Reading International, Inc. (NASDAQ:RDI) Q2 2022 Earnings Conference Call August 11, 2022 8:00 AM ET
Company Participants
Andrzej Matyczynski – Executive Vice President, Global Operations
Ellen Cotter – President & Chief Executive Officer
Gilbert Avanes – Executive Vice President, Chief Financial Officer & Treasurer
Conference Call Participants
Andrzej Matyczynski
Thank you for joining Reading International’s earnings call to discuss our 2022 second quarter results.
My name is Andrzej Matyczynski, and I am Reading’s Executive Vice President of Global Operations. With me, as usual, are Ellen Cotter, our President and Chief Executive Officer; and Gilbert Avanes, our Executive Vice President, Chief Financial Officer and Treasurer.
Before we begin the substance of the call, I will just try run through the usual caveats. In accordance with the safe harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters addressed in this earnings call may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause our actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are clearly set out in our SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements.
In addition, we will discuss non-GAAP financial measures on this call. Reconciliations and definitions of non-GAAP financial measures, which are segment operating income, EBITDA and adjusted EBITDA, are included in our recently issued 2022 second quarter earnings release on our company’s website.
We have adjusted, where applicable, the EBITDA items we believe to be external to our business and not reflective of our cost of doing business or results of operation. Such costs include legal expenses relating to extraordinary litigation and any other items that can be considered nonrecurring in accordance with the two-year SEC requirement for determining an item is nonrecurring, infrequent or unusual in nature. We believe adjusted EBITDA is an important supplemental measure of our performance.
In today’s call, we also use an industry accepted financial measure called theater level cash flow, TLCF, which is theater-level revenue less direct theater-level expenses. We will also use a measure referred to as food and beverage, F&B, spend per patron, SPP, which is a key performance indicator for our cinemas. The F&B SPP is calculated by dividing a cinema’s revenues generated by food and beverage sales by the number of admissions at that cinema.
Please note that our comments are necessarily summary in nature. And anything we say is qualified by the more detailed disclosure set forth in our Form 10-Q and other filings with the US Securities and Exchange Commission.
So with that behind us, I’ll turn it over to Ellen, who will review our 2022 second quarter results and discuss our strategies for navigating Reading through the post-COVID operating landscape. And then Gilbert will provide a more detailed financial review. Ellen?
Ellen Cotter
Thank you, Andrzej, and thanks, everyone, for joining the call today. In the second quarter of 2022, Reading delivered dramatically improved operational results clearly signaling that our operational recovery from the pandemic is well underway. Our second quarter 2022 consolidated total revenues of $64.5 million, which nearly doubled from $36 million in Q2 2021, represented the highest quarterly revenue since the fourth quarter of 2019 and 85% of the second quarter of 2019.
Our second quarter operating loss of $1.6 million was significantly better than any quarter since the onset of the pandemic. The $1.6 million operating loss represented an 87% improvement compared to the first quarter of 2022 and an 87% improvement compared to the second quarter of 2021. Also, if you exclude the $1.5 million impairment charge reflected on our Q2 2022 financials, our operations during the quarter would have essentially broken even.
Our second quarter EBITDA of just under $7.7 million represents the first quarter since the onset of the pandemic that we delivered a healthy EBITDA driven purely by operational results, as opposed to previous pandemic quarters when our EBITDA was positively influenced by strategic and successful asset monetization.
Recall that we monetize certain assets in the United States, Australia and New Zealand, unlocking book profit of $90.2 million and generating net cash of almost $142 million. The assets sold included non-income-producing land and where assets, which would not, in our view, have increased materially in value without investment of significant capital. And demonstrating the strength of our balance sheet as of June 30, 2022, we reported just under $50 million in cash and cash equivalents, which is a direct result of these sales.
As you know, confronted by the elimination of most of our cinema cash flow in 2020, due to the devastating pandemic and with no hope for US Federal monetary assistance through the Shuttered Venue Operators Grant program due to our public company status, our Board and management chose to monetize these real estate assets in 2021, instead of diluting our stockholders with an equity raise or burdening our future foundation with higher debt loads.
Clearly, our global cinema business, along with the rest of the industry rebounded strongly. At $61.8 million, our Q2 2022 global cinema revenue, which increased by 89% compared to Q2 2021 was the driver of our consolidated total revenue increase mentioned above and represented the highest quarterly cinema revenue since the fourth quarter of 2019 and 85% of cinema revenues for the same pre-pandemic period in 2019.
Not only did the second quarter reflect a stellar lineup of commercial films, but it offered moviegoers an interesting mix of titles, attracting varied audiences back to the cinemas. Top Gun: Maverick has been a sensational hit for the industry and for us, especially in markets like San Diego, Hawaii and Australia. Franchise pictures like Doctor Strange in the Multiverse of Madness, Jurassic World: Dominion and Sonic the Hedgehog 2 performed well across our global circuit.
Original and unique pictures like The Bad Guys, Elvis, The Lost City, The Black Phone and Everything Everywhere All at Once rounded out the theatrical slate and succeeded in bringing back different audiences to the cinema. And our second quarter 2022 cinema segment operating income of $3.5 million was the highest cinema segment operating income since the fourth quarter of 2019.
Not only was our global cinema business reignited during the second quarter of 2022, Reading’s real estate business also improved. Our Q2 2022 total real estate revenues increased by 17% to $4 million. During the second quarter of 2022, our two live theaters in New York City held public performances and substantially all of our 72 third-party tenants in Australia and New Zealand were either opening, were either open or completing tenancy fit-out works.
If you recall in January of 2022, our company executed its largest leasing transaction ever with the signing of a long-term lease with a strong credit international retailer for 3 levels of our 44 Union Square building in New York. During the second quarter, we progressed the tenant improvement phase and currently anticipate that the tenant will be open for business in early 2023 and anticipate cash rent starting to flow to asset sometime during Q4, 2022.
And we’re currently reviewing term sheets provided by our broker CBRE, contemplating the lease of the remainder of the building. Our recent operational achievements and resilience through the darkest days of the pandemic can be attributed to our two business, three-country business strategy which we strongly believe will continue building long-term value for our stockholders and support our future success.
Although, we would have preferred to hold all of our assets for future development, we monetize certain assets in 2021 to help our company through the worst times of the pandemic. As you can see from our recently filed quarterly reports, we believe we’re on a path to recovery and have retained what we believe to be our most valuable key assets.
Our future outlook remains optimistic. With respect to our global cinema business this past July was equally reassuring for us. During the first part of July 2022, two more blockbuster films were released, Minions, The Rise of Gru and Thor, Love and Thunder. On a functional currency basis, the attendance, total revenues and TLCF, theater-level cash flow for the month of July in each cinema division was the highest it’s been since February of 2020.
And while our August and September will, as has historically been the case, be slower months at the box office, the fourth quarter should deliver a strong result for us with highly anticipated features like Avatar 2, The Way of Water, Halloween End, Marvel’s Black Panther, Wakanda Forever, DC Comics, Shazam, Fury of the Gods and Black Adam and Disney’s Strange World.
Now let’s turn to our global cinema business. Despite the ongoing pandemic and presence of the new Omicron BA5 sub variant, we’re pleased to report that at $61.8 million, our Q2 2022 Global Cinema total revenues increased by 89% from Q2, 2021, and represented the highest quarterly cinema revenues since the fourth quarter of 2019 and was 85% of Q2, 2019 and represented a 65% increase from Q1, 2022 which was 107% of Q1, 2019.
At $3.5 million, our Q2, 2022 cinema segment operating income increased by 147% from Q2, 2021 and represented the highest quarterly segment operating income since the fourth quarter of 2019. And in the sign of progressive improvement, 148% increase over Q1 of 2022.
As I mentioned earlier, these reassuring results were primarily driven by the amazing Q2 gross box office performance of Top Gun, Maverick which has grossed over $8.8 million through our global circuit. Dr. Strange in the Multiverse of Madness which grossed almost $6 million in our circuit and Jurassic World, which grossed $4.3 million for us. Collectively, these three movies make up 49% of our Q2 2022 global gross box office revenues, and continue to reinforce our belief about the pent-up demand among moviegoers returning to the big screen.
Turning to some specifics about the United States. With all of our US cinemas operating, except one closed for non-COVID reasons, our Q2 2022 total cinema revenues of $30.3 million increased by 132% compared to Q2 2021. Our cinema segment operating loss reduced by 78% to a loss of $2 million from a loss of $9.3 million in Q2 of 2021.
As you may know, our US circuit is divided between commercial and specialty theaters that play our house product. This year, because of the dearth of arthouse product, many of our specialty arthouses played commercial films to fill in the gaps. We received a question about the landscape for arthouse content over the next 18 months.
Our US specialty cinemas that primarily play arthouse product on a more dedicated basis led by the Angelika Film Center in New York City did struggle more than the commercial theaters during the Q2 — during the second quarter of 2022. With no real standout order specialty movie titles, the gross box office of the Angelika New York City during the second quarter represented only 42% of the gross box office delivered during the second quarter of 2019.
However, arthouse programming usually picks up during the fourth quarter into the award season. The current booking lineup appears impressive and should result in a better outcome for us later in the year. Interesting titles already booked include Martin McDonagh’s The Banshees of Inisherin, Sarah Polley’s Women Talking and James Gray’s Armageddon Time.
Other arthouse titles that look promising include Sony Classics’ Living, the Palme d’Or, winner Triangle Of Sadness and Park Chan-wook’s, Decision to Leave. Because of the arthouse situation, our team actively sought to incentivize film lovers to return to our cinemas.
A couple of highlights from the team. On April 29th, we launched our first free to join Angelika Membership program at nine specialty cinemas. With only three full months of operation, the total number of members enrolled as of the end of July 2022, increased by over increased by over 200% and compared to the number of members enrolled by the end of May 2022, the program’s first month of operation.
Overall, we’re very pleased with the membership gains since launch with the highest number of monthly sign-ups being in July. Without any paid advertising and on the strength of internal marketing, the loyalty program is off to an excellent start with attendance tied to membership at 7.9% in May, 10.45% in June and over 14% in July. Also in April of 2022, our marketing team partnered with Sony Pictures Classics on the Bring A Friend Back to the movies promotion for The Duke’s starring Jim Broadbent and Helen Mirren. We offered anyone coming to see The Duke, a free ticket for a friend. Even though the attendance for The Duke featured many free tickets, The Duke still ended up being one of our strongest paid box office specialty titles during the quarter.
Also, on July 15, 2022, our marketing team in partnership with Focus Features launched see more to earn more, which provides guests with rewards once they reach specific tiers after seeing two, three and five Focus Features titles at our theaters. This promotion is currently set to run through the end of the calendar year, and we anticipate – and may continue into 2023.
With respect to CapEx investments in our US circuit, we’ve renovated our consolidated theater at the Kahala Mall in Honolulu, which we launched in November of 2021. In terms of return on investment, it’s too early to tell how this investment will eventually pan out. However, looking at financial results for Q2 2022 versus Q2 2019, pre-pandemic and pre-renovation, the total revenues at this date increased by 41% and our TLCF has increased substantially.
We’re also in the middle of a full top-to-bottom renovation of our Consolidated Theater in Kapolei, which we launched five months ago on March 3, 2022, with recliners in 50% of the auditoriums and to lobby renovation. Again, it’s too early to assess a return on investment. However, we’ll note that located in a suburban market, this theater is trending behind the performance of Kahala.
I’ll note that both theaters had not undergone any material renovation since we bought them in 2008. In terms of CapEx for the next 12 months, we’re scheduled to complete the remainder of the Kapolei renovation and to complete one additional top-to-bottom renovation at one of our mainland cinemas, which would include conversion to recliner seats and lobby upgrades and F&B upgrades.
Until our US circuit returns to profitability we’re carefully husbanding our cash resources. However, a number of landlords have approached us with opportunities to take over existing cinemas, which we continue to review.
Looking to Australia. By any measure, our Australian Cinema circuit had a standout quarter. On a functional currency basis, the second quarter 2022 cinema revenue for Australian circuit was not only the highest second quarter on record, but it represented the highest calendar quarter on record.
At $26.8 million, our Q2 2022 cinema revenues increased by 66% compared to Q2 2021. And our Q2 2022 cinema segment operating income increased by 237% to $4.8 million compared to Q2 2021. The investments we’ve made in the circuit over the last several years have paid off, aided by an absolutely blockbuster movie slate seemingly tailor-made for our audience in Australia.
Top Gun: Maverick, Doctor Strange in the Multiverse of Madness, Jurassic World Dominion and Sonic Hedgehog 2, all over performed, with Top Gun Maverick today currently breaking the third highest lifetime grossing film in Australia. Within the last few years, we’ve built five new Reading Cinemas, acquired two existing cinemas, added 18 new TITAN LUXE screens, added 37 premium screens, featuring recliner seats, added eight liquor licenses and added elevated food venues to 14 of our theaters.
During the second quarter of 2022, our global cinema team continued to deliver impressive F&B results. Our F&B revenues for the second quarter of 2022 recorded near-record results. At AUD7.16 in Australian dollar, our F&B, SPP ranks as the highest second quarter ever when you exclude the second quarter of 2020 and 2021 when the attendance was dramatically less.
To generate SPP this high during a very well-attended quarter bodes well for the prospects of our F&B business into the future. We continue to expand our cinema portfolio and pipeline in Australia. By the end of this year, we anticipate opening an eight-screen complex, which will be operated under the Angelika Film Center brand in South City Square, Brisbane, Queensland.
It will feature all recliner seating offer an elevated F&B menu with an elegantly appointed lobby and patio areas. We’re all excited about launching this boutique cinema that will be unique to the Brisbane market.
And by the end of 2023, we expect to launch a five-screen Reading Cinema with TITAN LUXE in Busselton, Western Australia. And we continue to review certain underserved pockets in Australia for opportunities to further grow our circuit.
And wrapping up with New Zealand. As of today, all of our New Zealand cinemas are open and operating without occupancy or seating restrictions except two that are temporary closed due to reasons unrelated to the pandemic.
Our Q2 2022 cinema revenues increased by 34% to AUD 4.6 million compared to Q2 2021. And our Cinema segment operating income increased by 15% to $700,000 compared to Q2 2021.
And to highlight the strength of our F&B team again at AUD 5.99 and in New Zealand dollars, our Q2 2022 New Zealand cinema F&B SPP ranks as the highest second quarter ever.
Now let’s turn to our real estate business. Reflecting the strength of our dual and diversified business strategy, our real estate business, which was less impacted than the cinema business played a key role in supporting our company’s cash flow through the pandemic.
Our second quarter 2022 operational results demonstrate that as our team evolves and gets stronger, this business continues to establish long-term value for our stockholders. At $4 million, our Q2 2022 total global real estate revenue represented a 17% increase over the same quarter in 2021. We reduced our total global real estate operating loss by 92% to AUD 88,000.
Our overall improvements were driven by a few key factors; generation of rental revenue from our US live theaters, which were closed during the second quarter of 2021, the resumption of internal cinema rental income in Australia and New Zealand, which was abated during 2021 and consistent and steady third-party rental streams from our Australian properties such as Newmarket Village, Cannon Park and the Belmont Common.
And note that while our results don’t reflect any straight-line rent yet for 44 Union Square, they are burdened with some 44-unit square operating expenses. The quarter also reflects the elimination of rental revenues and income from Auburn Redyard, Invercargill and the Royal George.
Note that as of June 30, 2022 following the monetizations of our Auburn Redyard and Invercargill properties, we still have 72 third-party tenants in our Australian and New Zealand property portfolio, representing almost 250,000 square feet of gross lettable area with a 92% occupancy rate.
In Australia, our Q2 2022, resulted in real estate revenue increasing by 12% [ph] to $3.1 million versus the second quarter in 2021 and real estate segment operating income increasing by 89% to $1.3 million compared to the second quarter of 2021. These property segment improvements were driven primarily by the resumption of internal cinema rent being charged to our Reading Cinemas in Australia, which we abated 2021 due to COVID and a reduction in operating expenses, partially offset by the loss of internal rent revenue from the monetization of Auburn Redyard and a reduction in third-party rental revenue.
During Q2 of 2022, at Cannon Park, our property team finalized the lease renewal with a 15,000 square foot tenant and secured a new lease for a 5,000 square foot tenant.
And at Newmarket Village, we executed two new leases collectively representing over 4,500 square feet and reflecting the strength and growth of our well-curated property portfolio. During the second quarter of 2022, our Australian third-party combined tenant sales increased by 8% compared to the second quarter of 2021.
In New Zealand, during the second quarter of 2022, real estate revenue increased by 53% compared to the second quarter of 2021 and our operating loss reduced by 35% to a loss of $300,000 compared to the second quarter of 2021. These improved results were related to the resumption of internal rent income in New Zealand, which was abated during 2021, offset by the elimination of internal rental income from the monetization of our Invercargill property in 2021.
And finishing up with the US. As a result of the reactivation of our live theaters in New York City, our second quarter 2022 real estate revenue increased by 29% to $585,000 versus the second quarter of 2021 and our real estate operating loss reduced by 17% to a loss of $1.1 million versus the second quarter of 2021. Note again, our US income reflects [Technical Difficulty] expenses for 44 Union Square, but no straight-line rent yet.
During the second quarter of 2022, our global property team continued to progress key real estate projects. At 44 Union Square, a newly redeveloped historic Tammany Hall that sits prominently at the intersection of 17th Street and Union Square East in Manhattan, we’re in the process of building out the space for our new international retailer will be occupying three floors for a flagship store. Based on the construction schedule and our lease terms, we continue to expect cash rent to be paid before the end of 2022 and expect an early 2023 store opening.
With total availability rate of about 19%, the Midtown South Submarket hasn’t recovered to pre-pandemic levels even though the Union Square area has shown some signs of improvement. Today, average asking rents in our area hover around $90 per square foot and the Submarket recently reported REIT deals with IBM and Google.
Our exclusive leasing agent, CBRE, has recently brought us potential tenants to review for the remainder of the building. Each has interesting uses that we see could work well in our unique and brandable space and each would exploit the building’s positioning as an iconic and monumental northeast anchor to Union Square Park. Our focus over the next 12 months will be on not only getting our retail tenant open for business, but completing the leasing of the building.
Our development priorities for the next few years not only include completing 44 Union Square, but returning our focus for our real estate assets in Wellington, New Zealand. In New Zealand, we’re eager and motivated to restart our Courtenay Central project, which will allow us to reopen a fully renovated 10-screen Reading Cinema along with completing a seismic upgrade to our Courtenay Central building.
Our goal for this theater, which historically was always one of the strongest in New Zealand, is to create the best movie theater experience in New Zealand. Over the last few years, we’ve continued to work together and strategize with various stakeholders, including Wellington City Council, potential development partners, prospective tenants and consultants.
With Tākina, Wellington’s new Convention Center across the street from us nearing completion, the time is right for us to move this project forward. Our global real estate team anticipates making announcements about our key Wellington assets during the next two quarters.
Now before I turn it over to Gilbert for a financial review of the second quarter, on behalf of Margaret, our Board and myself, we want to again extend our sincerest appreciation to the global Reading team. Our team has worked tirelessly through the most unprecedented events in our lifetimes.
Even though COVID cases are decreasing and government restrictions have eased, we know we’re not completely out of the woods just yet. It’s the daily efforts of the Reading team responsible for getting our company in its various divisions to a more stabilized position for our stockholders. Again, for that, we say thank you. Thank you.
With that, I’ll turn it over to Gilbert.
Gilbert Avanes
Thank you, Ellen. Consolidated revenues for the second quarter of 2022 increased by 79% to $64.5 million when compared to the same period last year, which is 85% of the comparable 2019 pre-pandemic revenue for the same quarter. Consolidated revenues for the six months ended June 30, 2022, increased by 83% to $104.7 million when compared to the same period last year, which is 76% of comparable 2019 pre-pandemic revenue for the six-month period.
These increases were attributable to a stronger film slate as well as substantially all of our cinema operation during the first six months of 2022, compared to the same period in 2021, when a portion of our cinemas were closed due to local government COVID mandate for part of our reporting period.
Net income attributable to our company for the quarter ended June 30, 2022, decreased by $25.1 million to a loss of $2.4 million when compared to the same period in 2021. Basic loss per share was $0.11 for the quarter ended June 30, 2022, compared to a basic earnings per share of $1.04 for the quarter ended June 30, 2021. This was due to a $43.2 million gain on sale of assets during the same quarter of prior year.
Net income attributable to Reading International Inc. for the six months ended June 30, 2022, decreased by $59.5 million to a loss of $17.8 million when compared to the same period in 2021. Basic loss per share was $0.81 for the six months ended June 30, 2022, compared to a basic earnings per share of $1.91 for the six months ended June 30, 2021. This was due to $89.8 million gain on sale of asset during the same six months prior year.
These changes are largely due to prior period profit from our asset monetization that did not occur for the quarter and six months ended June 30, 2022, partially offset by our increased cinema income, decreased tax expenses and positive foreign exchange rate impact from New Zealand and Australia.
For the second quarter of 2022, income tax expense decreased by $4 million to $1.5 million compared to the equivalent prior year period. For the six months ended June 30, 2022, income tax expense decreased by $12.1 million to $1.2 million compared to the equivalent prior year period. The change between 2022 and 2021 is primarily due to monetization of assets in 2021.
Non-segment G&A expense for the quarter ended June 30, 2022, increased by $0.9 million to $4.7 million compared to the prior year period and the six months ended June 30, 2022. It increased by $1.2 million to $9.1 million compared to the prior year period. These increases were attributable to increased legal fees, professional and outside services and salaries and wages.
Turning now to our cash flow. For the six months ended June 30, 2022. Net cash used in operating activities increased by $11.6 million to $17.6 million, when compared to the same period in 2021. This was driven by a $39 million increase in net change in operating assets and liabilities, primarily resulting from taxes payable and accounts payable, offset by $27.4 million decrease mainly attributable to improved cinema operating performance.
Cash used in investing activities during the six months ended June 30, 2022, and increased by $140.6 million to $3.7 million, mainly related to the proceeds from monetization of assets in 2021 that did not occur in Q2 2022.
Cash used in financing activities decreased by $32.6 million to $4.2 million, during the six months ended June 30, 2022, primarily due to using proceeds from asset sales to pay down debt, as well as paid off non-controlling interest in 2021.
Shifting to our financial position. Our total assets in June 30, 2022 were $627.6 million compared to $687.7 million on December 31, 2021. The $60.1 million reduction was primarily driven by a decline in cash and cash equivalents by which we funded our ongoing business operations and pay down debt. As of June 30, 2022, our total outstanding borrowings were $228.6 million compared to $236.9 million on December 31, 2021.
This decrease was due to pay down of debt and foreign exchange rate impact. Our cash and cash equivalent as of June 30, 2022 were $49.9 million. We are currently in compliance with our loan covenants. We continue to be in compliance with the terms of our loan agreements, without the need for additional loan modifications. We believe that our lenders understand that the current situation relating to COVID-19 pandemic is not of our making and that we are doing everything we can to deliver our strategic priorities.
We feel that we are continuing to have good relationships with our lenders.
We did not repurchase any shares in the second quarter of 2022 and due to COVID-19 pandemic and its impact on our overall liquidity, our stock repurchase program has and will likely continue to take a lower capital allocation priority for the foreseeable future.
I will now turn it over to Andrzej.
Question-and-Answer Session
A – Andrzej Matyczynski
Thanks, Gilbert. As usual, I’d like to thank our stockholders for forwarding questions to our Investor Relations e-mail. And as normal, we’ve addressed some of your questions in Ellen’s prepared remarks, but we’ve compiled a set of five questions e-mailed to us that we’ll address now. First question being what are you seeing in terms of inflation and wage pressure? Ellen?
Ellen Cotter
Inflation has definitely impacted all of our operational divisions. Most importantly, in our global cinemas, labor expense and F&B costs have gone up, when you compare the second quarter of 2022 to a pre-pandemic period like Q2 of 2019. Likewise, for this period, each country’s average ticket price and SPP increased due to strategic ticket and concession price increases. But we’ve calibrated the increases to not have a deterrent impact.
For instance, in the US, while it might be more expensive to see a highly anticipated blockbuster in the first week on a TITAN screen, we’re also providing more discounts through the week. For example, the recently launched Angelika membership program offers half of Tuesday or 50% of every ticket type on Tuesdays.
The component of the membership program has proven to be really effective at driving incrementally more weekday attendance. And in Australia and New Zealand, our strategic price increases are consistent with our value pricing foundational philosophy.
On the wage pressure, like other retailers across the globe, staffing has been a challenge across all of our operating divisions. Not only are wages increasing, but staffing in general is more difficult. Again, if you compare the second quarter of 2022 to the second quarter of 2019, our labor per capita have gone up by over 20%.
With this new headwind, it’s really forcing our teams to think more strategically. For instance, we’re taking better advantage of new technology and software programs to staff more precisely and we’re improving our online ordering functionality to drive guests to order and buy both tickets and F&B online in advance to improve our staffing efficiencies. Also, we continue to focus on booking creative events and programs to expand attendance and improve sales during traditionally slower points during the week, when we have minimum staffing.
On a final note, for decades, our industry has argued that movie theaters are recession-proof. Going to the movies was always and continues to be a reasonably priced form of entertainment for your family and friends. I think this most recent period bears out that old adage again. Over the last few months, despite some price increases, audiences have returned in record numbers to see top-notch entertainment like Top Gun, Minions, Sonic and Doctor Strange.
Andrzej Matyczynski
Thanks, Ellen. With the sizable BofA US term loan and now the Cinemas 1,2 and 3 Term Loan, newly reclassified to course current liabilities to substantially increase. What is the timing and status of paying-off or replacing this loan with longer-term financing? Gilbert?
Gilbert Avanes
The Cinemas 1,2,3 Term Loan has one additional six months extension to be exercised, that will push out the loan maturity date to April 1, 2023. The Bank of America term loan with its scheduled principal payments will be maturing on March 6, 2023. As with all loans that come up for refinancing, we work diligently with the lenders and at the same time, reach out for competitive bids from other lenders for most of the beneficial long-term loan financing. We believe that our current financial position, forecast and cash flow estimate based on our current expectation of industry performance and recovery mean that our company has sufficient resources to meet its obligation as they become due.
Andrzej Matyczynski
Thanks, Gilbert. Can you feel the next one? What was the US Cinemas that had 1.5 million asset value impairment?
Gilbert Avanes
For strategic reasons, we do not want to specify what theaters are included in the impaired asset value. However, the impairment relates to three small US cinemas with contribution to the overall income of our US Cinema circuit is negligible. We’d like to work with the landlords of these cinemas to craft the strategy, to reduce occupancy costs, so that operate on a profitable basis. However, we can offer no assurance that we’ll be successful in these negotiations.
Andrzej Matyczynski
Thanks, Gilbert. The fourth question. Can we get an update on pending applications for liquor licenses in the US, Australia and New Zealand? What is the timing for approval in these locations? How many more theaters would you like permits for? Ellen?
Ellen Cotter
Across the globe, our ultimate goal is to offer liquor in all of our theaters, where it makes sense for the surrounding community. With respect to our cinemas operating in the US, 74% offer liquor today. That’s six out of eight theaters on the East Coast in Texas, five out of seven in California and six out eight theaters in Hawaii. On the Mainland, California and in New York, we expect the four outstanding licenses, whether temporary or permanent to be obtained before the end of 2022. The status of the remaining licenses in Hawaii is dependent on discussions with our landlords. So I can’t estimate a time frame for those.
With respect to our cinemas in Australia and New Zealand, just under 60% offer liquor today. That is 18 out of 27 theaters in Australia and five out of 12 in New Zealand. Of the three liquor licenses pending, we expect to have all three before the end of 2022. And over the next few years, we’ll be working on obtaining the remainder of the licenses again, if it makes sense for the surrounding community.
Andrzej Matyczynski
Thanks, Ellen. And I guess I’ll feel the last question, which is, it’s clear that the cinema is going to fully require — recover. My question is on capital allocation. How does the company approach you? What better use of money is there than buying back shares at these prices?
I understand that the two businesses, three country, diversified structures, got us through the COVID storm, without dilution and leveraging the balance sheet. But the pandemic is over, and the time to act is now.
Let’s stop fighting the last war and look to the future and create more value than any property redevelopment has to offer by buying back a bunch of shares. Well, whilst we may agree on the sentiments expressed in the first part of the question, we still have to face the reality of the COVID effect, ebbing though it may be.
Based on our reported numbers, we have supported our business in the first six months of 2022 to the tune of some $25 million, excluding debt repayment and included what we would consider minimal investment in the CapEx needs of our business.
We had a cash balance of approximately £50 million at June 30th, as stewards of our shareholders’ money, we must firstly confirm what has so far been a strong recovery from the COVID era and avoid being placed in a position of either selling more assets, taking on expensive debt and/or diluting existing shareholders by using stock.
Management reviews and discusses our cash position and capital allocations on an almost daily basis and buying back a bunch of our shares is certainly an option that forms part of those discussions. We work to balance the needs of the business, so that there is a business to manage in the future against the opportunities afforded us based on the current stock price.
Well, that marks the conclusion of the call. As always, we appreciate you listening to the call. Thank you for your attention. And wish everyone, good health and safety.
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