Reading International Inc (RDIB) 2017 Q2 法說會逐字稿

Thank you for joining Reading International's Earnings Call to discuss our 2017 Second Quarter Results. My name is Andrzej Matyczynski. I'm Reading's Executive Vice President of Global Operations. With me are Ellen Cotter, our CEO; and Dev Ghose, our EVP and Chief Financial Officer.

Before we begin the substance of the call, I'll start by stating that 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 2017 second quarter earnings release on the company's website. In today's call, we will also use an industry-accepted financial measure called theater level cash flow, which is theater level revenues, less direct theater level expenses.

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 10-Q.

So with that behind us, Dev will be talking to us about the financial results for the 2017 second quarter a little later. But first, I'll turn the call over to Ellen, who will update us on the company's operations.

Thanks, Andrzej, and thank you, everyone, for joining us today and sending in your questions. We've tried to address many of your questions in our prepared remarks. And as always, we're available for follow-up calls to discuss our operations and strategy. As you saw in our earnings release, the $19 million of net income represented the highest net income for any quarter in Reading's history. This was largely driven by 2 onetime events. First, the full recognition of the gain on the sale of our Burwood property in Melbourne. That sale contract was executed in May 2014. Per the terms of the May 2014 contract, we received a partial prepayment on June 19, 2017 of $16.5 million, due to an early parcel sale by the purchaser of Burwood. Once we received this partial prepayment, the relevant accounting standards allowed us to recognize the full gain on the sale of Burwood.

Additionally, our record-setting net income was driven by another onetime event. The second quarter gain generated by our receipt of Courtenay Central insurance proceeds related to the November 2016 earthquake in Wellington, New Zealand. Dev will give you a bit more color on each of those events in a few minutes. And while these onetime items help drive our record net income for the quarter, we also continued to deliver solid operating performance. At $72.4 million, our total operating revenues were the second highest of any company quarter on record, and up 8% over the same period in 2016.

Over this last quarter, our cinemas in Australia reported total revenues of $25.4 million, which represented the second highest on record. In addition, our cinemas in New Zealand generated total revenues of $8.6 million, which is also the second highest quarter on record. And in the U.S., despite a weaker film slate, our U.S. theaters enjoyed a slight increase in total revenues compared to the same quarter in 2016.

As many of you have observed, the cinema industry has just recently undergone a very well-publicized and, from our perspective, overblown critique. As people who have worked for years in our business understand, the box office will always fluctuate based on the product. For every King Arthur, there is a Wonder Woman, which has grossed just over $400 million domestically to date, and is now ranked the third highest grossing movie that Warner Bros. has ever released. It has eclipsed the Harry Potter series. Our long-held faith in our industry was recently confirmed as we watched Baby Driver and Dunkirk. Both of these movies were original, brilliant, each an adrenaline rush and each absolutely needed to be seen on the big screen. We believe you need to view the last quarter and this upcoming box office quarter through that lens.

Now as it relates to our cinema business, we are differentiated and diversified from 2 perspectives. In the United States, we not only run commercial theaters tied to the major studio box office, but 12 of our 27 theaters depend on specialty or art or Angelika type of programming. Additionally, having cinema operations in Australia, New Zealand gives us further diversification protection. The release schedule in each of these countries can vary from the U.S. to a certain extent, thereby impacting our results. And we have historically received a boost from a locally produced film product in each of these markets.

Our consolidated second quarter cinema revenues increased by 6% to $67.4 million compared to the same period last year. And our cinema's segment operating income increased by 7% to $9.8 million over the prior year quarter.

Australia cinema revenue increased by 13% or $3 million for the quarter, primarily due to an increase in attendance and stronger foreign exchange rates. In New Zealand, cinema revenue increased by 7% or $585,000 for the quarter, mainly due to stronger exchange rates and the Courtenay Central business interruption insurance proceeds, representing $861,000 or NZD 1.2 million.

In the United States, as I mentioned, our total cinema revenues increased slightly by $410,000 compared to the same period last year. We've been asked by an investor to accurately breakdown our cinema revenues by country. In other words, of our total cinema revenues, what percentage does each country represent? For the second quarter 2017, in U.S. dollars, our cinema revenues broke down as follows: 50% for the United States, 37% for Australia, 13% for New Zealand. Comparatively, in the second quarter of 2016, our cinema revenue broke down as follows: 52% for the United States, 35% for Australia and 13% for New Zealand. So as you can see, our Australian cinema revenues have increased slightly based on this allocation.

We received a number of questions this quarter about our Australian and New Zealand cinema operations, which are led by Wayne Smith. Firstly, what is our competitive advantage in Australia and New Zealand? The key to the success of our international Cinema operations is a laser focus on all aspects of customer service. Our cinemas are designed and built to create the best cinematic experience for our guests. To build brand loyalty and repeat visits, we endeavor to offer the most-appealing and entertaining style of customer service. We are less concentrated in central business district locations and try to appeal to and expand the programming desires of our customers, which are not always aligned with the taste of a CBD audience. And finally, we strive to understand the pricing needs of our guest. Simply, our strategy is to offer value for the cinema dollar.

Our focused strategy on the customer works and these 2 circuits are quite successful in gaining market share. We also received questions about how the box office in each of the 3 countries might impact our results. As the studios make an effort to generally think up release dates across the globe, the box office trends in Australia and New Zealand broadly follow the United States. However, the theatrical release dates can vary based on each country's specific holiday schedule.

Family films often have a different release date, which can impact quarterly results. For instance, Despicable Me 3 opened in Australia on June 15, 2017, but opened in the United States on Friday, June 30, and on June 29, in New Zealand. In this case, Australia had the benefit of 2 high-grossing weeks in the second quarter of 2017. While the United States and New Zealand will mostly have Despicable Me 3 results reflected in the third quarter. Also, there is some programming differences that account for quarterly fluctuations. For instance, the Hunt for the Wilder People, a local New Zealand film and that country's highest-grossing movie ever opened in New Zealand on March 31, 2016. So New Zealand's second quarter of 2017 lacked strong comparable film.

Now let me provide more detail on the progress we made on executing our global cinema strategy. As I've mentioned previously, presentation is paramount to our strategy of delivering best-in-class cinematic experiences to our guests. We deliver state-of-the-art presentation mostly through our branded premium auditorium, TITAN XC and now TITAN LUXE. The U.S. circuit's first TITAN XC screen featuring Dolby ATMOS sound was installed on the Mainland this quarter, on May 5, at Grossmont in San Diego. The TITAN screen opened together with the launch of value pricing at that theater and the release of Guardians of the Galaxy.

Our strategic focus on food and beverage continues across each of our Cinema circuits and is helping drive our performance. Our second quarter 2017 U.S. and New Zealand food and beverage per caps achieved record highs at $4.97 and $3.93, respectively, and also calculated in functional currency. In the United States, we outperformed certain leading competitors. Our U.S. F&B revenues increased by 3.8% or the same period last year, and New Zealand F&B revenues increased by 7.3% over the second quarter in 2016.

In May 2017, with the previously acquired liquor license, alcohol sales were launched at the Tower Theatre in Sacramento, a fourth California location, in addition to Angelika Carmel Mountain, Grossmont and Towne Square. Our Q2 F&B revenues were positively impacted by this new offering. Our F&B revenues for our Australian circuit on a functional currency basis increased by 17.2% for the second quarter in 2017 compared to the same quarter last year.

We're also encouraged with the online movie ticket sales generated from our own websites in all 3 countries. The ticket sales generated from our own websites increased by 61% over the second quarter in 2016. And further improvements in our social media engagement across Australia, New Zealand and Hawaii are helping to foster our own online ticket sales. In the next few weeks, we'll soft launch our first ticketing app for one of our U.S. brands, with a view to launching apps for all global cinema brands by the end of the fourth quarter 2017.

Turning to our 2017 cinema CapEx program. Throughout the second quarter, we continued to progress our top to bottom renovation plans for our Reading Cinemas at Murrieta, California and Manville, New Jersey, which collectively represent 29 screens. We also further the plans for the completion of the second phase of the Consolidated Theatre renovation at Ward Village in Honolulu.

During the quarter, we also progressed renovation plans for 2 Reading Cinemas in Australia representing 19 screens. These renovations, which are all targeted to be materially completed by the end of 2017, will include the installation of luxury recliner seating. And some will now include adding our improving TITAN screens, modifications to accommodate an enhanced food and beverage menu, and lobby design changes. In the United States, we are hoping to soon announce plans for the conversion of another Reading Cinema to an Angelika Film Center.

In Australia, since June 2015, our board has approved the construction of an additional 4 theaters representing 27 screens. We expect that these theaters will become operational between 2017 to 2020. We recently announced the construction of a 5-screen Reading Cinema located in the City of Traralgon in Victoria, Australia. The Traralgon central business district site is being redeveloped now to include additional dining bar and hotel facilities, and now new cinema facilities. We also publicly announced an 8-screen Reading Cinema in the south city area of Brisbane. Additionally, our new 8-screen Reading Cinema with TITAN screen at Newmarket Village, just outside of Brisbane, is well under construction and continues to be anticipated to open by the end of 2017. There is also a theater with 6 screens that we're working on to bring on line soon.

Our team in Australia continues to explore the market and work with landlords on new build opportunities. In New Zealand, we have one other theater with 7 screens that's under contract and scheduled to open sometime in 2019.

We received questions from investors about our cinema acquisition strategy. We always evaluate opportunities that advance our overall strategy and provide attractive returns for our stockholders. This includes potential cinema acquisitions in Australia and New Zealand as well as in the United States. Today, we believe that our balance sheet would allow us to be competitive with other bidders for reasonably sized circuits. But it's unlikely that today, we would be a bidder for a circuit with 100-plus theaters. We believe that we have the financial flexibility to acquire a small- to mid-sized circuit in any one of our countries without impacting our existing 3-year plan. But, of course, each opportunity is evaluated on its own merit in order to generate the most attractive returns for our stockholders. I'd also note that our company is a disciplined buyer as our philosophy is to remain physically conservative in terms of our theater level cash flow acquisition multiples.

Now turning to our real estate business. Our second quarter 2017 consolidated real estate revenues increased by 30% to $6.9 million and our real estate segment operating income increased by 38% to $2.8 million. These increases were primarily attributable to the insurance proceeds we received related to the Courtenay Central business interruption insurance and settlement proceeds received from the producers of STOMP. These were offset by a significant increase in our real estate segment G&A expenses due to the needed expansion of our Australian and New Zealand real estate team to manage our growing portfolio.

I'll also note that like that -- I'll also note that our real estate, like our cinema business, is diversified in that we have significant real estate assets in each of the United States, Australia and New Zealand.

I'll first cover our real estate portfolio in New Zealand. As you know, we had to close Courtenay Central in Wellington in November 2016, due to the earthquake. At the start of the second quarter, we reopened Courtenay Central. Our Reading Cinemas, McDonald's and other tenants are all operating again. And the land under our now demolished parking garage temporarily offers 130 on-grade parking spots.

The demolition of our parking garage has provided an opportunity to rethink the entire project. Having the chance to reconstruct the garage has allowed us to engage with Countdown, our supermarket tenant, to create better access and integration to our center for their anchor tenancy. This reevaluation has allowed us to potentially add more retail space on the ground floor of our soon-to-be newly constructed parking garage. We also anticipate adding more retail and other uses on our Wakefield Street property, in other words the new Countdown building.

Assuming these new retail spaces and uses are fully implemented, they will add significantly more traffic to our Courtenay Central property. Which then leads to new thinking about the existing food court area. In other words, how do we maximize the space in the food court area to support the incremental customer traffic? The Peter Jackson movie museum scheduled to be built right across the street from our new Countdown building makes our project more attractive to a variety of tenants and potentially more valuable. Our master plan for a reimagine Courtenay Central is scheduled to be presented to our Board of Directors for review sometime during the fourth quarter of 2017.

Just before the end of the second quarter, we launched the Courtyard concept of Courtenay Central. With the Courtyard, we made a relatively small investment of under a $0.5 million in our existing rundown food court space. We activated the space to create Wellington's first indoor pop-up food and entertainment experience. We added 8 new short-term F&B tenants to serve a variety of street food from Indonesian wraps to handcrafted filtered coffee and pretzels. In addition, we added entertainment elements to the space to ensure that Courtenay Central will offer compelling experiences during our transitional period. Dev and I just got back from Wellington a few weeks ago. We both agreed that our opportunity in Wellington is exciting, and we look forward to keeping you updated.

Turning to Manukau. With the light industrial rezoning of our second Manukau parcel, we're continuing to evaluate all options for this property. I just recently visited our property, which is at the southern end of the Auckland airport, toured the market and met with our consulting team. Auckland is experiencing significant growth, but it's hampered by the lack of housing and industrial property. The airport, a publicly traded entity, has significant expansion plans to accommodate both the city's and country's growth. Over the last few months, our team has fielded calls from a variety of parties interested in purchasing the property. We're evaluating this opportunity thoughtfully and carefully, and we're committed to preceding down the path that best drives long-term value for our stockholders.

Currently, we are evaluating the sale of this property, joint venturing with an experienced industrial real estate developer or developing the property alone. Before a decision is made, we're gathering all of the necessary information to ensure the best possible outcome, including determining the cost and extent of the infrastructure works required to begin development. We plan to have a more defined strategy from Manukau in early 2018.

Turning to Newmarket Village in Brisbane, Australia. Construction continues to progress on our state-of-the-art 8-screen Reading Cinema with Titan auditorium, a new 10,000 square-foot dining precinct and parking mezzanine. We're still targeting a fourth quarter 2017 opening. With the help of Jones Lang LaSalle to date, we've signed heads of agreement to lease for 6 F&B tenants, which represents 75% of the new dining precinct.

Our team in Australia has developed an impressive, eclectic and quality mix of food and beverage retailers. At Redyard in Auburn, just outside of Sydney, we recently opened Chicago Jones Coffee & Chocolate Maison, a newly constructed tenant adding incremental revenue and income. Two additional incremental dining tenancies, Red Rooster and Oporto, are now under construction and will come online in the fourth quarter of 2017. Additionally, we're progressing the plans to overhaul the common areas of Redyard to create a more inviting physical environment for our guests.

Turning now to the United States and our 44 Union Square project in New York City. Construction is well underway. Many of you who live in New York can see the progress we're making. The upper floors of the building, the old theater balcony and the southern and eastern walls have been demolished. The northern and western walls have been braced, and what you can't see is the ongoing fabrication of the steel frame of our iconic dome that's taking place in Germany.

The question was raised what's your deadline for making a decision on Union Square tenants? We don't have a specific deadline. Our construction is moving at pace, and we're targeting having retailers in the space for fit out in 2018. In our Form 10-Q, we disclosed that we anticipate that this will likely happen in or before the end of the third quarter of 2018. The drumbeat of negative retail news might have given some retailers the impression that they have more leverage than they had a few years ago. Despite this, our development and leasing teams remain bullish. New York City generally and Union Square, in particular, remains one of the world's most important retail markets. And we're confident that as the construction nears completion, the cat and mouse game between tenant brokers and owners will shift in our favor because of the uniqueness of the space and its great location.

Retailers of the level we're targeting need a physical presence in Manhattan. In the last few months, we've exchanged retail proposals with globally recognized creditworthy retailers that are existing New York City retailers with expiring leases, who need to relocate to a new strategic New York City location. Or international tenants looking for a new flagship presence in New York.

We invite you again, to visit our website at 44unionsquare.com for additional information about the project.

As we've said earlier, our marketing for the office space starts officially in September of 2017. Even though marketing hasn't even officially begun, interest in its boutique office space offering one-of-a-kind iconic glass dome, is already building. Requests have been made to us over the last few months to prepare and deliver proposals to a number of creditworthy office tenants. The early interest is encouraging. Another question came in as to whether management was somehow moving away from Reading's historic practice of not constructing on spec? I would note that Reading has over the years commenced construction on projects where our cinema anchor was the only tenant in place. In other cases, we've move forward with only a single third-party anchored tenant in place. Furthermore, we believe that there is a material difference between a construction project facing on to Union Square in Manhattan and in a project in a less well-established market. Our Union Square project is unique. Indeed as I mention last quarter, at the end of 2016, a new appraisal was done in connection with the $57.5 million in construction financing for the project. That appraisal confirmed our analysis that just by completing our construction, we've significantly increased the value of the Union Square building for you, our stockholders.

Our construction is fully funded, and we do not intend to be rushed into taking a less-than-optimal deal for this great piece of real estate. Our purpose is not to accept any deal, but the best deal. A deal that will add long-term value to this key asset.

With respect to our Cinema 1, 2, and 3 project in New York City. In early June 2017, we announced the execution of an exclusive dealing and predevelopment agreement to jointly develop our Cinema 1, 2, and 3 property in New York with our neighbor, the owner of 2 restaurants at the 60th Street and 3rd Avenue. We're thrilled to be working alongside of Nick Tsoulos and Nick Pashalis, and believe that our new development will provide material incremental value for both partners. The parties will be working through the matters described in the agreement over the next several months. We have more to report in 2018.

A question arose about whether Reading and its partner believe that the market in New York is peaking again? Our partners have indicated to us that they are looking to create long-term value for their families. Similarly, Reading is creating long-term value for its stockholders. Our goal is to create a project that will weather the ups and downs of the New York City real estate cycle. Overall, we're pleased with our results for the quarter and the progress we're making on our strategic plan. We believe we will remain well positioned to drive long-term value for all Reading stockholders.

With that, I will turn the call over to Dev for financial review of the second quarter.

Thank you, Ellen. Now I will discuss the financial results for 2017 second quarter. As Ellen mentioned, revenue for the second quarter of 2017 represented the second-highest level achieved for any quarter in the history of the company. Our net income for the second quarter represented the highest level for any quarter in the company's history. Our results were assisted by 2 onetime items: A gain on sale of our Burwood property in Australia, and B, the receipt of insurance proceeds relating to our Courtenay Central ETC in Wellington, New Zealand.

Consolidated revenues for the second quarter of 2017 increased by 8% to $72.4 million. This is mainly due to higher admissions and increased food and beverage revenues in our Australian cinemas, business interruption proceeds for the closure period of our Courtenay Central ETC in Wellington, and settlement proceeds relating to STOMP, currently playing at our Orpheum Theatre in New York.

Our Courtenay Central ETC has since reopened on March 29, 2017. Our revenues for the first half of 2017 also increased by 8% or $10.2 million to $141.9 million for similar reasons.

Net income increased by $16.1 million to $19 million for the second quarter of 2017, and by $16.9 million to $22.1 million for the first half of the year. For the quarter, EPS, earnings per share, increased by $0.69 to $0.82 due to, firstly, an $885,000 increase net of taxes in segment operating income due to higher operating results, including the impact of business interruption insurance recoveries, which offset loss profits recognized during the first quarter of 2017. These increased our basic earnings per share by $0.04. Secondly, a $6.7 million gain, net of taxes, on the sale of our Burwood property, which contributed a $0.29 increase in our basic EPS. And thirdly, an $8.4 million gain, net of taxes, on insurance recoveries on Courtenay Central. This is net of business interruption money, which enhanced our basic EPS by $0.36.

Earnings per share for the first half of 2017 increased by $0.73 to $0.95 for the prior year period, mainly attributable to the following: Firstly, a $1.3 million in segment operating income due to higher operating results, which increased our basic EPS by $0.06. A $6.4 million increase in gain, net of the tax effect for the sale of the Burwood property, which was net of the gain on another property during first quarter of 2016 that contributed $0.28 increase in our basic earnings per share. And thirdly, an $8.4 million gain net of taxes on insurance recoveries for Courtenay Central, again, net of business interruption recoveries, which enhanced our basic earnings per share by $0.36.

Our nonsegment general and administrative expenses for the quarter and the 6 months ended June 30, 2017, compared to the same period of the prior year decreased by 5% or $261,000 and 5% or $500,000 for the 6 months, respectively. This decrease mainly relates to additional expenses paid in 2016 in connection with our 2015 year-end audit, $280,000 and $780,000 for the quarter in the 6 months ended June 30, 2017.

Legal expenses incurred, which are included within the general and administrative expenses category, included expenses for the derivative litigation the Cotter Employment Arbitration and other Cotter litigation matters during the quarter and 6 months ended June 30, 2017, totaled $387,000 and $1 million, respectively. In 2016, expenses related to the defense of the derivative litigation was substantially reimbursed from the company's director and officers' insurance program.

Income tax expense for the quarter and 6 months ended June 30, 2017 increased by $4.2 million and $4.7 million, respectively, compared to the equivalent prior-year period. Our tax rate for the 3 and 6 months ended June 30, 2017 were 23% and 25.5% compared to 36.3% and 36.0%, respectively, in the same period of the prior year. These differences in rates were primarily due to the significant increase in pretax income, offset by foreign earnings considered indefinitely reinvested, a decrease in our valuation allowance and nontaxable income from insurance proceeds.

Shifting to cash flows. Our net cash provided from operations for the first half of the year was $6 million, which is $2.5 million decrease from 2016. Slightly higher operational cash flows due to higher operating results were more than offset by higher cash outflows from expenses relating to film rent and legal expenses that have been accrued in prior periods. In regards to our investing activities, net cash increased by $30.1 million, compared to the same period of 2016, to net cash provided of $6.8 million, primarily due to the final insurance settlement related to our Courtenay Central earthquake damage which was $18.4 million net of business interruption recoveries, as well as the partial payment from Frasers, Australand, relating to the sale of our Burwood property, $16.6 million, offset by expenditures relating to the demolition and disposal of the parking building, adjacent to our Courtenay Central ETC in Wellington, $3.2 million. We repaid borrowings of $15.4 million and had additional borrowings of $22.9 million and $3.4 million in stock repurchases.

Turning now to our financial position. Our total assets decreased marginally to $4.4 million. Our cash and cash equivalents decreased by $5.9 million to $13.1 million. Of this amount, $4.0 million and $1.2 million was held by our Australia and New Zealand subsidiaries, respectively. Our intention now is to indefinitely reinvest Australian earnings, but we have not yet made a decision about indefinitely reinvesting New Zealand earnings, as we have thus far had net operating losses there. If the Australian earnings were used to fund U.S. operations, they would be subject to additional income tax upon repatriation. We manage our cash, investments and capital structure so that we are able to meet short-term and long-term obligations for our business, while maintaining financial flexibility and liquidity.

Our liquidity position remains strong with $13.1 million of cash on our balance sheet at June 30, 2017 and approximately $137.5 million of additional capacity under our borrowing arrangements. At this time, in the U.S., Australia, New Zealand with $74.8 million of that $137.5 million being unrestricted.

During the quarter, we were able to increase our mortgage loan on our headquarters building by $1.5 million. Additionally, we have worked with Westpac Bank regarding our primary line of credit in New Zealand and have pushed out the maturity date to December 31, 2018, which postpones this facility becoming current until the end of this year. Subsequently, in June 2017, we fully paid down our loan balance using the cash received from the insurance settlement.

With regard to Courtenay Central, we received the final insurance settlement of $20 million from our insurer in May 2017, effectively taking us to the $25 million earthquake coverage sublimate. We recognize a total gain of $10.7 million or NZD 14.8 million. $1.5 million, which represents NZD 2.1 million, that is recovery on our lost business profits during the period of closure from November 2016 to March 2017. While the earthquake slowed the redevelopment activities in progress at the location, the demolition of the parking structure has opened additional expansion opportunities for our Courtyard property.

Our overall global operating strategy is to conduct business, mostly on a self-funding basis, except for funds used to pay an appropriate share of our U.S. corporate overhead. However, we may periodically decide to move funds between jurisdictions when circumstances merit such action. For example, given the interest savings generated by using funds through the repayment of intercompany loans, by our Australian subsidiary to finance a portion of our Union Square redevelopment project rather than paying for high interest rate mezzanine loans, which will yield overall notional all-in interest savings of approximately 10%, we move $20 million of our intercompany loan to short-term from a long-term designation category.

Effectively, we sourced part of our Union Square financing needs from our available credit line in Australia and moved it from our Australian subsidiary to the U.S. as a repayment of intercompany loans. As a result, we recorded a gain of $820,000, which represented the foreign currency movement on the short-term intercompany loan for the 6 months ended -- sorry, June 30, 2017. At June 30, 2017, we have debt outstanding of $134.8 million and our debt-to-EBITDA ratio, excluding debt allocated to facilities under construction that is funds not generating any EBITDA was 1.51x.

Lastly, Frasers, the buyer of our Burwood property, completed the sale of 6 acres of the total 50.6 acre undevelop parcel to a third-party in June 2017. As part of the sale agreement for our Burwood property in Australia, we collected an amount of $16.5 million or AUD 21.8 million, which represented 90% of the sales price of that parcel. And this permitted us to record the full transaction gain of $9.4 million or AUD 12.5 million. The remaining receivable of $28.1 million or AUD 36.7 million is expected to be fully recovered on or before December 31, 2017. We would also like to note that our 2017 Annual Shareholders Meeting of the company will be held in November 2017.

And with that, I will turn the call back over to Andrzej.

Thanks, Dev. First, I'd like to thank our stockholders for forwarding questions to our Investor Relations e-mail. We were very pleased with the number of inquiries we've received. We have compiled the set of questions and answers that represents the most common questions and recurring themes that were e-mailed to us. As always, we are available after the webcast to address any additional questions and encourage you to continue reaching out to us.

Our first question was regarding the stock buyback program. Can you comment on that? And how many shares did you repurchase during the quarter?

I will fill that answer. In early March of this year, the Reading Board authorized a stock repurchase program to repurchase up to 25 million of Reading shares. This was the largest stock repurchase authorized in the company's history. The program demonstrates our confidence in the business plan, our future prospects and our commitment to driving stockholder value. The company chose not to be in the market during the period when we closed the window for trading via insiders. We prefer to maintain the flexibility in making buyback decisions rather than adopting a 10b5-1 plan. As a result, in the trading window between the first and second quarters, we were active in the market to the tune of 169,050 shares at a cost of approximately $2.71 million. At this point, the company has repurchased 210,949 shares, at a cost of $3.4 million, under the currently authorized plan. I'd like to further note that the company is subject to the technical rules of the SEC and NASDAQ that limit the timing and the number of shares that can be purchased.

Our second question we have received. What have been your efforts to unlocking stockholder value? Have you considered instituting a dividend?

Will let Dev handle that one.

It's been a little over year since we instituted a more vigorous investor relations program and launched cinema and real estate development priorities. We are pleased with our efforts thus far. Clearly, this is a work in progress and there is more to be done over time. On the investor relations front, we are working to augment further sell-side analyst coverage and additional investor outreach. We continue to execute on our 3-year business plan that we outlined earlier this year. And in addition, Andrzej talked about our new stock buyback program. As the real estate segment increases as a percentage of our overall asset base over time, we will certainly further evaluate the efficacy of instituting a dividend policy.

Thanks, Dev. The next question, what should investors know about nonrecurring transactions for the year thus far?

Again, Dev.

Thanks, Andrzej. Just to summarize, again, so 3 things here. We received enough of the sale proceeds from our Burwood property for us to be required to record the full gain on sale of that property. We've included this gain with an adjusted EBITDA as we view ourselves in part as a real estate company and one that over time would have sales of property in the normal course of business. Secondly, we've now received the full 25 million due to us for insurance related to damage to our Courtenay Central ETC. These amounts have been passed between insurance recovery for loss profits and costs incurred while the property was closed, reimbursement for the basis of property that had to be demolished and the balance is the gain on recovery from the insurance company. And this amount has been taken out of adjusted EBITDA for fuller disclosure. And then finally, STOMP settlement moneys received of $675,000.

Thanks, Dev. Next question. Why were U.S. margins down substantially when the admission revenues was slightly down, and food and beverage revenue was strong?

Ellen, could you handle this?

Compared to the second quarter in 2016, our U.S. cinema box office decreased slightly by about 1%, while our U.S. cinema operating income decreased by 35%. Our successful Olino Cinema in Hawaii opened during the fourth quarter of 2016 and has strengthened the overall U.S. cinema box office circuit in 2017. Also our U.S. Cinema F&B revenues were strong across the circuit, increasing by 4% compared to the second quarter in 2016. These positive revenue enhancements could not outweigh a few factors that have negatively impacted this circuit operating income. Firstly, the overall weaker film slate from the major studios affected our commercial theaters across the circuit. And a weaker film slate from the specialty film distributors negatively impacted our dedicated art houses. Last year, our dedicated art houses thrived with films like The Lobster and Love & Friendship. Despite this reduction in revenue, we can only reduce our operating expenses by so much, each theater has a certain level of fixed operating expense that just cannot be adjusted.

Thanks, Ellen. We have a question following up on the status of leasing of our unused corporate headquarter space. When will the G&A expenses reflect the $350,000 annual run rate savings from the headquarters building in that leasing revenues?

I think I will address that one. We've completed the fit out and the occupation of our corporate headquarter space, and also brought the to-be-leased space to a pre fit-out level. Our recently revamped lease marketing campaign has borne fruit with several potential leasing tenants interested in the property. While operating expenses are in line with estimates, until we secure a tenant, our projected savings will not be reflected in our income statement.

The next question, what do you believe the likelihood is that the California court in the Cotter Living Trust litigation will order a sale of stock representing controlling interest in Reading, and what is the company's anticipated response to any such order?

Ellen?

I'll respond to that question both on behalf of our company and on behalf of my sister Margaret and myself. At this time, it would be speculation to attempt to predict what the California court will do. Margaret and I believe that the applicable trust documents do not permit a sale of the Reading voting stock held by the Cotter Living Trust that have made that argument to the court. We have further advised the court that if there is to be a sale of these shares that Margaret and I intend to participate as potential purchasers of those shares. Margaret and I have great confidence in Reading's future. Our results over the past several years have been strong. We have a number of major real estate projects that are in various stages of development. Also, the board at Reading has established a special committee of non-Cotter independent directors, which committee will evaluate matters related to any such event and will take such steps that the committee believes to be in the best interest of the company and all of its stockholders.

And with that, we'll move to our last question. What are the next investment conferences reading plans to present at? And what additional proactive steps will the company take to attract both sell-side analysts and buy-side investors to the company?

This year, we presented at the B. Riley Conference in May and the Gabelli Conference in June. We will also participate in the Gateway conference in San Francisco in early September as well as the B. Riley Consumer Conference in New York at the end of September. We are considering our participation in one more investor conference in mid-December in Chicago, and we'll keep you updated. In addition to our goals of B. Riley, the company's first ever sell-side analyst, Dev and I continue to have conversations with other sell-side analysts to encourage them to initiate coverage of our company. To further that goal, Dev and I will be doing a nondeal roadshow in mid-August in the Milwaukee-Chicago area. We will continue to communicate our value proposition to the market and look forward to keeping stockholders updated on our progress.

With this last question, I'll wrap up the call. We hope you have found the information provided useful. As usual, Dev, Ellen and I are available for any follow-up calls. So please do not hesitate to reach out. We appreciate you listening to the call today, and look forward to keeping you updated on our performance on future earnings calls and through our ongoing communications. Thank you.