Q1 2023 Reading International Inc Earnings Call
Executive Vice President of Global operations with me are Ellen Cotter, our President and Chief Executive Officer, and go with Savannah is our executive Vice President and Chief Financial Officer and Treasurer.
Before we begin the substance of the cool I'll run through the usual caveats.
In accordance with the Safe Harbor provision of the private Securities Litigation Reform Act of 1995.
Certain matters that will be 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 2023 first quarter earnings release on the company's website.
We have adjusted where applicable the EBITDAR items, we believe to be external to our business and not reflective of our cost of doing business or results of operations.
Such costs include legal expenses relating to extra ordinary litigation.
And any other items that we can consider to be nonrecurring in accordance with the two year FCC requirement for determining whether an item as 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 T. L. C F.
Which is theater level revenue less direct theater level expenses.
A T. P average ticket price is also used and then as an accepted industry acronym.
We will also use a measure referred to as food and beverage spend per patron F&B SPP, which is a key performance indicator for our cinemas.
The F N B S. P. P is calculated by dividing our cinemas revenues generated by food and beverage sales by the number of admissions at that cinema.
Please note that our comments unnecessary summary in nature and anything we say is qualified by the more detailed disclosures 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 Allen, who will review, our 2021st quarter results and discuss our strategy followed by Gilbert who will provide a more detailed financial review Ellen.
Helen.
Speaker Change: Thanks, Andrzej and thank you for listening to our call today.
Speaker Change: We were pleased that our 2023 first quarter results reinforced our view that audiences in the U S. Australia, and New Zealand will continue to embrace the magic, it's great movies in a big screen shared environment.
Audiences across the World Love to Avatar, the WAF water with a 2.3 billion dollar global box office. This installment of the Avatar franchise has become the third highest grossing film of all time.
Speaker Change: Other standout first quarter films included the February release of the Ant man and the watch quantum mania, which has generated over $475 million globally.
Speaker Change: The March release of create trade, which has a global box office to date of $274 million.
Speaker Change: And John Wick Chapter four released at the end of the first quarter has grossed over $421 million globally to date.
Not only did the quarter features an amazing temples overall, a greater number of movies released theatrically that in prior periods.
Speaker Change: These films are mix of original movies and franchise favorites appealed to a variety of audiences.
Speaker Change: Pushing that to the last wish continued to attract family audience is.
Speaker Change: A man called auto, but general appeal to the more sophisticated filmgoers as well as co came there a dark action comedy loosely based on a true story outperformed box office expectations.
Magic Mike's last dance and 80 for Brady, both cater to more mature female driven audiences.
Speaker Change: Fans of the horror genre, we're delighted by the release of the original sci-fi horror film Megan a film combining the wonders and terrorists or artificial intelligence.
Speaker Change: And by the release of another screen franchise film.
The article content was also available for our faith based audience with the release of Lionsgate, Jesus Revolution, which outperformed expectations in the U S.
Speaker Change: At $45 $8 million of our 2023 first quarter consolidated total revenue represents a 14% increase from the first quarter of 2022.
Speaker Change: And to 74% of our 2019 first quarter consolidated total revenue.
Speaker Change: Our operating loss of $7 $9 million has improved by 33% compared to the first quarter of 'twenty two.
Speaker Change: But well behind the $1.3 million operating loss reported in Q1 2019.
Speaker Change: Our negative EBITDA of $2.8 million has improved by 60% compared to Q1 2022.
But well behind a positive $4 $8 million of EBITDA reported in Q1 2019.
Speaker Change: At $42 million, our first quarter 2023, global cinema revenue increased by 12% versus the first quarter of 2022, but.
Speaker Change: But represented 72% of 2019 first quarter global cinema revenues.
Speaker Change: Yeah.
Speaker Change: So while we are encouraged that our global cinema operations continue to improve we recognize that we're not back to pre pandemic levels and it will take more time to recover to those levels.
Speaker Change: Looking at our global real estate division at $5 $1 million, our first quarter real estate revenue increased by 22% compared to the same period in 2022.
Speaker Change: Decreased by 7% compared to the same period in 2019.
Speaker Change: When we were still operating Auburn Red yard in Australia, The rail, Georgia Theatre in Chicago, and the Invercargill property in New Zealand.
Speaker Change: At $1 million, our first quarter real estate operating income increased by almost 870% compared to the same period in 2022.
Speaker Change: And represented 87% of the operating income in the first quarter of 2019.
Speaker Change: Our first quarter Global real estate Division delivered the highest quarterly operating revenue and income since 2019.
Speaker Change: The first quarter 2023 represented the first full quarter of rent from Petco, our new retail tenant occupying 42% of the leasable area of 44, New Union Square in New York City.
Speaker Change: And another solid performance from our 75 third party tenant real estate portfolio in Australia, and New Zealand.
Speaker Change: Yeah.
Speaker Change: We're pleased with these continued improving results despite serious headwinds facing the company, including foreign exchange.
Speaker Change: Our results this quarter were negatively impacted by the continued weakening of the Australian and New Zealand dollars against the U S dollar.
Speaker Change: By five 5% and six 9% respectively.
Speaker Change: Higher interest rates, our first quarter interest expense increased by $1 million compared to the first quarter of 2022, despite a reduction in our debt balance.
Higher operating expenses due to the highest inflation, we've seen in years and.
And labor challenges.
Speaker Change: As of March 31, 2023, we had cash and cash equivalents of $14 $6 million.
We had a global debt balance of $213 $4 million, which represents a reduction of $2 $2 million from December 31 2022.
Speaker Change: Our cash balance is reduced primarily to support the operations pay down debt and fund certain capex investments.
Speaker Change: To assist our overall liquidity condition among other steps, we intend to monetize certain real estate assets, assuming our target prices can be achieved.
Speaker Change: Let's look more closely at our overall global cinema business.
Speaker Change: Our Q1 2023 global cinema revenue increased by 12% to $42 million versus the first quarter of 2022.
Speaker Change: And represented 72% of our 2019 first quarter global cinema revenue.
Speaker Change: This past quarter's global cinema operating loss of $4 $6 million.
Improved by 36% versus the first quarter of 2022, when we reported an operating loss of $7.2 million.
Speaker Change: But was well behind the $2.6 million, we generated in the first quarter of 2019.
Speaker Change: In Q1, 'twenty, two 'twenty, 348% of our global cinema revenues were generated in Australia, and New Zealand.
Speaker Change: So this quarter's foreign currency headwinds have negatively impacted our overall reported results.
Speaker Change: Even taking this into account the 20th twenty-three first quarter to deliver the highest first quarter metrics in terms of cinema revenue and operating income since March of 2021, most of that quarter's business was pretax pre pandemic.
Speaker Change: So while we're pleased our business continues to trend in the right direction, we're not yet back to 2019 levels.
Speaker Change: I've already touched on some of the standout movies that drove these improved results, but I'll take a minute to highlight the encouraging second quarter films that are continuing our momentum.
Speaker Change: The April release of Super Mario Brothers movie delivered Amazing results and has now become the 10th animated movie to gross over $1 billion globally.
Speaker Change: The blockbuster hit will be one of 'twenty to 'twenty three is best grossing movies.
Speaker Change: Air also debuted on the big screen in April and was Amazon's largest theatrical release to date.
Speaker Change: As of today, the crowd pleasing, Matt Damon and Ben Affleck film has grossed over $87 million globally.
Speaker Change: We were happy to see Amazon and earn an Amazon M. G. M title do so well and we're equally happy to hear Amazon confirm its target to have 10 to 12 theatrical releases a year.
Speaker Change: For the current month Guardians of the Galaxy volume three debuted on may 1st and it grows to almost $536 million globally as of today.
Speaker Change: And we expect Disney's little Mermaid and fast X the next.
Speaker Change: Bathroom, French fast and furious franchise to help make this may have strong box office month.
Speaker Change: In June we anticipate that audiences will be delighted by a variety of releases such as spiderman across the Spider verse Transformers rise of the base Pixar as elemental D. C Comics, the flash and Disney's, Indiana Jones, and the dial of Destiny.
And looking further ahead into 'twenty twenty-three July and August should be strong with Tom cruise returning for mission impossible dead Reckoning part one.
Speaker Change: And highly anticipated original movies Barbie from director, Greta Gerwig, and Oppenheimer from director Chris Nolan.
And finally, the 20th twenty-three holiday film lineup is also impressive.
Speaker Change: With the Marvels hung.
Speaker Change: Hunger games, the bout of song purchased snakes, Ghostbusters afterlife too in D. C Comics, Aquaman and a watch kingdom.
Speaker Change: Our first quarter 'twenty twenty-three average ticket price for a T P.
Speaker Change: Which was $12.60 in the U S.
Speaker Change: $14.10 in Australia.
Speaker Change: And $12.46 in New Zealand were the highest for any first quarter in each country.
Speaker Change: These a T P levels reflect.
Increased ticket prices from our premium large format screens, where our global audit audience has enjoyed avatar amp bank create three and John Wick.
Speaker Change: And higher general admission pricing taking into account higher cost across all across all expense categories.
Speaker Change: But our overall ticket pricing strategy remain set at levels to avoid presenting pricing barriers for our guests.
Speaker Change: One of the challenges of ticket pricing is the fact that the film rent we pay to the distributors is calculated as a percentage of box office.
So we pass onto the distributors a major portion sometimes over 60% and then it took a price increase.
Speaker Change: Consequently, I'll discuss later, we're continuing to focus on our F&B and ancillary revenues and ways to control the cost of the entertainment product we exhibit in our theaters.
Speaker Change: I'll touch now on some of the first quarter achievements and initiatives in each country.
Speaker Change: First turning to our U S. Cinemas are first quarter 2023 U S cinema revenue of $21 $8 million increased by 25% versus the first quarter of 'twenty two.
Speaker Change: And represents just under 70% of the first quarter of 2019.
Our U S cinema operating loss of $4 $3 million reduced by 32% versus the first quarter of 'twenty two.
Speaker Change: And is the best first quarter income result, since Q1 2019.
Speaker Change: When evaluating these results against 2019 consideration should be given to the fact that in the first quarter 2020 three we have 17 less screens compared to the first quarter of 2019, representing a 7% reduction in our U S screen count.
Speaker Change: A couple of recent highlights about our U S cinemas.
Speaker Change: Focusing first on our specialty art house space.
Speaker Change: Our first quarter 2023 box office at the Angelica in New York City increased 6% compared to the first quarter of 'twenty, two with quality titles like returns, so the well and women talking.
Speaker Change: Our free to join in Jelic, a membership program that launched a year ago and nine theaters has registered almost 65000 members as of today.
Speaker Change: Membership as a percentage of overall paid attendance for the nine Angelica locations is currently at 22% for the month of April 2023.
Speaker Change: The program's continued growth and the impact on our specialty cinema circuit is a testament to not only its attractive perks, but also the interest the audience has in theatrical movie going in specialty content.
Speaker Change: During the first quarter, our F&B teams continued to deliver impressive results.
Speaker Change: Our U S Q1, 2023 F N B S. P P was $7.72.
Speaker Change: Which is impressive in light of the roll out to three additional theaters of our successful half price Tuesday, where we offer guests not only 50% of tickets, but also 50% of popcorn chicken tenders.
Speaker Change: And the first week in May we soft launched the sale of our alcohol at reading cinemas in Bakersfield and expect to launch look ourselves and run our parks shortly.
Speaker Change: And we'll be starting alcohol sales that our villages by Angelika cinema in New York City within the next few weeks.
Speaker Change: As of today, we're licensed at 100% at theaters in the U S, where we intend to operate into the foreseeable future.
Speaker Change: Demonstrating the success of various initiatives to drive ancillary revenue, while the overall box office of normalizing our first quarter 2023, other cinema revenue, which includes theater rentals screen advertising and service fee income is our highest first quarter ever.
In terms of Capex, we're in the process of completing the plans for the renovation of our Angelika film Center in Dallas.
Speaker Change: We will be adding recliner seating a premium screen concept to be known as an jellicoe Lux.
Speaker Change: Upgrade all the F&B areas and create a more elegant lobby space.
Speaker Change: As part of this major renovation. We're also opening our first small format bookstore in the U S would you be connected to the theater.
Speaker Change: This strategic initiative is inspired by our state cinema in Tasmania, and hasn't much beloved independent bookstore that nicely complements the state's cinema experience for its dedicated dedicated clientele.
It also complements our endeavors to increase our ancillary revenues and to benefit from our own foot traffic.
Speaker Change: We expect the renovation at the Angelica Dallas to be completed in early 2024.
Speaker Change: At this point, we don't expect to close the theater, rather we'll renovate certain parts of the cinema and keep other parts open.
Speaker Change: In the U S with the exception of our Angelica Carmel Mountain I'm reading cinema's at Calix, all of our California theater, who benefit from renovations.
We're currently working with landlords to determine if we can arrive at mutually acceptable lease terms that include landlord renovation funds.
Speaker Change: We're in the process of closing two new center or two cinemas in the U S. What's your either on a month to month basis or at the end of their lease terms.
Speaker Change: We have other cinemas nearing the end of their lease terms, which are currently being reviewed and will be closed if satisfactory new lease terms can't be achieved.
Both theaters are currently cash flow negative and in the aggregate represent a noticeable drag on our theater level cash flow.
Speaker Change: Turning to Australia, and New Zealand.
Speaker Change: Our Q1 'twenty two 'twenty three Australian cinema revenue of $17 $2 million increased slightly by 1% versus Q1 2022.
Speaker Change: But when calculated in local currency the Australian cinema revenue increased by 7% versus the first quarter of 2022, which was generally in line with the Australian cinema industry.
Speaker Change: Our Australian cinema operating loss of $125000 improved by 78% versus the first quarter of 'twenty to 'twenty two.
Speaker Change: Our first quarter 2023, New Zealand cinema revenue of $3 million increased by 4% versus the first quarter of 'twenty two.
Speaker Change: But again when calculated in local currency, the New Zealand cinema revenue increased by 11% versus the first quarter of 'twenty two.
Speaker Change: And our New Zealand cinema operating loss of $162000 improved by 50% versus the first quarter of 'twenty two.
Speaker Change: Like our U S cinemas or theaters in Australia, New Zealand continued to show operational improvement.
Speaker Change: However, this quarter on a topline basis, they did not improve to the degree that the U S and I missed it.
Speaker Change: While each of our Australian and New Zealand divisions performed generally in line with their local industries.
Speaker Change: We believe that the differentiation between the U S and our international cinemas had to do with the industry's first quarter movie slate and a lesser appeal of certain films to the Australian and New Zealand audiences compared to the U S audiences fell.
Speaker Change: Films like cocaine Bear Jesus Revolution, and create three performed better in the U S than they did in our international markets.
Speaker Change: A couple of recent highlights about our cinemas in Australia, and New Zealand.
Speaker Change: During the first quarter, our teams in Australia, and New Zealand delivered the highest first quarter ever F. N. B S. P. Pes in Australia, It was $7.66 and in New Zealand It was $6.84.
Speaker Change: Our teams have done a terrific job with clever marketing promotions, including creative movie themed cocktails.
Speaker Change: Following our fourth quarter 2022, reading cinema App launch that facilitates the online F&B ordering in Australia, New Zealand. We also added the ability to buy alcohol via the App. This functionality is also available on our website.
Speaker Change: Through 2020 three will continue improving the functionality of our reading cinemas app by features by adding features allowing our guests to swap seats. After purchase so a group can sit near each other refund their own tickets and have a smoother checkout experience.
Speaker Change: We also recently went fully digital on our loyalty program, eliminating plastic cards, which reduced expenses at our overall environmental impact.
Speaker Change: In anticipation of our Angelika film Center launch of Brisbane out South City square well launch our Angelika film Center App in Australia in the second quarter of 'twenty three.
Speaker Change: As a sign of our confidence in the business, we continue to add to our cinema pipeline down in Australia.
Speaker Change: On January 13, 2023, we took over an existing six screen cinema and arm gel Australia too.
Speaker Change: To date the cinema has performed in line with other similarly sized theaters that are not newly built or recently renovated.
Speaker Change: In our view the theaters operation has been accretive to the overall theater level cash flow for our Australian circuit.
Speaker Change: Before the end of 2020 three we'll open our first Angelika film Center in Australia at the beautiful mixed use development South City square in Brisbane, it'll be a state of the art eight screen boutiques and amount with all recliner seats, great F&B menu in a beautifully done lobby and outdoor patio.
Speaker Change: And if I am screen reading cinema in Western Australia at the newly renovated bustle 10 Central original center that is just invested an impressive expansion.
Speaker Change: <unk> of their center.
Speaker Change: Our cinema will offer the bussell to community at all recliner seating, a tightened lux and an elevated F&B menu.
Speaker Change: Again, and a sign of our board's confidence in the long term viability of the cinema business. We recently approved the leasing of a new state of the art six screen cinema in Australia, featuring all reclining seating to tighten like screens and an elevated F&B offer.
Speaker Change: The leasing of a new state of the art five screen cinema in New Zealand, featuring all recliner seating tightened like screen and again, an elevated F&B offer.
Speaker Change: The capital commitment for each of these new cinemas will not be required for a few years, so will not impact our immediate liquidity requirements and give our circuits. The luxury of time to continue to strengthen cashless.
Next let's turn to our global real estate business.
Speaker Change: Our company's ability to remain viable during the COVID-19 pandemic was largely driven by our resilient dual and diversified business strategy.
Speaker Change: One of our cinemas endured a devastating decrease in cash flows are real estate operations remained strong.
Speaker Change: Our diversified strategy allowed us to use our real estate portfolio to offset the decline.
Speaker Change: As we now navigate a post pandemic world our real estate business continues to achieve improving results and establish long term value for our stockholders through the continuous improvement and development of our investment and operating properties.
Speaker Change: Our first quarter 2023, global real estate revenue of $5 $1 million increased 22% versus the first quarter and 22.
Speaker Change: Our Q1 2023 global real estate operating income of $1 million increased by almost 870% from the first quarter of 'twenty two when we had an operating income of $104000.
Speaker Change: As I noted earlier, despite our 2021 and asset sales of Auburn Red yard the Royal Georgia Theatre in Chicago, and our Invercargill property in New Zealand, our global Real estate Division delivered the highest quarterly operating revenue and income since December 2019.
Speaker Change: The improved first quarter 2023 segment operating results were primarily driven by the first full quarter of rent from Petco at 44 Union square that did not occur in the same period of the prior year.
Speaker Change: And solid the solid performance of our Australia, and New Zealand real estate portfolio, which I'll touch on in a minute.
Speaker Change: In the U S. Our first quarter 2023, real estate revenue of $1.6 million increased by $878000 or 130% driven by the petco rental stream that started in Q4 of 'twenty two.
Speaker Change: We expect the petco, whose occupying 42% of the buildings leasable area will open their new flagship this quarter the second quarter.
Speaker Change: Looking ahead to our second quarter in the U S. We're also excited about the may 10th the opening of the Empire strips back at the Orpheum Theatre in New York City.
Speaker Change: To date this fun crowd pleasing show has generated promising advanced ticket sales.
Speaker Change: On a U S dollar basis, our first quarter 2023, Australian real estate revenue remained flat at $3 $1 million compared to last year.
Speaker Change: In New Zealand on a U S dollar basis, our first quarter 2023, real estate revenue increased by 5% to $374000.
Speaker Change: These U S. Dollar reported results do not take into account the foreign currency headwinds that we experienced during the first quarter.
Speaker Change: A few notes about the quarters performance of our eight are Australian and New Zealand 75 third party real estate.
Speaker Change: Third party tenant real estate portfolio.
Speaker Change: As of March 31st our third party occupancy rate remains strong at 96% compared to 90% in the first quarter of 'twenty two.
Speaker Change: Reflecting our improved occupancy rates or number of third party tenants increase from 72 in the first quarter of 'twenty two to 75 in the first quarter 'twenty three.
Speaker Change: Going forward the portfolio will benefit from the first quarter twenty-three execution of six new leases and two new leases new lease renewals, which offer our communities a variety of new tenants from F&B to wellness sports in retail.
Speaker Change: Understanding our existing liquidity condition and our upcoming debt requirement.
Speaker Change: Our board recently approved the sale of our office building in Culver City.
Speaker Change: We've engaged a broker to handle the sale for us the range of buyers may include groups interested in our company and leasing back the office space for a certain term.
Speaker Change: When our brokers ready to present potential buyers will evaluate each offer and decide which path makes the most sense for our company's long term viability and for our stockholders.
Speaker Change: I'll finish by noting that while we still face short term liquidity challenges, we remain optimistic about our long term future.
Our first quarter cinema performance, coupled with a promising 2023 film lineup and continuous improvements in customer experience positions our company for success in 'twenty three and beyond.
Speaker Change: We're equally confident about the potential of our retained real estate assets, we have a diverse portfolio of properties that provide us with substantial opportunities to create long term value for our stockholders through either redevelopment financing or potential sales.
Speaker Change: That wraps up my business overview for the first quarter of 2023 before I turn it over to Gilbert for a financial review again on behalf of Margaret Our board and myself, we want to extend our sincerest appreciation to the global Redding team your dedication and hard work has been instrumental and sustaining our company through these.
Speaker Change: Difficult times.
Speaker Change: And with that I'll turn it over to Gilbert.
Gilbert: Thank you Ellen.
Gilbert: Consolidated revenues for the quarter ended March 31, 2023 increased by $5 6 million to $45 million when compared to the same period in the prior year.
Gilbert: This was primarily driven by strong cinema performance, which was the result of more robust film slate, leaving.
Gilbert: Leading to the increase in attendance compared to Q1 2020.
Gilbert: Yeah.
Net loss attributable to getting internationally for the quarter ended March 31, 2022 decreased by $4 two.
Gilbert: The net loss of $11 1 million when compared to the same period in the prior year.
Gilbert: Basic loss per share decreased by 20, <unk> to a basic loss per share.
Gilbert: Oh 50 for the quarter ended March 31, 2020 'twenty.
Gilbert: For March 31, 2023 compared to the quarter ended March 31 2023.
Gilbert: These results are due in large part to the increase in our cinema performance in Q1 2023 compared to Q1 2022.
Gilbert: Non segment G&A expenses for the quarter ended March 31, 2023 decreased by $43 million compared to the same period prior year.
Gilbert: For the first quarter of 2023 income tax benefit decreased by 1 million $2 5 million compared to the equivalent prior year period.
Gilbert: The change between 2023, and 2020, primarily related to the decrease in reserve for valuation allowance.
Gilbert: For the first quarter of 2023, our adjusted EBITDA loss decreased by $4 2 million compared to the same prior year period to a loss of $2 8 million. This decrease was primarily the result of stronger cinema operations performance the run.
Gilbert: Received from our tenants at our 44 Union square property.
Gilbert: Shifting to cash flow for the quarter ended March 31, 2023, net cash used in operating activities decreased by $2 5 million.
Gilbert: Cash used up 11 6 million when compared to the same prior year period. This was driven by improved cinema operating performance compared to the prior year period.
Thanks, Jeff mission of rental income from our tenants at 44 Union square property, which did not occur in the same period of prior year.
Gilbert: Cash used in investing activities for the three months ended March 31, 2023 was $1 5 million decrease of $2 million compared to the same period.
Gilbert: Period prior year.
Gilbert: Cash used in financing activities for the.
Gilbert: The three months ended March 31, 2023 decreased by $42 million to $1 4 million due to higher debt repayment in Q1 2022, when compared to Q1 2023.
Turning now to our financial position total assets on March 31, 2023.
Gilbert: $560 2 million compared to $587 1 million on December 31, 2022.
Gilbert: This decrease was driven.
Gilbert: $53 million decrease in cash and cash equivalents.
Gilbert: We funded our ongoing business operations.
Gilbert: As of March 31, 2023, our total outstanding borrowings were $213 4 million compared to $215 6 million on December 31 2020.
Gilbert: Our cash and cash equivalent as of March.
Gilbert: <unk> 31.
Gilbert: 23 were $14 6 million, which includes approximately $9 million and U S.
Gilbert: Julia.
Gilbert: 7 million in New Zealand.
Gilbert: Further to address the impact of COVID-19 on our business, we saw certain modifications to our loan agreement with bank of America, and maybe and Westpac.
Gilbert: One modification include changes to Shlomo.
Gilbert: Covenant compliance terms and waivers of certain covenant testing period.
Gilbert: We are currently in compliance with our loan covenants as.
Gilbert: So modified.
Gilbert: It has not been necessary for us to seek modifications or waivers with respect to our other loan agreement.
Gilbert: As we continue to be in compliance with the terms of such agreement without the need for any such modifications or waivers.
Gilbert: During the first quarter of 2023 modify their bank of America loan extending the maturity date.
Gilbert: After facility to September 2024.
Gilbert: Our cinemas 123 term loan was also extended during the first quarter of 2023 and now maturing on July three 2023.
Gilbert: As we continue to focus on preserving our liquidity no shares were purchased during the quarter ended March 31, 2023, and our stock repurchase program and we will.
Gilbert: We continue to take a lower capital allocation priority for the foreseeable future.
With that I will now turn it over to Andre.
Gilbert: Thanks.
Andre: We've tried to include answers to many of the questions received in the prepared remarks from Alan and Gilbert.
Andre: As a result, we only have a few additional questions and answers that will provide additional insights for management. The first question because the wage and hour claim settlement involved reading bearing a higher level of wage cost annually is that already reflected in our cinema segment cost structure alone.
Andre: Yeah.
Speaker Change: In our recent 10-Q filing we reported that the $4 million payments to the plaintiff for the settlement for the wage and hour claim was accrued for it in our 2021 cinema segment administrative expense.
Speaker Change: Going forward all of the California labor costs are reflected in our cinema segment cost structure operating in the state of California, generally does carry a higher labor costs and other U S markets, both in terms of base wages and regulatory compliance costs.
Speaker Change: Okay.
Speaker Change: Thanks Allen. The next question regards our U S cinema tern loan and ask if the payment in kind interest rate being accrued for and part of the current interest expense. If the loan is paid off as his original earlier date and the interest is forgiven will that be a balloon reversal of interest expense.
Speaker Change: Weddings plan to retire this loan borrowers updated principal pay down schedule or refinance some remaining balance into longer term U S and have the financing.
Speaker Change: And lastly, given the current variable rate on this loan do we feel that refinancing will be a similar higher or lower interest rates spreads Gilbert.
Speaker Change: We did not accrue.
Speaker Change: The Pik interest.
Speaker Change: This decision will depend on a number of factors.
Resolution of some of which is still uncertain.
Speaker Change: These factors, including without limitation, the availability of cash flow from our cinemas over the remaining terms of the loan.
Speaker Change: Right.
Appetite in the financial markets for loans secured by cinema leasehold interest.
As to the future interest rates, we believe that there is certainly a substantial uncertainty in the marketplace.
Speaker Change: The interest rate.
Speaker Change: Yield curve continues to be inverted, but fed watches or split as to whether or not the fed will continue to push up interest rates.
Speaker Change: And if they do the magnitude and timing of such increases and we expect that lenders seeing the margins erode are going to want protections against future increases in the cost of their borrowings.
Speaker Change: We are unable to provide meaningful guidance at this time.
Speaker Change: Thanks, good with it.
Speaker Change: And lastly on the different red rent obligations of the nine and a half million of deferred rent obligations as mentioned in our Q1 10-Q is there.
Speaker Change: As of March 31st or May 15th filing date, what is the timing for the cash payoff of these amounts goober can you handle that as well.
Speaker Change: The $9 5 million deferred rent is that as of March 31 2023.
Speaker Change: Varies from lease to lease also in our efforts to reduce our cost of occupancy you are having ongoing conversations with a number of our landlords some of whom have previously granted rent deferrals. Accordingly, while no assurance can be given we are endeavoring to further spread out or to otherwise get relief.
Speaker Change: From the payments of these deferrals.
Speaker Change: Thanks Colby.
Speaker Change: So that marks the conclusion of the call as usual. We appreciate you listening to the call today. Thank you for your attention and wish everyone Good health and safety.