asset, then an impairment is recognized for the amount by which the carrying value of the asset exceeds its estimated fair value based on an appraisal or a discounted cash flow calculation. For certain non-income producing properties or for those assets with no consistent historical or projected cash flows, we obtain appraisals or other evidence to evaluate whether there are impairment indicators for these assets.
(ii) Impairment ofGoodwill and Intangible Assets with indefinite lives - goodwill and intangible assets with indefinite useful lives are not amortized, but instead, tested for impairment at least annually on a reporting unit basis. The impairment evaluation is based on the present value of estimated future cash flows of each reporting unit plus the expected terminal value. There are significant assumptions and estimates used in determining the future cash flows and terminal value. The most significant assumptions include our cost of debt and cost of equity assumptions that comprise the weighted average cost of capital for each reporting unit. Accordingly, actual results could vary materially from such estimates. 42
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No impairment losses were recorded for goodwill and indefinite-lived intangible
assets for the third quarter and nine months ended
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements within the safe harbor provisions of theU.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "may," "will," "expect," "believe," "intend," "future," and "anticipate" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding the closures and reopening of our cinemas and theatres, including our expectations regarding renovations and addition of cinemas; our expected operating results, including the long-term impact of the COVID-19 pandemic and our ultimate return to pre-pandemic type results; our expectations regarding the recovery and future of the cinema exhibition industry, including the strength of movies anticipated for release in the future and any competitive pressures the industry may face in the future; our expectations regarding people returning to our theatres and continuing to use discretionary funds on entertainment outside of the home; our expectations regarding the impact of streaming and mobile video services on the cinema exhibition industry; our expectations regarding the impact of inflation on disposable income and its effect on customer attendance; our belief regarding the impact of a tightening labor market and supply disruptions on our business; our belief regarding the attractiveness of44 Union Square to potential tenants and ability to lease space on acceptable terms; our expectation regarding the opening of cinema complexes located in Invercargill,New Zealand andBrisbane QLD; our expectation regarding renovations at the Reading Cinemas in Busselton inWestern Australia ; our expectations of our liquidity and capital requirements, our reliance on operational cash flows and the allocation of funds and our expectations regarding industry demand and our ability to deliver value for stockholders. our expectations regarding the timing of a court hearing with respect to the Brown Class Action Complaint, the Wagner PAGA Claim and the Wagner Class Action Complaint. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. 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. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. 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, the following:
?with respect to our cinema and live theatre operations:
?the adverse effects of the COVID-19 pandemic (and its variants) and other contagious diseases on our Company's results from operations, liquidity, cash flows, financial condition, and access to credit markets;
?the adverse impact of the COVID-19 pandemic (and its variants) and other contagious diseases on short-term and/or long-term entertainment, leisure and discretionary spending habits and practices of our patrons;
?the decrease in attendance at our cinemas and theatres due to (i) health and safety concerns, (ii) a change in consumer behavior in favor of alternative forms of entertainment, or (iii) additional regulatory requirements limiting our seating capacity;
?reduction in operating margins (or negative operating margins) due to the implementation of social distancing and other health and safety protocols;
?potentially uninsurable liability exposure to customers and staff should they become (or allege that they have become) infected with COVID-19 while at one of our facilities;
?unwillingness of employees to report to work due to the adverse effects of the COVID-19 pandemic or to otherwise conduct work under any revised work environment protocols;
?the adverse impact that the COVID-19 pandemic may continue to have on the national and global macroeconomic environment;
?the disruptions or reductions in the utilization of entertainment, shopping, and hospitality venues, as well as in our operations, due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases such as COVID-19, or to changing consumer tastes and habits;
?the number and attractiveness to moviegoers of the films released in future periods, and potential changes in release dates for motion pictures;
?the lack of availability of films in the short- or long-term as a result of (i) major film distributors releasing scheduled films on alternative channels or (ii) disruptions of film production;
?the amount of money spent by film distributors to promote their motion pictures;
?the licensing fees and terms required by film distributors from motion picture exhibitors in order to exhibit their films;
?the comparative attractiveness of motion pictures as a source of entertainment and willingness and/or ability of consumers (i) to spend their dollars on entertainment and (ii) to spend their entertainment dollars on movies in an outside-the-home environment;
?the extent to which we encounter competition from other cinema exhibitors, from
other sources of outside-the-home entertainment, and from inside-the-home
entertainment options, such as "home cinemas" and competitive film product
distribution technology, such as, streaming, cable, satellite broadcast, video
on demand platforms, and Blu-ray/DVD rentals and sales;
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?our ability to continue to obtain, to the extent needed, waivers or other financial accommodations from our lenders and landlords;
?the impact of major movies being released directly to one of the multitudes of streaming services available;
?the impact of certain competitors' subscription or advance pay programs;
?the failure of our new initiatives to gain significant customer acceptance and use or to generate meaningful profits;
?the cost and impact of improvements to our cinemas, such as improved seating, enhanced F&B offerings, and other improvements;
?disruptions during cinema improvements;
?in the
?the risk of damage and/or disruption of cinema businesses from earthquakes as certain of our operations are in geologically active areas;
?the impact of protests, demonstrations, and civil unrest on, among other things, government policy, consumer willingness to go to the movies, and the spread of COVID-19 and its variants;
?additional delays by our landlords in theState of Victoria in the hand-over of cinema space to us which will result in further delays of our planned opening dates; and
?labor shortages and increased labor costs related to such shortages and to increasingly costly labor laws and regulations applicable to part time non-exempt workers.
?with respect to our real estate development and operation activities:
?the impact of the COVID-19 pandemic (and its variants) and other contagious diseases may continue to affect many of our tenants at our real estate operations inthe United States ,Australia, and New Zealand , their ability to pay rent, and to stay in business; ?the impact of the COVID-19 pandemic (and its variants) and other contagious diseases on our construction projects and on our ability to open construction sites and to secure needed labor and materials;
?the impact of the COVID-19 pandemic and its variants on real estate valuations
in major urban centers, such as
?the rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own;
?the ability to negotiate and execute lease agreements with material tenants;
?the extent to which we can obtain on a timely basis the various land use approvals and entitlements needed to develop our properties;
?the risks and uncertainties associated with real estate development;
?the availability and cost of labor and materials;
?the ability to obtain all permits to construct improvements;
?the ability to finance improvements;
?the disruptions to our business from construction and/or renovations;
?the possibility of construction delays, work stoppage, and material shortage;
?competition for development sites and tenants;
?environmental remediation issues;
?the extent to which our cinemas can continue to serve as an anchor tenant that will, in turn, be influenced by the same factors as will influence generally the results of our cinema operations;
?the increased depreciation and amortization expense as construction projects transition to leased real property;
?the ability to negotiate and execute joint venture opportunities and relationships;
?the risk of damage and/or disruption of real estate businesses from earthquakes as certain of our operations are in geologically active areas;
?the disruptions or reductions in the utilization of entertainment, shopping and hospitality venues, as well as in our operations, due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases such as COVID-19, or to changing consumer tastes and habits; and
?the impact of protests, demonstrations, and civil unrest on government policy, consumer willingness to visit shopping centers, and the spread of COVID-19, among other things.
?with respect to our operations generally as an international company involved in both the development and operation of cinemas and the development and operation of real estate and previously engaged for many years in the railroad business inthe United States :
?our ability to renew, extend, renegotiate or replace our loans that mature in 2023 and beyond;
?our ability to grow our Company and provide value to our stockholders;
?our ongoing access to borrowed funds and capital and the interest that must be paid on that debt and the returns that must be paid on such capital, and our ability to borrow funds to help cover the cessation of cash flows we experienced during the COVID-19 pandemic;
?our ability to reallocate funds among jurisdictions to meet short-term liquidity needs;
?the relative values of the currency used in the countries in which we operate;
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?the impact that any discontinuance, modification or other reform of London Inter-Bank Offered Rate (LIBOR), or the establishment of alternative reference rates, may have on our LIBOR-based debt instruments;
?changes in government regulation, including by way of example, the costs resulting from the requirements of Sarbanes-Oxley;
?our labor relations and costs of labor (including future government requirements with respect to minimum wages, shift scheduling, the use of consultants, pension liabilities, disability insurance and health coverage, and vacations and leave);
?our exposure from time to time to legal claims and to uninsurable risks, such as those related to our historic railroad operations, including potential environmental claims and health-related claims relating to alleged exposure to asbestos or other substances now or in the future recognized as being possible causes of cancer or other health related problems, and class actions and private attorney general wage and hour and/or safe workplace-based claims; and uncertainty of the outcome of litigation or arbitration related to our various real estate assets and operations;
?our exposure to cybersecurity risks, including misappropriation of customer information or other breaches of information security;
?the impact of major outbreaks of contagious diseases, such as COVID-19;
?the availability of employees and/or their ability or willingness to conduct work under any revised work environment protocols;
?the increased risks related to employee matters, including increased employment litigation and claims relating to terminations or furloughs caused by cinema and ETC closures; ?our ability to generate significant cash flow from operations if our cinemas and/or ETCs continue to experience demand at levels significantly lower than historical levels, which could lead to a substantial increase in indebtedness and negatively impact our ability to comply with the financial covenants, if applicable, in our debt agreements;
?our ability to comply with credit facility covenants and our ability to obtain necessary covenant waivers and necessary credit facility amendments;
?changes in future effective tax rates and the results of currently ongoing and future potential audits by taxing authorities having jurisdiction over our various companies;
?the impact of the events occurring in
?potential inflationary pressures; and
?changes in applicable accounting policies and practices.
The above list is not necessarily exhaustive, as business is by definition
unpredictable and risky, and subject to influence by numerous factors outside of
our control, such as changes in government regulation or policy, competition,
interest rates, supply, technological innovation, changes in consumer taste and
fancy, weather, earthquakes, pandemics, such as COVID-19, and the extent to
which consumers in our markets have the economic wherewithal to spend money on
beyond-the-home entertainment. Refer to 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 2021 Form 10-K, 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.
Forward-looking statements made by us in this quarterly report are based only on
information currently available to us and are current only as of the date of
this report. 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.
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