Reading International, Inc. (NASDAQ:RDI) Q3 2022 Earnings Conference Call November 11, 2022 5:00 PM ET
Company Participants
Andrzej Matyczynski – EVP, Global Operations
Ellen Cotter – President & CEO
Gilbert Avanes – EVP, CFO & Treasurer
Conference Call Participants
Andrzej Matyczynski
Thank you for joining Reading International’s earnings call to discuss our 2022 Third Quarter Results. My name is Andrzej Matyczynski, and I’m 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 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 third 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 non-recurring in accordance with the two year SEC requirement for determining an item is non-recurring, infrequent or unusual in nature. We believe adjusted EBITDA is an important supplemental measure of our performance.
In today’s call, we’ll also use an industry accepted financial measure called theater level cash flow TLCF, which is a 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 nature. And anything we say is qualified by the more detailed disclosure set forth in our Form 10-Q, and other filings with the U.S. Securities and Exchange Commission.
So with that behind us, I’ll turn it over to Ellen, who will review our 2022 third quarter results and discuss our strategies for navigating Reading through the post-COVID operating landscape, followed by Gilbert, who provide a more detailed financial review. Ellen.
Ellen Cotter
Thanks, Andrzej, and thank you everyone for joining our call today. Following the third quarter 2022 we remain confident in Reading’s future, including our operational recovery from the pandemic. And our two business, three country internationally diversified business strategy that we believe will continue to serve as a strong foundation for our company and our stockholders.
Our third quarter 2022 global revenues were $51.2 million, representing a 61% increase versus Q3 2021 and a 27% reduction from the pre-pandemic Q3 2019 quarter, or 73% of Q3 2019 global revenues. We generated these global revenues despite some acute challenges, including a significantly weaker movie slate opening during the months of August and September 2022, inflationary cost pressures, supply chain and labor shortage issues and foreign currency headwinds impacting Australian and New Zealand results that Gilbert will touch on later.
Despite these ongoing challenges, from an operational progress perspective, we reduced our Q3 2022 operating loss by 39% versus Q3 2021 to $6.7 million. And following our positive Q2 2022 EBITDA of $7.7 million we also generated positive EBITDA of $3.9 million in Q3 of 2022. Unlike comparable quarters in 2021, these 2022 quarters did not reflect significant EBITDA from asset monetization. Recall that during this 2021 period, we successfully monetized our Auburn/Redyard, Royal George and Invercargill property, in addition to two other properties, in order to address our liquidity crisis raised by the pandemic.
Recognizing that 94% of our Q3 2022 global revenues were generated by our global cinema circuit, we know we’re not out of the woods just yet. However, during the quarter, cinema audiences demonstrated again a real willingness to return to the big screen when the content is compelling, and/or the price is right. Q3 2022 offered moviegoers a great mix of titles that attracted different audiences. Even though August and September presented a much softer opening movies slate but disappointing box office, July of 2022 was a strong month thanks to well received franchise pictures like Thor: Love and Thunder, and Minions: The Rise of Gru.
The quarter also delivered the original and entertaining Bullet Train starring Brad Pitt. And despite opening in Q2 of 2022, Elvis and Top Gun: Maverick continued to hold well through the third quarter, which had them both ranking in the top five films across our global circuit for this quarter.
As further demonstration of the strength of the public’s interest in theatrical movie going, National Cinema Day in the U.S. was a big success for our U.S. Circuit. For one day, Saturday, September 3, the industry offered $3 tickets all day for all films, with exhibitors also offering concession deals. Throughout our U.S. Circuit, we hosted over 60,000 guests on that one day, which marked an increase of over 130% versus the same day or the same Saturday in 2019. We’re now in the homestretch of 2022, and looking at a very strong movie lineup to close out the year.
Today, we opened the long awaited release of Black Panther: Wakanda Forever. Going into opening day the advanced sales of this blockbuster for our global circuit were the third highest on a dollar basis since the onset of the pandemic, following Spider Man and Doctor Strange. And 13 years after the original Avatar, director James Cameron returns on December 16, with the highly anticipated spectacle, Avatar: The Way of Water.
Turning to our other business, real estate operations and development, our Q3 2022, total real estate revenues increased 28% to $4.1 million. This result was primarily driven by the solid performance of our international real estate portfolio of 74 third party tenants in Australia and New Zealand and the restarting of intercompany rent being charged to our own Reading cinemas, which was abated in 2021.
In terms of liquidity, as of September 30, 2022, we reported just under $40 million of cash, which is a direct result of our 2021 asset monetizations that raised on a gross basis $148 million, of which through 2021 and 2022 we used to pay down debt, pay taxes, meet certain CapEx obligations, meet our occupancy requirements and operational needs. Recall that when the pandemic caused the elimination of most of Reading’s [ph] cash flow in 2020, and with no hope for U.S. Federal monetary assistance through the Shuttered Venue Operators Grant Program due to our public company status, our Board of Management chose to monetize five real estate assets in 2021, instead of diluting our stockholders with an equity raise or burdening our future with higher debt loads.
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 monetized certain assets in 2021 to help our company through the worst times of the pandemic. We carefully selected assets that had not been adversely impacted by COVID market conditions that had reached a point where any material increase in value would have required substantial capital investment and were not critical to our operations.
As you can see from our recently filed quarter reports we’re on the path to recovery and we’ve retained what we believe to be our most viable key assets.
Now let’s turn to our global cinema business. With respect to Q3 2022, we’re pleased to report that at $48.4 million, our global cinema total revenues increased by 68% versus Q3 ’21 and represented 73% of Q3 2019. At $2.1 million, our cinema segment operating loss decreased by 58% from Q3 2021. As I just mentioned, these results were primarily driven by the Q3 gross box office of movies like Thor: Love and Thunder, Minions: The Rise of Gru, Top Gun: Maverick and Elvis.
Turning to some specifics about the U.S., at $24.7 million, our Q3 2022, total cinema revenues increased by 45% compared to Q3 2021, and represented 66% of Q3 2019. Our cinema segment operating loss increased by 22% to a loss of $4 million from a loss of $3.3 million in Q3 2021, which is reflective of higher film costs due to the blockbusters that played through the quarter, increased occupancy costs as compared to 2021 when certain occupancy costs were abated, and increased labor and operating costs, some of which were deferred and/or abated in ’21.
Our U.S. circuit is unique in that it’s divided between commercial and specialty theaters. During Q3 2022 our U.S. specialty cinemas, that primarily play arthouse product, on a more dedicated basis led by the Angelika Film Center in New York City struggled more than the commercial theaters.
With no real standout art or specialty movie titles, the Q3 gross box office the Angelika New York was only 35% of the gross box office delivered by that venue during the pre-pandemic Q3 2019 quarter. Despite being a small six screen cinema in Soho, the Angelika New York City has historically been one of the highest grossing art houses in North America. However, reflecting historic trends, the fourth quarter has picked up at the Angelika in New York, and it has again demonstrated its grossing potential.
Decision to Leave, a South Korean film directed by Park Chan-wook delivered an opening weekend gross box office of just under $60,000. Opening in four U.S. cinemas, the Angelika New York engagement represented over 60% of the total U.S. opening weekend gross for that film. With over $66,000 The Banshees of Inisherin delivered for the Angelika New York, the fourth highest opening weekend box office since the start of the pandemic, and the third highest opening of 2022. To-date with almost $130,000 the Angelika’s engagement of TÁR is the second highest out of over 1,000 runs in North America.
The specialty film lineup for the remainder of 2022 is encouraging. Our programing team is excited about Sarah Polley’s Women Talking, Sony Classics, Living, Brendan Fraser and the much talked about WHALE by Darren Aronofsky and Jim Parsons and Sally Fields starring in Spoiler Alert.
We received a few questions about our loyalty program. We launched our free Angelika membership program in April of 2022, with consistent membership growth since launch. As of today, our membership has increased by 26% since the end of September 2022 and by 46% since the end of August 2022. Our members are engaged in the program. Email marketing open rates are substantially higher than standard marketing. The popularity of the mystery screening component continues to increase. And membership attendance as a percentage of total attendance has continued to increase month to month. For instance, about 18% of the total attendance at our Angelika branded theaters in October 2022, and to-date in November of 2022 were members.
With respect to our food and beverage program, at $7.18 we delivered to another robust F&B per capita in Q3 of 2022, a 29% increase versus the pre-pandemic third quarter of 2019. We’re pleased with the growth in our F&B per capita which is continuously being driven by our dynamic F&B menu offerings throughout our U.S. locations, such as adding unique smaller items like SPAM musubi or commencing liquor sales in a particular cinema. This focus on menu expansion is helping drive revenues. During Q3 2022, our internal reporting indicates that guests have increased the number of items or units bought per transaction by over 30% compared to the same quarter in 2019.
I’ll also note that during Q3 2022, we added liquor sales to one theater in Oahu and expanded our Angelika New York alcohol offering beyond the cafe footprint. In addition, we recently received approval to begin serving alcohol in another New York City Theater, which will start in the fourth quarter of 2020. Another third quarter 2022 bright spot for the U.S. cinema circuit was our theater rental revenue, which continues to exceed pre-pandemic levels. Our third quarter 2022 rental revenue of approximately $440,000 increased just over 30% compared to the third quarter of 2019.
In terms of CapEx for the next 12 months, we’re scheduled to complete the remainder of the renovation of our consolidated theater in Kaplan and the island of Oahu, and a top to bottom renovation of the Angelika Film Center and Cafe in Dallas, which will include conversion to recliner seats, lobby upgrade, and an elevation of the food and beverage program. With respect to our U.S. Circuit, over the next 18 to 24 months, we’ll remain conservative about how we deploy our cash with a laser focus on returning to profitability. For instance, we recently elected not to reopen our consolidated theater and Kahala on the island of Oahu, due to our analysis that the venue could not be operated profitably without a material capital investment.
On a more positive note, let’s turn to Australia. By any measure, our Australian cinema circuit had a stellar quarter. At $20 million or Q3 2022 cinema revenues increased by 114% compared to Q3 2021, and represented 82% of the third quarter 2019 cinema revenue. Our third quarter 2022 cinema segment, operating income increased to $1.6 million, compared to a loss of $1.7 million in the third quarter of ’21. We’ll note that the positive Australian cinema circuit results are reflected in U.S. dollars and not Australian dollars. Because they’re not reflected in functional currency they are somewhat understated due to the weakness in the Australian dollar during this reporting period.
The capital investments we’ve made in the circuit over the last several years through both new builds and improving our existing portfolio with recliner seats, tightened leg screens and elevating our F&B programs have definitely paid off. And during Q3 2022 the movies slate over performed in Australia, as certain movies seem tailor made for Australian audiences. In addition to Minions, Maverick and Bullet Train, Aussie Chris Hemsworth, starred in Thor: Love and Thunder, which was directed by Kiwi, Taika Waititi and popular Aussie director Baz Luhrmann directed Elvis, which was also filmed in Australia.
During the third quarter of this year, our team continued to deliver impressive F&B results in Australia. At $7.32 in Australian dollars, our F&B SPP. ranks as the highest quarter ever. To generate an SPP this high during a well attended quarter bodes well for the prospects of our F&B business into the future. In Australia, we’ve rolled out both F&B online ordering capability for our customers, and a feature which allows customers to order online via QR codes in the cinema.
Our internal sales reporting suggests that these operational amenities have been embraced by our audiences, and have contributed to a healthy increase in the food and beverage, SPP. Because the sales are completed online, another benefit is improved labor costs due to reduced concession lines. In the fourth quarter we will further enhance our online offer by developing functionality whereby customers can come back and add an F&B order to their advanced ticket purchase after they’ve made their initial ticket purchase.
As we’ve reported before we continue to expand our cinema portfolio and pipeline in Australia. We’re finishing the design of an eight-screen complex to be operated under the Angelika Film Center brand in South Sydney Square, Brisbane and Queensland. It will feature all recliner seating, offer an elevated food and beverage menu which includes alcohol with an elegantly appointed lobby and patio area. We’re all excited about launching this boutique cinema that will be unique to the Brisbane market, which will now open in 2023. And by the end of 2023, we expect to launch a five-screen Reading cinema with TITAN LUX in Busselton, Western Australia.
And wrapping up with New Zealand, with respect to the third quarter of this year, our cinema revenues increased by 51% to $3.7 million compared to the third quarter in ’21 and represents 64% of the third quarter 2019 cinema revenue. Our cinema segment operating income increased over 100% to $274,000 compared to Q3 ’21. Like Australia we will note that the positive New Zealand cinema circuit results are reflected in U.S. dollars and not Kiwi dollars. Because they’re not reflected in functional currency, they’re somewhat understated due to the third quarter of 2022 weakness of the New Zealand dollar.
And highlighting the strength of our F&B team, at $6.28 in New Zealand dollars, our F&B SPP, ranked as the highest quarter ever. Like Australia our internal reporting suggests that the improvements to our F&B online ordering capabilities helped with these positive results. In terms of portfolio improvements in New Zealand, just in time for the 2022 holiday season, we’ll reopen our Reading cinemas in Invercargill, following a renovation that features one screen of recliner seating, a new lobby, elevated F&B program and a connection to the Invercargill Central, a new $165 million shopping center, developed by the consortium that bought our underlying land in 2021, and then leased back our Reading cinema to us.
This impressive mixed-use project will be completed by the end of 2022, and will feature national retail brands, hospitality, residential and office and will effectively serve as the new vibrant and bustling center of the Invercargill CBD.
Now let’s turn to our real estate business. Our improved third quarter 2022. Operational results demonstrate that this business continues to establish long term value for our stockholders. This is the first third quarter to fully reflect the elimination of all rental revenue and income from the sales of Auburn/Redyard, Invercargill and the Royal George Theatre in Chicago, and the carrying costs of our land holding in Coachella, California and Manukau New Zealand, all assets we held for decades, and were monetized in order to survive the devastating impacts of the pandemic.
Note that as of September 30 of this year, following the monetization of these assets our international property portfolio still reflects 74 third party tenants, nine owned Reading cinemas, about 250,000 square feet of gross lettable area with a 95% occupancy rate. At $4.1 million, our third quarter 2022 total global real estate revenue increased 28% over the third quarter of last year.
Our total global real estate operating loss reduced by 90% to a loss of $144,000. A few factors drove these Q3 improvements. We restarted charging internal rent to our owned Reading cinemas in Australia and New Zealand following a period of abatement in 2021 due to the pandemic, consistent and steady third party rental streams from our Australian properties such as Newmarket Village, Cannon Park and the Belmont Common. We’re pleased to report that at the end of the third quarter both our office building at Newmarket Village and retail at Belmont Common are now 100% occupied, which increased our overall property portfolio occupancy rate to 95%.
And reflecting the strength of our well curated property portfolio due to some third party tenants trading above their sales threshold, we earned percentage rent in the quarter. We should further point out that these improved quarterly results are reported in U.S. dollars and reflect the headwinds of foreign currency translation impacts. They reflect the payment of certain 44 Union Square expenses even though we haven’t begun to collect straight line right yet, and again, reflect the elimination of long held real estate assets that generated both rental revenue and income for us.
Taking into account all of these drivers, I’ll touch on each country’s Q3 2022 results. In Australia, our real estate revenue increased by 32% to $3.2 million versus the third quarter last year. And real estate segment operating income increased by over 100% to $1.4 million compared to the third quarter in ’21 In New Zealand real estate revenue increased by 70% to $400,000, compared to the third quarter of ’21, and our operating loss shrank by 34% to a loss of $300,000 compared to the third quarter of ’21.
In the U.S. real estate revenue decreased by 5% to a $0.5 million, versus the third quarter of ’21. And our real estate operating loss reduced by 19%, compared to the same period in 2021, to a loss of $1.2 million.
On a final note, during the third quarter of this year, as per the terms of our existing agreement, Audible an Amazon company opted to extend its license agreement for the Minetta Lane Theatre in New York through March of 2024, which allows Audible to continue to produce and exhibit their own content at the Minetta Lane. During the third quarter of 2022, our global property team progressed our key development projects.
At 44 Union Square in New York City in October, we substantially completed our landlord work on the seller ground and second floors for our new international retail tenant. The space has now been turned over to our tenant to complete their fit out for their new New York City flagship store. We expect cash rent to begin flowing before the end of December 2022 and anticipate their grand opening in early 23. Our exclusive leasing agents CBRE has been working to lease the remaining four floors. While no assurances can be given, through CBRE’s efforts we’ve been in discussions and trading term sheets with prospective tenants interested in leasing the entirety of the remainder of the space.
Each has interesting uses that we see could work well and are unique and brandable space, and each would exploit both the building’s one of a kind 800 piece glass dome roof, and location as the iconic and monumental Northeast anchor to Union Square Park in New York City. Prospective tenants are looking for specialty space, not generic office space. So we don’t believe we’re in direct competition with traditional office landlords generally in the Union Square market.
With respect to our Wellington, New Zealand property assets, we have 161,000 square feet of land, of which 85,000 square feet is improved with our Courtney Central building. Our Courtney Central building includes 54,000 square feet of retail space and our 10 screen Reading cinema which remains temporarily closed for seismic reasons.
Our parcels in the creative heart of New Zealand’s capital city are within walking distance of the expansive Wellington Harbor and Te Papa New Zealand’s national museum. In the third quarter of this year, we settled our arbitration with a potential supermarket tenant with whom we had signed an agreement to lease in 2013. So after a decade of working with them, which saw the intervention of the Kaikoura earthquake, and the resulting loss of our nine storey parking garage, each party has agreed that the contract is terminated and to bear their own costs.
This pivotal settlement which has provided us a path to freely and strategically work with various stakeholders, potential tenants development partners and governmental groups to advance and overall rethinking and master plan for our properties and to reestablish our assets as the key Wellington destination for film, families and fun. When our Reading cinemas in Wellington was open, it consistently ranked as one of the top highest grossing cinemas in the country.
Our plan would be to complete a top to bottom renovation of this theater with full luxury recliners, beautifully renovated lobby spaces and an elevated F&B experience. While the timing of this settlement and the ability to master plan comes at a time when the macroeconomic conditions are not ideal, it does come at a time when the Wellington City Council is preparing to further elevate Wellington’s status as both the arts and cultural capital of New Zealand and one of the most livable cities in the world.
In mid-July 2022, the Wellington City Council sought comments on its proposed district plan that outlines the strategic priorities for Wellington City and looks at its major planning and environmental issues, including housing supply, growth and infrastructure, biodiversity, climate change and natural hazards. With the closure of the original submission period in mid-September 2022, the city will summarize and seek further submissions in November of 2022.
Tākina, the beautiful new state-of-the-art Convention and Exhibition Center, across the street from our properties and owned by the Wellington City Council is on track to open in mid-2023. A few months ago, it was publicly reported that almost 80 events are already booked. Our executive team recently got a tour of the building and can confidently report it’s a stunning architectural accomplishment that has changed the look of the Wellington skyline.
The St. James Theatre, which is also owned by the Wellington City Council directly across the street from Courtney Central, and the crown jewel of Wellington’s live performance scene reopened in July of 2022 after a three year renovation and seismic strengthening.
Next year, the theater will bring not only Kinky Boots, but will also mount Wicked, one of Broadway’s biggest shows for the first time in Wellington. We believe that these developments have all added value to our holdings. And we expect to report more concretely about our development progress in Wellington during the first part of 2023.
Now before I turn it over to Gilbert for a financial review of the third quarter, on behalf of Margaret, our Board and myself, we want to again extend our sincerest appreciation to the global Reading team. Our team continues to work tirelessly through unprecedented times. We know we’re not out of the woods yet. But it’s the consistent diligent and thoughtful efforts of our team that are responsible for ensuring our company and its various divisions reach a more stabilized position for our stockholders. Again, thank you.
Gilbert Avanes
Thank you Ellen. Consolidated revenues for the third quarter of 2022 increased by 61% to $51.2 million, when compared to the same period of prior year, which is 73% of comparable 2019 pre-pandemic revenue for the same quarter. Consolidated revenues for the nine months ended September 30, 2022 increased by 75% to $155.9 million when compared to the same period last year, which is 75% of comparable 2019 pre-pandemic revenue for the same nine months period. These increases were attributable to a strong film slate as well as substantially all 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 COVID mandates for part of the reporting period.
Net loss attributable to our company for the quarter, ended September 30, 2022 improve by $4.9 million, a loss of $5.2 million when compared to the same period in 2021. Basic loss per share was $0.23 for the quarter ended September 30, 2022 compared to a basic loss per share of $0.46 for the quarter ended September 30, 2021. This was primarily due to an increase in cinema revenue related to a much stronger film slate, which drove higher attendance, partially offset by the weakening of the Australia and New Zealand dollars.
During the third quarter of 2022 both Australia and New Zealand dollars devalued against U.S. dollars. The average Australian dollar exchange rate against the U.S. dollar for the three months in Q3 2022 decreased 7% compared to the same period in 2021. The average Zealand dollar exchange rate against the U.S. dollar for the three months in Q3 2022 decreased 12.5% compared to the same period in 2021. The devaluation of the Australia and New Zealand currency, negatively impacts segment operating income and positively impacts segment operating loss in U.S. dollar terms.
Net income attributable to Reading International, Inc., for the nine months ended September 30, 2022 decreased by $54.5 million from an income of $31.6 million to a loss of $23 million when compared to the same period in 2021. Basic loss per share was $1.04 for the nine months ended September 30, 2022 compared to the basic earnings per share of $1.45 for the nine months ended September 30, 2021. This was mainly due to the sale of assets during the same nine months of the prior year partially offset by our increased cinema income and decreased income tax expense.
For the third quarter of 2022, income tax expense increased by $1.2 million to $0.3 [ph] million compared to the COVID impaired prior year period, primarily related to an increase in valuation allowance and partially offset by a decrease in GILTI tax in 2022.
For the nine months ended September 30, 2022, income tax expense decreased by $10.9 million to income tax expense of $1.5 million compared to the equivalent prior year period. The change between 2022 and 2021 is primarily due to a decrease in pre-tax income in 2022, mainly due to the non-recurring monetization of assets in 2021 that were not repeated in 2022 as well as changing GILTI tax valuation allowance and unrecognized tax benefit in 2022.
Turning now to our cash flow, for the nine months ended September 30, 2022, net cash used in operating activities increased by $8.4 million to $26.1 million when compared to the same period in 2021. This was driven by $39.4 million increase in net change in operating assets and liabilities primarily resulting from taxes payable and accounts payable and accrued expenses offset by $31.1 million decrease mainly attributable to the improved cinema operating performance compared to the prior year period.
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 a rise of $133.7 million of cash from investing activity in this period. Cash used in financing activities decreased by $33 million to $7.9 million during the nine months ended September 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 on September 30, 2022 were $589.7 million compared to $687.7 million on December 31, 2021. This $98 million reduction was primarily driven by a decline in cash and cash equivalent by which we fund our ongoing business operation and paid down debt, asset depreciation and amortization of leases. As of September 30, 2022 our total outstanding borrowings were $219.4 million compared to $236.9 million on December 31, 2021. This decrease was due to the pay down of debt, and foreign exchange rate impact on our non-U.S. debt.
Our cash and cash equivalents as of September 30, 2022, were $39.6 million. We exercised the second six months extension for our Raleigh [ph] National Loan. After balance date, but before filing the Q, we were also extending the closing of our agreements to purchase the ground lessee interest underlying of Village East Cinemas $5.9 million to July 1, 2024. We are currently in compliance with our loan covenants. While no assurance can be given, we believe that our relationship with our various lenders are good, and anticipate that we’ll either refinance or obtain extension for the current portion of our debt.
We continue to be in compliance with the terms of our loan agreement without the need for additional loan modifications. We believe that our lenders continue to understand our current situation relating to COVID-19 pandemic and its aftermath, knowing that it was clearly not of our making, and that we are doing everything we can to deliver on our strategic priorities. We feel that we can continue to have good relationship with our lenders.
We did not repurchase any shares in the third quarter of 2022. Due to the COVID-19 pandemic and its impact on our overall liquidity, our stock repurchase program has and will likely continue to take lower capital allocation priorities for the foreseeable future.
I will now turn it over to Andrzej.
Question-and-Answer Session
A – Andrzej Matyczynski
Thank you, Gilbert. As usual, for those questions that we did not address in the presentations by Ellen and Gilbert, we’ve put together three or four questions that we will address now. The first one of those, which Ellen will take, what are you hearing and seeing with respect of an increase in the quantity of film to be premiered in theaters, versus reduced number of film studios, have directed to theaters even now post pandemic. Ellen?
Ellen Cotter
All right. Our global programming teams are confident in the quantity and quality of content to be released theatrically in the next few years. Over the past few years, the wide ranging impacts of the pandemic definitely caused a reduction in the number of Hollywood movies being released theatrically. And that reduction in content has been a challenge for the industry across all of our markets. Knowing the value that the studios — that most of the studios plays on the theatrical window, but recognizing that it’ll take some time for production schedules to normalize over the next few years we anticipate that the quantity of Hollywood movies will increase from current levels and begin to approach pre-pandemic levels over the next few years.
The 2023 lineup that’s been announced so far looks really promising. Disney’s got multiple Marvel movies on their release schedule, starting with Ant-Man in February. Warner’s and DC Comics will deliver Shazam! and another Aquaman. Barbie and Wonka also look like they’ll have wide appeal. Sony has Spider-Man: Across the Spider-Verse, Universal will release Super Mario Brothers, another Fast and Furious movie and Chris Nolan’s Oppenheimer. And Tom Cruise returns with another highly anticipated Mission Impossible.
Clearly, I haven’t offered an exhaustive list of strong Hollywood titles, but just this list alone is encouraging from a quantity, quality and grossing perspective. I also think there’s room in the future for unique content to continue filling out the release schedule. In our markets over the last few pandemic years, we’ve enjoyed noteworthy grosses from non-studio content like Annie Mae, Indian films or local films from Australia and New Zealand. Into the future, our circuit will continue to seek out this content and try and maximize the gaps in the release schedules.
Andrzej Matyczynski
Thank you, Ellen. The second question relates to $5.9 million purchase price under the option for the Village East ground lease. As that lease continues to amortize off, if no adjustment to the purchase price, have the rents the theater has been paying to related party Sutton Hill Capital already been adjusted down to just the ground lease costs. Gilbert?
Gilbert Avanes
We exercised this option on August 28, 2019. Accordingly, we’re legally obligated to close. Due to cash constraint however, we have negotiated various extension of our obligation to close, most recently to July 1, 2024.
Andrzej Matyczynski
Thanks, Gilbert. We received several questions about the status of the Cinemas 1, 2 and 3 and the company’s development plans. Stockholders have inquired as to why we have not sold the building and used the proceeds to repurchase shares. Ellen?
Ellen Cotter
We believe that our Cinema 1, 2, and 3 building in New York City, which is located on Third Avenue across the street from Bloomingdale’s continues to be a key long term asset. Right now we’re operating the building as a three screen cinema. And we’ve determined it’s not the optimal time to shut down a cash flowing venue and commence redevelopment and/or to commence the sale process, when the New York City prices have been negatively impacted by the pandemic, and now the current macroeconomic environment.
Accordingly, this asset is not held-for-sale. At the current time, we’re also engaged in the negotiation of various loan extensions, re-financings and rent modifications. While we share the view that our shares are materially underpriced, in light of the company’s current conditions in negotiations, we don’t believe now’s the time to activate our stock repurchase program.
Andrzej Matyczynski
And keeping in line with the stock repurchase program, our final question is an amalgam of questions centered on the company’s willingness and ability to repurchase the stock. What better use of money is there than buying back shares at these prices? In light of the very cheap RDI stock price, what additional assets could be monetized and used to pay down costly and/or near term debt and thereafter fund the buyback of more deeply undervalued RDI shares? And are there any loan covenants preventing share repurchases?
Let me address this. As mentioned in prior earnings calls, we still must 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 nine months of 2022 to the tune of some $25 million excluding debt repayment and including what we would consider minimal investment in the CapEx need of our business. We are working diligently with our lenders to minimize the impacts of current debt repayment schedules.
We had an unrestricted cash balance of approximately $14 million on September 30, 2020. The aforementioned the dollar amounts remained substantially unchanged from June 30 of this year. As stewards of our shareholders money, we need to be certain that what has so far been a strong recovery from the COVID era is sustainable for the future. And we must avoid being placed in a position of either having to sell more assets, taking on expensive debt and/or diluting existing shareholders by issuing stock.
Whilst there are no direct loan covenants that would preclude us from repurchasing our stock on the open market, we are in the process of renegotiating various lending arrangements, and we do have liquidity covenants to consider. We believe that our lenders take comfort from our cash balances, even though they do not have any security interest in such deposits. Management reviews and discusses our cash position and capital allocation on an almost daily basis. And buying back a bunch of our shares continues to be an option that forms part of those discussions.
We continue to balance the needs of the business so that there is a business to manage in the future against the opportunity currently afforded to us based on the current stock price.
Andrzej Matyczynski
So that marks the conclusion of the call. As usual, we appreciate your listening to the call today. Thank you for your attention, and we wish everyone good health and safety.
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